ITAT rejects Revenue's Claim: ₹3.8 Crore 'Unaccounted Income' Addition Based on Mere Name Similarity [Read Order]

The case involved Mayura Saria Pvt. Ltd., an Ambikapur-based company, against whom the revenue had made additions alleging unaccounted cash transactions with Sky Alloys & Power Pvt. Ltd. The tax department's claim stemmed from search operations at Sky Alloys' premises in December 2021, where seized documents referenced transactions with "Mayura Yogesh." The Assessing Officer (AO) presumed this referred to Mayura Saria Pvt. Ltd. despite no direct evidence linking the two.

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The dispute arose when the AO added ₹3.81 crore (comprising ₹3.38 crore in alleged cash payments and ₹43 lakh in receipts) as the company's undisclosed income for Assessment Year 2015-16. The addition was based on excel sheets found during the Sky Alloys search, which mentioned "Mayura Yogesh," along with statements from Sky Alloys' employees. The company maintained that "Mayura Yogesh" was unrelated to it and that its legitimate transactions with Sky Alloys (₹78 lakh for raw material purchases) were properly recorded in its books.

The Commissioner of Income Tax (Appeals) [CIT(A)] had earlier deleted the addition, noting the AO failed to establish any connection between Mayura Yogesh and the company. The revenue then appealed to ITAT, arguing the CIT(A) ignored material evidence. However, ITAT upheld the deletion, observing that the AO's assumption was based entirely on borrowed opinions from the Investigation Wing without independent verification.

Judicial Member Ravish Sood and Accountant Member Arun Khodpia, in their order, emphasized that the revenue could not produce any evidence such as signatures, documents, or direct statements linking the company to Mayura Yogesh. The tribunal noted that the AO's reasoning that since the company had dealings with Sky Alloys, any "Mayura Yogesh" transactions must belong to it was speculative. The company also submitted affidavits confirming it had no employee or associate named Mayura Yogesh.

The ITAT referenced the Supreme Court's ruling in Andaman Timber Industries (2015), which held that additions cannot be sustained if based on unconfronted third-party statements. It also cited PCIT vs. Oriental Power Cables (2016), where the apex court stressed that denying cross-examination violates natural justice. In this case, the assessee's request to cross-examine Sky Alloys' directors was ignored.

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The tribunal concluded that the addition was made on "presumptive inferences, surmises, and assumptions" without corroborative evidence. It upheld the CIT(A)'s decision, noting the revenue failed to prove the alleged cash transactions belonged to Mayura Saria Pvt. Ltd. merely because of a similar-sounding name.

The ruling reinforces that tax authorities cannot make additions based solely on conjecture or unverified third-party data. The ITAT's decision brings relief to the company, which faced a substantial tax demand due to the disputed addition. The order also highlights the importance of due process, including the right to cross-examine, in tax assessments.

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