2023 (9) TMI 429 - AT - Income Tax

Tribunal upholds CIT(A)'s decision to delete Rs. 9.93 crore additions for lack of evidence

D.C.I.T., Central Circle-3, Surat. Versus Shri Mahendra Champaklal Mehta

The Tribunal dismissed the revenue's appeals for AY 2015-16 and AY 2016-17, upholding the CIT(A)'s decisions to delete additions totaling Rs. 9.93 crore ... Unexplained investment - CIT(A) deleted addition treating the MOU in question as dumb document - as submitted by assessee documents of MOU is seized from the third party, is unsigned MOU/partnership deed - HELD THAT:- The Hon’ble Delhi High Court in CIT Vs Gian Chand Gupta [2014 (5) TMI 443 - DELHI HIGH COURT] held that no addition can be made on account of unexplained investment if MOU for purchase of land as well as receipt was given by seller found during the survey was unsigned documents and the transaction was not materialised. Thus in view of the above discussions, we do not find any infirmity in the order passed by ld CIT(A). In the result, ground of No. 1 of appeal is dismissed. Addition u/s 69C - unexplained cash payment - addition based on loose paper/document from Param Properties wherein some word ‘M.C.’ was recorded - AO considered such document as a cash book for keeping the record of unaccounted cash transaction by Param Properties which was used by them for making various bookings in each project - HELD THAT:- On the observation of AO with regard to back up of I-Phone of Shri Agam V. Vadecha, the ld. CIT(A) held that storing the assessee’s phone number and other persons’ mobile number cannot be the basis for making addition, particularly even after taking backup of I-Phone, no communication was found which remotely indicate that the assessee has undertaken such transaction recorded in the seized material. AO’s finding in treating the abbreviation ‘M.C.’ pertaining to the assessee is not justified and deleted the entire addition. We also find that the AO has not made any independent investigation nor brought any adverse material on record to connect with the assessee with the seized material. Once, the person whose possession, such document, on the basis of which the Assessing Officer has drawn his belief has not taken the name of assessee while explaining ‘M.C.” as Mahendra C. Mehta rather explained it Manojbhai, the Assessing Officer was not justified in drawing conclusion that ‘MC’ means Mahendra C. Mehta. In view of the aforesaid factual discussion, we do not find any justification for making addition. Therefore, we affirm the order of ld. CIT(A) in deleting the addition - In the result ground No. 2 of the appeal raised by the revenue is dismissed. Reliance on loose papers and documents found from third party - The Hon’ble Supreme Court in Common Cause Vs Union of India (2017 (1) TMI 1164 - SUPREME COURT) held that the loose sheets of papers are wholly irrelevant as evidence not being admissible under section 34 of Evidence Act, so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. It was also held that there should be some relevant and admissible evidence and some cogent reason, which is prima facia reliable that too, supported by some other circumstances pointing out that particular third person against, whom the allegation has been levelled was in fact involved in the matter or has done some act during that period, which may have correlation with random entries. As decided in ANIL KHANDELWAL [2015 (5) TMI 86 - DELHI HIGH COURT] in absence of any corroborative evidence found during course of search at the premises of assessee, no adverse inference can be drawn against the assessee merely on the basis of seized material from the premises of third party. And that the revenue was not justified in resting its case just on loose papers and documents found from third party if such documents contained narration of transaction with assessee. Appeal of revenue is dismissed. Issues Involved:1. Treatment of MOU as a 'dumb document' and deletion of addition of Rs. 2.25 crore on account of unexplained investment.2. Deletion of addition of Rs. 20 lakh on account of unexplained cash payments.3. Deletion of addition of Rs. 5.21 crore on account of unexplained cash receipts.4. Deletion of addition of Rs. 1.47 crore on account of unexplained cash payments.Summary:Issue 1: Treatment of MOU as a 'dumb document' and deletion of addition of Rs. 2.25 crore on account of unexplained investmentThe revenue challenged the CIT(A)'s decision to treat the MOU as a 'dumb document' and delete the addition of Rs. 2.25 crore. The assessee argued that the unsigned MOU found at a third party's premises had no evidentiary value. The CIT(A) noted that the MOU was not signed, the property was still in the original owner's name, and no development work was undertaken as mentioned in the MOU. The Tribunal upheld the CIT(A)'s decision, referencing a similar case (DCIT Vs Shri Pravinchandra Hiralal Shah) where such addition was deleted due to lack of evidence.Issue 2: Deletion of addition of Rs. 20 lakh on account of unexplained cash paymentsThe revenue contested the deletion of Rs. 20 lakh added as unexplained cash payments based on documents seized from Param Properties. The assessee argued that 'MC' referred to a broker named Manojbhai, not the assessee. The CIT(A) found that the documents were neither in the assessee's handwriting nor signed by him and were identified by the third party as pertaining to Manojbhai. The Tribunal affirmed the CIT(A)'s decision, stating that no independent investigation linked the assessee to the seized documents.Issue 3: Deletion of addition of Rs. 5.21 crore on account of unexplained cash receiptsFor AY 2016-17, the revenue appealed against the deletion of Rs. 5.21 crore added as unexplained cash receipts. The CIT(A) observed that the Assessing Officer considered duplicate entries and no corroborative evidence linked the assessee to the seized documents. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of independent investigation and corroborative material.Issue 4: Deletion of addition of Rs. 1.47 crore on account of unexplained cash paymentsThe revenue also appealed against the deletion of Rs. 1.47 crore added as unexplained cash payments. The CIT(A) found no matching entries in the assessee's books or bank accounts and reiterated that 'MC' referred to Manojbhai. The Tribunal affirmed the CIT(A)'s decision, citing the absence of corroborative evidence and independent investigation.Conclusion:The Tribunal dismissed the revenue's appeals for both AY 2015-16 and AY 2016-17, affirming the CIT(A)'s decisions to delete the additions based on the lack of corroborative evidence and the identification of 'MC' as a broker named Manojbhai, not the assessee.