2007 (1) TMI 217 - AT - Income Tax

Income from undisclosed sources - Search And Seizure - charge levied on the basis of a dumb document - Order of the Ld CIT(A) is erroneous in law - presumption lying u/s 132(4A) - HELD THAT - One cannot infer merely from the face of the document as to what is the total of those transactions and whether they are in rupees or in kilograms or something else. In the absence of such proper decoding and clarification of number/quantity involved, no charge of income-tax can be levied. If the figures in the documents are same these are the quantities then they have to be converted in terms of money. There has to be some basis for conversion. If it is money, then it has to be shown how much it is. The presumption that these figures are in lakhs is simply bald, wild and baseless. We have no option but to infer that the Assessing Officer has failed to discharge his duties. He drew inferences, made presumptions, relied on surmises and thus made unsustainable additions. The discussion also leads us to infer that a charge on the basis of the document can be levied only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and/or in the search. The speaking from the document should be loud, clear and unambiguous in respect of all the four components as described above. If it is not so, then the document is only a dumb document. No charge can be levied on the basis of a dumb document. We also notice that the Assessing Officer could not establish that the assessee has charged any interest, if at all the impugned figures were advances. There is no material to show that the Assessing Officer has taxed these advances as wealth of the assessee. There is also no material to show that the assessee has taken any action to recover the money from the alleged debtors. It is not believable that the assessee or his legal heir would forget their money lying with the debtors. By one way or the other, he or his legal heir would try to recover the money. The Department has not done anything to find out that after the search in April, 1995. We are also unable to satisfy ourselves as to why the alleged transactions are considered in the assessment year 1989-90 when there is no date mentioned on the document. Once search took place in April, 1995, then undated paper could be presumed to be belonging to that period and hence the year of taxability would be the assessment year 1996-97. Thus, it is merely by surmises that the Assessing Officer has taxed it in the year 1989-90. The crux is that a document found during the course of search must be a speaking one and without any second interpretation, must reflect all the details about the transactions of the assessee in the relevant assessment year. Any gap in the various components as mentioned in section 4 of the Income-tax Act must be filled up by the Assessing Officer through investigations and correlations with the other material found either during the course of the search or on investigation. As a result, we hold that document No. 7 is a non-speaking document. Since the facts of the present case are similar to the case of Kantilal and Bros. v. Asst. CIT 1994 (11) TMI 194 - ITAT PUNE , we are of the view that no addition u/s 68 of the Act can be made on the basis of loose sheet being document No. 7 found during the course of the search. Presumption lying u/s 132(4A) - In our considered view, such presumption is available to the proceedings u/s 132(5). In section 278D, a separate presumption has been provided for invoking in prosecution proceedings. As no such presumption is provided in the assessment proceedings, we infer that where the Legislature intended to provide such presumption it has been so provided in various Chapters. In the Chapter relating to search and seizure that presumption about books of account and documents is provided but it is limited to the summary proceedings about retention or release of the assets u/s 132(5). This cannot be extended to assessment proceedings. Our view is supported by the decision of the hon'ble Supreme Court in P.R. Metrani v. CIT 2006 (11) TMI 136 - SUPREME COURT . Thus, the case of the Revenue is not assisted by section 132(4A) in any way. Even otherwise our considered view is that such presumption can only be raised when the documents is speaking one and it reflects complete transactions without two interpretations. As a result, we hold that the impugned document No. 7 is a dumb document and no addition can be made on that basis. Therefore, we confirm the order of the ld CIT(A) and dismiss the appeal filed by the Revenue.

Summary

Issues Involved:
1. Deletion of addition of Rs. 22,30,000 by the Commissioner of Income-tax (Appeals).
2. Admission of fresh evidence by the Commissioner of Income-tax (Appeals).
3. Applicability of sections 68 and 69 of the Income-tax Act, 1961.
4. Presumption under section 132(4A) for assessment purposes.

Detailed Analysis:

1. Deletion of Addition of Rs. 22,30,000:
The Revenue appealed against the deletion of Rs. 22,30,000 made by the Assessing Officer (AO) as income from undisclosed sources. The AO based this addition on a loose paper seized during a search at the residence of late Sri Satyapal Wassan. The document was presumed to reflect advances of loans. The assessee denied any connection with the document, and affidavits were submitted to support this claim. The Commissioner of Income-tax (Appeals) accepted the affidavits and concluded that the document contained orders for iron and steel scrap, not loans, and belonged to the late Dharamveer Wassan, brother of the assessee. Consequently, the addition was deleted.

2. Admission of Fresh Evidence:
The Commissioner of Income-tax (Appeals) admitted fresh evidence in the form of affidavits from various individuals and Smt. Nirmal Kanta Wassan, widow of Dharamveer Wassan. The affidavits stated that the document was related to orders for iron and steel scrap. The Revenue argued that this fresh evidence was admitted without giving the AO an opportunity to be heard, violating rule 46A. However, the Tribunal noted that the Revenue did not raise this issue as a ground of appeal and that the affidavits were in support of explanations already provided to the AO.

3. Applicability of Sections 68 and 69:
The AO made the addition under section 69, treating the figures on the seized document as undisclosed investments. The Revenue later suggested that the addition could be considered under section 68. The Tribunal found this argument misplaced as the AO had not made the addition under section 68. Moreover, the document in question was a loose sheet, not a "book" as required under section 68. The Tribunal emphasized that a book signifies a collection of sheets bound together permanently, which was not the case here.

4. Presumption under Section 132(4A):
The Tribunal discussed the presumption under section 132(4A), which allows certain inferences during search proceedings. However, it clarified that this presumption is rebuttable and not conclusive. The affidavits submitted by the assessee successfully rebutted the presumption that the document belonged to him. The Tribunal also referred to the Supreme Court decision in P. R. Metrani v. CIT, which held that the presumption under section 132(4A) does not extend to regular assessment proceedings.

Conclusion:
The Tribunal upheld the deletion of the addition of Rs. 22,30,000, agreeing with the Commissioner of Income-tax (Appeals) that the document was related to orders for iron and steel scrap and not loans. The Tribunal also found that the fresh evidence was rightly admitted and that the document could not be considered under sections 68 or 69. Furthermore, the presumption under section 132(4A) was rebutted by the affidavits provided. The appeal filed by the Revenue was dismissed.