2021 (8) TMI 1026 - AT - Income Tax

Initiation of proceedings u/s. 153C - Unaccounted on-money payment for purchase of land - Search and seizure u/s. 132 - addition based on loose paper found and seized - persons who have received the on-money payment have taken contradictory stands before different income-tax authorities and, therefore, the appellate proceedings in connected cases have direct bearing on the case of the assessee - CIT-A deleted the addition - HELD THAT - After perusal of the material on record and order of the AO it is clearly indicated that the information received from search conducted in Himalyan Group was also utilized in making impugned addition in the case of the assessee. The ld. counsel has also submitted that in addition to the fact that addition was not made on the basis of document seized from the office promises of Saumya Construction Pvt. Ltd., the referred documents dated 19-04-2008 as a copy of agreement between the Sandesh Ltd., Pusti Enterprises and Saumya Construction did not pertain to assessment year in question. Reliance upon the decision of Sanhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT wherein held that where loose papers found and seized did not establish co-relation document wise with assessment year, notice issued under section 153C had rightly been quashed and set aside. We have considered the judicial pronouncement as supra wherein it is held that where loose paper found and seized did not establish co-relation document wise with assessment year in question notice issued u/s. 153C had rightly been quashed and set aside. Before us, the Revenue could not point out to the contrary. In the light of the above facts and findings and after considering the decision of the ld. CIT(A), the appeal of the Revenue is dismissed. Therefore, this appeal of the revenue is dismissed.

Summary

Issues Involved:
1. Legality of the addition of ?11,05,51,000/- as unaccounted on-money payment for the purchase of land.
2. Validity of proceedings initiated under section 153C of the Income Tax Act, 1961.

Detailed Analysis:

1. Legality of the Addition of ?11,05,51,000/- as Unaccounted On-Money Payment for the Purchase of Land:

The revenue's primary contention was that the CIT(A) erred in deleting the addition of ?11,05,51,000/- made on account of unaccounted on-money payment for the purchase of land. The basis for this addition was the contradictory stands taken by the recipients of the alleged on-money payment before different income-tax authorities. The Assessing Officer (AO) had initiated proceedings under section 153C based on documents found during a search on Saumaya Construction Pvt. Ltd. and the Himalaya Group, which indicated that the land sold by Shri Rohit Modi included an unaccounted cash receipt of ?11,05,51,000/-.

The AO issued a show cause notice to the assessee, questioning why this amount should not be added as unexplained investment. The assessee responded, denying any cash payment beyond the documented price of ?1.20 crores, and provided an affidavit from Shri Rohit Modi and Smt. Pareshaben Modi supporting this claim. However, the AO rejected this submission, citing the lack of reliability of the affidavit and the absence of direct evidence to the contrary, leading to the addition of ?11,05,51,000/- on a protective basis.

Upon appeal, the CIT(A) deleted the addition, stating that the purchaser of the land was Saumaya Construction Pvt. Ltd., not the assessee. The CIT(A) found that the cash payment was made by Saumaya Construction Pvt. Ltd., as evidenced by the conveyance deed and other documents. The CIT(A) noted that the seized documents were related to the land identified as Tapovan, which was ultimately sold to Aryaman Co-operative Housing Society Ltd., with Saumaya Construction Pvt. Ltd. as the purchaser and not the assessee.

The Tribunal upheld the CIT(A)'s decision, noting that the revenue could not provide any contrary material evidence. The Tribunal also considered the affidavit from Rohit Modi, which stated that no payment was received from the assessee. The Tribunal concluded that the on-money payment was made by Saumaya Construction Pvt. Ltd. and not by the assessee, thus justifying the deletion of the addition.

2. Validity of Proceedings Initiated Under Section 153C of the Income Tax Act, 1961:

During the appellate proceedings, the assessee contested the validity of the proceedings initiated under section 153C. The assessee argued that the document cited in the reasons recorded for initiating proceedings did not pertain to the assessment year in question and was not incriminating. The document in question was an agreement between Saumya Construction Pvt. Ltd., Sandesh Ltd., and Pusti Enterprises, which did not mention Rohit Modi or Pareshaben Modi and had no connection with the transaction under scrutiny.

The Tribunal considered the Supreme Court's decision in CIT vs. Sinhgad Technical Education Society, which held that if the seized documents did not establish a correlation with the assessment year, the notice issued under section 153C could be quashed. The Tribunal found that the document cited did not pertain to the assessment year in question and was not incriminating. Consequently, the Tribunal held that the proceedings under section 153C were invalid and the addition made on this basis was not justified.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the addition of ?11,05,51,000/- and ruling that the proceedings initiated under section 153C were invalid. The Tribunal's decision was based on the lack of incriminating evidence linking the assessee to the alleged on-money payment and the invalidity of the proceedings under section 153C as per the Supreme Court's ruling.