TMI Blog2015 (11) TMI 1608X X X X Extracts X X X X X X X X Extracts X X X X ..... sue and rejected the assesse arguments. Therefore, we upheld the reopening of the assessment and reject the ground raised by the assessee. - Decided against assessee Addition towards alleged on money received by the assessee based on third party statement relied upon by the assessing officer - Held that:- A.O. is not correct in coming to the conclusion that the on money is exchanged between the parties based on a loose sheet found in the premises of a third person and also admission by 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 the addition made by the A.O. Therefore, we reverse the CIT(A) order and direct the Assessing Officer to delete the addition. - Decided in favour of assessee - I.T.A.No.453/Vizag/2012 - - - Dated:- 6-11-2015 - SHRI V. DURGA RAO, JUDICIAL MEMBE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Estates. In the statement recorded u/s 132(4) of the Act, the partners of the said firm admitted that the seized materials shown at page nos.41,42,83 84 of annexure A/C,F D seized from the business premises of M/s. Classique Farms Estates indicates the financial transaction entered into between by our firm with M/s. Sri Venkatarama Sai Developers and the amount written therein is the cash payments made by us over and above the amounts shown in the sale deed for purchase of the said property. Page no.84 of seized materials shows that ₹ 62 lakhs was paid by cheques drawn on Bank of Baroda and ₹ 1,38,00,000/- was paid in cash on various dates beginning from 2.1.2007 to 10.2.2007. Similar materials were also seized from the business premises of M/s. M.V.V. Builders, a group concern of M/s. Classique Farms Estates. As per the seized papers page nos.40,50,51,53 55 of annexure/MVVB/6 shows that total payment of ₹ 1,01,10,000/-was shown on various dates in the name of Shri Pattabhiram, Managing Partner of the assessee firm. When these seized materials were confronted to the partners of firm i.e. Shri M.V.V. Satyanarayana and Shri Rapeti Govind, they have confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in sheet no.84 shows that 40 acres @ 1.90 lacs per acre which comes to sum of ₹ 76 laks is the registered value. However, this portion of land was registered at ₹ 48 laks. Further, ₹ 178 laks was paid in cash out of which ₹ 40 laks was deducted. Which is written ₹ 138 laks as seen in sheet no.84. 3. During the course of assessment proceedings, the A.O. issued summons to Shri V. Pattabhiram and questioned about the said transaction. However, shri. V. Pattabhiram the partner of the assessee firm has denied having received any money in cash in excess of what is recorded in the sale deed. The relevant portion of his statement is reproduced as under: Statement of Mr. Ch. Venkata Pattabhi Ram recorded on 16.10.07: Q.6 Please go through sheet nos 55,53,51,50, and 40 of Annex MVB/6 seized in the business premises of M/s MVV Builders, Visakhapatnam. (Partner of M/s. Classique Farms Estates) wherein certain amounts were written as Paid to Pattabhi garu Please confirm whether the name written as Pattabhi garu is your name or not. Confirm whether the name written as Pattabhi garu is your name or not. Ans. Yes the name written Pattabhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration paid to us by cheques. Ans. Yes. There is 48 lakhs receipt proof. But there is no receipt for the balance amount. Q.4. Whether you have taken receipt for Cheque payment. Why have you not taken receipt for cash payment? Ans. We have not taken receipt for cash payment made. Q.5 When was the cash given before or after registration? Ans. Cash was given to you before registration. Q.6 Without registration or document proof how did you give us that much cash? Ans. I do not know but we have paid. 5. The assessing officer after considering the evidences available in the seized material and also statements given by the partners of M/s. Classique Farms Estates, held that the assessee s contention that there is no on money received by it from the sale of the said land is not acceptable. Therefore, the A.O. made an addition of ₹ 2,79,10,000/- towards alleged on money received by the firm from M/s. Classique Farms Estates as income from other sources and completed the assessment. 6. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before CIT(A), the assessee has raised three grounds. From ground no.2 it agitated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons as to how this amount alleged to have been paid to Smt. P. Radhika could be considered as on money in the hands of the assessee firm. To support his contentions, the assessee placed its reliance in the case of Jawaharbhai Atmaram Hathiwala Vs. ITO (2010) 128 TTJ 36 (UO). 8. However, the CIT(A) did not convinced with the explanations offered by the assessee, held dismissing the assessee s appeal i.e. both on validity of the reopening of the assessment as well as on merits of the issue. While confirming the assessment order, the CIT(A) held that it is not uncommon that on money is paid and received in real estate transactions and the same would be only within the knowledge of the buyer and the seller. Under these circumstances, it may not be expected that income tax officer is to bring out exact nature of the transactions in the nature of signed cash receipts, etc. The CIT further held that it is a well known fact and an open secret that there is a lot of black money involved in real estate transaction and the cash component is more in case of the lands situated in outskirts of big cities and towns. The CIT(A) further held that the entries in the seized materials when tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax (Appeals), Visakhapatnam is not justified in confirming the action of the Assessing Officer in levying interest under the provisions of section 234B of the Income Tax Act, 1961. 