2020 (11) TMI 38 - AT - Income Tax

Assessment u/s 153A - undisclosed income - Proof of incriminating material found in search - HELD THAT - Documents are in the shape of income tax return filed by the female members of the family of the assessee and his brother Shri Gopal Lal Yadav and only these documents were made the basis for making addition in the income of the assessee - since these income tax returns or computations sheets were already in possession of income tax department before the date of search. When once the documents which are already in possession of income tax department, then the same cannot be regarded as incriminating material unearth during the search proceedings. Assessment proceedings of the year under consideration was not pending as on the date of search and therefore, in these circumstances, the completed assessment can be interfered by the A.O. while making the assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search, which were not discharged in the course of original assessment. Admittedly, apart from these income tax returns and computation sheets seized, there is no other document found during the search which could indicate that the income declared by the assessee or his family members were incorrect. No corroborative evidence or material was brought on record by the A.O. to prove that the assessee had any other source of income other than that declared by him and that the assessee earned more than what he had declared in his return of income - A.O. had not recorded any finding and had mechanically added the amount while the A.O. ought to have supported the addition by recording findings on the basis of seized material. No addition can be made only on the basis of statements particularly when there is no material available with the department to prove that the surrender made was correct. In the present case, the department has not placed on record any material to prove that the surrender made by the assessee was correct. As admittedly, the assessment proceedings of the year under consideration was not pending as on the date of search and there was no incriminating document found, relating to the year under consideration, during the course of search. There cannot be any addition in the income of the assessee. The only document which the department is considering as incriminating material are only income tax returns and computation sheets belonging to the female members of the family of the assessee as well as his brother Shri Gopal Lal Yadav which admittedly were already in possession of the department, therefore, these documents itself cannot be termed as incriminating material . Since the documents found and seized during the course of search in the shape of income tax returns and computation sheets belonging to the female family members of the assessee as well as brother of the assessee which was already in possession of the income tax department, cannot be termed as incriminating document and no corroborative evidence/material was brought on record by the A.O. as discussed in detail above. Accordingly, the addition made by the A.O. and confirmed by the ld CIT(A) is hereby deleted. Unexplained expenditure - Addition on the basis of document seized during the course of search - HELD THAT - In the present case, the document clearly exhibits the name in which it was issued, the transaction written on it is also clear and there is no corroborative evidence to suggest that this document is part of any undisclosed activity of the assessee. The assessee has not denied about the correctness of documents but at the same time he explained that the document was related to his nephew Manoj Kumar Yadav. It clear before AO that the documents did not belong to the assessee but the A.O. still proceeded to make the addition in income, which is in our view, was not sustainable AO had not brought on record any material or evidence to establish that there had been any construction activity by assessee and that the document seized are in any related to that activity. Accordingly, the addition made by the A.O. and confirmed by the ld CIT(A) is hereby deleted. Unexplained boundary expenses in the year under consideration and the assessee has failed to explain about it - HELD THAT - There is no detail of construction of any kind and even no other documents have been found during search which could indicate about any construction activities being carried out by the assessee in the year under consideration. AO could not have concluded that the said bills were in relation to construction of shop. In para 6.1 of the order of assessment, although, the AO has tried to relate it to the documents relating to boundary wall expenses but we noted that among all the seized documents, there is only one document at Page no. 1 of Exhibit No. 7 which is relating to construction of boundary wall at Village Bhikhawas but these expenses relate to AY 2017-18 - these boundary wall expenses are not related in any way in respect of any construction in AY 2015-16 i.e. year under consideration. Therefore, we are of the considered view that the A.O. had made additions by misreading or misinterpreting the documents placed on record - Decided in favour of assessee.

Summary

Issues Involved:

1. Addition of ?12,74,700 as undisclosed income for A.Y. 2014-15.
2. Addition of ?2,92,867 as unexplained expenditure for A.Y. 2015-16.

Detailed Analysis:

1. Addition of ?12,74,700 as Undisclosed Income for A.Y. 2014-15:

The assessee contested the addition of ?12,74,700 as undisclosed income, arguing that the ITRs of female family members were wrongly considered as incriminating material. These ITRs were already in possession of the Income Tax Department before the search and thus cannot be regarded as incriminating material unearthed during the search. No other documents found during the search indicated that the income declared by the assessee or the female members was incorrect. The addition was based solely on statements recorded under section 132(4) during the search, which the assessee later retracted through an affidavit.

The Tribunal observed that the documents found during the search were already in possession of the Income Tax Department and related to different family members, not the assessee. Since no other incriminating material was found, the completed assessment could only be interfered with based on new incriminating material. The Tribunal cited various judicial pronouncements, including the Supreme Court and jurisdictional High Court, which held that no addition could be made solely based on retracted statements without corroborative evidence. The Tribunal concluded that the addition of ?12,74,700 was not sustainable and deleted it.

2. Addition of ?2,92,867 as Unexplained Expenditure for A.Y. 2015-16:

The assessee challenged the addition of ?2,92,867 as unexplained expenditure, arguing that the bills were issued in the name of a shop owned by his nephew Manoj Kumar Yadav, who had accepted the said bills through an affidavit. The Tribunal noted that the seized documents were bills and challans of TMT Bars issued in the name of 'Mehta Kirana Store,' which belonged to the nephew. The same documents were considered in the assessment of the assessee's brother, where no addition was made.

The Tribunal found that the presumption under Section 292C is limited to the correctness of documents found during the search but does not extend to presume an amount as the income of the assessee. The Tribunal cited judicial precedents that supported the view that the presumption under Section 292C is rebuttable. The Tribunal concluded that the addition of ?2,92,867 was not sustainable and deleted it.

Conclusion:

The Tribunal allowed both appeals, deleting the additions of ?12,74,700 and ?2,92,867, respectively, for A.Y. 2014-15 and A.Y. 2015-16. The Tribunal emphasized that no addition could be made solely based on retracted statements without corroborative evidence and that the presumption under Section 292C is rebuttable.