2015 (12) TMI 1650 - AT - Income Tax

Undisclosed investment addition u/s 69 - Held that - We have noticed that the basis for making the impugned addition is the loose sheet found during the course of search conducted in the Bharat Shah Group. A very important point is that the said loose paper does not contain the name of the assessee, it was an undated document and does not bear signature of anyone. Another important point is that both the purchaser as well as seller has denied the contents of the said document. AO has tried to decipher the information found in the said document by interpreting that Sh represents Cash payment and Q represents cheque payment. We notice that the assessing officer has not brought any material on record to corroborate his interpretation. A perusal of the document would show that the letter written after 45 looks like C and hence it is capable to different interpretation also as against the interpretation given by the AO as Lakhs . The assessing officer has only tried to corroborate his interpretation by comparing the aggregate amount noted in the loose sheet with the stamp duty valuation. However, as pointed out by the assessee, the alleged cash payment together with the purchase value declared by the assessee far exceeds the stamp duty valuation and hence such kind of corroboration is not acceptable. Even otherwise, the stamp duty valuation stated to be adopted by sec 50C is only a legal fiction applicable to a seller of property and it does not automatically support the conclusion that the difference between the stamp duty valuation and the actual sale consideration as passed hands. Though the AO has interpreted that the cheque payment made by the assessee was ₹ 2.85 crores, the said interpretation has been proved to be wrong by the co-owners, since they have actually paid a sum of ₹ 3.85 crores by way of cheque. Further, the assessee has stated that the payments have been made in 2004, 2010 and 2011, which fact also does not support the interpretation given by the assessing officer. Under these set of facts, we are of the view that the Ld CIT(A) was justified in observing that the assessing officer has made the impugned addition on surmises and conjectures. The decision rendered by Hon ble jurisdictional High Court in the case of Lata Mangeshkar (1973 (6) TMI 13 - BOMBAY High Court ) supports the case of the assessee. - Decided in favour of assessee

Issues Involved:
1. Legitimacy of the addition of Rs. 6.84 crores as undisclosed investment under Section 69 of the Income Tax Act.
2. Validity of the evidence (loose papers) used by the Assessing Officer (AO).
3. Reopening of the assessment based on the information from the Bharat Shah Group search.
4. Adherence to Rule 46A of the Income Tax Rules.

Issue-wise Detailed Analysis:

1. Legitimacy of the Addition of Rs. 6.84 Crores as Undisclosed Investment:
The revenue challenged the deletion of Rs. 6.84 crores added by the AO as undisclosed investment under Section 69 of the Income Tax Act. The AO inferred this addition based on loose papers found during a search in the Bharat Shah Group premises, which allegedly indicated cash payments for flat purchases. However, the CIT(A) and the Tribunal found that the loose papers did not contain the assessee's name, were undated, and lacked signatures. Both the buyer and seller denied any cash transactions, and the AO's interpretation of the document was not corroborated by any other evidence. The Tribunal upheld the CIT(A)'s decision, noting that the AO's addition was based on surmises and conjectures.

2. Validity of the Evidence (Loose Papers):
The loose papers were considered by the AO as evidence of cash payments. The Tribunal noted that these papers did not mention the assessee's name, were undated, and lacked signatures. The AO interpreted "Sh" as cash and "Q" as cheque payments, but this interpretation was not supported by any corroborative evidence. The Tribunal highlighted that the actual cheque payments made by the assessee were Rs. 3.85 crores, not Rs. 2.85 crores as inferred by the AO. The Tribunal also referenced various judicial pronouncements that loose papers without corroborative evidence cannot be relied upon for making additions.

3. Reopening of the Assessment:
The AO reopened the assessment based on information from the Bharat Shah Group search and the difference in stamp duty valuation and the purchase price shown by the assessee. The Tribunal observed that the reopening was not justified as the loose papers did not directly relate to the assessee and the AO did not apply an independent mind. The Tribunal emphasized that the stamp duty valuation under Section 50C is a legal fiction applicable to sellers and does not automatically imply that the difference represents undisclosed income.

4. Adherence to Rule 46A of the Income Tax Rules:
The revenue argued that the CIT(A) violated Rule 46A by admitting additional evidence. However, the Tribunal found that the CIT(A) did not admit any new evidence but called for a remand report from the AO based on the contentions raised by the assessee. The Tribunal concluded that there was no violation of Rule 46A.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order that deleted the addition of Rs. 6.84 crores as undisclosed investment. The Tribunal found that the AO's addition was based on uncorroborated loose papers and conjectures, and there was no violation of Rule 46A. The decision was pronounced on 9th December 2015.

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