2023 (9) TMI 1219 - AT - Income Tax

Scrutiny assessment - Addition u/s 68 - introduction of cash in Cash Book - assessee s claim of having received this amount as gifts from relatives was not accepted by AO - HELD THAT - The explanation of the assessee was disbelieved on the ground that the assessee had not furnished any evidence of receiving gifts from relatives as well as their sources of income, extent of agricultural holding, financial and status of her relatives, date and mode of receipt of gift to substantiate the genuineness of transactions and gift . From the available records, there is nothing to suggest that the Assessing Officer even asked the assessee to furnish these evidences/information /materials. Shortly after assessee s reply vide letter dated 14/12/2016, the Assessing Officer passed assessment order on 21/12/2016, taking adverse view against the assessee. Moreover, a total amount of Rs. 13,50,000/- received as gift, as claimed by the assessee, comes to an average of Rs. 4,50,000/- received from each donor. Whether having regard to facts and circumstances of the present case, this amount of Rs. 4,50,000/- is such that required the kind of rigorous and hot pursuit scrutiny by the Assessing Officer, which went as far as issue of summons to the assessee s relatives during remand to the Assessing Officer by the learned CIT(A); also deserves to be considered. Therefore, this is a fit case in which the Additional/ Joint Commissioner of Income Tax should play his role by issuing direction(s) u/s 144A of the IT Act to the Assessing Officer, giving due consideration to all relevant facts and circumstances. Therefore, AO is directed to make reference to learned Addl. CIT/Joint CIT u/s 144A and seek suitable directions (on whether the materials on record of the Assessing Officer are sufficient to accept the assessee s claim; and if not, the lines on which further investigation should be made) after the Assessing Officer starts fresh proceedings for passing denovo order in pursuance of aforesaid directions contained in foregoing paragraph (2.1) of this order. Both the Assessing Officer as well as Addl. CIT/Joint CIT are directed to view the entire matter with a fresh outlook without getting influenced by earlier orders of the Assessing Officer and the learned CIT(A).

Summary

Issues Involved:
1. Legality of the addition of Rs. 13,50,000/- by the Assessing Officer under section 68 of the Income Tax Act, 1961.
2. Adequacy of the opportunity provided to the assessee to present evidence and explanations.

Summary:

1. Legality of the Addition of Rs. 13,50,000/-:
The assessee's appeal challenged the addition of Rs. 13,50,000/- made by the Assessing Officer under section 68 of the Income Tax Act, 1961. The Assessing Officer rejected the assessee's explanation that the amount was received as gifts from relatives, citing a lack of evidence regarding the sources of income, agricultural holdings, and financial status of the relatives. The CIT(A) upheld this addition, stating that the assessee failed to produce the relatives for examination and did not comply with the summons issued under section 131 of the Act. The Tribunal found that the Assessing Officer did not provide sufficient opportunity to the assessee to furnish the required evidence and that the CIT(A) used adverse material without confronting the assessee, violating principles of natural justice. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the issue to the Assessing Officer for a fresh assessment, directing the Assessing Officer to seek directions from the Addl. CIT/Joint CIT under section 144A of the IT Act.

2. Adequacy of Opportunity Provided to the Assessee:
The Tribunal noted that the Assessing Officer failed to ask the assessee for specific evidence regarding the gifts and passed the assessment order shortly after receiving the assessee's explanation. The Tribunal emphasized that the Assessing Officer and CIT(A) did not consider whether the average amount of Rs. 4,50,000/- received from each donor warranted such rigorous scrutiny. The Tribunal directed the Assessing Officer to make a reference to the Addl. CIT/Joint CIT under section 144A to determine if the materials on record were sufficient to accept the assessee's claim or if further investigation was needed. The Tribunal instructed both the Assessing Officer and Addl. CIT/Joint CIT to approach the matter with a fresh outlook, uninfluenced by previous orders.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, setting aside the CIT(A)'s order and remanding the issue to the Assessing Officer for a fresh assessment, ensuring that the assessee is provided with a reasonable opportunity to present evidence and explanations.