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2019 (8) TMI 990 - AT - Income TaxUnexplained receipt of u/s 68 - no findings or any material to show that assessee's own unaccounted money have come back in the shape of alleged advance - HELD THAT - The existence of the agreement is not in dispute as found during the course of search and the payment was made through banking channel. Thus in the absence of any findings or any material to show that assessee's own unaccounted money have come back in the shape of alleged advance the genuineness of the transaction cannot be doubted merely on suspicion. Therefore, the reliance placed by the AO on the report of Investigation Wing, Calcutta itself is not a conclusive evidence to contradict or disprove the evidence produced by the assessee to prove the identity, creditworthiness of the purchaser and genuineness of the transaction. Once the assessee has discharged her onus to prove the identity and creditworthiness of the creditor/ purchaser and genuineness of the transaction, the burden is shifted on the AO to prove the contrary with some tangible material. AO has not conducted any independent inquiry except the Commission issued to Calcutta Wing which has resulted nothing but reported that the company was not found at the address which is otherwise not disputed by the Revenue as the assessment was completed and statement of the director of the said company was recorded by the Investigation Wing in earlier investigation proceedings. Therefore, the said report of the Commission issued by the AO is contrary to the earlier investigation report to dispute the identity and existence of the said company. Enhancement of assessment on the basis of the application made u/s 245C(1) before Settlement Commission - application for want of any conclusive proof or document disclosing undisclosed income offered by the assessee - HELD THAT - There is no quarrel that the material and other information produced by the assessee before the Settlement Commission or any evidence recorded by the Settlement Commission in the proceedings before it can be used by the AO as well as other income tax authority for the purpose of assessment. However, when application filed by the assessee u/s 245C(1) itself fails for want of any material supporting the additional income disclosed then mere disclosure of income in the application u/s 245C(1) cannot be a basis of addition to the income of the assessee. What is provided u/s 245HA(3) is the evidence which may be in the shape of material, information or result of the enquiry held or evidence recorded by Settlement Commission in the course of proceedings. However, in the case in hand, there was no occasion of conducting any proceedings or enquiry or recording any evidence as the application of the assessee was rejected for want of any supporting material. The ld. CIT(A) has also not referred to any incriminating material to disclose the income which was offered by the assessee in the said application filed u/s 245C(1) but disclosure made in the application itself was considered as an evidence. Once the application or proceedings before the Settlement Commission fails, the AO is required to adjudicate upon the entire proceedings and show cause notice. In the case in hand, in the absence of any material much less the incriminating material, no addition can be made on the basis of income offered in the application u/s 245C(1) which was rejected by the Settlement Commission. Accordingly, the enhancement made by the ld. CIT(A) is deleted. Cases followed M/S. ANANTNADH CONSTRUCTIONS AND FARMS PVT. LTD. 2017 (5) TMI 1692 - ITAT MUMBAI and MARUTI FABRICS 2014 (7) TMI 926 - GUJARAT HIGH COURT
Issues Involved:
1. Deletion of Addition under Section 68 of the IT Act, 1961. 2. Enhancement of Income Based on Application to Settlement Commission. Detailed Analysis: 1. Deletion of Addition under Section 68 of the IT Act, 1961 Background: - The Department challenged the deletion of an addition of ?8.00 crores made by the AO under Section 68 of the IT Act, 1961, which was claimed to be an unexplained receipt. - The assessee filed her return of income on 20-07-2012, declaring a total income of ?10,33,768/-. The assessment was completed under Section 143(3) on 30-09-2014. - A search and seizure operation was conducted on 17-12-2014 on various premises of Sehgal Group, leading to the discovery of an agreement to sell dated 10-10-2011, indicating that the assessee and her husband agreed to sell properties for ?56.00 crores, with an advance of ?8.00 crores received from M/s. Makesworth Projects & Developers Pvt. Ltd. - The AO doubted the genuineness of the transaction and added ?8.00 crores as unexplained receipt under Section 68. CIT(A) Findings: - The CIT(A) deleted the addition, stating that no incriminating material was found during the search to support the addition. - It was held that the advance received was forfeited due to the purchaser’s failure to pay the balance amount and should be reduced from the cost of acquisition as per Section 51 of the Act. Tribunal’s Analysis: - The Tribunal upheld the CIT(A)’s decision, emphasizing that the assessment was not pending on the date of search, and no incriminating material was found. - It was noted that the agreement to sell and the receipt of ?8.00 crores through RTGS transfer were genuine and documented. - The AO’s reliance on the statement of a director of M/s. Makesworth Projects & Developers Pvt. Ltd. was not sufficient without giving the assessee an opportunity for cross-examination. - The Tribunal cited several precedents, including the Hon’ble Jurisdictional High Court’s decision in Jai Steel (India) and the Hon’ble Bombay High Court’s decision in Murali Agro Products Ltd., supporting the requirement of incriminating material for additions in non-abated assessments. - The Tribunal concluded that the assessee had discharged her onus to prove the identity, creditworthiness, and genuineness of the transaction. 2. Enhancement of Income Based on Application to Settlement Commission Background: - The assessee filed an application under Section 245C(1) before the Settlement Commission, offering additional income of ?35.00 lacs for AY 2009-10 to 2015-16. The Settlement Commission rejected the application for lack of supporting material. - The CIT(A) enhanced the assessment by adding ?5.00 lacs for AY 2012-13 and ?10.00 lacs for AY 2015-16 based on the disclosure in the application to the Settlement Commission. Tribunal’s Analysis: - The Tribunal noted that the Settlement Commission rejected the application because the additional income was based on estimates without any supporting transactions or material. - It was held that mere disclosure of income in the application to the Settlement Commission cannot be a basis for addition in the absence of any incriminating material. - The Tribunal cited the ITAT Mumbai Bench’s decision in Anantanadh Constructions & Farms Pvt. Ltd. and the Hon’ble Gujarat High Court’s decision in Maruti Fabrics, which held that confidential information submitted to the Settlement Commission cannot be used for addition without supporting material. - The enhancement made by the CIT(A) was deleted as it was not supported by any incriminating material found during the search. Conclusion: - The appeals of the assessee were allowed, and the Revenue’s appeal was dismissed. - The Tribunal emphasized the necessity of incriminating material for additions in non-abated assessments and the inadmissibility of unsupported disclosures made to the Settlement Commission for assessment purposes.
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