Stamp duty valuation not a relevant criteria to decide payment of on-money by assessee

STamp duty valuation not a relevant criteria to decide payment of on-money by assessee but piece of evidence to ascertain correct facts with regard to value of property

ABCAUS Case Law Citation
ABCAUS 3455 (2021) (02) ITAT

Important case law relied referred:
ShyamKumar vs. ACIT (2018) 99 Taxman.com 39
Pullongode Rubber Produce Co. Ltd vs. State of Kerala 91 ITR 18
P. V. Kalyanasundaram vs CIT  294 ITR  049

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition u/s 69 of the Income Tax Act, 1961 (the Act) on account of payment of on-money for purchase of property.

A search and seizure action u/s 132 of the Act was conducted in the business premises of the assessee. Consequent to search, notice u/s 153A of the Act was issued for which assessee filed return of income. During the course of search an executive diary maintained by the assessee was found and seized. 

When seized documents were confronted to the assessee, he admitted that he had purchased a for a consideration which was written in the diary and was different from recorded price.

During the course of search, statement u/s 132(4) of the Act was also recorded wherein assessee admitted maintenance of diary and also confirmed entries recorded therein and accordingly, admitted undisclosed income on account of on-money payment for purchase of property.

The Assessing Officer on the basis of incriminating materials found during the course of search coupled with statement recorded from assessee has arrived at undisclosed income towards on-money payment for purchase of property on the basis of cash flow statement filed by assessee and made additions u/s 69 of the Act.

The CIT(A) confirmed additions made towards on-money payment for purchase of property on the ground that additions was made not only based on statement recorded u/s 132(4) of the Act but it was also supported by incriminating material in the form of executive diary maintained by assessee.

The ITAT confirmed the additions made by the Assessing Office. However, the Hon’ble High Court set aside the appeal to the file of  the ITAT for fresh consideration with a direction to consider orders of  Chief Revenue Officer/Inspector General of Registration on the  ground that although assessee had specifically taken a ground  challenging additions made by Assessing Officer towards on-money payment for purchase of property, ignoring value of  property assessed by revenue authorities for payment of stamp duty valuation is almost equal to value of property declared in the sale deed, the Tribunal failed to adjudicate specific ground taken by the assessee.

In second round before the Tribunal, the assessee contended that addition was made only on the basis of statement recorded u/s 132(4), even though assessee had retracted such statements before completion of assessment proceedings. Therefore, there was no value for the statement which was subsequently retracted and hence, the same could not be a basis for making addition towards on-money payment for purchase of property. 

It was further submitted that assessee had challenged additions made by Assessing Officer on the ground that entries recorded in executive diary was an estimate made for purchase of property.

Further, it was stated that although there was a minor difference in sale deed as well as value determined by authorities for the purpose of stamp duty. Therefore, additions made by Assessing Officer only on the basis of statement recorded during the course of search was incorrect.  

The Tribunal stated that addition cannot be made only on the basis of statement recorded during the course of search, this legal position has been clarified by various High Courts including the Hon’ble Supreme Court. But, if admission in a statement recorded u/s 132(4) is corroborated with evidences collected during the course of search then authorities are empowered to make additions on the basis of such statements.

The Tribunal opined that the order of Chief Revenue Officer /Inspector General of Registration, Chennai is not a relevant criteria to decide whether assessee has paid on-money or not, but it may be one piece of evidence to ascertain correct facts with regard to value of property. However, since, the assessee had taken a plea in light of said order/report of Chief Revenue Officer/Inspector General of Registration, the Assessing Officer ought to have considered the it before arriving at conclusion of on-money payment for purchase   of property, even though the Assessing Officer is not bound to accept the order of Chief Revenue Officer/Inspector General of Registration.

The Tribunal set aside the issue to the file of Assessing Officer with direction to consider order of Chief Revenue Officer/Inspector  General of Registration and decide the issue in accordance with  law on the basis of evidences available on record.

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