2011 (10) TMI 665 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition u/s 69B of the Act as unexplained investment in purchase of land.
2. Validity of the evidence and statements recorded during the survey u/s 133A.
3. Credibility of the notings made by the Accountant on the registries.
4. Directions issued u/s 144A of the Act.

Summary:

Issue 1: Deletion of Addition u/s 69B as Unexplained Investment
The Revenue's appeal contested the deletion of Rs. 39,23,278/- added by the AO u/s 69B as unexplained investment in land purchase. The AO had identified discrepancies between the registered value and actual purchase value based on statements and documents found during a survey u/s 133A. The Director admitted to undisclosed investments, surrendering Rs. 5,57,72,494/- for FY 2006-07. The AO later adjusted this to Rs. 4,57,72,494/- after acknowledging a totaling mistake.

Issue 2: Validity of Evidence and Statements During Survey
The AO relied on statements from various individuals and incriminating documents found during the survey. The Director and other company officials admitted to underreporting the purchase value of land. However, the CIT(A) found that the addition was not justified as it was based on notings by the Accountant on photocopies of registries, which were not corroborated by other evidence or confronted during the survey.

Issue 3: Credibility of Notings by the Accountant
The AO's addition was based on notings by the Accountant on two registries, indicating higher purchase values than recorded. The CIT(A) observed that these notings were not confronted during the survey or assessment proceedings and were inconsistent with other registries. The CIT(A) concluded that the addition was unjustified as the surrender was based on a comprehensive statement prepared by the Director, not individual registries.

Issue 4: Directions Issued u/s 144A
The Addl CIT issued directions u/s 144A, instructing the AO to give credit for Rs. 1,09,01,000/- shown as advances in the books and verify the arithmetical total of the surrendered amount. The AO complied, adjusting the addition accordingly.

Conclusion:
The Tribunal found that the AO did not adequately confront the notings on the registries or verify the actual purchase rates. The case was remanded to the AO for reconsideration, allowing the assessee to rebut the documents found during the survey. The appeal was allowed for statistical purposes, and the assessment order was set aside. The order was pronounced on 14-10-2011.