2015 (3) TMI 266 - AT - Income Tax

Undisclosed incomes - absence of any explanation by the assessee with regard to the entries in the seized diaries in respect of which assessee did not make any declaration of income - validity of proceeding u/s. 153A - Held that - It is not in dispute that the assessee was subjected to a search u/s. 132 of the Act on 20.11.2009. As per the provisions of section 153A of the Act, the AO was duty bound to make an assessment for the six assessment years as referred to in section 153A of the Act. A.Ys. 2004-05, 2005-06 and 2007-08 are assessment years failing within the period contemplated u/s. 153A of the Act. The assessment to be done u/s. 153A is not dependent on any incriminating material being found during the course of search. There is no such requirement u/s. 153A. While concluding assessment u/s. 153A, the AO can take cognizance of any material relating to the assessee. As we have already seen, it is not in dispute that the diaries were written under his instructions and contains recordings of transactions. In fact, K.P. Shetty took copies of seized diary and admitted undisclosed income based on entries therein. In such circumstances, the plea taken by the assessee that the proceeding u/s. 153A are invalid and that the proper course would be to proceed u/s. 153C of the Act and therefore the impugned assessment order has to be held to invalid is a contention, which cannot be accepted and has no force or merit. We are also of the view that u/s. 292C of the Act, there is a presumption that the documents found in the possession or control of any person in the course of search, belongs to such person and contents of such document are true. In the light of the fact that the assessee owned the entries in the seized diary, the contents should be presumed to be true and it is for the assessee to show that all the entries in the seized diary does not represent income. The assessee having miserably failed to point out with reference to each of the entries in the seized diary as to how it does not give rise to income, the assessee cannot take a valid plea that he disowned the diary and therefore no reliance can be placed on the diary to make addition in the hands of assessee. - Decided against assessee. Addition u/s. 69C - Held that - The assessee, amongst other things, was a property developer. The payments made by the assessee are not reflected in the regular books of account. They were held to be in addition to and over and above the business transactions of the assessee. The assessee has not explained the source as to how this expenditure (payments) were made. Therefore, addition u/s. 69C of the Act is called for. As far as the receipts are concerned, the AO has taxed the excess of expenditure over the receipts. We fail to see as to how such an approach adopted by the AO can be found fault with. We do not find any merits in the aforesaid submission made by the ld. counsel for the assessee. - Decided against assessee.

Summary

Issues Involved:
1. Validity of assessment in the name of a non-existent entity.
2. Jurisdiction of the Assessing Officer (AO).
3. Application of Section 153A versus Section 153C.
4. Admissibility and reliability of seized diaries as evidence.
5. Method of determination of undisclosed income.

Issue-wise Detailed Analysis:

1. Validity of Assessment in the Name of a Non-Existent Entity:
The assessee argued that the assessment was invalid as it was made in the name of a non-existent entity, M/s Trishul Developers, which had been succeeded by M/s Trishul Buildtech Infrastructure Pvt. Ltd. (TBIPL). The CIT(A) held that the assessment was valid because the returns were filed in the name of the firm, and the AO was not informed of the change in status. The CIT(A) relied on Section 170(1) of the Act, which states that the predecessor should be assessed for the income of the previous year up to the date of succession. The Tribunal upheld this view, stating that Section 170(2) was not applicable as the predecessor was available and had filed returns.

2. Jurisdiction of the Assessing Officer (AO):
The assessee contended that the JCIT (OSD) did not have jurisdiction over the case. The CIT(A) clarified that the officer was promoted in situ and continued performing the same functions, as per the CBDT's order and the Commissioner of Income Tax's order under Section 120(4)(b). The Tribunal agreed, noting that the assessee had accepted the jurisdiction by appearing before the officer and corresponding with him.

3. Application of Section 153A versus Section 153C:
The assessee argued that the seized diaries were not found in their possession but with Mr. Vijay Bhat and Mr. Prasad Kumar, and hence proceedings should have been initiated under Section 153C. The Tribunal rejected this argument, stating that the assessee was subjected to a search under Section 132, which mandates assessment for six years under Section 153A, irrespective of where the documents were found. The Tribunal emphasized that the assessment under Section 153A is not contingent on finding incriminating material during the search.

4. Admissibility and Reliability of Seized Diaries as Evidence:
The assessee disowned the entries in the seized diaries, citing a letter from K.P. Shetty. The Tribunal dismissed this claim, highlighting that K.P. Shetty had admitted the entries were made under his instructions and had declared undisclosed income based on some entries. The Tribunal referred to Section 292C, which presumes the documents found during a search belong to the person and their contents are true unless proven otherwise. The Tribunal concluded that the assessee failed to explain the entries, and thus, the contents of the diaries were presumed to be true.

5. Method of Determination of Undisclosed Income:
The assessee challenged the AO's method of taxing the difference between receipts and payments recorded in the diaries. The Tribunal upheld the AO's approach, noting that the payments were not reflected in the regular books and were considered over and above the business transactions. The Tribunal found no fault in taxing the excess of expenditure over receipts, as the assessee did not explain the source of these payments.

Conclusion:
The Tribunal dismissed the appeals, finding no merit in the assessee's arguments. The stay petitions were also dismissed. The judgment was pronounced on February 20, 2015.