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2022 (1) TMI 1351 - AT - Income TaxAssessment u/s 153A - Undisclosed income - Credits Transferred from Nagaland based entities - sufficient incriminating material found n search or not? - HELD THAT:- As AR submitted that in the absence of any incriminating material on record, no such additions could have been made by AO. This plea could not be accepted since this is not a case wherein no incriminating material has been found. Rather, it is the finding of CIT(A) that several incriminating materials were seized which include blank letter head of Nagaland based persons / entities, blank cheques, notes / diaries containing details of payments received and transferred. The evidence relating to unexplained investment made in cash towards purchase of immoveable properties was also seized. Thus, this is a case where sufficient incriminating material has been found by investigation team which indicates undisclosed income of the assessee - Decided against assessee. Best judgement basis u/s 144 - As alleged by assessee no notice u/s 143(2) was issued - Assessment Proceedings for AY 2018-19 - HELD THAT:- As it was to be held that none of the conditions for invoking jurisdiction u/s 144 was satisfied by Ld. AO which would vitiate the assessment proceedings. Further, the assessee has filed valid return of income and no notice u/s 143(2) has ever been issued before making assessment. The non-issuance of notice u/s 143(2), in non-curable defect and therefore, assumption of jurisdiction and subsequent order passed u/s 144 becomes bad-in-law. The case laws as cited above clearly support the legal ground raised by the assessee. Therefore, we hold that the assessment order passed for this year fails on legal grounds and the consequential additions made therein become unsustainable. We order so. This being so, no further adjudication is required in the appeal for AY 2018-19. The assessee’s appeal stand allowed on this ground alone. Addition based on statements recorded by investigation wing during the course of search operations from various persons - HELD THAT:- The pre-existing statements recorded by the Investigation Wing could not form the sole basis of assessment. It could also be seen that Shri G.K. Rengma retracted the statement vide affidavit dated 01.04.2019 wherein he clarified that the statement was recorded incorrectly. The said retraction was supported by the audited financial statements of Shri G.K. Rengma as placed on record. The total turnover of Shri G.K. Rengma as reflected in these financial statements is much higher than the figures recorded in the statement. Under these circumstances, the third-party statements recorded from Shri G.K. Rengma as well as from other persons would lose evidentiary value. The statements of remaining persons i.e., land owners / various other contractors have never been independently examined by Ld. AO. The copies of statement were never confronted to the assessee and no opportunity of cross-examination was ever provided to the assessee. Accordingly, the ratio of decision of Hon’ble Apex Court in Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT] would apply to the facts of the case and support the case of the assessee. Considering the same, no much weightage could be given to such statements and the same, on standalone basis, would not be sufficient to support the impugned additions. Addition under provisions of Sec.68 or 69 or 69A to 69D - as argued additions have been made merely on the basis of surmises, conjectures and on borrowed satisfaction without specifying the relevant sections under which additions have been made - HELD THAT:- The onus of the assessee has to remain confine to the extent of credits received by the assessee in his own books of accounts and not any further. To hold any contrary position, Ld. AO must establish this fact otherwise no such debits / credits appearing in bank accounts of other parties could be deemed to be the income of the assessee. The assessee’s onus u/s 68 in respect of entries in books / bank accounts of other persons is only secondary i.e., consequential upon the successful discharge of the primary onus by the A.O of establishing the assessee to be the actual owner of the books of account / bank accounts held in the names of other persons. This position has been held by Hon’ble Supreme Court in the case of CIT Vs. Daulat Ram Rawatmull [1972 (9) TMI 9 - SUPREME COURT].Therefore, the credits appearing in the other bank accounts could not be held to be income of the assessee. Adjudication on Merits - Credit Entries Received from Nagaland bases entities / individual - HELD THAT:- As we find that the debit / transfer entries aggregating to Rs.243.19 Crores have been treated to be the assessee’s income on the allegation that assessee’s unaccounted income has been routed through these accounts for the benefit of group as a whole. However, in para 7.10, we have already taken a position that the credit transfer received by the other family members and group concerns could not be assumed to be assessee’s undisclosed income since it is nowhere been established by the lower authorities that the assessee was de-facto owner of either Nagaland based bank accounts or the owner of bank accounts of various recipients. The other family members and group concerns of the assessee were separate Income Tax assessee and subjected to separate assessment. Therefore, the credit received in those accounts could not be held to be the assessee’s income. Under these circumstances, the assessee’s onus would remain confine to explain the credit received by it in his own bank accounts. Further, the assessment proceedings for AY 2018-19 have already been quashed by us on legal grounds. Therefore, at the outset, the addition, to that extent, could not be sustained in the hands of the assessee. Assessee’s onus to prove the ingredients of Sec.68 with respect to unsecured loan received from Shri G.K. Rengma and M/s Excellence Associates - Undisputedly the transactions have taken place through banking channels. On the basis of all these documentary evidences, it could be said that the requisite onus as required to be discharged u/s 68 was duly discharged by the assessee and it was the onus of the revenue to dislodge the same - upon perusal of orders of lower authorities, we find that no cogent material or evidences are on record to dislodge the claim of the assessee rather the additions are based more on allegations, surmises, conjectures and mere suspicion. In such a case, these amounts could not be considered to be the assessee’s undisclosed income. We order so. In the result, the addition to the extent of Rs.5,44,90,000/- is sustained under this head and the balance additions stand deleted. The corresponding grounds raised by the assessee in all the years stands partly allowed. Cash deposit in the bank accounts of the assessee - Since the assessee group has incorporated the alleged cash payment of Rs.16.10 Crores for purchase of immoveable properties in these cash flow statements, the separate addition made to that extent would also not be sustainable. Even otherwise, the properties have not been purchased by the assessee rather this addition is subject matter of consideration in other family members / entities which are separate taxable entities and therefore, the addition for those entities would not be sustainable in the hands of the assessee. Other Credit Entries in Bank Account of the assessee and other family members / entities - Since the assessment for AY 2018-19 has been quashed by us, the additions to that extent are otherwise not sustainable. The remaining credit entries for Rs.353.64 Lacs pertain to AYs 2012-13 & 2017-18. Out of this amount, the assessee has identified amount of Rs.88.50 Lacs being the entries which are lacking complete details / supporting evidences. The remaining entries are either not in the nature of income and a part of these entries has already been disclosed under IDS 2016. Few of the entries have already been disclosed in the Income Tax Returns of the assessee. The complete details of these entries have been placed by the assessee on page numbers 58 and 59 of Paper Book No.3A. We have perused the same. We find that all the other credit entries are in the nature of maturity proceeds of LIC, Chit money received by the assessee, directors loan withdrawn, mutual funds proceeds from UTI, refunds etc. These entries are not in the nature of assessee’s income. Therefore, the additional amount of Rs.88.50 Lacs as worked out by the assessee is found to be correct and therefore, sustained in the hands of the assessee. The remaining addition stands deleted since the same is not the in nature of income. Credit for income disclosed under IDS 2016 has not been given to the assessee - We find that this credit was not given in the absence of requisite declarations / certificates forthcoming form the assessee. The assessee has now placed all these documents in the paper book which has been detailed in Table 35 of written submissions. Further, the assessee has already considered such declaration while working out additional income which has also been accepted by us. Therefore, the assessee is left with no grievance on this account. Non consideration of additional evidences / documents as filed by the assessee before Ld. CIT(A) on 15.03.2021 and 16.09.2021 - Since, we have substantially accepted the working of the assessee which has been considered after incorporating all these evidences, the assessee is left with no grievance on this issue. The remaining grounds are either general or consequential in nature which does not require any specific adjudication on our part.
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