2017 (1) TMI 886 - AT - Income Tax

Undisclosed income addition u/s.69 - Held that - We find that a unsigned paper was seized from the residential premises of one of the group members of the builders,that the group had made a disclosure of ₹ 22.50 crores,that there are two statements of same member of the group,that in one of the statements he had stated that in all the cases cash was not received,that the assessee had denied payment of cash for purchase of the shop, that he was not allowed to cross examine the builder.In our opinion,Rule 46A is not applicable to the facts of the case.The assessee had not filed additional evidences before the FAA,so,there was no justification for invoking the provisions of Rule 46A of the Rules. We find that in the case of Synthetic Hydro Carbon (2012 (9) TMI 1086 - ITAT MUMBAI),the Tribunal has dealt with the same issue.In that matter also a shop was purchased from the same vendor and on the basis of the seized paper the AO had made an addition to the income of the assessee wherein held that no material brought on record by the AO to substantiate his claim that assessee has actually paid ₹ 52,26,000/- over and above the cheque amount for the purchase of Shop No. 119 at Little World. The entire assessment has been made only on the basis of surmise, assumptions and conjectures. In our humble opinion, such additions cannot be sustained - Decided in favour of assessee

Summary

Issues involved:
1. Addition of undisclosed income based on cash payment for purchase of a shop.
2. Cross-examination of builder and admissibility of seized document as evidence.
3. Applicability of Rule 46A of the Income Tax Rules.
4. Comparison with a similar case involving a shop purchase.

Detailed Analysis:
1. The primary issue in this case was the addition of undisclosed income amounting to ?71 lakhs based on cash payment for the purchase of a shop. The Assessing Officer (AO) made this addition under section 69 of the Income Tax Act, 1961, after finding discrepancies in the sale agreement and seized documents related to the purchase. The First Appellate Authority (FAA) upheld the addition, citing the builder's admission of receiving cash and the lack of grounds for cross-examination during the assessment proceedings.

2. The second issue revolved around the request for cross-examination of the builder and the admissibility of the seized document as evidence. The FAA denied the cross-examination request, referring to Rule 46A of the Income Tax Rules, and relied on statements recorded by the Investigation Wing to support the addition of undisclosed income. The Appellate Tribunal, however, found discrepancies in the seized document and the builder's statements, leading to the reversal of the FAA's decision in favor of the assessee.

3. The applicability of Rule 46A of the Income Tax Rules was also a point of contention in the case. The Tribunal determined that Rule 46A did not apply to the facts of the case, especially since the assessee did not submit additional evidence before the FAA. This decision played a crucial role in the final outcome of the appeal.

4. Lastly, a comparison with a similar case involving a shop purchase was made to support the assessee's position. The Tribunal referenced a previous case where the FAA had deleted an addition to the income of an assessee based on similar grounds. By following the precedent set in the earlier case, the Tribunal decided the effective ground of appeal in favor of the assessee, ultimately allowing the appeal and overturning the addition of undisclosed income.

In conclusion, the judgment highlighted the importance of thorough examination of seized documents, adherence to procedural rules, and consistency in decision-making based on precedents to ensure fair outcomes in tax disputes.