ITAT wrongly deleted additions from seized documents under Section 292C burden of proof rules

The HC held that the ITAT erred in deleting additions based on seized documents during search operations. The court emphasized that under Section 292C, once the AO makes a presumption regarding seized documents, the burden shifts to the assessee to disprove the facts. The ITAT incorrectly placed the burden on Revenue to prove handwriting and allowed the assessee to retract earlier admissions without proper examination. However, the court noted the AO should have interrogated the accountant who prepared the documents rather than the assessee directly. The matter was remanded to ITAT for reconsideration within six months.

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Issues Involved:

1. Whether the findings of facts and the appraisal of evidence by the tribunal leading to the deletion of the addition of Rs. 3,25,37,586/- and Rs. 17,29,25,670/- were perverse.
2. Whether the tribunal's order with respect to the said issue should be set aside.

Summary:

Issue 1: Findings of Facts and Appraisal of Evidence by the Tribunal

This appeal under Section 260A of the Income Tax Act, 1961, was admitted on 30th September 2019, on the substantial questions of law regarding the deletion of additions of Rs. 3,25,37,586/- and Rs. 17,29,25,670/-. It was later discovered that the appeal had previously been admitted on 26th August 2008, but only concerning the deletion of Rs. 17,29,25,670/-. The court directed the inclusion of the 2008 order in the supplementary affidavit, considering the 2019 order as allowing an additional ground for the deletion of Rs. 3,25,37,586/-.

A search and seizure operation on 19th December 1998 led to the discovery of undisclosed income and assets. The assessing officer recorded the respondent assessee's statement admitting undisclosed income and the purchase of jewellery from this income. However, the assessee later retracted this statement, claiming the documents were "test trial balances of imaginary figures." The assessing officer disbelieved this explanation, leading to the computation of undisclosed income.

The Commissioner of Income Tax (Appeals) found the seized documents did not belong to the assessee and that the presumption under Section 132(4A) was wrongly applied. The tribunal upheld this view, noting the lack of verification of handwriting and the absence of matching assets. The tribunal emphasized the rebuttable nature of the presumption under Section 132(4A), as supported by precedents like P.R. Metrani vs. Commissioner of Income Tax and Principal Commissioner of Income-tax, Central-1, Kol. Vs. Ajanta Footcare (India) (P.) Ltd.

Issue 2: Whether the Tribunal's Order Should Be Set Aside

The court highlighted that the presumption under Section 292C is discretionary and should not be interfered with unless disproved by the assessee. The tribunal failed to appreciate this, wrongly shifting the burden of proof to the Revenue. The tribunal allowed the assessee to retract his admission without substantial grounds, contrary to the principles laid down in cases like Bannalal Jat Constructions Pvt. Ltd. vs. Assistant Commissioner of Income-Tax and Surjeet Singh Chhabra vs. Union of India and Ors.

The court concluded that the tribunal's order was flawed and remanded the matter back to the tribunal for reexamination based on the evidence on record within six months.

Separate Judgment by BISWAROOP CHOWDHURY, J.:

Justice Biswaroop Chowdhury agreed with the grounds cited by Justice I. P. Mukerji but added that the Income Tax Authority should have verified the assessee's statements and interrogated the accountant responsible for the accounts. The matter was remitted to the tribunal for reconsideration, emphasizing the need for a thorough examination of the evidence and proper interrogation of relevant parties.

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