2016 (5) TMI 1501 - AT - Income Tax

Addition on receiving on-money - cash payment received from CCCPL - unaccounted investment for the purchase of land - taxability in the hands of individual assessee or company HELD THAT - Addition has been made on the allegation that the assessee-group has received Rs. 15.07 crores as discussed above as on-money from sale of land in question from CCPL. As discussed above in the case of Dr. Keyur Parikh and others 2013 (11) TMI 1242 - ITAT AHMEDABAD it has been held by the ITAT that there was no evidence in possession of Revenue to hold that the assessee made unexplained investments towards the purchase of land in question. Nothing contrary was brought to our knowledge on behalf of the Revenue. Since the assessee is a recipient in respect of the same property and it has been held by ITAT that in case of purchaser no unexplained investment has been made in respect of said property as discussed above. So the addition on receiving on-money in question in the hands of the assesseegroup are not justified unless there is evidence on the issue in favour of revenue which is missing in this case. Moreover revenue authorities ignored the fact that one of common directors of assessee companies namely Mr. Shekhar Patel had categorically denied having received cash amount on the sale of land in question. Revenue has ignored the same which is not justified. Assessees have not been provided cross examination of person who is alleged to have made payment of cash of Rs. 15.07 crores. to the assessees which is again not justified. Taking all the facts and circumstances of the case the addition made by the Revenue in all these groups alleged to be received from CCPL does not survive and same is directed to be deleted. This take care of main issue of on money in land deal in cases of all these assessees of this group. Disallowance of compensation paid - According to CIT(A) the assessee companies have not discharged the onus of proving the credit amount under the guise of compensation to Frontline Financial Services Ltd. - HELD THAT - Disallowance in question has been made mainly on account of denial by Tushar Shah as discussed above. The facts remain that main focus of revenue is on statement of Tushar Shah before ADIT (investigation). Irrespective of peculiar background of case assessees had right to cross examine Tushar Shah whose statement recorded by concern ADIT (investigation) has been mainly relied by revenue while making disallowance in question denial. Denial of opportunity of cross examination of said Tushar Shah is violation of principle of natural justice which is not justified. Taking all facts and circumstances into consideration we set aside this issue to CIT(A) with direction to decide the issue as per fact and law after providing due opportunity of hearing to both parties including cross examination of said Turshar Shah of FFSL by assessees as discussed above. Thus the second issue in all these appeals is allowed for statistical purposes.

Summary

Issues Involved:
1. Addition on account of alleged cash payment received from CCCPL.
2. Disallowance of compensation paid to Frontline Financial Services Pvt Ltd.

Detailed Analysis:

1. Addition on Account of Alleged Cash Payment Received from CCCPL:
Facts and Contentions:
- The Assessing Officer (AO) added Rs. 15.07 crores as cash received by the assessee companies, in addition to the cheque payment of Rs. 2.50 crores for the sale of land to CCCPL.
- The addition was based on seized documents and statements from six doctors associated with CCCPL who allegedly paid the cash.
- The assessees challenged the validity of the notice issued under section 153C, arguing that there was no incriminating material linking them to the alleged cash transactions.
- The assessees also contended that they were not given the opportunity to cross-examine the doctors whose statements were used against them.

CIT(A) Findings:
- The CIT(A) upheld the AO's addition, noting that the seized documents and statements of the doctors provided sufficient grounds for the addition.
- The CIT(A) rejected the assessees' contention regarding the invalidity of the notice under section 153C, stating that the documents seized indicated that the assessees received cash payments.

Tribunal's Analysis:
- The Tribunal noted that the AO did not provide the assessees with the opportunity to cross-examine the doctors, which violated the principles of natural justice.
- The Tribunal referenced the ITAT's decision in the case of Dr. Keyur Parikh & Others, where it was held that there was no evidence of unexplained investments towards the purchase of land.
- The Tribunal concluded that since the ITAT had already ruled in favor of the purchasers (Dr. Keyur Parikh & Others), the addition on account of alleged cash payments in the hands of the assessees was not justified.
- The Tribunal directed the deletion of the addition of Rs. 15.07 crores in the hands of the assessees.

2. Disallowance of Compensation Paid to Frontline Financial Services Pvt Ltd:
Facts and Contentions:
- The assessees claimed deductions for compensation paid to Frontline Financial Services Pvt Ltd (FFSL) for the termination of a development agreement.
- The AO disallowed the compensation, arguing that the agreement and the compensation were fabricated to reduce tax liability.
- The AO noted that FFSL's director, Tushar Shah, denied receiving the compensation.

CIT(A) Findings:
- The CIT(A) upheld the AO's disallowance, citing the statement of Tushar Shah, who denied receiving the compensation.
- The CIT(A) also noted that the assessees failed to produce Tushar Shah for cross-examination, despite being given the opportunity.

Tribunal's Analysis:
- The Tribunal found that the denial of cross-examination of Tushar Shah was a violation of the principles of natural justice.
- The Tribunal emphasized that the assessees had the right to cross-examine Tushar Shah, whose statement was crucial to the disallowance.
- The Tribunal set aside the issue to the CIT(A) with directions to provide the assessees the opportunity to cross-examine Tushar Shah and to decide the matter afresh based on the facts and law.

Conclusion:
The appeals were partly allowed for statistical purposes, with directions for the CIT(A) to reconsider the disallowance of compensation after providing the opportunity for cross-examination. The addition on account of alleged cash payments was deleted based on the principles of natural justice and the ITAT's prior decision in a related case.