2025 (3) TMI 703 - AT - Income Tax

Unexplained investment u/s. 69 - AO made an addition in the hands of the assessee on the basis of excel sheet noting maintained by Shri S.Seetharaman but in his sworn statement Shri S.Seetharaman has clearly stated that the assessee has arranged loan through his father - CIT(A) deleted addition HELD THAT - AO has made an addition on the basis of excel sheet found at the premises of third party. Assessee has denied advancing loan to Shri S.Seetharaman. AO has not brought any other corroborative evidence on record to prove that the assessee has advanced cash loan to Shri S.Seetharaman. The excel sheet was neither authored by the assessee nor found from the premises of the assessee. The name of the assessee in the excel sheet found can trigger the enquiry and that itself is not sufficient to establish the ownership of investment as unexplained. The mere fact that there were certain entries found from the records of third party is not sufficient to make addition on the ground that assessee had made unexplained investments. CIT(A) has rightly relied upon the decision of Appu Direct Pvt Ltd 2024 (1) TMI 1447 - ITAT CHENNAI for the proposition that cash transactions recorded in excel sheets found during the course of search proceedings cannot be added in the absence of corroborative evidence. Also decided in the case of Sant Lal 2020 (3) TMI 692 - DELHI HIGH COURT wherein the Hon ble Court has held that the assessee cannot be fasten with the liability on the basis of third-party material in the absence of any cogent material. In the case of the assessee the AO neither conducted proper enquiry to identify the actual lender nor made an effort to gather or corroborate evidence to establish that the assessee has actually advanced cash loan to Shri S.Seetharaman - Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the reopening of the assessment under Section 147 of the Income Tax Act was valid, as opposed to the provisions of Section 153C, given the circumstances of the case.

2. Whether the addition of Rs. 1,00,00,000/- as unexplained investment under Section 69 of the Income Tax Act was justified based on the evidence available, including an excel sheet found during a search and a sworn statement.

ISSUE-WISE DETAILED ANALYSIS

1. Reopening of Assessment under Section 147 vs. Section 153C

The relevant legal framework involves Sections 147 and 153C of the Income Tax Act. Section 147 pertains to the reopening of assessments, while Section 153C deals with assessments in cases where documents or assets are seized from a person other than the assessee.

The Tribunal noted that the CIT(A) had quashed the assessment proceedings on the basis that the notice should have been issued under Section 153C, not Section 148, as the material was seized from a third party's premises. The Tribunal did not delve deeply into this issue as the Revenue's appeal was primarily focused on the merits of the addition rather than the procedural aspect.

2. Addition of Rs. 1,00,00,000/- as Unexplained Investment under Section 69

The legal framework for this issue involves Section 69 of the Income Tax Act, which allows for the addition of unexplained investments to the income of the assessee.

Evidence and Findings: The evidence consisted of an excel sheet found on a pen drive during a search of a third party's premises and a sworn statement by Shri S. Seetharaman. The excel sheet indicated a loan of Rs. 1,00,00,000/- allegedly advanced by the assessee. However, the Tribunal noted that the excel sheet was not authored by the assessee, nor was it found on the assessee's premises.

Interpretation and Reasoning: The Tribunal observed that the Assessing Officer (AO) failed to conduct any inquiry with the assessee's father, who was mentioned in the sworn statement as having arranged the loan. The AO also did not bring any corroborative evidence to substantiate the claim of an actual loan transaction.

Application of Law to Facts: The Tribunal emphasized that mere entries in an excel sheet found at a third party's premises, without corroborative evidence, are insufficient to justify an addition under Section 69. The Tribunal relied on precedents that require concrete evidence to support additions based on search findings.

Treatment of Competing Arguments: The Revenue argued that the excel sheet and the sworn statement were sufficient evidence. However, the Tribunal found the CIT(A)'s reasoning persuasive, noting the lack of corroborative evidence and the absence of any direct admission of a loan by the assessee.

Conclusions: The Tribunal upheld the CIT(A)'s decision to delete the addition, concluding that the AO's reliance on uncorroborated evidence was not sustainable.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reinforced the principle that additions based on search proceedings require corroborative evidence. Mere entries in documents found at third-party premises are insufficient without further substantiation.

Final Determinations on Each Issue: The Tribunal dismissed the Revenue's appeal, thereby upholding the CIT(A)'s decision to quash the assessment proceedings and delete the addition of Rs. 1,00,00,000/- as unexplained investment.

Verbatim Quotes: The Tribunal cited several precedents, such as the decision in CIT V. S. Khader Khan Son, emphasizing that statements obtained during search proceedings cannot be the sole basis for additions without tangible evidence.

The Tribunal concluded that the CIT(A) had rightly deleted the addition, as the AO's findings were based on uncorroborated evidence. The appeal filed by the Revenue was dismissed.

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