Case Law Details

Case Name : Ketan V Shah Vs ACIT (ITAT Mumbai)
Appeal Number : ITA No. 2321 & 2322/Mum/2013
Date of Judgement/Order : 26/06/2015
Related Assessment Year : 2005-06 & 2007-08

Facts of the Case

The facts of the case are that search and seizure action u/s. 132 of the Act was carried on 21.2.2007 at the business premises of some person as well as residential premises of the assessee. Statutory notices were accordingly issued and served upon the assessee. During the course of the assessment proceedings, the assessee was issued a notice u/s. 142(1) of the Act. It was found that the assessee have transferred funds from the current business of the assessee to other establishments, investment in other business avenues etc. The assessee left for the USA in November 2004. It appears that the assessee apprehending liabilities under different tax authorities shifted his base to the USA. During the process he has transferred huge amounts out of India. Since the assessee has not come forward with any explanation. The same is taxed in the hands of the assessee as undisclosed income which has been transferred out of the system.

Held by CIT(A)

The Ld. CIT(A) was convinced that the assessee has failed to discharge the presumption u/s. 132(4A) of the Act and confirmed the addition made by the AO. Also it was held that the AO have made the additions on the protective measures to protect the interest of Revenue.

Contention of the Assessee

The Ld. Counsel submitted that the entire addition has been made on the basis of notings on a loose paper which is a dumb document and nothing can be made out from it. It can’t be said that the said notings relates to the assessee’s undisclosed income when that particular paper was not found from the premises of the assessee. The loose paper was not found from the premises of the assessee and further the case of the Revenue that the assessee was in possession of the said loose paper can’t be made as the assessee was out of India when the search was made. Therefore, the presumption drawn is not according to the law. The Ld. Counsel continued to argue that though the AO can pass a protective assessment order but the Appellate authority have to confirm addition on substantive basis only.

Contention of the Revenue

The Revenue contended that many opportunities were given to the assessee to explain his case. Also, the assessee never attended the assessment proceedings and never came forward with explanation.

Held by the Tribunal

The Hon’ble Tribunal observed that the basis for making the addition of Rs. 19.98 crores is the loose paper which doesn’t make any sense. Merely by making additions of all the figures mentioned in the loose paper would not justify the addition of Rs. 19.98 crores. The loose papers have to be substantiated by other independent evidences as well. The entire addition has been made on the presumption mentioned u/s. 132(4A) of the Act. The provisions of Sec. 132(4A) of the Act is not applicable as the paper was not found from the possession of the assessee but from the premises of the brother of the Assessee. There is no other material available other than the loose papers which could substantiate the claim of the Assessee. Also, when the search was made the Assessee was not present in India as the Assessee was out of India from 2004 to 2009 and the search took place in 2007. Further, the Hon’ble Tribunal relied on the case of CIT Vs Smt. Durgawati Singh 234 ITR 249, in which it was held that “It is also equally true that while a protective assessment is permissible, it is not open to the income-tax appellate authorities constituted under the Act to make a protective order.” In the facts of the case nowhere it has been proved by the Revenue that the substantive additions have been made as there was no documentary evidence available with them.

Accordingly, the Hon’ble Tribunal held that it was protective Assessment and there were no reasons in making any additions. Accordingly, the order of CIT(A) and AO were set aside.

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