2021 (1) TMI 905 - AT - Income Tax

Addition on account of alleged cash payment out of undisclosed income - Addition based on entries in the diary found in search - HELD THAT - No question was asked from the assessee regarding these transactions as part of his statement recorded u/s 132(4) - During the assessment proceedings, the assessee was asked to explain the said entries and the assessee explained that the said entries were not in his handwriting and were made by his son, Shri Jitendra Yadav and an affidavit of Shri Jitendra Yadav was also filed where he has owned up the entries and the transactions so reflected therein as made by him relating to family transaction and expenses. Revenue has not brought any evidence or finding disputing the contents of the said affidavit and the same thus remain unrebutted before us - where Shri Jitendra Yadav has owned up the entries and the transactions, the assessee has successfully discharged the onus cast on him and the presumption u/s 132(4A) cannot be drawn against him. In the result, there is no basis for impugned addition in the hands of the assessee and the same is hereby directed to be deleted. In the result, the appeal of the assessee is allowed. Addition u/s 69A - Addition based on assessee's statement recorded u/s 132(4) - THAT - Except at one place where savings have been written against the amount of ₹ 876,197, there is no mention of any particulars in terms of nature of transactions, parties with whom the transactions were undertaken, the date of such transactions, etc. Even the AO in the assessment order at para 5 of his order has stated that it appears to be payment received in cash by the assessee . Even there is no question which has been raised to the assessee as part of his statement recorded u/s 132(4) - where the AO himself is not clear about the nature of transaction which is the very foundation for determination of taxability of such transaction, the tax liability on such transaction cannot be fastened on the assessee. At the same time, the document so found reveal some work done by the assessee and given that the assessee is in the diary business, the net savings so determined can reasonably be related to the diary business already disclosed in the return of income in absence of any finding or corroboration relating to any other source of income. In the result, there is no basis for impugned addition in the hands of the assessee and the same is hereby directed to be deleted. In the result, the appeal of the assessee is allowed.

Issues Involved:

1. Legality of the assessment order passed under Section 143(3) read with Section 153A of the Income Tax Act.
2. Addition on account of alleged cash payment out of undisclosed income.
3. Addition on account of alleged unexplained money under Section 69A of the Income Tax Act.

Detailed Analysis:

1. Legality of the Assessment Order:

The assessee contested the validity of the assessment order passed under Section 143(3) read with Section 153A of the Income Tax Act, claiming it to be bad in law as well as on facts. However, during the hearing, the assessee chose not to press this ground of appeal. Consequently, this ground was dismissed as not pressed.

2. Addition on Account of Alleged Cash Payment:

In ITA No. 1000/JP/2019 for A.Y 2014-15, the assessee challenged the addition of ?235,000 made by the Assessing Officer (AO) on the basis of entries found in a seized diary (Exhibit No. 2, pages 20-21). The assessee argued that the entries were not in his handwriting and were made by his son, Shri Jitendra Yadav, who also submitted an affidavit owning up the entries. The AO and the Commissioner of Income Tax (Appeals) [CIT(A)] ignored this explanation and sustained the addition.

The Tribunal noted that the Revenue did not dispute the contents of the affidavit submitted by Shri Jitendra Yadav. Since the son had owned up the entries and transactions, the assessee successfully discharged the onus cast on him, and the presumption under Section 132(4A) could not be drawn against him. Therefore, the Tribunal directed the deletion of the impugned addition, allowing the assessee's appeal.

3. Addition on Account of Alleged Unexplained Money:

In ITA No. 1001/JP/2019 for A.Y 2017-18, the assessee contested the addition of ?876,197 made by the AO under Section 69A of the Income Tax Act, based on a loose paper (page 15 of Exhibit No. 2) found during the search, which mentioned "savings" of ?876,197. The assessee argued that the document was a "dumb document" with no date, period, or corroborative evidence linking it to unexplained money.

The Tribunal examined the provisions of Section 69A and noted that it applies only when the assessee is found to be the owner of any unexplained money, bullion, jewelry, or valuable article. In this case, no such physical finding was made. The Tribunal also observed that the document lacked details about the nature of transactions, parties involved, and dates. The AO himself was not clear about the nature of the transaction, stating it "appears to be payment received in cash by the assessee."

Given the lack of clarity and corroborative evidence, the Tribunal concluded that the addition under Section 69A was not justified. The document seemed related to the diary business already disclosed by the assessee. Therefore, the Tribunal directed the deletion of the impugned addition, allowing the assessee's appeal.

Conclusion:

Both appeals filed by the assessee were allowed, resulting in the deletion of the additions made by the AO. The Tribunal emphasized the importance of clear evidence and proper inquiry before making additions based on seized documents.

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