2022 (2) TMI 436 - AT - Income Tax

Addition u/s 153A - unaccounted commission income received by the assessee from Rockland group for providing accommodation entries - HELD THAT - No addition on account of commission allegedly received by the assessee can be made. In the case of PCIT vs. Anand Kumar Jain (HUF) 2021 (3) TMI 8 - DELHI HIGH COURT wherein the Hon ble Court held that the statement recorded in search cannot be regarded as the incriminating document for assessment u/s 153A unless opportunity of cross examination of the witness is provided to the assessee. Declaration made by Mr. Prabhat Kumar Srivastava, the Director in his affidavit denying payment of any fees/ commission to the assessee has neither been considered nor specifically rejected by the AO by recording any reasons. Nothing has been brought on record to disbelieve the statement of the Director, Mr. Prabhat Kumar Srivastava. In fact his statement remained uncontroverted by the AO. CIT(A) has recorded a categorical finding that no adverse inference can reasonably be drawn from the entry against the word Ashwani appearing in seized documents. It has been explained by the assessee before the AO and the Ld. CIT(A) that such references relate to payment of remuneration to the assessee and not to any commission. Even where there is mention of 2 to 3% commission in seized documents, the name of the assessee does not appear at all therein. In fact we notice that the AO in his remand report has categorically admitted that the statements of Sri Anil Agarwal, Sri Vipul Jain and Sri Mahavir Jain do not mention the name of the assessee being a party to the accommodation entries to the Rockland Group. No adverse inference can be drawn against the assessee regarding receipt of commission by him. The addition is based on presumptions alone without any corroborative evidence brought on record in support thereof. - Decided against revenue.

Summary

Issues:
1. Addition made under section 153A of the Income Tax Act on account of unaccounted commission income.
2. Reliability of statements and documents seized during search operation.
3. Admissibility of evidence and opportunity for cross-examination.
4. Interpretation of seized documents and declarations made by involved parties.
5. Legal objections raised by the assessee under Rule 27 of ITAT Rules.

Analysis:

Issue 1: Addition under section 153A
The main issue in this case pertains to the addition made by the Assessing Officer (AO) under section 153A of the Income Tax Act on account of unaccounted commission income received by the assessee from Rockland group for providing accommodation entries. The AO relied on statements of individuals and documents seized during the search operation to make this addition.

Issue 2: Reliability of statements and documents
The statements of various individuals and seized documents were crucial in determining the alleged commission income received by the assessee. However, the Lower CIT(A) found that the addition made by the AO lacked a sound basis and was purely speculative without circumstantial evidence. The CIT(A) emphasized the need for concrete evidence to support such conclusions.

Issue 3: Admissibility of evidence
The CIT(A) highlighted the importance of providing the assessee with an opportunity for cross-examination of witnesses whose statements were used against him. The failure to allow cross-examination raised doubts on the reliability of the evidence presented by the AO, as per established principles of natural justice.

Issue 4: Interpretation of seized documents and declarations
The CIT(A) analyzed the seized documents and declarations made by involved parties, concluding that no concrete evidence linked the assessee to receiving commission for providing accommodation entries. Declarations denying payment of fees/commission to the assessee were not adequately considered by the AO, leading to a lack of substantial proof to support the addition made.

Issue 5: Legal objections under Rule 27 of ITAT Rules
The assessee raised legal objections under Rule 27 of ITAT Rules, arguing that no incriminating documents were found during the search, and hence, no addition could be made. The application under Rule 27 was admitted by the Tribunal based on precedents supporting the assessee's position.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the findings and decision of the CIT(A) that the addition of commission income lacked substantial evidence and was based on presumptions. The Tribunal emphasized the importance of providing the assessee with a fair opportunity for cross-examination and highlighted the need for concrete proof to support additions made under section 153A. Additionally, the legal objections raised by the assessee under Rule 27 were considered, but ultimately dismissed as the appeal was already decided on merits.