2017 (4) TMI 50 - AT - Income Tax

Addition on undisclosed income - Reopening of assessment - Held that - Assessing Officer without taking into consideration all the information furnished, documents produced and available with him, make the addition of ₹ 13,63,080/- in the hands of the assessee while finalizing the assessment proceedings, without appreciating the facts, that on the basis of dump, uncorroborated and unsigned documents, without having any nexus to the payment of ₹ 13,63,080/- alleged to be paid to the assessee, the addition made only on the basis of presumption and guesswork of the Assessing Officer was not tenable, even the Directors of the company could also further not been able to prove the authenticity and validity of the document wherein reflecting the amount if any be paid to the appellant of ₹ 13,63,080/- during the Financial Year 2007-08 in their Statements recorded u/s 132 and 131 of the Income Tax Act 1961 and in their cross-examination also, therefore, the additions made are not liable to the sustained. - Decided in favour of assessee

Issues Involved:
1. Addition of ?13,63,080/- as undisclosed income.
2. Validity of assessment under Section 147 of the Income Tax Act.
3. Reliance on uncorroborated and unsigned documents.
4. Consistency in assessment based on previous years' findings.
5. Borrowed information from the Investigation Wing.
6. Rule of Consistency.
7. Statements and cross-examinations of Directors.
8. Presumption under Section 292C of the Income Tax Act.

Detailed Analysis:

1. Addition of ?13,63,080/- as Undisclosed Income:
The primary issue was the addition of ?13,63,080/- to the assessee's income as undisclosed income. The Assessing Officer (AO) based this addition on documents seized during a search operation at M/s Bright Group of Cases. The AO noted that the assessee, a faculty member, had received cash payments which were not disclosed in the return of income. Despite the assessee's affidavit denying receipt of such amounts and stating only ?91,000/- was received, the AO proceeded with the addition. The Tribunal found that the AO's addition was based on uncorroborated and unsigned documents, which were not sufficient to substantiate the alleged undisclosed income.

2. Validity of Assessment under Section 147:
The assessee contested the validity of the reassessment under Section 147, arguing that the AO relied on borrowed information from the Investigation Wing without independent satisfaction. The Tribunal noted that the AO must have his own satisfaction before recording reasons for reassessment. The reassessment was based on a report from the Investigation Wing, and the Tribunal found that the AO did not independently verify the information, making the reassessment invalid.

3. Reliance on Uncorroborated and Unsigned Documents:
The Tribunal emphasized that additions based on uncorroborated and unsigned documents are not tenable. The seized documents lacked proper authentication and were termed as "dumb documents." The Tribunal cited several judgments, including those of the Delhi High Court, which held that loose sheets or unsigned documents without corroborative evidence could not be relied upon for making additions.

4. Consistency in Assessment Based on Previous Years' Findings:
The assessee argued that similar additions made in the previous assessment year (2007-08) were deleted by the CIT(A). The Tribunal upheld the principle of consistency, stating that the AO should follow the rule of consistency, especially when the facts and circumstances are identical. The Tribunal found that the AO failed to consider the deletion of similar additions in the previous year, which should have been followed in the current assessment year.

5. Borrowed Information from the Investigation Wing:
The Tribunal highlighted that reassessment based solely on borrowed information from the Investigation Wing without the AO's independent satisfaction is not valid. The AO must independently verify the information before recording reasons for reassessment. The Tribunal referred to several judgments supporting this view, including the case of Pr. Commissioner of Income Tax Vs. G.&G. Pharma India Ltd.

6. Rule of Consistency:
The Tribunal reiterated the importance of the rule of consistency in tax assessments. It cited various judgments, including Radhasoami Satsang Vs. CIT, which held that the findings and conclusions drawn in previous years on identical facts should be followed in subsequent years. The Tribunal found that the AO did not adhere to this rule, leading to an inconsistent and unjustified addition.

7. Statements and Cross-Examinations of Directors:
The Tribunal noted that the statements of the directors of M/s Bright Professionals Pvt. Ltd. were inconsistent and lacked proper records. The directors admitted that they did not maintain proper books of accounts and that payments were made in cash without proper documentation. The Tribunal found that these statements could not be relied upon to substantiate the addition, especially when the directors themselves failed to provide concrete evidence.

8. Presumption under Section 292C of the Income Tax Act:
The Tribunal emphasized that the presumption under Section 292C is rebuttable and cannot be solely relied upon to make additions. The Tribunal referred to the case of Samta Khinda vs. ACIT, which held that unsigned loose papers without corroborative evidence have no evidentiary value. The Tribunal found that the AO's addition based on such documents was not sustainable.

Conclusion:
The Tribunal concluded that the addition of ?13,63,080/- as undisclosed income was not justified and deleted the addition. The reassessment under Section 147 was found to be invalid due to reliance on borrowed information without independent verification. The Tribunal upheld the principle of consistency and found that the AO failed to consider the deletion of similar additions in the previous year. The reliance on uncorroborated and unsigned documents, as well as inconsistent statements from the directors, was deemed insufficient to substantiate the addition. The appeal of the assessee was allowed, and the orders of the authorities below were cancelled.

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