2024 (2) TMI 842 - HC - Income Tax

HC upholds unexplained expenditure addition under Section 69C from seized diary entries lacking business nexus

Isidore Fernandes, and Mrs. Pauline Fernandes, Versus The Assistant Commissioner of Income Tax, Central Circle, Panaji, Goa.

The HC upheld the addition of unexplained expenditure u/s 69C based on transactions in a seized diary during search. The assessee claimed commission ... Unexplained expenditure u/s. 69C - addition based on transactions mentioned in the seized diary found in search - as per Revenue transactions noted in the diary were different from the real estate business on which the assessee had received commission and the amount was spent on some activities which have not been explained - CIT(A) observed that assessee has not brought on record any evidence to establish that entries pertain to any other assessment year and as such AO cannot be faulted for considering the transactions mentioned therein for the period relevant for he period 2001-02 HELD THAT:- The peak of amount in which commission was shown as received from January-2001 to February-2001 was produced during inquiry. It was not available on the date of search at the premises and entries are made after search to co-relate the amounts mentioned in the seized diary. The fact remains that assessee’s stand of having received commission income for transaction with Dempo for assisting M/s. Devashri Real Estate Developers for eviction of tenants, is repudiated by the fact that names and amounts given by M/s. Devashri Real Estate Developers are not dealing with the names and amounts found written in the seized material. It is the claim of M/s. Devashri Real Estate Developers that amounts were directly paid by them to the tenants by cheques or pay orders. Besides there being variations in the names and amounts, the assessee had no occasion to refer such payments made by M/s. Devashri Real Estate Developers and therefore Assessing Officer was right in treating the transaction recorded in the seized papers as distinct from the payments made by M/s. Devashri Real Estate Developers. It is pertinent to note that the documents found and seized from the assessee’s premises were written by Appellant no. 2 , wife of Appellant no. 1. The entries in this document is relating to the business of assessee of liaisoning for which commission has been received from time to time. Assessee has made payment, as explained, in getting clear the properties or vacating the same from unauthorized occupants. Assessee does not deny that these entries did not relate to the activities carried out by him. He also admits that only part of the entries are correct. The authorities below have found that explanation given by the assessee is not tenable and it does not support his case. Nexus of payment by M/s. Dempo has not been established with the payment shown as made in the lose sheets found in the house of assessee. The assessee was unable to explain the source of availability of funds. Payments are not disclosed by assessee in the regular returns of income tax filed prior to the date of search. The entries in the lose sheets has not been explained. The authorities below have rightly rejected the claim of the assessee being devoid of any merit - Decided against assessee. Issues Involved:1. Legality of the assessment order.2. Validity of additions made under Section 69C of the Income Tax Act.3. Justification of interest charged under Section 234B of the Income Tax Act.4. Admissibility of evidence and explanation provided by the assessee.Summary:1. Legality of the Assessment Order:The appeal was filed under Section 260-A of the Income Tax Act, 1961, challenging the order dated 30th June 2011 by the Income Tax Appellate Tribunal (ITAT), Panaji, Goa. The appellant had initially declared an income of Rs. 1,67,083/- and agricultural income of Rs. 57,239/-. A search under Section 132 was conducted, and the assessee later filed a revised return declaring NIL income, which was subsequently revised again to the original figures. The Assessing Officer assessed the total income as Rs. 19,25,286/- and agricultural income of Rs. 57,239/-, with interest payable amounting to Rs. 11,29,825/-.2. Validity of Additions Made Under Section 69C:The main contention was the addition of Rs. 30,85,000/- as unexplained expenditure under Section 69C based on entries in a seized diary. The assessee argued that these entries pertained to real estate commission business, which was accounted for in the books. However, the Assessing Officer, CIT(A), and ITAT found inconsistencies in the explanations provided by the assessee. The authorities noted that the names and amounts in the seized documents did not match with the information provided by M/s. Devashri Real Estate Developers, who confirmed that payments were made directly to tenants by cheques/pay orders. The ITAT upheld the addition, stating that the transactions were not related to real estate dealings for which the assessee received commission but were unexplained expenditures.3. Justification of Interest Charged Under Section 234B:The ITAT remitted the matter back to the Assessing Officer for verification of facts regarding the interest charged under Section 234B. The ITAT observed that interest could only be increased if it had been charged in the original assessment. The CIT(A) and ITAT upheld the Assessing Officer's action in charging interest under Section 234B.4. Admissibility of Evidence and Explanation Provided by the Assessee:The assessee failed to provide satisfactory explanations for the entries in the seized diary. The authorities found that the assessee's explanations were contradictory and not supported by evidence. The entries in the diary were admitted to be related to the assessee's business, but the nexus with payments by M/s. Dempo was not established. The authorities concluded that the assessee was unable to explain the source of funds, and the payments were not disclosed in the regular income tax returns filed prior to the search.Conclusion:The High Court found no reason to interfere with the concurrent findings of the Assessing Officer, CIT(A), and ITAT. The appeal was dismissed, and the decisions relied upon by the appellant's counsel were deemed inapplicable to the present case. The court held that the authorities had rightly rejected the assessee's claims, and the appeal lacked merit. The Income Tax Appeal No. 56 of 2012 was dismissed.