2019 (1) TMI 1812 - AT - Income Tax

Reassessment proceedings - unexplained investment under Section 69 - undated reasons recorded u/s 148 - HELD THAT - Since the facts and circumstances in the instant case are identical to the facts and circumstances in the case of Subhash Khattar 2017 (7) TMI 1091 - DELHI HIGH COURT thus respectfully relying on the decision we are of the opinion that no addition could have been made in the instant assessment year in absence of any incriminating material found from the premises of the assessee. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening under Section 148 based on undated reasons.
2. Appropriateness of using Section 148 instead of Section 153C.
3. Lack of crucial evidence to support the reopening.
4. Justification of the addition of ?560,000 under Section 69 as unexplained investment.

Detailed Analysis:

1. Validity of Reopening under Section 148 Based on Undated Reasons:
The appellant challenged the reopening under Section 148, arguing that the reasons recorded were undated, vague, and lacked a rational connection to the belief formed by the Assessing Officer (AO). The appellant contended that the reasons did not provide a clear nexus between the search and seizure operation at Aerens Group and the alleged cash payment by the assessee. The Tribunal referenced a similar case, Asha Rani Lakhotia Vs. ACIT, where entries of cash payments found on extracted hard disks from AEZ Group were deemed insufficient for reopening without corroborative evidence. The Tribunal found that the reasons for reopening were not substantiated by concrete evidence, leading to the conclusion that the reopening was invalid.

2. Appropriateness of Using Section 148 Instead of Section 153C:
The appellant argued that the correct provision to be used in this case was Section 153C, not Section 148, as the information was obtained from a third party (AEZ Group) during a search. The Tribunal, referencing the case of Subhash Khattar Vs. Principal CIT, noted that the jurisdiction under Section 153A (similar to 153C) was invalid when no incriminating material was found at the assessee's premises. The Tribunal upheld that the AO could not use Section 148 for reopening based on third-party information without direct evidence against the assessee.

3. Lack of Crucial Evidence to Support the Reopening:
The appellant highlighted that the crucial evidence, which was the basis of the AO’s case, was never brought on record or confronted to the assessee. The Tribunal observed that in the absence of corroborative evidence and the failure to confront the assessee with the alleged evidence, the reopening and subsequent addition were baseless. The Tribunal stressed that the AO's reliance on entries in the hard disks without presenting them to the assessee violated principles of natural justice.

4. Justification of the Addition of ?560,000 Under Section 69 as Unexplained Investment:
The AO added ?560,000 as unexplained investment under Section 69 based on entries found in the hard disks seized from AEZ Group. The appellant argued that this addition was speculative and not based on legally admissible evidence. The Tribunal noted that the AO failed to provide corroborative evidence linking the assessee to the cash payment. The Tribunal referenced the case of Subhash Khattar, where similar additions were deleted due to lack of direct evidence. The Tribunal concluded that the addition was unjustified, as it was based on speculative entries without corroborative evidence.

Conclusion:
The Tribunal allowed the appeal, deleting the addition of ?560,000 under Section 69. The Tribunal found the reopening under Section 148 invalid due to lack of concrete evidence and improper use of jurisdiction. The Tribunal emphasized the necessity of corroborative evidence and adherence to principles of natural justice in reassessment proceedings. The appeal was allowed in favor of the assessee, restoring the returned income and quashing the orders of the AO and CIT(A).