2015 (1) TMI 1231 - AT - Income Tax

Addition u/s. 69 - unaccounted money had been received by the sellers of property which was purchased by the assessee - CIT(A) deleted the addition - Held that - It is not in dispute that the assessee was not a party to the seized agreement of sale Banachitti which was the basis of making the entire addition. We find that it is not in dispute that the said agreement of sale does not bear the signature of the assessee. Further, we find that nowhere in the statement recorded of sellers, sellers have stated that they have received any money from the assessee which was more than the amount they acknowledged to have received from the assessee in respect of sale of land in question from the assessee. The sellers in their statements have claimed that they received the money from Shri Vivek Patel only and not from the assessee. The revenue could not bring any material on record, after making inquiry with said Shri Vivek Patel to show that the assessee paid actually any amount more than the amount stated in the registered Deed of sale. In absence of any such material, the additions were made only on the basis of assumptions and presumptions. In the above circumstances, we do not find any good reason to interfere with the findings of the CIT A . - Decided in favour of assessee. Validity of issuance of notice u/s 148 - objections raised by the assessee against the issuance of notice u/s 148 was not disposed off - Held that - On the considered view that the impugned order of re-assessment passed by the Assessing Officer without disposing off the objections raised by the assessee against the issuance of notice u/s 148 by a separate order is liable to be quashed. We order accordingly. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of additions made under Section 69 of the Income Tax Act.
2. Validity of the search and seizure operation.
3. Admissibility of oral evidence versus documentary evidence.
4. Validity of reassessment proceedings under Section 148 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legality of Additions Made Under Section 69 of the Income Tax Act:
The primary issue was whether the additions made by the Assessing Officer (AO) under Section 69 of the Income Tax Act were justified. The AO made additions based on a seized agreement (banachitthi) indicating that the sellers received unaccounted money from the assessee. However, the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT) found that the assessee was not a party to the banachitthi and there was no evidence that the assessee paid any additional money beyond what was recorded in the registered sale deeds. The CIT(A) noted, "No material on record to hold that Shri Vivek Prahladbhai Patel acted as benamidar of appellant." The ITAT upheld this view, stating, "Additions were made only on the basis of assumptions and presumptions."

2. Validity of the Search and Seizure Operation:
During the search of Shri Somabhai Ambalal Prajapati's premises, documents were found indicating unaccounted transactions. The AO relied on these documents to make additions. However, the ITAT found that the seized documents did not directly implicate the assessee. The tribunal noted, "The seized agreement of sale was executed between the seller and Shri Vivek Patel, and no material has been brought on record to show that the assessee actually paid the amount in question."

3. Admissibility of Oral Evidence Versus Documentary Evidence:
The AO relied heavily on oral statements from the sellers, which claimed that the transactions were conducted at higher values than those recorded in the sale deeds. The CIT(A) and ITAT emphasized the precedence of documentary evidence over oral statements. The CIT(A) stated, "No oral agreement contradicting/varying the terms of a document could be offered." The ITAT further noted, "Nowhere in the statement recorded of sellers, sellers have stated that they have received any money from the assessee which was more than the amount they acknowledged to have received from the assessee."

4. Validity of Reassessment Proceedings Under Section 148 of the Income Tax Act:
The assessee challenged the validity of the reassessment proceedings, arguing that the AO did not dispose of objections against the notice under Section 148 before proceeding with the reassessment. The ITAT found merit in this argument, citing the Gujarat High Court's decision in General Motors India P. Ltd v. DCIT, which mandates that objections to a notice under Section 148 must be disposed of by a separate order before proceeding with reassessment. The tribunal stated, "The impugned order of re-assessment passed by the Assessing Officer without disposing off the objections raised by the assessee against the issuance of notice u/s 148 by a separate order is liable to be quashed."

Conclusion:
The ITAT dismissed the revenue's appeals and allowed the assessee's cross-objections, quashing the reassessment orders and deleting the additions made under Section 69. The tribunal's decision was based on the lack of direct evidence linking the assessee to the unaccounted transactions and procedural lapses in the reassessment process. The judgment underscores the importance of adhering to procedural requirements and the precedence of documentary evidence over oral statements in tax assessments.