2022 (3) TMI 342 - AT - Income Tax

Assessment u/s 153A - Addition based on jottings in rough sheets found in search - unaccounted payment of brokerage for Goregaon Property, investment in cash for Pune Property, unaccounted interest paid in cash to various parties, unaccounted interest paid in cash by Shivalik ventures Pvt. Ltd. and unaccounted payment in cash towards Ladiwala Chawl - HELD THAT - In the present case although Late Jitendra Mehta has made disclosure in his statement dated 26/27th July 2011 recorded u/s 132(4) on being questioned about the various allegations but from the record we do not find any evidence that the Late Jitendra Mehta had entered into a transaction for sale of Bhoslewadi property. No material on record in support of the allegation that the investment towards the property in Goregaon, Pune and Ladiwala Chawl were made by the assessee Late Jitendra Mehta. It is brought to our notice that at the time of filing the return of income in response to notices issued u/s 153A the assessee / legal heir realized that assessee is not associated with any of the projects viz. Bhoslewadi, Goregaon, Pune and Ladiwala Chawl in his individual capacity. Even during the course of recording of the Statement the assessee clarified that no cash interest was paid to the lenders who had advanced loans to various concerns of Rohan Group. When the jottings in rough sheets are not in themselves capable of expressing or describing the essence of the transaction the way AO has deciphered them especially without corroborative evidence of parties attributed to the transaction, and when there is no material to show nexus between the assessee herein and the alleged transactions, no addition to the income can be justifiably made. In other words, it is held that no addition can be made when there is nothing to establish that such payments as alleged have been received or expended. No enquiry in this direction is seen made by the Assessing Officer. We accordingly hold that the impugned addition of on-money payment and receipts made in assessee s case is on the basis of a mere dumb document and not corroborated by any other evidence and thus, not sustainable. The additions made on the basis of uncorroborated noting and scribbling on loose sheets is accordingly unsustainable and is therefore directed to be deleted. On the basis of the above considered findings, the addition made in respect of each year is dealt accordingly in the ensuing paragraphs. Unaccounted cash expenses - We find that assessee was a director in the company engaged in the business of construction activity and he lived with his family in South Mumbai. Considering the number of family members viz., 7-8 and considering the standard of living of the assessee, the expenses of ₹.65,000/- can be considered as reasonable expenditure for meeting the household expenses and thus, in our view the noting found on the seized material pertaining to cash expenses are duly explained by the assessee and thus, the addition made by the Assessing Officer is not sustainable and is directed to be deleted. Accordingly, ground no. 2 is allowed. Addition made on account of negative peak undisclosed income - The said negative peak was arrived at by the assessee after considering the impact of various seized materials as discussed above. The assessee in its statement recorded u/s 132(4) made such disclosure on account of negative peak and undisclosed income. However, while filing its return of income u/s 153A, the said amount was not offered for taxation. Hence, Assessing Officer made this addition on account of negative peak and undisclosed income. The said addition is directed to be deleted. Addition on account of alleged cash interest. Shri Samir Shah, finance broker of Rohan Group was also searched along with the Rohan group - The statement of the person who is creator of the document is crucial to understand the nature of transaction emanating from the said document. In the present case, Samir Shah has himself admitted that the amounts appearing in the said seized material are merely rough workings of interest prepared by him in order to present before his clients. Further, it has been brought to our notice that the Assessing Officer of Samir Shah, in his remand report, has also admitted the amounts mentioned in the seized page as rough workings. It is also observed that none of the lenders have admitted that any cash interest has been received by them. All these documents/statements support the contention of the assessee that the entries mentioned on the seized pages are merely tentative workings of additional interest and there is nothing on record to hold that such workings had materialized and cash payment of interest was actually made. Under the circumstances we are unable to sustain the addition as made. We accordingly direct that the addition made by the Assessing Officer in respect of alleged cash payment of interest be deleted.

Issues Involved:
1. Addition of undisclosed income based on seized documents.
2. Confirmation of additions by the CIT(A).
3. Admission of undisclosed income by the assessee.
4. Negative peak and unaccounted receipts.
5. Alleged cash interest payments.
6. Unaccounted cash expenses.

Issue-wise Detailed Analysis:

1. Addition of Undisclosed Income Based on Seized Documents:
The core of the dispute is the addition of undisclosed income based on loose papers seized during a search and seizure action. The Assessing Officer (AO) made additions based on these documents and statements recorded under section 132(4) of the Income Tax Act, 1961. The AO treated the amounts noted in the seized documents as unaccounted receipts and payments, leading to significant additions to the assessee's income for various assessment years. However, the Tribunal observed that the seized documents were rough notings without any corroborative evidence linking them to actual transactions. The Tribunal emphasized that mere notings on loose sheets, without independent evidence, do not justify additions.

2. Confirmation of Additions by the CIT(A):
The CIT(A) confirmed the additions made by the AO based on the seized documents and the statement of the assessee. The Tribunal, however, found that the CIT(A) erred in confirming these additions without any independent corroborative evidence. The Tribunal highlighted that the presumption under section 132(4A) and section 292C of the Act is rebuttable and not conclusive. The Tribunal noted that the Revenue did not conduct any independent enquiry to substantiate the additions, making the CIT(A)'s confirmation unsustainable.

3. Admission of Undisclosed Income by the Assessee:
The Tribunal scrutinized the statement of the late Shri Jitendra Mehta, who admitted undisclosed income during the search. The Tribunal observed that the admission was conditional and made to buy peace of mind and avoid litigation. The Tribunal stressed that such admissions are not conclusive and can be retracted or modified. The Tribunal cited several judicial precedents to support the view that admissions made under duress or without corroborative evidence cannot be the sole basis for additions.

4. Negative Peak and Unaccounted Receipts:
For various assessment years, the AO made additions based on the concept of negative peak and unaccounted receipts. The Tribunal found that the AO failed to provide any independent evidence to support these additions. The Tribunal noted that the assessee had retracted from the initial admission and clarified that the transactions noted in the seized documents never materialized. The Tribunal directed the deletion of additions related to negative peak and unaccounted receipts, emphasizing the lack of corroborative evidence.

5. Alleged Cash Interest Payments:
The AO made substantial additions based on seized documents indicating alleged cash interest payments to various lenders. The Tribunal examined the statements of the finance broker, Samir Shah, who admitted that the notings were rough workings and not actual transactions. The Tribunal found that the AO ignored this crucial part of the statement. The Tribunal also considered the remand report and statements of lender parties, which corroborated the assessee's contention that no cash interest was paid. The Tribunal directed the deletion of additions related to alleged cash interest payments.

6. Unaccounted Cash Expenses:
The AO made additions for unaccounted cash expenses based on seized documents. The Tribunal found that the notings on the seized documents were rough and did not provide any clear evidence of actual transactions. The Tribunal considered the standard of living and the number of family members of the assessee, concluding that the noted expenses were reasonable household expenses. The Tribunal directed the deletion of additions related to unaccounted cash expenses.

Conclusion:
The Tribunal allowed the appeals filed by the assessee for all assessment years, directing the deletion of additions made by the AO and confirmed by the CIT(A). The Tribunal emphasized the necessity of independent corroborative evidence to justify additions based on seized documents and statements, and highlighted the principles of law regarding admissions and the presumption under section 132(4A) and section 292C of the Income Tax Act, 1961.

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