2013 (10) TMI 114 - HC - Income Tax

Dismissal of Appeal under Income Tax Act 1961, Lack of Evidence, Speculative Additions

The appeal under Section 260A of the Income Tax Act, 1961, stemming from the ITAT's order for the assessment year 2002-03, was dismissed. The court found ... Income escaping assessment u/s 147 of the Income Tax Act – Undisclosed investment made by the Assessee - Held that:- There was no any credible material, which could relate to or connect to the investment of Rs.21 lacs by Reena Arora, which she had paid to D.N. Taneja - The entries in the diary of D.N. Taneja found during search and seizure, which he admitted were not of the amount of Rs.21 lacs paid by Smt. Reena Arora. The entries were with noting on the top (Praveen, Dilbagh) only indicated a schedule of payment. The name of Reena Arora did not appear in the diary. The A.O. while relying upon additions on the basis of the entries did not provide reasonable opportunity to the assessee. He did not allow cross-examination of D.N. Taneja by the assessee nor any bank statement or other records were found connecting these entries to Reena Arora - The investment made by Reena Arora and quantum was purely a guess work, which has been arrived at on surmises and conjectures without giving her an opportunity to be heard – Decided against the Revenue. Issues:Appeal under Section 260A of the Income Tax Act, 1961 arising from the order dated 6.2.2009 by the Income Tax Appellate Tribunal for the assessment year 2002-03. Questions of law include the justification of canceling action under Section 147, the perversity of the ITAT order, and reliance on specific court decisions.Analysis:The case involves an appeal by the income tax department challenging the ITAT's order related to the assessment year 2002-03. The department raised questions regarding the justification of canceling action under Section 147 based on information from the investigation wing, the alleged perversity of the ITAT order, and reliance on court decisions concerning the validity of notices under Section 147. The appellant, Smt. Reena Arora, disclosed the purchase of properties in Gurgaon and filed her return for the assessment year. Subsequently, based on information regarding possible tax evasion, the department initiated proceedings under Section 147 read with Section 148 of the Act. The appellant objected to the proceedings, citing lack of credible information and challenging the additions made to her income.The Commissioner (Appeals) allowed the appeals, emphasizing the lack of opportunity for the appellant to cross-examine witnesses and rebut the evidence used against her. The Tribunal confirmed these findings, highlighting the uncertainty regarding income escaping assessment and the lack of credible information to show any concealment of receipts. The revenue argued that there was credible information based on incriminating documents and statements, but the court found no substantial material connecting the alleged investments by the appellant.Upon examination of the orders and material presented, the court concluded that there was no credible material linking the undisclosed investments to the appellant. The entries in the diary of a key witness did not directly implicate the appellant, and the additions to her income were based on guesswork without proper opportunity for her to defend against the allegations. The court held that the findings of the appellate authority and the ITAT were legally sound, dismissing the appeal on the grounds of no substantial questions of law requiring further consideration. The appeal was dismissed in limine, upholding the decisions of the lower authorities.