2022 (4) TMI 542 - AT - Income Tax

Addition u/s 69 - unaccounted advances given to Sh. Vikas Sharma on the basis of blank receipt found in search - addition based on undated cheques and receipts found in search - HELD THAT - Shri Vikas Sharma is the Managing Director of M/s Royal Terrace Hotels Pvt. Ltd. Sh. Manaswi Gautam, son of the assessee has made investment in the share capital of the company. As Vikas Sharma was in need of funds for construction of hotel, he approached Manaswi Gautam, son of the assessee to provide funds and for such arrangement he was required to give blank receipts and unnamed undated cheques. However, the funds could not be arranged. The cheques and the receipts were to be returned back to Shri Vikas Sharma but at that point of time they were misplaced and could not be traced. Therefore, Shri Vikas Sharma, in order to safeguard his interest obtained a cancellation receipt from the assessee on stamp paper where it was stated that cheques and receipts has been misplaced, the same has not been used, no transaction was carried out on the basis of these cheques and receipts and if the same is found it will be returned back to him. It is for this reason that in search cancellation receipt was not found from the assessee as it was given to Vikas Sharma but the cheques and receipts which were misplaced could be located by the search party in course of search. As in search of assessee no other material was found to indicate that he or any of his family members has given any cash advance to Vikas Sharma except that his son Manaswi Gautam has made investment of ₹ 1.21 cr. by cheque in M/s Royal Terrace Hotel Private Limited. Thus, when no transaction took place against the above undated cheques and receipts it cannot be presumed that the assessee has provided cash loan to Shri Vikas Sharma - Thus we direct to delete the addition made and sustained qua this issue - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of ?50 lakhs under Section 69 on account of alleged unaccounted advances.
2. Validity of the cancellation receipt.
3. Reliance on the statement of Sh. Vikas Sharma.
4. Consideration of ?30 lakhs received back from Sh. Ram Gopal Surolia.

Detailed Analysis:

1. Addition of ?50 lakhs under Section 69 on account of alleged unaccounted advances:

The assessee contested the addition of ?50 lakhs made by the Assessing Officer (AO) based on blank receipts found during a search operation. The AO presumed that the assessee had advanced a cash loan of ?50 lakhs to Sh. Vikas Sharma. The assessee argued that the blank receipts and undated cheques were given to Sh. Vikas Sharma as security for a potential loan that was never materialized. The Tribunal noted that the receipts did not mention the name of the person from whom the amount was received, the cheque number, or the date of the cheque. It was concluded that the mere presence of these receipts could not substantiate the claim that ?50 lakhs were advanced by the assessee.

2. Validity of the cancellation receipt:

The assessee presented a cancellation receipt dated 21.03.2012, stating that the cheques and receipts were misplaced and no transaction was carried out. The lower authorities rejected this receipt, considering it a fake document and an afterthought since it was not found during the search. The Tribunal examined the notarization and the stamp paper's veracity, noting that the cancellation receipt was accepted by Sh. Vikas Sharma in his statement recorded by ADIT on 23.11.2016. The Tribunal found no evidence to support the lower authorities' claim that the cancellation receipt was fake.

3. Reliance on the statement of Sh. Vikas Sharma:

The lower authorities relied on Sh. Vikas Sharma's statement to confirm the addition. However, the Tribunal observed that Sh. Vikas Sharma's statement indicated that he signed the receipts and cheques on the assurance of receiving funds from Sh. Manaswi Gautam, which did not materialize. The Tribunal found no contradiction in Sh. Vikas Sharma's statement and noted that the lower authorities' assumption of the cancellation receipt being fake was not substantiated by any material evidence.

4. Consideration of ?30 lakhs received back from Sh. Ram Gopal Surolia:

The assessee argued that ?30 lakhs received back from Sh. Ram Gopal Surolia should be set off against the addition of ?50 lakhs. The Tribunal noted that the lower authorities did not consider this aspect. The Tribunal found that the assessee had advanced ?63 lakhs to Sh. Ram Gopal Surolia in 2008, out of which ?30 lakhs were received back by 19.12.2011. This amount was not a receipt of a loan but a repayment of an earlier advance. The Tribunal directed that if any addition is sustained based on the blank receipts, the set-off of ?30 lakhs should be allowed.

Conclusion:

The Tribunal concluded that the lower authorities failed to establish conclusively that the assessee had advanced ?50 lakhs to Sh. Vikas Sharma. The Tribunal directed the deletion of the addition made and sustained by the lower authorities. The appeal of the assessee was allowed, and the order was pronounced in the open court on 31 March 2022.