Assessment order quashed for cash deposits under sections 69A and 115BBE due to insufficient evidence linking assessee to third party accounts

ITAT Delhi quashed assessment order u/s 153C involving additions under sections 69A and 115BBE for post-demonetization cash deposits. Third member ruled AO failed to provide conclusive evidence linking assessee to Rs. 30 crores deposited in third party bank accounts. CCTV footage showing relatives/associates at bank created mere presumption, not conclusive proof. Statement from interested director without corroborative evidence was unreliable. AO conducted inadequate inquiry, examining only one bank branch while ignoring statutory presumption under sections 132(4A) and 292C requiring burden of proof on person from whose possession money was found. Assessment order held invalid; additions deleted in assessee's favor.

---

---

Issues Involved:

1. Validity of the assessment order dated 29/12/2019 u/s 143(3) r.w.s 153C of the Income Tax Act, 1961.
2. Validity of the addition of Rs. 32,81,19,000 u/s 69A r.w.s. 115BBE of the Act.

Summary:

1. Validity of the Assessment Order u/s 143(3) r.w.s 153C:

The core issue was whether the assessment order dated 29/12/2019 passed u/s 143(3) r.w.s 153C of the Income Tax Act, 1961, is valid. The Tribunal noted that the Assessing Officer (AO) recorded satisfaction for initiating proceedings u/s 153C on 24/09/2018. According to the first proviso to section 153C(1), the date of search is considered the date of recording satisfaction. Thus, the AO should have initiated proceedings for the block period from assessment years 2012-13 to 2017-18. However, the AO failed to record satisfaction for the impugned assessment year 2017-18, rendering the assessment order invalid. The Tribunal quashed the assessment order, agreeing with the view expressed by the Ld. Accountant Member.

2. Validity of Addition of Rs. 32,81,19,000 u/s 69A r.w.s 115BBE:

The Tribunal examined the addition of Rs. 32,81,19,000 based on the statement recorded u/s 132(4) from Sh. Mohit Goel and CCTV footage from Kotak Mahindra Bank. The Tribunal found that the AO heavily relied on inconclusive evidence, such as the presence of close relatives of Sh. Rajesh Chawla in the bank and the statement of Sh. Mohit Goel, who was no longer a director of RBPL at the time of search. The Tribunal noted that the AO did not examine key witnesses or conduct a thorough investigation into the cash deposits in other bank accounts. Consequently, the Tribunal held that the addition was based on conjectures and surmises, not on cogent evidence, and deleted the addition.

Additional Issues:

The Tribunal also addressed other ancillary issues, such as the addition of Rs. 6,65,670 for labor expenses and Rs. 1,16,62,097 for unexplained liabilities. The Ld. Judicial Member sustained the addition of Rs. 6,65,670 and restored the addition of Rs. 1,16,62,097 to the First Appellate Authority. However, these issues were rendered academic as the Tribunal quashed the assessment order.

Conclusion:

The Tribunal quashed the assessment order u/s 143(3) r.w.s 153C of the Act, rendering the other issues academic. The addition of Rs. 32,81,19,000 and the alleged commission payment of Rs. 1.52 Cr. were also deleted due to lack of conclusive evidence.

---