2020 (1) TMI 1107 - AT - Income Tax

Assessment u/s 153A - unexplained money - unexplained expenditure u/s 69C - cash found during the search proceedings - additions loose sheets and rough papers - assessee submits that same belongs to Business and kept at residence of assessee - HELD THAT - AO has alleged that the assessee has incurred an expense in connection with the conversion of land from agriculture to NA with respect to survey numbers. However, the AO without verifying the fact from the parties in whose name the survey number was registered has treated the expenditure as unexplained u/s 69C - AO was under the obligation to carry out the necessary verification before reaching to the conclusion that the assessee has incurred unexplained expenditure. From the list of the expenditures there were mentioned several survey numbers of the land but no enquiry was conducted by the authorities below. In this respect, we would like to discuss the judgment passed by the Hon ble Delhi High Court in the matter of CIT, C-1-vs-Vatika Landbase Pvt. Ltd. 2016 (2) TMI 835 - DELHI HIGH COURT . In that matter, the Assessing Officer did not make any enquiry from the employee or from buyers of flats in respect of actual price paid by them. In that circumstances of the case the impugned addition made merely on the basis of unsigned and undated seized document has been held to be unsustainable in the eye of law. Thus, the proposition made by the revenue towards making addition on the basis of the figures mentioned on the said loose dumb document, thus, cannot be considered to be valid evidence in the absence of any enquiry made by the authorities which ought to have done in the manner as already dealt with us hereinabove. No authority acting judicially would have acted on the basis of a loose paper having no evidentiary value had there been minimum application of mind. Information contained in the seized documents are just the information without any support and therefore no credentials can be given to such information until and unless it is based on some materials. As such, seized loose documents found during the search should be read in association with the other materials before reaching to the conclusion that such seized material represent the income of the assessee. We also note that the lose paper found during the course of search did hold evidentiary value unless the same is supported by cogent material in regard we find guidance and support from order of the Hon ble Supreme Court in the case of Common Cause (A Registered Society) Vs union of India 2007 (9) TMI 25 - SUPREME COURT Regarding the seizure of cash we note that there was the reconciliation statement furnished by the assessee to justify the availability of cash found at his residence during the search proceedings. As such, there was no defect pointed out by the authorities below in the reconciliation statement furnished by the assessee. Therefore, we are of the view that such cash has been duly explained the assessee. Documents seized during the search proceedings is nothing but representing the dumb documents and therefore no additions based on the same can be made in the hands of the assessee. Accordingly we reverse the order of the authorities below and direct the AO to delete the addition made by him - Decided in favour of assessee.

Issues Involved:
1. Validity of proceedings under section 153A of the Income Tax Act.
2. Addition of ?2,02,56,330/- as alleged suppressed purchase price under section 69C.
3. Addition of ?10 lakhs as unexplained money under section 69A.

Issue-wise Detailed Analysis:

1. Validity of proceedings under section 153A of the Income Tax Act:

The assessee challenged the validity of the notice issued under section 153A of the Act. The Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] rejected the contention, observing that the assessment was framed under section 143(3) after issuing notices under sections 143(2) and 142(1). The Tribunal noted that the search was conducted on 03-01-2013, and as per section 153A(1)(b), proceedings are initiated for the six assessment years immediately preceding the year of the search. The assessment year under consideration did not fall within this period. Additionally, the assessment was completed under section 143(3), and no proceedings were initiated under section 153A for the year under consideration. Therefore, the Tribunal dismissed the grounds of appeal regarding the validity of proceedings under section 153A.

2. Addition of ?2,02,56,330/- as alleged suppressed purchase price under section 69C:

During the search, documents indicating cash payments of ?2,02,56,330/- were found. The assessee claimed these documents were rough estimates with no evidentiary value and not in his handwriting. The AO disagreed, citing section 292C, which presumes documents found in possession belong to the person. The AO treated the amount as unexplained expenditure under section 69C. The assessee argued that the group had already disclosed total expenditures during the relevant years, and the documents did not represent unexplained expenditures. The Ld. CIT(A) upheld the AO's addition, noting the assessee's contradictory statements and lack of documentary evidence.

The Tribunal noted that the AO failed to verify the facts from the parties in whose name the survey numbers were registered. The Tribunal emphasized that loose sheets without corroborative evidence have no probative value. Citing precedents, the Tribunal observed that such documents must be supported by cogent material. The Tribunal concluded that the documents were "dumb documents" and could not be relied upon for making additions. Therefore, the Tribunal directed the AO to delete the addition of ?2,02,56,330/-.

3. Addition of ?10 lakhs as unexplained money under section 69A:

Cash of ?10 lakhs was found during the search. The assessee explained that the cash represented business cash kept at the residential premises, supported by a reconciliation statement. The AO disagreed, stating the onus was on the assessee to explain the source of money. The Ld. CIT(A) upheld the AO's addition, noting the assessee's failure to provide a satisfactory explanation.

The Tribunal observed that the reconciliation statement furnished by the assessee was not disputed by the authorities. Therefore, the Tribunal held that the cash was duly explained and directed the AO to delete the addition of ?10 lakhs.

Conclusion:

The Tribunal allowed the appeal in part, holding that the additions based on the seized documents were not justified and directing the AO to delete the additions made. The order was pronounced on 21/01/2020 at Ahmedabad.

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