2023 (5) TMI 362 - AT - Income Tax

Receipt of on money on sale of flats - difference between the MM Value and Sale value - AO relied upon the statement given by the partner of the assessee firm and accordingly come to the conclusion that the alleged on money receipts is to be assessed to tax - CIT-A deleted the addition - HELD THAT - We notice that the AO did not conduct any independent enquiry with the buyers of flats in order to ascertain the cash payments made by them. All these facts cumulatively prove that the AO has made the impugned addition without any basis. Probably, he has given much importance to the Statement given by the partner of the assessee firm. Even if an assessee surrenders any income in the Statement, yet it is possible for him to show that the said surrender was made under misconception. In this case, we notice that the assessee has explained as to why it did not offer the additional income surrendered by its partner. The assessee has, in fact, furnished details before the AO stating that the actual sale consideration has been received equal to or more than the MM Value. We notice that the AO has not verified those details at all - AO has made the impugned addition without any basis. When there is no basis for arriving at the conclusion that the assessee has received any on-money, the addition is not justified as held by Hon ble Supreme Court in the case of PCIT vs. Nishant Construction (P) Ltd 2019 (1) TMI 1283 - SC ORDER AO has not brought on record any material in support of the addition made by him nor he provided any basis for arriving at the basis, particularly when all the 30 flats have not been sold during the year relevant to AY 2017-18. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting this addition. Addition on the basis of a document found at the premises of a Trust - assessee has been linked to the said document, since Shri Hemal Bheda said that this document may/appears to belong to the assessee herein - HELD THAT - AO should have conducted further enquiries in order to give a finding that the above said document did contain transactions belonging to the assessee only. Hence, we agree with the contentions of the assessee that the AO could not have placed full reliance on the vague statement at all. Even if he had given the reply in an authentic manner, the AO could not have made addition merely on the basis of said statement without corroborating the same with any other material. This document is undated and hence it cannot be said that these transactions are related to the year under consideration, even if it is assumed that the said document belongs to the assessee. We also noticed that the AO did not make any independent enquiry with regard to this document. AO was not justified in making this addition on the basis of a document, which should be classified as a dumb document - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 5.71 crores by the Assessing Officer (AO) as unexplained income.
2. Deletion of addition of Rs. 3.40 crores by CIT(A) relating to receipt of on money on sale of flats.

Summary:

Issue 1: Addition of Rs. 5.71 crores by the AO as unexplained income

During a survey operation at the premises of a Trust, a piece of paper was found, and it was suggested by a third party that it might belong to the assessee firm. The document contained details of receipts and payments, including a loan of Rs. 4.25 crores, which the AO assessed as unexplained income under section 69A of the Act. The assessee denied the contents of the statement and argued that the document was undated, unsigned, and unnamed, making it a "dumb document." The AO did not conduct any independent enquiry or provide cross-examination of the third party. The Tribunal held that the AO was not justified in making the addition based on an unauthenticated document without corroborating evidence and directed the AO to delete the addition of Rs. 5.71 crores.

Issue 2: Deletion of addition of Rs. 3.40 crores by CIT(A) relating to receipt of on money on sale of flats

The AO made an addition of Rs. 3.40 crores based on a statement given by a partner during a survey, which suggested that the assessee received on money from the sale of flats. The assessee argued that the flats were sold at or above the MM Value, and the income was offered to tax in the relevant years following the percentage completion method. The CIT(A) deleted the addition, noting that the AO had not provided any documentary evidence to support the addition and had not conducted any independent enquiry with the buyers. The Tribunal upheld the CIT(A)'s decision, stating that the AO had relied solely on the partner's statement without any basis or supporting material, and the addition was not justified.

Conclusion:

The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, directing the deletion of the additions made by the AO.