2016 (9) TMI 1062 - AT - Income Tax

Tribunal directs deletion of coerced income, stresses need for corroborative evidence in tax assessments.

Shri Pandoo P. Naig Versus ACIT, CC-32, Mumbai Vice-Versa And ACIT, CC-32, Mumbai Versus Prakash B. Bandarkar, Pravin B. Bandarkar, Room

The Tribunal dismissed the Revenue's appeals and allowed the main assessee's appeal. It directed the deletion of additional income declared under ... Addition to additional income offered during the survey action - dumb document - relevance / validity of statement made u/s 133A - threat undue influence or coercion - Held that:- The ld. CIT(A) thus disbelieved the part of the document which the AO had treated as depicting the unexplained investments of the assessee. Hence, out of the three parts of the document, one part has been ignored by the AO, the second part has been disbelieved by the CIT(A). However, the ld. CIT(A) has confirmed the additions only in respect of heading ‘profit’. However, the point which gains importance at this stage is that when the source of funds/ investments have been disbelieved by the CIT(A) , there left no reason for him to assume the alleged profits from such non existing source/investments. The ld. CIT(A), thus, made the impugned additions only because the assessee had made a declaration/offer of income of ₹ 4 crores during the survey action. Presumption u/s 292C - Held that:- - the section uses the word ‘may presume’ and not ‘shall presume’, hence the presumption of facts under section 292C is not a mandatory or compulsory presumption, but, a discretionary presumption; secondly, such a presumption is not a conclusive presumption but is a rebuttable presumption because it is a presumption of fact not a presumption of law. - No corroborative, correlating or circumstantial evidence has been found either during the survey action or during post survey investigations - Hence the nature of document seized does not point any strong/reliable or stanalone presumption under section 292C of the Act against the assessee. The fact that the assessee has not introduced any cash in his books of accounts on account of additional income, for which he had already paid tax also, together constitute good rebuttal to the initial presumption u/s 292C in this case. Relevance / validity of statement made u/s 133A - Held that:- Even if , for the sake of arguments, we assume it so, it is to be noticed that the assessee had paid taxes on the income disclosed and if the AO would have accepted his returned income as per the disclosure, the assessee would have got no chance or opportunity to claim that the disclosure made by him was under force, coercion or duress. - Once the assessee was forced into the litigation, then only he gathered courage to fight for his rights and to show that neither the alleged loose paper belongs to him nor he had any undisclosed income or profits and further that even the declaration taken from him during his statement was under threat and pressure. Power of tribunal to consider question of law - Held that:- The Hon’ble Supreme Court in National Thermal Power Co. Ltd. vs. CIT [1996 (12) TMI 7 - SUPREME Court] while answering the said question observed that, Tribunal is not prevented from considering questions of law arising in assessment proceedings although not raised earlier. CIT(A) though, rightly admitted the question of law as to whether the income offered by the assessee in the return of income consequent to offer made in his statement recorded during the survey action can be challenged before the appellate authority, but wrongly decided the same in favour of revenue. In view of our findings given above we have no hesitation to hold that the additional income was returned by the assessee perhaps under force, pressure, threat or coercion and under the mistaken belief. The assessee, in our view, was not liable to pay tax on the said additional income returned. We accordingly direct the Department to refund the taxes, if any, paid by the assessee in respect of additional income offered during the survey action. Issues Involved:1. Legitimacy of additions made by the Assessing Officer (AO) based on seized documents.2. Validity of the presumption under Section 292C of the Income Tax Act.3. Evidentiary value of statements made during survey proceedings under Section 133A.4. Admissibility and impact of additional grounds raised by the assessee before the appellate authority.5. Justifiability of additions made on substantive and protective bases in the hands of different assessees.Issue-wise Detailed Analysis:1. Legitimacy of Additions Based on Seized Documents:The AO made additions based on a computer-generated document found during the survey, which did not bear any signatures or handwriting of the assessee or his employees. The assessee denied any connection with the document, asserting that it might have been left by a visitor. The AO presumed the document represented undisclosed income and made substantial additions. However, the appellate authority found no corroborative evidence or unexplained assets to support the AO's additions. The Tribunal noted that the document was a 'dumb document' and lacked any direct link to the assessee, thus, the additions were not justified.2. Validity of the Presumption under Section 292C:Section 292C allows for a presumption that documents found during a search belong to the person in possession. However, this presumption is rebuttable. The Tribunal emphasized that the presumption under Section 292C is discretionary and not mandatory. The assessee successfully rebutted the presumption by demonstrating that no corroborative evidence linked him to the document. The Tribunal concluded that the nature of the document and lack of supporting evidence did not justify the presumption that it represented the assessee's undisclosed income.3. Evidentiary Value of Statements Made During Survey Proceedings under Section 133A:Statements made under Section 133A do not have the same evidentiary value as those made under Section 132(4) (during a search). The Tribunal cited several judicial precedents, including the Supreme Court's ruling in 'CIT vs. S. Khaderkhan Son,' which held that statements made during surveys cannot be the sole basis for additions unless corroborated by other evidence. The Tribunal found that the assessee's statement, claiming additional income under pressure, lacked corroborative evidence and thus could not justify the additions.4. Admissibility and Impact of Additional Grounds Raised by the Assessee:The assessee raised an additional ground before the CIT(A), claiming that the additional income declared during the survey was under coercion and should be deleted. The Tribunal referenced the Supreme Court's decision in 'National Thermal Power Co. Ltd. vs. CIT,' which allows appellate authorities to consider new grounds if they pertain to the correct tax liability. The Tribunal upheld the assessee's right to raise this ground and found that the additional income declaration was not voluntary but made under duress.5. Justifiability of Additions Made on Substantive and Protective Bases:The AO made substantive additions in the hands of the main assessee and protective additions in the hands of other assessees (Bandarkar brothers). The CIT(A) deleted the protective additions for the Bandarkar brothers, finding that their bank transactions were explained and did not relate to the main assessee. The Tribunal upheld this decision, noting that the Bandarkar brothers' transactions were through cheques and duly explained, and no connection to the main assessee was established.Conclusion:The Tribunal dismissed the Revenue's appeals and allowed the main assessee's appeal, directing the deletion of the additional income declared under coercion and ordering a refund of taxes paid on such income. The Tribunal emphasized the need for corroborative evidence to support additions based on presumptions and statements made during surveys, reinforcing the principle that tax assessments must be based on substantive evidence.