2022 (1) TMI 730 - AT - Income Tax

Reopening of assessment u/s 147 - Addition u/s 69 on account of unexplained investment - HELD THAT - We note that Ld CIT(A) observed that assessee has objected to the reopening of assessment. But Ld. CIT(A) did not accept the contention of the assessee. The ld CIT(A) noticed that on the basis of copy of FIR A.O. had valid reason to believe that income has escaped assessment. However in the FIR the year of payment was not mentioned. Therefore AO had no option but to reopen the assessment. Hence the A.O. s action for reopening the assessment was upheld by the Ld.CIT(A). On merits Ld. CIT(A) noted that so far as bringing the amount mentioned in the FIR is concerned this cannot be taxed in the assessment year in question as the payment has been made by the assessee during the previous year 2005-06 relevant to A.Y. 2006-07. This fact was brought to the notice of the A.O. during the assessment proceedings itself and the same has been mentioned by the. A.O - Therefore Ld. CIT(A) deleted the addition and also stated in his order that AO is free to take action to bring this amount under taxation in AY 2006-07 if he deems fit. Addition u/s 69 - unexplained investment - HELD THAT - It is a list of 104 persons from whom the assessee has claimed to have received advances amounting 1, 85, 00, 000. This list is not accompanied by any details; the said list is of no evidentiary value towards explaining of the sources of the said 1, 85, 00, 000/-. Hence the Id. AO is correct in his conclusion that the said amount claimed to be advanced by assessee for purchase of land is unexplained investment. Even in the appeal proceedings the AR has been able to file affidavits in only 29 out of said 104 lenders. There is no corroborative evidence/details to support the assertion made in the said affidavits. AR has not given copy of bank accounts or the income tax details of the said lenders. It is a trite law that in case of unsecured loans in books of account the primary onus is on the assessee to establish the identity and creditworthiness of lender and genuineness of transaction. However in the present case the assessee has not furnished only details to establish the above in spite of opportunities provided by AO. So the assessee failed to discharge the onus of proof the addition u/s 69 on account of unexplained investments is confirmed. - Decided against assessee.

Summary

Issues Involved:
1. Reopening of assessment for AY 2005-06 and AY 2006-07.
2. Addition of ?1,85,00,000 as unexplained investment under section 69 of the Income Tax Act, 1961.
3. Admission of additional evidence at the appellate stage.

Detailed Analysis:

1. Reopening of Assessment for AY 2005-06 and AY 2006-07:
The Revenue appealed against the deletion of ?1,85,00,000 by the CIT(A) for AY 2005-06. The CIT(A) upheld the reopening of assessment by the AO based on a copy of an FIR, which indicated that income had escaped assessment. The AO had valid reasons to believe that the income had escaped assessment. However, the FIR did not specify the year of payment, leading to the reopening of the assessment. The CIT(A) concluded that the amount mentioned in the FIR could not be taxed in AY 2005-06 as the payment was made during the previous year 2005-06, relevant to AY 2006-07. Consequently, the CIT(A) deleted the addition for AY 2005-06 but allowed the AO to take action for AY 2006-07 if deemed fit.

For AY 2006-07, the assessee contended that the reopening of the assessment was wrongful. The AO reopened the assessment based on the FIR and subsequent investigations, which revealed that the advance of ?1,85,00,000 was made during AY 2006-07. The CIT(A) found no irregularity in the procedure followed by the AO in reopening the assessment and dismissed the assessee's appeal.

2. Addition of ?1,85,00,000 as Unexplained Investment under Section 69:
For AY 2005-06, the CIT(A) deleted the addition of ?1,85,00,000 made by the AO under section 69, stating that the payment was made during the previous year 2005-06, relevant to AY 2006-07. The AO was directed to take appropriate action for AY 2006-07.

For AY 2006-07, the AO treated the amount of ?1,85,00,000 as unexplained investment under section 69 due to the assessee's failure to explain the source of the advance. The CIT(A) upheld this addition, noting that the assessee did not provide sufficient evidence to support the claim that the advances were received from 104 persons. The affidavits submitted by the assessee were not accompanied by corroborative evidence such as bank accounts or income tax details of the lenders. Therefore, the addition under section 69 was confirmed.

3. Admission of Additional Evidence at the Appellate Stage:
The assessee submitted additional evidence in the form of affidavits from 29 out of 104 persons during the appellate stage. The CIT(A) refused to admit these affidavits as additional evidence, citing Rule 46A of the Income Tax Rules, which allows additional evidence only under specific conditions. The CIT(A) noted that the assessee had ample time to collect and submit the evidence during the assessment stage but failed to do so. Consequently, the additional evidence was not admitted, and the addition under section 69 was upheld.

Conclusion:
The appeals filed by the Revenue for AY 2005-06 and the cross-objections filed by the assessee were dismissed. The appeal filed by the assessee for AY 2006-07 was also dismissed. The Tribunal confirmed the orders of the CIT(A) and upheld the addition of ?1,85,00,000 as unexplained investment under section 69 for AY 2006-07. The reopening of assessments for both AY 2005-06 and AY 2006-07 was found to be valid and in accordance with the law.