2014 (12) TMI 724 - HC - Income Tax

Additions towards unaccounted /black money lending business Whether the assessee were involved in money lending business or had engaged services of Brij Mohan Gupta as a broker Held that - The Tribunal was rightly of the view that the there was no material or evidence to show that the assessee were involved in money lending business or had engaged services of Brij Mohan Gupta as a broker - there is no evidence or material to show that Brij Mohan Gupta or Ram Avtar Singhal during the search had identified and decoded the alphabets AV to stand for M/s Amar Nath Virender Kumar, Khari Baoli - Ram Avtar Singhal and Rajeev Gupta had refused to identify the assessee and had stated that they did not know the parties - Revenue has not produced any statement of Ram Avtar Singhal, Rajeev Gupta or (Late) Brij Mohan Gupta implicating the respondent assessee or corroborating that the code AV stands for M/s Amar Nath Virender Kumar - even the relevant diary or papers seized with the code AV have not been produced - The assertion made in the letter written by the Deputy Commissioner of Income Tax, Central Circle-19, is not sufficient and a good ground to uphold the addition which is only a finding or an inference - failure to produce the diaries/statements and the relevant statement decoding the entries is fatal for the case of the revenue thus, the order of the Tribunal is upheld Decided against revenue.

Issues:
1. Search and seizure operations under Section 132 of the Income Tax Act, 1961.
2. Decoding of incriminating documents and diaries implicating the respondent-assessee.
3. Additions made by the Assessing Officer under Section 69A of the Act.
4. Appeal before the Tribunal and subsequent remand order.
5. Deletion of additions by the Commissioner of Income Tax (Appeals) and the Tribunal.
6. Production and reliance on statements of witnesses.
7. Implications of coded entries and decoded names.
8. Sufficiency of evidence to uphold additions.

Analysis:
1. The case involved search and seizure operations under Section 132 of the Income Tax Act, 1961, where incriminating documents and diaries were found, leading to the decoding of coded entries that implicated the respondent-assessee in clandestine money lending activities involving undeclared or black money.

2. The Assessing Officer made additions under Section 69A of the Act, which were initially deleted by the Commissioner of Income Tax (Appeals) due to the failure to provide complete statements and allow cross-examination. The Tribunal later upheld the deletion of these additions, emphasizing the lack of evidence implicating the respondent-assessee.

3. Despite a remand order directing the provision of statements and an opportunity for cross-examination, subsequent proceedings failed to establish the involvement of the respondent-assessee in the alleged money lending business, leading to the deletion of additions by the Commissioner of Income Tax (Appeals) and the Tribunal.

4. The statements of witnesses, including Ram Avtar Singhal and Rajeev Gupta, were produced during the proceedings. However, the statements did not conclusively link the decoded entries to the respondent-assessee, raising doubts about the accuracy and reliability of the evidence presented.

5. The implications of coded entries and decoded names, such as "AV" referring to "M/s Amar Nath Virender Kumar, Khari Baoli," were contested due to the lack of direct identification or corroboration by witnesses. The failure to produce relevant diaries, statements, and decoding evidence weakened the revenue's case.

6. Ultimately, the High Court dismissed the appeals, concluding that the decision of the Tribunal was not perverse and could not be interfered with based on the available facts. The insufficiency of evidence to support the additions led to the rejection of the revenue's claims.

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