2025 (7) TMI 1103 - AT - Income Tax

Addition of unsecured loan as unexplained Income u/s 69A r.w.s 115BBE - Admission of additional evidence filed by the Assessee - HELD THAT - The finding given in the case of Shri Jagdishkumar Gupta 2025 (7) TMI 1044 - ITAT MUMBAI additional evidences could not be filed before lower authorities for the obvious reason that the letters exchanged and the repayment of advance happened only after the orders were passed by the lower authorities. It is not in dispute that MOU dated 07.12.2021 was filed before the lower authorities including Affidavit of Sumitradevi Chaudhary and explanation furnished. It is seen that the AO has not examined Sumitradevi Chaudhary inspite of Affidavit filed by her and the lower authorities have simply relied upon the seized document for making the addition. We see no harm in restoring the issue back to the file of the AO for fresh adjudication - Appeal of the Assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this appeal is whether the addition of Rs. 75,00,000/- made by the Assessing Officer (AO) under section 69A read with section 115BBE of the Income Tax Act, 1961, treating an unsecured loan as unexplained income, was justified. The appeal challenges the confirmation of this addition by the Commissioner of Income Tax (Appeals) [CIT(A)]. The key questions revolve around the correctness of the addition, the admissibility and relevance of additional evidence filed by the Assessee, and whether the AO's reliance on seized documents without examining key witnesses was appropriate.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Legitimacy of Addition under Section 69A r.w.s 115BBE of the Income Tax Act

Relevant Legal Framework and Precedents: Section 69A of the Income Tax Act deals with unexplained money, etc., where the AO may treat any sum found credited in the books of the Assessee as income if the source is unexplained. Section 115BBE prescribes a special tax rate for such unexplained income. The legal principle requires the Assessee to satisfactorily explain the nature and source of the sum credited to avoid addition.

Court's Interpretation and Reasoning: The Tribunal noted that the facts and legal questions in this appeal are identical to those in a related case involving another party for the same assessment year, except for the amount involved. The Tribunal relied on the detailed findings and reasoning in that related case to decide the present appeal.

Key Evidence and Findings: The Assessee filed additional evidence comprising letters exchanged between the Assessee and family members with a third party, Sumitradevi Chaudhary, referring to a Memorandum of Understanding (MOU) dated 07.12.2021 regarding the sale of land and advance payments aggregating to Rs. 6 crores. Subsequent correspondence indicated the balance consideration of Rs. 44 crores was not payable due to the third party's inability to pay, and the MOU was eventually terminated with a demand for refund of advances paid. Bank statements showing payments aggregating to Rs. 70 lakhs were also submitted. The Assessee argued these events occurred after the lower authorities' orders and thus could not have been produced earlier.

Application of Law to Facts: The Tribunal accepted that the MOU and an affidavit from Sumitradevi Chaudhary were filed before the lower authorities, but the AO did not examine her and relied solely on seized documents to make the addition. The additional evidence filed post-orders was relevant and had a bearing on the issue. The Tribunal emphasized that the AO must consider all relevant evidence, including newly filed documents, and examine witnesses as necessary.

Treatment of Competing Arguments: The Revenue contended against admission of additional evidence and upheld the addition. The Tribunal, however, found the Assessee's explanation credible and the additional evidence material, noting that the evidence was not an afterthought but arose from events occurring after the lower authorities' orders. The Tribunal also observed procedural lapses by the AO in not examining key witnesses despite affidavits.

Conclusions: The Tribunal admitted the additional evidence and set aside the issue for fresh adjudication by the AO. It directed the AO to reconsider the matter de novo, taking into account the additional evidence and existing record, and to provide the Assessee an opportunity to be heard. The AO was also empowered to summon and examine any person deemed necessary. The Tribunal refrained from expressing any opinion on the merits, keeping the issue open.

3. SIGNIFICANT HOLDINGS

The Tribunal held: "The additional evidences filed have bearing on the issue at hand. These additional evidences could not be filed before lower authorities for the obvious reason that the letters exchanged and the repayment of advance happened only after the orders were passed by the lower authorities."

Further, it stated: "It is seen that the AO has not examined Sumitradevi Chaudhary inspite of Affidavit filed by her and the lower authorities have simply relied upon the seized document for making the addition."

The Tribunal's core principle established is that when additional evidence arises post the lower authority's order, and such evidence is relevant and material, it must be admitted, and the matter remanded for fresh consideration. The AO must conduct a thorough inquiry, including examination of witnesses, and cannot rely solely on seized documents without proper verification.

Final determination on the issue was that the addition under section 69A read with section 115BBE was not to be upheld without fresh adjudication. The appeal was allowed for statistical purposes by remanding the matter to the AO for de novo consideration, ensuring procedural fairness and comprehensive evaluation of all evidence.