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2021 (2) TMI 667 - AT - Income TaxAssessment u/s 153A - Addition u/s 68 - third parties on whose statements the addition was made and sustained by the authorities - HELD THAT - We find that a search seizure operation was carried out on the group of assessees on 23/08/2016 and in the earlier appeals which were decided by the Tribunal 2020 (12) TMI 1064 - ITAT LUCKNOW the Tribunal had made a finding of fact that in assessment year 2013-14, the additions could not have been made as additions were not made on the basis of material found during the course of search and the assessments in those years had already stood completed. As already held in our order dated 16/12/2020 in the case of the present assessees itself in other assessment years that additions were not made on the basis of any incriminating material as the Assessing Officer, while making the additions, had not relied on any seized material and had relied on the document marked as BK-2 which was seized by the search party from some other group and there the search took place almost one year before the date of search on the present assessee- Decided in favour of assessee.
Issues Involved:
1. Sustaining additions under Section 68 of the Income Tax Act, 1961. 2. Sustaining additions under Section 69C of the Income Tax Act, 1961. 3. Treatment of profit in wholesale trading as unexplained cash credit under Section 68 read with Section 115BBE. 4. Denial of opportunity to cross-examine witnesses and confront adverse material. Detailed Analysis: 1. Sustaining Additions under Section 68 of the Income Tax Act, 1961: The appellants challenged the additions made under Section 68 on the grounds that no incriminating material was found during the search, and the assessments were completed. The Tribunal noted that the additions were not based on any seized material from the appellant's premises but on a document marked as BK-2, seized from another group. The Tribunal reiterated its earlier decision, emphasizing that in the case of completed assessments, additions could only be made based on incriminating material found during the search. Since no such material was found, the additions under Section 68 were deemed unsustainable and were deleted. 2. Sustaining Additions under Section 69C of the Income Tax Act, 1961: The appellants argued that the additions under Section 69C for unexplained expenditure were also unsustainable as no incriminating material was found. The Tribunal agreed, noting that the Assessing Officer had not relied on any seized material from the appellant's premises. The Tribunal reiterated that in the absence of incriminating material, additions under Section 69C could not be sustained. Consequently, these additions were also deleted. 3. Treatment of Profit in Wholesale Trading as Unexplained Cash Credit under Section 68 read with Section 115BBE: The appellants contended that the profits from wholesale trading in cloth were genuine and supported by proper documentation, including VAT returns and banking transactions. The Tribunal observed that the Assessing Officer had not conducted any independent investigation and had relied solely on third-party information. The Tribunal noted that the appellants had provided substantial evidence to support their claims, including purchase and sale invoices, bank statements, and VAT documents. The Tribunal held that the treatment of profits as unexplained cash credit was unsustainable, and the additions were deleted. 4. Denial of Opportunity to Cross-Examine Witnesses and Confront Adverse Material: The appellants argued that the Assessing Officer had not provided an opportunity to cross-examine the witnesses whose statements were relied upon for making additions. The Tribunal emphasized that the right to cross-examine is a fundamental right and a part of natural justice. The Tribunal noted that the Assessing Officer had not confronted the adverse material to the appellants despite specific requests. The Tribunal cited the Supreme Court's decision in Andman Timber Industries vs. CIT, which held that not allowing cross-examination amounted to a violation of natural justice. Consequently, the Tribunal allowed the ground and deleted the additions made based on such adverse material. Conclusion: The Tribunal concluded that the additions made under Sections 68 and 69C were unsustainable as they were not based on any incriminating material found during the search. The Tribunal also held that the treatment of profits as unexplained cash credit was unsustainable due to the lack of independent investigation and reliance on third-party information. Furthermore, the denial of the opportunity to cross-examine witnesses was a violation of natural justice. As a result, the appeals were partly allowed, and the impugned additions were deleted.
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