2017 (11) TMI 1151 - AT - Income Tax

Received on-money in cash for sale of Vatva land - addition relying on recovery of alleged diary at the time of survey, and (b) admission of director in the statement recorded under section 133A of the Act at the time of survey - Held that - The alleged disclosure was retracted by directors by virtue of the affidavits and disclosure was a simplicitor as information. In the affidavit the assessee has leveled serious allegations against survey team pointing out that no such entries were found at the time of survey. They were noted during the course of survey under pressure of the survey team. When such a complaint was made during the course of assessment proceedings, and more so when the Chief Commissioner was appraised of this fact, then it ought to have been investigated and truth ought to have been dug out. We have gone through complete order available on the paper book and found that at the time of survey, litigation was pending before the Hon ble Bombay high Court in Company Petition between vendors of the assessee vis- -vis other financial institutions. Rights in the land have not been crytstallied in favour of the assessee before the Hon ble Bombay High Court. Decision was pronounced on 21.10.2011 whereas survey was conducted on 23.11.2010. Similarly, the assessee has brought to the notice of the AO that Civil Court in Ahmedabad has also granted status quo with respect to the land on an application filed by the GIIC. It has brought to the notice of the AO order of the Civil Court dated 6.9.2011 whose copy is available on page nos.188 to 190 of the paper book. Thus, the assessee was not having absolute alienable rights in the land at the time of survey. We also find that name of any purchaser was not mentioned in the diary. It is highly improbable that a sum of ₹ 14.85 crores would be given by an unknown person to the assessee in cash for purchase of a land without executing any documents. It is also improbable that only cash components would be given by the prospective buyer of the land. It is pertinent to observe that when explanation or a defence of an assessee based on number of facts supported by evidence and circumstances required consideration whether explanation is sound or not must be determined not by considering the weight to be attached to each single fact in isolation but by assessing the cumulative effect of all the facts in their setting as a whole. If we make an analysis of all the facts in their setting as a whole, then it would reveal that Revenue failed to bring corroborative evidence on record for demonstrating the alleged receipt of on-money by the assessee. The assessee was not having absolute alienable right in the land at the time of survey. It was subject to various litigations, and no prudent businessman would put such substantial money at a stake on a piece of land whose title is in dispute. We have perused discussion made by the ld.CIT(A), but it is pertinent to observe that the ld.CIT(A) has failed to appreciate evidentiary value of the alleged diary, more so when the assessee has leveled serious allegation against survey team itself. If we appreciate chain of circumstances about existence of diary, then such circumstances considered by the AO are not worthy of credence. Taking into consideration facts of the case on record, we are of the view that Revenue failed to collect sufficient evidence for holding that the assessee has received money for sale of alleged land. Therefore, we allow the appeal of the assessee and delete addition - Appeal of the assessee is allowed.

Issues Involved:

1. Confirmation of addition of ?14.85 crores as unaccounted income.
2. Validity and evidentiary value of statements recorded under section 133A during survey.
3. Genuineness and correctness of entries in the diary found during the survey.
4. Impact of ongoing litigation on the alleged receipt of on-money.

Issue-wise Detailed Analysis:

1. Confirmation of Addition of ?14.85 Crores as Unaccounted Income:

The assessee-company, engaged in real estate, was scrutinized for the assessment year 2011-12. During a survey under section 133A, a diary was found indicating cash receipts of ?14.85 crores, which the director admitted as unaccounted income. The AO added this amount to the assessee's income, which was confirmed by the CIT(A). The assessee contended that no such cash was received, and the land in question was under litigation, making the receipt of on-money improbable.

2. Validity and Evidentiary Value of Statements Recorded Under Section 133A During Survey:

The directors retracted their statements made during the survey, claiming they were made under pressure. The assessee argued that statements recorded under section 133A have no evidentiary value as they are not made under oath. This contention is supported by judicial precedents, including the Kerala High Court's decision in Paul Mathews and Sons Vs. CIT, and the Supreme Court's approval in CIT Vs. S. Khadar Khan & Sons, which state that such statements are merely informational and not conclusive evidence.

3. Genuineness and Correctness of Entries in the Diary Found During the Survey:

The AO verified cheque entries in the diary with the bank statements, concluding the diary's entries were genuine. However, the assessee argued that the diary was prepared during the survey under pressure, and the entries were not genuine. The assessee highlighted inconsistencies, such as the absence of dates and names for cash receipts, and the identical handwriting and ink for entries over six months, suggesting the entries were made simultaneously, not over time.

4. Impact of Ongoing Litigation on the Alleged Receipt of On-Money:

The land in question was subject to multiple litigations, including proceedings before the Bombay High Court and a status quo order from the Ahmedabad Civil Court. The assessee argued that it was improbable for anyone to pay such a large amount in cash for land embroiled in legal disputes. The CIT(A) dismissed this argument, stating that the assessee itself had purchased the land despite ongoing litigations, implying others could take similar risks. However, the tribunal found this reasoning flawed, as no corroborative evidence of such cash transactions was provided, and the legal disputes made the receipt of on-money unlikely.

Conclusion:

The tribunal concluded that the Revenue failed to provide sufficient evidence to support the addition of ?14.85 crores as unaccounted income. The statements recorded during the survey lacked evidentiary value, and the diary's entries were not convincingly genuine. The ongoing litigations further undermined the likelihood of receiving on-money. Consequently, the tribunal allowed the assessee's appeal and deleted the addition of ?14.85 crores.

Order:

The appeal of the assessee is allowed, and the addition of ?14.85 crores is deleted.

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