2025 (1) TMI 753 - AT - Income Tax

Addition in hands of the assessee company - cash payments were made to the farmers and same was seized during search proceedings - CIT(A) deleted addition - HELD THAT - As there is no evidence that assessee has purchased any asset during the year nor earlier - assessee has acted merely as a commission agent and all the payments relate to Murlidhar Infracon Pvt. Ltd. only. We observed from the conveyance deeds that Murlidhar Infracon Pvt. Ltd. has accepted that they have made payments by mentioning various payments made to farmers prior to its incorporation. It clearly denotes that the directors/shareholders of Murlidhar Infracon Pvt. Ltd. must have made the arrangement to make those payments. There is no record brought on record by the Revenue that these payments were routed through bank accounts maintained by the assessee. Therefore, in absence of any cogent material, we are inclined to agree with the findings of ld. CIT (A). No reason to disturb the finding of the CIT (A) and CIT (A) merely deleted the addition made in the hands of the assessee, however he remitted the issue back to the file of AO to redo the assessment after making proper verification. Therefore, there is no prejudice caused to the Revenue with the findings of ld. CIT (A). Accordingly, the grounds of appeal filed by the revenue are dismissed.

1. ISSUES PRESENTED and CONSIDERED

The judgment primarily revolves around the following legal issues:

Whether the addition of Rs. 5,21,34,953/- made by the Assessing Officer (AO) in the hands of the assessee company for alleged cash payments towards land purchases is justified.
The validity of the presumption that the seized documents, which mentioned "Payment Paid by Shivmurti," belonged to the assessee company, Shiv Murti Developers Pvt. Ltd.
Whether the procedural aspects of assessment under sections 147/148 and 153C of the Income Tax Act were adhered to, particularly concerning jurisdiction and the use of additional evidence.
The appropriateness of the deletion of the substantive addition by the Commissioner of Income Tax (Appeals) [CIT(A)] and the direction to reassess the correct entity.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Addition for Alleged Cash Payments

Relevant Legal Framework and Precedents: The assessment was conducted under sections 147/148 and 153C of the Income Tax Act, which pertain to reassessment and assessment of income escaping assessment, and assessment in case of search or requisition, respectively.
Court's Interpretation and Reasoning: The Tribunal examined whether the AO's addition was substantiated by corroborative evidence linking the cash payments to the assessee company.
Key Evidence and Findings: The AO based the addition on seized documents indicating cash payments, but the CIT(A) found no substantive evidence linking these payments to the assessee.
Application of Law to Facts: The Tribunal noted that the conveyance deeds and bank transactions indicated that payments were made by Murlidhar Infracon Pvt. Ltd., not the assessee.
Treatment of Competing Arguments: The assessee argued that the documents did not belong to them and that the payments were made by another entity. The Revenue contended that the documents indicated the assessee's involvement.
Conclusions: The Tribunal upheld the CIT(A)'s decision to delete the addition, finding no evidence that the cash payments were made by the assessee.

Issue 2: Presumption of Document Ownership

Relevant Legal Framework and Precedents: Section 292C of the Income Tax Act allows for presumption regarding documents found during a search. However, this presumption is rebuttable.
Court's Interpretation and Reasoning: The Tribunal considered whether the presumption that the documents belonged to the assessee was justified.
Key Evidence and Findings: The documents were seized from a third party, and the assessee denied ownership, arguing that "Shivmurti" could refer to other entities.
Application of Law to Facts: The Tribunal found that the presumption was not substantiated by evidence linking the documents to the assessee.
Treatment of Competing Arguments: The Revenue's reliance on the presumption was countered by the assessee's evidence of non-involvement.
Conclusions: The Tribunal agreed with the CIT(A) that the presumption was not validly applied to the assessee.

Issue 3: Procedural Validity of Assessment

Relevant Legal Framework and Precedents: The procedures under sections 147/148 and 153C require valid reasons for reopening assessments and proper jurisdictional adherence.
Court's Interpretation and Reasoning: The Tribunal assessed whether the AO followed due process in making the assessment and additions.
Key Evidence and Findings: The CIT(A) found procedural lapses, including reliance on submissions not part of the recorded reasons for reopening the assessment.
Application of Law to Facts: The Tribunal noted that the AO's assessment was based on assumptions and not on concrete evidence.
Treatment of Competing Arguments: The assessee highlighted procedural errors, while the Revenue defended the AO's actions.
Conclusions: The Tribunal upheld the CIT(A)'s findings of procedural deficiencies and the need for reassessment.

Issue 4: Appropriateness of CIT(A)'s Deletion and Direction

Relevant Legal Framework and Precedents: The CIT(A) has the authority to delete additions and direct reassessment under section 150 of the Income Tax Act.
Court's Interpretation and Reasoning: The Tribunal evaluated whether the CIT(A)'s actions were justified based on the evidence and procedural context.
Key Evidence and Findings: The CIT(A) found that the addition was not supported by evidence and directed the AO to reassess the correct entity.
Application of Law to Facts: The Tribunal found that the CIT(A)'s direction was appropriate given the lack of evidence against the assessee.
Treatment of Competing Arguments: The Revenue argued against the deletion, while the assessee supported the CIT(A)'s decision.
Conclusions: The Tribunal upheld the CIT(A)'s deletion of the addition and direction for reassessment.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The appellant has not undertaken any such transaction as there is no substantive evidence on record to establish."
Core Principles Established: The Tribunal emphasized the need for substantive evidence to support additions and the importance of adhering to procedural requirements in assessments.
Final Determinations on Each Issue: The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s deletion of the addition and direction for reassessment of the correct entity.

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