LALITA ANUP ANAND,MUMBAI vs. ITO WD 21(2)(2), MUMBAI

2.1. On the other hand, the ld. DR, Shri Rajesh Kr. Yadav, defended the addition made by the Assessing Officer and confirmed by the Ld. Commissioner of Income Tax (Appeals) by inviting our attention to para 10 and 12 of the impugned order along with page-37 of the paper book. It was also pleaded that Kamla Group also made disclosure before the settlement commission, therefore, the addition was rightly sustained.

2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee declared total income of Rs.9,33,230/- in her return on 31/07/2012. The assessee purchased two flats bearing no. 1201 & 1202. The allotment letter of both these flats was filed before the Ld. Assessing Officer vide letter dated 04/02/2015. The assessee made payment of Rs.2,30,00,000/- and furnished the copy of bank statement along with source of such payment before the Assessing Officer. The schedule of payment have also been mentioned in para -5 (page-2 of the assessment order). As per the Revenue, there was information from investigation wing that buyers paid on money to the Kamla Group for different projects. As per the Revenue, the assessee paid Rs.3 crores during the period relevant to Assessment Year 2012-13 in cash, which was not disclosed in the return. The Ld. Assessing Officer had reason to belief that income had escaped assessment, therefore, the case of the assessee was reopened u/s 147/148 of the Act. In response to the same the assessee vide letter dated 22/03/2014 requested the ld. Assessing Officer that the original return filed on 31/07/2012 may be treated to be return filed in response to notice u/s 148 of the Act. In response to the notices issued u/s 143(2) and 142(1) of the Act, the assessee attended the proceedings and furnished the details called for during the case as has been admitted/acknowledged in para -4 of the assessment order. The assessee was issued show cause notice on 16/03/2015, which is reproduced hereunder:-

"Information has been received from Investigation Wing after a search and seizure action conducted on Kamala Group of cases on 09.01.2013. During the course of this search proceedings evidence related to inter alia payment of On-Money (cash) for purchases of flat were found. These evidences were confronted to the Directors/Partners of the Kamala Group and they accepted the fact that On-Money was received on sale of various flats. The information was forwarded to this office from the Investigation Wing that you have made a cash payment of RS.3,00,00,000/- to Yojana Infratech on June 2011 for purchase of Flat NO.1201 & 1202. You are therefore requested to show cause as to why the said amount of cash should not be assessed as your income from undisclosed sources. "

2.3. The assessee vide reply dated 20/03/2015 to the aforementioned show cause notice, replied as under “Regarding payment made to Yojna Infratech for purchase of flat no.1201 and 1202 in their project at Khar, I and my daughter have made payment by cheque as details given earlier. Regarding cash payment, as stated in your notice, I deny such payment made by me. I request to give me opportunity to cross examine a person who has made statement and also furnished material on which you rely.” 2.4. We find that in aforesaid reply, the assessee specifically denied of making any payment in cash to the assessee and requested for cross examine the person who made the statement.

2.5. It is also noted that the department recorded the statement u/s 132(4) of the Act, of Shri Nilesh Gawde and Shri Mahendra Rawa, employees of Kamla Group, in which they confirmed that cash was received from sale of flat developed by various entities of Kamla Group of companies. These statements, as per the Revenue, were further confirmed by the Director/partners of the group. The Ld. Assessing Officer at the last page of the assessment order has observed that it is a common practice by the builders to get cash in advance while booking the property. The denial of making any cash payment by the assessee to the group was not accepted by the Ld. Assessing Officer, therefore, the amount of Rs.3 crore, alleged to be made in cash was added to the income of the assessee.

2.6. On appeal, before the Ld. Commissioner of Income Tax (Appeals), the explanation of the assessee could not find favour and thus the addition made by the Assessing Officer was affirmed. The assessee is in appeal before this Tribunal.

