The Pune Bench of Income Tax Appellate Tribunal(ITAT) upheld the addition of ₹4.20 crore, rejecting the challenge to the validity of digital evidence due to the absence of a Section 65B(4) certificate under the Indian Evidence Act, 1872.
Garware Technical Fibres Limited,appellant-assessee,manufactured aquaculture cage nets, fishing nets, sports nets, safety nets, and other related products. It filed its original return of income on October 31, 2018, declaring ₹124.08 crore.
A search and seizure operation was conducted on November 14, 2019. In response to a Section 153A notice, it filed a return on January 18, 2021, declaring the same income. Statutory notices were issued, and its representative appeared before the Assessing Officer(AO), submitting the required details.
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During a search at the assessee’s head office on November 14, 2019, authorities found a pen drive in the Head-Cashier’s cabin containing Excel sheets of unaccounted cash transactions. These included receipts from scrap sales and payments for business development, sales incentives, and other expenses. The Head-Cashier admitted the transactions were unaccounted.
The AO calculated unrecorded cash receipts of ₹31.65 crore and payments of ₹32.27 crore for assessment years 2013-14 to 2020-21. The assessee argued that no unaccounted cash was found and that the Excel sheets were only cash flow estimates. It also claimed that, even if genuine, only net profit should be taxed, not the total cash receipts.
The AO rejected these claims, stating that Section 292C presumed the seized documents were authentic. Since the records showed illegal payments, related expenses were disallowed under Section 37(1). The AO treated ₹4.20 crore as unaccounted income and added it to the total income.
The AO also disallowed a deduction under Section 35(2AB) for R&D expenses, as the assessee failed to submit Form 3CL from DSIR.
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Before the Commissioner of Income Tax(Appeals)[CIT(A)], the assessee challenged the addition, arguing it was based on uncertified electronic evidence and lacked a Section 65B(4) certificate. It claimed the seized documents were uncorroborated and sought deletion of the ₹4.20 crore addition. Alternatively, it argued that business expenses exceeded receipts, making full taxation unjustified.
The CIT(A) rejected the Section 65B(4) challenge.The AO was directed to restrict the disallowance to ₹40.41 lakh.
Aggrieved by the CIT(A) decision the assessee appealed before the tribunal.
The issue raised by the assessee was the non-deletion of the addition due to the absence of a certificate under Section 65B(4) of the Indian Evidence Act, arguing that the digital evidence could not be relied upon. The assessee claimed that no such certificate was drawn during the search, citing the Supreme Court’s ruling in Anvar P.V. vs. B K Basheer (2014).
In response,the revenue counsel countered that the CIT(A) had directed the AO to provide the certificate, which was forwarded to the assessee for comments, but no comments were received. The CIT(A) upheld the certificate’s validity, rejecting the assessee’s argument. The counsel submitted that the order was in accordance with the law and should be upheld.
The two member bench comprising Rama Kanta Panda(Vice President) and Astha Chandra(Judicial Member) reviewed the arguments and material on record. It noted that although the assessee had not raised the issue of the missing certificate under Section 65B(4) before the AO, the issue was brought up before the CIT(A).
The CIT(A) asked the Assessing Officer for a remand report, and the AO provided a certificate under Section 65B(4) for the pen-drive seized from Shri S.S. Dalvi’s office. The assessee did not comment on the certificate when it was shared with them.The CIT(A) concluded that the certificate was validly issued, and the digital evidence could be relied upon.
The appellate tribunal agreed with the CIT(A)’s decision, finding that the grounds raised by the assessee were not valid since no objections were made to the certificate. The decisions cited by the assessee were found to be not applicable. In conclusion,the appeal filed by the assessee was dismissed.
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