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2025 (1) TMI 574 - AT - Income TaxAddition of on-money paid in cash by the assessee to the developer for purchase of a property, source of which remained unexplained - addition to the income of the assessee based on an excel-sheet found during a search on a third party - HELD THAT - Data revealed from search conducted on a third person, as also confession of the third-party to the Settlement Commission was itself not sufficient evidence for taking any adverse view against the assessee; that there had to be some corroborative evidence in the light of the complete denial of the information contained in the data by the assessee. See Kaushik Nanubhai Majithia 2024 (3) TMI 1339 - GUJARAT HIGH COURT In the facts of the present case also, other than the data relating to the assessee found during the search on the third party and the admission of the third party, before the Settlement Commission, of having received on-money, there is no other evidence with the Department for holding that the assessee had paid on-money to the builder. The request for cross-examination of the builder was also held to be untenable by the ld.CIT(A) on the ground that no statement of the builder had been recorded during the search or later, with respect to the incriminating material. However it is fact on record that HN Safal Group has admitted receipt of on-money to the Settlement Commission. In the light of this admission by the HN Safal Group, it was imperative for the assessee to have been provided an opportunity of cross-examining the said builder. Thus we hold that the addition made in the case of the present assessee to the extent of on-money paid is not sustainable. Decided in favour of assessee. 1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in the judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Justification of Income Addition Based on Excel-Sheet Relevant Legal Framework and Precedents: The proceedings were initiated under Section 153C of the Income Tax Act, 1961, based on evidence found during a search. The relevant precedent is the decision of the Hon'ble jurisdictional High Court in the case of Pr.CIT Vs. Kaushik Nanubhai Majithia, where it was held that mere reliance on an excel-sheet without corroborative evidence is insufficient for income addition. Court's Interpretation and Reasoning: The court observed that the excel-sheet alone, found during the search at a third party's premises, does not constitute sufficient evidence to justify the addition. The court emphasized the need for corroborative evidence to substantiate the claims made in the excel-sheet. Key Evidence and Findings: The primary evidence was an excel-sheet listing the assessee's name, plot details, and alleged cash payment. However, there was no corroborative evidence linking the assessee to the on-money payment, nor was there any signature or authentication of the document. Application of Law to Facts: The court applied the principle that uncorroborated documents, especially those found in third-party premises, cannot be the sole basis for income addition. The absence of corroborative evidence and the denial of cross-examination rights were critical in this determination. Treatment of Competing Arguments: The Revenue argued that the excel-sheet was sufficient evidence due to the inclusion of specific details about the assessee. However, the court found this argument unpersuasive, noting the lack of corroborative evidence and the necessity of cross-examination. Conclusions: The court concluded that the addition of Rs. 84,35,930/- was not justified due to insufficient evidence and procedural shortcomings, such as the denial of cross-examination. Issue 2: Procedural Validity of Denying Cross-Examination Relevant Legal Framework and Precedents: The procedural fairness in tax proceedings requires that the assessee be given the opportunity to cross-examine witnesses or challenge evidence used against them. The precedent set by the Gujarat High Court in similar cases supports this requirement. Court's Interpretation and Reasoning: The court held that the denial of cross-examination rights violated procedural fairness. The court noted that the builder's admission to the Settlement Commission regarding on-money payments necessitated an opportunity for the assessee to cross-examine the builder. Key Evidence and Findings: The court found that no statements were recorded from the builder concerning the incriminating material, and the assessee was not given an opportunity to challenge the evidence through cross-examination. Application of Law to Facts: The court applied principles of natural justice, determining that the lack of cross-examination opportunities and corroborative evidence rendered the proceedings against the assessee procedurally invalid. Treatment of Competing Arguments: The Revenue contended that cross-examination was unnecessary as no direct statements from the builder were recorded. The court rejected this argument, emphasizing the need for procedural fairness. Conclusions: The court concluded that the procedural deficiencies, particularly the denial of cross-examination, invalidated the addition made to the assessee's income. 3. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "There is no basis for conducting proceedings against the assessee merely for the fact that the developer had paid tax on the amount shown in the excel-sheet. There is no adjudication with regard to the payment, which was shown in the excel-sheet to the effect that the same was actually paid by the assessee to the developer." Core Principles Established:
Final Determinations on Each Issue:
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