2021 (3) TMI 406 - AT - Income Tax

Revenue's Appeal Dismissed Over Lack of Evidence in Income Tax Addition

The Tribunal dismissed the Revenue's appeal challenging the deletion of Rs. 1.56 crore addition by the CIT(A) based on a snapshot found in the assessee's ... Undisclosed income - Search action u/s 132 - CIT(A) deleted the addition made on the basis of snapshot found in the i-phone of the assessee during the course of search u/s.132 of the Act at the residence of the assessee - AO added the entire amount to the income of the assessee by rejecting the contentions of the assessee that the said entries represented the old entries qua the financing business which assessee had been doing on brokerage basis till the year 2007 and which was closed in the year 2008 - CIT(A) deleted the addition by observing that the AO has failed to bring on record any substantive evidence to the effect that assessee has undisclosed/ unaccounted income - HELD THAT:- The undisputed facts are that during the course of search proceedings, certain snapshots taken in the i-phone of the assessee were examined and there were some entries which were claimed by the assessee as pertaining to the litigation which was going on in respect of fianance activities closed in the year 2008. As contended before us that he was facilitator only charging small commission for getting borrowers for intending lenders. Net worth of the payment was ₹ 28.71 Crores as on 31/03/2015 and ₹ 27.33 Crores as on 31/03/2016 and thus, the calculation of the AO that ₹ 1.56 Crores represented the net worth of ₹ 1.56 Crores on 06.07.2015 is wrong and rightly deleted by the ld. CIT(A) - AO has completely failed to bring any substantive evidence on record to prove that these entries represented the amounts in lakhs and hence , we do not find any infirmity in the order of ld. CIT(A) - The order passed by the ld. AO is based on presumption of surmises without any underlying substantive evidences and therefore, was rightly deleted by the AO. We are therefore, inclined to upheld the order of CIT(A) and appeal of the revenue is dismissed. Issues Involved:1. Deletion of Rs. 1.56 crore addition by CIT(A) based on snapshot found in the iPhone of the assessee during a search action under Section 132 of the Income Tax Act.Issue-wise Detailed Analysis:1. Deletion of Rs. 1.56 Crore Addition by CIT(A):The Revenue challenged the deletion of Rs. 1.56 crore by the CIT(A), which was added by the AO based on a snapshot found in the iPhone of the assessee during a search under Section 132 of the Income Tax Act at the assessee's residence.Facts and Background:A search under Section 132 was conducted on the assessee on 03/12/2015. The assessee filed a return declaring a total income of Rs. 68,27,800/-. During the search, a snapshot from the assessee's iPhone indicated a net worth of Rs. 1.56 crore, with entries of Rs. 23,00,000/- as 'C', Rs. 20,00,000/- as 'P', and Rs. 65,50,000/- as 'I'. The AO interpreted these as 'Cash', 'Profit', and 'Interest', respectively, and concluded that the amount represented unaccounted income, thus adding Rs. 1.56 crore to the assessee's income.Assessee's Explanation:The assessee contended that these snapshots were related to old disputed matters from before 2008, linked to a finance brokerage activity that had been closed due to disputes and bad debts. The assessee argued that the amounts mentioned were not received and represented amounts lost in the finance business.CIT(A)'s Observations:The CIT(A) observed that the word 'lost' was written at the top of the seized page, indicating the amounts represented losses. The CIT(A) noted that the net worth of the assessee was far greater than Rs. 1.56 crore, being Rs. 28.71 crore as of 31/03/2015 and Rs. 27.33 crore as of 31/03/2016. The CIT(A) held that the entries were rough notings without corroborative evidence, thus having no evidentiary value. The CIT(A) relied on various judicial precedents to conclude that mere suspicion cannot replace legal proof, and the addition based on presumption and surmises without corroborative evidence was unjustified.Tribunal's Findings:The Tribunal agreed with the CIT(A), noting that the AO failed to provide substantive evidence that the entries represented unaccounted income. The Tribunal emphasized that the net worth of the assessee was significantly higher than the disputed amount, and the AO's interpretation of the entries was based on presumption. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal.Conclusion:The Tribunal concluded that the AO's addition of Rs. 1.56 crore was based on presumption without substantive evidence. The CIT(A) rightly deleted the addition, considering the lack of corroborative evidence and the higher net worth of the assessee. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision.Result:The appeal of the Revenue was dismissed, and the order pronounced on 08/03/2021 was upheld.