2017 (6) TMI 1327 - HC - Income Tax

Court upholds 'dumb document' treatment, rejects income additions. Presumption under Section 292C rebuttable.

Principal Commissioner of Income-tax, Central-1, Kol. Versus Ajanta Footcare (India) (P.) Ltd.

The High Court dismissed the Revenue's appeal, upholding the appellate bodies' discretion in treating the document as a 'dumb document' and rejecting the ... Undisclosed purchase - unexplained expenditure - assessment made u/s 144 - addition was directed by the AO on the basis of a document in the form of a sheet found in course of a search and seizure operation under Section 132 of the Act, which contained certain figures scribbled on it - HELD THAT:- No question about the said document was put to the Director of the assessee in course of search. This factor was also taken into consideration by the aforesaid Appellate bodies. The two Statutory Appellate Authorities doubted the inherent probative value or quality of the above-referred document upon applying their mind on it. In substance, the said authorities found no reason to draw presumption against the assessee on the basis of scribbled figures appearing on the document in question. This is how two fact finding bodies chose to deal with that document. Even without proper explanation from the assessee, when the mandate of law is that authorities may presume certain facts under Section 292C of the Act to come to a conclusion in favour of Revenue, the nature of information contained in or revealed by such document would have to be examined to link such document to undisclosed income of the assessee. Both the Commissioner and the Tribunal found no linking factor. Both these authorities rejected the reasoning of the Assessing Officer on this basis of which the latter came to his finding that the figures appearing on the said document could be computed to arrive at undisclosed income of the assessee. The findings of the Statutory Appellate Authorities cannot be held to be perverse or based on no evidence in this case. The Statutory Appellate Authorities had examined the said document and found that the same could not be connected with assessee's transactions for the relevant assessment year. Issues Involved:1. Legitimacy of the addition of Rs. 6,08,43,727/- to the assessee's declared income.2. Validity of treating the document BRI/20 Page 7 as a 'dumb document.'3. Application of Section 292C of the Income Tax Act, 1961.4. Evaluation of the findings of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal.Detailed Analysis:1. Legitimacy of the Addition of Rs. 6,08,43,727/- to the Assessee's Declared Income:The Assessing Officer (AO) added Rs. 6,08,43,727/- to the assessee's declared income for the assessment year 2007-08, citing Rs. 5,10,32,507/- as undisclosed purchase and Rs. 98,10,220/- as unexplained expenditure. This was based on a document found during a search and seizure operation, which the AO interpreted as evidence of suppressed purchases and unexplained expenditures. The document contained figures without any explanatory notes, dates, or corroborative evidence linking it to the assessee.2. Validity of Treating the Document BRI/20 Page 7 as a 'Dumb Document':The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT) both treated the document BRI/20 Page 7 as a 'dumb document.' The Commissioner noted that the document did not contain the name of the assessee or any specific dates, making it impossible to attribute the figures to the assessee's transactions. The ITAT concurred, stating that the document lacked sufficient details to be considered reliable evidence. Both appellate bodies emphasized the absence of any corroborative material or statement linking the document to the assessee.3. Application of Section 292C of the Income Tax Act, 1961:The Revenue argued that under Section 292C, the contents of the document should be presumed true and attributable to the assessee. However, the appellate bodies exercised their discretion, as allowed by the provision, to determine that the document did not provide sufficient evidence to support the AO's additions. The High Court upheld this discretion, noting that the presumption under Section 292C is rebuttable and not mandatory.4. Evaluation of the Findings of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal:Both the Commissioner and the ITAT found no evidence of stock discrepancy or unaccounted transactions linked to the document. The Commissioner specifically pointed out that no statement regarding the document was recorded during the search or post-search investigation. The ITAT highlighted that the document did not specify any dates or names, making it unreliable for determining the assessee's income. The High Court agreed with these findings, stating that the appellate bodies' conclusions were neither perverse nor contrary to evidence.Conclusion:The High Court dismissed the Revenue's appeal, finding no substantial question of law. It upheld the appellate bodies' discretion in treating the document as a 'dumb document' and their rejection of the AO's additions to the assessee's income. The Court emphasized that the presumption under Section 292C is rebuttable and that the document lacked sufficient evidentiary value to support the AO's conclusions.