2014 (2) TMI 1276 - AT - Income Tax

Reopening of assessment - addition on account of alleged unaccounted sale proceeds - Held that - Annexure AB-1, there is no mention of payment of any on-money to the assessee. The presumption has been drawn from the statement of Shri Satish Kulkarni which has been retracted later on. The details given in the seized paper from a third party s premises itself do not put any liability upon the assessee to explain the seized paper because it was not recovered from the possession of the assessee and it did not lead to any conclusion that the assessee has received any on-money. Everything has been presumed by the AO against the assessee only on the statement of Shri Satish Kulkarni whereas the AO completely ignored the statements recorded by himself of the purchasers during the course of the original assessment proceedings. Considering all the facts in totality, in the light of the aforestated annexure AB-1, we failed to persuade ourselves to find any relevancy on the said document which could lead to a reasonable conclusion that the assessee has received some on-money which could be made basis for the reopening of the assessment. Accordingly, we set aside the notice u/s. 148 and hold the reassessment proceedings as invalid AO himself has examined those flats were some extra money in the form of interior decoration was found to be given. It was not the case of the AO that all the flats sold have fetched some on-money. The DR further brought to our notice that the Director of M/s. Ashoka Buildcom Ltd., have moved the Settlement Commission admitting payment of on-money therefore the same should be considered in the hands of the assessee. This submission of the Ld. DR cannot be accepted because what a third party is doing before the Settlement Commission cannot be said to have any relevance in the re-assessment proceedings of the assessee when the buyers have categorically stated that they have not paid any on-money which fact has also been stated in the form of affidavits. Considering all these facts in totality, in our humble opinion, the entire additions have been made on surmises and conjectures based upon irrelevant material ignoring direct evidences on record, therefore, the additions made by the AO cannot be sustained even on merit. - Decided in favour of assessee

Issues Involved:
1. Reopening of the assessment under Section 147 of the Income Tax Act.
2. Addition of Rs. 1,70,94,000 on account of alleged unaccounted sale proceeds.

Detailed Analysis:

1. Reopening of the Assessment under Section 147 of the Income Tax Act:

The assessee challenged the reopening of the assessment under Section 147 of the Income Tax Act, arguing that the Assessing Officer (AO) did not have a bona fide belief that income had escaped assessment. The AO had reopened the assessment based on information received from the ADIT (Inv) Unit II(2), Nasik, which alleged that the assessee had received Rs. 4,27,35,000 against the sale of three flats, whereas only Rs. 2,56,41,000 was shown by the assessee. The AO believed that the difference of Rs. 1,70,94,000 had escaped assessment.

The AO's belief was based on a document (Annexure AB-1) seized from M/s. Ashoka Buildcom Ltd. and a statement from Shri Satish M. Kulkarni, an employee of M/s. Ashoka Buildcom Ltd., who admitted that the difference between the total cost and agreement value was paid in cash and was out of books. The assessee argued that the AO did not consider the full context of the statements and documents, including a retraction by Shri Satish Kulkarni and a statement from Shri Ashok Kataria, which indicated that the document was an estimate.

The Tribunal found that the document (Annexure AB-1) was not relevant enough to form the basis for reopening the assessment. It was a worksheet related to capital gains and investments, not signed or dated, and did not mention the assessee's name. The Tribunal concluded that the AO had acted on suspicion rather than a bona fide belief that income had escaped assessment. The reassessment proceedings were thus held to be invalid.

2. Addition of Rs. 1,70,94,000 on Account of Alleged Unaccounted Sale Proceeds:

On the merits of the case, the addition of Rs. 1,70,94,000 was based on the document (Annexure AB-1) and the statement of Shri Satish Kulkarni, which was later retracted. The AO believed that the assessee had received on-money for the sale of flats, applying the test of human probabilities based on past instances where the assessee had sold flats by executing two agreements to generate unaccounted cash.

The Tribunal noted that during the original assessment proceedings, the AO had examined the flat purchasers, who denied paying any on-money. The document (Annexure AB-1) did not contain names of the purchasers, was not signed, and was not directly related to the assessee. The Tribunal found that the AO's reliance on this document and the retracted statement was insufficient to justify the addition. The Tribunal emphasized that additions cannot be made based on surmises and conjectures without corroborative evidence.

The Tribunal also rejected the argument that the AO should have applied the test of human probabilities during the original assessment proceedings. It was noted that the AO had already made specific additions based on verified instances of on-money transactions during the original assessment.

The Tribunal concluded that the entire addition of Rs. 1,70,94,000 was based on irrelevant material and ignored direct evidence from the flat purchasers. Therefore, the addition could not be sustained on merit.

Conclusion:

The appeal filed by the assessee was allowed, with the reassessment proceedings held invalid and the addition of Rs. 1,70,94,000 on account of alleged unaccounted sale proceeds being dismissed. The Tribunal emphasized the importance of acting on bona fide belief and corroborative evidence rather than suspicion and conjecture in reassessment proceedings.

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