2015 (11) TMI 437 - AT - Income Tax

Addition on receipt of on-money - CIT(A) deleted the addition on the ground that there was no such admission by any of the directors regarding receipt of on-money. He had offered an amount of ₹ 1.91 crores only to cover up any omission, deficiencies and to maintain harmony with department - whether no documentary evidence was found during the course of search or post search enquiry evidencing receipt of on-money by the assessee company - Held that - From the copy of the assessment order we find the basis of addition of ₹ 50 lakhs by the AO is merely on presumptions and surmises without any evidence whatsoever found during the course of search or post search enquiries that the assessee has infact received any such on-money. There is also no corresponding discussion in the assessment order regarding the statement of the owners admitting payment of on-money or any alleged incriminating evidence establishing such payments. Therefore, when there was no evidence found during the course of search or post search enquiries that the assessee has received any on-money on account of sale of flat No.A-202 and since neither the statement of the owners of flat No.A-202 was provided to the assessee nor the request of the assessee to cross examine the owners of flat No.A-202 was provided despite repeated request during the assessment proceedings and since the entire addition is based on presumptions and surmises, therefore, we do not find any infirmity in the order of the Ld.CIT(A) deleting the addition of ₹ 50 lakhs made by the AO on account of on-money received in respect of flat No. A-202. In this view of the matter and in view of the detailed reasoning given by the Ld.CIT(A) deleting the addition, the same is upheld and the grounds raised by the Revenue are dismissed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the addition of Rs. 50,00,000/- as on-money receipts.
2. Adequacy of evidence provided by the Assessing Officer (AO).
3. Adherence to principles of natural justice.
4. Justification of CIT(A)'s decision to delete the addition.

Issue-wise Detailed Analysis:

1. Legality of the Addition of Rs. 50,00,000/- as On-Money Receipts:
The AO added Rs. 50,00,000/- to the total income of the assessee based on alleged on-money receipts for Flat No. A-202. The AO's addition was grounded on the statements and documents seized during the search, which indicated discrepancies between the documented cost and the actual sale price of flats. The AO concluded that these discrepancies represented on-money receipts.

2. Adequacy of Evidence Provided by the Assessing Officer (AO):
The CIT(A) found that the AO's addition was based on presumptions and lacked concrete evidence. The AO relied on the statement of Ms. Chaitrali S. Karkare, who stated she was not involved in accounting and could not explain the discrepancies. Furthermore, the AO did not provide any documentary evidence or the statement of the owners of Flat No. A-202 to substantiate the claim of on-money receipts. The CIT(A) noted that no incriminating material or documents were found during the search to support the AO's conclusion.

3. Adherence to Principles of Natural Justice:
The CIT(A) observed that the AO did not grant the assessee an opportunity to cross-examine the individuals whose statements were used against them. This omission was considered a violation of the principles of natural justice. Despite repeated requests, the AO did not provide the assessee with the evidence or statements on which the addition was based.

4. Justification of CIT(A)'s Decision to Delete the Addition:
The CIT(A) deleted the addition of Rs. 50,00,000/- after considering the following points:
- Ms. Karkare's statement did not confirm the receipt of on-money.
- The director of the assessee company, Mr. Sudhir Darode, denied accepting on-money and offered Rs. 1.91 crores as additional income to cover any potential omissions and maintain harmony with the department.
- There was no independent discussion or evidence in the AO's assessment order to substantiate the claim of on-money receipts.
- The AO's addition was based on weak factual grounds and lacked concrete evidence.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 50,00,000/-, concluding that the AO's addition was based on presumptions and lacked substantial evidence. The Tribunal emphasized the importance of adhering to principles of natural justice and providing the assessee with an opportunity to cross-examine the evidence used against them. Consequently, the appeal filed by the Revenue was dismissed.