2021 (12) TMI 160 - AT - Income Tax

Assessment u/s 153C - incriminating material found in search or not? - As submitted that both the lower authorities failed to establish the existence of cogent and demonstrative material which is germane to adjudicating officer s satisfying for including that seized material/ document belong to the person other than the search person - HELD THAT - As in the incriminating material name of the assessee is appearing and he has a direct connection with the same and it cannot be said that these documents do not belong to the assessee. It is also revealed that assessee entered into a partnership on 04.06.2009 and contributed the said piece of land to the partnership firm and then he retired from partnership on 14.12.2009, leaving that piece of land as irrevocable property of partnership firm and copy of this deed was also found during the course of search. All these material are sufficient enough for the Ld. Assessing Officer to issue notice u/s 153C of the Act and examine the matter. This is a well-established fact that merely issuing notice u/s 153C of the Act and conducting the proceedings on the basis of any seized material may not end up into an addition. However, Ld. Assessing Officer is well within his jurisdiction to examine the aspect and conduct the proceeding u/s 153C of the Act. As in the instant case seized material found during the course of search at Mr. Sanjeev Agrawal and Kiran Agrawal belonged to the assessee and thus the proceedings u/s 153C of the Act has been rightly initiated and carried out. This legal ground raised by the assessee stands dismissed. Addition for alleged on money payment - HELD THAT - We observe that the alleged addition is purely based on the statement of Mr. Mangilal. Opportunity to cross examine was not provided. No other material was brought on record to establish that the assessee had paid on money . The revenue has also not brought on record that whether any addition for unaccounted income was made in the hands of Shri Mangilal. The only authentic and genuine piece of evidence is a registered sale deed, where both buyer and seller have signed before registering authority for the consideration of ₹ 40,00,000/- passed by the buyer to seller. One cannot appreciate the act of making addition in the hands of on assessee merely on the basis of statement of a person who himself have not stated a correct purchase consideration in the registered sale deed signed by him. Revenue authorities having not given any opportunity of cross examination to the assessee, defies the principle of natural justice as held by Hon ble Supreme Court in the case of Andman Timber Industries 2015 (10) TMI 442 - SUPREME COURT as the impugned addition is purely based on the statement of Mr. Mangilal who was not cross examined by the assessee. As well-established ratio laid down by Hon ble Courts that written evidence have much more weightage and needs to be given preference against the oral evidence. Similar view was also taken by us in the case of Mukesh Sharma. Lower authorities erred in confirming the addition for alleged on money payment in the hands of assessee without bringing on record any strong evidence against the assessee and without giving the opportunity of cross examination. We, therefore, delete the addition - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality and jurisdiction of proceedings under Section 153C of the Income Tax Act, 1961.
2. Addition of ?8,50,000/- under Section 69 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality and Jurisdiction of Proceedings under Section 153C:

The appellant challenged the legality of the proceedings under Section 153C, arguing that the Assessing Officer (AO) failed to establish the existence of cogent and demonstrative material indicating that the seized documents belonged to a person other than the searched person. The appellant cited several judgments, including those from the Supreme Court and High Courts, emphasizing that for Section 153C to be invoked, there must be incriminating material directly linking the assessee to the documents found during the search.

The Tribunal noted that during the search at the premises of Sagar Group, certain documents, including sale letters and power of attorney, were found that directly involved the assessee. These documents indicated the assessee's involvement in the sale of land and were sufficient for the AO to issue a notice under Section 153C. The Tribunal concluded that the seized material belonged to the assessee, justifying the initiation of proceedings under Section 153C. Thus, the legal ground raised by the assessee regarding the jurisdiction was dismissed.

2. Addition of ?8,50,000/- under Section 69:

The appellant contested the addition of ?8,50,000/- made by the AO based on the statement of Shri Mangilal, who claimed to have received this amount in cash over and above the registered sale consideration of ?40,00,000/-. The appellant argued that the addition was made without any incriminating material found during the search and without providing an opportunity for cross-examination of Shri Mangilal.

The Tribunal observed that the addition was solely based on Shri Mangilal's statement, with no corroborative evidence. The appellant denied making any cash payment, and the Tribunal noted that the revenue did not provide any opportunity for cross-examination, violating principles of natural justice. The Tribunal emphasized that written evidence, such as the registered sale deed, should be given more weight than oral statements. Consequently, the Tribunal found that the lower authorities erred in confirming the addition without strong evidence and deleted the addition of ?8,50,000/-.

Conclusion:

The Tribunal upheld the legality of the proceedings under Section 153C but deleted the addition of ?8,50,000/- under Section 69 due to lack of corroborative evidence and violation of natural justice principles. The appeal was partly allowed.