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Facts
The assessee filed two appeals against assessment orders related to AY 2019-20 and 2020-21. The Assessing Officer (AO) made additions of Rs. 62 lakhs and Rs. 13,52,360 respectively, alleging unexplained cash payments for property purchases during a search and seizure operation. The assessee contended that all payments were made through banking channels.
Held
The Tribunal held that the additions were made based on unsubstantiated information from an excel sheet and statements recorded during a search, without proper corroboration or an opportunity for cross-examination. The evidence presented by the AO did not conclusively prove cash payments. Therefore, the additions were unsustainable.
Key Issues
Whether additions made on the basis of uncorroborated information from a search, without providing cross-examination, are sustainable under Section 69 of the Income Tax Act. Whether the AO discharged the onus to prove unexplained cash payments for property.
Sections Cited
147, 144C(13), 148, 148A, 151A, 69, 132(4), 50C, 13(1), 69B, 271AAC
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Income Tax Appellate Tribunal, MUMBAI “I” BENCH : MUMBAI
Before: JUSTICE (RETD.) SHRI C.V. BHADANG & SHRI VIKRAM SINGH YADAV
Since common issues are involved, both these appeals were heard together and are being disposed-off by this consolidated order.
3. With the consent of both the parties, the appeal in (AY. 2019-20) was taken as the lead case for the sake of convenience and discussion, wherein the assessee has taking the following grounds of appeal:
“1. The ld.AO/DRP erred in upholding notice under section 148 of the Income Tax Act, 1961 ("Act") and the reassessment proceedings for AY 2019-20. The notice under section 148A(b), proceedings under section 148A and notice under section 148 are wholly without jurisdiction and there is no valid 'information' suggesting escapement of income.
2. The ld.AO/DRP erred in upholding notice under section 148 of the Income Tax Act, 1961 ("Act") and the reassessment proceedings for AY 2019-20 without appreciating that the same were initiated by the Jurisdictional Assessing Officer and not by the Faceless Assessing Officer and is contrary to the provisions of section 151A of the Act.
3. The ld.AO/DRP erred in making addition of Rs. 62,00,000 only on the basis of an alleged excel sheet and alleged statement of third party without providing an opportunity of cross-examination to the appellant and in total breach of principles of natural justice.
4. The ld. AO/DRP erred in making addition of Rs. 62,00,000 under section 69 of the Act. The requirements for bringing an amount to tax under section 69 (or any other provision of law) are not at all satisfied in the present case. The additions are wholly without any tangible material qua the present appellant and are completely unsustainable both in law and on facts.
5. The ld.AO/DRP erred in making addition of Rs. 62,00,000 without appreciating that there was no cash payment at all made by the present appellant. An initial booking of a flat was cancelled; and thereafter there was a separate booking and all relevant payments were made entirely through banking channels. There is no undisclosed investment. There is no cogent material with the Revenue to sustain any addition whatsoever in the hands of the Appellant..
6. Each of the above ground be considered as separate from the other grounds.
The appellant reserves its right to add to, alter, amend, modify or delete any of the grounds taken in this appeal.”
