2012 (7) TMI 983 - HC - Income Tax

Addition on account of On-Money - Held that - The material seized in form of loose paper was qua one flat No. A/204 only in respect of which taking of on-money could be alleged. It was on the basis of such loose papers, the addition on On-money account was sought to be made. That material could not have been used for the subsequent years for making addition on the same count. The addition in the Assessment Year 2004-05 was not sustained by the Tribunal in the appeal before it on the ground that the Assessing Officer ought to have confined himself in respect of sale transaction of one particular flat and he could not have on that basis calculated the addition for all flats. Accordingly, in respect of previous Assessment Year 2004-05, it was held by the Tribunal that the addition for On-money, made in the said year was not proper inasmuch as such addition could have been made only in respect of the flat in respect of which the evidence of On-money was found at the time of search. The said decision dated 31.03.2011 of ITAT, Ahmedabad was relied on, on behalf of the assessee. Even as for the year 2004-05 also, the addition on account of Onmoney was held to be on the basis of guess work and extrapolation, again in the next yar 2005-06 being year under consideration the addition of ₹ 1,52,53,128/- was made repeating the same story. When in respect of previous Assessment Year 2004-05 also the Tribunal had dismissed the Department s appeal on the ground that the addition in that year also was based on extrapolation, it emerged beyond pale of doubt that for the addition made for the year 2005-06 there was no evidence whatsoever and the same was presumptive in nature.

Summary

Issues involved:
1. Addition made by the Assessing Officer on account of 'On-Money' amounting to Rs. 1,52,53,128.

Comprehensive Analysis:
The High Court of Gujarat heard an appeal by the Revenue against the order of the Income Tax Appellate Tribunal for the Assessment Year 2005-06. The appellant raised a substantial question of law regarding the deletion of the addition made by the Assessing Officer on account of 'On-Money' amounting to Rs. 1,52,53,128. The assessee, a partnership firm in the real estate business, developed projects during the financial years 1997-98 to 2003-04. The Assessing Officer concluded that the assessee received 'On-money' at the rate of Rs. 180 per sq. ft based on certain loose papers found during a search. Consequently, an addition of Rs. 1,52,53,128 was made for the year 2005-06. The Commissioner of Income-tax (Appeals) deleted the addition, leading to the Department's appeal before the Tribunal for all the Assessment Years. The Tribunal ruled in favor of the assessee, citing a previous decision in the assessee's case for the Assessment Year 2004-05, where it was held that no extrapolation could be made without cogent evidence.

The Tribunal reasoned that the evidence of 'On-money' pertained to an earlier assessment year and not the year under appeal, thereby upholding the deletion of the addition. The housing projects were developed before the Assessment Year 2004-05, and the material seized during the search was specific to one flat only. The Tribunal had previously held that additions for 'On-money' should be limited to flats with evidence found during the search. The Tribunal's decision for the Assessment Year 2004-05 was relied upon, emphasizing that additions based on guesswork and extrapolation were not valid. The addition for the year 2005-06 lacked evidence and was presumptive in nature, similar to the previous year. The Tribunal's findings were deemed proper and logical, with no error noted in the impugned order. The appeal was dismissed as it lacked merit and did not raise any substantial question of law requiring consideration.