ITAT Dismisses Revenue’s Appeal; Rs 1.69 Cr Addition u/s 69A Deleted After Cross-Examination

A search under Section 132 on connected business groups and a survey under Section 133A were conducted after a grey-coloured diary was seized from a key managerial individual. It contained cash entries which, in a statement recorded under Section 132(4), were attributed to the assessee through the use of certain initials in the diary. The AO treated the entries as depicting unexplained money under Section 69A, relating Rs. 1,69,10,100 to income.

The appellate authority ordered cross-examination of the author of the diary, who admitted authorship and possession but stated that he never received money from or had monetary transactions with the assessors, claiming that his previous statements were given under duress and the notes were random.

CIT (A)’s Ruling: The addition was deleted by CIT (A), with an observation that the unaccounted cash could be examined in the hands of the diary’s author.

Issue Raised: Whether an addition of Rs. 1,69,10,100 under Section 69A can be sustained when it rests entirely on a diary seized from a third party and that person’s search statement, later retracted in cross-examination, without any corroborative material linking the assessee to the entries.

Tribunal’s Ruling: The Tribunal stated that the diary came from a third party, did not bear the assessee’s name, and the initials depended on were not corroborated. The sole unfavourable remark had been withdrawn during cross-examination, and nothing was brought forward to prove that the assessee owned or held the cash in question, making Section 69A irrelevant. In agreement with the appellate jurisdiction, the Tribunal ruled that third-party notings without supporting independent evidence, along with a repudiated statement, cannot be the sole basis for an addition under Section 69A.

It did not find any infirmity in the deletion and dismissed the appeal filed by the Revenue in its entirety

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