Briefly, the facts of the case are that a search and seizure operation u/s. 132 of the Act was carried out in the case of M/s. City Corporation Ltd., on 15-02-2023 and it was found that the assessee has made payment in cash during the financial year 2018-19 to the extent of Rs. 12 lakhs for flat No. 98-06-02 and Rs. 50 lakhs for flat No. 98-17-02. Since the assessee has not filed the return of income and the amount paid towards purchase of property in cash/on-money amounting to Rs. 62 lakhs remained un-explained and income to that extent has escaped assessment. Accordingly, the AO issued notice u/s. 148A(b) of the Act on 20-03-2023, asking the assessee to show cause as to why notice should not be issued u/s. 148 of the Act as the information available on record suggests that income chargeable to tax has escaped assessment for AY. 2019-20. The assessee did not respond to the show cause and thereafter, the AO passed order u/s. 148A(d) of the Act and notice u/s. 148 of the Act was issued on 31-03-2023. Thereafter, notice u/s. 142(1) of the Act was issued asking the assessee to furnish copy of the purchase deed along with details of mode of payment towards purchase of property, copy of bank account statement and sources of funds with supporting documentary evidences. In response, the assessee filed his submissions stating that he has booked a flat with the builder long back and due to non-receipt of OC and other reasons, the booking was cancelled and thereafter, final booking was done for flat No. 98-17-02 against which the payments made in cheque earlier were adjusted against the said booking and all further payments were made in cheque as per the consideration value and he has not made any cash payment to the builder. The submissions of the assessee were considered. As per the AO, the assessee has not furnished the source of investment made for the immoveable property and thereafter, a show cause was issued as to why the amount invested in the purchase of immoveable property could not be treated as „un-explained investment‟. In response to the show cause, the assessee reiterated his earlier submissions and stated that he has registered the said property at a consideration value of Rs. 1,11,23,584/- plus other expenses which comes to Rs. 1,26,04,454/- and all the payments have been made through banking channels so question of cash payment does not arise. It was further submitted that even the stamp valuation is less as compared to consideration and, therefore, there is no question of cash payment which arises in the instant case. The submissions so filed by the assessee in response to the show cause were considered. The AO referred to the purchase deed, the statements of various persons recorded u/s. 132(4) of the Act during the course of search, the statement of Managing Director of M/s. City Corporation Ltd., and the excel sheet extracted from the seized hard disk, wherein it shows that the assessee had made payment of Rs. 62 lakhs in cash to the builder during the relevant financial year and thereafter held that the source of investment of Rs. 62 lakhs remain un- explained and it was brought to tax u/s. 69 of the Act and the concluding findings of the AO are contained at para 11.6 of the draft assessment order passed u/s 144C(1) of the Act, dt. 29-03-2024, which read as under: “11.6 In view of the above facts and circumstances of the case, it is seen that the assessee has got the immovable property registered on 22.02.2019 at a total consideration value of Rs. 1,11,23,584/- out of which the amount of Rs. 11,12,359/-only was shown to have been paid till 22.02.2019 as per the deed dated 22.02.2019 and the assessee failed to furnish the source of even Rs. 11,12,359/-, Further the assessee has failed to furnish the source of payment of Rs. 33,85,793/- made to the builder at the time of booking i.e. on 22.02.2019 as claimed by the assessee. Further from the evidence gathered during the course of search proceedings in the case of City Corporation Limited, it is clear that the assessee has paid Rs. 62,00,000/- in CASH to the Builder M/s City Corporation Limited for the purchase of both the immovable properties. The assessee has failed to furnish the source of such amount of Rs. 62,00,000/-. Hence the source of amount of investment of Rs. 62,00,000/-remained unexplained and accordingly the same is added to the total income of the assessee as unexplained investment u/s 69 of the Act. Penalty proceeding u/s 271AAC is separately initiated for addition made u/s 69 of the Act.”
Against the draft assessment order passed u/s. 144C(1) of the Act, dt. 29-03-2024, the assessee filed objections before the ld. Ld. DRP, which was disposed-off by the DRP vide its order dt. 22-11-2024. During the course of DRP proceedings, the assessee filed a letter from Shri Anirudha Deshpande, Managing Director of M/s. City Corporation Ltd., as well as affidavit stating that no on-money was paid towards the purchase of the property. It was submitted by the assessee that the Managing Director of M/s. City Corporation Ltd., in its letter dt. 02-04-2024 has denied the cash transactions. It was further submitted that third party statements of the key employees and that of the Managing Director of M/s. City Corporation Ltd., recorded u/s. 132(4) of the Act could not be relied upon without giving proper opportunity of cross examination to the assessee and it was reiterated that all the payments have been made through banking channels and no cash payments have been made by the assessee to the builder.
The ld DRP taking into considerations the assessee‟s submissions, the remand report dt. 08-08-2024 received from the AO as well as the rejoinder of the assessee, disposed off the assessee‟s objections and dismissed the same vide its order u/s 144C(5) dated 22/11/2024.
