2022 (1) TMI 584 - AT - Income Tax

Tribunal confirms deletion of unaccounted additions based on cloud data; consistency with prior case cited

The Tribunal upheld the CIT(A)'s decision to delete additions of unaccounted capital, surplus profit, and undisclosed interest based on transactions found ... Validity of proceedings u/s 153C - unaccounted capital deployed by the assessee - transactions found on cloud data - name of ‘Mohanji Sukhani’ in the accounts of N. Trading Company - Whether mere mention of name in the ledger of N. Trading Company is not sufficient to prove that it is appellant’s name and therefore, the ld. CIT(A) held that the assessee succeeds in first legal ground that initiation of proceedings U/s 153C are void ab-initio and the transaction in the cloud data in the name of ‘Mohanji Sukhani’ cannot be attributed to the appellant? - HELD THAT:- As decided in Shri Jugal Kishore Garg [2021 (5) TMI 814 - ITAT JAIPUR] has recorded a categorical finding that M/s Manglam Builder & Developer Ltd had owned up all the “N Trading Company” data found in cloud as belonging to them. On the basis of the same, it filed settlement petition before Settlement Commission on 28.03.2018 and the `peak deposit' of unaccounted Capital introduced, loans and advances and interest paid and received was considered for computing its income and income of ₹ 15.10 cr. was offered on the basis of cloud data of N. Trading Company which was finally accepted by the Settlement Commission in its order dated 16.05.2019 and accordingly, where the amounts have been subjected to tax in the hands of MBDL and related entities, there is no infirmity in action of the ld CIT(A) in deleting the same in the hands of the assessee and appeals of the Revenue for all the three years were dismissed. In the instant case as well, we find that pursuant to search action in case of M/s Manglam Group, the action was taken in the hands of the assessee u/s 153C of the Act based on transactions in “N Trading Company” found on cloud data found and seized during the course of search and the assessment was completed u/s 143(3) r/w 153C wherein addition on account of unaccounted capital employed in crown square project of the Manglam Group - as recorded by the Coordinate Benches in the aforesaid decision, that M/s Manglam Builder & Developer Ltd had owned up all the “N Trading Company” data found in cloud as belonging to them and basis the same, it filed settlement petition before Settlement Commission on 28.03.2018 and the `peak deposit' of unaccounted Capital introduced, loans and advances and interest paid and received was considered for computing its income and income of ₹ 15.10 cr. was offered on the basis of cloud data of N. Trading Company which was finally accepted by the Settlement Commission in its order dated 16.05.2019 and accordingly, where the amounts have been subjected to tax in the hands of MBDL and related entities, the AO was directed to delete the additions in the hands of the assessee. The Revenue has not been able to highlight and demonstrate before us as to how the findings of the Coordinate Benches should not be followed in the instant case - we see no justifiable reason to deviate and take a different view in the matter and following the same, addition so made in the hands of the assessee is hereby held to be rightly deleted by the ld CIT(A) and we hereby affirm his findings in this regard. The grounds of appeal so taken by the Revenue are thus dismissed. Issues Involved:1. Justification of ignoring transactions found on cloud data and deleting additions of unaccounted capital, surplus profit, and undisclosed interest.2. Validity of proceedings under Section 153C.3. Attribution of transactions in the cloud data to the appellant.4. Consideration of data owned up by Manglam Group before the Settlement Commission.Issue-wise Detailed Analysis:1. Ignoring Transactions Found on Cloud Data and Deleting Additions:The Revenue challenged the CIT(A)’s decision to ignore transactions found on cloud data and delete additions of Rs. 1,21,80,000/- for unaccounted capital, Rs. 62,85,000/- for unaccounted surplus profit, Rs. 5,75,00,000/- for undisclosed interest on cash loans, and Rs. 25,62,800/- for undisclosed interest earned on cash loans. The Assessing Officer (AO) made these additions based on incriminating documents and data found during a search operation on the Manglam Group. The AO presumed the transactions pertained to the assessee due to entries in the N Trading Company cloud data. However, the assessee denied any relationship with N Trading Company and contended that mere mention of his name in the ledger was insufficient proof. The CIT(A) noted that the data found in the cloud was owned up by Manglam Group before the Settlement Commission, which had already taxed the undisclosed income. Thus, the CIT(A) directed the deletion of these additions.2. Validity of Proceedings Under Section 153C:The CIT(A) held that the initiation of proceedings under Section 153C was void ab-initio because the fundamental question of whether the name 'Mohanji Sukhani' in the N Trading Company’s accounts referred to the appellant was not proven. The CIT(A) emphasized that mere mention of the name in the ledger was not sufficient to attribute the transactions to the appellant.3. Attribution of Transactions in the Cloud Data to the Appellant:The AO presumed that the name 'Mohanji Sukhani' in the cloud data denoted the appellant and made additions based on this presumption. The assessee denied any involvement in the transactions and requested cross-examination of the witnesses. The CIT(A) found that the AO did not provide any corroborative material or opportunity for cross-examination, and the data was owned up by Manglam Group. The CIT(A) concluded that the transactions could not be attributed to the appellant.4. Consideration of Data Owned Up by Manglam Group Before the Settlement Commission:The CIT(A) noted that Manglam Group had owned up all the data found in the cloud and filed a settlement petition before the Settlement Commission. The Commission accepted the additional income offered by Manglam Group, including unaccounted capital, loans, advances, and interest. The CIT(A) found that the amounts added by the AO had already been subjected to tax in the hands of Manglam Group. Therefore, the CIT(A) directed the deletion of the additions made in the hands of the appellant.Conclusion:The Tribunal upheld the CIT(A)’s findings, emphasizing that the data found in the cloud was owned up by Manglam Group, which had already been taxed on the undisclosed income. The Tribunal followed the principle of consistency, referring to a similar case where the Jaipur Benches had dismissed the Revenue’s appeal under identical facts and circumstances. The Tribunal affirmed the CIT(A)’s decision to delete the additions and dismissed the Revenue’s appeal.