Addition can’t be sustained on the basis of Statements: ITAT [Read Order]

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The Income Tax Appellate Tribunal – ITAT, Kolkata bench has held that an addition under section 68 of the Income Tax Act, 1961 cannot be sustained on the basis of the statements.

The appellant, M/s. Modern Malleables Limited is engaged in the manufacturing and selling of overhead transmission and distribution line equipment, conductors and hardware accessories, etc. According to Assessing Officer (AO), an operation of search and seizure under Section 132 of the Income-tax Act, 1961 was conducted at the business and residential premises of one Shri Anand Sharma and Shri Janardan Chokhani at Kolkata in which the said Mr. Anand Sharma and Mr. Janardan Chokhani confessed that they were entry operators and that they have registered a large number of paper companies with bogus share capital/premium which have subsequently been sold for a commission or used for giving one-time entry of bogus share capital or expenses or unsecured loans/advances.

Relying on the statements AO contended that the AO notes that the assessee company kept the money with it without carrying out any business activity as stated in the Joint Venture.

The Tribunal consisting of the Vice President P. M. Jagtap and Judicial Member T. Varkey allowed the appeal and held that the additional amount cannot be sustained on the basis of the statement, which cannot be legally scrutinized.

“The documents were filed before the authorities below and the documents could not be controverted or its veracity was assailed before us as not genuine documents, therefore, the addition made u/s. 68 of the Act only on the basis of two statements which could not stand the scrutiny of law, was warranted and therefore, the addition cannot be sustained as per law.”

The ITAT while relying on various precedents noted, “AO to draw an adverse inference against the assessee because he did not give an opportunity to the assessee to cross-examine the statements. So we note that both the statements of Mr. Anand Sharma & Mr. Sushil Bhatter cannot be relied upon to support the addition made by AO.”

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