SUNIL NAGESH SHET,THANE WEST V. INCOME TAX OFFICER, WARD 3(5), THANE

ITA 4547/MUM/2023

AI Insights

The case revolves around an appeal by Sunil Nagesh Shet against the assessment order for the assessment year 2011-12, which added Rs. 21,50,000 to his income as undisclosed 'on-money' paid for a flat purchased from the Cosmos Group. The addition was based on information and statements from various persons associated with the Cosmos Group, following a search and seizure operation. The assessee contested the addition, arguing that he had not paid any 'on-money' and that he was not provided with any evidence or opportunity to contest the statements made by the builder's employees. The CIT(A) upheld the addition, leading to the present appeal before the Tribunal. The Tribunal, referencing a similar case (Paramjit Singh Seehra Vs ACIT), found that the assessee was not given a fair opportunity to contest the allegations against him, particularly the lack of cross-examination of the witnesses, and thus allowed the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315823 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Other Referred Cases: Paramjit Singh Seehra Vs ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH MESHRAM
• Assessee Lawyers: RAVINDRA N. NAIK
• Keywords: Condonation of delay; Income from undisclosed sources; Reopening of assessment; Principle of natural justice; Third party statement; Search and seizure; Opportunity of cross examination; Borrowed satisfaction; Bogus
• Section: 148; 142(1); 132

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER &GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 4547/MUM/2023 (AY : 2011-12) (Physical hearing) Sunil NageshShet 1/18, Vinayak Bhavan Kolbad Road, Near Pratap Cinema Thane (W), Maharashtra-400601. [PAN No. AEGPS 2748 B] Vs ITO,Ward-3(5), Thane B-Wing, 6th Floor, Ashar IT Park, Road No. 16Z, Wagle Estate, Thane-West, Maharashtra-400604. Appellant / Assessee Respondent / Revenue Assessee by Shri Ravindra N. Naik CA/ AR Revenue by Shri Rajesh Meshram, Sr. DR Date of institution of appeal 13.12.2023 Date of hearing 26.03.2025 Date of pronouncement 16.05.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the assessment order of ld. CIT(A) dated 03.08.2024 for A.Y. 2011-12.Initially this appeal was adjudicated on 25.06.2024 in ex-parte order in absence of assessee. However, the order dated 25.06.2024 was record on filing miscellaneous application (MA) vide MA No. 294/Mum/2024 dated 14.02.2025, thus this appeal was fixed for hearing afresh. The assessee has raised the following grounds of appeal: 1. The Assessment order passed under section 143 (3) of the Income Tax act 1961 is not warranted on the facts and circumstance of the case and it opposed to equity, law and justice. 2. Documents or excel sheet prepared by builder, on which addition is made are not shown neither provided copies to assessee to file his written version or say on said excel sheet or documents. ITA No. 4547/Mum/2023 Sunil Nagesh Shet 2 3. There is no concrete proof which shows that \"on money\" cash payments are made by assessee to builder. 4 The assessing officer has not found, any suspicious cash transaction or cash withdrawal in assesses bank account. 5. The assessing officer has ignored the fact that, the net profit of assessee is Rs 4,43,250/-Lakhs for that period and how he could pay Rs 21,50,000/- to the builder. 6. The data prepared by builder, on which addition is made are transfer multiple times from one destination to another and one person to another. 7. Search and seizure action U/s 132 of 1.T Act against builder was carried out by department on 24/9/2014 but neither intimation was given to the assessee nor his statement recorded during course of investigation. 8. Addition done on the basis of baseless assumption made by assessing officer. The addition is made only on the basis of oral statement made by employee of the builder. 9. Without prejudice to the above the estimate of income is excessive and uncalled for. 10. The appellant craves leaves to add, alter, amend, substitute and forgo any or all grounds of the present appeal before or at the time of hearing or filing written submissions. 11. Any other ground of appeal which may be taken at the time of hearing with the previous approval of the Hon'ble Commissioner of Income Tax (Appeals). 2. Brief facts of the case are that assessee is an individual, filed his return of income for assessment year (A.Y.) 2011-12 on 14.07.2011 declaring total income of Rs. 1,93,250/-. The case of assessee was reopened on the basis of information received from DDIT (Inv.), Mumbai that a search action was carried out on Cosmos Group wherein evidence in the form of e-mail and cash book was found and seized which contained the evidence of ‘on-money’ received by said ground on sale of various units. The assessee also purchased a flat from Cosmos Group in Financial Year 2010-11. On the basis of such information, the assessing officer recorded reason of reopening that assessee ITA No. 4547/Mum/2023 Sunil Nagesh Shet 3 has paid on-money of Rs. 21,50,000/- for purchase of flat /office space No. 303 in Cosmos Spring II /Sankalp Heights. The assessing officer after recording reasons of reopening issued notice under section 148 dated 23.08.2018. In response to notice under section 148, the assessee filed his reply that return of income filed originally may be treated as return in response to notice under section 148. The assessing officer after serving notice under section 143(2) and 142(1) proceeded for reassessment. In response to show cause notice, the assessee stated that he has purchased a residential flat for a consideration of Rs. 73,18,368/-, out of which Rs. 43.00 lakhs was paid out of sale of old residential flat and Rs. 30.18 lacs by taking housing loan. The assessee denied payment of ‘on-money’ to said builder. The assessing on the basis of information and the statement of various person of Cosmos Group, some part of those statement is mentioned in assessment order and concluded that assessee has paid on-money of Rs. 21,50,000/- and added the same to the income of assessee as undisclosed income. 