2015 (3) TMI 608 - AT - Income Tax

Tribunal affirms CIT(A) decision, deletes Rs. 30,50,000 addition under sec 69 ITA 1961 citing lack of evidence

DCIT Versus K. Natwar Singh

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 30,50,000 made by the AO under section 69 of the Income Tax Act, 1961. The ... Unexplained investment - unexplained interest credited to the assessee - unexplained cash credit/debits held as income of the assessee - CIT(A) deleted the addition - Held that:- It does not stand established that the assessee has made the impugned investment. We say so for the reason that the burden to establish the existence of impugned investment was on the Revenue, which, in the present case has not been discharged. Firstly, assessee denied the impugned transaction. Secondly, the claim of the Assessing Officer is based on the alleged evidence found on Shrl Chetan Gupta, and quite clearly said witness has not been confronted to the assessee at any stage during the course of assessment, although the same was specifically pleaded by the assessee. The said person is the witness of the revenue because it is on the basis of his testimony, It has been held that the assessee made the impugned investment. Therefore, non-affording of cross-examination makes the use of such evidence by the Revenue, as untenable. See CIT Vs. Ashwani Gupta, (2010 (2) TMI 42 - DELHI HIGH COURT), which followed its earlier decision of SMC Share Brokers Ltd. (2008 -TMI - 3387 - DELHI HIGH COURT) to concluded that once there was violation of the principles of natural justice, in as much as seized material was not provided to an assessee nor was cross-examination of the person on whose statement the Assessing Officer relied upon granted, then such deficiencies would amount to denial of opportunity and would be fatal to the proceedings. Thirdly Shri Chetan Gupta has denied recovery of the pen-drive and also the impugned transactions in the statement recorded by the Assessing officer on 16.11.2009, so however, even if it is accepted that the pen-drive was recovered from shri Chetan Gupta, then, it only amounts to a third-party evidence and could not be straightaway relied upon without being tested in cross-examination or on the basis of any corroborative evidence. For the aforesaid proposition, we are fortified by the judgment of Hon’ble Delhi High court in SMC Share Brokers Ltd. (supra) and S.M. Aggarwal (supra) and also Chiranjil Lal Steel Rolling Mills (1970 (11) TMI 30 - PUNJAB AND HARYANA High Court). The information received by the Assessing officer from his investigation Wing, at best, be regarded as a prima-facie material, but could not be construed as conclusive for use against the assessee to fasten any tax liability, because the same was required to be corroborated by credible and independent evidence or was required to be tested in cross-examination by the assessee, quite clearly none of these aspects have done by the Revenue in this case. Therefore, it is under these circumstances, that we have observed earlier that the Revenue has not proved that the impugned investment has been made by the assessee. In the light of above, the essential pre-requisite of Section 69 of the Act is not satisfied in this case. - Decided in favour of assessee. Issues Involved:1. Deletion of addition of Rs. 30,50,000/- made by AO under section 69 of the Income Tax Act, 1961 on account of unexplained investment and interest.Detailed Analysis:1. Deletion of Addition of Rs. 30,50,000/- Made by AO Under Section 69:Factual Background:The assessee filed a return of income declaring Rs. 5,98,230/- for the assessment year 2003-04. The return was processed under section 143(1) without scrutiny. The AO received information from the Assistant Commissioner of Income-tax, Central Circle-12, New Delhi, about a ledger account found in possession of Sh. Chetan Gupta by the Vigilance Bureau, Ludhiana, which included the assessee's name. A pen-drive recovered from Sh. Chetan Gupta contained data showing credits/deposits aggregating to Rs. 25 lakhs plus Rs. 5.50 lakhs as interest in the name 'N.S.', deciphered as Natwar Singh, the assessee. The AO observed these credits/deposits totaling Rs. 30,50,000/- were unexplained in the assessee's return and issued a notice under section 148 after recording reasons and obtaining necessary approval.Assessee's Response:The assessee denied making any deposits with Sh. Chetan Gupta and receiving any interest. The AO asked the assessee to produce Sh. Chetan Gupta for deposition, which the assessee refused, stating the onus was on the department.AO's Decision:The AO rejected the assessee's explanation and added Rs. 30,50,000/- to the declared income, totaling Rs. 36,48,230/-.CIT(A)'s Decision:The CIT(A) deleted the addition, stating the AO failed to establish the credits in Sh. Chetan Gupta's books as the assessee's investment. The AO did not record any statement from Sh. Chetan Gupta to support the claim. Judicial precedents were cited to support that no addition could be made based on third-party accounts without establishing authenticity and examining the third party. The CIT(A) referenced various judgments, including:- Chiranjee Lal Steel Rolling Mills Ltd. v CIT (84 ITR 222)- Bangodaya Cotton Mills Ltd. v CIT (224 CTR 62)- DCIT v Mahendra Ambalal Patel (40 DTR 243)- Prakash Chand Nahta v CIT (301 ITR 134)- CIT v Salek Chand (300 ITR 426)- SMC Share Broker Ltd. (288 ITR 345)- JMD Computers (20 DTR 317)- Amarjit Singh Bakshi (263 ITR 75)- Krishna Textiles (11 DTR 217)- A.N. Dyaneswaran (214 CTR (Mad) 482)The CIT(A) concluded that the addition should be made in Sh. Chetan Gupta's hands, not the assessee's, as there was no evidence linking the credits to the assessee.Tribunal's Decision:The Tribunal upheld the CIT(A)'s decision, referencing similar cases where additions based on the same pen-drive were deleted:- Capt. Amrinder Singh- Shri Raninder Singh- Smt. Heminder KumariThe Tribunal noted that the AO did not provide any new evidence or material to justify a different conclusion. The Tribunal emphasized the importance of cross-examination and corroborative evidence, which were lacking in this case. The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order.Conclusion:The Tribunal dismissed the Revenue's appeal, confirming the deletion of the addition of Rs. 30,50,000/- made by the AO under section 69 of the Income Tax Act, 1961, due to lack of evidence and failure to establish the credits as the assessee's investment. The decision was consistent with judicial precedents and similar cases.