2003 (10) TMI 247 - AT - Income Tax

Summary

Issues Involved:

1. Deletion of addition of Rs. 2,80,000 by CIT(A).
2. Examination and compliance of witness Shri Umakant Contractor.
3. Verification of sale and purchase transactions and related statements.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 2,80,000 by CIT(A):

The Revenue contested the deletion of Rs. 2,80,000 by the CIT(A), arguing that the CIT(A) erred by deleting the addition based on the failure of the AO to examine the witness of the assessee. The AO had initially added Rs. 2,80,000 under section 69A of the IT Act, considering it as 'on-money' paid by the assessee which was not recorded in the books of account. The CIT(A) deleted this addition, noting that the Department failed to produce any evidence to the contrary and that the presence of Shri Umakant Contractor, who was crucial to the case, was not enforced by the AO despite having the necessary powers.

2. Examination and Compliance of Witness Shri Umakant Contractor:

In the first round of litigation, the CIT(A) had directed the AO to re-examine the case after recording the statement of Shri Umakant Contractor, who was a middleman in the deal and reported to have constructed three gala houses. Despite this direction, in the second round of litigation, the AO failed to examine Shri Umakant Contractor as he did not comply with the summons. The CIT(A) observed that the AO should have used the powers under the IT Act to enforce the presence of Shri Umakant Contractor. The CIT(A) further noted that the Department could not penalize the assessee for the default of Shri Umakant Contractor.

3. Verification of Sale and Purchase Transactions and Related Statements:

The AO's assessment was based on the statements of Shri Valjibhai Fakirbhai, who initially stated that the property was sold for Rs. 4,75,000, but later, in cross-examination, confirmed that the sale price was Rs. 1,95,000. The CIT(A) found contradictions in the statements of Shri Valjibhai and noted that the AO failed to appreciate the actual facts. The witnesses to the sale and purchase transactions confirmed that the sale consideration for plot No. 339 was Rs. 1,95,000. The CIT(A) concluded that the AO had mixed up the sale considerations of different plots and failed to provide any substantial evidence to support the addition of Rs. 2,80,000.

Conclusion:

The Tribunal upheld the order of the CIT(A), confirming that the AO failed to examine Shri Umakant Contractor and did not provide sufficient evidence to support the addition of Rs. 2,80,000. The appeal by the Revenue was dismissed, as the Tribunal found no substance in the Revenue's arguments and confirmed that the CIT(A)'s deletion of the addition was justified based on the available evidence and the contradictions in the statements of the witnesses.