Revenue's appeal dismissed as additions under section 69A lack corroborative evidence for alleged undisclosed cash transactions

ITAT Chennai dismissed revenue's appeal against deletion of additions made under section 69A for alleged undisclosed cash transactions. AO relied on excel sheets seized from third party premises containing entries related to assessee firm. ITAT held additions unsustainable as no corroborative evidence supported the entries, neither the person from whom documents were seized nor assessee was examined regarding contents. Mere matching of bank entries in excel sheets with books doesn't validate cash transaction entries without supporting documentation like bills or receipts. AO's practice of appending two zeros to cash amounts while leaving bank amounts unchanged was deemed incorrect and untenable, creating inconsistencies in totals.

---

---

Issues Involved:
1. Deletion of addition towards undisclosed cash transactions from undisclosed sources.
2. Evidentiary value of seized materials from a third party.
3. Presumption under Section 132(4A) and Section 292C of the Income Tax Act.
4. Methodology of calculating undisclosed income.

Summary:

Issue 1: Deletion of Addition Towards Undisclosed Cash Transactions from Undisclosed Sources
The revenue challenged the deletion of an addition of Rs. 8,03,12,500/- made towards undisclosed cash transactions based on entries in excel sheets found in electronic devices seized during a search of the Christy group of companies. The Assessing Officer (AO) had made these additions under Section 69A of the Income-tax Act, 1961, as unexplained money. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted these additions, stating that the excel sheets found in the possession of a third party did not have any evidentiary value without corroborative evidence.

Issue 2: Evidentiary Value of Seized Materials from a Third Party
The CIT(A) held that the excel sheets found in the possession of a third party did not have evidentiary value since they were not found in the premises of the assessee and lacked corroborative evidence like cash receipts, unaccounted purchase bills, or sale bills. The CIT(A) noted that no other evidence was found during the search in the premises of the assessee to corroborate the entries in the excel sheets.

Issue 3: Presumption Under Section 132(4A) and Section 292C of the Income Tax Act
The CIT(A) observed that the presumption under Section 132(4A) and Section 292C of the Act, which applies to documents found in the possession of the assessee, does not apply to documents found in the possession of a third party. The Tribunal upheld this view, stating that the AO made additions without corroborative evidence to support the entries in the excel sheets.

Issue 4: Methodology of Calculating Undisclosed Income
The Tribunal found that the AO's method of appending two zeros to the value recorded in the excel sheets was incorrect and lacked a valid basis. The CIT(A) had also noted that the AO did not provide any explanation for selectively treating figures in one excel sheet differently from others. The Tribunal agreed with the CIT(A) that the method of computing undisclosed income by netting off cash receipts against cash payments was reasonable.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the additions made under Section 69A of the Act, stating that the additions were unsustainable in law without corroborative evidence. The Tribunal dismissed the appeals filed by the revenue for the assessment years 2016-17, 2017-18, and 2018-19 and also dismissed the cross objections filed by the assessee as infructuous.

---