2022 (1) TMI 478 - AT - Income Tax

Tribunal rules in favor of assessee, emphasizing consistency and lack of evidence in cloud data transactions

Deputy Commissioner of Income Tax, Central Circle-1, Jaipur. Versus Shri Ram Gopal Sarraf Khanda Bai Ji Ka, Manak Chowk, Jaipur

Deputy Commissioner of Income Tax, Central Circle-1, Jaipur. Versus Shri Ram Gopal Sarraf Khanda Bai Ji Ka, Manak Chowk, Jaipur - TMI Issues Involved:1. Justification of ignoring transactions found on cloud data and deleting the addition of unaccounted capital.2. Justification of ignoring transactions found on cloud data and deleting the addition of unaccounted interest earned.3. Justification of ignoring entries pertaining to unaccounted capital and advances found in the N Trading cloud data.4. Justification of giving relief based on the Manglam Group's ownership of the cloud data entries before the ITSC.Issue-wise Detailed Analysis:1. Justification of Ignoring Transactions Found on Cloud Data and Deleting the Addition of Unaccounted Capital:The Revenue challenged the deletion of Rs. 8,83,39,100/- added by the AO as unaccounted capital based on cloud data. The assessee denied any connection with the N Trading Co. cloud data, supported by affidavits from Mr. Nand Kishor Gupta and the assessee himself. The AO dismissed these affidavits, relying on the presumption under Section 132(4A) and the fact that MBDL had owned up the cloud data before the ITSC. However, the CIT(A) found that the mere mention of 'RGS' in the ledger was insufficient to prove it referred to the assessee, especially since the Manglam Group had claimed the data as their own and settled the tax liability on it before the ITSC. The Tribunal upheld the CIT(A)'s decision, noting that the cloud data transactions were already taxed in the hands of MBDL, and thus, the addition in the assessee's hands was unwarranted.2. Justification of Ignoring Transactions Found on Cloud Data and Deleting the Addition of Unaccounted Interest Earned:The AO added Rs. 1,06,35,650/- as unaccounted interest earned on cash loans/capital based on the same cloud data. The assessee contested this, supported by affidavits denying any such transactions. The AO rejected these affidavits, relying on the presumption under Section 132(4A). The CIT(A) found that the cloud data entries were not corroborated by any other evidence linking them to the assessee. Since MBDL had already included these transactions in their settlement before the ITSC, the CIT(A) deleted the addition. The Tribunal confirmed this, noting that the interest income was already taxed in the hands of MBDL.3. Justification of Ignoring Entries Pertaining to Unaccounted Capital and Advances Found in the N Trading Cloud Data:The AO argued that the entries in the N Trading cloud data indicated unaccounted capital and advances by the assessee. The assessee denied any connection with these entries, supported by affidavits. The CIT(A) found that the cloud data entries were not sufficiently linked to the assessee and noted that MBDL had owned up these entries before the ITSC. The Tribunal upheld the CIT(A)'s decision, emphasizing that the transactions were already taxed in the hands of MBDL, and thus, the addition in the assessee's hands was not justified.4. Justification of Giving Relief Based on the Manglam Group's Ownership of the Cloud Data Entries Before the ITSC:The CIT(A) provided relief to the assessee based on the fact that MBDL had owned up the cloud data entries before the ITSC and settled the tax liability on them. The Revenue contended that the CIT(A) erred in relying on the ITSC's findings, which were under challenge before the High Court. However, the Tribunal noted that the ITSC's order had not been stayed, and the principle of consistency required following the Coordinate Benches' decision in similar cases. Thus, the Tribunal upheld the CIT(A)'s decision to delete the additions in the assessee's hands, as the transactions were already taxed in the hands of MBDL.Conclusion:The Tribunal dismissed the Revenue's appeals, confirming the CIT(A)'s decision to delete the additions of unaccounted capital and interest in the assessee's hands. The Tribunal emphasized that the cloud data transactions were already taxed in the hands of MBDL, and the Revenue's challenge to the ITSC's order did not provide a basis for making the additions in the assessee's hands. The principle of consistency and the lack of corroborative evidence linking the cloud data entries to the assessee were key factors in the Tribunal's decision.