2017 (10) TMI 1094 - AT - Income Tax

Unexplained funds - Held that - If at any point of time no incoming fund is available, to explain the outgoing of fund, in that case addition could have been possible to make as unexplained investment under section 69A of the Act, otherwise the only addition could have been made was for total incoming of fund under section 68 of the Act. Though we understand that assessee has not cooperated and avoided the proceedings before the Assessing Officer, still it is the duty of the first appellate authority to assess the income as per the provisions of the Act. We are of the considered opinion that even in the situation of the failure of the assessee to explain the name and address of the persons from whom the funds received and to whom the funds given, additions cannot be sustained both for incoming of funds and outgoing of the funds. The contention of the assessee that cheque numbers and daily opening balances appearing in the diaries/lose papers have also been added, need to be examined thoroughly. In the interest of substantial Justice, we feel it appropriate to restore the matter to the file of the Assessing Officer for quantification of the additions in the case of the assessee in view of our observations made above. The assessee shall be afforded reasonable opportunity of being heard. Accordingly, grounds related to the addition of ₹ 126,28,85,990/- are allowed partly for statistical purposes. Assessment u/s 68 - Held that - The assessee has not discharged its onus laid down under section 68 of the Act of explaining the nature and source of the entries either before the lower authorities or before us. The assessee has not furnished any confirmation from the parties as well as not provided there complete addresses. In view of the failure of the assessee to discharge its onus, we do not find any error in the finding of the learned CIT-(A) in confirming the additions

Summary

Issues Involved:
1. Legality and jurisdiction of the CIT(A) and assessment order.
2. Consideration of submissions and case laws by the CIT(A).
3. Addition of unexplained income based on entries in Annexure A-1 and A-4.
4. Reassessment proceedings under sections 147/148.
5. Mathematical errors in the calculation of additions.
6. Onus of explaining the nature and source of credit entries.

Detailed Analysis:

1. Legality and Jurisdiction of CIT(A) and Assessment Order:
The assessee challenged the legality, jurisdiction, and validity of the CIT(A) and assessment orders for AY 2007-08 and 2012-13. The Tribunal noted that these grounds were general and dismissed them as infructuous.

2. Consideration of Submissions and Case Laws by CIT(A):
The assessee claimed that the CIT(A) failed to consider their submissions and the ratios of various case laws. The Tribunal found that the CIT(A) had summarized the facts and submissions of the assessee but upheld the additions made by the AO. The Tribunal did not find any specific infirmity in the CIT(A)'s approach.

3. Addition of Unexplained Income Based on Entries in Annexure A-1 and A-4:
The AO added ?126,28,85,990/- and ?30,00,000/- as unexplained income based on entries in Annexure A-1 and A-4. The assessee argued that these entries were accommodation entries for which only commission income should be taxed. The Tribunal noted that the assessee failed to provide names and addresses of the parties involved and did not disclose any commission income in their returns. The Tribunal partly allowed the appeal, directing the AO to quantify the additions by considering only one side of the transactions (either incoming or outgoing funds) and to exclude cheque numbers and daily opening balances from the addition.

4. Reassessment Proceedings Under Sections 147/148:
For AY 2007-08, the assessee challenged the reassessment proceedings, claiming non-compliance with the GKN Driveshaft case dictum and improper disposal of objections. The Tribunal noted that the assessee did not press these grounds during the hearing and dismissed them as infructuous.

5. Mathematical Errors in the Calculation of Additions:
The assessee pointed out factual inaccuracies and mathematical errors in the calculation of the unexplained income. The Tribunal directed the AO to re-examine the calculations and make necessary corrections, ensuring that only the correct amounts are added.

6. Onus of Explaining the Nature and Source of Credit Entries:
The assessee failed to discharge the onus of explaining the nature and source of credit entries amounting to ?30,00,000/- from three persons. The Tribunal upheld the CIT(A)'s decision to confirm these additions, as the assessee did not provide any confirmations or complete addresses of the parties involved.

Conclusion:
The Tribunal partly allowed the appeals for statistical purposes, directing the AO to re-examine the quantification of additions and correct any mathematical errors. The addition of ?30,00,000/- was upheld due to the assessee's failure to explain the entries. The reassessment proceedings challenges were dismissed as infructuous.