7. As per the ld DRP, the statement recorded on oath u/s. 132(4) of the Act has evidentiary value and the Courts have held that mere retraction after a long time gap makes such retractions mere afterthoughts and no credence can be given to the retraction statement and it loses significance. It was held that in the instant case, retraction letter of Shri Anirudha Deshpande, Managing Director, filed after more than one year of the search has no meaning. Also, no such retraction letters have in any case been filed from the key employees of M/s. City Corporation Ltd., who had categorically accepted the cash transactions in their statements recorded during the search. It was accordingly held that no credence can be given to the retraction statement. It was further held that original statement has been made on the basis of evidences found during the search in the form of information contained in the hard disk and the excel sheet and it is not the case that the original statement is not supported by any evidence thus, the claim of the assessee that the Managing Director, Shri Anirudha Deshpande has furnished a rebuttal letter dt. 02-04-2024 has no validity and in any case, no retraction has been filed by the key employees of M/s. City Corporation Ltd., who have categorically accepted the cash transactions in their statement recorded during the course of search u/s. 132(4) of the Act. Regarding assessee‟s contention of denial of cross examination, it was held that income tax proceedings are not ruled by the rule of evidence but what is applicable to these proceedings is the test of preponderance of probability and therefore, it cannot be said any material which the Department relies upon should be subjected to cross examination. The only this is required is that the AO should act in consonance with the rules of natural justice, which is duly complied with once the material to be used against the assessee is duly confronted to him and he is given due opportunity to explain the same. It was held that in the instant case, adequate opportunity of being heard has been provided to the assessee and the incriminating material has been duly confronted to him and rules of natural justice have been duly followed. It was held that the extract of relevant statements are duly reproduced in the draft assessment order and more over, the proceedings before the DRP are in continuation of the assessment proceedings and the assessee has been given adequate opportunity at this stage and hence, there should not be any grievance with regard to the lack of opportunity of being heard. In view of the same, the plea of the assessee regarding cross examination did not find favour with the ld DRP and the same was rejected. It was finally held by ld DRP that incriminating material found during search in the form of information contained in hard disk and excel sheet clearly showed the incriminating cash transactions made towards purchase of property, which have been duly admitted in the statement of Managing Director, Shri Anirudha Deshpande and key employees of City Corporation Ltd which support the action of the AO in making the addition of Rs. 62 lakhs in the hands of the assessee and accordingly the objections of the assessee were dismissed and the AO was directed to give effect to the aforesaid findings in terms of section 144C(13) of the Act.
In view of the findings and directions of the ld DRP, the AO finalized and passed the assessment order u/s. 147 r.w.s. 144C(13) of the Act, dt. 12-12-2024, wherein the assessed income was determined at Rs. 62,01,720/- by making an addition of Rs. 62 lakhs u/s. 69 of the Act. Against the said order, the assessee is in appeal before us.
During the course of hearing, the Ld.AR submitted that the assessee has purchased a residential house property i.e, Flat No 1702, Tower No. 98, Gateway Tower, Amanora Park Town, from the Developer, M/s City Corporation Limited, vide "Agreement for Lease" dated 22-02-2019 in joint name along with his wife, Mrs. Vaishali Amit Bagade [PAN: ADXPN9353K] as per the terms and conditions contained therein. It was further submitted that the said Agreement for Lease was registered on 22-02-2019 for an agreed price consideration of Rs. 1,11,23,584/- (Circle Stamp Duty Valuation of said flat u/s 50C- Rs. 76,78,400/-); with Stamp Duty amount Rs. 5,56,300/- & the registration fees Rs. 33,200/-. The aforesaid price consideration as mentioned herein above was agreed to be paid by the assessee and his wife to the said Developer, M/s City Corporation Limited and was sourced as under:
Details of Source Amount (Rs.) Income earned overseas and previous savings from 70,23,584/- overseas Earnings paid through banking channels Housing Loan from State Bank of India 41,00,000/- TOTAL 1,11,23,584/- 10. It was submitted that the entire transaction of acceptance of consideration of Rs. 1,11,23,584/- has been appositely confirmed, reflected and acknowledged by M/s. City Corporation Limited in their regular books of accounts and the transactions of aforesaid purchase of the residential property have been affected through authorized banking channels and are appropriately reflected in the assessee's Bank Account.
