2021 (5) TMI 664 - AT - Income Tax

Undisclosed investment in the purchase of property in the form of payment of on-money consideration - on-money over and above stated consideration of the sale deed - addition made on mere statement made u/s 132(4) - HELD THAT - In the present case, the additions are made merely based on statement of third parties without bringing on record any corroborative evidence. No such addition can be made. As held by the Hon ble Supreme Court in the case of CIT vs. Daulatram Rawatmull, 1964 (3) TMI 14 - SUPREME COURT even the circumstances raises suspicion, suspicion cannot take place of the evidence. That apart, the contentions of the appellant i.e. the assessee that the vendors had declared additional income only in order to escape the rigouts of the law to claim the benefits u/s 54 of the Act remains uncontroverted. Therefore, we are of the considered opinion that the fact that the vendors had disclosed additional income on account of sale of land as additional income before the Settlement Commission cannot form any basis for the addition in the hands of the appellant herein. Thus we are of the considered opinion that the Department had failed to establish that the appellant had paid any on-money over and above stated consideration of the sale deed to the vendors of the property at the time of purchase of Savargaon land. Therefore, no addition can be made on the mere statement given by the third party. Therefore, the orders of the lower authorities are reversed, we direct Assessing Officer to delete addition for the assessment year under consideration. Addition on-money consideration at the time of purchase of the lands - HELD THAT - It is settled position of law that onus lies upon the Department to collect cogent evidence to corroborate the notings on the loose sheets. The additions cannot be made merely on the basis of notings on the loose sheet papers which are in the nature of dumb documents having no evidentiary value. The onus lies on the Department to collect the evidence to corroborate the notings on the loose sheets. In the present case, it is undisputed position that as a result of search and seizure action in the case of respondentassessee and its group companies, no material whatsoever was seized and found indicating payment of on-money consideration at the time of purchase of the lands The Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO 1981 (9) TMI 1 - SUPREME COURT held that the capital gains is intended to tax the gains of assessee not what an assessee might have gained and what is not gained cannot be computed as gain and the assessee cannot fastened with the liability on a fictional income. Similarly, the Hon'ble Supreme Court in the case of CIT Vs. Shivakami Co. (P.) Ltd. 1986 (3) TMI 2 - SUPREME COURT held that unless there is evidence that more than what was stated was received, no higher price can be taken to be the basis for making addition. In the present case, we do not find any material on record suggesting the payment of onmoney consideration at the time of purchase of land by the respondentassessee and its group companies. Therefore, it can be said that the Assessing Officer had failed to bring on record any reliable evidence to prove that the respondent assessee had made investment in purchase of lands over and above the stated consideration. Therefore, we do not see any perversity in the findings of the ld. CIT(A) in deleting the addition based on the seized material. The findings given by us in relation to the appeal filed by the assessee for the same year also equally holds good in respect of present appeal and therefore, we do not find any merit in the appeal filed by the Revenue and we dismiss the appeal. Accordingly, we dismiss the appeal filed by the Revenue.

Issues Involved:
1. Legality of proceedings under Section 153A.
2. Addition based on the statement given under Section 132(4) regarding on-money consideration.
3. Evidentiary value of statements and seized material.
4. Cross-examination and contradictory statements.
5. Presumption under Section 132(4A) and its applicability.
6. Corroborative evidence requirement.
7. Role of Settlement Commission findings in assessment of third parties.

Detailed Analysis:

1. Legality of Proceedings under Section 153A:
The appellant challenged the initiation of proceedings under Section 153A of the Income Tax Act, claiming the absence of incriminating material or unexplained assets found during the search action. However, this ground was not pressed during the hearing.

2. Addition Based on Statement under Section 132(4):
The primary issue was the addition of ?2,58,20,476/- based on the statement given by the vendors (Kokani group) under Section 132(4) during the search and seizure proceedings. The Assessing Officer (AO) made the addition based on these statements, which suggested that the vendors received on-money over and above the stated consideration in the sale deed. The CIT(A) partially upheld this addition, confirming it to the extent of the amount admitted by the Kokani group in their statements.

3. Evidentiary Value of Statements and Seized Material:
The Tribunal noted that the statements given by the Kokani group under Section 132(4) were contradictory, as they later denied receiving any on-money from the Thakker group during cross-examination. The Tribunal emphasized that contradictory statements hold no evidentiary value, referencing the Supreme Court's decision in Dhirajlal Giridharilal vs. CIT, 26 ITR 736 (SC).

4. Cross-Examination and Contradictory Statements:
During cross-examination, the vendors categorically denied receiving any on-money from the Thakker group, stating that their declaration of additional income was made to buy peace with the Department. The Tribunal found that these denials and the affidavits filed by the vendors undermined the AO's reliance on their initial statements.

5. Presumption under Section 132(4A) and Its Applicability:
The Tribunal clarified that the presumption under Section 132(4A) applies only to the person in whose hands the material was found and cannot be extended to third parties. The Tribunal criticized the AO and CIT(A) for misapplying this presumption to the Thakker group.

6. Corroborative Evidence Requirement:
The Tribunal stressed that no addition can be made solely based on statements under Section 132(4) without corroborative evidence. It noted that no incriminating material was found during the search of the Thakker group's premises to suggest any payment of on-money. The Tribunal cited various judicial precedents, including the Gujarat High Court's decision in PCIT vs. Kunvarji Commodities Brokers Pvt. Ltd., 432 ITR 150, which held that additions cannot be made based on third-party statements in the absence of corroborative evidence.

7. Role of Settlement Commission Findings in Assessment of Third Parties:
The Tribunal observed that the Kokani group's admission of additional income before the Settlement Commission was not binding on the Thakker group. It referenced decisions like CIT vs. Vineeta Gupta and P.G. Foils Ltd. vs. Income-tax Settlement Commission to support this view. The Tribunal concluded that the findings in one person's assessment are not conclusive for another person's assessment without independent corroborative evidence.

Conclusion:
The Tribunal allowed the appeal of the assessee (Thakker group), directing the AO to delete the addition of ?2,58,20,476/-. It dismissed the Revenue's appeals for both assessment years 2014-15 and 2012-13, holding that the additions were based on assumptions, presumptions, and inadmissible material without corroborative evidence. The Tribunal emphasized the need for concrete evidence to justify any addition in the hands of the assessee.

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