2016 (12) TMI 1244 - AT - Income Tax

Addition on account of alleged unexplained expenditure under section 69C - Held that - In this entire assessment order, the AO himself has pointed out time and again different persons, who are alleged, to have made cash payments. Even on that count, the additions cannot be sustained in the hands of the assessee. In our considerate view, there being no evidence to support the Revenue s case that a huge figure, whatever be its quantum , over and above the figure booked in the records and accounts changed hands between the parties, no addition could therefore be made u/s. 69C of the Act to the income of the assessee. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of initiation of proceedings under Section 153C.
2. Legitimacy of invoking provisions of Section 153C.
3. Confirmation of addition on account of alleged unexplained expenditure under Section 69C.
4. Consideration of new evidence by CIT(A).
5. Reliance on the decision of the Delhi High Court in the case of Malik Bros (P) Ltd vs CIT.
6. Reliance on the order of Hita Land Private Limited.
7. Charge of interest under Sections 234B and 234C.

Detailed Analysis:

1. Validity of Initiation of Proceedings under Section 153C:
The appellant contended that the initiation of proceedings under Section 153C was invalid as no assessment or re-assessment proceedings were pending as on the date of the search under Section 132. However, this ground was not pressed by the appellant and was therefore dismissed.

2. Legitimacy of Invoking Provisions of Section 153C:
The appellant argued that invoking the provisions of Section 153C was bad-in-law due to the absence of any seized items (money, bullion, jewellery, valuable articles, books of account, or documents) belonging to the appellant that disclosed unaccounted expenditure. This ground was also not pressed and dismissed.

3. Confirmation of Addition on Account of Alleged Unexplained Expenditure under Section 69C:
The primary issue was the confirmation of an addition of ?2,82,000 as unexplained expenditure under Section 69C. The appellant's business involved the purchase and development of land. A search and seizure action revealed cash transactions of ?2,82,000 linked to the appellant. The AO treated this amount as unexplained expenditure based on incriminating materials seized. The appellant argued that the statement recorded during the search was coerced and later retracted, and that no concrete evidence supported the addition. The Tribunal found that the issue was covered by a previous decision in the case of M/s Avkash Land Reality Pvt Ltd, where similar additions were deleted due to lack of corroborative evidence. Consequently, the Tribunal directed the AO to delete the addition of ?2,82,000.

4. Consideration of New Evidence by CIT(A):
The appellant contended that CIT(A) erred in considering new evidence from Pathik Construction and Sh. Sunil Gulati, which had no connection to the appellant. The Tribunal did not specifically address this issue separately, but it was impliedly resolved in favor of the appellant by setting aside the addition.

5. Reliance on the Decision of the Delhi High Court in the Case of Malik Bros (P) Ltd vs CIT:
The CIT(A) relied on the Delhi High Court decision in Malik Bros (P) Ltd vs CIT, which the appellant argued was inapplicable as no landowners confirmed cash payments. The Tribunal found that the addition could not be justified without corroborative evidence, thus implicitly rejecting the reliance on the Malik Bros case.

6. Reliance on the Order of Hita Land Private Limited:
The appellant argued that CIT(A) erred in relying on an order that was quashed by the ITAT. The Tribunal's decision to delete the addition implicitly addressed this concern, indicating that reliance on the quashed order was inappropriate.

7. Charge of Interest under Sections 234B and 234C:
The appellant contested the charge of interest under Sections 234B and 234C. The Tribunal did not specifically address this issue, but the overall decision to allow the appeal partly suggests that the interest charges may also be reconsidered.

Conclusion:
The Tribunal set aside the order of CIT(A) and directed the AO to delete the addition of ?2,82,000 under Section 69C, thus partly allowing the appeals filed by the assessees. The decision was based on the lack of concrete evidence supporting the addition and was aligned with a previous Tribunal decision in a similar case. The appeals were allowed, and the order was pronounced in the open court on 27th Oct, 2016.