2012 (2) TMI 515 - HC - Income Tax

Addition in respect of the sale of flats to outsiders in the free sale component - unlawful consideration - Held that - Fifteen tenants were duly certified by a statutory board which had control over the process of redevelopment. Each of the tenants had registered agreements. Here again there was no direct evidence available of the receipt of any unlawful consideration. While the Court must take cognisance of the fact that direct evidence may not necessarily be forthcoming in such cases, it is equally necessary that the order of the Assessing Officer should be founded on some material and cannot be based purely on conjectures or surmises. As regards the statement of the Accountant, the Tribunal has taken a possible view by holding that the statement pertained to the free sale component in respect of which no addition has been made on flats sold to outsiders. As noted by the Tribunal, no addition has been made in respect of the sale of flats to outsiders in the free sale component. Hence, no substantial question of law would arise. The Appeal is accordingly dismissed.

Summary

Issues:
1. Relevance of statement 132(4) as evidence under Income Tax Act
2. Deletion of additions for excess area allotted to tenants
3. Deletion of additions for flats allotted to bogus tenants

Analysis:
Issue 1: Relevance of statement 132(4) as evidence under Income Tax Act
The appeal by the Revenue under Section 260A of the Income Tax Act, 1961 questioned the Tribunal's decision on the relevance of statement 132(4) as evidence. The Tribunal held that the old occupants were entitled to additional area in the new building as part of the redevelopment scheme. The Tribunal accepted the contention that a bargain was struck between the developer and the old occupants, and no evidence was found to substantiate that the assessee received on money from the old occupants. The Tribunal also noted that no addition was made on the sale of flats to outsiders in the free sale component based on the statement of the Accountant. The Tribunal's decision was based on the lack of evidence to support the Revenue's claim.

Issue 2: Deletion of additions for excess area allotted to tenants
The Assessing Officer made additions to the income of the assessee for excess area allotted to tenants and for flats allotted to bogus tenants. However, the additions were deleted by the Commissioner (Appeals) and affirmed by the Tribunal. The Tribunal noted that the list of tenants was certified by the Mumbai Buildings Repairs and Reconstruction Board, and affidavits were filed by the occupants with registered agreements. The Tribunal held that there was no evidence to establish that the assessee received extra consideration from the old occupants. The Tribunal emphasized the importance of the Assessing Officer confronting any doubts about the affidavits, which was not done in this case. The Tribunal's decision was based on the lack of evidence supporting the additions made by the Assessing Officer.

Issue 3: Deletion of additions for flats allotted to bogus tenants
The Tribunal's decision to delete the additions for flats allotted to bogus tenants was based on the lack of direct evidence of unlawful consideration received by the assessee. The Tribunal highlighted the necessity for the Assessing Officer's order to be founded on material evidence rather than conjectures or surmises. The Tribunal also considered the statement of the Accountant, noting that no addition was made on flats sold to outsiders in the free sale component. Therefore, the Tribunal concluded that no substantial question of law would arise, and the appeal was dismissed based on the Tribunal's findings.

In conclusion, the High Court of Bombay upheld the Tribunal's decision to delete the additions made by the Assessing Officer, emphasizing the importance of evidence and material facts in determining tax liabilities under the Income Tax Act, 1961.