2025 (1) TMI 34 - AT - Income Tax

Addition of income having received amount in cash - reliance on notings and the paper so seized in search - evidentiary value of documents so found - HELD THAT - It has not been established that the assessee actually received the said sum and further when the entire balance, as mentioned in the impugned document, is duly accounted for in the books of accounts of the assessee and the entire sales having been duly recorded in the books of accounts and no sales have been found to have been made outside the books and no other evidence having been established to prove the assessee having actually received the said sum. It is excruciating to note that the addition of ₹ 2.5 crore has been made without any charging provision so as to fall within the four squares of law. Nothing can be more painful to note that such order has passed the muster of section 153 of the Act. AO grossly erred in making the addition and which was wrongly confirmed by the learned CIT(A). Decided in favour of assessee.

html

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the addition of Rs. 2,50,00,000 to the assessee's income, allegedly received in cash, is justified.
Whether the delay of 702 days in filing the appeal should be condoned.
Whether the evidentiary value of the seized documents is sufficient to support the addition made by the Assessing Officer.
Whether the principles of natural justice were adhered to in the assessment proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Addition of Rs. 2,50,00,000 to Income

Relevant legal framework and precedents: The addition was made under the Income Tax Act, 1961, following a search and seizure operation under section 132(1). The legal principles involved include the requirement for corroborative evidence when making additions based on seized documents.
Court's interpretation and reasoning: The Tribunal found that the seized document did not bear any signature of the assessee and there was no corroborative evidence to prove the receipt of cash. The Tribunal noted that the document was not prepared by the assessee or its staff, and the Assessing Officer failed to conduct necessary inquiries with the alleged payer or the broker.
Key evidence and findings: The document in question was a loose paper without any supporting evidence. The assessee provided explanations and evidence that the amount represented two Letters of Credit from Canara Bank, not cash transactions.
Application of law to facts: The Tribunal applied the principle that presumption cannot replace evidence and found that the addition was made without sufficient evidence. The Tribunal emphasized the need for corroborative evidence to substantiate the addition.
Treatment of competing arguments: The Tribunal considered the Department's argument that the document indicated cash receipt but found it unsubstantiated due to lack of corroborative evidence and failure to verify from third parties.
Conclusions: The Tribunal concluded that the addition of Rs. 2,50,00,000 was not justified and directed its deletion.

Issue 2: Condonation of Delay

Relevant legal framework and precedents: The Tribunal considered the principles of natural justice and the reasonableness of the cause for delay.
Court's interpretation and reasoning: The Tribunal found that the delay was due to inadvertence by the counsel's staff and was reasonable. It emphasized that the assessee should not suffer due to the lapses of his legal advisor.
Key evidence and findings: The affidavit filed by the counsel and supporting documents demonstrated the procedural error and the timely payment of appeal fees.
Application of law to facts: The Tribunal applied the principle of natural justice and reasonableness to condone the delay.
Treatment of competing arguments: The Tribunal did not find any substantial argument from the Department against condonation.
Conclusions: The Tribunal condoned the delay of 702 days in filing the appeal.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "It is trite law that presumption however strong cannot substitute for evidence."
Core principles established: The addition of income must be based on corroborative evidence and not merely on presumptions or unsupported documents. The principles of natural justice require that procedural delays caused by counsel's inadvertence should not prejudice the assessee.
Final determinations on each issue: The Tribunal directed the deletion of the Rs. 2,50,00,000 addition and condoned the delay in filing the appeal.