By TIOL News Service

MUMBAI, FEB 18, 2019: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether loose papers found during search process of other person's premises, have no evidentiary value, and hence will not form sufficient reason for reopening a settled assessment. YES IS THE VERDICT.

Facts of the case:

The assessee, an individual, had filed his return for the relevant A.Y declaring a total income of Rs.29,920/- and the assessment was completed thereon at the returned income. Subsequently, the AO reopened the assessment, consequent to information obtained during the course of search operation conducted in the case of Bharat Shah Group, which was engaged in real estate business. In the course of raid, certain loose papers were found which related to the sale transactions of flats. The AO therefore inferred that the assessee had paid cash of Rs.6.84 crores to purchase flats and this investment was concluded from undisclosed income. Thus, adding the same as undisclosed income u/s 69, the assessment order came to be passed u/s 143(3) r/w/s 147.

On appeal, the CIT(A) came to the conclusion that loose sheet of papers relied upon by AO did not have any signature nor contain name of the assessee nor did it mention the rate at which the flat was sold. Further, the builder as well as the assessee had denied that any payments were made and / or received in cash in purchase of the flat. Thus, it held that no reliance could be placed on such documents to conclude that the assessee had made payments in cash and to tax the same as his undisclosed income. On further appeal, the Tribunal on examination of the record inter alia came to the same figure as recorded by the CIT(A).

High Court held:

++ it is found that the two Revenue authorities have concurrently come to a finding of fact that loose papers does not have any signature of any person nor did it contain name of the assessee. It is noted that the loose document is a dumb document as it does not give any particulars of the persons involved in the alleged transaction. Thus, it is not open to the AO to draw inferences from the document by interpreting the words "Sh" to mean cash payment and "Q" to mean cheque payment without any evidence on record. The CIT(A) as well as the Tribunal have concurrently rendered a finding of fact, which is not shown to be perverse in any manner.

(See 2019-TIOL-364-HC-MUM-IT)