2024 (12) TMI 239 - AT - Income Tax

Revenue's appeal dismissed as addition under section 69 cannot be based solely on post-dated cheques without proving nexus to undisclosed income

ACIT, Central Circle-28, New Delhi Versus Ms. Swapna Mohan

ITAT Delhi dismissed Revenue's appeal against CIT(A)'s deletion of addition under section 69 for unexplained investment. The addition was based solely on ... Addition u/s 69 - unexplained investment - PDCs are issued against the cash payment made by the assessee for acquiring different properties/spaces in the projects - HELD THAT:- As recorded by the CIT(A), is not rebutted by the Revenue by bringing any contrary material on record. The law is well settled that the addition made on the basis of conjectures cannot be sustained in the eye of law. CIT(Appeals) has rightly followed the decision of the co-ordinate Bench [2013 (10) TMI 974 - ITAT AHMEDABAD] that no addition can be made purely on the basis of post-dated cheques. In the case in hand impugned addition has been made on the basis of the post dated cheques recovered from the possession of the assessee. The explanation offered by the assessee is not controverted by the AO. AO has failed to establish any link of post dated cheques with undisclosed income of the assessee. In the absence of such nexus or link it cannot be construed that such cheques related to some unexplained income of the assessee. Therefore, we do not see any infirmity into the finding on fact recorded by the CIT(Appeals). The same is hereby upheld. The grievance raised by the Revenue lacks merit, hence dismissed. Issues Involved:1. Whether the addition of Rs. 2,45,00,000/- under Section 69 of the Income-tax Act was justified based on the post-dated cheques (PDCs) found during the search proceedings.2. Whether the explanation provided by the assessee regarding the source of investment and the nature of the PDCs was satisfactory and substantiated by documentary evidence.3. Whether the presumption of unaccounted investment by the Assessing Officer (AO) was valid without corroborative evidence.Detailed Analysis:Issue 1: Justification of Addition under Section 69The primary issue was whether the addition of Rs. 2,45,00,000/- made by the AO under Section 69 of the Income-tax Act was justified. The AO based this addition solely on the discovery of three post-dated cheques (PDCs) during a search operation. The AO presumed these cheques represented unaccounted investments by the assessee with the Amrapali Group. However, the CIT(A) found that the AO's addition was based on presumption and lacked corroborative evidence. The CIT(A) emphasized that the mere presence of PDCs, without supporting evidence, could not substantiate the claim of undisclosed income. The Tribunal upheld this view, stating that conjectures and presumptions could not lead to a valid addition under the law.Issue 2: Explanation by the AssesseeThe assessee explained that the PDCs were issued as security against an advance of Rs. 2 crores made by PSK to the Amrapali Group, supported by a Memorandum of Understanding (MOU) dated 08/07/2014. The CIT(A) found this explanation reasonable and supported by documentary evidence, including bank transactions and the MOU itself. The CIT(A) noted that the AO failed to provide any evidence contradicting the assessee's explanation. Furthermore, the CIT(A) highlighted that the appellant's nominal income from tuition fees made it improbable for her to generate such substantial unaccounted funds. The Tribunal agreed, noting that the explanation was plausible and supported by evidence, and thus, the AO's rejection of the explanation was unjustified.Issue 3: Presumption of Unaccounted InvestmentThe AO presumed unaccounted investment by the assessee without any corroborative evidence. The CIT(A) pointed out that no evidence was found during the search to indicate unaccounted payments to the Amrapali Group. The Tribunal referenced the Delhi High Court's decision in CIT v. Girish Chaudhary, which held that additions based solely on notings or documents without corroborative evidence could not be sustained. The Tribunal found that the AO's presumption lacked any supporting material, making the addition unsustainable. The Tribunal also noted that the AO failed to establish a link between the PDCs and undisclosed income, further weakening the presumption.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 2,45,00,000/-. The Tribunal emphasized that additions based on mere presumptions and without corroborative evidence could not be upheld. The explanation provided by the assessee was deemed satisfactory and supported by documentary evidence, and the AO's failure to establish a nexus between the PDCs and undisclosed income rendered the addition unjustified. The Tribunal's decision reinforced the principle that conjectures and surmises could not form the basis for additions under the Income-tax Act.