2014 (7) TMI 1290 - AT - Income Tax

Addition u/s 69 on the basis of oral statements of the sellers - documentary evidence assuming that the cash deposited in the bank account of the seller was actually received from the assessee over and above the price mentioned in the registered sale deed - Held that - AO merely believes the oral statements of the sellers and more specifically unreliable witness has been heavily relied upon. The assessee through its partner has also filed affidavit contradicting the allegations made against the assessee and the statements of the sellers. Wherever cash has been given to the sellers, it has been specifically admitted in the affidavit as is evidenced from page 31 (Bahadur Singh ₹ 3 lacs on 27.7.2006, ₹ 3 lacs on the same date to Leela Bai, ₹ 1 lac on 24.8.2006 to Shri Moti Ram, ₹ 1 lac on 24.8.2006 to Shri Pratap Singh and ₹ 3 lacs on 27.8.2006 to Shri Vikram Singh). All the transactions made through cash and cheque are duly recorded in the books of accounts maintained by assessee firm in regular course of its business. This factual matrix, contained in the affidavit of the assessee, has not been controverted by the Revenue, therefore, there is no reason to affirm the addition, so made, by the AO. AO is merely trying to catch the straw in whirlwinds with the help of oral statements of the sellers, ignoring the contents of the registered sale deeds, which are duly signed by the assessee as well as the sellers, in the presence of the witnesses and the registering authorities. It is noteworthy, as argued by the learned Counsel for the assessee also, that the sale was made on 27.7.2006 whereas the cash was deposited by the sellers in their accounts three months thereafter. It is quite unlikely that cash is given after the registration of the property. Noteworthy that sellers of the land filed return in December, 2009 and signed the affidavit on 31.12.2009. The receipt of cash and cheque are duly mentioned in the sale deed, therefore, it is unbelievable that after the registration of the property is made, the cash is deposited three months thereafter in the accounts of the sellers. Therefore, how it can be presumed that the property was sold at a different rate other than shown in the registered documents. The source has to be explained by the sellers, in whose accounts, the money was found deposited and not by the assessee. Therefore, the addition clearly seems to be made on presumptive basis. The mere fact that somebody made statement, by itself, cannot be treated as having resulted in an irrebutable presumption against the assessee. The burden cannot be discharged by the Revenue by merely referring to the statement of the third party and such statement cannot be the sole foundation that the assessee has deliberately suppressed the income. Even otherwise, if the explanation of the assessee is not acceptable, the onus shifts to the Revenue to prove the same with corroborating material. - Decided in favour of assessee.

Issues Involved:
1. Addition of Rs. 2,18,75,000 under Section 69 of the I.T. Act, 1961.
2. Adoption of land value at Rs. 11,50,000 per bigha.
3. Charging of interest under Sections 234A and 234B.
4. Initiation of penalty proceedings under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Addition of Rs. 2,18,75,000 under Section 69 of the I.T. Act, 1961:
The primary issue was whether the addition of Rs. 2,18,75,000 based on oral statements of the sellers, which claimed the cash deposited in their bank accounts was received from the assessee, was justified. The Tribunal noted that the assessee firm was constituted on 14.7.2006 and purchased land for Rs. 1,22,46,236, including registration charges. The Assessing Officer (AO) relied on statements from the sellers, who claimed the cash was received from the assessee, to add Rs. 2,18,75,000 to the assessee's taxable income. The Tribunal found that the cash deposits in the sellers' accounts occurred three months after the sale, and there was no direct evidence linking the cash to the assessee. The Tribunal emphasized that oral statements alone, without corroborative evidence, were insufficient to justify the addition. The Tribunal concluded that the Department had not discharged its burden of proof, and thus, the addition was not sustainable.

2. Adoption of land value at Rs. 11,50,000 per bigha:
The AO adopted a land value of Rs. 11,50,000 per bigha based on assumptions, ignoring the valuation report submitted by the assessee and the stamp duty valuation by the registering authority. The Tribunal found that the AO did not provide any substantial evidence to support the higher valuation. The registered sale deeds, which mentioned the sale price, were considered more reliable. The Tribunal held that the presumption of a higher land value without corroborative evidence could not be accepted, and thus, the AO's adoption of Rs. 11,50,000 per bigha was not justified.

3. Charging of interest under Sections 234A and 234B:
The Tribunal noted that the charging of interest under Sections 234A and 234B is consequential in nature. Since the primary addition under Section 69 was not sustained, the consequential interest charges would also be affected accordingly.

4. Initiation of penalty proceedings under Section 271(1)(c):
The Tribunal observed that the initiation of penalty proceedings under Section 271(1)(c) was premature at this stage. Therefore, no deliberation on this issue was required.

Conclusion:
The Tribunal allowed the appeal of the assessee, finding no justification for the addition made by the AO under Section 69 based on oral statements without corroborative evidence. The adoption of a higher land value by the AO was also not supported by substantial evidence. Consequently, the charging of interest under Sections 234A and 234B was deemed consequential, and the initiation of penalty proceedings under Section 271(1)(c) was considered premature.

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