The Delhi High Court held that the addition under section 69 of the Income Tax Act, 1961 is not valid without incriminating evidence and Upheld the Order of the Income Tax Appellate Tribunal(ITAT).
The appellant/revenue challenged the order passed by the Income Tax Appellate Tribunal [“Tribunal”]. The question before the Tribunal was whether the addition amounting to Rs.11,35,85,032/- made by the Assessing Officer (AO) concerning purported undisclosed profit/loss made by Sanjay Singhal, the respondent/assessee from trading in pulses and menthe on MCX/NCDEX was sustainable?
The AO took the view that the aforementioned profit/loss was booked in connivance with an entity named Raj Laxmi Commodities Private Limited [“Raj Laxmi”]. It was concluded that Raj Laxmi had given the User ID-3 to an employee of M/s Sharp Corp. Pvt. Ltd. i.e., one Mr Babulal Jangid.
The AO invoked the provisions of Section 69A of the Income Tax Act, 1961 [“Act”] and accordingly made an addition in the hands of the respondent/assessee, on a substantive basis, and in the hands of Sharp Group of Companies Ltd., albeit on protective basis.
The Tribunal has concluded that since nothing was found in the search and survey conducted vis-à-vis Sharp Group of Companies Ltd. and the respondent/assessee/Sanjay Singhal the said provision was not applicable.
Mr Sanjay Kumar, senior standing counsel, who appeared on behalf of appellant/revenue stated that the view taken by the Tribunal concerning the applicability of Section 69A of the Act was erroneous and that material was recovered which shows that the respondent/assessee was the owner of money, and the subject transaction concerning this aspect had not been recorded in the books of account maintained by the respondent/assessee.
A division bench comprising Justice Rajiv Shakdher And Justice Girish Kathpalia observed that in the absence of incriminating material, the addition under section 69 of the act is not valid.
The Court upheld the view of the Tribunal and closed the appeal.
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