Reopening cannot be Merely based on Retracted Statement in the Absence of Tangible Materials: ITAT deletes Addition u/s 153A of Income Tax Act [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal has deleted the addition made under Section 153A of the Income Tax Act, 1961 holding that the reopening could not be done merely based on Retracted statement in the absence of any tangible material.

The assessee, Saarthak Vanijya India Ltd's case was reopened on the basis of information received from the ADIT wherein it was mentioned that in consequence to search and seizure action taken on Bindal Group of cases including the present assessee.

It had been observed that the assessee had taken accommodation entry in the form of share premium and share capital from various non-existing paper companies. During the course of enquiry, the alleged investors were not found to be existing at the given address and the list of nine such parties was provided.

The AO observed that during the relevant AY 2007-08 the assessee has raised share application money and based upon the response of the assessee addition was made. The AO had primarily relied on the statement of Rajesh Bhagat who was the Director in Rajesh Metal India the predecessor entity of the assessee.

R.S. Singhvi, on behalf of the assessee submitted that the statement of Brijesh Bhagat being the stand-alone evidence could not be made basis for additions. He submitted that the statement alone was the basis of reopening and being a borrowed satisfaction could not have been relied.

The two-member Bench of Shamim Yahya, (Accountant Member) and Anubhav Sharma, (Judicial Member) considered the opinion that AO had fallen in error in relying the retracted statement of Brijesh Bhagat. If at all the statement of Brijesh Bhagat was relevant the same should have been corroborated by some material evidences from the enquiry of the AO had conducted with regard to creditworthiness of the parties.

Thus, the Bench had no hesitation but to accept that the assessments completed under Section 153A of the Income Tax Act that the retracted statement of Bhagat was not reliable piece of evidence and like making addition under Section 153A of the Income Tax Act the same could not have been the sole basis of reopening also.

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