2023 (2) TMI 593 - AT - Income Tax

Tribunal upholds CIT(A) decision to delete Rs. 2.50 Cr addition, stresses evidence & coherence

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 2.50 Crs, based on lack of corroborative evidence and logical inconsistencies in ... Assessment u/s 153C - pen drive was found and seized by the search team - unaccounted cash transactions made - CIT- A deleted addition - AY: 2014-15 - HELD THAT:- It is an admitted fact that no corroborative evidence was traced from the premises of the assessee during the search operations in the assessee’s own premises - loan was taken by way of RTGS and repaid by way of RTGS was evidenced from the paper book submitted before us. Further, there is also merit in the argument of the Ld. AR that when the cash balance of Rs. 2.50 Crs was available with the assessee, why a loan was taken from M/s. Polisetty Somasundaram by M/s. Durga Marketing Corporation where the assessee is a partner deserves consideration. As held by CIT from the statement of Polisetty Somasundaram conflicting versions are noticed wherein initially it was said that the transactions in the pen drive represent their unaccounted income and later it was stated that the impugned sums were received as security deposit for the loan given to Durga Marketing Corporation. From the material facts of the case there is no merit for the addition made by the AO. Considering the above facts and circumstances and judicial pronouncements the addition is not sustainable and hence deleted - CIT(A) has rightly considered the facts and adjudicated the grounds on merits - Decided against revenue. Addition of interest payment in cash - AY: 2015-16 - HELD THAT:- We find that in the impugned assessment year 2015-16, the Ld. CIT (A) has consistently allowed the appeal of the assessee on the protective additions made by the Ld. AO with respect to the receipt of cash by the assessee in the absence of any corroborative evidence found against the assessee during the search operations in the assessee’s premises - CIT(A) has directed the Ld. AO to delete the addition of interest payment in cash based on the relief allowed in deleting the addition of cash for Rs. 2.50 Crs. We are of the considered view that the Ld. CIT(A) has rightly deleted the additions in the impugned assessment year also and we do not find any reason to interfere in the decision of the Ld. CIT(A) - Dismiss the appeal of the Revenue. Issues Involved:1. Deletion of addition of Rs. 2.50 Crs by the CIT(A).2. Validity of notice U/s. 153C of the Income Tax Act.3. Protective assessment of Rs. 2.50 Crs in AY 2015-16.4. Deletion of interest payment addition of Rs. 6,16,438/-.Detailed Analysis:Issue 1: Deletion of addition of Rs. 2.50 Crs by the CIT(A)The Revenue challenged the deletion of Rs. 2.50 Crs by the CIT(A). The assessee, engaged in trading Gutka and real estate commission, had his premises searched, leading to a notice U/s. 153A. The AO accepted the income returned by the assessee but later issued a notice U/s. 153C based on a pen drive seized from M/s. Polisetty Somasundaram, which allegedly contained details of unaccounted cash transactions. The AO treated Rs. 2.50 Crs as unexplained income based on the pen drive and statements from M/s. Polisetty Somasundaram's Managing Partner, despite the assessee denying any cash transactions. The CIT(A) relied on various judicial precedents, including the Supreme Court and Delhi High Court rulings, and found no corroborative evidence from the assessee's premises, thus deleting the addition. The Tribunal upheld the CIT(A)'s order, noting the lack of corroborative evidence and logical inconsistencies in the AO's findings.Issue 2: Validity of notice U/s. 153C of the Income Tax ActThe assessee raised a legal ground regarding the validity of the notice U/s. 153C. The Tribunal, referencing the decision in CIT vs. Kabul Chawla, deemed this ground moot since the Revenue's appeal was dismissed in favor of the assessee, thus not requiring separate adjudication.Issue 3: Protective assessment of Rs. 2.50 Crs in AY 2015-16For AY 2015-16, the Revenue made a protective assessment of Rs. 2.50 Crs, alleging repayment of the amount in the subsequent financial year. The assessee argued that the same amount could not be taxed in two different assessment years. The Tribunal found that the CIT(A) consistently allowed the assessee's appeal, deleting the protective addition due to the absence of corroborative evidence. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.Issue 4: Deletion of interest payment addition of Rs. 6,16,438/-The AO alleged that the assessee paid interest of Rs. 6,16,438/- in cash to M/s. Polisetty Somasundaram. The CIT(A) deleted this addition, reasoning that if the assessee had made a security deposit, there would be no need for an interest payment. The Tribunal agreed with the CIT(A), noting the lack of evidence supporting the AO's claim and the logical inconsistency in the AO's reasoning.Conclusion:The Tribunal dismissed the Revenue's appeals for both assessment years (2014-15 and 2015-16) and upheld the CIT(A)'s orders. The Tribunal also disposed of the assessee's cross-objections, finding them either moot or supportive in nature. The judgment emphasized the necessity of corroborative evidence and logical consistency in tax assessments.