Rs. 5 crore on-money addition deleted due to contradictory statements lacking credibility and corroborating evidence

ITAT Chennai deleted addition of Rs. 5 crores alleged as on-money in property sale transaction. The addition was based on contradictory statements by a related party who retracted his initial statement within three months, claiming different loan amounts and sources. The tribunal held that such inconsistent statements lacked credibility and could not support the addition without corroborating evidence. The AO failed to conduct independent valuation of the property or refer it to a valuation officer, relying solely on unreliable third-party statements. The tribunal emphasized that additions cannot be made on mere presumption or suspicion, requiring cogent positive evidence. The assessee's appeal was allowed.

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Issues:
Addition of alleged on-money of Rs. 5 Crores on sale of property for Assessment Year 2021-22.

Detailed Analysis:

Assessment Proceedings:
During assessment, it was found that the assessee earned capital gains on the sale of properties, including one in Perambur, Chennai. A notebook seized during a search revealed that a cash loan of Rs. 25 Crores was taken by a related party for property investments. The party claimed to have paid Rs. 5 Crores as on-money over the sale consideration for the Perambur property. The AO added Rs. 5 Crores to the assessee's income, as the sale consideration declared was Rs. 16 Crores, less than the alleged total payment of Rs. 21 Crores. The assessee refuted the claim, citing a retraction by the related party and lack of valuation of the property.

Appellate Proceedings:
The assessee argued that the stamp duty value accepted as market value, lack of evidence for on-money payment, and contradictions in statements supported their case. However, the CIT(A) upheld the addition, relying on the related party's statement and dismissing the retraction. The CIT(A) considered the statement credible and justified the addition based on seized materials and explanations. The assessee appealed this decision, disputing the reliance on the related party's statement and emphasizing the lack of concrete evidence.

Findings and Adjudication:
The Tribunal noted the contradictory statements and retraction by the related party, indicating a lack of credibility. The absence of valuation by the AO and reliance solely on the related party's statement were deemed insufficient to sustain the addition. The Tribunal cited legal precedent emphasizing the need for independent valuation and proper inquiry. Considering these factors, the Tribunal ruled in favor of the assessee, deeming the additions unsustainable and directing the AO to re-compute the income accordingly.

In conclusion, the Tribunal allowed the appeal, overturning the addition of Rs. 5 Crores as on-money on the sale of the property, emphasizing the importance of concrete evidence and independent valuation in such cases.

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