Vivek Kumar Kathotia v. Dy. CIT & Vice Versa

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers2013 TaxPub(DT) 0105 (Kol-Trib) : (2013) 142 ITD 0394 : (2012) 150 TTJ 0462 : (2012) 079 DTR 0081 INCOME TAX ACT, 1961 --Search and seizure--Assessment under section 153A Separate addition for cash found during search--Since total undisclosed income arising from seized documents were already offered for taxation by assessee and cash found in course of search stood explained from the entries recoded in seized documents, no separate addition could be made in respect of cash. Income Tax Act, 1961 Section 143A Income Tax Act, 1961 Section 69 INCOME TAX ACT, 1961 --Search and seizure--Assessment under section 153AUndisclosed expenditure--Undisclosed expenditure for furniture, fixtures, flooring etc. incurred for assessment year 2008-09, he said expenditures was found recorded in RM1 and RM2 and also offered for taxation in regular return in response to section 153A and ....... in accounts. The addition is therefore, deleted. Income Tax Act, 1961 Section 153A Income Tax Act, 1961 Section 69 INCOME TAX ACT, 1961 --Search and seizure--Assessment under section 153A Presumption under section 292C vis-a-vis burden of proof--Search and seizure operation was carried out can 'F' group of companies and also on assessee, who was one of director of the company. Documents RM to RMS were seized. documents RM1 and RM2 depicting purchase and sale of gold diamonds and paintings and investment of sale proceeds in property and shares. The department presumed under section 292C that contents of document RM1 and Rm2 was incorrect. However, the department failed to discharge onus to disprove that documents were incorrect. On the basis of said presumption addition as made in respect of purchases in property and shares. Held: Term 'used' in the provision of section 292C 'may be presumed' and said term implies that the presumption is rebuttable. The term 'rebut' means to disprove. In other words, unless contrary is proved, what is stated in the seized documents has to be presumed to be true and thus, the provisions of section 292C does not confer discretionary power on the Department to presume or not to presume the corre is not for the benefit of the assessee but it is for benefit of department. We are of the view that the provision will equally apply to both assessee as well as department and section 292C of the Act only creates a legal fiction, whereby in case of search and seizure, contents of seized material are presumed to be true unless rebutted by the party claiming contrary. Now, onus of rebutting the presumption under section 292C is on the party claiming otherwise, be it assessee or revenue. In the present case before us, the seized documents RM-1 and RM-2 were found from the possession and control of the assessee. In present case, since seized documents RM-1 and RM-2 were found from possession and control of the assessee during the course of search in his case by legal fiction, a presumption under section 292C had to be drawn that the said documents belonged to the assessee and the contents thereof were true unless disproved by cogent evidence. The onus to prove that what was apparent from these books was not real was on the party which claimed it to be so. The department claimed that the contents of RM-1 and RM-2 found from the possession and control of the assessee in course of search were incorrect. Thus, the onus was on the department, to bring on record some acceptable evidence to prove that what was stated in the seized documents did not depict the actual state of affairs. The assessing officer and Commissioner (Appeals) failed to discharge such onus by bringing on record some cogent evidence to disprove notings in the seized papers. On the contrary, Commissioner (Appeals) and assessing officer tried to shift onus of proving entries in seized books/papers on the assessee in contradiction to provisions of section 292C of the Act. Seized documents RM-1 and RM-2 clearly depicting the purchase and sale of gold, diamonds and paintings and investment of the sale proceeds in property and shares had to be accepted as such unless some evidence or material was brought on record by the revenue to show that what was stated in the seized documents was not correct. Commissioner (Appeals)'s opinion that onus was on the assessee to prove that what was stated in the seized documents was true. Such an interpretation would render the deeming provisions of section 292C otiose and presumption as to the correctness of seized documents is automatic under section 292C of the Act unless the contrary is proved and as such, the assessee was not legally required to substantiate the seized documents with supporting evidence. Where the statute provides a deeming provision, what is prescribed is to be deemed without seeking corroborative evidence. From a bare perusal of RM-1 and RM-2, which would reveal that seized documents have been maintained in considerable details such as exact cartage of diamonds, the weight of gold and the rates of purchases and sales, the dates of purchase and sales have been mentioned. Further, in respect of paintings, minute details such as the exact size of the paintings and the names of the artists have also been mentioned in the seized documents. Thus, these are speaking documents and not dumb documents. A dumb document is a document which does not speak for itself and not a self-explanatory and detailed document like present one. Further, on going through these documents it is revealed that these documents also record several regular transactions of the assessee which stand duly disclosed in regular books of account. [Para 15] Several other notings pertaining to withdrawal of cash from the regular bank accounts of various companies, payment of cash on account of various properties acquired by various companies duly recorded in the books of those companies etc. were also recorded in RM-1 and RM-2. All these entries were verified from regular books