2017 (7) TMI 1102 - HC - Income Tax

Addition on the basis of documents found in search - no further expiry - Held that - The ITAT in the impugned order noted that the document was silent as to the payer and payee of the amount in question nor does it disclose that the payment was made by cheque or cash nor it is proved that the document is in the handwriting of assessee or at least bears his signatures. The addition of Rs. 80, 50, 000 merely on the basis of a single document without making any further enquiry was not justified. No attempt was made by the AO to find out if in fact it constituted estimates relating the construction of project of Omaxe Ltd. - Decided against revenue

Summary

Issues:
1. Appeal against deletion of addition to income by ITAT.
2. Validity of explanation offered by Assessee regarding seized document.
3. Application of Section 292C of the Act.
4. Justification of addition of income based on a single document.
5. Adequacy of enquiry by AO regarding estimates related to construction project.

Analysis:
1. The appeal before the High Court was filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) regarding the addition of Rs. 80,50,000 to the income of the Assessee for the Assessment Year 2004-05. The ITAT had deleted this addition, which was initially made by the Assessing Officer and affirmed by the Commissioner of Income Tax (Appeals) (CIT (A)).

2. The Assessee, a director of a construction company, explained that the seized document containing estimates related to a construction project belonged to the company he was associated with. However, the CIT (A) rejected this explanation as the document did not explicitly mention the company's name. The CIT (A) invoked Section 292C of the Act, presuming the document belonged to the Assessee since it was found in his residence.

3. The High Court noted that the ITAT found the seized document to be inconclusive as it did not specify the payer or payee of the amount, the mode of payment, or bear the Assessee's handwriting or signature. The Court emphasized that adding Rs. 80,50,000 to the Assessee's income based solely on this document without further enquiry was unjustified.

4. It was observed that the Assessing Officer failed to investigate whether the estimates in the document were indeed related to the construction project of the company the Assessee was associated with. The High Court concluded that the ITAT's decision had no legal flaw and did not raise any substantial question of law, leading to the dismissal of the Revenue's appeal.

5. In conclusion, the High Court upheld the ITAT's order, highlighting the lack of justification for the addition to the Assessee's income solely based on a single document and the failure of the Assessing Officer to conduct a thorough enquiry into the nature of the estimates.