VARSHA SANJAY RAUT,MUMBAI vs. INCOME TAX OFFICER WARD 35(3)(1), MUMBAI

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ITA 4053/MUM/2023Status: DisposedITAT Mumbai13 January 2025AY 2015-2016Bench: SHRI RAHUL CHAUDHARY (Judicial Member), SHRI GIRISH AGRAWAL (Accountant Member)1 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the addition was based solely on the statement of a third-party director of the builder, which was not properly examined or cross-examined by the AO. The builder's subsequent confirmation letter, which contradicted the earlier statement, was also ignored by the lower authorities. The Tribunal noted that the AO did not provide an opportunity for cross-examination and relied on a statement without independent investigation.

What were the facts?

The assessee purchased a property for a stated consideration, but the Assessing Officer (AO) made an addition on account of alleged 'on money' payment, citing a statement recorded during a search of the builder. The assessee contested this, providing a letter from the builder confirming the sale consideration was received through banking channels and denying any extra payment.

What were the issues?

Whether the addition made on account of alleged 'on money' based on a third-party statement without proper cross-examination and corroboration is valid?

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 132,Section 132(4),Section 69C

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “F” BENCH MUMBAI

Before: SHRI RAHUL CHAUDHARY & SHRI GIRISH AGRAWAL

Hearing: 17.10.2024Pronounced: 13.01.2025

O R D E R

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

1.

This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide order no. ITBA/NFAC/S/250/2023-24/1056116655(1), dated 15.09.2023 passed against the order by the Income Tax Officer, Ward 35(3)(5), Mumbai, u/s. 143(3) r.w.s. 147 of the Income-tax Act (hereinafter referred to as the “Act”), dated 08.12.2017 for Assessment Year 2015- 16.

2.

Grounds taken by the assessee are reproduced as under:

1. 1. On the facts and circumstances of the case as well as in Law the Learned Assessing Officer has erred in reopening assessment u/s 147 of the Act. The reopening of assessment u/s 147 of the Act directed by the Learned Assessing Officer, sustained by the Hon'ble Commissioner of Income Tax (Appeals), NFAC, is unfair and illegal and needs to be struck down.

2. On the facts and circumstances of the case as well as in law the Learned Assessing Officer has grossly erred in directing addition u/s 69C of the Act amounting to Rs. 54,95,000/-. The disallowance of the alleged "on- money" directed by the Learned Assessing Officer, sustained by the Hon'ble Commissioner of Income Tax (Appeals), NFAC, is unfair and illegal and needs to be struck down.

3. Under the circumstances the Appellant has been denied a reasonable opportunity to present its case.

4. The order under appeal is not only bad in law and invalid, but also against the principals of natural law of equity and justice.

3.

Brief facts of the case are that assessee had filed her original return on 20.03.2016 reporting total income at Rs.11,55,250/-. Subsequently, case was taken up by issuing notice u/s.148, dated 09.03.2017 by recording the reason that information was received from DDIT(Inv), Unit – 4(1), Mumbai, that search and seizure action u/s.132 of the Act was carried out on Runwal Group engaged in the business of real estate, who had accepted “on money” from the purchasers of residential and commercial premises. It was further noted in the reasons to believe recorded by the ld. Assessing Officer that assessee is one of the purchaser/owner who had purchased a unit no. G-06 in the project developed by Runwal Group and had paid “on money” of Rs.54,95,000/- in respect of the said purchase not accounted in her books. Ld. Assessing Officer thus, had reason to believe that income chargeable to tax in respect of “on money” paid in cash of Rs.54,95,500/- (unaccounted money) to Runwal Group has escaped assessment within the meaning of section 147 of the Act. According to the ld. Assessing Officer, the agreement value for the purchase of shop No.G-06 was Rs.1,35,04,500/- whereas total amount paid by the assessee was Rs.1,89,00,000/- which includes cash of Rs.54,95,000/- as “on money”. Assessee was called upon to furnish explanation in this respect which was duly complied with, though ld. Assessing Officer observed that she did not file any details of source of such payment of “on money” is concerned. Ld. Assessing Officer further, noted that assessee had paid the “on money” which is based on information received by him about the material seized during the course of search u/s.132, in the case of Runwal Group and statement recorded of Shri Subodh Runwal, Director of Runwal Homes Pvt. Ltd. on 21.11.2014 u/s.132(4). Aggrieved, assessee went into appeal before the ld. CIT(A).

4.

Assessee strongly contested that addition made by the ld. Assessing Officer is solely based on the statement recorded u/s.132(4) of Shri Subodh Runwal, Director of Runwal Homes Pvt. Ltd. which had been retracted subsequently. To corroborate the same, assessee furnished a letter issued by Runwal Homes Pvt. Ltd., dated 13.12.2017 wherein details relating to the property purchased by the assessee and the total consideration of Rs.1,34,04,500/- received by it as recorded in the registered sale deed were confirmed. The Company also confirmed that it did not receive any payment through any mode over and above the total consideration of Rs.1,34,04,500/-. It also clarified that acceptance u/s.132(4) of the Act for the units booked during the period 01.01.2014 to 15.11.2014 was nothing but a forced confession which was not accepted and matter was pending before the appellate authorities. The said letter is extracted below for ready reference.

5.

Despite the above submissions, ld. CIT(A) confirmed the addition made by ld. Assessing Officer by observing that ld. Assessing Officer has made the addition on the basis of a valid un-retracted statement u/s.132(4). Aggrieved, assessee is in appeal before the Tribunal.

