2019 (11) TMI 762 - HC - Income Tax

Presumption u/s 132(4A) raised in the assessment proceeding - Whether apart from from section 132(4A) the burden to explain the documents seized from the possession of the assessee during search is upon him and if it so, then has he discharge the burden ? - HELD THAT - Section 132(4A) of the Act provides that any books of account, documents, money, bullion, jewellary or other valuable articles or things found in possession or in control of any person in course of search may be presumed to be belonging to such person, and further, contents of such books of account and documents are true. But this presumption is not provided in absolute terms and the word used is may and not shall , as such the revenue has to corroborate the entries made in the seized documents before presuming that transactions so entered were made by the assessee. Presumption so provided is not in absolute terms but is subject to corroborative evidence. In the present case, Tribunal only on basis of presumption under Section 132 (4A) of the Act, reversed the finding of CIT (A), without recording any finding as to how the loose sheets which were recovered during search, were linked with the assessee. In the absence of corroborative evidence, the Tribunal was not justified in reversing the finding by the CIT (Appeals). In view of the above, we are of the considered view that order passed by Tribunal reversing the finding of CIT (A) in regard to deletion of addition made of ₹ 5,58,870/- and restoring the order of A.O. on mere presumption is unsustainable. The order dated 12th March, 2010 is set aside to that extent, and the matter is remitted back to Tribunal to decide afresh, as far as addition of ₹ 5,58,870/- is concerned, within a period of three months from today.

Summary

Issues:
1. Presumption under Section 132(4A) of the Income Tax Act in assessment proceedings.
2. Burden of proof on the assessee to explain seized documents during search.

Analysis:
1. The appeal challenged an order of the Income Tax Appellate Tribunal (ITAT) partly allowing the department's appeal. The questions of law raised were related to the presumption under Section 132(4A) of the Income Tax Act and the burden of explaining seized documents. The case involved a search at the assessee's residential premises and a joint locker, resulting in the discovery of jewelry and issuance of notices for undisclosed income assessment.

2. The Assessing Officer assessed undisclosed income, which was later challenged by the assessee before CIT (Appeals). The ITAT partly allowed the revenue's appeal, reversing the CIT (A)'s decision on certain additions. The assessee contended that there was no connection between the seized papers and the books of accounts, denying knowledge of the transactions mentioned. The Tribunal reversed the CIT (A)'s decision based on the presumption under Section 132(4A) without sufficient evidence linking the papers to the assessee.

3. The High Court emphasized that the presumption under Section 132(4A) is not absolute and requires corroborative evidence. The Tribunal's decision solely based on this presumption without establishing a connection between the seized papers and the assessee was deemed unjustified. Referring to a previous case law, the Court highlighted the need for corroborative evidence before presuming transactions based on seized documents.

4. Consequently, the High Court set aside the Tribunal's decision regarding the addition of a specific amount and remitted the matter back for fresh consideration within a specified timeframe. The Court found the Tribunal's reliance on presumption alone to reverse the CIT (A)'s decision unsustainable, thereby partly allowing the appeal and directing a reassessment based on corroborative evidence.

5. In conclusion, the judgment addressed the issues of presumption under Section 132(4A) and the burden of proof on the assessee regarding seized documents, emphasizing the necessity of corroborative evidence to support such presumptions in income tax assessment proceedings. The Court's decision provided clarity on the evidentiary requirements for establishing the validity of transactions based on seized documents during search operations.