2.7. We find that the whole basis of addition is based upon the statement tendered by two employees namely Shri Nilesh Gawde and Shri Mahendra Rawal of Kamla Group. In such a situation, we are expected to examine the contents of the statements, which is available at pages 19 to 51 of the paper book. In reply question no.7 with respect to providing details of commercial and residential project, Shri Nilesh K. Gawde specifically tendered that he was not looking after any project or sale related activities and therefore, he denied having any knowledge. In reply to question no.12, with respect to pen-drive, recovered during the course of search, it was replied that this pen-drive belongs to Mahendra, who was handling the cash department of Kamla Mill compound. A reply to question no.19, with respect to details of the directors and their nature of job, he specifically denied by saying that ‘I don’t know’. With respect to other firms, he specifically denied as is evident from pages 22 to 24 of the paper book (containing the statement). In reply to question no.21 with respect to entries in the Excel Sheets appearing in annexure ‘O’ as well as print out seized in annexure ‘A1’. It was specifically replied that the particular data was prepared by one Shri Mahendra Rawal and further tendered that his job is merely to enter data as directed by Shri Mahendra Rawal, who does the cross checking after data entry. In reply to question no.23, with respect to the transactions in regular books of accounts, it was contended that he does not know about the recording as he was not a person working in the accounts department.

2.8. So far as the statement of Shri Mahendra Rawal (pages 32 onwards of the paper book) is concerned, in reply to question no.9 whether he was a director or partner or proprietor in any company/firm, etc. he contended that he is Director in some of the companies and further confirmed that he is a partner in Aqua Marine. In reply to question no.14, with respect to work in M/s Kamla Mills Ltd. he tendered that he deals with the purchase of steel, bajari, cement, bricks, etc. In reply to question no. 17, whether he is having any role in sale in the aforementioned companies, he specifically denied of having any role. In reply to question no.18, with respect to sales and receipt of money, he said these are dealt with by one Shri Manmohan Taneja and he is not aware as from where the cash was coming/received out of sale and also whether it is entered in the books or not. In reply to question no.20, as to what was to be done of the cash, he said that the cash was used to send at the direction of Shri Nilesh Gowani. In reply to question no.21 as to who was dealing cash page-38, he has tendered that the cash was from Shri Manmohan Taneja and Shri Nilesh Gawde was to enter the same in the computer. That in reply of question no.22, to supply of the cash account, he tendered that he is not having any copy, diary or soft copy. In reply to question no.23, as to who is having the accounts of cash, he specifically denied that he is not aware about the same. In reply to question no.24, whether he was handling the cash presently, he specifically tendered that he has no knowledge about it. The contents of the statement either deny the receipt of cash and if received, it nowhere says that any cash was received from the present assessee on sale of two flats. The allegations are clearly vague. In such a situation, unless and until it is proved that any cash was received from the assessee, the addition cannot be said to be justified, which is purely on the basis of statement of some persons and no evidence has been collected that any cash was received from the assessee. Even if it is presumed that some cash was received by Kamla Group then it is the group which is expected to explain the source of the cash but certainly no addition can be made in the hands of the present assessee. Presumption cannot take the shape of evidence, however, strong it may be. So far as, the contention of the Ld. DR that Kamla Group made disclosure before the Settlement Commission does not prove that any cash was received from the present assessee. It is for the Kamla Group to explain the nature and source of such cash, if any, surrendered before any authority.

2.9. It is also noted that before the Ld. Assessing Officer/CIT(A) and also before this Tribunal, the assessee duly produced the computation of total income along with the acknowledgment of return filed by the assessee (pages 5 to 7 of the paper book), copy of letters submitted during assessment proceedings, balance sheet (pages 8 to 9 of the paper book), details of date-wise payment made by the assessee for purchase of flats (page-10 of the paper book), copy of allotment letters dated 01/06/2011, copies of statements recorded from Shri Nilesh Gawde and Mahendra Rawal (pages 19 to 51 of the paper book) and written submissions dated 19/07/2016 (page-60 and 61 of the paper book) filed before the Ld. Commissioner of Income Tax (Appeals).

