2000 (8) TMI 239 - AT - Income Tax

Summary

Issues Involved:

1. Legitimacy of the addition of undisclosed income based on seized documents.
2. Reliability of Dr. Parmar's statements and seized documents.
3. Justification for the addition of "on money" receipts for the entire Sunbeam Apartment project.

Summary:

1. Legitimacy of the addition of undisclosed income based on seized documents:

The assessee, a private limited company, appealed against the order passed by the Dy. CIT u/s 143(3) r/w s. 158BD of the IT Act, 1961. The AO based the addition of undisclosed income on a seized paper from Dr. Parmar's residence, concluding that the assessee received unaccounted "on money" for the Sunbeam Apartment project. The AO assessed the total undisclosed income of the assessee-company for the block period at Rs. 65,81,600.

2. Reliability of Dr. Parmar's statements and seized documents:

The assessee argued that the seized paper is a "dumb document" without any narration or corroborative evidence linking it to the assessee-company. Dr. Parmar's statements were inconsistent, and no direct evidence indicated that the jottings on the paper related to transactions between the assessee and Dr. Parmar. The Tribunal noted that Dr. Parmar's statements were contradictory and self-serving, aimed at protecting his own interests. The Tribunal found no reliable evidence to support the AO's conclusions regarding the receipt of "on money" by the assessee.

3. Justification for the addition of "on money" receipts for the entire Sunbeam Apartment project:

The Tribunal observed that the AO's addition of Rs. 57,03,600 for the remaining area of Sunbeam Apartment was based on presumptions and surmises, without any supporting evidence. The AO's observations indicated that all payments from shop/flat-holders were received by cheques, and confirmations were filed and verified. The Tribunal concluded that the AO's addition was unjustified, as it was not supported by any material evidence.

Conclusion:

The Tribunal found that the Department's case relied heavily on a document with no direct or indirect relation to the assessee-company and inconsistent statements from Dr. Parmar. The Tribunal held that the AO's addition of Rs. 65,81,600 as undisclosed income was unjustified and directed its deletion. The appeal filed by the assessee was allowed.