2017 (11) TMI 897 - AT - Income Tax

Additions in the hands of the assesses on protective basis - a search and seizure operation was conducted in the group concerns of M/s. Dhariwal & Family and also the residential premises of the assessee u/s. 132 - Held that - While making the addition, the AO was of the view that amount reflected in the slips were paid to assesses on behalf of Dhariwal Industries Ltd. Therefore, the amount reflected in the slip either belonged to Mr. Sohanraj Mehta or Dhariwal Industries Ltd. The assesses being employees of Dhariwal Industries Ltd., had no right to retain the said amount. More over, during the course of assessment proceedings, the assesses have vehemently denied any receipt of the amount reflected in the slips. Under these circumstances, if the AO intends to make an addition in the hands of assesses, he has to bring out some more evidence on record to justify that the amount reflected in the slips were paid to the assesses and assesses have retained it. In the absence of this evidence, we are of the view that the addition made on protective basis in the hands of assesses deserves to be deleted. We accordingly find no infirmity in the order of the CIT(Appeals), who has rightly deleted the additions. Accordingly, we confirm the order of CIT(Appeals). - Decided against revenue.

Issues Involved:
1. Validity of protective assessments.
2. Evidence supporting the receipt of amounts by the assesses.
3. Presumption under Section 132(4A) of the Income-tax Act.
4. Deletion of additions by the CIT(Appeals).

Issue-wise Detailed Analysis:

1. Validity of Protective Assessments:
The Revenue conducted a search and seizure operation under Section 132 of the Income-tax Act, 1961, at the premises of the assesses and their group concerns. The AO made protective assessments based on seized documents indicating payments to the assesses. The Tribunal noted that the AO's protective assessments were based on the statement of Mr. Sohanraj Mehta, who claimed that the amounts were paid to the assesses on behalf of Dhariwal Industries Ltd. However, the assesses denied receiving any amounts, and the Tribunal found that no substantial evidence was provided to justify the protective assessments.

2. Evidence Supporting the Receipt of Amounts by the Assesses:
The Tribunal observed that the seized documents, which included names of the assesses, suggested payments made by Mr. Sohanraj Mehta. However, the assesses denied receiving any such payments. The CIT(Appeals) found that merely recording the names of the assesses on a piece of paper did not merit assessment in their hands. The Tribunal upheld this view, emphasizing that the AO failed to bring additional evidence to prove that the assesses retained the amounts reflected in the seized documents.

3. Presumption under Section 132(4A) of the Income-tax Act:
The Tribunal discussed the presumption under Section 132(4A), which applies to the person from whom documents are seized. In this case, the seized documents were found in the possession of Mr. Sohanraj Mehta, not the assesses. The Tribunal noted that the presumption under Section 132(4A) could not be extended to the assesses, and the loose papers found with Mr. Sohanraj Mehta could not be presumed to belong to the assesses or reflect their business transactions.

4. Deletion of Additions by the CIT(Appeals):
The CIT(Appeals) deleted the additions made on a protective basis, finding no substantial evidence to support the AO's claims. The Tribunal upheld this decision, referencing various Tribunal orders that had similarly deleted additions based on documents found with Mr. Sohanraj Mehta. The Tribunal concluded that the AO's estimation of unaccounted income and suppressed turnover was not supported by any cogent evidence, such as unaccounted purchase or sales vouchers, transport receipts, or unaccounted purchase receipts.

Conclusion:
The Tribunal dismissed the appeals of the Revenue and the cross objections of the assesses, confirming the order of the CIT(Appeals). The Tribunal reiterated that the AO failed to provide sufficient evidence to substantiate the protective assessments and the alleged receipt of amounts by the assesses. The Tribunal's decision emphasized the importance of concrete evidence in making additions and upheld the principle that mere presumptions or unverified documents could not justify such assessments.

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