2016 (7) TMI 1081 - AT - Income Tax

Undisclosed purchases - whether vendees have paid more amounts in cash to the vendor for purchase of land? - Held that - No doubt the Revenue was able to collect information for initiating inquiry but failed to bring clinching evidence on record demonstrating the fact that vendees have paid more amounts in cash to the vendor for purchase of land. This fact may be appreciated with the different angle also. The sale deed was executed on 11.8.2008. The assessees have come to know about the dispute of the land. Then, why they will pay rest of ₹ 20,66,500/- in the accounting year relevant to the Asstt.Year 2009-10. The AO has assumed payment of cash at the end of the assessee simply for the reasons that the investment is being made by the vendor, but that cannot be a plausible reason. The AO should have collected concrete evidence demonstrating the fact that the payment of amount in cash, over and above, one stated in the sale deed. Taking into consideration these facts,allow all the appeals of the assessee and delete addition in each hands of the assessees in the Asstt.Year 2008-09 (except from the hand of Manibhai V. Patel, because status of his appeal is not available at this stage) and in the Asstt.Year 2009-10. - Decided in favour of assessee

Summary

Issues Involved:
1. Penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961.
2. Assessment orders under sections 143(3)/144/153C of the Income Tax Act.
3. Jurisdiction transfer under section 127 of the Income Tax Act.
4. Condonation of delay in filing appeals.
5. Merits of the assessment orders and statements recorded under section 132(4) of the Income Tax Act.
6. Right to cross-examine witnesses.

Detailed Analysis:

1. Penalty Proceedings under Section 271(1)(c) of the Income Tax Act, 1961:
The appeals ITA No.2723/Ahd/2015 and 2722/Ahd/2011 arose from penalty proceedings initiated against the assessees under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal allowed the claim of the assessee and deleted the addition, thereby nullifying the basis for imposing the penalty. Consequently, the penalty imposed under section 271(1)(c) was deleted, and the appeals of the assessees were allowed.

2. Assessment Orders under Sections 143(3)/144/153C of the Income Tax Act:
The remaining eleven appeals arose from assessment orders passed under sections 143(3)/144/153C of the Income Tax Act. The facts were common across these appeals, and the Tribunal took the facts from ITA No.482/Ahd/2012 and 3012/Ahd/2011. The assessment orders were based on a search and seizure operation conducted under section 132, where it was disclosed that the land was sold for a higher consideration than stated in the sale deed. The AO added the difference as undisclosed income in equal shares to the hands of the appellants.

3. Jurisdiction Transfer under Section 127 of the Income Tax Act:
The jurisdiction over the assessees was transferred to ACIT/DCIT, CC-1 (3), Ahmedabad by an order under section 127 of the Income Tax Act, dated 26.3.2009. The assessees contended that they did not receive the order of transfer and hence did not respond to subsequent notices, leading to ex parte assessment orders.

4. Condonation of Delay in Filing Appeals:
Two appeals were time-barred by five and a half months. The assessees explained the delay by stating that they had handed over their income-tax proceedings to a chartered accountant's firm, where a clerk misplaced the papers. The Tribunal found the explanation satisfactory and condoned the delay, allowing the appeals to proceed.

5. Merits of the Assessment Orders and Statements Recorded under Section 132(4) of the Income Tax Act:
The Tribunal evaluated the statements recorded under section 132(4) and found that none of the vendors mentioned the names of the assessees. The Tribunal noted that the AO failed to gather corroborative evidence and relied solely on the statements of the vendors. The Tribunal emphasized that the AO should have collected concrete evidence demonstrating the payment of amounts in cash over and above the stated sale consideration.

6. Right to Cross-Examine Witnesses:
The assessees requested the opportunity to cross-examine the vendors, which was not granted. The Tribunal referred to the Supreme Court decision in the case of Andaman Timber Industries, which held that not allowing cross-examination violates the principles of natural justice. The Tribunal concluded that the evidence against the assessees should be excluded as they were not given a fair opportunity to cross-examine the witnesses.

Conclusion:
The Tribunal allowed all the appeals of the assessees, deleted the additions made by the AO, and set aside the penalties imposed under section 271(1)(c) of the Income Tax Act. The order was pronounced on 14th June 2016 at Ahmedabad.