No Evidence of Cash Receipt: ITAT Deletes Addition of Rs.2.5 Crore due to Lack of Corroborative Proof
Section 28 of the Bharatiya Sakshya Adhiniyam, 2023 (BSA), which states that entries in regularly maintained books are admissible as evidence but require corroboration
The Income Tax Appellate Tribunal (ITAT), Nagpur Bench, has nullified an addition of Rs. 2.5 crore made by tax authorities against Shrigopal Rameshkumar Sales Pvt. Ltd. The tribunal ruled that the tax department failed to produce any corroborative evidence to support its claim of a cash receipt. The case pertained to the assessment year 2015–16, and the Nagpur-based cotton trading company...
The Income Tax Appellate Tribunal (ITAT), Nagpur Bench, has nullified an addition of Rs. 2.5 crore made by tax authorities against Shrigopal Rameshkumar Sales Pvt. Ltd. The tribunal ruled that the tax department failed to produce any corroborative evidence to support its claim of a cash receipt. The case pertained to the assessment year 2015–16, and the Nagpur-based cotton trading company had contested the addition.
The dispute arose during a search operation, where officials seized a handwritten note that allegedly indicated receipt of Rs. 2.5 crore in cash. Based on this, the Assessing Officer (AO) treated the amount as undisclosed income. However, the company clarified that the note was a reconciliation statement prepared by their broker, Surenthira Kumar. It related to transactions with Govindraja Mills Group and reflected Letter of Credit payments already recorded in the company’s books.
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The ITAT found several flaws in the department’s case. Firstly, the seized document did not bear any signatures of the company’s officials. Secondly, the AO made identical additions of Rs. 2.5 crore for two separate assessment years—2014–15 and 2015–16—indicating inconsistency. Thirdly, no verification was done with either the alleged payer, Govindraja Mills, or with the broker who had prepared the note. Lastly, the company had maintained proper documentation and corresponding entries in its books for all the relevant sales transactions.
Sandipkumar Salunke, representing Revenue cited Law of Evidence and Cross–Examination of Tax and Allied Laws, highlighting Section 28 of the Bharatiya Sakshya Adhiniyam, 2023 (BSA), which states that entries in regularly maintained books are admissible as evidence but require corroboration. He argued that if the AO suspects manipulation or suppression, the books can be rejected after providing the assessee an opportunity to respond.
The tribunal based its decision on established legal principles. It referred to the Supreme Court’s judgment in Dhakeshwari Cotton Mills Ltd. v.CIT [1954] which held that assessments cannot rely on conjectures. It also cited Kishan Chand Chellaram v. CIT (1980), which emphasized the need for cross-examination opportunities and proper evidence.
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ITAT Bench comprised of V. Durga Rao (Judicial Member) and K.M. Roy (Accountant Member) concluded that the addition was based entirely on an unsigned and unverified document. They observed that since the assessee had provided full details of the transactions and even offered to have them verified, the department’s failure to perform basic verification rendered the addition legally unsustainable.
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