Case Law Details
DCIT Vs Mahalaxmi Infracontract Ltd. (ITAT Ahmedabad)
Brief facts: The Assessing Officer made disallowance of ₹ 2,94,25,669/- on account of interest on GST and also disallowed GST late filing fee of ₹ 6,63,133/-. In appeal, Ld. CIT(Appeals) allowed the appeal of the assessee by holding that the aforesaid expenditures are not for violation of any law and are only compensatory in nature and hence the same are allowable as a deduction under section 37 of the Income Tax Act (“Act”).
Observations:
The Hon’able ITAT Observed that nothing has been brought on record by the Department to demonstrate that the aforesaid interest on GST and GST delayed filing fee was for infraction/violation of any law and no specific infirmity was pointed out in the order passed by Ld. CIT(Appeals).
Cases relied –
Mahalakshmi Sugar Mills Co. vs. Commissioner of Income-tax [1980] 123 ITR 429 (SC)/[1980] 16 CTR 198 (SC)[09-04-1980], the Hon’ble Supreme Court held that interest paid to Government for delay in payment of cess cannot be described as a penalty paid for an infringement of law. While passing the order, Hon’ble Supreme Court made the following observations:
It is apparent that section 3(2) of the 1956 Act requires the payment of cess on the date prescribed under the U.P. Sugarcame Cess Rules, 1956. If the cess is not paid by the specified date, then by virtue of section 3(3) of the 1956 Act the arrear of cess will carry interest at the rate of six per cent per annum from the specified date to the date of payment. Section 3(5) of the 1956 Act is a very different provision. It does not deal with the interest paid on the arrear of cess but provides for an additional sum recoverable by way of penalty from a person who defaults in making payment of cess. It is a thing apart from an arrear of cess and the interest due thereon.
The interest paid under section 3(3) of the 1956 Act cannot be described as a penalty paid for an infringement of the law. As that is the only ground on which the revenue resist the claim of the assessee to a deduction of the interest under section 10(2)(xv) of the 1922 Act the assessee was entitled to succeed. There was no dispute that the payment of interest represented expenditure laid out wholly or exclusively for the purpose of the business. There was also no dispute that it was in the nature of revenue expenditure.
Following this decision, the Rajasthan High Court in Rajasthan Central Stores (P.) Ltd. v. CIT [1985] 156 ITR 90 held that interest paid on account of the delay in remitting to the Government sales tax, is permissible deduction.
Similar view was taken by the Calcutta High Court in Balrampur Sugar Co. Ltd. v. CIT [1982] 135 ITR 227 and the Allahabad High Court in Triveni Engg. Works Ltd. v. CIT [1983] 144 ITR 732 (FB).
Order Decision : –
The Ld. CIT(Appeals) has correctly held that the above interest on GST and GST late filing fee was not towards violation of any law and hence is allowable as a deduction under section 37 of the Act.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
These are cross appeals have been filed by the Department and the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-11, (in short “Ld. CIT(A)”), Ahmedabad vide orders dated 15.07.2024 & 29.07.2024 passed for A.Ys. 2020-21, 2021-22 & 2017-18.
Assessment year 2020-21
2. The Department has raised the following grounds of appeal:
“(1) In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the disallowance of interest on GST of Rs.2,94,25,669/- and GST late filing fees of Rs.6,33,133/- ignoring the facts of the case that expenses claimed by the assessee are penal in nature therefore, no allowable under section 37 of the IT Act.
(2) In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing higher depreciation of Rs. 18,65,95,684/- claimed by the assessee on plant & machinery @30% instead of 15%.
(3) In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing higher depreciation of Rs.5,96,48,062/- claimed by the assessee on plant and machinery (Dumper/Tipper) @ rate of 45% instead of 15%.
(4) The Revenue craves leave to add/alter/armed and/or substitute any or all of the grounds of appeal.”
Ground Number 1: Ld. CIT(Appeals) has erred in deleting the disallowance of interest on GST of ₹ 2,94,25,669/- and GST delayed filing fee of ₹ 6,33,133/-
3. The brief facts of the case are that the Assessing Officer made disallowance of ₹2,94,25,669/- on account of interest on GST and also disallowed GST late filing fee of ₹6,63,133/-. In appeal, Ld. CIT(Appeals) allowed the appeal of the assessee by holding that the aforesaid expenditures are not for violation of any law and are only compensatory in nature and hence the same are allowable as a deduction under section 37 of the Income Tax Act (“Act”).
4. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) giving relief to the assessee. Before us, nothin has been brought on record by the Department to demonstrate that the aforesaid interest on GST and GST delayed filing fee was for infraction/violation of any law and no specific infirmity was pointed out in the order passed by Ld. CIT(Appeals).
5. In the case of Mahalakshmi Sugar Mills Co. vs. Commissioner of Income-tax [1980] 123 ITR 429 (SC)/[1980] 16 CTR 198 (SC)[09-04-1980], the Hon’ble Supreme Court held that interest paid to Government for delay in payment of cess cannot be described as a penalty paid for an infringement of law. While passing the order, Hon’ble Supreme Court made the following observations:
It is apparent that section 3(2) of the 1956 Act requires the payment of cess on the date prescribed under the U.P. Sugarcame Cess Rules, 1956. If the cess is not paid by the specified date, then by virtue of section 3(3) of the 1956 Act the arrear of cess will carry interest at the rate of six per cent per annum from the specified date to the date of payment. Section 3(5) of the 1956 Act is a very different provision. It does not deal with the interest paid on the arrear of cess but provides for an additional sum recoverable by way of penalty from a person who defaults in making payment of cess. It is a thing apart from an arrear of cess and the interest due thereon.
….
The interest paid under section 3(3) of the 1956 Act cannot be described as a penalty paid for an infringement of the law. As that is the only ground on which the revenue resist the claim of the assessee to a deduction of the interest under section 10(2)(xv) of the 1922 Act the assessee was entitled to succeed. There was no dispute that the payment of interest represented expenditure laid out wholly or exclusively for the purpose of the business. There was also no dispute that it was in the nature of revenue expenditure.
6. Following this decision, the Rajasthan High Court in Rajasthan Central Stores (P.) Ltd. v. CIT [1985] 156 ITR 90 held that interest paid on account of the delay in remitting to the Government sales tax, is permissible deduction. Similar view was taken by the Calcutta High Court in Balrampur Sugar Co. Ltd. v. CIT [1982] 135 ITR 227 and the Allahabad High Court in Triveni Engg. Works Ltd. v. CIT [1983] 144 ITR 732 (FB).
7. Accordingly, in light of the aforesaid decisions and discussion, we are of the considered view that Ld. CIT(Appeals) has correctly held that the above interest on GST and GST late filing fee was not towards violation of any law and hence is allowable as a deduction under section 37 of the Act. We find no infirmity in the order of Ld. CIT(Appeals) so as to call for any interference.
8. In the result, ground number 1 of the Department’s appeal is dismissed.
Ground Number 2: Ld. CIT(Appeals) erred in allowing higher depreciation of ₹18,65,95,684/- claimed by the assessee or plant and machinery @30% instead of 15%
9. The brief facts of the case are that during the course of assessment, the Assessing Officer observed that assessee claimed depreciation @30% on plant and machinery, being motor dumper, tipper etc whereas the assessee has shown income from mining contract job and not from the business of transportation on hire. The AO observed that assessee has been awarded composite work which includes blast hole, drilling, excavation, dumping the overburden at dumping site and transporting the mined mineral from mines to stocking place and levelling the same. Accordingly, the AO was of the view that the assessee has not been able to establish that the assessee was awarded work exclusively for transportation and its dumpers/tippers were used exclusively for earning transportation income. The AO was of the view that 30% rate of depreciation is available only if motor lorries are used for running them on hire. As per the facts of the assessee’s case, there is no income from hire and the assessee has received it’s income from business of mining activities, which is different from running vehicles on hire. Accordingly, the assessing officer restricted the claim of depreciation to 15% by holding that depreciation @30% is permissible only when the motor buses, motor lorries and motor taxis are used in business of running them on hire.
