NARAYANBHAI MANJIBHAI BODRIYA,MUMBAI V. INCOME TAX OFFICER, 41(3)(3), MUMBAI

ITA 4699/MUM/2023

AI Insights

The case revolves around the appeal by Narayanbhai Manjibhai Bodriya against the order of the CIT(A), which sustained the additions made by the Assessing Officer regarding alleged undisclosed cash payments for a property purchase and discrepancies in stamp duty valuation. The Assessing Officer had made these additions based on statements from the property developer and his accountant, recorded during a survey under section 133A of the Income-tax Act. The Tribunal criticized the reliance on these statements without corroborative evidence and the failure to provide the assessee an opportunity to cross-examine the witnesses, which is a fundamental right in the context of legal proceedings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396886 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Other Referred Cases: CBI v. V. C. Shukla [1998] SCC 410, ACIT vs. Lata Mangeshkar (Miss) (1974) 97 ITR 696, Andaman Timber Industries [2015] 281 CTR 241, Maria Fernandes Cheryl vs. ITO in ITA No.4850/Mum/2019, Shri Dnyaneswar Maharaj Sansthan Alandi Dewachi - WP 3309 of 2022, Piramal Enterprises Ltd. - WP 2958 of 2016, Rajnish C Bharti - ITA No.5826/MUM/2016, Devansh Exports - ITA No.2178/Kol/2017
• Laws Referred To: Income-tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Sale consideration of property below Jantri Value; Reopening of assessment; Third party statement; Reason to believe; Opportunity of cross examination; Borrowed satisfaction
• Section: 147; 148; 143(3); 56; 131; 69; 50C; 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH MUMBAI BEFORE MS KAVITHA RAJAGOPAL, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 4699/MUM/2023 Assessment Year: 2014-15 Narayanbhai Manjibhai Bodriya B-13, Vinayak Heights, Upper Govind Nagar, Kailshpuri, Malad East, Mumbai – 400097 (PAN : AKTPB6156F) Vs. Income Tax Officer – 41(3)(3), Mumbai (Appellant) (Respondent) Present for: Assessee : Shri K.A. Vaidyalingan, AR Revenue : Shri Ram Krishn Kedia, Sr. DR Date of Hearing : 07.03.2025 Date of Pronouncement : 30.05.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide order no. ITBA/NFAC/S/250/2023-24/1057516253(1), dated 30.10.2023 passed against the assessment order by the Income Tax Officer, Ward – 30(2)(4), Mumbai, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 02.12.2017 for Assessment Year 2014- 15. 2 ITA No.4699/MUM/2023 Narayanbhai Manjibhai Bodriya, AY 2014-15 2. Grounds raised by the assessee are reproduced as under: “1. On the facts and in the circumstances of the case, the learned CIT (A) erred in confirming and sustaining the addition of Rs.34,54,250/- which was made by the learned AQ u/s. 69 of the Income tax Act on the alleged ground that the Appellant had paid the said amount in cash to developers, M/s. Shah Housecon Private Limited towards cost of residential flat purchased by him. The learned AO made the impugned addition solely on the basis of statement recorded of the said Developers and without furnishing copy of the said statement, in spite of specific requests for the same were made to the learned AO. 2. On the facts and in the circumstances of the case, the learned CIT (A) erred in confirming and sustaining the addition of Rs.34,54,250/- which was made by the learned AO u/s. 69 of the Income tax Act on the alleged ground that the Appellant had paid the said amount in cash to developers, M/s. Shah Housecon Private Limited towards cost of residential flat purchased by him. The impugned addition is made on the basis of the statement of the said developers, but the Appellant was not afforded reasonable opportunity to cross examine the said party as they did not attend on the appointed date and no further opportunity was afforded to the Appellant by the learned AO. 3. On the facts and in the circumstances of the case, the learned CIT (A) erred in confirming and sustaining the addition of Rs.34,54,250/- which was made by the learned AO u/s. 69 of the Income tax Act on the alleged ground that the Appellant had paid the said amount in cash to developers, M/s. Shah Housecon Private Limited towards cost of residential flat purchased by him purely on the basis of suspicion, surmises, conjectures, assumptions and presumptions without appreciating the fact that the onus was on the learned AO to conclusively prove that the Appellant had made cash payment as the Appellant could not be expected to prove the negative. 4. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming and sustaining the addition of Rs.6,75,000/- which was made by the learned AO u/s. 56 (2)(vii)(b)(ii) of the Act on the ground that the stamp duty value of the property purchased by the Appellant exceeds the consideration as per Agreement, without appreciating the fact that the difference in value between the two is less than 5% of the consideration and therefore the impugned addition is not justified more so as 5%/10% tolerance limit prescribed by the Finance Act 2020/2021 applies retrospectively as held by the jurisdictional ITAT, Mumbai in the context of Section 50C of the Act.” 2.1. We have heard both the parties and given our thoughtful consideration to the submissions made before us as well as to the material placed on record along with orders of the authorities below. 