Search and seizure (presumption u/s 132[4A]) – Section 132(4A) of ITA, 1961 – No addition could be made on account of undisclosed income only on basis of presumptions u/s 132(4A) without recording any findings as to how loose sheets found during search were linked to assessee – In absence of corroborative evidence, Tribunal was not justified in reversing finding of CIT(A)

18. Ajay Gupta vs. CIT

[2020] 114 taxmann.com 577 (All.)

Date of order: 13^th November, 2019

Search and seizure (presumption u/s 132[4A]) – Section 132(4A) of ITA, 1961 – No addition could be made on account of undisclosed income only on basis of presumptions u/s 132(4A) without recording any findings as to how loose sheets found during search were linked to assessee – In absence of corroborative evidence, Tribunal was not justified in reversing finding of CIT(A)

The residential premises of the assessee were searched u/s 132 of the Income-tax Act, 1961 on 28^th February, 2000. Pursuant to a notice u/s 158BC, the assessee filed return of income declaring NIL undisclosed income. The A.O. assessed the undisclosed income at Rs. 65,33,302.

The CIT (Appeals) partly allowed the appeal of the assessee. The CIT (Appeals) deleted the addition of Rs. 5,58,870 made by the A.O. on account of papers found during the search. The Tribunal reversed the order of the CIT (Appeals) and restored that of the A.O. The appeal by the assessee was admitted on the following questions of law:

‘1. Whether the presumption u/s 132(4A) of the Income-tax Act can be raised in the assessment proceedings?

2. Whether, apart from section 132(4A) of the Act, the burden to explain the documents seized from the possession of the assessee during search is upon him, and if it is so, then has he discharged the burden?’

The Allahabad High Court allowed the appeal and held as under:

‘i) It is not in dispute that two loose papers were found during search from the premises of assessee, however, during block assessment proceedings, the assessee had denied the documents and statement was recorded by Deputy Director of Investigation; he had submitted that he had no concern with the said documents so seized. Further, the A.O. while passing the assessment order, had only on basis of the loose papers found during search made addition to the undisclosed income of the assessee while the entries of said papers remained uncorroborated.

ii) This Court, in the case of CIT vs. Shadiram Ganga Prasad, 2010 UPTC 840, has held that the loose parchas found during search at the most could lead to a presumption, but the Department cannot draw inference unless the entries made in the documents so found are corroborated by evidence.

iii) As section 132(4A) of the Act provides that any books of accounts, documents, money, bullion, jewellery or other valuable articles or things found in possession of, or in control of any person in course of search may be presumed to be belonging to such person, and further, if the contents of such books of accounts and documents are true. But this presumption is not provided in absolute terms and the word used is “may” and not “shall”, as such the Revenue has to corroborate the entries made in the seized documents before presuming that transactions so entered were made by the assessee. Presumption so provided is not in absolute terms but is subject to corroborative evidence.

iv) In the present case, the Tribunal only on basis of presumption u/s 132 (4A) of the Act, reversed the finding of CIT (Appeals) without recording any finding as to how the loose sheets which were recovered during search were linked with the assessee. In the absence of corroborative evidence, the Tribunal was not justified in reversing the finding by the CIT (Appeals).