2021 (11) TMI 511 - HC - Income Tax

Unexplained investments - second round of litigation - whether Tribunal is right in law in deleting the addition made by assessing authority with regard to unexplained investments by erroneous holding that the assessing authority has not furnished its report after verifying the recipient even when the onus/burden is on the assessee to prove the veracity of evidence found against him in the course of search as per section 69C of the Act and without considering the contents of seized materials? - HELD THAT - It is not in dispute that in the first round prior to remand made by the Tribunal, the assessing officer has recorded the statements of Mr.J.Das. He Mr.J.Das had categorically stated that he has received only ₹ 2,00,000/- from the assessee. This has been reiterated by the Commissioner of Income Tax Appeals . However, the Commissioner of Income Tax Appeals proceeded to sustain the addition of ₹ 2,00,000/- deleting the addition of ₹ 18,00,000/-. The statement of Mr.J.Dass being recorded by the assessing officer, now it cannot be contended by the Revenue that no particulars of Mr.J.Dass was available with the assessing officer to comply with the directions issued by the Tribunal. Thus, it was mandatory for the assessing officer to comply with the directions of the Tribunal. The ground of the Revenue that Mr.J.Das had expired and his particulars were not available with the Department to verify whether Mr.J.Das has been assessed for ₹ 20,00,000/- or the department had accepted that he had received only ₹ 2,00,000/- could not be done, is a lame excuse and cannot be acceded to. It is well settled that the finding given by the Tribunal on pure questions of facts is not exigible to further adjudication while considering the matter relating to substantial question of law. No perversity is found in the findings recorded by the Tribunal. - Decided against revenue.

Summary

Issues:
1. Challenge to order under Section 260-A of the Income Tax Act, 1961 by Revenue.
2. Deletion of addition made by assessing authority for unexplained investments and bogus expenditure.
3. Discrepancies in verifying recipient's details.
4. Compliance with Tribunal's directions by Assessing Officer.
5. Burden of proof on the assessee regarding unexplained income.

The High Court of Karnataka heard an appeal filed by the Revenue challenging the order passed by the Income Tax Appellate Tribunal related to assessment years 1991-92 to 2001-02. The substantial questions of law raised were regarding the deletion of additions made by the assessing authority for unexplained investments and bogus expenditure. The Tribunal was accused of erroneous deletion without considering seized materials and failure to verify recipient details. The case involved a real estate company subjected to a search action resulting in additions to undisclosed income. The Commissioner of Income Tax [Appeals] partly allowed the appeal, leading to further appeals by both the assessee and the Department. The Tribunal remanded the matter to the Assessing Officer for fresh adjudication based on the order of the sister concern.

After directions from the Tribunal, the Assessing Officer confirmed additions related to unexplained investments and bogus expenditure on lands, modifying the unexplained expenditure on Janson Mall. The subsequent appeals by the assessee and the Revenue led to conflicting decisions, with the Tribunal favoring the assessee. The Revenue argued that the burden to prove the recipient's details was on the assessee, emphasizing non-compliance with Section 69C of the Act. The assessee contended that the Assessing Officer failed to verify recipient details before passing the re-assessment order, leading to the deletion of a significant amount from the addition. The Tribunal's findings were based on factual aspects and statements of the recipient, supporting the assessee's claims.

The Court analyzed the submissions of both parties and the material on record. It noted that the Assessing Officer had recorded the recipient's statements in the first round, emphasizing the need to verify the recipient's assessments as directed by the Tribunal. However, the Assessing Officer failed to comply with these directions, leading to discrepancies in the reassessment order. The Commissioner of Income Tax [Appeals] highlighted the non-compliance and lack of verification, supporting the Tribunal's decision to delete a substantial portion of the addition. The Court dismissed the Revenue's arguments regarding the unavailability of recipient details and upheld the Tribunal's findings, emphasizing the importance of complying with Tribunal directions and verifying factual aspects before making additions to undisclosed income.

In conclusion, the Court ruled in favor of the assessee, dismissing the appeal by the Revenue and upholding the Tribunal's decision regarding the unexplained investments in Janson Mall. The judgment highlighted the significance of verifying recipient details and complying with Tribunal directions in assessing undisclosed income, emphasizing the burden of proof on the assessee in such cases.