2021 (2) TMI 325 - AT - Income Tax

Undisclosed advances - Addition being made in respect of cash loan alleged to having being advanced in cash - addition solely on the basis of Annexure 'A' seized during search operation - estimating interest @ 8% on the alleged advances - HELD THAT - We find force in the contentions so advanced by the ld AR that each of the entries reflect individual transactions with either date of advancement or repayment or tentative date of repayment and therefore, a generalized conclusion cannot be drawn basis review of just two entries where other entries applying same hypothesis will give a very incomprehensible conclusion. Given that there is no other corroborative evidence on record that the assessee has advanced such amount during the year under consideration, merely basis the reading and analysis of the seized document as a whole, it cannot be held that the assessee has entered into a fresh and different transaction with M/s Columbus Overseas LLP, other than the one which is duly recorded in its books of accounts. Thus, the addition of ₹ 25 lacs and consequent addition of interest of ₹ 2 lacs is hereby directed to be deleted. - Decided in favour of assessee.

Issues Involved:
1. Addition of ?25,00,000 as undisclosed advances.
2. Addition of interest @ 8% on the alleged advances.
3. Invocation of provisions of section 115BBE of the IT Act, 1961.

Issue-wise Detailed Analysis:

1. Addition of ?25,00,000 as undisclosed advances:
The assessee challenged the addition of ?25,00,000 made by the AO, alleging it to be undisclosed advances to M/s Columbus Overseas LLP, based on a rough noting in a seized document (Annexure 'A' of exhibit-4). The assessee argued that the document was a memorandum for administrative purposes, detailing loans advanced by various family members, and not evidence of undisclosed cash loans. The assessee provided documentary evidence, including ledger accounts, bank statements, and interest receipts, to substantiate that the loan was advanced through banking channels and recorded in the books. The AO's assumption that the seized document indicated undisclosed cash loans was based on presumptions and lacked material evidence. The Tribunal found merit in the assessee's contention, noting that the document contained future dates, which could not logically represent the date of cash advances. The Tribunal concluded that the seized document was a rough memorandum and not proof of undisclosed loans. Consequently, the addition of ?25,00,000 was deleted.

2. Addition of interest @ 8% on the alleged advances:
The AO estimated interest income @ ?1 per hundred per month on the alleged cash loan of ?25,00,000, resulting in an addition of ?2,00,000. The assessee contended that the interest on the loan advanced to Columbus Overseas LLP was recorded in the books and offered for taxation, as evidenced by Form 26AS. The Tribunal agreed with the assessee, noting that the interest income was duly recorded and taxed, and there was no basis for the AO's assumption of additional interest income. Therefore, the addition of ?2,00,000 as undisclosed interest income was deleted.

3. Invocation of provisions of section 115BBE of the IT Act, 1961:
The assessee challenged the invocation of section 115BBE, arguing that the loan of ?25,00,000 was recorded in the books and not undisclosed. Given the Tribunal's findings on the first issue, it held that the invocation of section 115BBE was misplaced and unjustified. Consequently, this ground of appeal was also decided in favor of the assessee.

Conclusion:
The Tribunal found that the additions made by the AO were based on presumptions and lacked material evidence. It held that the seized document was a rough memorandum and not proof of undisclosed cash loans. Therefore, the additions of ?25,00,000 and ?2,00,000 were deleted, and the invocation of section 115BBE was held to be unjustified. The appeal of the assessee was allowed.

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