2013 (11) TMI 972 - HC - Income Tax

Unaccounted investment Held that - During the search carried out in the case of one Shri Vikas A. Shah agreement to sell of the land was found - Third party statement of Vikas A. Shah was used without allowing cross examination of third party which is against the principle of natural justice. This land had registered document and the value has been accepted to be correct by registering authority to the charge of stamp duty. There was no material or evidence that any on money was paid by the appellant on the transaction - The statement given by Vikas A. Shah was self service statement without any supporting evidence - No search was carried out on the appellant. The seized papers were found in the possession of Shri Vikas A. Shah. The third person evidence cannot be base for addition on the basis of any entries therein. The order passed by the ITAT in the case of the co-purchaser-Abhalbhai Arjanbhai Jadeja was further carried before this Court - When in the case of the co-purchaser, similar addition was deleted by the CIT(A) - The tribunal has not committed any error in dismissing the appeal preferred by the revenue and consequently confirming the order passed by the CIT(A) deleting the addition of Rs.92,00,000/- made on account of unaccounted investment Decided against Revenue.

Summary

Issues:
1. Addition of unaccounted investment of Rs.92,00,000
2. Reliability of documents seized from a third party
3. Ignoring the statement of the seller recorded under Section 131
4. Use of third-party statement without cross-examination
5. Legal position on third-party evidence for additions

Analysis:

Issue 1: Addition of unaccounted investment of Rs.92,00,000
The case involved a search operation under Section 132(2) of the Income Tax Act, leading to the initiation of proceedings under Section 153C(1) based on seized documents related to a land sale agreement. The Assessing Officer made an addition of Rs.92,00,000 as unaccounted income based on a statement by Shri Vikas A. Shah. However, the CIT(A) partially allowed the appeal and deleted the addition. The ITAT upheld the CIT(A)'s decision, citing similar cases where additions were deleted. The High Court confirmed the ITAT's decision, emphasizing that when similar additions were deleted in related cases, no error was found in dismissing the revenue's appeal.

Issue 2: Reliability of documents seized from a third party
The ITAT considered the reliability of documents seized from a third party in making additions. It was noted that the Assessing Officer relied on a statement by Shri Vikas A. Shah without allowing cross-examination, which was deemed against the principles of natural justice. The absence of corroborative evidence and the lack of a search on the appellant raised doubts about the addition. The High Court upheld the ITAT's decision, emphasizing the importance of corroborative evidence and the legal position on using third-party evidence for additions.

Issue 3: Ignoring the statement of the seller recorded under Section 131
The tribunal justified ignoring the statement of the seller recorded under Section 131, emphasizing the lack of corroborative material to support the alleged on-money payment. The absence of further evidence and the reliance on third-party statements without sufficient proof led to the deletion of the addition. The High Court upheld this decision, highlighting the importance of concrete evidence in such cases.

Issue 4: Use of third-party statement without cross-examination
The case raised concerns about using a third-party statement without allowing cross-examination, which was deemed a violation of natural justice principles. The High Court emphasized the need for proper procedures and corroborative evidence to support additions, ensuring fairness and reliability in assessments.

Issue 5: Legal position on third-party evidence for additions
The High Court referenced legal precedents such as Prathana Construction Pvt. Ltd. and Prabhat Oil Mills to support its decision on the use of third-party evidence for additions. It stressed the importance of concrete evidence and the lack of a legal basis for relying solely on third-party statements without proper verification. The Court upheld the CIT(A)'s decision based on the legal position and factual considerations.

In conclusion, the High Court dismissed the Tax Appeal, affirming the ITAT's decision to delete the addition of Rs.92,00,000 as unaccounted investment based on the lack of concrete evidence and the reliance on third-party statements without proper verification.