2018 (2) TMI 1935 - HC - Income Tax

High Court dismisses appeal on unexplained investments under Income Tax Act, emphasizes need for thorough investigations

The High Court dismissed the appeal concerning the addition of unexplained investments under Section 68 of the Income Tax Act, 1961. The Assessing ... Unexplained investment u/s 68 - Search proceedings - CIT(A) and the ITAT concurrently deleted the amounts brought to tax under Section 68 holding that the relevant enquiry based upon the materials furnished by the assessee had not been made - HELD THAT:- Search in the premises of the Bhushan Steel Group, had led to survey in the premises of various other assessees including M/s Adamine Construction Pvt. Ltd., and in the end the additions made in that case too were deleted. The deletion – again concurrently by the lower appellate authorities was upheld by this Court recently in Principal Commissioner of Income Tax v. M/s Adamine Construction Pvt. Ltd. [2018 (2) TMI 1464 - DELHI HIGH COURT] . ' Here too, the Court has considered the materials. What is evident is that the AO went by only the report received and did not make the necessary further enquiries – such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO. - Decided against revenue Issues:1. Addition of unexplained investment under Section 68 of the Income Tax Act, 1961 based on a search conducted in the premises of a third party.2. Deletion of the amounts brought to tax under Section 68 by the CIT(A) and ITAT due to inadequate enquiry by the Assessing Officer.3. Comparison with a similar case involving M/s Adamine Construction Pvt. Ltd. where additions were also deleted by lower appellate authorities.Analysis:1. The Assessing Officer (AO) added Rs. 5,50,00,000 as unexplained investment under Section 68 of the Income Tax Act, 1961, based on amounts received from 7 entities after a search in the premises of a third party. The AO sought reports from the Commissioner at Mumbai and Kolkata. However, the CIT(A) and the Income Tax Appellate Tribunal (ITAT) deleted the amounts brought to tax under Section 68, citing lack of proper enquiry based on materials provided by the assessee.2. The High Court noted that a search at Bhushan Steel Group's premises led to surveys at various other assessees, including M/s Adamine Construction Pvt. Ltd. In a similar case, the additions made were also deleted by lower appellate authorities. The Court recently upheld the deletion in Principal Commissioner of Income Tax v. M/s Adamine Construction Pvt. Ltd. The AO's reliance solely on received reports without further necessary enquiries, like checking bank accounts or other available particulars, was deemed insufficient. The Court emphasized that the AO should have conducted a more thorough investigation beyond the initial report, as the assessee had provided basic details that were not adequately examined.3. Drawing parallels with the Adamine Construction case, the Court highlighted the importance of proper enquiry by the Assessing Officer. It was observed that the AO's failure to conduct detailed investigations beyond the initial report led to the dismissal of the appeal. The Court concluded that no legal question arose in this matter, resulting in the dismissal of the appeal.In conclusion, the High Court dismissed the appeal, emphasizing the significance of conducting thorough investigations and proper enquiries by the Assessing Officer before making additions under Section 68 of the Income Tax Act, 1961. The judgment highlighted the need for primary material and detailed scrutiny of provided information to ensure fair and accurate tax assessments.