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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI DUVVURU RL REDDY & SHRI G. MANJUNATHA
PER G.MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the
order of the learned Commissioner of Income Tax (Appeals)-16,
Chennai dated 01.03.2019 and pertains to the assessment year
2009-10.
The assessee has raised the following grounds of appeal:-
“1. Commissioner of Income-tax (Appeals) is not justified in holding that cost paid for purchase of a residential house on 16.04.2008 was ` 90 lakhs against `42 laths according to Sale document, and consequently deciding that `49.5 lakshs was incurred out of unexplained sources.
As a noting in Diary seized during search on 22.05.2014 does not narrate that a larger amount was actually paid to the transferor, it ought not to have led the officials to conclude that an on-money
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was paid.
As the assessee had confessed to offer the additional amount as income, only ‘tentatively” during a statement recorded at about 2 am, and had retracted it in a return of income furnished on 07- 05-2015 as required by a notice dated 09-04-2015, the addition made on its basis is not justified.
Such a statement recorded at odd hours should not have been considered as a voluntary one (328 ITR 4II (Guj).
Similar confession retracted only by a return of income, was accepted by the Madras High Court in 303 ITR 235 and deletion of amount treated as on-money held valid, observing that it is harsh and unequitable to tax a notional income.
6 While Madras High Court in 282 ITR 259 (affirmed by Supreme Court in 294 ITR 49) accepted a retraction of confession made on the basis ofa slip seized during search, in spite of transferor’s filing a revised return including ‘on-money, the Assistant Commissioner ought not to have rejected the retraction, on an incorrect view that it was made only on 20-12-2016.
The Department ought to have made independent enquiries on the market value of the property, as required by the above decisions of Madras High Court and Supreme Court and considered the fact that the sale consideration amount was not disturbed in transferors assessment (163 Taxman 482 Del HC); the Statutory authority namely 5p1, Deputy Collector (Stamp) fixed its market value at Rs. 44,80,700/- being 6.6% more than Rs, 42 lakhs mentioned in the document; reliance on such stamp authority’s value is recognized in 313 ITR 178 Amsr and 57 DTR 449 Ahd.
Even the tentative confession ought not to have extracted at all, as it was prohibited by Boards Circular dated 10-03-2013 referred to in 300 IER 157 at 65 (Mds HC) and task Force’s recommendation published in 179 CTR St 5 at 235 at Para 3.27.
CIT (Appeals) is not justified, relying on decisions in cases ofdissimilar facts, in requiring evidence that an on-money was not paid, while the seller had confirmed in the sale document the actual amount received; requiring to prove a non existing matter is
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not lawful. Commissioner (Appeals) ought to have discussed the decisions ofjurisdictional and Apex Court relied on by Grounds of Appeal, and repeated at Pages 3 and I8 of the appellate order, which are applicable to the facts of this case. 10. Alternately, as assesse is only a co-owner of the property with 50% share along with wife Mrs.P.Sumathi, entire excess amount ought not to have been assessed as his income, as contended by Grounds of appeal repeated in order of CIT(Appeals), at Pages 4 and 19, but ignored to be dealt with by 1st appellate order. 11. For these and other reasons, which may be stated at the time of hearing of the appeal, it is prayed that the addition made to income may please be deleted.”