11. It was submitted that the additions have been made purportedly on the basis of a noting in an unverified excel sheet found during the search and seizure operation u/s. 132 of the Act against the Developer, M/s.City Corporation Limited which was not even confronted to the assessee. It was further submitted that no other corroborative or incriminating material has been brought on record and in absence of the same, the assessment is illegal and liable to be quashed. In this regard, reliance was placed on the following decisions: i. Anil Jaggi v. ACIT (2018) 89 taxmann.com 266 (Mum.); ii. Heena Dashrath Jhangiani v. ITO (ITA No. 1665/Mum/2018)] 12. It was further submitted that no cash payment was made by the assessee and in none of the excerpts of the statements of the employees of the said developer, as reproduced in the impugned order, is there a mention of the assessee or the assessee having paid cash to the said developer. It was submitted that the assessee has not only sworn on oath by his affidavit dated 8th April, 2024 that he has not engaged in any cash transactions with the said developer, but he has also provided letters dated 2nd April, 2024 and 9th June, 2025 from Shri Aniruddha Deshpande, Managing Director, confirming that no cash payment was received from the assessee towards the purchase of the flat. Such letter further stated that the statements of the employees of the said developer were recorded under coercion and had subsequently been withdrawn.
It was further submitted that the assessee has not been provided the opportunity to cross-examine the persons, on whose statement such addition has been made. In fact, in para. 7.3.4.2. of the ld. DRP Directions for AY 2019-20, the DRP has held that since the assessee was provided the opportunity of being heard, the assessee's plea of seeking cross- examination has no merit. It was submitted that without being provided the opportunity of cross-examination, the testimony of the employees of the developer cannot be relied on and ought to be disregarded. In this regard, Ld.AR placed reliance on the following decisions:
i. H.R. Mehta vs. ACIT (2016) 72 taxmann.com 110 (Bom.); ii. Kundal Raghubir Bhandari vs. ITO (ITA No. 3646/Mum/2023)]
It was submitted by the Ld.AR that the assessee has explained in detail the nature and source of investment. The flat was purchased, inter alia, through the assessee's earnings, sale of an old property and a housing loan, all of which were transferred through legitimate banking channels. The Assessee had produced the ledger of the said developer, the allotment letters and acknowledgment receipts issued by the developer, and its bank and loan statements which set out the transactions made. Such bank statements also show that no withdrawals of significant sums were made therefrom. Moreover, the agreed purchase consideration, as mentioned in the registered agreement, was substantially higher than the circle stamp duty valuation of the flat. In this regard, the assessee also produced the Index-II of other flats in the said building, measuring similar area as his flat, to show that comparable transactions involving third parties were also undertaken at a similar rate, thereby, lending further credence in the assessee's case. It was submitted that neither has the assessee paid nor was there any reason for the assessee to have made an additional/unaccounted payment of Rs. 62,00,000/- (AY 2019-20) and Rs. 13,52,359/- (AY 2020-21) over and above the agreed consideration.
The Ld.AR submitted that particularly, for AY.2020-21, while making an addition of Rs. 11,12,359/-, the AO has failed to note that such amount represents 10% of the agreement value and is in accordance with section 13(1) of the Real Estate (Regulation and Development) Act, 2016, which prohibits the promoter from accepting more than 10% of the cost of the flat without registering the agreement for sale. The same in line with the policy of the developer, as has also been explained in the letters dated 28-03- 2025 and 09-06-2025 issued by Managing Director Shri Anirudha Deshpande. It was further submitted that in fact, cl. 3.1 further provides the tabulation of payment subject to the development milestones achieved and entry (b) to the said clause accounts for the balance payment, which formed part of the total credit of Rs. 33,85,793/- to be paid on the execution of the Agreement. Moreover, while the DRP accepted the explanation and source of Rs. 39,00,000/- and vide para 7.4 of its order, directed the AO to delete the proposed additions, it failed to recognize that the booking amount of Rs. 11,12,359/- formed a part of such source of investment aggregating to Rs. 39,00,000/-. On such basis, even the purported addition of Rs. 11,12,359/- ought to have been deleted.
It was submitted that the assessee duly explained and established the nature and source of the investments in relation to the impugned transaction and discharged his burden thereof. In accordance with settled law, once all the aforesaid facts and documents were presented before the AO, the burden cast upon the assessee was duly discharged and the onus shifted to the AO to prove that the same was not satisfactory which the AO has failed to discharge and proceeded to pass the impugned order. It was accordingly submitted that the addition so made be directed to be deleted.
Per contra, the Ld.DR is heard, who has relied on the findings and order passed by the ld DRP as well as that of the AO which we have already taken note of supra and not been repeated.
