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2014 (10) TMI 466 - AT - Income TaxUndisclosed income - Sale consideration of flats sold by assessee on-money transactions - Held that - Addition was made by the AO on the basis of documentary evidence found during the course of search at the premises of buyer of the flat M/s Unimark Remedies Ltd. - As per the seized document found at the premises of M/s Unimark Remedies Ltd., there was on-money transaction for payment of 4 flats purchased at 10th & 11th floor at Kamaleshwar II, Tagore Road, Santacruz, Mumbai constructed by the assessee firm. During the course of search itself, statement of Shri Mehul Parekh (Director Finance, M/s Unimark Remedies Ltd.) were recorded - In respect of transaction appearing in the incriminating documents inventorised as Annexure-A-2, Mehul Parekh admitted on behalf of URL the payment of on-money to the assessee - the admission of Mehul Parekh was on the basis of documentary and corroboratory evidence - This admission of Director on behalf of URL has been confirmed by another director Mr. Yogesh Parekh, who is also a CA. In his statement, Shri Yogesh Parekh admitted that he was looking after accounts, administrative and financial affairs of M/s URL and that they have purchased two floors at 10th & 11th Floor in Kamaleshwar Tower from assessee and as per the diary seized at the time of search action, Shri Mehul Parekh, Director of the company has paid ₹ 75,20,000/- in cash on different dates of the year 2005 to Mr. Rajubhai Dhiru, partner of assessee firm M/s Orbit Enterpises as on-money for purchase of two floors. M/s Unimark had also admitted this payment as its income in the block assessment. In view of documentary evidence found during the course of search along with statement of the payees recorded u/s.132(4), further fortified by cross examination allowed to the assessee clearly proves that assessee was in respect of on-money on sale of flats which were not accounted for in the regular books of accounts - the AO was justified in adding the same in assessee s income and it was correctly confirmed by the CIT(A) after recording detailed finding of his appellate order which has not been controverted by the assessee by bringing any positive material on record thus, the order of the CIT(A) is upheld Decided against assessee. Reopening of assessment Held that - There was sufficient material before the AO to form an opinion that there was an escapement of income in respect of payments made by the buyers of flats to the assessee firm as per the seized document found during the course of search of Unimark Remedies Ltd., which was not found recorded in the assessee s books of account there was no infirmity in the reopening of the assessment by issue of notice u/s.148 of the I.T. Act - Decided against assessee.
Issues Involved:
1. Addition made by AO on account of alleged 'on money' received by assessee. 2. Validity of reopening of assessment under section 147/148 of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Addition Made by AO on Account of Alleged 'On Money' Received by Assessee: The primary issue revolves around the addition made by the Assessing Officer (AO) based on alleged 'on money' received by the assessee from Unimark Remedies Ltd. for the sale of flats. The AO's decision was based on documents found during a search at Unimark Remedies Ltd., which indicated cash payments made to the assessee. Statements from directors of Unimark Remedies Ltd. corroborated these findings. The AO recorded reasons for the belief that there was an escapement of income and issued a notice under section 148. Summons issued to Unimark Remedies Ltd. and other flat owners confirmed the transactions. The statements of directors Mr. Mehul Parekh and Mr. Yogindra Parikh were key, with both admitting to the payment of on money. The AO concluded that the assessee received Rs. 68,20,000/- in cash, which was not offered for taxation, thus making an addition under section 69A of the IT Act as unexplained money. The CIT(A) upheld the addition, finding the AO's reasons for reopening the assessment and the material evidence sufficient. The CIT(A) noted that the AO's belief of income escapement was based on reasonable grounds and supported by judicial precedents, thus validating the reopening of the assessment. The CIT(A) also found the evidence, including corroborative statements and cross-examinations, compelling enough to sustain the addition. The assessee's arguments against the addition included claims that the sale prices were higher than comparable sales and close to stamp duty values, and that other flat buyers confirmed no additional payments. The assessee also highlighted contradictions in the statements of Unimark Remedies Ltd.'s directors and questioned the reliability of the seized documents. The Tribunal, after reviewing the evidence and arguments, concluded that the addition was justified. The Tribunal noted the corroborative evidence from the search, the directors' admissions, and the cross-examination, which collectively substantiated the AO's findings. The Tribunal dismissed the assessee's appeals, affirming the addition. 2. Validity of Reopening of Assessment under Section 147/148 of the Income Tax Act: The second issue concerns the validity of the reopening of the assessment under sections 147 and 148. The AO reopened the assessment based on documents found during a search at Unimark Remedies Ltd., indicating unaccounted cash payments to the assessee. The CIT(A) upheld the reopening, citing sufficient material for the AO's belief in income escapement. Judicial precedents support the AO's action, stating that at the stage of issuing a notice under section 148, the AO only needs material that could lead a reasonable person to believe there is income escapement. The Tribunal agreed with the CIT(A), finding no infirmity in the reopening of the assessment. The Tribunal emphasized that the material found during the search and the corroborative statements provided a reasonable basis for the AO's belief. The Tribunal dismissed the assessee's arguments against the reopening, affirming the CIT(A)'s decision. Conclusion: The Tribunal upheld the addition made by the AO on account of alleged 'on money' received by the assessee, supported by corroborative evidence and statements from Unimark Remedies Ltd.'s directors. The Tribunal also validated the reopening of the assessment under sections 147 and 148, finding sufficient material for the AO's belief in income escapement. Both appeals by the assessee were dismissed.
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