2024 (9) TMI 1782 - AT - Income Tax

Addition u/s 69A and 69C - money received on sale of flats - As per AO so sufficient incriminating material in the form of loose papers excel sheet entries and statements recorded during the search and post search proceeding to establish that the assessee has received cash over and above the value as per the sale deed - CIT(A) deleted addition - HELD THAT - The assessing officer had neither carried out any enquiry/verification from the parties mentioned in the loose paper and nor brought any material on record to disprove the submission of the assessee. AO had made addition u/s 69C on the basis of loose paper without disproving the submission of the assessee that same was merely proposal and further during the course of assessment proceedings the AO had made enquiry from M/s. Sai Estate Consultant u/s 133(6) of the Act and in response the said broker submitted that they had neither received any commission income nor raised any invoices towards the alleged commission. After considering the facts and material as discussed we do not find any reason to interfere in the decision of ld. CIT(A). Therefore grounds no.1 to 3 of the appeal filed by the revenue are dismissed. Accordingly the appeal of the Revenue is dismissed.

Summary

ISSUES:

Whether additions under section 69A of the Income Tax Act on account of alleged receipt of "on money" (cash over and above sale deed value) from sale of flats are justified based on incriminating material found during search and seizure proceedings.Whether additions under section 69C of the Income Tax Act on account of alleged cash brokerage/commission paid to brokers on sale of flats are justified based on seized loose papers, excel sheets, WhatsApp chats, and statements recorded during search and post-search proceedings.Whether the appellate authority erred in deleting the additions despite rejecting the assessee's challenge to the authenticity and credibility of the incriminating material found during search and seizure.Whether WhatsApp chats and electronic evidence seized during search have evidentiary value in income tax proceedings.Whether absence of physical cash recovery during search negates the inference of receipt of unexplained cash.Whether the assessing officer complied with principles of natural justice and provided adequate opportunity of hearing before making additions.Whether the onus to prove receipt of cash lies on the revenue or the assessee in proceedings under sections 69A and 69C.

RULINGS / HOLDINGS:

The additions of Rs. 2,93,00,000/- under section 69A on account of alleged receipt of on money were deleted as the assessee successfully rebutted the presumption by producing sale agreements, ledger accounts, and bank statements showing payments were received through banking channels, and the assessing officer failed to bring cogent and corroborative evidence to the contrary.The addition of Rs. 43,15,000/- under section 69C on account of alleged cash brokerage payments was deleted since the loose paper relied upon was a mere proposal that did not materialize, the broker denied receipt of any commission in response to notice under section 133(6), and the assessee demonstrated that no such cash payments were made or accounted for.The appellate authority did not err in deleting the additions despite rejecting the assessee's challenge to the authenticity of incriminating material because the merits of addition were examined independently and the balance of convenience favored the assessee due to doubts in the AO's findings.WhatsApp chats and electronic evidence seized during search proceedings have evidentiary value to the extent they are corroborative, supported by sections 132(1), 132(4), 132(4A), and 292C of the Income Tax Act, which provide for presumption of truth and admissibility in income tax proceedings.Absence of physical cash recovery during search does not negate the inference of receipt of unexplained cash since searches cannot cover all premises and assessees may hide incriminating material; thus, absence of cash is not determinative of innocence.The assessing officer provided adequate opportunity of hearing as evident from multiple hearings over a staggered period, satisfying principles of natural justice.The onus to prove receipt of cash lies on the revenue; the assessing officer must bring cogent evidence to substantiate unexplained cash receipts, and mere reliance on loose papers without corroboration is insufficient.

RATIONALE:

The court applied the statutory framework under the Income Tax Act, particularly sections 69A (unexplained money), 69C (unexplained expenditure), 132 (search and seizure), and 292C (presumption as to documents found during search), which empower authorities to rely on seized documents and electronic records with a presumption of truth.Precedents were relied upon to establish that income tax proceedings are quasi-judicial and not bound by strict rules of evidence under the Indian Evidence Act; material on record and preponderance of probabilities suffice for assessing tax liability.The court emphasized the principle that the revenue bears the burden of proof to establish unexplained cash receipts and cannot shift the onus onto the assessee to disprove such receipts without adequate inquiry or corroborative evidence.Decisions cited clarified that WhatsApp messages and electronic evidence have limited but significant evidentiary value in income tax proceedings, distinct from civil commercial disputes.The appellate authority's approach to independently assess the merits of additions and apply the balance of convenience test was upheld, reflecting a doctrinal emphasis on fairness and evidentiary scrutiny in tax assessments arising from search and seizure.The court rejected the argument that wrong quoting of sections (e.g., invoking section 69A instead of another) is fatal, endorsing substance over form in tax proceedings.The reasoning acknowledged practical limitations of search operations and recognized that absence of physical cash recovery does not conclusively prove absence of undisclosed income.