2022 (5) TMI 134 - AT - Income Tax

Unexplained cash loan - addition made as based on the documents seized during the course of search at the office premises of M/s Maad Realtors and Infra Private Limited. - HELD THAT - Letter filed before the Assessing Officer submitted that the entry of Rs. 25,00,000 in cash was by mistake of the accountant was passed in the Ledger account of the assessee and the same in fact was investment by Rashmi Ameya Developers Housing Estate Realtors Ltd, the Assessing Officer neither called for any information / document from Rashmi Ameya Developers Housing Estate Realtors Ltd. nor issued any notice under section 133(6) of the Act to ascertain the authenticity of such a statement. Assessing Officer completely dis-regarded the aforesaid letter dated 08.09.2016 and merely on the basis of seized document page 15 made addition in the hands of the assessee as unexplained cash loan to M/s Maad Realtors and Infra Private Limited. Further, the Assessing Officer also neither recorded any statement of the director/partner of M/s Maad Realtors and Infra Private Limited nor granted opportunity of cross examination to the assessee. Thus, the impugned addition is based only on entry found in the seized documents, without the same being corroborated with any other evidence found during the course of search or post search investigations and assessments. Further, we agree with the submission of learned A.R. that section 292C of the Act is not applicable in the present case, as it is not the claim of Revenue that seized documents were found in the possession of the assessee. Decided in favour of assessee. Addition on account of unexplained expenditure - HELD THAT - From the contents of loose documents, as mentioned in the impugned order passed by the learned CIT(A), it is evident that the same is nothing but the calculation of cumulative interest on month-to-month basis by charging the interest in the next month on the principal plus interest of the preceding month. Further, the details do not show any payment or receipt of interest on monthly basis, otherwise, the principal amount would have been actually reduced rather than being increased. In the present case, no evidence has been brought on record by the Assessing Officer to prove that assessee was involved in 2 projects named in the loose documents. In view of the above, we find no infirmity in the order passed by the learned CIT(A) deleting the addition made by the Assessing Officer on account of unexplained expenditure. Accordingly, grounds raised in Revenue s appeal are dismissed.

Summary

Issues Involved:
1. Addition of Rs. 25,00,000 as unexplained cash loan.
2. Deletion of addition of Rs. 2,11,97,690 on account of unexplained expenditure.

Detailed Analysis:

Issue 1: Addition of Rs. 25,00,000 as unexplained cash loan

The assessee contested the addition of Rs. 25,00,000 as an unexplained cash loan to M/s Maad Realtors and Infra Private Limited. The Assessing Officer (AO) based this addition on seized documents during a search at the premises of M/s Maad Realtors. The documents indicated a cash loan of Rs. 25,00,000 given by "Nana" (the assessee) to M/s Maad Realtors. The assessee argued that this entry was an accounting error, and the correct transaction was a loan of Rs. 2,00,00,000, which was recorded in the books and represented on the asset side of the balance sheet. The accountant of M/s Maad Realtors also clarified that the Rs. 25,00,000 entry was a mistake.

The CIT(A) upheld the AO's decision, stating that the documents pertained to different periods and the assessee was given full information on the documents used against him. However, the Tribunal found that the AO did not corroborate the seized document with any other evidence or allow cross-examination of M/s Maad Realtors' directors/partners. The Tribunal concluded that the addition was not justified and directed its deletion.

Issue 2: Deletion of addition of Rs. 2,11,97,690 on account of unexplained expenditure

The Revenue appealed against the deletion of Rs. 2,11,97,690 added as unexplained expenditure. During a survey, loose papers showing interest calculations for certain projects were found in the assessee's office. The AO treated these documents as evidence of undisclosed income and added the interest amounts to the assessee's income. The assessee argued that the documents did not pertain to him and represented notional interest calculations.

The CIT(A) agreed with the assessee, stating that the documents only showed cumulative interest calculations without any actual payment or receipt of interest. The CIT(A) held that the documents were "dumb documents" and could not be the basis for any addition. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to prove the assessee's involvement in the projects mentioned in the documents.

Conclusion:

The Tribunal allowed the assessee's appeal for the assessment year 2011-12, deleting the addition of Rs. 25,00,000 as unexplained cash loan. The Tribunal dismissed the Revenue's appeal for the assessment year 2014-15, upholding the deletion of Rs. 2,11,97,690 on account of unexplained expenditure. The judgments emphasized the need for corroborative evidence and the opportunity for cross-examination in such cases.