2017 (6) TMI 585 - AT - Income Tax

Appellate Tribunal emphasizes need for incriminating material in income tax additions

DCIT –CC, 8 (4), Mumbai Versus Silver Arch Builders & Promotors

The Appellate Tribunal upheld the First Appellate Authority's decision to delete the addition made by the Assessing Officer under the head 'on money ... Assessment u/s 153A - addition to income - proof of incriminating material found - Held that :- No incriminating material was found during the search and seizure operation that could justify the addition made by the AO. She has analysed the page number 114 that was seized by the authorised party carrying out the search proceedings. It is very clear that neither the name of the assessee nor the name of the project is appearing in the paper. The assessee had objected before the AO that the statements of the employees were not given to it. We do not know as to whether same were made available to the assessee or not. The statements of the employees, in search and seizure cases, can be used if they are supported by some kind of collaborative evidence. On a specific query by the bench to the DR about supporting evidence proving the receipt of alleged on money, she could not refer to any material. As the assessment for the AY. 2007-08 was not pending, so, without some incriminating material the AO should not have made the addition to the total income of the assessee. - Decided in favour of assessee. Issues involved:1. Validity of the addition made by the Assessing Officer under the head 'on money received' during the assessment years 2007-08 and 2008-09.2. Interpretation of incriminating material found during search and seizure operations.3. Adjudication of appeals challenging the orders of the CIT(A)-47, Mumbai.Issue 1: The Assessing Officer (AO) made an addition of &8377; 36.71 lakhs under the head 'on money received' during the assessment year 2007-08. The AO based this addition on statements recorded during search proceedings, indicating the acceptance of 30% on money over and above the receipt value of agreements. The assessee disputed these claims, stating that the individuals whose statements were relied upon were not authorized to close sales transactions. The First Appellate Authority (FAA) examined the case and concluded that no incriminating material was found during the search, leading to the deletion of the addition made by the AO. The FAA's decision was upheld by the Appellate Tribunal, emphasizing the importance of incriminating material to justify such additions.Issue 2: The FAA analyzed the seized paper and statements of employees, noting the absence of any mention of the assessee or the project undertaken by it. The FAA highlighted that incriminating material seized during search operations should form the basis of any additions made under section 153A of the Income Tax Act. The Tribunal concurred with the FAA's findings, emphasizing the necessity of incriminating material to support additions to the assessee's total income. The Tribunal also referenced the order of a special bench and the dismissal of the Departmental appeal by the Bombay High Court, reinforcing the requirement for legal and factual support for such additions.Issue 3: The appeals challenging the CIT(A)'s orders for both assessment years were adjudicated together by the Appellate Tribunal for convenience. Following the analysis of the facts and legal precedents, the Tribunal dismissed the appeals filed by the AO for both assessment years, affirming the decisions of the CIT(A) and emphasizing the importance of incriminating material in justifying additions to the assessee's income.In conclusion, the judgment focused on the validity of additions made by the AO, the interpretation of incriminating material, and the adherence to legal principles in determining the assessee's total income for the respective assessment years. The Tribunal's decision underscored the significance of incriminating evidence in supporting such additions and upheld the rulings of the CIT(A) in both cases.