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Facts
A search and seizure operation was conducted on January 12, 2017. During the assessment proceedings for A.Y. 2013-14, the Assessing Officer (AO) made an addition of Rs. 4,87,81,500/- for unexplained unsecured loans under Section 68 of the Income Tax Act. The assessee challenged this addition before the CIT(A) arguing that it was not based on any incriminating material found during the search.
Held
The CIT(A) deleted the addition, relying on the Delhi High Court's decision in CIT Vs Kabul Chawla. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, affirming that the addition was based on entries in the books of account and not on incriminating material found during the search. Citing the Supreme Court's ratio in Abhisar Buildwell, the Tribunal concluded that such an addition, without incriminating material, is not sustainable.
Key Issues
Whether an addition for unexplained unsecured loans under Section 68 of the IT Act is sustainable when based solely on entries in the books of account and not on incriminating material found during a search.
Sections Cited
Section 68 of the Income Tax Act
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: SH. N. K. BILLAIYA & MS ASTHA CHANDRA
This appeal by the revenue is preferred against the order of the CIT(A)-27, New Delhi dated 18.02.2022 pertaining to A.Y. 2013-14.
The grievance of the revenue read as under :-
The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.4,87,81,500/- made by the AO on account of unexplained unsecured loans u/s 68 of the IT Act.
2. The Ld. CIT(A) has erred in law and on facts in stating that the addition made by AO on account of unexplained unsecured loans u/s 68 of the IT Act, 1961 is not sustainable and deserves to be deleted as the addition had been made not on the basis of incriminating material/evidence found during the search proceedings.
3. The Ld. CIT(A) has erred in law and on facts in deleting the addition made by the AO in view of the judgment in the case of CIT Vs Kabul Chawla (2016) 380 ITR 0573 as the said decision does not deal with the facts & circumstances of the present case.
(a) The Ld. Commissioner of Income Tax (Appeals) is erroneous and not tenable in law and on facts.
(b) The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.
The above grounds of appeal have already been approved by Pr. CIT, Central-2, New Delhi
Briefly stated the facts of the case are that a search and seizure operation was conducted by the Investigation Wing of the Department on 12.01.2017 in Crink Jewel Group of cases. In the search proceedings certain documents relating to the assessee were also found and seized. Accordingly statutory notices were issued and served upon the assessee.
4. During the assessment proceedings the AO noticed that the assessee has taken long term borrowings from different parties. The assessee was asked to furnish the details / information alongwith evidences. On receiving no plausible reply the AO made the addition of Rs.48781500/- as unexplained credit.
The addition was challenged before the CIT(A) on the ground that no incriminating material was made the basis for the impugned addition. The CIT(A) was convinced that the ratio laid down by the Hon’ble Delhi High Court in the case of Kabul Chawla 380 ITR 573 is squarely applicable and deleted the addition.
We have carefully perused the assessment order. There is no dispute that the addition as unexplained cash credit is based upon the entries found in the books of account of the assessee and has nothing to do with any incriminating material found at the time of search. Therefore, the ratio laiddown by the Hon’ble Supreme Court in the case of Abhisar Buildwell 454 ITR 212 the CIT(A) deleted the impugned addition.
In the light of the above we decline to interfere with the findings of the CIT(A) the appeal of the revenue is accordingly dismissed.
Decision announced in the open court on 23.01.2024.