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Income Tax Appellate Tribunal, DEHRADUN BENCH “SMC”, NEW DELHI
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2021-22, arises out of the order of the Commissioner of Income Tax (Appeals)-3, Noida [hereinafter referred to as „ld. CIT(A)‟, in short] dated 24.04.2024 against the order of assessment passed u/s 143(3) the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 28.12.2022 by the Assessing Officer, DCIT, Central Circle, Dehradun (hereinafter referred to as „ld. AO‟).
At the outset, we find that the assessee filed this appeal belatedly before this Tribunal. The reasons adduced by the assessee is that his both parents were suffering from cancer and assessee was pre occupied in consulting the doctors regarding their treatment during the relevant time which had eventually resulted in delay of about a fortnight in filing of appeal before this Tribunal. Considering the reasons adduced for the delay, in the Page | 1 interest of substantial justice, we are inclined to condone the delay and admit the appeal of the assessee for adjudication.
The assessee is has raised the following grounds of appeal:-
“1) The learned CIT (Appeals) has erred both in law and on facts by making an addition based on an image recovered from the mobile phone of a third party i.e. Sh. Anuj Kumar Singhal. This action disregards the presumptions stipulated in Section 292C, which clearly states that the person from whose possession and control the books/documents are found is presumed to be the owner for all purposes under the Act. 2) The learned CIT (Appeals) has erred in law and on fact by confirming the addition of Rs. 5,00,000 under Section 69C of the Income Tax Act, 1961, Imposed by the Assessing Officer, despite the assessment being carried out under Section 40A(3). The addition was made solely because the appellant did not provide an explanation for the alleged expenditure, leading the Ld. Assessing Officer to consider it for addition under Section 69C due to the appellant's inability to verify the transaction. It is important to note that the assessee neither Incurred nor recorded such an expense in his audited books of accounts, rendering the action unjust and invalid. 3) The Learned CIT (A) made additions of Rs. 32,969 and Rs. 45,570 based on loose paper containing rough workings that have no relation to the appellant's business. These papers neither mention the appellant's name nor the business, and the amounts listed were never treated as expenditures by the appellant. Treating these amounts as unexplained expenditure under Section 69C is inappropriate because it disregards the inherent requirement of this section, which mandates that the "assessee must have incurred that expenditure" for it to be considered unexplained. 4) The appellant asserts that during both the search proceedings and the assessment, they did not admit to owning such images/rough workings. Considering these numbers as unexplained under section 69 and adding them to the income, despite the fact that they cannot be directly associated with the assessee's business or were not claimed in the duly submitted and department-accepted books of accounts, due to the Respondent's dissatisfaction with the Appellant's submissions, and further upholding the additions made by the Ld. Assessing Officer, makes the action unjust and invalid. 5) That learned CIT (Appeals) erred in law and on fact by confirming the addition of Rs. 5,78,539, imposed by the Ld. Assessing Officer, are purely work of assumptions to finalized high pitched additions to put on record adverse finding which never actually existed. 6) The appellant craves leave to reserve its right to add to, delete from, amend, alter or modify its Grounds of Appeal before or at the time of hearing.”
We have heard the rival submissions and perused the material available on record. The assessee is an individual engaged in the business of wholesale and retail trade of Fast Moving Consumer Goods (FMCG) in the name and style of M/s. Shree Satya Sai Traders. A search and seizure operation was conducted u/s 132 of the Act on the assessee‟s residential and business premises on 17.12.2021. The assessee had filed his regular return of income u/s 139(1) of the Act for AY 2021-22 on 10.01.2022 declaring total income of Rs. 22,05,930/-. The ld AO observed that during the search operation carried out in the case of the assessee, an image was found and seized from the mobile of the assessee‟s brother Shri Anuj Kumar Singhal. Further, as per the ld AO, on examination of the image it was noticed that the image is actually a ledger in the name of assessee‟s proprietorship concern M/s. Shree Satya Sai Traders in the books of some unknown entity/ person, which revealed that assessee had made purchase to the tune of Rs. 5,55,221/- and paid cash of Rs. 5 lakhs on 27.03.2021. Accordingly, the ld AO directed the assessee to explain the nature of aforesaid purchase of Rs. 5 lakh together with its source and also show caused as to why the said expenditure be not disallowed u/s 40A(3) of the Act. The assessee submitted that the said image was found from the mobile of assessee‟s brother at the time of search and hence, the presumption in terms of Section 292C of the Act would apply to his brother and not to the assessee. The ld AO referred to the statement given by the assessee in response to Question No. 10, wherein, the assessee submitted that his brother looks after the proprietary concern affairs. Accordingly, the ld AO concluded that the image found and seized from the mobile of assessee‟s brother containing ledger account of assessee‟s business concern pertains and belongs to assessee and accordingly, rejected the contention of the assessee. Since, the nature and source of the said cash expenditure of Rs. 5 lakhs was not given by the assessee, the ld AO added the same as unexplained expenditure in terms of section 69C of the Act. This action of the ld AO was upheld by the ld CIT(A).
