2022 (6) TMI 683 - AT - Income Tax

Unexplained expenditure - Addition on the basis of contents of the seized document - amount as unexplained and invoking section 69C - HELD THAT - The impounded material reflects receipts and payments and the assessee has already paid the difference of the amounts to taxation after going through the entire set of papers. The property 62/1, Ajmal Khan Park has been purchased on 08.11.2012 whereas the notings reflect 04.12.2012. The transaction of purchase of the said property has culminated on 08.11.2012. Hence, the probability of any payment post, purchase of a property is also ruled out. The assessee has offered to tax the amount on account of the payments A/c and receipts A/c Assessing Officer shall have the basis for assuming that the assessee has not disclosed the income for taxation. Reliance was also placed on the decision of Hon'ble Supreme Court in the case of CBI Vs. V.C. Shukla 1998 (3) TMI 675 - SUPREME COURT - In the case of ACIT Vs. Sharad Chaudhary 2014 (8) TMI 309 - ITAT DELHI it was held that the loose paper found on standalone could not be used as a basis for making the addition without the company of any other supportive material and evidence, more so when the contents were not interlinked. Hence, keeping in view the fact that the assessee has offered the amounts mentioned on the impounded material which has been accepted by the revenue and also keeping in view that revenue has not brought anything on record to prove that the assessee is liable to pay the taxes more than what has been already disclosed and also keeping in view the fact that the transactions of Ajmal Khan Park, 62/1 stands culminated, we hereby direct that the addition made be deleted. - Decided in favour of assessee.

Issues Involved:
1. Legitimacy of the addition of Rs. 55,00,000/- under Section 69C of the Income Tax Act, 1961.
2. Justification of the addition based on the contents of a seized document.
3. Evaluation of the evidence provided by the assessee to explain the source of the amount.
4. Applicability of various case laws and judicial precedents to the facts of the case.

Issue-wise Detailed Analysis:

1. Legitimacy of the Addition of Rs. 55,00,000/- under Section 69C:
The assessee contested the addition of Rs. 55,00,000/- made by the AO based on a seized document, treating the amount as unexplained expenditure under Section 69C of the Income Tax Act, 1961. The AO had determined that the assessee failed to reconcile the amounts mentioned in the seized document with its books of accounts, leading to the addition of Rs. 75,00,000/- (Rs. 55,00,000/- in cash and Rs. 20,00,000/- by cheque). The CIT(A) provided remission for the Rs. 20,00,000/- paid by cheque but upheld the addition of Rs. 55,00,000/- due to lack of explanation.

2. Justification of the Addition Based on the Contents of a Seized Document:
During a search and survey operation, a document (Annexure A-5, Page No. 8) was impounded, showing transactions under "Received A/c" and "Payment A/c." The document mentioned property "62/1 Ajmal Khan Park." The AO asked the assessee to explain the nature and source of these transactions. The assessee submitted that the figures were reconciled with rent accounted for in the books, with Rs. 11,17,000/- surrendered as undisclosed income. However, the AO found the explanation insufficient and added Rs. 75,00,000/- to the assessee's income based on the document's notations.

3. Evaluation of the Evidence Provided by the Assessee:
The assessee argued that the entries in the seized document were rough jottings and not indicative of any real transactions. The CIT(A) accepted the explanation for the Rs. 20,00,000/- paid by cheque, as it was substantiated with ledger accounts and bank statements. However, for the Rs. 55,00,000/- in cash, the CIT(A) found no supporting documents or satisfactory explanation, thus upholding the addition.

4. Applicability of Various Case Laws and Judicial Precedents:
The assessee cited several judicial precedents, including cases from ITAT and High Courts, arguing that additions should not be based solely on loose papers without corroborative evidence. The Tribunal considered these precedents and found that the revenue did not provide sufficient evidence to justify the addition of Rs. 55,00,000/-. The Tribunal noted that the property transaction related to "62/1 Ajmal Khan Park" had concluded prior to the date mentioned in the document, ruling out the possibility of post-transaction payments. The Tribunal concluded that the addition was based on guesswork without substantive evidence, directing the deletion of the addition.

Conclusion:
The Tribunal allowed the appeal, directing the deletion of the Rs. 55,00,000/- addition, as the revenue failed to substantiate the claim with adequate evidence. The decision emphasized the necessity of corroborative evidence for additions based on seized documents, aligning with judicial precedents that discourage reliance on standalone loose papers for such purposes.

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