2021 (10) TMI 359 - AT - Income Tax

Reopening of assessment u/s 147 - unaccounted cash receipts - on-money towards sale of shops / flats - addition based on one statement of Shri Suraj Parmar promoter of Cosmos group - abbreviations RJ‟ as used in the excel sheet as interpreted to mean the director of the assessee company Shri Ravi Jhunjhunwala - HELD THAT - The prime reason to make the addition of on-money in the hands of the assessee is the statement of Shri Suraj Parmar. However, in reply to question no.13, Shri Parmar categorically stated that cash generated from the project was distributed to the partners in the respective projects and it is mainly utilized in purchase of land. Therefore, whatever cash was generated by the cosmos group or Shri Suraj Parmar on account of on-money towards sale of shops / flats that was distributed among the partners of M/s Cosmos Lifestyle and the assessee is not a partner of that entity - in the statement of Shri Suraj Parmar, Shri Bharat Jhunjhunwala was stated to be the key person of the assessee group and stated to be the recipient of cash component. However, Shri Bharat Jhunjhunwala, in statement on oath u/s 131 recorded on 12/10/2015, denied having received any cash component from the cosmos group. The assessee has also denied having received cash component in the project. In such a case, the onus would be on revenue to prove the fact of exchange of cash between the Cosmos group and the assessee entity. We find that except for statement of Shri Suraj Parmar, there is no other corroborative evidence on record to substantiate this fact. Name of assessee entity nowhere figures in the seized data and there is no material on record which would suggest that any cash was paid to the assessee out of on-money received by Cosmos Group. The data only mentions abbreviations RJ‟ which is amenable to several interpretations and could not go on to conclusively prove that the same would represent director of the assessee company. Therefore, no concrete belief could be made on the basis of these abbreviations. No additions could be made merely on the basis of presumption, conjectures and surmises. The assessee has all along denied having received any cash component from the cosmos group. In such a situation, the onus was on revenue to prove with corroborative material the fact of exchange of cash between the assessee and the cosmos group. However, except for statement of Shri Suraj Parmar, there is nothing in the armory of Ld. AO to prove this fact. Denial of natural justice - denial of opportunity to cross examine - As opportunity to cross-examine the person making adverse statements against the assessee has never been provided to the assessee. Since the statement formed the very basis of making additions in the hands of the assessee, not providing such an opportunity of cross-examination would make the additions unsustainable in the eyes of law as held by Hon‟ble Apex Court in M/s Andaman Timber Industries - Decided in favour of assessee.

Summary

Issues Involved:

1. Legality of reopening the assessment under Section 147 by issuing notice under Section 148.
2. Non-provision of backup/soft copy of the unaccounted tally data seized.
3. Alleged violation of principles of natural justice and fair play by passing the order in haste.
4. Addition of ?1,05,97,720/- on account of alleged on-money received from Suraj Parmar or Cosmos Group.

Detailed Analysis:

1. Legality of Reopening the Assessment under Section 147 by Issuing Notice under Section 148:
The assessee challenged the reopening of the assessment under Section 147 by the issuance of notice under Section 148, claiming it was illegal, bad-in-law, or otherwise void for want of jurisdiction. However, this ground was not pressed by the assessee and thus was dismissed as not pressed.

2. Non-provision of Backup/Soft Copy of the Unaccounted Tally Data Seized:
The assessee argued that the Assessing Officer (AO) failed to provide the backup/soft copy of the unaccounted tally data seized from the premises of Cosmos Group. This ground was also not pressed by the assessee and was dismissed accordingly.

3. Alleged Violation of Principles of Natural Justice and Fair Play by Passing the Order in Haste:
The assessee contended that the AO passed the impugned order in great haste, violating principles of natural justice and fair play. The tribunal noted that the assessee was given due opportunity to present its case, and the submissions were considered by the AO. Therefore, this ground was not upheld.

4. Addition of ?1,05,97,720/- on Account of Alleged On-money Received from Suraj Parmar or Cosmos Group:
The primary grievance was the addition of ?1,05,97,720/- based on the alleged on-money received from Suraj Parmar or Cosmos Group. The tribunal examined the facts and found that the addition stemmed from search operations on Cosmos Group, revealing unaccounted cash transactions recorded in duplicate email accounts and tally files. Suraj Parmar's statement indicated that the unaccounted cash transactions were part of a joint venture with the assessee, and 40% of the cash component was to be given to the assessee.

The assessee denied receiving any cash component and pointed out discrepancies in the evidence, arguing that the data was unreliable. The tribunal noted that except for Suraj Parmar's statement, there was no corroborative evidence to substantiate the addition. The tribunal emphasized that no concrete belief could be formed based on abbreviations like "RJ," which were open to multiple interpretations.

Furthermore, the tribunal highlighted the importance of cross-examination, which was not provided to the assessee, making the addition unsustainable in law. Citing the Hon'ble Apex Court's decision in M/s Andaman Timber Industries V/s CCE, the tribunal underscored that not allowing cross-examination of witnesses whose statements were the basis of the impugned order amounted to a violation of the principles of natural justice.

Conclusion:
The tribunal found that the facts did not support the confirmation of the impugned additions. Consequently, the addition of ?1,05,97,720/- was deleted, and the appeal was partly allowed. The order was pronounced on 6th October 2021.