The third person evidence cannot be base for addition on the basis of any entries therein

Here is an important verdict by ITAT Ahemdabad wherein it has been held that the third person evidence cannot be base for addition on the basis of any entries therein

The copy of the order is as under:

 

Income Tax Appellate Tribunal – Ahmedabad

Kantibhai Revidas Patel, Surat vs Department Of Income Tax

            IN THE INCOME TAX APPELLATE TRIBUNAL

              AHMEDABAD “D” BENCH AHMADABAD

             Before Shri Mukul Kr. Shrawat, Judicial Member and

                    Shri T.R. Meena, Accountant Member

                             IT(SS)A No. 543/Ahd/2010

                             Assessm ent Year :2005-06

     Dy. Commissioner of        V/s. Shri Kantibhai Revidas Patel,

     Incom e-tax,                    4/49, Tankiwali Sheri,

     Circle-6, Surat,                Golwala Chakla, Haripura,

     Room No. 623, Aayakar           Surat

     Bhavan, Majura gate,

     Surat

                          PAN No. ABBPP1021D

              (Appellant)        ..          (Respondent)

      अपीलाथȸ कȧ ओर से                        Shri T. Shankar, Sr. D.R.

      By Appellant

      ू×यथȸ कȧ ओर से/By Respondent            None

      सुनवाई कȧ तारȣख/Date of Hearing

                                                10.01.2013

      घोषणा कȧ तारȣख/Date of Pronouncement      08.03.2013

                                        ORDER

PER : T.R.Meena, Accountant Member This is an appeal at the behest of the Revenue which has emanated from the order of CIT(A)-IV, Surat, dated 19.03.2010 for A.Y. 2005-06. The sole ground of appeal of the Revenue is against deleting the addition by the CIT(A) of Rs.92,00,000/- made by the A.O. as on money paid towards purchase of land.

2. The A.O. observed that there was a search operation u/s.132 conducted on Vikas A. Shah. During the course of search, various documents/ books of accounts/ other valuable articles/ other things were I T( S S) A N o. 543 / A hd / 10 A. Y . 0 5- 06 Page 2 found and seized from the vehicle No.GJ1 HUF 251 (Station Van Toyota Car, owned and claimed by Vikas A. Shah). On verification of various documents found, seized and inventorised as item no. A-1 to A-271 & item no. 1 to 6 of Annexure O-1, it is noticed that page no. 16 to 25 of A-241 are the original copy of general power of attorney dated 10.10.2003 given by Bhikaji Jesanji Thakor & Others in favour of Kantibhai Revabhai Patel. The A.O. found that relevant purchases were belonged to the appellant, therefore, in view of the provision of Section 153C(1)of the IT Act proceeding was initiated by issuing notice dated 04.06.2008. On verification of the various documents found and seized, inventorised as item no.A-1 to 271 and item no.1 to 6 of Annexure O- 1, it was noticed that page no.16 to 25 of A-241 were original copy of power of attorney dated 10.10.2003 given by Bhikaji Jesanji Thakur & Others in favour of Kantibhai Revabhai Patel. Further, on verification of page no.38 of A-241, which contained details of sale of land admeasuring 11504 sq. yds @ 1,951/-, it was noticed that an amount of Rs.81,00,000/- had been shown to be received from Kantibhai Revidas Patel. In his statement (ans. no. 107) Shri Vikas Shah had categorically stated that he had sold half of the land of Dholakuva, i.e. 11504 sq.yds. to Shri Amit Jadeja & Others. Further, he had clarified that he had yet to receive Rs.38,00,000/- from Amit Jadeja & Others towards sale proceeds of the land at Survey No. 60 of Village Dholakuva. The A.O. concluded that he had already received balance amount of Rs. 1.93 crore. On verification of the case records of the appellant, it was noticed that the appellant had shown value of land at Rs.9,00,000/- only (4.5 lakhs + 4.5 I T( S S) A N o. 543 / A hd / 10 A. Y . 0 5- 06 Page 3 lakhs in the name of Kantibhai Patel). The A.O. gave reasonable opportunity of being heard to the assessee on this issue. The assessee also filed reply which has been considered by the A.O. The ld. A.O. also considered the statement of Shri Vikas A. Shah recorded u/s. 131 (1A) of the IT Actdated 14.03.2005 & 19.04.2005 and relevant Q & A No. 107 & 155 had been considered by the A.O. The assessee’s reply was not found convincing to the A.O. on the ground that page no. 38 of Annexure A-241, the amount of Rs.2.25 crore was incoded form which had been confirmed by Shri Vikas A. Shah during the course of statement recorded u/s. 131 on 14.03.2005, Shri Vikas A. Shah had categorically transaction noted on page no.38 of Annexure A-241 which related to land at serial no. 60 of Village Dholakuva. Ld. A.O. further relied in case of Roger Enterprises (P) Ltd. vs. DCIT, 88 ITD 95, ITAT, Delhi ‘B’ Bench, wherein it was held that any statement of a person who is one of the party of the transaction/ transactions has evidentiary value and therefore cannot be ignored. The assessee’s share in above land was 50%. Thus, after reducing Rs.4.5 lacs from 96.5 lacs, the remaining difference is Rs.92 lacs, was added in the income of the assessee. It is market practice that full value of consideration never are shown in the agreement. Therefore, after relying the case of Rohini Ramnath Lele 117 CTR 208 ITAT, Mumbai, wherein it was held that ‘prevailing practice of paying on money should be considered if even if purchaser denies. In the instance case, Shri Kantibhai R. Patel, the assessee had denied to make any payment in addition to documentary price of land but the fact was that he had paid an amount of I T( S S) A N o. 543 / A hd / 10 A. Y . 0 5- 06 Page 4 Rs.92,00,000/- in addition to documented price of Rs.4.5 lacs towards the purchase of land at Survey No.60 of village Dholakuva. Ld. A.O. further relied in case of Pranav Construction Co. vs. ACIT, ITAT, Mumbai ‘B’ Bench, wherein it was held that an admission is the best evidence. Here also Shri Vikas A. Shah had categorically admitted while explaining entries noted on page no.38 of A-241. Thus, after discussing the various case laws and factual position, the ld. A.O. made addition of Rs.92,00,000/-.

3. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A) who had had deleted the addition by observing as under:

“I have carefully gone through the submission of the appellant, assessment order & order of the Hon. CIT(A)-I, Ahmadabad and I am agreement with the AR that the ratio of the case of Abhel Jadeja (co-purchaser of the appellant) is clearly applicable to the facts of the appellant’s case. The relevant portion of the order of Hon. CIT(A) – I, Ahmadabad is reproduced below.

6. I have considered the submissions of the appellant and the contents of the remand report, I have also gone through the copies of the relevant seized material and the statement of Shri Vikas Arvindbhai shah. It may b mentioned that the Assessing Officer did not make a separate addition for the alleged receipt of Rs.44,80,000 as the same has been considered to be covered by the bigger proposed addition of Rs.91,50,000/- on account of payment of on-money. In other words, the Assessing Officer held that the receipt of Rs,44,80,000 was available with the assessee to partly pay the on-money. In my view, there I T( S S) A N o. 543 / A hd / 10 A. Y . 0 5- 06 Page 5 does not appear to be any basis for the Assessing Officer to assume by way of dalai or brokerage or for any other transaction. There is no basis for the presumption that the assessee earned undisclosed income of Rs.44,80,000. Coining to the Assessing Officer’s assumption that the assessee paid on-money of Rs.92 lacs, the reply filed by the assessee is very convincing and it brings out the anomalies in the conclusions drawn by the Assessing Officer entirely on the basis of certain replies given Shri Vikas Arvindbhai Shah and also on certain assumptions. Except certain notings on the rough papers and the statement of Shri Vikas Arvindbhai Shah, there is no other independent evidence or material to suggest that the appellant paid on-money of Rs.92 lacs. Shri Vikas Arvindbhai Shah stated that he is yet to receive Rs.32 lacs from the assessee which appears to an am improbability. No prudent man would leave such a big amount outstanding when the sale transaction is registered. Apart from this, it is also noticed that the land has been purchased by the appellant and Kantibhai jointly and as per the document for purchase which is registered with the Sub-Registrar, value is Rs.9 lakh- This value has not been challenged by the stamp duty authority. Thus, there is no reason for presumption that the appellant had made any payment in excess of the said purchase price of Rs.9 lakh.

7. In so far as the second aspect is concerned, I have considered the submissions made on behalf of the appellant. It is an accepted fact that there was no search in the case of the appellant and no document was seized.

The seizure was in the case of Vika Shah. In the I T( S S) A N o. 543 / A hd / 10 A. Y . 0 5- 06 Page 6 circumstances, the decision of the jurisdictional ITAT in the case of Prathna Construction and Prabhat Oil Mills referred to above are squarely applicable to the facts of the present case, Further, the ratio of decision of Hon’ble Supreme Court in the case of V. C. Shukla, Supra, is relevant, wherein, it is held as under:

“From a plain reading of s.34, it is manifest that to make an entry relevant there under it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above section at is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still, the statement made therein shall not alone be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. “Book” ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as “Book” for they can be easily detached and replaced.

8. My predecessor in office has after considering the above referred decision in similar circumstances, deleted the addition made in the case of Amit Kantilal Guru which was made based on the seized documents from third I T( S S) A N o. 543 / A hd / 10 A. Y . 0 5- 06 Page 7 person and it was held that no addition could be made on the basis of notings made in the seized documents of third person. In the present case too, entries found from the books/documents of third party, does not conclusively prove that the amounts mentioned in the documents, in the absence of other corroborative evidence, pertains to the appellant. As mentioned in the instant appellate order, in the remand proceedings too, no further corroborative evidences have been gathered so as to justify the additions. Such additions could not be made on the basis of presumptions and on the basis of mere statements of third party, particularly when the seized documents were discovered from third party’s premises. Accordingly, I agree with the appellant’s submission that no addition could be made in the hands of the appellant based on loose papers found from Vikas A. Shah. The addition of Rs.91,50,000/-is deleted.”

