Even admission of assessee without corroborative evidence cannot be made basis for addition – High Court
In a recent judgment, the Hon’ble Rajasthan High Court has held that the admission of the assessee in absence of any corroborative evidence to strengthen the case of the Revenue cannot be made the basis for any addition.
ABCAUS Case Law Citation:
4269 (2024) (10) abcaus.in HC
Important Case Laws relied upon:
Sir Chunilal vs. Mehta and sons Ltd. Vs. Century Spinning and Manufacturing Co. Ltd
M/s Pullangode Rubber Produce Co. Ltd. vs. State of Kerala and Another
Pankaj Bhargava and Anr. vs. Mohinder Nath and Anr.
In the instant case, the Revenue had challenged the order passed by the Income Tax Appellate Tribunal (ITAT) in upholding the decision of CIT(A) who had deleted the addition u/s 68 of the Income Tax Act, 1961 (the Act) made by the Assessing Officer (AO) on account accommodation entries.
Although the overall tax effect involved in this case was below the prescribed monetary limit for filing further appeal before the High Court under section 260-A of the Income Tax Act, 1961 vide Circular No. 5/2024 dated 15th March 2024, the PCIT pleaded that Notwithstanding that, the present Appeal had been filed in view of para no. 3.1(h) of the said Circular which provides for filing of the appeal where the case involves organized tax evasion including cases of bogus capital gain/loss through penny stocks and cases of accommodation entries.
The case set up by the Income Tax Department was that a search was conducted at the residence and offices of one person and at the residences of his employees and associates and on examination of the soft data seized and impounded in course of the search proceeding, it was detected that he was engaged in providing accommodation entries of share capital, share premium, share application money, unsecured loans, long term capital gains, short term capital gains etc. in lieu of cash received by him.
Accordingly, a notice under section 148 of the Act was issued to him for initiating the reassessment proceedings on the ground of escapement of income. The re-assessment was completed under section 143(3) read with Section 147 of the Act by making additions on account of bogus share application money and commission for bogus accommodation entries.
The appeal of the assessee was allowed by the CIT(A) and later the appeal of the Revenue was dismissed by the ITAT.
The Hon’ble High Court opined that the Tribunal had rendered the findings on the basis of the materials on record and observed that the assessee had furnished each and every document required for proving the identity, creditworthiness of the share applicants and genuineness of the transactions whereas the Revenue had not been able to brought on record any evidence to show that cash was paid by the company to any person for obtaining accommodation entries.
The Hon’ble High Court noted that the Hon’ble Supreme Court held that if a question of law has been settled by the highest Court of the country that question, however important and difficult it may have been regarded in the past and however large may be its effect on any of the parties, would not be regarded as substantial question of law. The expression ‘substantial question of law’ has been explained by the Hon’ble Supreme holding that the proper test for determining whether a question of law raised in the case is substantial would be to find out whether it directly and substantially affects the rights of the parties and if so whether it is either an open question or is not free from difficulty or calls for discussion of alternative views.
The Hon’ble High Court stated that applying the aforesaid test, the question sought to be raised by the Revenue was not even a question of law. The ground taken by the revenue that the findings recorded by the Tribunal were contrary to records seemed to have been raised just for the sake of creating a ground; nothing had been shown to Court on this point. The findings recorded by the appellate Authority and the Tribunal were in consonance with the law of evidence and the Act.
The Hon’ble High Court pointed out that a glance at materials on record shows that the Assessing Officer made the addition only on the basis of the statement given by the alleged entry provider though he had recorded that the assessment order was passed after considering the “totality of the facts and circumstances the case.
The Hon’ble High Court further observed that it was a matter of record that the alleged entry provider had retracted his statements given before the Assessing Officer. Even otherwise, an admission by the assessee cannot be said to be a conclusive piece of evidence. The admission of the assessee in absence of any corroborative evidence to strengthen the case of the Revenue cannot be made the basis for any addition.
The Hon’ble High Court stated that the substantial questions of law framed by the appellant Revenue pertained to an open issue which stands concluded by the decision of the Hon’ble Supreme Court.
Accordingly, it was held that no substantial question of law arose between the parties and the Income Tax Appeal was not maintainable.
Download Full Judgment Click Here >>
- Vague references without disclosing basis made transfer order u/s 127(2) illegal
- Contingent liabilities cannot be added to income merely on the basis of tax audit report
- Direction to surrender passport in compliance of bail condition in a GST evasion case upheld
- ITAT deleted penalty as Tax Audit Report was filed before completion of assessment
- ICAI sets up two new branches in Southern India Regional Council (SIRC)