3 ITA No.4699/MUM/2023 Narayanbhai Manjibhai Bodriya, AY 2014-15 3. On the first issue raised vide ground nos. 1, 2 and 3 relating to addition of Rs.34,54,250/- made u/s.69 alleging that assessee has paid on-money in cash to the developer towards cost of residential flat purchased, brief facts are that assessee purchased a property for a consideration for Rs. 1,40,60,000/- vide registered conveyance deed dated 26.12.2013. Based on information received by the ld. Assessing Officer from DCIT, CC-5(1), Mumbai vide letter dated 24.08.2016, it was noted that a survey action u/s 133A was conducted at the business premise of the developer M/s. Shah Housecon Pvt. Ltd. (SHPL) on 11.11.2014. Impounded documents and statements of Shri Mansukh Harakchand Shah, Managing Director of SHPL and Shri Binesh Balakrishnan, Sr. Accountant of SHPL were recorded which revealed that SHPL has received on-money against sale of flats/shops in its project ‘Levels’. Ld. Assessing Officer extracted question 11 and 12 and their answers from the statement of Shri Mansukh Shah to note that builder has confirmed receipt of cash from the assessee over and above the agreement value paid by the assessee. He thus drew an adverse view that payment of on-money in cash of Rs. 34,54,250/- by the assessee is met out of undisclosed income. 3.1. It is important to note that case of the assessee was re-opened u/s 147 by recording the reasons to believe on 07.10.2016, that is after the receipt of information from DCIT, CC-5(1), Mumbai vide letter dated 24.08.2016. The reasons so recorded are reproduced in para 2 of the impugned assessment order and are extracted below. \"In this case information was received about cash Rs. 34,54,250/- given by the assessee to M/s. Shah Housecon Pvt. Ltd. 2. The D.C.I.T, CC-5(1), Mumbai's vide letter dated 24.08.2016 bearing F.No. DCIT-CC-5(1)/Information/2016-17 also informs about M/s. Shah Housecon Private Ltd is engaged in real estate business as builders and developers. 4 ITA No.4699/MUM/2023 Narayanbhai Manjibhai Bodriya, AY 2014-15 3. The assessee has filed ITR SAHAJ. The sources income are salary at Rs. 2,04,000/- and income from other sources at Rs. 968/-. AIR shows that assessee has purchased a property on 26.12.2013 for Rs. 1,47,35,000/-. 4. considering the income offered by the assessee for taxation which meager Rs. 1,43,950/- in comparision to value of property purchased by the assessee, part of which has been paid in cash of Rs. 34,54,250/-, I have a reason to believe that the assessee has understated his income in return of provision of explanation 2(b) to sec. 147 of the Act.\" 3.2. Notice u/s 148 was issued against which assessee filed his objections. In these objections, while denying making of alleged cash payment, assessee specifically stated that no evidence is produced to substantiate the allegation and mere reliance on a third party statement without any evidence leads only to a presumption. According to the assessee, such an exercise of re-opening of the case is based on reasons to suspect rather than reasons to believe and thus submitted to set aside the said proceedings. Assessee furnished relevant documentary evidences vide his submissions dated 11.08.2017 and 18.08.2017, copy of which is placed in the paper book. 3.3. Ld. Assessing Officer while disposing the objections raised by the assessee passed the rebuttal order dated 06.09.2017. In para 2a of this order, it is categorically stated by the ld. Assessing Officer that information is based on statement of Shri Mansukh Haraklal Shah and Shri Binesh Balakrishnan, both from SHPL. These statements have been recorded by virtue of statutory powers u/s 133A conferred upon the surveying authorities. The said para 2a is extracted below: “AR has denied having paid any sum to M/s. Shah Housecon Pvt. Ltd as alleged in notice/reasons for re-opening. However this information is based on statement of Shri. Mansukh haraklal Shah, Managing director of M/s. Shah Housecon Pvt. Ltd and Shri. Binesh Balakrishnan, Sr. Accountant of the this company. These statements have been recorded by virtue of statutory powers u/s 133A conferred upon surveying Authorities. Therefore mere denial by the assessee does not carry any weightage and reasons have been correctly recorded based on the information. 