2022 (6) TMI 683 - AT - Income Tax

Tribunal directs deletion of Rs. 55,00,000 addition under Income Tax Act Section 69C; emphasizes need for corroborative evidence.

Solitare World Pvt. Ltd. Versus ACIT, Central Circle-25 New Delhi

Solitare World Pvt. Ltd. Versus ACIT, Central Circle-25 New Delhi - TMI Issues Involved:1. Legitimacy of the addition of Rs. 55,00,000/- under Section 69C of the Income Tax Act, 1961.2. Justification of the addition based on the contents of a seized document.3. Evaluation of the evidence provided by the assessee to explain the source of the amount.4. Applicability of various case laws and judicial precedents to the facts of the case.Issue-wise Detailed Analysis:1. Legitimacy of the Addition of Rs. 55,00,000/- under Section 69C:The assessee contested the addition of Rs. 55,00,000/- made by the AO based on a seized document, treating the amount as unexplained expenditure under Section 69C of the Income Tax Act, 1961. The AO had determined that the assessee failed to reconcile the amounts mentioned in the seized document with its books of accounts, leading to the addition of Rs. 75,00,000/- (Rs. 55,00,000/- in cash and Rs. 20,00,000/- by cheque). The CIT(A) provided remission for the Rs. 20,00,000/- paid by cheque but upheld the addition of Rs. 55,00,000/- due to lack of explanation.2. Justification of the Addition Based on the Contents of a Seized Document:During a search and survey operation, a document (Annexure A-5, Page No. 8) was impounded, showing transactions under 'Received A/c' and 'Payment A/c.' The document mentioned property '62/1 Ajmal Khan Park.' The AO asked the assessee to explain the nature and source of these transactions. The assessee submitted that the figures were reconciled with rent accounted for in the books, with Rs. 11,17,000/- surrendered as undisclosed income. However, the AO found the explanation insufficient and added Rs. 75,00,000/- to the assessee's income based on the document's notations.3. Evaluation of the Evidence Provided by the Assessee:The assessee argued that the entries in the seized document were rough jottings and not indicative of any real transactions. The CIT(A) accepted the explanation for the Rs. 20,00,000/- paid by cheque, as it was substantiated with ledger accounts and bank statements. However, for the Rs. 55,00,000/- in cash, the CIT(A) found no supporting documents or satisfactory explanation, thus upholding the addition.4. Applicability of Various Case Laws and Judicial Precedents:The assessee cited several judicial precedents, including cases from ITAT and High Courts, arguing that additions should not be based solely on loose papers without corroborative evidence. The Tribunal considered these precedents and found that the revenue did not provide sufficient evidence to justify the addition of Rs. 55,00,000/-. The Tribunal noted that the property transaction related to '62/1 Ajmal Khan Park' had concluded prior to the date mentioned in the document, ruling out the possibility of post-transaction payments. The Tribunal concluded that the addition was based on guesswork without substantive evidence, directing the deletion of the addition.Conclusion:The Tribunal allowed the appeal, directing the deletion of the Rs. 55,00,000/- addition, as the revenue failed to substantiate the claim with adequate evidence. The decision emphasized the necessity of corroborative evidence for additions based on seized documents, aligning with judicial precedents that discourage reliance on standalone loose papers for such purposes.