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2024 (7) TMI 703 - AT - Income TaxAssessment u/s 153C - addition u/s 69A - Undisclosed cash transaction from undisclosed sources - entries pertaining to the assessee firm based on the excel sheets found in the electronic devices seized during the course of search in the case of Christy group of companies - assessee has challenged additions made by the Assessing Officer towards alleged cash transactions not recorded in the books of accounts of the assessee, on the basis of seized excel sheets u/s. 69A. HELD THAT - In order to impart life and evidentiary value to the alleged excel sheets there must be statement recorded pertaining to those transactions from the person who is having control over the electronic devices and also from the searched person and these statements should be confronted to the appellant firm for getting sanctity that these transactions had actually being taken place. However, no such exercise has been carried out by the AO before making additions u/s. 69A of the Act. Further, the appellant firm has denied that there are any transactions outside the books of accounts. Therefore, once the appellant firm has denied the transaction outside the books of accounts, the AO has to prove with evidence that alleged cash transactions recorded in excel sheets were belongs to the assessee. However, no such effort was made by the investigation department and the AO. As in Shadi Ram Ganga Prasad, SP Kanodia and Smt. Premlatha Kanodia 2010 (4) TMI 1199 - ALLAHABAD HIGH COURT where it has been held that the loose papers found from the possession of a person during the search can be used to raise a presumption against the said person only - the said loose sheets cannot be held against the parties whose names appear therein, unless the person from whose possession it was recovered admits in his statement that the entries in the loose sheet relate to the transaction made by such parties. As no efforts were made by the department to establish the nexus of the assessee with the undated and unsigned printout found during the search and to corroborate the contents of the said printout to arrive at a definite conclusion that the assessee derives such alleged income. Entries of the loose papers which were seized were not corroborated with any other evidence on record and no enquiry or verification was made and thus, no additions can be made u/s. 69A - See Umesh Israni 2019 (4) TMI 1947 - BOMBAY HIGH COURT Decided in favour of assessee. Revenue has taken a ground in light of alleged two set of accounts maintained Tally1 and Tally 2 by the assessee group and argued that, the appellant is in the practice of replacing the invoices not checked by any Government authorities in the accounted Tally - In our considered view the ground taken by the revenue is devoid of merits, because the AO neither considered so called Tally1 and Tally 2, nor made any additions based on said evidences in the assessment order in respect of additions made u/s. 69A of the Act. Therefore, in our considered view the ground of appeal taken by the revenue fails. Appending two zeros to value recorded in alleged excel sheets, the AO has added two zeros to values recorded to excel sheets for assessment year 2018-19 2019-20 only - When the bank entries is matching with the books of accounts of the assessee without appending two zeros, the question of appending two zeros to cash entries alone is totally incorrect. Since, the payment through bank noted in seized excel sheets are matching with the corresponding entries found in the bank statement without need to append two zeros, it is considered that the payments through cash found noted in the same excel sheet cannot be construed by adding two zeros to the said amounts. If the payments through cash alone are considered by adding two zeros and the payment through bank are considered in the manner in which they appear in the excel sheets, the totals of the payments column and the receipts column will be grossly different from the total mentioned in the excel sheet. It is therefore clearly evident that, all the amounts mentioned in the excel sheets, regardless of whether they are cash transactions or bank transactions are the actual amounts without suppression of two zeros at the end. Therefore, we are of the considered view that the AO is erred in appending two zeros to the cash transactions appearing in the seized excel sheets and same is untenable. Undisclosed cash transactions - Since, the cash payments are made out of cash receipts to the extent of the available cash receipts, aggregating the cash receipts as well as cash payments for determining the undisclosed income results in exaggerated amount of such income. It is further noted that, when the AO is not able to identify the nature of cash receipts or payments then the best is to net off the cash receipts against the cash payments to arrive at undisclosed income. Therefore, findings of the facts recorded by the ld. CIT(A) with regard to the manner of computing undisclosed income appears to be reasonable and acceptable. Thus additions made by the AO u/s. 69A of the Act towards alleged cash transactions recorded in excel sheets found during the course of search proceedings of Christy Group in the premises of Shri. P. Karthikeyan, without there being any corroborative evidence is unsustainable in law. The ld. CIT(A), after considering relevant facts has rightly deleted additions made by the AO - Decided in favour of assessee.
