Case Law Details
PCIT Vs Tarun Kumar Goyal (Telangana High Court)
The appeal was filed by the Revenue under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal (ITAT) dated 20.04.2021 for the Assessment Year 2016-17. The Revenue questioned the Tribunal’s decision deleting an addition of ₹6,40,00,000 that had been made on the basis of material seized during a search under Section 132.
Background of the Casevs
The respondent, an individual assessee, was assessed under Section 143(3) read with Section 153A following search and seizure operations conducted in the case of M/s. Western Constructions, its partners, and related group entities. The Assessing Officer added ₹6.40 crore to the assessee’s returned income, treating it as unexplained and unreconciled cash investment allegedly admitted during the search.
The assessee’s appeal before the Commissioner of Income Tax (Appeals) was dismissed. Thereafter, the assessee approached the Income Tax Appellate Tribunal, which allowed the appeal and deleted the addition. The Revenue challenged that decision before the High Court.
Tribunal’s Findings
Reliance on Seized Material
The Tribunal found that the addition was based solely on a loose Excel sheet allegedly showing cash payments over and above the sale consideration in connection with a project of M/s. Western Constructions. The Revenue relied upon the partner’s statement and the seized document, contending that the presumptions under Sections 132(4) and 292C applied.
The Tribunal held that the presumption under Section 292C is confined to the person from whose possession the material is seized and cannot automatically be extended to a third party. It observed that taxing statutes must be interpreted strictly and rejected the Revenue’s attempt to apply the statutory presumption against the assessee.
Statement of the Partner
The Tribunal also rejected the Revenue’s reliance on the statement of the partner of M/s. Western Constructions. It noted that the partner had stated during and after the search that he was not aware of the company’s business affairs. The Tribunal further observed that the seized document did not contain the assessee’s name. It also referred to the assessment of the recipient company, where the alleged on-money was attributed to another individual rather than the assessee, while noting that no action had been initiated against that individual.
Assessee’s Statement During Search
The Tribunal declined to treat the assessee’s post-search admission as conclusive evidence. Referring to CBDT circulars dated 10.03.2003 and 18.02.2011, it observed that admissions made during search or survey have no significance unless supported by evidence collected during the search itself.
Nature of the Seized Document
The Tribunal examined whether the seized Excel sheet could form the basis of the addition. It found that the document did not mention the assessee’s name, was not shown to be part of the regular books of account of either the seller or purchaser, and consisted only of rough notings and jottings. Relying on several judicial precedents, including decisions of the Supreme Court, High Courts and Tribunals, the Tribunal held that such loose sheets lacking dates, complete particulars and corroborative evidence constitute “dumb documents.”
The Tribunal concluded that the alleged on-money addition was based solely on such a dumb document without any independent corroborative evidence and therefore directed deletion of the addition of ₹6.40 crore.
High Court’s Decision
The High Court observed that the Tribunal had recorded pure findings of fact after considering the material on record. Upon examining the Tribunal’s order, the Court found no element of perversity in its conclusions.
The Court further held that the issues raised by the Revenue related only to questions of fact and did not give rise to any substantial question of law under Section 260A.
Accordingly, the High Court declined to entertain the appeal and dismissed the Revenue’s appeal, with no order as to costs. It also directed that any pending miscellaneous applications in the appeal would stand closed.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Heard Mr. A.Radha Krishna, learned Standing Counsel for the Income Tax Department for the appellant.
2. This appeal has been preferred by the revenue as the appellant under Section 260A of the Income Tax Act, 1961 (briefly referred to hereinafter as the Act’) assailing the legality and validity of the order dated 20.04.2021 passed by the Income Tax Appellate Tribunal, Hyderabad Bench ‘A’, Hyderabad (Tribunal) in ITA No.457/ Hyd/20 for the assessment year 2016-17.
3. The appeal has been preferred proposing the following questions as substantial questions of law:
“1. The order of the ITAT is erroneous on law and facts of the case?
2. Whether on the facts and in the circumstances of the case and in law, the ITAT is justified in deleting the addition of Rs.6,40,00,000/- made by the Assessing Officer based on the incriminating material found during the course of search under Section 132 of the Act?
3. Whether on the facts and in the circumstances of the case and in law, the ITAT is justified to consider the incriminating material found, which was when confronted with the assessee admitted the undisclosed investment under oath in sound state of mind while recording the statement under Section 132 of the Act as dumb document?
4. Whether on the facts and in the circumstances of the case and in law, the ITAT is justified to treat the seized document as dumb document when the developer has accepted the contents of the material seized during the course of search and filed return accepting the content of seized material and the content includes both cash and cheque amounts received by builder and are verifiable with bank statements?”
4. Respondent in this case is an assessee under the Act having the status of individual. Assessment order dated 28.12.2018 was passed by the assessing officer under Section 143(3) read with Section 153A of the Act for the assessment year 2016-17. The above assessment order came to be passed in the back drop of search and seizure operations carried out in the case / of M/s. Western Constructions and its four partners as well as related group entities. The assessing officer by way of the order of assessment made addition of Rs.6,40,00,000.00 to the returned income of the respondent on the ground that the said amount was unexplained and unreconciled cash investments of the respondent which was admitted during search.
