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2025 (1) TMI 25 - AT - Income TaxAddition u/s. 69C - unexplained expenditure - Addition based on seized material corroborated by the statement of Director of the assessee - CIT(A) deleted addition - HELD THAT - CIT(A) has discussed this issue at length and gave clear finding of fact that seized material is devoid of any evidence regarding alleged payment of trade payables due of Shri Paranthaman concerns outside books of accounts. We noted that although there is statement of Shri A.N.Boopathy, but this is a rebuttable statement and the assessee has led evidence in the shape of books of account which clearly reflects the trade payables as outstanding and moreover, seized materials confirms that. The contention of the Revenue that it is natural that name of Shri Paranthaman concerns did not figure in loose sheets since it is the list of actual sundry creditors as on 31.03.2018 and they did not figure in loose sheet no.11, 12 and 13, since they contain names of fictitious creditors as stated by Shri A.N.Boopathy is not at all relevant. We noted that there are contradictions and logical flaws in his statement as brought out by the CIT(A) and as noted by the CIT(A). The fact that Shri A.N.Boopathy considered loose sheet No.12 as the list of actual creditors as on 31.03.2017 which is supposed to include in trade payables of Paranthaman concerns also, is discussed and analyzed by the CIT(A). It is fact that once quantum of actual sundry creditors as on 31.03.2017 was disposed off by the CIT(A) based on loose sheet, particularly loose sheet no.12, the claim of the AO in the same breath that loose sheet no.11,12 13 contained the name of fictitious creditors introduced in place of Paranthaman concerns fails. We noted that seized loose sheet contained print out of group summary of sundry creditors which do not contain the complete list of sundry creditors as per the books of account and they contained partial list taken for the purpose of reconciliation in the process of finalization of accounts. Thus, difference in the amount of sundry creditors as on 31.03.2018 was explained by Shri A.N.Bhoopathy as mentioned in the seized loose sheets in his statement as payment made to Shri Paranthaman concerns outside the books of accounts. Hence, as per books of account, the assessee has clearly established by evidences that trade creditors payable of Rs. 4.00 crores to Shri Paranthaman concerns was outstanding and clearly allowable and not outside the books of accounts or cash. Hence, we confirm the order of the CIT(A) deleting the addition. Appeal of the Revenue is dismissed. 1. ISSUES PRESENTED and CONSIDERED The core legal issue presented in this judgment is whether the addition of Rs. 4,00,00,000/- made by the Assessing Officer (AO) towards unexplained expenditure under Section 69C of the Income Tax Act, 1961, in respect of trade payables allegedly settled outside the books of accounts, was justified. Specifically, the court examined:
2. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: Section 69C of the Income Tax Act, 1961, deals with unexplained expenditure. If an assessee incurs any expenditure and fails to explain the source, the amount may be deemed as income of the assessee for that financial year. Court's interpretation and reasoning: The court scrutinized the seized materials and the statement of Shri A.N.Boopathy, Director of the assessee company. The CIT(A) found that the seized materials did not substantiate the AO's claim that the trade payables were settled outside the books of accounts. The CIT(A) observed discrepancies in the AO's interpretation of the seized documents and the statement of Shri A.N.Boopathy. Key evidence and findings:
Application of law to facts: The CIT(A) applied Section 69C and determined that the AO's addition was not legally sustainable. The CIT(A) concluded that the evidence provided by the assessee, including ledger accounts and financial statements, demonstrated that the payments were duly recorded in the books of account, contradicting the AO's claim of settlement outside the books. Treatment of competing arguments: The Revenue argued that the seized materials and the statement of Shri A.N.Boopathy supported the addition. However, the CIT(A) and subsequently the Tribunal found that the evidence did not support the AO's conclusion. The Tribunal agreed with the CIT(A) that the statement of Shri A.N.Boopathy was rebuttable and lacked corroboration from the seized materials. Conclusions: The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 4,00,00,000/- under Section 69C, finding that the evidence did not support the AO's claim of unexplained expenditure. 3. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "In view of the aforesaid discussion, the undersigned is of the considered view that the addition made by the AO as unexplained expenditure as per the provisions of section 69C of the Act is not legally sustainable and lacks merit." Core principles established:
Final determinations on each issue: The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order to delete the addition of Rs. 4,00,00,000/- made under Section 69C of the Income Tax Act, 1961, due to lack of evidence supporting the AO's claim.
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