BHAGAWATI M JAIN,DOMBIVALI vs. WARD 3(1), KALYAN

On the given facts, circumstances and judicial pronouncements, CIT (Appeals) has erred in confirming the action of Ld. Assessing Officer by making addition of Rs. 21,99,000/- u/s 69B. Such confirming of addition u/s 69B is bad in law and addition is liable to be deleted.

2.1. Essentially, the issue involved in this appeal is in respect of addition made towards alleged on money payment made by the assessee in respect of an immovable property purchased by him from a builder in whose case a search and seizure action had undertaken u/s. 132 of the Act.

3.1. Ld. Assessing Officer acknowledged the submissions made by the assessee, however he noted that on verification of index-II, it was found that market value of property was Rs.37,20,500/-, as against the agreement value of Rs.29,50,000/-. He also referred to the admission made by one, Shri Kulin Shantilal Vora, who looks after the sales of all the projects of M/s. Bhagawati Developers and its group concerns whose statement was recorded under oath during the search and survey action. By placing reliance on the said statement and seized material found during the course of search of the builder, ld. Assessing Officer

Bhagawati M Jain AY 2018-19 came to a conclusion that assessee had made undisclosed investment and thus, passed an order u/s.148A(d) for issuing notice u/s.148. Notice u/s.148 was issued on 08.04.2022 in response to which assessee filed his return of income on 23.05.2022 reporting total income at Rs.5,00,130/-.

3.2. Case of the ld. Assessing Officer is that a search and seizure operation was conducted on M/s. Bhagawati Developers and its group concerns. One of the concerns covered in the search operation is M/s. Patel Enterprises which is a firm and Shri Kulin Shantilal Vora is its partner. Sale agreement of shop purchased by the assessee clearly mentions the name of one party as M/s. Patel Enterprises through partner Kulin Shantilal Vora. According to the ld. Assessing Officer, unit wise and flat/shop wise details of on money received by the group and its group concerns was provided by the search group. In the said search, Shri Kulin Shantilal Vora had admitted the receipt of on money on the sales made by the group and its concerns. Such sales include one of the shop purchased by the assessee from the group concern.

3.3. In this regard, ld. Assessing Officer had issued a show cause notice, to which assessee replied reiterating denial of cash payment and asking for evidence of cash payment. Assessee also sought copies of statement recorded of Shri Kulin Shantilal Vora and his cross examination. However, ld. Assessing Officer observed on such a request that, admission made by Shri Kulin Vora is a matter of common sense and human probability that no person will admit receipt of money in huge amount just without any reason, since, assessee has confronted that such a statement made by Shri Kulin Vora is only to avoid or save himself from the proceedings of the department. On the request made for providing opportunity for cross examination of Shri Kulin Shantilal

Bhagawati M Jain AY 2018-19 Vora, ld. Assessing Officer observed in the impugned order that, the statement of Shri Kulin Shantilal Vora is for all sales made and on money received on them from multiple parties, one of them being assessee, whose details were found in the seized documents. He thus, noted that specific mention of assessee cannot be found in the statement and therefore, statement not being in person or party specific, no question of cross examination arises. He thus, denied providing the opportunity of cross examination to the assessee, in respect of the statement which formed the basis for the purpose of making addition. Assessment was thus, completed by drawing a conclusion that assessee had made undisclosed investment under the provisions of section 69B and thus, addition was made of Rs.21,99,000/- to the total income, on account of payment of on money in cash for the shop purchased by the assessee.

Bhagawati M Jain AY 2018-19 5. Before us, ld. Counsel for the assessee emphasized on the fact that assessee had been repeatedly, right from the first submission made in response to notice u/s.148A(b), seeking the details and material which were relied upon for the allegation of payment of on money in cash by the assessee, as well as asking for cross examination of the person whose statement were relied upon which were recorded during the course of search proceedings of the builder and its group concerns. Specific submission made by the assessee in one of his replies dated 11.11.2023 as reproduced in the impugned reassessment order is extracted below for ready reference: “Now, in your show cause notice, you just stated that one Shri Kulin Vora admitted in his stated recorded, the group was accepting on money in form cash amount. And only on this statement your conclusion that I have paid cash Rs. 21,99,000/- to the builder without any evidence and proof that I personally paid the case to the builders. It is clear that builder given their statement on his owns situation to avoid the further proceeding against him or save him some other proceeding, on this I am not concern. Without any proof or any evidence against me for such payment to the builders, I am objecting for your conclusion that I have also paid cash amount of Rs. 21,99,000/- for purchase of shop, without giving me any proof or evidence of cash payment by me to the builder. Even I asked earlier for this proof or evidence of cash payment by me to the builder, but still today no evidence was produce or furnished to me. And even not allowing me for the cross examination of the said builders. I am referring to following decision as held for similar issue. i. C Vasantalal and Co. 45 ITR 206(SC) ii. Kishan Chand Chellaram VSCIT (125 ITR 713) iii. CIT Central Jaipur Vs. Smt. Sunita Dhadda iv. M/s Andaman Timber Industries Vs. Commissioner of Central Excise 92015 (281 CTR 241(SC)."

