Sub-section (4A) was inserted by Taxation Laws (Amendment) Act, 1975 with effect from 01.10.1075 to permit a presumption to be raised in the circumstances mentioned therein. It raises a presumption in respect of the contents of books of account and other documents. This presumption is linked with what is found at the time of search and seizure.
The Taxation Laws (Amendment) Act, 1975, was enacted, primarily, to give
effect to the recommendations of the Committee of Experts set up under the
Chairmanship of justice K.N. Wanchoo, retired Chief Justice of India which was, inter
alia, required to suggest concrete and effective measures (i)
to unearth black money and prevent its proliferation through further evasion,
and (ii) to check avoidance of tax through various legal devices, etc.
One of the measures examined by this Committee for unearthing black money
related to search which the Committee considered as a “potent instrument in the
hands of the department to provide direct and clinching evidence about tax
evasion and the existence of black money”. Searches also enabled the tax
department to get hold of hidden books of account.
Before the insertion of sub-section (4A), the onus of
proving that the books of account, other documents, money, bullion, jewellery,
etc. found in possession or control of a person in the course of a search
belonged to that person was on the Income Tax Department. The sub-section (4A)
provides for certain presum ptions in case of seizure of books of accounts or
other documents, money, jewellery or other valuable articles from possession of
the assessee i.e. it shall be presumed that the said aricle or books etc
belongs to the person in whose possession or control they were found in the
course of search. A similar presumption is also enacted as to the truth of the
contents of the books of account so found. The presumptions raised by
sub-section (4A) are rebuttable presumptions.
Section
132(4A) of the Income-tax Act, 1961 provides that where any books of account,
other documents, money, bullion, jewellery or other article or thing are or is
found in the possession or control of any person in the course of a search, it
may be presumed that -
(a)
the books of account, other documents, money, bullion, etc., found in
the possess/ion or control of
any person in the course of a search
belong to such person;
(b)
the contents of such books and other documents are true;
(c)
the signature and other handwriting are of that particular person who
can reasonably be assumed to
have signed or written books of account
or other documents; and
(d) in case of a document, that it
was duly stamped and executed or attested by the person by whom it
purports
to have been so executed or attested.
It is necessary that all the conditions enumerated above must be
satisfied if the benefit of the sub-section is proposed to be taken. Thus, if
the books of account or documents, etc., were not found in the course of a
search proceeding, but were impounded in the course of their production before
the Assessing Officer or if the search made was found to be illegal, then the
conditions of the sub-section cannot be said to have been satisfied and, hence,
presumptions contained in sub-section (4A) will not be of any assistance.
Text
of Section 132(4A)
[1][(4A)
Where any books of account, other documents, money, bullion, jewellery or other
valuable article or thing are or is found in the possession or control of any
person in the course of a search, it may be presumed—
(i)
that such books of account, other documents, money, bullion, jewellery or other
valuable article or thing belong or belongs to such person;
(ii)
that the contents of such books of account and other documents are true; and
(iii) that the signature and every
other part of such books of account and other documents which purport to be in
the handwriting of any particular person or which may reasonably be assumed to
have been signed by, or to be in the handwriting of, any particular person, are
in that person’ s handwriting, and in the case of a document stamped, executed
or attested, that it was duly stamped and executed or attested by the person by
whom it purports to have been so executed or attested.]
KEY NOTE
1. Inserted by the Taxation Laws (Amendment) Act,
1975, with effect from 01.10.1975.
Section
132(4A) provides for the presumption that where during the course of a search
proceeding, any books of account, documents, money, bullion, jewellery or other
valuable article or thing is found in possession or control of any person, then
it may be presumed that:
(1)
They belong to the person searched.
(2)
The contents of such books of account and other documents are true.
(3)
The documents are in his handwriting and they are signed by
him.
Basic
ingredients of these presumptions are contained in Section 132(4A)
Basic
ingredients of these presumptions are contained in section 132(4A).
These
ingredients are:
(a)
books of account, other documents, money, bullion, jewellery or valuable
article or things should be found in the search;
(b)
they should be found in the possession or control of any person in the course
of search—
v if these two conditions are
satisfied then a presumption is raised against the assessee—
(i)
about ownership of the documents/books of account/ money/bullion/jewellery/valuable
articles or things as belonging to such persons;
(ii)
about truthfulness of books of account and documents; and
(iii)
about signature or handwriting which is presumed to be of such person.
