2019 (5) TMI 180 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 69 - as alleged agreement to sell found from third party, assessee has given ₹ 1 crore in cash to M/s. Sabh Infrastructure Ltd., on account of purchase of property - HELD THAT - Copy of the seized agreement to sell which is unsigned by any of the party to the agreement and even there is no witness to the said agreement. It was just a typed copy like photo copy as found during the course of search may be an electronic document found in search. Since it is not signed by the assessee or any other person on behalf of M/s. Sabh Infrastructure Ltd., therefore, it has no evidentiary value and cannot be read in evidence against the assessee. Similarly, the case of M/s. Sabh Infrastructure Ltd., was reopened by the A.O. for assessment year under appeal i.e., 2010-2011, but, no adverse inference has been drawn against the said Company and no addition on account of any amount received from assessee have been made in the case of their assessment u/s 147. There is no other tangible material on record to justify if assessee has paid any cash amount to M/s. Sabh Infrastructure Ltd., on account of purchase of any property. Therefore, in the absence of any tangible material and in the absence of any legally enforceable agreement found during the course of search, it is difficult to believe that assessee has paid any amount in cash to M/s. Sabh Infrastructure Ltd., as is mentioned in the reasons. No reason for the A.O. to record that there is an income escaped assessment on account of the fact mentioned in the agreement to sell. Also See SHRI KRISHAN GOPAL, PROP. M/S. KAY PEE LOCK INDUSTRIES VERSUS ITO WARD-39 (1) NEW DELHI 2017 (5) TMI 836 - ITAT DELHI Considering the totality of the facts and circumstances of the case, we are of the view that there was no justification for the A.O. to record reasons for reopening of the assessment and there was no justification for the A.O. to record his belief that income chargeable to tax has escaped assessment in the matter. In view of the above discussion, we set aside the Orders of the authorities below and quash the reopening of the assessment u/s 147/148. Resultantly, the entire additions shall stand deleted. Appeal of Assessee is allowed.

Summary

Issues Involved:
1. Validity of reopening of assessment under section 147/148 of the I.T. Act.
2. Admissibility of unsigned electronic evidence in the form of an agreement to sell.
3. Justification for the addition of ?1 crore under section 69 of the I.T. Act.

Issue-wise Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147/148 of the I.T. Act:
The case was reopened under section 148 of the I.T. Act based on information from the Investigation Wing regarding an agreement to sell found on a hard disc during a search. The assessee challenged the reopening, arguing that the unsigned document found during the search was inadmissible as evidence. The Tribunal emphasized that the validity of reassessment proceedings must be judged with reference to the reasons recorded for reopening. The reasons cited by the A.O. included an unsigned agreement to sell found at the premises of a third party, which allegedly indicated that the assessee paid ?1 crore in cash. However, the Tribunal found that the document had no evidentiary value as it was unsigned and not legally enforceable. Consequently, the Tribunal concluded that there was no tangible material to justify the belief that income had escaped assessment, thereby quashing the reopening of the assessment.

2. Admissibility of Unsigned Electronic Evidence:
The unsigned agreement to sell found on the hard disc was central to the case. The Tribunal noted that the document was not signed by any party involved, nor were there any witnesses to the agreement. It was merely a typed copy found during the search, which could be considered an electronic document. The Tribunal held that since the document was unsigned, it had no evidentiary value and could not be used against the assessee. This position was supported by the Tribunal's reference to the case of Shri Krishan Gopal vs. ITO, where it was held that photocopies and unsigned documents have little evidentiary value and cannot be admitted as evidence.

3. Justification for the Addition of ?1 Crore under Section 69 of the I.T. Act:
The A.O. made an addition of ?1 crore under section 69 of the I.T. Act, based on the unsigned agreement to sell. The assessee denied making any cash payment. The Tribunal observed that the case of M/s. Sabh Infrastructure Ltd., the alleged recipient of the ?1 crore, was also reopened for the same assessment year, but no adverse inference or addition was made against the company. The Tribunal found no other tangible material on record to justify the addition. In the absence of any legally enforceable agreement or other evidence, the Tribunal held that the addition was unjustified. Consequently, the Tribunal deleted the entire addition.

Conclusion:
The Tribunal allowed the assessee's appeal, quashing the reopening of the assessment and deleting the entire addition of ?1 crore. The decision underscored the importance of having tangible and legally admissible evidence before reopening assessments and making additions under the I.T. Act.