The Income Tax Appellate Tribunal ( ITAT ) has quashed income tax additions based solely on third-party statements, as seen in the recent ruling in Olive Overseas Pvt. Ltd. vs. DCIT.
In this case, the assessment proceedings against Olive Overseas Pvt. Ltd. were initiated following a search operation on another party, Shri Praveen Kumar Jain, who was alleged to have provided accommodation entries.
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Additionally, a statement by the company’s accountant, Shri Manish Jain, was also relied upon. However, no independent incriminating material was found during the search of Olive Overseas Pvt. Ltd., and the additions were largely based on the earlier retracted statement of Praveen Kumar Jain.
The assessee contended that apart from the contentions raised for A.Ys. 2012-13 up to 2015-16 ( unabated assessment ), the additions in the A.Ys. 2016-17 to 2018-19 are made on the basis of uncorroborated and non-descript statement of Shri Manish Jain and Shri Praveen Kumar Jain.
It was also argued that the statement of Shri Praveen Kumar Jain which is the basis of statement obtained from Shri Manish Jain in the present search, could only be possibly relevant to the assessment years which are prior to date of search falling in A.Y. 2014-15.
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The Tribunal highlighted that merely relying on the statement of a third party without any corroborating evidence cannot justify income tax additions. This position is supported by the Supreme Court judgement in PCIT vs. Abhisar Buildwell Pvt. Ltd., which mandates that in the absence of incriminating material found during a search, the Assessing Officer cannot enhance the taxable income in proceedings under section 153A.
The tribunal bench of Judicial Member Yogesh Kumar U S and Accountant Member Pradip Kumar Kedia ruled that the additions based on uncorroborated statements were not sustainable in law, particularly when no independent verification or material was presented to substantiate the claims.
As a result, the Tribunal quashed the income tax additions made for the assessment years in question.
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