Issues Involved:
1. Legality of additions made under Section 69A of the Income-tax Act, 1961 based on excel sheets found in the possession of a third party. 2. Evidentiary value and corroboration of entries in seized excel sheets. 3. Presumption under Section 132(4A)/292C of the Income-tax Act, 1961. 4. Methodology of appending two zeros to the values recorded in excel sheets. 5. Aggregation of cash receipts and payments for determining undisclosed income. Issue-wise Detailed Analysis: 1. Legality of Additions under Section 69A Based on Excel Sheets Found in the Possession of a Third Party: The judgment addresses the legality of additions made by the Assessing Officer (AO) under Section 69A of the Income-tax Act, 1961 based on excel sheets found in the possession of an employee of Christy group of companies. The Tribunal held that no additions can be made under Section 69A based on documents found in the possession of a third party without examining the contents of said documents from the person from whom they were found, and without confronting those documents to the assessee and its partners. The Tribunal emphasized that the excel sheets did not constitute adequate evidence to draw adverse inferences against the assessee in the absence of any corroborative evidence. 2. Evidentiary Value and Corroboration of Entries in Seized Excel Sheets: The Tribunal noted that the excel sheets found in the possession of a third party did not have evidentiary value since they were not found in the premises of the assessee. The Tribunal observed that no corroborative evidence like cash receipts, unaccounted purchase bills, or sale bills were found to substantiate the entries in the excel sheets. The Tribunal further noted that the AO did not reference any statements recorded under Section 132(4) of the Act to corroborate the entries in the excel sheets. Consequently, the Tribunal found that the additions made by the AO were unsustainable in law. 3. Presumption under Section 132(4A)/292C of the Income-tax Act, 1961: The Tribunal held that the presumption under Section 132(4A)/292C of the Act is applicable only when documents are found in the possession of the assessee. Since the documents in question were found in the possession of a third party, the presumption that the documents belong to the assessee and that the contents recorded therein are true and correct does not apply. The Tribunal cited several judicial precedents to support its conclusion that no adverse inference could be drawn against the assessee based on documents found in the possession of a third party. 4. Methodology of Appending Two Zeros to the Values Recorded in Excel Sheets: The Tribunal found that the AO erred in appending two zeros to the values recorded in the excel sheets based on the statement of an employee of Christy group. The Tribunal noted that the statement of the employee was related to a specific transaction and did not pertain to the business activities of the assessee. The Tribunal further observed that the AO did not provide any valid reasons for appending two zeros to the values recorded in the excel sheets. The Tribunal concluded that the methodology adopted by the AO was untenable and unsustainable in law. 5. Aggregation of Cash Receipts and Payments for Determining Undisclosed Income: The Tribunal held that it is not appropriate to aggregate cash receipts and cash payments for the purpose of determining undisclosed income. The Tribunal observed that aggregating cash receipts and payments results in an exaggerated amount of undisclosed income. The Tribunal noted that when the AO is unable to identify the nature of cash receipts or payments, the best approach is to net off the cash receipts against the cash payments to arrive at the undisclosed income. The Tribunal found that the findings of the CIT(A) regarding the manner of computing undisclosed income were reasonable and acceptable. Conclusion: The Tribunal upheld the findings of the CIT(A) and dismissed the appeals filed by the revenue for the assessment years 2017-18, 2018-19, and 2019-20. The Tribunal also dismissed the cross objections filed by the assessee as infructuous. The judgment emphasizes the importance of corroborative evidence and proper examination of documents before making additions under Section 69A of the Income-tax Act, 1961.
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