No addition for alleged unaccounted sale proceeds based on mere loose papers or retracted statements
Case Law Details
Vionodchandra Dalsukhram Gokhlani Vs ITO (ITAT Ahmedabad)
The recent case of Vinodchandra Dalsukhram Gokhlani Vs ITO by ITAT Ahmedabad serves as a precedent on how material evidence plays a crucial role in matters related to alleged unaccounted sale proceeds. This article delves into the specifics of the case, examining its legal implications, the importance of material evidence, and the concept of ‘natural justice.’
Core Issue
The heart of this case lies in the matter of unaccounted sale proceeds for two shops, alleged by the Assessing Officer (AO) against the assessee, Mr. Gokhlani. According to the AO, the sale proceeds amounting to Rs.21,58,000/- were unaccounted for, prompting an appeal to the CIT(A).
Assessment Order and Grounds of Appeal
The assessee filed an appeal citing several grounds, including not being provided with sufficient opportunity to counter the AO’s claims, absence of material evidence, and a violation of the principles of natural justice. The appeal also questioned the legality of the addition of Rs.21,58,000/- as unaccounted sale proceeds.
Legal Arguments and Material Evidence
The appellant argued that the addition was based on “loose papers” and “retracted statements,” without giving him the opportunity for cross-examination. It was stated that the sale deeds were registered, providing evidence for the sale proceeds.
Revenue’s Counter Arguments
The Revenue argued that the AO had, in fact, provided opportunities for cross-examination and insisted that the diary containing loose papers was legitimate proof.
Court’s Ruling
After reviewing the case materials and hearing both parties, the ITAT ruled in favor of the assessee. The court emphasized that basing the addition solely on ‘loose papers’ or ‘retracted statements’ was not justifiable. The court gave weight to the registered sale deeds and the affidavits from the purchasers, clearly stating that creating doubt where none exists cannot be the basis for making such additions.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee against order dated 20.02.2018 passed by the CIT(A), Gandhinagar, Ahmedabad for the Assessment Year 201314.
2. The Assessee has raised the following grounds of appeal :-
“1. That on facts, and in law, the learned CIT(A) has grievously erred in confirming the addition inspite of the fact that appellant is not provided with sufficient and reasonable opportunity there is violation of principles of natural justice by not supplying the copies of report/materials relied on for making the addition, nor granting opportunity to cross examine the persons whose statements are relied, inspite of the specific prayer made by the appellant, and by completely ignoring the Affidavits filed by the purchasers.
2. That the learned CIT(A) has grievously erred in law, and on facts, in confirming the addition of Rs.21,58,000/- made as unaccounted sale proceeds on sale of shops.
3. That on facts, evidence on record, and as per law, the entire addition ought to have been deleted, as prayed for.”
3. The return of income was field on 30.09.2014 declaring total income of Rs.7,52,410/- and agricultural income of Rs.6,16,315/-. The same was processed under Section 143(1) of the Income Tax Act, 1961. The Assessing Officer observed that in this case information was received from Deputy Director of Income Tax (Investigation) and as per the documents found, the assessee was in receipt of on-money on sale of two shops at Radhanpur. Therefore, show cause notice dated 14.03.2016 was issued to explain as to why the on-money received of Rs.26,00,000/- should not be added to the total income of the assessee treating the same as unaccounted. After taking the reply of the assessee and the details, the Assessing Officer made addition of Rs.21,58,000/- as unaccounted sale proceeds.
4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The Ld. AR denied that the assessee sold Shop nos.6 & 7 at Radhanpur for Rs.42,00,000/- i.e. Rs.21,00,000/- for each shop to M/s. Queen Jewellers, Bhuj. The Ld. AR further submitted that the assessee sold the shop to Shri Tarunkumar Kantilal Soni and Shri Kamlesh Chandrakant Soni for Rs.2,21,000/-and for which the assessee has produced sale deeds which has been registered. The Ld. AR further submitted that the assessee has also credited sale proceeds of Rs.2,21,000/- each for both the shops in his books on 02.05.2012 and the sale deeds were registered on 23.04.2012. Thus, the Ld. AR submitted that the assessee was not given opportunity of cross-examination of Shri Tarunkumar Kantilal Soni, Partner of M/s. Queen Jewellers who was also summoned by the Assessing Officer to remain present on 30.03.2016. The said Shri Tarunkumar Kantilal Soni in fact remained absent but filed affidavit stating therein that the purchase of the shop was done for Rs.2,21,000/- only. The other partner Shri Kamlesh Chandrakant Soni also filed a similar affidavit. The Ld. AR submitted that the Assessing Officer as well as the CIT(A) was not justified in not granting opportunity to cross-examine the persons whose statements are relied upon on the specific prayer made by the assessee completely ignored the affidavits filed by those persons. The Ld. AR, therefore, prayed that the survey cannot be only based for treating the said amount as on-money and when the purchaser as well as registered sale documents stating the amount clearly, the Assessing Officer cannot ignore the same.
6. The Ld. DR submitted that the Assessing Officer has granted opportunity of cross-examination to the assessee but the person did not attend the assessment proceedings and, therefore, the cross-examination was denied to the assessee was an incorrect statement on behalf of the assessee. The Ld. DR submitted that the diary shows the Shop Number and, therefore, the statements made by those partners having authenticity and the Assessing Officer as well as the CIT(A) has rightly made the addition.
7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the entire revenue’s base on addition is of the loose papers found in the diary as well as statements of the partners but the said statement was retracted. In fact, it was not retracted but the statement given at the time of survey did not reveal that there was on-money transaction in respect of sale of shop. From the affidavit of the partners as well as from the registered document of sale deed, it clearly indicates that the purchase price of the shop was Rs.2.21,000/- only. Creating doubt when there is no doubt on papers as well as to that of the conduct of the parties cannot be the basis for making addition. Thus, the Assessing Officer as well as the CIT(A) was not right in making addition in respect of unaccounted sale proceeds.
8. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on this 4th August, 2023.
