Income Tax Appellate Tribunal Deliberates on Tax Evasion Allegations in ITA No. 1257/DEL/2022, Dismisses Appeal

Income Tax Appellate Tribunal Delivers Verdict on ITA No. 1257/DEL/2022

Background of the Case

The Income Tax Appellate Tribunal (ITAT) Delhi Bench, presided over by Shri Chandra Mohan Garg (Judicial Member) and Dr. B.R.R. Kumar (Accountant Member), delivered a judgment on the appeal by JCIT Circle-28(1), Delhi against Ajay Sharma concerning the assessment year 2009-10 under ITA No. 1257/DEL/2022. The crux of the matter revolved around an order by the NFAC, New Delhi dated 11.10.2021, which the appellant challenged on various grounds.

Arguments Presented

For the revenue, Shri Amit Katoch, CIT(DR), argued that the CIT(A) erroneously deleted the addition made on account of unexplained investment u/s. 69 of the Income Tax Act, 1961, amounting to Rs. 1,95 crore. The revenue’s contention hinged on the accusation that the respondent, in his individual capacity, made cash payments amounting to this sum without appropriate documentation or explanation, thereby necessitating the addition as unexplained investment under the Act.

Ms. Sonal Wadhera, Advocate for the assessee, contended that the conclusion drawn by the Assessing Officer was contrary to the documentary evidence at hand, asserting that the Assessing Officer’s conclusion was not only perverse but also disregarded the actual facts of the case. The defense highlighted that no agreement in the individual capacity was entered into by the assessee with M/s Yamuna Builders P Ltd, thus challenging the basis of the addition made by the Assessing Officer.

Findings and Judgment

The Tribunal meticulously examined the submissions, evidences, and the laws pertinent to the case. It observed that the Assessing Officer erred in making the addition without considering the corporate veil existing between the respondent and the transactions undertaken. It was clarified that the respondent acted not in an individual capacity but as a part of M/s Shalu Construction P. Ltd. As a result, any transactions, including receipt or payment of cash, were conducted by the corporate entity and hence, should have been investigated under its ambit rather than the individual.

Furthermore, the Tribunal noted that the entire case against the respondent was based on incongruities and failed to prove beyond reasonable doubt that the respondent engaged in any form of tax evasion personally. As such, the Tribunal found no merit in the appeal and decided to uphold the order passed by the CIT(A), effectively dismissing the appeal brought forward by the revenue.

Conclusion

This judgment underscores the importance of distinguishing between the actions of individuals and the corporate entities they represent in legal and financial dealings. It emphasizes the need for the Assessing Officer to base their investigations on concrete evidence rather than presumptions and to respect the corporate veil unless there’s decisive evidence suggesting otherwise. The Tribunal’s dismissal of the appeal reaffirms the critical principle of law that allegations of tax evasion or unexplained investments require a robust and concrete foundation of evidence.

Decision Date

The tribunal pronounced the order in the open court on 22nd September 2023, bringing the case to a conclusive end.

Income Tax Appellate Tribunal Deliberates on Tax Evasion Allegations in ITA No. 1257/DEL/2022, Dismisses Appeal