2019 (5) TMI 886 - AT - Income Tax

Unexplained income based on receipt given by the appellant as security - Addition u/s 69 - survey under section 133A - Addition based on 1 memorandum of understanding and 1 receipt was found in survey - HELD THAT - It is very important to note that had this transaction actually taken place, then along with the memorandum of understanding and the receipt the relevant documents/title deed of the property, should also have been found from the premises. No question has been raised by the AO about the existence of the documents of that property in the form of title deed et cetera. Though the memorandum of understanding and receipt were found from the office of the assessee however in absence of any corroborative material the addition cannot be made. Further the memorandum of understanding that has been found from the office of the assessee was not signed at all by the assessee. Even the property mentioned in that particular memorandum of understanding was never transacted at all. Further on reading of the memorandum of understanding it is clear that Mr. Jayant did not have any right in the property. Preamble of the memorandum of understanding clearly shows that the property is in dispute. The assessee has also explained the other transactions entered into by Mr. Jayant with the assessee. Further the receipt found from the office of the assessee was also not dated and therefore it was not known that on which date the assessee has paid the alleged money to Mr Jayant - there is no signature of another party on the memorandum of understanding itself. Further on the receipt also the signature of these 2 parties have been obtained, however none of the parties confirmed that in fact there witness to the payment of INR 7,500,000 by assessee to Mr Jayant. Thus property did not belong to Mr Jayant, even otherwise he did not have any right to sell this property, property mentioned in the memorandum of understanding remains untransacted, no enquiry by the learned assessing officer with respect to the original title deed of the property mentioned in the memorandum of understanding along with the receipt but not found during the course of search, memorandum of understanding not signed by the assessee,confirmation of both the parties that the transactions have not fructified, version of the witness not confirming the memorandum of understanding and in absence of any corroborative material found during the course of search with respect to the above property, We are not inclined to confirm the above addition. - Decided in favour of assessee.

Summary

Issues involved:
1. Jurisdiction of search u/s 132
2. Addition of unexplained income of INR 7,500,000 based on a receipt
3. Dispute regarding the transaction and receipt validity

Issue 1: Jurisdiction of search u/s 132
The appeal was filed by the assessee against the order of the Commissioner of income tax appeals, challenging the search conducted under section 132 on the premises of the appellant. The appellant argued that the search was without jurisdiction and not based on any incriminating material. However, the assessing officer and CIT (Appeals) maintained that the search was valid. The Tribunal dismissed this issue as the appellant did not press ground number 1 of the appeal.

Issue 2: Addition of unexplained income of INR 7,500,000 based on a receipt
The dispute centered around the addition of INR 7,500,000 in the hands of the assessee based on a receipt found during a survey. The assessing officer contended that the amount was received by the assessee from Mr. Jayant, as evidenced by the signed receipt. However, the appellant denied making this payment, stating that the transaction did not take place and the receipt was null and void. The Tribunal analyzed the documents, including the memorandum of understanding and receipt, and found discrepancies. It noted that the property mentioned in the documents did not belong to Mr. Jayant, and no corroborative evidence was found during the search. As a result, the Tribunal reversed the lower authorities' decision and deleted the addition of INR 7,500,000.

Issue 3: Dispute regarding the transaction and receipt validity
The Tribunal examined the details of the transaction, the property involved, and the statements of the parties involved. It highlighted that the memorandum of understanding was not signed by the assessee, and the property mentioned remained untransacted. Additionally, the absence of original title deeds during the search raised doubts about the transaction's authenticity. The Tribunal emphasized the lack of corroborative material and discrepancies in the documents, leading to the deletion of the addition of INR 7,500,000. Consequently, ground number 2 of the appeal was allowed, and the appeal was partly allowed by the Tribunal.

In conclusion, the Tribunal's judgment addressed the issues of jurisdiction, addition of unexplained income, and the validity of the transaction and receipt. The decision highlighted discrepancies in the documents, lack of corroborative evidence, and inconsistencies in the transaction details, leading to the deletion of the addition in question.