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2016 (2) TMI 607 - DELHI HIGH COURT

2016 (2) TMI 607 - DELHI HIGH COURT - TMI - Cognizance of provisions of Section 292C - addition made by the AO on the basis of the impounded documents found in search - whether evidence was impounded not only from the premises of the assessee, but from the Computer of the assessee - Gross Profit addition deleted - Held that:- Section 292C of the Act, inter alia, provides that where any books of accounts or other documents are found in possession or control of any person in the course of search u .....

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mation from the Director of M/s Smridhi Sponge Limited; details of the bank accounts; final accounts; Director's Report; PAN Number etc. which sufficiently discharged the burden cast on the Assessee. The ITAT also found that the Assessee had provided the necessary information for the AO to make the requisite enquiries from M/s Smridhi Sponge Limited as well as M/s Galaxy Exports Pvt. Ltd. In our view, no interference with the order of the ITAT is called for under Section 260A of the Act since th .....

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Srivastava, Adv JUDGMENT CM No.3683/2016 (for condonation of delay in filing) & CM No.3685/2016 (for condonation of delay in re-filing) in ITA 116/2016 CM No.1251/2016 (for condonation of delay in filing) & CM No.1253/2016 (for condonation of delay in re-filing) in ITA 74/2016 1. For the reasons stated in the applications, the delay in filing and in refiling the appeals is condoned. 2. The applications stand disposed of. ITA 116/2016 ITA 917/2015 ITA 74/2016 3. These appeals have been p .....

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/2013 was Assessee's cross appeal against the said order. ITA 2926/Del/2013 was filed by the Assessee impugning a separate order dated 22nd February, 2013 passed by the CIT(A) in respect of the AY 2008-09. Concededly, the material facts for AY 2007-08 and 2008-09 necessary for addressing the disputes are similar and, therefore, the ITAT had proceeded to examine and decide the appeals in the context of the facts as obtaining for AY 2007-08. 4. Briefly stated, the subject controversy arises co .....

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py of an account stored in the computer of the Assessee. However, the Assessment Order indicates that certain loose papers were found and seized during the survey and the same indicated certain transactions with one M/s Smridhi Sponge Limited pertaining to Financial Years 2006-07 and 2007-08. 6. Based on the aforesaid loose papers, the assessments for AY 2007-08 and AY 2008-09 were reopened and notices under Section 148 of the Act were issued to the Assessee on 8th September, 2010. In response t .....

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ertain to it. The Assessee also filed an affidavit to that effect. According to the Assessee, the said document pertained to some other person who had perhaps used the Assessee's computer. Nonetheless, in order to discharge its onus, the Assessee conducted a search from the Registrar of Companies as well as the official site of the Income Tax Department and submitted the details of M/s Smridhi Sponge Limited as well as the names of its Directors. The Assessing Officer (hereafter 'AO' .....

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d document contained details of payments made outside the books of accounts to M/s Smridhi Sponge Limited for purchases made. The AO thereafter estimated the sales made by adding a gross profit margin of 8% on the alleged undisclosed purchases and concluded that the Assessee had made sales of ₹ 2,57,51,355/- outside its books of accounts. On the above basis, the AO made an addition of ₹ 2,68,11,454/- under Section 68 of the Act as undisclosed income of the Assessee. Addition on the s .....

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them as to the transaction of the Assessee. The Assessee had further downloaded information regarding the overdraft facility enjoyed by M/s Smridhi Sponge Limited and also sought to produce the same before CIT(A). The Assessee also downloaded the Balance Sheet of M/s Smridhi Sponge Limited, which disclosed the outstanding balance of ₹ 1,22,04,722/- against M/s Galaxy Exports Pvt. Ltd. The Assessee sought to produce various documents before the CIT(A) and for the purposes filed an applicati .....

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CIT(A) disbelieved the same principally for the reason that the same, although dated 11th October, 2012, was not filed alongwith the application under Rule 46A that was filed on 22nd October, 2012. The CIT(A) also observed that the confirmation was not produced on subsequent dates of hearing but was sought to be produced on a much later date on 13th January, 2013. The CIT(A) further held that the AO was justified in drawing a presumption under Section 292C of the Act in respect of loose documen .....

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for making the quantum of alleged undisclosed sales, which was computed at ₹ 99,73,187/-. Thus, CIT(A) reduced the amount of undisclosed income for AY 2007-08 to ₹ 1,20,33,295/- being the aggregate sum of gross profit and working capital. Similarly, the CIT(A) reduced the addition made by the AO in respect of the AY 2008-09;. the CIT(A) accepted the addition of ₹ 14,33,880/- on account of profit but restricted further addition to ₹ 69,41,555/-, thus, computing the total a .....

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r, the Assessee had immediately undertaken a search through internet and had collected the details about M/s Smridhi Sponge Limited which included its office address, company registration number, PAN number and particulars of its Directors and forwarded the same to the AO. In addition, since the document contained a reference to Galaxy, the Assessee had also made enquiries and had provided the details of Galaxy Exports Pvt. Ltd. and its Directors. Further, the Assessee had also provided the bank .....

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nal accounts of M/s Smridhi Sponge Limited disclosed transactions with Galaxy Exports which was a company dealing in iron ore. Subsequently, the Assessee had also produced a letter from the Director of M/s Smridhi Sponge Limited conforming that the company did not have any transaction with the Assessee. 13. The ITAT observed that despite the information being provided by the Assessee, the AO had not made the efforts to make the necessary enquiries but had rested content with his notice under sec .....

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t Section 292C provides that where a document is found in possession of a person during search or survey, a presumption can be drawn that it belongs to such person, however, the said presumption is rebuttable and the Assessee can rebut the same. The ITAT noted that in the given facts, the Assessee had asserted that it did not have any dealing with M/s Smridhi Sponge Limited and had filed an affidavit to that effect. Further, in order to rebut the presumption, the Assessee had provided all necess .....

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Pvt. Ltd. Further, the Assessee had also provided details of Galaxy Exports Private Limited. Thus, given the stand of the Assessee, it had done all that it was in its power to do. 15. On the other hand, the AO had not produced any corroborative evidence which would indicate that the Assessee's denial of dealings with M/s Smridhi Sponge Limited was false. Accordingly, the ITAT concluded that no addition could be made on the basis of the documents seized during the survey. 16. The Revenue has .....

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ed documents. ii, WHETHER on the facts and in the circumstances of the case, the ITAT was justified in law in not taking proper cognizance of provisions of Section 292C of the Income Tax Act, 1961 in correct perspective, as the evidence was impounded not only from the premises of the assessee, but from the Computer of the assessee? iii. WHETHER on the facts and in the circumstances of the case, the ITAT was correct in holding that the heavy onus cast upon the assessee by virtue of the provisions .....

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