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Facts
The assessee filed an appeal against an order confirming an addition of Rs.84,35,930/- made by the AO. The addition was based on an excel sheet found during a search of a third party, which allegedly showed the assessee paid on-money for a property.
Held
The Tribunal held that the addition was not sustainable as it was based solely on an excel sheet found from a third party without corroborative evidence. The Tribunal followed the decision of the jurisdictional High Court, which held that such proceedings are not maintainable without proper corroboration and an opportunity for cross-examination.
Key Issues
Whether an addition can be made solely on the basis of an excel sheet found during a third-party search without corroborative evidence or opportunity for cross-examination?
Sections Cited
250, 153C, 245D(4)
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & MS. SUCHITRA RAGHUNATH KAMBLE
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the Assessee against order passed by the ld.Commissioner of Income (Appeals)-11, Ahmedabad dated 17.10.2023 under section 250 of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short] for the Asst.Year 2012- 13.
2. Grounds raised are as under:
The learned CIT(A) erred in law and on facts in dismissing the appeal. He did this without considering one of the written submissions that was uploaded on the portal during the course of the appellate proceedings; without actually verifying the document that is stated to have been seized from the third party (on the strength of which the case was subjected to issuance of the notice under section 153C of the Act and consequential addition to the returned income thereafter); without considering the non- 2 adherence of the constitutional rights and of the law of the land as interpreted by the judicial authorities; and without verifying as to how the dots between the said seized document were connected with the untenable findings of the AO.
2. The learned CIT(A) has erred in law and on facts in confirming the addition of Rs.84,35,930/- that was arbitrarily made by the AO while passing the assessment order.”
The ld.counsel for the assessee contended before us that the sole issue in the present appeal relates to addition made to the income of the assessee of Rs.84,35,930/- allegedly being on-money paid in cash by the assessee to the developer for purchase of a property, source of which remained unexplained. The ld.counsel for the assessee contended that the only effective ground of appeal is ground no.2.
1. 4. Drawing our attention to the facts of the case, it was pointed out that the impugned addition was made on the basis of information revealed during search conducted in the case of “HN Safal Group” on 4.9.2013. During search a hard-disk containing data of “Safal Amrakunj Scheme” carried out by “M/s.Safal Estate” was seized and the said data allegedly contained names of members, client/customers, unit/plot number, payment details through cheque and cash, details of outstanding etc. He pointed out that from this data, the AO noted the assessee, Shri Kiritkumar Chapaklal Shah had paid on-money for the purpose of purchase of a bungalow of “Safal Amrakunj Scheme” as detailed at page no.3 of his order as under:
Bungalow No. Payment in F.Y. NAME NEW CASH 22 2011-12 Shri Kiritkumar 84,35,930/- Chapaklal Shah
5. The AO, he pointed out, further noted the order of the Settlement Commission, passed order under section 245D(4) in SA No.GJ/AHCC/0162019/2015-16/IT, in which the ITSC had worked out total on-money receipt of Rs.61.45 crores in Aamrakrunj Scheme.
Based on the above two findings, the AO held that it was obvious that the assessee had paid on-money for purchase of immovable property from the group, and in the absence of any explanation of the source of the same, he made addition of the on-money so paid to the income of the assessee as investment remaining unexplained to the extent of Rs.84,35,930/-. The same, he stated, was confirmed by the ld.CIT(A).
The ld.counsel for the assessee, pointed out that this issue is no longer res integra, having been dealt by the Hon’ble jurisdictional High Court in the case of Pr.CIT Vs. Kaushik Nanubhai Majithia, R/Tax Appeal No.20 of 2024 dated 6.3.2024, wherein, he pointed out that the Hon’ble High Court had categorically held that there was no basis at all for conducting the proceedings against the assessee merely for the fact that the developer had paid taxes on the amount shown in the excel-sheet; that merely basis excel-sheet without any corroborative evidence, the addition could not have been made to the income of the assessee. Our attention was drawn to the contents of the order as under:
“1. Having noted the findings of the facts returned by the Commissioner of Income Tax (Appeals) ('CITA', in brief) and the Income Tax Appellate Tribunal ('ITAT, herein after), we may record that, essentially, the proceedings under Section 153C of the Income Tax Act, 1961 (in short, 'IT Act of 1961') were initiated against the Respondent- assessee on the basis of an excel sheet found from the computer of a person, associated with the Company, namely Navratna Organizers and Developers Private Limited (in short as 'the Developer'), in the premises of whom the search was conducted.
The excel sheet, according to the learned Counsel for the Revenue, contained the details of payment made by the assessee to the developer, with respect to which tax had been paid by the developer before the Settlement Commissioner. The findings returned by the CITA and ITAT on the issue is sought to be assailed on the ground that the payment of tax by the developer, in whose premises search was conducted, before the Settlement Commissioner, with respect to the amount entered in the excel sheet found from the possession of the assistant working with the developer, is sufficient proof of the transaction between the assessee and the developer.
