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TMI Blog2024 (11) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... documents but not supported by actual cash passing hands, no addition can be made. In the instant case also, the AO has drawn presumptions that the image files and Excel sheets represent import of goods by the assessee. However, the said presumption is not supported by any other evidence to prove that the assessee has actually imported the goods mentioned in the above said files. We hold that the AO could not have made the impugned additions in both the years on the basis of image and Excel files, which were not supported by the corroborating materials. Documents found in the phone of the partner of the assessee-firm cannot be considered to be credible evidence which would support the addition made by the AO. Decided in favour of assessee. - Shri B.R. Baskaran, Accountant Member And Shri Raj Kumar Chauhan, Judicial Member For the Assessee : Shri Rahul Hakani For the Revenue : Smt. Sanyogita Nagpal, CIT-DR ORDER PER B.R. BASKARAN, A.M : The assessee has filed appeals for the AYs. 2020-21 and 2021-22. The Revenue has filed appeal for the AY. 2021-22. All these appeals are directed against the orders passed by the Ld.CIT(A)-52, Mumbai. All these appeals were heard together and are b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccounted purchases. In this regard, the AO also referred to the answer given by Shri Dikesh Mehta, wherein he had stated that purchases of around 65% total goods come from China and had also explained the procedures for importing items from China. However, during the course of assessment proceedings, he reiterated that the firm has not imported any goods from China. By placing reliance on the image files and Excel files, the AO took the view that the assessee has imported goods from China and accordingly held that the value of these purchases should be assessed as unexplained expenditure u/s 69C of the Act. Upon the analysis of the image files, the AO segregated the purchases year-wise as under:- Asst. Year 2020-21 - Rs.24,02,088 Asst. Year 2021-22 - Rs.59,56,592 Total - Rs.83,58,680 3.3. Before the AO, the assessee reiterated that it does not import goods from China and the details found in the phone of the partner were only quotations received from Chinese suppliers. It was explained that the mobile accessories business is a competitive one and the price fluctuations are high. Hence it is necessary for the assessee to keep track of the trend in prices to survive in the market. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Dikesh Mehta. According to Ld A.R, they are dumb documents and hence no credence should have been given to them. Further, it is contended that the AO has not properly followed the procedure prescribed u/s 65B of Information Technology Act, 2000 before relying upon the digital evidences. The Ld D.R, on the contrary, relied upon the order passed by Ld CIT(A). 3.8. We shall analyse the nature of evidences found from the phone of the partner Shri Dikesh Mehta. We noticed that they are in the form of image files and Excel files. Following points are worth noting:- (a) The AO has taken the view that the image files appear to be invoices and Excel files appear to be shipping details . It can be noticed from the observations made by the AO himself that those documents appear to be such and such, meaning thereby, the assessing officer himself was not sure about the authenticity of the documents. (b) The image files contained the name of buyer as Raj-DK and not the name of the assessee as Raj Technology . Under the law, the Invoice constitutes a contract and the same is enforceable in law for recovery of the amount due under the Invoice. Hence, the suppliers, in order to protect themsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the goods were never imported by it. When the assessee has not imported the goods, it would be impossible for anyone to prove the negative fact. (h) The Ld A.R submitted that the assessee does not have import export code , which is essential requirement to import goods from foreign countries. This fact also disproves the presumption entertained by the AO. (i) We notice that the AO has not conducted any independent enquiry with anyone like custom authorities, shipping agents, suppliers etc. 3.9. Further, the AO did not bring any corroborative materials and also did not conduct any independent enquiry to prove the genuineness of these documents and to disprove the explanations of the assessee. The assessee also submitted that the procedure prescribed under sec. 65B of the Information Technology Act, 2000 has not been followed by the AO. However, in our view, the AO has not proved the genuineness and the reliability of the image files and Excel files before placing reliance on them. 3.10. In view of the foregoing discussions, we are of the view these documents, being loose papers, should be classified as dumb documents only and the AO could not have placed reliance on these document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y can be considered to be dumb documents only, since they were not corroborated by any other independent documents or enquiry. Accordingly, we hold that the additions made by the AO in both the years viz., Rs. 24,02,088/- and Rs. 59,56,592/- made respectively in AYs.2020-21 and 2021-22 are liable to be deleted. 3.14. Accordingly, we set aside the orders passed by the Ld.CIT(A) on the above said issue in both the years and direct the AO to delete the above mentioned additions made in both the years under consideration. 4. We shall now take up the appeal filed by both the parties for AY. 2021-22. The addition relating to un-explained purchases made u/s 69C of the Act has already been adjudicated in the earlier paragraphs. The remaining issue is related to the addition made on the basis of list of debtors found from the phone of the partner. Since the Ld.CIT(A) has granted partial relief, both the parties are in appeal on this issue. 4.1. From the mobile phone of Mr Dikesh Mehta, the partner of assessee firm, six Excel files containing the details of name of persons and the amounts mentioned against their name were found. The AO has observed that these files are established to be Sund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2021-22. Under the Income tax Act, the unexplained income is assessable in the year to which it pertains to. Without establishing that the alleged sundry debtors belong to the assessee and it pertained to AY 2021-22, the AO could not have made the addition. (d) The AO has made the addition u/s 69A of the Act as unexplained money. We noticed that the provisions of section 69A are applicable when the assessee is found to be the owner of any money, bullion, jewellery or other valuable article . The list of sundry debtors, in our view, will not fall in any of the categories of assets mentioned. Hence we are of the view that the AO was not justified in invoking the provisions of sec.69A for making this addition. (e) The Trade debtors are always represented by the sales made to them. During the course of search action, no material was found to show that the assessee was indulging in making unaccounted purchases and sales. The AO has also not brought on record any material to show that the assessee has purchased and sold the goods outside the books. The image files found from the phone, which was alleged to represent import of goods by the assessee was for a sum of Rs. 83,58,690/-, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT vs. Lavanya Land (P) Ltd (2017)(397 ITR 246) (Bom), it was held that where entire decision is based on huge amounts revealed from seized documents but not supported by actual cash passing hands, no addition can be made. In the instant case also, the AO has drawn presumptions that the Excel sheets represent sundry debtors balance, i.e., the amount due to the assessee. However, the said presumption is not supported by any other evidence to prove that the assessee has actually sold the goods to these persons. There should not be any doubt that the goods could not be sold without purchasing them. The AO has not brought on record any material to show that the assessee has purchased goods outside the books of account in order to affect the sales to these sundry debtors. 4.7. The Ld A.R also placed his reliance on the decisions cited in paragraph 3.11 supra with regard to the electronic evidences. 4.8. In view of the foregoing discussions, we are of the view that, the instant case, the documents found in the phone of the partner of the assessee firm cannot be considered to be credible evidence which would support the addition of sundry debtors balance made by the AO in AY 2021-22, i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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