2023 (11) TMI 1044 - AT - Income Tax

Unexplained investment u/s. 69 - addition was made on the basis of seized material found during the course of search action on the assessee - loose sheet, inter-alia, contain Balance Sheet - As per AO assessee has not furnished the details of creditors, such as names, addresses, PANs, I.T. particulars, confirmation letters of the creditors, mode of receipt of the amounts, creditworthiness of the creditors in respect of the credit nor the basis for capital balance - CIT(A) deleted addition - HELD THAT - As on the date of search, certain loose sheets were found which contained date wise Balance Sheet of the assessee. The assessee has not maintained any regular books of accounts and dealing as a trader of foreign currency. The loose sheet, inter-alia, contain Balance Sheet as on 03-05-2016. However, Balance Sheet as on 11-05-2016 i.e., a day prior to date of search was also available on record which has totally been ignored by Ld. AO. It could be seen that the Balance Sheet is prepared day wise considering the transaction of the each of the day. Therefore, the most relevant Balance Sheet, in our considered opinion, would be the Balance Sheet as available on latest date i.e., on 11-05-2016. CIT-DR has argued that there is not substantial difference in the Balance Sheet. Even if the said argument is accepted, we find that AO is only accepting a part of the Balance Sheet and putting onus on assessee to substantiate the other part of the Balance Sheet. The liability side of the Balance Sheet contains the capital account of the assessee and details of sundry creditors which constitute source of sundry debtors, stock and cash in hand. A presumption would arise that the documents belong to the assessee and the entries made therein are correct and true. Therefore, the assessee could not be obligated to substantiate only one part of the Balance Sheet while accepting the other part of the Balance Sheet which is favorable to the department. The approach of Ld. AO, in this regard, is clearly erroneous and the same could not be held to be justified. We concur with the aforesaid adjudication of Ld. CIT(A) in the impugned order. Considering the Balance Sheet as a whole, the impugned addition is not sustainable in law. Also we find that the adjudication of CIT(A) is based on appreciation of correct factual matrix. The latest Balance Sheet as seized by the department has been compared with the Balance Sheet prepared till the date of search and discrepancy in the capital account has already been added to the income of the assessee. The estimated income for post search period has also been added. Therefore, whatever addition was required to be made, has already been made in the impugned order. Nothing more is required to be added. Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition towards unexplained investment assessed under Section 69 of the Income Tax Act, 1961.
2. Condonation of delay in filing the appeal.

Condonation of Delay:
The Registry noted a delay of 17 days in filing the appeal, which was condoned as the respondent did not object, and the appeal was admitted for adjudication on merits.

Issue 1: Deletion of Addition towards Unexplained Investment:

Assessment Proceedings:
The assessee, engaged in the purchase and sale of foreign currency, was subjected to a search on 12-05-2016, resulting in the seizure of certain loose papers. The Ld. AO made an addition of Rs. 209.48 Lacs based on a balance sheet dated 03-05-2016 found during the search, reflecting stock, cash, and receivables totaling Rs. 256.55 Lacs. The assessee claimed that the liability side of the balance sheet, showing capital and sundry creditors, explained the sources of these assets. However, the Ld. AO rejected this explanation due to a lack of detailed information about the creditors and capital balance, thus adding the amount as unexplained investment under Sections 69 and 69A of the Act.

Appellate Proceedings:
The assessee appealed against the additions, arguing that the balance sheet as on 11-05-2016 was more relevant and that the Ld. AO selectively considered only favorable figures. The Ld. CIT(A) observed that the entire seized document should be considered, not just selective entries. The Ld. CIT(A) noted that the Ld. AO ignored the liabilities that explained the sources of the assets. The Ld. CIT(A) deleted the addition, emphasizing that the Ld. AO's selective approach was not justified.

Our Finding and Adjudication:
The Tribunal concurred with the Ld. CIT(A)'s findings, stating that the Ld. AO's approach of accepting only part of the balance sheet and ignoring the liabilities was erroneous. The balance sheet as on 11-05-2016, being the latest, was considered more relevant. The Tribunal upheld the deletion of the addition, noting that the Ld. CIT(A) had already accounted for discrepancies in the capital account and estimated income for the post-search period.

Conclusion:
The appeal was dismissed, and the deletion of the addition of Rs. 209.48 Lacs was upheld. The order was pronounced on 30th August 2023.