2018 (4) TMI 1636 - HC - Income Tax

On-money received on sale of flats in the schemes known as Ratnakar 3 and Ratnakar 4 situated in Satellite area of city of Ahmedabad - addition based on loose papers - Held that - If we Eliminate documents from consideration what Revenue would have are the admissions made by the representative of M/s. Sambhav Infrastructure Pvt. Ltd of having received on-money in sale of flats and the comparison by the Revenue authorities of the given rates for the constructed properties in the same area. Firstly neither the AO nor the CIT (A) had compared the rates of M/s. Sambhav Infrastructure Pvt. Ltd or any other constructed properties which was sold during the same time in the same area. Even after making the additions in case of M/s. Sambhav Infrastructure Pvt. Ltd with the aid of the confessional statements made by the representative neither the AO nor the CIT (Appeals) co-related the sale with that of the assessee by establishing that the sales were during the same period in relation to the properties which offered similar advantages. In fact their contention was that this demonstrated a uniform trend or a pattern in the industry of cash transactions. The reference to the material collected from the website was also bereft of comparability in terms of area location and period. All in all the entire issue was factual in nature. The Tribunal having considered the relevant facts no question of law arises.

Summary

Issues:
1. Addition of ?32.56 crores by the Assessing Officer during the assessment year.
2. Reliability of evidence regarding on-money received in sale of flats.
3. Comparison of rates with other properties in the same area.
4. Consideration of loose documents and admissions by M/s. Sambhav Infrastructure Pvt. Ltd.
5. Tribunal's ruling in favor of the assessee based on lack of reliable or independent evidence.

Analysis:
1. The appeals involved the challenge of the addition of ?32.56 crores made by the Assessing Officer during the assessment year. The respondent-assessee, engaged in construction development projects, was subjected to a survey operation where certain documents were found, leading to further inquiries by the Assessing Officer. The addition was based on the conclusion that the assessee had received on-money in the sale of flats, specifically in schemes known as Ratnakar 3 and Ratnakar 4 in Ahmedabad.

2. The Commissioner (Appeals) confirmed the addition, relying on loose documents, admissions by M/s. Sambhav Infrastructure Pvt. Ltd, and market rates collected by the Assessing Officer. The Tribunal initially remanded the proceedings for cross-examination but later ruled in favor of the assessee, citing lack of reliable evidence to prove the acceptance of on-money in property sales.

3. The High Court analyzed the evidence, noting that the loose documents did not align with the assessee's schemes, and the comparison with rates from other properties lacked specificity in terms of area, location, and period. The Assessing Officer and the Commissioner (Appeals) failed to establish a direct correlation between the sales of M/s. Sambhav Infrastructure Pvt. Ltd and the assessee's properties, mainly relying on a perceived industry trend of cash transactions.

4. Ultimately, the High Court upheld the Tribunal's decision, emphasizing the factual nature of the issue and the lack of substantial evidence to support the addition made by the Assessing Officer. The Tribunal's consideration of relevant facts led to the dismissal of the tax appeals, as no question of law was found to arise from the case.