2023 (3) TMI 1347 - AT - Income Tax

Unexplained payment - Rejection of books of accounts - CIT (Appeals) as well as the Assessing Authority fails to cross-examine the deponent of the affidavits submitted before the CIT(A) - HELD THAT - When the assessee stated on oath by way of an affidavit, the Assessing Authority ought to have cross-examined and also made further inquiry with regard to the correctness of the contents of such affidavit. When the Assessing Authority failed to avail this opportunity, Ld.CIT(A) ought to have deleted the entire additions. We therefore, allow Ground raised by the assessee and direct the AO to delete the remaining impugned addition. Appeal filed by the assessee is allowed.

Issues Involved:
1. Legality of the order passed by the Assessing Authority and sustained by the Commissioner of Income Tax (Appeals).
2. Failure to cross-examine the deponent of the affidavits submitted before the CIT(A).
3. Acceptance of submission and evidence submitted before CIT(A).
4. Legality of the addition made and sustained when the proof of payment was made in the preceding year.
5. Rejection of the entire amount explained without assigning any reason.
6. Legality of the reopening of assessment u/s 147/148 of IT Act.
7. Legality of charging interest.

Summary:

Issue 1: Legality of the Order
The Tribunal found that the assessee maintained books of accounts and submitted a balance sheet. The rejection of books of account without assigning any reason was deemed illegal. The Tribunal cited the case of DEPUTY COMMISSIONER OF INCOME TAX vs. MEWAR TEXTILESMILLS LTD., where it was held that without invoking s. 145(1) and pointing out defects, the book results cannot be ignored. The Tribunal confirmed that no addition is justified if the books of accounts are not rejected, referencing several cases including CIT vs. Maharaja Shree Umaid Mills Ltd. and CIT vs. Padamchand Ram Gopal.

Issue 2: Failure to Cross-examine the Deponent
The Tribunal noted that the affidavit submitted by the assessee was not cross-examined by the Assessing Officer (AO). Citing the Supreme Court judgment in M/s. Mehta Parekh & Co., it was held that the contents of the affidavit should be accepted if the deponent is not cross-examined. The Tribunal found that the addition was arbitrary and illegal as the affidavit was not contested.

Issue 3: Acceptance of Submission and Evidence
The Tribunal observed that the Commissioner of Income Tax (Appeals) ignored the binding nature of the Supreme Court judgment and the evidence submitted, including the balance sheet. The assessee's explanation was rejected without proper consideration, which was deemed incorrect.

Issue 4: Legality of the Addition
The Tribunal reiterated that the investment of the previous year cannot be treated as income of the subsequent year. The addition of Rs. 2,00,000 was sustained without any basis, and the assessee's explanation was not properly considered.

Issue 5: Rejection of the Entire Amount Explained
The Tribunal found that the explanation provided by the assessee regarding agricultural income and previous year's balance sheet was not given due consideration. The rejection of the entire amount without assigning any reason was deemed arbitrary.

Issue 6: Legality of Reopening Assessment u/s 147/148
The Tribunal did not specifically address this issue in the judgment provided.

Issue 7: Legality of Charging Interest
The Tribunal did not specifically address this issue in the judgment provided.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, directing the AO to delete the remaining impugned addition of Rs.2,00,000, emphasizing the need for cross-examination of affidavits and proper consideration of submitted evidence. The order was pronounced in the open Court on 24/03/2023.

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