2022 (9) TMI 1115 - AT - Income Tax

Reopening assessment u/s. 147 - Hawala transactions - addition on the basis of allegation of third party - money deposited in the bank account operated by Late Shri Chotalal V. Doshi - HELD THAT - In the instant set of facts, there is no corroborative evidence has been placed on record to show that it was the assessee who had deposited the said amount in the bank accounts operated by Late Shri Chhotglal V. Doshi, who was a Hawala operator. The entire additions were made only on the basis of statement recorded of son of Late Shri Chhotglal V. Doshi, who has stated that he had written the name in the diary so maintained by him, on the basis of instructions of his father. Apart from this, no evidence has been placed on record to substantiate that the money deposited in bank account maintained by Late Shri Chhotglal V. Doshi, belonged to the assessee. We are of the considered view that the Revenue has not brought forth any substantive/corroborative evidence to demonstrate that the money deposited in the bank account operated by Late Shri Chotalal V. Doshi, belonged to the assessee. Accordingly, in light of the judgement cited above, we are hereby deleting the additions made by the Department. Appeal of assessee allowed.

Summary

Issues:
Appeal against order of National Faceless Appeal Centre for A.Y. 2011-12 under section 143(3) r.w.s. 147 of the Income Tax Act, 1961.

Analysis:
1. The appellant contested the reopening of assessment under section 147 of the Act for A.Y. 2011-12. The Assessing Officer (AO) reopened the case based on information regarding unaccounted cash deposits by a third party, alleging the appellant's involvement in transactions totaling Rs. 15,87,700. The AO treated this amount as unexplained and added it to the total income, leading to the appeal.

2. The appellant argued that the addition was based on third-party allegations without substantial evidence. The appellant requested cross-examination of the third party, who admitted to not knowing the appellant. However, the CIT(A) upheld the addition, stating that in Hawala operations, it is not necessary to maintain detailed records. The CIT(A) relied on the "reasonable probability" that the transaction pertained to the appellant, dismissing the appeal based on lack of concrete evidence.

3. During the appeal hearing, the appellant emphasized the lack of evidence linking the appellant to the deposited amount. The appellant highlighted that the entire addition was based on the son of the deceased Hawala operator's statement, lacking any corroborative evidence. The appellant cited case law to support the argument that entries in a third party's account are insufficient without additional proof of authenticity.

4. The Tribunal observed that there was no corroborative evidence proving the appellant's involvement in the cash deposits. Citing precedent cases, the Tribunal emphasized the necessity of substantial evidence to support additions to an assessee's income. As the Revenue failed to provide such evidence, the Tribunal ruled in favor of the appellant, deleting the additions made by the Department.

5. The appeal for A.Y. 2010-11 mirrored the issues and arguments presented for A.Y. 2011-12. Given the identical nature of facts and issues, the Tribunal applied the decision made for A.Y. 2011-12 to A.Y. 2010-11. Consequently, the appeal for A.Y. 2010-11 was also allowed, resulting in the allowance of both appeals for both assessment years.

In conclusion, the Tribunal ruled in favor of the appellant for both A.Y. 2010-11 and A.Y. 2011-12, deleting the additions made by the Revenue due to the lack of substantial evidence linking the appellant to the alleged cash deposits. The decision highlighted the importance of concrete corroborative evidence in such cases to uphold additions to an assessee's income.