2015 (10) TMI 2111 - AT - Income Tax

Assessment u/s 153C - Undisclosed investment in payment of consideration towards purchase of land at village Kharigaon, Taluka & Dist. Thane - Held that - The assessee had filed explanation and its version regarding the first draft agreement which has not been disproved by the Assessing Officer. Once the assessee had explained that the first draft agreement was never executed and also the reasons as to why it was not executed and also proved that the second draft agreement was made which was further corrected and improved and was finally acted upon, the burden shifted upon the A.O. to disprove the explanation offered by the assessee, which the A.O. has failed to discharge. The another pertinent fact is that the second draft agreement was also found during the search action and cannot be said to be an afterthought of the assessee. The Assessing Officer has failed to prove that any cash transaction had been undertaken between the assessee and the sellers of the land in question. No such evidence has been brought on record before us by the authorities below. In our view, the addition on the basis of unsigned, undated draft agreement, the figures written on which had been struck off, cannot be a basis of addition in this case, especially in the absence of any other incriminating or corroborating evidence of exchange of cash. So far as the addition on the basis of loose paper in relation to payment made to Sh. Mukund keni is concerned, the notable fact is that it has been mentioned in the lose papers that ₹ 60 lakh was paid by cheque and the other figures mentioned were ₹ 20 lakh by cheque and ₹ 1.50 crore by cash. The stand of the Assessing Officer has been that the amount of ₹ 1.50 crore was paid in cash. However, the Assessing Officer even could not prove the payment of ₹ 20 lakh which was also mentioned to be paid by cheque. Whereas, the assessee has explained that the originally ₹ 60 lakh were paid by cheque and out of which ₹ 40 lakh was received back by the assessee from Shri Mukund Keni and that the deal has not been finalized till date. When there is no evidence about the payment of amount of ₹ 20 lakh by cheque about which the investigation wing /search party has made thorough investigations, then the presumption about the payment of cash cannot be drawn under such circumstances. The additions solely on the basis of suspicion, how strong it may be, in our view, are not sustainable in the eyes of law. We therefore set aside the impugned additions made by the lower authorities. - Decided in favour of assessee.

Summary

Issues:
1. Addition of undisclosed investment in payment of consideration towards purchase of land.
2. Upholding the addition of undisclosed investment in payment of consideration to another party.
3. Validity of explanations provided by the appellant regarding the transactions.

Analysis:
1. The appellant, an AOP involved in real estate development, appealed against the orders of the CIT(A) regarding the addition of undisclosed investments in land purchase. The AO made additions to the income of the appellant for unexplained expenditures related to cash payments made during land acquisitions. The appellant contended that the draft agreement seized during the search was not acted upon due to various land issues, and the actual consideration for the land was lower than initially stated. The appellant provided detailed explanations, supported by seized documents and statements from involved parties, to justify the transactions. The Tribunal found that the AO failed to disprove the appellant's explanations and lacked corroborating evidence for the alleged cash payments. Consequently, the additions were set aside, and the appeal was allowed.

2. Regarding the addition of undisclosed investment in payment to another party, the Tribunal examined the loose paper seized during the search, which indicated cash and cheque payments made to the party. The AO claimed that a significant amount was paid in cash, but the appellant clarified that a portion was returned through cheques, and the deal was not finalized. The Tribunal emphasized the lack of evidence supporting the cash payment and the importance of concrete proof in such cases. As the AO could not substantiate the cash transaction and failed to establish the payment by cheque, the Tribunal overturned the additions, citing insufficient grounds for the decision.

3. The Tribunal thoroughly reviewed the explanations and evidence presented by the appellant, highlighting discrepancies in the AO's findings and the lack of concrete proof for the alleged cash transactions. The Tribunal emphasized the importance of substantiated claims and the burden on the AO to disprove the appellant's explanations, which was not met in this case. By considering the seized documents, statements of involved parties, and the circumstances surrounding the transactions, the Tribunal concluded that the additions made by the lower authorities were not sustainable in the absence of compelling evidence. As a result, the Tribunal allowed the appeal, setting aside the additions and ruling in favor of the appellant.

This detailed analysis of the judgment highlights the key issues, the arguments presented by the appellant, and the Tribunal's reasoning in overturning the additions based on the lack of concrete evidence and failure to disprove the appellant's explanations.