2016 (10) TMI 352 - AT - Income Tax

Addition u/s 68 - disallowance for receiving bogus accommodation entries - Held that - It is a well settled law that addition cannot be made simply basing on some report like Report received from Investigation Wing etc. and when the assessee produces certain evidence, the onus lies on the AO to cause enquiries/ verification to demolish that evidence. However, in the present case no such attempt has been made by the AO and no enquiry or verification was ever done by him. Hence, Ld. CIT(A) has rightly deleted addition - Decided in favour of assessee.

Summary

Issues involved:
1. Deletion of addition under section 68 of the Income Tax Act
2. Deletion of addition under section 69 of the Income Tax Act
3. Proper enquiry by the Ld. CIT(A)
4. Validity of the Ld. CIT(A)'s order

Analysis:

1. The case involved an appeal by the Department and a cross objection by the Assessee against the Order dated 16.9.2015 of the Ld. CIT(A)-6, New Delhi for the assessment year 2005-06. The Department questioned the deletion of an addition of ?60,00,000 made under section 68 of the Income Tax Act, alleging receipt of bogus accommodation entries by the Assessee without discharging its onus. Similarly, the Department challenged the deletion of another ?60,000 addition under section 69 of the Act for commission paid. The Ld. CIT(A) had to determine if a proper enquiry was conducted before allowing the appeal and deleting the disallowance, as per the Hon'ble Jurisdictional High Court's guidelines in a previous case.

2. The Assessee's income tax return for the relevant year declared a loss and was accompanied by an audited statement of accounts. The Department issued notices at the wrong address, leading to a series of communication issues. Despite the Assessee's objections and submissions, the Assessing Officer proceeded with the reassessment, adding the disputed amounts. The Ld. CIT(A) later deleted these additions, prompting the Department's appeal to the Tribunal.

3. During the Tribunal proceedings, the Department did not appear, leading to an ex-parte decision in favor of the Assessee. The Assessee's counsel argued for upholding the Ld. CIT(A)'s order, emphasizing the lack of interference required. The Tribunal examined the Ld. CIT(A)'s detailed analysis of the case, which highlighted the lack of proper enquiry by the Assessing Officer. The Ld. CIT(A) relied on various precedents to support the deletion of additions, emphasizing the need for the AO to conduct thorough investigations before making additions based on suspicion alone.

4. Ultimately, the Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s order and the principles established by previous judgments. The Assessee's cross objection, being supportive of the Ld. CIT(A)'s decision, was also dismissed as a result. The Tribunal's decision was based on the lack of proper enquiry by the Assessing Officer and the Assessee's compliance with providing evidence, shifting the onus to the Department to verify the authenticity of the transactions in question.

This comprehensive analysis outlines the key issues, procedural history, arguments presented, and the final decision of the Tribunal in this tax appeal case.