2024 (12) TMI 508 - HC - Income Tax

Unexplained cash credits - credit entries in the accounts of the group concerns, of amounts received from Nagaland based entities - deposits found in the bank accounts of the said group concerns unexplained - tribunal found that the credit transfer received by other family members and group concerns could not be assumed to be the assessee's undisclosed income since the Revenue could not establish, at any stage, that the assessee was either the de facto owner of the Nagaland based bank accounts or the owner of the bank accounts of the various recipients HELD THAT - We find that the Appellate Tribunal considered the aforesaid aspects and specifically found that with regard to the said amounts of Rs.3.22 crores and Rs.8.49 crores, the assessee had placed on record copies of the PAN and Aadhar cards, Income Tax exemption certificates issued u/s 10(26) of the I.T. Act, copies of work order issued by the Government, copies of immovable property ownership certificates etc. along with audited financial statements, turnover certificates and affidavits affirming the loan transactions, all of which clearly aided the assessee in discharging his initial burden of proof that the persons from whom the amounts were received had advanced these amounts as loans to the assessee and they were persons who had the requisite means to advance the said amounts. The fact that these transactions had taken place through banking channels was also found by the Tribunal to be significant in assessing the genuineness of the transactions. We see no reason, as we have no material before us, to disbelieve the findings of the Tribunal on this count. Tribunal had sustained certain additions to the taxable income of the assessee by rejecting the argument of the assessee that such additions were made without there being any material that was obtained by the Revenue consequent to the search u/s 132 and therefore could not be made at all in proceedings pursuant to a notice u/s 153A - Tribunal had rejected his contention by placing reliance on the decision of this Court in E.N. Gopakumar 2016 (11) TMI 72 - KERALA HIGH COURT wherein, it was held that there is no requirement of incriminating materials being detected in a search in order to complete an assessment or re-assessment of income under Section 153A of the I.T. Act. As is well settled through the judgment of Abhisar Buildwell Pvt. Ltd. 2023 (4) TMI 1056 - SUPREME COURT , the ratio in Gopakumar 2016 (11) TMI 72 - KERALA HIGH COURT is no longer good law since the court in Abhisar Buildwell (supra) clearly found that in case no incriminating material is unearthed during the search, the Assessing Officer cannot assess or reassess taking into consideration other material in respect of completed assessments/unabated assessments and no addition can be made in the absence of such incriminating material found during the course of search u/s 132. No doubt, the assessee has not come in appeal against the order of the Appellate Tribunal but we thought it apposite to mention this to demonstrate that the Revenue cannot be seen as prejudiced in any manner by the order of the Appellate Tribunal impugned in these appeals. Decided in favour of the assessee.

Summary

Issues Involved:

1. Legality of the Appellate Tribunal's decision to delete additions related to credits from Nagaland-based banks.
2. Justification for cash deposits in the bank accounts of the assessee and related entities.
3. Validity of the Appellate Tribunal's interference with the CIT(A)'s order and the findings of fact.

Detailed Analysis:

1. Legality of the Appellate Tribunal's Decision on Nagaland-based Bank Credits:

The Revenue challenged the Appellate Tribunal's decision to delete additions made to the assessee's income concerning credits from Nagaland-based banks. The Tribunal found that only Rs.23.98 crores out of Rs.243.19 crores was credited to the assessee's account, with the remainder attributed to family members and group concerns. The Tribunal determined that the Revenue failed to establish that the assessee was the de facto owner of the Nagaland bank accounts or the accounts of the recipients. The Tribunal emphasized that these family members and group concerns were independently assessed under the Income Tax Act. Consequently, the Tribunal limited the addition to the assessee's taxable income to Rs.5,44,90,000, considering the disclosures made under IDS, 2016, and other documentary evidence, including PAN and Aadhar details, government contracts, and banking transactions.

2. Justification for Cash Deposits in Bank Accounts:

The Tribunal addressed cash deposits in the bank accounts of the assessee and related entities. The authorities had added these deposits to the assessee's income as unexplained cash deposits under Section 68 of the I.T. Act. The Tribunal excluded deposits in accounts of family members and group concerns, finding no evidence that these accounts belonged to the assessee. For the cash deposits in the assessee's account, the Tribunal found Rs.26.48 lakhs were already addressed in a subsequent assessment year, leaving Rs.599.56 lakhs for consideration. The Tribunal reviewed the assessee's cash flow statements and determined that Rs.5,35,15,000 should be sustained as additions. The Tribunal also deleted separate additions for immovable property purchases, aligning with its earlier findings.

3. Validity of the Appellate Tribunal's Interference with CIT(A)'s Order:

The Tribunal's interference with the CIT(A)'s order was challenged, particularly regarding other credit entries in bank accounts. The Tribunal restricted additions to entries related to the assessee's account, sustaining Rs.88,50,000 under this head. The Tribunal also considered the assessee's declarations and payments related to applications to the Income Tax Settlement Commission, which were not filed due to the timing of the assessment completion. The Tribunal found that the assessee provided sufficient documentary evidence to satisfy the requirements of Section 68, including identity, creditworthiness, and transaction genuineness, particularly for loans from Sri G.K. Rengma and M/s Excellence Associates.

Conclusion:

The Tribunal's findings were based on substantial evidence, including documentary proof and the lack of Revenue's ability to disprove the assessee's claims. The Tribunal's decision to delete or limit additions was upheld, with the substantial questions of law answered against the Revenue. The Tribunal's reliance on existing legal precedents and its detailed examination of evidence led to the dismissal of the Revenue's appeals.