2015 (11) TMI 187 - AT - Income Tax

Addition u/s.69A - reopening of assessment - assessmet u/s 153A - search initiation - Held that - As decided in Shri Vinit Ranawat Vs. ACIT 2015 (6) TMI 608 - ITAT PUNE presumption u/s 132(4A) is available only in respect of the person from whom the paper is seized. It could not be applied against a third party and hence, no addition could be made on the basis of the evidence found with third party. In this case, the addition has been made on the basis of the documents found with Dhariwal Group and thus, the presumption u/s. 132(4A) could not be used against the assessee since no incriminating documents were found with it. In the case of ACIT Vs. Lata Mangeshkar (Miss) (1973 (6) TMI 13 - BOMBAY High Court ), the addition was made in the hands of the assessee on the basis of the entries in the books of third persons. Hon ble Bombay High Court held that such addition could not be made only on the basis of the notings in the books of third persons. The facts of the present case are covered by the decision of Lata Mangeshkar (supra). It is a settled legal position that the decision of jurisdictional High Court is binding on all authorities below it. Thus, the reliance placed by the Assessing Officer on the loose papers is not justified at all. Therefore, the question of making any addition is not justified in the absence of other corroborative evidence to that effect. The assessee from the very beginning has denied to have received any such payment from M/s. Dhariwal group through Mr. Sohan Raj Mehta and since no incriminating material was found from the residence of the assessee during the course of search and since the assessee is not dealing with M/s. Dhariwal group in his individual capacity, therefore, respectfully following the decisions cited above and in view of our reasonings given earlier, we are of the considered opinion no addition in the hands of the assessee can be made. Since it is held that the assessee has not received any amount, therefore, the question of taxing the same u/s.56(2)(vi) as held by CIT(A) does not arise. In this view of the matter, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition In the present case no corroborative evidence whatsoever was found or brought on record to show that the assessee has infact received the money. Neither the statement of Shri Sohanraj Mehta was given to the assessee nor the request of the assessee to cross examine Shri Sohanraj Mehta was provided to the assessee. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reassessment proceedings.
2. Addition under Section 69A of the Income Tax Act for unexplained money.

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The assessee challenged the reassessment proceedings initiated under Section 147 of the Income Tax Act, arguing that the assessment should have been completed under Section 153C since the documents were seized from a third party. The reassessment was also challenged as it was initiated beyond the expiry of four years from the end of the relevant assessment year. The assessee contended that the documents seized during the search on Shri Sohanraj Mehta were not in the handwriting of the assessee and did not contain any acknowledgment of receipt by the assessee. The assessee also argued that the source of the alleged payments should be taxed in the hands of the payer, not the recipient.

The Appellate Tribunal dismissed the grounds challenging the validity of the reassessment proceedings as 'not pressed' by the assessee.

2. Addition under Section 69A for Unexplained Money:
The addition of Rs. 2 crores under Section 69A was based on documents seized during the search on Shri Sohanraj Mehta, which indicated payments to the assessee. The assessee denied any business connection with Shri Sohanraj Mehta and argued that no corroborative evidence was provided to prove the receipt of the amount. The assessee also contended that the statement of Shri Sohanraj Mehta was not provided, and the opportunity to cross-examine him was not granted.

The Tribunal found that the addition was based solely on the notings in the seized documents without any corroborative evidence. It was noted that the statement of Shri Sohanraj Mehta, who allegedly made the payments, was not provided to the assessee, nor was the assessee allowed to cross-examine him. The Tribunal cited several cases where similar additions based on third-party documents were deleted due to lack of corroborative evidence and the denial of the opportunity to cross-examine the third party.

The Tribunal referenced the case of Shri Vinit Ranawat, where similar additions based on documents seized from Shri Sohanraj Mehta were deleted. The Tribunal emphasized that the presumption under Section 132(4A) of the Income Tax Act applies only to the person from whom the documents are seized, not to third parties. The Tribunal also highlighted the importance of providing the assessee with the opportunity to cross-examine the third party whose statements are used against them.

The Tribunal concluded that no addition under Section 69A is justified in the absence of corroborative evidence and the denial of the opportunity to cross-examine Shri Sohanraj Mehta. Consequently, the Tribunal set aside the order of the CIT(A) and directed the AO to delete the addition of Rs. 2 crores for the assessment year 2004-05.

Conclusion:
The Tribunal allowed the appeals filed by the assessee, deleting the additions made under Section 69A for both assessment years 2004-05 and 2005-06, due to lack of corroborative evidence and procedural lapses in not providing the opportunity to cross-examine the third party.