of account and found to be correct and accepted as such by the Department. This also fortifies the fact that RM-1 and RM-2 contained genuine entries of the appellant and were not dumb documents. [Para 15] Revenue did not make any effort to controvert the correctness of the noting in the seized documents. Revenue, both authorities below, did not doubt the rates at which gold, diamonds and paintings were purchased and sold by the assessee and were not proved to be unfeasible or impracticable. Lower authorities failed to prove a single instance where sale proceeds of diamonds, gold or paintings actually represented 'on-money' or some other form of undisclosed receipt and in the absence of cogent evidence express noting in the seized documents could not be arbitrarily disregarded and no additions could be made solely on the basis of surmises and conjectures. Even seized documents could not be outrightly rejected as dumb documents without disproving the same. It is also a fact that seized papers were findings of search operations carried out by the Department and not papers submitted by the assessee suo motu in course of normal assessment which required substantiation. These papers were part of Department's evidence unearthed as a result of search carried out by the Department, and thus, the same were to be taken at face value unless contrary is proved. [Para 16] In view of these facts, we are of the opinion that RM-1 and RM-2 was a day to day account prepared by assessee and discovered as a result of search and the contents therein had to be presumed to be true under section 292C unless proved otherwise. The Commissioner (Appeals) rejected the claim of the assessee that this is not an authenticated document but relied on documents marked GB/12 impounded in course of survey in the premises of M/s Fort Projects (P) Ltd. and the said seized documents contained certain details of unrecorded cash payment on account of acquisition of Salt Lake property. Since RM-1 and RM-2 explaining the source of acquisition of such property and accounts prepared on the basis of the same were rejected by Commissioner (Appeals), we are of the considered opinion that notings in GB-12 only substantiate/confirm the entries pertaining to investment in property at Salt Lake noted in RM-1 and RM-2. Thus, GB-12 only fortifies the correctness of RM-1 and RM-2 and Commissioner (Appeals) failed to explain the logic behind relying on one set of seized documents marked GB-12 containing details of unaccounted investment in property and rejecting the other set of seized documents marked RM-1 and RM-2 containing both the details of investment in property as well as explaining the source thereof. Commissioner (Appeals) failed to appreciate that since RM-1 and RM-2 were found from the possession and control of the appellant in course of search conducted in the assessee's own case, presumption under section 292C could more aptly be drawn in respect of RM-1 and RM-2 rather than documents impounded in course of survey in group case, i.e., GB-12. [Para ] In view of above facts, it is clear that the documents seized during the course of search from the possession of assessee are true till it is proved otherwise by cogent evidence. The onus to prove that the apparent is not the real is on the party who claims it to be so. Here, in the present case, department claimed that documents inventorised RM-1 to RM-4 are dumb documents and for this revenue has no basis whatsoever. [Para 17] Hence, we consider documents found from the possession of the assessee during the course of search was real and declaration made by assessee on the basis of entry recorded in these documents of long-term capital gain on account of sale of gold and diamond and also receipts on account of sale of paintings are true and there is no basis not to accept the same. Accordingly, we delete the addition made by Commissioner (Appeals) of Rs. 6.009 crores and Rs. 90 lacs for assessment years 2006-07 and 2007-08 is deleted. [Para 17] Since seized documents RM-1 and RM-2 are accepted as true, consequently the assessee has also explained the investment made in purchase of Salt Lake property and also explained the investment in shares explaining source thereof from sale proceeds of diamonds and gold. The assessee has explained that it did not make any investment of Rs. 20 lakhs in the purchase of shares of Fort Projects (P) Ltd. as held by Commissioner (Appeals), which is clearly proved by seized documents RM-1 and RM-2 and the table reproduced by the assessing officer in his assessment orders of these years. After going through facts, this mistake has cropped up due to mistaken notion of the Commissioner (Appeals). As regards investment of Rs. 18.40 crores the same has been extracted by lower authorities from RM-1 and RM-2. Apart from RM-1 and RM-2, Commissioner (Appeals) could not have arrived at the factum of investment in shares by assessee from any other source. The Commissioner (Appeals) accepted the factum of investment in shares from RM-1 and RM-2 for making addition on one hand and rejecting the same as dumb documents on the other hand. Since it has already held that seized documents RM-1 and RM-2 are correct financial statements prepared after incorporation the entries from the seized documents are also true explaining the investment in shares. Accordingly, on the same reasoning, the addition of unexplained investment in shares amounting to Rs. 18.60 crores for assessment years 2008-09 is deleted. [Para 18] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0105 (Kol-Trib) : (2013) 142 ITD 0394 : (2012) 150 TTJ 0462 : (2012) 079 DTR 0081

INCOME TAX ACT, 1961

--Search and seizure--Assessment under section 153A Separate addition for cash found during search--Since total undisclosed income arising from seized documents were already offered for taxation by assessee and cash found in course of search stood explained from the entries recoded in seized documents, no separate addition could be made in respect of cash.

