TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 639
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....he assessment was completed under section 143(3) of the Act. 2. Condonation of Delay 2.1 The Registry noted delay of 153 days in filing both appeals before us. The assessee filed condonation application. It is seen that the impugned appellate order of the learned CIT(A) is dated 08.09.2023. The assessee has explained that though he became aware of the disposal of the appeals on 15.09.2023 when he visited the Income Tax Portal, he was unable to download the orders due to persistent technical glitches in the system. Grievances were duly filed before DIT-Systems (Grievance Nos. 14757788, 14757814, and others dated 12.09.2023 and 16.09.2023), but the issue remained unresolved. Subsequently, the assessee made formal written applications to the office of the CIT(A)-12, Ahmedabad, vide letters dated 02.12.2023 and 06.02.2024, requesting certified copies of the orders. As per the email communication dated 08.02.2024, the order was finally received by the assessee via email from the CIT(A)'s office on that date. The assessee has mentioned this as the date of receipt in Form 36. The present appeals were filed on 08.04.2024, i.e., within 60 days from the date of actual receipt. 2.2 The exp....
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....6, again declaring income of Rs. 1,62,04,810/-. For A.Y. 2016-17, notice under section 143(2) was issued on 04.08.2017, treating the original return filed under section 139(1) as return in response to proceedings under section 153A. 3.3 During the assessment proceedings, the Assessing Officer issued notices under sections 143(2) and 142(1) along with a detailed questionnaire calling for explanation on the entries made in the seized diary. The assessee furnished written submissions and explanations along with cash book entries. The explanation of the assessee was that the diary did not reflect actual unaccounted transactions, and some of the entries were either duplicative or already recorded in the regular books. 3.4 The Assessing Officer, however, observed that certain entries in the diary relating to payments for furniture, fittings, materials, and labour were not supported by corresponding entries in the books of account. It was further noted that several payments were made in cash and not verifiable through disclosed sources. Based on the analysis of diary entries, the AO concluded that a sum of Rs. 20,10,886/- represented unexplained expenditure incurred by the assessee towa....
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.... reiterated the factual matrix of the case and submitted that the addition made by the Assessing Officer on account of unexplained expenditure towards renovation of the residential house is wholly unjustified, being based solely on uncorroborated loose notings found in a diary seized during search, marked as Annexure-BS/2. It was submitted that the said diary comprises assorted notings of varying nature, including estimates for proposed renovation works, projected expenditure, and some actual payment details, many of which had not crystallised into final payments. The AR emphasized that the mere presence of handwritten estimates or remarks in such a diary, without any supporting material or corroborative evidence, cannot constitute valid basis for making addition under section 69C or otherwise, particularly when the assessee had maintained regular books of account and has offered a plausible explanation with supporting documents. 5.1 The AR submitted that during the assessment proceedings, the assessee placed on record complete documentary evidences to explain the renovation expenditure, including (i) cash book [P/B pgs. 236-269], (ii) cash flow statement [P/B pgs. 133-134], (iii)....
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....the Assessing Officer and submitted that the addition of Rs. 20,10,886/- on account of unexplained expenditure was duly justified in light of the material found during the course of search proceedings. With respect to the assessee's reliance on the valuation report of the registered valuer estimating the cost of renovation at Rs. 26,66,000/-, the DR drew our attention towards para 6.1 of the order of CIT(A) and contended that such a report was an afterthought, obtained much later during the assessment proceedings and lacks evidentiary value in light of the contemporaneous and spontaneous nature of the seized diary entries. The DR emphasized that the valuation report is inherently subjective and cannot displace the concrete notings found in the diary, which directly evidences the actual payments made. 7. We have carefully perused the assessment order, the seized material marked as Annexure BS/2, the tabulated analysis appearing at para 4 of the order of Assessing officer, the valuation report filed by the assessee, and the respective orders of the Assessing Officer and the ld. CIT(A). We have also considered the contentions of the assessee's AR and the DR. 7.1 The material fac....
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....e explanation supported by a professional valuer's report. The CIT(A) further noted that the AO had not summoned or examined any of the parties mentioned in the diary, no investigation was carried out to verify the actual expenditure, negative balances were mechanically ignored, part of the renovation expenditure could be reasonably considered explained through the valuation report and accounted payments. 7.5 The Ld. CIT(A) observed that while the assessee challenged the notings in the seized diary (Annexure BS/2) as being estimates or non-contemporaneous, in his rebuttals he had also accepted the correctness of some entries. The CIT(A) therefore held that all entries could not be dismissed outright as mere estimates. The Ld. CIT(A) concluded that the diary entries appeared to be real and contemporaneous, having been maintained during the renovation activity. Therefore, he did not entirely accept the assessee's plea that they were merely speculative jottings. He noted that mere denials by the assessee or confirmations filed without adequate verification were not sufficient to displace the evidentiary value of seized materials. 7.6 Based on the above considerations, the CIT(A)....
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....rigid, especially when the assessee sought to explain the recorded expenditure based on contemporaneous civil rates and activity-wise cost estimation. Even if not admissible under Rule 46A, the CIT(A) could have considered the report as an indicative corroborative aid. Notably, the CIT(A) failed to conduct independent verification or enquiry under section 131/133(6), which could have provided further clarity on the nature and extent of work and expenditure. 7.9 Thus, the CIT(A)'s reasoning for sustaining only Rs. 6,00,000/- (AY 2015-16) and Rs. 1,00,000/- (AY 2016-17) is grounded in a partial acceptance of diary entries, coupled with denial of full reliance due to lack of corroborative documentary evidence and partial admission by assessee. The rejection of the valuer's report is based on procedural non-compliance and perceived lack of reliability in retrospectively estimated figures. However, even if the valuation report dated 12.06.2019 is excluded from the scope of Rule 46A, it still serves as an indicative benchmark to test the reasonableness of the overall renovation cost vis-à-vis the diary entries and accounted payments. Upon comprehensive examination of the record,....
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....ents a logically defensible threshold lower than the CIT(A)'s ad-hoc additions (which is approximately 30% of unaccounted expenses) estimate on account of the following: * The valuation report filed by the assessee estimated the total cost at Rs. 26.66 lakh, which is less than the accounted payment of Rs. 36.19 lakh, suggesting no inflation or suppression prima facie; * Substantial confirmations from vendors and cash/bank books were placed on record during appellate proceedings; * There was no attempt by the AO to cross-verify diary entries or to summon any of the parties named therein; * The seized diary, though contemporaneous, contained several entries without exact date linkage, leading to ambiguity in year-wise allocation; * Negative balances in the AO's table (indicating excess or duplicate payments) were ignored, potentially leading to overestimation. Therefore, by applying a 25% calibrated adjustment, we derive a singular addition figure of Rs. 4,65,000/-, to be taxed substantively in A.Y. 2015-16, considering that most entries pertain to that period, with no separate addition warranted for A.Y. 2016-17. 7.13 By applying this calibrated percentage, we ensure....