2018 (9) TMI 2069 - AT - Income Tax

Additions on account of cash payment to the sellers of the land - additions on the basis of documents found and seized during the course of search - Whether CIT(A) has erred in allowing the claim of the assessee merely based on the self serving statements made by the MD of the assessee and its employees also of the sellers? - HELD THAT - As in different seized material different narrations are there. These seized materials does not contain the entries of cash payment. Rather it contains the various payments along with dates. The CIT(A) has compared these dates of payments along with actual date of payment through cheque etc. and he found that the entries found in the seized material do not co-relate with the actual payments recorded in the books of accounts. Moreover the total payment according to the seized material is 22.3 crores against which assessee has explained the total payment through cheque was made at 22.05 crores with regard to which CIT(A) has observed that this figure comes closer to the figure shown in the seized material at 22.3 Crores. During the course of hearing DR could not explain as to how the entries in seized material can be taken into account for making an addition on account of cash payment of 5 Crores to the seller in the light of the fact that the entries found in the seized material do not co-relate with the payments recorded in the books of accounts. As carefully examined the orders of CIT(A) and we find that CIT(A) has made detailed analysis of the entries found in the seized material and the entries recorded in the books of accounts and he has rightly concluded where the entries with regard to payment through cheque do not co-relate with the entries recorded in the books of accounts no cognizance of the entries recorded with regard to the entries relating to cash payment in the seized material can be taken. We therefore are of the view that CIT(A) has rightly adjudicated the issue. No defect has been pointed out by the learned DR. We therefore confirm the order of the CIT(A) deleting the additions in both the years. Addition of interest payment outside the books of accounts - additions on account of cash payment to the sellers of the land and interest payment outside the books - HELD THAT -CIT(A) has deleted the addition on account of interest paid outside the books of accounts and we find that the addition was deleted having noted that the loose sheets on the basis of which inference was drawn by the AO for interest on delayed payments itself is not reliable piece of evidence and the entries found with regard to the payment through cheque do not co-relate with the entries found in the books of account. We therefore are of the view that CIT(A) has rightly examined the issue under the given facts and circumstances of the case and we do not find any infirmity in the order of CIT(A) and we confirm the same. Appeals of the Revenue stands dismissed.

Issues Involved:
1. Disallowance of interest payment of ?1.09 crores.
2. Additions on account of cash payment to the sellers of the land to the tune of ?1.55 crores.
3. Validity of additions based on documents found and seized during the course of search.
4. Reliance on self-serving statements for allowing claims.
5. Contradictions in documents found during the search.
6. Proof of cash withdrawals from bank accounts.
7. Evidence from hard disk data.
8. Spread of undisclosed payment over two assessment years.
9. Overall validity of the CIT(A)'s order.

Detailed Analysis:

1. Disallowance of Interest Payment of ?1.09 Crores:
The CIT(A) deleted the addition of ?1.09 crores made by the AO on account of interest payment outside the books of accounts. The AO based this addition on a loose sheet found during the search, which showed details of interest calculated at 24% per annum due to delayed payments. However, the CIT(A) noted that the loose sheet was merely an estimate and not proof of actual payment. The CIT(A) found no evidence of cash withdrawals from bank accounts to support the AO's claim. The Tribunal upheld the CIT(A)'s decision, stating that the loose sheet alone could not be considered conclusive evidence without corroborative material.

2. Additions on Account of Cash Payment to the Sellers of the Land to the Tune of ?1.55 Crores:
The AO made additions based on seized materials indicating that the assessee paid ?1.55 crores in cash in AY 2010-11 and ?3.45 crores in AY 2011-12. The CIT(A) deleted these additions, concluding that the loose sheets and other documents found during the search did not match the actual cheque transactions recorded in the bank statements. The Tribunal agreed with the CIT(A), noting that the entries in the seized materials did not correlate with the payments recorded in the books of accounts.

3. Validity of Additions Based on Documents Found and Seized During the Course of Search:
The CIT(A) and the Tribunal both found that the documents seized during the search, including loose sheets and email correspondences, were not reliable evidence for making additions. The cheque entries in these documents did not match the actual cheque transactions in the bank statements, casting doubt on the authenticity of the cash entries.

4. Reliance on Self-Serving Statements for Allowing Claims:
The AO criticized the CIT(A) for relying on self-serving statements from the assessee's MD and employees. However, the CIT(A) found these statements consistent with the documentary evidence and bank statements. The Tribunal upheld the CIT(A)'s approach, noting that the AO failed to provide independent evidence to contradict these statements.

5. Contradictions in Documents Found During the Search:
The CIT(A) identified several contradictions in the seized documents. For instance, some documents mentioned cash payments to be made in due course, while others indicated payments already made. The CIT(A) concluded that these inconsistencies undermined the reliability of the documents. The Tribunal agreed, emphasizing the need for corroborative evidence.

6. Proof of Cash Withdrawals from Bank Accounts:
The AO argued that the assessee made cash payments from unaccounted income. However, the CIT(A) found no evidence of cash withdrawals from the assessee's bank accounts to support this claim. The Tribunal upheld this finding, noting that the AO failed to establish a link between the alleged cash payments and the assessee's bank transactions.

7. Evidence from Hard Disk Data:
The AO relied on data from a hard disk seized during the search, which included soft copies of books of account and other details. The CIT(A) and the Tribunal found that this data was not sufficient to prove cash payments, as it contained several inconsistencies and lacked corroborative evidence.

8. Spread of Undisclosed Payment Over Two Assessment Years:
The AO assessed the undisclosed payment over two assessment years based on the seized documents. However, the CIT(A) and the Tribunal found that the documents did not provide a reliable basis for such an assessment, given the inconsistencies and lack of corroborative evidence.

9. Overall Validity of the CIT(A)'s Order:
The Tribunal upheld the CIT(A)'s order, finding that the CIT(A) had conducted a detailed and thorough analysis of the evidence. The Tribunal agreed with the CIT(A) that the seized materials were not reliable evidence for making additions and that the AO's conclusions were based on suspicion rather than concrete evidence.

Conclusion:
The Tribunal dismissed the Revenue's appeals, confirming the CIT(A)'s deletion of additions related to cash payments and interest payments. The Tribunal emphasized the need for corroborative evidence to support additions based on seized materials and found that the AO had failed to provide such evidence.

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