10. In appeal, Ld. CIT(Appeals) noted that for assessment years 2015-16, 2017-18 and 2018-19, similar issue came up for consideration before his predecessor and similar additions made by the assessing officer were deleted. Ld. CIT(Appeals) placed reliance on several judicial precedents and observed that the assessee was engaged in business of providing earthmoving equipment on hire and engaged in business of undertaking mining contracts, cargo handling and transportation contracts and for this purpose, the tippers/dumpers were used by the assessee for fulfilling the transportation part related to mining contracts. Ld. CIT(Appeals) observed that use of dumpers and tippers are integral part of the contract and without which, the contracts would not have been completed. Accordingly, in light of these facts, Ld. CIT(Appeals) allowed the appeal of the assessee.
11. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). Before us, at the outset, the counsel for the assessee submitted that on identical set of facts and issues, the Ahmedabad Tribunal in assessee’s own case for assessment years 2015-16, 2017-18 and 2018-19 have allowed the issue in favour of the assessee by dismissing the Department’s appeal on this issue. Accordingly, the issue is directly covered in favour of the assessee considering the orders passed by Ahmedabad Tribunal in assessee’s own case for assessment years 2015-16, 2017-18 and 2018-19.
12. It would be useful to reproduce the relevant extracts of the order passed by Ahmedabad Tribunal in ITA Nos. 484, 485 and 486/Ahd/2023 in the assessee’s own case, in which this issue was decided in favour of the assessee and Department’s appeal was dismissed:
“7. The case of the assessee is this that the depreciation claimed @30% on the dumper & tipper is as per the provisions of law as the activities of the assessee includes excavation of over burden materials, mining of minerals, transportation of excavated over burden material, excavation of minerals, transportation of minerals from mines to pit head and transportation of minerals from Pit head to Lignite handling system/power plant. Therefore, such motor vehicles, namely, dumpers & tippers are used in transportation of over burden materials and excavated materials owned by the Principal i.e. mining owner and not by the assessee. This particular vehicles are only used for transport beyond the shifting of materials from one place to another Mines, on which, excavation, transportation and other activities are carried out does not belong to the assessee and thus excavated earth and minerals transported doesn’t belong to the assessee but to the Principal who awarded this contract, whereas, the view of the Ld. AO is this that the assessee has been awarded with composite work including blast hole, drilling excavation, blasting, removal of overburden, dumping the overburden at dumping site and transporting the mined minerals from mines to stocking place and leveling of the same. It is found that in some cases separate rates for lignite mining and lignite transportation has been mentioned whereas the nature of work for all the sites is similar. Therefore, the assessee is not exclusively awarded contract work for transportation work and its dippers and tippers were exclusively used for earning transportation income. According to the Ld. AO, the claim of the assessee at the rate of depreciation is only available if motor lorries are used for running without hire, the assessee’s income is not from hire but from business of mining and other ancillary works as mentioned hereinabove, as the assessee got payment for these activities from the person who has awarded the contract on the basis of MT mined materials (net) or of instances on basis of “MT” material including overburden + mined materials. The assessee is basically having business of mining where excavators and dumpers are used which is entirely different income from vehicle running on hire. The Ld. AO relied upon certain judgmets including judgment passed by Hon’ble Rajasthan High Court in case of CIT vs. Sardar Stone, reported in 215 ITR 350 and judgment passed by the Hon’ble Karnataka High Court in the case of Veener Mills vs. CIT, reported in 201 ITR 764. Finally, the Ld. AO attempted to distinguish the judgment passed by the Hon’ble Apex court in the case of Gupta Global Exim (supra) to this effect that as the Hon’ble Supreme Court has allowed depreciation at higher rates for motor lorry used in the business of running them on hire. The basic test would be whether the assessee is having the transportation business whereas the assessee is having mining business not from transportation as the year under consideration and even in earlier year wherein mining contract which is also reflecting from the audit report from A.Ys. 2014-15 & 2015-16 has shown being mining and civil contractor rather than transportation. The assessee fails the test laid down by the Hon’ble Supreme Court and found not eligible for depreciation at higher rate. Addition thereon to the tune of Rs.8,71,10,768/- was made by the Ld. AO in the hands of the assessee.
