2021 (7) TMI 718 - AT - Income Tax

Addition on account of unaccounted commission paid for obtaining accommodation entry - addition u/s. 69C on the presumption that the assessee had paid commission in order to obtain accommodation entries - HELD THAT - When the addition made for obtaining accommodation entries itself is deleted then there cannot be any scope for sustaining the addition made on the presumption that the assessee would have incurred commission expenditure for obtaining such accommodation entries.- we do not have any hesitation to delete the addition made by the Ld. AO on this issue which is omitted to be adjudicated by the Ld. CIT (A). Accordingly, addition made by the Ld. AO on the presumption that the assessee would have incurred commission expenditure for obtaining accommodation entries is hereby deleted. Addition u/s 69B - on-money transaction - assessee company has paid on-money to the sellers of the property and added to the income of the assessee invoking the provisions of section 69B - HELD THAT - We cannot conclusively agree on the finding of the Ld. Revenue Authorities that the assessee has paid on-money to the sellers of the property because the two evidence relied by the Ld. Revenue Authorities viz., the data retrieved from the Pen-drive and the admission by the vendors of the property though may have a persuasive value but will not have much substantive evidentiary value in order to make additions in the hands of the assessee. Therefore, in the interest of justice, we hereby direct the Ld. AO to delete the addition made in the hands of the assessee towards on-money paid for the purchase of the residential property.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of ?95 lakhs towards unaccounted commission.
3. Addition of ?14,09,25,000 invoking the provisions of section 69B of the Act.

Comprehensive, Issue-Wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The assessee filed an appeal with a delay of 03 days due to the COVID-19 pandemic, which resulted in the closure of their office from 23/3/2020 to 8/5/2020 and subsequent operational difficulties. The Tribunal found the reasons for the delay reasonable and condoned the delay in the interest of justice, allowing the appeal to be adjudicated on merits.

2. Addition of ?95 Lakhs Towards Unaccounted Commission:

The assessee challenged the addition of ?95 lakhs made by the Assessing Officer (AO) under section 69C of the Act on the presumption that this amount was paid as commission for obtaining accommodation entries of ?18,60,00,000. The CIT(A) had already deleted the addition of ?18,60,00,000 towards accommodation entries, and the Revenue did not appeal against this deletion. The Tribunal observed that since the primary addition of ?18,60,00,000 was deleted, the related addition of ?95 lakhs for presumed commission expenditure could not stand. Therefore, the Tribunal deleted the addition of ?95 lakhs.

3. Addition of ?14,09,25,000 Invoking the Provisions of Section 69B of the Act:

During a search operation, incriminating materials were found indicating that the assessee paid ?14,09,25,000 in cash for purchasing a residential property, in addition to the documented sale consideration of ?19,40,75,000. The AO added this amount to the assessee's income under section 69B of the Act. The CIT(A) confirmed this addition, citing corroborative evidence from the seller's admission and seized documents.

The assessee argued that the evidence relied upon by the Revenue, primarily data from a Pen-drive, lacked corroborative physical evidence and did not comply with section 65B(4) of the Evidence Act. The Tribunal noted that the Pen-drive data, without proper certification and corroboration, could not be considered conclusive evidence. Additionally, the Tribunal emphasized that statements from third parties (sellers) and unsupported digital data could not substantiate the addition. The Tribunal cited various judicial precedents, including the Supreme Court's ruling in K.P. Varghese vs. ITO, which held that additions based on presumed sale consideration without concrete evidence are not permissible. Consequently, the Tribunal directed the AO to delete the addition of ?14,09,25,000.

Conclusion:

The Tribunal allowed the appeal of the assessee, condoning the delay in filing, deleting the addition of ?95 lakhs towards unaccounted commission, and directing the deletion of ?14,09,25,000 added under section 69B of the Act. The judgment was pronounced considering the extraordinary circumstances due to the COVID-19 pandemic, as per the Tribunal's decision in DCIT vs. JSW Ltd.