2018 (4) TMI 870 - AT - Income Tax

Unexplained investment - seized documents on the basis of which the addition was made by the lower authorities - Held that - AO is required to read the contents of the seized document as a whole. The AO cannot use part of the content of the seized document against the assessee and ignoring the other part of the contents without adducing any reason - We hold that the seized document should be read and applied in totality. As there was no mention of any cash payment to Shri Pawan Kumar Sharma and Smt. Meena Sharma in seized documents, accordingly, we hold that the AO has made the addition on his presumption and conjecture. As we have decided the issue in favor of assessee on technical count, we are not inclined to adjudicate other arguments of Ld. AR raised during the course of hearing. Thus, the appeal filed by the assessee is allowed. Penalty u/s 271(1)(c) - Held that - The penalty was initiated on the charge of concealment of income but in the penalty order it was levied on Port the charges that this concealment of income as well as furnishing inaccurate particulars of income. Thus in the instant case the penalty has not been levied on the specific charge as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled - Decided in favour of assessee

Issues Involved:
1. Legality of the assessment order passed under Section 143(3)/153A.
2. Principles of natural justice and reasonable opportunity of being heard.
3. Addition of ?19,01,224/- as unexplained investment for acquisition of shares.
4. Penalty proceedings under Section 271(1)(c).

Detailed Analysis:

1. Legality of the Assessment Order:
The assessee contended that the assessment order passed by the Assessing Officer (AO) under Section 143(3)/153A was illegal and bad in law. However, this ground was not pressed by the assessee's counsel and was dismissed as not pressed.

2. Principles of Natural Justice and Reasonable Opportunity of Being Heard:
The assessee argued that the assessment order was against the principles of natural justice as it was passed without affording a reasonable opportunity of being heard. The contention was that the statement recorded under Section 131 of the Act of Shri Pawan Sharma was not provided to the assessee for confrontation, thus violating natural justice principles. The Tribunal noted that the AO selectively relied on parts of the statements and affidavits without providing the assessee an opportunity to counter them, which was against the principles of natural justice.

3. Addition of ?19,01,224/- as Unexplained Investment:
The primary issue was the addition of ?19,01,224/- as unexplained investment for the acquisition of shares of Empire Casting Pvt. Ltd. (ECPL). The AO based the addition on seized documents during a search operation, which indicated a total transaction value of ?1.15 crores, out of which ?37.11 lakhs was paid by cheque and ?1 lakh in cash, with the remaining ?76.89 lakhs presumed to be paid in cash from unaccounted sources. The assessee contended that the deal was reduced to ?38.11 lakhs as the plant, machinery, stock, debtors, and technical know-how were not included in the final transaction. The Tribunal observed that the AO failed to provide conclusive evidence of the cash payment and relied on presumptions. The Tribunal held that the seized documents should be read in totality, and since there was no mention of additional cash payment, the addition was based on conjecture and presumption. Thus, the addition was deleted.

4. Penalty Proceedings under Section 271(1)(c):
The penalty under Section 271(1)(c) was imposed on the grounds of concealment of income and furnishing inaccurate particulars of income. The Tribunal noted that the penalty proceedings were initiated on the charge of concealment but were levied for both concealment and furnishing inaccurate particulars. The Tribunal referred to various judgments, including those from the Supreme Court and High Courts, which held that penalty proceedings must specify the exact charge. Since the penalty order did not specify the charge and was based on a defective notice, the penalty was deleted.

Conclusion:
The Tribunal allowed the appeals filed by the assessee, holding that the assessment order was not in accordance with the principles of natural justice, and the addition of ?19,01,224/- as unexplained investment was based on presumptions without concrete evidence. Consequently, the penalties imposed under Section 271(1)(c) were also deleted due to procedural defects and lack of specific charges.

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