2016 (8) TMI 1497 - AT - Income Tax

Addition u/s 68 - accommodation entries in the garb of purchase and sale of jewellery - CIT-A deleted the addition and held that the existence of the jewellery was proved from the VDIS, 1997 declaration and the assessee has claimed the sale of the same jewellery, which got tallied with the purchase bills issued by the buyer and assessee has not provided any opportunity to the assessee to explain the material facts on which the Assessing Officer made the addition - HELD THAT - A.O. could not point out any discrepancy in the evidences relied by the assessee nor bought out any credible evidence to contradict the contention of the assessee. Even if A.O. has some material to reject the assessee s contention, he should provide an opportunity to the assessee to seek his explanation on such material. Such material does not carry any evidential value in the absence of opportunity to the assessee. Any assessment framed on the basis of such material does not stand in the eye of law - addition made in the assessment order cannot sustain as per law and accordingly the same is directed to be deleted - See SH. MOHAN LAL AGARWAL 2013 (1) TMI 570 - ALLAHABAD HIGH COURT case - Decided in favour of assessee.

Issues:
1. Validity of reassessment proceedings under Section 147 r.w.s. 143(3) of the Income-tax Act, 1961.
2. Deletion of addition made on account of accommodation entry provided by M/s. Bishan Chand Mukesh Kumar.
3. Opportunity provided to the assessee to explain material facts before making the addition.
4. Existence of jewellery as proved from VDIS, 1997 declaration.
5. Rebuttal of evidence by the Assessing Officer to establish the fraudulent nature of the sale of jewellery.
6. Adverse inference drawn by the Assessing Officer without contradicting VDIS declaration with suitable evidence.
7. Lack of concrete evidence to suggest the assessee still owning the jewellery post-transaction.
8. Confirmation of transaction by the buyer and absence of discrepancy in the evidence relied upon by the assessee.
9. Previous Tribunal decisions on similar issues.

Analysis:

1. The reassessment proceedings under Section 147 r.w.s. 143(3) were challenged by the assessee, contending that the addition made on the basis of accommodation entries provided by M/s. Bishan Chand Mukesh Kumar was unjustified. The Assessing Officer relied on a block assessment order in the case of M/s. Bishan Chand Mukesh Kumar to hold the sale of jewellery as bogus, resulting in an addition of income from an undisclosed source. The learned Commissioner of Income Tax (Appeals) validated the reassessment proceedings but deleted the addition, leading to the Revenue's appeal.

2. The core issue revolved around the addition made on account of accommodation entries provided by M/s. Bishan Chand Mukesh Kumar. The Assessing Officer alleged that the firm engaged in providing accommodation entries against commission, and the assessee was a beneficiary. However, the Commissioner deleted the addition, emphasizing the need for the Assessing Officer to establish the fraudulent nature of the sale of jewellery. The absence of concrete evidence to support the addition led to its deletion.

3. The crucial aspect was the Assessing Officer's failure to provide the assessee with an opportunity to explain material facts before making the addition. The Commissioner highlighted the importance of rebutting evidence with cogent and credible evidence, emphasizing that transactions cannot be deemed bogus solely on surmises and conjectures. The lack of a contradictory stance against the VDIS declaration by the Assessing Officer weakened the grounds for the addition.

4. The existence of jewellery was crucial, as proved from the VDIS, 1997 declaration. The Commissioner noted that the Assessing Officer did not provide substantial evidence to refute the VDIS declaration, which affirmed the assessee's ownership of the jewellery. The Commissioner stressed that unless the certificate issued under VDIS, 1997 was withdrawn, the Assessing Officer could not disregard the existence of the jewellery.

5. The judgment emphasized the importance of concrete evidence to establish the fraudulent nature of the sale of jewellery. The Assessing Officer's failure to demonstrate that the assessee did not possess the jewellery post-transaction weakened the case for the addition. The confirmation of the transaction by the buyer and the absence of contradictions in the evidence presented by the assessee further supported the deletion of the addition.

6. Previous Tribunal decisions on similar issues were referenced to support the deletion of the addition. The judgments highlighted the need for specific facts to show sham transactions and the lack of evidence to prove the assessee's involvement in fraudulent activities. The Tribunal upheld the Commissioner's findings, dismissing the appeal of the Revenue based on the established legal precedents and lack of substantial evidence against the assessee.

Conclusion:
The judgment focused on the validity of reassessment proceedings, the deletion of the addition based on accommodation entries, and the necessity for the Assessing Officer to provide the assessee with an opportunity to explain material facts. The decision underscored the significance of concrete evidence, the existence of jewellery as proven by the VDIS declaration, and the lack of substantial evidence to support the addition made by the Assessing Officer. The Tribunal upheld the Commissioner's decision based on legal precedents and the absence of evidence against the assessee, ultimately dismissing the Revenue's appeal.

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