Assessment reopening under Section 147 valid but unexplained investment addition deleted without corroborative evidence

ITAT Jodhpur upheld the reopening of assessment u/s 147 based on statement recorded during search and documents found, finding no infirmity in AO's speaking reasons concluding income escaped assessment. However, regarding addition u/s 69 for unexplained investment in plot purchase, ITAT directed deletion of addition following Dhirendra Singh precedent, ruling that additions cannot be made solely on statement basis without corroborative material and without allowing assessee opportunity to cross-examine the person whose statement formed basis of addition. Appeal decided partly in favour of assessee.

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Issues Involved:
1. Jurisdiction under Sections 147/148 of the Income Tax Act.
2. Service of notice under Section 148 after the prescribed time limit.
3. Validity of reasons for reopening the assessment.
4. Jurisdiction under Section 153C in relation to Sections 153A, 153B, and 153D.
5. Addition under Section 69 based on alleged on-money payment.
6. Opportunity for cross-examination.
7. Levy of interest under Section 234B.

Issue-wise Detailed Analysis:

1. Jurisdiction under Sections 147/148 of the Income Tax Act:
The assessee challenged the jurisdiction acquired by the Assessing Officer (AO) under Sections 147/148, arguing that the assessment order and jurisdiction were unjustified and erroneous. The Tribunal upheld the AO's decision, stating that the AO had recorded speaking reasons and concluded that income had escaped assessment, thereby justifying the reopening of the assessment.

2. Service of Notice under Section 148 after the Prescribed Time Limit:
The assessee contended that the notice under Section 148 was served after the stipulated date. The Tribunal did not find any merit in this argument and upheld the service of notice as valid.

3. Validity of Reasons for Reopening the Assessment:
The assessee argued that the reasons for reopening the assessment were based on vague, non-specified, and irrelevant material. The Tribunal found that the AO had valid reasons based on the statement of Shri Madan Mohan Gupta recorded during a search and seizure operation, as well as documents found during the search. Thus, the reopening of the assessment was deemed justified.

4. Jurisdiction under Section 153C in Relation to Sections 153A, 153B, and 153D:
The assessee claimed that the AO should have proceeded under Section 153C, read with Sections 153A, 153B, and 153D, as the material used emanated from a search carried out under Section 132. The Tribunal did not find any merit in this argument and upheld the AO's jurisdiction under Section 147.

5. Addition under Section 69 Based on Alleged On-Money Payment:
The AO added Rs. 4,00,000 to the assessee's income, alleging that the assessee had paid on-money for the purchase of a plot. The Tribunal found that neither the seized documents nor the statement of Shri Madan Mohan Gupta provided any evidence of on-money payment by the assessee. The Tribunal referred to similar cases where such additions were deleted due to lack of corroborative evidence and the denial of cross-examination. Consequently, the Tribunal directed the AO to delete the addition.

6. Opportunity for Cross-Examination:
The assessee argued that the AO did not provide an opportunity to cross-examine Shri Madan Mohan Gupta, whose statement was used against the assessee. The Tribunal found that the denial of cross-examination amounted to a violation of natural justice. Citing various judicial precedents, the Tribunal held that the addition made without allowing cross-examination was unsustainable and directed its deletion.

7. Levy of Interest under Section 234B:
The assessee contested the levy of interest under Section 234B, arguing that it was not automatic and that no interest was leviable. The Tribunal upheld the CIT(A)'s decision, which relied on the Supreme Court's ruling in CIT vs. Anjum M.H. Ghaswala, stating that the levy of interest was automatic.

Conclusion:
The Tribunal allowed the appeal in part, directing the deletion of the addition made under Section 69 due to lack of corroborative evidence and the denial of cross-examination. The Tribunal upheld the reopening of the assessment under Sections 147/148 and the levy of interest under Section 234B. The appeal was allowed in terms indicated, and the stay application was dismissed as infructuous. The order was pronounced in the open court on 19th March 2020.

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