By TIOL News Service

MUMBAI, JAN 23, 2018: THE issue is - Whether no fault can be found with the additions made on the basis of identified loose papers seized during the search and the assessee admitting the same during assessment process but later retracting her statement. YES is the answer.

Facts of the case

The Assessee, an actress by profession, had filed her return for the relevant AY. The Revenue conducted a search and seizure operation and seized various materials. In the course of the assessment proceeding, the AO noted that the Assessee did promotional activity on being brand ambassador of NDTV Toyota Greenathon campaign. Further, in this regard, on verifying the seized documents, the AO observed that the Assessee was given a Toyota Prius hybrid luxury sedan car. Therefore, the receipt of Toyota car in this connection was added in the hands of the Assessee u/s 28(iv).

The AO also found that the Assessee was charging an amount as gross rental per month from one M/s. Sivani Oil & Gas Exploration Services in cheque and cash however, TDS was deducted by the payee with respect to cheque amount. The Assessee was not showing the entire rental amount in her books and accordingly, an addition of Rs.6,00,000/- was made while computing Assessee's total income. Further, the AO observed that in the return of wealth filed, the Assessee had claimed the penthouse as exempt as an office, being used for the business purpose. However, in this regard, statement on oath of one of the Assessee's employees Ms. Deepika Prakash was recorded u/s 132(4). On verification, it was found that the said penthouse was of two different units and separate agreements were made for the same. Meanwhile, the AO noticed that the said penthouse was not utilized since AY 2009-10 but, the Assessee was claiming depreciation for the same. Therefore, the Assessee was asked to submit the details alongwith requisite documents but, the Assessee failed to furnish the same. Further, it was found that the said penthouse was located in the residential area. Hence, it could not be considered as commercial property. Therefore, the annual value of the said properties had to be determined u/s 23(1)(c) and to be charged under 'income from house property'. Following the same, the AO disallowed the depreciation claimed on the said penthouse and added the same to the Assessee's income.

On appeal, the CIT(A) confirmed the addition towards unaccounted income in respect of rent receipt in cash from Shivani Oil and Gas Exploration and hence, granted a partial relief to the Assessee.

On appeal, the Tribunal held that,

++ the addition is based upon the seized papers in which there was scribbling found for the cash component of the rent receipt. In the assessment proceedings, the Assessee has duly accepted the same and has submitted to the AO to telescope the same against other incomes disclosed. However, the AO has clearly given a finding that the income against which the Assessee wants them to be telescoped related to separate piece of loose papers and they have nothing to do with the seized paper with reference to which this addition has been made. Now the Assessee is submitting that there has been no such rent receipt in cash. Merely making such a statement will not support the case of the Assessee when incriminating material has been found. Furthermore, the Assessee pleads that the Assessee follows cash system of accounting. This also does not help the case of the Assessee. The assessment being based upon specifically identified loose paper which the Assessee has duly agreed during the course of assessment cannot be said to be arbitrary. Hence, there is no infirmity in the order of the authorities and hence, the same is confirmed;

(See 2018-TIOL-145-ITAT-MUM)