2023 (1) TMI 1219 - AT - Income Tax

Revenue's Lack of Evidence Results in Deletion of Additions

Shri Kanjibhai Tapubhai Patel Versus The Income Tax Officer Ward 3 (2), Jamnagar

The Tribunal found that the Revenue lacked substantive corroborative evidence linking unaccounted credits to the assessee, leading to the deletion of ... Reopening of assessment u/s 147 - unexplained cash credits - suspicious transactions carried out against Late Shri Chhotalal V. Doshi (Prop. of Abhi Enterprise) and it was found that he used to lend his bank account to other persons for commission - HELD THAT:- As the Revenue has not brought on record any corroborative evidence to demonstrate that the money deposited in the Bank Account operated by Late Shri Chottalal Doshi belong to the assessee, the Co-ordinate Bench has been pleased to delete the addition made by the authorities below. We, under the identical facts and circumstances of the case as relied upon by the assessee in the case of Shri Mukeshkumar Vrajlal [2022 (9) TMI 1115 - ITAT RAJKOT] do not find any reason to deviate from such stand taken by the Co-ordinate Bench. Hence, respectfully, relying upon the same, we delete the addition made by the authorities below. The appeal preferred by the assessee for A.Y. 2010-11 is, thus, allowed. Issues Involved:1. Legitimacy of the reopening of the assessment under Section 147 of the Income Tax Act.2. Validity of additions made based on third-party statements without corroborative evidence.3. Right to cross-examine witnesses whose statements are used against the assessee.Issue-Wise Detailed Analysis:1. Legitimacy of the Reopening of the Assessment:The assessment for the A.Y. 2010-11 was reopened under Section 147 of the Income Tax Act due to suspicious transactions linked to Late Shri Chhotalal V. Doshi, a known Hawala operator. The Revenue believed that unaccounted credits of Rs. 34,15,391/- found in impounded diaries were unexplained and related to the assessee. The reopening was based on information provided by the ADIT, which the Assessing Officer (AO) relied upon without independent verification.2. Validity of Additions Made Based on Third-Party Statements:The Revenue added Rs. 34,15,391/- to the assessee's income based on the statement of Shri Dharmendra Doshi, son of Late Shri Chhotalal V. Doshi. The assessee contested that they had no transactions with the Doshi family and that the additions were based solely on unverified third-party allegations. The Tribunal noted that no corroborative evidence was presented to substantiate that the money deposited in the bank accounts operated by Late Shri Chhotalal V. Doshi belonged to the assessee. The Tribunal referenced several judgments, including:- ACIT v. Lata Mangeshkar: Entries in third-party accounts are insufficient without corroborative evidence.- Abhay Kumar Bharamgouda Patil: Additions based solely on statements without corroborative evidence are not justified.- Pradeep Amrutlal Runwal v. TRO: Noting in loose papers without evidence of actual transactions is insufficient for additions.3. Right to Cross-Examine Witnesses:The assessee requested to cross-examine Shri Dharmendra Doshi, whose statement was pivotal in reopening the assessment. This request was denied, which the assessee argued violated their right to a fair hearing. The Tribunal emphasized that the denial of the opportunity to cross-examine undermined the credibility of the evidence used against the assessee. The Tribunal cited judgments supporting the necessity of cross-examination for fair adjudication, including:- Dhakeswari Cotton Mills Ltd. Vs. CIT- Krishna Chand Chela Ram Vs. CIT- Andaman Timber Industries Vs. CITConclusion:The Tribunal concluded that the Revenue failed to provide substantive corroborative evidence linking the unaccounted credits to the assessee. The addition was based on a 'reasonable probability' rather than concrete evidence. Consequently, the Tribunal deleted the additions made by the AO and upheld by the CIT(A), allowing the appeals for A.Y. 2010-11, 2008-09, and 2011-12. The Tribunal's decision was pronounced on 25/01/2023, thereby providing relief to the assessee.