2023 (4) TMI 397 - HC - Income Tax

Additions made on account of cash payments - Addition based on lose pape - assessee failed to discharge burden of proof - Whether CIT(A) has rightly deleted the said additional by a detailed analysis of the entries found in the seized material and the entries recorded in the books of accounts? - Revenue's specific case is, payment has been made outside the books - HELD THAT - As before arriving at a conclusion, CIT(A) had called for a remand report from the AO and he has noted about the same in his order that in the remand report, the AO had confirmed that he had recorded the sworn statements of Shri.Arun Nayak and Shri.Pradeep Kumar Shenoy under Section 132(4) and 131 of the IT Act and they have not stated anything adverse against the Assessee. Therefore, their statements were not used by AO in scrutiny assessments. According to AO, nothing adverse was stated by him against the Assessee. Above all, it is relevant to notice that the payments through cheques have commenced from 2.5.2006 and ended on 31.5.2013. The e-mail is of the year 2010. In AO's order, the explanation given by Assessee has been recorded and it shows that according to the Assessee, initial sum of ₹5 crores was sought to be paid in cash, but subsequently the same has been paid in cheque. Both CIT(A) and ITAT which are the last fact finding authorities, on examination of the material on record, the remand report submitted by AO and by following the authority in the case of CIT v. Anil Bhalla 2010 (2) TMI 7 - DELHI HIGH COURT have held that the addition made by AO based on lose paper, was not sufficient to make additions. Decided in favour of the Assessee.

Summary

Issues involved:
The issues involved in this case are:
1. Whether the additions made on account of cash payments to a company should be deleted, considering the explanations provided and the seized materials.
2. Whether the addition made under Section 69C of the Act for interest should be deleted based on the reliability of the evidence.
3. Whether the Tribunal's order can be considered as perverse for not properly considering the seized materials.

Issue 1:
The appeal by the Revenue challenged the order passed by the ITAT regarding additions made on account of cash payments to a company. The CIT(A) had deleted the additions after a detailed analysis of the entries found in the seized material and the books of accounts. The Revenue contended that the CIT(A) erroneously deleted the additions without considering all the seized materials. The Tribunal, however, upheld the CIT(A)'s decision.

Issue 2:
The second issue revolved around the addition made under Section 69C of the Act for interest. The assessing authority had made this addition based on certain evidence, which the Tribunal found to be unreliable. The Tribunal concluded that the assessing authority did not provide sufficient evidence to support the addition. The Revenue challenged this decision, arguing that the Tribunal failed to consider the seized materials properly.

Issue 3:
The final issue questioned whether the Tribunal's order was perverse for not adequately considering the seized materials. The Revenue argued that the Tribunal did not give due regard to the seized materials, which, according to them, justified the additions made by the assessing authority. However, both the CIT(A) and the ITAT, as the last fact-finding authorities, found that the additions made by the assessing authority were not supported by enough evidence.

The Hon'ble Judges heard arguments from both sides. The case involved the Assessee filing a return for Assessment Year 2011-12, disclosing a taxable income. Following a search under Section 132 of the Income Tax Act, the assessing officer added certain amounts, which were later deleted by the CIT(A) and upheld by the ITAT.

The arguments presented by the Revenue focused on the discrepancies in the payments made by the Assessee, as reflected in the seized material and the books of accounts. The Revenue contended that the additions made by the assessing officer were justified based on the discrepancies highlighted.

On the other hand, the Assessee's representative emphasized that all payments were made through cheques, as evidenced by the ledger extracts provided. The CIT(A) had meticulously analyzed the case and concluded that the payments were indeed made through cheques. The ITAT also supported this view upon re-examining the evidence.

After careful consideration of the contentions and perusal of the records, the Judges found that the additions made by the assessing officer lacked sufficient evidence. Both the CIT(A) and the ITAT had thoroughly examined the case and concluded that the additions were not justified based on the available evidence.

In conclusion, the appeal was dismissed, and the substantial questions of law were answered in favor of the Assessee and against the Revenue. No costs were awarded in this matter.