AO can not extrapolate numbers on seized dumb document into lakhs – ITAT

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

 dumb document

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.

Held:
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).

dumb document
Download Full Judgment

RBI directs NBFCs to appoint nominated counsels in High Court

RBI directs NBFCs to appoint nominated counsels in High Court to represent them when a petition is filed seeking interim orders/ directions against any NBFC

RBI directs NBFCs to appoint nominated counsels

Reserve Bank of India

Appointment of nominated counsel in the Hon’ble High Court of Delhi at New Delhi- Compliance of the Order dated 21.07.2017

RBI/2017-18/44
DNBR (PD) CC.No.088/03.10.001/2017-18

August 14, 2017

To

All NBFCs notified as ‘Financial Institutions’ under sub clause (iv) of clause (m) of sub section (1) of section 2 read with section 31A of the SARFAESI Act, 2002

Madam/ Sir,

Appointment of nominated counsel in the Hon’ble High Court of Delhi at New Delhi- Compliance of the Order dated 21.07.2017

In Writ Petition (C) No. 1088 of 2017 (M/s J.K Jewellers vs. Capri Global Capital Ltd), the Hon’ble High Court of Delhi at New Delhi was pleased to pass the following order:

“5. The underlying purpose of issuing directions to the RBI as mentioned in the order dated 08.02.2017 is to ensure that when a party files a petition in this court for seeking interim orders/ directions against any NBFC, the Court has adequate assistance from the other side. It was with the said intention that RBI was directed to issue a Circular calling upon all the NBFCs to appoint nominated counsels in the High Court for them to receive advance copies of petitions and be ready with necessary instructions.

6. …… it is deemed appropriate to direct RBI to issue a Circular within two weeks, asking all NBFCs empowered to invoke Section 14 of the SARFAESI Act to appoint nominated counsels in the High Court and convey their names to the Registry within four weeks from the date of receipt of the Circular so that henceforth, advance copies of petitions can be served directly on the said counsels and they are ready with instructions at the stage of admission itself.”

2. In pursuance of the above directions of the Hon’ble High Court, all NBFCs notified as “Financial Institutions” under sub clause (iv) of clause (m) of sub section (1) of section 2 read with section 31A of the SARFAESI Act, 2002 are hereby advised to take necessary action.

Yours faithfully

(C.D. Srinivasan)
Chief General Manager

Important judgment on EPS payment by exempted establishment by Kerala High Court

Important judgment on EPS payment by exempted establishment under Section 17(1)(C) by Kerala High Court in the case of cooperative bank

Important judgment on EPS payment

Hon’ble High Court of Kerala has dismissed the Petition flied by an exempted establishment challenging the assessment order passed by Kannur. P.F. office.

The petition was filed by M/s Mowanche ry Co-operative Rural Bank Ltd, an exempted establishment from EPS’95, contending that he was paying an amount of 10% of the wages towards pension scheme under Kerala Co-op. Societies Employees Self Financing Pension Scheme, 1994 and as such he is liable to pay only the differential 2% as his contribution towards EPS’ 1995.

The Hon’ble Court dismissed the Petition with the observation that “the contribution made by the petitioner at a higher rate of 10% was in accordance with a n entirely different Scheme and the exemption that was granted to the petitioner was from the specific obligation under the EPF Act and nothing more”.

ICAI Educational Material on Ind-AS 16 Property, Plant and Equipment and FAQ

ICAI Educational Material on Ind-AS 16 Property, Plant and Equipment and FAQ

ICAI Educational Material on Ind-AS

ICAI Educational Material on Ind-AS 16 Property, Plant and Equipment

Ind AS Implementation Committee of the Institute of Chartered Accountants of India (ICAI) has brought out an Educational Material on Indian Accounting Standard (Ind AS) 16, Property, Plant and Equipment. This Standard brings out many new recognition and measurements concepts like component accounting, capitalisation of expenditure based on assessment of probability of future economic benefits associated with the item and not necessarily based on criteria of ownership, initial measurement to include asset dismantlement, removal and restoration costs, recognition of enabling assets such as safety and environment and major inspection costs as PPE, depreciation charge based on revalued amount under revaluation model. 

The objective of Ind AS 16 is to prescribe the accounting treatment for property, plant and equipment so that users of the financial statements can discern information about an entity’s investment in its property, plant and equipment and the changes in such investment.

This Educational Material contains the following:

(a) Summary of Ind AS 16 

(b) Frequently Asked Questions (FAQs) 

(c) Appendix I – Differences between Ind AS 16, Property, Plant and Equipment and AS 10, Property, Plant and Equipment