Tribunal upholds CIT(A)'s decision on section 68 addition, emphasizing lack of evidence.

The Tribunal upheld the CIT(A)'s decision to delete the addition under section 68, emphasizing that the AO's actions were based on suspicion without concrete evidence and violated principles of natural justice. The Tribunal also dismissed the cross objections filed by the assessees. Both the appeals by the Revenue and the cross objections by the assessees were ultimately dismissed.

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Issues Involved:

1. Deletion of addition under section 68 based on suspicion and presumption.
2. Jurisdiction of the ACIT, Central Circle, Kollam.
3. Rejection of technical grounds by CIT(A).
4. Validity of reopening of assessment based on suspicion.
5. Delay in filing cross objections.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 Based on Suspicion and Presumption:

The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 7.36 Crores, holding that the addition was made only on suspicion and presumption. The CIT(A) observed that the transactions were through banking channels, and the creditors were identifiable and income tax assessees. The AO had only suspicion and presumption without any concrete evidence. The Tribunal upheld the CIT(A)'s decision, noting that the AO's addition was based on suspicion without corroborative evidence. The Tribunal emphasized that suspicion cannot replace evidence and the AO should act judicially and not arbitrarily. The Tribunal also noted that the AO did not provide the assessee an opportunity to cross-examine the parties whose statements were relied upon, which violated the principles of natural justice.

2. Jurisdiction of the ACIT, Central Circle, Kollam:

The assessees in their cross objections argued that the ACIT, Central Circle, Kollam, lacked jurisdiction as there was no order under section 127 of the IT Act transferring jurisdiction. The CIT(A) rejected this ground without assigning jurisdiction to the ACIT, Kollam. The Tribunal dismissed the cross objections as not pressed by the assessee's counsel during the hearing.

3. Rejection of Technical Grounds by CIT(A):

The assessees contended that the CIT(A) erred in rejecting their technical grounds on irrelevant and flimsy grounds. The CIT(A) did not consider the objection under section 124(3) filed by the assessees regarding the jurisdiction of the ACIT, Kollam. The Tribunal did not delve into this issue as the cross objections were dismissed as not pressed.

4. Validity of Reopening of Assessment Based on Suspicion:

The assessees argued that the reopening of the assessment was based on suspicion regarding the credits in their books of accounts, which was against the CBDT's directions. The CIT(A) rejected this contention, noting that the AO considered the objections made by the assessees. The Tribunal upheld the CIT(A)'s decision, noting that the AO's addition was based on suspicion without concrete evidence and that the AO did not provide an opportunity for cross-examination, violating natural justice principles.

5. Delay in Filing Cross Objections:

There was a short delay of 8 days in filing the cross objections by the assessees. However, during the hearing, the assessee's counsel did not press the cross objections, leading to their dismissal by the Tribunal.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to delete the addition under section 68, noting that the AO's addition was based on suspicion without corroborative evidence and that the AO violated the principles of natural justice by not providing an opportunity for cross-examination. The Tribunal dismissed the cross objections filed by the assessees as not pressed. The appeals filed by the Revenue and the cross objections filed by the assessees were dismissed.

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