ITAT Delhi: Addition Under Section 69A Unsustainable on Basis of Undated Loose Paper Lacking Corroboration — Air Con Systems (India) Pvt. Ltd. Vs DCIT

Background and Context

The Delhi Bench of the Income Tax Appellate Tribunal recently rendered a significant decision in the matter of Air Con Systems (India) Pvt. Ltd. Vs DCIT, where the core question revolved around whether an addition of Rs. 62,00,000 under Section 69A of the Income Tax Act, 1961 could be sustained solely on the basis of an undated loose paper recovered during a search — not from the assessee itself, but from the premises of a third party.

The assessment in question pertained to Assessment Year 2020-21 and arose from proceedings initiated under Section 144 read with Section 153A of the Income Tax Act, 1961. The matter came before the Tribunal after the Commissioner of Income Tax (Appeals), New Delhi confirmed the addition made by the Assessing Officer, prompting the assessee to prefer an appeal before the ITAT.

Facts of the Case

A search and seizure operation was originally conducted in the case of Sanjay Jain and Mehtas on 26.10.2020, following which consequential searches were carried out against several entities including M/s Canon Fasteners, M/s Pawan Kumar, and M/s Winner Constructions Pvt. Ltd. — all reportedly involved in construction business and alleged accommodation entry transactions.

The assessee, Air Con Systems (India) Pvt. Ltd., was also brought within the ambit of the search proceedings, and a notice under Section 153A was duly issued on 18.11.2021. Notably, no return of income was filed by the assessee in response to this notice.

During the assessment proceedings, the Assessing Officer placed reliance on page 46 of Annexure A-7 from FCB-1, a document recovered from the residence of Sh. Surender Gupta. Based on entries contained in this paper, the AO concluded that the assessee had received a sum of Rs. 62,00,000 in cash, particularly noting entries captioned as "CASH ANTH HR" and "CASH ANTH YOG", which were presumed to refer to cash received in connection with the Anthurium Project from individuals named Yogesh Jangra and Harsh Gupta on behalf of the assessee.

This amount was treated as unexplained and undisclosed receipts and added to the assessee's income under Section 69A of the Act. The CIT(A) upheld the addition, following which the assessee approached the Tribunal.

Grounds of Appeal Raised Before ITAT

The assessee raised the following grounds before the Tribunal: