2020 (4) TMI 533 - AT - Income Tax

Undisclosed investments u/s 69 - cash loan given - Addition on the basis of said lose papers seized and statement recorded of the assessee during the course of search - CIT (A) also confirmed the fact that the three unsigned receipts are incriminating documents found in the search and seizure action u/s 132, which shows actual transactions have been taken place - HELD THAT - On going through the entire factual position, we are unable to accept with the observation of the ld. CIT (A) who has confirmed the addition and at the same time accepting the fact that the receipts are unsigned and yet treating them as incriminating documents. Going through the statements of the assessee as well as the counter parties, affidavits, the receipts per se and also the observation of the ld. CIT (A) that the receipts are unsigned, we hereby hold that no addition is called for based on these documents and hence, the addition made by the Assessing Officer on this account is hereby directed to be deleted. - Appeal of the assessee is allowed.

Summary

Issues:
- Addition of undisclosed investments u/s 69 of the Act based on seized documents
- Validity of statements and affidavits during search proceedings
- Acceptance of retracted statements by the authorities
- Treatment of unsigned receipts as incriminating evidence

Analysis:
The case involved an appeal by the assessee against an order confirming the addition of undisclosed investments of ?50 lakhs under section 69 of the Income Tax Act, 1961. The addition was based on loose papers seized during a search at the premises of Prakash Industries, which indicated cash loans given to individuals. The assessee contested the addition, questioning the authenticity of the seized documents and the validity of the statements recorded during the search. The assessee retracted the earlier statement, alleging coercion and denial of the loan transactions. The receipts were found to be undated and unsigned, with the alleged recipients denying any loan transactions. The authorities, however, did not accept the retracted statements and affidavits, treating the unsigned receipts as incriminating evidence.

During the proceedings, the Assessing Officer recorded statements of the alleged recipients, who denied receiving any loans. Affidavits reaffirming their denial were also submitted. Despite this, the CIT (A) upheld the addition, considering the unsigned receipts as conclusive evidence of transactions. The Tribunal, upon review, found that the unsigned receipts and contradictory statements undermined the credibility of the seized documents. The Tribunal held that no addition was warranted based on the available evidence and directed the deletion of the addition made by the Assessing Officer.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the seized documents, retracted statements, and denials by the alleged recipients did not substantiate the addition of undisclosed investments. The Tribunal highlighted the importance of credible evidence in tax assessments and ruled in favor of the assessee based on the lack of conclusive proof supporting the addition.