6.

Before us, ld. Counsel for the assessee, at the outset, pointed out from the reasons to believe recorded by the ld. Assessing Officer that there is no mention about the statement recorded of Shri Subodh Runwal, Director of the Runwal Homes Pvt. Ltd., for the acceptance of “on money” which forms the very basis of the entire addition made by the ld. Assessing Officer and confirmed by ld. CIT(A). He further, submitted that ld. Assessing Officer has made the addition u/s.69C by treating Rs.54,95,000/- as un-explained investments in the hands of the assessee. He further emphasised on the confirmation given by Runwal Homes Pvt. Ltd. about the transaction undertaken by the assessee with the said company as well as clarifying on the statement given by its Director in the course of their search and its status. To this effect, ld. Counsel asserted that the in the entire proceedings, nowhere it has been brought on record, the contents of the statements so made which forms the sole basis for making the addition in the hands of the assessee. According to the ld. Counsel, it is important to take note of the contents of the statement vis-à-vis clarification given by it in its letter issued to the assessee on 13.12.2017 wherein it is mentioned that this statement was nothing but a forced confession which it has not accepted and the matter is pending before the appellate authorities. Thus, ld. Counsel strongly contended that the findings arrived at by both, ld. Assessing Officer and Ld. CIT(A) are not based on any cogent and convincing evidence.

7.

Per contra, ld. Sr. DR placed reliance on the orders of the authorities below. We have heard both the parties and perused the material on record. We take note of the fact that there is no mention about the recording of statement of Shri Subodh Runwal, u/s. 132(4) in the case of search of Runwal Group in the reasons to believe recorded for the purpose of initiating proceedings u/s. 148 r.w.s.

147.

Ld. Assessing Officer in para-2 of the impugned order notes that “It was further informed that on the basis of material seized during the course of search u/s. 132 and statement recorded of Shri Subodh Runwal (Director), Runwal Homes Pvt. Ltd. on 21.11.2014 u/s. 132(4) of the IT Act, 1961, that the assessee had paid ON MONEY (in cash) of Rs.54,95,500/-, towards purchase of a shop No. G-06 in Runwal Green.” From the perusal of the orders of the authorities below, there is no reference to any other corroborative material except for the registered deed for the purchase of the property by the assessee vis-à- vis the statement relied upon for the purpose of making the addition in the hands of the assessee for drawing a conclusion of “on money” paid by the assessee in cash in addition to consideration recorded in the registered deed. Assessee has been asked to prove the negative which has been strongly objected upon by the ld. Counsel.

7.1. We find that ld. Assessing Officer himself has not examined the person on whose statement he has relied upon to arrive at a conclusion of “on money” paid by the assessee in cash nor he has given any opportunity to the assessee to cross examine the said party before taking such an adverse view. It is important to note that statement by Shri Subodh Runwal, Director of the Runwal Homes Pvt. Ltd. was not deposed before the ld. Assessing Officer himself but was during the course of search in their case on 21.11.2014. Further, ld. Assessing Officer himself has not made any specific investigation on his own accord, leaving the underlying evidence un-examined, more particularly without giving fair opportunity to the assessee.

7.2. We also take note of the fact that ld. CIT(A) has ignored the confirmation letter issued by the builder i.e., Runwal Homes Pvt. Ltd., clarifying on the transaction undertaken by it with the assessee as well as on the status of the statement recorded during the course of their search which has a direct bearing on the addition so made by the ld. Assessing Officer in the hands of the assessee, since the statement of Shri Subodh Runwal forms the sole basis for making addition in the hands of the assessee. In the said letter, it has confirmed and explained the total consideration received by it under registered deed through banking channel from the assessee.

7.3. Considering the above facts and circumstances of the case, we are of the opinion that there is no supporting evidence to confirm the addition, except the statement of Shri Subodh Runwal, recorded during the course of their search. Thus, in absence of any irrefutable evidence and connected material brought on record by the Revenue, merely a statement by an un-connected person does not constitute reasons to believe that income of assessee had escaped assessment, more particularly when assessee has produced corroborative evidence to demonstrate the actual transaction undertaken by her in terms of registered deed as well as confirmation letter issued by the builder.

7.4. We observe that there was a search action in the case of the builder, Runwal Homes Pvt. Ltd., and in that case the builder has accepted that they have received “on money” from the various projects conducted by them and he has disclosed the name of all the flat owners. The tax authorities proceeded to make the addition based on the above declaration of receipt of “on money” in the hands of the flat owners. Assessee being one of the flat purchaser, the assessment was reopened. However, no effective cross examination opportunity was given to the assessee.

7.5. Reliance was placed on the Hon'ble Supreme Court judgment in Andaman Timber Industries [2015] 281 CTR 241. The Hon'ble Supreme Court 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)

7.6. Further, assessee has made an investment by purchasing a shop from Runwal Homes Pvt. Ltd. and is not an expenditure incurred by her, for which ld. Assessing Officer has invoked provisions of section 69C. Assessee has purchased a property under a duly registered deed for which the transactions have been routed through banking channel. In our view, the addition so made by the ld. Assessing Officer is on presumption basis without any effort made to examine the facts involved in the transaction except for placing reliance on the statement recorded during the course of search of an un-connected person. In the given set of facts and circumstances as discussed hereinabove, we delete the addition so made by the ld. Assessing Officer towards un-explained investment in the form of “on money” paid by the assessee to the builder. Grounds raised by the assessee in this respect are allowed.

8.

In the result, appeal of the assessee is allowed.

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