9. From these grounds of appeal, the assessee has raised two issues i.e. validity of reopening of the assessment and addition on merits. Now let us first take up the issue of validity of reopening of the assessment. 10. During the course of hearing, the Ld. A.R. submitted that the assessment order passed u/s 143(3) r.w.s. 147 of the Act is bad in law. The Assessing officer issued notice on the basis of information received from the investigation wing. The assessing officer did not conduct any independent enquiry or his opinion is not based on any tangible material so as to form a belief of escapement of income. The A.R. further submitted that the assessing officer ignored the fact that the appellant has purchased a property in 2005 and within such a short period, the appellant could not have made so much profit. Therefore, the A.O. did not make any attempt to find out how much was the consideration paid by the assessee when the property was purchased and what was the consideration received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion based on the information received from the investigation wing of the department. The CIT(A) has elaborately discussed on the issue and rejected the assesse arguments. Therefore, we upheld the reopening of the assessment and reject the ground raised by the assessee. 12. The next issue arises for our consideration, is whether the CIT(A) is right in confirming the additions made by the assessing officer towards alleged on money received by the assessee based on third party statement relied upon by the assessing officer. The factual matrix of the issue is that there was a search in the case of M/s. Classique Farms Estates. During the course of search proceedings, certain incriminating documents were found. The seized documents reveals that the assessee has sold lands for a consideration of ₹ 48 lakhs and also received on money of ₹ 2,79,10,000/-. During the course of assessment proceedings, the A.O. recorded statements from the partners of the vendee firm u/s 132(4) of the Act. During the course of investigation, the partners of the vendee firm have admitted that they have paid on money to the assessee firm for purchase of property. On cross examination, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile completing the assessment. The A.O. merely acted upon the statement given by the third party, which was totally denied by the partners of the assessee firm. 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 partners of vendee firm made in the statement u/s 132(4) of the Act in their case, against the assessee. But, the A.O. failed to note that admission of other parties cannot be considered as conclusive evidence against the assessee, unless there is a 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. 15. In the present case on hand, except loose sheet found in the premises of third party and admission made by the third party in their assessment proceedings, there is no other evidence on record to prove that on money is paid. The assessing officer, without brought on record any evidence to prove that on money is exchanged between the parties, merely harping upon the loose sheet and the third party admission, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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. 17. Now coming to the case laws relied upon by the assessee counsel, the assessee s counsel at the time of hearing relied upon plethora of case laws in support of his contentions. 18. The A.R. relied upon ITAT Hyderabad `A Bench decision in the case of Smt. K.V. Lakshmi Savitri Devi Vs. ACIT (2012) 148 TTJ 517, wherein the Tribunal under similar circumstances held as under: Admittedly there was no search action in the case of the assessee. It is a loose slip containing certain entries recording the payment which was found at the premises of CRK. It does not contain either date of payment or name of the person who has made the payment. According to the Department, CRK denotes C. Radha Krishna Kumar and KRK denotes K. Rajani Kumari. However, no name of the assessee was found in the louse sheet. The property was purchased from P w/c CRK for a disclosed consideration of Ps. 65 lakhs by the assessee. The property has been registered and the sale deed was executed for a cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 65 lakhs. In spite of this the AO proceeded to conclude that the seized material is conclusively reflecting the payment of consideration at ₹ 165 lakhs. The Department herein i required to establish the nexus of the seized material to the assessee. As stated earlier there is no date and name of the assessee. The allegation of the Department is that the seized material denotes the payment made by the assessee to the purchaser for