AI Drafter 
TaxTMI 
TaxTMI 
2020 (12) TMI 444
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....hat Shri Praveen Mishra retracted his statement thereby making him assessee's witness and hence no opportunity of his cross examination was required rather it was assessee's onus to produce him before the AO for cross examination. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 5,54,92,000/- u/s 69 of The I.T. Act, 1961 on the ground that no evidence could be gathered by the AO to prove that cash over and above the admitted amount of Rs. 2.08 Cr. has been paid, despite the fact that in Para 5.1 in the same order, the LD. CIT (A) has mentioned about the details of cash receipts and payments found in the Pen Drive recovered during Search operation, thereby relief has been granted on self contradictory observation. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 5,54,92,000/- u/s 69 of The I.T. Act, 1961 without appreciating the fact that the assessee had failed to rebut the evidence in the form of Pen Drive containing details of cash receipts and payments, which is an evidence being relied upon by the Departm....
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.... at Rs. 5,56,08,000/- by making an addition of Rs. 5,54,92,000/- u/s. 69 of the IT Act, towards on money paid. 6. In the assessment order the Assessing Officer noted that during the search conducted on Nish Developers Pvt. Ltd. on 04.04.2014, a pendrive was recovered from one of the key employees, Shri Praveen Mishra. That this pendrive had details of cash receipts and payments by Nish Developers Pvt. Ltd. The assessee being one of the purchasers whose name figured in the list of people who have paid on money, the assessee was also covered under search and seizure action. The assessee is also a Director in M/s. Aklavya Builders and Developers Pvt. Ltd. which was also covered in search. During the search, M/s. Aklavya Builders and Developers Pvt. Ltd. has offered additional income of Rs. 2.45 crores which includes on money receipts among others. When confronted about the purchase of fiats in One Avighna Park, the assessee has admitted paying cash to the tune of Rs. 2,08,08,000/- for both the flats together. This according to him has been paid for some amenities. As per the pendrive found with Shri Praveen Mishra, the assessee was supposed to have made payment of Rs. 8.70 crore....
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....s on money receipt Aklavya Builders and Developers Pvt. Ltd. The main contention of the assessee is that he was not confronted during or after the search about Rs. 8.70 crores. The Id.Counsel for the appellant also argued that as there was no incriminating material found during search with regard to acquisition of flats at One Avighna Park, no addition with respect to the same should have been made by the Ld.AO. However, the main reason for the conduct of search in this case was the payment of on money by the assessee for purchase of flats at One Avighna Park. That is the genesis for the search and the assessee has been confronted with this information during the search. Even though the figure of Rs. 8.70 crores was not put to the assessee during the search, it is very much a part of the search and can be considered as incriminating material on the basis of which additions can be made. This plea of the assessee is rejected." 10. However on the merits of the case she deleted the addition by observing that the same has been done solely on the basis of the statement of Shri Praveen Mishra an employee of the builder M/s. Nish Developers Pvt. Limited, which has also been ret....
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....of third party statement, the least the Ld.AO should have done is provide for cross-examination of Shri Praveen Mishra. Not providing an opportunity to cross examination when reliance is placed on a certain statement, violates the principle of natural justice as held by the Hon'ble Apex Court in the case of Andaman Timber Industries Ltd. Vs, CIT(2015) 127 DTR 0241(SC) and HR Mehta vs. ACIT 289 CTR 0561(Bom). The Hon'ble Apex Court in the case of Andman Timbers, supra held:- "According to us, not allowing the assessee to cross examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the Impugned order is a serious flaw which makes the order nullity Inasmuch as It amounted to violation of principles of natural Justice because of which the assessee was adversely affected. It is to be borne I mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impu....
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....t or indirect, this addition made by the Ld.AO cannot be upheld. Therefore, the addition made by the Ld.AO cannot be sustained." 11. Against the order revenue has filed appeal before the ITAT and the assessee has also raised objection as noted above. The learned departmental representative relied upon the orders of authorities below. He submitted that the addition been made pursuant to clear findings in the search. That a Pendrive was seized from the employee of the concerned builder and developer. That this Pendrive contained the details of on money paid. That the employee's retraction was very late. 12. Per contra learned counsel of the assessee submitted that no incriminating material has been seized in the course of search. That the addition is without reference to any seized material and as such the same is not sustainable in law. He further referred to several decisions that statement on survey cannot be the sole basis of addition. The details submission of the learned counsel of the assessee in this regard the summarised as under :- "The Assessee humbly submits that the entire addition of Rs. 5.54 Crores made by the AO, in the present case is entirely based....
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....inental warehousing Corporation (Xhava Sheva) Ltd. (2015) 374ITR 645 (BOM) • All Cargo Global Logistics P. Ltd. Vs. ACIT (2011) 137 ITD 287 (Mum) • CIT Vs. Gurinder Singh Bawa (2016) 386 ITR 418 (Bom) • CIT Vs. Kabul Chawla (2015) 61 taxmann.com 412 (Del) • ACIT Vs. M/s. Thakkar Popatlal Velji Sales Ltd. (ITA No. 5743/Mum/2010 dt. 8.5.2013. • Tarannum Zafar Khan Vs. ACIT (ITA No. 5888 to 5890/Mum/2009 dt. 12.7.2013) Assessee further submits that apart from the above it is also settled law, that a statement on a standalone basis cannot be equated with incriminating material so as to enable the Assessing Officer to make additions in the hands of the Applicant. Further, it is also well settled that no addition could be made in the hands of the Assessee simply on the basis of a statement. Ref. S Khader Khan Sons - (2008) 300 ITR 157 (Mad) affirmed in 352 ITR 480 (SC), Satinder Kumar v/s. ACIT- (1977) 106ITR 64 (HP). Not only that an admission or an acquiescence on the part of an assessee cannot be the foundation of assessment as held in various judicial pronouncements [Ref. Absalom v/s Talbot (1944) 26 Tax Cases ....
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.... search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded." Shri Basant Bansal v/s ACIT - (2015) 171 TTJ 603 (Jaipur Tribunal) Held that: (ii) Whether in the light of CBDT Instruction dt. 10th March 2003, search proceedings and assessment can be based upon incriminating material and not on such disclosures. Conclusion : A perusal of the CBDT instruction reveals that even Board is aware of such laconic disclosures and expects its officers to rely on incriminating evidence. Thus, CBDT also is not in favour of search assessments being based only on such disclosures; it wants them to be based on incriminating material. In view of the facts, circumstances, CBDT instructions and various case law relied on by the assessee we are unable to uphold the additions solely on the basis of disclosure which doesn't meet....
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....T- (1980) 125ITR 713 (SC) CIT v/s Ashish International - ITXA 4299 of 2009 (Bombay High Court) CIT v/s H.R. Mehta - ITXA 58 of 2001 (Bombay High Court)" 13. In view of the above submissions the additions made without any incriminating material, in the assessment order passed by the AO u/s 153A of the Act deserves to be deleted and the action of the Ld. AO in disturbing the concluded assessment deserves to be quashed." 13. Upon careful consideration we find the addition in this case for on money payment for the booking of flat is solely based upon the pendrive drive and the statement of the employee of the builder. The same has been retracted. Apart from the above there is no other corroborative material. The assessee during the course of search has admitted to have paid Rs. 2.08 crore for amenities in cash. This was duly offered for assessment in the case of the company of the assessee where he was director and the same has been accepted by the Department. No addition on this account has been done by the assessing officers also. 14. As regards the addition based upon the statement of the employee of the builder proposed by the assessing officer, the....