2018 (7) TMI 2279 - HC - Income Tax

Addition u/s 68 - unexplained bank deposit - HELD THAT - Misplaced apprehension of the Assessing Authority that since confirmations were in the same handwriting, therefore, they were not believable is a typical pro-revenue approach, without any foundation. The agriculturists most of whom might have been illiterates, could not have been expected to write their own confirmations to be produced before the Assessing Authority, but as the witnesses they could have been certainly summoned by the Assessing Authority for verifying the written confirmations given by them and it is only thereafter that the Assessing Authority could have confirmed the fact as to whether the written confirmations given by them were genuine or fake. As far as the evidence collected through the Tahsildar under Section 133(6) of the Act is concerned also, we do not find that the said exparte evidence collected by the Assessing Authority has been confronted to the assessee or the Agriculturists in question. Thus, the whole process of enquiry conducted by the Assessing Authority in the present case does not have any foundational legs to stand upon. Revenue authority even though bestowed with the job to collect revenue in accordance with law cannot act arbitrarily and on a mere guess work make the additions in the declared income of the assessee. The reasonable factual enquiry in the matter, only can give support to their findings of facts, which are the subject matter of further scrutiny by the appellate forums and also by the constitutional Courts. The very foundation of assessment enquiry conducted by the Assessing Authority does not inspire any confidence in the present case and the entire assessment has to fall to the ground. We are of the opinion that the first appellate authority after having looked into the evidence on record was justified in granting the relief to the assessee, but Tribunal without assigning any cogent reasons has taken a different view of the matter and has rendered a finding of fact, which is bad and perverse to that extent. The said finding, therefore, cannot be sustained and the order of the Tribunal, therefore, requires to be quashed and set aside. The substantial question is thus answered in the favour of assessee.

Summary

Issues Involved
1. Addition of cash credits under Section 68 of the Income Tax Act.
2. Validity of the confirmation letters from agriculturists.
3. Assessment of evidence and enquiry conducted by the Assessing Authority.
4. Decision of the CIT (Appeals) vs. ITAT's partial allowance of Revenue's appeal.

Detailed Analysis

1. Addition of Cash Credits under Section 68 of the Income Tax Act
The primary issue revolves around the addition of Rs. 15,07,900/- to the assessee's declared income under Section 68 of the Income Tax Act. The assessee claimed that this amount was refunded in cash by agriculturists after failed land purchase agreements and subsequently deposited in her bank account. The Assessing Authority disbelieved this explanation and added the amount as unexplained cash credits.

2. Validity of the Confirmation Letters from Agriculturists
The assessee produced confirmation letters from four agriculturists, stating they refunded the advances in cash. The Assessing Authority disbelieved these letters, noting inconsistencies such as similar handwriting, lack of transaction dates, and identical addresses. The Tahsildar's letter further contradicted the claims, stating that some agriculturists did not own the mentioned agricultural lands.

3. Assessment of Evidence and Enquiry Conducted by the Assessing Authority
The CIT (Appeals) accepted the assessee's explanation, noting the withdrawals from her bank account and the reflection of these advances in previous returns. The CIT (Appeals) criticized the Assessing Authority for not summoning the agriculturists or allowing cross-examination, thereby deeming the enquiry process inadequate.

4. Decision of the CIT (Appeals) vs. ITAT's Partial Allowance of Revenue's Appeal
The ITAT partly allowed the Revenue's appeal, deleting the addition only to the extent of Rs. 10,00,000/- and upholding Rs. 5,07,900/- as unexplained. The ITAT's rationale was that the assessee failed to provide details of bank withdrawals for the remaining amount. The High Court found this reasoning flawed, noting that the assessee had provided evidence for withdrawals totaling Rs. 18,30,000/- and that the ITAT failed to properly consider the evidence.

High Court's Judgment
The High Court quashed the ITAT's order, restoring the CIT (Appeals)'s decision. The Court emphasized that the Assessing Authority's enquiry was inadequate and based on unfounded apprehensions. The Court noted that the Assessing Authority should have summoned the agriculturists and confronted the assessee with the Tahsildar's letter. The High Court concluded that the CIT (Appeals) had rightly assessed the evidence and granted relief to the assessee.

Conclusion
The High Court allowed the assessee's appeal, setting aside the ITAT's order and restoring the CIT (Appeals)'s decision, thereby deleting the addition of Rs. 15,07,900/- under Section 68 of the Income Tax Act. The Court emphasized the need for a thorough and reasonable factual enquiry by the Assessing Authority.