The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the income tax addition worth Rs. 2 crores and held that the AO cannot ask the assessee to prove the non-occurring of an event.
The bench of Anubhav Sharma (Judicial Member) and Shamim Yahya (Accountant Member) has observed that it is not proper on the part of the AO to ask the appellant to prove with witnesses and documentary evidence the non-occurring event. The witnesses and documentary evidence are called upon to prove the occurrence of the event, not its non-occurrence.
The Income Tax Officer has enclosed a copy of the TEP along with a copy of the agreement to sell between M/s. Northern India Plywood Pvt. Ltd. and M/s. Gammon Constructions Pvt. Ltd. As per the agreement, the assessee has made a payment of Rs. 4 crores (2 crores by check and 2 crores in cash) to M/s. Northern India Plywood Pvt. Ltd. in advance for the farmhouse.
The assessee/respondent contended that the alleged agreement copy that was given to us is a fabricated document by some person. No agreement or receipt has ever been signed by any of the parties, and no payment has been exchanged either in cash or by check.
The AO noted that the assessee company filed bank statements to prove that they had not received any payment by way of a check or through a banking channel. Hence, AO dropped the issue of cheques cleared or debited from the bank account but not the addition for cash payments of Rs. 2 crore. AO made the addition upon a finding that the assessee had not been able to give proof that such a transaction had not taken place.
The assessee appealed before the CIT (A). The CIT (A) deleted the addition by noting that the AO has put the onus on the assessee to prove that the cash transaction has not taken place.
The tribunal held that the document on the basis of which an addition of Rs. 2 crore is sought to be made is not a cogent document. The same is the unsigned photocopy on which the addition was made for the impugned amount. Furthermore, AO, instead of proving that a cash transaction took place, put the burden on the assessee to prove that the said transaction did not take place.
Case Title: ITO versus Gammon Construction Pvt. Ltd