2023 (4) TMI 693 - AT - Income Tax

Addition u/s 69A r.w.s 115BBE - accommodation entry receipts - CIT(A) concluded by holding that since the transactions are not in the name of the assessee, the assessee cannot claim the benefits arising from such transactions - HELD THAT - Provisions of section 69A can be invoked only when the assessee is found to be owner of any money, bullion, jewellery or any other valuable article and such money, bullion, jewellery or valuable article is not found recorded in the books of account and the assessee offers no explanation about the nature and source of acquisition of the said asset or, explanation offered is not satisfactory in the opinion of the Assessing Officer, then such asset is deemed to be the income of the F.Y in which such asset is found. A bare perusal of the assessment order clearly shows that no money, bullion, jewellery or valuable article was found during search conducted on 07.04.2017 which is F.Y. 2017-18 relevant to A.Y 2018- 19. Then, we fail to understand how the provisions of section 69A have been invoked for A.Y 2015-16 which is under consideration because u/s 69A of the Act, addition can be made in the year in which asset etc is found and since no such asset was found during the course of search, section 69A of the Act cannot be applied to the alleged loss. The transaction sheet extracted in the body of the assessment order shows that it pertained to M/s Rajlaxmi Commodities Pvt Ltd and not to the assessee. Therefore, if any person needs to be questioned about the impugned loss is M/s Rajlaxmi Commodities Pvt Ltd and not the assessee. The entire addition has been made merely on surmises and conjectures and hypothesis. Moreover, we fail to understand how the statement recorded on 29.12.2015 is relevant for the search conducted on 07.04.2017. In fact, in his statement itself, in reply to question Nos. 22 and 24, Shri Naresh Aggarwal has categorically stated that all transactions were recorded in the books of account of M/s Rajlaxmi Commodities Pvt Ltd and in reply to Question Nos. 25 and 32, Shri Naresh Aggarwal has stated that profit and loss of USR ID 3 pertained to M/s Rajlaxmi Commodities Pvt Ltd. The undisputed fact is that income from the same transaction USR 3 for A.Y under consideration has been accepted by the department as income of M/s Rajlaxmi Commodities Pvt Ltd. There appears to be no motive behind the allegation that the assessee Shri Sanjay Singhal has taken accommodation entries to reduce his taxable income as he has never claimed any loss in his return of income. The undisputed fact is also that transactions are not in the name of the assessee and therefore, the assessee cannot claim benefits arising from such transactions in his return of income. Decided against revenue.

Summary

Issues Involved:
The judgment involves issues related to the reliability of statements, discrepancies in transactions, application of section 69A of the Income-tax Act, 1961, and the burden of proof in a tax assessment.

Reliability of Statements:
The Revenue challenged the decision of the CIT(A) regarding the reliability of the statement of Sh. Naresh Kumar Aggarwal, Director of M/s Rajlaxmi Commodities. The CIT(A) found the statement to be inconsistent and contradictory in parts, leading to doubts about its reliability. The Revenue contended that the value of physical transactions and those on the derivatives market did not match up, which was a common occurrence. However, the CIT(A) dismissed these arguments and emphasized that the profit or loss in the trades was settled by actual movement of funds.

Application of Section 69A:
The Assessing Officer made substantial additions in the hands of Sh. Sanjay Singhal based on alleged unaccounted transactions. The CIT(A) examined the provisions of section 69A, which deal with unexplained money or assets. The CIT(A) pointed out that no incriminating material was found during the search operation, and therefore, the application of section 69A for the relevant assessment year was questioned. The CIT(A) concluded that the additions made by the Assessing Officer under section 69A were not justified.

Burden of Proof in Tax Assessment:
The entire assessment was primarily based on the statement of Sh. Naresh Aggarwal, recorded two years prior to the search operation. The Tribunal noted that there was a lack of evidence linking the alleged transactions to the assessee, Sh. Sanjay Singhal. The Tribunal observed that the additions were made on conjectures and hypotheses without concrete proof. The Tribunal emphasized that since the transactions were not in the name of the assessee, he could not claim benefits or be held liable for them. Ultimately, the Tribunal upheld the decision of the CIT(A) and dismissed the appeals of the Revenue.

This judgment highlights the importance of reliable evidence, the application of relevant legal provisions, and the burden of proof in tax assessments. The Tribunal's decision underscores the necessity for concrete evidence to support allegations and the significance of ensuring that assessments are based on factual and relevant information.