The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) recently ruled that the incriminating statements by third parties cannot be used for addition in Income Tax assessment.
The assessee Shantha Natarajan and Harish Bhatt Natarajan, both are individuals, who filed their return of income for A.Y. 2013-14 ,returning a total income of Rs.72,03,990/-. A search and seizure operation under Section 132 of the Income Tax Act was carried out in the residential premises of the assessee.
The Income Tax department issued a notice to the assessee under Section 153A of the Income Tax Act, and the assessee filed their return of income for the relevant assessment year.
The Assessing Officer completed the assessment by adding Rs. 1,99,52,042 towards capital gains, Rs. 1,14,82,651 towards unexplained investment in the form of capital contribution, and Rs. 20,04,000 towards unexplained cash deposits in bank accounts, resulting in a total taxable income of Rs. 4,06,42,683/-
The aggrieved assessee filed appeal before the. CIT (A) who partly allowed the appeal of assessee. Before the Tribunal, the counsel for the Assessee confirmed that the CIT (A) had acted contrary to the provisions of section 153A of the Income Tax Act, as no incriminating material was found during the course of search.
Counsel for the assessee further submitted the letter and it was mentioned that the assessee was provided the copies of the statements recorded under Section 132(4) of the Income Tax Act. He added that the statement of a third party without being provided a copy of which and without giving an opportunity to cross-examine cannot be said to be incriminating document.
It was further submitted that an addition based on the statement of a third party cannot be made under Section 153A of the Income Tax Act and it is beyond the scope of said provision and therefore, the entire addition made by the Revenue is without any basis.
The Bench, consisting of an Accountant Member (RamaKanta Panda) and a Judicial Member (Laliet Kumar), observed that the additions were made in the hands of the assessee on the basis of the statement of the purchaser’s husband, Mr. Mohammed Basheer, who was not the Vendee, without providing a copy of the said statement to the assessee.
In the present case, no document was found which shows that “on money” of Rs.4.15 crore was paid to the assessee over and above the registered value mentioned in the sale deed, and there is only a statement by Mohd. Basheer, who is not even the purchaser of the property.
No addition can be made in the hands of the assessee based on the statement recorded by the Investigating Wing by a third party. The statement of a third party already recorded under Section 132(4) of the Income Tax Act cannot be considered as an incriminating document for the purpose of making the addition under Section 153A of the Income tax Act. Appeal of the assessee got allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