We have heard the rival contentions and perused the material available on record. It is a case where the AO has invoked the deeming provisions of Section 69 of the Act and has brought to tax a sum of Rs 62 lacs as unexplained investments in the hands of the assessee. Section 69 of the Act provides that where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. In other words, the deeming provisions envisage a situation where the source of investment is either not explained or not satisfactory explained by the assessee. As far as the factum of investment is concerned, there cannot be any dispute and therefore, before the AO invokes such deeming provisions, the factum that the assessee has made such an investment has to be clearly established and brought on record and the onus is clearly on the AO.
In the instant case, the AO has referred to statements recorded during the course of search u/s 132(4) of the employees and Managing Director of City Corporation Limited wherein they have admitted cash receipts from customers in respect of sale of flats in respect of Amanora Park Town project, and excel sheet extracted from a hard drive seized during the course of search which contain information about the flat purchasers who have made cash payment towards purchase of flats. Further, the AO has referred to various circumstantial evidences which have been found during the course of search and has held that from the evidence gathered during the course of search, it is clear that the assessee has paid Rs 62 lacs in cash to City Corporation Limited for purchase of two immoveable properties. The assessee has disputed the same and has contended that he has purchased one Residential Flat No 1702, Tower No. 98, Gateway Tower, Amanora Park Town, from the Developer, M/s City Corporation Limited, vide Agreement for Lease dated 22-02-2019 registered on the same date in joint name along with his wife, Mrs. Vaishali Amit Bagade for an agreed price consideration of Rs. 1,11,23,584/- paid through banking channels (Circle Stamp Duty Valuation of said flat being Rs. 76,78,400/-) and has not made any cash payment towards such purchase of flat.
Therefore, it is not a disputed fact that the assessee has made investment, however, such an investment is by way of purchase of a single flat and not two flats as alleged by the AO. Further, the question that really boils down is whether such investment is limited to Rs. 1,11,23,584/- paid through banking channels or there is payment over and above the said amount and which has been paid through cash amounting to Rs 62,00,000/-. The statements so recorded of the employees and the Managing Director of City Corporation limited u/s 132(4) are not doubt relevant to initiate the investigation but to hold that the assessee has actually made the cash payment to the developer, the said statements needs to be corroborated with other evidences which could be found during the course of search. The AO has referred to an excel sheet extracted from a hard disk seized during the course of search. The contents of said excel sheet are not on record and the ld DR was asked during the course of hearing to produce the same, however, all that the ld DR has submitted during the hearing was a letter dated 3/03/2023 written by DDIT(Inv) Unit -1(2), Pune with subject “information found during search action in case of flat owners who purchased flat during the financial year 2018-19 from CCL group of companies in Amanora Town Park”. The said letter again refers to the statement of various persons recorded during the course of search and a list of flat owners which was prepared, basis the excel sheet so extracted, who have made cash payment to the builder. The said list no doubt contains the name of the assessee and the corresponding amount, however, the question really is what are the exact contents of the excel sheet, the date of preparation and authentication thereof and whether the same was available with the AO at the time of making the assessment and how the AO has reached a conclusion that the assessee has made such payment. The fact that the ld DR couldn‟t produce the same during the course of hearing demonstrate that the excel sheet was not even available with the AO at the time of making the assessment. Therefore, the findings of the ld DRP that the incriminating material found during the course of search has been confronted to the assessee is thus not borne out of records. Further, the AO has referred to various circumstantial evidences gathered during the course of hearing, however, the nature of such evidences and the contents thereof have not been described or referred to by the AO in the assessment order. We therefore have a situation whether basis information received from the Investigation Wing, the AO has initiated the reassessment proceedings and finally concluded the reassessment proceedings holding that the assessee has made investment to the tune of Rs 62 lacs.
Having said that, even going by the information contained in excel sheet and the fact that the same has been accepted in statements recorded u/s 132(4) of the employees and the Managing Director of City Corporation Limited, the question is whether mere noting on an excel sheet found during the course of search in case of another person binds the assessee or can be held against the assessee. The assessee has no control over what is written in the excel sheet and who has written the contents thereof and therefore, where the assessee is disputing the same, there has to be something more than notings in the excel sheet which can positively demonstrate that cash payment has been made by the assessee and accepted by the developer. However, we find that there is nothing on record to this effect. The assessee has even asked for cross-examination of persons whose statements have been recorded and relied upon by the AO, however, even the same has been denied to him. Therefore, it is a case whether unsubstantiated information and the statements recorded during the course of search in case of the developer without allowing cross-examination has formed the basis for making the addition in the hands of the assessee which cannot be sustained and liable to be set- aside.
