2021 (12) TMI 27 - HC - Income Tax

Addition u/s 69A - survey action under Section 133A - Addition based on loose paper in search - AO came to a conclusion that 'Parvez Sir' mentioned in the loose paper found in the premises of Alliance Hotel was the Respondent and added the amount to the income of Respondent under Section 69A - HELD THAT - The paper showing the name of 'Parvez Sir' was found in the premises of Alliance Hotel during the course of survey / search action of one Alliance Hotel and not from Respondent. The contents of the papers found were also not in the handwriting of Respondent. Mr. Kashan Ghaswala, partner of Alliance Hotel, has stated that 'Parvez Sir' mentioned in the paper found was not the Respondent. Even Respondent has categorically stated that he is not the 'Parvez Sir' mentioned in the papers found from the premises of Alliance Hotel. Therefore, the Assessing Officer was not justified in invoking the provisions of Section 69A of the Act because addition upon conjectures and surmises without any evidence to dispute the explanation offered by the Assessee cannot be made. There should have been some money found with the Assessee. There is no concrete evidence which has been brought on record by the Assessing Officer to establish that the entry 'Parvez Sir' in the impounded paper establishes the fact that it refers to Respondent. The Assessing Officer has made the addition only on the surmise that the impounded papers were containing entries which are dated 15/11/2006 whereas Respondent retired from the firm on 14/11/2006. In our view, the CIT(A) as well as ITAT were justified in coming to a conclusion that the Revenue could not establish the nexus between these documents with Respondent and that the Assessing Officer also has not made any efforts whatsoever to indicate that 'Parvez Sir' noted in the documents are really referring to Respondent. ITAT has not committed any perversity or applied incorrect principles to the given facts - No substantial question of law.

Summary

Issues:
1. Addition of ?2,62,40,000 under Section 69A of the Income Tax Act, 1961.
2. Addition of ?40,00,000 under Section 69A of the Income Tax Act, 1961.

Analysis:

Issue 1:
The Respondent initially declared an income of ?1,11,092 for the relevant assessment year. However, during a survey action, certain papers were found indicating a cash expenditure of ?6,88,22,000, with one item mentioning 'Parvez Sir - ?2,62,40,000'. The Assessing Officer concluded that 'Parvez Sir' referred to the Respondent and added ?2,62,40,000 to the Respondent's income under Section 69A. Additionally, a further sum of ?40,00,000 was added based on other papers found during the survey. The Respondent appealed to the Commissioner of Income Tax (Appeal), who deleted the additions. The ITAT upheld the CIT(A)'s decision. The High Court observed that the papers mentioning 'Parvez Sir' were found at Alliance Hotel's premises, not the Respondent's, and were not in the Respondent's handwriting. Statements by a partner of Alliance Hotel and the Respondent denied the connection between 'Parvez Sir' and the Respondent. The Court held that the Assessing Officer lacked justification to invoke Section 69A as there was no evidence linking the Respondent to the impounded papers.

Issue 2:
The High Court further analyzed the lack of concrete evidence linking the impounded papers to the Respondent. The Assessing Officer's basis for the addition was the dates on the documents, which did not align with the Respondent's retirement date. The Court agreed with the CIT(A) and ITAT that the Revenue failed to establish a connection between the papers and the Respondent. It was noted that the Assessing Officer made the addition based on assumptions without verifying the nexus between the documents and the Respondent. The Court concluded that the ITAT did not err in its decision, as there was no perversity or incorrect application of principles. Ultimately, the Court found the Appeal to be meritless and dismissed it without costs.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the facts of the case, the legal arguments presented, and the High Court's reasoning leading to the dismissal of the Appeal.