Data retrieved from Pen-drive & admission not substantive evidentiary value to make additions

Data retrieved from Pen-drive and admission by vendors though may have a persuasive value no substantive evidentiary value to make additions. Data retrieved from digital device certificate u/s 65B(4) of Evidence Act must prove its authenticity.

In the instant case, the assessee had cjhallenged the order passed by the CIT(A) in confirming addition made by the Assessing Officer (AO) invoking the provisions of section 69B of the Income Tax Act, 1961 (the Act) towards unaccounted sale consideration paid for purchase of residential property.

ABCAUS Case Law Citation
ABCAUS 3536 (2021) (07) ITAT

Important case law relied referred:
Gajjam Chinna Yellappa vs. ITO
CIT vs. S. Khader Khan Son
K. P. Varghese vs. ITO [1981] 131 ITR 597
CIT vs. Smt. K.C. Agnes [2003] 262 ITR 354
CIT vs. P.V. Kalyanasundaram

The assessee was a Private Limited company engaged in the business of investing in real estate and undertaking infrastructure projects.

The return of income (ITR) of the company was processed u/s 143(1) of the Act. Thereafter a search and seizure operations u/s 132 of the Act was conducted in the case of the assessee company and its related persons and concerns.

During the search, a pen drive was found and seized containing details of cash paid by the assessee company towards purchase of residential property.

On of the employee of the searched party admitted that Pen-drive belonged to him and the data pertained to the group company. This was also confirmed same in his statement recorded.

The sellers of the property confirmed the on-money transaction   and admitted the same in their scrutiny assessment proceedings and paid tax.

As a result, the AO came to the conclusion that the assessee company had paid on-money to the sellers of the property and added to the income of the assessee invoking the provisions of section 69B of the Act.

Before the Tribunal the assessee submitted that the Pen-drive relied on by the Revenue was neither books of account nor a document, but it was only a digital device.

It was further argued by stating that any digital evidence should also be corroborated with some physical evidence seized during the course of search, otherwise no conclusive conclusion can be drawn and in the case of the assessee no such physical evidence was seized during the course of the search, or any material was found with the assessee subsequently.

It was further submitted that the print out of the digital data did not bear the signature of the party and there were no signature of either Revenue Officers or witness in order to prove the integrity of the data retrieved.

The Tribunal noted that the summary of alleged payment made was signed by the employee of the assessee stating that the   printout is taken from the file in Pen-drive. Other than that, nothing was penned in the print-out. Further, those documents were not signed by the Revenue Officers or by any witness.

The Tribunal stated that for the data retrieved from a digital device certificate u/s 65B(4) of the Evidence Act, it is essential to prove the authenticity of the data which was lacking in the case.

Further, the Tribunal stated that the data was maintained by the employee of the assessee which did not link to any document found with the assessee or in the premises of the Directors or any other employees of the assessee company.

The Tribunal opined that due to aforesaid deficiency to treat it as evidence against the assessee, these documents were dumb documents and cannot be made a basis for making addition in the hands of the assessee.

The Tribunal also pointed out that the confessions obtained from the employee of the assessee which were subsequently retracted by him.

The Tribunal noted that the CBDT vide Instruction F. No. 286/2/2003-IT (INV.II), dated 10/3/2003 has condemned the forced confession made during the search and survey operations.  

The Tribunal observed that the Hon’ble High Court had held that where assessment order passed on the basis of mere statement recorded during the course of survey which are retracted and where the Assessing Officer did not produce any other cogent material to support the statements or sale consideration of land, the assessment order is to be set aside.

Further, the Tribunal noted that the Hon’ble High Court had held that the statement recorded u/s. 133A of the Act has no evidentiary value and admission made during such statement cannot be made basis of addition.

The Tribunal stated that Revenue Authorities while making the addition heavily relied on the statement of the sellers observing that they had admitted such payment and paid tax on the same in their scrutiny assessment proceedings. However, seller’s assessment orders were not produced to verify the facts and relying on the oral statements, making of such addition not justified.

The Tribunal also expressed surprise as to how such addition can be made in the hands of the buyers as well as the sellers of the property.

The Tribunal pointed out that the Hon’ble Supreme Court had categorically held that no addition can be made on the plea of understatement of sale consideration unless it is established that physically money has been received over and above the declared consideration.

Also, the Tribunal noted that Hon’ble High Court had held that when a document shows a fixed price, there would be a presumption that it is the correct price agreed upon by the parties. It is true that on the basis of the agreement the sale deed is executed. But it is not necessary that the price stated in the agreement will be price shown in the sale deed.

Further, it was noted that the Hon’ble Supreme Court had held that the fact as to the actual sale price of the property, the implication of the contrary statements made by the vendor or whether reliance could be placed on the loose sheets recovered in the course of the raid were all question of fact.

The Tribunal held that in the instant case, data retrieved from the Pen-drive and the admission by the vendors of the property though may have a persuasive value but will not have much substantive evidentiary value in order to make additions in the hands of the assessee.

Accordingly, the Tribunal allowed the appeal in the favour of the assessee.

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