2008 (10) TMI 675 - AT - Income Tax

Summary

Issues Involved:

1. Deletion of addition of Rs. 95 lakhs made u/s 68 on account of alleged accommodation entries.
2. Deletion of addition of Rs. 47,500/- made on account of commission allegedly paid for obtaining accommodation entries.
3. Validity of initiation of reassessment proceedings u/s 148.
4. Admission of additional evidence by CIT(A) and its verification by AO.

Summary:

1. Deletion of Addition of Rs. 95 Lakhs u/s 68:

The Revenue appealed against the CIT(A)'s order deleting the addition of Rs. 95 lakhs made by the AO u/s 68 for alleged accommodation entries. The AO had added this amount as unexplained credits, claiming it was introduced through accommodation entries from M/s Suma Finance and Investment Ltd. The CIT(A) admitted additional evidence provided by the assessee, which included documents confirming the sale of shares and the receipt of Rs. 82 lakhs from M/s Suma Finance and Investment Ltd. The CIT(A) concluded that the amount was received by way of sale of shares and could not be considered a credit entry to which Section 68 would apply, thus deleting the addition.

2. Deletion of Addition of Rs. 47,500/- on Account of Commission:

The AO had also added Rs. 47,500/- as unexplained expenditure on account of commission allegedly paid for obtaining the accommodation entries. Since the CIT(A) deleted the addition of Rs. 95 lakhs, the related commission addition was also deleted, as there was no justification for the commission if the primary addition was not sustained.

3. Validity of Initiation of Reassessment Proceedings u/s 148:

The CIT(A) upheld the validity of the reassessment proceedings initiated by the AO u/s 148, rejecting the assessee's challenge on this issue. The reassessment was based on specific information about the introduction of unaccounted money through accommodation entries.

4. Admission of Additional Evidence by CIT(A) and Its Verification by AO:

The CIT(A) admitted additional evidence provided by the assessee, which was not initially presented to the AO. This evidence included various documents confirming the transactions with M/s Suma Finance and Investment Ltd. The AO objected to the admission of this additional evidence, arguing that the assessee had sufficient opportunity to present it during the assessment proceedings. The Tribunal observed that the AO did not verify the additional evidence in his remand report and focused mainly on objecting to its admission. The Tribunal held that the CIT(A) should have afforded the AO a specific opportunity to verify the additional evidence after admitting it. Consequently, the Tribunal set aside the CIT(A)'s order and restored the matter to the AO for fresh examination and verification of the additional evidence, directing the AO to decide the issue afresh after proper verification and providing the assessee an opportunity to be heard.

Conclusion:

The Tribunal allowed the Revenue's appeal for statistical purposes, setting aside the CIT(A)'s order and remanding the matter to the AO for fresh adjudication after verifying the additional evidence.