2022 (3) TMI 341 - AT - Income Tax

Assessment u/s 153A - Addition of unaccounted investment - purchase of flats had denied that they have paid cash for the flats bought by them through the assessee - statement recorded by the assessee was voluntary u/s. 132(4) of the Act during search - whether AO as well as CIT(A) erred in making addition in the order u/s 153A of the Income Tax Act, 1961 on the basis of statements recorded and document found in third party premises? - HELD THAT - We observe that during the search along with other key personal, assessee also was covered not just merely as a person who has booked the flat but also as a person who was claimed to have referred client to the M/s.Nish Developers Pvt. Ltd. Since the assessee was directly connected with the collection of funds on behalf of M/s.Nish Developers Pvt. Ltd., accordingly, assessee was covered as one of the party in the search proceedings. Merely because assessee has retracted from the statement and also the assessee has accepted that assessee has collected funds from clients on behalf of the M/s.Nish Developers Pvt. Ltd., it clearly indicates that the statement recorded on oath from Shri Praveen Mishra cannot be set aside and it can only be considered for making assessment u/s. 153A not u/s.153C of the Act. Accordingly, additional ground raised by the assessee is dismissed. Addition made by AO purely based on the statement recorded u/s. 132 - Onus is on the revenue to prove the contents of the pendrive and other lose sheets by bringing on record corroborating evidences. They noticed that the revenue has not bothered even to make further enquiry from the flat buyers to ascertain the amount of on-money. Therefore, in view of the facts and circumstances, we held that the pendrive cannot be relied on to make on-money addition in the hands of the assessee. Addition of benefit @2% of the cash component - We consider the cash deposited by the assessee is belongs to the assessee itself for the purchase of two flats allotted in the name of the assessee and the other family members, the price of the flat per square feet will astronomical to the extent of ₹.1,10,230/- whereas the purchase rate recorded in the document is only ₹.22,126/- and ₹.21,839/- per square feet. It clearly indicates that assessee has collected the money from other parties and based on the statement recorded by the assessee during search, this on-money received through the assessee are from other flat owners who has booked the flats. Since it is recorded in the name of the assessee it clearly shows that assessee is involved in soliciting client for the M/s.Nish Developers Pvt. Ltd. The Ld.CIT(A) came to the conclusion that assessee himself has involved in introducing clients and must have solicited commission @2%. Since assessee was allotted two flats on concessional rates and with the above said services to the M/s.Nish Developers Pvt. Ltd., assessee might have enjoyed the benefits of getting concessional rate. We do not have any data on the different rates of flats sold to other parties to determine how much benefit assessee has received in this transaction. Considering the fact that assessee has solicited clients for the M/s.Nish Developers Pvt. Ltd., and got the flats at the concessional rate it clearly indicate that there is quid pro quo in this transaction and we are in agreement with Ld.CIT(A), who has estimated the benefit @2% of the cash component. Therefore, we do not see any reason to interfere with the finding of the Ld.CIT(A)

Issues Involved:
1. Validity of the addition based on documents found at a third-party premise.
2. Whether the assessee paid "on-money" for flats purchased.
3. Estimation of brokerage income.
4. The relevance and validity of the retracted statements.
5. The applicability of Section 153A versus Section 153C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Addition Based on Documents Found at a Third-Party Premise:
The assessee argued that the addition cannot be made based on documents found at a third-party premise, specifically a pen drive found during a search at Mr. Praveen Mishra's residence. The pen drive contained details of cash transactions allegedly involving the assessee. The assessee denied any cash transactions and requested the cross-examination of persons who named him. The tribunal noted that the addition cannot be solely based on third-party documents without corroborative evidence, referencing several case laws supporting this view.

2. Whether the Assessee Paid "On-Money" for Flats Purchased:
The Assessing Officer (AO) alleged that the assessee paid "on-money" for flats based on entries in the pen drive. The assessee denied these allegations, claiming that the flats were purchased at a discounted rate without any "on-money" payment. The Ld. CIT(A) accepted the assessee's contention, noting that the purchase consideration was higher than the stamp duty value, and thus, the claim of no "on-money" payment was found acceptable. The tribunal upheld this view, emphasizing that the revenue failed to provide concrete evidence of "on-money" transactions.

3. Estimation of Brokerage Income:
The Ld. CIT(A) concluded that the assessee acted as a broker for M/s. Nish Developers Pvt. Ltd., introducing clients and handling cash transactions. Consequently, the Ld. CIT(A) estimated a brokerage income of 2% of the cash passed on to the developers, amounting to ?10,02,000/-. The tribunal found this estimation reasonable, considering the lack of direct evidence but acknowledging the role of the assessee in facilitating transactions.

4. The Relevance and Validity of the Retracted Statements:
The assessee retracted his statement given during the search, claiming it was made under duress. The AO dismissed this retraction, considering the original statement as voluntary and valid. The Ld. CIT(A) and the tribunal considered the retraction but noted that it was made two years after the original statement. The tribunal emphasized that the retraction alone does not invalidate the original statement, especially when corroborated by other evidence.

5. The Applicability of Section 153A versus Section 153C of the Income Tax Act:
The assessee contended that the addition should have been made under Section 153C, not 153A, as the incriminating material was found at a third-party premise. The tribunal dismissed this argument, noting that the assessee was directly involved in the transactions and the search covered his premises as well. Therefore, the proceedings under Section 153A were deemed appropriate.

Conclusion:
The tribunal upheld the Ld. CIT(A)'s decision to estimate brokerage income at 2% of the cash transactions, rejecting the assessee's and revenue's appeals. The tribunal emphasized the need for corroborative evidence for additions based on third-party documents and upheld the validity of proceedings under Section 153A. The appeals for other assessment years were similarly dismissed, following the same rationale.

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