5.1 On the contrary, ld. Sr. DR placed reliance on the orders of authorities below and submitted that addition made is based on material passed on by search party to the ld. Assessing Officer and is thus, justified.

Bhagawati M Jain AY 2018-19 note that assessee has consistently, right from the first submission in the proceedings, has been categorically denying having paid any amount in cash over and above the agreement value. Ld. Assessing Officer has not confronted to the assessee any of the material found during the course of search of the builder and its group concerns for the allegation of payment of on money. The seized material found during the course of search of the builder is not corroborated with any other evidence except by the statement of one Shri Kulin Shantilal Vora, which also has not been confronted to the assessee for cross examination. We note that since the assessee was not provided with the adverse material, it hampers the primary and fundamental requirements of principles of natural justice. The reason given by ld. Assessing Officer for denying the opportunity of cross examination of Shri Kulin Shantilal Vora is that, his statement is for all the sales made by the group and the group concerns in respect of on money received by them from multiple parties. The statement is not on specific mention of assessee, since it refers to all the sales made on which on money was received from various parties. Such an observation and reasoning given by ld. Assessing Officer, brings out the fact that there is no specific mention of the assessee in the statement recorded during the course of search which forms the sole basis for the ld. Assessing Officer to make addition in the hands of the assessee.

6.1. We find that, at best, such a statement can raise a doubt or suspicion against the conduct of the assessee to trigger further enquiry or investigation for finding out and bringing on record relevant fact and material, so, as to conclusively prove the payment of on money by the assessee over and above the declared sales consideration. In the given set of facts as emerging from the orders of the authorities below and the replies furnished by the assessee, apparently ld. Assessing Officer has Bhagawati M Jain AY 2018-19 failed to bring any such evidence or material on record to prove the payment of on money by the assessee, more so, when assessee has from the very beginning denied payment of any such on money in cash. Addition made is on account of on money based on the information found during the search and seizure operation of the builder and the statement recorded u/s.132(4) of the Act. The material so found is not from the possession of the assessee, but in the course of search and seizure operation conducted in case of a third party that is the builder. There is no further corroborative evidence to establish that the contents of the seized material and the statement relied upon, are correct and authentic to the extent that assessee paid on money in cash. Further, not providing the opportunity to cross examine the person on whose statement reliance is placed, results into breach of principles of natural justice. In this regard, we place our reliance on the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE [2015] 281 CTR 241 (SC), wherein it has been held that failure to give the assessee the opportunity to cross examine witness, whose statements are relied upon, results in breach of principles of natural justice. It is a serious flaw, which renders the order a nullity.

6.2. We also place our reliance on the decision in the case of CIT vs. ODEON Builders (P) Limited 418 ITR 315, wherein it is held that addition/disallowance made solely on third party information without subjecting it to further scrutiny and denying the opportunity of cross examination of the third party, renders the addition/disallowance bad in law.

6.3. Hon'ble Supreme Court in the case of KP Varghese vs. ITO [1981] 131 ITR 597 (SC) observed in Para 4 that it is a well settled rule of law that the onus of establishing the conditions of taxability are fulfilled, is Bhagawati M Jain AY 2018-19 always on the revenue. To throw the burden of showing that there is no understatement of consideration on the assessee would be to cast an almost impossible burden upon him to establish the negative, namely that he did not receive any consideration beyond that declared by him. Thus, Hon'ble Supreme Court laid the burden on the revenue to establish the conditions for bringing to charge any income in the hands of the assessee.

7.1. Other grounds raised by the assessee, dealing with the jurisdictional issues are left open and not dealt upon as appeal of the assessee has been allowed on the merits of the case.

Order is pronounced in the open court on 10 March, 2026 Sd/- Sd/- (Pawan Singh) (Girish Agrawal) Judicial Member Accountant Member Dated: 10 March, 2026 MP, Sr.P.S.

Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER,

(Dy./Asstt.Registrar) ITAT, Mumbai