The Delhi Bench of the Income Tax Appellate Tribunal (“ITAT”) ruled that the presumption u/s 292C of the Income-tax Act, 1961, for the ownership and truth of documents discovered in search, is rebuttable and is not conclusive in specifying undisclosed income.
The taxpayer, Krishna Gopal Saraf, a salaried employee of Sarthak Vanijya India Ltd (SVIL), was under search and seizure operations dated 7 March 2014, along with the Bindal Group and related entities. As per the search, assessments for Assessment Years (AYs) 2013-14 and 2014-15 were specified under Section 153A read with Section 143(3).
The Assessing Officer made additions on two counts, unexplained credit card payments of ₹4.55 lakh and ₹7.28 lakh, and an addition of ₹18 lakh as undisclosed income, based on a loose paper found during the investigation.
The taxpayer challenged the additions before the CIT(A) and after that with ITAT, alleging absence of incriminating material, improper initiation of search, lack of notice u/s 143(2), and arbitrary treatment of legitimate expenses as unexplained income.
The Tribunal dealt with the preliminary objections contesting the validity of the search u/s 132. It is said that such challenges are not kept before the ITAT and lie outside its jurisdiction.
The Bench for the non-issuance of notice u/s 143(2) put reliance on the Delhi High Court ruling in Ashok Chadda v. ITO (337 ITR 399), reiterating that a separate notice u/s 143(2) is not obligatory for finalising assessments u/s 153A. As per that, these grounds were dismissed.
For the assessment year 2013-14, the Assessing Officer (AO) categorised credit card payments of ₹4.55 lakh as unexplained expenditure u/s 69C, relying on data from the Annual Information Return (AIR). The taxpayer clarified that these payments were made using various sources, including salary income, encashment of fixed deposits, loans from friends and family, and personal cash savings.
Likewise, for AY 2014-15, additions of ₹7.28 lakh were made on identical grounds. The CIT(A) does not assume the explanations specifying a lack of supporting bank statements and cash flow details.
Neither the AO nor CIT(A) do not responds to compute the explanations or validate the bank account and salary records, ITAT discovered. The bench noted that the taxpayer was a salaried person with modest transactions and ruled that a deeper factual examination was required.
Hence, the issue of credit card expenditure was remitted back to the assessing officer for fresh verification of sources like salary receipts, FDR maturity, and borrowings, after giving due opportunity to the taxpayer.
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The principal dispute is about the addition of ₹18 lakh as undisclosed income for AY 2014–15. In the search, a red bag was found at the residence of the taxpayer that had office keys and a loose paper with a note of “withdrawal ₹18,00,000 on 16.10.2013” under the name “R.K. Mishra.” The AO invoked Section 292C, presuming ownership and truth of the document, and considered the amount as the unexplained income of the taxpayer.
The tribunal said that the presumption u/s 292C is confined to the ownership and truth of the document’s contents, but does not automatically specify the transaction as unaccounted income.
After the taxpayer refused the authorship of the note and stated that it pertained to another employee, R.K. Mishra, the burden shifted to the Assessing Officer (AO). The AO was then responsible for conducting further inquiries, which could include verifying the handwriting, interviewing Mishra, or linking the transaction to the taxpayer’s finances.
The Bench quoted judicial precedents, including Godwin Construction Pvt. Ltd. v. ACIT (ITAT Delhi), remarking that deeming provisions should not be applied mechanically without factual substantiation.
Concluding that the addition of Rs 18 lakh was made without satisfactory proof and that the lower authorities do not discharge their onus, the Tribunal removed the addition. Both appeals for AYs 2013-14 and 2014-15 were partly permitted, with directions to the AO to re-examine the limited issue of credit card payments.
| Case Title | Krishna Gopal Saraf vs The A.C.I.T |
| Case No. | ITA No. 4564/DEL/2017 [A.Y 2013-14] and ITA No. 4565/DEL/2017 [A.Y 2014-15] |
| Assessee By | Mr. Naman Mohnot |
| Department By | Shri Javed Akhtar |
| Delhi ITAT | Read Order |
