2021 (11) TMI 96 - AT - Income Tax

Assessee's Appeals Allowed: Emphasis on Cross-Examination & Corroborative Evidence

The appeals filed by the assessee were partly allowed, with significant deletions of additions made by the AO based on unsubstantiated loose sheets and ... Addition u/s 69A - As submitted that considering the seized material there was sufficient material before AO who have made additional u/s 69/69A of the Act in these asst. years and the same to be confirmed - HELD THAT:- In this case, addition made towards unexplained investment and mentioning the wrong section is not fatal, though such addition to be made under section 69 of the Act but the AO mentioned the same as section 69A of the Act. Accordingly, this ground of appeal is dismissed. Addition based on seized loose sheet - HELD THAT:- The loose sheet found during the course of search are undated and did not bare the signature of the assessee or any other person. Hence, they are not in the nature of self speaking documents having no evidentiary value and cannot be taken as sole basis of determination of undisclosed income of the assessee. When document like loose sheets of paper are recovered and the revenue wants to make use of it, the onus is on the revenue to collect cogent evidence to corroborate the noting. The revenue has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized paper reveled the unaccounted income of the assessee. Further, no circumstantial evidence in the form of any unaccounted cash, jewelry or investment outside the books of account was found in the course of search action in the case of assessee. Thus, the impugned addition was made by the AO on gross relief in advocate material or rather no sufficient material at all and as such neither to be deleted. We are of the view that an assessment carried out in pursuance of such action, no addition can be made on the basis of un-corroborative noting and scribbling on loose paper made by unidentified person having no evidentiary value, is unsubstantiated and is bad in law. Addition towards unexplained expenditure - addition on the basis of loose sheet - HELD THAT:- As we have deleted the various additions in all these assessment years, which are based on the seized material marked as A/BHB/11 and not supported by any material evidence. Being so, the amount voluntarily offered by the assessee in his return of income at ₹ 3,03,05,017/- is to be taxed and as such there is no question of giving any telescopic benefit and the AO not at all required to deduct ₹ 1.35 crores from the computation of income in assessment year 2011-12. He has to go by return filed by the assessee on 26/11/2011 in acknowledgment No.292359831260911 for the asst. year 2011-12 while passing the giving effect order to our findings in this order. This ground of appeal is dismissed accordingly Issues Involved:1. Framing of assessment without any incriminating material and issuance of notice under section 153A without recording satisfaction.2. Addition under section 69A of the Income Tax Act.3. Reliance on loose sheet entries found during the course of search.4. Unexplained investments and expenditures.5. Telescoping benefits of voluntarily disclosed income.Issue-wise Detailed Analysis:1. Framing of Assessment Without Incriminating Material and Issuance of Notice under Section 153A:The first common ground raised by the assessee was regarding the framing of assessment without any incriminating material and the issuance of notice under section 153A without recording satisfaction. This ground was not pressed during the hearing and was consequently dismissed.2. Addition under Section 69A of the Income Tax Act:The assessee contended that the provisions of section 69A were incorrectly applied as there was no finding that the assessee was the owner of the money. The Assessing Officer (AO) relied on the presumption under section 132(4A), which the assessee failed to rebut. The AO's mention of section 69A instead of section 69 was deemed not fatal, and the addition was upheld.3. Reliance on Loose Sheet Entries Found During the Course of Search:The AO made additions based on loose sheets found during the search, which were challenged by the assessee on several grounds:- Assessment Year 2008-09: The AO interpreted entries in the loose sheets as evidence of unexplained investments. However, the Tribunal found that the entries were not corroborated by any positive material, lacked signatures, and were not substantiated by any independent evidence. The addition of Rs. 25 lakhs was deleted.- Assessment Year 2009-10: Similar to the previous year, the addition of Rs. 25 lakhs based on loose sheet entries was deleted due to lack of corroborative evidence.- Assessment Year 2010-11: Multiple additions totaling Rs. 3.2 crores were challenged. The Tribunal found that the AO's reliance on loose sheets without corroborative evidence was improper. Additions related to Aptha Rakshaka, Bhadra, Bhanu Hassan, Basava Reddy, Anaji Nagaraj, Prasanna Theatre, and Shanta Enterprises were deleted.- Assessment Year 2011-12: Additions totaling Rs. 328.50 lakhs were challenged. The Tribunal found that the AO's reliance on loose sheets and statements without proper corroboration and cross-examination was improper. Additions related to Kanteerava, Dushta, Adduri, Mass, Sanju Weds Geetha, and Chingari were deleted.4. Unexplained Investments and Expenditures:The AO made various additions towards unexplained investments and expenditures based on loose sheets and statements recorded during the search. The Tribunal found that the additions were based on unsubstantiated loose sheets and lacked corroborative evidence. Consequently, the additions were deleted.5. Telescoping Benefits of Voluntarily Disclosed Income:The assessee argued for telescoping benefits of the voluntarily disclosed income of Rs. 3.03 crores against the alleged cash payments. The Tribunal found this ground to be infructuous in light of the deletions made in the main grounds of the appeal. The AO was directed to go by the return filed by the assessee while passing the giving effect order.Conclusion:The appeals filed by the assessee were partly allowed, with significant deletions of additions made by the AO based on unsubstantiated loose sheets and lack of corroborative evidence. The Tribunal emphasized the importance of providing the opportunity for cross-examination and the need for corroborative material to support additions based on loose sheet entries. The order was pronounced in the open court on 28th October 2021.