2005 (11) TMI 232 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 32 lakhs on account of 'on money' received by the assessee.
2. Credibility of statements recorded under sections 131(1A) and 132(4) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Addition of Rs. 32 lakhs on account of 'on money' received by the assessee:
The assessee contested the retention of an addition of Rs. 32 lakhs, arguing that no 'on money' was received. The case arose from a search and seizure at the premises of Siddharth Enterprise, where Shri Shailesh Mehta, a partner, stated he paid Rs. 47 lakhs as 'on money' for land purchased from the assessee-company. The AO relied on this statement to make the addition. However, the assessee denied receiving any 'on money' and highlighted discrepancies in Shri Mehta's statements during cross-examination. The CIT(A) deleted part of the addition, retaining Rs. 32 lakhs, considering the initial spontaneous statement of Shri Mehta as more credible.

2. Credibility of statements recorded under sections 131(1A) and 132(4) of the Income Tax Act:
The Department argued that the statement under section 132(4) was voluntary and had evidentiary value, while the CIT(A) gave more credence to the statement under section 131(1A) recorded at the beginning of the search. The CIT(A) reasoned that the initial statement was more truthful as it was spontaneous. The Tribunal examined both statements and the cross-examination, noting that Shri Mehta admitted to paying 'on money' but also pointed out inconsistencies. The Tribunal found that while 'on money' payments are common in real estate, the statement of Shri Mehta alone, without corroborative evidence, was insufficient for the addition. The Tribunal reduced the addition to Rs. 10 lakhs, considering the overall circumstances and the Department's own acceptance of 'on money' transactions in related cases.

Conclusion:
The Tribunal partially allowed the assessee's appeal, reducing the addition to Rs. 10 lakhs, while dismissing the Revenue's appeal. The decision emphasized the need for corroborative evidence beyond the statement of a third party to justify additions and acknowledged the common practice of 'on money' in real estate transactions.