2018 (11) TMI 44 - AT - Income Tax

Addition u/s 69C - Addition under the head cash payments made to the tenants - expenditure remains unexplained and being unaccounted - CIT-A restricted part addition - addition made on the basis of certain payments appearing on the back side of page No.102 of Annexure A-I seized during the course of search - Held that - We find from records of the case that the facts are clear that these payments, if at all, have been made or are received by Grishma Constructions & Trading Pvt. Ltd and not by the assessee, as the front side of the same page has got details relating to the project being undertaken by Grishma Constructions on the land owned by Ram Panchayat Trust. We have noted that the CIT(A) has observed this fact but noted that Grishma Constructions also not owned up these transactions and these transactions have not been considered in its hands during the assessment made in its case. He further noted that the additions made by the AO, as of now, unless and until the assessee group owns up such transactions elsewhere is to be added here. As for as payment to Shri Desai is concerned, the CIT(A) partly rejected this page by observing that sufficient evidence has been made available by the assessee, as this payment has been made through cheque and an agreement in this regard has been entered into between Shri Desai and Grishma Constructions & Trading Pvt. Ltd. As regards payment to other parties the facts of the case are that these payments pertains to Grishma Constructions or are received by Grishma Construction. Hence, we are of the view that this paper belongs to Grishma Constructions & Trading Pvt. Ltd and not the assessee even though they are closely related parties. We find that these payments had been made to the tenants of Ram Panchayat Temple Trust, apparently, for vacation of property of Grishma Constructions & Trading Pvt. Ltd whose project was going to start. Further it is also a fact that the Pluto Project was undertaken by Grishma Construction & Trading Pvt. Ltd. by entering into MoU for development of property of Ram Panchayat Temple Trust, Borivali Mumbai dated 02.07.2004. These facts also confirm that only interested party for vacation of property from tenants was Grishma Construction & Trading Pvt. Ltd and not the assessee. Hence, we delete the addition - Decided in favour of assessee.

Summary

Issues:
Appeal against CIT(A)'s order restricting addition of cash payments to tenants made by AO.

Analysis:
The appeal arose from CIT(A)'s order limiting the addition of ?69.55 lakhs out of total ?88.50 lakhs made by the AO under cash payments to tenants. The assessee contended that no such addition was warranted, challenging CIT(A)'s decision. The AO, based on a seized document, added the unexplained cash payments under section 69C of the Income Tax Act, 1961. The CIT(A) restricted the addition to ?69.55 lakhs paid to certain tenants, deleting the balance amount. The Tribunal heard arguments and examined the facts.

The assessee, a Director of a construction and trading company, faced a search operation leading to the AO's assessment under section 153A. The AO relied on a seized document showing cash payments to tenants. The CIT(A) restricted the addition to specific tenants, based on explanations provided. The Tribunal analyzed the seized document and the nature of payments made.

The Tribunal considered the front and back sides of the seized document, noting that the payments were related to a project undertaken by a group concern of the assessee, not by the individual. The Tribunal observed that the payments were made to tenants by the construction company, not the assessee personally. The Tribunal highlighted that sufficient evidence was provided for some payments, while clarification was lacking for others. The Tribunal concluded that the payments were made by the construction company for property vacation, not by the assessee, ultimately deleting the addition.

In conclusion, the Tribunal allowed the assessee's appeal, emphasizing that the payments were made by the construction company, not the individual assessee. The Tribunal considered the project details and ownership of transactions, leading to the deletion of the addition. The decision was pronounced in favor of the assessee on 29-10-2018.