2022 (9) TMI 243 - AT - Income Tax

Undisclosed income surrendered by the assessee at the time of search - ad hoc disclosure under coercion, threat and undue pressure - presumption u/s 292C - the document belonged to the assessee - Reliance on the statement made by the key person of the group after approximately two months from the date of search - HELD THAT - A joint inspection was carried out on 28.12.2021 but the said document could not be found in the assessment folder and this was duly admitted by the D.R. during the course of hearing before us. So we are unable to comment on the contents of BSA/1 the document which was seized during the course of search and was stated to the belonging to the assessee but the undisputed position is that no addition can be made on the basis of ad hoc disclosure made during the course of search or post search when there is no corroborating evidence. In the present case only BSA/1 was seized during the search which was denied by the assessee in the assessment proceedings. Assessee cannot be slapped with tax liability based upon the information contained in the document which could not be produced before the Bench despite the specific direction. We note that the search team has not found any cash, money and not other assets corroborating the said addition in the hands of the assesse. Therefore presumption of section 292CA of the Act cannot be applied in this case. So far as the another plea of the income tax authorities is concerned that the retraction was made only in the return of income, we are not satisfied with the said plea as the assessee has retracted the disclosure in the return of income itself and the case is supported by the decision of Co-ordinate Bench in the case of Shri Lalji Khimjibhai Patel 2019 (10) TMI 998 - ITAT RAJKOT - Appeal of assessee Allowed.

Summary

Issues Involved:
1. Confirmation of addition of Rs. 89,13,710/- as undisclosed income.
2. Validity of addition based on ad hoc disclosure made under coercion.
3. Applicability of Section 292C presumption.
4. Non-production of seized document BSA/1 during assessment and appeal proceedings.
5. Retraction of disclosure in the return of income.

Issue-Wise Detailed Analysis:

1. Confirmation of Addition of Rs. 89,13,710/- as Undisclosed Income:
The main issue revolves around the confirmation of an addition amounting to Rs. 89,13,710/- by the Ld. CIT(A), which was initially made by the AO as undisclosed income surrendered by the assessee during a search operation. The search conducted on 16.09.2009 led to the seizure of documents marked BSA/1. A key person of the group, Shri Sambhunath Agrawal, admitted to an undisclosed income of Rs. 7.5 crores on behalf of family members, including Rs. 1 crore for the assessee, which was not declared in the return of income.

2. Validity of Addition Based on Ad Hoc Disclosure Made Under Coercion:
The assessee argued that the addition was based on a disclosure made under coercion and undue pressure, which was neither voluntary nor supported by any incriminating material. The Ld. Counsel for the assessee contended that the key person of the group, Shri Sambhunath Agrawal, could not make a valid disclosure on behalf of the assessee. Furthermore, the seized document BSA/1 was claimed to pertain to a customer of M/s Utsav Rice Mills Pvt. Ltd. and not to the assessee.

3. Applicability of Section 292C Presumption:
The Ld. CIT(A) and the AO applied the presumption under Section 292C, which assumes that documents found in possession of the assessee belong to them unless proven otherwise. The assessee failed to discharge the onus of proving that the seized documents did not belong to him, leading to the confirmation of the addition by the Ld. CIT(A).

4. Non-Production of Seized Document BSA/1 During Assessment and Appeal Proceedings:
During the proceedings, the assessee's counsel was unable to inspect the document BSA/1, as it was not found in the assessment folder. This non-production was admitted by the Ld. D.R. The Tribunal noted that no corroborating evidence was found during the search to justify the addition, and the document BSA/1 could not be produced before the Bench despite specific directions.

5. Retraction of Disclosure in the Return of Income:
The Tribunal considered the retraction of disclosure in the return of income as valid. It was noted that the search team did not find any cash, money, or other assets corroborating the addition. The Tribunal referenced the decision of the Co-ordinate Bench in the case of Shri Lalji Khimjibhai Patel, which held that no addition could be made solely on the basis of notings on a piece of paper without corroborative evidence.

Conclusion:
The Tribunal concluded that the addition based on the ad hoc disclosure made during the search or post-search proceedings, without corroborating evidence, was not sustainable. The presumption under Section 292C could not be applied due to the lack of corroborating evidence. The Tribunal set aside the order of the Ld. CIT(A) and directed the AO to delete the addition of Rs. 89,13,710/-. The appeal of the assessee was allowed.