Brief facts of the case are that the assessee is an individual,
derives income from house property and income from other
sources, besides agricultural income. A search and seizure action
u/s. 132 of the Income Tax Act, 1961 was conducted in the business
premises of the assessee on 22.05.2014. Consequent to search,
notice u/s. 153A of the Act was issued on 09.04.2015 for which assessee has filed return of income declaring total income of `
8,88,420/-. During the course of search on 22.05.2014, an
executive diary maintained by the assessee for the year 2008 was
found and seized. When seized documents were confronted to the
assessee, assessee admitted that he purchased a property for
which requirement of funds has been estimated. However, property
has been subsequently purchased for a consideration which is
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different from the consideration recorded in executive diary. During the course of search, statement u/s. 132(4) of the Act was also recorded wherein assessee admitted maintenance of diary and also confirmed entries recorded therein and accordingly, admitted undisclosed income on account of on-money payment for purchase of property at `94,28,000/-. The Assessing Officer, on the basis of
incriminating materials found during the course of search coupled with statement recorded from assessee has arrived at undisclosed income towards on-money payment for purchase of property on the basis of cash flow statement filed by assessee at `49,50,000/- and
made additions u/s.69 of the Act. The assessee carried the matter in appeal before first appellate authority, but could not succeed. The learned CIT(A), for the reasons recorded in his appellate order dated 01.03.2019, confirmed additions made towards on-money payment for purchase of property on the ground that additions made by Assessing Officer is not only based on statement recorded during the course of search u/s. 132(4) of the Act, but it was also supported by incriminating material in the form of executive diary maintained by assessee and hence, arguments of assessee that no addition could be made on the basis of confession statement alone does not hold good. The learned CIT(A) has also distinguished
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various case laws relied upon by assessee and further relied upon
the decision of Hon’ble Madras High Court in the case of
S.ShyamKumar Vs. ACIT (2018) 99 Taxman.com 39. The
assessee carried the matter in further appeal before Tribunal.
The Tribunal vide its order dated 08.11.2019 in ITA No.
942/Chny/2019 has confirmed the additions made by Assessing
Officer towards on-money payment for purchase of property by
holding as under:-
“6. We heard the rival submissions and perused the material on record. The only issue involved in the present appeal relates to addition of Rs.49,50,000/- on account of unexplained investment in the purchase of property. Assessee had admitted undisclosed income in the form of on-money payment for purchase of property but it appears that statement was retracted subsequently. It is a matter ofthat seized documents in the form of diary clearly indicate payment of consideration over and above the apparent consideration mentioned in the sale deed. Therefore dehorse the statement given by the assessee, the material on record clearly indicate payment of on-money, the source for which remains unexplained. The ratio of the decision of Jurisdictional High Court in the case of S. Shyam Kumar (supra) is squarely applicable to the facts of the present case, wherein it was held as follows:- “11. Wefind that the case on hand is not a simple case of relying upon somescribbling and notings but a case where the entries, which were clear and legible, were taken into consideration by the Assessing Officer . The correctness of
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which was examined by the Commissioner of Income (Appeals) and further examined by the Tribunal Thus, we find the assesseehas not made out any good ground to interfere with the order of the Tribunal’’.
In the light of the above decision, we do not find any reason to interfere with the orders of the lower authorities.”
The assesse has challenged order of the Tribunal before the
Hon’ble Madras High Court in Tax Appeal No.139 & 150 of 2020.
The Hon'ble High Court, vide its order dated 05.03.2020 has set
aside the appeal to the file of the ITAT ‘B’ Bench for fresh
consideration with a direction to consider orders of Chief Revenue
Officer / Inspector General of Registration, Chennai-28 dated
11.02.2013 on the ground that although assessee has specifically
taken a ground challenging additions made by Assessing Officer
towards on-money payment for purchase of property, ignoring value
of property assessed by revenue authorities for payment of stamp
duty and such valuation is almost equal to value of property
declared in the sale deed, the Tribunal failed to adjudicate specific
ground taken by the assessee . The relevant findings of the Hon’ble
High Court are as under:-
“9. This Court has carefully considered the rival submissions and also perused the materials placed before it.
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A perusal of the order passed by the CIT (Appeals) dated 01.03.2019 as well as the original order dated 08.11.2019 passed by the Income Tax Appellate Tribunal did not deal with the aspect as to the adjudication done under Section 47 (A) (1) of the Indian Stamp Act. It also appears from the materials placed in the form of additional typed set of documents dated 04.03.2020 filed by the appellant /assessee that challenging the adjudication done by the Special Deputy Collector, Salem, dated 19.08.2011, further appeal, was filed under Section 47 (A) (5) of the Indian Stamp Act before the Chief Commissioner Stamp), Salem and the value of the site fixed at ` 545 per sq.ft has been increased to Rs.600 per sq.ft and it was also complied with.
