Unsigned Loose Paper Not Convincingly Explained: ITAT Restores ₹75 Lakh On-Money Addition u/s 69A to CIT(A) [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) ruled that the assessee's explanation for an unsigned loose paper found during search was not convincing and restored the Rs. 75 lakh addition under Section 69A of the Income Tax Act, 1961, to the Commissioner of Income Tax (Appeals) [CIT(A)] for fresh adjudication.

Mehta Emporium Jewellers (assessee) was subjected to a search under Section 132 of the Income Tax Act. During the search, an unsigned loose paper was found, indicating receipt of Rs. 75 lakh as on money. The Assessing Officer (AO) added this amount under Section 69A as unexplained money, based on the document seized from the assessee's premises.

In the assessment order, the AO noted that the loose paper, though unsigned, was discovered during a valid search operation under Section 132. The AO rejected the assessee's claim that the document was a "dumb document" without evidentiary value, emphasizing that it was found at the assessee's business premises.

Aggrieved by the AO’s order, the assessee appealed to the CIT(A). The CIT(A) deleted the addition and held that the loose paper was unsigned and lacked corroborative evidence of actual transactions. The CIT(A) concluded that there was no proof of cash payments or receipts outside the books, and thus the addition under Section 69A could not be sustained.

Aggrieved by the CIT(A)’s order, the Revenue appealed to the ITAT. The Revenue Counsel argued that the CIT(A) erred in deleting the addition without appreciating the facts, including the document's discovery during search. The Counsel submitted that the assessee had not adequately explained the loose paper, and the onus under Section 132(4A) lay on the assessee.

The assessee’s counsel contended that the loose paper was a dumb document with no evidentiary value, as it was unsigned and found in the premises without proof of belonging to the assessee. The counsel claimed it might have been wrapping paper from a customer for jewellery repair.

The two-member bench, comprising Beena Pillai (Judicial Member) and Renu Jauhri (Accountant Member), observed that the assessee's explanation that the document may have been received from a customer while giving jewellery for repair and wrapped in paper did not appear convincing.

The bench noted that the screenshot of the document in the assessment order did not resemble crumpled wrapping paper. It further observed that the document was found at the assessee's premises, and no such explanation was provided during the partner's statement under Section 132(4) of the Income Tax Act.

The bench invoked Section 132(4A), shifting the onus to the assessee to explain the document, which was not adequately discharged. It restored the issue to the CIT(A) for fresh adjudication, directing a due opportunity for the assessee to explain, including a possible forensic examination report if required.

The appeal of the Revenue was partly allowed for statistical purposes.

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