8. In appeal, apart from all this explanation, the assessee further relied upon the Circular being No. 652 dated 14.06.1993 issued by the CBDT, wherein it has been categorically fixed that higher rate of depreciation was admissible on motor vehicle in the assessee’s business of transportation of goods on hire and that higher rate will not apply if the motor lorries etc. are used in the non-hiring business of the assessee. Further Circular No. 609 dated 29th July, 1991, wherein the Board has clarified that the higher rate of depreciation is also admissible when the assessee is using motor lorry in his own business of transportation of goods on hire. The following facts and figures were also placed before the First Appellate Authority:
…
10. Further that, it was also placed on record that the judgment passed by the ITAT, Rajkot was challenged before the Hon’ble High Court in the case of PCIT, Rajkot-I vs. Durga Construction Co., reported in [2018] 93 taxmann.com 436, wherein the High Court came to the conclusion that the assessee therein was engaged in the business of mining and extractions. Needless to mention that the business carried out by the assessee before us is akin to the business carried out by the assessee therein, namely, Durga Construction Company. It is also noted that judgment passed by the Hon’ble Gujarat High Court in case of PCIT, Rajkot-I vs. Durga Construction Co. (supra), the department filed SLP before the Hon’ble Court which stood dismissed. Thus, the ratio laid down by the Jurisdictional High Court still holds the field under which the assessee’s claim could be considered with a positive note. As it is evident from the records before us and the orders passed by the authorities below which had not been able to be controverted by the Ld. DR that the assessee engaged in the activities of excavation of over burden, mining of minerals, transportation of such excavated over burden material, excavation of minerals, transportation of minerals from mines to Pit head and transportation of minerals from Pit head to Lignite handling system/power plant, where the motor lorries used for the transportation of goods on hire. The condition under the zone of consideration for claiming higher rate of depreciation at 30% on dumpers and tippers have been fulfilled by the assessee and, therefore, having regard to the entire aspect of the matter i.e. the business activities of the assessee qua the claim of the assessee, particularly, when the fact of composite contract awarded to the assessee of mining and transportation has not been able to be controverted by the Ld. DR. We do not find any reason to interfere with the order passed by the Ld. CIT(A) in granting relief by deleting the addition made by the Ld. AO by restricting the depreciation at 15% against the claim of depreciation at 30% on the dumpers and tippers used by the assessee. The same is found to be just and proper and therefore, upheld.
11. In the result, Revenue’s appeal is dismissed.”
13. Accordingly, in view of the aforesaid order passed by Tribunal in assessee’s own case for previous assessment years, ground number 2 of the Department’s appeal is dismissed.
Ground Number 3: Ld. CIT(Appeals) has erred in allowing higher depreciation of ₹5,96,48,062/- claimed by the assessee on plant and machinery (dumper/tipper) @40% instead of 15%
14. The brief facts of the case are that the assessee had claimed the depreciation of Rs. 7,15,01,403/- on specific class of assets @45% based on the CBDT’s NOTIFICATION NO. GSR 679 (E) [NO. 69/2019 (F.NO. 370142/17/2019-TPL)], which was effective from 23-08-2019, wherein it was mentioned that motor buses, motor lorries and motor taxis used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and put to use before the 1st day of April, 2020 are eligible for depreciation @45%. However, since the assessee had opted for being taxed under section 115BAA of the Act, wherein the highest rate of deprecation that can be claimed by the assessee was 40% only, the CIT(A) in his appellate order restricted the depreciation claim to 40% and disallowed depreciation of Rs. 1,18,53,341/- while deleting the remaining addition of Rs.5,96,48,062/-. The learned CIT(A) deleted such addition based on the facts mentioned in Ground Number 2 above and the issue is similar to the issue as mentioned in the Ground Number 2 above and accordingly the assessee placed reliance on observations made in the decision of the learned CIT(A) for allowing depreciation of Rs.5,96,48,062/- @40% as against 15% decided by the Assessing Officer.
15. We observe that for this purpose, the assessee has placed reliance on notification number GSR 679 (E) dated 20-09-2019, which allows for higher rate of depreciation @45% (later revised downwards to 40% by Ld. CIT(Appeals) since the assessee had opted for being taxed u/s 115BAA of the Act) on block of assets consisting of motor buses, motor lorries and taxis used in the business of running them on hire. The assessing officer on the basis of reasoning given in ground number 2 above, restricted the claim of depreciation to 15%, whereas Ld. CIT(Appeals) allowed the appeal of the assessee on this issue.