In the considered opinion of this Court, the said order passed by the statutory authority would definitely have a bearing on the adjudication done by the authorities below and despite the fact that specific ground has been raised before the CIT (Appeals) as well as before the ITAT, the said grounds have not been considered and adjudicated. Therefore, the following substantial question of law raises for consideration:
Whether the order of CIT (Appeals) dated 01.03.2019, as confirmed by the impugned order of ITAT dated 08.21.2019, as to the non-consideration of adjudication done under Section 47 (A) (1) of the Indian Stamp Act as well as adjudication done by the Chief Revenue Officer / Inspector General of Registration, Chennai 28 in the appeal filed under Section 47 (A) (5) of the Indian Stamp Act, is sustainable in law?
In the considered opinion of this Court, the Substantial Question of Law framed is answered in affirmative in favour of the appellant / assessee, in the light of the reasons assigned above.
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In the result, T.C.No.150/2O2O is partly allowed and the impugned order dated 08.11.2019 passed by the Income Tax Appellate Tribunal is set aside and the matter is remanded to the Income Tax Appellate Tribunal B Bench for fresh consideration as to the order of the Chief Revenue Officer / Inspector General of Registration, Chennai 28 dated 11.02.2013 in Pa.Mu.No.5907S/NZ/2010 and as a consequence of allowing T.C.A.No.150/2020, no orders are necessary in T.C.A.No.139/2020 and as a result, the said appeal is dismissed. No Costs.”
The case has been taken up for hearing in pursuant to
directions of Hon’ble High Court of Madras. At the time of hearing,
learned AR for the assessee submitted that the Assessing Officer as
well as learned CIT(A) has made additions towards on-money
payment for purchase of property only on the basis of statement
recorded during the course of search u/s.132(4) of the Act, even
though assessee has retracted such statements before completion
of assessment proceedings. Therefore, there is no value for the
statement which was subsequently retracted and hence, the same
cannot be a basis for making addition towards on-money payment
for purchase of property. The AR further submitted that assessee
has challenged additions made by Assessing Officer on the ground
that entries recorded in executive diary is an estimate made for
9 ITA No.942/Chny/2019
purchase of property, because the property purchased was an old
property, which requires reconstruction and hence, assessee has
estimated funds required for purchase and construction of building.
However, property was purchased at the stated consideration in the
sale deed which was ultimately more or less equal to value
determined by stamp duty authorities. Further, although there is a
minor difference in value shown in sale deed as well as value
determined by authorities for the purpose of stamp duty as such
difference is less than 6% which is negligible. Therefore, additions
made by Assessing Officer only on the basis of statement recorded
during the course of search is incorrect. The AR further submitted
that when the assessee specifically challenged additions in light of
order of Chief Revenue Officer /Inspector General of Registration,
Chennai, the authorities below have failed to consider report/order of
Chief Revenue Officer, which is crucial document to decide the
value of property. Therefore, he submitted that additions made by
Assessing Officer towards on-money payment for purchase of
property u/s.69 of the Act should be deleted.
The learned DR appearing for the Revenue, on the other
hand, strongly supporting the order of learned CIT(A) submitted that
10 ITA No.942/Chny/2019
it is a matter of fact on record that during the course of search
executive diary maintained by assessee was found and seized
which indicates on-money payment for purchase of property and
same has been confirmed by assessee in the statement recorded
u/s.132(4) of the Act. Therefore, it is incorrect to say that additions
made by Assessing Officer is only on the basis of statement, but not
any corroborative evidence found during the course of search. The
DR further submitted that when the evidences collected during the
course of search clearly indicate on-money payment for purchase of
property, which was further confirmed by statement, then there is no
reason for the assessee to come with an argument that additions
made by Assessing Officer towards on-money payment for purchase
of property is on the basis of confession statement.
