2019 (1) TMI 1543 - ITAT JAIPUR

Addition u/s 68 - unexplained share application money and premium received - HELD THAT:- AO has made the addition based on the report of the Investigation Wing Kolkata whereas the assessee has produced all the relevant documentary evidence to establish the identity, creditworthiness and genuineness of the transactions. Hence in the absence of any discrepancy or otherwise any material or record to show that the assessee’s own unaccounted/undisclosed income has routed through the share applicants, the addition made by the AO is not justified. Accordingly, we do not find any error or illegality in the impugned order of the CIT (Appeals) in deleting the addition.

Disallowance u/s 14A - sufficiency of own interest free fund - HELD THAT:- There is no dispute that the assessee’s own interest free fund was many times more than the investment made for both the assessment years 2010-11 and 2011-12. Further, there was no dividend income earned by the assessee during these assessment years, therefore, in the absence of any exempt income earned by the assessee during the years under consideration, the disallowance made by the AO being 1% of the average investment is not sustainable when there is no specific and identified expenditure or finding by the AO regarding any expenditure incurred by the assessee for earning the exempt income.

Assessment u/s 153A - no incriminating material found or seized during the course of search and seizure action - HELD THAT:- As relying on M/S. KOTA DALL MILL case [2019 (1) TMI 344 - ITAT JAIPUR] the addition made by the AO without any material much less the incriminating material is not sustainable in law. Further, the report of the Investigation Wing Kolkata is also not a material or document either found or detected during the search and seizure action in case of the assessee but it pertains to the investigation carried out by the Investigation Wing Kolkata in a separate matter. Therefore, the said report will not partake the character of incriminating material found or seized during the course of search and seizure action in the case of the assessee. Hence the additions made by the AO while framing the assessment under section 153A of the Act are deleted for want of incriminating material.

Cross examination of the witnesses denied - denial of natural justice - HELD THAT:- When the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolkata is also based on the statement of such person then the denial of cross examination by the AO as well as ld. CIT (A) despite the fact that the assessee was ready to bear the cost of the cross examination of the witnesses is a gross violation of principles of natural justice. Thus the additions made by the AO on the basis of such statement without any tangible material is not sustainable in law and liable to be deleted. See M/S. KOTA DALL MILL case [2019 (1) TMI 344 - ITAT JAIPUR] - Assessee appeal allowed.