2024 (5) TMI 91 - AT - Income Tax

Addition u/s 69A - cash loans given by the assessee as unexplained - whether incriminating the assessee found in the seized materials to support the allegation that the assessee has given cash loans? - HELD THAT - We notice from the assessment order that the AO has not brought out any specific finding on how the impugned entries are linked to the assessee and whether any other seized material other than what is shared with the assessee have been used to aid the interpretation. We further notice that other than decoding the entries as pertaining to the assessee the AO has not brought any other material on record to substantiate that the assessee has given the cash loans to Shri Nilesh Bharani. Assessee has furnished the audited financial statements for the year ended 31.03.2012 before the AO during assessment proceedings and that the AO has not recorded any adverse findings with regard to the same. From the perusal of the findings of the CIT(A), we notice that the CIT(A) has not gone into the merits of the issue and has merely confirmed the addition relying on AO's findings. Thus as nothing has been brought on record by the AO to substantiate the allegation that the assessee has entered into the impugned transactions, addition made by the AO without bringing any concrete evidence on record incriminating the assessee is not sustainable - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of assessment u/s 147.
2. Merits of addition u/s 69A based on alleged cash loans.
3. Denial of cross-examination opportunity.
4. Relevance of retracted statements.

Summary:

Validity of Assessment u/s 147:

The assessee contended that the assessment framed u/s 147 is bad in law as the reasons recorded by the AO mentioned "borrowed" loans whereas the addition was made for loans "given". The Tribunal noted that the CIT(A) did not provide specific findings on this contention.

Merits of Addition u/s 69A:

The AO made an addition of Rs. 21,50,000 treating it as unexplained money based on decoded entries from seized materials and statements recorded during a search on M/s Evergreen Enterprises. The assessee argued that no concrete evidence linked him to the alleged cash loans and requested cross-examination of the individuals from whom statements were recorded. The Tribunal found that the AO did not bring any specific findings or additional material to substantiate the alleged transactions. The CIT(A) also failed to address the merits of the issue adequately.

Denial of Cross-Examination Opportunity:

The Tribunal observed that the AO denied the assessee's request for cross-examination of Shri Nilesh Bharani, whose statements were crucial to the case. This denial was significant as it impacted the fairness of the assessment proceedings.

Relevance of Retracted Statements:

The Tribunal referred to a similar case (Mayur Kanjibhai Shah) where the retracted statement of Shri Nilesh Bharani was not considered substantive evidence. The Tribunal concluded that the addition based on such retracted statements and decoded entries, without concrete evidence, is not sustainable.

Conclusion:

The Tribunal held that the addition of Rs. 21,50,000 made by the AO is not sustainable due to the lack of concrete evidence incriminating the assessee. Consequently, the appeal was allowed in favor of the assessee, and the legal contentions did not warrant separate adjudication.

Order pronounced in the open court on 29-04-2024.