2024 (12) TMI 1386 - AT - Income Tax

Additions towards alleged unexplained expenditure and unexplained receipt of money - loose papers and documents found in the course of search at the premises of assessee - presumptions available u/s 132(4A) r.w.s 292C - HELD THAT - The loose papers/documents found in the course of search and referred to in the course of hearing on behalf of the Revenue shows some kind of estimates issued by one, R.B.Bros. (Contractor) towards in the name of Balyan House . No inquiry has been made from the contractor despite the particulars allegedly available. It is not known whether such estimate is attributable to assessee or other tax-payers living jointly in the same house. It was for the Revenue to probe in to the matter. Despite extreme course of search, no irregularity in the form of excess cash or other unaccounted assets has been claimed to be discovered. The circumstantial evidence thus, do not stand to the contrary to the assertions made by the assessee. Additions based on mere discovery of loose papers/documents without anything more, in such circumstances would tantamount to holding the conclusiveness of such loose papers for the purpose of assessment. Such view if taken, would run contrary to the judicial dicta available in this regard. The adverse view taken by the AO as well by Ld.CIT(A) based on the loose papers/documents seized in the course of search appears to be of abstract nature and without corroboration. Preponderance of probabilities in the facts of the present case is in favour of the assessee and against the Revenue. The least which the Revenue could have done was to pose a pointed question to the assessee u/s 132(4) at the time of search itself. The Revenue failed to do so. It is well settled that onus lies on the persons who alleges. The assessee cannot be placed within impossible burden to prove a negative point in the case of K.P.varghese 1981 (9) TMI 1 - SUPREME COURT . The assessee having denied its privy to the information found as per loose sheet, the onus was somewhat shifted to the Revenue. No negative evidence to support the entries was found despite a drastic step of search. Absence of material and denial by the assessee coupled with the social status of the assessee where a large number of people regularly visit the premises of the assessee, do raise estoppels. The benefit of doubt thus, requires to go in favour of the assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the additions made by the Assessing Officer (AO) towards unexplained expenditure and unexplained money based on loose papers and documents found during a search at the premises of the assessee are justified.
• The extent and applicability of statutory presumptions under Section 132(4A) and Section 292C of the Income Tax Act, 1961, in the context of the seized documents.
• Whether the burden of proof was appropriately shifted to the Revenue after the assessee denied ownership and relevance of the seized documents.
• The adequacy of the inquiries conducted by the Revenue to substantiate the additions made based on the seized documents.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Additions Based on Seized Documents

• Relevant Legal Framework and Precedents: The additions were made under Sections 69A and 69C of the Income Tax Act, which pertain to unexplained money and unexplained expenditure, respectively. The presumptions under Section 132(4A) and Section 292C were invoked by the AO.
• Court's Interpretation and Reasoning: The Tribunal noted that the presumption under Section 132(4A) is rebuttable and not absolute. The court emphasized the need for corroborative evidence to support the additions.
• Key Evidence and Findings: The seized documents were loose papers found at the premises of the assessee, which the assessee denied owning. The AO failed to conduct inquiries to substantiate the entries in the documents.
• Application of Law to Facts: The Tribunal found that the AO did not adequately prove the connection between the seized documents and the assessee. The lack of corroborative evidence and failure to question the assessee during the search weakened the Revenue's case.
• Treatment of Competing Arguments: The assessee argued that the documents did not belong to him and could have been left by visitors. The Revenue relied on statutory presumptions, which the Tribunal found insufficient without further inquiry.
• Conclusions: The Tribunal concluded that the additions based solely on the seized documents were unjustified due to the lack of corroborative evidence and proper inquiry.

Issue 2: Applicability of Statutory Presumptions

• Relevant Legal Framework and Precedents: Sections 132(4A) and 292C of the Income Tax Act provide for presumptions regarding the ownership and truthfulness of documents found during a search.
• Court's Interpretation and Reasoning: The Tribunal highlighted that these presumptions are rebuttable and require corroboration. The presumption does not automatically lead to additions without further evidence.
• Key Evidence and Findings: The Tribunal noted the absence of direct evidence linking the documents to the assessee and the lack of inquiries by the Revenue.
• Application of Law to Facts: The Tribunal applied the principle that presumptions must be supported by evidence, which was lacking in this case.
• Treatment of Competing Arguments: The Tribunal considered the assessee's denial and the Revenue's reliance on presumptions, ultimately siding with the assessee due to insufficient evidence.
• Conclusions: The Tribunal concluded that the statutory presumptions could not be the sole basis for additions without corroborative evidence.

3. SIGNIFICANT HOLDINGS

• Preservation of Verbatim Quotes: "The statutory presumption contemplated u/s 132(4A) r.w.s. 292C of the Act are not absolute but rebuttable."
• Core Principles Established: The judgment reinforces that statutory presumptions under the Income Tax Act are rebuttable and require corroborative evidence for additions based on seized documents.
• Final Determinations on Each Issue: The Tribunal set aside the additions made by the AO, ruling in favor of the assessee due to the lack of corroborative evidence and proper inquiry by the Revenue.