2020 (12) TMI 444 - AT - Income Tax

Assessment u/s 153A - Addition u/s 69 - on money payment made by the assessee - AO has failed to allow cross examination of key witness Shri Praveen Mishra, an employee of the builder before making addition - HELD THAT - In this case for on money payment for the booking of flat is solely based upon the pendrive drive and the statement of the employee of the builder. The same has been retracted. Apart from the above there is no other corroborative material. Assessee during the course of search has admitted to have paid ₹ 2.08 crore for amenities in cash. This was duly offered for assessment in the case of the company of the assessee where he was director and the same has been accepted by the Department. No addition on this account has been done by the assessing officers also. As regards the addition based upon the statement of the employee of the builder proposed by the assessing officer, the assessee has duly explained that if the same is accepted as correct then the rate of flat in October 2010 would be ₹ 51,500 As noted by the learned CIT(A) despite extensive search no other material of on money was seized except for the admission of the assessee for the amount paid for the amenities, which were duly offered to tax in the hands of the assessee s company in which he was director - there is no other material on record to suggest that the value of the flat would be at that rate assigned by the assessing officer. It is also not the case that assessing officer had sent the matter for valuation by the DVO. In similar circumstances when there was allegation of on money paid, honourable Madras High Court in the case of P.V. Kalyansundaram 2006 (2) TMI 79 - MADRAS HIGH COURT found that non-reference to DVO is fatal. In the said case on money/addition solely based upon scribblings/jottings was found to be non- sustainable. The honourable Supreme Court had duly affirmed the said decision reported in the case of Commissioner of Income Tax vs. P.V. Kalyanasundaram ( 2007 (9) TMI 25 - SUPREME COURT The other case laws referred by learned CIT(A) are also germane and support the case of the assessee. Hence in our considered opinion on the facts and circumstances of the case when the addition is solely based upon builder s employee statement, which has been retracted and without any corroborative material brought on record, the same is not sustainable. The case laws cited above duly support this proposition. As already noted above the assessing officer having not referred the matter to the DVO for valuation has committed a fatal error. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition of ?5,54,92,000/- under Section 69 of the Income Tax Act, 1961.
2. Jurisdictional challenge by the assessee regarding the addition made without incriminating material in an assessment under Section 153A of the Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?5,54,92,000/- under Section 69 of the Income Tax Act, 1961:

The Revenue contested the deletion of an addition of ?5,54,92,000/- by the CIT(A), arguing that the assessee was not provided an opportunity to cross-examine Shri Praveen Mishra, whose statement was pivotal in making the addition. The CIT(A) had noted that the statement of Shri Praveen Mishra, an employee of Nish Developers Pvt. Ltd., was retracted and that the assessee was not given a chance to confront him. The CIT(A) concluded that the addition was based solely on the retracted statement without any corroborative evidence.

The Tribunal upheld the CIT(A)'s decision, emphasizing that the addition was based on the pendrive and the retracted statement of the employee without any corroborative material. The Tribunal noted that the assessee had admitted to paying ?2.08 crores for amenities, which was offered for assessment and accepted by the Department. The Tribunal found the rate of ?51,500 per square foot, as suggested by the Assessing Officer, to be unrealistic compared to the rate of ?28,000 to ?30,000 per square foot in November 2014. The Tribunal also highlighted the lack of any material seized during the search to support the addition and the failure of the Assessing Officer to refer the matter for valuation by the DVO, which was considered a fatal error.

2. Jurisdictional Challenge by the Assessee Regarding the Addition Made Without Incriminating Material in an Assessment Under Section 153A of the Act:

The assessee challenged the jurisdiction of the Assessing Officer to make the addition without any incriminating material found during the search. The CIT(A) rejected this challenge, stating that the information regarding the payment of on-money for the purchase of flats was part of the search and could be considered incriminating material. However, the Tribunal did not engage in the adjudication of this issue, as it had already confirmed the deletion of the addition on merits.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order deleting the addition of ?5,54,92,000/-. The Tribunal found that the addition was not sustainable as it was based solely on the retracted statement of the builder's employee without any corroborative evidence. The Tribunal also noted the unrealistic rate applied by the Assessing Officer and the lack of any material seized during the search to support the addition. The Tribunal did not address the jurisdictional challenge raised by the assessee, considering it to be of academic interest after confirming the deletion of the addition on merits.

Order Pronouncement:

The order was pronounced under Rule 34(4) of the ITAT Rules by placing the result on the notice board on 07.12.2020.