2012 (1) TMI 369 - AT - Income Tax

Unexplained investment u/s 69 - AO found that the assessee purchased a property for which he passed some amount from the regular sources and the balance amount had been paid from unexplained sources, as during the survey, unsigned draft agreements were found. Also, no revised agreements were found at premises of assessee's company. HELD THAT - ld. CIT (A) held that the AO was not right in making impugned addition of the amount in question on the basis of unsigned and undated draft agreement and without bringing any corroborative evidence on record. We found that the agreements and the revised agreement cannot be denied merely for the reason that they were not found during the course of survey at the premises of assessee's company. The assessee claims that the same were there at his residence. The assessee's statements were not recorded during the course of survey otherwise he could have explained the complete facts at that time itself. Further, these agreement are written on the stamp papers issued prior to the date of transactions. No evidence is there on record showing the balance payment of sum by the assessee or his family members. The amount remaining to be paid in terms of the draft agreement also remained payable in terms of the signed agreement but the terms were subsequently revised and payment was made as per the revised terms. In view of these facts and circumstances of the case, we find that the ld. CIT(A) has given a well reasoned and well founded order after dealing with each and every aspect of the issue and we are in full agreement with the findings of the CIT(A) that the addition of balance amount made by applying the provisions of section 69 is not justified. We therefore, confirm the order of ld. CIT (A) - Decision in favour of Assessee.

Summary

Issues Involved:
1. Deletion of addition of Rs. 1,85,00,000/- made by the Assessing Officer under Section 69.
2. Validity and reliability of the documents found during the course of survey.
3. Burden of proof regarding the payment of on-money.

Detailed Analysis:

1. Deletion of Addition of Rs. 1,85,00,000/- under Section 69:
The only ground in the departmental appeal was against the deletion of the addition of Rs. 1,85,00,000/- made by the Assessing Officer (AO) under Section 69. The AO made this addition based on documents found during a survey at M/s. Gravita India Limited, which suggested a higher sale consideration for a plot than what was declared by the assessee. The assessee argued that these documents were incomplete drafts and provided final agreements showing a lower consideration. The AO dismissed these as afterthoughts and non-genuine, leading to the addition of Rs. 1,85,00,000/- from unexplained sources. However, the CIT (A) found the draft agreement unreliable due to its undated and unsigned nature and noted that the AO failed to correlate the document with other evidence or conduct necessary investigations. The CIT (A) also observed that the final agreements were on proper stamp paper and notarized, and the AO did not prove them incorrect. Consequently, the CIT (A) directed the deletion of the addition, a decision upheld by the Tribunal.

2. Validity and Reliability of Documents Found During Survey:
During the survey, a draft agreement was found indicating a sale consideration of Rs. 2,51,00,000/-. However, the CIT (A) noted several issues with this draft agreement: it was undated, unsigned by both parties and witnesses, on plain paper, and contained several corrections. The CIT (A) emphasized that such a document could not be deemed reliable evidence. Furthermore, the final agreement and revised agreement provided by the assessee were made on proper stamp paper and notarized, indicating their genuineness. The Tribunal agreed with the CIT (A) that the draft agreement was not acted upon and that the final agreements were valid.

3. Burden of Proof Regarding Payment of On-Money:
The CIT (A) highlighted that the burden of proof lies on the revenue to show that the assessee paid more than what was recorded in the books, referencing the Supreme Court decision in K.P. Varghese's case. The AO failed to provide evidence of on-money payments of Rs. 14,00,000/- or Rs. 2,26,00,000/- as mentioned in the draft agreement. The Tribunal noted that no corroborative evidence was found during the survey to support the AO's claim. The CIT (A) and the Tribunal both concluded that the unsigned draft agreement alone could not justify the addition, especially when the final agreements and other statutory records indicated otherwise. The Tribunal upheld the CIT (A)'s decision, confirming that the addition of Rs. 1,85,00,000/- was unjustified.

Conclusion:
The Tribunal dismissed the departmental appeal and the cross-objection filed by the assessee, confirming the CIT (A)'s decision to delete the addition of Rs. 1,85,00,000/-. The judgment emphasized the importance of reliable evidence and the burden of proof on the revenue to substantiate claims of undisclosed income.