No Relief From Penalty if Assessee Failed to Explain Possession of Incriminating Docs Recovered During Search | ITAT

Case Details: Rajendra Agarwal v. ACIT, Central Circle-1 - [2025] 171 taxmann.com 265 (Jaipur-Trib.)

Judiciary and Counsel Details

• Rathod Kamlesh Jayantbhai, Accountant Member & Narinder Kumar, Judicial Member
• Vedant Agarwal, Adv. for the Appellant.
• Mrs Anita Rinesh, JCIT-Sr D.R. for the Respondent.

Facts of the Case

A search and seizure operation was carried out at the residential premises of the assessee. During the search, two incriminating documents were recovered from said premises showing that the assessee had received interest income on a loan given to several persons whose names were also reflected in those documents.

The Assessing Officer (AO) made additions to the assessee’s income on the basis of said incriminating documents. He also passed a penalty order under section 271AAB and levied a penalty on the amount treated as undisclosed income of the assessee.

On appeal, the CIT(A) upheld the levy of penalty at a minimum of 30% of the undisclosed income. Aggrieved-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Jaipur Tribunal held that the assessee does not dispute that he had not filed any return of income for the said two assessment years. Statements of the assessee were recorded under section 132(4), i.e., during search & seizure, and 131, i.e., post search.

Even though it has been submitted by the assessee, in the course of arguments that the assessee had retracted, the statements said to have been recorded during the search proceedings, no material has been placed on record to discard the said statements, i.e. one made at the time of search and seizure, and the other made under section 131.

On going through the questions, with responses thereto by the assessee, it transpires, and as rightly submitted on behalf of the revenue, the attention of the assessee was specifically drawn to the two documents. While putting it to him that on 3-4-2013, said documents were recovered at the time of search of his residential premises and that transactions recorded therein revealed that same pertained to lending money, on interest, to the persons named therein.

In response to the question, the assessee admitted to the seizure of the said documents from his residential premises at the time of the search on 3-4-2013. However, he denied that the same connected with him or was in his or his son’s handwriting. He also pleaded those transactions recorded therein had no connection with his business and that he did not know about the said transactions.

When the incriminating material was admittedly recovered from the assessee’s residential premises, it was for the assessee to explain how the said documents were found lying at his residential premises and who the author of the contents thereof was. However, while searching his residential premises, the assessee failed to demonstrate possession of the two incriminating documents recovered.

The simple ignorance displayed by the assessee, in the manner indicated above, does not aid the assessee in shifting the onus to the AO. Therefore, the additions to the assessee’s income and further penalty order under section 271AAB(1)(c) were justified.

List of Cases Reviewed

• Ajay Gupta v. Commissioner of Income-tax [2020] 114 taxmann.com 577 (Para 29) followed.

List of Cases Referred to

• Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399/293 Taxman 141/454 ITR 212 (SC) (para 20)
• Ajay Gupta v. CIT [2020] 114 taxmann.com 577/270 Taxman 71 (Allahabad) (para 20)
• Pr. CIT v. Umesh Ishrani [2019] 108 taxmann.com 437 (Bombay) (para 20)
• Navneet Jhamb v. Asstt. CIT [2023] 156 taxmann.com 345 (Punjab & Haryana) (para 20).