2020 (12) TMI 734 - HC - Income Tax

Addition based on document seized during search - Unsigned notings seized during the search - undisclosed income - Addition on the basis of invalid evidence and in the absence of cross examination of the witness, whose statement formed the foundation - HELD THAT - From the perusal of the order of assessment, it is evident that the AO relied on the document seized during the course of the search and not on the statement of Jayaram and brought to tax as undisclosed income. The assessee had the opportunity to adduce the evidence in rebuttal before the CIT (Appeals) as well as before the tribunal, however, he failed to do so. Even in second round of litigation, the Assessing Officer has placed reliance on the document seized during the course of search in the premises of the assessee and the aforesaid document admittedly relates to transaction in question in respect of which sale deeds have been executed in favour of the assessee. Therefore, the presumption arises that the payment was made to the assessee in view of Section 132(4A) of the Act. Despite opportunities being granted, the assessee did not lead any evidence in rebuttal and did not discharge the burden. Therefore, the finding recorded by the tribunal that a sum was an undisclosed income cannot be said to be perverse. Substantial question of law framed by a bench of this court is answered against the assessee.

Summary

Issues:
Validity of addition made by assessing officer based on evidence and lack of cross-examination opportunity.

Analysis:
The appellant, a real estate firm, appealed under Section 260A of the Income Tax Act, challenging the addition of undisclosed income during the block assessment period. The assessing officer added a sum as undisclosed income based on seized notings and a statement from a witness, Jayaram. The Commissioner of Income Tax (Appeals) partially deleted the addition, and the matter was remitted to the Assessing Officer by the tribunal. Subsequently, the Assessing Officer determined the undisclosed income again, which led to further appeals by the appellant.

The main contention of the appellant was the lack of opportunity to cross-examine Jayaram and produce the party to whom the payment was made. The appellant argued that the seized document did not prove any payment and that reliance on Jayaram's statement without cross-examination was unjust. Citing various legal precedents, the appellant emphasized the importance of cross-examination and proper evidence in such cases.

On the contrary, the revenue's counsel argued that the Assessing Officer did not solely rely on Jayaram's statement, and the statutory presumption under Section 132(4A) of the Act supported the addition. The revenue highlighted that the seized document was related to the property in question, and the appellant failed to rebut the statutory presumption despite multiple opportunities.

The court analyzed Section 132(4A) which raises a statutory presumption, shifting the burden to the assessee to rebut it with evidence. It was noted that the Assessing Officer primarily relied on the seized document rather than Jayaram's statement. The appellant had ample chances to present evidence but failed to do so, leading to the affirmation of the undisclosed income addition.

Ultimately, the court found no merit in the appeal, ruling against the appellant and in favor of the revenue. The judgment upheld the addition of undisclosed income based on the seized document and the statutory presumption, concluding that the appellant did not discharge the burden of proof to rebut the presumption.

This detailed analysis of the judgment showcases the legal intricacies involved in the case, emphasizing the importance of evidence, cross-examination rights, and statutory presumptions in income tax assessments.