2023 (6) TMI 33 - AT - Income Tax

Addition of On-money receipts - addition based on the documents impounded during the survey proceedings - plea of the assessee that the addition could not be made as income from the project had been declared under IDS-2016 - CIT(A) categorically held that assessee sold the unit / shops to Mahotsav group about 28% higher that the prevailing jantri rate and there is no concrete evidence against the assessee either on writing or oral which establish that the assessee received alleged on money - HELD THAT - As decided in CIT Vs Sunita Dandda 2017 (7) TMI 1164 - RAJASTHAN HIGH COURT held that where the assessing officer made addition on account of on money on sale of land to a builder group relied on the statement of director and not allowed cross examination of the said director, there being violation of natural justice and the impugned addition is liable to be deleted. The Special Leave Petition of revenue is dismissed by Hon ble Supreme Court 2018 (3) TMI 1610 - SC ORDER . Apex Court in Common cause Vs Union of India 2017 (1) TMI 1164 - SUPREME COURT held that there must be some relevant and admissible evidence and some cogent reason which is prima facia reliable and that too, supported with some other circumstances pointing out that in particular third person against whom the allegation is made was involved in the matter or has done something during that period. In Dhakeswari Cotton Mills Vs CIT 1954 (10) TMI 12 - SUPREME COURT as held by Hon ble Apex Court that though, the assessing officer is not fettered with technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence on account of law, but in making assessment he is not entitled to make a pure guess and make assessment without reference to any material at all. In CIT Vs Lavanya Land (P) Ltd 2017 (7) TMI 141 - BOMBAY HIGH COURT held that when entire decision was based on seized documents and there was no material to conclusively show that huge amounts revealed from seized documents were actually transferred from one side to another, additions u/s 69C were not sustainable. Thus we find that the finding of the ld CIT(A) is based on sound legal reasoning, which we affirm. In the result, the grounds of appeal raised by the revenue are dismissed.

Summary

Issues Involved:
1. Justification of deletion of addition by CIT(A).
2. Ignoring the payer's approach to the Income Tax Settlement Commission.
3. Necessity of upholding the Assessing Officer's order.

Summary:

1. Justification of Deletion of Addition by CIT(A):
The revenue appealed against the deletion of an addition of Rs. 10.84 crores by the CIT(A), which was based on documents impounded during a survey at Mahotsav Creation Pvt. Ltd. The Assessing Officer (AO) had issued a show cause notice to the assessee, suggesting that Rs. 13.84 crores should be treated as unaccounted money. The assessee denied these allegations, stating that the documents were not in their possession or handwriting, and no cash payment was received as alleged. The CIT(A) held that the documents were recovered from a third party and were not signed by the assessee, thus being "dumb documents." Additionally, the name mentioned in the documents did not match any partner of the assessee. The CIT(A) also noted that the statement of Narendra Lunkad, which the AO relied upon, did not mention any cash payment to the assessee and was not provided for cross-examination. The CIT(A) concluded that there was no concrete evidence against the assessee, and the addition was deleted.

2. Ignoring the Payer's Approach to the Income Tax Settlement Commission:
The revenue contended that the CIT(A) ignored the fact that the payer of the 'on money' had approached the Income Tax Settlement Commission for settlement of tax disputes on these unaccounted transactions. However, the CIT(A) found that the documents and statements relied upon by the AO did not conclusively prove that the assessee received any unaccounted money. The CIT(A) emphasized the lack of direct evidence and the necessity for corroborative evidence when documents are recovered from a third party.

3. Necessity of Upholding the Assessing Officer's Order:
The revenue argued that the CIT(A) should have upheld the AO's order. However, the Tribunal found that the AO's addition was based on documents found at a third party's premises and uncorroborated statements. The Tribunal cited various legal precedents, including the Hon'ble Supreme Court's rulings, which emphasized the importance of allowing cross-examination and the lack of evidentiary value of statements recorded during surveys without corroborative evidence. The Tribunal affirmed the CIT(A)'s order, dismissing the revenue's appeal.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 10.84 crores, emphasizing the lack of direct evidence, the necessity for corroborative evidence, and the violation of natural justice principles due to the denial of cross-examination. The appeal by the revenue was dismissed.