Assessment us 153C based on paper not belonging to assessee was bad. Shifting burden without making basic enquiries not acceptable-Delhi HC

Assessment us 153C based on paper not belonging to assessee held as bad. Shifting the burden on assessee without making basic enquiries to unearth truth of the document can not be accepted-Delhi High Court

ABCAUS Case Law Citation:
ABCAUS 1254 (2017) (05) HC

The Grievance:
The appellant Revenue had challenged the order passed by the ITAT setting aside the initiation of proceedings against the Assessee under Section 153C of the Income tax Act, 1961 (‘the Act’)

Assessment Year : 2010-11
Date/Month of Pronouncement: May, 2017

Important Case Laws Cited/relied upon:
Pepsico India Holding Ltd. v. ACIT (2015) 370 ITR 295 (Del).
Principal Commissioner of Income-tax-8 v. Super Malls (P.) Ltd. [2017] 291 CTR 142 (Del),
Principal Commissioner of Income Tax, Circle-II v. Satkar Fincap
Principal Commissioner of Income Tax (Central)-2 v. Nau Nidh Overseas Pvt. Ltd.

Brief Facts of the Case:
The assessment of the assessee was initially completed under Section 143(3). Later, a search and seizure operation was undertaken u/s 132 of the Act on the premises of a real estate broker. During the course of the search at his premises a document was found. The said computer-generated document contained the name of the assessee which reflected that for the purchase of an area in the Mall, the assessee had paid in cash apart from the declared sale consideration.

Replying to the questionnaire, the assessee clarified that the said document did not pertain to any transaction in respect of purchase of any space in the Mall and that it was just a draft proposal presumably by a broker. She also pointed out that the property which she had purchased had been for a consideration which was higher than the prevalent circle rate.

However, the AO being not satisfied with the said reply, recorded a satisfaction note for issuance of a notice to the Assessee under Section 153C of the Act. Subsequently, in the resultant assessment proceedings, the AO passed an order u/s 153C/143(3) of the Act making additions on account of cash payment made out of her unaccounted sources which amounted to Rs. 19,02,68,289/-.

CIT(A) allowed the appeal in part only restricting the additions to Rs. 5,50,72,700. Both the Revenue and the assessee filed appeals before the ITAT which were disposed of by the impugned order.

Observations made by the High Court:
It was noted that the document relied upon by the Revenue to sustain the additions made had not been shown to ‘belong’ to the Assessee. It was further noticed that the search took place in 2009 i.e., prior to the amendment in Section 153C(1) of the Act with effect from 1st June 2015. Therefore, it is not open to the Revenue to seek to point out that the document in question, ‘pertains to’ or ‘relates to’ the Assessee.

It was also noted that in his detailed interrogation the real estate broker had denied cash payments by the assessee and such paper was stated to be mere a draft proposal.

The High Court observed that from the reply of the real estate broker it was evident that even according to him the document in question did not belong to the Assessee and that the document was a proposal delivered at his residence by some other broker and which proposal remained with him before it could be forwarded to the Assessee. In the meanwhile, the search and seizure operation took place.

It was observed that the Revenue could not place any material whatsoever before the CIT (A) or the ITAT to justify the invocation of Section 153C of the Act against the Assessee on the basis that the said document belonged to her.

Regarding the contention of the Revenue that the presumption in Section 292C(1)(ii) would stand attracted to the case viz., that the contents of the document should be presumed to be true as the said presumptions have not been rebutted by the Assessee, the High Court observed that The AO appeared to have proceeded purely on conjectures as regards what the document had stated without noticing the internal contradictions and inconsistencies. The shifting of the burden on the Assessee without making these basic enquiries to unearth the truth of the document could not have been accepted and was rightly commented upon by the ITAT.

The High Court observed that the entire basis for making the additions to the assessable income of the Assessee was a single document. It was opined that the attempt at making additions on the basis of the said document without any further investigation, was bound to be rendered unsustainable in Law.

Held:
It was held that no substantial question of law had arisen from the impugned order of the ITAT. The appeals were accordingly dismissed.