2.10. If this issue is analyzed with the market rate/stamp duty recknores rates of 2011 (pages 13 to 18 of the paper book) are analyzed, the ld. Counsel explained before us that the ready recknor rate of the stamp duty valuation authority are lower than the payment made by the assessee, meaning thereby, at the relevant time, the ready recknor rates itself proves that the case of the assessee is genuine. There is no evidence on record, on behalf of the Revenue, that in fact any ón money’ was paid by the assessee to the builder/Kamla Group over and above the payments made through cheque/banking channel. So, from this angle also, we find merit in the contention of the assessee.

2.11. Now, we shall examine the allotment letters dated 01/06/2011 (pages 13 to 18 of the paper book). It is noted that Yojna Infratech, vide letter dated 01/06/2011, address to Mrs. Lalita Anand (present assessee) that two flats along with two open car parking space were allotted to the assessee, wherein, para 2, it has been clearly mentioned that the total consideration of the flat was Rs.2,14,00,000/-, which has to be deposited on the terms and conditions on the specified date provided at page -14 of the paper book). It is also noted (pages 17 & 18 of the paper book), the ready recknor rates of land + building for the residential building was Rs.1,67,600/-, which clearly establishes that the area-wise rates (ready recknor rates of valuation authority) are lower to the payment made by the assessee through banking channel.

2.12. Now, we shall deal with the cases relied upon by both sides. The Hon'ble Punjab And Haryana High Court in the case of COMMISSIONER OF INCOME TAX vs. SMT. PARAMJIT KAUR 311 ITR 38 (P & H) held as under:-

“This reference under s. 256(1) of the IT Act, 1961 (for short "the Act") has been made to this Court at the instance of the Revenue by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for brevity "the Tribunal") arising out of its order dt. 19th April, 1996 in relating to the asst. yr. 1989-90 raising the following question of law :

Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in quashing the assessment order for the asst. yr. 1989-90 by holding that the notice under s. 148 is invalid ?

2. The facts are that the assessee filed her original return declaring nil income and the AO on receiving the information from Survey Wing of the IT Department that Neta Metal Works prepared a demand draft for a sum of Rs. 83,040 payable at Chandigarh in favour of M/s Coal India Ltd., which was not accounted in the assessee’s books of account, issued a notice under s. 148 of the Act. The AO after recording reasons framed assessment under s. 143(3) of the Act at an income of Rs. 83,040 on 2nd Sept., 1994. On appeal by the assessee, the first appellate authority upheld the validity of notice under s. 148 of the Act but set aside the assessment on the addition made by the AO and remitted the matter to him to frame a fresh assessment after allowing reasonable opportunity of being heard to her. The assessee took the matter in second appeal and the Tribunal vide its order dt. 19th April, 1996 held that since the AO had failed to incorporate material and his satisfaction for reopening the assessment, the same was invalid.

4. Sec. 147 of the Act defines the power and jurisdiction of the AO for making an assessment or reassessment of escaped income. Sec. 148 of the Act, on the other hand, provides for initiation of the reassessment proceedings with issuance of a notice on the assessee concerned. Sec. 147 empowers the AO to assess or reassess income chargeable to tax if he has reasons to believe that the income for any assessment year has escaped assessment. The power conferred under this section is very wide, but at the same time it cannot be stated to be a plenary power. The AO can assume jurisdiction under the said provision provided there is sufficient material before him. He cannot act on the basis of his whim and fancy, and the existence of material must be real. Further, there must be nexus between the material and escapement of income. The AO must record reasons showing due application of mind before taking recourse to reassessment proceedings. Still further the AO can assume jurisdiction for reassessment proceedings provided he has reasons to believe but the same cannot be taken recourse to on the basis of reasons to suspect.

