2021 (8) TMI 1215 - AT - Income Tax

Unexplained u/s.68 - un-explained cash credit addition - Huge amount withdrawn from bank - self made vouchers for expenses - AO observed that expenses were not supported by bills/vouchers and no TDS was made on such amounts - loose sheets found during survey proceedings - HELD THAT - This assessee is admittedly a company engaged in construction and building of infrastructure projects/facilities. The department had carried out the survey in question dt.03-10-2012 at its premises. It came across the alleged impounded document forming part of case records before us - This crucial document found at assessee s premises during survey makes it clear that it is in the nature of assessee s INVESTMENT STATEMENT FROM 10-09-2007 TO 10-08-2012 wherein it had duly recorded payment, fund transfers, site payments involving group companies, other payments and administrative expenses along with working capital limits, term loans from banks other loans funds, other group companies funds received from sites and other receipts indicating varying sums - the impounded document is assessee s INVESTMENT STATEMENT FROM 10-09-2007 TO 10-08-2012 wherein its Managing Director had duly pointed out the same in the nature of investments and loans which ought to be treated as un-explained u/s.68 of the Act only. The assessee s further argument that the impugned sum is merely an estimate also fails to inspire confidence since there is no material before us which could suggest the factual position to be different than that found during the course of survey . It appears that assessee s failure in filing its cogent explanation only led the AO to add the impugned sums in all these assessment years. We thus restore this un-explained cash credit addition in these facts and circumstances in AY.2010-11. The CIT(A) s findings under challenge stand reversed therefore. Revenue succeeds in its instant identical latter substantive ground.

Summary

Issues Involved:
1. Disallowance of certain expenditure claims related to the Dummugudem Project.
2. Addition of unexplained cash credits.

Issue-wise Detailed Analysis:

1. Disallowance of Certain Expenditure Claims Related to the Dummugudem Project:
The Revenue challenged the CIT(A)'s decision to restrict the disallowance of the assessee's expenditure claim pertaining to the Dummugudem Project to 12.5% of ?15.82 crores and deleting an unexplained credits addition of ?20,50,99,560/-. The Assessing Officer (AO) had observed that the assessee withdrew ?15.82 crores in cash for the Dummugudem Project without sufficient supporting bills/vouchers and made no TDS on such amounts. During assessment proceedings, only self-made vouchers were produced, leading the AO to disallow the entire amount as unexplained expenses.

The assessee contended that the source of ?15.82 crores was explainable through books, received from Gayatri Ratna JV, and routed through banking channels. The CIT(A) noted that ?10.09 crores were paid to a subcontractor, M/s. Mohan Projects Contractors Pvt Ltd (MPCPL), and accounted for in their books. The CIT(A) found the AO's sweeping observations regarding unverifiable nature of vouchers unsubstantiated and held that disallowing the entire ?15.82 crores would result in abnormal profits, which is impractical in the business line. Thus, the CIT(A) merged the disallowed amount with another disallowance of ?32.80 crores related to the same project and treated the ground as partly allowed.

The Tribunal upheld the CIT(A)'s decision, noting that the AO had already disallowed the entire expenditure of ?32.18 crores related to the project as bogus under a separate head, making the disallowance of ?15.82 crores a double addition.

2. Addition of Unexplained Cash Credits:
The AO made an addition of ?20,50,99,560/- based on entries in documents impounded during a survey conducted on 30-10-2012. The AO found that certain entries in the impounded material were not reflected in any head of accounts and treated them as unexplained credits. The assessee argued that the loose sheets were rough estimates prepared for management and lacked evidentiary value. The CIT(A) agreed with the assessee, noting that the AO selectively picked entries from the loose sheets without indicating the basis for such isolation. The CIT(A) found the additions based on assumptions and not supported by facts or solid reasons, thus deleting the additions.

The Tribunal, however, reversed the CIT(A)'s findings. It noted that the impounded document was an "Investment Statement" covering a period from 10-09-2007 to 10-08-2012, and the assessee's Managing Director had admitted the entries as representing investments and loans on an estimate basis. The Tribunal found that the document, supported by correct entries, could not be dismissed as a dumb document. It emphasized that the document was in the nature of books of account as per Section 2(12A) of the Act and should be treated as disclosing correct particulars during the survey as per Section 292(C) of the Act. The Tribunal restored the addition of unexplained cash credits of ?20,50,99,560/-, reversing the CIT(A)'s findings.

Conclusion:
The Tribunal partly allowed the Revenue's appeals by upholding the CIT(A)'s decision on the disallowance of expenditure claims related to the Dummugudem Project but reversing the CIT(A)'s decision on the addition of unexplained cash credits. The impounded document was deemed reliable, and the addition of unexplained cash credits was restored. The order was pronounced in the open court on 24th August 2021.