2010 (3) TMI 939 - AT - Income Tax

Block Assessment u/s 158BD - Addition u/s 68 - Unexplained loan and advances - seized diary identified as KPS-53 u/s 132 - levy of surcharge - HELD THAT - If facts of the assessee's case before us, it will be revealed that the documents found and seized and relied upon for making the addition under appeal by the Revenue have neither date nor the name of the assessee and therefore, it cannot be assumed or presumed as to when and by whom the nothings were recorded. It is also not known as to in what connection the nothings even if considered as giving and taking of money were made; meaning thereby that these documents being dumb documents, no addition can be made on the basis of assuming or presuming the nothings in those documents relating to any other transaction nor recorded in the documents. In a nutshell, any infirmity in the order of the CIT(A) on this point (sic) and therefore, following the law laid down in various decisions relied upon by the assessee in its synopsis, we uphold the order of the CIT(A) on this point. The Revenue's ground is rejected. Levy of surcharge - We, after hearing the parties, restore this issue to the file of the CIT(A) with a direction that the same may be reconsidered in the light of the decision of the hon'ble Supreme Court in the case of CIT v. Rajiv Bhatara 2009 (2) TMI 12 - SUPREME COURT . In the result, the Revenue's appeal is partly allowed for statistical purposes. Addition on Seized material bearing identification mark KPS-55 - Assessing Officer had proposed to Initiate action for making assessment u/s 158BD in the case of seven parties - HELD THAT - We are of the opinion that the Assessing Officer having taken a conscious decision as required under the provisions of section 158BD of the Act for initiating proceedings in the case of Baldev Singh and others on the basis of various documents seized the issue relating to interpretation of document under reference and consequential effect can be decided only after the decision in the case of Baldev Singh and since the Revenue has not brought any information on record as to what happened in the case of Baldev Singh, we, in the interest of justice, are of the opinion that the addition on the basis of that very document, which has to be considered in the hands of Shri Baldev Singh, cannot be sustained in the assessee's case. Consequently to meet the ends of substantial justice, we set aside this addition and restore the issue back to the file of the Assessing Officer with the directions that question of computing any undisclosed income on the basis of document placed at Revenue's paper book (supra) may be decided afresh in accordance with law after considering the action having been taken in the case of Baldev Singh and allowing the assessee a proper opportunity of being heard. Since the assessee has not raised any other issue, the assessee's appeal is allowed for statistical purposes.

Issues Involved:
1. Deletion of Rs. 85.22 lakhs on account of unexplained loan and advances based on the seized diary identified as KPS-53.
2. Deletion of surcharge levied under section 113 of the Income-tax Act, 1961.
3. Addition of Rs. 16,43,865 on the basis of seized material bearing identification mark KPS-55, page 163.

Issue-wise Detailed Analysis:

1. Deletion of Rs. 85.22 lakhs on account of unexplained loan and advances based on the seized diary identified as KPS-53:

The Revenue contended that the learned Commissioner of Income-tax (Appeals)-I, Patna erred in deleting Rs. 85.22 lakhs based on the seized diary KPS-53, arguing that the onus was on the assessee to dispute the entries in the diary under section 132(4A) of the Income-tax Act, 1961. The Assessing Officer had added Rs. 85.22 lakhs as unexplained investment under section 69 based on the diary entries, which purportedly detailed loans advanced and outstanding to different persons.

The Commissioner of Income-tax (Appeals) found several issues with the addition:
- The diary did not have any dates, signatures, or witnesses, making it impossible to determine the period to which the entries belonged.
- The Assessing Officer did not prove that the handwriting in the diary was that of the assessee.
- There was no evidence to establish the nature of the transactions or the association of the persons mentioned in the diary.
- The presumption under section 132(4A) could not be availed for making a block assessment.

The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision, noting that the documents were "dumb documents" as they did not indicate any specific period or connection to the assessee's business activities or investments. The Revenue's ground was rejected.

2. Deletion of surcharge levied under section 113 of the Income-tax Act, 1961:

The Revenue argued that the learned Commissioner of Income-tax (Appeals)-I, Patna erred in deleting the surcharge levied, holding that section 113 did not apply to searches conducted prior to June 1, 2002. The Tribunal restored this issue to the file of the Commissioner of Income-tax (Appeals) for reconsideration in light of the decision of the hon'ble Supreme Court in the case of CIT v. Rajiv Bhatara [2009] 310 ITR 105.

3. Addition of Rs. 16,43,865 on the basis of seized material bearing identification mark KPS-55, page 163:

The Assessing Officer added Rs. 16,43,865 as unexplained income based on a single loose paper identified as KPS-55, page 163, which contained various jottings and amounts. The Commissioner of Income-tax (Appeals) confirmed the addition, noting that the paper showed receipts of amounts by the appellant, and the handwriting and signatures on the paper were that of the appellant.

The Tribunal found that the Assessing Officer had accepted the assessee's submissions that the transactions might relate to Shri Baldev Singh and had proposed to initiate action under section 158BD in his case. The Tribunal set aside the addition and restored the issue back to the Assessing Officer for fresh decision after considering the action taken in the case of Baldev Singh.

Conclusion:

The Tribunal upheld the deletion of Rs. 85.22 lakhs and restored the issue of surcharge to the Commissioner of Income-tax (Appeals) for reconsideration. The addition of Rs. 16,43,865 was set aside and remanded back to the Assessing Officer for fresh consideration after the decision in the case of Baldev Singh. The Revenue's appeal was partly allowed for statistical purposes, and the assessee's appeal was allowed for statistical purposes.

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