CHIRAG ANILKUMAR ASRANI,ULHASNAGAR vs. ITO WARD 2(1), KALYAN, KALYAN

First of all, we take up Ground No. 3, which relates to the merits of the addition made by the AO under Section 69A of the Income Tax Act. By raising this ground, the assessee has challenged the decision of the learned CIT(A), wherein the addition made by the AO of Rs. 5 lakh under Section 69A of the Act on account of "on-money" was made.

We have heard the counsels for both the parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities. From the records, we notice that the assessee, being an individual, had filed its return of income declaring loss. However, during the year under consideration, the assessee, along with Shri Anil Murlidhar Asrani (that is, the father of the assessee), purchased Shop No. 2, Kalika Plaza, Lower Floor, for its commercial purpose from M/s Deepak Builders and Developers by sale agreement dated 10.10.2022 for a total consideration of Rs. 92,22,000/-, which includes agreement value of Rs. 87,00,000/- and stamp duty value of Rs. 5,22,000/-.

However, as per the information received by the AO from the Investigation Wing of the Income Tax Department, a search and seizure operation under Section 132 of the Act was conducted on Chande Group of entities, and the said group was found to be engaged in the business of dealing and construction of land and building under the name and style of Deepak Infra & Homes Private Limited. Based on the said information received from the DCIT, the case of the assessee was reopened by issuing notice under Section 148 of the Act, on the ground that the assessee had paid "on-money" to the builder in cash, which was over and above the agreement value. Thus, after affording an opportunity of hearing to the assessee, additions were made, which were also upheld by the Ld. CIT(A).

We further notice that since an addition of Rs. 5 lakh was made in the year under consideration under Section 69A of the Income Tax Act, thus, before proceeding further, we deem it necessary to evaluate whether the provisions of Section 69A of the Income Tax Act are applicable in this case.

So, we find that the provisions of Section 69A of the Act are applicable where a person is found to be the owner of any money, bullion, jewellery or any other valuable article. However, in the present case, the alleged payment of on-money in cash by the assessee in relation to the purchase of an immovable property is an investment and the same is not covered by the phrase "any money, bullion, jewellery or any other valuable article". Also, nowhere in the present case is it found that the assessee is the owner of any money, bullion, jewellery or any other valuable article. Thus, in this way, the provisions of Section 69A of the Act are designed to bring to tax "any money, bullion, jewellery or other valuable article" that are not recorded in the books of account and for which the assessee fails to provide a satisfactory explanation regarding their source.

In view of the above, it is apparently evident that the Assessing Officer had erroneously and without proper application of mind made the addition of Rs. 5 lakh under Section 69A of the Act.

Even otherwise, Index-II of the registered sale agreement reflects that the market value of the property in question purchased by the assessee is Rs. 86,97,240/-, whereas the apparent consideration of the property as per the agreement is Rs. 87,00,000/-. Thus, in this way, the apparent consideration is already higher than the stamp duty valuation as per Index-II, and thus, in this way, there is no rational basis to allege or presume that the assessee could have made any payment of any amount over and above the apparent consideration.

After having considered the entire facts and circumstances of the present case, we find that the AO has not brought anything on record to indicate that any consideration over and above the stated sale price has actually passed hands between the parties.

The assessee, on the contrary, has placed on record all the documentary evidence in order to prove that the property in question was bought by the assessee for the sale consideration mentioned in the agreement, and the AO, on the other hand, could not find out any defect in the valuation adopted or in the genuineness of the transactions, nor could the AO dispute the market value of the property. Thus, in the absence of any adverse material on record or any finding on the understatement of consideration, the addition cannot be made by the AO merely on presumptions and conjectures. In this regard, reliance is being placed upon the decisions in the case of:

Furthermore, while framing the assessment order, the AO has relied upon the statement of one Mr. Deepak Chande recorded under Section 132(4) of the Act. The said confirmation allegedly obtained from the third parties and loose papers/sheet containing certain handwritten notings were found during the course of the search. In this regard, we notice that only an incomplete copy of the statement on oath of Mr. Chande was given to the assessee, while no copy of the alleged third-party information was ever provided.

We further notice that the loose sheet merely contains certain handwritten notings relating to a tentative transaction concerning Shop No. 02, Kalika Plaza, Ground Floor. Although it mentions the name of the parties and the area of the property, it does not bear the signature of the assessee nor establish that any payment over and above the recorded consideration was actually given. Further, the said document is not supported by any independent evidence or statement corroborating its contents. It is a settled proposition of law that a loose sheet, by itself, has no conclusive evidentiary value unless its contents are independently verified and corroborated by cogent material.

Moreover, the statement recorded under Section 132(4) in itself is not enough to make any addition unless the same is corroborated.

We are further of the view that the presumption under Section 132(4A) is only against a person in whose possession the document is found and not against any other person. The said presumption, even otherwise, is not conclusive and cannot be applied in the absence of any corroborative evidence, as held in the case of Straptex (India) (P.) Ltd. [84 ITD 320 (Mum.)].

Therefore, in the absence of any corroborative material, the impugned addition is based merely on assumption and presumption, and thus the same is not sustainable in the eyes of law.

Apart from this, we further notice that no opportunity to cross- examine the said Mr. Chande, whose statement has been relied upon by the AO, was granted to the assessee, despite a specific request made by the assessee, which, in our view, is a clear violation of the principles of natural justice, particularly when the said statement was relied upon to make the addition in question. In this regard, reliance is being placed upon the decisions in the case of:

Therefore, considering the entirety of the facts and circumstances and also considering the decisions discussed and referred to by us above, we are of the view that the addition made by the AO and upheld by the CIT(A) of Rs. 5 lakh is without any basis and foundation and, thus, the same stands quashed. Consequently, this ground raised by the assessee is allowed.

Since we have already deleted the addition on merits, there is no need to adjudicate the other legal grounds raised by the assessee at this stage, as the same are academic in nature.

In the result, appeal filed by the Assessee stands partly allowed.