2015 (9) TMI 137 - AT - Income Tax

Addition on protective basis - coal business carried out by the assessee through the syndicate of Bhutoria Group - assessee contended that this addition was made in the hands of the assessee, solely on the basis of the statement of Shri. Prakash Chandra Bhutoria and some documents seized from his computer - CIT(A) deleted the addition - Held that - Undisputedly the addition was made in the hands of the assessee on protective basis. Though it was observed in the assessment order that substantive addition is to be made in the hands of the alleged syndicate AOP pointed out by Shri. Prakash Chandra Bhutoria in his statement recorded during the course of search conducted at Bhutoria group or his premises, but nothing has been placed on record to establish whether any substantive addition was made in the hands of the AOP syndicate. Answer to the question whether the addition on protective basis made in the hands of the assessee can be converted into substantive addition in the hands of the assessee in the absence of the fact that no substantive addition has been made in the hands of the syndicate group, the answer is certainly no, as the Assessing Officer himself is not confident with regard to the addition in the hands of the assessee on the basis of the statement of Shri. Prakash Chandra Bhutoria and the seized documents which were neither confronted nor the assessee was allowed to cross-examine Shri. Prakash Chandra Bhutoria whose statement was used to make the addition in the hands of the assessee. It is settled opposition of law that any evidence/statement/declaration cannot be used against a person or the assessee unless and until the same is confronted to the assessee and the assessee is allowed to crossexamine the said witness or person. In the instant case, the assessee has asked the Assessing Officer during the course of assessment proceedings to allow him to cross-examine Shri. Prakash Chandra Bhutoria whose statement was sought to be relied on by the Assessing Officer. Initially the Assessing Officer has summoned Shri. Prakash Chandra Bhutoria and asked the assessee to cross-examine in Kolkata, but on the designated date Shri. Prakash Chandra Bhutoria did not appear and the assessee was forced to come with empty hands. Thereafter though the assessee has requested to afford an opportunity to cross-examine Shri. Prakash Chandra Bhutoria with respect to the documents found during the course of search, but the Assessing Officer did not enforce his attendance for cross-examination and finally despite repeated requests the assessee was not allowed to cross-examine Shri. Prakash Chandra Bhutoria. The Assessing Officer, however, heavily relied upon the statement and the seized documents for making the addition in the hands of the assessee on account of undisclosed receipt from the alleged syndicate group. Thus addition in the hands of the assessee cannot be made on the basis of third party s statement who was not allowed to be cross-examined by the assessee for any reason. More so in the instant case addition in the hands of the assessee was made on protective basis which means the Assessing Officer himself was not confident with respect to the tax liability of the alleged income estimated by him in the hands of the assessee. - Decided in favour of assessee. Addition made on account of unexplained investment in coal business - CIT(A) deleted the addition - Held that - Assessing Officer has made addition only on conjectures and surmises. No evidence was brought on record in order to establish that the assessee has earned any other income except commission receipts. Moreover, the assessee worked as an agent of NCCF who sold coal to the consumers. Undisputedly the coal was being supplied directly to the consumers by NCCF and assessee earned only commission thereon. Therefore, addition on account of investment is not sustainable in the eyes of law - Decided in favour of assessee. Addition made under different heads as profit earned by the assessee - profit in trading of coal at Kanpur, Kolkata and Bhubaneswar - CIT(A) deleted the addition - Held that - the basis for these additions was only the material seized during the course of search from Shri. Prakash Chandra Bhutoria and his statement. Shri. Prakash Chandra Bhutoria was not allowed to be cross-examined by the assessee, therefore, his statement cannot be relied on for making the addition against the assessee. Accordingly, we find no infirmity in the order of the ld. CIT(A) - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition made on protective basis on account of coal business through the syndicate of Bhutoria Group.
2. Deletion of addition on account of profit from premium on purchase and sale of coal.
3. Deletion of addition on account of payments to sub-agent for deposit with NCCF.
4. Deletion of addition on account of unexplained credit balance with NCCF.
5. Deletion of addition on account of investment in coal business.

Detailed Analysis:

1. Deletion of Addition on Protective Basis on Account of Coal Business:
The Revenue challenged the deletion of additions made by the Assessing Officer (AO) on a protective basis, alleging that the assessee received income from a coal business operated through the Bhutoria Group syndicate. The AO's findings were based on seized documents and the statement of Shri Prakash Chandra Bhutoria. However, the assessee was not allowed to cross-examine Bhutoria, which is a critical aspect as per legal precedents. The CIT(A) deleted the additions, emphasizing that the seized documents were uncorroborated and that Bhutoria's statement could not be relied upon without cross-examination. The Tribunal upheld the CIT(A)'s decision, citing the necessity of cross-examination and the AO's failure to substantiate the substantive addition in the hands of the syndicate.

2. Deletion of Addition on Account of Profit from Premium on Purchase and Sale of Coal:
The AO made additions assuming that the assessee was involved in trading coal independently, based on loose papers and statements from Bhutoria. The CIT(A) found no corroborative evidence of such trading activities and noted that the assessee's business model involved earning a fixed commission from NCCF, not trading. The Tribunal confirmed the CIT(A)'s decision, highlighting the lack of evidence and the reliance on unverified statements and documents.

3. Deletion of Addition on Account of Payments to Sub-Agent for Deposit with NCCF:
The AO added amounts assuming payments to sub-agents for deposits with NCCF. The CIT(A) deleted these additions, noting that the AO's findings were speculative and not supported by concrete evidence. The Tribunal upheld this deletion, reiterating the importance of evidence and the inability to rely on unverified documents and statements.

4. Deletion of Addition on Account of Unexplained Credit Balance with NCCF:
The AO added an unexplained credit balance with NCCF to the assessee's income. The CIT(A) deleted this addition, stating that the additional evidence provided by the assessee clarified the issue. The Tribunal confirmed this deletion, emphasizing that the AO did not adequately investigate the evidence provided.

5. Deletion of Addition on Account of Investment in Coal Business:
The AO made additions assuming the assessee invested in the coal business based on seized documents and Bhutoria's statement. The CIT(A) deleted these additions, finding no evidence of such investments and noting that the assessee's role was limited to earning a commission. The Tribunal upheld this decision, stressing the lack of substantive evidence and the reliance on unverified statements.

Conclusion:
The Tribunal dismissed the Revenue's appeals, confirming the CIT(A)'s deletions of various additions. The key reasons included the lack of corroborative evidence, the necessity of cross-examination, and the speculative nature of the AO's findings. The Tribunal emphasized the importance of substantiating additions with concrete evidence and adhering to legal principles regarding the use of third-party statements.