2016 (3) TMI 632 - AT - Income Tax

Cash consideration on sale of tenancy rights - Held that - CIT(A) was that it was highly probable that when a deed of conveyance was executed in favour of the tenant by the trust, consideration paid otherwise than in cash would have been pocketed by the assessee. The CIT(A) in coming to the above conclusion has proceeded on the presumptions without sufficient evidence to justify such conclusion. In our view circumstantial evidence in this case by no stretch of imagination can lead to a conclusion that the assessee would have received the cash consideration on sale of tenancy rights. In this regard it is also seen that none of the transferee were examined with reference to the seized documents. In our view therefore neither the addition of ₹ 10 lakhs nor addition of ₹ 2.30 lakhs which is agitated by the revenue in its appeal can be sustained.- Decided in favour of assessee Applicability of section 292C - Presumption as to assets, books of account, etc - Held that - Though the transactions might relate to M/s. BCL Financial Services the assessee in his capacity as Managing Director had received the moneys set out in the form of notings in the seized papers. He has pointed out that when similar situation prevailed in respect of moneys received by the assessee on behalf of Brijlal Todi Charitable Trust, the AO drew an inference that the assessee being in complete control of the activities of the trust ought to have received on money from the transferees. According to him such an inference had to be drawn even the seized document is attributable to M/s. BCL because the assessee was the Managing Director in complete control of BCL. Again reference was made to provision to section 292C of the Act. The learned counsel for the assessee relied on the order of CIT(A). We have given a careful consideration to the rival submissions, The first aspect as we have already noticed, is that the AO was convinced that seized documents NT/1 34 to 38 belong to BCL and that appropriate proceedings will be initiated against BCL in respect of transactions. Having come to such a conclusion the AO could not have attributed the entries in the seized documents to the assessee. As far as page 34 of the seized document is concerned we find that this contains more of a memorandum of things to be done which is in the form of computer print out. There is nothing brought on record as to who is the author of the documents. Besides the above no adverse inference can be been drawn from the seized documents because many of the writing has been struck out in the seized paper. As far as page 35 is concerned, again there are several entries which have been scored off. On the top of page 35 a list of five names and certain figures against these names are found. As to whether the sum shown against the names are monies receivable or payable by the assessee, has not been brought out on record. As rightly held by the CIT(A), the document does not speak for itself. There is nothing to show that the seized documents actually evidence sale of cars and that these payments had to be received by the assessee. As far as pages 36 to 38 are concerned again these documents seem to record approximate sale price realizable and the course of action to be adopted and time frame within which certain actions are to be taken. This cannot be the basis to come to a conclusion that there was sale and the figures mentioned in the documents were in fact realized by the assessee. Besides the above all these entries are not attributable to the assessee and were that of BCL. We are also of the view that the presumption u/s 292 C of the Act, in the given facts and circumstances of the case, stand rebutted - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of additions based on seized documents NT/1.
2. Attribution of undisclosed income to the assessee.
3. Validity of additions based on entries in seized documents NT/1 pages 34 to 38.

Issue-Wise Detailed Analysis:

1. Deletion of Additions Based on Seized Documents NT/1:

The primary issue revolves around the deletion of additions totaling Rs. 2,30,000 out of Rs. 12,30,000 made based on entries recorded in seized document NT/1 (pages 20 & 21). The CIT(A) held that Rs. 2,30,000 represented an advance for contemplated sales, and since the properties were not sold, no income generation occurred. The CIT(A) concluded that the remaining Rs. 10 lakhs were rightly taxed as undisclosed income of the assessee, based on circumstantial evidence and the proximity of the assessee to Brijlal Todi Charitable Trust, which was the owner of the properties in question. The Tribunal found that the CIT(A) presumed the receipt of Rs. 2.5 lakhs by cheque was by the assessee, which was incorrect as the cheque was given to Brijlal Todi Charitable Trust. The Tribunal held that the seized documents could not be attributed to the assessee and allowed the Cross Objection by the assessee, dismissing the revenue's appeal.

2. Attribution of Undisclosed Income to the Assessee:

The CIT(A) attributed Rs. 10 lakhs as undisclosed income to the assessee based on the assumption that the assessee, being in control of Brijlal Todi Charitable Trust, pocketed the cash received from the sale of rooms. The Tribunal disagreed, stating that the properties belonged to the trust and not the assessee. The Tribunal emphasized that the presumption under section 292C of the Income Tax Act, 1961, is rebuttable and cannot be equated to conclusive proof. The Tribunal found no evidence to support the CIT(A)'s conclusion that the assessee received the cash consideration on the sale of tenancy rights.

3. Validity of Additions Based on Entries in Seized Documents NT/1 Pages 34 to 38:

The assessee contended that pages 34 to 38 of NT/1 belonged to M/s. BCL Financial Services Ltd., of which the assessee was the Managing Director. The AO initially accepted this contention but still raised queries regarding these pages. The CIT(A) deleted the additions made by the AO, stating that the entries were dumb and lacked corroborative evidence. The Tribunal upheld the CIT(A)'s decision, noting that the documents were not attributable to the assessee and were more of a memorandum of things to be done. The Tribunal found that the presumption under section 292C of the Act was rebutted and dismissed the revenue's grounds related to these pages.

Conclusion:

The Tribunal dismissed the revenue's appeal and allowed the assessee's Cross Objection, finding that the additions based on the seized documents NT/1 were not sustainable. The Tribunal emphasized that the properties belonged to Brijlal Todi Charitable Trust and not the assessee, and the entries in the seized documents could not be attributed to the assessee without sufficient evidence.