No Addition Is Permitted U/s 68 Without Linking Alleged Entries Of Cash With That Of Material Seized During Course Of Search: Mumbai ITAT
On finding that the AO has failed to prove that the seized documents were related to the assessee, the Mumbai ITAT held that the addition made by the AO u/s 68 of the Income Tax Act, without bringing any concrete evidence on record incriminating the assessee is not sustainable, and deserves to be deleted. The ITAT went on to hold that the order passed is an un-reasonable order and...
On finding that the AO has failed to prove that the seized documents were related to the assessee, the Mumbai ITAT held that the addition made by the AO u/s 68 of the Income Tax Act, without bringing any concrete evidence on record incriminating the assessee is not sustainable, and deserves to be deleted.
The ITAT went on to hold that the order passed is an un-reasonable order and in cryptic manner, as the entire loan pertaining to assessee was added as unexplained credit without providing the assessee any opportunity to explain those.
Section 68 of the Income Tax Act, statutorily authorises an AO to assess the unexplained cash credit as 'Income and add it back to the total income of an assessee accordingly'.
The Bench of the ITAT comprising of Anikesh Banerjee (Judicial Member) and Padmavathy S (Accountant Member) reiterated while referring the decision of the Coordinate Bench in the case of ITA No.3243/Mum/2023 that “the Assessing Officer made the additions mainly on the ground that Nilesh Bharani in his statement recorded under section 132(4) of the Act has admitted that he was in the business of lending / borrowing money in cash (unaccounted and undisclosed business). Further, in the course of search, a diary has been seized wherein inter-alia following entries have been recorded and the Assessee's name is also appearing in the same diary in coded word.” (Para 9)
Facts of the case:
A search and survey action were completed wherein statement of was recorded and certain documents were seized. Based on the material seized and the statement recorded an information was received by the AO that a cash loan of Rs. 21,50,000/- given by the assessee. Accordingly, the AO issued a notice u/s 148 in response to which the assessee filed the return of income. The AO further issued notice calling on the assessee to file further details pertaining to the impugned loan transactions. The assessee submitted before the AO that no such loan transaction was carried out by him and that nothing in the seized material or the statement recorded links the assessee to the impugned transaction. The assessee also requested the AO to provide an opportunity for cross examination. The AO however, did not accept the submissions of the assessee and proceeded to make the addition u/s 68 treating the entire loan as unexplained. On appeal, the CIT(A) upheld the addition made by the AO u/s 68.
Observations of Tribunal:
The Bench noted that the accountant in the statements recorded has explained how the entries are to be decoded for understanding what each entry means really.
The Bench observed that the AO has not brought out any specific finding on how the impugned entries are linked to the assessee and whether any other seized material other than what is shared with the assessee have been used to aid the interpretation.
The Bench further observed that other than decoding the entries as pertaining to the assessee the AO has not brought any other material on record to substantiate that the assessee has given the cash loans.
The Bench found that the CIT(A) has not gone into the merits of the issue and has merely confirmed the addition relying on AO's findings.
The Bench further found that nothing has been brought on record by the AO to substantiate the allegation that the assessee has entered into the impugned transactions.
Therefore, ITAT allowed the assessee's appeal.
Counsel for Appellant/Taxpayer: Subodh Ratnaparkhi
Counsel for Respondent/Department: R.R. Makwana
Case Title: Parag Motilal Savla verses ITO
Case Number: I.T.A. No. 4220/Mum/2023