2022 (6) TMI 599 - AT - Income Tax

Unexplained/undisclosed income - Addition based on finding are based on the statements of erstwhile teachers who have been terminated from service - Assessee is a pensioner retired from Police Department. After retirement he is stated to be Director in school named Jayanti Jyoti Muk Badhir Nivasi School run for deaf and dumb children - Tax Evasion Petition (TEP) received against the Assessee from some staffs of the said School stating that, in the capacity of Secretary of the school, the Assessee has received certain amounts from them for their appointment as teacher/ caretaker / staff - HELD THAT - As per the Assessing Officer, the assessee is in capacity of Secretary of the School of Jayant iJyoti Muk Badhir Nivasi School, has received certain amounts during the Financial Years under consideration for appointment of teacher/caretaker/staff. Based on the statement reordered u/s 131 of the Act from the persons who claimed to have paid the amount to the Assessee, the statement made before Police Authority and based on the statement of one complainant recorded before the Court. AO has treated the alleged money given to the Assessee in lieu of the job as unexplained/undisclosed income and added to the total income of the assesse. By mere reading of the assessment order, the Ld. AO has not provided any opportunity to the Assessee to dispute or contradict the statement made by the persons who claimed to have paid the amount to the Assessee. Admittedly all the persons who gave given the statements against the Assessee have been dismissed from the service and after dismissal from the service the Tax Evasion Petitions have been filed and thereafter recorded the statements u/s. 131 of the Act have been recorded. Therefore the said statements cannot be believed in the facts and circumstances of the case more so when those statements were not subject to any cross examination by the Assessee. AO has relied on statements made before the Police Authority and also the statement recorded before the Court by the complainant and the witnesses in the Criminal Trial. It is found that, based on the complaint given by one Sh. Mahadeorao Kokate a criminal prosecution has been launched for the offence punishable u/s 420 of IPC against the Assessee. The prosecution has failed to prove the allegations made in the complaint that the complainant and other witnesses have paid money to the Assessee for appointment of teacher/caretaker/ staff. The Ld. Magistrate after conducting the due Trial has acquitted the Assessee from all the charges levelled against him. Further Assessee was also subject to the enquiry conducted by the Anti Corruption bureau, wherein the Assessee has been found not guilty of the allegations of corruption made against him. We are of the considered opinion that the addition made by the Ld. AO which has been upheld by the Ld. CIT(A) is not sustainable under law and the same is deserves to the set aside. Therefore, we allow the grounds of appeal by setting aside the orders passed by the lower authorities by allowing the appeals.

Summary

Issues:
Assessment of undisclosed income based on statements from terminated teachers, reliance on criminal trial statements, lack of opportunity for Assessee to dispute claims.

Analysis:
The Assessee, a retired pensioner from the Police Department, faced allegations of receiving payments in his capacity as Secretary of a school for appointments. The Assessing Officer (AO) added undisclosed income based on statements from individuals who claimed to have made payments to the Assessee. The Assessee challenged the additions through appeals before the Commissioner of Income Tax (Appeals) (CIT(A)), who upheld the AO's decision. The Assessee then appealed to the Appellate Tribunal.

The Assessee argued that the statements relied upon were from terminated teachers with malicious intent, emphasizing his exoneration from criminal charges and corruption allegations. The Tribunal noted that the AO did not provide the Assessee with an opportunity to challenge the statements, which were made after the teachers were dismissed and not subject to cross-examination. Moreover, the criminal trial failed to prove the allegations against the Assessee, leading to his acquittal. The Tribunal considered the Anti Corruption Bureau's findings of no corruption by the Assessee.

The Tribunal concluded that the additions made by the AO and upheld by the CIT(A) were unsustainable in law. Citing lack of credibility in the statements and the Assessee's exoneration from criminal charges, the Tribunal set aside the lower authorities' orders and allowed the Assessee's appeals. Consequently, the Tribunal ruled in favor of the Assessee, allowing the appeals and overturning the previous decisions.

In summary, the judgment addressed issues of assessing undisclosed income based on questionable statements, the lack of opportunity for the Assessee to challenge claims, and the significance of exoneration in criminal proceedings and corruption allegations. The Tribunal's decision highlighted the importance of credibility and due process in such assessments, ultimately ruling in favor of the Assessee based on the lack of substantiated evidence against him.