₹8.80 Cr Addition cannot be made Solely on Estimation and Extrapolation Without Corroborative Evidence: ITAT sets aside Addition [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune Bench, held that the Assessing Officer (AO) has erred in making the addition amounting to ₹8,80,26,071 solely on estimation and extrapolation without any corroborative evidence and in the absence of the assessee’s name in the incriminating documents found during the search and seizure of a third party.

Deputy Commissioner of Income Tax (DCIT), the appellant, filed an appeal challenging the order of the Commissioner of IncomeTax (Appeals) (CIT(A)) for the deletion of additions made by the AO

The respondent, a partnership firm engaged in the business of land development, had filed its return of income for Assessment Year 2014-15 declaring Nil income.

A search and seizure action was conducted by the Investigation Wing of the Income Tax Department for the Kokani Group, Nashik. During the course of the search, various incriminating documents were found and seized. The seized material contains the reference of the sold land at “367 Makhmalabad,” which was owned by the respondent.

Based on the seized documents, reassessment proceedings were initiated. The AO observed that one page recorded cheque payment of ₹81,33,300 against “367 Makhmalabad” and another page recorded cash payment of ₹86,63,700 against the same property.

The AO further noted that the respondent had sold multiple plots to members of the Kokani Group. On the basis of the alleged cash component of ₹86,63,700 reflected in the seized document, the AO extrapolated the figure proportionately

It was concluded by AO that the respondent had received the total unaccounted cash of ₹8,80,26,071. Accordingly, the AO made additions of ₹8,80,26,071 as undisclosed business income.

The respondent filed an appeal before CIT(A). Upon examination, it was held by the CIT(A) that no corroborative evidence was brought on record to prove payment of money to the respondent and that the additions were made purely on estimation and extrapolation from a single entry in the seized document. Accordingly, the additions were deleted.

The appellant, aggrieved by the decision of CIT(A), appealed before the ITAT.

The counsel representing the Revenue, Amit Bobde, contended that the CIT(A) erred in holding that proceedings should have been initiated under Section 153C instead of Section 147 and submitted that the non obstante clause in Section 153C does not automatically bar reassessment under Section 147.

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The appellant counsel also contended that the name of the property sold by the respondent appeared in the seized material and the AO was justified in extrapolating the cash component for other plots transferred to members of the Kokani Group.

The respondent counsel, Subodh Ratnaparkhi, contended that the seized document did not contain the name of the respondent and there was no corroborative evidence on the record for the respondent. It was also contended by the respondent counsel that incriminating documents containing information relating to the assessee during the search, must be initiated under section 153C

Vinay Bhamore, Judicial Member and Manish Borad, Accountant Member, held that in the absence of any name of the assessee or its partners in the seized material, the AO erred in making the addition for the amount mentioned against the “367 Makhmalabad” land mentioned in the seized material

Tribunal also held that the AO grossly erred in extrapolating the figures of the alleged on money in the absence of any corroborative incriminating material or any other information procured through independent examination of the facts and addition has been made without any tangible evidence and solely on estimations and extrapolation.

Accordingly, the appeal by the Revenue was dismissed

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