2022 (2) TMI 272 - AT - Income Tax

Assessment u/s 153A - unexplained expenditure on account of cash payment made towards land - search and seizure operations U/s 132 wherein loose papers found and seized - HELD THAT - In the case before us, except the said seized papers, no other corroborative evidence has been brought on record by the AO. Whereas the assessee has proved beyond doubt the fact that the said property is still in dispute. The seller also has denied of getting any further payment from the assessee before the AO. Hence we agree with the arguments of AR that no prudent businessman will give full money to the seller, if the property being purchased is in dispute. Considering the above mentioned facts and circumstances of the case, we are of the view that the addition made by the A.O. and upheld by the ld. CIT(A) on the basis of seized document is without any basis or foundation more particularly when no specific facts by virtue of documents have been placed on record and have not rebutted by the Revenue, thus, in this eventuality, no addition was warranted. Accordingly, we direct to delete the addition made by the A.O. and confirmed by the ld. CIT(A). - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the assessment order passed under Section 143(3) read with Section 153A of the Income Tax Act.
2. Justification of the addition of ?8,00,000 as unexplained expenditure on account of cash payment made towards land dealing.

Issue-wise Detailed Analysis:

1. Legality of the Assessment Order:
The assessee contested that the assessment order passed under Section 143(3) read with Section 153A of the Income Tax Act was "bad in law." The return of income for the year under consideration was filed on 31/07/2014, declaring a total income of ?8,69,300, which was processed under Section 143(1) on 05/11/2014. A search and seizure operation under Section 132 was conducted at the assessee's residential premises on 10/09/2014, leading to the assessment order dated 23/12/2016, determining the total income at ?16,69,300 by making an addition of ?8,00,000 as unexplained expenditure. The assessee argued that the assessment order was not justified, but the tribunal did not find merit in this argument and focused on the substantive issue of unexplained expenditure.

2. Justification of the Addition of ?8,00,000 as Unexplained Expenditure:
The primary issue was the addition of ?8,00,000 made by the Assessing Officer (A.O.) as unexplained expenditure based on seized documents during the search operation. The seized documents included loose papers and vouchers indicating transactions. The A.O. concluded that the assessee had made payments totaling ?37,80,000, which included unexplained cash payments.

The assessee argued that the documents were rough jottings and did not correspond to any specific transactions. It was contended that the payments mentioned were part of a property deal with Mr. Madhav Vallabhdas Mohta, which was not completed due to the property being in a "No Development Green Zone." The assessee provided additional evidence, including ledger accounts and gift confirmation letters, to substantiate the claim that the payments were made through legitimate sources, including gifts from family members.

The tribunal observed that the A.O. had recorded the statement of the seller, Mr. Mohta, who denied receiving the balance sale consideration in cash and confirmed that the registration of the sale deed could not take place. The tribunal emphasized that the addition was based solely on the seized documents without any corroborative evidence. Citing the Supreme Court's decision in Dhakeswari Cotton Mills Ltd. and the Allahabad High Court's decision in CIT Vs. Rameshwar Prasad Bagla, the tribunal noted that assessments should not be based on pure guesswork without reference to material evidence.

The tribunal concluded that the addition of ?8,00,000 was unwarranted as the assessee had demonstrated that the property deal was not completed and the seller had denied receiving further payments. The tribunal directed the deletion of the addition made by the A.O. and confirmed by the CIT(A).

Conclusion:
The appeals for both assessment years 2014-15 and 2015-16 were allowed, with the tribunal directing the deletion of the addition of ?8,00,000 as unexplained expenditure. The tribunal emphasized the lack of corroborative evidence and the necessity of basing assessments on material evidence rather than assumptions.