purchase of the property. However, no such narration or name of the assessee was found in the seized material. The Department is not able to unearth any document or material or any corroborative material to show that the assessee herein actually paid Ps. 165 lakhs for purchase of the property. The Department has not brought on record the date on which the payment was made and the source from which ii is paid and/or any details of bank account from where the cash was withdrawn. Without any of these details, the Department has taken a view that the assessee has paid Ps. 165 lakhs for purchase of the property. The Department cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion, however strong cannot take place of materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or the name of the person who made the payment. It rightly held that the Revenue failed to establish the nexus of the seized material to the respondent and had drawn inferences based on suspicion, conjectures and surmises which cannot take the place of proof. We also agree with the Tribunal that the assessing officer did not conduct any independent enquiry relating to the value of the property purchased and the burden of proving the actual consideration in the purchase of the property is on the Revenue and it had failed to discharge the said burden. 20. The A.R. further relied upon the ITAT Ahmedabad `C' Bench decision in the case of Jawaharbhai Atmaram Hathiwala Vs. ITO reported in (2010) 128 TTJ 36, wherein under similar set of facts, the Hon ble ITAT decided the issue in favour of the assessee as under: The assessee has claimed to have made payment of ₹ 1,01,687/- only upto 31st March, 1999 and has consistently taken the stand that it has not paid balance amount of ₹ 3,81,414/- as stated in the seized document. No evidence could be brought on record by the Revenue to show that in fact the assessee had paid the amount of ₹ 3,81,414/- to OD. No doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the photo copy of sale agreement seized in course of search and seizure operation. The assessee has produced before the AO registered sale deeds in support of its claim that they had purchased the property for a consideration of ₹ 23.50 lakhs. When the AO alleges that the assessee has paid more than what has been declared in the registered sale deed because the fair market value of the asset as on the date of transaction exceeds full value of consideration declared by the assessee then it is for the AO to prove that the value declared by the assessee is understated . In the appeal before us, excepting the photo copy of sale agreement, there is no other evidence on record found as a result of search or brought on record on the basis of enquiry conducted by the AO which could establish the fact that the actual consideration passed between the parties is not as mentioned in the registered sale deed but as per the sale agreement found during search operation. It is also an interesting fact to note that in the statement recorded from the assessee u/s 132(4) the revenue authorities have not put any question with regard to the sale agreement seized at the time of search and seizu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represents the expenditure incurred by Smt Nalini Devi. However, the amount was found to be the summary of the balance of various accounts operated by the family members of Smt. Nalini Devi. We find that the CIT (A) in his elaborate and well reasoned order has dealt with all these aspects and came to a finding on fact that the AO has made the addition purely on conjectures and surmises and not on the basis of any material or evidence brought on record. On examining the facts and materials before us, we are of the view that the finding arrived by the CIT (A) is just and proper and in accordance with the principles of law laid down by the Hon'ble Supreme Court and Hon'ble High Courts which are cited before him. We therefore find no necessity to interfere with the finding of the CIT (A) on this issue. Hence the grounds raised by the revenue for the years under consideration are dismissed. 22. The Hon ble A.P. High Court in ITA No.232 of 2013 in the case of CIT Vs. Smt. R. Nalini Devi has upheld the order of the ITAT Hyderabad Bench. The Hon ble High Court while, considering the issue held as under: We have heard the learned counsel for the appellant and gone through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry statements made by Rajarathinam or whether reliance could be placed on the loose sheets recovered in the course of the raid are all question of fact. We therefore find no infirmity in the order of the High Court. Accordingly, we dismiss the appeal. 24. Considering the total facts and circumstances of the case and also applying the ratios of the judgements cited above, we are of the opinion that the A.O. is not correct in coming to the conclusion that the on money is exchanged between the parties based on a loose sheet found in the premises of a third person and also admission by 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 the addition made by the A.O. Therefore, we reverse the CIT(A) order and direct the Assessing Officer to delete the addition. 25. In the result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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