We have heard both the parties, perused the material available
on record and gone through orders of the authorities below. The
facts borne out from records clearly indicate that Assessing Officer
has made addition towards on-money payment for purchase of
property on the basis of noting in one executive diary, which was
found and seized during the course of search, as per which
assessee has paid on-money for purchase of property over and
11 ITA No.942/Chny/2019
above stated consideration recorded in registered deed. The said
finding was further strengthened by statement recorded from
assessee u/s.132(4) of the Act during the course of search, where
assessee has admitted maintaining executive diary and has also
confirmed contents of such diary. Further, assessee has admitted
on-money payment for purchase of property over and above the
stated consideration recorded in the deed. But, admission made
during the course of search has been subsequently retracted on the
ground that contents found in executive diary is only an estimate for
purchase and construction of property, but not amount paid for
purchase of property. To strengthen his argument, assessee has
taken support from the order of Chief Revenue Officer /Inspector
General of Registration, Chennai dated 11.02.2013, where value of
property has been arrived at Rs.44,84,700/-, as against recorded
consideration of Rs. 42,00,000/-. We have carefully considered the
arguments of assessee in light of facts brought out by the lower
authorities including facts recorded by Tribunal. The Tribunal in
earlier round of litigation on perusal of various details, recorded
categorical finding that sole basis for addition towards on-money
payment for purchase of property is an executive diary found during
the course of search. It was further noted that when the document
12 ITA No.942/Chny/2019
found during the course of search was confronted to assesse, the
assessee has admitted contents and also admitted undisclosed
income towards on-money payment for purchase of property.
Therefore, from the above it is very clear that the revenue
authorities went on to decide the issue only on limited point of
whether assessee has paid on-money for purchase of property and
such payment is supported by evidences collected during the course
of search or not. But, the contention of assessee before the
authorities was that although, initially the assessee has admitted
undisclosed income on account of purchase of property, but such
admission was on tentative basis without any corroborating
evidence. Further, assessee has filed retraction statement with
necessary evidence and retracted from his earlier statement
regarding on-money payment for purchase of property. No doubt,
addition cannot be made only on the basis of statement recorded
during the course of search. This legal position has been clarified by
various High Courts including the Hon’ble Supreme Court in the
case of Pullongode Rubber Produce Co. Ltd Vs. State of Kerala 91
ITR 18 and also in the case of P.V Kalyanasundaram vs. CIT 294
ITR 049. But, if admission in a statement recorded u/s.132(4) is
corroborated with evidences collected during the course of search,
13 ITA No.942/Chny/2019
then authorities are empowered to make additions on the basis of
such statements. However, in this case, before making any
addition, the Assessing Officer should have examined the claim of
assessee in light of report/order of Chief Revenue Officer /Inspector
General of Registration, Chennai or determine value of the property
by conducting further enquiry or referring valuation to Departmental
Valuation Officer (DVO). In this case, although assessee has filed
order of Chief Revenue Officer /Inspector General of Registration,
Chennai, but the Assessing Officer as well as learned CIT(A) has
not taken said order into cognizance, while adjudicating the issue.
Even the Tribunal has not considered the plea of assessee in light of
the said evidences. In our considered view, order of Chief Revenue
Officer /Inspector General of Registration, Chennai is not a relevant
criteria to decide whether assessee has paid on-money or not, but it
may be one piece of evidence to ascertain correct facts with regard
to value of property. Since, the assessee has taken a plea in light of
said order/report of Chief Revenue Officer /Inspector General of
Registration, the Assessing Officer ought to have considered the
order before arriving at conclusion that assessee has paid on-
money payment for purchase of property, even though the
Assessing Officer is not bound to accept the order of Chief Revenue
14 ITA No.942/Chny/2019
Officer /Inspector General of Registration, Chennai. Therefore, we
are of the considered view that appeal needs to be set aside to the
file of Assessing Officer to reconsider the issue in light of the
arguments of assessee that order of Chief Revenue Officer
/Inspector General of Registration, Chennai was not considered
while adjudicating the issue. Hence, we set aside the issue to the file
of Assessing Officer and direct him to consider order of Chief
Revenue Officer /Inspector General of Registration, Chennai, and
decide the issue in accordance with law on the basis of evidences
available on record.
In the result, the appeal filed by the assessee is treated as
allowed for statistical purposes. Order pronounced in the open court on 5th February, 2021
Sd/- Sd/- (धु�वु� आर.एल रे�डी) (जी.मंजुनाथ) (Duvvuru RL Reddy) (G.Manjunatha) !या�यक सद$य /Judicial Member लेखा सद$य / Accountant Member चे!नई/Chennai, 'दनांक/Dated 5th February, 2021 DS आदेश क� ��त)ल*प अ+े*षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु,त (अपील)/CIT(A) 4. आयकर आयु,त/CIT 5. *वभागीय ��त�न1ध/DR 6. गाड� फाईल/GF.