ITAT Ahmedabad Deletes ₹26.08 Lakh Addition Based Solely On Investigation Wing Information

The Ahmedabad Bench of the Income Tax Appellate tribunal has upheld the deletion of a ₹26.08 lakh addition made against a taxpayer.

The tribunal held that an addition cannot be sustained solely on information received from the Investigation Wing without independent enquiry or corroborative evidence linking the taxpayer to the alleged transactions.

A bench of Vice-President Dr. B.R.R. Kumar and Judicial Member Suchitra R. Kamble dismissed the Revenue's appeal. It affirmed the order of the Commissioner of Income Tax (Appeals).

"No evidence has been brought on record demonstrating any direct nexus between the assessee and the alleged accommodation entry providers. In the absence of any independent enquiry or corroborative evidence linking the assessee with the impugned transactions, the addition made u/s 68 of the Act cannot be sustained merely on the basis of information received from the Investigation Wing," the tribunal held.

The case arose from reassessment proceedings initiated after the department received information following a search conducted in the cases of Jignesh Shah and Sanjay Shah. According to the department, the taxpayer had received accommodation entries amounting to ₹26.08 lakh through Pranatpal Tradelink Pvt. Ltd. and Suramya Tradelink Pvt. Ltd.

Based on this information, the Assessing Officer treated the amount as unexplained cash credit. The amount was added to the taxpayer's income.

The tribunal noted that the addition was based entirely on information received from the Investigation Wing. It was also based on allegations regarding the involvement of third parties in providing accommodation entries.

The bench recorded that the taxpayer had denied having any transactions with the two companies named by the department. It further noted that no independent enquiry or bank verification had been carried out regarding the alleged transactions.

The tribunal observed that no material had been produced to establish a direct nexus between the taxpayer and the alleged accommodation entry providers.

It also noted that the Revenue had not placed any material before it to rebut the factual findings recorded by the Commissioner of Income Tax (Appeals).

"We find that the assessee has not claimed any LTCG as exempt in the return of income, rather it was a Short Term Capital Loss of Rs. 39,775/-," the tribunal observed.

The bench also noted that the department's case rested on an allegation that the taxpayer had received bogus long-term capital gains of ₹19.14 lakh and ₹6.94 lakh through the two companies.

"Since there were no evidences on record to prove that assessee had received bogus LTCG of Rs.19,14,000/- and Rs.6,94,000/- as alleged in the assessment order mentioned above, we do not find any infirmity in the order of the Ld. CIT(A) deleting the addition of Rs.26,08,000/-," the tribunal held.

The tribunal, consequently, dismissed the Revenue's appeal. It upheld the deletion of the ₹26.08 lakh addition.

For Appellant: Prashant Srivastav, CA

For Respondent: Veerabadram Visalavath, Sr DR