5. In ITO & Ors. vs. Lakhmani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC), the Hon’ble Supreme Court while interpreting the provisions of s. 147 of the Act held as under :

.....the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words 'definite information’ which were there in s. 34 of the Act of 1922, at one time before its amendment in 1948, are not there in s. 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far- fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence.

6. The Tribunal while allowing the appeal of the assessee came to the conclusion that it was essential for the AO before issuing notice to record his own satisfaction on the basis of material and should not have acted merely upon the information received from the survey circle. It was further noticed that the Dy. CIT(A) had recorded that there was not sufficient evidence for making addition of Rs. 83,040 in the hands of the assessee and the matter was remanded to him to further investigate for connecting the amount of the draft with the escaped income of the assessee still it was held that the initiation of reassessment was valid. The Tribunal concluded that contradictory findings had been recorded by the Dy. CIT(A) and held the reopening to be invalid.

7. It is undisputed that the AO had initiated reassessment proceedings on the basis of information received from the survey circle that the assessee had got prepared a demand draft for a sum of Rs. 83,040 which was not accounted in the books of account of the assessee. The AO had not examined and corroborated the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings. The AO had thus acted only on the basis of suspicion and it cannot be said that the same was based on belief that the income chargeable to tax had escaped income (sic- assessment). The AO has to act on the basis of "reasons to believe" and not on "reasons to suspect". The Tribunal had, thus, rightly concluded that the AO had failed to incorporate the material and his satisfaction for reopening the assessment and, therefore, the issuance of notice under s. 148 of the Act for reassessment proceedings was not valid.

In view of the above, the question of law referred to this Court is answered against the Revenue and in favour of the assessee.”

2.13. In the aforesaid case, the Hon'ble High Court concluded/observed that section 147 empowers the AO to assess or reassess income chargeable to tax if he has reasons to believe that the income for any assessment year has escaped assessment. The power conferred under this section is very wide, but at the same time it ca nnot be stated to be a plenary power. The AO can assume jurisdiction under the said provision provided there is sufficient material before him. He cannot act on the basis of his whim and fancy, and the existence of material must be real. Further, there must be nexus between the material and escapement of income. The AO must record reasons showing due application of mind before taking recourse to reassessment proceedings. Still further the AO can assume jurisdiction for reassessment proceedings provided he has reasons to believe but the same cannot be taken recourse to on the basis of reasons to suspect.—ITO & Ors. vs. Lakhmani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC) relied on.

2.14. It was further observed by the Hon'ble High Court that The AO had initiated reassessment proceedings on the basis of information received from the survey circle that the assessee had got prepared a demand draft for a sum of Rs. 83,040 which was not accounted in the books of account of the assessee. The AO had not examined and corroborated the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings. The AO had thus acted only on the basis of suspicion and it cannot be said that the same was based on belief that the income chargeable to tax had escaped assessment. The AO has to act on the basis of "reasons to believe" and not on "reasons to suspect". The Tribunal had, thus, rightly concluded that the AO had failed to incorporate the material and his satisfaction for reopening the assessment and, therefore, the issuance of notice under section 148 for reassessment proceedings was not valid and finally concluded that AO has to record reasons showing due application of mind before taking recourse to reassessment proceedings; AO having initiated reassessment proceedings simply on the basis of information received from the survey circle of the Department that the assessee had got prepared a demand draft which was not accounted in her books of account, without incorporating corroborative material and his own satisfaction that income has escaped assessment, issuance of notice under s. 148 was not valid.

2.15. In the present appeal also the Ld. Assessing Officer broadly relied upon the information received from the investigation wing and did not made any enquiry from the Kamal Group. As mentioned earlier and argued by the Ld. Counsel for the assessee to provide the information, if any, received by him, the Assessing Officer of the present assessee asked the assessee to get the documents from the Assessing Officer of the another group. We are in agreement with the argument of the ld. Counsel for the assessee that the present assessee has no locus standi to go to another Assessing Officer and ask for the documents of a different assessee. The ld. Assessing Officer of the present assessee was expected to independently examine the documents or the information, which pertains to the case of Kamal Group but that was not done. Even during hearing, cross examination was not provided by the Assessing Officer and at the instance of the Ld. First Appellate Authority, such opportunity was provided.

