The Income Tax Appellate Tribunal ( ITAT ) Delhi Bench has dismissed the appeals filed by two companies and upheld the additions made by the Assessing Officer ( AO ) under Section 153A of the Income Tax Act, 1961. The tribunal ruled that the seized documents found during the search had evidentiary value, making the additions legally valid.
The case involved Shri Sai Om Infravision (P) Ltd. and Shri Om Sai Infrapromoters Pvt. Ltd., which were subjected to a search and seizure operation under Section 132 of the Income Tax Act. The search was conducted at the premises of Kaushalya Residency Girls Hostel, GNHIPL, where authorities discovered a diary containing financial transactions that were not recorded in the books of accounts.
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Based on the seized diary, the AO made additions to the income of both companies for various Assessment Years (AYs). For Shri Sai Om Infravision (P) Ltd., the additions were Rs.6.44 crore for AY 2014-15, Rs.1.30 crore for AY 2015-16, Rs.2.38 crore for AY 2017-18, and Rs.32 lakh for AY 2018-19. The AO treated these amounts as undisclosed income and taxed them accordingly.
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The companies appealed before the Commissioner of Income Tax (Appeals) CIT(A), arguing that the diary was a “dumb document” with no evidentiary value. The CIT(A) provided partial relief by deleting certain portions of the additions, but some additions were sustained based on the unaccounted transactions recorded in the seized diary. The companies then appealed before the ITAT, challenging the validity of the sustained additions.
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The appellants contended that the entries in the seized diary lacked corroborative evidence and could not be solely relied upon for making additions under Section 69A. They cited legal precedents, including M/s D.N. Singh vs. CIT, Central, Patna & Anr. and Naresh Balyan vs. ACIT, which established that mere notings in loose sheets do not constitute conclusive proof of undisclosed income. The appellants argued that since the AO did not provide independent evidence supporting the figures in the diary, the additions should be deleted.
The Revenue opposed the appeal, asserting that the seized diary had clear financial implications and indicated unaccounted transactions. The department cited the Madras High Court’s decision in M. Vivek vs. DCIT, which held that documents recovered during a search operation qualify as evidence under Section 132(4) and can be relied upon for making additions. The Revenue argued that the CIT(A) had already granted relief where appropriate, and the remaining additions were justified.
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The ITAT reviewed the case and ruled that mentioning the wrong section for making additions does not invalidate the assessment if the basis of the additions is unexplained transactions recorded in the seized documents. The tribunal held that the CIT(A) had carefully analyzed the records and only sustained those additions that had a direct nexus with financial transactions of the assessees.
The ruling was delivered by Shamim Yahya, Accountant Member, and Sudhir Pareek, Judicial Member. The tribunal concluded that the Madras High Court’s ruling in M. Vivek vs. DCIT established that loose documents seized during a search hold evidentiary value. The ITAT, therefore, upheld the CIT(A)’s order sustaining part of the additions.
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In Conclusion, all the appeals were dismissed.
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