Addition made on the basis of cancelled money receipt found during search quashed as its contents was not confronted with issuer
ABCAUS Case Law Citation
ABCAUS 3401 (2020) (10) ITAT
Important case law relied upon by the parties:
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition to sale consideration of house property (the impugned addition).
During the year under assessment, the assessee had sold a house property and received the amount of sale consideration through cheque. However, the assessee had not offered the resultant capital gain in the original return of income.
A Search and Seizure operation was conducted in the case of a group of Companies wherein some incriminating documents were seized.
One of the documents found at the residence of directors of the group companies was money receipt according to which the said house property was sold at a much higher amount than the amount received by assessee through cheque.
As per the said money receipt, the assessee was given cash mentioned in the receipt which was only part payment. The said Money receipt was signed by the brother of assessee and also by the purchaser of the house property. Another money receipt though cancelled mentioned the amount of remaining cash to be paid to the assessee.
During post search inquiry the statement of the appellant assessee was recorded by the Investigation Wing. The assessee accepted to have received the amount of cash mentioned in the money receipt but not admitted that such cash was only a part payment and had received balance cash than as per other money receipt.
The assessee also recorded that he had given the statement voluntarily and without any pressure, force and coercion and also stated that he found that the statement was recorded correctly.
Accordingly, the case of the assessee was reopened by issuing notice under section 148 of the Income Tax Act, 1961 (the Act).
In response to notice u/s 148, the assessee filed the return of income disclosing the amount of cash surrendered on the basis of the money receipt seized.
During the reassessment proceedings, the assessee stated that he had not received any money other than as per agreement to sell property. However, to buy peace of mind, he had agreed to surrender only the amount mentioned in the money receipt.
However, the AO computed the sale consideration by adding the amount received as per the money receipts over and above the cheque amount.
The CIT(A) upheld the addition.
Before the Tribunal, the assessee submitted that during the course of examination by the Investigation Wing, the assessee was confronted with only the amount mentioned in receipt as paid and the assessee was never asked for any further amount received by him.
It was only during the re-assessment proceedings that the AO confronted regarding the alleged balance amount of payment and, therefore, in absence of any material before him, he could not have made the addition since the so-called balance amount was a cancelled receipt which the Investigation Wing had considered proper not to confront with the assessee.
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The Tribunal observed that the dispute was with respect to the receipt which happened to be a cancelled one and the AO had not confronted the contents of the said receipt from the buyer though his complete address was mentioned.
The Tribunal opined that since the Investigation Wing after considering the cancelled receipt had never confronted the assessee regarding the receipt of cash mentioned in it, in absence of any other corroborative material before the AO, he was not justified in making the addition.
The Tribunal further held that the AO had simply made the addition merely on presumption. Although the assessee had surrendered some amount, at no point of time he agreed for impugned addition.
The Tribunal held the CIT(A) was not justified in sustaining the addition made by the AO on the basis of a cancelled money receipt found during the course of search.
Thus, the appeal was allowed in favour of the assessee.