2021 (5) TMI 860 - AT - Income Tax

Unexplained expenditure u/s. 68 - unexplained expenditure taxed u/s. 69C v/s unexplained cash credit to be taxed u/s.68 - AO observed in the assessment order that as per information available on record, it showed that one Shri Sanjeev Kumar Singh is an entry operator and had provided various bogus accommodation entries for commission through his erstwhile companies/partnership firms and proprietorship concerns - HELD THAT - We find that the Revenue had not brought any evidence on record as to who Shri Sanjeev Kumar Singh is and how he is connected with the assessee herein. The primary onus has been duly discharged by the assessee by stating that he does not know who Shri Sanjeev Kumar Singh is and assessee had also specifically stated in writing that there are no business dealings with Shri Sanjeev Kumar Singh. While this is so, the primary onus has been discharged duly by the assessee, the onus shifts back to the ld. AO who is duty bound to provide all the necessary evidences/materials that are available with him vis- -vis the assessee thereon and confront the assessee with those evidences, if any, linking the assessee. Addition has been made by the AO towards unexplained expenditure u/s. 68 - As per the provisions of the Act, the unexplained expenditure will get taxed u/s. 69C of the Act and unexplained cash credit will get taxed u/s. 68 - The requirement of these two sections are totally separate and distinct. Moreover, the ld. AO had also observed in his assessment order that during the course of search and seizure action conducted in the case of Shri Sanjeev Kumar Singh u/s. 132(1) of the Act, it was found that he was an entry operator and had provided bogus accommodation entries to various beneficiaries for earning commission income through his entities. Nowhere in the assessment order, the ld. AO had brought on record with supporting evidences that whether the assessee had received any loans or had received any accommodation bills from Shri Sanjeev Kumar Singh Also the nature of transaction is also not mentioned in the assessment order; whether the same is payment or receipt is also not discernible from the assessment order. When all these points were duly pointed out before the ld. CIT(A), we find that the ld. CIT(A) had not even bothered to address any of the issues but merely relied on various case laws that are totally irrelevant to the facts of the issue and proceeded to confirm the addition made thereon. Appeal of the assessee is allowed.

Summary

Issues:
- Addition of unexplained expenditure u/s. 68 of the Income Tax Act, 1961.

Analysis:
1. The appeal in ITA No. 6785/Mum/2019 for A.Y. 2011-12 challenged the addition of ?11,72,434 as unexplained expenditure under section 68 of the Income Tax Act. The ld. AO had made this addition based on the belief that the assessee had provided accommodation entries through a specific individual, Shri Sanjeev Kumar Singh.

2. The Tribunal considered the primary onus of proving the connection between the assessee and Shri Sanjeev Kumar Singh. The assessee denied any transaction with Shri Sanjeev Kumar Singh, and the Revenue failed to provide evidence linking the two. The Tribunal noted that the ld. AO did not establish how the amount in question was related to the assessee or the nature of the transaction, whether it was a payment or a receipt.

3. The Tribunal emphasized the distinction between unexplained expenditure taxed under section 69C and unexplained cash credit taxed under section 68 of the Act. It was observed that the ld. AO's reliance on irrelevant case laws and failure to present concrete evidence linking the assessee to the alleged unexplained expenditure weakened the case against the assessee.

4. Ultimately, the Tribunal found the addition of ?11,72,434 to be baseless, made without proper evidence, and solely on assumptions. Consequently, the Tribunal allowed the grounds raised by the assessee and deleted the said addition.

5. In conclusion, the Tribunal allowed the appeal of the assessee, highlighting the lack of substantiated evidence connecting the assessee to the alleged unexplained expenditure. The decision to delete the addition was based on the failure of the ld. AO to meet the burden of proof and provide relevant material to support the claim of unexplained expenditure under section 68 of the Act.