2020 (6) TMI 410 - AT - Income Tax

Assessment u/s 153 OR 147 - unexplained cash credits u/s 68 - HELD THAT - On the strength of the information received from the ADIT, INV, the Assessing Officer assumed jurisdiction u/s 148 of the Act and accordingly, statutory notices were issued and served upon the assessee. Since the documents were found at the premises of the searched person, they did not belong to the assessee and the transactions recorded in the seized documents were in the books of the searched person and, therefore, information received from the Investigation Wing was a tangible material evidence which prompted the Assessing Officer to initiate proceedings u/s 148 of the Act. P rovisions of section 153C of the Act do not apply on the facts of the case in hand, and therefore, jurisdictional issue challenged by the assessee does not hold any water. Addition u/s 68 - Direct and clinching evidences cannot be brushed aside lightly. The entire additions have been made on surmises and assumptions revolving around the statement of one Shri Devi Das Tikamdas Chattani ignoring the fact that the director of M/s Index Securities and Research Pvt Ltd alongwith major share holder Shri Sant Lal Aggarwal appeared before the Assessing Officer. Financials were available with the Assessing Officer. AO/CIT(A) should not have discarded the evidences. In our considered opinion, the assessee has successfully discharged the onus cast upon it u/s 68. Addition u/s 69C - Addition is directly related to the loan amount as the same is interest paid by the assessee to the company and the same is also directed to be deleted. Before closing, it can be seen from the confirmation exhibited elsewhere that the loan was taken on 11.09.2009 and within three months, the loan was repaid. All the transactions have been done through banking channel. Cash loans given to the assessee - Foundation of the impugned addition is the statement of Shri Devi Das Tikamdas Chattani. Except for that, there is no direct evidence brought on record to show that any cash transactions took place between the assessee and the said person. Assessing Officer never confronted Shri Devi Das Tikamdas Chattani to Shri Sant Lal Aggarwal. If the statement of Shri Devi Das Tikamdas Chattani is to be believed, then on the same facts, statement of Shri Sant Lal Aggarwal cannot be ignored or brushed aside lightly. Merely because the statement of Shri Sant Lal goes in favour of the assessee, cannot be a reason to disbelieve the same. As mentioned elsewhere, there is no direct evidence brought on record which could suggest that some cash transactions took place between the assessee and the searched person. The observations made by the Assessing Officer at page 25 of the assessment order clearly show that the entire addition has been made on surmises and conjectures. Considering the facts of the case in hand, in the light of statement of Shri Sant Lal Aggarwal, we do not find any merit in the impugned addition and the same is directed to be deleted.- Assessee appeal allowed partly

Summary

Issues:
1. Challenge to additions of unexplained cash credits under section 68 of the Income Tax Act, unexplained expenditure under section 69C, and validity of assessment order under sections 143(3) and 147.
2. Application of section 153C of the Act for jurisdictional issues.
3. Assessment of unexplained cash credits and expenditure based on seized documents and statements.
4. Burden of proof under section 68 on the assessee to explain transactions.
5. Analysis of evidence provided by the assessee to support transactions.
6. Examination of the credibility of the company involved in the transactions.
7. Reliability of statements made by individuals involved in the transactions.
8. Consideration of direct evidence versus assumptions made by the Assessing Officer.
9. Decision on the validity of additions based on statements and lack of direct evidence.
10. Direction for re-computation of interest under section 234B of the Act.

Detailed Analysis:
1. The appeal contested additions of unexplained cash credits and expenditure, challenging the assessment order for the assessment year 2010-11. The Assessing Officer made additions under sections 68 and 69C of the Act, based on seized documents and statements obtained during a search operation.

2. The jurisdictional issue regarding the application of section 153C was raised by the assessee, but the Tribunal found that it did not apply to the case, dismissing the challenge.

3. The Assessing Officer relied on seized documents and statements to link the assessee to unexplained cash credits and expenditure, alleging involvement in a money lending business. Statements of individuals involved in the transactions were crucial in making these additions.

4. Under section 68, the burden of proof was on the assessee to explain the transactions. The Assessing Officer found discrepancies in the explanations provided, leading to the additions of unexplained cash credits.

5. The assessee submitted evidence such as confirmations, bank statements, and financial details of the company involved to support the transactions. However, the Assessing Officer did not find these direct evidences convincing.

6. The credibility of the company, M/s Index Securities and Research Pvt Ltd, was questioned by the Assessing Officer, alleging it to be a paper entity. The Tribunal analyzed the financials and statements of directors to determine the company's legitimacy.

7. Statements made by individuals involved in the transactions, such as Shri Devi Das Tikamdas Chattani and Shri Sant Lal Aggarwal, played a significant role in the assessment. Discrepancies in these statements were highlighted during the proceedings.

8. The Tribunal emphasized the importance of direct evidence over assumptions made by the Assessing Officer, especially when conflicting statements were presented. Lack of direct evidence supporting cash transactions was a key factor in decision-making.

9. After careful consideration of all evidence and statements, the Tribunal concluded that the additions made by the Assessing Officer were not substantiated and lacked a strong factual basis, leading to the deletion of the additions.

10. Lastly, the Tribunal directed the re-computation of interest under section 234B of the Act, emphasizing the mandatory nature of interest levy and the need for accurate computation as per legal provisions.