Additions to be based solely on tangible material and not on the basis of estimations or extrapolation theory: ITAT

Array Land Developers Pvt Ltd Vs DCIT (ITAT Chennai)

Conclusion: In present facts of the case, the ITAT observed that Guess work or estimation or extrapolation of income is not permissible unless there are strong evidences to suggest otherwise. The additions are to be based solely on tangible material and not on the basis of estimations or extrapolation theory.

Facts: In present facts of the case, the appeals by assessee for AY 2015-16, 2016-17 & 2017-18 arises out of common order passed in the matter of separate assessments framed by Ld. Assessing Officer [AO] u/s.143 r.w.s. 153A of the Act on 25-12-2019.

In present facts of the case, the assessee group was subjected to search action on 09.11.2017. During the course of search action, a laptop was found which was accepted to be used by one of the directors of the assessee company. In the laptop, an excel sheet was found which contained details of windmill purchased by the assessee from various parties. This sheet, inter-alia, contained the details of parties from whom windmill was purchased, HTSC No., KW details of wind mill, date of purchase, Land cost as per Sale Deed, Machinery Cost including VAT and Total cost which was summation of machinery cost and land cost. The total cost tallied with the total purchase value of the windmills along with the land as per the books of accounts of the assessee. The last column had no title but it mentioned certain acronyms like “7C95L” etc. Based on certain loose sheets, the term “C” & “L” was understood by Ld. AO as “Crores” and “Lacs” respectively. The same led a suspicion in the mind of Ld. AO that the assessee made cash payment over and above the recorded value and accordingly, impugned additions were made in the hands of the assessee u/s 69A for alleged cash payment.

It was observed by the ITAT that assessee’s representative has, all along, denied having made any such cash payment to the vendors over and above the recorded book value. The evidence being relied upon by Ld. AO was in the shape of editable excel sheets which do not convey anything to show that such payment, in fact, was made by the assessee to various vendors. The assessee also submitted that the laptop was personal laptop of major shareholder and on the basis of this sheet alone, the impugned additions could not be sustained in law. Under these circumstances, it was observed that the onus had shifted on revenue to controvert the submissions made on behalf of the assessee by bringing on record cogent evidences to controvert the submissions of the assessee. The same could be in the shape of further investigation from the vendors and confronting to them the said material found from the assessee’s premises. However, there was total lack of any further independent investigation on the part of Ld. AO despite the fact that the assessment was made after a considerable period of time and Ld. AO had ample time to carry out such an investigation. Except for passing on this information to other AO’s, no efforts have been made by Ld. AO to corroborate the stand taken by him. The impugned addition, has been made on mere presumptions and assumptions of cash payment by the assessee which is not backed up by any evidence on record.

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