Similar view has been taken by the Coordinate Bench in case of Heena Dashrath Jhanglani (supra) and the relevant findings therein read as under:
“10. I have considered rival submissions and perused material on record. Undisputedly, the genesis of the addition made of ₹ 42 lakh on account of alleged payment of on-money in cash towards purchase of a flat lies in a search and seizure operation conducted in case of Hiranandani Group and related persons. Though, in the assessment order the Assessing Officer has not discussed in detail the nature of incriminating material / evidence available on record to indicate payment of on-money in cash by the assessee to M/s. Crescendo Associates, however, from the show cause notice dated 4th March 2015, which is reproduced by the Assessing Officer in the assessment order, it appears that the incriminating materials are in the form of pen drive found and seized from the residence of one of the employees of Hiranandani Group and a statement recorded under section 132(4) of the Act from Shri Niranjan Hiranandani, Director and Promoter of the Group, wherein, the details of on-money paid by buyers /prospective buyers to Hiranandani Group concerns are mentioned and further, in the statement recorded under section 132(4) of the Act on 14th March 2014, Shri Niranjan Hiranandani, has admitted receipt of on-money in cash towards sale of flats / shops. Thus, it is clear that except these two pieces of evidences the Assessing Officer had no other evidence on record which demonstrates that the assessee had paid on-money in cash for purchase of the flat. It is further relevant to observe, from the assessment stage itself the assessee has requested the Assessing Officer to provide him with all adverse materials and full text of the statement recorded under section 132(4) of the Act from Shri Niranjan Hiranandani. The assessee had also requested the Assessing Officer for allowing her to cross-examine Shri Niranjan Hiranandani and other parties whose statements were relied upon.
Apparently, this request of the assessee was not acceded to by the Assessing Officer. When the assessee took up the aforesaid issue before the first appellate authority, the learned Commissioner (Appeals) in letter dated 18th July 2016, had clearly directed the Assessing Officer to provide the assessee all adverse materials /documentary evidences available with him indicating payment of on-money. However, on a perusal of the remand report dated 23th June 2017, a copy of which is at Page-53 of the paper book, it is very much clear that the Assessing Officer has completely avoided the issue and there is no mention whether the assessee was provided with all the adverse material and if, not so, whether he has provided them to the assessee as per the directions of the learned Commissioner (Appeals). Thus, from the aforesaid facts, it is patent and obvious that the addition of 42 lakh made on account of on-money payment in cash is without complying with the primary and fundamental requirement of rules of natural justice. It is well settled proposition of law that if the Assessing Officer intends to utilize any adverse material for deciding an issue against the assessee he is required to not only confront such adverse materials to the assessee but also offer him a reasonable opportunity to rebut / contradict the contents of the adverse material. Further, the assessment order reveals that the Assessing Officer has heavily relied upon the statement recorded from Shri Niranjan Hiranandani, for making the disputed addition. However, it is the allegation of the assessee, which prima-facie appears to be correct, that the Assessing Officer has not provided the full text of such statement recorded and has also not allowed the assessee an opportunity to cross-examine Shri Niranjan Hiranandani, and other persons whose statements were relied upon. This, in my view, is in gross violation of rules of natural justice and against the basic principle of law. In this context, I may refer to the decision of the Tribunal, Mumbai Bench, in Nikhil Vinod Agarwal (supra). Thus, for the aforesaid reason, the addition made cannot be sustained.