3. Aggrieved by the additions in the assessment, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee reiterated the similar contention that he has not paid any on-money to the builder. He was not provided any evidence or excel sheet prepared or recovered from the builder about payment of on-money. There is various contradiction in the statement of various persons of builder. A copy of such statement was never provided to the assessee. The assessee is a goldsmith and doing labour job work and has no capacity to make such payment. ITA No. 4547/Mum/2023 Sunil Nagesh Shet 4 4. The ld. CIT(A) on considering the submission of assesse confirmed the action of assessing officer holding that from the statement of persons employed with builder, it is clearly confirmed that there was involvement of on-money in the purchase / sale of flats from the data shows that assesse has paid on- money of Rs. 21,50,000/-. Further aggrieved assessee has filed present appeal before Tribunal. 5. We have heard the submission of ld. Authorised Representative (AR) of the assessee and the learned senior departmental representative (ld. Sr. DR) for the Revenue. The ld. AR of the assessee fairly submits that there is delay of 72 days in filing appeal before Tribunal. The assessee has already filed application for condonation of delay. The ld. AR of the assesse submits that delay in filing appeal is neither intentional nor deliberate but due to the reason that assessee was not medically fit and advice to take complete rest by medical professional. The copy of medical prescription and advice for complete rest is filed on record. The ld. AR of the assessee submits that delay in filing appeal may be condoned and the assessee may be allowed to contest the case on merit. On merits of the additions, the ld. AR of the assessee submits that assessment was reopened on the basis of information / allegation of on-money to the Cosmos Group / builder. The assessing officer / department relied upon third party statement without providing copy of such statement to the assessee. On the similar set of fact, the Co-ordinate Bench of Mumbai Tribunal in Paramjit Singh Seehra Vs ACIT reported viz; (2025) 171 taxmann.com 142( Mum- Trib) wherein on similar allegation, the addition of on-money to same builder was made. However, on appeal before Tribunal entire addition was deleted. The case of assessee is identical and thus the ITA No. 4547/Mum/2023 Sunil Nagesh Shet 5 grounds of appeal raised by the assessee are covered by this decision, copy of which is filed on record. 6. On the other hand, ld. Sr. DR for the Revenue, on the plea of condonation of delay submits that Bench may take decision as per law. However, on merit of the case, the ld. Sr. DR for the Revenue submits that assessing officer made addition on the basis of evidence found during the search action. On the basis of evidence, it was proved that Cosmos Group was involved in accepting on-money. Thus, he supports the order of ld. Assessing Officer/CIT(A). 7. We have considered the rival submissions of both the parties and have deliberate on facts of the case. Firstly, we are considering the plea of ld. AR of the assessee for condoning the delay. Before us, the ld. AR of the assessee vehemently argued that relevant time, the assessee was not well and advice complete rest. In support of such contention, the assessee has filed various medical prescription and advice of doctor for complete rest. Considering the facts of the case and taking lenient view, delay in filing appeal is condoned. Now adverting to merits of the case. 8. We find that assessee has raised multiple grounds of appeal. However, the substantial relief claimed in all the grounds of appeal relates to addition of Rs. 21,50,000/- on account of alleged on-money paid to Cosmos Group / builder. We find that contention of assessee right from the beginning is that he has not paid any on-money. We find that in the assessment order, the assessing officer has nowhere specified as to he has arrived on a figure of Rs. 21,50,000/-. Neither any alleged e-mail or any working of on-money is explained in the assessment order. The assessing officer has no where mentioned in the assessment order that the made any communication either ITA No. 4547/Mum/2023 Sunil Nagesh Shet 6 by alleged e-mails or otherwise about the payment of on-money or any person form Cosmos group identify assessee. We find that on similar set of fact, the Co-ordinate Bench of Tribunal in Paramjit Singh Seehra vs ACIT (supra) deleted the similar addition. The relevant part of decision is extracted below: “6. We have heard the rival submissions and perused the materials on record. It is observed that the assessee had filed his return of income and thereafter the assessee's case was reopened on the ground that it was found that the assessee has paid Rs.70,00,000/- as total sale consideration for a flat acquired from the Cosmos Hawaii project of Cosmos group. It is evident that the said information was received pursuant to a search and seizure action conducted in the case of Cosmos group on 24/09/2014 wherein the said amount was paid over and above the agreement value of the flat. The assessee was furnished with the reasons for reopening and thereafter the objections of the assessee were disposed off. It was also observed that statements recorded under section 132(4) of the 1.T. Act of Shri Manish Mehta, Director of Cosmos group stating that the details of receiving on- money in the sale consideration of flats/shops/offices and by introducing the same as unaccounted income in its books in the form of bogus unsecured loans were kept and maintained in gmail and Yahoo mail account of Cosmos group. Further to this, the statement of Ms. Maruna