2014 (1) TMI 1621 - AT - Income Tax

Addition to income - unexplained refundable security deposit received by the assessee from his employees at the time of joining the employment and unexplained loans - Held that - A perusal of the impugned order juxtaposed with the written submissions filed by the assessee shows that the grievance of the assessee is justified. In the written submissions, the assessee has specifically stated that the employees/persons from whom the earnest money was received, were not employed with the assessee at the time of the hearing before the A.O., as the assessee had closed its business during Assessment Year 2008-09 and the Assessing Officer had not given proper opportunity to the assessee for causing the appearance of these employees/persons. This aspect of the matter has not been gone into by the Ld. CIT (A). The assessee has also submitted that the amounts had been refunded to the employees/persons at the time of full and final settlement and the addition made by the Assessing Officer includes an opening balance of ₹ 4,20,000/- from friends and relatives of the assessee, which does not relate to the year under consideration. It was also stated that the assessee had no balance outstanding of the employees/persons, as all the amount had been refunded to them and no person was, at the relevant time, traceable, having left the employment of the assessee on the closure of its business during the year. This aspect also does not find mention, much less adjudication in the impugned order. The assessee has further stated that all the bills and vouchers and related records were made available before the Assessing Officer for verification purposes. Again, the Ld. CIT (A) makes no comment. Thus remit this matter to the file of the Assessing Officer for decision afresh in accordance with law, on affording due and adequate opportunity of hearing to the assessee - Decided in favour of assessee for statistical purposes

Issues involved:
1. Assessment of alleged total income against returned income with arbitrary additions.
2. Addition of unexplained refundable security deposit and unexplained loans.
3. Failure to consider evidence furnished by the assessee.
4. Burden of proof under section 68 not discharged due to closure of business.
5. Additions made without necessary inquiries by the Assessing Officer.
6. Adhoc addition to declared trading results without valid basis.

Analysis:

1. The appeal was against the order passed by the CIT (A) for Assessment Year 2008-09. The appellant challenged the assessment of alleged total income, claiming it was upheld without proper consideration of submissions and evidence. The appellant argued that the additions made were arbitrary and unwarranted, emphasizing the failure to apply mind and disregarding the evidence presented.

2. The CIT (A) upheld the addition of unexplained refundable security deposit and unexplained loans. The Assessing Officer observed discrepancies in the transactions, requesting the appellant to produce necessary evidence and creditors. Despite opportunities given, the appellant failed to provide satisfactory explanations, leading to the conclusion that transactions were not genuine. The CIT (A) confirmed the additions based on lack of cooperation and failure to establish the genuineness of transactions.

3. The appellant contended that the CIT (A) failed to consider the evidence furnished, including the refund of amounts to employees and the availability of bills and vouchers for verification. The written submissions highlighted the closure of business, lack of traceability of employees, and proper documentation provided to the Assessing Officer. However, the CIT (A) did not address these crucial points in the order.

4. Regarding the burden of proof under section 68, the appellant argued that due to the closure of business and unavailability of employees, it was challenging to provide necessary evidence within the given timeframe. The Assessing Officer's insistence on producing creditors was deemed unreasonable given the circumstances, leading to the need for a fresh decision by the Assessing Officer.

5. The Assessing Officer made additions without conducting necessary inquiries, leading to the appellant's claim of illegal and unsustainable additions. The lack of proper verification and failure to consider the evidence presented raised concerns about the validity of the additions, prompting the need for a reassessment with adequate opportunity for the appellant to be heard.

6. Lastly, the adhoc addition to the declared trading results was challenged by the appellant, citing the availability of bills and vouchers for verification. The CIT (A) confirmed the addition without proper justification, leading to the decision to remit the matter to the Assessing Officer for a fresh decision in accordance with the law and after affording due hearing to the appellant.

This detailed analysis of the judgment highlights the key issues raised by the appellant and the CIT (A)'s decisions, emphasizing the need for proper consideration of evidence and a fair opportunity for the appellant to present their case.

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