2016 (4) TMI 635 - AT - Income Tax

Income from unexplained /undisclosed sources - Held that - It is a classical case where various additions have been made by the AO without proper application of mind and has no distant connection with the material on record. We find that the third party transactions were added in the hands of the assessee without without any basis or material and thus, the AO framed the assessment in a hypothetical way putting the assessee to enormous harassment and inconvenience . Similarly, the ld. CIT(A) confirmed the addition without looking into the merits and facts of the cases which are very clear and apparent from the records produced. Therefore, in view of these facts, the additions on account of unexplained/undisclosed income are ordered to be deleted by reversing the order of First Appellate Authority. AO is directed accordingly. - Decided in favour of assessee

Summary

Issues Involved:
Confirmation of addition of income from unexplained/undisclosed sources.

Analysis:
The appeal was against the confirmation of additions of specific amounts as income from unexplained/undisclosed sources by the Commissioner of Income Tax (Appeals) for the assessment year 2007-08. The assessee, a proprietor of a trading business, faced scrutiny due to transactions not fully confirmed by parties involved. The Assessing Officer (AO) made additions based on lack of verification of loan creditors' identity and creditworthiness. The Commissioner upheld the additions, noting the lack of documentary evidence supporting the transactions claimed by the assessee.

The assessee argued that the AO and the Commissioner did not consider the facts and records presented. Detailed submissions were made regarding specific transactions, including amounts received from various parties, supported by confirmation letters, bank statements, and ledger accounts. The assessee contended that the additions were made erroneously, as the transactions were legitimate and verifiable through documentation provided.

Upon review, the Tribunal found that the additions lacked a factual basis and were made without proper assessment or consideration of the evidence presented. The Tribunal observed that the additions caused undue harassment to the assessee and were unjustified. Consequently, the Tribunal ordered the deletion of the additions to the income, reversing the decision of the Commissioner. The Tribunal directed the Assessing Officer to act accordingly.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the lack of merit in the additions made by the AO and upheld by the Commissioner. The judgment highlighted the importance of a thorough and evidence-based assessment in such cases to prevent unwarranted hardship to taxpayers.