2015 (6) TMI 1068 - AT - Income Tax

Addition on sale consideration received - computation of undisclosed income for the block period - Held that - The Assessing Officer shall compute the undisclosed income for the block period in accordance with the provisions of the Act on the basis of the evidence found as a result of search or other documents, materials or information as are available with the Assessing Officer and relatable to such evidence found during the course of search operation. In the case before us, no such material is available on record as explained by the Assessing Officer himself in Annexure 1 to the assessment order other than stock of gold jewellery and silver. The statement said to be recorded u/s 132(4) of the Act from the assessee on 3.1.2000 does not throw any light with regard to payment of on-money for the purchase of property. Only Shri G. Babu admits during the course of his examination u/s 131 of the Act that he received ₹ 31 lakhs towards sale consideration. This information furnished by Shri G. Babu does not relate to any material or evidence found during the course of search operation. The evidence of Shri G. Babu could be relied upon provided the Assessing Officer is in possession of any evidence which was found during the course of search operation. In the absence of any material found during the course of search operation, this Tribunal is of the considered opinion that the statement recorded from Shri G. Babu on 29.12.1999 cannot be relied upon for making any addition in the hands of the present assessee. Therefore, this Tribunal is of the considered opinion that the CIT(A) has rightly deleted the addition of ₹ 31 lakhs. Assessing Officer for the purpose of computing undisclosed income for the block period, the CIT(A) cannot travel beyond the evidence found during the course of search operation. The CIT(A), by referring to payment of stamp duty, registration charges etc. estimated the undisclosed income at ₹ 5 lakhs. This Tribunal is of the considered opinion that in the absence of any material found during the course of search operation, the power of the CIT(A) which is co-terminus with that of the Assessing Officer cannot be extended to make any addition towards undisclosed income. Therefore, the CIT(A) is not justified in sustaining the addition of ₹ 5 lakhs. Cost of improvement addition - Held that - As rightly submitted by the ld. Counsel, no material was found during the course of search operation. The Assessing Officer found that the Valuation Officer has estimated the cost of construction to the extent of ₹ 2,99,700/-. The assessee disclosed the cost of construction only at ₹ 2,16,000/- therefore, the difference of ₹ 83,700/- was treated as unexplained investment for the block period. The fact remains that no books of account was found during the course of search. The valuation report was obtained after the search. In fact, no material was available with regard to the construction of the building. In the absence of any material, this Tribunal is of the considered opinion that there cannot be any addition with regard to the so called improvement to the property. Accordingly, the order of the CIT(A) is set aside and the addition made to the extent of ₹ 5 lakhs towards investment in immovable property and another addition of ₹ 83,700/- towards improvement of the property are deleted. Addition towards gold jewellery to the extent of 215 gms, the CIT(A) found that the excess stock of gold jewellery was to the extent of 1.924 kg. The CIT(A), after considering the explanation offered by the assessee found that the correct stock as per the register is 11054 gms. Inspite of the reconciliation made by the assessee, the Assessing Officer proceeded to assess the value of the difference of 215 gms of gold jewellery treating it as undisclosed income. This Tribunal is of the considered opinion that when the assessee explained the difference by filing the reconciliation statement, there is no need for making any further addition. Moreover, the addition deleted was only to the extent of ₹ 86,000/-. Therefore, this Tribunal do not find any infirmity in the order of the lower authority and the same is confirmed.

Summary

Issues Involved:
1. Addition of Rs. 31 lakhs towards on-money payment for the purchase of immovable property.
2. Addition of Rs. 5 lakhs made by the CIT(A) during appellate proceedings.
3. Addition of Rs. 83,700 towards the improvement of property based on the valuation report.
4. Addition of Rs. 86,000 towards excess gold jewellery stock.

Detailed Analysis:

1. Addition of Rs. 31 lakhs towards on-money payment for the purchase of immovable property:
The Assessing Officer (AO) made an addition of Rs. 31 lakhs based on the alleged on-money payment for the purchase of property. The CIT(A) deleted this addition, stating there was no material found during the search operation to support this claim. The Departmental Representative (DR) argued that incriminating materials were found during the search, and the assessee admitted to the total sale consideration of Rs. 31 lakhs during examination. However, the Tribunal found that no material was seized during the search, and the statement recorded on 3.1.2000 did not mention the on-money payment. The Tribunal concluded that the CIT(A) rightly deleted the addition as there was no evidence found during the search operation to support the claim of on-money payment.

2. Addition of Rs. 5 lakhs made by the CIT(A) during appellate proceedings:
The CIT(A) made an addition of Rs. 5 lakhs towards the cost of construction without any material found during the search operation. The Tribunal noted that the CIT(A)'s power is co-terminus with that of the AO but cannot extend beyond the evidence found during the search. Since no material was found during the search, the Tribunal held that the CIT(A) was not justified in sustaining the addition of Rs. 5 lakhs and deleted it.

3. Addition of Rs. 83,700 towards the improvement of property based on the valuation report:
The AO made an addition of Rs. 83,700 based on the valuation report, estimating the cost of construction at Rs. 2,99,700, while the assessee disclosed Rs. 2,16,000. The Tribunal noted that no books of account were found during the search, and the valuation report was obtained post-search. In the absence of any material evidence, the Tribunal held that the addition towards the improvement of the property was not justified and deleted the addition.

4. Addition of Rs. 86,000 towards excess gold jewellery stock:
The AO made an addition of Rs. 86,000 for 215 grams of excess gold jewellery found during the search. The CIT(A) deleted this addition after considering the assessee's reconciliation statement, which explained the difference in stock. The Tribunal found that the reconciliation provided by the assessee was satisfactory and upheld the CIT(A)'s decision to delete the addition.

Conclusion:
The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal, concluding that there was no material evidence found during the search operation to justify the additions made by the AO. The Tribunal confirmed the deletion of the additions by the CIT(A) and emphasized the importance of having concrete evidence found during the search to support any additions in block assessments.