2012 (10) TMI 1033 - AT - Income Tax

Assessment framed u/s 153C - satisfaction of the AO was not recorded before initiating proceedings u/s 153 C read with Section 153A

Issues Involved:
1. Validity of jurisdiction assumed by the AO under Section 153C of the Income Tax Act.
2. Addition of Rs. 12.50 crores on account of alleged investment in property out of undisclosed income.
3. Reliability of evidence received through anonymous fax.
4. Importance of statements recorded under Section 132(4) of the Income Tax Act.
5. Opportunity to cross-examine witnesses.
6. Adjustment of closing balance receivable from certain individuals against alleged cash payment.
7. Proper opportunity to adduce evidence and cross-examine parties.
8. Detailed submissions not considered properly by CIT(A).

Issue-wise Detailed Analysis:

1. Validity of Jurisdiction Assumed by AO under Section 153C:
The Tribunal examined whether the Assessing Officer (AO) validly assumed jurisdiction to frame the assessment under Section 153C. The search was conducted on entities of the Piyush Group, and documents were found and seized. The AO issued a notice under Section 142(1) and framed the assessment determining a total income of Rs. 12,45,77,500/-. The assessee contested the jurisdiction, arguing that no satisfaction was recorded by the AO, a mandatory requirement for assuming jurisdiction under Section 153C. The Tribunal, however, upheld the validity of the assessment, noting that the same AO held jurisdiction over all Piyush Group cases, including the assessee company. The Tribunal found that the AO recorded satisfaction on 28.8.2009 before issuing the notice under Section 142(1) and thus, the assessment was validly framed under Section 143(3) read with Section 153C.

2. Addition of Rs. 12.50 Crores on Account of Alleged Investment in Property:
The AO made an addition of Rs. 12.50 crores, alleging that the assessee paid this amount in cash over and above the sale price of Rs. 5.50 crores for a property in Faridabad. The addition was based on documents received through fax and statements recorded during the assessment proceedings. The Tribunal found that the documents received through fax were not reliable as they were not corroborated by original documents or authenticated sources. The Tribunal also noted that the statements of Harish Singla, recorded under Section 132(4), initially denied any cash payment but later contradicted this in subsequent statements. The Tribunal held that the subsequent statements were not reliable as they were not made under oath and were recorded without giving the assessee an opportunity to cross-examine Singla.

3. Reliability of Evidence Received Through Anonymous Fax:
The Tribunal held that the fax message received from anonymous sources could not be considered valid evidence in the absence of the original agreement. The fax message was deemed unreliable and not enforceable legally or contractually. The Tribunal emphasized that a mere photocopy of a document could not be considered reliable unless the original document was brought on record.

4. Importance of Statements Recorded Under Section 132(4):
The Tribunal highlighted the evidentiary value of statements recorded under Section 132(4) during the search proceedings. It noted that Harish Singla's initial statements under Section 132(4) denied any cash payment, and these statements carried more weight as they were made under oath. The Tribunal found no valid reason for Singla's subsequent contradictory statements, which were recorded without confronting him with his earlier statements.

5. Opportunity to Cross-examine Witnesses:
The Tribunal criticized the AO for not providing the assessee an opportunity to cross-examine Harish Singla regarding his subsequent statements. It held that using these statements adversely against the assessee without cross-examination was unjust.

6. Adjustment of Closing Balance Receivable from Certain Individuals:
The AO alleged that the closing balance receivable from certain individuals was adjusted against the alleged cash payment for the property. The Tribunal found no evidence to support this claim and noted that the amounts shown as receivable were not sufficient to justify the alleged cash payment of Rs. 12.50 crores.

7. Proper Opportunity to Adduce Evidence and Cross-examine Parties:
The Tribunal noted that the assessee was not given a proper opportunity to present evidence or cross-examine the parties involved. It emphasized the importance of fair proceedings and criticized the AO for not adhering to this principle.

8. Detailed Submissions Not Considered Properly by CIT(A):
The Tribunal found that the CIT(A) did not properly consider the detailed submissions made by the assessee. It noted that the CIT(A) relied on conjectures and surmises without substantial evidence.

Conclusion:
The Tribunal concluded that the AO failed to establish beyond doubt that the property was purchased for Rs. 18 crores with Rs. 12.50 crores paid in cash. It set aside the orders of the authorities below and directed the AO to delete the addition of Rs. 12.50 crores. The appeal was partly allowed.

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