ITAT dismisses Revenue’s appeal; upholds deletion of additions under Section 69A

The assessee was engaged in Angadia services, filed his return of income for AY 2022-23, declaring a total income of Rs. 9.58 crore. A search under Section 132 was conducted on 26.05.2022 in the AGL Group and its associates, including the assessee’s residence. Assessment under Section 143(3) determined total income at Rs. 13.31 crore after making four additions, namely, Rs. 1.47 crore as unexplained loan under Section 69A, Rs. 4.79 lakh as interest thereon, Rs. 2.16 crore as unexplained money based on seized digital data, and Rs. 4.33 lakh as ad hoc commission income.

The CIT(A) deleted all additions, holding that there was no evidence connecting the assessee with the alleged transactions and that additions were made on assumptions without corroboration. The Revenue appealed before the ITAT.

Issue Raised: Whether the CIT(A) erred in deleting additions made under Section 69A and disallowing ad hoc income additions based solely on third-party seized data and uncorroborated digital evidence.

ITAT’s Order: The Tribunal observed that the Assessing Officer had relied merely on a WhatsApp message and a loose sheet found from third parties, without any direct or corroborative evidence linking them to the assessee. It held that the AO failed to discharge the initial onus under Section 69A to establish ownership of unexplained money. The same transaction had also been taxed in the hands of M/s Astron Paper & Board Mills Ltd., making the addition untenable and violative of the principle against double taxation.

Regarding the Rs. 2.16 crore addition, the Tribunal found that the Excel file and diaries relied upon ere unsigned, lacked corroboration, and did not mention the assessee’s name. The AO had selectively used parts of the document while ignoring contradictory entries. The statements relied upon were later retracted, and cross-examination was denied. Since the seized materials were not found in the assessee’s possession, the presumptions under Sections 132(4A) and 292C were inapplicable.

On the ad hoc addition of Rs. 4.33 lakh, the ITAT held that since the assessee had already declared Rs. 55,703 as commission income, further addition on assumptions of a higher rate was unjustified. The AO brought no material to prove that commission was charged at Rs. 500 per lakh instead of Rs. 50 per lakh. Therefore, the Tribunal upheld the CIT(A)’s findings and dismissed the Revenue’s appeal in full.

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