2003 (10) TMI 277 - AT - Income Tax

Unexplained investments - Investment in the purchase of raw material and processing charges - HELD THAT - After careful consideration we are of the opinion that this is an undeniable fact that the addition in question u/s 69 has been made on the sole basis of the statement of the partner Shri Kabra recorded by the Central excise authorities which fact has been incorporated by the learned CIT(A) in his order as we have mentioned above. This is also an undeniable fact that the learned AO never recorded any further statements of Shri Kabra or anybody else. A copy of the statements recorded by the Central excise authorities was never provided to the assessee. No independent investigation was carried by the learned AO even though he proposed to make an addition u/s 69 of the Act in the hands of the assessee. There is no evidence of suppressed sales as the sales declared by the assessee have been accepted fully by the AO and no action has been taken by the ST Department despite there being information regarding the fact that the statement made by Shri Kabra has been retracted in the very next opportunity immediately after making of the statement. The assessee has been maintaining complete financial and quantitative records at all stages of production and no specific defects have been pointed out by the authorities below. The learned CIT(A) has categorically mentioned at various places at its order that the learned AO has not pointed out any defects in the books of accounts nor brought on record and that the AO was not justified in rejecting the books of accounts which the Department has not come in second appeal. Thus we are of the opinion that the totality of the facts and circumstances before us do not justify additions u/s 69 merely on the basis of the statement of the partner Shri Kabra without any further supporting evidence being on record. We find support from the CBDT s Circular No. 286/2/2003 dt. 10th March 2003.

Summary

Issues Involved:
The judgment involves issues related to additions made under section 69 of the Income Tax Act, 1961 based on a statement recorded by Central Excise Authorities, and lack of opportunity for the assessee to defend the additions.

Additions under Section 69:
The appeals before the Appellate Tribunal ITAT Jodhpur related to the same assessee for different assessment years. The appellant, a partnership firm engaged in trading, faced allegations of clandestine removal of cloth leading to a penalty and addition under section 69 of the IT Act. The AO added the alleged unexplained investment in raw materials and processing charges based on a statement by Shri Kabra. The CIT(A) confirmed the addition, relying on Shri Kabra's statement, which the appellant disputed. The authorized representative argued that the burden on the Department under section 69 was not met, as the addition was solely based on Shri Kabra's statement without independent verification. The Tribunal found that the addition lacked sufficient supporting evidence beyond the statement, leading to the allowance of the appeal.

Lack of Opportunity for Defense:
In another appeal by the same assessee, the authorized representative highlighted the inadequate opportunity given for the assessee to defend the additions made by the authorities below. The Tribunal noted that the assessee was not adequately heard during the proceedings, as evident from the appellate order requesting adjournments that were declined. In the interest of justice, the issues were remanded back to the CIT(A) for fresh consideration with a clear directive to provide a proper opportunity for the assessee to present their case.

*Separate Judgment:*
No separate judgment was delivered by the judges in this case.