2021 (2) TMI 678 - AT - Income Tax

Addition u/s 68 - accommodation entries receipt - Addition on the basis of statements of Shri Mukesh Kumar and Shri Deepak Agarwal found that they have controlled the Investor Company PIPL who have provided accommodation entry to the assessee company - HELD THAT - Assessee has produced the documentary evidences noted above which clearly shows that the Investor company has made investment in assessee company which is confirmed by the Investor in their confirmation and affidavit of the Director. The balance-sheet of the Investor shows that they have made investment in assessee company and they have sufficient balance to make the investment in assessee company which was made through banking channel. No cash was found to have been deposited in the account of the Investor before making investment in assessee company and actual shares were also allotted to the Investor by the assessee company. Thus, documentary evidences on record have not been rebutted by the A.O. through any evidence or material on record. No independent enquiry has been made against these documentary evidences. Therefore, such documentary evidences clearly supports the explanation of assessee that genuine investment have been made in the assessee company. There is no adverse material available on record against the assessee so as to make the impugned addition and that no investigation have been made by the A.O. on the documentary evidences submitted by assessee, we are of the view that addition is wholly unjustified. We, accordingly, set aside the Orders of the authorities below and delete the addition - Decided in favour of assessee.

Summary

Issues:
Reopening of assessment under section 147/148 of the I.T. Act, 1961 and addition of ?10 lakhs under section 68 of the I.T. Act, 1961.

Analysis:
1. The appeal challenged the Order of the Ld. CIT(A)-9, New Delhi, regarding the reopening of the assessment under section 147/148 of the I.T. Act, 1961 and the addition of ?10 lakhs under section 68 of the I.T. Act, 1961 for the A.Y. 2011-2012.

2. The basis for the reopening of the assessment was a search conducted in the cases of two individuals, Shri Deepak Agarwal and Shri Mukesh Kumar, who were found to be providing accommodation entries. The A.O. made the addition against the assessee based on statements by these individuals without allowing the assessee to cross-examine them.

3. The assessee submitted various documentary evidences to support their case, including bank statements, board resolutions, and confirmations from the investor company. The A.O. did not conduct an independent inquiry into these evidences and denied the assessee the right to cross-examine the individuals whose statements were used against them.

4. The Tribunal held that the denial of the right to cross-examine the witnesses was a violation of the principles of natural justice. The Tribunal referred to relevant case laws to support the assessee's position and concluded that the addition of ?10 lakhs was unjustified.

5. The Tribunal set aside the Orders of the authorities below and deleted the addition of ?10 lakhs, stating that there was no adverse material available on record against the assessee to support the addition. The issue of reopening the assessment was considered academic and not necessary to decide due to the deletion of the addition.

6. The Tribunal allowed the appeal of the Assessee, emphasizing the importance of following due process and ensuring that the assessee's rights, including the right to cross-examine witnesses, are upheld in assessment proceedings.