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2018 (12) TMI 1702 - AT - Income TaxAddition u/s 68 - unexplained cash credit - HELD THAT - There is difficulty in rejecting the assessee s plea as opposed to the normal course of human conduct. The evidence collected by the lower authorities was not enough to establish their stand that the main transactions carried out by the assessee with the above parties were only paper transactions and only accommodation entries. As discussed earlier, there is no evidence which was brought on record to directly show that these transactions are accommodation entries. No addition could be made on account of these alleged transactions in the hands of the assessee by treating them as unexplained credits u/s. 68 - transaction shall be accepted to be real as there is no evidence showing otherwise. Further, the surrounding circumstances apart from the direct evidence in the instant case did not contain anything which belied the claim of the assessee. In view of this we are of the opinion that the addition made by the AO cannot be sustained. As such, the CIT(A) is justified in deleting such additions made u/s. 68 and confirm the order of the CIT(A). Similar ground was raised in other appeals. This ground of appeals of the Revenue is dismissed for all the assessment years. Addition u/s. 69B - HELD THAT - Since, the transaction was between M/s. Basanth Impex and Shri Thulasidas, there is no material on record to suggest that the assessee was in any way involved in this business. Therefore, the order of the CIT(A) on this issue is confirmed, deletion of addition is justified. This ground of appeals of the Revenue is dismissed. Addition u/s. 69B towards interest free loans advanced - HELD THAT - Advances by M/s. Basanth Impex to Shri Thulasidas, a close friend and associate of the assessee, interest free loans of ₹ 2 crores advanced by Ms/. Basanth Impex to Shri Jayakrishnan, a close friend and associate of the assessee and interest free loans of ₹ 4.21 crores advanced by M/s. Basanth Impex to M/s. Thulasi Developers which is promoted by Shri Thulasidas, a close friend and associate of the assessee. The Assessing Officer suspected that these advances were actually made by the present assessee himself, hence, he treated it as unexplained income of the assessee. As discussed earlier there is no material to establish that loans advanced by M/s. Basanth Impex to these persons are undisclosed investments of the assessee. In other words, the assessee had not advanced the loans to these parties. Hence, we are not in a position to interfere with the order of the CIT(A) in deleting the addition. Thus, this ground of appeals of the Revenue is also dismissed. Addition being investment made by the assessee in shares of Penver Products (P) Ltd . - HELD THAT - The total investment was made at ₹ 1.61 crores. Out of this, the assessee paid ₹ 1 crore and the balance amount of ₹ 61 lakhs was paid by M/s. Basanth Impex towards subscription of 7367 shares of M/s. Penver Products Pvt. Ltd. which was duly recorded in the books of account of M/s. Basanth Impex. Being so, it cannot be said that the said investment was by the assessee so as to treat the unexplained investment in the hands of the assessee. Accordingly, we do not find any infirmity in deletion of the addition by the CIT(A). Unexplained investment - HELD THAT - AO co-related these jottings in the loose paper to purchase of land at Ambalipadam by M/s. Sabari Quality Foods. According to him, there was a difference between the actual transaction recorded by the assessee in his books of account and entries in the loose paper found during the course of search. In our opinion, entries in the loose paper cannot be considered as material to sustain the addition. More so, the CIT(A) observed that there was no statement recorded from the assessee towards this transaction by the Department. Further, there was no inquiry made with the seller of the land to verify the actual price of the land and there was no admission made by the assessee during the course of search regarding this transaction. Under these facts and circumstances, the CIT(A) deleted the addition as no corroborative material was found to sustain the addition. Accordingly, we do not find any infirmity in the order of the CIT(A) and confirm the same. This ground of appeal of the Revenue is dismissed. Addition as deemed dividend u/s. 2(22)(e) - HELD THAT - Assessing Officer has not noticed the fact that the assessee had advanced a sum of ₹ 8,48,01,579/- to M/s. Sabari Switchgear Pvt. Ltd. Thus, net amount of ₹ 8,07,78,171.43 as on 31/03/2009 was advanced by the assessee to M/s. Sabari Switchgear P. Ltd. Without verifying these facts, the Assessing Officer treated the advance of ₹ 40,23,407/- given by M/s. Sabari Switchgear Pvt. Ltd. to the assessee as deemed dividend u/s. 2(22(e) of the Act which is not correct. Hence, the CIT(A) deleted the addition. In view of this, we do not find any infirmity in the order of the CIT(A) and the same is confirmed. Hence, this ground of appeal of the Revenue Proceedings u/s.153A - HELD THAT - The date of search has to be reckoned with last warrant executed and there was no dispute about the fact that last warrant was executed in F.Y. 2014-15 and, therefore, the AO had correctly initiated the proceedings u/s. 153A for A.Y. 2009-10 and dismissed this ground of appeal of the assessee. Accordingly, this ground of Cross Objections of the assessee is dismissed. Notice u/s.153A without having jurisdiction as his objection filed on 26.12.2016 was not disposed off u/s.124(3) - HELD THAT - Since the order was already passed on 08.11.2016, the CIT(A) was of the view that the ACIT, Central Circle had valid jurisdiction and accordingly he issued notice U/s. 153A on 29.11.2016. The Principal CIT, Chennai had given time upto 25.11.2016 for filing objections. However, no objection was filed by the assessee by that date and the AO correctly issued Notice on 29.11.2016. CIT(A) was of the view that the assessee filed his objection on 26.12.2016, which can only be treated as an afterthought and needed to be ignored, as by then assessment proceedings were in advance stage and