2023 (7) TMI 1277 - AT - Income Tax

Addition u/s 69A or 69C - WhatsApp documents relied upon - no entry about the interest component in the books of assessee - HELD THAT - There is no rebuttal of the finding of the AO that there is no entry about the interest component in the books of assessee. When this document was sent by one K.V. Rao Director of assessee acknowledged the same. Further as rightly pointed out by the CIT(A) the details to be found in this WhatsApp document tallies with the dates of borrowings as admitted by the assessee in its books of accounts. We therefore are of the considered opinion that undoubtedly this is an incriminatory material and it is not open for the assessee to challenge the reliance of Revenue on this document without explaining the existence of contents of the document. Quantum of addition - when the document itself reads that the payment of interest was only Rs. 1 crore and the balance of Rs. 1, 62, 85, 178/- was clearly shown therein Revenue may accept or reject the document as a whole. They cannot say that this document proves the charging of interest and its rate but ignore the payment of Rs. 1 crore alone. Revenue is accepting the rate of interest and charging thereof but they are not accepting the quantum of payment. It is impermissible. Revenue has to accept or reject the documents as a whole. Since we are of the considered opinion that this document cannot be thrown away without consideration we accept the same as a whole and reach a conclusion that the assessee paid interest only in part to the tune of Rs. 1 crore and the balance of liability is Rs. 1, 62, 85, 178/-. With that view of the matter we sustain the addition only to the tune of Rs. 1 crore which is an interest expense not to be found in the books and direct the learned Assessing Officer to delete the balance. Appeal of the assessee is partly allowed.

Summary

Issues involved:
The issues involved in this case are the application of sections 69A and 69C of the Income Tax Act, 1961 to determine the tax liability of the assessee based on unexplained expenditure, specifically related to interest payments on a loan.

Details of the Judgment:

Issue 1: Application of Section 69A of the Act
- The assessee filed its return of income for the assessment year 2019-20, declaring total income.
- A search and seizure operation was conducted, revealing loan transactions details with interest.
- The Assessing Officer added the interest amount to the income returned by the assessee under section 69A of the Act.
- The assessee contended that the addition was based on presumptions and loose sheets, challenging the Assessing Officer's action.
- The CIT(A) upheld the addition under section 69C instead of 69A, citing precedents to justify the decision.
- The assessee appealed, disputing the findings and asserting that the provisions of section 69A or 69C did not apply to the case.

Issue 2: Interpretation of WhatsApp Document
- The WhatsApp document showed interest expenses of Rs. 2,62,85,178, with a partial payment of Rs. 1 crore.
- The Assessing Officer noted the absence of interest entries in the assessee's books, relying on the WhatsApp document.
- The Tribunal considered the document as crucial evidence, matching the dates of borrowings in the assessee's accounts.
- The Tribunal concluded that the assessee paid only a portion of the interest, sustaining an addition of Rs. 1 crore while directing deletion of the balance.

Conclusion:
The Tribunal partially allowed the appeal, accepting the WhatsApp document as evidence of interest payment and directing the deletion of the excess amount added to the assessee's income. The decision clarified the application of sections 69A and 69C in determining the tax liability based on unexplained expenditure related to interest payments on a loan.

This summary provides a detailed overview of the judgment, highlighting the key issues, arguments presented, and the Tribunal's decision regarding the application of relevant sections of the Income Tax Act.