5. Against the above order of the assessing officer, respondent preferred first appeal before the Commissioner of Income Tax (Appeals)-II (briefly referred to hereinafter as `CIT(A)). By the appellate order dated 31.01.2020, the first appellate authority dismissed the appeal of the respondent against which the related appeal came to be filed by the respondent before the Tribunal. This appeal was heard along with two other appeals. By the order dated 20.04.2021, Tribunal allowed the appeal of the respondent. Tribunal held as follows:
“10. We have given our thoughtful consideration to rival arguments. We find no reason to sustain the impugned identical addition of money payment in cash addition in these assessees’ hands. It is an admitted fact that learned lower authorities have gone by the alleged loose sheet only allegedly revealing the impugned payments made out at assessees’ behest over and above the sale price involving M/s.Western Pearl Project sold by M/s.Westem Constructions/vendees. Learned departmental authorities have treated the latter’s partner’s statement and the alleged ‘Excel’ sheet as the basis of the impugned additions. Learned CIT-DR also quoted Section 132(4) r.w.s.292C of the Act that such an incriminating material found/seized during the course of search carries presumption of correctness as well. He fails to rebut the clinching legislative expression used in Section 292C of the Act carrying presumption inter alia that the specified categories of the incriminating material are presumed to be belonging to ‘such persons’ and their contents are true, validly signed and are executed and are treated to be in the possession; qua the concerned assessee only than in case of any third person as well. The Revenue’s endeavour to this effect seeking to apply 292C r.w.s. 132(4) presumptions fails_ We make it clear that hon’ble apex court’s recent landmark decision (2018) 9 SCC 1 (FB) (SC) has recently settled the law that provisions of a taxing statement have to be interpreted in stricter parlance only.
11. Next comes yet another equally important facet of the instant issue. The Revenue has cited statement of M/s.Western Construction’s partner (supra) that the same duly proved that the on-money payments had been made in cash by these assessees. This argument also fails inter alia for the reasons that Shri Raju had made it clear during and after search that he was not aware of the company’s business affairs. And that the alleged document never mentioned these affairs. An assessee’s names at all as it is not only the Assessing Officer impugned assessment but even in case of the recipient M/s.Western Construction’s assessment order dt.28-12-2018 as well wherein it had been held that the on money amount was attributable to Shri Narendra Kumar Goyal than these twin assessees. Ld.CIT-DR was fair enough in informing the bench that the department has not initiated any action against Shri Narendra Kumar Goyal. That being the case, the evenue’s stand of having strictly gone by the contents of the seized document only to this effect itself is self-contradictory since Shri Goyal (assessees’ father) has nowhere been examined till date.
12. Shri Moharana’s next argument is the assessees’ statement (supra) had duly admitted the impugned on money payment. We are unable to agree with the instant plea based on mere admission made post search in view of the CBDT’s circular(s) dt. 10-03-2003 and 18-02-2011 making it clear that such an admission of undisclosed income made during search or survey does not carry any significance and the same has to be based on evidence collected in the very process only.
13. Lastly comes the crucial issue as to whether the impugned seized material / ‘Excel’ sheet (not mentioning the assessees’ names) forms a dumb document or not. We make it clear that the department has failed to corroborate the Impugned seized document indicating assessee’s alleged on money payment over and above the sale price itself. All it has done is to rely on their father’s name only. It is nowhere clear as to whether it is an alleged document forming part of the books of account maintained in the regular course of business either by the vendor or vendee side. All it contains therefore is rough notings and jottings only. This tribunal bench’s decision Nishan co-ordinate Constructions Vs. ACIT ITA No.1502/Ahd/2015; after considering the hon’ble apex court’s landmark decision in Common Cause, Vs. Union of India (2017) 77 taxmann.com 245 (SC) and CBI Vs. V.C.Shukla (1998) 3 SCC 410 (SC) holds that such loose sheets deserves not revealing to be treated as a dumb documents only since not reviling full details about the dates containing lack Particulars and and therefore, ought not to be made basis of an addition. Similar other judicial precedents ACIT Vs. Layer Exports P.Ltd., (2017) [184 TTJ 469) (Mumbai) & ITO Vs. Kranti Impex Pvt. Ltd., ITA No.1229/Mum/2013, dt.28-02-2018 (dealing with a seized document seized not either bearing the taxpayer’s name or signature). Shri Neeraj Goyal Vs. ACIT, ITA No.5951/De1/2017, dt.21-03-2018, (Del) (2012) 23 taxmann.com 269] Nagaijuna Construction Co. Ltd., Vs. DCIT, CIT Vs. S.M.Agarwal, [293 ITR 43), CIT Vs. Shri Girish Chaudhary (2008) 296 ITR 619 (Del) also echo the very principle. We accordingly hold that the impugned addition of on-money payment made in both these assessees’ hands on the basis of a mere dumb document and not corroborated by any other evidence is not sustainable. We thus direct to delete the impugned identical addition forming subject matter of adjudication in both these cases.”
6. The above findings rendered by the Tribunal are pure findings of fact.
7. We have carefully gone through the order .of the Tribunal and we are of the considered opinion that such finding of the Tribunal does not suffer from any element of perversity.
8. That being the position, the questions proposed before us are questions of facts and not any question of law, not to speak of any substantial question of law.
9. For the reasons indicated above, we are not inclined to entertain the appeal.
10. Appeal is accordingly dismissed. However, there shall be no order as to costs.
11. As a sequel, miscellaneous applications pending, if any, in this appeal, shall stand closed.
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