AMARNATH VIJAN,MUMBAI vs. ITO (IT) 4(3)(1), MUMBAI

The first issue is as regards to the order of CIT(A) confirming the action of the AO for initiating reassessment proceedings under section 147 read with section 148 of the Act. For this Assessee has raised the following ground No. 1: - “I .1 The learned Commissioner of Income tax -

At the outset, the learned Counsel for the assessee stated that he has instructions from the assessee not to press this ground and 3 accordingly, the same is not pressed. Hence, this ground is dismissed as not pressed.

The next issue on merits is against the order of CIT(A) in respect to own money payments made to the builder i.e. cash payments amounting to ₹ 25 lacs added by the Assessing Officer. For this assessee has raised the following grounds: - “2.1 The Id. CIT(A) erred in confirming the disallowance of Its. 25,00,000/-, made by A.O., comprising of cash payment given to Builder based on oaths u/s 132 (4) of the Income Tax Act. 1961 given by the builder.

Briefly stated facts are that that assessee's case was re-opened u/s.147 of the Act and notice under section 148 of the Act was issued and served on the assessee giving reasons for re-opening of the assessment. The assessee failed to comply with several notices dated 01.04.2014, 05.08.2014 and 28.01.2015, seeking copies of return of income for the relevant year with details. Further, notices were sent to Bank for bank statement of the assessee. The assessee was requested to furnish full details of sale and purchase agreement with statement of capital gain, NRE Account Statement, and sources of cash of Rs.25,00,000/- paid to 4 Hiranandani Group for purchase of property with specific explanation as to why Rs.25,00.000/- should not be added in the total income. In response to the same, assessee filed letter dated 27.03.2015 denying the payment of Rs.25,00,000/- to the developer, Hiranandani Group. However, the AO did not accept the submissions of the assessee stating that during the course of search proceedings dated 11.03.2014, evidences relating to payment of Rs.25,00,000/- were noticed during F.Y.2006-07 relevant to A.Y.2007-08. Hence, the amount of Rs.25,00,000/- was added back to the total income of the assessee. Aggrieved by the action of the AO, the assessee filed the above appeal. The CIT(A) confirmed the addition.

At the outset, the learned Counsel for the assessee sated the facts that the AO had made addition on account of "on-money" paid to Hirandani group for purchasing the property of Rs 25,00,000 based on the information from investigation department The aforesaid addition is made merely by relying on the information obtained by way of data in pen drive which is confirmed by Shri Niranjan Hiranandani the MD of Hiranandani group. The fact is that the assessee is a NRI staying in Dubai since almost a decade before the current year. The only source of income in India is rent received from property rented to Zenta Pvt Ltd which is deposited in NRE account of assessee. According to assessee there is no other source of income which may earn/generate any unrecorded cash in India. The assessee submitted copy of passport showing assessee stay in India (2 yrs before and after) and return of income for the year. Also, the fact remains that no corroborative evidence like receipt, confirmation letter from assessee were found during the course of Investigation or during course of assessment showing payment of cash by assessee to Hiranadani Group, and therefore it was contended that addition made merely on the basis of information and 5 statement of third party without any corroborative evidence of such cash payment is bad in law. When assessee had purchased the property at fair market value, as it is evident from the statement showing the rate at which property are sold to other purchaser in the same premises.

The learned Counsel for the assessee narrated that the issue is squarely covered by various decisions of the Tribunal and Tribunal is consistently taking the view, wherein an addition was made in respect to cash alleged to be paid as own money to Hiranandani builders or its group concerns and the very same statements and very same date like Pen Drive, etc. stated to be seized from Hiranandani group of cases were relied on by the AO. The learned Counsel for the assessee specifically drew our attention to the decision of Shri Anil Jaggi Vs. ACIT in vide order dated 20.12.2017, wherein exactly on identical facts, the Tribunal has deleted the addition by observing in Para 15 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 ld. A.R to drive home his contention that no payment of any “on 6 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 ld 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 7 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 ld. 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 8 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 9 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.”

The learned Counsel for the assessee and the learned Departmental Representative, both, stated that there is no difference in facts and the above transactions is emanating out of the same search as in the case of Shri Anil Jaggi (supra). Respectfully, following the same, we direct the AO to delete the addition and allow the appeal of the assessee.

In the result, the appeal of the assessee is allowed.