2021 (2) TMI 741 - AT - Income Tax

Income from undisclosed sources - money deposited in the bank account - HELD THAT - It is clear from the orders of the revenue authorities that they not made any reference to the documentary evidence filed by the assessee. The case of the Revenue appears to be that M/s. Sneha International was rotating cash by transferring funds to various entities. M/s. Sneha International received cash and thereafter transfered funds to M/s. Sherawali Corporation and M/s. Venkata Industries who in turn transferred funds to the Assessee in the form of RTGS bank Transfer. The claim of the Assessee was that the receipts by the Assessee from the aforesaid two parties was for sale of shares of a company by name Mag Impex Ltd., was not disbelieved either by the AO or the CIT(A). As far as the assessee is concerned, he has filed confirmation of Sherawali Corporation and Venkata Industries. CIT(A) has ignored this confirmation on the ground that the signature of the confirming parties were barely visible. The address of the confirming parties are very much available in the confirmation and if any doubt persisted on the veracity of the confirmation, then the proper course would have been to issue summons to the confirming parties to find out the truth or otherwise of the transactions on sale of shares on account of which monies were received by the assessee through banking channels. CIT(A) has confirmed the addition made by AO ignoring the evidence available on record. In my view the evidence filed by the assessee satisfactorily explains the credits in question and the impugned addition has been made ignoring the material on record on the basis of surmises and conjectures. There is an allegation that it is Assessee s money which went to Sneha International and that was deposited by Snehal International in a bank account and from that bank account funds were transferred to M/S.Sherwali Corporation and M/S.Venkata Industries, but there is no evidence to substantiate such allegation. Assessee has produced material evidence to show that the sum in question was received on account of sale of shares and no evidence has been brought on record to counter the plea of the assessee. No such evidence has been brought on record in the present case except to make an allegation that Sneha International was involved in rotating cash and the bank transactions in question had been made by Sneha International in favour of M/S.Sherwali Corporation and M/S.Venkata Industries after depositing such cash in their bank account. The learned Counsel has rightly placed reliance on the decision in the case of Orissa Coporation Pvt. Ltd., 1986 (3) TMI 3 - SUPREME COURT and case of ACIT Vs. Hanuman Agarwal 1983 (9) TMI 25 - PATNA HIGH COURT for the proposition that without issuing summons under section 131 of the Act to a party who filed confirmation, no adverse inference can be drawn by the AO - Appeal by the assessee is allowed.

Summary

Issues:
Addition of ?29 lakhs as income from undisclosed sources based on bank deposits.

Analysis:
The case involved an appeal by the assessee against the order of CIT(A)-6, Bengaluru, related to the Assessment Year 2010-11. The primary issue for consideration was the addition of ?29 lakhs by the Assessing Officer (AO) as income from undisclosed sources, based on money deposited in the bank account of the assessee. The assessee, a real estate company, received funds through RTGS transactions from two entities, claiming it was for the sale of shares of a company named Mag Impex Pvt. Ltd. The AO, however, made the addition of ?29 lakhs, alleging that cash was deposited in the bank account and then transferred to other entities. The CIT(A) upheld the AO's decision, citing suspicious transactions reported by the Investigation Wing Kolkata involving the entities from which the funds were received. The CIT(A) dismissed the appeal, stating that the confirmation documents provided by the assessee were insufficient. The Tribunal noted that the revenue authorities did not consider the documentary evidence submitted by the assessee. The Tribunal found that the confirmation documents provided by the assessee were valid and that the addition made by the AO and confirmed by the CIT(A) was based on conjecture and surmises. The Tribunal emphasized the need for proper verification and the issuance of summons to confirming parties before making adverse inferences. Relying on legal precedents, the Tribunal concluded that the addition of ?29 lakhs should be deleted, and consequently, the appeal by the assessee was allowed.

In conclusion, the Tribunal overturned the decision of the CIT(A) and directed the deletion of the addition of ?29 lakhs as income from undisclosed sources. The Tribunal emphasized the importance of considering documentary evidence and conducting proper verification before making additions based on suspicions. The Tribunal highlighted the necessity of issuing summons to confirming parties to ascertain the veracity of transactions. The Tribunal's decision was influenced by legal precedents emphasizing the need for substantive evidence to support allegations of undisclosed income.