I-T - Unsigned entries in pen drive wherein name of assessee company is not found, can't be used as evidence against assessee: ITAT
By TIOL News Service
NEW DELHI, DECEMBER 05, 2018: THE ISSUE IS - Whether unsigned entries in pen drive wherein name of assessee company is not found can be used as evidence against assessee company - NO IS THE VERDICT.
Facts of the case
The assessee company had filed its return of income for relevant AY. A search operation was carried out by the Punjab Vigilance Bureau in the case of Sh. Chetan Gupta at his business premises.From the data collected the AO was of the view that income had escaped assessment. The AO issued notice u/s 148 of Act. The AO asked for the explanation of the assessee-company regarding entries contained in pen-drive found from the possession of Shri Chetan Gupta. The assessee-company explained that the alleged pen-drive was recovered from Shri Chetan Gupta had got no relevance or correlation with the affairs of the Company. He was merely a director of the assessee company and any document being allegedly maintained or belonging to him did not have any correlation with the accounts of the Assessee-Company. The assessee submitted that its accounts were audited by Chartered Accountant who had given unqualified report to the Company. The assessee-company maintained proper books of account. Therefore, entries contained in the pen-drive could not be made basis for addition against the assessee-company. The AO was not satisfied with reply of assessee and made addition for unexplained credit u/s 68 of Act. The assessee-company challenged the initiation of re-assessment proceedings and addition before CIT(A).
On appeal, the Tribunal held that,
++ that the Department has considered the peak credit of all the credit entries maintained in each and every ledger account at Rs.43,67,62,555/-. According to the Department, the pen-drive represents the accounts of such unaccounted transactions which were being kept and maintained by Shri Chetan Gupta. The Order of the Tribunal, passed in case of Shri Chetan Gupta, clearly established that all the entries in the pen-drive were considered for calculating the peak credit entries in the hands of Shri Chetan Gupta and as such Counsel for the Assessee has rightly contended that when the peak credit has been considered entirely in the hands of Shri Chetan Gupta, there were no question of making any addition against the assessee-company. Further, Shri Chetan Gupta has not made any statement against the assessee-company;
++ CIT(A) in the case of the assessee-company for A.Y. 2007-2008 vide Order dated 23.02.2016 following the Order in the case of Shri Chetan Gupta deleted the entire addition. The ITAT, Delhi F-Bench also in the case of sister concern of the assessee-company R.L. Agencies Pvt. Ltd., on identical issue following the Order in the case of Shri Chetan Gupta (supra), deleted similar addition. These facts clearly prove and establish that assessee-company has no connection with the entries contained in the pen-drive. The print-out of the pendrive was brought on record which was unsigned. No name of the assessee-company is mentioned. Therefore, it was having no evidentiary value to make any addition against the assessee-company. The issue is, therefore, covered by the Order of the ITAT, Delhi Bench in the case of Shri Chetan Gupta and others. Thus no addition could be made against the assessee-company;
++ the AO recorded reasons for reopening of the assessment on the basis of pen-drive found from the possession of Shri Chetan Gupta. Shri Chetan Gupta do not make any allegation against the assessee-company. The Tribunal has held that the pen-drive belongs to Shri Chetan Gupta. In the reasons for reopening of the assessment, no name of the assessee-company have been mentioned because it is mentioned as "RLTRV PVT EXP". The reasons for reopening of the assessment did not refer to any material to connect the assessee-company with escapement of income or incurring any unaccounted expenses. The A.O. did not verify the details contained in the pen-drive. The A.O. has initiated the re-assessment proceedings because assessee-company has incurred unaccounted expenditure under section 69C of the I.T. Act. But, later on, did not make any addition under section 69C of the I.T. Act. The A.O. has failed to establish as to how assessee-company has incurred the expenses. The assessee-company has not debited any expenditure in the profit and loss account and also did not claim deduction of the same in its books of account. How the entries in the pen-drive were connected with the assessee-company have also not been established. It, therefore, appears that A.O. did not apply his mind to the alleged pen-drive before initiating the re-assessment proceedings in the matter. Thus, there is absence of link between alleged tangible material and formation of belief. At the most, it could be inferred that the belief of the A.O. was based on mere imagination, speculation and suspicion. Therefore, it is not a fit case for initiation of reassessment proceedings under section 147/148 of the I.T. Act against the assessee-company. Appeal of the Assessee-Company is allowed.
(See 2018-TIOL-2319-ITAT-DEL)
