2018 (4) TMI 21 - AT - Income Tax

Addition u/s 69C - addition on loose paper found during search - Held that - In the case of the assessee when on one hand affidavit was furnished stating that the amount belongs to someone else and if the Department was not agreeing with it, it could have enquired independently regarding the status of affidavit and verify the statement therein. Secondly, we do not find anything on record to suggest that seized document was supported by any other corroborative evidence. Therefore, we hold that addition made in the hands of the assessee is arbitrary, illegal and liable to be deleted. We, therefore, set aside the order of the ld. CIT(A) and direct deletion of addition made in the hands of the assessee. - Decided in favour of assessee

Summary

Issues:
- Addition of unexplained investment of ?12,04,938
- Whether the seized document belonged to the assessee or the firm
- Corroboration of evidence for addition under section 69C
- Legal grounds and grounds on merit raised by the assessee
- Compliance with the Income Tax Act regarding additions based on seized documents

Analysis:
1. The appeal involved the addition of ?12,04,938 on account of unexplained investment, contested by the assessee as belonging to a firm, M/s R. K. G. Cold Storage & Ice Factory. The assessee argued that the addition lacked corroborating evidence and was made without proper examination of the nature of expenditure.

2. The assessee provided a letter from the firm stating that the expenditure mentioned on the seized document did not pertain to the assessee personally. However, no further documentary evidence was presented to prove that the amount was incurred by the assessee, leading to the addition under section 69C of the Income Tax Act, 1961.

3. In the written submission, the assessee highlighted the search & seizure operation, the origin of the seized document, and the involvement of family members in the firm. The assessee emphasized that the addition was solely based on the seized paper without conducting a thorough investigation or obtaining corroborative evidence.

4. During the hearing, the assessee's representative argued that the seized document belonged to the firm, not the assessee, supported by an affidavit. The representative cited judicial authorities to support the contention that additions based solely on suspicion without corroborative evidence should be deleted.

5. The Tribunal observed that the Assessing Officer and the CIT(A) did not independently verify the affidavit's authenticity or corroborate the seized document with other evidence. Relying on previous judgments, the Tribunal concluded that the addition lacked a legal basis as it was not supported by corroborative evidence.

6. Ultimately, the Tribunal held that the addition made in the hands of the assessee was arbitrary and illegal, directing the deletion of the amount from the assessee's income. The decision emphasized the importance of corroborative evidence and independent verification in making additions under the Income Tax Act.

This detailed analysis of the judgment highlights the key issues, arguments presented, legal principles applied, and the final decision reached by the Tribunal regarding the addition of unexplained investment in the case.