2016 (8) TMI 460 - AT - Income Tax

Validity of jurisdiction of AO under sec. 153A - addition on account of unexplained source of investment in cash in a project on the basis of material found during the search at the premises of Aerens group - Held that - A huge addition of ₹ 3,21,00,000 cannot be made in a casual manner without having corroborative evidence in support. It is a prevailing practice in the dealings of immoveable properties that cash amount, if any, out of the agreed consideration is paid during the course of execution/registration of the sale deed and admittedly in the present case no sale deed or other mode of transfer has been effected. Merely because name of the assessee is appearing in the said hard disc and amongst other investors are investor Shri I.E. Soomar appearing in the said hard disc has admitted payment of cash amount, cannot be a basis for arriving at a definite conclusion, in absence of corroborative evidence in support, that the assessee had also paid the amount of ₹ 3,21,00,000 in cash. Assessing Officer was not justified in assuming jurisdiction under section 153A and authorities below were also not justified in making and sustaining the addition in question merely on the basis of a hard disc found during the course of search at the premises of Aerens Group without any corroborative evidence in support. We thus hold that the assessee/appellant succeeds on both the above issues i.e. on validity of assumption of jurisdiction under sec. 153A and the addition in question. The grounds involving the above issues are accordingly allowed in favour of assessee

Summary

Issues:
1. Validity of jurisdiction assumed under sec. 153A.
2. Addition of ?3,21,000 as unexplained source of investment in cash in a project.

Issue 1: Validity of jurisdiction under sec. 153A
The case involved a search and seizure operation at Aerens group premises and the assessee's premises. The Assessing Officer made an addition of ?3,21,00,000 as undisclosed investment in the Indrapuram Habitat Centre based on a hard disc found during the search at Aerens group, showing the name of the assessee with cash payment. The assessee denied the cash payment, but the authorities upheld the addition. The AR argued that no incriminating material was found at the assessee's premises, and the AO wrongly made the addition without giving an opportunity to cross-examine. The AR also disputed the authenticity of the seized material and highlighted discrepancies in the evidence. The AR contended that no assessment was pending on the date of search, and thus, no assessment could be framed under sec. 153A against the assessee. The AR relied on various decisions to support this argument.

Issue 2: Addition of ?3,21,000 as unexplained source of investment in cash
The AR reiterated that no incriminating material was found at the assessee's premises, and the addition was made solely based on the hard disc found at Aerens group. The AR argued that the assessee consistently denied the alleged cash payment and pointed out inconsistencies in the department's case. The AR emphasized that no sale deed had been executed, and the practice in property dealings suggests cash payments are made during registration. The AR highlighted the lack of corroborative evidence supporting the addition and referred to legal precedents where additions based on similar grounds were not upheld. The ITAT held that the AO lacked jurisdiction under sec. 153A and the addition was not justified based solely on the hard disc without corroborative evidence. Consequently, the ITAT allowed the appeal, ruling in favor of the assessee on both issues.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, arguments presented by both parties, legal precedents cited, and the final decision rendered by the ITAT.