2020 (12) TMI 334 - AT - Income Tax

Unexplained cash credit - cash seized at the time of search - being 449 grams of gold added by the AO by alleging that the same is unexplained investment of the assessee and the addition of bogus purchases - As argued orders of authorities below are without providing adequate opportunity of being heard to the assessee and also without properly considering the evidences brought on record by the assessee before the lower authorities - HELD THAT - Matter should go back to the file of AO for a fresh decision on all the issues because the Assessment Order has been passed by the AO without properly considering the details brought on record by the assessee. On pages 6 and 7 of the assessment order for A. y. 2007 08, the AO has noted that the assessee has furnished several papers running into thousands of pages including PAN of investors, copy of Share Application Forms and Ledger Accounts of the Share Applicants but the AO brushed aside all these documents by saying that confirmation letters and source of the share application money was not submitted although before us, it is established by the assessee by filing various documents in the paper book that confirmation of some investors, bank statements of some investors, NBFC Certificate of some investors issued by RBI etc. were very much submitted before the AO and there is no finding of the AO as to how the same are not relevant for examining and deciding the identity and credit worthiness of the investors and genuineness of the transaction. Instead of brushing aside all documents without any discussion, the AO should have discussed about the issue and the documents brought on record by the assessee as to how the same fails to establish the identity and credit worthiness of the investors and genuineness of the transaction. But the AO has not done so and therefore, it is not possible for us to examine the correctness or otherwise of the conclusion drawn by the AO in a summary manner. It is also seen that copy of Investigation Wing report was also not provided to the assessee to enable the assessee to file reply. Hence, we do not decide any of the issues on merit and restore the entire matter (Technical issue or issue on merit) involved in these five appeals back to the file of AO for a fresh decision

Issues Involved:
1. Legality of the search operation and subsequent assessment under Section 153A.
2. Addition of share application money as unexplained cash credits under Section 68.
3. Non-provision of investigation reports and opportunity for cross-examination.
4. Treatment of confirmation letters and other documents submitted by the assessee.
5. Treatment of specific additions in Assessment Year 2013-14, including gold, silver articles, and cash seized.

Issue-wise Detailed Analysis:

1. Legality of the Search Operation and Subsequent Assessment under Section 153A:
The appellant challenged the legality of the search initiated, alleging it was illegal and ultra vires the provisions of Section 132(1)(a), (b), and (c) of the Act. The appellant contended that the search was conducted based on suspicion without prior information or material, rendering the consequent assessment under Section 153A null and void. The authorities failed to prove the valid initiation, execution, and completion of the search as required by law. The appellant also argued that the CIT(A) did not properly examine the validity of the search proceedings, thus rendering the entire proceedings invalid.

2. Addition of Share Application Money as Unexplained Cash Credits under Section 68:
The appellant contested the addition of share application money as unexplained cash credits, asserting that they had discharged the onus by providing all necessary details regarding the share applicants. The authorities were criticized for not appreciating that the provisions of Section 68 did not require proving the source of the source for the impugned assessment year. The appellant provided various documents, including PAN of investors, share application forms, and ledger accounts, which were allegedly not properly considered by the authorities. The authorities were also accused of treating the confirmation letters as bogus without proper justification.

3. Non-provision of Investigation Reports and Opportunity for Cross-examination:
The appellant raised grievances about the non-provision of investigation reports from Kolkata and Bengaluru units, which were used against them. They argued that the authorities did not afford an opportunity to cross-examine third parties whose statements were used against the appellant. The non-provision of the sworn statement recorded from the managing director, which was used against the appellant, was also highlighted as a violation of natural justice principles.

4. Treatment of Confirmation Letters and Other Documents Submitted by the Assessee:
The appellant argued that the authorities failed to take cognizance of various documents/details/information submitted, confirming the additions without proper application of mind. The authorities were criticized for not providing adequate opportunity to be heard and for not considering the evidence brought on record. The appellant provided evidence such as NBFC Certificates issued by RBI, confirmation letters, and bank statements of investors, which were allegedly brushed aside by the AO without proper discussion.

5. Treatment of Specific Additions in Assessment Year 2013-14:
For the assessment year 2013-14, the appellant objected to specific additions made by the AO, including:
- Addition of ?11,76,380/- being 449 grams of gold as unexplained investment.
- Addition of ?66,22,780/- by treating purchases from M/s. Sparkle Jewellery as bogus.
- Addition of ?23,03,100/- by treating personal silver articles of the directors as unexplained investment.
- Addition of ?34 lakhs by alleging the cash seized at the time of search was unexplained money.

The appellant argued that these additions were made without providing adequate opportunity to be heard and without properly considering the evidence on record.

Tribunal's Decision:
The tribunal noted that the AO did not properly consider the details brought on record by the assessee and brushed aside the documents without proper discussion. The tribunal found that the investigation reports and statements used against the assessee were not provided, preventing the assessee from filing a proper reply. The tribunal restored the entire matter back to the AO for a fresh decision on all issues, directing the AO to provide copies of investigation reports, statements, and an opportunity for cross-examination. The AO was instructed to pass a speaking and reasoned order after providing a reasonable opportunity of being heard to the assessee.

Conclusion:
All five appeals of the assessee were allowed for statistical purposes, with the tribunal directing a fresh examination of all issues by the AO in accordance with the law.

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