Percentage Completion Method for Undisclosed Cash Receipts!

[Vivek Jalan]

Is an Excel sheet found during search, corroborative evidence? Is a figure mentioned in such sheet reliable? Whether undated and unsigned details can be considered as ‘evidence’ on the basis of which tax can be levied? Is an excel sheet just a dump document? The same has also to be answered keeping in view Section 132(4A) of The Income Tax Act which provides that where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person ; that the contents of such books of account and other documents are true ; and that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

To answer this one must firstly look into Section 156 of The Indian Evidence Act which states as follows –

“When a witness whom it is intended to corroborate gives evidence of any relevant fact, he may be questioned as to any other circumstances which he observed at or near to the time or place at which such relevant fact occurred, if the Court is of opinion that such circumstances, if proved, would corroborate the testimony of the witness as to the relevant fact which he testifies. Illustration A, an accomplice, gives an account of a robbery in which he took part. He describes various incidents unconnected with the robbery which occurred on his way to and from the place where it was committed. Independent evidence of these facts may be given in order to corroborate his evidence as to the robbery itself.”

Hence, Corroborating evidence is evidence that strengthens or confirms already existing evidence. Omissions and contradictions come in the way of inspiring confidence about credibility of the witness and the evidence. The proof of Contradiction is vital to destroy the credibility of the case. Therefore, it is important for the AO to look into the fact that the presumption under section 132(4A) of the Act is rebuttable and where there is denial of such presumption, onus shifts to the Ld. AO to make further investigation. An attempt has to be made then to examine the said parties to establish the veracity of the entries made in the xls sheet. Addresses of such parties have also to be found out.

Hence where Pursuant to search and seizure conducted, AO reopened case of assessee under Section 147 of the Act and made addition on account of unexplained cash receipt treating it as being against booking of space and applying Percentage Completion Method of revenue recognition, the matter was remanded back in the case, that the Record of assessee needs to be examined as to either in its case Percentage Completion Method has been applied or assessment has been made on basis of Project  Completion Method.

See:

DCIT, CENTRAL CIRCLE- 18, NEW DELHI VERSUS M/S. CELEBRATION CITY PROJECTS LTD. AND M/S. CELEBRATION CITY PROJECTS LTD. VERSUS DCIT, CENTRAL CIRCLE-18, NEW DELHI