A search and seizure operations were conducted on various premises of the group to which the assessee belonged. During the search operations, the A.O. seized various material, including an agreement to sell dated 10-10-2011. The agreement provided that the assessee, along with her husband, agreed to sell properties for Rs 56 crores and had received an advance of Rs.8 crores. The A.O. doubt the genuineness of the transactions and obtained a report from the Investigation Wing. Based on the report, he held the transaction not to be genuine as the said company was found to indulge in providing accommodating bogus entities.

After the search and seizure, the assessee and her husband approached the settlement commission. The assessee offered an amount of Rs.35 lakhs for AY. 2009-10 to 2015-16. The settlement commission rejected the application as the additional amount declared was merely based on estimates.

The CIT(A) deleted the addition made by the A.O. but enhanced the addition considering the settlement commission application. There was cross-appeal by the revenue and assessee before the Tribunal.

On revenue appeal, the Tribunal held that that the transaction is not an afterthought as the agreement was found during the search operations, and the existence of the agreement cannot be doubted. The amounts were transferred from bank accounts. The Investigation Wing report does not dispute the existence of the company. The identity of the purchase is not in doubt, and the revenue authorities accept the assessment of the purchaser. The A.O. has not brought any material to show that the company does not have sufficient funds; on the contrary, the financial statements show sufficient net worth of the company. In the absence of the material, genuineness of the transaction cannot be doubted merely on suspicion. The mere reliance on the Investigation Wing report itself is not conclusive evidence unless incriminating material is produced. Once the assessee discharged the onus to prove the identity and creditworthiness of the creditor/purchaser and genuineness of the transaction, the burden is shifted on the A.O. to prove the contrary with some tangible material. The A.O. should have conducted an independent inquiry. As per section 51, once the amount forfeited, the same would be deducted from the cost for which asset was acquired or written down value or fair market value as the case may be in computing the cost of acquisition for capital gain.

On assessee appeal, the Tribunal noted that the CIT(A) made the addition based on the application made u/s.245C(1) before settlement commission. Further, it noted that the application was rejected for want of any conclusive proof or documents and was based on estimates. The confidential information submitted before the settlement commission cannot be a basis of addition in the assessment proceedings in the absence of any incriminating material found during search and seizure action. The application filed u/s. 245C (1) was rejected, and cannot be a basis of addition to the income of the assessee. Followed, Maruti Fabrics (2014) 47 Taxmann.com 298  (Guj.)(HC) (AY. 2012-13, 2015-16)