2014 (4) TMI 1087 - AT - Income Tax

Tribunal upholds CIT(A)'s decision, stresses need for corroborative evidence and thorough inquiry

The Tribunal dismissed all appeals by the Revenue, upholding the CIT(A)'s decisions to delete additions for both assessment years. The judgments stressed ... Addition on account of opening cash balance - CIT(A) deleted the addition - Held that:- Entry relating to this opening balance was not appearing in the books of account in the assessment year under consideration as this is earlier year’s carry forward balance. As held by the Hon’ble Rajasthan High Court in the case of CIT Vs. Parameshwar Bhora, [2007 (1) TMI 105 - RAJASTHAN HIGH COURT ] amount which was credited in books of account of the assessee in the preceding year cannot be treated as unexplained cash credit or unexplained investment under s. 68/69 in the relevant assessment year. In the present case, since the opening balance of cash is only carried forward entry and it is not appearing in the financial year under consideration, following the ratio laid down by the Hon’ble Rajasthan High Court in the said case, we uphold the order of the CIT(A) in deleting the addition made by the AO on account of opening cash balance. - Decided against revenue Addition on amount received out of the withdrawal of his wife Smt. Padmavathi from her business - CIT(A) deleted the addition - Held that:- The CIT(A) observed that as a principle the department has accepted the investment and availability of fund belonging to appellant’s wife and therefore, the AO should have accepted the claim of the assessee basing on documentary evidence. It is also found that the AO had not caused any enquiry to ascertain the existence of the concern owned by appellant’s wife. In the facts and circumstances of the case, we do not find any infirmity in the order of the CIT(A) in directing the AO to delete the addition received by the assessee from his wife. - Decided against revenue Addition made based on the scribbling found in the seized material - unaccounted payments made by the assessee for investment in lands - CIT(A) deleted the addition - Held that:- In this case, the addition was made by the AO based on the loose paper and the same, in our view, cannot be considered as conclusive evidence. As held by the CIT(A) in the impugned order “except relying on the notings in the loose slips, no attempt has been made to corroborate the notings with independent evidence. The parties to the transaction particularly the vendor has not examined. In every transaction there is a circle concerning two parties. It is not known whether the vendor has disclosed the consideration as noted in the diary. Therefore, merely on the basis of presumption and some uncorroborated notings additions cannot be made.” In our opinion, the deletion of addition by the CIT(A) is justified and no interference is called for in the order of the CIT(A) - Decided against revenue Issues Involved:1. Deletion of addition of Rs. 5,05,000/- as opening cash balance.2. Deletion of addition of Rs. 8,00,000/- received from assessee's wife.3. Deletion of addition of Rs. 26,33,165/- based on scribbling found in seized material (AY 2006-07).4. Deletion of addition of Rs. 31,04,000/- based on scribbling found in seized material (AY 2007-08).Detailed Analysis:Issue 1: Deletion of Addition of Rs. 5,05,000/- as Opening Cash BalanceThe Revenue challenged the CIT(A)'s decision to delete the addition of Rs. 5,05,000/- as opening cash balance. The Appellate Tribunal upheld the CIT(A)'s decision, citing that the opening balance was a carry-forward entry from the previous year and not an unexplained cash credit or investment for the relevant assessment year. The Tribunal relied on the precedent set by the Hon'ble Rajasthan High Court in the case of CIT Vs. Parameshwar Bhora, which held that amounts credited in previous years cannot be treated as unexplained in the current year.Issue 2: Deletion of Addition of Rs. 8,00,000/- Received from Assessee's WifeThe Revenue also contested the deletion of Rs. 8,00,000/- received from the assessee's wife. The assessee claimed that the amount was withdrawn from his wife's business, Stoneware Enterprises. The CIT(A) accepted this claim, noting that the business was assessed to tax and the withdrawals were documented. The Tribunal affirmed this decision, observing that the AO did not conduct any inquiry to disprove the existence of the concern or the source of funds.Issue 3: Deletion of Addition of Rs. 26,33,165/- Based on Scribbling Found in Seized Material (AY 2006-07)The AO made an addition of Rs. 26,33,165/- based on scribbling found in seized material, alleging unaccounted payments for land investments. The CIT(A) deleted the addition, stating that the notings in the loose sheets were uncorroborated and lacked evidentiary value. The Tribunal upheld this decision, emphasizing that the AO failed to corroborate the notings with independent evidence or examine the vendors involved. The Tribunal cited multiple judicial precedents, including CIT Vs. Shivakani Co P Ltd and K.P.Varghese Vs. ITO, which establish that uncorroborated notings cannot form the basis for additions.Issue 4: Deletion of Addition of Rs. 31,04,000/- Based on Scribbling Found in Seized Material (AY 2007-08)Similar to the previous year, the AO added Rs. 31,04,000/- based on scribbling found in seized material, alleging unaccounted payments for land investments. The CIT(A) deleted the addition, following the same rationale as in AY 2006-07. The Tribunal upheld this decision, reiterating that the notings were uncorroborated and the AO did not examine the vendors or provide independent evidence. The Tribunal's decision was supported by judicial precedents, including CIT Vs. Anil Bhalla and CIT Vs. Jaipal Aggarwal, which held that dumb documents cannot justify additions without corroborative evidence.Conclusion:The Tribunal dismissed all the appeals of the Revenue, affirming the CIT(A)'s decisions to delete the additions for both assessment years. The judgments emphasized the necessity of corroborative evidence and proper inquiry by the AO before making any additions based on seized materials or notings.