2021 (12) TMI 751 - AT - Income Tax

Unexplained expenditures and unaccounted cash payment - Onus to proof - HELD THAT - It is the onus of the assessee to justify based on the cogent material that the impugned cash expenditure was incurred out cash balance of the regular cash book of the assessee. If that be so, there cannot be any addition to the total income of the assessee merely on the reasoning that the assessee failed to record the expenditure in the books of accounts on the date of incurrence of the expenses which were actually recorded in the books of accounts on a later date. It is a matter of verification. It has to be seen whether there was the cash available in the books of accounts of the assessee as on the date on which the impugned expenditures were incurred i.e. November 2007. If there was sufficient cash in the books of the firm of the assessee, there is no possibility of treating the impugned expenditure as unexplained expense as provided u/s 69C until and unless the revenue brings on record based on cogent materials that there was no cash available in the books of the assessee on the relevant dates or the source of such expenditure was from the third source which was unexplained. We note that once the revenue has treated the entire amount of expenditure as unexplained expense under section 69C of the Act, there cannot be any addition separately being part and parcel of the total addition otherwise it would lead to the double addition which is not warranted under the provisions of law until and unless the provisions of law requires so - we set aside the issue to the file of the AO for fresh adjudication as per the provisions of law and after necessary verification of the cash book. Ground of appeal of the assessee is partly allowed for the statistical purposes.

Issues Involved:

1. Legality of the CIT (A)'s order.
2. Addition of ?60,10,250/- under Section 69C of the Income Tax Act, 1961.
3. Alleged double addition of ?28,06,000/- under Section 69C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality of the CIT (A)'s Order:

The assessee contended that the order passed by the CIT (A) was against the principles of law, equity, and justice. The CIT (A) upheld the additions made by the AO, which the assessee argued were based on incorrect factual matrices and lacked proper verification.

2. Addition of ?60,10,250/- under Section 69C of the Income Tax Act, 1961:

The AO initially framed the assessment under Section 143(3) of the Act, making an addition of ?10 lakh under Section 68. Subsequently, the Principal CIT invoked Section 263, identifying unverified unrecorded cash expenditures of ?60,10,250/- based on a loose paper document found during a survey.

The assessee claimed these expenditures were for land acquisition and related activities, funded from available cash balances that were omitted from the books but later recorded post-survey. The AO, however, did not accept this explanation, noting discrepancies in the cash book and the timing of the expenditures. The AO treated the entire amount as unexplained expenditure under Section 69C.

The CIT (A) upheld this addition, citing the lack of evidence linking the expenditures to recorded cash withdrawals and the director's admission during the survey that these were unaccounted expenditures.

3. Alleged Double Addition of ?28,06,000/- under Section 69C of the Income Tax Act, 1961:

The assessee argued that the amount of ?28,06,000/- was added twice: once as part of the total ?60,10,250/- and again separately. The CIT (A) dismissed this contention, maintaining that the expenditures were unaccounted and thus rightly added under Section 69C.

Tribunal's Findings:

The Tribunal noted the survey revealed a significant discrepancy between the recorded cash and physical cash available. The assessee explained this by citing an advance given to Shri Hanuba and unrecorded expenditures, which were later accounted for in an updated cash book. The Tribunal emphasized the need for verification of whether sufficient cash was available in the books when the expenditures were incurred.

The Tribunal found merit in the assessee's argument regarding the double addition of ?28,06,000/-. It stated that treating the entire ?60,10,250/- as unexplained expenditure should preclude a separate addition for the same amount, as it would result in double taxation.

Conclusion:

The Tribunal set aside the issue to the AO for fresh adjudication, emphasizing the need for verifying the cash book and ensuring no double addition occurs. The appeal was partly allowed for statistical purposes.

Order Pronounced:

The appeal of the assessee was partly allowed for statistical purposes, and the order was pronounced in the court on 25/11/2021 at Ahmedabad.

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