2015 (5) TMI 542 - AT - Income Tax

Tribunal directs fresh assessment by Assessing Officer, to verify cash deposits against prior disclosure.

The Tribunal set aside the matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer was directed to verify the disclosure ... Unexplained investments - Unexplained credits received - accommodation entries - deposits in appellant's bank accounts received from various intermediaries operated by Sh. SK Gupta to provide accommodation entries to various beneficiaries against cash received from them - CIT(A) confirming the addition made u/s 68 - Held that:- There was no explanation filed before the AO except filing the copy of the bank pass book and it was only during the course of proceeding before the CIT(A) the assessee company tried to explain that the cash deposits were made out of the money belong to the beneficiary to whom accommodation entries were provided and the same explanation was reiterated before us. In our considered opinion, this would not meet the requirement of Section 69 of the Act. There was no material on record that Mr. S.K. Gupta who acted as intermediary between the assessee company and the beneficiary of accommodation entries had filed the confirmation letter stating that amount deposited in the Bank account was provided by him. Nor, the order of the Hon’ble Settlement Commission establishes the availability of cash with Mr. Gupta when the cash was deposited in the bank accounts of assessee company. This issue is essentially based on the facts. The interest of justice would be met, if the matter is restored to the file of the Assessing officer with a direction that the Assessing Officer shall verify the disclosure made in the case of Mr. S.K. Gupta before the Hon’ble settlement commission and whether the amount of cash deposited in the present case is covered by such disclosure. If the cash deposited in the assessee case is covered, in the disclosure of Mr. S.K. Gupta before settlement commission, the addition may be deleted. See M/s KSA Chits Pvt. Ltd. Versus Dy. Commissioner of Income Tax [2015 (3) TMI 881 - ITAT DELHI ] - Decided in favour of assessee for statistical purposes. Issues Involved:1. Addition and enhancement of income without confronting the assessee with material evidence.2. Incorrect finding regarding details of beneficiaries.3. Treatment of credits in the assessee's books under Section 68 of the Income-tax Act, 1961.4. Impact of proceedings in Mr. S.K. Gupta's case.5. Taxation of credits in the hands of other intermediaries.6. Consideration of Settlement Commission's findings in Mr. S.K. Gupta's case.7. Directions issued under Section 144A for A.Y. 2004-05.8. Consistency in assessment across different years.9. Enhancement of income by Rs. 57,06,000/-.10. Relief for amounts added twice and cash deposits.Detailed Analysis:1. Addition and Enhancement of Income Without Confronting the Assessee:The assessee company contended that the Commissioner of Income Tax (Appeals) confirmed the addition and enhanced the income without confronting the assessee with material seized from the laptop and statements during the survey operation. The Tribunal noted that the assessee was not provided with an opportunity to explain the source of cash deposits in the bank account, which led to the addition of Rs. 1,14,90,113/-.2. Incorrect Finding Regarding Details of Beneficiaries:The assessee argued that the CIT(A) incorrectly found that details of beneficiaries were not in the seized material, which was demonstrated through bank particulars. The Tribunal observed that the CIT(A) failed to appreciate the evidence provided by the assessee regarding the beneficiaries.3. Treatment of Credits Under Section 68:The assessee claimed that it was merely a conduit for funds transfer and that credits in its books should not be treated as its income under Section 68. The Tribunal referred to the modus operandi of Mr. S.K. Gupta, who operated multiple accounts to provide accommodation entries. The Tribunal concluded that the assessee's explanation did not conclusively explain the source of cash deposits, and the provisions of Section 69, rather than Section 68, were applicable.4. Impact of Proceedings in Mr. S.K. Gupta's Case:The assessee argued that the proceedings in Mr. S.K. Gupta's case should impact its assessment. The Tribunal noted that the Settlement Commission's order in Mr. S.K. Gupta's case did not provide any clue about the sources of cash deposits in the assessee's name. Each assessment is independent, and the Settlement Commission's order cannot be extended to the assessee's case.5. Taxation of Credits in the Hands of Other Intermediaries:The assessee contended that the credits in its books were also taxed in the hands of other intermediaries. The Tribunal found no material on record to support this claim and held that the explanation provided by the assessee did not meet the requirements of Section 69.6. Consideration of Settlement Commission's Findings:The assessee relied on the Settlement Commission's findings in Mr. S.K. Gupta's case. The Tribunal noted that the Settlement Commission's order only quantified the commission income in Mr. S.K. Gupta's hands and did not support the non-applicability of Section 68 in the assessee's case.7. Directions Issued Under Section 144A for A.Y. 2004-05:The assessee argued that similar facts in A.Y. 2004-05 led to directions under Section 144A that no addition should be made. The Tribunal did not find this argument persuasive, as each assessment year is independent.8. Consistency in Assessment Across Different Years:The assessee highlighted that its returned income was accepted in preceding and subsequent years on identical facts. The Tribunal reiterated that each assessment year is independent, and consistency in other years does not impact the current assessment.9. Enhancement of Income by Rs. 57,06,000/-:The Tribunal found that the CIT(A) enhanced the income without properly considering the assessee's reply dated 14.03.2013. The Tribunal directed the Assessing Officer to verify the disclosure made in Mr. S.K. Gupta's case before the Settlement Commission and determine if the cash deposits were covered by such disclosure.10. Relief for Amounts Added Twice and Cash Deposits:The assessee sought relief for amounts added twice and cash deposits. The Tribunal directed the Assessing Officer to verify the claims and eliminate any double taxation or circular transactions.Conclusion:The Tribunal set aside the matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer was directed to verify the disclosure made in Mr. S.K. Gupta's case before the Settlement Commission and determine if the cash deposits in the assessee's case were covered by such disclosure. The appeal was allowed for statistical purposes.