2008 (9) TMI 28 - HC - Income Tax

Appeal dismissed as fact-finding upheld: diary notings reconciled with accounts, tax only on proven receipts

THE COMMISSIONER OF INCOME TAX DELHI (CENTRAL) -II Versus DK. GUPTA

HC dismissed the appeal. The tribunal upheld CIT(A)'s finding that additions based on notings in diaries seized from the assessee's premises were not ... Addition on basis of notings in diaries seized from the assessee’s premises - tribunal noted that the notings were also reconciled in terms of absolute figures from the accounts seized during the search - HELD THAT:- Tribunal upheld the findings of the Commissioner of Income-tax (Appeals) and agreed with the view taken by the latter that the assessee was liable to tax only on those receipts which had been proved to be income in the hands of the recipient. As a result thereof, the tribunal found no reason to interfere with the findings recorded by the Commissioner of Income-tax (Appeals) on the ground that the same were based on valid and cogent materials placed on record and also produced before the Assessing officer during the course of assessment proceedings. The tribunal also noted that all the evidence, materials, explanations were furnished before the Assessing Officer and it is on the basis of such material that the Commissioner of Income-tax (Appeals) had arrived at the conclusion that no addition was warranted on the basis of the seized diaries. The tribunal, being the final fact finding authority, has returned a certain set of facts. We find no perversity in such findings and, consequently, no question of law, what to speak of a substantial question of law, arises for our consideration. Appeal is dismissed. Issues:1. Appeal against deletion of addition made on account of entries recorded in seized diaries.2. Interpretation of entries in seized diaries and burden of proof on revenue.3. Validity of findings by Commissioner of Income-tax (Appeals) and Income-tax Appellate Tribunal.4. Determination of tax liability based on proven income.Analysis:1. The appeal was filed by the revenue challenging the deletion of an addition of Rs 7,53,55,000 made based on entries in two diaries seized during a search conducted on the assessee's premises. The revenue contended that the diaries were not adequately explained and should be considered as inculpatory evidence.2. The diaries seized contained various notings, appointments, and reminders related to the business activities of the assessee. The tribunal noted that the entries were reconciled with the accounts seized during the search and found that the notings were in lakhs of rupees. The assessee provided explanations for each item queried by the Assessing Officer, clarifying that the entries were related to discussions and not actual transactions.3. The tribunal analyzed the provisions of Section 132(4A) of the Income-tax Act, which allows for presumptions in certain situations. However, the tribunal concluded that the revenue failed to prove that the entries in the diaries translated into undisclosed income. The burden of proof shifted to the revenue to demonstrate that the explanations provided by the assessee were incorrect, which they could not establish.4. Ultimately, the tribunal upheld the findings of the Commissioner of Income-tax (Appeals) and determined that the assessee was liable for tax only on proven income. The tribunal found no reason to interfere with the Commissioner's decision as it was supported by valid evidence presented during assessment proceedings. The court affirmed that the findings were factual and not perverse, leading to the dismissal of the appeal.In conclusion, the High Court dismissed the appeal, emphasizing that the issues raised were factual, and the tribunal's findings were based on valid evidence. The burden of proof rested on the revenue to demonstrate undisclosed income, which they failed to do. The court upheld the decision that tax liability should be based on proven income, as determined by the Commissioner and the tribunal.