PRINCIPAL COMMISSIONER OF INCOME TAX-I vs. M/S OM METAL REAL ESTATE PVT. LTD.

Facts

The Revenue is aggrieved by an order of the ITAT which affirmed the CIT(A)'s order, setting aside the Assessing Officer's (AO) addition of approximately ₹9.25 crores for Assessment Year 2009-10. The AO had re-opened the assessment under Section 147, alleging on-money payment of ₹9.25 crores by the assessee, M/s Om Metal Real Estate Pvt. Ltd., for its 25% share in land purchased by M/s Om Metals Developers (P) Ltd. This was based on documents seized during a search related to another company. The AO made an addition under Section 69, noting similar additions were made for another shareholder. The CIT(A) set aside the addition, holding that any action should be against M/s Om Metals Developers (P) Ltd. and not the assessee. The ITAT affirmed the CIT(A)'s order.

Held

The Tribunal held that the Assessing Officer's addition of ₹9.25 crores was unsustainable. The reasoning was based on several deficiencies in the Revenue's evidence. Firstly, the person who wrote the noting on the seized document, Mr. S.K. Jain, was not examined by the Revenue. Secondly, the statement of Mr. Padam Singhee, who vouched for the particulars of the noting, was not produced. Thirdly, Mr. Ramesh Kumar Somani, at whose premises the document was found, was neither confronted nor was his statement recorded. Crucially, the sellers from whom the land was purchased, and who would have been the recipients of any on-money, were not examined, and there was no evidence of their acceptance of on-money. The Tribunal also noted that the Revenue itself had accepted no on-money payment in the case of M/s Om Metals Developers (P) Ltd., and the seized document did not even mention the assessee company. Therefore, the AO had solely relied on the Investigation Wing's findings without independent inquiry or material to conclude that the assessee made an on-money payment. The High Court found that the findings of the CIT(A) and ITAT were entirely factual and no substantial question of law arose.

Key Issues

1. Whether the Tribunal erred in law by upholding the deletion of the addition of ₹9.25 crores made by the Assessing Officer under Section 69 of the Income Tax Act, 1961, on account of alleged on-money payment for land acquisition. The Revenue contended that the AO had made an addition based on seized documents and noting, alleging on-money payment by the assessee. The Revenue relied on the findings of the Investigation Wing. The Assessee contended, and the CIT(A) and ITAT agreed, that the Revenue failed to produce crucial evidence. Specifically, the person who wrote the noting (Mr. S.K. Jain) was not examined, the statement of Mr. Padam Singhee who vouched for the particulars was not produced, and Mr. Ramesh Kumar Somani, at whose premises the document was found, was not confronted nor was his statement recorded. Furthermore, the sellers, who would have received the on-money, were not examined, and there was no acceptance of on-money receipt by M/s Om Metals Developers (P) Ltd. or its shareholders. The ITAT also noted that even in the case of M/s Om Metals Developers, the Revenue itself had accepted no on-money payment, and the seized document did not mention the assessee company.