UNSIGNED AND UNDATED PAPER FOUND DURING THE SEARCH WITH NO CORROBORATIVE EVIDENCE. NOT RECORDING OF THE SATISFACTION BY AO: WHETHER ADDITIONS TO THE INCOME CAN BE MADE?
Recently, in Samta Khinda vs. ACIT [I.T.A. Nos. 336/DEL/2012 and 5515/DEL/2013, decided on 29/11/2016], some of the grounds raised were that the CIT (A) had grossly erred in law and on the facts of the case in confirming the addition of Rs. 96 lacs in the hands of the assessee as unaccounted income from undisclosed sources in terms of Sec 69/698/69C of the Income Tax Act, 1961(herein referred to as ‘the Act’) where there was no corroborating evidence of the figure of Rs 96 lacs mentioned on the loose paper and in applying Section 292C of the Act merely because some papers were found from the premises of the assessee while ignoring vital facts and contentions of the assessee and in confirming the addition of Rs 5.67 lacs in the hands of the assessee as unexplained jewellery under section 69B of the Act.
The assessee/appellant against the order of the AO dated 31.12.2010, filed an appeal before the CIT(A), who vide order dated 28.11.2011 had partly allowed the appeal and confirmed the addition of Rs.96 lacs on account of unaccounted income from undisclosed sources in terms of Section 69/69B/69C of the Act and Rs. 5.67 lacs as unexplained jewellery under section 69B of the Act.
Against the order of CIT(A), assessee preferred appeal before the Delhi, ITAT where counsel of the assessee in support of contentions, stated that the case of the assessee was squarely covered by the various decisions of the Hon’ble High Court of Delhi and the Coordinate Benches of the ITAT.
The learned Members of the ITAT, Delhi in the backdrop of judicial pronouncements presented, analyzed the facts of the case/appeal. In the case, a paper was found during the course of search on 6.11.2008 and assessment of search made by the AO under section 143(3) of the Act. The learned Members observed that, in fact, AO should also have recorded his satisfaction in this case under section 153A of the Act.
Even otherwise, the document shown does not have the date of transaction where amount of Rs. 96 lakhs was alleged to have been transferred by appellant to other person. Further the AO had also stated that the transaction was also corroborated by the date of cheque transaction. We do not found any cheque transaction where assessee was involved in the transaction which was allegedly taxed in the hands of the assessee. Much to say that there was no date of cash transaction as alleged then it was surprising how AO had correlated the date with other transaction. Even otherwise when the assessee had denied the transactions, AO should have examined the recipient of search stated in that document and then confronted the assessee with the same. All these exercise had not at all been carried out by the AO. Furthermore, the presumption stated under section 292C of the Act was a rebuttal presumption.
Therefore, when the assessee herself denied any such transaction, it cannot be stated that the actual transaction had taken place between the assessee and the person concerned whose name mentioned therein. Further, the learned Members observed that the circular no. 24 dated 31.12.2015 which is based on the decision of the Hon’ble Supreme Court of India in the case of CIT vs. Calcutta Knitwears (2014) 43 taxmann.com 446 (SC) and is in respect of recording of satisfaction note under section 158bd/153c of the Act also supports the case of the assessee that satisfaction should have been recorded in the case of the appellant under section 153A of the Act. This circular states that even if the AO of the search person is one and the same then he should also record the satisfaction.
Leaving aside the matter on satisfaction in this case the assessment has also been made disregarding the provisions of the search as provided under Chapter XIV-B of the Act. The learned Members of the ITAT held that the appellant succeeds on the issue of satisfaction in view of the CBDT’s circular stated above and also on the merit as the sole addition has been based on the document in which one transaction is allegedly without mentioning the date and further no corroborative evidence of any investment made by the assessee was found.
Further the document was also unsigned and undated, the addition made in the hands of the assessee of Rs. 96 lacs cannot be sustained. The addition of Rs 5.67 lacs in the hands of the assessee as unexplained jewellery under section 69B of the Act was also deleted by ITAT. On the grounds that, the same was totally based on assumption and on the lack of satisfaction of AO in view of the above-mentioned circular of the CBDT.