2004 (4) TMI 263 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 1,11,46,448 as income from undisclosed sources.
2. Determination of whether Shri D. Sengupta was a benamidar for the assessee.
3. Compliance with directions given by the CIT(A) in previous orders.
4. Evaluation of evidence and statements provided by Shri D. Sengupta and the assessee.

Detailed Analysis:

1. Addition of Rs. 1,11,46,448 as Income from Undisclosed Sources:
The Revenue's appeal centers on the addition of Rs. 1,11,46,448 as income from undisclosed sources. The initial assessment included Rs. 1,13,53,285, which was later reduced to Rs. 23,53,825 and ultimately set aside multiple times by the CIT(A). The final assessment by the AO on 27th March 2002, reinstated the addition of Rs. 1,11,46,448, claiming the assessee was the real owner of the goods found during the search.

2. Determination of Whether Shri D. Sengupta was a Benamidar for the Assessee:
The AO based the addition on statements by Shri D. Sengupta, asserting he was a benamidar for the assessee. However, these statements were inconsistent. Initially, Sengupta claimed he was a benamidar, but later retracted, stating the goods were imported on behalf of license holders who provided the funds. The CIT(A) and the Tribunal emphasized that the AO failed to provide cogent and sufficient evidence to prove the benami nature of the transactions.

3. Compliance with Directions Given by the CIT(A) in Previous Orders:
The CIT(A) had directed the AO to establish the benami transaction with cogent evidence and to determine the actual ownership of the goods. The AO repeatedly failed to comply with these directions, relying instead on inconsistent statements by Sengupta without corroborating documentary evidence. The Tribunal noted that the AO did not consider the entirety of Sengupta's statements or the documentary evidence provided by the assessee.

4. Evaluation of Evidence and Statements Provided by Shri D. Sengupta and the Assessee:
The Tribunal examined the statements and evidence, noting that Sengupta's initial statements were contradicted by later admissions that the goods were imported on behalf of license holders who provided the funds. The Tribunal found that the AO did not establish a clear link between the assessee and the funds used for importing the goods. The documentary evidence, including confirmations from license holders and bank records, supported the assessee's claim that Sengupta was not a benamidar.

Conclusion:
The Tribunal concluded that the AO did not discharge the burden of proof required to establish that Sengupta was a benamidar for the assessee. The addition of Rs. 1,11,46,448 was based on mere suspicion and conjecture, without sufficient legal evidence. The Tribunal upheld the CIT(A)'s order deleting the addition, emphasizing that suspicion cannot replace proof in legal proceedings. Consequently, the Revenue's appeal was dismissed.