2022 (6) TMI 64 - AT - Income Tax

Unexplained cash payments made outside the books - Reliance on seized material found during the course of section 133A - HELD THAT - We note that the able assistance coming from the revenue side that this disallowance/addition is very much based on the seized material found during the course of section 133A survey exercise dated 7 8.11.2012. There could hardly be only dispute that such seized documents very much carry presumption of correctness regarding contents therein as per section 292C of the Act. We further find that the assessee could not reconcile the impugned addition figures in its regular books before the learned lower authorities. We thus conclude in this factual backdrop that the impugned addition of Rs. 1,75,27,892/- has been rightly made in both the lower proceedings. The same stands upheld. Ad-hoc addition of Rs. 7,00,000/- - HELD THAT - Revenue could hardly rebut the fact that the CIT(A) has nowhere adjudicated the same in his order under challenged. We thus restore the assessee's instant latter substantive ground back to the CIT(A) for his detailed adjudication as per section 250(6) of the Act as per within three effective opportunities of hearing. Ordered accordingly.

Summary

Issues Involved:
1. Disallowance of unexplained cash payments made outside the books
2. Ad-hoc addition of Rs. 7,00,000

Issue 1: Disallowance of unexplained cash payments made outside the books

The appellant challenged the correctness of the lower authorities' action of adding a disallowance of Rs. 1,75,27,892 as unexplained cash payments made outside the books. The CIT(A) upheld the AO's action based on the findings during a survey, where loose papers indicated cash expenditures not recorded in the books. The appellant claimed that these payments were sourced from bank withdrawals, but discrepancies in dates and amounts led to the rejection of this explanation. The loose papers' examination revealed discrepancies, with one paper showing a total of Rs. 62,00,000, while the actual total was Rs. 1,88,50,000. The appellant's explanations were found factually incorrect, with cash outflows not reflected in the cash book. The Tribunal concluded that the appellant failed to reconcile the impugned addition figures in the regular books, upholding the Rs. 1,75,27,892 addition.

Issue 2: Ad-hoc addition of Rs. 7,00,000

The second substantive ground of ad-hoc addition of Rs. 7,00,000 was raised by the appellant, but the CIT(A) did not address this in the order. The Tribunal noted that the Revenue did not rebut this fact and ordered the restoration of this ground back to the CIT(A) for detailed adjudication. The appellant's appeal was partly allowed for statistical purposes, with the second substantive ground remanded to the CIT(A) for further consideration within three effective opportunities of hearing.

In conclusion, the Tribunal upheld the disallowance of unexplained cash payments made outside the books amounting to Rs. 1,75,27,892, while ordering a review of the ad-hoc addition of Rs. 7,00,000. The judgment highlighted the importance of reconciling seized material with regular books and ensuring detailed adjudication of all substantive grounds raised during the appellate proceedings.