Estate Investment Company Pvt. Ltd. Vs DCIT (ITAT Mumbai)
“Dumb Diaries Can’t Create Tax Liability” – ITAT Deletes Additions Based on Uncorroborated Search Notings & Retracted Statements
Assessee faced search & survey operations on 07.10.2021. Diaries & loose sheets maintained by an employee (PKS) were found, containing rough cash entries allegedly related to NOC receipts for release of rights in Eksali lands & other cash dealings. AO treated diary entries as conclusive evidence & , based on statements of PKS, NKS & KB recorded u/s 132(4), made huge additions towards capital gains & unexplained cash u/s 69A across multiple years.
Assessee argued that the diaries were personal rough notings, not part of books of account, full of duplications & illegible entries, & not maintained under company direction. Both PKS & NKS retracted their statements explaining that entries were rough & unverified. No corroborative evidence or independent verification of parties mentioned in the diaries was made by AO.
CIT(A) gave partial relief by deleting additions on non-KB entries u/s 69A & correcting computational mistakes, but confirmed additions of ₹4.96 Cr as capital gains & ₹2.50 lakh u/s 69A.
Before ITAT, Assessee raised both legal & factual grounds. On merits, ITAT held that statements of PKS & NKS were inconsistent & retracted, diaries were personal & uncorroborated, & AO failed to summon any parties, conduct verification, or apply independent mind. Presumption u/s 132(4A) does not apply, as diaries were not found from the Assessee but from employee. Entries were “dumb documents” & could not form basis of addition. Therefore, additions of ₹4.96 Cr (capital gains) & ₹2.50 lakh (u/s 69A) were deleted.
