2014 (9) TMI 116 - AT - Income Tax

Unexplained, unverifiable and undisclosed income u/s 68 Held that - How the information has been initially blocked and thereafter made available only as a result of the appeal before the CIC there can be no two opinions that justice has not been done - The actions of the AO in mis-recording suppressing and thereafter obstructing necessary flow of information namely receipt of reply received by a director does not speak well of the manner in which the proceedings have been conducted there was no reason to believe that the reply has not been followed up with appropriate action however the fact remains that in the facts of the present case justice has not been done - The tax collecting authority is presumed to act fairly and transparently while exercising its quasi-judicial powers. Though numerous arguments on facts have been raised by the assessee in regard to statement of unconcerned persons relied upon in regard to the functioning of the assessee from a specific place and ignoring the statements of concerned persons furnished in response to information sough u/s 133(6) or in regard to the legal consequences qua the genuineness of empowering a specific person to operate the bank accounts on behalf of the Directors revenue has relying on the order mainly confined himself to stating that he has no objection if the issue is restored - it is not appropriate to address the arguments at any stage any view expressed now would pre-decide the issue wherein both sides have not advanced their argument - it is appropriate to set aside the order and the matter id remitted back to the AO for fresh adjudication Decided in favour of Assessee.

Summary

Issues Involved:
1. Validity of the order passed by the CIT(A).
2. Addition of Rs. 1,66,05,000/- as unexplained income under Section 68 of the Income Tax Act.
3. Inclusion of sale proceeds under Section 68.
4. Chargeability of interest under Section 234B of the Income Tax Act.

Detailed Analysis:

1. Validity of the Order Passed by CIT(A):
The assessee challenged the validity of the CIT(A)'s order on the grounds that it was bad in law and on facts. The Tribunal considered the procedural aspects and the manner in which the assessment proceedings were conducted. It was noted that the assessee had to resort to the RTI Act to obtain necessary information, which was initially denied by the CPIO. The Tribunal observed that the AO had misrecorded facts and obstructed the flow of information, leading to a lack of fairness and transparency in the proceedings. Consequently, the Tribunal deemed it appropriate to restore the issue back to the AO for a de novo assessment, thus invalidating the CIT(A)'s order.

2. Addition of Rs. 1,66,05,000/- as Unexplained Income under Section 68:
The addition of Rs. 1,66,05,000/- was made by the AO under Section 68, citing unexplained, unverifiable, and undisclosed income. The AO's assessment was based on the non-compliance of notices issued to various parties and discrepancies in the names of individuals operating the bank accounts. The Tribunal noted that the AO had carelessly recorded names and failed to consider the explanations and evidence provided by the assessee. The Tribunal found that the assessee had provided sufficient evidence, including audited books of accounts and confirmations from parties. The Tribunal concluded that the AO had not conducted a fair assessment and directed a de novo assessment for proper verification of facts.

3. Inclusion of Sale Proceeds under Section 68:
The assessee argued that the amount of Rs. 1,66,05,000/- being the sale proceeds, having been included in the income, could not be again included under Section 68. The Tribunal noted that the CIT(A) had not properly addressed this issue and had relied on the AO's findings without considering the assessee's explanations. The Tribunal directed the AO to re-examine the issue, taking into account the assessee's submissions and evidence, and to conduct a fair assessment.

4. Chargeability of Interest under Section 234B:
The assessee contested the chargeability of interest under Section 234B. The Tribunal observed that the CIT(A) had not provided a detailed analysis of this issue. Given the procedural lapses and the need for a de novo assessment, the Tribunal directed the AO to re-evaluate the chargeability of interest under Section 234B based on the revised assessment.

Conclusion:
The Tribunal set aside the impugned order and restored the issues back to the file of the AO for a de novo assessment. The grounds raised by the assessee were allowed for statistical purposes, and the appeal was pronounced in favor of the assessee for further verification of facts.