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TMI Blog2017 (11) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment and reject ground raised by the assessee. Additions towards alleged on money received by the assessee for sale of property based on third party statement - Held that:- A.O. is not correct in coming to the conclusion that on money is exchanged between the parties based on a loose sheet found in the premises of a third person. To sustain the addition, the A.O. should have conducted an independent enquiry about the value of the property and ascertain whether any under valuation is done, if so what is the correct value of the property. Further, the A.O. did not brought on record any evidence to support his contention to say that there is on-money exchanged between the parties. In the absence of proper enquiry and sufficient evidences, we find no reason to confirm addition made by the A.O towards on money. Therefore, we direct the Assessing Officer to delete addition made towards on money. Penalty levied u/s 271(1)(c) for concealment of particulars of income deleted. - I.T.A No.250/Mum/2013 And I.T.A No.2748/Mum/2016 - - - Dated:- 27-10-2017 - Shri D.T. Garasia (JUDICIAL MEMBER) And Shri Rajesh Kumar (ACCOUNTANT MEMBER) For The Appellant : Shri Hari Raheja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid ₹ 3.05 crores in cash for purchase of property from assessee company. The director of M/s Hicons Constructions Pvt Ltd , Mr. Rafique Mohd Nazir Sheikh, in his statement recorded u/s 132(4) of the Act admitted that the transactions recorded in the impugned seized material related to cash receipts and cash payments in respect of sale / purchase of properties. Based on the information gathered during the course of search, the ADIT (Inv), Unit 3(2), Mumbai issued summons u/s 131 of the Act to M/s Riveria Properties Pvt Ltd for causing necessary examination of the directors thereof in the context of information relating to cash expenditure incurred by M/s Hicons Constructions. The statement of Shri Bhagwan D Rathod, director of M/s Riveria Properties Pvt Ltd was recorded on oath u/s 131 of the Income-tax Act, 1961 to ascertain whether the said cash receipts had been accounted for in the books of the assessee company. Shri Bhagwan D Rathod, director of the assessee company in the statement recorded during the course of investigation categorically denied of having received any cash from M/s Hicons Constructions Pvt Ltd for sale of property. He further stated that the property h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee refused to avail such opportunity. In facts and circumstances it was held that the assessee had no submissions / arguments to defend its case. The CIT(A) further observed that under these factual circumstances, the AO was justified in making additions of ₹ 3.05 crores u/s 69A of the Act. Aggrieved by the order of CIT(A), the assessee is in appeal before us. 5. The Ld.AR for the assessee submitted that the Ld.CIT(A) erred in upholding the action of the AO in reopening the assessment based on solitary statement of third party recorded u/s 132(4) of the Act without any evidence to prove the truth except entry in the books of documents and transactions. The Ld.AR further submitted that reopening of assessment is bad in law and liable to be quashed as the AO has not applied his mind to the facts or any material which suggests escapement of income, but relied upon the third party statement based on some loose papers found in the premises of third party which is not relevant to the assessment in assessee s case. As regards addition made by the AO towards on-money, the Ld.AR submitted that the assessee has categorically denied of having received any money over and above whateve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich cannot be the basis for reopening assessment. The assessee questioned materials relied upon by the A.O. to form a belief of escapement of income. 2. Having heard both sides, we find that the A.O. had reopened assessment for the reasons recorded which is supported by information received from investigation wing of department. The information received from the Investigation wing reveals certain financial transaction between the Assessee Company and M/s Hicons Construction private limited. Based on such information, the A.O. has formed a reason to believe that income chargeable to tax had been escaped assessment. The question is whether such information constitutes sufficient material for reopening assessment or not. The provisions of section 147 of the Act, authorize the assessing officer to assess or re-assess income chargeable to tax, if he has reason to believe that income for any assessment year has escaped assessment. The primary requirement of section 147 of the Act, is that there should be formation of belief by the assessing officer coupled with material evidence. If the A.O. has cause or justification to know or suppose that