16. On going through the facts of the instant case, we find no infirmity in the order of Ld. CIT(Appeals) so as to call for any interference.
17. In the result, ground number 3 of the Department’s appeal is dismissed.
Assessment year 2021-22
18. We observe that similar Grounds of appeal have been raised by the Department for assessment year 2021-2022.
19. In light of the observations for assessment year 2020-21, the Department’s appeal is dismissed for assessment year 2021-2012 as well.
Assessment year 2017-18:
20. The assessee has raised the following grounds of appeal:
“GROUND NO.1 – Invalid invocation of Section 147: –
The Learned Commissioner of Income Tax (Appeals) -11, Ahmedabad [herein after referred to as “the Learned CIT(A)”] has erred in law and on facts that the assessment carried out u/s 147 is valid though the sole basis of the reopening of the assessment is without any contra confirmation by the appellant and the incriminating documents found during the search proceedings carried out on the premises of the third party. The learned CIT(A) grossly erred in recognising the fact that the learned AO also did not provide the appellant the opportunity to cross examine the third party as well as the case of the appellant was reopened on the basis of borrowed satisfaction only.
GROUND NO.2 – Invalid Addition of Rs.50,24,589/- u/s 69C of the Act: –
The Learned CIT(A) has erred in law and on facts as much as confirming the addition of Rs.50,24,589/- u/s 69C as unexplained expenditure made by the learned AO without considering the facts that the appellant has neither received a cash loan of Rs.10,45,00,000/- from Mr. Girish N Patel nor paid any cash interest of Rs.50,24,589/-to Mr. Girish N Patel. The learned AO framed an allegation of cash receipt of loan and cash payment of interest only on the basis of illusionary and imaginary working made in the excel sheets which was recovered from email of the accountant of Mr. Girish N Patel without any confirmation or acceptance of the appellant.
Therefore, it is prayed to your honour that such order needs to be quashed and additions need to be deleted by passing appropriate order.
Further, the appellant craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal.”
21. The assessee has also raised the following additional grounds of appeal:
“Ground No. 1.1
On the facts and in the circumstances of the case and in law, the learned Assessing Officer (‘learned AO’) has erred in initiating the assessment proceedings under section 147 of the Act without appreciating the fact that notice should have been issued under section 153C of the Act in the present case.”
22. We shall first look into the merits of the instant additions. The brief facts of the case are that during the course of search proceedings on the Sadbhav group, various incriminating documents were found and seized. While examining the seized documents, the Assessing Officer observed that Shri Girish Patel Director of M/s Saakar Infra Nirmal Private Limited and his family members are managing and controlling multiple companies which were not carrying out any genuine business activities but were providing accommodation entries, unaccounted transactions in unsecured loans and the assessee was one of such beneficiaries who had availed accommodation entries to the tune of ₹10.45 crores. Further, examination of the incriminating documents also revealed that the assessee had taken cash loans of ₹10.45 crores from Girish Patel during the period 01-01-2017 to 21-03-2017 by paying interest @19.5%. The total amount of interest was shown at ₹50,24,589/-. The assessing officer made addition of ₹10.45 crores on account of undisclosed receipts in the form of cash loan and ₹50,24,589/- on account of interest paid in cash under section 69C of the Act, while passing the assessment order.
23. In appeal, Ld. CIT(Appeals) deleted the addition of ₹10.45 crores, however upheld the addition made on account of interest paid, amounting to ₹50,24, 589/- under section 69C of the Act. The assessee is in appeal before us against the aforesaid addition confirmed by Ld. CIT(Appeals).
24. Before us, the counsel for the assessee submitted that there is no corroborative evidence to substantiate that the assessee had paid interest on such loan taken and the entire additions have been made only on the basis of an unsigned Excel Sheet. Further, the amount of ₹10.45 crores, which was added as unexplained income (unsecured loans taken in cash outside books of account) was itself deleted by Ld. CIT(Appeals) during the course of appellate proceedings. The counsel for the assessee submitted that an unsigned Excel sheet, without any further corroborative evidence cannot lead to the present addition being made in the hands of the assessee, on account of unexplained interest.
