2021 (10) TMI 6 - AT - Income Tax

Addition of on-money paid by the assessee to the Builder for purchasing the flat - assessee submitted that all the payments were made through banking channels only - CIT-A deleted the addition - HELD THAT - Except for entry in the pen-drive, there is nothing in the kitty of Ld. AO to conclude that the assessee paid on-money to the builder. The additions were made purely on the basis of third-party entry. Except for allegation, there is nothing on record which would indicate that the assessee has paid cash to the builder. Assessee was non-resident and residing in Spain. The assessee did not have any source of Income in India which is evident from the fact that it filed Nil return of income. It was not possible to bring such amount of cash from Spain to India otherwise than through banking channels. The Ld. CIT(A) has clinched the issue in right perspective. Finding no reason to interfere in the same, we dismiss the appeal.

Summary

Issues:
1. Addition of on-money paid to the Builder for acquiring a flat.
2. Application of section 132(4A) of the IT Act in the assessment.

Analysis:

Issue 1: Addition of on-money paid to the Builder for acquiring a flat
The appeal by the revenue for Assessment Year 2013-14 challenged the deletion of an addition of ?1,95,20,000 made in the assessment order on account of "On-Money" paid to the Builder. The revenue contended that the deletion was improper despite admissions of on-money receipt by the Employee/Director/Partner during a search operation on the Builder group. The material facts revealed that the assessee, a non-resident, was alleged to have paid on-money to purchase a flat. However, the assessee denied the allegation, stating that all payments were made through banks. The Ld. AO added the amount based on information from a seized pen-drive and admissions during search operations. The Ld. CIT(A) observed that the burden of proof for unaccounted income on a non-searched person would require additional material evidence linking the assessee directly. As there was no evidence of cash flow and considering the non-resident status of the assessee, the additions were deemed unjustified, leading to the appeal's dismissal.

Issue 2: Application of section 132(4A) of the IT Act in the assessment
The revenue contended that the provisions of section 132(4A) of the IT Act should apply in the assessment, arguing that the contents of documents found during a search operation are presumed true, thereby validating the transaction between the assessee and the searched person. However, the Ld. CIT(A) clarified that this presumption applies to the searched person and not a third party. The Ld. CIT(A) emphasized the need for corroborative evidence to link the assessee directly to unaccounted transactions. The judgment highlighted that mere third-party entries without supporting evidence cannot form the basis for adding unaccounted income to a non-searched person's assessment. The dismissal of the appeal affirmed the Ld. CIT(A)'s decision based on the lack of concrete evidence linking the assessee to the alleged on-money payment.

In conclusion, the judgment emphasized the importance of substantial evidence and direct linkage in adding unaccounted income to an assessee's assessment, especially when dealing with non-resident individuals and third-party transactions. The dismissal of the appeal upheld the principle that mere allegations without concrete proof are insufficient to justify additions in assessments.