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Case Law Details

Case Name : DCIT Vs Delco India Pvt Ltd( ITAT Delhi) ITA no 2453/Del/2013 and 2925-2926/Del/2013
Appeal Number : 16/06/2015
Date of Judgement/Order :
Related Assessment Year :

Once assessee discharges primary onus cast on him to explain unaccounted transaction, having explained with the help of evidence, onus shift to revenue to rebut the same.

Brief Facts

1. A search and seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as “Act” ) was carried out by the Investigation Wing on 26.02.2009 on Shri Ram Hari Ram Group of cases. the case of the present assessee amongst others was also covered u/s 133A of the Act during the course of the search and survey in the group cases of Sri Ram Hari Ram. A perusal of the assessment order shows that as per the Appraisal Report, during the course of the search/survey at the business premises of M/s Delco India Pvt. Ltd., loose papers pertaining to the assessee company were found and impounded. Subsequently the case was centralized in Central Circle-2, New Delhi by CIT, Delhi-IV, New Delhi u/s 147 of the Act vide his order F.No.-CITIV/ Centralization/149/2009-10/2298 dated 30.11.2009. the AO takes into consideration the Annexure-2 wherein amongst other pages specific pages 11-14 contained details of transactions with M/s Smridhi Sponge. The Assessing Officer considering these documents observed that they pertained to 2007-08 & 2008- 09 assessment year. Accordingly in view thereof the case of the assessee for these two years was re-opened after recording of reasons.

2. Thereafter, the AO required the assessee to explain the documents found and seized in respect of the transactions with M/s Smridhi Sponge for the two years. In response thereto the assessee have submitted that the documents do not pertain to it. The said submission was supported by filing an affidavit to the said extent. Alongwith the same, the assessee as per record relying upon its efforts on the web searches of the said concern maintained with the Registrar of Companies (ROC) and the official income tax site submitted the assessment details of M/s Smridhi Sponge as well as list and names and addresses of its Directors including the mailing address of M/s Smridhi Sponge.

3. The AO accordingly issued notice u/s 133(6) of the Act at the given address of M/s Smridhi Sponge requiring the said concern to furnish copy of the ledger account for the business carried out with M/s Delco India Pvt. Ltd. The notice was received back unserved with the remark “left”. In view of these facts, the AO considering that the entries on the pages which

4. The assessee was required to explain and co-relate with its books of accounts remained unverifiable and unexplained, he concluded that in the absence of any verification the assessee company had relations with M/s Smridhi Sponge and was dealing in business with it out of its books of account. assessment order and addition was made as undisclosed income u/s 68


Whether addition made by AO for undisclosed income of Rs 2,68,11,454/- is justifiable in view of the fact that assessee has rebutted onus cast of him with the help of information/ documents/evidence, which he could have made to support his claimed that he has not done any transaction with alleged party.

Contention of Assessee

1. that the assessee is answerable for explaining the transactions found on its computer with M/s Smridhi Sponge. The assessee’s answer has all along been on record as no transactions were ever done by the assessee with the said concern who was a stranger to the assesse. The assessee has done what it could have done best in the circumstances where he is called upon to explain the transactions of a stranger. The assessee has never said that the documents were not found from its computer. The explanation has repeatedly been offered that some person may have used the computer to email or take a print out or whatever and the unconnected facts of M/s Smridhi Sponge may have remained on its computer but the facts remains that the assessee had no interaction with the said concern.Apart from the fact that the specific unrelated documents were found there is no other evidence with the department to insist that the assessee had transactions with the said concern.Nothing has been placed on record to rebut the repeated denial of the assessee on record including the denial on affidavit.

2. The assessee is a manufacturer of containers; the group i.e Sri Ram Hari Ram Group is a jewelers group and the seized document refer to transactions in “Iron Ore” which is not the raw material of the assessee whose raw material necessarily is steel. However, Smridhi Sponge and Galaxy Exports on the other hand as per ROC site and the facts in the seized documents evidently show are dealing in M.S.Ingot and “Iron Ore” is a raw material for this. Thus the CIT(A) while confirming the findings of the AO has erred in holding that there was a similarity in the business of the assessee and M/s Smridhi Sponge whereas the facts in reality are to the contrary.

