2025 (8) TMI 1359 - AT - Income Tax

Additions under Section 69A and s.143(3) read with s.153C deleted where group declared receipts and affiliate affidavit negated personal liability

ITAT, Mumbai held that additions under section 69A and under section 143(3) r.w.s. 153C in respect of alleged undisclosed receipts were not sustainable. ... Addition u/s.69A - Undisclosed income of the appellant - Addition u/s 143(3) r.w.s. 153C - assessee claimed that these transactions were undertaken by him on behalf of the Antariksh Group - additional income has been offered by the Antariksh Group - HELD THAT:- We are of the view that the group has declared substantial additional income which includes on-money received from its customers and the assessee’s contention that he merely received these amounts on behalf of the group entities has been confirmed by M/s. Shubhvastu Infracon LLP by submitting an affidavit to this effect. We, therefore, hold that no addition u/s 69A in the hands of the assessee should have been made. The other amount of Rs. 1,00,000/- received on 02.07.2014 falls outside the period of consideration, hence could not be added in AY 2014-15. Thus, total addition made u/s 69A of the Act is hereby deleted. This ground of the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether additions made under section 69A (unexplained cash receipts) based on documents seized during a group search can be sustained against an assessee who contends the amounts were received on behalf of a group entity and have been offered to tax by the group before the Settlement Commission/Interim Board of Settlement. 2. Whether a cash receipt dated outside the relevant financial year can be treated as income for the assessment year under consideration. 3. Validity of invocation of assessment jurisdiction under section 153C following a search of group premises (raised but not adjudicated on merits because of the decision on substantive additions). 4. Consequential reliance on special tax provisions (section 115BBE) and other grounds connected to the section 153C proceedings (raised but rendered academic by disposal on merits). ISSUE-WISE DETAILED ANALYSIS - Addition under section 69A (are the seized receipts assessable to the individual?) Legal framework: Section 69A permits treating unexplained cash credits/receipts as the assessee's income where the assessee fails to satisfactorily account for such receipts. Section 153C governs assessment of unrecorded income of a person where material is seized from premises of another person during search. Precedent Treatment: The Tribunal did not rely on or distinguish any reported precedents in the impugned order; decision is fact-driven and rests on documentary records and admissions by a group entity before the Interim Board of Settlement (IBS)/Settlement Commission. Interpretation and reasoning: The Tribunal examined (i) the seized receipts and their dates, (ii) an affidavit/confirmation from a group entity admitting that the impugned receipts related to group transactions, and (iii) the IBS/Settlement Commission record showing that the group had declared substantial additional income including on-money receipts and specifically quantified additional income attributed to the group entity said to have received such on-money. On these materials the Tribunal accepted the assessee's factual contention that the cash receipts were received on behalf of the group entity and formed part of additional income offered before the IBS. Ratio vs. Obiter: Ratio - where seized documents disclose cash receipts that the assessee demonstrates, by contemporaneous group admissions and acceptance by the Settlement mechanism, belong to a group entity and have been offered for taxation by the group, the assessing officer cannot sustain an addition against the individual under section 69A. Obiter - general observations on the weight of remand reports or the precise sufficiency of evidence to meet the statutory standard were not expanded into broad principles beyond the facts before the Tribunal. Conclusions: The Tribunal deleted additions under section 69A aggregating Rs. 1,50,000 for AY 2014-15 (deleting Rs. 50,000 and holding the Rs. 1,00,000 dated outside the year not leviable for that AY) and deleted Rs. 1,00,000 for AY 2018-19. The Tribunal held that the receipts were shown to be on account of group on-money offered in the group's IBS/Settlement application and therefore not assessable to the individual under section 69A. ISSUE-WISE DETAILED ANALYSIS - Temporal validity of receipts (date outside relevant period) Legal framework: Income is assessable to the year in which it accrues/receives in accordance with the relevant accounting/chargeability provisions; receipts dated outside the financial year under consideration are not includible in that assessment year. Precedent Treatment: No authority cited; the Tribunal applied basic chargeability principles to the seized receipt dates. Interpretation and reasoning: A seized receipt dated 03.07.2014 was held by the Tribunal to fall outside the financial year relevant to AY 2014-15 (which requires the receipt to be within the year under consideration) and therefore could not be treated as income for that assessment year regardless of its presence among seized documents. Ratio vs. Obiter: Ratio - a document evidencing receipt outside the relevant financial year cannot be used to make an addition for that assessment year. Obiter - none material beyond the direct application of temporal chargeability. Conclusions: The Tribunal disallowed the addition relating to the receipt dated outside the year and accordingly reduced the addition for AY 2014-15. ISSUE-WISE DETAILED ANALYSIS - Jurisdiction under section 153C and related grounds (academic) Legal framework: Section 153C permits making an assessment of a person based on material seized from another's premises during search if the material discloses the former's income; validity of such proceedings depends on compliance with statutory preconditions. Precedent Treatment: The Tribunal did not adjudicate on precedent or interpretive issues concerning section 153C because it found the substantive additions unsustainable on merits. Interpretation and reasoning: Having allowed the appeals on merits with respect to the additions under section 69A, the Tribunal held that challenges to the validity of assessment proceedings under section 153C became academic and therefore declined to rule on those jurisdictional grounds. Ratio vs. Obiter: Obiter - the Tribunal expressly refrained from deciding the section 153C jurisdictional questions; this restraint is binding on the outcome of these appeals but does not constitute a precedent on 153C issues. Conclusions: Jurisdictional objections under section 153C were not decided because the Tribunal resolved the appeals by deleting the substantive additions; those grounds were left unadjudicated as academic. ISSUE-WISE DETAILED ANALYSIS - Invocation of section 115BBE and other consequential legal grounds Legal framework: Section 115BBE applies special taxation rules to certain undisclosed income; its applicability depends on whether income is chargeable as undisclosed income in the hands of the assessee. Precedent Treatment: No precedent was applied; the Tribunal did not reach the applicability of section 115BBE. Interpretation and reasoning: Because the Tribunal deleted the additions under section 69A, any consequential invocation of section 115BBE or other legal consequences contingent on sustaining undisclosed income were rendered academic. Ratio vs. Obiter: Obiter - conclusions about non-application of section 115BBE are implicit (because the foundational additions were deleted) but the Tribunal made no express ruling on the provision's applicability. Conclusions: Issues relating to section 115BBE and other consequential legal grounds are not adjudicated and effectively fall away given deletion of the section 69A additions. OVERALL CONCLUSION The Tribunal allowed the appeals on the substantive merits by deleting the additions made under section 69A for both assessment years: in AY 2014-15 the Tribunal deleted Rs. 1,50,000 (holding Rs. 50,000 to be part of the group's disclosed additional income and Rs. 1,00,000 as outside the year) and in AY 2018-19 deleted Rs. 1,00,000 for similar reasons. Consequential and jurisdictional grounds connected to section 153C and section 115BBE were held to be academic and were not adjudicated.