2013 (2) TMI 574 - HC - Income Tax

Addition on the basis of presumption AO made addition on the ground that there was on-money transaction in the sale of plots of lands developed by the assessee AO based his reasoning on statements of witnesses and Site Engineer, indicating booking of plots at a higher rate than reflected in books Held that - During search, nothing was found which revealed that the assessee had ever received on money on sale of plots - The disclosure was not on account of profits from such projects specifically - The persons whose statements are recorded have no locus standi to confirm as to what is the rate charged by the assessee - The persons whose statements were recorded have merely visited the site but has not actually transacted with the assessee - The Site Engineer is not empowered either book the plots or to quote the rate Since these persons are not competent to admit any undisclosed income, their statements cannot be admitted in evidence for taking a view against the assessee - Merely on presumption no amount can be added as undisclosed turnover or profit thereon - Addition not sustainable Against the revenue.

Summary

Issues:
1. Addition of Rs.6.57 crores based on statements during search and survey operations.

Analysis:
The primary issue in this case revolved around the addition of Rs.6.57 crores made by the Assessing Officer based on alleged on-money transactions in the sale of plots of lands developed by the assessee. The Assessing Officer relied on statements of witnesses and a site engineer to justify the addition. The CIT(Appeals) believed in on-money transactions but only brought the profit element to tax, not the entire receipt. The Tribunal upheld the CIT(Appeals)' decision, leading to the Revenue's appeal before the High Court.

The High Court observed that the Tribunal based its decision on the fact that statements of prospective buyers and the site engineer could not be the sole basis for the addition. Moreover, these statements were retracted by the individuals later on. The Court noted that the site engineer had also retracted his statement. The Tribunal emphasized that the Revenue lacked substantial evidence to support the addition, especially since the statements of witnesses were not reliable and no concrete evidence was found during the search operations to prove the on-money transactions.

The High Court further highlighted that the Revenue's presumption of on-money transactions in real estate cannot be the sole basis for adding undisclosed turnover or profit. The Court emphasized that without concrete evidence or reliable statements, additions cannot be sustained merely on presumption. The Court concluded that the entire issue hinged on the evaluation of evidence on record, and since the available evidence did not support the additions, the Tax Appeal was dismissed. The Court found no question of law arising from the case, ultimately upholding the decisions of the lower authorities and rejecting the Revenue's appeal.