2020 (10) TMI 744 - AT - Income Tax

Assessment concluded based on a news article - Concealment of material facts relevant for both disclosure as per Income-tax Act and the Accounting Standards as well as during the course of assessment proceedings - A.O. had alleged that the assessee has received an amount of USD 30 million as proceeds for sale of urbantouch.com The shareholders of the assessee had sold their shares in the Company in the month of August 2012 and the domain name was sold by the assessee in March 2013 - HELD THAT - In the instant case as well, the article printed may have been to provide information with respect to the fact that the shareholders of the assessee are selling the shares held by them. However, the same has been misunderstood by the A.O. and an adjustment to that effect has been made in the subject assessment order. It would also be pertinent to note that the copy of the article which was relied upon by the A.O. was not provided to the assessee during the course of assessment proceedings. Accordingly, the information contained in the news article was not ratified by the assessee. Additionally a letter was written by assessee company objecting to the material published in the article which was the basis, on which the A.O. has passed the assessment order. In this letter to the Editor of Economic Times, the assessee states that the article per se did not speak about any amount being received by the assessee and only speaks of consideration received by the shareholders. Given the same, no specific action was taken by the assessee or any of its Directors at the time the news article was published. Transaction of sale of shares by the investors is distinct and separate from the sale of shares undertaken in August, 2012. Neither the assessee nor the investors have received the said amount of USD 30 million. The amount has been reported in the news articles relied upon by the A.O. without carrying out adequate due diligence and without being ratified by the assessee or the investors. We are of the view that the assessment in the instant case has been concluded based on a news article which does not in any case constitute adequate material on record. Accordingly, addition made by the A.O., has been rightly deleted by the CIT(A). - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of CIT(A)'s relief of ?152,31,66,000/-.
2. Validity of the A.O.'s reliance on news articles for assessment.
3. Accuracy of financial statements and submissions by the assessee.
4. Alleged concealment of material facts by the assessee.

Issue-Wise Detailed Analysis:

1. Legitimacy of CIT(A)'s Relief of ?152,31,66,000/-:
The appeal revolves around the CIT(A)'s decision to grant relief of ?152,31,66,000/- to the assessee, which the A.O. had added as undisclosed income under 'Capital Gains'. The CIT(A) concluded that the A.O.'s reliance on a news article, which reported that the assessee received USD 30 million from the sale of Urban Touch, was not substantiated with corroborative evidence. The CIT(A) found that the A.O. did not verify the authenticity of the news report and had no concrete evidence to support the claim. Consequently, the CIT(A) deemed the addition unjustified and allowed the appeal, deleting the addition.

2. Validity of the A.O.'s Reliance on News Articles for Assessment:
The A.O. based the assessment on a news article, which claimed that the assessee received USD 30 million from the sale of Urban Touch. The CIT(A) and the Tribunal emphasized that judicial notice cannot be taken of facts stated in a news item as they are hearsay and inadmissible unless proved by evidence. The Tribunal cited the Supreme Court's judgment in Laxmi Raj Shetty vs. State of Tamil Nadu, which held that a newspaper report is hearsay evidence and not sufficient to establish facts. The Tribunal concluded that the A.O.'s reliance on the news article without verifying its veracity was unjustified.

3. Accuracy of Financial Statements and Submissions by the Assessee:
The A.O. pointed out discrepancies in the audited balance sheet and other financial statements submitted by the assessee. However, the CIT(A) found that the A.O. did not provide sufficient evidence to substantiate these discrepancies. The Tribunal noted that the assessee had submitted comprehensive financial records, including audit financial statements, which were not adequately considered by the A.O. The Tribunal upheld the CIT(A)'s finding that the A.O.'s assessment based on unverified news articles was not justified.

4. Alleged Concealment of Material Facts by the Assessee:
The A.O. accused the assessee of concealing material facts during the assessment proceedings. However, the CIT(A) and the Tribunal found that the A.O. did not provide concrete evidence to support this claim. The Tribunal noted that the assessee had disclosed all relevant transactions, including the sale of shares and domain name, and had provided supporting documents. The Tribunal concluded that the A.O.'s allegations of concealment were unfounded and that the addition of ?152,31,66,000/- was rightly deleted by the CIT(A).

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the addition of ?152,31,66,000/- made by the A.O. The Tribunal emphasized that the assessment based on unverified news articles was not justified and that the assessee had provided adequate financial records and disclosures. The Tribunal's decision was pronounced in open court on 9th September 2020.