2020 (5) TMI 228 - AT - Income Tax

Reopening of assessment - reason to believe or reason to suspect - addition in hands of the assessee on the basis of some entries in the books of third persons as per noting found in the loose papers - additions were made as per informations were received from Investigation Wing on the basis of TEP (Tax Evasion petition) and the noting found in the loose papers wherein the name of the assessee is mentioned and against the name of the assessee 1.87 is written but whether it is an amount in thousand, Lakhs or Crores nothing is evident from that noting - HELD THAT - Revenue Authorities could not bring any other corroborative evidences to substantiate the said noting in the loose paper. The entire addition has been based on this single noting found in this loose paper without any corroborative evidences. Even at the time of hearing, the Ld. DR could not place on record any relevant document, evidences in order to substantiate and corroborate the addition made on the basis of that entry in the loose paper. Tribunal in the case of Pradeep Amrutlal Runawal Vs. TRO 2015 (12) TMI 958 - ITAT PUNE and Addl. CIT Vs. Miss Lata Mangeshkar 1973 (6) TMI 13 - BOMBAY HIGH COURT wherein it is a settled legal position that it is not correct for the Assessing Officer to just rely on the noting found on the loose paper and make addition in the hands of the assessee if there is no corroborative evidences or materials substantiating to that effect. Noting in the loose paper on the basis of which the AO reopened the assessment did not contain any signature of the assessee and it is also not established whether at all any amount was received by the assessee and most important the Department could not bring on record any other corroborative evidences in support of the addition made - Decided in favour of assessee.

Summary

Issues:
Validity of reopening u/s. 148 and consequential reassessment order, addition of ?1,87,00,000 in the hands of the assessee based on transfer of tenancy rights, sufficiency of evidence for the addition, lack of corroborative evidence for the addition.

Analysis:

Issue 1: Validity of Reopening u/s. 148 and Consequential Reassessment Order
The assessee challenged the validity of the reopening under section 148 and the subsequent reassessment order. The contention was that the reopening was based on a reason to suspect, making the entire proceedings, including the order passed under section 147, invalid in law. The tribunal noted that the assessee did not press Ground No.1 & 2 during the hearing, leading to their dismissal as "not pressed."

Issue 2: Addition of ?1,87,00,000 Based on Transfer of Tenancy Rights
The primary issue revolved around the addition of ?1,87,00,000 in the hands of the assessee concerning the transfer of tenancy rights in a shop. The Assessing Officer made this addition based on information received from a Tax Evasion Petition (TEP) and a loose paper noting cash payment to the legal heir of the previous tenant. The assessee argued that the addition lacked sufficient evidence and that the loose paper did not specify the amount clearly. The tribunal agreed that the addition was made solely on the basis of the loose paper without corroborative evidence, leading to the direction to delete the addition from the assessee's hands.

Issue 3: Sufficiency of Evidence for the Addition
The tribunal emphasized the importance of corroborative evidence in making additions to an assessee's income. It was noted that the loose paper used as the basis for the addition did not contain the assessee's signature or clear details regarding the amount mentioned. The tribunal highlighted that the Revenue Authorities failed to provide any other supporting evidence to substantiate the addition, leading to the decision to set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition.

In conclusion, the tribunal partially allowed the assessee's appeal, emphasizing the necessity of corroborative evidence and proper documentation to support additions to an assessee's income. The judgment highlighted the importance of adhering to legal principles and ensuring that additions are based on concrete evidence rather than mere suspicion or incomplete information.