2024 (10) TMI 1615 - AT - Income Tax

Addition arising out of search proceedings - disallowance of wages payable salaries payable - addition is based on notings found in Measurement books (M Books) for labor payments and excel sheets - HELD THAT - As identical issue has been decided by us in assessee s appeal for AY 2017-18 2024 (9) TMI 1654 - ITAT CHENNAI wherein held as seen that the assessee has reversed provision of wages payable and salaries payabe and claimed the same on actual payment basis in FY 2016-17. The same is very much clear from the above reconciliation. Since the provision as wrongly claimed in return of income filed u/s 139(1) has now been reversed in return of income filed u/s 153A, the payment made in subsequent year would be allowable as deduction in the subsequent year. If the same is not allowed, the assessee would suffer double disallowance which is wholly unjustified Therefore, considering the fact of the case, the amount would be allowed as deduction. For balance provision of Rs. 14.69 Lacs has been made on 31-03- 2017. The aggregate provision as on 31-03-2017 was Rs. 29.53 Lacs which has fully been paid by the assessee through banking channels in the month of April and May, 2017 which is evident from ledger of salaries payable. Unexplained investment u/s 69 - Onus to prove - addition stem from excel sheet titled as 15% and 12% found during search - HELD THAT - Upon perusal of loose excel sheet as extracted in the assessment order, it could be seen that these sheets lacks sufficient details to form an opinion of actual cash introduction by the partners of the firm. The same merely contain certain computation of interest only without suggesting anything more. The complete details of the transactions could not be deciphered from the same. The same do not have any details as to source of alleged capital introduction by the partners. Under these circumstances, not much credence could be given to this document to make impugned additions in the hands of the assessee in the absence of corroboration of entries as contained therein. As decided in the case of Kranti Impex Pvt. Ltd. 2018 (3) TMI 424 - ITAT MUMBAI when the seized papers were undated having no acceptable narration and did not bear the signature of any party, they are in the nature of dumb documents having no evidentiary value and could not be taken to be the sole basis for determination of undisclosed income of the assessee. The onus would be on revenue to collect cogent evidences to corroborate the nothings therein. The ratio of other decisions as cited by the assessee during first appeal also supports the case of the assessee. Thus, impugned additions as made by Ld. AO, merely on the basis of loose sheets without corroboration thereof, was not adequate enough to draw adverse inference of cash flows against the assessee. Therefore, we delete the same and allow the corresponding grounds as raised by the assessee. AO is directed to recompute the income of the assessee in terms of our adjudication.

Summary

Issues Involved:

1. Disallowance of wages payable and salaries payable.
2. Addition of unexplained investment under Section 69 of the Income Tax Act.

Detailed Analysis:

1. Disallowance of Wages and Salaries Payable:

The primary contention revolves around the disallowance of wages payable amounting to Rs. 405.91 Lacs and salaries payable of Rs. 17.96 Lacs. The addition was based on discrepancies found in Measurement books (M Books) and excel sheets compared against regular Tally data. The Assessing Officer (AO) concluded that the assessee booked wages payable in the last month of various financial years to suppress profits. The CIT(A) confirmed this addition.

Upon review, the Tribunal found that the assessee had reversed the provision of wages payable in the subsequent year and had already offered additional income to that extent in the return filed under Section 153A. The Tribunal noted that the provision was artificially made to suppress profits and was reversed in the return filed under Section 153A. The Tribunal held that if the provision is reversed in a particular year, the payment thereof in the next year should be allowable as expenses of the subsequent year. The Tribunal deleted the disallowance, noting that disallowing the expenses in both years would be unjustified.

2. Addition of Unexplained Investment under Section 69:

The addition of Rs. 11.90 Crores as unexplained investment under Section 69 was based on an excel sheet found during the search, which allegedly contained entries of capital introduction by the partners. The AO argued that the partners introduced unaccounted money generated by the firm. However, the assessee contended that the excel sheet was merely a projection for a TWAD project and not actual transactions.

The Tribunal noted that the statements made by the Accountant and the Managing Partner during search proceedings were contradictory and lacked corroborative evidence. The Tribunal observed that the loose sheets were merely projections and lacked sufficient details to form an opinion of actual cash introduction. The Tribunal cited legal precedents, emphasizing that loose sheets without corroborative evidence do not hold evidentiary value. Consequently, the Tribunal deleted the addition, stating that the addition was based on mere surmise without concrete evidence.

Conclusion:

The Tribunal allowed the appeal partly, deleting the additions for disallowance of wages and salaries payable and unexplained investment under Section 69, while dismissing the legal grounds raised regarding jurisdiction. The Tribunal directed the AO to recompute the income in line with its findings. The judgment emphasizes the necessity of corroborative evidence in making additions based on documents found during search proceedings.