income had escaped assessment, it can be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which reveals cash transactions incurred by M/s Hicon Constructions private limited is at page no. 79 of Annexure, A-1, page No. 43 of annexure A-7 and page no. 51 of annexure A-15 which were seized from the residence of Shri. Nadeem Lakdawala. During search, in the statement recorded u/s 132(4), the director of Hicon group admitted that financial transactions recorded in seized materials is cash receipts and payments in its business. During post search investigations, the director of assessee company has been summoned and his statement was recorded to cross verify seized documents. During post search investigation, the director of assessee company Sri. Bhagavan D Rathod has admitted having sold immovable property to M/s Hicon constructions private limited for a consideration of ₹ 1,70,00,000/-, however denied having received any amount in cash over and above what is stated in the sale deed. 4. The assessee company has sold immovable property called Fatima manzil admeasuring 1075 sq, yds. to M/s Hicon Construction private limited by an indenture dated 6-7-2005 for a consideration of ₹ 1,70,00,000/-. The assessee has disclosed said sale of property in its return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for registering the properties and also which was accepted by the registering authority. Further, there is no evidence to show that there is under valuation of property and section 50C of the Act is invoked while completing the assessment. The A.O. merely acted upon on the statement given by the third party, which was totally denied by the directors of the assessee company It was a settled position of law that unless the statement is tested under the cross examination, the same cannot be considered as evidence against the assessee. The A.O. used the admission of directors of Vendee Company made in the statement recorded u/s 132(4) of the Act, in their case, against the assessee, even though the director of Hicon group specifically not taken assessee company name anywhere in the statement. But, the A.O. failed to note that admission of other parties cannot be considered as conclusive evidence against the assessee, unless there is corroborative evidence on record, because the maker of statement can bind himself, but how he binds others from his statement without there being any further evidence on record. 6. In the present case on hand, except loose sheet found in the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alone. To tax any particular receipt, primary evidence is very much necessary and unless there is primary evidence, circumstantial evidence cannot be considered as conclusive evidence against any person to tax any particular receipt. Circumstantial evidence plays an important role in income tax proceedings, where the A.O. needs to estimate the income based on some evidence available for part of the year, then remaining period estimation can be made based on evidence available. But, payment/receipt of on money is purely a factual issue which cannot be decided based on circumstantial evidence. 8. Now coming to the case laws relied upon by the assessee. The assessee counsel, at the time of hearing relied upon plethora of case laws in support of his contentions. Though, many case laws are dealt with similar issue, the decision of Hon ble Supreme Court is directly on the issue which is very much relevant in the context of taxation of on money. The Hon ble Supreme Court in the case of CIT Vs. P.V. Kalyana Sundaram (2007) 294 ITR 49, under similar circumstances held in favour of the assessee. The relevant portion of order is reproduced hereunder: We have heard learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no corroborative material to suggest that the assessee has actually paid ₹ 1.65 rores towards purchase consideration of the property. The assessee and her brother categorically denied the payment of any money over and above ₹ 65 lakhs. The AO placed hi reliance on the statement of 5, who is a third party. The evidence brought on record by the Department is not enough to fasten additional tax liability on the assessee. As seen from the above document this is just a handwritten loose document and the handwriting is also not of the assessee and the loose document was found at the premises of a third party. The burden is on the Department to prove conclusively that the loose document belongs to the assessee. There is no presumption in law that the assessee has actually paid ₹ 165 lakhs towards purchase of the property. The undisclosed income in this case is to be computed by the AO on the basis of the available material on record. It should not be based on conjectures and surmises. As of now, the material considered by the AO for making the addition of Ps. 1 crore is seized material marked a 'A/CRK104' and the statement of S. This loose sheet found at the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the addition cannot be sustained. Thus, no addition can be made on a dumb document and noting on loose sheet. It should be supported by the evidence on record and the evidence on record is not sufficient to support the Revenue's action. In a block assessment undisclosed income has to be determined or the .basis of the material and evidence detected in the course of the search action. The circumstances surrounding the case are not strong enough to justify the addition made by the Department. The burden of proving the actual consideration in the purchase of property is on the Revenue. Considering the entire facts of the case, the Revenue has failed to discharge its duty, instead made up a case on surmises and conjectures which cannot be allowed. Under these circumstances, there is no reason to confirm the addition of ₹ 100 lakhs towards on-money payment. Accordingly, the addition of ₹ 100 lakhs is deleted.-CIT vs. P.V. Kalyanasundaram (2006) 203 CTR (Mad) 449: (2006) 282 ITR 259 (Mad) relied on 10. The Hon ble A.P. High Court in the case of Smt. K.V. Lakshmi Savitri Devi Vs. ACIT in ITTA 563 of 2011, upheld the order of the ITAT Hyderabad Bench. The Hon ble Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of purchase of flat the said denial cannot be brushed aside without bringing any positive material on record. Merely recording made by a third party or statement of a third party cannot be treated as so sacrosanct so as to read as a positive material against the assessee. In view of the above the CIT(A) was not justified in confirming addition to the extent of ₹ 3,81,414/- in the hands of the assessee. Therefore the addition of ₹ 3,81,414/- is deleted. Asst. CIT Vs. Prabhat Oil Mills (1995) 52 TTJ (Ahd) 533 relied on; K.P. Varghese Vs. ITO (1981) 24 CTR (SC) 358: (1981) 131 ITR 597 (SC) applied. 12. In yet another case, the ITAT Hyderabad B bench in the case of DCIT (Central Circle)-6 Vs. B. Vijay Kumar in ITA No.930 931 of 2009 held the issue in favour of the assessee as under: 11. We have heard rival submissions, perused the material submitted before us and al so perused the order s of the revenue authorities. On a reading of the assessment order, it is absolutely clear that the addition has been made entirely on the basis of the photocopy of the sale agreement seized from the residence of the assessee in course of search and seizure operation. Undispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. Madha and Azam S . Madha vs . CIT (89 ITR 65) has held that photocopies have little evidentiary value . Therefore , photocopies of any document cannot by itself be considered as evidence for purpose of making addition in assessment proceedings. The AO is required to bring further evidence on record to show that the sale agreement was actually acted upon by the parties. This is because of the fact. when the AO is going to make an addition, there should be sufficient evidence brought on record to support such addition. No addition can be made on conjectures and surmises. As seen from the assessment order, the AO has adopted value of the property at the Rs . 7000/ - per sq. yard on the date of transaction. For adopting such a valuation, the AO has not conducted any enquiry or brought any materials on record to s how that the value of the property on the date of transaction was actually ₹ 7000 per sq. yard. On the other hand, the assessee has demons t rated with supporting evidence that the value of the land on the date of transaction was the rate mentioned in the registered sale deed and for which the property was sold. The assessee has also produced sufficient evidence to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same shows that the property was purchased at a price of ₹ 23,50,000/-. This registered sale deed was disclosed at the time of original assessment. According to us, the agreement of sale loses its force, the moment registered sale deed is executed. If the property has been purchased at a higher price than that of mentioned in the purchase deed, then the onus is on the Assessing Officer to establish that, as has been rightly concluded by the Tribunal on this issue. Moreover, photocopy of the unsigned agreement has got no evidentiary value. The Assessing Officer has done a guess work while coming to the conclusion that the price of the property is more than mentioned in the sale deed. There must be some material and basis to conclude that the purchase has been made at an under valuation. 14. Considering the total facts and circumstances of the case and also applying the ratios of the judgements cited above, we are of the view that the A.O. is not correct in coming to the conclusion that on money is exchanged between the parties based on a loose sheet found in the premises of a third person. To sustain the addition, the A.O. should have conducted an independent enquir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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