2024 (12) TMI 862 - AT - Income Tax

Assessment u/s 153C - unexplained money u/s 69A - Information gathered during the course of search at the premises of third party/JBL - HELD THAT - While the show cause notice was issued with regard to cash transactions mentioned against Anuj-Shamli Shyamli the assessee denied any link with these names. Neither copies of the documents/statements were provided to the assessee nor he was given an opportunity to cross-examine the persons concerned based on whose statement proceedings in the case of the assessee had been initiated. The assessee has all along maintained that he is in no way connected to the names Anuj-Shamli Shyamli . We also note that while coming to the conclusion that these entries belonged to the assessee,AO has relied upon the statements recorded during the search and has also reproduced relevant portions thereof in the assessment order. As such, the assessee ought to have been provided relevant documents, copies of statements as well as an opportunity to cross-examine these persons. As decided in SURENDER KUMAR JAIN 2024 (3) TMI 426 - ITAT DELHI addition made by the Ld. AO in both the AY(s) is not sustainable because it is based on mere suspicion, surmise and conjectures and not on legally sound footing and the Ld. CIT(A) admittedly confirmed the addition based alone on facts which emerges from the details and findings made by the Ld. AO. Thus addition u/s 69A and on account of undisclosed income need to be deleted - Decided in favour of assessee.

Issues Involved:

1. Jurisdiction under Section 153C of the Income Tax Act.
2. Validity of assessment under Section 153C/143(3) without statutory preconditions.
3. Addition of INR 26,60,000 as unexplained money under Section 69A.
4. Addition of INR 200 as undisclosed profit from unaccounted transactions.
5. Rejection of books of accounts under Section 145(3) and reliance on third-party evidence.
6. Levy of interest under Sections 234A and 234B.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 153C:
The appellant challenged the jurisdiction assumed under Section 153C of the Income Tax Act, arguing that the notice and subsequent assessment were conducted without satisfying statutory preconditions. It was contended that no money, bullion, jewelry, or documents belonging to the appellant were seized during the search on M/s Jindal Bullion Ltd., making the notice under Section 153C illegal and unsustainable. The appellant further argued that the documents seized were disclosed and not incriminating, thus not justifying proceedings under Section 153C. The Tribunal noted that the appellant was not provided with the relevant documents or an opportunity to cross-examine individuals whose statements were used to initiate proceedings, violating principles of natural justice.

2. Validity of Assessment under Section 153C/143(3):
The appellant contended that the assessment was invalid due to a lack of valid approval under Section 153D. The Tribunal did not specifically adjudicate this issue, as the appeal was allowed on merits regarding the additions.

3. Addition of INR 26,60,000 as Unexplained Money:
The addition of INR 26,60,000 was contested on the grounds that it was based on digital data from a third party without corroborative evidence. The Tribunal observed that the appellant was not given an opportunity to rebut the evidence or cross-examine the individuals whose statements were used. It was noted that similar cases involving the Jindal Bullion Ltd. group were set aside by Co-ordinate Benches for similar reasons. Consequently, the Tribunal held that the addition could not be sustained and directed its deletion.

4. Addition of INR 200 as Undisclosed Profit:
The addition of INR 200, representing alleged undisclosed profit from unaccounted transactions, was also contested. The Tribunal found that this addition, like the larger one, was based on insufficient evidence and without proper opportunity for the appellant to contest the claims. Thus, this addition was also deleted.

5. Rejection of Books of Accounts and Reliance on Third-party Evidence:
The appellant argued that the additions were made without rejecting the books of accounts under Section 145(3) and relied on uncorroborated third-party evidence. The Tribunal agreed, noting the lack of corroborative evidence and the failure to provide necessary documents or cross-examination opportunities. This lack of procedural fairness contributed to the decision to delete the additions.

6. Levy of Interest under Sections 234A and 234B:
The appellant contested the levy of interest under Sections 234A and 234B, arguing they were not applicable based on the case facts. However, as the appeal was allowed on the merits of the additions, these grounds were rendered academic and not specifically adjudicated.

Conclusion:
The Tribunal allowed the appeal, deleting the additions of INR 26,60,000 and INR 200, based on the failure to provide the appellant with necessary documents and cross-examination opportunities, aligning with principles of natural justice. Other legal grounds were not adjudicated as they became academic following the decision on merits.

← Previous Next →