1982 (2) TMI 123 - AT - Income Tax

Summary

Issues:
Dispute over addition of Rs. 20,000 made by the ITO and sustained by the Commissioner (Appeals) based on papers found during search and seizure operations under section 132 of the Income-tax Act, 1961.

Analysis:
The assessee disputed the addition of Rs. 20,000 made by the ITO and upheld by the Commissioner (Appeals) based on certain papers found during search and seizure operations. The main paper in question bore names and amounts, but the Revenue failed to prove that these entries pertained to the assessee and were intentionally kept outside the books. The assessee argued that it offered explanations and even proposed verification by calling the concerned parties, which the ITO did not pursue. The burden of proof lay on the assessee to show that the papers did not belong to them, as per section 132(4A) introduced later. The Tribunal noted that the entries on the papers did not conclusively link the amounts to the assessee, and the ITO's rejection of the explanation without verifying with the parties concerned was unjustified.

The Departmental representative contended that the burden of explanation lies with the assessee once documents are found in their possession, regardless of ownership. However, the Tribunal found that the mere presence of papers with entries did not automatically shift the burden to the assessee without proper evidence. Despite the absence of section 132(4A at the relevant time, the Tribunal emphasized that the burden on the assessee regarding papers found during search and seizure was substantial. The Tribunal disagreed with the Departmental representative's argument and concluded that the addition of Rs. 20,000 was not justified based on the available evidence and the failure to summon the concerned parties for verification.

After considering the submissions and examining the documents, the Tribunal found that the entries on the papers did not conclusively prove the amounts were related to the assessee. The Tribunal highlighted that the assessee had offered explanations and cooperation for verification, which the ITO did not act upon. The Tribunal emphasized that the burden on the assessee was significant, especially in the absence of specific provisions like section 132(4A) at the relevant time. Consequently, the Tribunal reversed the decision of the Commissioner (Appeals) and deleted the addition of Rs. 20,000 from undisclosed sources. The appeal was allowed in favor of the assessee, highlighting the importance of proper verification and burden of proof in such cases.