2002 (4) TMI 952 - AT - Income Tax

Summary

Issues Involved:

1. Addition of Rs. 60 lakhs based on entries in a seized diary.
2. Validity of the seized document as evidence for making additions.
3. Applicability of section 68 and section 69 in relation to the seized document.
4. Adequacy of the explanation provided by the assessee regarding the entries.

Summary:

1. Addition of Rs. 60 Lakhs Based on Entries in Seized Diary:
The appeal concerns an addition of Rs. 60 lakhs made by the Assessing Officer (AO) and confirmed by the CIT(A). The AO based this addition on a document seized during a search at the assessee's premises, which contained entries indicating possession and expenditure of Rs. 60 lakhs. The assessee contended that the entries were merely planning notes for his daughter's marriage, not actual transactions.

2. Validity of the Seized Document as Evidence:
The AO and CIT(A) treated the diary entries as actual transactions, rejecting the assessee's explanation of the entries being mere planning. The AO argued that the specific dates and figures indicated actual possession and expenditure, not planning. The CIT(A) supported this view, citing that the onus was on the assessee to disprove the entries.

3. Applicability of Section 68 and Section 69:
The AO applied section 68, treating the entries as unexplained cash credits. The assessee argued that the provisions of section 68 and section 69 could not be applied as the AO did not prove actual possession or expenditure of Rs. 60 lakhs. The Tribunal examined whether loose papers could be considered "books of account" u/s 68, referencing the Supreme Court's decision in V.C. Shukla, which distinguished between bound books and loose sheets.

4. Adequacy of Assessee's Explanation:
The Tribunal found merit in the assessee's explanation that the entries were planning for his daughter's marriage. The Tribunal noted that no corroborative evidence was presented by the Department to prove actual possession or expenditure of Rs. 60 lakhs. The Tribunal also observed that the jewellery and cash found during the search were fully explained and matched the records.

Decision:
The Tribunal concluded that the addition of Rs. 60 lakhs was based on suspicion without substantive evidence. The seized loose sheets did not qualify as "books of account" u/s 68. The Tribunal held that the Department failed to provide independent corroborative evidence to support the addition. Consequently, the Tribunal deleted the addition and reversed the order of the CIT(A).

Separate Judgment:
The Vice-President dissented, arguing that the diary entries should be considered u/s 68 and that the addition was justified. However, the Third Member agreed with the Accountant Member, leading to a majority decision in favor of the assessee, deleting the addition of Rs. 60 lakhs.