2025 (3) TMI 1270 - AT - Income Tax

Addition made u/s. 69A - Addition was made by the AO primarily relying upon certain information received as a result of search and seizure operation conducted in case of third parties - FAA deleted addition - HELD THAT - There is nothing on record to suggest that any independent enquiry was taken up with M/s. MEC Tech or its proprietor to ascertain whether in reality it has paid the amount to the assessee. From the stage of assessment proceeding itself the assessee has consistently taken the stand that it has received the amount from M/s. UVI Films Productions Pvt. Ltd. and the stand taken by the assessee was backed by corroborative evidence. The A.O. has not brought any cogent material/evidence to dislodge assessee s claim or to discredit the evidences brought on record by the assessee. Merely on suspicion conjuncture and surmises the A.O. has made the addition. On going through the observations of the first appellate authority we are convinced that he has deleted the addition after carefully analyzing and appreciating the facts and evidences available on record. That being the case we do not find any infirmity in the decision of first appellate authority. Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment are:

• Whether the reopening of the assessment under Section 147 of the Income Tax Act, 1961, was valid, given the introduction of faceless assessment provisions by the Finance Act 2021.
• Whether the first appellate authority was justified in deleting the addition of Rs. 1,10,00,000/- made under Section 69A of the Income Tax Act, 1961, on the grounds of it being a bogus transaction.
• Whether the amount routed through MEC Tech was a genuine business transaction or not.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Reopening of Assessment under Section 147

• Relevant legal framework and precedents: The reopening of assessments under Section 147 is subject to conditions and procedural requirements. The Finance Act 2021 introduced faceless assessment and automated allocation of cases, which impacts the jurisdictional authority's ability to issue notices.
• Court's interpretation and reasoning: The Tribunal noted that the first appellate authority invalidated the reassessment based on the jurisdictional High Court's decision in Hexaware Technologies Ltd. vs. ACIT, which was not further analyzed due to the resolution of the substantive issue.
• Conclusion: The Tribunal did not adjudicate on the validity of the reopening of assessment as the issue became academic following the decision on the substantive issue.

Issue 2: Deletion of Addition under Section 69A

• Relevant legal framework and precedents: Section 69A deals with unexplained money, where the burden is on the assessee to explain the nature and source of the money received.
• Court's interpretation and reasoning: The Tribunal examined the evidence provided by the assessee, which included agreements and bank statements showing that the amount was received from M/s. UVI Films Productions Pvt. Ltd. for marketing and distribution expenses related to a film.
• Key evidence and findings: The assessee provided documentary evidence, including agreements and bank statements, showing that the amount was received from M/s. UVI Films Productions Pvt. Ltd. The Tribunal found no evidence from the AO to substantiate the claim that the amount was received from MEC Tech.
• Application of law to facts: The Tribunal applied the principles of Section 69A and found that the AO's addition was based on unsubstantiated information and lacked corroborative evidence.
• Treatment of competing arguments: The Tribunal found the assessee's evidence credible and consistent, while the AO's conclusions were based on suspicion without corroborative evidence.
• Conclusion: The Tribunal upheld the first appellate authority's decision to delete the addition, as the AO failed to disprove the assessee's claims with evidence.

3. SIGNIFICANT HOLDINGS

• Core principles established: The Tribunal emphasized the necessity of corroborative evidence when making additions under Section 69A based on third-party information. Mere suspicion or unsubstantiated information is insufficient.
• Final determinations on each issue: The Tribunal dismissed the Revenue's appeal, upholding the first appellate authority's decision to delete the addition of Rs. 1,10,00,000/-. The issue of the validity of the reopening of assessment was left open as academic.