2020 (12) TMI 653 - AT - Income Tax

Cash payments made by the assessee to employee in M/s. Navaratna Estates - search u/s. 132 conducted - HELD THAT - No evidence was found by the department to establish that assessee has given loans to Shri Lanka Anil Kumar during the course of search and no evidence was found regarding utilization of purported advances by Shri Lanka Anil Kumar. Shri Anil Kumar also subsequently retracted from the statement and clarified that he has not received any cash loans from the assessee. Addition was made merely on the basis of whatsapp messages and the statement recorded from section 132(4) from Shri Lanka Anil Kumar which was subsequently retracted. Therefore we are of the view that the addition made by the AO is unsustainable and the Ld. CIT(A) rightly deleted the addition. Accordingly, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld. The appeal of the revenue on this ground is dismissed. Disallowance of exemption claimed u/s. 10(38) on account of sale of shares of M/s. Tuni Textiles Mills Limited - HELD THAT - DR did not bring any evidence to controvert the submission of the assessee with regard to sale of shares in respect of Tuni Textiles Ltd. No evidence was also brought on record to show that the assessee had received the money over and above the sum - Therefore, the addition made by the AO appeared to be double addition and the same is unwarranted as observed by the Ld. CIT(A) in his corrigendum dated 14.12.2019. We do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld. The appeal of the revenue is dismissed.

Summary

Issues Involved:

1. Addition of ?1,05,00,000/- relating to alleged cash payments by the assessee.
2. Disallowance of exemption claimed under Section 10(38) for ?1,57,76,500/- on account of sale of shares of M/s. Tuni Textiles Mills Limited.
3. General grounds not requiring specific adjudication.

Issue-wise Detailed Analysis:

1. Addition of ?1,05,00,000/- relating to alleged cash payments by the assessee:

A search under Section 132 of the Income Tax Act was conducted at the residential premises of the assessee and Shri Lanka Anil Kumar. During the search, WhatsApp messages on Anil Kumar's mobile phone indicated cash payments allegedly made by the assessee. Anil Kumar's statement under Section 132(4) claimed these messages represented cash loans in lakhs from the assessee. However, the assessee contended that the amounts were for petty cash expenses ranging from ?5,000/- to ?10,000/-. The Assessing Officer (AO) did not accept the assessee's explanation and added ?1,05,00,000/- as undisclosed income.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, noting the absence of corroborative evidence beyond the WhatsApp messages and Anil Kumar's statement. The CIT(A) emphasized that additions based solely on third-party statements without independent evidence are unsustainable. The Tribunal upheld the CIT(A)'s decision, stating the AO failed to provide the assessee an opportunity to cross-examine Anil Kumar and did not produce evidence to support the addition.

2. Disallowance of exemption claimed under Section 10(38) for ?1,57,76,500/- on account of sale of shares of M/s. Tuni Textiles Mills Limited:

The AO disallowed the exemption under Section 10(38) for ?1,57,76,500/- claimed by the assessee, alleging it was a double addition. The assessee argued that the amount was received from the sale of shares of Jaisukh Dealers Limited and not Tuni Textiles Mills Limited. The CIT(A) rectified the error, confirming the assessee's submission and deleting the double addition. The Tribunal upheld the CIT(A)'s corrigendum order, finding no evidence to contradict the assessee's claim regarding the sale of shares of Tuni Textiles Mills Limited.

3. General grounds not requiring specific adjudication:

The Tribunal noted that Ground No. 3 was general in nature and did not require specific adjudication.

Conclusion:

The Tribunal dismissed the revenue's appeal and the assessee's cross objections, upholding the CIT(A)'s orders on both the addition of ?1,05,00,000/- and the disallowance of exemption under Section 10(38). The judgment emphasized the necessity of corroborative evidence for additions based on third-party statements and the importance of rectifying double additions.