3. That for the efforts done by the assessee which ideally should have been done by the department it was submitted that instead of carrying the enquiry to its logical conclusion the authorities have instead viewed the efforts of the assessee with suspicion and forget about lauding the assessee have instead caste aspersions on the efforts of the assessee who out of the compulsions and necessities of needing to save itself from the consequences of the additions on unrelated facts has all along given relevant facts searched diligently on the official government sites and made available to the department.

4. It was his submission what stopped the department from making necessary inquiries from either the Directors of M/s Smridhi Sponge or the Assessing Officer of M/s Smridhi sponge or the concern who has honoured the cheque payment to M/s Smridhi Sponge namely M/s Galaxy Exports (P). Ltd. or the Bankers of M/s Galaxy Exports. The details of the cheque and the transacted amounts it was submitted tallied with the details of withdrawal from the specific account where the branch code, the city and the address of the concerned banks of M/s Galaxy Exports were all given and tallied. Similarly even for M/s Smridhi Sponge the PAN and the tax jurisdiction of the said concern including the names and particulars of the Directors of M/s Smridhi Sponge their shareholders and shareholding pattern, their long lasting interaction demonstrated from the Balance sheets filed with ROC stood addressed. In the said circumstances, what stopped the department from making necessary enquiries from the said concern remains unaddressed.

5. Assessee has filed fresh evidence in CIT(A), and CIT(A) has asked remand report from AO on the new evidence, in this connection its was submitted that that even in the Remand proceedings, the only action taken by the AO after initially objecting to the admission of the fresh evidence in the Remand Report was that notice was sent to the new address of M/s Smridhi Sponge Ltd. At Kolkata u/s 133(6) and also at Jamshedpur which as per record came back with the comment “left” and “addressee left” respectively. It is submitted that these comments do not mean that the said concern was not in existence and it merely suggests that the postman did not then find the said concern there thus it was argued nothing turns on the said comments. It was also his argument that what stopped the AO to carry out the necessary verification from the AO of M/s Smridhi Sponge Ltd. the details was available with him and this aspect has not been addressed by the Revenue.

6. concerned officers show no desire or effort to bring those concerns within the tax net and not bothering with the fact that as a result of this repeated inaction they have caused heavy losses to the Revenue in collecting the just and due taxes from them which ideally should have been their primary concern the Assessing Officer and the CIT(A) have satisfied themselves by picking a soft target wrongly on facts

Contention of Revenue

1. Relying upon the assessment order and even the impugned order, it was his submission that the manner in which the assessee is coming up with information about the M/s Smridhi Sponge Ltd. Repeatedly giving different addresses, it demonstrates the falsity of the pleadings of the assessee in stating that is has no interaction with the said concern.

2. In the face of the various details of these concerns given by the assessee, both the authorities it was submitted have rightly rejected the false claim of the assessee and held that the assessee on facts had interactions with M/s Smridhi Sponge Ltd. which are not recorded in its books of accounts. These arguments of the assessee it was submitted have been strongly deprecated by the CIT(A) who has rightly dis-believed the confirmation belatedly relied upon stated to be from M/s Smridhi Sponge Ltd.

3. It was submitted since the seizure of documents was from the possession of the assessee in terms of the provisions of section 292(C) of the Act the burden it was submitted has not been discharged by the assessee. It was his submission that the assessee has sent the department on a wild goose chase all over the country. Acting on the information provided the AO as per record it was submitted has sent notice u/s 133(6) which returned unserved.

4. Even AO has sent new notice u/s 133(6) after direction of CIT(A) , theses notice sent also return with the comment “left”. In these facts having carried out the entire enquiry as per the information provided by the assessee, the arguments that the addition is not warranted on facts it was submitted is not correct. The burden placed on the assessee u/s 292(C), it was submitted has not been discharged and the income has rightly been added in the hands of the assessee.

