2024 (11) TMI 810 - AT - Income Tax

Assessment u/s 153A - Disallowance of wages payable, Unexplained investment u/s 69 AND Addition u/s 69C - HELD THAT - The assessee, thus, denied that the entries as mentioned therein represent unaccounted cash expenditure and the same was nothing but a MIS report for the purpose of discussion. The notings were approximate project expenditure of different sites of the assessee s projects. Thus, the statements have been contradicted and therefore, the same would loose its evidentiary value. Before lower authorities, the assessee has taken a stand that the aforesaid sheet has no evidentiary value since the same merely contain approximate project expenses only. It was the further submissions that whatever the expenses were incurred, the same was accounted for in the regular books of accounts and therefore, the impugned addition would not be sustainable in the eyes of law. Upon perusal of aforesaid notings, it could be seen that, on standalone basis, no inference of cash payment could be drawn against the assessee. The notings lack even the basis details i.e., date of payment, the persons to whom payments were made and the source of such payments. The notings are bald notings which do not convey much meaning. The figures as mentioned in the sheet are round figures without any more details which support the fact that these are mere estimations only. The sheet, in our considered opinion, is merely in the nature of dumb document having no evidentiary value. These sheets even lack basic details so as to form an opinion of cash payment by the assessee. The complete details of the transactions could not be deciphered from the same. Under these circumstances, not much credence could be given to this document to make impugned additions in the hands of the assessee in the absence of corroboration of entries as contained therein. Therefore, the presumption of unaccounted / unexplained expenditure in terms of Sec. 69C is arbitrary and without any corroborative evidence establishing the same. There is no direct evidence of any cash payment by the assessee. Not even a single concrete evidence has been brought on record to establish that the assessee, in fact, has incurred cash expenditure which was not accounted for in the regular books of accounts. It could be seen that the assessee was subjected to search proceedings and after considering every incriminating material as found therein, the assessee already admitted additional income and Ld. AO made further additions in earlier years. Therefore, even otherwise, each and every unaccounted income whatever has been earned by the assessee-firm in earlier years, the same has already been brought to tax and therefore, no further addition could be made in the hands of the assessee at the time of expansion thereof. All these facts lends credence to the arguments of Ld. AR. Similarly, Mumbai Tribunal, in the case of ITO vs. Kranti Impex Pvt. Ltd. 2018 (3) TMI 424 - ITAT MUMBAI held that when the seized papers were undated having no acceptable narration and did not bear the signature of any party, they are in the nature of dumb documents having no evidentiary value and could not be taken to be the sole basis for determination of undisclosed income of the assessee. The onus would be on revenue to collect cogent evidences to corroborate the nothings therein. The ratio of other decisions as cited by the assessee during first appeal also supports the case of the assessee. Upon cumulative consideration of aforesaid facts and reasoning, we would hold that impugned additions as made by Ld. AO merely on the basis of loose sheets without corroboration thereof, was not adequate enough to draw adverse inference of unexplained cash expenditure. Therefore, we delete the same and allow the corresponding grounds as raised by the assessee. The Ld. AO is directed to recompute the income of the assessee in terms of our adjudication.

Issues Involved:
1. Disallowance of wages payable for Rs. 424.49 Lacs.
2. Addition of unexplained investment under Section 69 for Rs. 85 Lacs.
3. Addition under Section 69C for Rs. 2033 Lacs.

Issue-wise Detailed Analysis:

1. Disallowance of Wages Payable:
The disallowance of wages payable amounting to Rs. 424.49 Lacs was based on discrepancies found in Measurement books and excel sheets compared with regular Tally Data. The Assessing Officer (AO) concluded that the assessee booked wages payable in the last month of various financial years to suppress profits. Despite the assessee's submissions, the AO made the addition, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The tribunal found that the issue had been previously decided in favor of the assessee for the Assessment Year 2017-18, where it was determined that the expenditure was not bogus but only a timing difference. The provision for wages had been reversed, and the payment made in the subsequent year should be allowable as an expense of that year to avoid double disallowance. Consequently, the tribunal deleted the impugned addition.

2. Addition of Unexplained Investment under Section 69 for Rs. 85 Lacs:
The addition was based on an excel sheet found during the search, allegedly reflecting capital introduction by partners. The AO added the amount to the income of the assessee after rejecting their submissions. The tribunal found that the issue had been similarly adjudicated in the assessee's favor for the Assessment Year 2018-19. It was noted that the loose sheets lacked evidentiary value, as they contained mere calculations without corroborative evidence. The tribunal emphasized that no concrete evidence was provided to substantiate the claim of unexplained investment, and thus, the addition was deleted.

3. Addition under Section 69C for Rs. 2033 Lacs:
This addition was based on an excel sheet titled 'sheet 7' found during search proceedings, which allegedly contained unaccounted cash payments for non-business purposes. The AO added the amount to the income of the assessee, which was confirmed by the CIT(A). The tribunal found that the loose sheet was a dumb document with no evidentiary value. The tribunal noted that the notings lacked basic details such as date of payment, payees, and source, rendering them insufficient to support the addition. The tribunal concluded that the presumption of unexplained expenditure was arbitrary and unsupported by corroborative evidence. Therefore, the addition was deleted.

Conclusion:
The tribunal allowed the appeal in part, deleting the additions related to disallowance of wages payable, unexplained investment under Section 69, and alleged unexplained expenditure under Section 69C, while dismissing the legal grounds raised by the assessee due to lack of material arguments.

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