Addition under section 69 for alleged hawala investment deleted where revenue failed to prove illegal remittances

ITAT, Delhi (AT) held that addition under s.69 for alleged unexplained investment via hawala was unsustainable. The tribunal accepted the assessee company's contention that the cloned hard disk version relied on by the revenue was never furnished, placing the burden on revenue to prove illegal remittances with cogent evidence. CBDT's FT TR review and Cyprus correspondence confirmed that funds were raised and invested legitimately via share issuance and FDI. In absence of proof beyond suspicion, the addition was deleted and decision favored the assessee.

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Issues Involved:
1. Contravention of Section 250(6) of the Income Tax Act, 1961.
2. Validity of multiple approvals under Section 153D of the Act.
3. Additions/disallowances in assessment under Section 153A without nexus to search materials.
4. Principles of natural justice and demonstration of seized documents.
5. Ad-hoc additions under Section 69 as unexplained investments.
6. Quashing of the impugned order due to principles of natural justice.

Summary:

1. Contravention of Section 250(6) of the Income Tax Act, 1961:
The assessee argued that the CIT(A) erred in passing the order in contravention of Section 250(6) of the Act. However, the Tribunal did not specifically address this issue in the judgment, focusing instead on the substantive grounds of appeal.

2. Validity of Multiple Approvals under Section 153D of the Act:
The assessee contended that the CIT(A) erred in confirming the actions of the AO and the Addl. CIT by granting multiple approvals under Section 153D without any legal mandate. The Tribunal did not provide a detailed analysis on this issue, as the appeal was allowed on other grounds.

3. Additions/Disallowances in Assessment under Section 153A without Nexus to Search Materials:
The Tribunal examined whether the additions made by the AO had any nexus with the material unearthed during the search operations. The AO had made an addition of Rs. 119,88,60,000/- under Section 69 of the Act as unexplained investments based on seized data indicating amounts sent and received under the FDI route. The Tribunal found that the assessee had provided sufficient evidence to explain the FDI transactions, including certificates from banks, share certificates, and RBI documents. The Tribunal concluded that the AO's addition was based on suspicion without concrete evidence, and thus, the addition was unsustainable.

4. Principles of Natural Justice and Demonstration of Seized Documents:
The assessee argued that the assessment order was devoid of the principles of natural justice as the AO did not demonstrate the seized documents based on which the addition was made. The Tribunal noted that the assessee had requested a cloned copy of the seized hard disk, which was not provided by the AO. The Tribunal accepted the assessee's contention that the seized documents were not adequately demonstrated, thereby violating the principles of natural justice.

5. Ad-hoc Additions under Section 69 as Unexplained Investments:
The AO had made ad-hoc additions of Rs. 119,88,60,000/- under Section 69 of the Act based on the belief that the assessee had sent money abroad through the hawala route and received it back under the FDI route. The Tribunal found that the assessee had provided sufficient documentation to explain the FDI transactions and that the AO's addition was based on mere suspicion. The Tribunal held that the revenue failed to provide concrete evidence to support the addition, and thus, the addition was directed to be deleted.

6. Quashing of the Impugned Order due to Principles of Natural Justice:
The assessee argued that the impugned order deserved to be quashed as it violated the principles of natural justice. The Tribunal agreed, noting that the AO did not provide the cloned copy of the seized hard disk, which was crucial for the assessee's defense. The Tribunal held that the assessment order was unsustainable due to the violation of natural justice principles.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the deletion of the addition made under Section 69 of the Act. The other legal grounds raised by the assessee were not adjudicated, as the relief was granted on merits. The order was pronounced in the open court on 11/03/2024.

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