2015 (6) TMI 608 - AT - Income Tax

Undisclosed cash receipt - validity of the assessment u/s.153A - Held that - The presumption u/s 132(4A) is available only in respect of the person from whom the paper is seized. It could not be applied against a third party and hence, no addition could be made on the basis of the evidence found with third party. In this case, the addition has been made on the basis of the documents found with Dhariwal Group and thus, the presumption u/s. 132(4A) could not be used against the assessee since no incriminating documents were found with it. In the case of ACIT Vs. Lata Mangeshkar (Miss) (1973 (6) TMI 13 - BOMBAY High Court ), the addition was made in the hands of the assessee on the basis of the entries in the books of third persons. Hon ble Bombay High Court held that such addition could not be made only on the basis of the notings in the books of third persons. The facts of the present case are covered by the decision of Lata Mangeshkar (supra). It is a settled legal position that the decision of jurisdictional High Court is binding on all authorities below it. Thus, the reliance placed by the Assessing Officer on the loose papers is not justified at all. Therefore, the question of making any addition is not justified in the absence of other corroborative evidence to that effect. Since in the instant case the assessee from the very beginning has denied to have received any such payment from M/s. Dhariwal group through Mr. Sohan Raj Mehta and since no incriminating material was found from the residence of the assessee during the course of search and since the assessee is not dealing with M/s. Dhariwal group in his individual capacity, therefore, respectfully following the decisions cited above and in view of our reasonings given earlier, we are of the considered opinion no addition in the hands of the assessee can be made. Since it is held that the assessee has not received any amount, therefore, the question of taxing the same u/s.56(2)(vi) as held by CIT(A) does not arise. In this view of the matter, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition of ₹ 1 crore for A.Y. 2006-07 and ₹ 20 crores for A.Y. 2007-08. Grounds raised by the assessee on this issue are accordingly allowed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of assessment under Section 153A of the Income Tax Act.
2. Addition of undisclosed income based on seized documents from a third party.
3. Application of Section 56(2)(vi) of the Income Tax Act for taxing the alleged undisclosed income.

Detailed Analysis:

1. Validity of Assessment under Section 153A:
The assessee challenged the validity of the assessment under Section 153A, arguing that no incriminating documents or unaccounted assets were found during the search of the assessee's premises. The CIT(A) held that the requirement of making an assessment or reassessment under Section 153A has no relation to the nature of incriminating material found or not found during the search. The provisions of Section 153A require the total income for the preceding six years to be assessed or reassessed in pursuance of notice under Section 153A, which includes any kind of income, not restricted to undisclosed income or escaped income.

2. Addition of Undisclosed Income Based on Seized Documents from a Third Party:
The AO made additions based on documents seized from the premises of a third party, Shri Sohan Raj Mehta, which allegedly indicated that the assessee received unaccounted cash from M/s. Dhariwal Industries Ltd. The assessee denied receiving any such amounts and requested cross-examination of the individuals involved, which was not granted. The CIT(A) upheld the addition, relying on the statement of Shri Sohan Raj Mehta and the seized documents. However, the Tribunal found that the seized documents were not sufficient to establish that the assessee received the amounts, especially when no incriminating evidence was found during the search of the assessee's premises. The Tribunal noted that the presumption under Section 132(4A) of the Income Tax Act applies only to the person from whom the documents were seized and not to third parties. Various judicial precedents, including those from the Hon'ble Supreme Court and different High Courts, support the view that additions cannot be made solely based on entries in documents seized from third parties without corroborative evidence.

3. Application of Section 56(2)(vi) of the Income Tax Act:
The CIT(A) held that the amount received by the assessee was without consideration and therefore liable to tax under Section 56(2)(vi) of the Income Tax Act. This provision was introduced to curb bogus capital-building and money-laundering by treating any sum received without consideration as income from other sources. However, the Tribunal found that since it was not established that the assessee received the amount, the question of taxing the same under Section 56(2)(vi) does not arise.

Conclusion:
The Tribunal allowed the appeals filed by the assessee, directing the deletion of the additions made for undisclosed income for the assessment years 2006-07 and 2007-08. The Tribunal held that the additions were not justified as they were based on documents seized from a third party without corroborative evidence and that the provisions of Section 56(2)(vi) were not applicable in the absence of proof that the assessee received the amounts.