2.16. In another case from Hon'ble Delhi High Court in UNITED ELECTRICAL COMPANY (P) LTD. vs. COMMISSIONER OF INCOME TAX & ORS. 258 ITR 317 (Del.), it was observed/held as under:-

“2. Since a very short point is involved, with the consent of counsel for the parties we take up the matter for final disposal.

3. Challenge in this writ petition under Art. 226 of the Constitution of India is to the notice dt. 30th April, 2002, issued under s. 148 of the IT Act, 1961 (for short the Act), by the ITO, respondent No. 3 herein, seeking to reopen the assessment of the petitioner-company for the asst. yr. 1996-97.

Submitted to Addl. CIT, Range 18, with request to accord approval for issue of notice under s. 148 r/w s. 151(2) of IT Act. (Underlining, italicised in print, for emphasis) Sd/- (Sugan Chand Mittal) ITO, Ward 18(1), New Delhi Yes, I am satisfied that it is a fit case for issue of notice under s. 148 of the IT Act. Sd/- (N.K. Sharma) Addl. Commissioner of Income-tax, Range 18, New Delhi"

6. Since the purported belief of the AO was based on the statement of one Mr. V.K. Jain, the AO was requested to supply a copy thereof, which was supplied to the petitioner.

7. Alleging that in his statement recorded under s. 131 of the Act, the said V.K. Jain had nowhere stated that loan given to the petitioner was bogus, no adverse inference could be drawn against the petitioner towards the loan transaction and, therefore, no "reasons to believe" existed with the AO to initiate proceedings under s. 147/148 of the Act, the present petition was filed for quashing of notice dt. 30th April, 2002.

13. In Ganga Saran & Sons (P) Ltd. vs. ITO & Ors. (1981) 22 CTR (SC) 112 : (1981) 130 ITR 1 (SC), their Lordships of the Supreme Court, inter alia, observed that the expression "reason to believe" is stronger than the expression "is satisfied". The belief entertained by the AO should not be irrational or arbitrary. Alternatively put, it must be reasonable and must be based on reasons which are material.

2.17. In the aforesaid case, the Hon'ble Delhi High Court held/observed that section 147 authorises the AO to assess or reassess income chargeable to tax, if he has reason to believe that the said income for any assessment year has escaped assessment. The power conferred under the said section, particularly after 1st April, 1989, is no doubt very wide but it cannot be said to be plenary. True, the amended provisions of s. 147 are contextually different from the pre-1989 provision, inasmuch as the cumulative conditions spelt out in cl. (a) of old s. 147 namely, that income chargeable to tax had escaped assessment by reason of : (i) omission or failure on the part of the assessee to make a return of his income under s. 139 for any assessment year, or (ii) failure to disclose fully and truly all material facts necessary for his assessment for that year, are not present in the new main section but the crucial expression "reason to believe" still exists in the new provision. The amended s. 147 provides that where the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may apply the provisions of ss. 148 to 153 and assess or reassess the income which has escaped assessment. Sub-s. (2) of s. 148 mandates that before issuing notice to the assessee under sub-s. (1), for filing the return, the AO shall record his reasons for doing so. Therefore, formation of reason to believe and recording of reasons are imperative before the AO can reopen the completed assessment. Proviso to sub-s. (1) of s. 151 provides that after the expiry of four years from the end of the relevant assessment year, notice under s. 148 shall not be issued unless the Chief CIT or the CIT, as the case may be, is satisfied, on the reasons recorded by the AO concerned, that it is a fit case for the issue of such notice. These are some inbuilt safeguards to prevent arbitrary exercise of power by an AO to fiddle with the completed assessment. Thus, existence of tangible material, for the formation of opinion is a prerequisite for initiation of action under s.

