2016 (5) TMI 877 - AT - Income Tax

Additions made on the basis of papers found in the course of search - Held that - The finding of the learned CIT(A) that the additions of 54, 63, 230/- for A.Y. 2006-07 and 9, 17, 200/- for A.Y. 2007- 08 in the case of hand are factually unsustainable since the said scored out entries on the right side of the diary are not in the handwriting of Shri Narendra Jain (partner of the appellant firm) who has disowned knowledge of their context and that they were recorded by Shri Kartik a former employee of the assessee firm who was not examined by the AO. In these factual circumstances and placing reliance on the decisions of the ITAT Pune Bench in Prabhat Chandra S. Jain (2015 (11) TMI 402 - ITAT PUNE ) and S.K. Gupta (1998 (2) TMI 164 - ITAT DELHI-C ) in support of the proposition that additions made on the basis of papers found in the course of search without bringing any corroborative evidence is not factually sustainable we uphold the order of the learned CIT(A) in holding that the additions of 54, 63, 230/- in A.Y. 2006-07 and 9, 17, 230/- in A.Y. 2007-08 are unwarranted and unjustified Allowance of telescopic benefit - Held that - As find from the record that the learned CIT(A) after factually examining the claims of the assessee and the findings of the AO has correctly upheld the AO s action in treating the proportionate sale proceeds of 36, 81, 818/- including 26.40 lakhs said to have been received from Shri Nazar as income of the assessee for A.Y. 2006-07 and at the same time allowing the assessee s plea that telescoping is to be allowed in respect of income of 26.40 lakhs admitted by the assessee in A.Y. 2007-08 on account of sale consideration received from Shri Nazar from out of the addition of 36, 81, 818/- under section 68 of the Act in A.Y. 2006-07. We find that apart from raising the above grounds the learned D.R. for Revenue has not been able to bring on record any material evidence to controvert the above findings of the learned CIT(A) and with which we concur. In this factual matrix of the case as discussed above we find no reason to interfere with or deviate from the factual findings recorded by the learned CIT(A) and therefore uphold his order allowing telescoping of 26.40 lakhs in this year on account of income of 26.40 lakhs admitted by the assessee in A.Y. 2007-08 on account of sale consideration received from Shri Nazar.

Summary

Issues Involved:
1. Proportionate addition on account of undisclosed cash receipts on the sale of Kellambakkam land.
2. Allowing telescopic benefit of ?26.40 lakhs for A.Y. 2007-08.
3. General grounds raised by the Revenue.

Detailed Analysis:

1. Proportionate Addition on Account of Undisclosed Cash Receipts on Sale of Kellambakkam Land:

The Revenue challenged the orders of the CIT(A) for A.Y. 2006-07 and 2007-08, arguing that the CIT(A) erred in deleting additions of ?54,63,230/- and ?9,17,200/- respectively. The Revenue contended that the diary entries, which belonged to Shri Narendra Jain, a partner in the assessee firm, represented real monetary transactions of cash receipts not recorded in the books of accounts. The CIT(A) had deleted these additions, noting that the entries were in the handwriting of a former employee, Shri Kartik, and had been struck off, thus not substantiating the additions.

The Tribunal upheld the CIT(A)'s decision, agreeing that the additions were based on struck-off entries in a diary without corroborative evidence. The Tribunal referenced the ITAT Delhi Bench's decision in S.K. Gupta and ITAT Pune Bench's decision in Prabhat Chandra S. Jain, which held that additions based on loose papers without corroborative evidence are unsustainable. Consequently, the Tribunal dismissed the Revenue's grounds for both assessment years.

2. Allowing Telescopic Benefit of ?26.40 Lakhs for A.Y. 2007-08:

The Revenue challenged the CIT(A)'s decision to allow telescopic benefit of ?26.40 lakhs for A.Y. 2007-08, arguing that it would reduce the income below the returned income without any evidence. The Tribunal noted that the assessee had received ?26.40 lakhs from Shri Nazar, which was credited in the books on 06.04.2006 and offered as income for A.Y. 2007-08. The AO had treated the entire amount of ?36,81,818/- as unexplained cash credit under section 68 of the Act for A.Y. 2006-07.

The Tribunal upheld the CIT(A)'s decision, agreeing that the same income cannot be taxed in two different assessment years, thus allowing the telescoping of ?26.40 lakhs for A.Y. 2007-08. The Tribunal found no material evidence from the Revenue to counter the CIT(A)'s findings and upheld the order allowing the telescoping benefit.

3. General Grounds Raised by the Revenue:

The general grounds raised by the Revenue for both assessment years were deemed to require no adjudication.

Conclusion:

The Tribunal dismissed the Revenue's appeals for both assessment years 2006-07 and 2007-08, upholding the CIT(A)'s decisions on all contested grounds. The order was pronounced in the open court on 17th May 2016.