Loose excel sheets without any corroboration thereof, was not adequate enough to draw adverse inference of unaccounted loans by the assessee-firm – ITAT
In a recent judgment, the ITAT Chennai has held that loose excel sheets found during search without any corroboration thereof, was not adequate enough to draw adverse inference of unaccounted loans by the assessee-firm.
ABCAUS Case Law Citation:
4291 (2024) (10) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) sustaining the addition as unexplained investment u/s 69 of the Act on the presumption of unaccounted loans advanced by the Appellant. The Revenue had also filed cross objection for CIT(A) deleting the part addition towards bogus purchases.
The assessee was a resident firm. The assessee was subjected to search action u/s 132. Post search-proceedings, notice u/s 153A was issued to the assessee. The assessee filed return of income and disclosed certain additional income.
Accordingly, an assessment was framed u/s 143(3) r.w.s. 153A making addition inter alia towards bogus purchases based on certain excel sheets as found from personal computer used by the General Manager who admitted that one of the excel sheets contain cash received from various parties against whom bogus purchases were entered in regular books of accounts. Though the payments were made through banking channels but subsequently cash was received back from them. Few of the parties were admitted to be 100% bogus parties i.e., no material was received from these parties and only purchase invoices were received without delivery of any material. In few cases, part of the purchases was found to be genuine whereas part of the purchases was found to be without any supporting documents.
In the return, the assessee suo moto computed amount of bogus purchases and disallowed the same in the computation of income. However, the AO added back all the purchases quantified as bogus purchases to the income of the assessee.
The CIT(A) noted that AO could make one-to-one link in one or two cases between bogus purchases recorded in seized loose excel sheets in names of few parties and purchase bills raised in their names without supporting documents. The GM had identified 100% bogus purchases only from four parties. After examining the factual position vis-à-vis seized material
and explanation furnished by the assessee, the CIT(A) reached a conclusion that out of impugned addition, the party-wise break up with respect to purchases for approx. 2 crores was not provided by AO to the assessee. The same was simply categorized as ‘others’. No reasons had been given by AO for not disclosing party-wise details of such purchases. Therefore, the addition, to that extent, could not be sustained.
The Tribunal observed that find that during the course of search proceedings, adequate evidences were found that the assessee booked bogus purchases from certain parties. The purchases so made lacked supporting documents and the money as paid through banking channels were received back by the assessee. There was no finding that the other purchases were completely bogus. The party listed as ‘others’ for which even the names of the suppliers had not been identified by the AO. Therefore, the Tribunal held that the addition to that extent, had rightly been deleted by CIT(A).
The second addition was with respect to unexplained investment u/s 69 based on loose excel sheet found during search and the same was seized. The said excel sheet contained details of accounted and unaccounted loan transactions. The GM had stated that the entries made as ‘Ac’ were accounted loans advances by the assessee and its related concerns. The AO noted that loans were advanced to various parties and interest was charged at the rate of 1% to 1.7% depending upon the parties. Shri Vinoth, GM stated that entries with the description ‘U.Ac’ were cash loans advanced by the Managing Partners of the assessee firm. Similarly, the entries with the description ‘others’ were cash loans received from various parties and advanced to other parties by the managing partner.
Considering the contents of excel sheets, AO show-caused the assessee as to why the loans outstanding for this year was not to be treated as unexplained investment.
It was explained that all these notings were with reference to various parties who required loans and the parties who were possessing the funds and ready to give the same on interest. The assessee used to refer the parties who were in possession of funds to the funds-required parties. Only for the sake of reference, these noting were made in excel sheets for the purpose of management information. However, rejecting assessee’ submissions, AO added all amounts as unexplained investment u/s 69.
The Tribunal noted that impugned addition has been made solely on the basis of loose excel sheet found during search and statements recorded. It was observed that excel sheet had incomplete details and no date had been mentioned therein against alleged loans given by the assessee. It was also not mentioned who had given the loans and when the loans were given. Nothing could be deciphered on the basis of the same to substantiate the allegation that these were unaccounted loans given by the assessee during the year.
The ttt further observed that none of the parties to whom alleged loans had been given, not even been identified and no enquiries have been made from them to support the allegations. Merely on the basis of excel sheet, AO had concluded that the assessee had lent unaccounted loans to various parties. However, the allegations are bereft of any corroborative evidences on record.
The Tribunal opined that the said excel sheets were merely dumb document having not much evidentiary value unless the same was supported by corroborative evidences to support the fact that the assessee, in fact, advanced such undisclosed loans during this year.
It was further observed that the GM had stated that the unaccounted loans were advanced by the Managing Partners (Individuals) to various concerns. Going by this statement alone, the impugned alleged loans could not be added into the hands of the assessee at all since it was stated by him that the loans were advanced by individual partners and not by the assessee-firm. With respect to statement of Managing Partner it was noted that he had stated that the loans were lent out of unaccounted business income by virtue of inflation of expenses. Both the statements of GM and Managing Partner run contrary to each other. The assessee was subjected to search proceedings and after considering each and every incriminating material as found therein, the assessee already admitted additional income and AO made further additions in earlier years. Therefore, even otherwise, each and every unaccounted income whatever has been earned by the assessee-firm in earlier years, the same has already been brought to tax and therefore, no further addition could be made in the hands of the assessee at the time of expansion thereof.
The Tribunal noted that in a recent judgment, Karnataka High Court rendered in the context of Sec.153C, held that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. The Hon’ble Court referred to the decision of Hon’ble Supreme Court while arriving at such a conclusion. The Hon’ble Supreme Court had held that held that every transaction as recorded in the regular books needs to be independently corroborated and proved when some liability is to be fastened in respect of such transactions. Therefore, the legal principle as laid down by Hon’ble Supreme Court is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case. Pertinently, Special Leave Petition (SLP) of revenue against the decision of the Karnataka High Court has been dismissed by Hon’ble Supreme Court recently.
Further, the Tribunal observed that the Mumbai ITAT has held that when the seized papers were undated having no acceptable narration and did not bear the signature of any party, they are in the nature of dumb documents having no evidentiary value and could not be taken to be the sole basis for determination of undisclosed income of the assessee. The onus would be on revenue to collect cogent evidences to corroborate the nothings therein.
As a result the Tribunal held that impugned additions made merely on the basis of loose excel sheets without any corroboration thereof, was not adequate enough to draw adverse inference of unaccounted loans by the assessee-firm.
Accordingly, the Tribunal deleted the same and allowed the grounds raised by the assessee.
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