A presumption is an inference of fact drawn from other known
or proved facts. It is a rule of law under which courts are authorized to draw
a particular inference from a particular fact. It is of three types, (i) “may
presume”, (ii) “shall presume” and (iii) “conclusive proof”. “May presume”
leaves it to the discretion of the Court to make the presumption according to
the circumstances of the case. “Shall presume” leaves no option with the Court
not to make the presumption. The Court is bound to take the fact as proved
until evidence is given to disprove it. In this sense, such presumption is also
rebuttable. “Conclusive proof” gives an artificial probative effect by the law
to certain facts. No evidence is allowed to be produced with a view to
combating that effect. In this sense, this is irrebuttable presumption.
The words in sub-section (4) are “may be presumed”. The
presumption under sub-section (4A), therefore, is a rebuttable presumption. The
finding recorded by the High Court in the impugned judgment that the
presumption under sub-section (4A) is a irrebuttable presumption insofar as it
relates to the passing of an order under sub-section (5) of section 132 and
rebuttable presumption for the purpose of framing a regular assessment was not
correct. There is nothing either in section 132 or any other provisions of the
Act which could warrant such an inference or finding.
Presumption under sub-section (4A) would not be available for
the purpose of framing a regular assessment. There is nothing either in section
132 or any other provision of the Act to indicate that the presumption provided
under sub-section (4A) of section 132 which is a self-contained code for search
and seizure and retention of books, etc., can be raised for the purpose of
framing of the regular assessment as well. Wherever the Legislature intended
the presumption to continue, it has provided so. Reference may be made to
section 278D which provides that where during the course of any search under
section 132(4A), any money, bullion, jewellery or other valuable articles or
things or any books of account, etc., are tendered by the prosecution in
evidence against the person concerned, then the provisions of section 132(4A)
shall, so far as may be, apply in relation to such assets or books of account
or other documents. This clearly spells out the intention of Legislature that
wherever the Legislature intended to continue the presumption under section
132(4A), it has provided so. It has not been provided that the presumption
available under section 132(4A) would be available for framing the regular
assessment under section 143 as well.
This is also evident from the fact that whereas the
Legislature under section 132(4) has provided that the books of account, money,
bullion, jewellery and other valuable articles or things and any statement made
by such person during examination may thereafter be used as evidence in any
other proceedings under the Act, it has not provided so under section 132(4A).
It does not provide that the presumption under section 132(4A) would be
available while framing the regular assessment or for that matter under any
other proceeding under the Act except under section 278D.
Section 132, being a complete code in itself, cannot intrude
into any other provision of the Act. Similarly, other provisions of the Act
cannot interfere with the scheme or the working of section 132 or its
provisions. Presumption under section 132(4A) is available only in regard to
the proceedings for search and seizure and for the purpose of retaining the
assets under section 132(5) and their application under section 132B. It is not
available for any other proceeding except where it is provided that the
presumption under section 132(4A) would be available.
Sub-section (4A) enables an assessing authority to
raise a rebuttable presumption that such books of account, money, bullion, etc.
belonged to such person; that the contents of such books of account and other
documents are true, and, that the signatures and every other part of such books
of account and other documents are signed by such person or are in the handwriting
of that particular person.
Where a search is carried out against a person and
documents, money, bullion, jewellery, valuable articles or things are found in
possession/control of another person during the course of the search, then such
presumption can be raised only against such another person in whose control and
possession the valuable assets/documents are found, even though no warrant for
search has been issued against him.
Carrying out search against the person i.e. issuance
of warrant of authorisation against the person for raising presumption is not
necessary. There should be a search and the person in whose control and
possession assets/books/documents are found may be some person or may be other.
If these items are found in control and possession of the person searched, then
presumption would be raised against the person searched in respect of these
items. But if these items are found in control and possession of some other
person during the course of search, then presumption would be raised against
that other person.
Presumption
regarding ownership and contents [Section 132(4A)]
Section 132(4A) provides that any books of account,
other documents, or valuable articles or things shall be presumed to be
belonging to the person in whose possession or control these are found during
the course of search and the contents of such books of account and documents
shall also be presumed to be correct. Section 132(4A) or 292C shows that for
raising the presumption against a particular person, it is not necessary that
search should be carried out against such person.
Handwriting
That the signature and every other part of the books
of accounts and other documents which purport to be in the handwriting of any
particular person or which may reasonably be assumed to be signed by that
person are so handwritten/signed by that person.
Stamping,
attestation and execution of documents, etc.
That, in the case of documents stamped, executed or
attested, they were so stamped, executed or attested by the person by whom they
purport to have been so executed, attested or stamped.
Presumption is discretionary and
not mandatory or conclusive i.e. such presumption is rebuttable presumption
[i.e. the assessee can disprove]
The presumption under section 132(4A) is rebuttable
presumption and the assessee can rebut the presumption by leading cogent
evidences to this effect. The onus would lie upon the Assessing Officer to
establish that undisclosed income can be attached to the assessee emanating
from the evidences found from his possession.
The phrase, used in the sub-section is ‘may be
presumed’. Therefore, the presumptions, are rebuttable. The expression ‘may
presume’ has been explained in the Indian Evidence Act, 1874 in section 4 as
under :
“May presume — Whenever, it is provided by this
Act that the Court may presume a fact, it may either regard such fact as
proved, unless and until it is disproved, or may call for proof of it:”
The presumption thus, is not final or conclusive.
Being rebuttable, it may be disproved by the person from whose possession or
control the things mentioned in the sub-section are recovered. For example, if
some documents, etc., are recovered during search, the presumption is that
these are in the handwriting of the person whose place has been searched, but
such a presumption can be disproved by showing that the papers or documents are
not in the handwriting of that person.
In order to overcome this difficulty, section 292C was
inserted with effect from 01.10.1975 which provided raising of presumption in
regular assessment in respect of books of account or documents, money, bullion,
jewellery, etc. found in the possession or control of any person in the course of
search under section 132.
Text
of section 292C
[1][Presumption as to
assets, books of account, etc.
292C. [2][(1)] Where any books of account,
other documents, money, bullion, jewellery or other valuable article or thing
are or is found in the possession or control of any person in the course of a
search under section 132 [3][or
survey under section 133A],
it may, in any proceeding under this Act, be presumed—
(i)
that such books of account, other documents, money, bullion, jewellery or other
valuable article or thing belong or belongs to such person;
(ii)
that the contents of such books of account and other documents are true; and
(iii) that the signature and every
other part of such books of account and other documents which purport to be in
the handwriting of any particular person or which may reasonably be assumed to
have been signed by, or to be in the handwriting of, any particular person, are
in that person’s handwriting, and in the case of a document stamped, executed
or attested, that it was duly stamped and executed or attested by the person by
whom it purports to have been so executed or attested.
[4][(2) Where any books of account,
other documents or assets have been delivered to the requisitioning officer in
accordance with the provisions of section 132A, then, the provisions of
sub-section (1) shall apply as if such books of account, other documents or
assets which had been taken into custody from the person referred to in clause (a)
or clause (b) or clause (c), as the case may be, of sub-section (1) of section
132A, had been found in the possession or control of that person in the course
of a search under section 132.]
KEY NOTE
1. Inserted by the Finance Act, 2007, with retrospective
effect from 01.10.1975.
2. Renumbered as sub-section (1) by the Finance Act,
2008, with retrospective effect from 01.10.1975.
3. Inserted, ibid, with retrospective effect from
01.06.2002.
4. Inserted by the Finance Act, 2008, with retrospective
effect from 01.10.1975.
The signature and every other part of such books of
account and other documents which purports to be in the handwriting of any
particular person or which may reasonably be assumed to have been signed by, or
to be in the handwriting of, any particular person, are in that person’s
handwriting, and in the case of a document stamped, executed or attested, that
it was duly stamped and executed or attested by the person by whom it purports
to have been so executed or attested.
Concept
of presumption as to ownership
This
concept is in line with the principal given under Indian Evidence Act. Section
110 of Indian Evidence Act, 1872 reads as under:—
Text
of Section 110 of the Indian Evidence Act, 1872
“110.
Burden of proof as to ownership
When
the question is whether any person is owner of anything of which he is shown to
be in possession, the burden of proving that he is not the owner is on the
person who affirms that he is not the owner.”
Presumption so provided under section 132(4A) is not in absolute terms but is subject to corroborative evidence - No addition could be made on account of undisclosed income only on basis of presumptions under section 132(4A) without recording any findings as to how loose sheets found during search were linked to assessee
Section
132(4A) of the Act provides that any books of account, documents, money,
bullion, jewellary or other valuable articles or things found in possession or
in control of any person in course of search may be presumed to be belonging to
such person, and further, contents of such books of account and documents are
true. But this presumption is not provided in absolute terms and the word used
is "may" and not “shall”, as such the revenue has to corroborate the
entries made in the seized documents before presuming that transactions so
entered were made by the assessee. Presumption so provided is not in absolute
terms but is subject to corroborative evidence. In the present case, Tribunal
only on basis of presumption under Section 132(4A) of the Act, reversed the
finding of CIT(A), without recording any finding as to how the loose sheets
which were recovered duringsearch, were linked with the assessee. In the
absence of corroborative evidence, the Tribunal was not justified in reversing
the finding by the CIT (Appeals) and, thus, matter was to be remanded to
Tribunal for reconsideration. [In favour of assessee/Matter remanded] – [Ajay
Gupta v. CIT (2020) 270 Taxman 71 : 114 taxmann.com 577 (All.)]
Presumption
as to assets, books of account – Does not hold good in case the addition is
made in the hands of a person other than the person searched – Unexplained
expenditure
A search was carried on the premises of a firm.
Certain material which evidenced undisclosed income and which was allegedly in
the handwriting of one of the partners of the assessee-firm was discovered and
seized. Based on such material, the Assessing Officer made an addition in the
hands of the assessee-firm. Held that the presumption under Section 292C works
only against the person who is searched and does not work against a third
person. Having discovered the material which allegedly was in the handwriting
of one of the partners of the assessee-firm, the Assessing Officer did not endeavour
to collect/produce any other evidence to establish the undisclosed income in
the hands of the assessee-firm, inspite of getting a second opportunity in the
remand proceedings. In the circumstances, such addition in the hands of the
assessee-firm was to be deleted.—[CIT v. Cordial Co. (2019) 308 CTR 159 :
176 DTR 185 (Ker.)]
Documents seized in third party premises
in the course of search – No mention of name of assessee in the seized
documents – Deletion of addition is held to be justified
Section 69A : Unexplained money – Dismissing
the appeal of the revenue, the Tribunal held that, on the basis of documents
found in the premises of third party and also there was no mention of
assessee’s name in seized document, additions cannot be made merely based on
presumption and surmises. (Related Assessment year : 2013-14)—[ACIT v.
Navneet Kumar Sureka (2019) 174 ITD 320 (ITAT Delhi)]
Assessing Officer passed
income escaping assessment on basis of a loose sheet found in premises of
father of assessee, action of Assessing Officer was justified being based on
relevant material and, merely, because he used wrong presumption in assessment
order it would not change nature of order
Unexplained
investments (Loose sheets) - Where any books of account, other documents etc is
found in possession or control of any person in course of a search, it may be
presumed under section 132(4A) that such documents belong to such person. A
search was conducted in premises of father of assessee. A loose sheet was found
there which was an account in name of assessee having several debit and credit
entries on regular basis. Assessee neither explained entries nor filed return.
Assessing Officer added amount of peak credit as unexplained investment in
total income of assessee. He, further, held that presumption under section
132(4A) was also on assessee. Tribunal affirmed order of the Assessing Officer.
Assessing Officer had framed an opinion that income of assessee had escaped
assessment on basis of information contained in loose sheet which was a
reasonable basis to believe that income chargeable had escaped assessment and,
therefore, action of Tribunal in affirming order of Assessing Officer was
justified. Further, expression used in assessment order that presumption under
section 132(4A) was also on assessee would not change nature of order. [In
favour of revenue] (Related Assessment year : 1987-88) – [Ashok Kumar v.
CIT, Patna (2016) 386 ITR 342 : 290 CTR 450 : 239 Taxman 436 : 69 taxmann.com
129 (Patna)]
Presumption under section 132(4A)
regarding ownership of seized assets was not limited to proceedings for search
and seizure under section 132, and was also available for framing regular
assessment
The assessee was engaged in the business of civil
constructions. On receipt of information from the Central Bureau of
Investigation, that unaccounted cash was being delivered from the office
premises of the assessee to one ‘A’ search action under section132 was
conducted, at the premises of ‘A’, the office premises of the assessee, and the
premises of the Vice-President of the assessee. After taking into consideration
the sworn statements of ‘A’ and the incriminating documents seized from the
office premises of the assessee and the explanations offered by the assessee,
it was found that the assessee had made illegal payments to various officials
of Government agencies which were inadmissible in computing the income of the
assessee and, therefore, the Assessing Officer held that the undisclosed income
of the assessee, which was not recorded in the books were, liable to be
assessed as the undisclosed income of the assessee and assessment was completed
accordingly. The assessee contended that the evidence contemplated under
sub-section (4) and the presumption envisaged under sub-section (4A) of
section132 can be taken into account only for the purpose of search operations
and, therefore, the acceptance of evidence and presumption drawn by the
Assessing Officer to conclude an assessment order could not be sustained under
law. Held that in view of the introduction of section 158BH, sub-section (4)
and sub-section (4A) of section 132 are applicable in the matter of conducting
the assessment by the Assessing Officer and, therefore, there was no illegality
or infirmity on the part of the Assessing Officer to have taken into account
the sworn statements of the witnesses taken on oath. [In favour of revenue] – [Bhagheeratha
Engineering Ltd. v. ACIT (2015) 379 ITR 244 : (2016) 282 CTR 209 : (2017) 79
taxmann.com 325 (Ker.)]
During search and seizure, investments were found in name of assessee, presumption could only be that they formed part of unaccounted income of assessee and mere fact of producing affidavit of close relatives would not be sufficient explanation
Section 69, read with
section 132 - Unexplained investments (Gifts) - During search and seizure under
section 132 certain investments in assessee's name came to light. During block
assessment proceedings, assessee claimed to have received certain gifts in cash
from his wife and mother. Affidavits from mother and wife were also produced.
Assessing Officer was not satisfied with said affidavits and treated said
amount as undisclosed income of assessee. When investment were found in name of
assessee and assessee alone, that too in course of search and seizure under
section 132, presumption could only be that they formed part of unaccounted
income of assessee and mere fact of producing an affidavit by wife or mother of
assessee would not be treated by Assessing Officer as sufficient explanation.
Findings recorded by Assessing Officer were pure findings of facts based upon
material on record and, therefore, could not be interfered with. [In favour of
revenue] (Related Assessment years
: 1994-95 and 1995-96) - [Hemant Kumar Ghosh v. ACIT (2015) 375 ITR 79 : 281
CTR 356 : 232 Taxman 778 : 59 taxmann.com 271 (Patna)]
Seized paper did not reflect the
name of assessee – , Revenue was not justified in drawing presumption under
section 132(4A) - Deletion of addition was held to be justified
Tribunal found that though materials were seized in
search, said materials did not reflect name of assessee. Most of cheques were
stale and some other cheques were either blank or were in name of third
parties, therefore, Tribunal held that revenue was not justified in drawing presumption
under section 132(4A). Dismissing the appeal of revenue the Court held that
since finding recorded by Tribunal could not be found fault with, same was to
be upheld. [In favour of assessee] (Related Assessment Years 1998-99, 2000-01
to 2003-04)—[CIT v. Blue Lines (2015) 231 Taxman 49 (Karn.)]
Assessing officer made additions in case of assessee on basis of noting in loose papers found during search proceedings in case of third party against name of assessee as there was no evidence to suggest that payments were made to assessee, additions so made were not justified
Where addition was based on two loose papers found
during the course of search simply because name of assessee was mentioned on
the paper addition could not be made in hands of assessee. Secondly,
presumption under section 132(4A) was available only in respect of person from
whom paper was seized. It could not be applied against third party and no
addition could be made on basis of such evidence found with third party.—[Pradeep
A. Runwal v. TRO (2014) 166 TTJ 498 : 149 ITD 548 (ITAT Pune)]
Search
and seizure – Block Assessment Diary seized – Presumption is applicable
In the course of search a diary was found which
contained the noting of higher value of purchase of property than shown in the
books of account. The author of the diary was son of the partner, who stated
that he has written the diary as per instruction of his partner. On the basis
of diary addition was made in the block assessment. The addition was deleted by
the Tribunal. On appeal the court held that the presumption under section
132(4A) is applicable hence addition is justified in block assessment as the
author of diary was son of the partner.—[CIT v. Ambika Appalam Depot (2012)
340 ITR 497 (Mad)]
There was a presumption raised under section 132(4A) on seizure of fax message and it was upon assessee to rebut that presumption by offering a plausible explanation - ere production of letter purported to have been written by same person who had sent fax message would not be sufficient to rebut presumption - Since no effort seemed to have been made by assessee to rebut presumption, addition made by Assessing Officer was to be upheld
Section 69 - Unexplained investments – During search
operation conducted in assessee’s case, a fax message was seized which showed
that assessee had purchased a property for certain consideration. – However, in
books of account maintained by assessee, lesser payment was shown for purchase
of said property. – Assessee contended that fax had to be read with letter
written by same person on next day clarifying that he had wrongly mentioned
price in fax massage without verifying facts. – Assessing Officer, not being
satisfied with assessee’s explanation in that regard, made addition of amount
of difference between amount shown in fax message and that shown in assessee’s books
of account as his undisclosed investment in property. There was a presumption
raised under section 132(4A) on seizure of fax message and it was upon assessee
to rebut that presumption by offering a plausible explanation. Mere production
of letter purported to have been written by same person who had sent fax
message would not be sufficient to rebut presumption. Since no effort seemed to
have been made by assessee to rebut presumption, addition made by Assessing
Officer was to be upheld. (Related Assessment Year 1992-93)—[CIT v. Naresh
Kumar Aggarwala (2011) 331 ITR 530 : 198 Taxman 194 (Del.)]
A document was seized
during search of assessee's business premises which was a document for return
of money of Rs. 20 lakhs advanced by assessee and assessee did not deny said
document, presumption was that amount shown in document, which was not
reflected in accounts maintained by assessee, was his income by way of
unexplained investment
Held
that considering the language of section 292C, there was a presumption that the
contents of the document are true, as the document is seized from the premises
in control of the assessee and that the said document belongs to the assessee.
A reading of the said document would make it clear that the document in fact
was the document for return of money already advanced. The presumption
therefore, would be that the sum of Rs. 20 lakhs had already been received by
the assessee. Though this document was put to the assessee, nowhere did he deny
the payment of loan of Rs. 20 lakhs. His only denial was that he had not
received the sum of Rs. 5 lakhs. Considering this to be documentary evidence,
though the presumption was rebuttable, in the instant case the assessee had not
discharged that burden. As noted in the judgment in P. R. Metrani v. CIT (2006)
287 ITR 209 (SC), the expression ‘may presume’ leaves it to the discretion of
the Court to make a presumption based on the circumstances of the case. Though
the presumption under sub-section 132(4A) is a rebuttable presumption, the
assessee had been unable to rebut that presumption. Therefore, one could find
no fault with the conclusion arrived at by the Tribunal. Presumption that
contents of document are true. Amount shown in document assessable as
unexplained. [In favour of revenue] - [Surendra M. Khandhar v. ACIT and
Others (2010) 321 ITR 254 : (2009) 224 CTR 409 (Bom.)]
Pursuant to a search at residence of assessee, two Memorandum
of Understandings (MoUs) were recovered, which were entered into by assessee
with ‘R’ and ‘M’ for purchase of agricultural land. In terms of MoUs, assessee
was required to pay certain amount as part consideration. The
assessee as well as ‘R’ and ‘M’ (alleged payees) denied the money transaction to
have advanced or received any amount as shown to have changed hands as per the
MOU found during search. In addition thereto, the case set up was that the agricultural
land had, in fact, been sold to ‘D’ by ‘R’ and ‘M’. That was confirmed by one
of the directors of ‘D’. Thus, it was clear that the MoUs did not fructify. Section
132(4A) uses the expression ‘it may be presumed’. It is not obligatory on the
assessing authority to make a presumption. Even if a presumption is required to
be made, then the presumption is a rebuttable one and relates to a question of
fact. In the instant case, the assessee had stated that in fact there was no
transfer of money between him and ‘R’ and ‘M’. On the other hand, ‘R’ and ‘M'
had denied receipt of any money from the assessee. In the fact of those
denials, there ought to have been corroborative evidence to show that there was
in fact such a transfer of money. Both the Commissioner (Appeals) as well as
the Tribunal had come to the conclusion that there was no such material on
record. The Assessing Officer relied on certain other transactions entered into
by the assessee with ‘R’ and ‘M’ for drawing a presumption in respect of the
transfer of money, but the Tribunal rightly held that those were independent
transactions and had nothing to do with the MoUs, which were the subject-matter
of discussion. Even if there was something wrong with some other transactions
entered into, that would not give rise to an adverse inference insofar as the
subject MoUs were concerned. High Court by impugned order held that since property in
question was eventually sold by ‘R’ and ‘M’ to ‘D’ and there was no
corroborative evidence to show that there was in fact a transfer of money,
addition was rightly deleted. Special Leave petition filed against impugned
order was to be dismissed. [In favour of assessee] – [CIT v.
Ved Prakash Choudhary (2010) 3 taxmann.com 785 (SC)]
Merely because there are notings of offers on slips of paper, it did not mean that those transactions actually took place - Presumption about noting and jotting in documents is not available under section 132(4A), assessee liable to tax only on receipts proved to be income of assessee
Assessee was a director in a company which was in
business of property development and real estate. During a search conducted at
business premises of said company, two diaries were seized from assessee. Notings
in those diaries included appointments, reminders, noting/jottings, etc.. On
being questioned, assessee explained that notings in said diaries were in
connection with general property related discussions and had nothing to do with
actual transactions. Assessing Officer, however, raised a presumption against
him in view of provisions of section 132(4A) and made addition on account of
entries recorded in said two diaries. On appeal, Commissioner (Appeals) deleted
addition. On revenue's appeal, Tribunal held that provisions contained in
section 132(4A) did not authorize Assessing Officer to raise such a
presumption, particularly when assessee had offered explanation along with
documents and evidences and had also furnished an affidavit to that effect. Tribunal
further returned a finding of fact that there was no corroborative or direct
evidence to presume that notings/jottings recorded in said two diaries had
materialized into transactions giving rise to income which had not been
disclosed in regular books of account. Tribunal, therefore, upheld order of Commissioner
(Appeals). The issues sought to be raised were purely issues of fact. The
Tribunal, being the final fact-finding authority, had returned certain sets of
facts. There was no perversity in such findings and, consequently, no
substantial question of law arose for consideration. Findings of facts recorded
by Tribunal could not be interfered with. [In favour of assessee] (Block period
01.04.1995 to 18.03.2002) - [CIT
v. D. K. Gupta (2009) 308 ITR 230 (2008) 174 Taxman 476 (Del.)]
Presumption under section 132(4A) is not available to authorities while framing the regular assessment
There is nothing either in section
132 or any other provision of Act to indicate that presumption provided under
sub-section (4A) of section 132, which is a self-contained code for search and
seizure and retention of books, etc., can be raised for purpose of framing of
regular assessment under section 143 as well - Presumption under section
132(4A) is available only in regard to proceedings for search and seizure and
for purpose of retaining assets under section 132(5) and their application
under section 132B, and it is not available for any other proceeding except
where it is provided that presumption under section 132(4A) would be available.
