2021 (5) TMI 149 - AT - Income Tax

Unexplained money - non-compliance of the rules of natural justice - assessee is one of the purchasers of Villa Plot in Emaar Hills Township (P) Ltd. and the villa plots were sold at a price higher than what is recorded in the MOU/Allotment letter of Registered Document - HELD THAT - As relying on SHRI G. MAHESH BABU VERSUS DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 7, HYDERABAD AND VICA-VERSA 2015 (12) TMI 986 - ITAT HYDERABAD issue relating to payment of on-money requires to be examined afresh by Assessing Officer after confronting evidence/material sought to be relied upon to the assessee and seeking his response on them. The Assessing Officer must also disclose to the assessee the material/information on the basis of which he has quantified the onmoney payment - If the Assessing Officer is able to establish on the basis of evidence gathered that the assessee has paid on- money to the extent quantified by him, then he can make the addition under S.69B. On the flip side, if there is no evidence available on record to directly link the assessee towards payment of on-money, then merely on the basis of the fact that some other buyers have accepted payment of on-money, no addition can be made. With the aforesaid observations, we remit the issue to the file of the Assessing Officer with a direction to re-decide the same afresh in accordance with law, after giving reasonable opportunity to the assessee, duly complying with the principles of natural justice - Assessee s appeal is allowed for statistical purposes.

Summary

Issues:
Assessment Year 2010-11 - Addition of unexplained money - Violation of natural justice - Reopening of assessment u/s 148 of the Act - Cross examination of third parties - Opportunity to rebut adverse material - Remand to Assessing Officer for reexamination.

Analysis:
The appeal pertains to the Assessment Year 2010-11 against the CIT (A)'s order. The Assessing Officer reopened the assessment under section 148 of the Act after discovering discrepancies related to the purchase of a Villa Plot in Emaar Hills Township. The investigation revealed that the recorded price was lower than the actual cash component paid by the assessee. The Assessing Officer relied on statements from company directors and marketing personnel to make additions to the assessee's income. The CIT (A) confirmed the assessment order, leading the assessee to appeal before the Tribunal on various grounds, including violation of natural justice and lack of opportunity to cross examine third parties.

The Tribunal referred to a similar case involving Shri G. Mahesh Babu, where the issue was remanded to the Assessing Officer for reexamination after finding a violation of natural justice. The Tribunal observed that the Assessing Officer failed to provide the assessee with the opportunity to rebut adverse material and cross examine witnesses. It emphasized the importance of adhering to the principles of natural justice, highlighting that no person should be condemned without a fair hearing. The Tribunal concluded that the addition made by the Assessing Officer could not be sustained due to the violation of natural justice.

Considering the precedent and principles of natural justice, the Tribunal set aside the assessment and remanded the issue to the Assessing Officer for reconsideration in accordance with the law. The Tribunal directed the Assessing Officer to provide the assessee with a fair opportunity of hearing and to disclose all material and evidence used to quantify the alleged unexplained money. The Tribunal stressed the need for a thorough reexamination of the issue, ensuring the assessee's right to rebut adverse material and cross examine relevant witnesses. Ultimately, the Tribunal allowed the assessee's appeal for statistical purposes, emphasizing the importance of procedural fairness and adherence to legal principles in tax assessments.

In conclusion, the judgment highlights the significance of upholding natural justice principles in tax assessments, ensuring that taxpayers have a fair opportunity to respond to adverse material and cross examine witnesses. The Tribunal's decision to remand the issue to the Assessing Officer underscores the importance of procedural fairness and thorough examination of evidence in determining tax liabilities.