ITAT Upholds CIT(A) Deletion of ₹2.17 Crore Addition u/s 69C Due to Lack of Evidence on Unexplained Expenditure [Read Order]

The Nagpur Bench of Income Tax Appellate Tribunal(ITAT) upheld the Commissioner of Income Tax(Appeals) [CIT(A)]’s decision to delete the ₹2.17 crore addition made under Section 69C of Income Tax Act,1961, citing a lack of corroborative evidence on unexplained expenditure.

The Revenue-appellant appealed against the order passed by CIT(A) dated 09/11/2023 for the Assessment Year(AY) 2014–15. In this case,Yashwant Ajabrao Khodke,respondent-assessee,was issued a notice under section 153C of the  Act on February 18, 2021, following a search at Roshan Diwakar Dhore’s residence in Nagpur.

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The assessee had originally filed a return on February 9, 2015, declaring an income of ₹42,17,640 and later filed a return under section 153C on March 9, 2021, declaring the same income.

During the search, documents seized indicated that the assessee had purchased land for ₹1,35,00,000. However, additional cash payments totaling ₹2,17,00,000 were found through sale receipts and a diary impounded from Narayana Education Society, where the seller was a trustee.

Based on this, the Assessing Officer(AO) treated the amount as unexplained expenditure under section 69C, increasing the total assessed income to ₹2,59,17,640, and initiated a penalty under section 271(1)(c) of the Act.

Aggrieved by the order, the assessee appealed before the CIT(A).

The CIT(A) deleted the ₹2.17 crore addition made by AO under Section 69C, which was based on an unsigned cash receipt found at a third party's premises. The receipt contradicted the sale deed and lacked supporting evidence. The assessee also challenged the assessment for missing a Document Identification Number (DIN), but the CIT(A) found it was corrected within the allowed time.

The Revenue appealed before the Tribunal.

Read More: ITAT Upholds CIT(A)’s Deletion of Rs. 6.8 crore Addition for Bogus Purchase due to Submission of Valid Proof

The two member bench comprising V.Durga Rao(Judicial Member) and K.M.Roy(Accountant Member) reviewed the arguments, examined the records, and upheld the CIT(A)’s order. It found that the AO’s claim that the original receipt should remain with the payer,was not justified, as no evidence supported this assumption. The ITAT held that additions could not be made without corroborative evidence.

It noted that the documents were found at third-party premises, not with the assessee, making the presumption under Sections 132(4A) and 292C inapplicable. The receipts were neither signed nor acknowledged by the assessee, further supporting the claim that they were not issued by the assessee. Additionally, the diary found at Narayan Education Society was not maintained or signed by the assessee, lacking evidentiary value.

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The appellate tribunal observed that both the sale agreement and the final sale deed were executed for ₹1,35,00,000, making the registered sale deed conclusive unless proven otherwise. As the Revenue failed to provide strong evidence to support the addition, the ITAT upheld the CIT(A)’s decision and dismissed the appeal.

To Read the full text of the Order CLICK HERE

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