4 3. We find inherent fallacy in this submission, inasmuch as, there is no basis for conducting proceedings against the assessee merely for the fact that the developer had paid tax on the amount shown in the excel-sheet. There is no adjudication with regard to the payment, which was shown in the excel-sheet to the effect that the same was actually paid by the assessee to the developer. Even otherwise, the concurrent findings returned by the CITA and ITAT are that the document found from the premises of the third party namely excel- sheet, which is the basis of the proceedings was without any signature and there is no corroborative material to substantiate the said document. The nature of the document has not been explained by the Assessing Officer while proceeding against the assessee. The statements of the persons recorded during search with reference to the alleged, seized material, was not provided to the assessee and hence, the entire proceedings under Section 153C of the IT Act of 1961 stood vitiated.
Learned Counsel for the petitioner could not successfully demolish the facts, which are recorded concurrently by the CITA and ITAT.
No question of law much less any substantial question of law to entertain this appeal. The same is accordingly, dismissed.”
It was pointed out that subsequently, the ITAT, Ahmedabad Bench had followed this decision of the Hon’ble jurisdictional High Court in a number of cases as under:
i) Rajesh N. Desai, IT(SS)No.150 & 151/Ahd/2023 dated 26.11.2024; ii) Kashish G. Chandani, IT(SS)No.147/Ahd/2023 dated 10.6.2024
He, therefore, contended that it is now settled that merely on the basis of noting contained in the excel-sheet, that too found in the premise of a third-person, and on the basis of the admission made by the third person, regarding contents of the same to the Settlement Commission, no addition could be made in the hands of the persons, noted in this sheet to have invested, in the absence of any other corroborative evidence filed by the Revenue.
The ld.DR, however, relied heavily on the order of the authority below, pointing out that the data in the excel-sheet was 5 revealing/containing the name of the assessee, plot in which invested, cheque payment made by the assessee, and also cash payment made of Rs.84,35,930/-. He pointed out that the contents of the rest of the data, except on money, in the excel sheet has not been disputed by the assessee; that he did invest in the impugned plot and did make cheque payment. Therefore, he contended, the assessee cannot now dispute the information pertaining to the cash made by him, as contained in the data. The contention of the ld.DR was that this excel- sheet was sufficient evidence for making addition in the hands of the assessee. He pointed out from the order of the ldCIT(A) that there was no statement recorded of the searched person with respect to the incriminating material relied upon by the AO, and therefore, there was no need for providing cross-examination of the builder to the assessee also. In this regard, he drew our attention to para 6.15 of the CIT(A)’s order holding so. He stated that the decision of the Hon’ble Gujarat High Court, therefore, was distinguishable, wherein it was noted that the assessee had not been provided opportunity of cross-examination
We have heard both the parties, and gone through the order of the authorities below, and have also considered case laws referred to before us.
It is not disputed that the addition in the present case has been made on the basis of excel-sheet data found during search conducted on the HN Safal Group; that the data revealed the assessee to have invested in a bungalow in Safal Amrakunj Scheme, and further revealed that besides cheque payment, the assessee has also made cash payment to the tune of Rs.84,35,930/-. It is, this, information in the excel-sheet which is the basis with the Revenue for holding that the assessee had made investment in cash in the impugned property.
6 Besides, the fact that the builder i.e. HN Safal Group had admitted to have taken on-money in the said scheme to the Settlement Commission and paid taxes thereon, is another fact on which the AO has relied for holding that the assessee also had paid on-money while investing in the property of the Safal Scheme.
We find that, as rightly pointed out by the ld.counsel for the assessee, in identical facts and circumstances , the Hon’ble jurisdictional High Court had held that this data revealed from search conducted on a third person, as also confession of the third-party to the Settlement Commission was itself not sufficient evidence for taking any adverse view against the assessee; that there had to be some corroborative evidence in the light of the complete denial of the information contained in the data by the assessee. The Hon’ble High Court had noted that besides corroborative evidences, the assessee also ought to have been provided opportunity of cross-examination to the builder. In the facts of the present case also, other than the data relating to the assessee found during the search on the third party and the admission of the third party, before the Settlement Commission, of having received on-money, there is no other evidence with the Department for holding that the assessee had paid on-money to the builder. The request for cross-examination of the builder was also held to be untenable by the ld.CIT(A) on the ground that no statement of the builder had been recorded during the search or later, with respect to the incriminating material. However it is fact on record that HN Safal Group has admitted receipt of on-money to the Settlement Commission. In the light of this admission by the HN Safal Group, it was imperative for the assessee to have been provided an opportunity of cross-examining the said builder.
7 12. In view of the same, we find that the issue is directly covered by the decision of the Hon’ble Gujarat High Court in the case of Kaushik Nanubhai Majithia (supra), following which, we hold that the addition made in the case of the present assessee to the extent of on-money paid of Rs.84,35,930/- is not sustainable. We accordingly direct the AO to delete the same.
Ground No.2 raised by the assessee is allowed, thus allowing the appeal of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 9th January, 2025 at Ahmedabad.