2.18. In another case, the Hon'ble Delhi High Court in 305 ITR 245 (Del.) held as under:-

“The Revenue is aggrieved by an order dt. 8th Sept., 2006 passed by the Tribunal, Delhi Bench 'G’ in IT(SS) No. 107/Del/2003 relevant for the block period from 1st April, 1989 to 20th Feb., 2000.

3. On the basis of the MoUs, the AO issued a questionnaire to Ravi Talwar and Madhu Talwar regarding receipt of the amount of Rs. 25 lakhs each but while they both admitted having signed the MoUs, they denied having received any amount. The AO concluded that the denials by the assessee of having made payments and of Ravi Talwar and Madhu Talwar of having received the amounts was only to escape payment of tax liabilities. Accordingly, an amount of Rs. 50 lakhs was added in the hands of the assessee under s. 69 of the Income-tax Act, 1961 (for short 'the Act’) as unexplained expenditure.

4. The view taken by the AO was not accepted by the CIT(A) and also by the Tribunal. Both concurrently were of the view that there was not enough evidence to add the amount in the hands of the assessee.

5. The CIT was of the view that all the parties had denied the transaction and in fact the property in question was eventually sold by Ravi Talwar and Madhu Talwar to M/s Delhi Tent and Decorators (P) Ltd. whose director gave a statement on 4th Feb., 2002 to the effect that he had purchased the agricultural land in question from Ravi Talwar and Madhu Talwar. It was also held that in view of the denial of receipt of any money by Ravi Talwar and Madhu Talwar, there ought to have been some independent corroboration of the payment but there was no such material forthcoming.

11. Even in ITO vs. T. Abdul Majeed (1987) 64 CTR (Ker) 266 : (1988) 169 ITR 440 (Ker) it has been held as follows :

It is true that s. 132(4A) of the Act enables the Court to presume the truth of the contents of such books. However, it is a presumption which can be rebutted. Moreover, the presumption envisaged therein is only a factual presumption. It is in the discretion of the Court, depending upon other factors, to decide whether the presumption must be drawn. The expression used in the sub-section is 'may be presumed’ as is used in s. 114 of the Evidence Act, 1872. It is not a mandate that whenever the books of account are seized, the Court shall necessarily draw the presumption, irrespective of any other factors which may dissuade the Court from doing so.

12. Insofar as the present case is concerned, the assessee had stated that in fact there was no transfer of money between him and Ravi Talwar and Madhu Talwar. On the other hand, Ravi Talwar and Madhu Talwar had denied receipt of any money from the assessee. In the fact of these denials, there ought to have been corroborative evidence to show that there was in fact such a transfer of money. Both the CIT as well as the Tribunal have come to the conclusion that there was no such material on record.