Even otherwise also, the addition made is unsustainable because of the following reasons. As discussed earlier in the order, the basis for addition on account of on-money is the information contained in the pen drive found during the search and seizure operation and the statement recorded under section 132(4) of the Act. As regards the information contained in the pen drive, it is the contention of the assessee that the said pen drive was not found from the possession of the assessee but in course of search and seizure operation conducted in case of a third party. Therefore, in absence of further corroborative evidence to establish that the contents of the pen drive are correct and authentic to the extent that the assessee paid on-money in cash, no addition can be made under section 69B of the Act. Further contention of the assessee is that in the statement recorded under section 132(4) of the Act, Shi Niranjan Hirandani has not made any reference to the assessee, therefore, in absence of any other corroborative evidence to establish that assessee has paid on-money in cash, no addition can be made. I find substantial merit in the aforesaid submissions of the assessee. In my view, neither the information contained in the pen drive nor the statement recorded under section 132(4) of the Act from Shri Niranjan
Hiranandani are enough to conclusively establish the factum of payment of on-money by the assessee. At best, they can raise a doubt or suspicion against the conduct of the assessee triggering further enquiry / investigation to find out and bring on record the relevant fact and material to conclusively prove the payment of on-money by the assessee over and above the declared sale consideration. Apparently, the Assessing Officer has failed to bring any such evidence / material on record to prove the payment of on-money by the assessee. More so, when the assessee from the very beginning has stoutly denied payment of on-money in cash. Notably, while dealing with a case involving similar nature of dispute concerning similar transaction with another concern of Hiranandani Group, the Tribunal in case of Shri Anil Jaggi v/s ACIT (supra) has held as under:- "15. We shall now take up the case of the assessee on merits and deliberate on the validity of the addition of Rs. 2.23 crore made by the A.O on the ground that the assessee had made a payment of "on money" for purchase of flats from M/s Lakeview developers. We have perused the facts of the case and the material available on record on the basis of which the addition of Rs. 2.23 crore had been made in the hands of the assessee. We have further deliberated on the material placed on record and the contentions of the Id. A.R to drive home his contention that no payment of any "on money" was made by the assessee for purchase of flats from M/s Lakeview Developers. We find that the genesis of the conclusion of the A.O that the assessee had paid "on money" of Rs. 2.23 crore for purchase of property under consideration is based on the contents of the pen drive which was seized from the residence of an ex-employee of Hiranandani group.
We have perused the print out of the pen drive (Page 42 of APB) and find ourselves to be in agreement with the view of the Id A.R that though against the heading "Amount of on money paid" the name, address and PAN No. of the assessee is mentioned alongwith the details of the property purchased by him, viz. Flat no.2501 in "Somerset" building from Lakeview Developers (a Hiranandani group concern), however, the same would not conclusively prove suppression of investment and payment of "on money" by the assessee for purchase of the property under consideration. We find that the information as emerges from the print out of the pen drive falls short of certain material facts, viz. date and mode of receipt of on money", who had paid the money, to whom the money was paid, date of agreement and who had prepared the details, as a result whereof the adverse inferences as regards payment of "on money" by the assessee for purchase of the property under consideration remain uncorroborated. We further find that what was the source from where the information was received in the pen drive also remains a mystery till date. We find that Sh. Niranjan Hiranandani in the course of his cross-examination had clearly stated that neither he was aware of the person who had made the entry in the pen drive, nor had with him any evidence that the assessee had paid any cash towards purchase of flat. We have deliberated on the fact that Sh. Niranjan Hiranandani in his statement recorded on oath in the course of the Search & seizure proceedings had confirmed that the amounts aggregating to Rs. 475.60 crore recorded in the pen drive were the on-money received on sale of flats, which was offered as additional income under Sec. 132(4) and thereafter offered as such for tax in the petition filed before the Settlement commission. We are of the considered view that there is substantial force in the contention of the Id. A.R that mere admission of the amounts recorded in the pen drive as the additional income by Sh. Niranjan Hiranandani, falling short of any such material which would inextricably evidence payment of "on money" by the assessee would not lead to drawing of adverse inferences as regards the investment made by the assessee for purchase of the property under consideration. We rather hold a strong conviction that the very fact that the consideration paid by the assessee for purchase of the property under consideration when pitted against the market value" fixed by the stamp valuation authority is found to be substantially high, further fortifies the veracity of the claim of the assessee that his investment made towards purchase of the property under consideration was well in order. We are of the considered view that though the material acted upon by the department for drawing of adverse inferences as regards payment of "on money" by the assessee formed a strong basis for doubting the investment made by the assessee for purchase of the property under consideration, but the same falling short of clinching material which would have irrefutably evidenced the said fact, thus, does not inspire much of confidence as regards the way they have been construed by the lower authorities for drawing of adverse inferences in the hands of the assessee. We thus are of a strong conviction that as the material relied upon by the lower authorities does not corroborate the adverse inferences drawn as regards the investment made by the assessee, therefore, the same cannot conclusively form a basis for concluding that the assessee had made payment of "on money" for purchase of the property under consideration. We thus in the backdrop of our aforesaid observations are of the considered view that the adverse inferences drawn by the A.O as regards payment of "on money" of Rs. 2.23 crore by the assessee for purchase of Flat No. 2501 from M/s Lakeview Developers are based on of premature observations of the A.O, which in the absence of any clinching evidence cannot be sustained. We thus are unable to subscribe to the view of the lower authorities and set aside the order of the CIT(A) sustaining the addition of Rs. 2.23 crores in the hands of the assessee."