Income Tax Act, 1961 Section 143A

Income Tax Act, 1961 Section 69

INCOME TAX ACT, 1961

--Search and seizure--Assessment under section 153AUndisclosed expenditure--Undisclosed expenditure for furniture, fixtures, flooring etc. incurred for assessment year 2008-09, he said expenditures was found recorded in RM1 and RM2 and also offered for taxation in regular return in response to section 153A and ....... in accounts. The addition is therefore, deleted.

Income Tax Act, 1961 Section 153A

Income Tax Act, 1961 Section 69

INCOME TAX ACT, 1961

--Search and seizure--Assessment under section 153A Presumption under section 292C vis-a-vis burden of proof--Search and seizure operation was carried out can 'F' group of companies and also on assessee, who was one of director of the company. Documents RM to RMS were seized. documents RM1 and RM2 depicting purchase and sale of gold diamonds and paintings and investment of sale proceeds in property and shares. The department presumed under section 292C that contents of document RM1 and Rm2 was incorrect. However, the department failed to discharge onus to disprove that documents were incorrect. On the basis of said presumption addition as made in respect of purchases in property and shares. Held: Term 'used' in the provision of section 292C 'may be presumed' and said term implies that the presumption is rebuttable. The term 'rebut' means to disprove. In other words, unless contrary is proved, what is stated in the seized documents has to be presumed to be true and thus, the provisions of section 292C does not confer discretionary power on the Department to presume or not to presume the corre is not for the benefit of the assessee but it is for benefit of department. We are of the view that the provision will equally apply to both assessee as well as department and section 292C of the Act only creates a legal fiction, whereby in case of search and seizure, contents of seized material are presumed to be true unless rebutted by the party claiming contrary. Now, onus of rebutting the presumption under section 292C is on the party claiming otherwise, be it assessee or revenue. In the present case before us, the seized documents RM-1 and RM-2 were found from the possession and control of the assessee. In present case, since seized documents RM-1 and RM-2 were found from possession and control of the assessee during the course of search in his case by legal fiction, a presumption under section 292C had to be drawn that the said documents belonged to the assessee and the contents thereof were true unless disproved by cogent evidence. The onus to prove that what was apparent from these books was not real was on the party which claimed it to be so. The department claimed that the contents of RM-1 and RM-2 found from the possession and control of the assessee in course of search were incorrect. Thus, the onus was on the department, to bring on record some acceptable evidence to prove that what was stated in the seized documents did not depict the actual state of affairs. The assessing officer and Commissioner (Appeals) failed to discharge such onus by bringing on record some cogent evidence to disprove notings in the seized papers. On the contrary, Commissioner (Appeals) and assessing officer tried to shift onus of proving entries in seized books/papers on the assessee in contradiction to provisions of section 292C of the Act. Seized documents RM-1 and RM-2 clearly depicting the purchase and sale of gold, diamonds and paintings and investment of the sale proceeds in property and shares had to be accepted as such unless some evidence or material was brought on record by the revenue to show that what was stated in the seized documents was not correct. Commissioner (Appeals)'s opinion that onus was on the assessee to prove that what was stated in the seized documents was true. Such an interpretation would render the deeming provisions of section 292C otiose and presumption as to the correctness of seized documents is automatic under section 292C of the Act unless the contrary is proved and as such, the assessee was not legally required to substantiate the seized documents with supporting evidence. Where the statute provides a deeming provision, what is prescribed is to be deemed without seeking corroborative evidence. From a bare perusal of RM-1 and RM-2, which would reveal that seized documents have been maintained in considerable details such as exact cartage of diamonds, the weight of gold and the rates of purchases and sales, the dates of purchase and sales have been mentioned. Further, in respect of paintings, minute details such as the exact size of the paintings and the names of the artists have also been mentioned in the seized documents. Thus, these are speaking documents and not dumb documents. A dumb document is a document which does not speak for itself and not a self-explanatory and detailed document like present one. Further, on going through these documents it is revealed that these documents also record several regular transactions of the assessee which stand duly disclosed in regular books of account. [Para 15] Several other notings pertaining to withdrawal of cash from the regular bank accounts of various companies, payment of cash on account of various properties acquired by various companies duly recorded in the books of those companies etc. were also recorded in RM-1 and RM-2. All these entries were verified from regular books of account and found to be