2013 (4) TMI 747 - AT - Income Tax

Tribunal upholds CIT(A)'s decision in favor of assessee, emphasizing need for corroborative evidence

Deputy Commissioner of Income Tax, Central Circle- Circle-12, New Delhi Versus Bhola Nath Radha Krishan, Delhi

The Tribunal upheld the CIT(A)'s order, ruling in favor of the assessee. The deletion of the addition of Rs. 1,35,00,000, comprising unaccounted profit ... Addition on account of unaccounted profit and unaccounted investment - addition in course of search and seizure operation u/s 132(1) - CIT-A deleted addition - Held that:- Considering the totality of above facts, we entirely agree with the learned CIT(A) that the statement of Shri Sohan Raj Mehta cannot be used against the assessee and, similarly, the chits found from the third party, with which the assessee has no dealing, cannot be used against the assessee in the absence of any corroborative evidence. That merely because some excess stock was found in the survey for which separate addition has already been made, it cannot be further presumed that the assessee made sales outside the books, specially when the survey was followed by the search and neither during the course of survey nor during the course of search, any evidence of sale outside the books was found. In view of the totality of above facts, we do not find any justification to interfere with the order of learned CIT(A). The same is sustained. - Decided against revenue Issues Involved:1. Legality of the CIT(A)'s order.2. Deletion of the addition of Rs. 1,35,00,000 made by the Assessing Officer on account of unaccounted profit and investment found during search and seizure operations.Issue-wise Detailed Analysis:1. Legality of the CIT(A)'s Order:The Revenue challenged the correctness of the CIT(A)'s order, arguing that it was flawed in both law and facts. The CIT-DR contended that during the search at the premises of a third party, Shri Sohan Raj Mehta, chits indicating cash payments to the assessee were found. Despite the CIT(A)'s decision to delete the addition due to lack of corroborative evidence, the Revenue argued that the excess stock found during a survey at the assessee's premises corroborated the unaccounted transactions. The CIT-DR insisted that the CIT(A)'s decision was incorrect and should be reversed.2. Deletion of Addition of Rs. 1,35,00,000:The CIT(A) deleted the addition of Rs. 1,35,00,000 made by the Assessing Officer, which included Rs. 27,00,000 as unaccounted profit and Rs. 1,08,00,000 as unaccounted investment. The CIT(A) based this deletion on the absence of corroborative evidence linking the assessee to the chits found at Shri Sohan Raj Mehta's premises.The CIT(A) emphasized that the legal presumption under section 132(4A) of the IT Act applies only to the person from whom the incriminating material is seized, not to third parties. Several precedents were cited, including *Straptex (India) (P.) Ltd. vs. DCIT* and *Rama Traders vs. First ITO*, supporting the view that third-party documents or statements without corroborative evidence cannot justify an addition.The CIT(A) observed that the statements recorded from Shri Sohan Raj Mehta did not specifically mention the assessee, and no corroborative evidence was found during the search at the assessee's premises. The CIT(A) also noted that the assessee was not allowed to cross-examine Shri Sohan Raj Mehta, which is a requirement for using third-party statements as evidence, as established in *Kishin Chand Chela Ram*.The CIT(A) further addressed the frequent retractions of Shri Sohan Raj Mehta's statements, which undermined their credibility. The CIT(A) concluded that the Assessing Officer's reliance on these statements without allowing cross-examination or providing the retraction statements to the assessee was unjustified.Final Judgment:The Tribunal upheld the CIT(A)'s order, finding no infirmity in the deletion of the addition. It was emphasized that no evidence of unrecorded sales or purchases was found during the search at both the assessee's and RMD Group's premises. The Tribunal agreed that the chits found at a third party's premises and the unreliable statements of Shri Sohan Raj Mehta could not be used against the assessee without corroborative evidence. The appeal of the Revenue was dismissed, and the CIT(A)'s order was sustained.Decision Pronounced:The decision was pronounced in the open Court on 5th April, 2013.