25. In response, DR placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order.
26. We have heard the rival contentions and perused the material on record. On going through the records of the case, we observe that the assessing officer had made an addition of ₹10.45 crores as unexplained income of the assessee towards, under section 69A of the Act, on account of cash loan received by the assessee from Shri Girish N. Patel, during the impugned year under consideration. Further, the Assessing Officer also made addition of ₹50,24, 589/- towards cash payment of interest as unexplained expenditure under section 69C of the Act. However, Ld. CIT(Appeals) deleted the addition of ₹10.54 crores towards cash loan by holding that since the assessing officer itself was of the view that this was a “loan” taken by the assessee, albeit in cash, the same cannot constitute as unexplained “income” of the assessee under section 69A of the Act. However, the position of the assessee is that the assessee has neither taken any cash loan and nor paid any interest in cash to any party during the impugned year under consideration. The only basis for making addition is an unsigned Excel sheet recovered from the premises of a third party, which cannot be the basis for making additions in the hands of the assessee. In our considered view, it is a well-settled principle that any addition cannot alone be made on the basis of unsigned Excel sheets, without any further corroborative evidence to substantiate that the assessee had paid interest in cash to a third-party. In the case of the DCIT v. Shri Jaypraksh A Keshwani in IT(SS)A No. 99/Ahd/2021 for A.Y. 2015-16 the Ahmedabad Tribunal made the following observations:
“1. DCIT, Central Circle 1(1) Vs. Shri Jayprakash A Keshwani in the Hon’ble IT AT “D” Bench, Ahmedabad in IT(SS)A No.99/AHD/2021 AY 2015-16, Dated 3108-2023.
Wherein it was held as under;
“On going through the facts of the instant case and the arguments put forth before us by both parties, we are inclined to agree with the view taken by Ld. CIT(A) in the appellate order.
Firstly, the additions have been made on the basis of excel sheet found at the premises of the third party i.e. Mr. MurlidharM. Trivedi. However, apart from the fact that the name of the assessee has been mentioned in the aforesaid excel sheet, there is no further corroborative evidence which substantiates that the assessee had in fact made on-money payment with respect to the aforesaid two properties.
Secondly, admittedly, the assessee had furnished all relevant documents viz. copies of agreements, details of cheque payments etc. towards purchase of the aforesaid two products.
Thirdly, it is a settled law that additions cannot be made solely on the basis of notings / jottings in relation toward transaction, without any corroborative evidence for sustaining the addition.
In the case of Gordhanbhai Talavia 146 taxmann.com 528, the ITAT held that where the Assessing Officer made additions to income of the assessee on the basis of certain loose papers recovered during search, however, no enquiry was conducted or independent evidence was brought on record, being corroborative evidence to connect seized material with the assessee, there was no infirmity or illegality in the order passed by Commissioner (Appeals) in deleting the addition.
In the case of Pradeep Amrutlal Runwal 47 taxmann.com 293, the IT AT held that where the Assessing Officer made additions in the case of the assessee on the basis of notings in loose papers found during the search proceedings in case of third party against the name of assessee, as there was no evidence to suggest that payments were made by the assessee additions so made were not justified. In the case of Regency Mahavir Properties 89 taxmann.com 444, the ITATheld that no addition under Section 69 can be made on the basis of documents being found from premises of third party in absence of any document evidencing the fact that assessee had paid any cash as on-money to said party for purchase of property.
In the case of Vinit Ranawat 88 taxmann.com 428, the ITATheld that no addition can be made in the hands of the assessee on the basis of papers found with the third party when there was no business connection between the assessee and that third party.
Fourthly, it is a settled principle of law that no addition can be made on the basis of statement of a third party, without allowing the assessee an opportunity of cross-examining the person on the basis of whose statement the addition has been made. The Hon’ble Supreme Court in the case of Andaman Timber Industries 62 taxmann.com 3 (SC), held that when statements of witnesses are made the basis of demand, not allowing the assessee to cross-examine the witness is a serious flaw which makes order a nullity, as it amounts to violation of principles of natural justice. In the case of CITvs. Sunita Dhadda 100 taxmann.com 526, the Hon’ble Supreme Court dismissed the Department’s SLP against order of High Court holding that where Assessing Officer while making addition on account ofon-money received by the assessee on sale of land to a builder group relied upon statement of Director of builder and did not allow the assessee to cross-examine the said Director, there being violation of principle of natural justice, impugned addition was liable to be deleted. In the instant facts despite a specific request made by the assessee to cross-examine the person on the basis of whose statement the addition was made, such opportunity of cross-examination was not granted to the assessee.
