2020 (7) TMI 334 - AT - Income Tax

Addition u/s 68 or 69A - assessee failed to prove the source of income in the hands of the persons who gave DD in favour of the Excise Commissioner on behalf of the assessee - no pan numbers were given in their confirmation letters - HELD THAT - If we go through the observations of the Tribunal, it is very clear that the Tribunal has concluded the issue of applicability of provisions of sec.68 or 69A of the Act, without allowing further scope to challenge the issue. Therefore, we are of the considered view that, there is no merit in the arguments of the ld. AR of the assessee that the provisions of sec.68 or 69A of the Act has no application to the impugned amounts. As regards the additions made towards the DDs taken from certain parties, on perusal of confirmation letters filed by the assessee before the AO, the copies of which are made available to us in paper book, we find M/s Sangameshwara Enterprises from whom a sum of ₹ 5.00 lakh has been taken by the assessee was confirmed that they have issued DD in favour of the assessee and said DD has been taken from M/s Vysya Bank, Bidar Branch. We further noted that M/s Sangameshwara Enterprises is also assessed to income tax at Gulbarga. Therefore, we are of the considered view that, no additions could be made in respect of DD taken from M/s Sangameshwara Enterprises. As regards amount received from Sheri. Negara, although the assessee has filed confirmation letter along with affidavit from the person who gave the DD, but fact remains that the details of pan numbers and income tax assessment of Shri Nagaraj has not been furnished so as to ascertain whether Shri Nagaraj is having sufficient source of income to explain the DD issued on behalf of assessee. From the above, it is clear that addition made towards DD taken from Shri. Nagaraj to the extent of ₹ 5.00 lakhs remains unexplained. There is no error in the findings recorded by the AO as well as the ld.CIT (A) to confirm the addition. Addition made for DD received from Shri V.B.Manik Rao - As explained in the light of the findings of the Tribunal Therefore, we are of the considered opinion that once the assessee has given the details of income tax assessment of person who gave the DD, merely for the reason that pan number is not furnished, no addition could be made. Hence, we direct the AO to delete the addition made towards DD taken in the name of Shri V.B.Manik Rao. Out of additions sustained by the ld. CIT (A) of ₹ 22.00 lakhs, the assessee gets a relief to the extent of ₹ 15.00 lakhs towards Demand Drafts received from M/s Sangameshwaran Enterprises, Shri N.R.Veerappa and Shri V.B,Manik Rao. The balance amount of ₹ 7.00 lakhs being amount received from Shri Nagaraj and Shri U.G.Rohit is still unexplained and hence, we confirm the additions made by the AO towards Demand Drafts claimed to have received from above two parties. Appeal filed by the assessee is partly allowed.

Summary

Issues:
1. Confirmation of assessment order opposed to Supreme Court decision.
2. Addition of demand drafts without PAN numbers.
3. Double entry transaction confirmation.
4. Applicability of sections 68 and 69A of the Income Tax Act.
5. Confirmation letters filed by the assessee.
6. Source of income verification for parties issuing demand drafts.
7. Relief granted by the CIT (A) and Tribunal.
8. Appeal against the CIT (A) order.
9. Arguments presented by the assessee.
10. Arguments presented by the Department.
11. Tribunal's analysis and decision on the additions made.

The judgment pertains to an appeal against the assessment order for AY 2001-02, where the assessee contested various grounds. The CIT (A) partially confirmed the additions made by the assessing officer. The Tribunal had earlier granted partial relief to the assessee and remitted the issue back to the AO for further examination. In the subsequent assessment, the AO confirmed additional additions, leading to the current appeal. The assessee challenged the CIT (A) order, arguing that confirmation letters were submitted, and the source of income was explained for the demand drafts received. The Department supported the CIT (A) order, emphasizing the lack of necessary confirmations with PAN numbers. The Tribunal reviewed the case, noting the directions given in the previous round of litigation. It upheld the additions in some cases where the source of income was not adequately proven, despite confirmation letters. The Tribunal found that certain demand drafts were adequately explained, leading to the deletion of those specific additions. Ultimately, the Tribunal partially allowed the appeal, granting relief in some instances but confirming additions where the source of income remained unexplained.

In conclusion, the Tribunal's decision in this case involved a detailed analysis of the confirmation letters submitted by the assessee, the source of income verification for parties issuing demand drafts, and the applicability of provisions under the Income Tax Act. The Tribunal carefully considered the previous directions given, the explanations provided by the parties involved, and the assessment of the source of income to determine the validity of the additions made. The judgment highlights the importance of providing complete and verifiable documentation to support financial transactions and the necessity of complying with legal requirements, such as providing PAN numbers.