2019 (7) TMI 1485 - AT - Income Tax

Admission of additional evidence under Rule 46A - additions made by the AO u/s. 69C and 40A(3) - HELD THAT - Since the documents filed by the assessee as additional evidences are of the nature that may advance the interest of justice and vital to decide the issue under consideration the same need to be admitted and considered on merits. Hence the documents filed as additional evidence in the course of appeal proceedings were rightly admitted for consideration and adjudication of the issues under consideration by the Ld. CIT(A) which does not need any interference on our part therefore we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground no. 1. Addition on account of unexplained expenditure u/s. 69C - AO not verified the actual contents of seized material and addition made based on Report of the Special Auditor - HELD THAT - It is noted that the assessee has incurred expenditure which was not recorded in the books of accounts and the AO is duty bound to examine all these aspects before reaching the conclusion which he failed to do so. It is also noted that the transactions mentioned on the seized documents were only proposals sent by broker for the land deal for approval of the management and on the basis of such rough proposals no adverse conclusion should have been drawn by the AO. CIT(A) has rightly held that AO was not justified in making the impugned addition merely on the basis of the observations of the Auditors without going into the veracity of the same hence the addition made by the AO u/s. 69C was rightly deleted by the CIT(A) which does not need any interference on our part Addition u/s 2(22)(e) - HELD THAT - As perusing the aforesaid findings of the Ld. CIT(A) for the assessment year 2007-08 in assessee s own case we find that since the facts involved in the assessee s present case are identical to the facts of the above case in respect of assessment year 2007-08 in assessee s own case hence following the above order of the earlier Ld. CIT(A) of the assessment year 2007-08 in the case of M/s Samag Construction Ltd. a company of Saamag Group Ld. CIT(A) has rightly deleted the addition made by the AO u/s. 2(22)(e) in the case of the assessee which does not need any interference on our part hence we uphold the action of the Ld. CIT(A) on the issues in dispute and reject the ground raised by the Revenue. Addition of cash payment for purchase of land - observations of the Auditor made in his Report u/s. 142(2A) which were based on the document seized during the course of search proceedings - HELD THAT - AO observed that the reply of the assessee has been considered which for the same reasons as given for making the addition u/s. 69C was not found to be acceptable and therefore the impugned addition as made u/s. 69C. Since we have already confirmed the findings of the CIT(A) of deleting the addition hence the addition in dispute is not tenable because the same was made on surmises and conjectures on the basis of a document seized during the course of search which was nothing but was a dumb paper on which rough notings have been recorded which is normal in the real estate business. However the amounts mentioned on the seized document was unexplained expenditure without analyzing and verifying the contents thereof was not justified hence the addition made by the AO was rightly deleted by the Ld. CIT(A) which does not need any interference on our part therefore we uphold the action of the Ld. CIT(A) on the issue in dispute and accordingly reject the ground raised by the Revenue. Scrutiny assessment - non service of notice u/s. 143(2) within the prescribed time limit - HELD THAT - AO failed to discharge the onus of proving the service of notice upon the assessee u/s. 143(2) of the Act within the statutory period of limitation. We note that in the case of the assessee a speed post booking list is lying in the assessment record indicating the issuance of notice to the assessee but there was no evidence on record to show that either the same was received back by the AO or the same was served upon the assessee on or after the prescribed time limit. Thus in this case the notice u/s. 143(2) of the Act was not proved to have been served upon the assessee on or before 30.9.2012. - Decided against revenue

Summary

Issues Involved:
1. Admission of additional evidence under Rule 46A.
2. Deletion of addition on account of unexplained expenditure under Section 69C.
3. Deletion of addition made under Section 2(22)(e) of the Income Tax Act, 1961.
4. Validity of the assessment order due to non-service of notice under Section 143(2) within the prescribed time limit.

Issue-wise Detailed Analysis:

1. Admission of Additional Evidence under Rule 46A:
The Revenue contended that the CIT(A) erred in admitting additional evidence under Rule 46A. The Tribunal noted that during the appellate proceedings, the Assessee moved an application for admission of additional evidence which was forwarded to the AO for examination. The AO's report was received, and the Assessee filed a rejoinder. The Tribunal upheld the CIT(A)'s decision to admit the additional evidence, citing that the documents were crucial for disposing of the case and advancing the interest of justice. Therefore, the Tribunal dismissed the Revenue's ground on this issue.

2. Deletion of Addition on Account of Unexplained Expenditure under Section 69C:
The Revenue challenged the deletion of additions made by the AO under Section 69C. The Tribunal observed that the AO relied on the Special Audit Report without verifying the actual contents. The Tribunal found that the seized records did not indicate the years in which the expenditures were incurred, and the AO failed to examine these aspects. The Tribunal agreed with the CIT(A) that the transactions mentioned were merely proposals and not actual expenditures. Consequently, the Tribunal upheld the deletion of the addition under Section 69C and dismissed the Revenue's ground.

3. Deletion of Addition Made under Section 2(22)(e) of the Income Tax Act, 1961:
The Revenue contested the deletion of additions made under Section 2(22)(e). The Tribunal referred to the CIT(A)'s earlier order for AY 2007-08, where similar additions were deleted. The CIT(A) had held that the additions should be made in the hands of the borrowers/shareholders, not the lender. Following this precedent, the Tribunal upheld the CIT(A)'s decision to delete the addition under Section 2(22)(e) for the current assessment year. The Tribunal found no merit in the Revenue's argument and dismissed the ground.

4. Validity of the Assessment Order Due to Non-Service of Notice under Section 143(2):
The Revenue argued that the CIT(A) erred in holding that the notice under Section 142(1) was not served within the prescribed time limit. The Tribunal noted that the onus was on the AO to prove the service of notice within the statutory period. The Tribunal found no evidence that the notice was served on the Assessee within the required time frame. Citing the Supreme Court decision in Y. Narayana Chetty vs. ITO, the Tribunal held that the proceedings initiated without serving the notice within the statutory period were null and void. Thus, the Tribunal upheld the CIT(A)'s decision to quash the assessment order and dismissed the Revenue's appeal on this ground.

Conclusion:
The Tribunal dismissed all the appeals filed by the Revenue, upholding the CIT(A)'s decisions on all the issues. The Tribunal found that the CIT(A) had rightly admitted additional evidence, deleted the additions under Sections 69C and 2(22)(e), and quashed the assessment order due to non-service of notice under Section 143(2) within the prescribed time limit.