2024 (3) TMI 822 - AT - Income Tax

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

Alchemist Touchnology Versus ACIT, Central Circle-20, Delhi

ITAT, Delhi (AT) held that addition under s.69 for alleged unexplained investment via hawala was unsustainable. The tribunal accepted the assessee ... Addition u/s 69 - Unexplained investment by sending monies abroad in illegal means - onus to prove - material that is relied upon by the revenue is the hard disk seized during search - whether the expression “amounts sent” of 19500000 USD mentioned in seized data represent amounts sent by assessee under hawala route or the amounts sent by LGF from Cyprus to assessee company? - HELD THAT:- We are in agreement with the argument advanced by the ld. AR that if the seized documents were already provided to the assessee on 04.12.2018 itself, then what is the need for the ld. AO to grant an opportunity to the assessee to be present for receiving the cloned copy of the hard disk on 05.02.2019. Hence the version of the assessee that the cloned copy of the hard disk-2 which allegedly contained the material for making the impugned addition was never handed over to the assessee requires to be accepted. In this background, the stand taken by the assessee that it had not sent any monies abroad through illegal means and hence there cannot be any addition u/s 69 towards unexplained investment in the hands of the assessee company requires to be accepted. We hold that when assessee states that it had not made any investment by sending monies abroad in illegal means, it cannot be asked to prove the negative. The onus shifts on the revenue to prove the fact with cogent materials that statement of assessee is incorrect. Without doing so, the revenue cannot directly proceed to make an addition u/s 69 of the Act by entertaining a huge suspicion. We find that from perusal of the records, there is no evidence to prove that the “amounts sent” shown in the hard disk is actually amounts sent by assessee company in hawala route which had ultimately found its way in the form of share capital and share premium under FDI route. The revenue had completely addressed this issue and made an addition purely on suspicion and surmise without any basis thereby making the addition totally unsustainable in the eyes of law. It is trite law that suspicion howsoever strong would not partake the character of legal evidence and hence a greater onus is casted on the revenue to bring on record cogent evidences to justify its suspicion, which is conspicuously absent in the instant case. The only material that is relied upon by the revenue is the hard disk seized during search which only contained the details of “amounts sent” and “amounts received”. Nowhere the said material even suggested that the amounts were sent by assessee company in illegal route which in turn had surfaced back in the form of share capital and premium under FDI route from Cyprus. This case was even subjected to examination by CBDT Foreign Tax Division wherein FT & TR reference was also made to Cyprus tax authorities. FT & TR had submitted its report duly confirming the fact that LGF had raised monies through issue of shares and those monies had been utilized by them for making investment in shares of Assessee Company under FDI route. No adverse comments were indeed given by FT &TR of CBDT with regard to these transactions. Hence the source of source is also duly established and proved by the assessee company herein - Decided in favour of assessee. 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.