2019 (9) TMI 975 - AT - Income Tax

Additions made u/s 68 - unexplained cash credits - HELD THAT - In the present case, the entire evidence has to be appreciated in a wholesome manner and even when there is a documentary evidence, the same can be overlooked if there are surrounding circumstances to show that the claim of the assessee is opposed to the normal course of human thinking and conduct or human probabilities. There is difficulty in rejecting the assessee s plea as opposed to the normal course of human conduct. The evidence collected by the lower authorities was not enough to establish their stand that the main transactions carried out by the assessee with the above parties were only paper transactions and only accommodation entries. There is no evidence which was brought on record to directly show that these transactions are accommodation entries. Therefore, no addition could be made on account of these alleged transactions in the hands of the assessee by treating them as unexplained credits u/s. 68 - Transaction shall be accepted to be real as there is no evidence showing otherwise. The surrounding circumstances apart from the direct evidence in the instant case did not contain anything which belied the claim of the assessee. In view of this we are of the opinion that the addition made by the AO cannot be sustained. - Decided in favour of assessee.

Issues Involved:

1. Deletion of addition under section 68 based on suspicion and presumption.
2. Jurisdiction of the ACIT, Central Circle, Kollam.
3. Rejection of technical grounds by CIT(A).
4. Validity of reopening of assessment based on suspicion.
5. Delay in filing cross objections.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 Based on Suspicion and Presumption:

The Revenue contended that the CIT(A) erred in deleting the addition of ?7.36 Crores, holding that the addition was made only on suspicion and presumption. The CIT(A) observed that the transactions were through banking channels, and the creditors were identifiable and income tax assessees. The AO had only suspicion and presumption without any concrete evidence. The Tribunal upheld the CIT(A)'s decision, noting that the AO's addition was based on suspicion without corroborative evidence. The Tribunal emphasized that suspicion cannot replace evidence and the AO should act judicially and not arbitrarily. The Tribunal also noted that the AO did not provide the assessee an opportunity to cross-examine the parties whose statements were relied upon, which violated the principles of natural justice.

2. Jurisdiction of the ACIT, Central Circle, Kollam:

The assessees in their cross objections argued that the ACIT, Central Circle, Kollam, lacked jurisdiction as there was no order under section 127 of the IT Act transferring jurisdiction. The CIT(A) rejected this ground without assigning jurisdiction to the ACIT, Kollam. The Tribunal dismissed the cross objections as not pressed by the assessee's counsel during the hearing.

3. Rejection of Technical Grounds by CIT(A):

The assessees contended that the CIT(A) erred in rejecting their technical grounds on irrelevant and flimsy grounds. The CIT(A) did not consider the objection under section 124(3) filed by the assessees regarding the jurisdiction of the ACIT, Kollam. The Tribunal did not delve into this issue as the cross objections were dismissed as not pressed.

4. Validity of Reopening of Assessment Based on Suspicion:

The assessees argued that the reopening of the assessment was based on suspicion regarding the credits in their books of accounts, which was against the CBDT's directions. The CIT(A) rejected this contention, noting that the AO considered the objections made by the assessees. The Tribunal upheld the CIT(A)'s decision, noting that the AO's addition was based on suspicion without concrete evidence and that the AO did not provide an opportunity for cross-examination, violating natural justice principles.

5. Delay in Filing Cross Objections:

There was a short delay of 8 days in filing the cross objections by the assessees. However, during the hearing, the assessee's counsel did not press the cross objections, leading to their dismissal by the Tribunal.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to delete the addition under section 68, noting that the AO's addition was based on suspicion without corroborative evidence and that the AO violated the principles of natural justice by not providing an opportunity for cross-examination. The Tribunal dismissed the cross objections filed by the assessees as not pressed. The appeals filed by the Revenue and the cross objections filed by the assessees were dismissed.

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