2023 (3) TMI 1147 - AT - Income Tax

Reopening of assessment u/s 147 - addition of other receipts u/s. 68 r.w.s. 115 BBE - During course of search in the inquiry conducted it was gathered that that Dineshchandra R. Agarwal Infracon Private Limited has generated unaccounted money by way of booking bogus Sub-contractors Expenses and assessee is one of the entity who has received amount against expenses incurred by such concern as subcontractor expenses - HELD THAT - No discussion in the assessment order about the tangible material or statement the addition made. It is based on the general information received the assessment was re-opened. Assessee demonstrated before us that he has discharged primary onus casted upon him and has proved the performance of the work and the same is supported by the tangible evidence placed on record. The records so produced was not disputed but also not tested for its correctness and in the absence of these exercise the documents placed on record cannot be placed a side and the decision be made merely based on some information on which there is no basis discussed or confronted to the assessee. Allegation of work that is disputed by the revenue considering that the same are bogus in nature cannot be considered so because the assessee has demonstrated before us with the work order issued by M/s. Dineshchandra R. Agarwal Infracon Private Limited wherein the address of the work is mentioned as Painting Runway Airfoce Station, Nal Site Bikaner and work at Runway resurfacing project AT Nal AF station Bikaner . Both these work were required to be carried out at the Nation pride military organization and the entry and attention are strictly monitored and therefore, there is no reason to be believe that though M/s. Dineshchandra R. Agarwal Infracon Private Limited may be indulged in booking for some bogus expenditure but in this case the primary material does not suggest so and in spite of the relevant material placed by the assessee the revenue did not prove that the work has not been carried out - allegation made by the revenue is general in nature and the addition of the whole of the receipt is not warranted. No hesitation to vacate the addition made by the ld. AO for an amount as the assessee has already declared profit @ 8 % of the receipt as it evident from the finding of the ld. AO. In terms of these observations the ground no. 2, 3 and 4 are allowed.

Summary

Issues Involved:
1. Reopening of the case under Section 148 of the Income Tax Act, 1961.
2. Addition of Rs. 18,43,234 under Section 68 of the Income Tax Act, 1961.
3. Lack of independent enquiry before making the addition.
4. Denial of opportunity for cross-examination and access to relevant documents.

Summary:

Reopening Under Section 148:
The assessee challenged the reopening of the case under Section 148, arguing that the Assessing Officer (AO) relied solely on information from the Joint Commissioner of Income Tax, without independent verification or analysis of the documents and statements from the search on M/s Dineshchandra R. Agarwal Infracon Pvt. Ltd. (DRPL). The AO did not provide the assessee with copies of these documents or statements, leading to a "borrowed satisfaction" rather than an independent belief of income escapement. The Tribunal noted that the reopening was based on general information without specific tangible material and thus deemed the reopening to be invalid.

Addition Under Section 68:
The AO added Rs. 18,43,234 to the assessee's income, treating it as unexplained cash credits under Section 68, based on the information that DRPL had generated unaccounted money through bogus sub-contractor expenses. The assessee argued that the income was declared under Section 44AD on a presumptive basis and provided work orders, invoices, ledger accounts, and bank statements as evidence. The Tribunal found that the AO did not conduct any independent enquiry to verify the genuineness of the work performed by the assessee and relied solely on the information from the search.

Lack of Independent Enquiry:
The Tribunal observed that the AO did not verify the work order with the relevant military organization where the work was allegedly performed. The CIT(A) also failed to consider the assessee's submissions and dismissed the appeal without addressing the lack of independent enquiry. The Tribunal emphasized that the AO should have corroborated the information received with independent evidence.

Denial of Cross-Examination and Access to Documents:
The assessee contended that the AO did not provide an opportunity for cross-examination or access to the relevant documents relied upon for making the addition. The Tribunal agreed that the assessee should have been given these opportunities, and the failure to do so breached the principles of natural justice.

Conclusion:
The Tribunal vacated the addition of Rs. 18,43,234, noting that the assessee had already declared profit at 8% of the receipts, which was reasonable for a civil contractor. The Tribunal allowed the appeal on merits, rendering the challenge to the reopening of the assessment moot. The appeal was thus allowed in favor of the assessee.