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2016 (1) TMI 610 - AT - Income TaxUnexplained cash receipts - Search action u/s.132(1) - assessment proceedings u/s.153A r.w.s 143(3) - addition on the basis of Red Executive Diary and a loose paper bundle - CIT(A) deleted the addition on the ground that the amount received from Mr. Gulab Maharu Badgujar 19 lakhs in the hands of the assessee - Decided in favour of assessee Addition on account of unexplained expenditure - as per AO there are certain payments as per the SMSs which were not recorded in the books of account - CIT(A) deleted the addition - Held that - .CIT(A) deleted the addition on the ground that the assessee has demonstrated that the amount of 2 lakhs related to M/s. Suyojit Infrastructure Pvt. Ltd. and does not belong to the assessee and the addition was made by the AO on surmises. Further the SMSs revealed the payment of the impugned amount to Shri Bhatt and the SMSs nowhere contain that the payment is made on 21-10-2010. There is no material before the AO to the proposition that the impugned payment is made on 21-10-2010 and that too by the assessee. 30. So far as the other amount of 3, 37, 500/- is concerned the CIT(A) deleted the same on the ground that the same has been claimed to be paid to Shri Dwarka Prasad Agarwal an employee of Suyojit Infrastructure Pvt. Ltd. for making payment to departmental labour. Since the assessee was a director of Suyojit Infrastructure Pvt. Ltd. and such entries were already recorded in the books of account of the company therefore addition of the same in the hands of the assessee is not justified. The above factual findings given by the Ld.CIT(A) could not be controverted by the Ld. Departmental Representative. - Decided in favour of assessee
Issues Involved:
1. Unexplained Cash Receipts 2. Unexplained Expenditure Issue-wise Detailed Analysis: 1. Unexplained Cash Receipts: The case revolves around the addition of unexplained cash receipts amounting to Rs. 19,00,000/- for the Assessment Year (A.Y.) 2006-07, Rs. 2,02,00,000/- for A.Y. 2007-08, and Rs. 67,00,000/- for A.Y. 2011-12. The assessee, an architect and director in various companies, was subjected to a search action under Section 132(1) of the Income Tax Act, during which a Red Executive Diary (Annexure-8) and a loose paper bundle (Annexure A/7) were seized. These documents indicated cash receipts from Mr. Gulab & Mrs. Yogita Badgujar. The Assessing Officer (AO) treated these amounts as unexplained cash receipts and added them to the income of the assessee, citing that the partnership firm M/s. Suyojit Baug, on whose behalf the amounts were allegedly received, had not filed any income tax returns and its partnership deed was not registered. The AO also noted that the receipts were not recorded in the books of accounts of the assessee and were admitted as additional income by the assessee in his statement recorded under Section 132(4). The assessee contended that the amounts were received as advance against the sale of shops in a proposed project by M/s. Suyojit Baug, and were liabilities in the books of the firm. The CIT(A) accepted the assessee's explanation, emphasizing that the amounts were recorded in the books of M/s. Suyojit Baug and that the firm's existence was not in dispute despite it not filing returns or being registered. The CIT(A) observed that the amounts were liabilities and not income, and that the admission of additional income by the assessee during the search could not override statutory provisions. The ITAT upheld the CIT(A)'s order, noting that the partnership firm's existence was substantiated by various documents, including audited accounts and an MOU. The Tribunal also referenced judicial precedents, including the Ahmedabad Bench's decision in M/s. Om Developers and the Calcutta High Court's ruling in SAIL DSP VR Employees Association 1998, which held that what is not otherwise taxable cannot become taxable merely because of an admission by the assessee. Thus, the addition of Rs. 19,00,000/- was deleted. 2. Unexplained Expenditure: For A.Y. 2011-12, the AO added Rs. 5,37,500/- to the assessee's income based on SMS evidence indicating payments to Shri Dilip Bhatt and Shri Dwarka Prasad Agarwal that were allegedly not accounted for. The assessee argued that these transactions were recorded in the books of M/s. Suyojit Infrastructure Pvt. Ltd., with the payment to Shri Dilip Bhatt being a refund of advance and the payment to Shri Dwarka Prasad Agarwal being for departmental labor charges. The CIT(A) deleted the addition, finding that the SMSs did not conclusively prove that the payments were made on the dates mentioned or by the assessee personally. The CIT(A) accepted the assessee's explanation that the payments were related to M/s. Suyojit Infrastructure Pvt. Ltd., where the assessee was a director, and were recorded in the company's books. The ITAT upheld the CIT(A)'s order, noting that the AO had not provided sufficient evidence to contradict the assessee's claims. Conclusion: The ITAT dismissed all three appeals filed by the Revenue, upholding the CIT(A)'s deletion of the additions for unexplained cash receipts and unexplained expenditure. The Tribunal emphasized the importance of substantiating claims with evidence and upheld the principle that statutory provisions cannot be overridden by mere admissions during search proceedings.
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