2019 (4) TMI 2155 - AT - Income Tax

Reopening of assessment - unexplained investment in plot - on-money on purchase of the plot - information received from Investigation Wing, Jaipur by the A.O as one Sh. Madan Mohan Gupta has accepted on money receipt on sale of Revenue Residency Scheme which is Rs. 2000/- per square yard. - whether no opportunity for the cross examination of the person on whose statement addition was made? - HELD THAT - Under similar facts, the addition made on account of on money was deleted after following the observation made in the case of Dhirendra Singh 2019 (3) TMI 2029 - ITAT JAIPUR wherein held addition made by AO merely on the basis of statement, when there is no corroborative material with AO suggesting the alleged addition, without allowing assessee an opportunity to cross examine the person on whose statement addition was made. Accordingly, AO is directed to delete the addition so made - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of the assessment.
2. Addition of Rs. 4,66,660/- as unexplained investment in the plot.

Issue-wise Detailed Analysis:

1. Reopening of the Assessment:
The assessee contested the reopening of the assessment. The assessment was reopened based on information received from the Investigation Wing, Jaipur, indicating that one Sh. Madan Mohan Gupta had accepted on-money receipts on the sale of plots in the Revenue Residency Scheme. The Tribunal found that the reopening of the assessment was not justified as there was no concrete material evidence provided by the lower authorities to substantiate the claim of on-money payments. The Tribunal referred to previous similar cases, such as Dhirendra Singh Vs. ITO, where the reopening of assessments under similar circumstances was found to be without merit.

2. Addition of Rs. 4,66,660/- as Unexplained Investment in the Plot:
The main contention was the addition of Rs. 4,66,660/- by the Assessing Officer (A.O.) as unexplained investment under Section 69 of the Income Tax Act, 1961. The A.O. based this addition on the statement of Sh. Madan Mohan Gupta, which suggested that on-money payments were made for the plot. However, the Tribunal observed that there was no direct evidence linking the assessee to the alleged on-money payment. The seized documents and statements of Sh. Madan Mohan Gupta did not explicitly mention any on-money received from the assessee. Moreover, the assessee had purchased the plot from Rajasthan Tehsildar Sewa Parishad, not directly from Sh. Madan Mohan Gupta, indicating no privity of contract between the assessee and Gupta.

The Tribunal also noted that the assessee was denied the opportunity to cross-examine Sh. Madan Mohan Gupta, which is a violation of the principles of natural justice. This denial undermined the validity of the addition. The Tribunal cited several judicial precedents, including the Supreme Court's decision in Andaman Timber Industries, which emphasized the necessity of cross-examination to uphold the principles of natural justice.

Additionally, the Tribunal referenced similar cases, such as Shri Mehtab Singh Ujjawal Vs. ITO and Shri Deva Ram Suthar, where additions based on similar grounds were deleted due to lack of corroborative evidence and denial of cross-examination.

Conclusion:
The Tribunal concluded that both the reopening of the assessment and the addition of Rs. 4,66,660/- lacked merit. The A.O. was directed to delete the addition, and the appeal filed by the assessee was allowed. The judgment emphasized the importance of concrete evidence and adherence to principles of natural justice in tax assessments.