2014 (1) TMI 978 - AT - Income Tax

Tribunal dismisses Revenue's appeal on unexplained expenses under Income Tax Act

The ACIT, Central Circle-9, Mumbai Versus M/s. Ascent Housing Pvt. Ltd.

The ACIT, Central Circle-9, Mumbai Versus M/s. Ascent Housing Pvt. Ltd. - TMI Issues:Appeal against deletion of addition made under section 69C of the Income Tax Act based on unexplained expenses found in seized documents during search and seizure action.Analysis:The case involved an appeal by the Revenue against the order of the Ld. CIT(A)-37, Mumbai pertaining to A.Y. 2007-08. The Revenue contended that the Ld. CIT(A) erred in deleting the addition made under section 69C of the Income Tax Act on the basis of unexplained expenses identified in documents seized during a search and seizure action under section 132(1) of the Act. The documents seized from the office premises of a group company indicated expenses related to a property transaction, with a portion of the expenses already recorded in the assessee's books. The Revenue argued that the remaining unexplained expenditure should be treated as income under section 69C. The assessee, on the other hand, explained that the seized documents contained estimated entries and not actual expenses, with the recorded expenses already reflected in its books.The Ld. CIT(A) considered the explanations provided by the assessee and concluded that the round sums mentioned in the seized documents were estimated in nature, as evidenced by the allowance of a portion of similar estimated expenses in the books. The Ld. CIT(A) found no corroborative evidence during the search to support the unrecorded expenses as claimed by the Revenue. Emphasizing the requirement for substantiation, the Ld. CIT(A) deleted the addition under section 69C.Upon appeal, the Revenue argued that the Ld. CIT(A) took contradictory views on the same document, claiming that recorded entries negate the estimation argument. The Tribunal, after reviewing the submissions and evidence, noted that while a portion of the expenses was recorded, the unexplained balance lacked substantiation by the Revenue. The Tribunal highlighted the absence of verification from relevant parties mentioned in the seized documents and the failure to investigate the actual expenditure with the property seller. Citing precedents, the Tribunal stressed the need for corroborative material to support additions based on estimations and conjectures. Ultimately, the Tribunal upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal.In conclusion, the Tribunal found no grounds to interfere with the Ld. CIT(A)'s findings, leading to the dismissal of the Revenue's appeal against the deletion of the addition made under section 69C of the Income Tax Act.