Tribunal overturns tax department's decision due to lack of evidence, burden of proof on department

The Tribunal allowed the appeal of the assessee and deleted the addition of Rs. 3,81,414, as the department failed to provide sufficient corroborative evidence to prove the alleged "on money" payment for the flat. The Tribunal emphasized that the burden of proof lies with the department and overturned the CIT(A)'s decision based solely on a seized document and a third party statement.

---

---

Issues Involved:
1. Confirmation of addition of Rs. 3,81,414/- on account of alleged "on money" paid by the assessee for investment in a flat.

Issue-wise Detailed Analysis:

1. Confirmation of Addition of Rs. 3,81,414/- on Account of Alleged "On Money":

The sole issue in this appeal revolves around the confirmation of an addition of Rs. 3,81,414/- by the Commissioner of Income Tax (Appeals) [CIT(A)], which was alleged to be "on money" paid by the assessee for the purchase of a flat.

Facts of the Case:
The assessee purchased a flat in the housing scheme "Chandan Park" developed by M/s. Ohm Developers. During a search at the business premises of M/s. Ohm Developers, certain papers were seized. One such paper indicated that the assessee had made a total payment of Rs. 6,69,725/-, out of which Rs. 4,83,101/- pertained to the year under consideration. However, the assessee's records showed a payment of only Rs. 1,01,687/- to M/s. Ohm Developers, resulting in a difference of Rs. 3,81,414/-. The Assessing Officer (AO) issued a show-cause notice to the assessee regarding the unexplained payment of Rs. 3,81,414/-. The assessee requested and was allowed to cross-examine Shri Ketan O. Der, a partner of M/s. Ohm Developers, who admitted to receiving "on money." Despite the assessee's denial of making any such payment, the AO added the amount to the assessee's total income as an unexplained payment.

Appeal Before CIT(A):
The assessee argued that the seized document was not written by them or their representatives but by an employee of M/s. Ohm Developers at the instance of its partner, Shri Ketan O. Der. The assessee contended that there was no other evidence to support the payment of "on money" and that the story of such payment was fabricated. The CIT(A) upheld the addition, citing the statement of Shri Ketan O. Der and the common practice of part payment in cash in property transactions.

Arguments by Assessee's Representative:
The assessee's representative argued that besides the statement of Shri Ketan O. Der, there was no evidence to prove that the assessee had paid any "on money" for the flat. They cited the case of Additional Commissioner Of Income Tax vs. Miss Mangeshkar (1974) 97 ITR 696 (BOM), where the Tribunal had rejected entries in a ledger due to lack of corroborative evidence and reliability issues. They also referenced the case of Assistant Commissioner Of Income Tax vs. Prabhat Oil Mills (1995) 52 TTJ (Ahd) 533, where it was held that mere entries in a seized book without corroborative evidence cannot substantiate unrecorded transactions.

Tribunal's Findings:
The Tribunal observed that the AO and CIT(A) relied heavily on the seized document and the statement of Shri Ketan O. Der. However, no corroborative evidence was presented to prove that the assessee had paid the alleged "on money." The Tribunal noted that the seized document was not in the handwriting of the assessee or their representatives, and no document containing the assessee's signature or handwriting was found during the search. The Tribunal emphasized that the onus of proving the payment of "on money" lies with the department, referencing the Supreme Court's decision in K.P. Varghese V. ITO [1981] ITR 597, which held that mere seizure of documents does not conclusively prove the receipt of "on money."

Conclusion:
The Tribunal concluded that the CIT(A) was not justified in confirming the addition of Rs. 3,81,414/- based solely on the seized document and the statement of a third party without any corroborative evidence. The Tribunal deleted the addition of Rs. 3,81,414/- and allowed the appeal of the assessee.

Result:
The appeal of the assessee was allowed, and the addition of Rs. 3,81,414/- was deleted.

Order Pronouncement:
The order was pronounced at the close of the hearing in the presence of the parties in the Court on 9/10/2009.

---