Seized diary entries can support reopening and on-money additions when contemporaneous property details show understatement of consideration

A seized diary entry with specific contemporaneous details of a property purchase can support reopening under section 147(a) where it indicates failure to disclose material facts fully and truly. A jurisdictional objection may also be lost if expressly not pressed before the first appellate authority. On the addition issue, the contemporaneous seized record was treated as sufficient to discharge the revenue's initial burden on alleged on-money payment, shifting the burden to the assessee to rebut the inference with credible evidence. A corresponding protective addition in the husband's hands cannot survive where the substantive addition is sustained in the wife's assessment.

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Issues: (i) Whether the reassessment initiated under section 147(a) was valid; and (ii) whether the addition of Rs. 1,85,900 on account of alleged on-money payment for purchase of the flat was justified, with the connected protective addition in the husband's hands.

Issue (i): Whether the reassessment initiated under section 147(a) was valid.

Analysis: The assessee had expressly stated before the first appellate authority that the challenge to the reassessment was not pressed after the completion of the original assessment came to light. That amounted to a conscious waiver of the jurisdictional objection. On merits also, the seized diary containing a specific note of the property purchase and the higher consideration provided material showing failure to disclose fully and truly all material facts, so reopening was not invalid merely because the diary had been seized before completion of the original assessment under section 143(1).

Conclusion: The reassessment under section 147(a) was held valid, against the assessee.

Issue (ii): Whether the addition of Rs. 1,85,900 on account of alleged on-money payment for purchase of the flat was justified, with the connected protective addition in the husband's hands.

Analysis: The seized diary contained a precise note describing the property, the date, and a purchase price of Rs. 3,76,121, which was materially higher than the apparent consideration in the agreement and wealth-tax records. The assessee's denial and the seller's denial were treated as self-serving and insufficient to displace the seized contemporaneous record. The burden, after the revenue discharged its initial onus, shifted to the assessee, who failed to prove that the entry was a mistake. The inference that the on-money was paid in the accounting year was accepted. Since the substantive addition in the wife's hands was sustained, the corresponding protective addition in the husband's hands could not stand.

Conclusion: The addition was upheld in the wife's hands and the protective addition in the husband's hands was deleted.

Final Conclusion: The appeal of the wife failed on both the reopening and merits, while the husband's appeal succeeded because the same amount had already been sustained substantively in the wife's assessment.

Ratio Decidendi: A seized document containing specific contemporaneous details of an investment can discharge the revenue's initial burden in proving understatement, after which the assessee must rebut the inference with credible evidence; a jurisdictional objection to reassessment may also be lost by conscious waiver before the appellate authority.

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