2018 (11) TMI 203 - AT - Income Tax

Tribunal upholds AO's additions for unexplained deposits, reverses CIT(A)'s deletions. Reopening assessments based on tangible material.

The Tribunal upheld the Assessing Officer's additions under Section 68 for unexplained deposits and unexplained liabilities, reversing the CIT(A)'s ... Reopening of the assessment - unexplained deposits - unexplained liabilities - assessee company is part of one of the companies operated for providing accommodation entries - CIT(A) deleted the additions - Held that:- There is no evidence that assessee has submitted confirmation of those parties. Even before the ld CIT(A) it was not rebutted that assessee is not an accommodation entry provider. Further, in absence of preliminary discharge of initial onus by the assessee of the sums credited in the books, of the assessee, the ld AO is not duty bound to issue any summons u/s 131 of the Act. When assessee has not provided the complete details of the persons from whom the sums were received, it is not correct to say that the AO should have issued summons to those parties. The ld CIT(A) has deleted the addition for the reason that assessee filed details of credit and debit entries of the bank account and also the loans paid. CIT(A) has blind foldedly accepted the explanation of the assessee without giving any credence to the fact of the case that assessee company is an accommodation entry provider and unless the real beneficiaries are named by it, it cannot escape the taxation of the sum credited in its books of account. As assessee’s director has confessed that assessee company is providing accommodation entries, then, CIT(A) even did not care to verify that who are the beneficiaries and what is the amount of commission received by assessee from the beneficiaries from providing accommodation entries. Without even calling for all these details, the ld CIT(A) has deleted the addition. In view of this, we reverse the finding of the ld CIT(A) and confirm the order of the ld Assessing Officer with respect to the addition - Decided in favour of revenue. Current liabilities unexplained - Held that:- The assessee submitted before the ld CIT(A) that it received sum of ₹ 14 lakhs from Shreys Infradevelopers Pvt. Ltd and San Portfolio Pvt Ltd of ₹ 135000/-, however, no confirmation was provided of these parties. In view of this the addition has been made by the ld AO. The ld CIT(A) deleted the addition without even asking for the confirmation. We find that unless the assessee submits the confirmation of these parties the addition cannot be deleted. In view of this we reverse the finding of the ld CIT(A) and restore the order of the ld AO - Decided in favour of revenue. Issues Involved:1. Deletion of additions made by the Assessing Officer (AO) under Section 68 as unexplained deposits.2. Deletion of additions made by the AO as unexplained liabilities.3. Validity of reopening of assessment under Section 147/151.4. Estimated profit on sale of investments.Detailed Analysis:1. Deletion of Additions under Section 68 as Unexplained Deposits:The revenue challenged the deletion of additions of Rs. 3,95,32,500/- for AY 2007-08, Rs. 6,85,31,671/- for AY 2008-09, and Rs. 12,10,33,910/- for AY 2009-10 made by the AO under Section 68 as unexplained deposits. The AO had noted that the assessee failed to provide necessary documentary evidence to prove the identity, capacity, and genuineness of the parties from whom the money was received. The AO's assessment was based on the statement of Shri Asheem Gupta, who admitted to providing accommodation entries. The CIT(A) deleted the additions, stating that the assessee had provided sufficient details and that the AO did not pursue the evidence provided. However, the Tribunal found that the CIT(A) failed to apply the law correctly and did not verify the beneficiaries of the accommodation entries. The Tribunal reversed the CIT(A)'s order and upheld the AO's additions.2. Deletion of Additions as Unexplained Liabilities:For AY 2007-08, the AO made an addition of Rs. 15,35,000/- as unexplained liabilities, which the CIT(A) deleted. The AO noted that the assessee did not provide confirmation of the liabilities. The CIT(A) deleted the addition, stating that the assessee had provided details of loans and interest earned. The Tribunal found that the CIT(A) did not verify the confirmations and reversed the CIT(A)'s order, restoring the AO's addition.3. Validity of Reopening of Assessment:The assessee challenged the reopening of assessments for all three years, arguing that the AO did not have fresh tangible material and that the provisions of Sections 147 to 151 were not complied with. The CIT(A) upheld the reopening, stating that the statement of Shri Asheem Gupta was a tangible material for reopening. The Tribunal agreed with the CIT(A), noting that the statement was never retracted and was sufficient for reopening. The Tribunal dismissed the assessee's cross-objections challenging the reopening.4. Estimated Profit on Sale of Investments:For AY 2008-09, the AO made an addition of Rs. 4,35,320/- and for AY 2009-10, an addition of Rs. 3,10,500/- as estimated profit on sale of investments. The CIT(A) deleted these additions, stating that they were made on surmises and conjectures without any inquiry. The Tribunal agreed with the CIT(A) on this issue and directed the AO to delete the additions, dismissing the revenue's grounds on this matter.Conclusion:The Tribunal allowed the revenue's appeals regarding the deletion of additions under Section 68 and unexplained liabilities, reversing the CIT(A)'s order and restoring the AO's additions. The Tribunal dismissed the assessee's cross-objections challenging the reopening of assessments. The Tribunal also dismissed the revenue's appeals regarding the estimated profit on sale of investments, upholding the CIT(A)'s deletion of these additions.