2022 (1) TMI 962 - AT - Income Tax

Addition of cash payment by the assessee to the sellers of the land - unexplained cash/on-money - CIT(A) deleted the addition observing that merely on the basis of admission of joint seller Shri Manohar Patel, it cannot be concluded that the assessee had paid the cash/on-money - as per CIT-A in cases of allegation of on-money , burden to prove such allegations lies on the Assessing Officer and in the instant case, there are no evidence on record except admission by joint seller to prove the same - HELD THAT - We find that ld. CIT-DR except placing reliance upon the orders of the Assessing Officer could not bring any contrary material on record to controvert the finding of the ld. CIT(A). We find that the assessee had categorically denied to have paid any alleged cash/on money to the sellers either individually or as director on behalf of company submitting that the purchase transaction was executed at value mentioned in the purchase deed and no payment whatsoever beyond this sum was given. We find that the onus of proof was also discharged by the assessee by submission of various details and documentary evidences during the assessment proceedings substantiating the said fact. AO merely placed reliance on the Statements of Shri Manohar Patel but failed to appreciate the fact that there was no tangible evidence brought on record to substantiate the allegations made and no independent inquiries were conducted by the Ld. AO either u/s 131 or 133(6) to bring out correct facts on record rather sole reliance was made on the information given by DDIT (Inv.)-II, Indore. - there are no evidences on record to establish the market value of land being more than actual sale consideration. Thus, the alleged additions made by the ld. Assessing Officer are purely based on suspicion, conjectures and surmises. We are of the view that mere admission of seller of acceptance of cash/on-money cannot be considered as tangible material in the absence of any other corroborative material. See SHREE PARSHWANATH CONSTRUCTION VERSUS ITO-2 (1) , UJJAIN 2014 (7) TMI 1290 - ITAT INDORE We also find that during the course of assessment proceedings, the assessee had requested the Ld. AO for opportunity of cross-examination with the sellers on whose statement s reliance was placed but the same was ignored by the Ld. AO leading to violations of principles of Natural Justice which is, in our view, unjustified in view of the judgment of ANDAMAN TIMBER INDUSTRIES 2015 (10) TMI 442 - SUPREME COURT wherein as examined the omission on the part of the AO not providing opportunity to assessee to cross-examine of two witnesses and held that it was a serious flaw and since the statements of those witnesses were made the basis of the impugned order, this omission on the part of AO makes the order nullity inasmuch as it amounted to violation of Principles of natural justice. Thus addition made on account of alleged payment of cash/on-money is totally baseless and erroneous - Decided in favour of assessee.

Issues Involved:

1. Justification of the Ld. CIT(A)'s decision in not appreciating the findings and establishment of the AO.
2. Deletion of the addition of ?2,43,12,100/- due to alleged non-enquiry by the AO, non-establishment of greater market value, and non-appreciation of the seller's statement.
3. Non-reliance on the information and report received by the AO from the Investigation Wing.
4. Delay in filing the appeals and its condonation due to the COVID-19 crisis.

Issue-wise Detailed Analysis:

1. Justification of the Ld. CIT(A)'s Decision:
The Revenue argued that the Ld. CIT(A) did not appreciate the findings and establishment of the AO. The AO had made an addition of ?2,43,12,000/- based on statements recorded from the joint seller, Shri Manohar Patel, who admitted to receiving cash payments from the assessee. However, the Ld. CIT(A) deleted the addition, stating that mere admission by the joint seller without tangible evidence could not justify the addition. The Ld. CIT(A) emphasized the need for concrete evidence to support the claim of "on-money" payments, which was lacking in this case. The Tribunal upheld this view, stressing that the burden of proving actual consideration lies with the Revenue, and merely relying on statements without corroborative evidence is insufficient.

2. Deletion of the Addition of ?2,43,12,100/-:
The AO's addition was based on the statement of the joint seller, which claimed that the assessee paid an additional ?2,43,12,000/- in cash over the registered sale deed amount. The Ld. CIT(A) found that the AO did not conduct any independent inquiry or provide tangible evidence to substantiate the claim. The Tribunal noted that the purchase transaction was conducted at the registered value of ?2,69,90,000/-, with all payments made through banking channels. The Tribunal also highlighted that the AO failed to establish that the market value of the land was higher than the registered value. Consequently, the Tribunal agreed with the Ld. CIT(A) that the addition was based on suspicion and conjecture rather than solid evidence.

3. Non-reliance on Information from the Investigation Wing:
The Revenue contended that the Ld. CIT(A) did not rely on the detailed inquiry and investigation report from the Investigation Wing. However, the Tribunal observed that the AO merely relied on the information provided by the Investigation Wing without conducting any independent verification or inquiry. The Tribunal emphasized that the AO should have conducted an independent inquiry to verify the claims, which was not done in this case. Therefore, the Tribunal found no merit in the Revenue's argument and upheld the Ld. CIT(A)'s decision.

4. Delay in Filing the Appeals and Its Condonation:
The appeals were delayed by 48 days, and the delay was attributed to the COVID-19 crisis. The Tribunal condoned the delay, considering the exceptional circumstances and the extension of due dates for filing appeals as per CBDT's notification. The Tribunal admitted the appeals for adjudication on merits, finding the reasons for the delay satisfactory.

Conclusion:
The Tribunal dismissed the departmental appeals, confirming the Ld. CIT(A)'s decision to delete the addition of ?2,43,12,000/-. The Tribunal found that the AO's addition was based on mere statements without tangible evidence, and the burden of proving actual consideration was not discharged by the Revenue. The Tribunal also noted the lack of independent inquiry by the AO and the violation of principles of natural justice due to the denial of cross-examination. The appeals were dismissed, and the Ld. CIT(A)'s findings were upheld.

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