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Facts
A search and seizure operation was conducted on the assessee company, VVIP Group, where a director confessed to surrendering Rs. 16,65,60,788/- as undeclared 'on money'. However, the assessee only declared Rs. 13,45,00,379/- in its return, leading the AO to add the difference of Rs. 3,20,60,409/-. The AO also made an adhoc disallowance of Rs. 20 lakhs for unverifiable expenses.
Held
The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 3,20,60,409/-, finding that this amount represented refunds as per the seized document and the net disclosed income was correct. Regarding the adhoc addition of Rs. 20 lakhs for unverifiable expenses, the Tribunal partly allowed the revenue's appeal by restricting the addition to Rs. 1 lakh, acknowledging that some expenses were supported by self-generated vouchers.
Key Issues
1. Whether the CIT(A) erred in deleting the addition related to the difference between surrendered and declared income from 'on money'. 2. Whether the adhoc addition of Rs. 20 lakhs for unverifiable expenses was justified.
Sections Cited
Section 132 (Income-tax Act, 1961), Section 132(4), Rule 18(6) of the ITAT Rules
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘H’ BENCH,
Before: SHRI N.K. BILLAIYA, & MS ASTHA CHANDRA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the ld. CIT(A), Kanpur dated 14.06.2021 pertaining to A.Y. 2016-17.
The grievances of the Revenue reads as under:
“1. On facts and circumstances of the case and in law, the Ld. CIT(A) err d in deleting the addition made by AO to the tune of Rs. 3,20,60,409/- on account of difference of income surrendered during the course of search proceedings and the income declared by the assessee in return of income. As the Ld. CITIA) has not appreciated the fact that Shri Praveen Tyagi Director of the assessee company has confessed to surrender the amount of Rs.16,65,60,788/ -which was received as cash against the booking and the same was not declared in the books of accounts and the same i.e. R .16, 5,60,788/- was treated as "On Money" by the director himself.
2. On facts and circumstance of the ca e and in law, the ld. CIT(A) erred in deleting the addition made by AO to the tunc of Rs. 20,00,000/- unverifiable expenses. During the course of assessment proceeding the AR of the assess e company had acknowledged vide order sheet entry dated 26.12.2018 that some of the vouchers are not proper.
3. On facts and circumstance of the ca e and in law, the ld. CIT(A) relevant facts & circumstances and misread the facts to arrive at the conclusion.”
Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules.
Briefly stated, the facts of the case are that a search and seizure operation was conducted u/s 132 of the Income-tax Act, 1961 [the Act, for short] on 03.11.2016 at the premises of assessee company VVIP Group.
During the course of search and seizure operation at the residential premises of Shri Praveen Tyagi, Director of the assessee company, Annexure A was found and seized which is as under:
Shri Praveen Tyagi, Director of the company was confronted with the above seized document who stated that the above payments have been received in the company against the booking of flats in F.Y 2015-
He further stated that cash received amounting to Rs. 16,65,60,788/- has not been shown in the books of account of the assessee company as this amount is on money which he offered as unaccounted income of the assessee company.
However, during post search proceedings, the assessee company filed a written reply in respect of the surrendered amount of Rs. 16,65,60,788/- on the issue of on money. The relevant part reads as under:
However, when the Assessing Officer saw the returned income of the assessee, he found that the assessee has included Rs. 13,45,00,379/- in its income out of total surrendered amount of Rs. 16,65,60,788/- and added the difference amount of Rs. 3,20,60,409/-
The Assessing Officer further found that the assessee has claimed expenses under various heads which are mostly supported by self generated vouchers and, therefore, made adhoc disallowance of Rs. 20 lakhs.
The assessee challenged the addition before the ld. CIT(A) and vehemently contended that documents should be read as a whole and in the alleged Annexure A, the assessee has returned Rs. 3,20,60,409/, therefore, the same was not included in the returned income of the assessee and balance surrendered amount has been honoured and the assessee has paid taxes thereon.
After considering the facts and submissions, the ld. CIT(A) found the contention of the assessee correct. In the loose sheet which is basis for making addition since there was refund of Rs. 3,20,60,409/-, the ld. CIT(A) directed the Assessing Officer to delete the same from the additions made.
In so far as adhoc addition of Rs. 20 lakhs is concerned, the ld. CIT(A) was of the opinion that no specific defect has been pointed out and addition has been made on surmises and conjectures and on hypothetical observations and, accordingly, directed the Assessing Officer to delete the same.
Before us, the ld. DR strongly supported the findings of the Assessing Officer but could not point out any factual error in the findings of the ld. CIT(A).
Seized document is exhibited elsewhere. It can be seen from the same that out of total amount of Rs. 16,65,60,788/-, Rs. 3,20,60,409/- has been refunded as mentioned in the sheet itself. Therefore, net cash generated by the assessee amounts to Rs. 13,45,00,379/- and the same has been disclosed by the assessee in its return of income.
Deletion of Rs. 3,20,60,049/- cannot be faulted with.
It would be pertinent to mention here that though the receipt of cash was found to be noted in the loose sheet, but physical cash was never found from the premises of Shri Praveen Tyagi nor any investment not disclosed was found which means that cash of Rs. 13,45,00,379/- must have been spent of some personal venture like family functions, marriage in the family etc etc.
16. In so far as addition of Rs. 20 lakhs is concerned, there is no dispute that it is purely on adhoc basis though the observation of the Assessing Officer that some of the expenses are supported by self generated vouchers cannot be brushed aside lightly. But, such petty expenses cannot be Rs. 20 lakhs. Therefore, in the interest of justice and fair play, we direct the Assessing Officer to restrict the addition to Rs. 1 lakhs only. The assessee shall get part relief on this addition.
17 In the result, the appeal of the Revenue in is partly allowed.
The order is pronounced in the open court on 21.02.2024.