2012 (9) TMI 969 - AT - Income Tax

Unexplained investment in purchase - Addition on the basis of Seized sale agreement - addition made only a photo copy and also not signed by the assessee - Held that - No addition can be made on conjectures and surmises. As seen from the assessment order, the AO has adopted value of the property at the ₹ 7000/- per sq. yard on the date of transaction. For adopting such a valuation, the AO has not conducted any enquiry or brought any materials on record to show that the value of the property on the date of transaction was actually ₹ 7000 per sq. yard. On the other hand, the assessee has demonstrated with supporting evidence that the value of the land on the date of transaction was the rate mentioned in the registered sale deed and for which the property was sold. The assessee has also produced sufficient evidence to show that there was dispute going on regarding the legal right over the property which also had an effect on the fair market value of the property. It is also pertinent to mention here that the assessee had filed his return f income for the assessment years under dispute much prior to the date of search declaring the purchase of land in question at the consideration mentioned in the registered sale deeds. So far as the AO s observations on the loose sheets recovered from the residence of Smt. Nalini Devi are concerned, the CIT (A) after duly examining them has given a conclusive finding that the assessee s name has no where been mentioned in those documents nor the amount of ₹ 109.48 lakhs represents the expenditure incurred by Smt Nalini Devi. However, the amount was found to be the summary of the balance of various accounts operated by the family members of Smt. Nalini Devi. We find that the CIT (A) in his elaborate and well reasoned order has dealt with all these aspects and came to a finding on fact that the AO has made the addition purely on conjectures and surmises and not on the basis of any material or evidence brought on record. - Decided against revenue

Issues Involved:
1. Evidential value of a photocopy of a sale agreement found during a search.
2. Consideration of the cost of purchase of the property based on the sale deed versus the purchase agreement.
3. Reliance on direct evidence found during the search regarding the receipt of advances and expenditures by the vendor.
4. Application of the Supreme Court decision in P.R. Metrani vs. CIT.

Analysis:

1. Evidential Value of a Photocopy of a Sale Agreement:
The Revenue argued that the CIT (A) erred in holding that the photocopy of the sale agreement found during the search had no evidential value. The CIT (A) determined that the addition on account of unexplained investment was made solely based on the photocopy of the sale agreement, which did not bear the signature of the assessee. Both the assessee and the vendor denied the correctness and authenticity of the sale agreement. The CIT (A) noted that no other evidence or material was found during the search to substantiate that the assessee had paid the sale consideration as mentioned in the photocopy of the sale agreement. The CIT (A) concluded that the photocopy of the sale agreement was not sufficient to make an addition under section 69 of the Act.

2. Consideration of the Cost of Purchase of the Property:
The CIT (A) directed the AO to consider the cost of purchase of the property as per the registered sale deed and ignore the purchase agreement found during the search. The assessee provided copies of four registered sale deeds indicating a total sale consideration of Rs. 22,98,000/-. The AO, relying on the photocopy of the sale agreement, concluded that the property was purchased for Rs. 1,68,00,000/-. The CIT (A) found that the AO failed to bring sufficient material on record to prove that the actual consideration paid was as mentioned in the photocopy of the sale agreement. The CIT (A) emphasized that the AO must prove the payment of on money, as held by the Supreme Court in KP Verghese (131 ITR 597).

3. Direct Evidence Found During the Search:
The AO relied on some materials seized from the residence of the vendor, Smt. Nalini Devi, to conclude that she had incurred expenditures amounting to Rs. 109.48 lakhs, which could only have been made from the sale consideration of Rs. 1,68,00,000/-. The CIT (A) found that the loose papers seized from Smt. Nalini Devi's residence did not mention the assessee's name, and the AO linked the assessee to these entries purely on presumptions and surmises. The CIT (A) held that no addition could be made based on unsigned agreements and uncorroborated notings.

4. Application of the Supreme Court Decision in P.R. Metrani vs. CIT:
The Revenue contended that the Supreme Court decision in P.R. Metrani vs. CIT (287 ITR 209) was not applicable to the facts of the case. However, the CIT (A) relied on this decision to hold that the presumption under section 132(4A) regarding documents found during the search is rebuttable. The assessee rebutted this presumption by filing an affidavit and other documents proving that the photocopy of the sale agreement was not acted upon.

Conclusion:
The Tribunal upheld the CIT (A)'s findings, noting that the AO failed to provide sufficient evidence to support the addition made under section 69 of the Act. The Tribunal agreed that the addition was based on conjectures and surmises, and not on credible evidence. Consequently, the appeals filed by the Revenue were dismissed.

Separate Judgments Delivered:
Since the facts and circumstances of both cases, i.e., Sri B. Vijay Kumar (Indl.) and Smt. Nalini Devi, were identical, the Tribunal dismissed the grounds raised by the Revenue in both cases following the same reasoning.

Final Order:
All appeals filed by the Revenue were dismissed, and the order was pronounced in court on 18-9-2012.

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