2015 (2) TMI 1115 - AT - Income Tax

Addition on undisclosed income - addition on the basis of such seized paper - CIT(A) delted the addition - Held that - A categorical finding has been given by CIT(A) that statement of Shri Shobhan Raj Mehta was not given to the assessee and beyond the belief of presumption on the information supplied by the ADIT(Inv.)-III, Kanpur, further evidences are not found to corroborate the additions. He has also given a finding that Cross-examination of Shri Shobhan Raj Mehta was not allowed and the assessee firm had strongly denied having any financial and business transactions with Mr. Shobhan Raj Mehta. These findings of CIT(A) could not be controverted by Learned D.R. of the Revenue and moreover, the name of the assessee i.e. Pawan Kumar Agarwal is very common name and merely because this name is mentioned in a seized paper found during the course of search at Bangalore at the premises of Shri Shobhan Raj Mehta, with whom the assessee was not having any direct transaction, it cannot be said that the said Pawan Kumar Agarwal, of whom the name was mentioned in the seized paper is the assessee. Without establishing this aspect that the name mentioned in the seized paper is that of the assessee, no addition can be made in the hands of the present assessee on the basis of such seized paper. Considering these facts, we do not find any reason to interfere in the order of CIT(A). - Decided in favour of assessee.

Summary

Issues Involved:
Revenue's appeal against deletion of addition of undisclosed income u/s 69A, failure to appreciate facts by CIT(A), presumption regarding identity of Pawan Agarwal, lack of inquiry by AO, and need for further investigation. Assessee's cross-objection on deletion of addition, lack of evidence linking Pawan Agarwal to assessee, absence of opportunity for cross-examination, and justification of appellate order.

Analysis:

1. Addition of Undisclosed Income:
The Revenue challenged the deletion of an addition of undisclosed income under section 69A by the CIT(A). The Revenue contended that the CIT(A) erred in not appreciating the facts presented by the Assessing Officer during the assessment proceedings. The CIT(A) highlighted that the material provided by the department did not conclusively link the name Pawan Agarwal in the seized paper to the assessee. The CIT(A) emphasized that the addition made by the Assessing Officer lacked substantial evidence and was based on guesswork, leading to the decision to delete the addition.

2. Identity of Pawan Agarwal:
The dispute revolved around the presumption that the name Pawan Agarwal in the seized paper referred to the assessee. The CIT(A) noted that the name Pawan Agarwal was common and could belong to someone other than the assessee. The CIT(A) pointed out that the Assessing Officer failed to establish a direct link between the seized paper and the assessee, as no slip, letter, or document connecting the two was found. The CIT(A) concluded that the addition made by the Assessing Officer was unjustified and lacked corroborative evidence.

3. Lack of Inquiry and Cross-Examination:
The CIT(A) highlighted that the Assessing Officer did not allow cross-examination of Shri Shobhan Raj Mehta, from whose possession the seized paper was found. The CIT(A) also noted that the department did not provide the complete statements on which the addition was based, despite requests from the assessee. The failure to conduct a thorough inquiry and provide necessary evidence led the CIT(A) to conclude that the addition was based on presumption and guesswork, warranting its deletion.

4. Need for Further Investigation:
The CIT(A) emphasized that the Assessing Officer did not carry out further inquiry or investigation based on information provided by the ADIT(Inv.)-III, Kanpur. The lack of collected evidence or statements, along with the denial of cross-examination, indicated a deficiency in the assessment process. The CIT(A) underscored that without corroborative evidence, the addition made by the Assessing Officer was unwarranted and, therefore, deleted.

5. Conclusion:
The CIT(A) upheld the deletion of the addition of undisclosed income, emphasizing the lack of concrete evidence linking the seized paper to the assessee. The failure to establish the identity of Pawan Agarwal as the assessee, coupled with the absence of proper inquiry and cross-examination, led to the decision to dismiss the Revenue's appeal and the assessee's cross-objection. The judgment highlighted the importance of substantiated evidence in making additions to an assessee's income, ensuring a fair and justified assessment process.