5 ITA No.4699/MUM/2023 Narayanbhai Manjibhai Bodriya, AY 2014-15 3.4. Subsequent to disposal of objections, ld. Assessing Officer issued notice dated 23.10.2017 to the assessee. In this notice, in para 2, it is stated that on the basis of statement of Shri Mansukh Shah and Shri Binesh Balakrishnan recorded u/s 133A it is established that assessee has used undisclosed income of Rs. 34,54,250/- for making payment in cash to the builder. For this, assessee was asked to submit his explanation which is complied vide letter dated 30.10.2017. Extracts of para 2 of this notice is as under: “On the basis of statement of Shri. Mansukh haraklal Shah, Managing director of M/s. Shah Housecon Pvt. Ltd and Shri. Binesh Balakrishnan, Sr. Accountant of the this company recorded by virtue of statutory powers u/s 133A conferred upon surveying Authorities it is established that undisclosed income of Rs. 34,54,250/- has been used by you for making payment in cash to builder M/s. Shah Housecon Pvt. Ltd. a) Therefore you are hereby given an opportunity to submit your objection for adding undisclosed income of Rs. 34,54,250/- u/s 698.” 3.5. In this reply furnished by the assessee vide letter dated 30.10.2017, he specifically asked ld. Assessing Officer to provide the details along with evidences and also an opportunity to cross examine the builder for the allegation of receipt of cash. 3.6. In the assessment order, ld. Assessing Officer noted in para 5 that the opportunity for cross examine was provided to the assessee but Shri Mansukh Shah and Shri Binesh Balakrishnan have failed to attend in response to summon u/s 131 of the Act. He further records that though no cross examination has been done, the statement proves payment of cash by the assessee for purchasing the property from SHPL. He thus concluded to make the addition of Rs. 34,54,250/- for the alleged cash payment u/s 69 of the Act. 6 ITA No.4699/MUM/2023 Narayanbhai Manjibhai Bodriya, AY 2014-15 3.7. Ld. Assessing Officer also made addition of Rs. 6,75,000/- on account of difference between the purchase consideration of Rs. 1,40,60,000/- as recorded in the registered agreement and Rs. 1,47,35,000/- being the market value fixed by the stamp duty office, by applying section 56(2)(vii)(b)(ii). 4. Before the ld. CIT(A), assessee reiterated the submissions made before the ld. Assessing Officer. After considering the same, additions made were sustained. Following are our observations from the perusal of the first appellate order: a) In para 6.1.1, it is stated that documents were confronted to the assessee from where the undisclosed cash component was worked out. Similar noting is made in para 6.4 by stating that when all the documents/information had been duly provided to the assessee, action of the ld. Assessing Officer is justified. We observe that such a fact of supply of documents/information to the assessee is not discernible from the material on record. b) In para 6.1.3.2, ld. CIT(A) presumes about factual correctness of the impugned property transaction. We observe that there is no doubt about execution of purchase transaction of the property between the assessee and the Builder. However, issue in appeal is on the factual position of payment made in cash by the assessee towards on- money, over and above the purchase consideration recorded in the registered agreement. There cannot be any presumption to this effect unless warranted by cogent and positive material on record. c) In para 6.1.3.3, ld. CIT(A) refers to attenuating circumstances of the assessee which points to the likely 7 ITA No.4699/MUM/2023 Narayanbhai Manjibhai Bodriya, AY 2014-15 payment of on-money. We observe that there is no dispute on the purchase consideration recorded in the registered agreement. Assessee has furnished the payment details for the same upon specific directions of the Bench. Details of payment of purchase consideration of Rs. 1,40,60,000/- is tabulated below: AGREE- MENT AMOUNT Shah Payment Other Payment Date- 01 Detail 14060000 1290850 03-12- 2013 Payment Greater Bank- 251812 47891 03-12- 2013 Service Tax Greater Bank- 251811 140600 10-02- 2014 VAT Greater Bank- 141980 360060 01-11- 2018 Payment BANKOFINDIA- RTGS 12409090 28-12- 2018 Payment BANK OF INDIA- 050560 1532298 01-01- 2019 GST BANK OF INDIA- 050562 14060000 14060000 1720789 d) In para 6.3, ld. CIT(A) hold that it became incumbent on the assessee to establish that what is being found from the third party, admitted by that third party is false or fabricated. In para 6.4, he also notes that if what was stated by the builder during the course of survey was untrue, then, assessee ought to have convinced the builder 8 ITA No.4699/MUM/2023 Narayanbhai Manjibhai Bodriya, AY 2014-15 to either retract the statement or issue and affidavit in favour of the assessee. We observe that such an onus cannot be thrusted upon the assessee to prove the negative. We draw force from the decision Hon'ble Supreme Court in the case of CBI v. V. C. Shukla [1998] SCC 410 wherein it was held that any loose sheets or diary found with the party where search was conducted, will not have any evidentiary value and it cannot be used against third party without any corresponding corroborative evidence. Further, the Hon'ble jurisdictional High Court of Bombay in the case of ACIT vs. Lata Mangeshkar (Miss) (1974) 97 ITR 696 (Bom) held that no addition could be made in the hands of the assessee on the basis of noting found in the books of third person. e) In para 6.4, ld. CIT(A) notes that though the assessee could not cross-examine the concerned builder due to his non- appearance in