COMMISSIONER OF INCOME TAX Vs. ANIL KHANDELWAL

JUDGEMENT

(1.) THE Revenue is aggrieved by an order of the Income Tax Appellate Tribunal ('ITAT') dated 18.07.2014 in ITA Nos. 5516 - 5517/Del/2012. Its grievance - urged as a question of law - is against the ITAT's confirmation of the CIT (A) 's order cancelling the inclusion of Rs. 27 lakhs (for AY 2006 -07) and Rs. 1,14,80,000/ - (for AY 2007 -08) in ITA Nos. 5516 -5517/Del//2012.

(2.) A search and seizure action was conducted on 12.12.2006 at the business and residential premises of Shri S.K. Gupta along with other concerns. Similar search action was conducted in respect of companies and other business entities which were controlled by him or owned by him or different individuals connected with him. The assessee was one such individual. He was issued with notice under Section 153A of the Income Tax Act, 1961 on 24.10.2008. The assessee had filed return of income on 5.11.2008 showing Rs. 1,82,556/ -. In further proceedings under Section 143(3) read with Section 153A, it was asked to respond to a questionnaire dated 7.11.2008 in regard to the transactions concerning his family members and concerns with which they were connected. The AO specifically confronted the assessee with extracts of certain documents, i.e., Annexure A -1 of party A -5 seized during the course of search of S.K. Group in the New Asiatic Building, Connaught Place, New Delhi. The assessee's replies were not accepted resulting in addition to the extent noticed in the earlier part of the judgment. The assessee preferred appeals [to the CIT (A)]. After considering the submissions, the said Commissioner accepted the assessee's contentions and directed that the amounts sought to be brought to tax by the AO ought to be deleted. The revenue's appeals were rejected by the ITAT through the impugned order. The ITAT took note of the reasoning of the CIT (A) as well as various Supreme Court decisions on the question as to whether the principle of natural justice had been complied with. It secondly went into the question as to whether the inference drawn on the basis of the materials seized was sustainable. Confirming the reasoning of the CIT (A) in paragraph 2.2 of the appellate order, the ITAT held as follows: -

(3.) LEARNED counsel for the Revenue submits that given the nature of the materials seized from Shri S.K. Gupta, findings of the AO with regard to the addition under Section 69 were warranted. He also submitted that the recourse to presumption by the AO under Section 132(4A) and Section 292C was in the circumstances valid and that both the CIT (A) and ITAT fell into error in holding that such inference could not have been drawn. It was submitted that the AO correctly deduced that the assessee's replies were evasive and unreliable given the determination that he was a friend of Shri S.K. Gupta whose premises were in the first instance searched. It was also submitted that the damaging material in the form of three pages of handwritten ledger extract clearly indicated the assessee's name and of the group companies and the inference drawn was, therefore, justified. Furthermore, given that Shri S.K. Gupta had admittedly indulged in furnishing accommodation entries, the assessee's explanation could not have been accepted.