VIVEK TULSIBHAI CHOVATIYA,RAJKOT vs. THE ITO WARD 2 (1) (1), RAJKOT

Grounds of appeal raised by the assessee are as under “1. The Ld. CIT(A) erred on facts as also in law in confirming the addition of Rs.11,00,000/- made by alleging that assessee had paid on money through cash of Rs.11,00,000/- for purchase of property in the project RK Empire. The addition u/s 69 of the Act may kindly be deleted.” 3. Succinctly, the factual panorama of the case is that assessee before me is an Individual. In this case, the assessee has e-filed the return of income for assessment year (AY) 2020-21, on 30-12-2020, declaring total income at Rs.2,71,500/-. Thereafter, a notice u/s 148 of the Act dated 21-03-2024 of the Income-tax Act, 1961 issued to the assessee, by which the case of the assessee for the assessment year under consideration has been reopened, for the reasons that the assessee has made unaccounted investment of Rs.11,00,000/- with R.K. Group (in RK EMPIRE No.204) during the previous year relevant to assessment year under consideration. Subsequently, notices u/s 142(1) of the I.T. Act were issued on 05-07-2024, 25-11- 2024, 10-01-2025, 14-02-2025 and in response the assessee has responded from time to time and furnished various details, however not furnished the copy of purchase deed. Further, the assessee has objected for reopening of assessment and the same has been rejected by passing speaking order dated. 01-03-2025. Further, the copy statement of Shri Sarvanand Sonvani and Shri Girish Vanjani was also provided to the assessee. A show cause notice was issued to the assessee on 01-03-2025 proposing the addition of Rs.11,00,000/- with R.K. Group (in RK EMPIRE No.204) and in response to the said show cause notice, the assessee has responded on 05-03- 2025 & 07-03-2025 and objected for proposed addition.The reply of the assessee has been considered by the assessing officer but not found as satisfactory explanation. As stated above, there was Miracle ledger which clearly shows that the assessee made cash payment of Rs.11,00,000/- with R.K. Group (in RK EMPIRE No.204) during the previous year relevant to assessment year under consideration towards purchase of unit in above referred project. The assessee did not submitted/uploaded sufficient documentary evidences to substantiate the same. Therefore, the explanation of the assessee was not found satisfactory. Therefore, assessing officer held that assessee has purchased in RK EMPIRE. No.204 and paid “on-money” of Rs.11,00,000/-, in cash, during the previous year relevant to assessment year under consideration. Therefore, unaccounted “on-money” payment of Rs. 11,00,000/- was treated by the assessing officer, as income in the hands of the assessee as unexplained money within meaning of section 69 r.w.s 115BBE of the Act.

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the CIT(A) who has confirmed the action of the assessing officer, therefore, assessee is in further appeal before this Tribunal.

I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel for the assessee submitted that Assessing Officer has grossly erred in alleging that the assessee had made a cash payment of Rs. 11,00,000/-, as ‘on-money’ for purchase of property in the project RK Empire and thereby treating the same as unexplained money under section 69 of the Act. The addition has been made in complete disregard of the facts of the case and the submissions placed on record, resting merely on suspicion, conjectures, and surmises. The assessee submits that the impugned addition is wholly unjustified and unsustainable either on facts or in law and, therefore, deserves to be deleted. The learned Counsel further submitted that assessee has also agreed that an estimated addition may be made in the hands of the assessee on account of “on money” and appeal of the assessee may be partly allowed. On the other hand, ld. D.R. for the Revenue did not raise any objection, if the Bench wants to make an estimated addition in the hands of the assessee. I note that assessee did not file the complete documents and evidences before the assessing officer, such as copy of purchase deed and other documents etc. I note that Assessing Officer made the addition on account of “on money” for purchase of property in cash of Rs. 11,00,000/- u/s. 69 of the Act. During the assessment proceedings, the assessee has not provided to the assessing officer, the underlying data and documents, on the basis of which, the impugned addition was made, therefore, entire addition cannot be deleted. If an assessee fails to produce documentary evidence in support of a claim (such as expenses, purchases, or investments), the estimated or ad -hoc addition should be made on account of payment of “on money”. In CIT v. President Industries [2002] 124 Taxman 654 (Gujarat), the Assessing Officer had found evidence of suppression of sales. He adopted the entire receipt (sales) as income but the Hon'ble Jurisdictional High Court has held that the entire undisclosed receipts (sales) cannot constitute income.I also note that both the parties i.e. the ld. Counsel for the assessee and ld. D.R. for the Revenue have agreed that in order to meet the end of justice an estimated addition may be made in the hands of the assessee. Therefore, considering these facts, I direct the A.O. to make an estimated addition @ 30% of Rs. 11,00,000/-, which comes to Rs.3,30,000/-, by following normal rate of income tax.

In the result, appeal filed by the assessee is partly allowed in above terms.