2024 (7) TMI 646 - AT - Income Tax

Unexplained cash credit u/s 69C - diary seized during a search operation contained entries of cash expenses - diary of Shri Rohit Sharma seized from the office of the assessee as belonging to the assessee by applying the presumption u/s 132(4) of the Act - HELD THAT - As search and seizure action in the office of appellant/assessee led to recovery of diary which contained entries of cash payment to vendors. The assessee vide question was issued questionnaire u/s 142(1) of the Act to provide explanation. Appellant/assessee submitted reply and affidavit interalia claiming that the diary found from his office was of Shri Rohit Sharma. The diary mentions expenses incurred on election contested by several candidates of Aam Aadmi Party. Affidavit of Shri Rohit Sharma was also filed. The contents of affidavit especially para No. 6 do not properly explain entries as names of person paying the amount and the expenses paid are vaguely mentioned. Names of relatives of appellant/assessee are also mentioned. Shri Rohit Sharma had stated that only Rs. 10,95,700/- was incurred for promotion of Aam Aadmi Party and many candidates in West Delhi constituency. No supporting document regarding averment was submitted. In absence of specific details and other supporting documents, the affidavit of Shri Rohit Sharma was rightly rejected by the Learned AO and Learned CIT(A). Impugned orders being just, fair and reasonable, deserve to be upheld. Decided against assessee.

Issues:
1. Addition of unexplained cash credit under section 69C of the Income Tax Act, 1961.
2. Ownership of the diary containing cash payment entries.
3. Rebuttal of the presumption under section 132(4) of the Act.
4. Expenditure incurred during the election campaign.
5. Applicability of tax under section 115BBE.
6. Aggregation of duplicate/triplicate entries in the diary.
7. Validity of the impugned orders based on mechanical approval under section 153D.
8. Failure to provide specific details or supporting documents.
9. Rejection of the affidavit of Shri Rohit Sharma by the authorities.
10. Upholding of the impugned orders by the tribunal.

Analysis:

1. The appeal challenged the addition of Rs. 42,98,086 as unexplained cash credit under section 69C of the Income Tax Act, 1961. The diary seized during a search operation contained entries of cash expenses, leading to the conclusion by the Learned AO that the amount was unexplained and added to the total income of the assessee under section 69C. The appellant contended that the diary belonged to a third party, Shri Rohit Sharma, and the presumption under section 132(4) was rebutted by filing affidavits. However, the authorities found the explanations insufficient and upheld the addition.

2. The ownership of the diary was a crucial point of contention. The appellant argued that the diary belonged to Shri Rohit Sharma and contained expenses related to the election campaign of Aam Aadmi Party candidates, not the appellant. Despite providing explanations and affidavits, the authorities did not accept the contentions, leading to the dismissal of the appeal.

3. The appellant further challenged the addition of the unexplained expenditure during the election campaign, stating that the Expenditure Observer appointed by the Election Commission did not dispute the expenses incurred by party workers without the appellant's knowledge. However, the tribunal upheld the decision based on the lack of concrete evidence or specific details to support this claim.

4. Regarding the applicability of tax under section 115BBE, the appellant argued that the additional tax liability was not applicable for the relevant assessment year. However, the authorities did not find merit in this argument, leading to the dismissal of the appeal.

5. The tribunal also considered the aggregation of duplicate/triplicate entries in the diary and the validity of the impugned orders based on mechanical approval under section 153D. The authorities found the explanations provided by the appellant insufficient to support the claims made, leading to the decision to uphold the orders.

6. The rejection of the affidavit of Shri Rohit Sharma by the authorities was a key aspect of the judgment. Despite the appellant's efforts to provide explanations and supporting documents, the tribunal found the affidavit lacking in specific details and supporting evidence, resulting in the dismissal of the appeal.

7. Ultimately, the tribunal upheld the impugned orders, considering them just, fair, and reasonable based on the material facts presented. The tribunal found the grounds of appeal devoid of merit and upheld the decision to dismiss the appeal, concluding the case in favor of the department.

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