2023 (2) TMI 517 - AT - Income Tax

Rectification of mistake u/s 154 - Addition u/s 69A - cash found during the course of search and seizure operation as unexplained money by ad-hoc estimation of expenses incurred - HELD THAT:- Section 154 enables the AO to rectify a mistake apparent on record. A reading of the assessment order and the order u/s 154 nowhere speaks of any mistake which has occurred in the assessment order. The order passed by the AO is as if he is sitting into the shoes of ld. CIT and passing an order u/s 263 of the Act, which is not actually correct. How these additions of cash have been done u/s 154 claiming that there was a mistake apparent from record in the original order, is not borne out anywhere in the records.

We note that assessee has filed return under presumptive taxation regime of section 44ADA in which books of accounts were not required. Assessee’s submissions in explanation of cash-in-hand are sufficiently cogent. The estimate of cash by the ld. CIT (A) was also not done on correct basis.

CIT (A) himself stated that claim of the assessee in respect of non-cash expenses cannot be ruled out. However, the assessee has not provided details of such expenses. This is a strange observation and ld. CIT (A) has on ad hoc basis held that on some non-cash expenses, 1/3rd of the expenses calculated by AO in this regard i.e. Rs.5,21,650/- (1/3rd of Rs.15,64,650/-) is allowed.

This is solely on the basis of surmises and conjectures. The estimate of cash under the presumptive regime by the AO as well as CIT (A) is flawed. The same is based on surmises and conjectures and the same is not sustainable on merits also. So, to conclude, this estimate of cash in order passed u/s 154 is jurisdictionally not permissible and secondly, on merits also, we note that the addition is based on surmises and conjectures which cannot be sustained.Appeal filed by the assessee stands allowed.