Tribunal deletes tax addition due to lack of evidence, emphasizing importance of substantiated claims.

The Tribunal allowed the appeal of the assessee, directing the deletion of the addition of Rs. 1,05,150. The decision emphasized that retracted statements and unsupported allegations could not justify additions, highlighting the importance of substantive evidence in tax matters. The outcome favored the assessee, leading to the deletion of the disputed amount.

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Issues Involved:
1. Non-supply of information received by the Assessing Officer (AO) from the Director of Income Tax (Investigation) (D.I. (Inv)).
2. Treatment of purchase from AVI Exports as bogus and unexplained expenditure.

Issue-wise Detailed Analysis:

1. Non-supply of Information Received by AO:
The assessee contended that the assessment order was "bad, illegal and void" because the AO did not supply the copy of the information received from D.I. (Inv) based on which the assessment was reopened. The AO had received information suggesting that the assessee was a beneficiary of accommodation entries through non-genuine purchase bills from AVI Exports. The case was selected for reassessment under section 147 of the Income-tax Act, 1961, by issuing a notice under section 148 of the Act. However, the AO did not provide the assessee with the information that triggered the reassessment.

2. Treatment of Purchase from AVI Exports as Bogus and Unexplained Expenditure:
The AO observed that the assessee, a trader in jewellery items, had allegedly received accommodation entries by way of non-genuine purchase bills amounting to Rs. 1,05,150 from AVI Exports. Despite the assessee's submission of purchase details, payment through banking channels, and supporting documents, the AO deemed the transaction as merely an accommodation entry and not genuine. The AO's stance was based on the statement from the Investigation Wing that AVI Exports was an accommodation entry provider. The AO further noted that the assessee could not substantiate the movement of goods from Surat to Kolkata. Consequently, the AO added Rs. 1,05,150 as unexplained expenditure.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting that the proprietor of AVI Exports had admitted to providing accommodation entries in lieu of commission. This admission was part of a broader modus operandi involving several fictitious firms issuing bogus bills. The CIT(A) confirmed the addition based on the statements recorded during the search and seizure action.

Tribunal's Findings:
Upon hearing both parties, the Tribunal referred to a similar case adjudicated earlier, where the addition based on the statement of Shri Rajendra Jain was deleted. The Tribunal observed that the assessee maintained proper books of accounts, including stock registers, bills, and vouchers. The purchases were made against proper bills and were used in making jewellery, which was sold at a profit. The Tribunal noted that the revenue had accepted the sales made by the assessee, implying that the purchases must have occurred.

The Tribunal found no evidence to support the revenue's claim that the assessee received cash back from AVI Exports in lieu of cheques issued. It was also noted that Shri Rajendra Jain had retracted his statement, claiming it was made under coercion. The Tribunal emphasized that a retracted statement could not be treated as reliable evidence.

The Tribunal referenced the tax audit report, which confirmed the maintenance of regular books of accounts and detailed stock records. The assessee had provided all necessary details, including purchase bills, ledger accounts, and payment proofs. The Tribunal concluded that the revenue's allegation led to an impossible situation and lacked substantive evidence.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the deletion of the addition of Rs. 1,05,150. The Tribunal's decision was consistent with previous rulings on similar issues, reinforcing the principle that retracted statements and unsupported allegations could not justify additions.

Result:
The appeal of the assessee was allowed, and the addition of Rs. 1,05,150 was deleted. The order was pronounced in the open court on 3rd July 2020.

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