2024 (1) TMI 1276 - AT - Income Tax

Addition u/s 69A - unaccounted cash loan and interest thereon - addition based on statement recorded of entry provider but was later retracted - in the course of search a diary has been seized wherein few entries have been recorded and the Assessee s name is also appearing in the same diary in coded word - HELD THAT - It is an admitted fact that the AO has not entertained the Assessee s request for cross examination of Entry provider Shri Nilesh Bharani / M/s Evergreen Enterprises and also it is a fact that Shri Nilesh Bharani subsequently retracted his statement. Therefore his statement made earlier become doubtful as claimed by the Assessee and cannot be relied as substantive evidence. Even otherwise we have failed to understand that how the name as mentioned in the said diary as NENSIBHI ELLA can be attributed to the Assessee s name. Further how the coded amount of Rs. 32, 500 can be construed as Rs. 3, 25, 000, 00/-. How the Assessee is connected with the said narration of entries written in diary. As per Assessee s claim the mobile number noted in said diary is even otherwise do not belong to the Assessee and the AO also failed to verify the owner of the said number to connect with the Assessee. Thus retracted statement of Shri Nilesh Bharani/ M/s Evergreen Enterprises who otherwise neither named nor specified the role and also not connected the Assessee specifically and the aforesaid facts/entries made in the diary as noted above by us in fact is not at all substantive material to make and sustain the addition as done by the authorities below in this case and therefore we are inclined to delete the addition. Consequently the addition under consideration stands deleted. Decided in favour of assessee.

Summary

Issues Involved:
The issues involved in this case include reopening of assessment under section 147/148 of the Income-tax Act, 1961 based on information received, addition of income under section 69A of the Act, denial of opportunity for cross-examination, and the validity of the additions made by the Assessing Officer.

Reopening of Assessment:
The Assessee, a sole proprietor of a retail business, had filed its return of income for the A.Y. 2012-13, showing total income of Rs. 5,05,980/-. The Assessing Officer reopened the assessment based on information received regarding cash lending activities of the Assessee, which had allegedly escaped assessment. The Assessee denied lending any cash loan as claimed and requested cross-examination of the involved parties.

Addition of Income under Section 69A:
The Assessing Officer, relying on a statement by a third party and entries in a seized diary, made an addition of Rs. 3,25,00,000/- under section 69A of the Act, along with an additional amount for alleged interest. The Assessee contested these additions, challenging the credibility of the evidence presented.

Denial of Opportunity for Cross-Examination:
The Assessing Officer did not allow the Assessee's request for cross-examination of the third party involved in the case. The Assessee argued that the third party's retracted statement should not be considered as substantive evidence, especially since it did not specifically connect the Assessee to the alleged transactions.

Validity of Additions Made:
Upon careful review of the facts and circumstances, the Tribunal found that the retracted statement and the entries in the seized diary were not substantial evidence to support the additions made by the authorities. The Tribunal observed discrepancies in connecting the Assessee to the alleged transactions and concluded that the additions were not justified. Consequently, the Tribunal allowed the Assessee's appeal and deleted the addition under consideration.

Separate Judgment Delivered:
The Tribunal, comprising SHRI. NARENDER KUMAR CHOUDHRY (JUDICIAL MEMBER) AND MISS. PADMAVATHY S. (ACCOUNTANT MEMBER), pronounced the order on 31/01/2024, setting aside the unreasonable order passed by the lower authorities and deleting the addition made under section 69A of the Act, thereby allowing the Assessee's appeal.