2013 (12) TMI 532 - AT - Income Tax

Validity of proceedings u/s 158BD Search and seizure operation were carried out on the residential and office premises of M/s Keystone Realtors Pvt. Ltd., of which CPDPL is one of the group companies - In the search, the JV agreement was found and seized and along with that certain documents were seized wherein there was evidence on money having been received by the assessee on the sale of some flats by such company Held that - Following Manish Maheshwari vs ACIT 2007 (2) TMI 148 - SUPREME COURT OF INDIA - For the purposes of initiating proceedings u/s 158BD, the AO who had conducted search, must record reasons for transferring material connected with another person and transfer the material to the AO having jurisdiction over the person, on whom the block assessment has to be framed - As borne out from the letter from the ACIT 17(3) The material and statement asked for are not in possession - This fact is further strengthened, because, the DR sought time to ask the AO one last time, which was duly allowed to the DR, to enquire, whether there is any material against the assessee, the DR, once again, showed his helplessness on the issue of producing the material relied upon by the AO to initiate and make an assessment under section 158BD Decided against assessee.

Summary

Issues:
Deletion of addition made on account of on money received by the assessee.

Analysis:
The appeal was filed by the department against the order of CIT(A) XXVII, Mumbai, challenging the deletion of the addition made on account of on money received by the assessee. The facts of the case revolved around the ownership of a property at Chakala Road, Andheri (East) inherited by the assessee and co-owners. The eldest brother of the assessee, using the power of attorney, entered a joint venture with a developer, CPDPL. Subsequently, a suit of forgery and fraud was filed against the brother and CPDPL. The Bombay High Court observed that the brother had committed fraud by receiving money for himself, depriving the co-owners of their rights.

The Income Tax Department initiated proceedings under section 158BD on the assessee based on incriminating papers seized during a search operation at CPDPL's premises. The addition of Rs. 5,56,839/- was made on the assessee's share of on money received by CPDPL. The CIT(A) deleted the addition, stating that no evidence was presented to confirm the payment of on money to the assessee. The CIT(A) highlighted that on money transactions are outside the books of accounts and CPDPL was not questioned regarding such payments to the assessee.

During the ITAT proceedings, the department argued that the assessee received on money, while the assessee's representative reiterated the lack of evidence against the assessee. The ITAT analyzed the facts, including the observations of the Bombay High Court, and concluded that the addition was unfounded. The ITAT emphasized the absence of material against the assessee and the failure to comply with legal procedures for initiating proceedings under section 158BD. Citing the Supreme Court's ruling in a similar case, the ITAT upheld the CIT(A)'s decision to delete the addition, ultimately dismissing the department's appeal.

In summary, the ITAT upheld the CIT(A)'s decision to delete the addition made on account of on money received by the assessee, citing the lack of concrete evidence against the assessee and procedural irregularities in initiating proceedings under section 158BD. The judgment emphasized the importance of adhering to legal procedures and ensuring substantial evidence before making additions in tax assessments.