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.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment primarily revolves around the following core issues:

Whether the addition of Rs. 2,50,00,000 to the assessee's income, allegedly received in cash, was justified.
Whether the delay of 702 days in filing the appeal should be condoned.
Whether the evidentiary value of the seized documents and the notings therein were sufficient to substantiate the addition.

2. ISSUE-WISE DETAILED ANALYSIS

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

Relevant Legal Framework and Precedents: The case involves the interpretation of provisions under the Income Tax Act, 1961, particularly regarding the assessment of undisclosed income based on seized documents during a search operation.
Court's Interpretation and Reasoning: The Tribunal considered the absence of corroborative evidence supporting the addition. The court emphasized that mere notings on loose papers do not suffice as evidence of undisclosed income unless corroborated by other substantial evidence.
Key Evidence and Findings: The primary evidence was a document seized during a search, which allegedly recorded a cash transaction of Rs. 2,50,00,000. The assessee denied the transaction and attributed the document to a broker, not themselves or their employees.
Application of Law to Facts: The Tribunal applied the principle that in the absence of corroborative evidence, the notings on a document cannot be the sole basis for an addition. It also noted the lack of inquiry from the broker or the alleged payer, Govindraja Mills Group.
Treatment of Competing Arguments: The assessee argued that the amount in question was accounted for as Letter of Credits, not cash. The Revenue contended that the seized document was indicative of undisclosed cash receipts. The Tribunal favored the assessee due to the lack of corroborative evidence from the Revenue.
Conclusions: The Tribunal concluded that the addition of Rs. 2,50,00,000 was not justified due to the absence of corroborative evidence and directed its deletion.

Issue 2: Condonation of Delay

Relevant Legal Framework and Precedents: The Tribunal considered the principles of natural justice and reasonable cause for delay in filing appeals.
Court's Interpretation and Reasoning: The Tribunal accepted the explanation that the delay was due to inadvertence by the assessee's counsel's staff, who misunderstood the filing procedure.
Key Evidence and Findings: The affidavit and supporting documents demonstrated that the appeal was initially filed with the Departmental Representative within the prescribed period, though not with the Registry.
Application of Law to Facts: The Tribunal found the explanation reasonable and in the interest of justice, condoned the delay.
Conclusions: The delay of 702 days was condoned, allowing the appeal to be adjudicated on its merits.

Issue 3: Evidentiary Value of Seized Documents

Relevant Legal Framework and Precedents: The Tribunal examined the evidentiary value of documents seized during a search, referencing the necessity of corroborative evidence.
Court's Interpretation and Reasoning: The Tribunal emphasized that notings and jottings on seized documents require corroboration to be considered as evidence of undisclosed income.
Key Evidence and Findings: The document in question was not signed by the assessee, and no corroborative evidence was presented to prove the alleged cash receipt.
Application of Law to Facts: The Tribunal applied the principle that presumption cannot replace evidence and highlighted the lack of inquiry into the authenticity of the document.
Conclusions: The Tribunal found the document insufficient as evidence for the addition and directed its deletion.

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 Tribunal reiterated that notings on seized documents require corroboration and cannot solely justify additions. It also emphasized the importance of a fair opportunity for the assessee to contest evidence.
Final determinations on each issue: The Tribunal allowed the appeal, condoned the delay, and directed the deletion of the addition of Rs. 2,50,00,000, finding the evidence insufficient and uncorroborated.

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