C I T JAIPUR vs. RANJEET SINGH DEORA

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ITA/121/2010HC RajasthanRJHC02050840201010 July 2013Author: MAHESHWARI DINESH,NARENDRA KUMAR JAIN-II8 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT was justified in deleting the additions. The Court found that the submissions made by the Revenue did not raise any substantial question of law, as they primarily related to the appreciation of evidence and factual inquiries. The Court noted that the seized paper was from a third party (Shri D.L. Purohit), and the assessee was not given an opportunity to cross-examine Shri D.L. Purohit or Shri Mahendra Choudhary. The ITAT rightly observed that no presumption could be drawn against the assessee under Section 132(4A) for a paper not recovered from him, and additions could not be made solely based on entries in a document seized from a third party without corroborative evidence. The Court found no perversity or wrong application of principles in the ITAT's order. Therefore, the appeal filed by the Revenue was dismissed.

What were the facts?

The Revenue (CIT Jaipur-II) appealed against an order of the Income Tax Appellate Tribunal (ITAT) concerning the assessment of Ranjeet Singh Deora for the block period 01.04.1996 to 09.10.2002. During search and seizure operations, a loan account was seized from the residence of Shri D.L. Purohit, containing entries from 01.03.1996 to 21.03.2001. The Assessing Officer (AO) inferred that the assessee paid Rs. 10,42,541/- as interest on a loan of Rs. 7,50,000/- from Shri Mahendra Choudhary, an ex-Director of a company where the assessee was an ex-employee. The AO added this interest as unexplained expenditure. Additionally, the AO found entries showing a payment of Rs. 5,91,336/- to Shri Mahendra Choudhary, with a balance of Rs. 18,182/-, and added Rs. 5,73,000/- as out-of-books cash payment to undisclosed income. The Commissioner of Income Tax (Appeals) [CIT(A)] restricted the total addition to Rs. 1,00,000/-. Both the assessee and the Revenue appealed to the ITAT.

What were the issues?

1. Whether the ITAT was justified in deleting the additions of Rs. 10,42,541/- (interest payment) and Rs. 5,73,000/- (loan repayment) made by the AO, which were based on a document seized from a third party, in the absence of corroborative evidence and without affording an opportunity for cross-examination of relevant persons, turning on Section 132(4A) and general principles of evidence. Assessee's contention (as presented by the ITAT): The seized document (page 24 of Exhibit A-2) was found from Shri D.L. Purohit's residence, not the assessee's. The entries did not tally with the assessee's books. Shri D.L. Purohit and Shri Mahendra Choudhary were neither examined by the AO nor allowed for cross-examination by the assessee. No presumption under Section 132(4A) could be drawn for a document not recovered from the assessee. Revenue's contention (as presented by the ITAT and the High Court): The CIT(A) erred in deleting the additions substantially, despite accepting the seized paper as admissible evidence. The ITAT was not justified in deleting the additions altogether, and if there was a denial of adequate opportunity, the matter should have been restored to the AO.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 132,Section 132(4A),Section 158BC,Section 69C,Section 269T

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Income Tax Appellate Tribunal, Jaipur

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