Loose Computerized Sheet Found at Taxpayer’s Premises Not Corroborative Evidence: ITAT Deletes ₹7 Crore Addition and Penalty [Read Order]
The Tribunal ruled that a loose computerized sheet found during a search lacked corroborative evidence, and cannot justify a ₹7 crore addition or penalty.
![Loose Computerized Sheet Found at Taxpayer’s Premises Not Corroborative Evidence: ITAT Deletes ₹7 Crore Addition and Penalty [Read Order]](https://images.taxscan.in/h-upload/2025/06/21/2051593-itat-loose-computerized-sheet-taxpayers-evidence-addition-penalty-taxscan.webp "Loose Computerized Sheet Found at Taxpayer’s Premises Not Corroborative Evidence: ITAT Deletes ₹7 Crore Addition and Penalty [Read Order]")
The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that a loose computerized sheet found during a search without corroborative evidence, did not constitute valid grounds for an income addition of ₹7 crore or the imposition of a penalty under Section 271AAA of the Income Tax Act, 1961.
Tara Health Foods Ltd. (assessee), a company faced scrutiny for Assessment Year (AY) 2010-11 following a search operation under Section 132 on 12.10.2010. The Assessing Officer (AO) issued a notice under Section 153A, and the assessee filed a return on 21.09.2012, declaring a total income of Rs. 24,32,43,800.
During the search, a loose paper (page 3 of Annexure A-2) was found, indicating cash advances of Rs. 2 crore, Rs. 2 crore, and Rs. 3 crore to M/s Muez Hest Process Tech (P) Ltd. on 20.12.2009, 22.12.2009, and 24.12.2009, respectively, with repayments of Rs. 3.5 crore each on 22.02.2010 and 23.02.2010.
The AO demanded an explanation, but the assessee denied any connection to the transactions, stating the paper was unrelated to its business. M/s Muez Hest Process Tech (P) Ltd. also confirmed no such cash transactions occurred, supported by their executive’s statement before the AO.
The AO added Rs. 7 crore to the taxable income, alleging unaccounted transactions. The AO also levied a penalty under Section 271AAA which was imposed on both additions. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the AO’s orders.
Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT. The counsel for the assessee argued that the loose sheet lacked corroborative evidence, as no assets or transactions linked to the Rs. 7 crore were identified during the search.
The Counsel for the assessee relied on the ITAT Mumbai Bench’s deletion of penalties under Sections 271D and 271E against M/s Muez Hest India Pvt. Ltd. for the same transactions (ITA Nos. 6889 and 6890/Mumbai/2016), reinforcing the absence of such dealings.
The Revenue’s counsel argued that the loose sheet, found at the assessee’s premises, implied the assessee’s involvement in the Rs. 7 crore transactions, citing the Supreme Court’s ruling in S. Rudramuniyappa vs. Commissioner of Income Tax.
The two-member bench, comprising Rajpal Yadav (Vice President) and Manoj KumarAggarwal (Accountant Member), observed that the loose sheet, though computerized, lacked signatures or evidence of execution.
The tribunal also observed that M/s Muez Hest India Pvt. Ltd. denied any cash transactions, and no corroborative material was found during the search to link the Rs. 7 crore to any unaccounted investment or transaction.
The tribunal observed the Revenue’s failure to establish a nexus with the assessee’s business, especially since penalties against M/s Muez Hest were deleted.
The tribunal deleted the Rs. 7 crore addition and ruled them as unsubstantiated. The penalty under Section 271AAA was also deleted. The appeals of the assessee were partly allowed.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
