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Facts
The Assessing Officer (AO) made two additions to the assessee's income. The first addition of Rs. 42 lakh was for unexplained investment based on a third party's statement regarding on-money payment for flats. The second addition related to the difference between the Sale Deed value and the value adopted by State Registration Authorities under Section 56(2)(x).
Held
The Tribunal held that the addition on account of on-money payment was not sustainable as the appellant was not provided with the statement of the third party nor given an opportunity to cross-examine them, violating principles of natural justice. The second ground concerning Section 56(2)(x) was dismissed as the CIT(A) had already provided relief.
Key Issues
Whether additions based solely on an unprovided third-party statement and without an opportunity for cross-examination are valid. Whether the relief granted by CIT(A) on the second ground of appeal is final.
Sections Cited
69, 56(2)(x), 133A, 132(4)
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Income Tax Appellate Tribunal, Mumbai “F” Bench, Mumbai.
Before: Shri Sandeep Gosain (JM) & Shri Omkareshwar Chidara (AM)
From the assessment order, it is observed that the Ld. AO made an addition of Rs. 42 lakh by stating that the appellant paid extra cash of Rs. 42 lakh to the builder. It was mentioned by the Ld. AO that during the survey action on the builder, certain documents were found and impounded which relate to on-money receipt of sale of flats in housing project. The director of the builder company, Mr. Ganesh Sane admitted that he accepted “on-money” while selling flats in his project and consequently declared the amount of cash received as unaccounted income in the hands of their Company, Mumbai Shelter Housing Developer Pvt. Ltd. This director has 2 Sada Bahadur Ramadhar Gupta also admitted that he received Rs. 42 lakh from this appellant. Accordingly, this amount of Rs. 42 lakh was added by the AO. On this issue, Ld. CIT(A) has also confirmed the addition made by the Ld. AO stating that seller has admitted cash receipt from the appellant and subsequently the same was admitted as additional income in their hands. In view of the same, addition made by the Ld. AO was confirmed by Ld. CIT(A).
Aggrieved by the addition made by the Ld. AO and which is confirmed by Ld. CIT(A), appellant filed an appeal before the ITAT. The Ld. AR has argued that on this issue, based on the statement of the third party, no addition can be made in appellant’s hands. The appellant was not given copy of the statement of the builder, who claims that he received on-money from appellant. It was also mentioned by Ld. AR that it is not known which additional income was offered by the builder and whether it consists of so called on-money received from the appellant. Since, no details were furnished to the appellant, addition cannot be made on presumption and surmises. Ld. AR of the appellant has also stated that the appellant was not given opportunity to cross examine the director of the builder company who alleged that he received on-money from appellant. Since there is absolutely no evidence with regard to on-money payment of the appellant, addition made by the Ld. AO should be deleted, it was argued.
The Ld. DR relied on the orders of the Ld. AO and Ld. CIT(A). Ld. DR of the appellant has stated that there was Survey action in the case of builder- company where director of the company has clearly admitted that on-money of Rs. 42 lakh was admitted to have been received from appellant and hence, addition should be upheld. Apart from that, from the assessment order it is observed that the builder company which sold flats to the appellant has also admitted this on-money as additional income while filing Return of Income.
Heard both sides. There is sufficient force in the argument of Ld. AR of the appellant that he was neither given copy of statement of the director of 3 Sada Bahadur Ramadhar Gupta the builder company nor was given opportunity to cross examine him. It was also not clear from the assessment order that which on-money received from the appellant was admitted as “additional income” by the builder company for taxation. Principles of natural justice demands that copy of statement based on which addition was made should be given to the person who is aggrieved. Here, the appellant claims that he has not received copy of statement and was not given opportunity to cross examine despite being asked. Details of the additional income offered by the builder company were also not mentioned in the assessment order and whether on-money received from the appellant, was included in “additional income” of the builder company. There is also some confusion in the assessment order, where it was mentioned that Survey under section 133A of the I.T. Act was conducted on the builder, whereas statement was recorded under section 132(4) of the Act because statement under this section could be recorded only when there is Search and Seizure action and not survey under section 133A of the Act. Even Ld. CIT(A) could not fortify the stand of the Ld. AO by giving copy of the statement to the appellant nor mentioned details of “additional income” offered by the builder company. Ld. CIT(A) simply reproduced assessment order and concurred with the order of the Ld. AO and confimred the addition. As there is no corroborative evidence to show that the appellant has paid on-money either at the time of survey action or subsequently, no addition can be made merely on the statement of the third party. Even statement of third party was not given to the appellant and relevant portion of the question and answer were also not available in the Orders of the lower authorities. In view of the same, addition relating to on-money made by the Ld. AO is deleted.
As far as the second addition relating to section 56(2)(x) of the Act, which dealt with addition relating to difference between the Sale Deed value and value adopted by State Registration Authorities, it is seen that 4 Sada Bahadur Ramadhar Gupta the Ld. CIT(A) has already given relief to the appellant and hence there is no grievance and hence this ground is dismissed.
The appellant of appellant is allowed. Order pronounced in the open Court on 27/11/2025.