2017 (9) TMI 1624 - HC - Income Tax

Addition u/s 68 - incriminating documents seized from the residence of the assessee and other persons admission of key persons of the Group u/s 132(4)- Held that - The seized paper was neither dated nor signed by the assessee or the seller of the property the paper was vague in as much as balance amount was stated at Rs. 10, 000 lacs and not Rs. 1 lacs and an agreement was also entered which was duly attested by the Notary on 17.9.2001 a copy whereof has been placed regarding the sale of the property in question. In this agreement it has been specifically mentioned that the seller of the property has received Rs. 10, 000/- in cash at the time of signing the agreement and Rs. 9.90 lacs would be received in seven days at the time of registration. Thus in view of the agreement and sale deed the contents of paper seized loose its reliability besides the sellers in their affidavit (pages 30 to 31 o the paper book) have affirmed that the agreed consideration for the sale of the property was Rs. 10 lacs only. It is also established position of law that an addition cannot be made solely on the basis of surrender made during the course of search or survey in absence of corroborative evidence in support. - Decided in favour of assessee.

Summary

Issues Involved:

1. Whether ITAT is perverse in deleting the addition of various amounts on account of capital gains, ignoring incriminating documents, admissions under section 132(4), and the valuation report of the DVO proving on-money was received on the sale of land by the assessee.
2. Whether the Tribunal is justified in deleting the disallowance made by the AO under section 54B despite the assessee not purchasing new agricultural land in his name.
3. Whether the Tribunal erred in not deciding the ground relating to the deletion of addition made by the AO under section 68 on account of unexplained cash credits.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Capital Gains:

The Tribunal's decision to delete the additions on account of capital gains was challenged on the grounds that it ignored incriminating documents seized, admissions under section 132(4), and the DVO's valuation report proving on-money was received on the sale of land. The Tribunal, however, based its decision on several key points:

- The Settlement Commission's order indicated that the rate of Rs. 10.68 lakhs per bigha could not be used as a basis for valuing the entire land, as rates varied between Rs. 2 lakhs to Rs. 10.68 lakhs per bigha.
- The Tribunal noted that the statement recorded under section 132(4) was not of the assessee but of a third person, and no direct evidence of on-money was found during the search.
- The Tribunal emphasized that the assessee was illiterate, and much importance could not be given to the statements recorded under section 132(4) without corroborative evidence.
- The Tribunal found no concrete evidence of on-money payments, and the unsigned agreement found during the search was not reliable as it was disowned by both parties and not supported by any independent material evidence.
- The Tribunal also pointed out that no cash was found during the search, and the buyer was not interrogated regarding the alleged on-money payments.

2. Deletion of Disallowance Under Section 54B:

The Tribunal was questioned for deleting the disallowance made by the AO under section 54B despite the assessee not purchasing new agricultural land in his name. The Tribunal found that:

- There was no direct evidence to support the claim that the assessee received on-money, which would have impacted the application of section 54B.
- The Tribunal relied on the affidavits of Smt. Badami Devi and Shri Ganga Ram, which remained uncontroverted, indicating that the transactions were genuine and did not involve on-money.
- The Tribunal concluded that the disallowance under section 54B was not justified in the absence of concrete evidence of on-money payments.

3. Non-decision on Addition Under Section 68:

The Tribunal's failure to decide on the ground relating to the deletion of the addition made by the AO under section 68 on account of unexplained cash credits was also raised. The Tribunal, however, provided a comprehensive analysis:

- The Tribunal noted that the AO's basis for not accepting the sale consideration shown by the appellant was an unsigned agreement found during the search, which was not corroborated by any other evidence.
- The Tribunal emphasized that addition cannot be made solely on the basis of third-party statements or unsigned agreements without corroborative evidence.
- The Tribunal found that the search did not result in any recovery of incriminating evidence or undisclosed investments, and thus, the addition under section 68 was not justified.

Conclusion:

The Tribunal's observations were based on a thorough appreciation of facts, and as the last fact-finding authority, its decision was upheld. The issues were answered in favor of the assessee, and all appeals were dismissed.