Unexplained Investment Addition Deleted For Lack Of Evidence | HC
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Case Details: Principal Commissioner of Income-tax Central vs. Priya Blue Industries (P.) Ltd. [2025] 181 taxmann.com 745 (Gujarat)
Judiciary and Counsel Details
- Bhargav D. Karia & Pranav Trivedi, JJ.
- Varun K.Patel, Sr. Standing Counsel for the Appellant.
Facts of the Case
The assessee was covered in a search operation. During the search, the Assessing Officer (AO) found undated cheques from the assessee. In response, the assessee submitted that no cash loan was given by any of the assessee of the group to the companies whose cheques in question were found during the search.
The assessee, in the normal course of its business and on account of a mutual understanding with the parties involved, had taken cheques that were not required to be deposited. However, AO made additions to the assessee’s income, contending that the undated cheques were issued in lieu of unaccounted cash loans.
The matter reached the Gujarat High Court.
High Court Held
The High Court held that the assessee submitted that it had taken the cheques from the parties in question, which were not required to be deposited. The assessee had discharged its onus of proving the identity and genuineness of the transactions. The assessee also demonstrated that the cheques in question were received in the normal course of business and that no cash loan was involved in the transaction.
During the search operation, no incriminating evidence was found to support the contention that the assessee had given any cash loan. Thus, the AO made the entire addition based on a presumption. Further, no cash trail or loose papers were found to support the presumption drawn by the AO. The cheques found during the search were also undated, and the AO did not make any inquiries of the parties who issued them.
AO made additions solely on the basis of presumptions and surmises, not on any evidence. Thus, the AO’s additions were deleted.
List of Cases Reviewed
- Balasinor Road Transport Co-Op. Society Ltd. v. ITO [IT Appeal No. 39/Ahd/2022, dated 28.06.2024] (para 4.2) affirmed
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