5. Further relying upon the principle laid down by the Apex Court in the case of Dhakeshawari Cotton Mills vs CIT 26 ITR 775 (SC) and Homi J Gheesta vs CIT 41 ITR 135 (SC) it was submitted that there was no need for the department to prove by way of a direct evidence that the specific sum was an income in the hands of the assessee as the AO is not fettered by technical rules of evidence and he is entitled to act on material which may not be accepted as evidence in a Court of law and since the documents were found from the premises of the assessee, the burden of proving that it was not so was cast upon the assessee.

Observation/decision of Hon’ble Tribunal

1. What repeatedly emerges from the above-mentioned facts and evidences is that the assessee during the assessment proceedings and in the appellate proceedings makes an all out mammoth exercise to give the details of M/s Smridhi Sponge Ltd. and also traces the two specific cheque numbers mentioned in the seized documents which were paid by the bankers of M/s Galaxy found mentioned as “Galaxy” in the seized documents however surprisingly for unstated reasons the department sits back after issuing notices to the address provided of M/s Smridhi Sponge relying blindly on section 292C of the Act only on the rationale that the print outs had been founded from assessee’s premises and thus they necessarily disclosed the assessee’s undisclosed transactions with the said concern. The said conclusion of the tax authorities is completely misplaced on facts.

2. A perusal of section 292C shows that a statutory presumption can be drawn where any documents is found in possession of a person in the course of a search or survey that it belongs to “such a person”. A presumption is also drawn that the contents of such a document are true. The presumption having been drawn as per law is required to be confronted and the documents as per record have been confronted.

3. In the facts of the present case, the assessee has denied having any transactions with M/s Smridhi Sponge and has also denied consequently the contents of the seized document as relatable to it; the denial as per the assessment order is also on an affidavit; the particulars available in the public domain procured through the internet searches from the ROC and the official income tax sites as per print outs of the downloads are relied upon. The fact that these were unimpeachable third party evidences that too from the official government sites goes without saying. In these facts, merely sending notices to the addresses provided on the ROC site cannot be said to be rebutting the evidence on record.

4. The fact that these were relevant unimpeachable evidence has not been doubted. In these facts the reluctance of the tax authorities to address this issue and to carry the enquiries to the logical conclusion is a glaring fact of deliberate inaction. The repeated inactions speak louder then the half heated actions undertaken. The evidences remains unrebutted on record. No effort to co-relate the assessee’s alleged undisclosed transactions with M/s Smridhi Sponge appear to have been addressed so as to demolish the consistent claim on record that it had no dealings with the said concern. In such a background the departmental stand that the level of information available with the assessee proved that the assessee had interactions with the said concern is adding insult to injury.

5. We fail to understand why no efforts whatsoever as per record were made by the AO either in the assessment proceedings or Remand proceedings to obtain relevant information from the Assessing Officer of M/s Smridhi Sponge Ltd. We are of the view that as far as the assessee is concerned the onus to address the seized documents qua which a statutory presumption has been drawn stands fully discharged.

6. The onus placed upon the assessee is a rebuttable onus and on facts the same has been discharged. The onus thus having shifted to the department castes a duty upon the Revenue to act upon the information made available to them and takes action thereon. As far as the assessee is concerned, the income has wrongly been assessed in its hands. The reliance placed by the ld. CIT DR that burden cast upon the assessee to prove that it was not so; or that the AO cannot be fettered by technical rules of evidence are well-settled legal position and in the facts of the present case do not help the Revenue in any way as the onus on the assessee is a rebuttable onus and having rebutted the onus it shifts on the Revenue.

7. The efforts of the assessee through third party evidences that too by way of information on the government web sites in public domain by way of making information available from the ROC and income tax sites gives more than sufficient information to the tax department to act thereon which for reasons best known to the concerned officers remains unaddressed however, as far as the assessee is concerned the onus to meet the statutory presumption stands discharged. No corroborative evidence, infact no evidence whatsoever has been placed on record to show in the face of the assessee’s efforts and stand that the document pertains to the assessee.

8. Accordingly, appeal of the assessee is allow and appeal of Revenue is dismissed .

Analysed by CA Rahul Sureka

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