Fifthly, we also observed that the Assessing Officer in the assessment order has not brought out the locus standi of Mr. Murlidahr M. Trivedi, on the basis of whose statement the addition were made in the hands of the assessee. Mr. Murlidhar M. Trivedi in his affidavit merely stated that the transactions in question pertained to NODPL and from his statement, it is not clear as to how Mr. Murlidhar M. Trivedi is related to NODPL since neither is he a Director or a Authorized person or an employee of NODPL. Even during the course of arguments before us, the Ld. DR has not been able to verify the relationship between Mr. Murlidhar M. Trivedi and NODPL. Therefore, it is not clear as to what evidentiary value does the statement of Shri Murlidahr M. Trivedi carry and what is his “locus standi” to make such statement which can implicate the assessee.
9. Accordingly, looking into the instant facts, our observations in the preceding paragraphs and judicial precedents on the subject, we do not find any infirmity in the order of Ld. CIT(A) so as to call for any interference.
10. In the result, the appeal of the Department is dismissed”
The fact of the above judicial pronouncement squarely applicable to the case of the appellant as in the case of the appellant;
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- The learned AO made the addition u/s 69C on the basis of excel sheet found at the premises of the third party.
- The name “Mahalaxmi” is mentioned in the excel sheet, however the learned AO did not bring any corroborative evidence which substantiates that the appellant has in fact accept the loan in cash and payment of interest made in cash.
- The appellant during the assessment proceeding strongly objected the reason recorded and denied any cash transaction out of its audited books of account, which was provided to the learned AO during the assessment proceedings.
- The appellant had not been provided an opportunity to cross examine Shri Girish N Patel. The appellant had not been provided the copy of the statement given by Shri Girish N Patel.
- No any corroborative evidence in support of the information received from the Investigating Wing was brought on record by the learned AO. The learned AO just copied the alleged loan amount and alleged interest payment amount for making the addition in the case of the appellant.
- Thus, the addition made by the learned AO u/s 69C which was subsequently upheld by the learned CIT(A) is not sustainable in the eyes of the law.
2. Kashish Gaurav Chandani Vs. The ITO Ward – 3 (3)(2), Ahmedabad in the ITAT “B” Bench, Ahmedabad in IT(SS)A No.147/Ahd/2023, dated 10-06-2024 Wherein it was held as under;
“6.7. As regards the cash component of Rs.7,86,450/-, the assessee has consistently denied making such payment and there is no corroborative evidence brought on record by the AO to substantiate this addition. Therefore, in the absence of any conclusive evidence, the addition of Rs.7,86,450/- is not sustainable.”
2.7 Therefore, the learned CIT[A] ought to have appreciated that the impugned addition made was purely on suspicion and surmise, assumptions and presumptions and consequently, it results in to gross injustice to the regular tax payer appellant by involving the appellant in to the unnecessary legal proceedings and therefore, the baseless and illegal addition requires to be deleted.
Thus, on the basis of the above facts and circumstances, the appellant is praying to your good honour to consider the written submission and allow the appeal by passing appropriate order.”
27. In view of the above, looking into the instant facts of the assessee’s case we are of the considered view that apart from the unsigned excel sheet recovered from third party premises, there is no corroborative evidence to sustain the addition in the hands of the assessee. Accordingly, we hereby allow the assessee’s appeal on merits.
28. Since, we have allowed the assessee’s appeal on merits, we are not inclined to go into the adjudication on assessee’s additional grounds of appeal challenging the jurisdiction of the present addition made in the hands of the assessee.
29. In the result, appeal of the assessee is allowed.
30 In the combined result, the appeals of the Department are dismissed and the appeal of the assessee is allowed.
This Order is pronounced in the Open Court on 12/03/2025
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