2017 (5) TMI 471 - AT - Income Tax

Rightful owner of the money found deposited in the bank accounts - survey under section 133A - Held that - We could see variance in the amount brought to tax in the hands of Shri Naresh Agarwal and the assessee company, the reason is attributed, to some extent, to the fact that the Assessing officer has distributed the total amount of ₹ 3,41,99,953 among three companies including the assessee company. The fact remains that the deposits found deposited in the same bank accounts have been brought to tax in hands of Shri Naresh Agarwal and the assessee company. On perusal of the assessment orders, we find that there existed an ambiguity to determine the person to whom the deposits and the resultant income rightfully belongs. We, therefore, donot find anything wrong in the action of the Revenue authorities in bringing to tax the same amount in the hands of Shri Naresh Agarwal and the assessee company as there exist an ambiguity or doubt as to the rightfully owner of the money found deposited in the bank accounts. Rightful owner of the money so found deposited in the bank accounts and who should be finally assessed to tax in respect of said bank deposits - Held that - The records of transaction of the bank accounts basis which the AO has determined the assessee s company tax liability is a critical piece of evidence which can support and corroborate the statements so recorded. It is equally important to know the contents of these documents and how the AO has established the necessary nexus with the assessee company. Unfortunately, the records and paperbook submitted before us is silent on this and in absence of the same, we are unable to take a view in the matter solely basis the statements so recorded.Further, the ld AR has raised various contentions (as noted above) in terms of inconsistency in the statements of Shri Naresh Agarwal, the absence of nexus with the assessee company, the locus standi of Shri Sharad Heda and how the same cannot be relied upon and held against the assessee. In our view, what is relevant is that the statements should be read as a whole and any inconsistencies should be examined. Further independent investigation be carried out by the AO to determine the necessary nexus with the assessee company with the amounts so deposited in the bank accounts and the locus standi of shri Sharad Heda, the relationship and linkage with the promoters/directors and in the affairs of the assessee company before a final view is taken in the matter. In our view, there is not enough material on record for us to take a view in the matter and the matter deserves to be set-aside to the file of the ld CIT(A) to examine the same afresh. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Confirmation of additions of ?28,71,656/-.
2. Estimation of sales and Net Profit (N.P.) rate.

Detailed Analysis:

1. Confirmation of Additions of ?28,71,656/-:
The assessee contested the confirmation of additions by the Ld. CIT(A), Ajmer, arguing that the appellant company did not transact any business during the year, and the onus on the Department was not discharged. The Department's case was based on the survey conducted under section 133A at the premises of Shri Naresh Kumar Agarwal and Smt. Kiran Agarwal, where it was found that huge cash deposits in their bank accounts were allegedly linked to unaccounted sales by marble traders, including the appellant. The AO concluded that the assessee received ?3,41,99,953/- through the bank accounts of Shri Naresh Agarwal and his family, with ?1,13,99,984/- attributed to the assessee as undisclosed sales. The Ld. CIT(A) confirmed the addition, citing the evidence of transactions and the statements of Shri Naresh Agarwal, who admitted to facilitating unaccounted sales for the Heda Group.

2. Estimation of Sales and N.P. Rate:
The AO estimated the sales at ?1,13,99,984/- and applied an average G.P. rate of 25.19% based on the G.P. rates of sister concerns M/s Shobha Marbles and M/s Shree Asharam Bapu Marbles. This resulted in an additional income of ?28,71,656/- being added to the total income of the assessee. The assessee argued that it had no trading or manufacturing activity during the year and that the statements of Shri Naresh Agarwal were inconsistent and unreliable. The assessee also contended that the assessment was based on assumptions and presumptions without independent evidence.

Judgment Analysis:
The Tribunal noted that the fundamental issue was whether the amounts found deposited in the bank accounts of Shri Naresh Agarwal and Smt. Kiran Agarwal could be taxed twice, once in their hands and again in the hands of the assessee company. The Tribunal referenced the Supreme Court's decision in Lalji Haridas v. Income-tax officer, which allowed for assessment on two persons to protect the Revenue's interest where there is ambiguity about the rightful owner of the income.

The Tribunal found that the Revenue's case relied heavily on the statements of Shri Naresh Agarwal and the details of transactions provided by him. However, there was insufficient material on record to conclusively establish the nexus between the deposits and the assessee company. The Tribunal emphasized the need for independent investigation and corroboration of the statements with documentary evidence.

The Tribunal remanded the matter back to the CIT(A) for a fresh examination, directing that the assessee provide detailed explanations and corroborate the transactions. The CIT(A) was instructed to call for the records from the Investigation Wing and confront the assessee with the details, allowing for cross-examination and verification of the beneficiaries.

Conclusion:
The Tribunal set aside the matter to the CIT(A) for a fresh examination, emphasizing the need for a thorough investigation and proper opportunity for the assessee to present its case. The appeal was allowed for statistical purposes, and the Tribunal directed that the matter be re-examined in light of the detailed directions provided.