correct and accepted as such by the Department. This also fortifies the fact that RM-1 and RM-2 contained genuine entries of the appellant and were not dumb documents. [Para 15] Revenue did not make any effort to controvert the correctness of the noting in the seized documents. Revenue, both authorities below, did not doubt the rates at which gold, diamonds and paintings were purchased and sold by the assessee and were not proved to be unfeasible or impracticable. Lower authorities failed to prove a single instance where sale proceeds of diamonds, gold or paintings actually represented 'on-money' or some other form of undisclosed receipt and in the absence of cogent evidence express noting in the seized documents could not be arbitrarily disregarded and no additions could be made solely on the basis of surmises and conjectures. Even seized documents could not be outrightly rejected as dumb documents without disproving the same. It is also a fact that seized papers were findings of search operations carried out by the Department and not papers submitted by the assessee suo motu in course of normal assessment which required substantiation. These papers were part of Department's evidence unearthed as a result of search carried out by the Department, and thus, the same were to be taken at face value unless contrary is proved. [Para 16] In view of these facts, we are of the opinion that RM-1 and RM-2 was a day to day account prepared by assessee and discovered as a result of search and the contents therein had to be presumed to be true under section 292C unless proved otherwise. The Commissioner (Appeals) rejected the claim of the assessee that this is not an authenticated document but relied on documents marked GB/12 impounded in course of survey in the premises of M/s Fort Projects (P) Ltd. and the said seized documents contained certain details of unrecorded cash payment on account of acquisition of Salt Lake property. Since RM-1 and RM-2 explaining the source of acquisition of such property and accounts prepared on the basis of the same were rejected by Commissioner (Appeals), we are of the considered opinion that notings in GB-12 only substantiate/confirm the entries pertaining to investment in property at Salt Lake noted in RM-1 and RM-2. Thus, GB-12 only fortifies the correctness of RM-1 and RM-2 and Commissioner (Appeals) failed to explain the logic behind relying on one set of seized documents marked GB-12 containing details of unaccounted investment in property and rejecting the other set of seized documents marked RM-1 and RM-2 containing both the details of investment in property as well as explaining the source thereof. Commissioner (Appeals) failed to appreciate that since RM-1 and RM-2 were found from the possession and control of the appellant in course of search conducted in the assessee's own case, presumption under section 292C could more aptly be drawn in respect of RM-1 and RM-2 rather than documents impounded in course of survey in group case, i.e., GB-12. [Para ] In view of above facts, it is clear that the documents seized during the course of search from the possession of assessee are true till it is proved otherwise by cogent evidence. The onus to prove that the apparent is not the real is on the party who claims it to be so. Here, in the present case, department claimed that documents inventorised RM-1 to RM-4 are dumb documents and for this revenue has no basis whatsoever. [Para 17] Hence, we consider documents found from the possession of the assessee during the course of search was real and declaration made by assessee on the basis of entry recorded in these documents of long-term capital gain on account of sale of gold and diamond and also receipts on account of sale of paintings are true and there is no basis not to accept the same. Accordingly, we delete the addition made by Commissioner (Appeals) of Rs. 6.009 crores and Rs. 90 lacs for assessment years 2006-07 and 2007-08 is deleted. [Para 17] Since seized documents RM-1 and RM-2 are accepted as true, consequently the assessee has also explained the investment made in purchase of Salt Lake property and also explained the investment in shares explaining source thereof from sale proceeds of diamonds and gold. The assessee has explained that it did not make any investment of Rs. 20 lakhs in the purchase of shares of Fort Projects (P) Ltd. as held by Commissioner (Appeals), which is clearly proved by seized documents RM-1 and RM-2 and the table reproduced by the assessing officer in his assessment orders of these years. After going through facts, this mistake has cropped up due to mistaken notion of the Commissioner (Appeals). As regards investment of Rs. 18.40 crores the same has been extracted by lower authorities from RM-1 and RM-2. Apart from RM-1 and RM-2, Commissioner (Appeals) could not have arrived at the factum of investment in shares by assessee from any other source. The Commissioner (Appeals) accepted the factum of investment in shares from RM-1 and RM-2 for making addition on one hand and rejecting the same as dumb documents on the other hand. Since it has already held that seized documents RM-1 and RM-2 are correct financial statements prepared after incorporation the entries from the seized documents are also true explaining the investment in shares. Accordingly, on the same reasoning, the addition of unexplained investment in shares amounting to Rs. 18.60 crores for assessment years 2008-09 is deleted. [Para 18]