2025 (4) TMI 24 - AT - Income Tax

Addition representing alleged cash payment made for purchase of an old machinery and held as unexplained investment by invocation of section 69B r.w.s. 115BBE - AO has observed that based on the said printout that assessee has made cash payment to M/s Chetak Enterprises for purchase of an old machinery - HELD THAT - As printout was not speaking document which can be used as a basis for making the addition u/s 69B of the Act in the absence of any substantive enquiry to validate the content of the paper with any supportive and corroborative material more particularly have been regard to the confirmation from M/s Chetak Enterprises Ltd. also denied to have been received any cash. The market value of the machinery also stands corroborative as per the valuation report which too stands unrebutted. The document should be clear and unambiguous in respect of all four components of charge of tax. If it is not so the document is only a dumb document and no charge of tax can be levied on the assessee on the basis of a dumb document. Further it has been held that in absence of any supportive and corroborative material and evidence a loose paper found during search containing rough notings of proposals/offers could not be a basis for making addition u/s 69B of the Act. See Sharad Choudhary 2014 (8) TMI 309 - ITAT DELHI AO has not even made any enquiry about the value of the old machinery purchased by the assessee. Considering there was no justification for the CIT(A) to have sustained the addition and accordingly we delete the addition made u/s 69B. Grounds 4 to 4.2 raised by the assessee are allowed. Addition made representing alleged cash payment made to supplier and held as unexplained expenditure by invocation of section 69C r.w.s. 115BBE - HELD THAT - We observed that the ld. CIT(A) has sustained the addition by holding that the assessee during the course of assessment and appellate proceedings has failed to prove the source of expenditure. It is noted that there is no admission of cash paid by any of the director or employee of the assessee. It is noted that there is no admission of receipt of cash. It is noted that the payments were made through banking channel only and it had not made any such payment in cash. As observed that the AO did not consider the need to summon to M/s Aggarwal Sun Pipes and M/s Verticast Concrete (P) Ltd. or to record the statement by giving an opportunity to assessee to cross examine the said person. The AO has not even referred to any statement record of the assessee or any corroborative evidence detected as a result of search. There was no justification for the ld. CIT(A) to have sustained the addition and accordingly we delete the addition made u/s 69C.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the assumption of jurisdiction under Section 153A of the Income Tax Act, 1961, and the framing of assessment under the same section were valid.
• Whether the approval obtained under Section 153D was mechanical, illegal, and invalid, thereby rendering the assessment order invalid and without jurisdiction.
• Whether the addition of Rs. 4,97,14,659/- as unexplained expenditure under Section 69C read with Section 115BBE was justified.
• Whether the addition of Rs. 2,77,79,000/- as unexplained investment under Section 69B read with Section 115BBE was justified.
• Whether the addition of Rs. 1,00,00,000/- as unexplained expenditure under Section 69C read with Section 115BBE was justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction under Section 153A

• Legal Framework: Section 153A of the Income Tax Act allows for assessment or reassessment of income if a search is conducted under Section 132.
• Court's Interpretation: The Tribunal did not specifically address the jurisdiction issue in detail, as the primary focus was on the additions made under various sections.
• Conclusion: Grounds 1 and 2 related to jurisdiction were not pressed by the assessee and were dismissed.

Issue 2: Addition of Rs. 4,97,14,659/- under Section 69C

• Legal Framework: Section 69C deals with unexplained expenditure, which is deemed to be the income of the assessee if the assessee fails to explain the source of such expenditure.
• Court's Interpretation: The Tribunal noted that the facts were similar to a previous case where the issue was restored to the Assessing Officer for fresh consideration.
• Key Evidence: The addition was based on seized documents, which were not confronted to the assessee during the assessment proceedings.
• Conclusion: The Tribunal restored the matter to the Assessing Officer for fresh consideration, allowing the assessee's grounds for statistical purposes.

Issue 3: Addition of Rs. 2,77,79,000/- under Section 69B

• Legal Framework: Section 69B pertains to unexplained investments, where the value of the investment exceeds the amount recorded in the books.
• Court's Interpretation: The Tribunal found that the addition was based on loose papers, which were deemed to be dumb documents without corroborative evidence.
• Key Evidence: The assessee provided ledger accounts, invoices, and a valuation report, but no cash payment evidence was found.
• Conclusion: The Tribunal deleted the addition, finding no justification for sustaining it.

Issue 4: Addition of Rs. 1,00,00,000/- under Section 69C

• Legal Framework: Similar to the previous Section 69C issue, this section deals with unexplained expenditure.
• Court's Interpretation: The Tribunal noted that there was no admission of cash payments by the assessee or the suppliers, and the transactions were through banking channels.
• Key Evidence: The Tribunal found the seized documents to be dumb documents without corroborative evidence.
• Conclusion: The Tribunal deleted the addition, finding no justification for sustaining it.

3. SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal emphasized that additions based on seized documents must be supported by corroborative evidence. Dumb documents, which do not clearly indicate any transaction, cannot form the basis for additions.
• Final Determinations: The Tribunal allowed the appeal partly by deleting the additions made under Sections 69B and 69C, while dismissing the jurisdictional grounds as they were not pressed by the assessee.