Respectfully following the view taken by the Hon. CIT (A)-I, Ahrnedabad in the aforesaid cases, I hold that the AO had erred in making addition on account of unaccounted investment of Rs.92,00,000/- to the total income of the appellant and therefore, the addition of Rs.92,00,000/- is hereby deleted.”

4. Now the Revenue is before us. Ld. Sr. D.R. vehemently relied upon the order of the A.O. whereas on the side of the appellant, no-one appeared before us. As discussed above, the similar addition was made in case of Abhalbhai Arjanbhai Jadeja, who has 50% share in this land has already been deleted by the Co-ordinate ‘B’ Bench in ITA Nos. 174, 175 & 176/Ahd/2009 for A.Y. 2003 – 04, 04-05 & 05-06 & C.O. No. 6, 7 & 8 /Ahd/2010 for above years.

I T( S S) A N o. 543 / A hd / 10 A. Y . 0 5- 06 Page 8 The operative portion of the respected co-ordinate Bench decision is as under:

“13. In assessment year 2005-06, the facts are slightly different. In this year, the addition of Rs.91.50 lacs was made on account of alleged payment of on money. In this year also, the A.O. was of the opinion that addition of Rs.44.80 lacs is required to be made in respect of payment by Shri Vikas A. Shah as dalali/brokerage but since addition Rs.91.50 lacs was made on account of on money, a separate addition of Rs.44.80 lacs was not made in this year. The addition of Rs.91.50 lass in this year was deleted by Ld. CIT(A) on this basis that except the noting on the reference paper and the statement of Shri Vikas A. Shah, there is no other corroborative material/evidence to suggest that the assessee paid on money or Rs.92 lacs. It is further noted by Ld. CIT(A) that Shri Vikas A. Shah stated that he is yet to receive Rs.32 lacs form the assessee, which appears to be improbable because no prudent man could leave such a huge amount outstanding when the sale transaction is registered.

He further noted that the land was purchased by the assessee and Kantibhai jojntly and as per the documents for purchase winch is registered with the sub-registrar at a value of Rs.9 lacs and this valuation has not been challenged by the Stamp Duty Authority and, therefore, there is no reason for presumption that the assessee has made any payment in excess of the said purchase price of Rs. 9 lacs. Finally, Ld. CIT(A) has deleted this addition by stating that in the absence of any other corroborative evidence and in view of the fact that in the remand proceeding also, no further corroborative evidence have been gathered to justify the addition, the addition cannot be made on the basis of presumption and on the basis of the statement of any third party and particularly when seized document was recovered form third party’s premises. Considering all these I T( S S) A N o. 543 / A hd / 10 A. Y . 0 5- 06 Page 9 facts, we are of the considered opinion, no interference is called for in the order of Ld. CIT(A) in respect of the addition made by the A.O. of Rs.91.50 lacs on account of alleged on money payment by the assessee orin respect of addition of Rs.44.80 lacs ultimately not made by the A.O. in respect of receipt of dalali/brokerage by the assessee from Shri Vikas A Shah. Hence, in this year also, we decline to interfere in the order of Ld. CIT(A).”

5. We have heard rival contentions and gone through the material on record. Ld. A.O. had used third party statement of Vikas A. Shah in framing the assessment. The statement of Shri Vikas A. Shah recorded u/s. 131(1A) not u/s. 132 of the IT Acton 14.03.2005 and 19.04.2005. The ld. A.O. had used this statement without allowing cross examination of Vikas A. Shah which is against the principle of natural justice. This land had registered document and the value has been accepted as to correct by Registering authority to the charge of stamp duty. There was no material or evidence that any on money was paid by the appellant on the transaction. Ld. A.O. had not referred this land to the DVO for determining the market value on date of registration. The statement given by Vikas A. Shah was self service statement without any supporting evidence. There was no search carried out on the appellant. The seized papers were found in the possession of Shri Vikas A. Shah. The third person evidence cannot be base for addition on the basis of any entries therein. The ld. CIT(A) had also considered following decisions:

i. Prathana Construction Pvt. Ltd. 70 TTJ 122 (Ahmadabad)

ii. Prabhat Oil Mills reported in 52 TTJ 533, (Ahmadabad)

 I T( S S) A N o. 543 / A hd / 10 A. Y . 0 5- 06

iii.    Jaindal Stainless Ltd. 9 DTR 345 (ITAT, Delhi)

After considering all the facts and legal position of this issue, we do not find any reason to intervene in the order of the CIT(A). Accordingly, we uphold the order of the CIT(A).

6. In the result, the Revenue’s appeal is dismissed. This Order pronounced in open Court on 08.03.2013 Sd/- Sd/-

 (Mukul Kr. Shrawat)                                        (T.R. Meena)

  Judicial Member                                        Accountant Member

                                            True Copy

S.K.Sinha

आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-

1. अपीलाथȸ / Appellant

2. ू×यथȸ / Respondent

3. संबंिधतआयकर आयुƠ / Concerned CIT

4. आयकरआयुƠ- अपील / CIT (A)

5. ǒवभागीयूितिनिध,आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड[फाइल / Guard file.

By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।