2010 (9) TMI 1275 - AT - Income Tax

Tribunal overturns tax assessment, citing lack of evidence

M/s. Trident Creation Pvt. Ltd. Versus The D.C.I.T., Central Circle 1 (1), Ahmedabad

M/s. Trident Creation Pvt. Ltd. Versus The D.C.I.T., Central Circle 1 (1), Ahmedabad - TMI Issues Involved:1. Addition of Rs. 1,03,88,000/- on account of unexplained investment under Section 69B of the I.T. Act.2. Reliance on various evidences and cases of other persons not applicable to the appellant's facts.3. Denial of cash payments by the appellant company.4. Use of loose papers as evidence for unexplained payments.5. Lack of corroborative evidence for the alleged cash payments.6. Opportunity for cross-examination not provided.7. Applicability of Section 69B.Issue-wise Detailed Analysis:1. Addition of Rs. 1,03,88,000/- on account of unexplained investment under Section 69B of the I.T. Act:The Assessing Officer (AO) added Rs. 1,03,88,000/- as unexplained investment based on seized documents (Annexure A-10 and A-11) during a search on Dharmadev Builders Group. The AO correlated entries in these documents with the assessee's ledger, concluding that the assessee made cash payments totaling Rs. 1,30,88,000/- for purchasing shops/offices. The assessee denied making any cash payments and argued that the addition was unjustified.2. Reliance on various evidences and cases of other persons not applicable to the appellant's facts:The AO relied on admissions by other purchasers in the same complex who acknowledged making cash payments. The AO argued that the same treatment should apply to the assessee. The assessee contended that these cases were not relevant to its facts and that no evidence showed the appellant company paid any unaccounted amount.3. Denial of cash payments by the appellant company:The assessee denied making any cash payments, asserting that the amount paid through cheques was the true price. The assessee provided a Memorandum of Understanding (MOU) dated 05-05-2004, stating the purchase price was Rs. 60.40 lakhs, and argued that no subsequent cash payments were made.4. Use of loose papers as evidence for unexplained payments:The AO considered the loose papers as crucial evidence for the addition. The assessee argued that these papers did not mention any cash payment by Trident Creation Pvt. Ltd. and that the documents were not sufficient to justify the addition. The assessee cited various legal precedents to argue that loose papers alone, without corroborative evidence, could not form the basis for such an addition.5. Lack of corroborative evidence for the alleged cash payments:The assessee highlighted that no corroborative evidence was found during a survey at its premises. The AO did not produce any statement from the builder or other parties confirming the receipt of cash payments from the assessee. The assessee argued that the addition was based on assumptions and lacked concrete evidence.6. Opportunity for cross-examination not provided:The assessee contended that it was not given the opportunity to cross-examine the builder or other persons whose cases were used as comparables. The CIT(A) concluded that the principles of natural justice were met as the assessee was given the opportunity to rebut the documents relied upon, and personal cross-examination was not necessary.7. Applicability of Section 69B:The CIT(A) upheld the addition under Section 69B, stating that the conditions for invoking this section were met. The assessee had not satisfactorily explained why the cost of its properties was significantly lower than similar properties in the same building. The CIT(A) applied the principle of preponderance of probability, considering the practice of paying 'on money' in real estate transactions.Conclusion:The Tribunal found that the AO had not brought sufficient and cogent material to prove that the assessee made cash payments over and above the stated consideration. The seized papers were deemed 'dumb documents' without corroborative evidence. The Tribunal noted that no search was conducted on the assessee, and no incriminating evidence was found during the survey. The Tribunal concluded that the addition was based on assumptions and set aside the orders of the authorities below, deleting the entire addition. The appeal of the assessee was allowed.