Addition for alleged cash payment based on file/data retrieved from hard disk quashed

Addition for alleged cash payment based on file/data retrieved from hard disk found during search of third party quashed in absence of corroborative evidence

ABCAUS Case Law Citation
ABCAUS 3404 (2020) (10) ITAT

Important case law relied upon by the parties:
Subhash Khattar
Arvind Nath Seth & Sons HUF
CIT vs. Alpha Impact Pvt. Ltd.
CIT vs. Prem Prakash Nagpal

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition u/s 69 of the Income Tax Act, 1961 (the Act) made by the Assessing Officer (AO).  

The assessee was an individual having income from salary, capital gains, property etc.

The assessee filed his return of income for the assessment year under consideration which was initially processed u/s 143(1) of the Act. 

Subsequently, the AO received information from the Investigation Wing w.r.t cash payments for the purchase/booking of the property, the details of which according to the AO were not disclosed by the assessee in the return of income.

The AO noted that a search and seizure operation was conducted in the case of a business group wherein a Hard Disk was seized. From the details discovered from hard disk it was noticed that the said business group had sold commercial spaces to different parties by receiving part cash payments and the cash payments were not reflected in its books of accounts.

From the details obtained from hard disk, it was noticed that assessee had also purchased a Shop and the assessee had paid part payment in cash. 

Accordingly, a notice u/s 148 of the Act was issued. The Assessee was therefore, asked to explain the source of cash payment. The Assessee denied the making of cash payment. 

The submission of the assessee was not found acceptable to AO who concluded that assessee had made investments in cash out of the income generated from undisclosed sources.

Thereafter, the assessment was framed u/s 148/143(3) and the total income was determined after making adding u/s 69 of the Act.

Aggrieved by the order of AO, assessee carried the matter before CIT(A) who upheld the order of the AO. 

The Tribunal observed that the coordinate Bench, in a similar case involving the addition based on excel file from hard disk found during search of the same business group, had deleted the addition.

The Coordinate Bench had held that a huge addition could not be made in a casual manner without having corroborative evidence in support of the alleged cash.

• SC lays down tests to determine if a debt is financial debt or operational under IBC
• Commonality of directors of companies does not mean deposits received was bogus
• Application though named as rectification but if tax is not legitimate, it also touches merit: HC
• Cost of acquisition as on 01.04.1981 taken as per valuer report by reverse indexing of FMV
• AO was directed to serve notice of hearing through physical mode upon assessee 

The Coordinate Bench noted in another case, where Assessing Officer had made additions under sec. 69 of the Act on the basis of the documents found during search at a place of third party, the Hon’ble  High Court that the Assessing Officer could not prove by evidence that said documents belonged to the assessee and that any money transaction had taken place.

Assessing Officer could not prove by evidence that said documents belonged to the assessee and that any on money transaction had taken place.

The Tribunal found that no distinguishing feature in the facts of the case and that of case laws relied upon by the assessee had been pointed out by the Revenue.

Further, no material was brought to show that the decisions of the co-ordinate bench of the Tribunal had been set-aside/stayed or over ruled by higher judicial forum.

Therefore, following the order of the co-ordinate bench and for similar reasons, the Tribunal held that the Revenue was not justified in making the impugned addition.

The appeal was accordingly allowed in favour of the aseessee.

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