1997 (3) TMI 610 - AT - Income Tax

ITAT rejects addition based only on loose papers; no deemed income without invoking sections 69 to 69D

ITAT held that additions based solely on loose papers seized during search were unsustainable. The Revenue failed to establish whether the noted figure ... Additions - loose papers found and seized - onus to explain the contents fully and truly and to the satisfaction - word ‘commission’ - probabilities and assumptions - No opportunity to cross-examine the assessee - violation of natural justice - HELD THAT:- No evidence as to where the figure represents the receipt in assessee’s hands or expenditure by the assessee or loan given by the assessee or loan taken by the assessee. There is also no date as to when it was given or taken. If it was taken by the assessee then, unless and until it was proved to be in genuine loan/advance, it cannot be taxed and that too can be done only under the deeming provisions which is not Revenue’s case. If it was given by the assessee then also, in the absence of date, it cannot be taxed in this year as we have already given a finding that Revenue has not invoked the deeming provisions of sections 69 to 69D. So, even if it is assumed that this figure represents giving or taking of loan by the assessee during the period Jan. 1985 to Dec. 1985 then also, it cannot be taxed act; assessee’s income for assessment year 1986-87. There is no evidence in favour of the conclusion arrived at by the Assessing Officer or the one canvassed by the learned D.R. and, as it is settled law that if the decision of the Tribunal is based on suspicions, conjectures and surmises or on no material or partly on evidence and partly en suspicion; same is likely to be set aside by the higher courts. We are therefore, of the opinion that the findings of the Assessing Officer are based only on suspicion and suspicion however strong it may, cannot take the place of proof. So, we are unable to sustain the findings of the Assessing Officer. As well as the settled principles of law, we are of the opinion that the conclusion arrived at by the Assessing Officer was based purely on suspicions and the CIT (Appeals) was justified in deleting the additions having been made only on suspicions. The order of the CIT (Appeals) is upheld and the Revenue’s appeal is dismissed. As regards to D.R’s plea relating to consideration of Assessee’s explanation by the CIT (Appeals) submitted before him, without giving opportunity to Assessing Officer, we have bound that the CIT (Appeals) has not based his decision on that explanation, rather has accepted the Assessee’s plea made before the Assessing Officer to the effect that the figures on loose paper No. 44 were rough working of the Firm. This plea is therefore, rejected. Issues Involved:1. Deletion of addition of Rs. 3,38,152 by CIT (Appeals).2. Opportunity for cross-examination by the Assessing Officer (A.O.).Summary:1. Deletion of Addition of Rs. 3,38,152 by CIT (Appeals):The Revenue appealed against the CIT (Appeals) decision to delete the addition of Rs. 3,38,152 made by the A.O. The A.O. had added this amount to the assessee's taxable income based on a seized loose paper marked as page No. 44, which allegedly contained details of commission, unexplained investment, and interest. The assessee explained that the figures on the loose paper were rough workings related to the estimated earnings of M/s. Gem India Manufacturing Co., not actual transactions. The CIT (Appeals) found the addition to be based on suspicion and deleted it, stating that 'suspicion however strong cannot take the place of proof' as held by the Supreme Court in Uma Charan Shaw & Bros. Co. v. CIT [1959] 37 ITR 271. The Tribunal upheld the CIT (Appeals) decision, noting the lack of direct evidence or material to support the A.O.'s conclusion that the figures represented the assessee's income.2. Opportunity for Cross-Examination by the Assessing Officer (A.O.):The Revenue objected to the CIT (Appeals) considering the fresh explanation without giving the A.O. an opportunity to cross-examine the assessee. The Tribunal found that the CIT (Appeals) had not based his decision on the fresh explanation but had accepted the assessee's plea made before the A.O. that the figures on the loose paper were rough workings of the firm's projected earnings. Therefore, the Tribunal rejected the Revenue's plea, stating that the CIT (Appeals) was justified in deleting the additions made purely on suspicions.In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT (Appeals) order to delete the addition of Rs. 3,38,152 and rejecting the plea for cross-examination by the A.O.