Suresh Khambayat, Sales Head and Smt. Meenal Mahesh Patil, head of account, Shri SurajParmar, one of the three chief promoters and Shri Manish Mehta, Director of Cosmos group was recorded under section 132(4) of the 1.T. Act wherein it is specified that the said persons have accepted that email data contained the unaccounted income received from sale of flats/shops/offices and that the figures mentioned against the sale of flats represent unaccounted cash in multiples of 100 INR. From these documents, the assessee's name alongwith PAN, assessment year and total amount of Rs.70,00,000/- was specified. The Assessing Officer has corroborated the seized materials alongwith the statements of the director, the sales head, head of accounts and one of the three chief promoters of Cosmos group. The assessee has denied the allegation of the Assessing Officer by stating that the said property was purchased from Cosmos group vide agreement of sale dated 31/08/2012 and that the assessee has paid Rs.11,00,000/- during assessment year 2010-11 through account payee cheque as advance amount for booking of the flat. The Assessing Officer has stated that the advance payment of Rs. 11,00,000/- through account payee cheque needs no verification and that the Assessing Officer has reopened the assessee's case only pertaining to information obtained during the search and seizure action carried out at Cosmos group for payment of Rs.70,00,000/- as on-money over and above the consideration of the sale agreement made by the assessee. The ITA No. 4547/Mum/2023 Sunil Nagesh Shet 7 assessee's allegation that the reopening of assessment was merely a borrowed satisfaction and not the Assessing Officer's own satisfaction is negated by the Assessing Officer in his detailed order wherein based on the information received from the Investigation Wing of the department. The Assessing Officer has corroborated the said information with other evidences which includes documentary evidence and the statement recorded under section 132(4) from the concerned persons. It is also pertinent to point out that the statements were not retracted by any of the persons subsequently. From the above observation, we find no error in the action of the Assessing Officer in reopening the assessment of the assessee for the impugned year and the objection of the assessee on this ground is not sustainable. 7. The assessee in ground 1 has raised the issue that the assessee was not given an opportunity of cross examination of the two persons, viz. Shri Manish Mehta and Mrs. Meenal Patel of Cosmos group, whose statements were recorded under section 132(4) of the I.T. Act. The assessee has further stated that vide letter dated December, 16, 2016 where the assessee has requested for an opportunity to cross examine the persons whose statements were relied upon by the department, the assessee was not given an opportunity of cross examination. Though the Ld.DR has contended that the statements of persons relied upon by the department are concerned with the business with whom the assessee has entered into transaction for purchase of the property, we are not convinced with the said explanation. The assessee has relied upon the decision of Andaman Timber Industry v. CCE [2015] 127 DTR 241 (SC) where the Hon'ble Apex Court has held that failure to give the assessee the right to cross examine the witness whose statements were relied upon results in breach of principles of natural justice which results in serious flaw thereby rendering the order a nullity. The present case in hand has identical facts of the above said decision wherein the department has relied upon the statement of persons, which the department has solely placed reliance on in making the impugned addition. It is also pertinent to point out that the said statements were not retracted and the assessee, as a matter of right, should be given an opportunity to cross examine the said persons. It is observed that the Assessing Officer has failed to provide the opportunity of cross examination despite the assessee's request vide 26/12/2016. Even assuming the fact that the said letter was dated just a few days before passing of the, we find that the Ld.CIT(A) could have given an opportunity to the assessee to cross examine the parties. The Ld.CIT(A), in his order on page 29 has relied upon the decision of Smt. KusumLataThakral v CIT [2009] 185 Taxman 237/[2010] 327 ITR 424 (Punjab & Haryana) and substantiated that the cross examination given by the Assessing Officer cannot be taken as an undue advantage by the assessee. It is evident from this that the Ld.CIT(A) has also not given opportunity to the assessee to cross examine the parties. It is necessary to specify that the power of CIT(A) is co-terminus with that of the Assessing Officer. No doubt, the Ld.CIT(A), as a principle of natural justice, should have facilitated this opportunity of cross examining the parties by the assessee. ITA No. 4547/Mum/2023 Sunil Nagesh Shet 8 We, by respectfully following the decision of the Hon'ble Apex Court in Andaman Timber Industry (supra), deem it fit to quash the assessment order on the basis of violation of principles of natural justice. 8. As the assessment order itself is quashed, the other grounds of appeal need no adjudication. 9. In the result, the appeal filed by the assessee is allowed.” 9. Considering the facts of the case are almost similar except of variation of figure of addition on account of alleged on-money, therefore, following the principal of consistency and by following the decision of Co-ordinate Bench the addition made by assessing officer are deleted. In the result, the grounds of appeal of assessee are allowed. 10. In the result, the appeal of assessee is allowed. Order pronounced in the open Court on 16/05/2025. S Sd/-/- GIRISH AGRAWAL ACCOUNTANT MEMBER - S Sd/-/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 16/05/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "