AO can not extrapolate numbers on seized dumb document into lakhs. Addition made by deciphering erased figures by forensic report was based on surmises and conjunctures- ITAT
ABCAUS Case Law Citation:
ABCAUS 2028 (2017) (08) ITAT
Assessment Year : 2010-11
Important Case Laws Cited/relied upon by the parties:
CIT Vs. Kalyansundaram (294 ITR 94)
CIT Vs. Naresh Kumar Aggarwala (331 ITR 510)
Surendra M Khandhar Vs. ACIT (321 ITR 254)
Brief Facts of the Case:
The Income Tax Department (Revenue) carried out a search and seizure operation u/s 132 of the Income Tax Act, 1961 (the Act) at the residence and business premises of a business group in 2009. The assessee was one of the directors of the said group.
During the course of search a diary was seized. It was noticed by the tax officials that the back side of a page in the diary contained certain notings, which were made in pencil but was erased subsequently. Hence the entries were not legible.
The Revenue referred the same to the forensic laboratory. The forensic laboratory reported that the noting have been made in 4 columns. First column contains certain narration and remaining three columns contain numeric numbers. Forensic Laboratory deciphered numeric numbers to some extent.
The Assessing Officer (AO) took the view that the numbers mentioned should be taken as “in lakhs” and accordingly added up the numeric numbers deciphered by the Forensic Laboratory which came to Rs. 22.05 crores. Accordingly, the AO assessed the aggregate sum of Rs. 22.05 crores as undisclosed income of the assessee.
The CIT(A) was convinced that the impugned seized document could not be the basis for arriving such a conclusion without further corroboration. He also noticed that the ITAT has expressed this view in assessee’s own case in past assessment years that the Assessing Officer could not extrapolate numbers into “lakhs” and could not make addition purely on the basis of surmises and conjunctures. The CIT(A) also took support of the decision rendered by Hon’ble Apex Court.
Contention of the Appellant Revenue:
It was submitted that the assessee could not offer any valid explanation to the nature of entries noted in the incriminating material. It was submitted that the burden to disprove the presumption placed on the seized documents u/s 132(4A) of the Act lied upon the assessee, which the assessee has failed to discharge.
It was contended that as per the decision rendered by Hon’ble Delhi High Court and the Hon’ble Bombay High Court had the entries noted in the incriminating document are liable to be assessed as income of the assessee, if the assessee fails to discharge the presumption by offering a plausible explanation. It was submitted that the entries made in the seized document were deciphered by the forensic laboratory. However, it was fairly admitted that the forensic laboratory did not comment anything about the age of document.
Contentions of the Respondent Assessee:
It was submitted that the entries deciphered by the forensic laboratory clearly indicated that the entries were related to the year “2002”. Therefore the AO could not have made the additions, if any, during the year under consideration.
It was submitted that the entries might have been made by the assessee with regard to certain business proposal and they have been erased thereafter as the proposal might not have taken place.
It was contended that the seized diary was a dumb document with no date, no name. Even it was not clear as the entries were related to receipts or to payments. There was no mention about the nature of transactions also.
It was further submitted that decisions relied upon by the Revenue were not applicable to the present case, as they had been rendered on the basis of facts available in those cases. The facts relating to the incriminating documents found in the cases were very clear and further the assessees had failed to rebut the presumption placed u/s 132(4A) of the Act. However, in the instant case, the facts relating to the entries were not clear and hence the same was a dumb document and no inference could be drawn thereon without any corroborating material.
Observations made by the Tribunal:
The Tribunal noted that that the entries found in the incriminating material did not bring out anything about its nature. Some figures had been noted in a columnar form. It was not clear as to whether they pertained to “receipt” or “payment”.
The ITAT was of the view that the AO could not bring any material on record to understand the meaning and nature of entries. Hence, in the absence of any other corroborative material, the said document should only be construed as dumb document.
The Tribunal also opined that that no reasons could be found for extrapolating the figures into lakhs as done by the AO. It was also noted that the co-ordinate bench also took an identical view in the assessee’s own case.
It also noted that the assessee had given detailed explanations before the CIT(A) and hence the CIT(A) had deleted the addition by placing reliance on the various case laws.
It was held that that the addition made by the AO had to be taken as an addition made on surmises and conjectures, which was liable to be deleted. Accordingly, the ITAT upheld the order passed by CIT(A).