2016 (9) TMI 1489 - AT - Income Tax

Addition based on loose papers as found at the time of search operation - corroborative and concrete evidence against the assessee - Held that - No search was carried out in the premises of Shri Pukhraj Soni and no loose paper/ hundi/ documents/ promissory note/ cash book or cash flow statement were found or seized, which could prove the movement of cash to & fro between Shri Pukhraj Soni & Shri Nilesh Ajmera with respect to interest and loans. We find that the AO failed to bring on record any corroborative and concrete evidence against the assessee which could prove that the assessee has advanced money to Shri Nilesh Ajmera. The inference of the AO that the assessee has advanced the money is merely based on suspicion, surmises and conjectures and there was no material to support the conclusion of the AO that the assessee has advanced the money. We derive support from the decision in the case of Dhakeshwari Cotton Mill Pvt.Ltd. vs. CIT, 1954 (10) TMI 12 - SUPREME COURT , wherein it was held that while making an assessment there must be something more than the bare suspicion to support the assessment. In another case of K.P. Varghese vs. ITO, 1981 (9) TMI 1 - SUPREME COURT has held that mere seizure of note books of documents at the personal residence of an employee would not conclude the issue against the employer company that the on money has been received by the employer company. The onus of proving the charging of on money lies on the Revenue. - Decided in favour of assessee

Issues Involved:
1. Deletion of addition of ?2,50,00,000/- by CIT(A).
2. Deletion of addition of ?9,37,500/- by CIT(A).
3. Emphasis on nonexistence of corroborative evidence by CIT(A).
4. Insistence on proper evidence in unaccounted transactions.
5. Reliance on denials of involved parties by CIT(A).

Detailed Analysis:

1. Deletion of Addition of ?2,50,00,000/- by CIT(A):
The Revenue challenged the deletion of ?2,50,00,000/- by the CIT(A), which was initially added by the AO based on loose papers found during a search operation. These papers indicated transactions involving the assessee. The CIT(A) relied on a previous decision in the case of Shri Nilesh Ajmera, where it was held that loose sheets cannot be considered books of accounts under Section 68 of the IT Act, and Section 69D was not applicable as no hundi documents were found. The Tribunal upheld this view, noting that the AO failed to provide corroborative evidence to support the addition.

2. Deletion of Addition of ?9,37,500/- by CIT(A):
Similarly, the deletion of ?9,37,500/- by the CIT(A) was contested by the Revenue. This amount represented interest allegedly received by the assessee on the ?2,50,00,000/- advance. The CIT(A) again relied on the decision in the case of Shri Nilesh Ajmera, where it was determined that without corroborative evidence, the addition could not be sustained. The Tribunal found no error in this reasoning and dismissed the Revenue's appeal.

3. Emphasis on Nonexistence of Corroborative Evidence by CIT(A):
The Revenue argued that the CIT(A) erred by emphasizing the lack of corroborative evidence. The Tribunal, however, noted that the AO's reliance on loose papers without additional supporting evidence was insufficient to justify the additions. The Tribunal supported the CIT(A)'s approach, emphasizing the necessity of concrete evidence to substantiate claims of unaccounted transactions.

4. Insistence on Proper Evidence in Unaccounted Transactions:
The Revenue contended that proper evidence should not be insisted upon in cases of unaccounted transactions. The Tribunal disagreed, stating that even in cases of unaccounted transactions, the burden of proof lies with the Revenue to provide substantial evidence. The Tribunal reiterated that mere suspicion or uncorroborated documents cannot form the basis for additions.

5. Reliance on Denials of Involved Parties by CIT(A):
The Revenue criticized the CIT(A) for relying on the denials of the parties involved in the transactions. The Tribunal found that the CIT(A) correctly considered these denials, especially in the absence of any corroborative evidence from the AO. The Tribunal highlighted that the AO's conclusions were based on assumptions rather than concrete proof.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the additions of ?2,50,00,000/- and ?9,37,500/-. The Tribunal emphasized the importance of corroborative evidence and proper documentation in substantiating claims of unaccounted transactions, aligning with previous judicial pronouncements and the principle of consistency. The order was pronounced in open court on September 21, 2016.

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