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Facts
The revenue's appeal pertains to AY 2011-12, challenging the CIT(A)'s deletion of an addition of Rs. 10,50,00,000/-. This addition was made by the AO based on information from a search action against M/s. Nish Developers Pvt. Ltd., alleging on-money payment by the assessee. The assessee had paid Rs. 17,50,00,000/- for a flat, and the AO estimated Rs. 10.50 Crores as on-money.
Held
The Tribunal noted that the addition was based on data from a pen drive recovered from an employee, which was found to be created from imagination and not related to the assessee in similar cases. In previous judgments on identical facts, the Tribunal had deleted such additions. The assessee's flats were purchased at rates above the determined average rate for that period, indicating no on-money.
Key Issues
Whether the CIT(A) was justified in deleting the addition of Rs. 10,50,00,000/- made on account of alleged on-money payment by the assessee, based on information from a search action against a third party.
Sections Cited
143(1), 132, 132(4)
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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: ANIKESH BANERJEE, HON’BLE
28. In the present case also during cross examination before AO during assessment proceeding, Mr Pravin Mishra admitted that he has prepared all this data on his own imagination which is not related to the assessee. The cross examination being conducted in the presence of the AO, the AO has also not re-examined Mr Pravin Mishra, thus acceding to the same. In case the AO was not convinced of the said statement, he ought to have re-examined or carried out further investigation to gather further evidences for substantiating his stand. Therefore, considering the facts of the case and judicial pronouncements in this regard, the order of CIT(A) on the issue of pen drive cannot be accepted. Considering all these facts of the assessee, we are of the view that the order of Ld. CIT(A) applying a blanket rate of 20% on the on-money calculated on the basis of data in the pen drive wherein the name of the customers were not even matching with the data in the pen drive and also the fact the amounts mentioned against the various flats purchasers having glaring and huge variations and that the pen drive was recovered from the premises of the employee of the assessee, the onus is on the Revenue to prove that data in pen drive are related to affairs of the assessee. Though the AO has not done his duty to determine correct income of the assessee by carrying out proper investigation of the case, yet the Tribunal being highest fact finding body is equally duty bound to determine correct income of the assessee based on the facts available on record....
8. The above observations of the Coordinate Bench show that the very basis of the assessment has been removed. Therefore, the impugned additions do not have any legs to stand. Therefore, we decline to interfere with the findings of the Ld. CIT(A).”
The entire quarrel revolves around the search and seizure action conducted at the premises of M/s. Nish Developers wherein on the basis of a pen drive, the alleged additions for receiving On-money were made in the hands of M/s. Nish Developers and the Co-ordinate Bench in a bunch of appeal in & Ors, order dated 12/03/2021, has held as under:- “28. In the present case also during cross examination before AO during assessment proceeding, Mr Pravin Mishra admitted that he has prepared all this data on his own imagination which is not related to the assessee. The cross examination being conducted in the presence of the AO, the AO has also not reexamined Mr Pravin Mishra, thus acceding to the same. In case the AO was not convinced of the said statement, he ought to have re-examined or carried out further investigation to gather further evidences for substantiating his stand. Therefore, considering the facts of the case and judicial pronouncements in this regard, the order of CIT(A) on the issue of pen drive cannot be accepted. Considering all these facts of the assessee, we are of the view that the order of Ld. CIT(A) applying a blanket rate of 20% on the on- money calculated on the basis of data in the pen drive wherein the name of the customers were not even matching with the data in the pen drive and also the fact the amounts mentioned against the various flats purchasers having glaring and huge variations and that the pen drive was recovered from the premises of the employee of the assessee, the onus is on the Revenue to prove that data in pen drive are related to affairs of the assessee. Though the AO has not done his duty to determine correct income of the assessee by carrying out proper investigation of the case, yet the Tribunal being highest fact finding body is equally duty bound to determine correct income of the assessee based on the facts available on record. Considering the statement of third parties and sales pattern of the assessee as submitted before us by the assessee as also before the authorities below, we observe that the selling rate of the flats in the assessee's project is varying from Rs.20,000 per sq Ft to Rs.30,000 per sq. ft. during this period. Such variation pattern suggest that there may be some involvement of on-money in these transactions. This fact was also admitted by five buyers in their statement recorded Us 132(4) of the Act during the course of search. Therefore to meet ends of justice, it would be reasonable to determine on-money by comparing average rate of sale for each year with the transaction to determine on- money for the period upto the date of search for all 71 flats sold during this period, as out of 72 flats one of the flat was cancelled. In other words as per data available on records, average rate for A Y 2011-12 works out to Rs.22,214/- so any flats sold during this year lower than this rate, the difference should be considered as on-money received on account of sale of the said flat. In our considered this aspect needs to examined at the level of AO to ascertain the amount of on-money. Accordingly, we set aside the order of ld CIT(A) on this issue and direct the AO to examine working 5 of average sale rate on the basis of sales data on yearly basis and determine on-money for A Y 2011-12 to A Y 2014-15 on the same lines. Needless to mention that the AO will give sufficient opportunity of hearing to the assessee.”
Thus, the basis was whether the average rate worked out to Rs. 22,214/-, any transaction below this rate, had to be considered involving On-money payment, so any flats sold during this year, lower than this rate, the difference should be considered as on-money received on account of sale of the said flat. The assessee’s flat A2203 & A2204, were transacted at Rs. 23597/- per sq.ft.. Thus, both the flats were above the cut off rate of Rs.22,214/- and, therefore, by the decision of the Co- ordinate Bench (supra), there is no involvement of any On-money.
Considering the facts of the case in totality, in light of the decisions of the Co-ordinate Bench (supra), we do not find any reason to interfere with the findings of the ld. CIT(A).