The Calcutta HC in a recent case upheld the Income Tax Appellate Tribunal’s ( ITAT ) decision to delete Income tax addition made under section 69 of the Income Tax Act 1961 ( ITA ) due to lack of direct evidence against the assessee.
An appeal was filed by the Principal Commissioner of Income Tax ( Central-2 ), Kolkata, against Salarpuria Properties Pvt. Ltd., the assessee , under Section 260A of the ITA. The appeal was directed against an order passed by the ITAT on May 24, 2024, concerning the assessment year 2005-06.
The backdrop of the said appeal arose from a search operation where documents were seized from the premises of Sri Dayanand Pai and his employees.
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The Assessing Officer ( AO ) added income to the tax liability of the assessee under Section 69C of the Income Tax Act, based on these seized documents.
Although the documents in question did not explicitly mention Salarpuria Properties Pvt. Ltd., it had references to “Salarpuria a/c.” The AO assumed this referred to Salarpuria Properties Pvt. Ltd, the assessee.
The AO relied on a statement from Sri Dayanand Pai, recorded under Section 132(4A) of the ITA, to justify the additions.
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Aggrieved, the assessee appealed against this before the Commissioner of Income Tax ( Appeals ) [ CIT (A) ], who observed that the documents could belong to any company within the Salarpuria Group and not necessarily to the assessee.
Moreover, the CIT(A) noted that the AO did not conduct further enquiry on whether “Salarpuria a/c” actually referred to the assessee, which weakened the revenue’s case.
In result, the CIT (A) deleted the addition in favor of the assessee. Aggrieved by this the Revenue appealed before the ITAT, which also affirmed the CIT (A)’s order. Dissatisfied, the case was escalated to the High Court of Calcutta by the Revenue.
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After examining the relevant facts, the division bench of TS Sivagnanam and Justice Hiranmay Bhattacharya noted that the Tribunal had re-evaluated the evidence and concluded that the seized documents did not definitively implicate Salarpuria Properties Pvt. Ltd, and that the reference in the cash entries of Sri Dayanand Pai could denote any entity within the group.
In light of the above observation, the court held that the ITAT was right in its decision. Accordingly, the appeal was dismissed.
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