Addition of unexplained expenditure incurred on election candidates of AAP confirmed

Addition for unexplained expenditure incurred on election on candidates of Aam Aadmi Party confirmed by ITAT

In a recent judgment, ITAT Delhi has upheld the addition for unexplained expenditure incurred on election on candidates of Aam Aadmi Party (AAP).

ABCAUS Case Law Citation:
ABCAUS 4128 (2024) (07) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition on account of unexplained cash credit under section 69C of the Income Tax Act, 1961 (the Act).

The assessee was a cabinet minister of Delhi Government under Aam Aadmi Party. A search and seizure action under section 132 of the Act was carried out in a Group and associates. A search warrant of authorization under section 132 of the Act was issued in the name of the appellant. During search an incriminating document in the form of a diary was recovered and seized from premises of the appellant. The diary contained entries of large amount of cash payment.

Notice under section 153A of the Act followed by notice under section 143(2) and notice under section 142(1) of the Act along with a detailed questionnaire was issued to the assessee to furnish details, documents.

The assessee was requested to provide explanation with respect to cash expenses during the year under consideration. Assessee submitted common reply with an affidavit of assessee mentioning that the diary was written by some other person and the same belonged to him. Affidavit of the other person was also filed.

However, the Assessing Officer (AO) concluded that amount was unexplained and added it to the total income of the assessee under section 69C as unexplained expenditure for the year under consideration and taxed under section 115BBE.

The assessee contended that CIT(A) erred in confirming addition by holding the diary seized was belonging to the assessee by applying the presumption u/s 132(4) of the Act ignoring that the said presumption is a rebuttable presumption. The presumption was rebutted by filing of affidavit of the other person owning the diary and explaining its contents by way of affidavit. That the diary was owned by a third party. So, the diary could not be considered as belonging to assessee as per settled law. No amount was mentioned in the diary was ever given to appellant/assessee.

It was contended that CIT(A) erred in confirming addition of unexplained expenditure under section 69C of the Act being the amounts mentioned in a diary seized from the office premises as expenses incurred by the appellant during his election campaign. The appellant never incurred the said amount during his election campaign in his constituency as the Expenditure Observer appointed by the Election Commission never challenged the same. The affidavit showed that the said amounts were spent by many party workers on their own violation without knowledge of the appellant. So the addition deserved to be deleted.

It was further contended that AO erred in law in making addition as unexplained expenditure under section 69C of the Act without appreciating that there were many duplicate/ triplicate entries in said diary and all amounts could not be aggregated for purpose of computing the amount spent.

The Tribunal observed that an affidavit of the said other person was filed regarding entries on each page of diary mentioning amounts and figures. The contents of affidavit did not properly explain entries as names of person paying the amount and the expenses paid were vaguely mentioned. Names of relatives of appellant/assessee were also mentioned. It was stated in the affidavit that only a lesser amount was incurred for promotion of Aam Aadmi Party and many candidates in West Delhi constituency. However, no supporting document regarding averment was submitted.

The Tribunal opined that in absence of specific details and other supporting documents, the affidavit of third person was rightly rejected by the AO and CIT(A) and the impugned orders being just, fair and reasonable, deserve to be upheld.

In view of above the appeal of the assessee was dismissed.

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