2018 (1) TMI 725 - AT - Income Tax

Addition u/s.69C on account of unaccounted expenditure - source of such expenditure or part thereof - Held that - We find that at page nos.30 to 71 of the paper book filed by the assessee is a copy of the said seized diary. Perusal of the same shows that in the seized diary in some of the pages amount is mentioned along with name of certain election publicity items like flags etc., in some places the name of person, date and amount is mentioned and at some places only name of person and amount has been mentioned. From the perusal of the same, it cannot be concluded that the figures mentioned therein were actual financial transactions. It cannot be deciphered therefrom whether the amount mentioned against election material were quotation or actual payment made. Similarly from the name and figure mentioned along with date or without date it is not clear whether the same are actual financial transactions or not and if they are actual financial transactions whether they represent amount received or amount paid by the assessee. Further, we find that the ld.DR could not controvert the finding of CIT(A) that no corroborative material was found during the course of search or even thereafter to show that the figure mentioned in the diary was actual financial transaction.There is no such presumption that the amount mentioned in seized document will be presumed the amount of actual financial transaction. - Decided against revenue

Summary

Issues Involved:
1. Whether the CIT(A) erred in deleting the addition of ?8,06,14,288/- made by the AO under Section 69C of the Income Tax Act, 1961, on account of unaccounted expenditure.

Issue-Wise Detailed Analysis:

1. Addition of ?8,06,14,288/- under Section 69C:
- Facts of the Case: The AO observed during a search and seizure operation under Section 132 of the I.T. Act, 1961, conducted on 23.06.2010, that a diary marked LPS 01/01 was seized from the residence of the assessee. The diary contained entries which the AO interpreted as unaccounted expenditures related to political activities, specifically election expenses. The total of these entries amounted to ?8,06,14,288/-. The AO added this amount to the assessee's income for the assessment year 2009-2010 under Section 69C of the Act, presuming these were unaccounted expenditures.

- Assessee's Argument: The assessee contended that the diary contained rough jottings related to discussions of BJP karyakartas during informal meetings about election estimates and not actual expenditures. The assessee argued that there was no concrete evidence of actual expenditure or that the expenditure was incurred from the assessee's income. Furthermore, the assessee was not a candidate in the election, and the diary did not relate to the assessee's sources of income.

- CIT(A)'s Findings: The CIT(A) deleted the addition, noting that the AO did not provide any corroborative evidence to show that the entries in the diary represented actual financial transactions. The CIT(A) emphasized that the diary did not contain sufficient details to indicate that the notings were actual expenditures. The CIT(A) also highlighted that the AO's assumption was based on probabilities and presumptions without concrete evidence. The CIT(A) concluded that the proximity of the assessee with the political party alone was not sufficient to hold the assessee liable for the alleged expenditures.

- Tribunal's Analysis: The Tribunal reviewed the diary and noted that it contained names, amounts, and dates, but it was not clear whether these were actual financial transactions or merely quotations. The Tribunal emphasized that there was no corroborative material found during the search or thereafter to support the AO's assumption that the figures in the diary represented actual expenditures. The Tribunal also referred to legal precedents, including the Supreme Court's ruling in Central Bureau Of Investigation vs V.C. Shukla & Ors, which held that loose sheets are not admissible as evidence and entries in such sheets are not prima facie evidence. The Tribunal concluded that the presumption under Section 132(4A) does not extend to assuming that the amounts mentioned in seized documents are actual financial transactions.

- Conclusion: The Tribunal upheld the CIT(A)'s order, confirming the deletion of the addition of ?8,06,14,288/- made by the AO under Section 69C. The Tribunal found that the AO's addition was based on assumptions and presumptions without corroborative evidence, and therefore, the grounds of appeal by the Revenue were dismissed.

Judgment:
- The appeal filed by the Revenue was dismissed, and the deletion of the addition of ?8,06,14,288/- by the CIT(A) was upheld. The Tribunal emphasized the lack of concrete evidence and the reliance on presumptions by the AO, which did not justify the addition under Section 69C of the Income Tax Act, 1961.