NARAYANBHAI MANJIBHAI BODRIYA,MUMBAI vs. INCOME TAX OFFICER, 41(3)(3), MUMBAI

4. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming and sustaining the addition of Rs.6,75,000/- which was made by the learned AO u/s. 56 (2)(vii)(b)(ii) of the Act on the ground that the stamp duty value of the property purchased by the Appellant exceeds the consideration as per Agreement, without appreciating the fact that the difference in value between the two is less than 5% of the consideration and therefore the impugned addition is not justified more so as 5%/10% tolerance limit prescribed by the Finance Act 2020/2021 applies retrospectively as held by the jurisdictional ITAT, Mumbai in the context of Section 50C of the Act.”

2.1. We have heard both the parties and given our thoughtful consideration to the submissions made before us as well as to the material placed on record along with orders of the authorities below.

3.1. It is important to note that case of the assessee was re-opened u/s 147 by recording the reasons to believe on 07.10.2016, that is after the receipt of information from DCIT, CC-5(1), Mumbai vide letter dated 24.08.2016. The reasons so recorded are reproduced in para 2 of the impugned assessment order and are extracted below. "In this case information was received about cash Rs. 34,54,250/- given by the assessee to M/s. Shah Housecon Pvt. Ltd.

3. The assessee has filed ITR SAHAJ. The sources income are salary at Rs. 2,04,000/- and income from other sources at Rs. 968/-. AIR shows that assessee has purchased a property on 26.12.2013 for Rs. 1,47,35,000/-. 4. considering the income offered by the assessee for taxation which meager Rs. 1,43,950/- in comparision to value of property purchased by the assessee, part of which has been paid in cash of Rs. 34,54,250/-, I have a reason to believe that the assessee has understated his income in return of provision of explanation 2(b) to sec. 147 of the Act."

3.2. Notice u/s 148 was issued against which assessee filed his objections. In these objections, while denying making of alleged cash payment, assessee specifically stated that no evidence is produced to substantiate the allegation and mere reliance on a third party statement without any evidence leads only to a presumption. According to the assessee, such an exercise of re-opening of the case is based on reasons to suspect rather than reasons to believe and thus submitted to set aside the said proceedings. Assessee furnished relevant documentary evidences vide his submissions dated 11.08.2017 and 18.08.2017, copy of which is placed in the paper book.

3.3. Ld. Assessing Officer while disposing the objections raised by the assessee passed the rebuttal order dated 06.09.2017. In para 2a of this order, it is categorically stated by the ld. Assessing Officer that information is based on statement of Shri Mansukh Haraklal Shah and Shri Binesh Balakrishnan, both from SHPL. These statements have been recorded by virtue of statutory powers u/s 133A conferred upon the surveying authorities. The said para 2a is extracted below: “AR has denied having paid any sum to M/s. Shah Housecon Pvt. Ltd as alleged in notice/reasons for re-opening. However this information is based on statement of Shri. Mansukh haraklal Shah, Managing director of M/s. Shah Housecon Pvt. Ltd and Shri. Binesh Balakrishnan, Sr. Accountant of the this company. These statements have been recorded by virtue of statutory powers u/s 133A conferred upon surveying Authorities. Therefore mere denial by the assessee does not carry any weightage and reasons have been correctly recorded based on the information.

3.4. Subsequent to disposal of objections, ld. Assessing Officer issued notice dated 23.10.2017 to the assessee. In this notice, in para 2, it is stated that on the basis of statement of Shri Mansukh Shah and Shri Binesh Balakrishnan recorded u/s 133A it is established that assessee has used undisclosed income of Rs. 34,54,250/- for making payment in cash to the builder. For this, assessee was asked to submit his explanation which is complied vide letter dated 30.10.2017. Extracts of para 2 of this notice is as under: “On the basis of statement of Shri. Mansukh haraklal Shah, Managing director of M/s. Shah Housecon Pvt. Ltd and Shri. Binesh Balakrishnan, Sr. Accountant of the this company recorded by virtue of statutory powers u/s 133A conferred upon surveying Authorities it is established that undisclosed income of Rs. 34,54,250/- has been used by you for making payment in cash to builder M/s. Shah Housecon Pvt. Ltd. a) Therefore you are hereby given an opportunity to submit your objection for adding undisclosed income of Rs. 34,54,250/- u/s 698.”

3.5. In this reply furnished by the assessee vide letter dated 30.10.2017, he specifically asked ld. Assessing Officer to provide the details along with evidences and also an opportunity to cross examine the builder for the allegation of receipt of cash.

