2021 (11) TMI 96 - AT - Income Tax

Assessee's Appeals Allowed: Emphasis on Cross-Examination & Corroborative Evidence

Shri B.H Basha Versus The Dy. Commissioner of Income-tax, Central Circle-1 (4), Bengaluru.

Shri B.H Basha Versus The Dy. Commissioner of Income-tax, Central Circle-1 (4), Bengaluru. - TMI Issues Involved:1. Framing of assessment without any incriminating material and issuance of notice under section 153A without recording satisfaction.2. Addition under section 69A of the Income Tax Act.3. Reliance on loose sheet entries found during the course of search.4. Unexplained investments and expenditures.5. Telescoping benefits of voluntarily disclosed income.Issue-wise Detailed Analysis:1. Framing of Assessment Without Incriminating Material and Issuance of Notice under Section 153A:The first common ground raised by the assessee was regarding the framing of assessment without any incriminating material and the issuance of notice under section 153A without recording satisfaction. This ground was not pressed during the hearing and was consequently dismissed.2. Addition under Section 69A of the Income Tax Act:The assessee contended that the provisions of section 69A were incorrectly applied as there was no finding that the assessee was the owner of the money. The Assessing Officer (AO) relied on the presumption under section 132(4A), which the assessee failed to rebut. The AO's mention of section 69A instead of section 69 was deemed not fatal, and the addition was upheld.3. Reliance on Loose Sheet Entries Found During the Course of Search:The AO made additions based on loose sheets found during the search, which were challenged by the assessee on several grounds:- Assessment Year 2008-09: The AO interpreted entries in the loose sheets as evidence of unexplained investments. However, the Tribunal found that the entries were not corroborated by any positive material, lacked signatures, and were not substantiated by any independent evidence. The addition of Rs. 25 lakhs was deleted.- Assessment Year 2009-10: Similar to the previous year, the addition of Rs. 25 lakhs based on loose sheet entries was deleted due to lack of corroborative evidence.- Assessment Year 2010-11: Multiple additions totaling Rs. 3.2 crores were challenged. The Tribunal found that the AO's reliance on loose sheets without corroborative evidence was improper. Additions related to Aptha Rakshaka, Bhadra, Bhanu Hassan, Basava Reddy, Anaji Nagaraj, Prasanna Theatre, and Shanta Enterprises were deleted.- Assessment Year 2011-12: Additions totaling Rs. 328.50 lakhs were challenged. The Tribunal found that the AO's reliance on loose sheets and statements without proper corroboration and cross-examination was improper. Additions related to Kanteerava, Dushta, Adduri, Mass, Sanju Weds Geetha, and Chingari were deleted.4. Unexplained Investments and Expenditures:The AO made various additions towards unexplained investments and expenditures based on loose sheets and statements recorded during the search. The Tribunal found that the additions were based on unsubstantiated loose sheets and lacked corroborative evidence. Consequently, the additions were deleted.5. Telescoping Benefits of Voluntarily Disclosed Income:The assessee argued for telescoping benefits of the voluntarily disclosed income of Rs. 3.03 crores against the alleged cash payments. The Tribunal found this ground to be infructuous in light of the deletions made in the main grounds of the appeal. The AO was directed to go by the return filed by the assessee while passing the giving effect order.Conclusion:The appeals filed by the assessee were partly allowed, with significant deletions of additions made by the AO based on unsubstantiated loose sheets and lack of corroborative evidence. The Tribunal emphasized the importance of providing the opportunity for cross-examination and the need for corroborative material to support additions based on loose sheet entries. The order was pronounced in the open court on 28th October 2021.