2015 (12) TMI 958 - AT - Income Tax

Search and seizure action u/s.132 - addition u/s 69 - Held that - Presumption u/s. 132(4A) is available only against the person from whose possession the document is found and not against the third person. In the absence of clinching evidence against the third person as stated above, no action could be taken against him. In such a situation, the Assessing Officer was not justified to make addition in question in assessee s case. In view of above, we are of the view that the addition made by the Assessing Officer is not justified and the same is directed to be deleted. It is pertinent to mention here that this case is being decided in its facts and circumstances; it cannot be applied to other cases as such. - Decided in favour of assessee

Issues Involved:
1. Reopening of the case under Section 148.
2. Addition of Rs. 5.10 crores under Section 69A based on seized documents.
3. Validity of addition based on documents found with third parties.
4. Relevance of Section 114 of the Indian Evidence Act.
5. Assessee's alleged transactions with RMD Gutkha Group.

Issue-Wise Detailed Analysis:

1. Reopening of the Case Under Section 148:
The assessee initially contested the reopening of the case under Section 148, arguing that there was no evidence linking the seized documents to the assessee and that the reopening was based on mere suspicion. However, these grounds were not pressed during the hearing and were dismissed as not pressed.

2. Addition of Rs. 5.10 Crores Under Section 69A Based on Seized Documents:
The primary issue was the addition of Rs. 5.10 crores under Section 69A, which the Assessing Officer (AO) attributed to the assessee based on documents seized from the residence of Shri Sohanraj Mehta, a C&F agent for RMD Gutkha Group. The AO relied on the notings on these documents and statements made by Shri Mehta to conclude that the amounts noted were unaccounted payments received by the assessee. The CIT(A) upheld this addition, emphasizing the evidential value of the documents and the modus operandi explained by Shri Mehta.

3. Validity of Addition Based on Documents Found with Third Parties:
The assessee contended that no addition could be made based on documents found with third parties, especially without corroborative evidence. The Tribunal agreed, noting that there was no evidence of any transaction between the assessee and the Dhariwal Group. The Tribunal emphasized that the presumption under Section 132(4A) of the Income Tax Act applies only to the person from whom the documents are seized and not to third parties. The Tribunal cited several cases, including ACIT vs. Lata Mangeshkar and Thakkar Developers Ltd., to support this view.

4. Relevance of Section 114 of the Indian Evidence Act:
The AO invoked Section 114 of the Indian Evidence Act, which allows the court to presume that evidence not produced would be unfavorable to the person withholding it. The Tribunal found this reliance misplaced, as the rule applies only when it is evident that the assessee possesses the evidence in question. The Tribunal concluded that the burden of proof was on the AO to establish that the amounts noted on the seized papers were indeed received by the assessee.

5. Assessee's Alleged Transactions with RMD Gutkha Group:
The assessee consistently denied any business relations with the Dhariwal Group and argued that there was no corroborative evidence linking the notings on the seized papers to the assessee. The Tribunal found this argument persuasive, noting that the AO failed to provide any evidence of transactions between the assessee and the Dhariwal Group. The Tribunal also noted that the mere presence of the assessee's name on the seized documents was insufficient to justify the addition without further corroborative evidence.

Conclusion:
The Tribunal concluded that the addition of Rs. 5.10 crores under Section 69A was not justified due to the lack of corroborative evidence linking the seized documents to the assessee. The Tribunal emphasized that the presumption under Section 132(4A) could not be applied to third parties and that the AO failed to meet the burden of proof. Consequently, the Tribunal directed the deletion of the addition and allowed the appeal filed by the assessee.

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