Company’s book, Including Manual Cash book, deemed Non-Incriminating u/s 153A of Income Tax Act: ITAT deletes S.69 Addition [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the Section 69 addition, ruling that the company’s books, including the manual cash book, were deemed non-incriminating under Section 153A of the Income Tax Act, 1961.

A search and seizure operation under Section 132(1) of the Income Tax Act, 1961 was conducted on 29/05/2018 along with parallel search of M/s. Lion Manpower Solutions Pvt. Limited in which appellant was director and admittedly no incriminating material was found from the search premises of the appellant. The alleged incriminating material on the basis of which an addition was made in the impugned assessment order was found from the search premises of Lion Manpower.

Admittedly the original return of income for AYs 2015-16 and 2016- 17 was filed on 30/09/2015 and 30/09/2016, respectively and which stood processed under section 143(1), and the time limit to issue notice under section 143(2) stood expired on 30/09/2016 and 30/09/2017 respectively. Accordingly, the aforesaid assessment stood concluded before the conduct of search under section 132 on 29.05.2018. 

The assessment proceedings under section 153A of the Act, were initiated for both the AYs, which were completed vide order(s) dated 17/03/2021 after making addition(s) of Rs. 28, 20,658/- and Rs. 9, 25,074/- respectively under Section 69C of the Income Tax Act on the basis of a manual cash book, alleged to be containing cash expenses from unexplained sources found from the premises of Lion Manpower. 

The CIT(A) has held that the source of expenses is cash of the company traceable to the seized cash book itself in the form of;

1. funds introduced by the appellant and
2. withdrawals from the bank account of the company,

such expenditure cannot be treated as unexplained expenditure under Section  69C of the Income Tax  Act. 

The two-member bench of the tribunal, consisting of M. Balaganesh (Accountant Member) and Anubhav Sharma (Judicial Member), reviewed the case and concluded that the CIT(A) had correctly upheld the AO‘s findings. They determined that no substantive addition was necessary for the Company based on the manual cash book. The cash transactions were verified to be from known sources and matched the existing books, which were deemed final in the Company’s assessment. Therefore, the same set of books, including the manual cash book found at the Company’s premises, cannot be considered incriminating material under Section 153A of the Income Tax Act for making an addition in the hands of the assessee as a searched person for the two assessment years in question.

The corollary to aforesaid being that to consider the said seized document of transactions of appellant reflected in manual cash book in the hands of appellant, provisions of Section 153 C of the Act should have been invoked at the first instance. Thus, the change of head of the addition by CIT (A), has resulted in vitiating the exercise of jurisdiction under Section 153A of the Income Tax Act and 153C of the Income Tax Act. Consequently, the appeals were allowed. 

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