2021 (6) TMI 719 - AT - Income Tax

Assessment u/s 153A - Addition based on statement of third party - HELD THAT - The decisive issue as per the observation of the Tribunal that there cannot be any addition on mere statement given by the third party. The Hon ble Supreme Court in the case of P.V. Kalyanasundaram, 2007 (9) TMI 25 - SUPREME COURT in the identical set of facts has held that in absence of any corroborative evidences, no addition can be made just based on the statement of third party. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of proceedings under Section 153A of the Income Tax Act, 1961.
2. Validity of Notice under Section 153A in the absence of incriminating material.
3. Finality of assessment for AY 2014-15 and the absence of incriminating material.
4. Addition of unexplained investment based on alleged 'on-money' transactions.
5. Adoption of returned income versus assessed income.

Issue-wise Detailed Analysis:

1. Legality of Proceedings under Section 153A of the Income Tax Act, 1961:
The assessee challenged the legality of the proceedings under Section 153A, arguing that no search operations were conducted at their business premises. The Tribunal observed that the issue was covered by its earlier decision in the assessee's own case, where it was held that no addition could be made based on mere statements without corroborative evidence. The Tribunal referred to the Supreme Court's ruling in P.V. Kalyanasundaram, which emphasized the need for corroborative evidence for any addition.

2. Validity of Notice under Section 153A in the Absence of Incriminating Material:
The assessee contended that the notice under Section 153A was invalid as no incriminating material was found during the search. The Tribunal reiterated that additions could not be made solely based on third-party statements without corroborative evidence. The Tribunal cited the CBDT Circular, which discourages obtaining admissions of undisclosed income under coercion without credible evidence.

3. Finality of Assessment for AY 2014-15 and Absence of Incriminating Material:
The assessee argued that the assessment for AY 2014-15 had attained finality, and no incriminating material was found during the search. The Tribunal upheld this view, stating that the Department failed to establish any 'on-money' payment by the assessee. The Tribunal directed the deletion of the addition of ?2,58,20,476/- for AY 2014-15.

4. Addition of Unexplained Investment Based on Alleged 'On-Money' Transactions:
The Tribunal noted that the addition of unexplained investment was based on statements from third parties without any corroborative evidence. Referring to the Supreme Court's decision in P.V. Kalyanasundaram, the Tribunal emphasized that suspicion could not replace evidence. The Tribunal directed the deletion of the addition, highlighting that the Department failed to prove any 'on-money' payment by the assessee.

5. Adoption of Returned Income versus Assessed Income:
The assessee requested the adoption of the loss declared in the return for computation of assessed income instead of the Nil income adopted by the AO. The Tribunal allowed the appeal, directing the AO to adopt the income declared in the return at a loss of ?2,30,564/-.

Appeals by Revenue:

Low Tax Effect:
The Tribunal dismissed the Revenue's appeals for AY 2011-12 and 2013-14 due to the low tax effect, as per the recent CBDT Circular, which revised the monetary limits for filing appeals. The tax effect in these cases was less than ?50 Lakhs.

Addition Based on Seized Materials:
For AY 2012-13 and 2014-15, the Revenue's appeals were based on additions made by the AO from seized materials. The Tribunal, following its earlier decision, held that the AO failed to bring reliable evidence to prove any 'on-money' transactions by the assessee. The Tribunal dismissed the Revenue's appeals, citing the Supreme Court's rulings in K.P. Varghese and Shivakami Co. (P.) Ltd., which require evidence of higher price received for making additions.

Conclusion:
The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeals, emphasizing the need for corroborative evidence for any additions and adhering to the CBDT Circular on low tax effect. The order was pronounced on 21st June 2021.