The Income Tax Appellate Tribunal (ITAT) has ruled that extended working hours alone cannot be a valid basis for assuming additional income in the form of commissions where an addition made by the Assessing Officer (AO) on the grounds of alleged receipt of commissions by the assessee due to his involvement in transactions outside normal banking hours was challenged by the assessee.
The case arose from a search and seizure operation conducted under Section 132 of the Income Tax Act at the premises of the assessee and his associates. The AO had added ₹77,00,000 to the assessee’s income under Section 69A of the Income Tax Act, claiming that the assessee had received commission in the form of cash and gold for facilitating cash deposits in shell companies during the demonetization period.
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This conclusion was drawn based on statements given by the assessee’s associates and the fact that the bank where the assessee was employed processed cash deposits after regular working hours.
The tribunal, however in judicial disagreement with the approach of the Assessing Officer, observed, “If the assessee has done the work beyond the working hours, this may be a violation of the banking rules, but on that basis, the addition cannot be made assuming that the assessee has received the commission.”
The Income Tax Tribunal highlighted that the entire case against the assessee was built on assumptions and statements, without any corroborative evidence found during the search or seizure operation.
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The tribunal further cited the decision of the Delhi High Court in Pr. CIT vs. Pavitra Realcon Pvt. Ltd. to reinforce its point that “statements made during a search operation, without any corroborating evidence, cannot be the sole basis for making additions to income.”
The ITAT stressed that material evidence is required to substantiate claims of unexplained income, and extended working hours alone do not suffice as proof of illicit gains.
Moreover, the tribunal pointed out that no cash or gold was found at the residence of the assessee during the search, and thus, the addition made under Section 69A of the Income Tax Act was not sustainable.
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The tribunal bench concluded that the AO’s addition was based purely on speculation and assumptions, leading it to allow the assessee’s appeal and strike down the addition
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