MALINI VACHANI AKERKAR,MUMBAI vs. DCIT CC 36, MUMBAI

This appeal has been filed by the assessee against the order dated 31.10.2016 passed by the Commissioner of Income Tax (Appeals) (for short ‘the CIT (A)’)-53, Mumbai, for the assessment year 2009-10, whereby the Ld. CIT (A) has dismissed the appeal filed by the assessee against assessment order passed u/s 143 (3)/ 153A of the Income Tax Act, 1961 (for short ‘the Act’).

Brief facts of the case are that the assessee an individual having income from salary, house property, business or profession and from other sources had filed return of income for the assessment year under consideration declaring the total income of Rs. 50,60,720/-. Subsequently, a search and seizure operation was carried out u/s 132 of the Act in the case of Y.A. Mamaji Group on 28.01.2011. Pursuant to the search action, the AO issued notice u/s 153A against the assessee and in response thereof, the assessee filed her return declaring the same income as had been in original return. Thereafter the 2 Assessment Year: 2009-10 AO issued notice u/s 143 (2) read with section 153A and 142 (1) of the Act. In response to the said notices, the authorized representative (AR) of the assessee attended the proceedings and filed the details and submissions. During the course of search documents Annexure-A2 containing page 1 to 46 were seized from the residence of the assessee. The document containing at page 44 of the said bunch contained the details of expense amounting to Rs. 3,20,000/-. Accordingly, the AR was asked to explain the contents of the said documents. The AR submitted that the same is not in the writing of the assessee nor the same had any link with the business of the assessee. Rejecting the contention of the assessee the AO made addition of the said amount to the income of the assessee holding the same as unexplained cash expenses. In the first appeal, the Ld. CIT(A) confirmed the addition made by the AO. 3. Aggrieved by the order of Ld. CIT (Appeals), the assessee has preferred this appeal before the Tribunal on the following effective grounds:-

Before us, the Ld. counsel for the assessee submitted that the addition has been made merely on the basis of loose papers recovered during the search. The assessee had made it clear during the search proceedings that the questioned entries are in the hand of Sh. Ali Mamaji and she had no idea about the same. She had further stated that the letter pad containing the questioned entries has no connection with her business. The letter pad was used by her for drafting letters in Ali Mamaji’s office and she had brought the same for writing draft e-mails on behalf of herself and Ali Mamaji. The AO has not conducted any enquiry to verify the facts stated by the assessee. No notice was issued to Mamaji to confront the plea of the assessee. Since, the AO has 3 Assessment Year: 2009-10 not rebutted the contention of the assessee, there is no justification of making addition of the said amount to the income of the assessee. The Ld. counsel relied on the various case law in support of his arguments.

On the other hand, the Ld. Departmental Representative (DR) relying on the order passed by the Ld. CIT (A) submitted that since the incriminating documents were recovered from the possession of the assessee, the onus was upon her to explain to the satisfaction of the AO. Since, the explanation given by the assessee was not found plausible, the Ld. CIT (A) has rightly confirmed the addition made by the AO. 6. We have heard the rival submissions and also gone through the material on record including the cases relied upon. Admittedly, the document in question was recovered from the residence of the assessee, which contain the details of expenditure amounting to Rs. 3,20,000/-. However, the recovery of the questioned document itself is not sufficient to make addition of the amount in question to the income of the assessee particularly when the assessee has given a plausible explanation that the pad containing the details belong to Mamaji the Managing Director and owner of YAMFPL having store called Pallate. She has also stated in her statement recorded u/s 132 (4) of the Act that as a Director of YAMFPL she was not involved in purchasing process but only involved in identifying the products to be purchased from the shop floor viz. selection of brand. She has further stated that the said letter pad belong to YAMFPL, however the details are in the writing of Mr. Ali Mamaji. We further notice that the Ld. CIT (A) has confirmed the addition made by the AO on the ground that u/s 292C of the Act, any books of account other documents, money, bullion, jewellery etc. found in the possession of any person during the course of search u/s 132 or survey u/s 133A, may be presumed that such books of account etc. belong to that person. We have perused the questioned document which contains some rough noting however, the same does not indicate the name of the assessee or any other person. It 4 Assessment Year: 2009-10 also does not contain date, year. The Hon’ble Supreme Court in the case of P.R Mitrani Vs. Commissioner of Income Tax, Bangalore 287 ITR 209 (SC) has held that a presumption is an inference of fact drawn from other known or prove facts. It is the rule of law under which courts are authorized to draw a particular inference from particular facts which are of three types i.e. may presume, shall presume and conclusive proof. Since, the words in section 292C are may be presumed, presumption is rebuttable and the assessee has explained the circumstances under which the documents in question came to her possession and further pointed out that the document/details are in the hand of Ali Mamaji, the AO should have confronted the stand of the assessee. However, there is no evidence on record on the basis of which it can be concluded that the AO had made efforts to examine Ali Mamaji in the light of the statement of the assessee.

Further, there is no corroboration of the figure mentioned in the questioned documents forming the basis of addition to the income of the assessee. In a similar set off circumstances, the Hon’ble Calcutta High Court in the case of PCIT vs. M/s Ajanta Foodcare Ltd. GA No. 1685 of 2016 of 2016 has declined to interfere with the findings of the appellate authorities which had decided the issue in favour of the assessee. The relevant portion of the judgment reads as under:- “10. In the subject proceeding, two Statutory Appellate Authorities have exercised their discretion against the Revenue and in favour of the assessee. The reason for exercising such discretion is that no stock discrepancy could be demonstrated and there was no corroboration of the figures forming the basis of addition to the income of the assessee as well as directed by the Assessing Officer. No question about the said document was put to the Director of the assessee in course of search. This factor was also taken into consideration by the aforesaid Appellate bodies. The two Statutory Appellate Authorities doubted the inherent probative value or quality of the above referred document upon applying their mind on it. In substance, the said authorities found no reason to draw presumption against the assessee on the basis of scribbled figures appearing on the document in question. This is how two fact finding bodies chose to deal 5 Assessment Year: 2009-10