2021 (11) TMI 359 - AT - Income Tax

Reopening of assessment u/s 147 - Unaccounted income - Onus to prove - Addition based on seized loose papers - assessee obligation to explain the entries found in the seized documents - HELD THAT - The assessee by furnishing the documentary evidence can rebut the presumption specified under section 292C We find that the assessee has furnished the necessary details such as ledgers, confirmation from the clients stating that the cash received from these parties were for certain expenses to be incurred on behalf of the clients - amount of fees received by the assessee in the form of cheque was only the income of the assessee. Now, the onus shifted upon the AO disprove the contention of the assessee. For this purpose, the AO has been given enough power under the provisions of law especially under section 133(6)/131(1) of the Act. But we find that no such power was exercised by the authorities below. We find in the case of CIT vs. Paeveen Juneja 2017 (7) TMI 1172 - DELHI HIGH COURT . As seized document is a piece of evidence which play a vital role to determine the income of the assessee. But such document cannot give absolute power to the authorities below to work out undisclosed income of the assessee without bringing corroborative evidences. The seized document give the information to the AO to dig out the facts in more detail that too in a particular direction. The seized documents must be supported based on other materials indicating that cash received by the assessee was either available or it was utilized in some other manner. Thus, based on piece of lose paper, nothing adverse can be drawn against the assessee without verifying or bringing other corroborative evidences to support the case of the revenue. We are not inclined to confirm the order of the authorities below. Hence, we set aside the order of the learned CIT (A) and direct the AO to delete the addition made by him. - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of part addition of ?13,50,000 out of ?27 Lacs instead of deleting the whole amount of addition.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding an assessment order passed under section 143(3) read with section 147 of the Income Tax Act for the Assessment Year 2013-2014. The main issue raised by the assessee was the confirmation of a part addition of ?13,50,000 out of ?27 Lacs instead of deleting the entire amount of addition.

The facts revealed that the assessee, an individual practicing as an architect, had a survey conducted at their premises under section 133A of the Act. During the survey, a document marked as page 5 of annexure A-1 was seized, showing discrepancies between cash entries in the seized document and the regular books of accounts. The Assessing Officer treated the unaccounted income of ?27 Lacs as undisclosed income of the assessee, leading to the addition.

The assessee contended that the cash received was for expenses to be incurred on behalf of clients, such as fees to be paid to the Municipal Corporation, and was not recorded in the books as it was not income. The seized document was not in the assessee's handwriting and was prepared by staff for calculations. The assessee argued that the entire cash receipt could not be treated as income, as supported by judicial pronouncements.

The Commissioner of Income Tax (Appeals) confirmed the addition of ?13.50 Lacs, considering that the entries in the seized documents matched with the regular books of accounts. However, the Commissioner also acknowledged the assessee's argument that the entire cash receipt could not be treated as income, applying 50% of the cash receipt as income under section 44 AD due to the assessee's profession as an architect.

The Tribunal rejected the contention that an addition made in another entity's assessment could not be added to the assessee's income. The Tribunal emphasized the need to evaluate expenses claimed by the assessee independently of the recipient's income inclusion. The Tribunal also highlighted the assessee's obligation to explain entries in seized documents and the rebuttable nature of the presumption under section 292C of the Act.

Referring to relevant case law, the Tribunal emphasized that the seized document alone could not establish undisclosed income without corroborative evidence. As the authorities failed to provide supporting evidence, the Tribunal directed the Assessing Officer to delete the addition. Consequently, the Tribunal allowed the appeal of the assessee.

In conclusion, the Tribunal set aside the Commissioner's order and directed the deletion of the addition, emphasizing the importance of corroborative evidence in determining undisclosed income based on seized documents.