2016 (3) TMI 813 - AT - Income Tax

Undisclosed investments - Held that - All the additions deserve to be set aside to the file of Assessing Officer for re-adjudication because at the time of assessment proceedings neither the Assessing Officer was possessing the clinching evidences which could exhibit the unexplained investments exclusively in the hands of assessee nor the assessee could file his explanation with regard to the allegations posed before him on the strength of Panchnama of ACB. It is pertinent to observe that prosecution in the criminal case failed to establish the possession of disproportionate assets by the assessee, meaning thereby the evidence collected by the prosecution was not of that nature which could satisfy the court about unexplained investment by the accused. Bearing this fact in mind, when we perused the assessment orders then it revealed that AO has relied upon the Panchnama/charge sheet prepared by prosecution. On due consideration of these facts we are of the view that it is for the ld. AO to first lay his hands on an evidence which shows unexplained investment by the assessee. The ld. AO thereafter supposed to call upon the explanation of the assessee qua that investment or any assets possessed by him. If the AO is not satisfied with the explanation of the assessee then addition in the hands of assessee can be made. The ld. Assessing Officer shall decide the issues in accordance with law keeping in view the decision of the Special Judge, ACB.

Summary

Issues involved:
1. Common issues in appeals by Revenue for AY 2003-04 and by assessee for AYs 2001-02 to 2005-06.

Detailed Analysis:
1. The judgment dealt with a series of appeals involving common issues from the Revenue for the assessment year (AY) 2003-04 and the assessee challenging orders by CIT(A) for AYs 2001-02 to 2005-06. The tribunal decided to address these appeals collectively due to shared facts across the cases.

2. The primary issue revolved around the assessment of the assessee, an employee in the Gujarat Police Department, following a search conducted by the Anti Corruption Bureau (ACB) leading to the discovery of significant cash and investments allegedly belonging to the assessee and family members. The Assessing Officer framed assessments under relevant sections for the mentioned AYs based on the findings.

3. The judgment delved into specific instances of investments, like in Kisan Vikas Patras (KVP) and Time deposits, which the Assessing Officer considered unexplained and added to the total income of the assessee. The tribunal scrutinized the Assessing Officer's actions and the explanations provided by the assessee regarding the ownership of these investments.

4. In the AY 2005-06 assessment, the tribunal noted the recovery of a substantial amount of cash by the ACB and the subsequent determination of taxable income by the Assessing Officer. The assessee's appeals to the CIT(A) did not yield favorable outcomes, leading to further appeal before the tribunal.

5. The crux of the matter lay in the Special Judge's acquittal of the assessee in a corruption case, which the tribunal considered significant in re-evaluating the additions made by the Assessing Officer based on evidence collected during the search operation. The tribunal emphasized the importance of the Special Judge's judgment in assessing the legitimacy of the additions made by the Assessing Officer.

6. Ultimately, the tribunal set aside the additions made by the Assessing Officer for re-adjudication, citing the Special Judge's judgment as a crucial factor in determining the legitimacy of the unexplained investments and assets. The tribunal directed the Assessing Officer to re-examine the issues in light of the Special Judge's findings and provide the assessee with a fair hearing opportunity.

7. The tribunal concluded by allowing the appeals of both the assessee and the Revenue for statistical purposes, ensuring that the observations made did not prejudice either party and emphasizing the need for a thorough re-evaluation by the Assessing Officer based on the new information presented in the Special Judge's judgment.