2023 (7) TMI 1199 - AT - Income Tax

Addition on the basis of dumb/rough documents seized - Unsecured advances obtained - search and seizure operation u/s 132 - HELD THAT - Addition has been made on the basis of presumptions and assumptions that Shri Mahendra Sethia is engaged in the business of providing accommodation entries of share capital or sale of investment without bringing any corroborative material on record - since the document found during the course of search is not signed by anyone from the assessee company, it is nothing less than a dumb documents which can not be basis of addition alone. The case of the assessee finds support from the several decisions as stated hereinabove. Accordingly on this account the addition cannot be sustained and deserve to be deleted. Addition has been made on the basis of statement of Gopal Agarwal who nowhere named the assessee to be beneficiaries of accommodation entries and also no cross examination was ever provided to the assessee of Mr Gopal Agarwal and therefore as has been held in the case of Andaman Timber Industries 2015 (10) TMI 442 - SUPREME COURT and in case of H R Mehta 2016 (7) TMI 273 - BOMBAY HIGH COURT the addition made with opportunity of cross examination is bad in law. We have also perused the annual audited accounts of the assessee during the year and observe that there has not been any issue of equity share capital or raising of fresh loans. We observe that that whatever little unsecured loans were raised were from the relatives . We direct the AO to delete the addition. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. General Issue (Ground No. 1)
2. Confirmation of Addition of Rs. 2,80,00,000/- based on Seized Documents (Ground Nos. 1 to 6)

Summary:

General Issue:
The issue raised in ground no. 1 is general in nature and does not require any specific adjudication.

Confirmation of Addition of Rs. 2,80,00,000/- based on Seized Documents:
A search and seizure operation was conducted on 13.03.2014 at the premises of M/S CCI Logistics Limited, leading to the seizure of various incriminating materials. The AO observed that the documents revealed the assessee had given cash totaling Rs. 2,80,00,000/- to Gopal Agarwal. The assessee explained that the cash was handed over for safekeeping and was duly recorded in the books of accounts. However, the AO added this amount to the income of the assessee as undisclosed income, citing statements from Gopal Agarwal and Satish Sharma, and the involvement of Mahendra Sethia as an entry operator.

During appellate proceedings, the Ld. CIT(A) dismissed the appeal, stating that the seized document was not a 'dumb document' and the transactions were genuine. The Ld. CIT(A) found the explanation for safekeeping unconvincing and noted that the cash transactions were unaccounted from undisclosed sources.

The Ld. A.R argued that the addition was based on a dumb document and lacked substantive basis. The Ld. A.R referred to various judicial precedents to support the argument that the document could not be the sole basis for addition and that no cross-examination was allowed.

The Tribunal observed that the addition was made on presumptions without corroborative material. The document was unsigned and considered a dumb document. The Tribunal also noted that no cross-examination was provided, making the addition bad in law. The Tribunal set aside the order of the Ld. CIT(A) and directed the AO to delete the addition.

Conclusion:
The appeal of the assessee was allowed, and the addition of Rs. 2,80,00,000/- was deleted. The order was pronounced in the open court on 25th July, 2023.