2014 (11) TMI 130 - AT - Income Tax

Sale transaction of land - Difference of amount between Agreement of Sale and Sale Deeds to be treated as undisclosed income or not Held that - When the difference of consideration between the sale agreement and the sale deed was put to Sri M.A. Chary, he has accepted vide his sworn statement recorded on 29.9.2008 that the total consideration for the said property was ₹ 3.06 crores - Sri M.A. Chary changed his stand on this issue and stated that the figure of ₹ 3.06 crores is not correct since there was some problem with the property recording Urban Land Ceiling and the vendees did not agree to pay the figure quoted by his late father - the total consideration was only ₹ 1.47 crores and not ₹ 3.06 crores and it was further stated that the agreement referred to was only an unsigned draft prepared for own guidance before finalising the transaction CIT(A) rightly was of the view that the document found in the possession of Shri M.A. Chary at the time of search cannot be ignored as a dumb document due to the fact that the contents of the letter are independently corroborated - The property mentioned in the sale agreement was ultimately sold to the same vendee as agreed in the month of November 2004 - The amount of advance paid by cheque by Shri M.S. Prasad to the assessee was not in doubt - such document could not have been discarded as no evidentiary value attached to it. The assessee could not rebut the evidence found and the contention of the AO on this issue with any cogent or reasonable evidences - The document of sale agreement found in the residential premises of Shri M.A. Chary is a valid document in view of the contemporaneous evidence to the contents of the agreement - On the day of search Shri M.A. Chary deposed that his father sold plot for ₹ 3.06 crores as per agreement - Statement recorded on the day of search is primary statement and it was given on confronting various documents and material found during search - The deponent would not have ventured to state anything which is not in his knowledge - The subsequent retraction could not be considered as a valid retraction and it is only an afterthought. The property is situated in a posh commercial area of Jubilee Hills, Hyderabad and because of its prime location it will definitely fetch higher value than that was disclosed by the assessee - the buyer of the property will be having the registered document and hence the unsigned agreement being in the possession of the seller viz., the assessee would not amount to dumb document - the circumstantial evidence cannot be brushed aside particularly when going through the process of the agreement, all the clauses in the agreement have been followed - the property was registered by way of three different agreements of which the agreement dated 18.11.2004 mentioned consideration of sale consideration without bringing out the schedule of payment whereas in the other two documents payment schedules have been mentioned which only throws suspicion that the consideration has been consciously reduced thus, the order of the CIT(A) is upheld Decided against assessee.

Issues Involved:
1. Validity of unsigned draft agreement as evidence for sale consideration.
2. Determination of actual sale consideration for capital gains computation.
3. Validity of retraction of statements by the legal heir.
4. Applicability of Section 50C of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of unsigned draft agreement as evidence for sale consideration:
The unsigned draft agreement dated 25.08.2004 indicated a sale consideration of Rs. 3.06 crores for the property. The assessee argued that this was merely a draft for negotiation purposes and had no legal sanctity. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] held that the document could not be ignored as it was corroborated by contemporaneous evidence, including the payment of an advance of Rs. 9 lakhs by cheque and the subsequent sale to the same vendee. The Tribunal agreed with the CIT(A) that the unsigned agreement, found during the search, was valid evidence and not a "dumb document."

2. Determination of actual sale consideration for capital gains computation:
The AO assessed the difference of Rs. 1,58,76,500 between the sale agreement (Rs. 3.06 crores) and the registered sale deeds (Rs. 1.47 crores) as undisclosed long-term capital gains. The assessee contended that the property had various issues like Urban Land Ceiling (ULC), boundary disputes, and high-tension electric lines, which justified the lower sale consideration. The CIT(A) and the Tribunal found that these issues were known at the time of the agreement, and the sale consideration of Rs. 3.06 crores was agreed upon despite these problems. The Tribunal upheld the CIT(A)'s decision to adopt Rs. 3.06 crores as the sale consideration for computing capital gains.

3. Validity of retraction of statements by the legal heir:
Sri M.A. Chary, the legal heir, initially accepted the sale consideration of Rs. 3.06 crores in his sworn statement but later retracted, stating the figure was incorrect due to property issues. The CIT(A) and the Tribunal found the retraction invalid, considering it an afterthought. The primary statement made during the search was given on confronting various documents and was deemed more credible. The Tribunal cited judicial precedents where delayed retractions were not allowed, supporting the CIT(A)'s decision to disregard the retraction.

4. Applicability of Section 50C of the Income-tax Act, 1961:
The assessee argued that the AO could not enhance the sale value beyond the guideline value under Section 50C. The CIT(A) and the Tribunal did not specifically address this argument but focused on the evidentiary value of the unsigned agreement and the corroborative evidence. The Tribunal upheld the sale consideration of Rs. 3.06 crores based on the agreement and other corroborative evidence, implicitly rejecting the applicability of Section 50C in this context.

Conclusion:
The Tribunal dismissed the appeal of the assessee, confirming the order of the CIT(A). The unsigned draft agreement was considered valid evidence for determining the sale consideration of Rs. 3.06 crores. The retraction by the legal heir was deemed invalid, and the issues with the property were known and factored into the agreed sale price. The Tribunal upheld the assessment of undisclosed long-term capital gains based on the higher sale consideration.

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