Tribunal overturns income addition, citing lack of evidence and jurisdiction

Ram Niwas Asha Rani Lakhotia Trust Versus Assistant Commissioner Of Income-Tax

Ram Niwas Asha Rani Lakhotia Trust Versus Assistant Commissioner Of Income-Tax - [2018] 64 ITR (Trib) 486 Issues Involved:
1. Addition of Rs. 25,20,884 as income from undisclosed sources.
2. Lack of positive and cogent evidence for the addition.
3. Non-consideration of evidence produced by the appellant.
4. Legality and arbitrariness of the appellate order.

Issue-wise Detailed Analysis:

1. Addition of Rs. 25,20,884 as Income from Undisclosed Sources:
The primary issue revolves around the addition of Rs. 25,20,884 as income from undisclosed sources. The Assessing Officer (AO) observed that this amount was paid in cash for the purchase of property from the AEZ group, based on an excel sheet found during a search operation. The AO treated this cash payment as unexplained income due to the lack of satisfactory explanation from the assessee. The Commissioner of Income-tax (Appeals) confirmed this addition.

2. Lack of Positive and Cogent Evidence for the Addition:
The assessee contended that the addition was made without any positive and cogent evidence, relying instead on irrelevant facts. The learned authorized representative argued that no incriminating material was found during the search at the assessee's premises, and the addition was based solely on the excel sheet found at the AEZ group’s premises. The Tribunal noted that the AO relied on the confession of a third party, I.E. Soomar, who admitted to cash investments, but this alone was not sufficient to justify the addition without corroborative evidence.

3. Non-consideration of Evidence Produced by the Appellant:
The assessee argued that the AO did not consider the evidence produced, which clearly established that no cash payment was made. The Tribunal highlighted that the AO failed to provide corroborative evidence linking the assessee to the alleged cash payment, and merely relying on the third-party confession was inadequate. The Tribunal referenced similar cases, such as Subhash Khattar, where additions were not upheld due to the absence of incriminating documents found during the search.

4. Legality and Arbitrariness of the Appellate Order:
The assessee claimed that the appellate order was arbitrary, illegal, and violated fundamental principles of contemporary jurisprudence. The Tribunal agreed, emphasizing that the addition was made in a casual manner without substantial evidence. The Tribunal cited the Delhi High Court’s decision in CIT v. Kabul Chawla, which held that additions under section 153A of the Income-tax Act cannot be made in the absence of incriminating material found during the search.

Conclusion:
The Tribunal allowed the appeal, ruling that the AO was not justified in assuming jurisdiction under section 153A and that the addition of Rs. 25,20,884 was unwarranted. The Tribunal reiterated that the absence of corroborative evidence and reliance on third-party confessions without direct linkage to the assessee were insufficient grounds for the addition. The decision was further supported by similar judgments in related cases, confirming the Tribunal's stance. The appeal was thus allowed, and the addition was deleted.

Order Pronounced:
The order was pronounced in the open court on March 1, 2018, confirming the Tribunal's decision to allow the appeal and delete the addition of Rs. 25,20,884.