2011 (11) TMI 438 - HC - Income Tax

Search and seizure - Revenue made addition of Rs 52.50 lacs treating the same to have been paid by the assessee to seller for purchase of land based on the statements of the children of deceased seller - Held that - It is undisputed that registered sale deed has been executed by Sri Venkatagiriyappa in favour of the assessee and is bought for a consideration of Rs. 8,50,000/- . Also, statement of son of deceased vendor was not cross-examined. Further materials on record would also show that additional income of Rs. 14.00 lakhs was offered and the same has been accepted for the AY 1997-98 and the finding that actual sale consideration of Rs. 75.00 lakhs and not Rs. 8,50,000/-, is not at all based upon the material found during search and is based / upon the statement of Sri V. Sadananda, which could not have been relied upon by the Assessing Officer. Addition rightly deleted - Decided in favor of assessee.

Summary

Issues:
1. Discrepancy in the declared price of land purchase.
2. Reliability of statement by deceased vendor's son.
3. Cross-examination opportunity in assessment proceedings.
4. Justification of addition based on vendor's son's statement.

Analysis:

Discrepancy in Declared Price:
The appeal concerns a discrepancy in the declared price of land purchase by the assessee and his wife, as per a registered sale deed, and the amount mentioned in a statement by the deceased vendor's son. The assessment was reopened based on this information, leading to a reassessment where the actual consideration was determined to be higher than the declared amount. The Appellate Authority allowed the appeal, citing lack of confrontation and cross-examination opportunities for the assessee.

Reliability of Vendor's Son's Statement:
The key issue revolves around the reliability of the statement made by the deceased vendor's son regarding the actual sale consideration. The Tribunal dismissed the appeal by the revenue, emphasizing the lack of independent evidence supporting the addition made by the Assessing Officer. The respondent argued that the statement should not be the sole basis for the assessment order without an opportunity for cross-examination.

Cross-Examination Opportunity:
The respondent contended that the assessment order solely relying on the statement of the vendor's son, without providing an opportunity for cross-examination, lacked jurisdiction. The absence of cross-examination raised questions about the validity of the assessment process and the basis for determining the actual sale consideration.

Justification of Addition Based on Vendor's Son's Statement:
The High Court carefully considered the contentions of both parties and the evidence on record. It noted that the assessment was primarily based on the statement of the vendor's son, without cross-examination, and not on material found during the search. The Court found that the addition of Rs. 52,50,000 was not adequately supported by independent evidence, leading to the dismissal of the revenue's appeal and upholding the order passed by the Appellate Authority.

In conclusion, the High Court ruled in favor of the assessee, dismissing the appeal by the revenue. The Court found that the assessment order lacked a sufficient legal basis due to the reliance on the vendor's son's statement without the opportunity for cross-examination. The decision emphasized the importance of proper procedures and evidence in tax assessment proceedings.