3.6. In the assessment order, ld. Assessing Officer noted in para 5 that the opportunity for cross examine was provided to the assessee but Shri Mansukh Shah and Shri Binesh Balakrishnan have failed to attend in response to summon u/s 131 of the Act. He further records that though no cross examination has been done, the statement proves payment of cash by the assessee for purchasing the property from SHPL. He thus concluded to make the addition of Rs. 34,54,250/- for the alleged cash payment u/s 69 of the Act.

3.7. Ld. Assessing Officer also made addition of Rs. 6,75,000/- on account of difference between the purchase consideration of Rs. 1,40,60,000/- as recorded in the registered agreement and Rs. 1,47,35,000/- being the market value fixed by the stamp duty office, by applying section 56(2)(vii)(b)(ii).

payment of on-money. We observe that there is no dispute on the purchase consideration recorded in the registered agreement. Assessee has furnished the payment details for the same upon specific directions of the Bench. Details of payment of purchase consideration of Rs. 1,40,60,000/- is tabulated below:

AGREE- Shah Other Date- MENT Payment Payment 01 Detail AMOUNT 14060000 1290850 03-12- Payment Greater Bank- 2013 251812 47891 03-12- Service Greater Bank- 2013 Tax 251811 140600 10-02- VAT Greater Bank- 2014 141980 360060 01-11- Payment BANKOFINDIA- 2018 RTGS 12409090 28-12- Payment BANK OF INDIA- 2018 050560 1532298 01-01- GST BANK OF INDIA- 2019 050562

14060000 14060000 1720789 d) In para 6.3, ld. CIT(A) hold that it became incumbent on the assessee to establish that what is being found from the third party, admitted by that third party is false or fabricated. In para 6.4, he also notes that if what was stated by the builder during the course of survey was untrue, then, assessee ought to have convinced the builder to either retract the statement or issue and affidavit in favour of the assessee. We observe that such an onus cannot be thrusted upon the assessee to prove the negative. We draw force from the decision Hon'ble Supreme Court in the case of CBI v. V. C. Shukla [1998] SCC 410 wherein it was held that any loose sheets or diary found with the party where search was conducted, will not have any evidentiary value and it cannot be used against third party without any corresponding corroborative evidence. Further, the Hon'ble jurisdictional High Court of Bombay in the case of ACIT vs. Lata Mangeshkar (Miss) (1974) 97 ITR 696 (Bom) held that no addition could be made in the hands of the assessee on the basis of noting found in the books of third person. e) In para 6.4, ld. CIT(A) notes that though the assessee could not cross-examine the concerned builder due to his non- appearance in response to summons issued by the Department, yet it is not fatal to these proceedings. He goes on to hold that these are not the witness of the Department but of the assessee owing to the purchase transaction executed. From the factual narration in above paragraphs including that of the ld. Assessing Officer, it is evident that basis of allegation and addition are the statements of the builder recorded u/s 131 during the course of their survey u/s 133A. Also, ld. Assessing Officer records the factual position of both Shri Mansukh Shah and Binesh Balakrishnan failing to attend the cross examination against summon issued to them though assessee did visit his office and waited for the same. Such a position is covered in favour of the assessee by the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries [2015] 281 CTR 241 (SC) which held that when the assessment is made on the basis of statements recorded from third parties and if those statements were not provided nor cross examination was given to the assessee, the assessment order made based on those statements is bad in law. Further, reliance is placed on the following judicial pronouncements for the proposition that reopening of assessment only on the basis of third-party statement and borrowed satisfaction is not justified: i. Shri Dnyaneswar Maharaj Sansthan Alandi Dewachi - WP 3309 of 2022 (Bom) (Pages 1-9 of Case Law Paper Book) ii. Piramal Enterprises Ltd. - WP 2958 of 2016 (Bom) (Pages 10-13 of Case Law Paper Book) iii. Rajnish C Bharti - (Pages 14- 22 of Case Law Paper Book) iv. Devansh Exports - (Pages 55-75 of Case Law Paper Book) f) In para 6.5, ld. CIT(A) observes that assessee could have shown that payment was not made in cash but through the regular banking channels. We observe that all along assessee has denied making payment in cash as alleged. According to him, what has been paid is duly recorded in the registered agreement corroborated by the payment details, already tabulated above. Bench made a specific observation before the ld. Sr. DR on this since, if, both payments are taken together, the total consideration would far exceed the market value determined for the purpose of stamp duty value which is not justifiable.