Facts in the instant appeal are more or less identical, except, the parties to the transaction, the flat sold and the quantum of alleged on- money paid in cash. In fact, the assessee's case stands in a much better footing since in case of Shri Anil Jaggi (supra) the Assessing Officer had allowed cross-examination of Shri Niranjan Hiranandani by the assessee which is not the case in the instant appeal. Thus, in my view, in absence of any corroborative evidence brought on record to conclusively prove that the assessee has paid on-money of ₹ 42 lakh in cash to M/s. Crescendo Associates towards purchase of flat, I am inclined to delete the addition made by the Assessing Officer.
In light of aforesaid discussions and in the entirety of facts and circumstances of the case, in absence of any corroborative evidence on record that the assessee has paid on-money of Rs 62 lacs in cash to City Corporation Limited, the addition so made is hereby directed to be deleted.
In light of aforesaid discussions and our findings on merits of the case, other grounds of appeal have become academic and the same are thus dismissed as infructious.
In the result, the appeal of the assessee is partly allowed.
In this appeal, the assessee has taken the following grounds of appeal:
“1. The Ld. AO/DRP erred in upholding reopening notice section/s 148 of the Income Tax Act, 1961 ('Act') and the reassessment proceedings for AY 2020-21 without appreciating that the same were initiated by the Jurisdictional Assessing Officer and not by the Faceless Assessing Officer, and is contrary to the provisions of section 151A of the Act.
2. The Ld. AO/DRP erred in making an addition of Rs. 13,52,360/- u/s 69 of the Act even when the requirements for bringing an amount to tax u/s 69 (or any other provision of law) are not at all satisfied in the present case. The additions are wholly arbitrary, without any tangible or cogent material qua the Appellant and are completely unsustainable both in law and on facts.
The Impugned Order passed by the Ld. AO and the Directions issued by the DRP fail to consider the documents on record furnished by the Appellant, are contrary to the principles of natural justice, suffer from non- application of mind and arrive at a conclusion that no reasonable person properly instructed in the law could have arrived at.
4. Out of the total addition of Rs. 13,52,360/-, the Ld. AO/DRP: (a) Erred in making an addition of Rs. 2,40,000/-only on the basis of an alleged Excel sheet and alleged statement of third party without appreciating that there was no separate and/or contemporaneous material whatsoever regarding any alleged cash payment by the Appellant and in failing to appreciate that the Appellant had paid the entire purchase consideration by normal banking channels as confirmed by the Developer, and moreover, this amount was added without providing an opportunity of cross-examination to the Appellant, in total breach of the principles of natural justice. b) Erred in making an addition of Rs. 11,12,359/- failing to appreciate that this was the booking amount paid by the Appellant to the Developer by way of normal banking channels, duly recorded in the registered agreement executed in respect of the flat purchased by the Appellant, and duly explained by the Appellant as to the manner in which this amount together with the entire purchase consideration was paid by way of normal banking channels and by way of adjusting the amounts paid initially against the booking of another flat in the same scheme, and as such, there was no undisclosed investment or cash payment whatsoever. The Ld. AO/DRP also failed to appreciate that the mentioning of this amount in the registered agreement was as per the Developer's standard format adopted under RERA, and that in any event, amounts greater than this sum had been paid by the Appellant as on the relevant date, and therefore, no addition whatsoever on this account is warranted.
5. Each of the Grounds is urged separately and without prejudice to the other. The Appellant craves leave to add/alter/amend the above Grounds.”
Both the parties fairly submitted that the facts and circumstances are identical, therefore, our findings and directions contained in shall apply equally to this matter and the additions so made of Rs 13,52,360/- is hereby directed to be deleted. The other grounds of appeal are dismissed as infructious and the appeal is partly allowed.
In the result, both the appeals filed by the assessee are partly allowed.