the appellant was aware that substantial additions are likely to be made. In view of the sequences of events discussed above, the CIT(A) held that this ground of appeal was of no relevance and the same was dismissed. Assessment barred by limitation of time - The dates of limitation have to be counted from the date of execution of last warrant and not the last panchanama, therefore, the AO correctly held 31.12.2016 as time barring date for finalization of assessment. Accordingly, we confirm the finding of the CIT(A) and dismiss this ground of Cross Objections of the assessee. No notice u/s.143(2) - HELD THAT - Notice u/s. 143(2) was issued to establish the jurisdiction by the AO. From the records, the CIT(A) found that the Assessing Officer had issued Statutory Notices and the same was complied by the assessee also. It was observed that the assessee had raised this issue of jurisdiction, albeit belatedly, before the CIT, Chennai, when the case was transferred from Chennai to Kollam. Since the objection was filed late, beyond the date given by the Principal CIT, Chennai, the same was not considered by him. In view of these facts, the CIT(A) held that this ground was not maintainable and the same was dismissed . Original assessment was completed u/s, 143(3) and no incriminating material was found in the search - HELD THAT - CIT(A) held that whether these transactions were recorded in the books of the assessee and whether the income emanating from these transactions were offered to tax by the assessee or not could only be ascertained in assessment proceedings u/s.153A r.w.s. 143(3). According to the CIT(A), it is not necessary that all the documents found and seized in the search should result in addition to total income. The CIT(A) took the view that the very purpose of assessment is to examine these documents and then the AO takes a decision regarding the taxability. Therefore, the CIT(A) did not find any infirmity in the action of the AO and dismissed this ground of appeal of the assessee. We are in agreement with the finding of the CIT(A) and dismiss this ground of Cross Objections of the assessee.
Issues Involved:
1. Deletion of addition made under section 68 of the I.T. Act. 2. Deletion of addition made under section 69B of the I.T. Act. 3. Deletion of addition of investment in shares. 4. Deletion of addition towards unexplained investment. 5. Deletion of addition made under section 2(22)(e) of the I.T. Act. 6. Jurisdiction and procedural issues raised by the assessee. Detailed Analysis: 1. Deletion of Addition Made Under Section 68 of the I.T. Act: The Revenue challenged the deletion of additions made under section 68, arguing that the assessee failed to prove the genuineness of transactions and the capacity of lenders. The Assessing Officer (AO) made additions based on statements from third parties, which were later retracted. The Tribunal noted that the AO did not provide the assessee an opportunity for cross-examination of these third parties and relied on statements without corroborative evidence. The Tribunal upheld the CIT(A)'s decision to delete the additions, emphasizing that suspicion cannot replace evidence and that the AO's conclusions were based on assumptions and not on solid evidence. 2. Deletion of Addition Made Under Section 69B of the I.T. Act: For the assessment years 2011-12 and 2012-13, the AO made additions under section 69B, treating certain loans as unexplained investments by the assessee. The CIT(A) deleted these additions, noting that the transactions were between third parties and there was no evidence linking the assessee to these transactions. The Tribunal upheld this decision, stating that the AO's additions were based on suspicion and lacked documentary evidence. 3. Deletion of Addition of Investment in Shares: The AO added ?61 lakhs as unexplained investment in shares of Penver Products (P) Ltd., arguing that M/s. Basanth Impex, which made the investment, did not have sufficient funds. The CIT(A) deleted the addition, noting that the investment was recorded in the books of M/s. Basanth Impex and there was no evidence showing that the assessee funded this investment. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of evidence linking the assessee to the investment. 4. Deletion of Addition Towards Unexplained Investment: The AO made an addition of ?3,08,19,727/- based on a loose paper found during the search, which allegedly indicated unaccounted investment in land. The CIT(A) deleted the addition, noting that there was no corroborative evidence, such as statements from the assessee or inquiries with the land sellers, to support the addition. The Tribunal upheld this decision, emphasizing that entries in a loose paper alone cannot justify an addition. 5. Deletion of Addition Made Under Section 2(22)(e) of the I.T. Act: The AO treated certain loans received by the assessee from M/s. Sabari Milineium Impex P. Ltd. and M/s. Sabari Switchgear P. Ltd. as deemed dividends under section 2(22)(e). The CIT(A) deleted these additions, noting that the reserves and surpluses of the lending companies were negative or that the assessee had advanced more funds to the companies than received. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to verify the facts correctly. 6. Jurisdiction and Procedural Issues Raised by the Assessee: The assessee raised several procedural issues, including the timing of the last panchanama, jurisdiction of the AO, and the issuance of notice under section 143(2). The CIT(A) and the Tribunal found these issues to be without merit. The Tribunal noted that the AO had valid jurisdiction, issued the necessary notices, and provided the assessee with opportunities to defend against the proposed additions. The Tribunal dismissed the assessee's procedural objections, confirming the validity of the assessment proceedings. Conclusion: The Tribunal dismissed the Revenue's appeals and the assessee's cross objections, upholding the CIT(A)'s decisions to delete the various additions made by the AO. The Tribunal emphasized the importance of evidence over suspicion and procedural correctness in the assessment process.
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