2014 (11) TMI 760 - AT - Income Tax

Addition u/s 68 - Multiple accounts in various branches Unaccounted black money found by DIT(Inv.) Whether undisclosed income actually represented disputed settlement amount recoverable from M/s Miraculas Construction P. Ltd. against the leasing charges due Genuineness of transaction - Held that - The information in the case of assessee was received from DIT(Inv.) that the assessee company had received ₹ 30,04,500/- from Shattarchi Fin. & Leasing P. Ltd. vide cheque dated 04/05/2003 the case of the assessee was reopened u/s 148 of the IT Act after following due procedure of law and statutory notices were issued to the assesee to give detailed facts regarding the above credit entry - the assessee was unable to prove the identity, genuineness and creditworthiness of the party from whom the amount had been received and could not correlate it to any business activities - assessee has failed to prove that the draft/cheque of ₹ 30 lacs dated 24/05/2003 received by the assessee company from M/s Shattarchi Fin. & Leasing P. Ltd. is recovery of that from M/s Miraculous Const. P. Ltd. The assessee company has failed to prove the source of ₹ 30 lacs credited in its books of account - the assessee has failed to substantiate its claim by filing any documentary evidence - assessee company has also failed to produce the Director of M/s Shattarchi Fin. & Leasing Ltd. and M/s Miraculous Construction P. Ltd. Even assessee has not filed any confirmation or bank account or balance sheet of M/s Miraculous Const. P. Ltd. for substantiating its claim before the Revenue Authority thus, the order of the CIT(A) is upheld Decided against assessee.

Summary

Issues:
- Reopening of assessment for AY 2004-05 based on undisclosed income
- Addition of Rs. 30,04,500 as undisclosed income
- Failure to substantiate source of income
- Appeal against CIT(A) order confirming addition

Reopening of assessment for AY 2004-05 based on undisclosed income:
The assessee filed a return declaring Nil income for AY 2004-05, which was processed under section 143(1) of the Income Tax Act, 1961. Information revealed during an investigation indicated that the assessee was involved in receiving unaccounted money through accommodation entries. The AO, after receiving approval, issued a notice under section 148 to the assessee, followed by subsequent notices for information and hearings. The AO's actions were challenged by the assessee, claiming the assessment was rushed and lacked sufficient opportunity for explanation.

Addition of Rs. 30,04,500 as undisclosed income:
The AO found that the assessee had taken accommodation entries amounting to Rs. 30,04,500 from a provider named Shattarchi Fin. & Leasing. The AO concluded that this amount had escaped assessment and added it to the assessee's income. The assessee argued that the amount was received from another entity as part of a settlement, but failed to provide sufficient evidence to support this claim. The AO's decision was upheld by the CIT(A), leading to the current appeal.

Failure to substantiate source of income:
The assessee's argument that the amount in question was part of a settlement with another party was not substantiated with proper documentation. The AO and subsequent authorities found that the assessee failed to prove the identity, genuineness, and creditworthiness of the source of income. Despite submitting a paper book with various documents, the assessee could not establish a clear link between the credited amount and the alleged settlement.

Appeal against CIT(A) order confirming addition:
The assessee appealed the CIT(A)'s decision to uphold the addition of Rs. 30,04,500 as undisclosed income. During the appeal, the assessee's counsel focused on challenging the assessment under section 68 of the IT Act and argued that the undisclosed income represented a disputed settlement amount. However, the appellate tribunal found that the assessee's failure to provide concrete evidence or substantiate its claims led to the dismissal of the appeal. The tribunal upheld the CIT(A)'s order, stating that the assessee did not present sufficient documentary evidence to support its case.

In conclusion, the appellate tribunal dismissed the appeal, upholding the CIT(A)'s decision regarding the addition of Rs. 30,04,500 as undisclosed income for AY 2004-05. The tribunal found that the assessee failed to substantiate its claims and provide necessary evidence to support its case, leading to the dismissal of the appeal.