TMI Blog2005 (11) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... h Enterprise, was recorded. In his statement Shri Shailesh Mehta stated that he had paid 'on money' of Rs. 47 lakhs for the land purchased by him for their Panorama Project. The money was paid to Shri Ashoklal, director of the assessee-company. As per the statement of Shri Mehta, total consideration amounted to Rs. 61 lakhs but conveyance deed was executed for Rs. 14 lakhs only. The remaining consideration of Rs. 47 lakhs was paid in cash. On the basis of statement of Shri Mehta, the assessee-company was called upon to explain as to why 'on money' receipt of Rs. 47lakhs should not be taxed in the year under consideration. The assessee vide its reply dt. 2nd Feb., 1998 stated that Shri Mehta paid only Rs. 14 lakhs on the sale of land and he has not paid any 'on money' as alleged by him. Simultaneously search proceedings were conducted by the authorized officers at the premises of Shri Shailesh Mehta and also at the premises of Shri Ashoklal, director of the assessee-company, and no incriminating documents or papers were seized by the authorized officers which indicate any receipt of 'on money' from Shri Shailesh Mehta. 3.1 The AO, after considering the statement of Shri Shailesh M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in reply to question Nos. 11 and 12 and has also admitted payment of 'on money'. In this very statement, Mr. Mehta had admitted that plot at the Panorama Complex was purchased for total consideration of Rs. 40 lakhs and the documents for the land were executed for Rs. 14 lakhs only. However, in his second statement which was recorded under s. 132(4) of the IT Act, after having admitted 'on money' receipt on the sale of its various projects, Shri Shailesh Mehta in answer to question No. 7 submitted that the land at Panorama Complex was actually purchased for Rs. 61 lakhs and his earlier statement that the same was purchased for Rs. 40 lakhs was not correct. In the opinion of CIT(A), this second statement of Shri Shailesh Mehta is not as reliable as the statement under s. 131(1A) recorded in the morning of 23rd Aug., 1995. In this statement, it appears that after having admitted charging of 'on money' Shri Shailesh Mehta increased the value of plot just to claim more debit on account of purchase of plot so that 'on money' receipts on sale of flats, etc. may be set off to a larger extent. In view of these facts, he observed that he has the reason to rely on the spontaneous statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F) Ors. vs. Dy. CIT in ITA Nos. 4600-4513 of 1991, dt. 27th March, 2001, reported at Taxmann Feb., 2004, at p.197. As per learned Authorised Representative, this issue is squarely covered by ITA No. 181/Rjt/1999, dt. 23rd Aug., 1999, in case of Ravindra Bhagwanji, Jamnagar vs. ITO wherein similar addition was deleted by the Tribunal after observing as under: "That statement of Shri Shailesh Mehta is highly motivated and self-serving. After purchase of plot in question Siddharth Enterprises developed it by constructing multi-storeyed building. He surrendered certain amount for assessment and claimed higher expenses than one claimed in the books. Shri Mehta claimed to have paid on money to assessee and others in the purchase of land. The deduction of on money has been allowed to Shri Mehta. This is what the AO has reproduced from the assessment order of Siddharth Enterprises, dt. 6th Nov., 1996." 4.1 On the other hand, learned Departmental Representative submitted that in the statement recorded under s. 132(4), Sri Shailesh Mehta clearly stated that the fact of giving 'on money' and the cross-verification was also allowed to the assessee and Shri Shailesh Mehta has never denied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrier of the 'on money'. He, therefore, held that addition was to be made only with respect to sale consideration of Rs. 40 lakhs, after deducting white money paid by the assessee. The CIT(A) also observed that it is a common knowledge that 'on money' payment is made in the real estate transactions and the extent of 'on money' depends on the location of property and its uses. It is also a fact that builders have connived with each other on the issue of recording of minimum consideration in respect of transfer of properties so that stamp duty and other taxes could be saved. Once the transaction takes place, such evidences are destroyed, therefore, it is unlikely that the Department would get any evidence to corroborate the tracing of such 'on money' transactions. As per CIT(A) in all such transactions one has to rely on circumstantial evidence which accord with human probabilities. 5.1 Now coming to the decision of Tribunal relied on by the learned Authorised Representative, we found that receipt and payment of 'on money' was held to be not taxable on the basis of facts and circumstances of each particular case and no ratio has been laid down in any of the judgments with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement of other co-purchasers were..... Further, there is no evidence to show that the assessee was allowed to cross-examine Shri Mehta before statement was used against the assessee. Having regard to above circumstances, we are of the view that self-serving statement of Shri Mehta is of no value and addition based thereon is not sustainable. It is directed to be deleted." 5.2 After going through the observation made in the order of Tribunal as stated by learned Authorised Representative, we found that in the case of Ravindra Bhagawanji, the addition was mainly deleted on the finding that statement of one party cannot form basis for making addition in the hands of the assessee when the assessee had clearly denied such receipt of 'on money'. A finding was also recorded in this case that there is no evidence to show that the assessee was allowed to cross-examine Shri Shailesh Mehta, before submission was used against the assessee. Thus, it is specifically clear that out of the two reasons/justification given for deletion of addition, one is with regard to not allowing cross-examination of Shri Shailesh. Mehta to the assessee. However, in the instant case, the AO has allowed cross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the alleged plot. Similarly, the Department has accepted the theory of 'on money' being received by the assessee-company and taxed the same in its hands. Now the question arises as to whether it can be presumed that while purchasing the alleged plot of land, the assessee-company had not paid any 'on money'. Undisputedly as per the observations made by the AO and CIT(A) , there is involvement of 'on money' in case of real estate dealings. Therefore, while accepting the payment of 'on money' by Shri Shailesh Mehta and receipt of 'on money' by the assessee, it cannot be denied that no 'on money' has been paid by the assessee-company on the purchase of the alleged plot of land which was' in turn sold to Shri Shailesh Mehta and on which it has received 'on money'. Therefore, keeping in view the facts and circumstances of the case vis-a-vis theory adopted by the Department itself and which is also known in commercial ,world, and also keeping in view the ratio of 'on money' to the white money, as discussed by the Departmental authorities in their respective orders, we are inclined to hold that the assessee-company is also not out of this vicious circle of 'on money' payment and rece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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