It was held that such
presumption is restricted to summary assessment under section 132(5) for
deciding as to retain or release assets seized in the search for the purposes
of determining the estimated tax liability. The presumption does not extend to
regular assessment thereafter yet material seized can be used as a piece of evidence
in any other proceedings under the Act, all contentions are left open. (Related Assessment
years : 1981-82 and 1982-83) - [P. R. Metrani v. CIT (2006) 287 ITR
209 : 157 Taxman 325 : : 206 CTR 290 (SC)]
Presumption under section 132(4A) is only against person in whose possession document is found and not against any other person - Presumption under section 132(4A) is a rebuttable presumption and not conclusive, and cannot be applied in absence of corroborative evidence
The
presumption under section 132(4A) is in respect of the person in whose
possession the books or documents are found. The use of the words ‘to such
person’ in the said section means the person in whose possession the books of
account or documents are found. Clause (ii) of section 132(4A) provides that
the contents of such books of account or documents are true. This presumption can be applied only against the person in whose
possession the books of account or the documents are found. Therefore, the
presumption under section 132(4A) is applicable only against the person in
whose possession books of account or other documents are found and not against
any other person. Moreover, the presumption under section 132(4A) is a
rebuttable presumption and not a conclusive one it could not be applied in the absence of
corroborative evidence. - [Straptex (I) Pvt. Ltd. v. DCIT (2003) 84 ITD 320
: 79 TTJ 228 (ITAT Mumbai)]
Presumption under the provision of section
132(4A) would in any case not be applicable to a third party from whose
possession such papers and documents have not been obtained
Undisclosed
income of any other person - During search of premises of a firm and its
partners, documents allegedly containing details of certain land transaction
pertaining to assessee-company were seized and statements of third parties were
recorded under sections 132(4) and 131(1A). Loose papers and documents seized
from premises of third parties and statements recorded at back of assessee
without it being afforded opportunity to interrogate said deponents and without
bringing on record any supporting evidence, could not be made basis for adding
undisclosed income in hands of assessee. Additions were also made to assessee’s
income on basis of statement of a party, made behind back of assessee, to
effect that cash payments were made by assessee to such party for acquiring
development rights. No search had taken place in case of such party and no
documents or records evidencing payment of on-money were seized. Assessee was
given no opportunity to cross-examine said party. Addition made on basis of
statement of such party would be unsustainable. (Block period 1985-86 to
21.09.1996). - [Prarthana
Construction (P) Ltd. v. DCIT (2001) 118 Taxman 112 : 70 TTJ 122 (ITAT
Ahmedabad)]
Presumption
in terms of Section 132(4A) is not applicable in cases of prosecution under
Sections 276C and 277
It was held that the presumption laid down in Section
132(4A) cannot be applied to criminal proceedings in view of the specific
language mentioned in Sections 276C and 277 of the Income-tax Act. Section 276C
requires that it must be established that there is wilful attempt to evade any
tax and hence the doctrine of mens rea is still required to be proved by
the prosecution. Thus in matters of prosecution under sections 276C and 277 of
the Incometax Act, the rule of presumption would not operate, but the doctrine
of mens rea would still prevail.—[Prem Dass v. ITO (1999) 236 ITR 683
(SC)]
Presumption under section 132(4A) requires independent corroborative evidence
A
paper containing jottings of certain figures, even if seized from possession of
assessee would not come within the compass of the definition of the word
‘document’ to be used as an evidence and cannot be the basis for assessing the
undisclosed income; such paper would also not represent books of account.
It was held that the
seized paper being not corroborated by any independent evidence cannot be
considered as a document in proof of investment in house property, and,
accordingly, this paper is liable to be ignored. - [Atul Kumar Jain v. DCIT
(1999) 64 TTJ 786 (ITAT Delhi)]
There was no irregularity in applying the presumption available under section 132(4A) in regular assessment
In the assessee was residing with his daughter.
The business premises of the assessee as well as of his daughter were searched
and Rs. 85,000 was seized from the bed-room normally used by the assessee in
his daughter’s house and Rs. 7,500 from his business premises. The Income-tax
Department applied the presumption under section 132(4A) while the daughter
claimed that both the amounts belonged to her. Both the ITO and Commissioner
(Appeals) did not accept the daughter’s claim. The High Court upheld the ITO’s
action saying that search was conducted in exercise of the statutory duty and
there was no irregularity in applying the presumption under section 132(4A).
Thus, in this case, even when the assessee denied both possession and control
of money, the presumption regarding money seized was found to be applicable.
Therefore, a clear-cut elucidation of the two words ‘possession’ and ‘control’
is not possible. – [R. Bharathan
v. ITO (1990) 182 ITR 146 (Ker.)]
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