2024 (12) TMI 813 - AT - Income Tax

Addition u/s 68 - Denial of natural justice - no Opportunity for cross-examination not provided to the assessee - HELD THAT - The assessee company filed PAN details, copies of Memorandum of Association and Article of Association, Copies of Audit Report and Balance Sheets, Bank statement of the companies, copies of share application form along with Board Resolutions before the AO and before the CIT(A) also, which are placed on record. Assessee company also filed the confirmation of the aforesaid two companies confirming the payments made to assessee company and the same are placed on record. All the transactions are through proper banking channel and reflected in the books of account of assessee company as well as aforesaid two companies. The books of account of assessee company are audited and auditor has not made any adverse remark in maintaining of the books of account. Under these circumstances and the evidences furnished on facts of the case, we do not find any justification in observations made by the Assessing Officer that the aforesaid two companies provided accommodation entries to the assessee company. It is also admitted facts that the AO has not brought on record any contrary evidences that negates the legal evidences adduced by the assessee company. AO appears to have simply dismissed the evidences provided without assigning any valid reasons, other than the statement recorded by the Department in some other case, the contents of which were also not provided to the assessee company. In view of the above fact, the action of the AO is found to be untenable. It is also admitted facts that during the course of assessment proceedings. the assessee company s counsel had requested the Department to supply copies of the statement and other material based on which the Department had taken an adverse view against the assessee company. We find that the Department has neither provided nor had granted opportunity to cross examination. Whereas, the Assessing Officer on basis of statement of one unrelated person, proceeded to made addition to income of the assessee as unexplained cash credit under section 68 of the Act. It was incumbent on the Assessing Officer to afford the assessee an opportunity of cross-examination and in the absence of such opportunity, the impugned addition is not justified. Assessing Officer has stated that the investment made by these companies is bogus despite furnishing of all the documents in support which were available on record. Even after making such submissions and after furnishing all the relevant documents to justify the assessee company s stand, the Assessing Officer simply disagreed with the contentions of the assessee company without mentioning any concrete reason for his disagreement. We find that the Assessing Officer has not demanded any other documents that could have been produced by the assessee company which were required for his satisfaction. The Assessing Officer has also not mentioned in his order about any contrary findings or the existence of any adverse documents that were available with him which proved the transaction as bogus. The Assessing Officer also has not mentioned that the advances received by the assessee company were its own cash re routed through accommodation entries or even that the advances were accommodation entries of any other person. Therefore, merely on the basis of Third Party statements, the actual facts and evidences available cannot be denied or rejected . In the present case, the assessee company has provided all possible documents to prove the genuineness of transactions and booking advance. The assessee has also fulfilled its burden, but not a single document has been proven false and the onus was on the Assessing Officer to disprove the transactions which he has failed miserably. Appeal filed by the Revenue is dismissed.

Summary

Issues Involved:

1. Deletion of addition under Section 68 of the Income Tax Act, 1961.
2. Opportunity for cross-examination not provided to the assessee.
3. Assessment based on statements recorded during search and seizure operations.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 of the Income Tax Act, 1961:

The primary issue in this case was whether the addition of Rs. 2,15,00,000 under Section 68 of the Income Tax Act, 1961, was justified. The assessee company, engaged in the construction business, had received advances against the sale of property amounting to Rs. 1,50,00,000 from M/s. Prabhav Industries Ltd. and Rs. 65,00,000 from M/s. Avance Technologies Ltd. These amounts were received through proper banking channels and were recorded in the books of accounts. The agreements to sell were executed on 31/03/2010, and subsequent modification agreements were executed on 16/02/2012, converting these advances into equity shares due to the failure of the companies to make further payments. The CIT(A) found that the assessee had provided sufficient evidence, including PAN details, Memorandum of Association, bank statements, and confirmations from the companies, to establish the genuineness of the transactions. The CIT(A) concluded that the addition under Section 68 was not justified as the assessee had discharged its onus to prove the identity, creditworthiness, and genuineness of the transactions.

2. Opportunity for Cross-examination Not Provided to the Assessee:

The assessee contended that the addition was based on statements recorded during search and seizure operations involving a third party, Shri Shirish Chandrakant Shah, without providing an opportunity for cross-examination. The CIT(A) noted that the statements were recorded behind the back of the assessee and were not provided to them for rebuttal. The CIT(A) emphasized that the principles of natural justice were violated as the assessee was not given an opportunity to cross-examine the individuals whose statements were used against them. The Tribunal upheld this view, noting that the failure to provide cross-examination rendered the addition unjustified.

3. Assessment Based on Statements Recorded During Search and Seizure Operations:

The Revenue's case relied heavily on statements recorded during search and seizure operations at the premises of Shri Shirish Chandrakant Shah. However, the CIT(A) observed that no incriminating material or documents were found linking the assessee company to the alleged accommodation entries. The Tribunal noted that the statements were general in nature and did not specifically implicate the assessee company. The Tribunal found that the Assessing Officer had not conducted any independent inquiry to substantiate the allegations, and the reliance on third-party statements without corroborative evidence was insufficient to justify the addition.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition under Section 68, as the assessee had adequately demonstrated the genuineness of the transactions, and the principles of natural justice were not followed by the Assessing Officer.