Unsubstantiated material found in pen drive cannot be considered as a conclusive evidence to make additions

Unsubstantiated material found in  pen drive cannot be considered as a conclusive evidence to make additions

In this case, the entry found in Pendrive was considered in the case of Sri Veeraiah Choudhary for AY 2006-07. It is also brought to our notice that vide letter dated 18/12/2008 Shri T. Veeraiah Chowdhary through his auditor brought to the notice of the DCIT, Circle 3(1) that the actual amount as per the impounded material was only Rs. 1.05 crores and not Rs. 1.30 crores and the said amount was offered for taxation in the hands of Shri T. Veeraiah Choudhary in AY 2006-07. A copy of the said letter was kept on record vide page 34 of the paper book. The assessment order for AY 2006-07 also suggests that the addition of Rs. 1.05 crores was only made in the assessment of Shri T. Veeraiah Chowdhary. This same entry pertaining to the amount of Rs. 1,30,00,000/- was considered in the hands of Assessee, though there is no positive material found in the course of survey to suggest that this entry pertains to Assessee. Being so, in our opinion, mere guess work is not possible while framing assessment without any proper material. The Assessing Officer shall have the basis for assuming the unexplained credit in the case of the assessee and it is not possible to assess the income of the assessee in the absence of any evidence on arbitrary basis. The unsubstantiated material found in the pendrive cannot be considered in the hands of the assessee as a conclusive evidence so as to make additions towards unexplained credit. It was held by the Hon’ble Supreme Court in the case of CBI Vs. V.C. Shukla [1998] 3 SCC 410 that “ file containing loose sheets of paper are not books” and entries therein are not admissible u/s 34 of the Evidence Act, 1872.”

 In the present case, the pendrive found during the course of survey proceedings in the case of T. Veeraiah Choudhary, M.D. of assessee company, which reflect the cash payment of Rs. 1 .3 crores made to Shri RTV Prasad. The same was considered in the hands of the Sri T. Veeraiah Choudhary as an investment for the AY 2006-07. In our opinion, as this is not substantiated by any corroborative evidence to establish that the assessee is involved in this transaction, so as to make addition in the hands of the assessee. Hence, in the absence of any corroborative evidence or material to establish that the entry is pertaining to Assessee, we set aside the order of CIT(A) and delete the addition on this count. Accordingly, this ground appeal of Assessee is allowed.

If banking facilities are not available at the place where land is purchased no dis allowance u/s 40A(3) of the Income Tax Act,1961.

Sec 40A(3) itself provides that the exceptions will have to be prescribed having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors. Taking all these factors, considering the nature of activity of the Assessee and the necessity for them to pay cash to the land owners we are of the opinion that the condition under Rule 6DD for exemption viz., transactions should have taken place on Bank Holidays should be read down in the case of the Assessee.

In the case under consideration, no banking facility is available where the properties were purchased by Assessee, therefore, there was no choice for the assessee except to make the payments in cash due to exceptional or  unavoidable circumstances as provided under Rule 6DD. In view of the above discussion, we set aside the order of CIT(A) and delete the addition of Rs. 4,09,98,105/- made u/s 40A(3) of the Act.