We find that the image that was found from the brother of the assessee was not containing any ledger as stated by the lower authorities. Instead it reflects a small statement containing certain figures together with the name of assessee‟s proprietary concern with the date. The said transaction neither depicts any purchase made by the assessee nor sales made by the assessee. It does not reflect transaction purported to be recorded in any ledger account under any accounting software available in the market. The assessee had always pleaded that his brother Anuj Kumar Singhal is an independent person assessed to income tax and had duly filed his return of income showing income from trading business. It is not in dispute that the image was found and seized from the mobile of assessee‟s brother during the course of search. Hence, the said contents should be presumed to be belonged to Shri Anuj Kumar Singhal in terms of section 292C of the Act, unless rebutted by him. The revenue was not able to bring on record any rebuttal statement given by Shri Anuj Kumar Singhal either during the course of search or during the course of assessment proceedings. Hence, there is no scope of considering the sum of Rs. 5 lakhs in the hands of the assessee by relying on the image found from 3rd party premises. Accordingly, Ground Nos. 1 and 2 raised by the assessee are hereby allowed.
Ground No. 3 raised by the assessee is challenging the addition made in the sum of Rs. 32,969/- and Rs. 45,570/- u/s 69C of the Act.
We have heard the rival submissions and perused the material available on record. During the course of search, the ld AO had mentioned that a loose paper was found and seized from the assessee brother‟s mobile which mentioned that there was some cash payment of Rs. 32,969/- on 27.12.2020 for some unknown expenditure and cash memo dated 18.03.2021 of Rs. 45,570/-. Since the nature and source of the aforesaid expenditure of Rs 32,969/- was not furnished by the assessee, the ld AO proceeded to treat the same as unexplained expenditure u/s 69C of the Act. With regard to cash memo of Rs. 45,570/-, the ld AO observed that the said bill did not bear any particulars as to who raised it and that the cash payment of Rs. 45,570/- appeared to have been made by the assessee. Since, no plausible explanation was given by the assessee regarding the same, he proceeded to treat the same as unexplained expenditure u/s 69C of the Act.
At the outset, the ld AR vehemently argued that the show cause notice for both the sums were originally given by the ld AO as to why the same should not be disallowed u/s 40A(3) of the Act by drawing a presumption that the loose sheet represents payments made by the assessee. But ultimately the addition was made u/s 69C of the Act without providing any opportunity of being heard to the assessee to explain as to why section 69C of the Act was not applicable. Be that as it may, on perusal of the said loose sheets, we find that these papers are some estimates and rough notings. There is no mention of receiver of payment or identity of person who possibly existed and had received any payment. There is no evidence to prove that the said loose sheet represent payments made by the assessee so as to either invoke the provisions of section 40A(3) or section 69C of the Act. The said loose sheet does not even mention that it represent either payment or receipt. Hence, we hold that these loose sheets are mere dumb documents not corroborated with any other extraneous link with the transactions of the assessee or his business. Hence, we have no hesitation to delete the said additions made in the sums of Rs. 32,969/- and Rs. 45,570/- u/s 69C of the Act. Accordingly, Ground No. 3 raised by the assessee is allowed.
Ground Nos. 4, 5 and 6 are general in nature and does not require any specific adjudication.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 09/04/2025.