Tribunal rules in favor of assessee, directing deletion of additions for 3 years

The Tribunal ruled in favor of the assessee, directing the AO to delete the impugned additions for all three years under consideration. The Tribunal found the additions based on diary entries and statements to be made on surmises and conjectures, with unreliable statements from Shri S.K. Terdale. It concluded that the loans given to relatives were independent transactions unconnected to the alleged undisclosed deposits, dismissing the AO's theory of converting black money into white. The appeals of the assessee were allowed, and stay applications were dismissed as infructuous.

---

---

Issues Involved:
1. Addition towards undisclosed income relating to alleged deposits.
2. Validity of reopening of assessments.
3. Reliability of statements given by Shri S.K. Terdale.
4. Burden of proof and presumption under section 292C of the Income Tax Act.
5. Correlation between loans given to relatives of the assessee and alleged undisclosed deposits.

Issue-wise Detailed Analysis:

1. Addition towards undisclosed income relating to alleged deposits:
The assessee challenged the addition towards undisclosed income based on alleged deposits made in a co-operative society. The revenue had carried out survey operations and impounded a diary maintained by Shri S.K. Terdale, which recorded the receipt of deposits from certain persons, including the assessee. The assessee denied any connection with the deposits and refused to cross-examine Shri S.K. Terdale. The AO reopened the assessments and made additions based on the diary entries and statements from Shri S.K. Terdale. The Tribunal found that Shri S.K. Terdale's statements were unsubstantiated and unreliable, and the assessee could not be compelled to prove a negative fact. The Tribunal concluded that the additions were made on surmises and conjectures and directed the AO to delete the impugned additions.

2. Validity of reopening of assessments:
The assessee raised grounds regarding the validity of reopening the assessments. However, since the Tribunal decided the grounds on merits in favor of the assessee and the learned AR did not advance arguments on the legal ground, the Tribunal did not find it necessary to adjudicate these grounds.

3. Reliability of statements given by Shri S.K. Terdale:
The Tribunal examined the reliability of the statements given by Shri S.K. Terdale, who admitted to maintaining the diary and recording the deposits against the name of the assessee. However, Terdale could not identify the persons who brought the money or provide any corroborative evidence. The Tribunal found that Terdale's statements were not substantiated and could not be used against the assessee. The Tribunal noted that the assessee denied the transactions and did not accept Terdale's statements, reinforcing the view that the statements were unreliable.

4. Burden of proof and presumption under section 292C of the Income Tax Act:
The Tribunal discussed the presumption under section 292C, which applies to the person from whom documents are seized during a survey. In this case, the presumption applied to the society/bank, not the assessee. The Tribunal found that the society/bank failed to discharge its burden of proof to substantiate the diary entries. The Tribunal agreed with the assessee's contention that proving a negative fact is impermissible under the law.

5. Correlation between loans given to relatives of the assessee and alleged undisclosed deposits:
The AO attempted to correlate the loans given to the assessee's relatives with the alleged undisclosed deposits. The Tribunal found that the loans were business loans secured against stock and repaid within a short period, indicating they were independent transactions unconnected with the alleged deposits. The Tribunal concluded that the AO's theory of converting black money into white was not supported by the facts and circumstances of the case.

Conclusion:
The Tribunal set aside the orders passed by the CIT(A) and directed the AO to delete the impugned additions for all three years under consideration. The appeals of the assessee were allowed, and the stay applications were dismissed as infructuous.

---