MR. HOSHANG JAMSHED MOHTA,MUMBAI vs. ITO-35(1)(4), MUMBAI

This is an appeal preferred by the assessee against the order of the Ld. CIT(A)/NFAC, Delhi dated 22.09.2022 for AY. 2011-12.

The main grievance of the assessee is against the action of the Ld. CIT(A) upholding addition of Rs.8,75,000/-. 3. Brief facts is that the assessee had filed return of income for AY. 2011-12 on 25.07.2011 declaring total income at Rs.5,08,820/-. Later, the AO got information that investigation wing while conducting search in the M/s Sheth Developer Pvt. Ltd, it was found that the said party had accepted ‘on money’ for flats from the buyers of flats. And the assessee was one such buyer of a flat and had paid Rs. 8,75,00/- for purchase of Flat No. 1003 in Vasant Lawns-green developed by Sheth Developers. According to AO, the assessee has paid/cash ‘on money’ of Rs.8,75,000/- for purchase of an immovable 2 A.Y. 2011-12 Hoshang Jamshed Mohta property being flat no. 1003, Vasant Lawns-Green, Thane, over and above the sale consideration shown in the sale deed. Therefore, he re- opened the assessment of the assessee and gave show cause notice (SCN) to the assessee as to why this amount given as ‘on money’ to the Sheth Builders be added to the income of the assessee. Pursuant to the SCN, the assessee denied having given any ‘on money’ to the Sheth Developers for purchase of flat over and above sale consideration shown in the registered agreement; and also requested AO for cross-examination of the developer, if he had made any adverse statement against the assessee. However, the AO neither gave any statement recorded of the developer against the assessee regarding payment of ‘on money’ nor he summoned the developer for cross- examination and made an addition of Rs.8,75,000/- as unexplained investment. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the addition only on the strength of the statement recorded by the developer u/s 132(4) of the Income Tax Act, 1961 (hereinafter “the Act”). Aggrieved, the assessee is before this Tribunal.

I have heard both the parties and perused the records. Based on statement recorded during search of Sheth Developers from whom the assessee has purchased a flat, the assessment pertaining to AY. 2011- 12 was reopened. The allegation was that the assessee had given cash/ on money to the tune of Rs.8,75,000/- over and above the sale consideration of the flat. During the assessment proceedings, when the AO confronted the assessee about this allegation, the assessee denied 3 A.Y. 2011-12 Hoshang Jamshed Mohta making any payment of cash ‘on money’ over and above the sale consideration. And also requested the AO to provide him the adverse statement if any recorded regarding this allegation. And the assessee also requested the AO to provide an opportunity to cross-examine the person/developer who has given statement if any against him of having given ‘on money’. However, the AO did not provide a copy of the statement recorded u/s 132(4) of the Act which suggested that the assessee had given Rs.8,75,000/- as ‘on money’ to the developer and also didn’t summon him for examination. And the AO did not give any opportunity to the assessee to cross-examine the developer who has made such an allegation against the assessee. Without doing so, the AO has made an addition based on the information, he received from the investigation wing. On appeal, the Ld. CIT(A) has confirmed the addition mainly on the basis of the statement recorded during the search of the developer and he found fault with the assessee for not producing any documents to disprove the allegation. This impugned action of the Ld. CIT(A) cannot be countenanced. It is true that the AO can act upon any material brought to his notice against the assessee but if he is going to rely on those material (in this case the statement recorded u/s 132(4) of the Act of the developer) then he has to give a copy of the same to the assessee and provide an opportunity to the assessee to meet it/rebut/explain the same. Then only the AO can use it against the assesee. Here in this case, even though the assessee requested for a copy of the statement of developer, the AO has not given the same [copy of the statement of developer recorded u/s 4 A.Y. 2011-12 Hoshang Jamshed Mohta 132(4) of the Act]. It is noted that AO on the strength of this statement of developer had resorted to re-opening (i.e. the assessee has given ‘on money’ to the tune of Rs.8,75,000/- to the developer for purchase of flat over and above sale consideration). Moreover, it is noted that even though, the assessee requested for cross-examination of the person/developer on whose statement the show cause notice was given to the assessee (before making the addition), the AO failed to summon the developer and allow the assessee to cross-examine the developer which vitiate the addition and for that we rely on the decision of the Hon’ble Supreme Court in the case of Andaman Timber Industries Vs. CCE (281 CTR 241) (SC) and CIT Vs. Odeon Builders Pvt. Ltd. (2019) (418 ITR 314). The assessee also brought to my notice a similar action this Tribunal in the case of an assessee whose case was also reopened for payment of ‘on money’ to the Sheth Developer. And this Tribunal has deleted the addition (refer ITO Vs. M/s. Samriddhi Finvest Advisory Services Pvt. Ltd. dated 31.05.2022.) Therefore, as discussed (supra) the addition made on the assessee to the tune of Rs. 8,75,000/- is directed to be deleted.