2019 (7) TMI 1773 - AT - Income Tax

Additions towards cash payment u/s 69A for purchase of flats - assessee has failed to bring on record the source of cash of ₹ 1 crore paid to the M/s Nish Developers P. Ltd. - CIT(A) granting relief with regards to the additions made in the hands of third party - CIT(A) after considering relevant submissions of the assessee and also taken into account additional evidence filed by the assessee came to the conclusion that when the person who gave statement u/s 132(4), retracted from his admission by filing a sworn affidavit, the AO was erred in reaching to the conclusion that the assessee has paid cash for booking flat - HELD THAT - AO has relied upon information received from DDIT (Inv.) as per which the CEO and trusted employee of M/s Nish Developers P.Ltd., in the statement recorded during search proceedings have admitted the fact of receiving cash for booking of flats. Except this, the AO has not carried out any independent enquiry to find out the truth in light of statement recorded from CEO of M/s. Nish Developers P.Ltd. towards cash payment made for bookings flats. The assessee has also filed copy of purchase deed which was executed on 24/12/2013 and market value of the said flat has been determined by the Registrar at ₹ 2,72,20,000/- for the purpose of stamp duty. When the market value of the flat which was agreed to be purchased in 2010 for a purchase of price ₹ 2, 75,00,000/- is determined after more than three years by the Sub Registrar at ₹ 2,72,20,000/-, there is no reason for the AO to make additions towards alleged cash payment only on the basis statement of some persons, more particularly when the persons who gave such statements have been subsequently retracted statement by filing a sworn affidavit. The Ld. CIT(A) after considering relevant facts and also by following the decision of Hon ble Supreme Court in the case of Shri. Kishanchand Chellaram 1980 (9) TMI 3 - SUPREME COURT held that the AO has made additions without conducting any independent enquiry and solely on the basis of information received from DDIT (Inv.) without there being any further evidences to support his findings that a sum of ₹ 100 Lacs alleged to have been paid in cash by the assessee. We do not find any error in the findings of CIT(A) - Decided against revenue.

Summary

Issues Involved:
1. Whether the addition of ?1 crore as unexplained money under Section 69A of the IT Act, 1961, based on alleged cash payments for booking a flat, was justified.
2. Whether the statements recorded from the CEO and an employee of the builder, which were subsequently retracted, can be relied upon for making the addition.

Detailed Analysis:

Issue 1: Addition of ?1 crore as unexplained money under Section 69A

The assessee filed a return of income for AY 2013-14, declaring a total income of ?12,37,820. During scrutiny, the AO found information from DDIT (Inv.) indicating that the assessee made a cash payment of ?1 crore to M/s Nish Developers Pvt. Ltd. for booking a flat. Statements from the CEO and an employee of Nish Developers admitted receipt of the cash. The AO, relying on these statements, added ?1 crore as unexplained money under Section 69A of the IT Act, 1961.

The AO's findings were based on the fact that the builder did not deny the receipt of cash but stated it was not recorded in their books. The AO concluded that the assessee failed to explain the source of the ?1 crore paid in cash on specific dates and thus added the amount to the assessee's income, initiating penalty proceedings under Section 271(1)(c) for concealment.

Issue 2: Reliability of retracted statements

The assessee appealed to the CIT(A), arguing that no cash was paid, and the builder denied receiving any cash. The statements from the builder's employee were retracted via an affidavit, and the builder confirmed that all payments were made through banking channels. The CIT(A) observed that the AO did not provide copies of the statements or allow cross-examination, violating principles of natural justice. The CIT(A) noted that the market value of the flat was less than the purchase price, negating the need for cash payments. The CIT(A) relied on the Supreme Court's decision in Kishanchand Chellaram v. CIT, which emphasized that retracted statements could not be relied upon without further evidence. Consequently, the CIT(A) deleted the addition of ?1 crore.

The revenue appealed to the ITAT, arguing that the CIT(A) erred in deleting the addition and that the AO's findings were based on clear facts from the builder's statements. The revenue contended that the retraction was self-serving and lacked credibility.

The ITAT reviewed the case and found that the AO relied solely on the DDIT's information and did not conduct an independent inquiry. The ITAT noted that the assessee provided an agreement showing the flat's value and payments made through banking channels. The ITAT upheld the CIT(A)'s decision, stating that the AO's addition was based on suspicion without supporting evidence. The ITAT dismissed the revenue's appeal, affirming that the addition of ?1 crore was unjustified.

Conclusion:

The ITAT concluded that the AO's addition of ?1 crore as unexplained money under Section 69A was not justified, as it was based on retracted statements and lacked independent inquiry or supporting evidence. The appeal filed by the revenue was dismissed.