14. In our opinion, no substantial question of law arises. Dismissed.”

2.19. The Hon'ble Delhi High Court, after considering the factual matrix, concluded that the facts of the case make it very clear that there were two MoUs entered into by the assessee with R and M in respect of the purchase of agricultural land. The two MoUs did record that "the purchase consideration shall be Rs. 123.30 lacs. The purchaser having paid to the vendor the sum of Rs. 25,00,000 part of the said purchase consideration as a deposit and shall pay the residual of said purchase consideration to the vendor on or before 30th April, 1999 when the purchase will be completed." Notwithstanding this, the assessee as well as R and M denied the money transaction. In addition thereto, the case set up was that the agricultural land had, in fact, been sold to DT (P) Ltd. by R and M. This was confirmed by N, one of the directors of DT (P) Ltd. Quite clearly, the MoUs did not fructify. Sec. 132(4A) uses the expression "it may be presumed". It is not obligatory on the assessing authority to make a presumption. Even if a presumption is required to be made, then, the presumption is a rebuttable one and relates to a question of fact. Insofar as the present case is concerned, the assessee had stated that in fact there was no transfer of money between him and R and M. On the other hand, R and M had denied receipt of any money from the assessee. In the fact of these denials there ought to have been corroborative evidence to show that there was in fact such a transfer of money. Both the CIT(A) as well as the Tribunal have come to the conclusion that there was no such material on record. The AO relied on certain other transactions entered into by the assessee with R and M for drawing a presumption in respect of the transfer of money, but the Tribunal rightly held that those were independent transactions and had nothing to do with the MoUs, which were the subject matter of discussion. Even if there was something wrong with some other transactions entered into, that would not give rise to an adverse inference insofar as the subject MoUs are concerned. No substantial question of law arises.. The Hon'ble Court relied upon the decision in CIT vs. S.M.S. Investment Corporation (P) Ltd. (1994) 207 ITR 364 (Raj) and ITO vs. T. Abdul Majeed (1987) 64 CTR (Ker) 266 : (1988) 169 ITR 440 (Ker) and finally held that since both assessee and alleged payees having denied to have advanced or received any amount as shown to have changed hands as per the MoU found during search, no addition could be made in block assessment in the absence of any further corroborative facts, the presumption under s. 132(4A) being a rebuttable one; no substantial question of law arose out of order of Tribunal deleting the addition.

2.20 In another case in CIT vs Prem Prakash Nagpal (2014) 220 taxman 168 (Del.), wherein, there was unexplained investment (investment in land/buildings, the Ld. Assessing Officer made certain additions u/s 69 of the Act on the basis of document found during search at place of third party, which indicated that the assessee has purchased a plot by consideration in cash. The Assessing Officer could not prove by evidence that such documents belongs to assessee and any ‘on money’ transaction has taken place. The Hon'ble High Court held that on the basis of documents could not be treated as conclusive proof of ‘on money’ transaction, therefore, addition could not be sustained. While coming to this conclusion, the Hon'ble Court duly considered the decision from Hon'ble Apex Court in CIT vs P. B. Kalyansundaram (2007) 294 ITR 49 (Supreme Court) and K.P. Vergese vs ITO (1981) 131 ITR 597 (Supreme Court). In another case, identically the Hon'ble Karnataka High Court in CIT vs D. Kanta (2012) 19 taxman.com 92 (Karnataka), where the assessee and his wife purchase land through the registered sale deed for a consideration of Rs.8.5 lakhs. A search action was carried out in the case of son of the vender from whom the assessee purchased said land. During search, the vendor died and his son in his statement stated that the assessee received a consideration of Rs.75 lakh. On the basis of this information, the assessment of the assessee was reopened. To buy peace, the assessee declared additional income of Rs.14 lakh. The Assessing Officer held that for the purposes of stamp duty and fees, the assessee paid additional stamp duty of Rs.7.5 lakh. He also ascertained form the Revenue authorities that the market price of the land was Rs.25 lakhs per acre. The actual consideration of the land was taken at Rs.75 lakh. On further appeal, the Tribunal upheld the order of the Ld. Commissioner of Income Tax (Appeals). The Hon'ble High Court held that since, the finding of the Assessing Officer was not based upon the material found during search and was merely based upon vendor’s son, the addition has to be deleted. In the light of the foregoing discussion and the cases discussed therein, it is clear that in the present case also, the Department merely relied upon the statement of two person who were employees of a different group and there was no evidence with the Assessing Officer that in fact any ‘on money’ was paid in cash. Even in the statement tendered by these two employees, it has not been mentioned that in fact any cash was received by the group from the assessee over and above the payments made through banking channel. Even if the other group has made any disclosure before the Settlement Commission does not prove that any cash was received from the present assessee. Thus, considering the totality of facts and ratio laid down in the aforesaid cases by Hon'ble High Courts and Hon'ble Apex Court, we direct the Ld. Assessing Officer to delete the addition, which has been made purely on suspicion. Thus, the appeal of the assessee is allowed.

Finally, the appeal of the assessee is allowed.

This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 19/04/2017.