2021 (2) TMI 424 - AT - Income Tax

Tribunal dismisses Revenue's appeal, upholds deletion of additions under Section 69 for lack of evidence

The Tribunal upheld the CIT(A)'s decision to delete additions totaling Rs. 1,85,72,100/- under Section 69 and Rs. 2,03,610/- for unaccounted interest ... Unexplained investment under section 69 - Burden of proof and requirement of corroborative evidence - Finance broker modus operandi and brokerage income - Attribution of unaccounted interest income to assessee - Reliance on search-and-seizure documents vis-a -vis independent inquiryUnexplained investment under section 69 - Burden of proof and requirement of corroborative evidence - Reliance on search-and-seizure documents vis-a -vis independent inquiry - Finance broker modus operandi and brokerage income - Deletion of addition of Rs. 1,85,72,100/- made as unexplained investment under section 69. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the assessee had consistently explained the business as that of a finance broker arranging loans between lenders and borrowers and earning brokerage. The seized loose papers (BS-28) were shown to record post-dated cheques and entries prepared at the request of outstation borrowers, and the assessee produced ledger extracts and confirmations for several parties evidencing transactions through account-payee cheques. The Assessing Officer did not carry out independent enquiries with the parties or banks named in the seized documents and produced no corroborative evidence to establish that the sums belonged to the assessee. Applying the settled principle that additions cannot be made on mere suspicion and that the onus under section 69 lies on the revenue to prove ownership of the investment, the Tribunal found the coordinate decisions relied upon and the appellate findings persuasive and declined to disturb the deletion except for confirming a nominal brokerage addition already sustained by the CIT(A). [Paras 11, 12]Finding of CIT(A) deleting the addition of Rs. 1,85,72,100/- is affirmed and Revenue's ground challenging that deletion is dismissed.Attribution of unaccounted interest income to assessee - Burden of proof and requirement of corroborative evidence - Reliance on search-and-seizure documents vis-a -vis independent inquiry - Deletion of addition of Rs. 2,03,610/- claimed as unaccounted interest income. - HELD THAT: - The Tribunal agreed with the CIT(A) that the Assessing Officer's conclusion that the assessee received cash interest was based on assumption drawn from the loose papers without addressing interest receipts by cheque. The assessee's explanation, corroborated by statements recorded during search and by documentary ledger entries and confirmations, was that interest and principal payments were made directly by borrowers to lenders and the assessee only earned brokerage. In absence of independent inquiry or corroborative material by the AO to attribute the interest to the assessee, the addition was held to be unsustainable and rightly deleted by the CIT(A). [Paras 13, 14]Finding of CIT(A) deleting the addition of Rs. 2,03,610/- is confirmed and Revenue's challenge is dismissed.Final Conclusion: Revenue's appeal is dismissed; the appellate tribunal affirmed the CIT(A)'s deletion of the principal unexplained investment addition and the unaccounted interest addition, save for a small brokerage addition already sustained, on the ground that revenue failed to discharge the onus of proving ownership of the amounts or provide independent corroboration of the seized entries. Issues Involved:1. Deletion of addition of Rs. 1,85,72,100/- made under Section 69 of the Income Tax Act, 1961.2. Deletion of addition of Rs. 2,03,610/- on account of unaccounted interest income.Issue-wise Detailed Analysis:1. Deletion of Addition of Rs. 1,85,72,100/- under Section 69:The Revenue challenged the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] to delete the addition of Rs. 1,85,72,100/- made by the Assessing Officer (AO) under Section 69 of the Income Tax Act, 1961. The AO alleged that the assessee had given cash loans based on seized documents (BS-28) during a search operation. The assessee contended that they acted purely as a finance broker, arranging loans between lenders and borrowers, and all transactions were conducted through account payee cheques. The CIT(A) found that the AO did not conduct any independent inquiry to substantiate the claims of cash loans and accepted the assessee's explanation that the transactions were brokered and conducted via cheques. The CIT(A) relied on judicial precedents, including the cases of Biren V Savla vs ACIT and ACIT vs V.Kishore Lal Balwant Rai, to conclude that the AO's additions were based on assumptions without corroborative evidence. Consequently, the CIT(A) confirmed a minor addition of Rs. 27,900/- as brokerage income and deleted the remaining Rs. 1,85,72,100/-.2. Deletion of Addition of Rs. 2,03,610/- on Account of Unaccounted Interest Income:The AO made an addition of Rs. 2,03,610/- alleging that the assessee received interest income in cash from the cash loans given. The assessee rebutted this by stating that no cash loans were given and all transactions were through account payee cheques, duly accounted for in the books. The CIT(A) observed that the AO selectively picked transactions showing interest received in cash while ignoring interest received through cheques. The CIT(A) concluded that the AO's addition was based on assumptions and lacked substantive evidence. Therefore, the CIT(A) deleted the addition of Rs. 2,03,610/-.Conclusion:The Tribunal upheld the CIT(A)'s findings, emphasizing that the AO failed to provide corroborative evidence for the alleged cash loans and interest income. The Tribunal noted that the assessee's business as a finance broker was consistently carried out through account payee cheques, and no evidence supported the AO's claims of cash transactions. Consequently, the Tribunal dismissed the Revenue's appeal, confirming the deletion of both additions.Judgment:The appeal by the Revenue was dismissed, and the order pronounced in the open Court on 09.02.2021.