2014 (8) TMI 903 - HC - Income Tax

Additions in the hands of purchaser (Assessee) cash was found from the lockers of the vendors - vendors stated that the same as receipt of on-money for the sale of the property in question - Held that - on-money was received by them from the assessee - the AO has not made any attempt to verify the accounts of the assessees - whether any search was conducted at the business premises of the assessees is not clear from the record - huge amount was found from the bank lockers of the vendors, who made the statement that the same was received from the assessee as on-money - It is a common practice that the property is registered on the circle rate and remaining money is paid as on-money - in the absence of any evidence/document, it cannot be applied by closing of the eye - There must be evidence on record to prove that on-money was received from the assessees - Assessees have purchased the property from the vendors - The vendors were not having sufficient source of income to accumulate the huge amount, which was recovered from the lockers alongwith the bank slips of Punjab National Bank - The AO has not examined the accounts especially withdrawal of the assessees in a proper manner the matter needs deep investigation thus, the matter is remitted back to the Tribunal for fresh adjudication Decided in favour of Revenue.

Summary

Issues:
- Addition of undisclosed income based on statements of vendors
- Cross-examination of vendors not conducted
- Lack of verification of accounts of the assessees
- Need for further investigation into the matter

Analysis:
The case involved appeals by the Department against an order of the Income Tax Appellate Tribunal regarding the assessment year 2005-06. The dispute arose from the sale of a property by Jain brothers and Smt. Veer Bala Agarwal, with allegations of undisclosed income received as "on-money." The AO added amounts to the income of M/S. Superior Exims (P) Ltd. and Shri Sanjeev Agarwal, which were later deleted by the Tribunal, leading to the Department's appeals.

The Department argued that the vendors' statements confirmed the receipt of "on-money," supported by cash found in bank lockers. They contended that proper opportunities for cross-examination were provided, and the vendors' financial activities did not justify the recovered amounts. The Department emphasized the need for upholding the additions made by the lower authorities.

Conversely, the assessee's counsel highlighted the lack of cross-examination of vendors and the absence of withdrawals from the assessees' bank accounts. They emphasized the proper reflection of transactions in the company's accounts and questioned the authenticity of the vendors' statements. The counsel relied on legal precedents to support their arguments for dismissal of the appeals.

The Court acknowledged the grievances regarding the lack of cross-examination and the inadequate verification of assessees' accounts. It noted the substantial cash found in vendors' lockers and the need for evidence to substantiate the "on-money" claims. Emphasizing the necessity for thorough investigation, the Court set aside the Tribunal's order for fresh adjudication, stressing the importance of examining the vendors' statements and financial activities. The Court directed the Tribunal to expedite the decision within three months, allowing the appeals for statistical purposes.