2024 (7) TMI 891 - AT - Income Tax

Addition of alleged on-money on sale of certain property - reliance on contradictory statements and retraction by the related party - HELD THAT - Pursuant to search action u/s 132 a notebook was found which inter-alia contained notings of loans obtained by Shri R.Sabapathy. No dates were mentioned against these entries. Based on the statement of Shri R.Sabapathy Ld. AO alleged that Shri R.Sabapathy received loan from Shri Rakesh of Swarna Shilpi out of which an amount of Rs. 5 Crores was utilized as payment to assessee as on-money against purchase of impugned property by his sister. However this statement was retracted within a span of 3 months and Shri R.Sabapathy stated that loan of Rs. 17 Crores was received from Shri Rakesh whereas the balance of Rs. 8 Crores was out of sale of excess stock. It could thus be seen that Shri R.Sabapathy has taken contrary stand and his statement could not be held to be credible one. As the statement of Shri R.Sabapathy was modified within a short span of time and therefore the same could not be accepted as credible one. No concrete reliance could be placed on the same to make impugned addition in the absence of any other evidence on record. We accept another argument of Ld. AR that the value as shown in the sale deed was accepted for stamp duty valuation purposes - No valuation whatsoever has been undertaken by Ld. AO and no exercise is shown to have been carried out by Ld. AO to establish that the market value of the impugned property was much more. In the absence of such a finding the impugned additions are merely unsubstantiated additions which could not be sustained in law. It is trite law that no addition could be made on mere presumption and suspicion. The Ld. AO has to bring on record cogent positive evidences to sustain addition based on third party statement / material. The assessee has all along denied impugned payments and the assessee therefore could not be expected to prove the negative. See P.V.Kalyanasundaram 2006 (2) TMI 79 - MADRAS HIGH COURT wherein held Ld. AO did not conduct any independent enquiry relating to the value of the property purchased or did not refer the valuation to valuation officer and merely relied on the statement given by the seller the same would be fatal to additions. We would hold that impugned additions are not sustainable in law. The same stand deleted. Assessee appeal allowed.

Summary

Issues:
Addition of alleged on-money of Rs. 5 Crores on sale of property for Assessment Year 2021-22.

Detailed Analysis:

Assessment Proceedings:
During assessment, it was found that the assessee earned capital gains on the sale of properties, including one in Perambur, Chennai. A notebook seized during a search revealed that a cash loan of Rs. 25 Crores was taken by a related party for property investments. The party claimed to have paid Rs. 5 Crores as on-money over the sale consideration for the Perambur property. The AO added Rs. 5 Crores to the assessee's income, as the sale consideration declared was Rs. 16 Crores, less than the alleged total payment of Rs. 21 Crores. The assessee refuted the claim, citing a retraction by the related party and lack of valuation of the property.

Appellate Proceedings:
The assessee argued that the stamp duty value accepted as market value, lack of evidence for on-money payment, and contradictions in statements supported their case. However, the CIT(A) upheld the addition, relying on the related party's statement and dismissing the retraction. The CIT(A) considered the statement credible and justified the addition based on seized materials and explanations. The assessee appealed this decision, disputing the reliance on the related party's statement and emphasizing the lack of concrete evidence.

Findings and Adjudication:
The Tribunal noted the contradictory statements and retraction by the related party, indicating a lack of credibility. The absence of valuation by the AO and reliance solely on the related party's statement were deemed insufficient to sustain the addition. The Tribunal cited legal precedent emphasizing the need for independent valuation and proper inquiry. Considering these factors, the Tribunal ruled in favor of the assessee, deeming the additions unsustainable and directing the AO to re-compute the income accordingly.

In conclusion, the Tribunal allowed the appeal, overturning the addition of Rs. 5 Crores as on-money on the sale of the property, emphasizing the importance of concrete evidence and independent valuation in such cases.