2017 (9) TMI 1027 - AT - Income Tax

Unexplained credits received by the assessee company from Shri SK Gupta - Held that - The facts of the relevant issue involved in the appeal are similar to the facts discussed in the appeal of the assessee for assessment year 2004 05. During the year the information found from the laptop of Mr. S. K. Gupta was that assessee has obtained and accommodation entry of ₹ 5 255000 from that particular person. The assessee could not produce the basic details before the Ld. assessing officer on the issue. The facts of the impugned addition remain the same as they were in the appeal of the revenue for assessment year 2004 2005. The CIT A also deleted the addition on the reasons given by him in the appeal of the assessee for assessment year 2004 05 before him. As we have already confirmed the addition allowing the appeal of the revenue for assessment year 2004 05, we do not have any reason to deviate from the reasons for decision stated therein. In view of this, we allow the appeal of the revenue for assessment year 2005 06 reversing the finding of the Ld. CIT appeal in deleting the addition of ₹ 52555000/-on account of unexplained income with respect to accommodation entries provided by Sh. S. K. Gupta, who is beneficiary is assessee.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained credits received by the assessee company.
2. Jurisdictional issue of the provisions of section 153A and 153C.
3. Opportunity of cross-examination of the entry provider.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Credits:
The Revenue appealed against the deletion of additions made by the Assessing Officer (AO) for unexplained credits received by the assessee company from Mr. S.K. Gupta and various companies controlled by him. The AO had added ?21,007,350 for AY 2004-05 and ?5,077,250 for AY 2005-06, citing that Mr. S.K. Gupta was an established entry provider. The AO's assessment was based on a survey conducted under section 133A, which revealed that Mr. S.K. Gupta was providing accommodation entries through paper companies. The AO rejected the assessee's contention that these were genuine transactions of purchase and sale of shares, as the assessee failed to produce contract notes or any documentary evidence to support the genuineness of these transactions. Consequently, the AO treated these credits as unexplained income.

2. Jurisdictional Issue of the Provisions of Section 153A and 153C:
The CIT(A) rejected the assessee's jurisdictional challenge regarding the applicability of sections 153A and 153C. However, the CIT(A) deleted the additions made by the AO, accepting the assessee's confirmations from the parties involved and noting that capital gains from these transactions had been taxed in the original assessments. The CIT(A) also noted that the assessee was not afforded an opportunity for cross-examination of Mr. S.K. Gupta, which was considered a procedural lapse.

3. Opportunity of Cross-Examination of the Entry Provider:
The Tribunal observed that the assessee did not avail the opportunity for cross-examination of Mr. S.K. Gupta, despite it being granted during appellate proceedings. The Tribunal emphasized that the assessee failed to provide basic documents to prove the genuineness of the transactions, such as contract notes or loan agreements. The Tribunal criticized the CIT(A) for naively accepting the transactions as genuine merely because they were conducted through banking channels and for not considering the substantial evidence of accommodation entries provided by Mr. S.K. Gupta.

Judgment for AY 2004-05:
The Tribunal reversed the CIT(A)'s order and reinstated the addition of ?21,007,350 as unexplained income. The Tribunal highlighted that the assessee did not provide credible evidence to substantiate the transactions and that the CIT(A) erred in deleting the addition based on superficial arguments.

Judgment for AY 2005-06:
Following similar reasoning as for AY 2004-05, the Tribunal reversed the CIT(A)'s order and reinstated the addition of ?5,077,250 as unexplained income. The Tribunal reiterated that the transactions were not substantiated with credible evidence and that the CIT(A) erred in deleting the addition.

Conclusion:
The Tribunal allowed the Revenue's appeals for both assessment years, reinstating the additions made by the AO for unexplained credits received by the assessee company from Mr. S.K. Gupta and various companies controlled by him. The Tribunal emphasized the lack of credible evidence provided by the assessee and criticized the CIT(A) for accepting the transactions as genuine without thorough scrutiny.