2024 (10) TMI 486 - AT - Income Tax

Unexplained income u/s 69 r.w.s 115BBE - addition on account of the earned commission - addition was made on the assumption basis because the assessee who was working in the bank as a bank employee finished their work beyond the working hours - HELD THAT - If the assessee has done the work beyond the working hours this may be the violation of the banking rules but on that basis the addition cannot be made assuming that the assessee has received the commission from the Rajeev Singh Kushwaha. As undisputed fact that the statement recorded u/s 132(4) of the Act has better evidentiary value but it is also settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements. In this case addition was made merely on the statement basis and no other corroborating material was found during the search and seizure operation. According to AO 1 kg gold bar was seized by the Enforcement Directorate from the premise of the accomplice of the assessee Shri Shobhit Sinha sister s residence at Lucknow on 03-12-2016. We have observed that the AO has made the addition on the basis that the assessee had helped Shri Rajeev Singh Kushwaha in cash deposits by flouted the banking norms. AO has made the addition only on mere assumption and not on any material recovered during search and seizure. In the absence of the supporting evidence additions made by the AO is not sustainable. The appeal of the assessee is liable to be allowed.

Issues Involved:

1. Whether the assessment proceedings were initiated under the proper section.
2. Alleged violation of the principle of natural justice.
3. Legitimacy of the addition of Rs. 17,00,000/- under Section 69A read with Section 115BBE.
4. Legitimacy of the addition of Rs. 29,00,000/- under Section 69A read with Section 115BBE.
5. Applicability of Section 69A to an individual not maintaining books of accounts.
6. Reliance on statements without corroborative evidence for making additions.

Issue-wise Detailed Analysis:

1. Initiation of Assessment Proceedings:
The appellant contended that the assessment proceedings were not initiated under the proper section, which rendered the impugned order bad in law. The CIT(A) dismissed this ground, maintaining that the proceedings were validly initiated under the relevant provisions of the Income Tax Act, 1961. However, this issue was not elaborated upon further in the judgment, indicating that the appellate tribunal found no merit in this argument.

2. Violation of Natural Justice:
The appellant argued that there was a gross violation of the principle of natural justice, as they were not provided an opportunity to cross-examine individuals whose statements were relied upon. The tribunal acknowledged this concern, emphasizing that the addition should not be based solely on statements without providing the assessee an opportunity for cross-examination, which is a fundamental aspect of natural justice.

3. Addition of Rs. 17,00,000/-:
The CIT(A) confirmed the addition of Rs. 17,00,000/- under Section 69A read with Section 115BBE, based on statements and assumptions about the removal of ill-gotten money prior to the search. The tribunal found that the addition was made on an assumption basis without corroborative evidence. The tribunal highlighted that statements alone, without supporting material evidence, cannot substantiate such additions, aligning with the precedent that statements need corroboration with tangible evidence.

4. Addition of Rs. 29,00,000/-:
Similar to the earlier addition, the CIT(A) sustained the addition of Rs. 29,00,000/- under Section 69A read with Section 115BBE, relying on pre-recorded statements. The tribunal criticized this reliance on statements without corroborative evidence, reiterating that mere assumptions and statements are insufficient grounds for such additions. The tribunal emphasized the necessity of material evidence to support the statements, which was lacking in this case.

5. Applicability of Section 69A:
The appellant argued that Section 69A is not applicable as they did not maintain books of accounts. The tribunal noted that this argument is not tenable, referencing the Delhi High Court's stance that this question remains open for determination in future cases. However, the tribunal did not find this argument sufficient to challenge the applicability of Section 69A in the current case.

6. Reliance on Statements Without Corroborative Evidence:
The tribunal underscored that additions cannot be sustained solely on the basis of statements recorded under Section 132(4) without corroborative material evidence. Citing various judicial precedents, the tribunal emphasized that statements must be supported by evidence discovered during search operations to justify additions. In this case, the tribunal observed that no corroborative material was found during the search and seizure operation, rendering the additions unsustainable.

Conclusion:

The tribunal concluded that the additions made by the Assessing Officer were based on assumptions and statements without corroborative evidence, violating the principles of natural justice. Consequently, the appeal of the assessee was allowed, and the additions were deleted. The judgment reiterated the necessity of corroborative evidence to support statements used for making additions under the Income Tax Act.

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