2020 (12) TMI 399 - AT - Income Tax

Unexplained investment - HELD THAT - During the course of assessment proceedings, the assessee firm has accepted the same and in its submission has stated that we have inspected the seized records and only invoice of ₹ 45,000/- has been issued in name of our firm and related to us . Further submission of the assessee firm that the payment for such purchase was made by Shri W. R Singhal in his individual capacity is contradictory and in any case, is not supported by any corroborative evidence which has been brought on record. Once the bill is issued in name of the assessee firm and the assessee firm accepts the same and consequent purchase of electronic item, the onus is clearly on the assessee firm to demonstrate through verifiable evidence that such purchases have been done from its disclosed sources of income. In absence of any evidence on record that such purchases were made by the assessee firm from its own disclosed sources, the unexplained investment towards such purchase of ₹ 45,000 is hereby upheld. As far as the other bill no. 1199 of ₹ 175,000/- is concerned, the presumption is not rebutted that the said document was found from the residential premises of Shri S.K Singhal and therefore, any action where so required as per law is to be taken in his individual hands and not in the hands of the assessee firm. Further, we find that there is no mention of the assessee firm s name on the said bill and thus, there is no basis to hold that the said document belongs to the assessee firm. The addition of ₹ 175,000 is thus deleted

Summary

Issues Involved:
1. Addition of ?2,20,000 on account of alleged unexplained investment.
2. Levy of penalty under section 271(1)(c) for A.Y. 2004-05.

Issue-wise Detailed Analysis:

1. Addition of ?2,20,000 on account of alleged unexplained investment:

The primary issue revolves around the addition of ?2,20,000 to the income of the assessee firm due to alleged unexplained investment in electronic items. The facts of the case disclose that during a search conducted on the Kamdhenu Group, two bills issued by Ganpati Electronics were seized from the residence of one of the partners of the assessee firm. These bills included one for ?45,000 and another for ?1,75,000. The Assessing Officer (AO) made an addition of ?2,20,000, concluding that the assessee firm failed to satisfactorily explain the source of investment for these purchases.

The AO's findings included:
- The bill for ?45,000 had the name of the assessee firm, indicating the purchase was made by the firm.
- The claim that the payment was made by an individual (Sh. W. R. Singhal) was unsupported by evidence.
- The bill for ?1,75,000, although claimed to be mistakenly attached, was deemed to belong to the assessee firm due to circumstantial evidence.

The CIT(A) upheld the AO's decision, emphasizing that the assessee failed to substantiate its claims with documentary evidence and that the primary onus was on the assessee to explain the seized documents. The CIT(A) cited section 132(4A) of the IT Act, which presumes documents found during a search belong to the person in possession unless rebutted.

Upon appeal, the Tribunal noted:
- The documents were seized from the residence of a partner, not the firm's official premises.
- The presumption under section 132(4A) applies to the individual (Sh. S.K. Singhal) unless rebutted.
- The bill for ?45,000 was accepted by the assessee firm, but the payment source was not corroborated by evidence, thus, the addition for ?45,000 was upheld.
- The bill for ?1,75,000 did not mention the firm's name and was presumed to belong to the individual, leading to the deletion of the ?1,75,000 addition.

2. Levy of penalty under section 271(1)(c) for A.Y. 2004-05:

The second issue concerns the levy of penalty under section 271(1)(c) for the assessment year 2004-05. The Tribunal noted that no specific arguments were presented by the assessee's representative regarding the penalty. Considering the AO's order, the Tribunal confirmed the levy of penalty. However, given the partial sustenance of additions, the matter was remanded to the AO for recomputation of the quantum of penalty based on the sustained addition.

Conclusion:

The appeal was partly allowed, with the addition of ?45,000 upheld and the addition of ?1,75,000 deleted. The penalty issue was remanded to the AO for recomputation in light of the Tribunal's directions.