2015 (5) TMI 347 - AT - Income Tax

On money payment - CIT(A) deleted the addition - scope of Section 142A - Held that - CIT(A) has given a finding that the DVO was called for valuation of the property on 18.12.2009 and he has given the report on 24.12.2009 without doing any inspection of the property and without supporting his valuation by any concrete evidence as to the actual market price in the same vicinity or surrounding locality. Ld CIT(A) has also given a finding that the assessee has sold the property at the highest price during the said period as compared to the sale price of other properties and his rates were higher than the Jantri rates. We thus find that ld CIT(A) after considering the submissions and the factual aspect of the case and by detailed and well reasoned order has deleted the addition. We also find that the Co-ordinate Bench of Tribunal in the case of ITO vs. Chandrakant Patel (2011 (4) TMI 868 - ITAT AHMEDABAD ) has noted that that the area of operation and scope of Section 142A is limited in its span only to determine the value of investment in respect of certain assets and there is no power vested with the A.O to seek the help of valuation officer in respect of determination of capital gain prescribed u/s 48 of the Act. Before us, Revenue has not brought any material on record to controvert the findings of Ld. CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of Ld. CIT(A)- Decided against Revenue. Income from demolition - set off against the overhead expenses and the net expenses denied - CIT(A) deleted the addition - Held that - While deleting the addition, Ld. CIT(A) has given a finding that the demolition of old structure was done by the Assessee as a builder and in the agreement it was not stated that the Assessee was given vacant land by removing all the debris upon demolition of the building. He has also noted that the income from sale of scrap has been accepted by Assessee in cheque and has been reduced from the project cost and therefore there is no loss to the Revenue as the project cost has been reduced. Before us, Revenue has not brought any material on record to controvert the findings of Ld CIT(A). We therefore find no reason to interfere with the order of Ld CIT(A) - Decided against Revenue.

Summary

Issues Involved:
1. Deletion of addition of Rs. 7.4 crores on account of on-money payment.
2. Deletion of addition of Rs. 13,50,000/- as income from demolition.

Issue-wise Analysis:

1. Deletion of Addition of Rs. 7.4 Crores on Account of On-Money Payment:

The Revenue contested the deletion of Rs. 7.4 crores added by the Assessing Officer (A.O.) as on-money received by the assessee from the sale of property. The A.O. based the addition on evidence found during a search under section 132 of the Income Tax Act, including a seized diary and statements recorded under section 132(4). The diary indicated the property was purchased for Rs. 12.4 crores, with Rs. 7.4 crores paid in cash outside the books. The A.O. also relied on a valuation report by the District Valuation Officer (DVO) which valued the property at Rs. 12.25 crores.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, noting that the statements of the purchasers were retracted and no concrete evidence supported the on-money payment. The CIT(A) emphasized that the DVO's report was not valid for determining the selling price under section 142A, which is meant for assessing investment in property. It was also noted that the property was sold at the highest price in the locality, higher than the Jantri rates (stamp duty rates).

The Tribunal upheld the CIT(A)'s decision, noting that the addition in the case of one of the directors (Axay Sheth) was deleted by the Tribunal, and the Revenue failed to provide material evidence to overturn this finding. The Tribunal also agreed that the A.O. had no authority to call for a DVO report to determine the selling price.

2. Deletion of Addition of Rs. 13,50,000/- as Income from Demolition:

The A.O. added Rs. 13,50,000/- as income from other sources, arguing that the sale deed indicated the property was received as freehold land without any structure, hence no income could arise from demolition. The assessee claimed the income was from the sale of scrap generated from demolishing an old structure, which was set off against project expenses.

The CIT(A) deleted the addition, accepting that the demolition was part of the assessee's business activities and the income from scrap was received by cheque and reduced from the project cost. The Tribunal upheld this decision, noting the CIT(A)'s findings that the demolition was done by the assessee and the income was correctly accounted for, resulting in no loss to the Revenue.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions to delete the additions of Rs. 7.4 crores and Rs. 13,50,000/-. The Tribunal found no concrete evidence supporting the on-money payment and validated the proper accounting of demolition income within the assessee's business activities.