2013 (5) TMI 497 - AT - Income Tax

Unexplained investment u/s 69 B - search u/s 132 - Held that - Revenue made the additions only based on the two agreements found at the time of search. There are no other evidences coming forth to establish that the assessee would have paid over and above the amount mentioned in the registered documents. There was no evidence to show that the assessee had purchased the land through the middleman. Though there were two agreements there was nothing to substantiate that they were acted upon. Mr. Natvarsingh Admar who is supposed to be the middleman had confirmed before the revenue authorities in his statement u/s 131 dated 24-11-2011 that the agreements executed were not acted upon and they were cancelled.The registered documents suggest only the facts that the land was purchased by all the assessees directly from the farmers at the rates specified therein.There was no evidence whatsoever to suggest that there was payment of on-money or to suggest that the market value of the land purchased by the assessees was over and above shown in the registered documents. In fact all the documents were executed at the Jantry Value. AO had also not referred the matter to the Valuation Officer to establish that the value of the land purchased by the assessees was below the market value or had not made any enquiries with the owners of the land who sold the land to the assessees in order to establish that the assessee had paid amount over and above the value shown in the registered documents thus it is apparent that the revenue had made addition only on the basis of surmises and conjunctions that the assessee would have paid Rs.2, 80, 000/- per bigha. The onus thrusts upon the revenue to prove its stand is not met as decided in K. P. Varghese Vs ITO (1981 (9) TMI 1 - SUPREME Court). It is pertinent to note the decision of CIT Vs Naresh Khattar HUF (2003 (1) TMI 77 - DELHI High Court) wherein held that inference has to be drawn on the totality of the circumstance and not on any single fact while making addition u/s 69B. In favour of assessee.

Summary

Issues Involved:
1. Legitimacy of additions made under Section 69B of the Income Tax Act as undisclosed investment.
2. Validity of agreements and their impact on the market value of the land.
3. Examination of evidence and statements regarding the transactions.

Issue-wise Detailed Analysis:

1. Legitimacy of Additions under Section 69B:
The main issue involved was whether the additions made by the Assessing Officer (AO) under Section 69B of the Income Tax Act, considering the amounts as undisclosed investment, were legitimate. The AO made additions based on two agreements found during a search operation, which indicated that the assessees had agreed to purchase land at Rs.2,80,000/- per bigha. However, the assessees contended that these agreements were not acted upon and were subsequently canceled. The AO did not accept the assessees' explanation, citing several reasons, including the lack of documentary evidence for the cancellation of agreements and the improbability of the assessees advancing a substantial amount without verifying land records.

2. Validity of Agreements and Market Value of Land:
The agreements in question were executed between the assessees and Mr. Natvarsingh Nathusingh Admar, who admitted to receiving an advance of Rs.90,00,000/- for land procurement. The AO inferred that the market value of the land was Rs.2,80,000/- per bigha based on these agreements. However, the assessees argued that the agreements were canceled as Mr. Admar could not procure the land, and the advance was returned. The AO's additions were based on the presumption that the land was purchased at the rate mentioned in the agreements, despite the assessees purchasing the land directly from landowners at lower rates.

3. Examination of Evidence and Statements:
The Tribunal noted several key points in favor of the assessees:
- There was no evidence to show that the agreements were acted upon.
- Mr. Admar confirmed that the agreements were canceled and the advance was returned.
- The registered documents indicated that the land was purchased directly from the farmers at the specified rates.
- There was no evidence of on-money payment or that the market value of the land was higher than the registered value.
- The AO did not refer the matter to the Valuation Officer or make inquiries with the landowners to substantiate the claim of higher market value.

Conclusion:
The Tribunal concluded that the additions made by the AO were based on assumptions and presumptions without concrete evidence. The onus to prove the additions was not met by the revenue. The Tribunal referenced the decision in K. P. Varghese Vs ITO 131 ITR 597 (SC), emphasizing that there was no evidence of on-money payment. The aggregate addition of Rs.2,09,72,810/- was deleted as it lacked merit. The appeals filed by the assessees were allowed, and the additions were ordered to be deleted.

Order:
The Tribunal pronounced the order in the open Court on 03-05-2013, allowing the appeals filed by all the assessees and deleting the aggregate additions of Rs.2,09,72,810/-.