2013 (11) TMI 513 - AT - Income Tax

Undisclosed income - Whether the primary ingredients of the sections 69 or 69A are met for their invocation by the Revenue - Held that - AO on basis of seized document made additions u/s 69 as un-identified investment there was sufficient material before the A.O. to have made additions I.T.A.T. by elaborate reasoning has also held that the presumption created by the document had not been rebutted nor had the assessee denied the loan amount - no infirmity in AO s order contention raised at the appellate stage was merely an attempt to create doubts in the mind of court no violation of principle of natural justice - vacating the impugned order, restore the matter back to the file of the A.O. for allowing an opportunity to the assessee to prove his case before him, and who shall frame the assessment afresh per a speaking order, considering all the objections, if any, raised by the assessee to the impugned addition - Decided in favour of assessee.

Issues Involved:
1. Addition of Rs. 60 lakhs towards payment for a tenanted property by the assessee.
2. Invocation of Sections 69/69A of the Income Tax Act, 1961.
3. Validity of the evidence and statutory presumption under Section 292C.
4. Merits of the assessee's explanations and objections.
5. Procedural fairness and right to cross-examination.
6. Reassessment and burden of proof.

Issue-wise Detailed Analysis:

1. Addition of Rs. 60 Lakhs Towards Payment for a Tenanted Property by the Assessee:
The Revenue's appeal contests the deletion of an addition of Rs. 60 lakhs made towards payment for a tenanted property, which was undisclosed by the assessee. The addition was based on a Note dated 04.04.2004, recovered during a search operation, indicating that the assessee paid Rs. 60 lakhs in cash for the property. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, leading to the Revenue's appeal.

2. Invocation of Sections 69/69A of the Income Tax Act, 1961:
Sections 69/69A of the Act allow for the taxation of investments or money not recorded in the books of account if the assessee offers no satisfactory explanation about their nature and source. The Tribunal examined whether the primary ingredients for invoking these sections were met. The Note, written by Shri Nuruddin B. Ajani, was undisputed and supported by the statutory presumption under Section 292C, shifting the onus to the assessee to disprove the payment or explain its source.

3. Validity of the Evidence and Statutory Presumption Under Section 292C:
The Tribunal noted that the written Note and the circumstances surrounding the transaction supported the presumption of truth under Section 292C. The assessee's explanation regarding the change in shareholding of the company, Empire Continental Exports (P.) Ltd., further corroborated the transaction mentioned in the Note. The Tribunal emphasized that the presumption of ownership and the truth of the documents found during the search were valid under the law.

4. Merits of the Assessee's Explanations and Objections:
The assessee argued that he was seriously ill, had no taxable income, and had no direct interest in the company involved in the transaction. The Tribunal found these explanations insufficient to rebut the presumption of payment. The change in shareholding and the timing of possession transfer supported the inference of payment. The Tribunal clarified that the absence of direct interest in the company did not negate the applicability of Sections 69/69A, as the payment could have been made on behalf of the company by the assessee.

5. Procedural Fairness and Right to Cross-Examination:
The assessee contended that he was not provided with the statement of the Ajanis for cross-examination. The Tribunal found this objection meritless, as the addition was based on the Note, not on any statement. The Tribunal noted that the assessee had not requested cross-examination during the assessment proceedings and had not provided any substantial representation to the Assessing Officer (AO).

6. Reassessment and Burden of Proof:
The Tribunal concluded that while the Revenue had a strong prima facie case, the assessee had not discharged the burden of proof under Sections 69/69A. However, considering the assessee's critical health condition, the Tribunal decided to vacate the impugned order and remand the matter back to the AO. The AO was directed to allow the assessee an opportunity to prove his case and frame the assessment afresh, considering all objections raised by the assessee.

Conclusion:
The Tribunal allowed the Revenue's appeal for statistical purposes and remanded the matter to the AO for reassessment. The Tribunal emphasized that its findings were based on the material on record and were not final, leaving the AO to make a fresh determination based on the evidence presented during the reassessment proceedings.

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