2023 (5) TMI 1113 - HC - Income Tax

On-money transaction - seized documents carry receipt of on-money in relation to the previous assessment years - ITAT deleted addition - HELD THAT - Appellate authority as well as the Tribunal concurrently found that there was total dearth of evidence to come to conclusion that there was on-money transaction and that on such count it would not entitle the assessing officer to make addition in the income. The material in the nature of loose papers were not reliable, it was observed. More particularly, it was not related to the Assessment Year 2015-2016 and nothing was there to show that the on-money was received in respect of sale of units/flats recognised to be the sale of assessment year concerned. The findings of the appellate authority and Tribunal are based on ground of absence of evidence. The decision is based on appreciation of evidence. No substantial question of law.

Summary

Issues involved:
The judgment involves the interpretation of substantial questions of law u/s 260A of the Income Tax Act, 1961 related to the addition of on-money receipts in the income of the assessee firm for Assessment Year 2015-2016.

Interpretation of Substantial Questions of Law:
The Revenue raised four substantial questions of law, challenging the deletion of the addition of Rs. 3,15,77,644 made on account of on-money receipts by the Appellate Tribunal. The questions revolved around whether the Tribunal erred in law and on facts in deleting the addition based on the lack of evidence for on-money transactions in the year under consideration, despite evidence of such transactions in previous years. The Tribunal found that the Assessing Officer extrapolated the on-money receipts without sufficient evidence, and that the addition based on flimsy instances was not justified.

Background and Assessment:
A search conducted u/s 132 of the Income Tax Act against an individual revealed incriminating documents related to on-money transactions in projects developed by the assessee firm. The Assessing Officer made an addition of Rs. 3,15,77,644 to the income of the assessee for Assessment Year 2015-2016, based on unaccounted cash receipts against unit sales from 2011-2015. The Commissioner of Income Tax (Appeals) directed the deletion of the addition, which was upheld by the Appellate Tribunal.

Decision and Rationale:
The Appellate Tribunal observed that there was no clinching evidence of on-money receipts for the year under consideration, 2015-2016, despite evidence for previous years. The Tribunal found the Assessing Officer's extrapolation of on-money receipts to be unsustainable and not based on direct evidence. It was noted that no statements of buyers were recorded, and the loose papers used as evidence were unreliable and not related to the relevant assessment year. Both the Appellate Authority and the Tribunal concluded that there was a lack of evidence to support the addition of on-money receipts, leading to the dismissal of the Revenue's appeal.

Conclusion:
The judgment dismissed the appeal of the Revenue, affirming the decision to delete the addition of on-money receipts in the income of the assessee firm for Assessment Year 2015-2016. The decision was based on the absence of substantial evidence and the unreliable nature of the material used by the Assessing Officer for making the addition.