Sec.132 and Chapter 14 B of Income Tax Act - Basing on the receipts one is payment of Rs. 10 lakhs and another is refund of Rs.10 lakhs resulted in failure of a deal - can not be added as unexplained income with out recovering any cash ready in hand -2015 A.P.(2014)MSLLAWREPORTS


The premises of the appellant was searched on 19.01.2001 
by the officials of the Income Tax Department in exercise of power
under Section 132 of the Act.  A receipt evidencing payment of a
sum of Rs.10,00,000/- to one Mr. Prabhakar Reddy is said to have
been discovered.  Another receipt evidencing repayment of that
very amount was also discovered.  A statement under sub-Section 
(4) of Section 132 of the Act is also recorded on the day of search.
When a question was put to the appellant as to whether he has
made any payment to one Mr.Prabhu, he gave answer in a  
negative.
        Thereafter, a further statement was recorded on 27.03.2001.
A question was put to the appellant as to whether he paid a sum of
Rs.10,00,000/- to Mr. Prabhakar Reddy.  The appellant accepted
that he paid that amount to Mr.Prabhakar Reddy on 25.11.2000 
for purchasing of a plot. He further explained that the deal did not
fructify, and as such, the amount of Rs.10,00,000/- was returned
to him on 30.11.2000.  The case of the appellant was that the
amount is from the funds of M/s.Sapta Sikhara Housing Private
Limited (for short the company) in which he himself and his
family members have substantial stake.=
The Assessing Officer passed an order of Block Assessment  
on 31.01.2003 adding a sum of Rs.10,00,000/- to his income and
levying tax as provided for under Chapter 14B of the Act. -
 In the instant case, the plea of the appellant was that the
amount was held by the company and that it was paid to the
owner of the land.  The transaction did not fructify and it was paid
back to the company.  Neither the person, who is said to have
received the amount nor any other individual, were examined to
prove that the payment was by; or, for and on behalf of the
appellant herein.       The plea of the appellant was that the
department did not cross-verify the matter from any authorized
representative of the company.  Therefore, whether one goes by the
factum of the Department itself treating the only documents,
namely, receipts as not true; or their failure to record the
statements of any individual including the authorized
representative of the company, the very basis for the proceedings
ceases to exist.
        The Assessing Officer as well as the Tribunal proceeded on
the assumption that the appellant was under obligation to explain
the factum of payment.  When the amount was not recovered nor 
was said to be in the control and custody of the appellant, there
was no basis for initiating that proceedings.
      We, therefore, allow the appeal and set aside the order of
Block Assessment insofar as it has added a sum of Rs.10,00,000/- 
to the income of the appellant.  There shall be no order as to costs. -2015 A.P.(2014)MSLLAWREPORTS

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