2018 (3) TMI 424 - AT - Income Tax

Tribunal upholds annulment of assessment under Income Tax Act due to lack of evidence

Income Tax Officer, 5 (2) (2), Mumbai Versus Kranti Impex Pvt. Ltd. And Vice-Versa

The Tribunal confirmed the Commissioner of Income Tax (Appeals)'s decision to annul the assessment under section 153C of the Income Tax Act, 1961, due to ... Validity of assessment u/s 153C - proof of incriminating material found - Held that:- When dumb documents like the present loose sheets of papers are recovered and the Revenue wants to make use of it, the onus rests on the Revenue to collect cogent evidence to corroborate the noting therein. The Revenue has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized papers reveal the unaccounted on-money receipts of the assessee. Further, no circumstantial evidence in the form of any unaccounted cash, jewellery or investments outside the books of account was found in course of search in the case of assessee. Thus, the impugned addition was made by the AO on grossly inadequate material or rather no material at all and as such, deserves to be deleted. See ACIT vs. Layer Exports Pvt. Ltd. [2016 (10) TMI 1024 - ITAT MUMBAI] and ITO vs. Mangalam Gems Pvt. Ltd. [2017 (2) TMI 165 - ITAT MUMBAI] - Decided in favour of assessee Issues Involved:1. Validity of the assessment completed under section 153C of the Income Tax Act, 1961.Detailed Analysis:1. Validity of the Assessment Completed Under Section 153C:The primary issue in this appeal concerns the validity of the assessment completed under section 153C of the Income Tax Act, 1961. The Revenue contested the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which annulled the assessment framed under section 153C. The CIT(A) based its decision on the absence of mandatory conditions required under section 153C, specifically the lack of recorded satisfaction by the Assessing Officer (AO) of the searched person (Bharat Shah Group) that the seized documents belonged to the assessee.Search and Seizure Context:A search under section 132 was conducted at the premises of Bharat Shah Group on 15-03-2008, during which certain loose papers were seized. These papers allegedly indicated transactions involving the assessee, including the purchase of flats. The AO added a cash payment amounting to Rs. 2,06,32,051 as unexplained investment under section 69 based on these documents.CIT(A)'s Findings:The CIT(A) annulled the assessment, citing that:- Satisfaction must be recorded by the AO of the searched person (Bharat Shah Group) that the seized documents belonged to the present appellant.- Such documents must be handed over to the AO of the present appellant before issuing a notice under section 153C.- No material or evidence was provided to prove that these conditions were fulfilled.Tribunal's Analysis:The Tribunal upheld the CIT(A)'s decision, agreeing that the conditions precedent for invoking section 153C were not satisfied. The Tribunal referenced a similar case involving Mangalam Gems Pvt. Ltd., where it was established that the documents seized did not conclusively belong to the assessee and were considered 'dumb documents' with no evidentiary value.Legal Precedents:The Tribunal referred to the judgment of the Hon'ble Delhi High Court in CIT v. Pepsico India Holdings (P.) Ltd., which clarified that the term 'belongs to' in section 153C cannot be equated to 'relates to' or 'refers to.' The seized documents must unequivocally belong to a person other than the searched person for section 153C to be invoked.Conclusion:The Tribunal confirmed the CIT(A)'s order annulling the assessment under section 153C, as the mandatory conditions were not met. Consequently, the appeal of the Revenue was dismissed, and the Cross Objection (CO) of the assessee became academic and was also dismissed. The Tribunal emphasized that assessments under section 153C must be based on cogent and positive materials that conclusively prove undisclosed income or investments, which was not established in this case.Final Judgment:Both the appeals of the Revenue and the CO of the assessee were dismissed, and the order was pronounced in the open court on 28-02-2018.