response to summons issued by the Department, yet it is not fatal to these proceedings. He goes on to hold that these are not the witness of the Department but of the assessee owing to the purchase transaction executed. From the factual narration in above paragraphs including that of the ld. Assessing Officer, it is evident that basis of allegation and addition are the statements of the builder recorded u/s 131 during the course of their survey u/s 133A. Also, ld. Assessing Officer records the factual position of both Shri Mansukh Shah and Binesh Balakrishnan failing to attend the cross examination against summon issued to them though assessee did visit his office and waited for the same. Such a position is covered in favour of the assessee by the 9 ITA No.4699/MUM/2023 Narayanbhai Manjibhai Bodriya, AY 2014-15 decision of Hon'ble Supreme Court in the case of Andaman Timber Industries [2015] 281 CTR 241 (SC) which held that when the assessment is made on the basis of statements recorded from third parties and if those statements were not provided nor cross examination was given to the assessee, the assessment order made based on those statements is bad in law. Further, reliance is placed on the following judicial pronouncements for the proposition that reopening of assessment only on the basis of third-party statement and borrowed satisfaction is not justified: i. Shri Dnyaneswar Maharaj Sansthan Alandi Dewachi - WP 3309 of 2022 (Bom) (Pages 1-9 of Case Law Paper Book) ii. Piramal Enterprises Ltd. - WP 2958 of 2016 (Bom) (Pages 10-13 of Case Law Paper Book) iii. Rajnish C Bharti - ITA No.5826/MUM/2016 (Pages 14- 22 of Case Law Paper Book) iv. Devansh Exports - ITA No.2178/Kol/2017 (Pages 55-75 of Case Law Paper Book) f) In para 6.5, ld. CIT(A) observes that assessee could have shown that payment was not made in cash but through the regular banking channels. We observe that all along assessee has denied making payment in cash as alleged. According to him, what has been paid is duly recorded in the registered agreement corroborated by the payment details, already tabulated above. Bench made a specific observation before the ld. Sr. DR on this since, if, both payments are taken together, the total consideration would 10 ITA No.4699/MUM/2023 Narayanbhai Manjibhai Bodriya, AY 2014-15 far exceed the market value determined for the purpose of stamp duty value which is not justifiable. 5. In the given set of facts and circumstances as discussed hereinabove, we delete the addition so made by the ld. Assessing Officer towards un-explained investment in the form of “on money” alleged to have been paid by the assessee in cash to the developer. Ground nos. 1, 2 and 3 raised by the assessee in this respect are allowed. 6. On the second issue raised vide ground no. 4, it was contended that the difference towards the actual consideration and the stamp duty value is Rs.6,75,000/- which works out to 4.80% of the registered deed value. Since this value is within the tolerance band of 5% as provided in third proviso to section 50C(1) as brought in by way of amendment w.e.f. 01.04.2017 and a tolerance band increased to 10% w.e.f. 01.04.2021, these have been held to be retrospective w.e.f. 01.10.2009 in plethora of judicial precedents. Ld. Counsel relied on the decision of Co-ordinate Bench of ITAT, Mumbai in the case of Maria Fernandes Cheryl vs. ITO in ITA No.4850/Mum/2019, dated 15.01.2021 wherein it was held as under: “We are, therefore, satisfied that the amendment in the scheme of Section 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à-vis stamp duty valuation to 10%, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related statutory provision of Section 50C, i.e. 1 April 2003. In plain words, what is means is that even if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face value and the anti- avoidance provisions under section 50C will not be invoked.” 6.1. Admittedly, it is a fact that the difference of Rs.6,75,000/- works out to 4.8% of the registered deed value. It is a settled position of law 11 ITA No.4699/MUM/2023 Narayanbhai Manjibhai Bodriya, AY 2014-15 that the amendment brought in this respect has been held to be retrospective, since it is curative in nature. Thus, in the given set of facts where even though the valuation of property for the purpose of stamp duty valuation is higher but falling within the tolerance band than the stated sale consideration in the registered deed, the said actual sale consideration is to be accepted as the fair value and provisions to section 56(2)(vii) cannot be invoked. Accordingly, in the given set of facts and following the decision of the Co-ordinate Bench as stated above, we delete the addition of Rs.6,75,000/- made on this account. Ground no. 4 raised by the assessee is allowed. 7. In the result, appeal of the assessee is allowed. Order is pronounced in the open court on 30th May, 2025 Sd/- Sd/- (Kavitha Rajagopal) (Girish Agrawal) Judicial Member Accountant Member Dated: 30th May, 2025 MP, Sr.P.S. Copy to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai "