INCOME TAX ACT, 1961

Section 132(4)

Search and seizure - Addition on account of unaccounted interest income - Addition based on seized papers -

AO made addition in respect of unaccounted interest paid to assessee on the basis of entries in laptop and documents seized during the course of search operation in the case of a company 'A'. Such entries were found in diary and laptop of 'R' who was one of the directors of the 'A'. It was submitted on behalf of assessee that the author of the entries denied to have paid any interest to the assessee and also stated that such entries were made on notional basis. Further, it was also submitted that the MD of the 'A' also denied in his statement that no payment was made on account of interest to the assessee. Held: It was found that the seized documents on the basis of which the impugned addition was made did not contain the name of the assessee. Further, the laptop and seized diary belonged to 'R' and his statement was recorded under section 132(4), wherein he denied to have made any interest payment to the assessee, therefore, no liability could be fasten on the assessee to prove that he received any interest. Similarly statement of MD of the 'A' was recorded under section 132(4), who also denied payment of any interest to the assessee. Further, no agreement was brought on record if there was any understanding between the parties to charge the interest. Therefore, in absence of any evidence connecting the assessee with the receipt of interest, it was not a case of making addition against the assessee.

REFERRED : CIT (Central)-1, New Delhi v. Ved Prakash Choudhary (2008) 305 ITR 245 (Del.) Common Cause (A Registered Society) v. Union of India (2017) 394 ITR 220 (SC) The Hon'ble Gujarat High Court in the case of Dy. CIT v. Mahendra Ambalal Patel (2010) 40 DTR 243 (Guj.)

FAVOUR : In assessee's favour

A.Y. :

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