2019 (10) TMI 912 - AT - Income Tax

On money received on sale of property - undisclosed / un accounted sales consideration received against sale of property over and above the apparent and declared sales consideration which is as per registered sale deed - HELD THAT - When the addition has not been made in the hands of the buyer, who is the source of the cash payment to the seller (assessee), no addition can be made in the hands of the assessee. In fact the addition should have been made in the hands of the buyer on account of cash paid to the seller and in the hands of the seller as unaccounted sale consideration subject to capital gains tax. Even otherwise the assessee has requested for the cross-examination of Sri Honey Gupta as well as the broker during the assessment proceedings however same has been denied. The only evidence available with the Assessing Officer is the statement of Mr. Honey Gupta and the broker which has been used against the assessee for making the addition. When the assessee had specifically asked for the cross-examination and if same was not given to the assessee, the addition cannot be made in the hands of the assessee, as denial of opportunity to the assessee to cross-examine the witness whose statements were made the sole basis of the assessment is a serious flaw rendering the order as nullity in as much as it amounted to violation of the principles of the natural justice as held in ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II 2015 (10) TMI 442 - SUPREME COURT - In view of this we do not have any other alternative but to direct the learned assessing officer to delete the addition made in the hands of the assessee over and above the declared sales consideration towards the sale of the property for the computation of the capital gain - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of ?1,70,00,000 as alleged undisclosed/unaccounted sales consideration received against the sale of property.
2. Adverse inference taken without providing complete material and opportunity for cross-examination.
3. Consideration of alleged receipts in the wrong assessment year.
4. Legality of proceedings for not initiating and issuing notices to all legal heirs.

Issue-wise Detailed Analysis:

1. Addition of ?1,70,00,000 as Alleged Undisclosed/Unaccounted Sales Consideration:
The primary issue in this case is the addition of ?1,70,00,000 to the assessee's income, based on the alleged cash payment received over and above the declared sales consideration of ?1,40,00,000 for the sale of a property. The Assessing Officer (AO) relied on statements from Shri Honey Gupta and Shri Naveen Nangia, which claimed that the actual sale consideration was ?3.10 crores, with ?1.70 crores paid in cash. The AO added this amount to the assessee's income as undisclosed income. However, the assessee argued that the property was sold to Shri Avdhesh Mittal for ?1.40 crores, and the transaction was registered in the name of Smt. Santosh Rani Gupta on Mittal's instructions. The assessee contended that no cash payment was received, and the addition was based solely on statements without corroborative evidence.

2. Adverse Inference Taken Without Providing Complete Material and Opportunity for Cross-Examination:
The assessee argued that the addition was made without providing complete material collected during the investigation and without allowing the opportunity to cross-examine the witnesses whose statements were used against him. The AO did not grant the assessee the opportunity to cross-examine Shri Honey Gupta and Shri Naveen Nangia, which the assessee claimed was a violation of natural justice. The Tribunal noted that the statements were recorded at the back of the assessee and that the cross-examination was specifically requested but denied. The Tribunal held that denial of the opportunity to cross-examine the witnesses whose statements formed the sole basis of the assessment rendered the order a nullity, citing the Supreme Court's decision in 281 CTR 241.

3. Consideration of Alleged Receipts in the Wrong Assessment Year:
The assessee contended that even if the alleged cash payment of ?1.70 crores was considered, it could not be attributed to the assessment year 2010-11. The sale deed was registered, and possession was given in November 2009, falling within the financial year 2009-10. The statement of Shri Honey Gupta indicated that the payment was made in the financial year 2010-11, creating a discrepancy. The Tribunal noted this contradiction and found that the addition could not be sustained based on the conflicting statements regarding the timing of the alleged payment.

4. Legality of Proceedings for Not Initiating and Issuing Notices to All Legal Heirs:
The assessee also raised the issue of the legality of the proceedings, arguing that the notices were not issued to all legal heirs, thereby not allowing their participation. However, the Tribunal's decision primarily focused on the lack of opportunity for cross-examination and the contradictions in the statements, which were sufficient to reverse the addition.

Conclusion:
The Tribunal concluded that the addition of ?1,70,00,000 could not be sustained due to the denial of the opportunity for cross-examination, contradictions in the statements regarding the timing of the alleged payment, and the lack of corroborative evidence. The Tribunal directed the AO to delete the addition, allowing the assessee's appeal.