2022 (6) TMI 438 - AT - Income Tax

Addition as unexplained income of the assessee - Addition based on loose sheets found in search - HELD THAT - Onus purely lies on the assessee to explain with cogent evidences. Since that loose sheet was seized from the preemies of the assessee, the presumption u/s. 292C of the Act would lie on the assessee and it is for the assessee to rebut the contents of the said loose sheet with cogent evidences. Moreover, it is trite law that the seized documents should be looked into in toto and both the Revenue as well as assessee could not ignore that portion of the same seized document which is detrimental to each. One part of the same seized document shows transactions carried out by cheques which are matching with the books of accounts of other group entities, the transactions carried out/proposed to be carried out in cash for purchasing demand drafts to make payment to R.D. Karas and Sons should also be treated as correct and that portion of the document alone cannot be ignored by the assessee. Hence, onus that prevail on the assessee had not been discharged here. However, we find that the Ld. CIT(A) had concluded that assessee had made payments to R.D. Karas and Sons in demand drafts by using unaccounted cash. This fact can be easily cross verified from the books of accounts of R.D. Karas and Sons which exercise has not been carried out by the lower authorities. Hence, we deem it fit and appropriate to remand this issue to the file of the Ld. AO for the limited purposes of carrying out the verification with R.D. Karas and Sons to check whether these demand drafts have been credited in the books of R.D. Karas and Sons. If the demand drafts are found credited in the books of accounts of R.D. Karas and Sons, then addition is to be confirmed in the hands of the assessee. If it is not found credited in the books of R.D. Karas and Sons, then the statement given by the assessee that demand drafts that were proposed to be taken but were never taken becomes true, and in such an event, no addition is made in the hands of the assessee. With these observations, we remand this issue to the file of the Ld. AO. Accordingly, the grounds raised by the assessee for A.Y. 2010-11 are allowed for statistical purposes.

Issues Involved:
1. Condonation of Delay in Filing Appeals
2. Admission of Additional Evidence under Rule 46A
3. Addition under Section 2(22)(e) of the Income Tax Act
4. Addition of Unexplained Income

Detailed Analysis:

1. Condonation of Delay in Filing Appeals:
The appeals were filed belatedly by 140 days due to the COVID-19 pandemic. The tribunal relied on the Government of India's notifications extending the time limits for filing appeals and condoned the delay, admitting the appeals for adjudication.

2. Admission of Additional Evidence under Rule 46A:
Issue: The assessee challenged the Ld. CIT(A)'s decision not to admit additional evidence regarding the applicability of Section 2(22)(e) of the Income Tax Act.

Analysis: The tribunal found that the additional evidence was crucial for determining whether the provisions of Section 2(22)(e) were applicable. It was noted that in a similar case involving another shareholder, the tribunal had directed the Ld. CIT(A) to consider additional evidence. The tribunal emphasized that under Section 250(4) of the Act, the Ld. CIT(A) has the power to make further inquiries and admit additional evidence if justified by the facts and circumstances.

Judgment: The tribunal remanded the appeal for A.Y. 2014-15 to the Ld. CIT(A) to consider all additional evidence and decide the issue on merits.

3. Addition under Section 2(22)(e) of the Income Tax Act:
Issue: The addition of Rs. 88,99,265/- as deemed dividend under Section 2(22)(e) in the hands of the assessee.

Analysis: The assessee argued that the advance given by MAAD Realtors to DM Logistics was in the ordinary course of business for acquiring agricultural lands. The Ld. AO observed that both companies had common shareholders holding more than 20% shares, thereby attracting the provisions of Section 2(22)(e). The Ld. CIT(A) upheld the addition but did not admit additional evidence provided by the assessee.

Judgment: The tribunal directed the Ld. CIT(A) to admit additional evidence and reconsider the issue on merits, following the precedent set in the case of another shareholder.

4. Addition of Unexplained Income:
Issue: The addition of Rs. 64,70,818/- as unexplained income based on seized documents.

Analysis: The seized documents indicated transactions with R.D. Karas & Sons, with certain entries marked as 'D' (demand drafts) and others as cash. The Ld. AO added Rs. 64,70,818/- as unexplained income, presuming these were cash transactions. The Ld. CIT(A) upheld this addition, noting that the entries indicated payments made by the assessee.

Judgment: The tribunal found that the seized document's credibility was established, but the Ld. AO had not verified whether the demand drafts were credited in R.D. Karas & Sons' books. The tribunal remanded the issue to the Ld. AO for verification. If the demand drafts were found credited, the addition would be confirmed; otherwise, it would be deleted.

Conclusion:
Both appeals for A.Y. 2010-11 and 2014-15 were allowed for statistical purposes, with directions for further verification and consideration of additional evidence. The tribunal emphasized the importance of a thorough and fair inquiry, especially in complex tax matters.

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