Tribunal directs deletion of additions for alleged on-money payments due to lack of evidence

The Tribunal allowed the assessee's appeals, directing the Assessing Officer to delete the additions made towards alleged on-money payments for the assessment years 2007-08 and 2008-09. The Tribunal found that the Department failed to prove that the assessee received on-money, emphasizing the lack of corroborative evidence to support the claim. As a result, the additions based on loose sheets and third-party statements were deemed unjustified and were consequently deleted.

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Issues Involved:
1. Validity of reopening of assessment under section 148 of the Income Tax Act.
2. Addition towards alleged on-money payment for purchase of site.

Issue-wise Detailed Analysis:

1. Validity of Reopening of Assessment under Section 148:
The assessee challenged the validity of the notice issued under section 148 of the Income Tax Act and the consequent reassessment proceedings. However, during the course of the hearing, the assessee's authorized representative did not press these grounds. Therefore, the Tribunal dismissed the grounds relating to the validity of reopening of assessment as not pressed.

2. Addition towards Alleged On-Money Payment for Purchase of Site:
The core issue for consideration was the addition of Rs. 50 lakhs and Rs. 25 lakhs for the assessment years 2007-08 and 2008-09, respectively, towards alleged on-money payment received by the assessee from M/s. M.V.V. Builders.

Facts and Proceedings:
- During a search and seizure operation at the premises of M/s. M.V.V. Builders, it was found that the builder had paid an on-money amount of Rs. 75 lakhs in cash to one of the co-owners, including the assessee, towards the purchase of a site.
- The Assessing Officer (A.O.) issued notices under section 148, believing that the income chargeable to tax had escaped assessment. The assessee filed revised returns but did not disclose the alleged on-money.
- The A.O. made additions of Rs. 50 lakhs and Rs. 25 lakhs based on seized documents and the statement of M.V.V. Satyanarayana, the Managing Partner of M/s. M.V.V. Builders, who admitted to paying the amounts towards settlement of a land dispute.

Assessee's Arguments:
- The assessee denied receiving any on-money and submitted a letter from M/s. M.V.V. Builders stating that no on-money was paid.
- The assessee argued that the sale transaction was completed by way of a registered sale agreement-cum-GPA and the full consideration was received through proper banking channels.
- The assessee contended that the A.O. relied solely on loose sheets and the statement of a third party without any corroborative evidence.

Revenue's Arguments:
- The Department argued that the seized materials and the statement of the Managing Partner were sufficient evidence to prove the on-money payment.
- The Department maintained that the assessee failed to substantiate the claim that the money was paid towards settlement of land disputes to various persons.

Tribunal's Findings:
- The Tribunal observed that there was no search in the assessee's case and the loose sheet found during the search at M/s. M.V.V. Builders' premises did not conclusively prove that on-money was paid to the assessee.
- The Tribunal noted that the A.O. did not conduct any independent enquiry or bring any corroborative evidence to support the claim of on-money payment.
- The Tribunal emphasized that the burden of proof lies with the Department to show that the assessee received on-money, which the Department failed to discharge.
- The Tribunal referred to various case laws, including the decisions of the ITAT Hyderabad and the Hon’ble Supreme Court, which supported the assessee's contention that loose sheets and third-party statements without corroborative evidence are insufficient to sustain additions.

Conclusion:
The Tribunal concluded that the A.O. was not justified in making additions based on loose sheets and third-party statements without corroborative evidence. The Tribunal set aside the order of the CIT(A) and directed the A.O. to delete the additions made towards alleged on-money for the assessment years 2007-08 and 2008-09.

Result:
The appeals filed by the assessee were allowed, and the additions made by the A.O. were deleted.

Pronouncement:
The above order was pronounced in the open court on 12th August 2016.

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