2017 (12) TMI 1713 - AT - Income Tax

Unaccounted Investment - AO has made the addition only on the basis of unsigned document found in search - non reference to the DVO report - HELD THAT - As unsigned agreement to sell was found as a result of search but it is also a matter of fact, as submitted by the assessee and not denied by the DR, that no question was asked by the search team on this document during the course of search. The contention of the learned DR that the document seized is sufficient to make addition of unaccounted investment is contrary to the provisions of law as the document found during the course of search is not required to be proved or disproved by both, assessee as well as the department as only presumption can be made u/s 132(4A) of the Act with regard to a seized document. This presumption is a rebuttable presumption. However, the first onus to disprove such document is on the assessee. In the present case we note that the AO in order to verify the veracity of the document, referred the valuation of the property in question to the DVO with specific remarks that a document showing consideration of ₹ 21.96 crore has been found during the course of search. The DVO after having the knowledge of the seized document showing value of ₹ 21.96 Crore valued the property at ₹ 7.11 Crore with supporting evidence. Strangely, the AO after carrying out this exercise of valuation during the assessment proceedings did not refer the same in assessment order while making the addition of ₹ 698 lakhs. Also gone through the document like DVO report, sale deed of adjacent property, HSIIDC rate of allotment document and other documents and find that the land prices of the property, excluding construction were in the vicinity of the amount paid by the appellant to Bluebird Software Private Limited and its shareholders. It is also a matter of fact and record the sale price on the basis of signed documents is accepted by the department in the hands of sellers of the property or shareholders of Blue Bird Software Private Limited. Those assessment orders are also passed after search in their cases by the central circle. The assessee has also placed on record the assessment order of Blue Bird Software Pvt Ltd who has purchased this property for 6.80 cr just few months before the date of unsigned document. This value is also accepted by the Income tax authorities. The assessee has been able to produce enough evidence on record to rebut the presumption. In the case of M.M. Financers (P) Ltd vs DCIT 2006 (12) TMI 189 - ITAT MADRAS-B it is held that the expression used in section 132(4A) is may be presumed and it does not mean that other factors are not to be taken into consideration. The mandate does not mean that it has to be presumed irrespective of all other factors. The decision of Delhi High Court in the case of CIT vs Ved Prakash Choudhary 2008 (2) TMI 14 - DELHI HIGH COURT also support the case of the assessee. Thus addition made by the AO is contrary to the DVO report obtained by him and the CIT(A) has ignored the vital and material documents and evidences on record before upholding the order of the AO. Consequently, the addition upheld by the CIT(A) is deleted - decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the addition of ?6,98,00,000/- as unaccounted investment based on an unsigned agreement.
2. Consideration of signed agreements and Departmental Valuation Officer (DVO) report.
3. Rebuttable presumption under Section 132(4A) of the Income-tax Act, 1961.
4. Validity of the assessment orders of the sellers and valuation of the property.

Detailed Analysis:

1. Legitimacy of the Addition of ?6,98,00,000/- as Unaccounted Investment Based on an Unsigned Agreement:
The primary issue revolves around the addition of ?6,98,00,000/- to the income of the appellant based on an unsigned agreement found during a search. The Assessing Officer (AO) considered this document to be true under Section 132(4A) of the Income-tax Act, 1961, which presumes the contents of seized documents to be true. However, the appellant argued that this unsigned document should not be considered valid evidence for the addition, especially since it was not confronted during the search and no questions were asked about it at that time.

2. Consideration of Signed Agreements and Departmental Valuation Officer (DVO) Report:
The appellant presented two signed agreements showing a consideration of ?8,00,00,000/- for the property in question, which were duly executed and accounted for in the books of accounts. Additionally, the DVO valued the property at ?7.11 Crore, which supports the appellant's contention that the unsigned agreement showing ?21.96 Crore is not realistic. The AO, however, ignored the DVO report and the signed agreements, leading to the addition of ?6,98,00,000/- as unaccounted investment.

3. Rebuttable Presumption under Section 132(4A) of the Income-tax Act, 1961:
The presumption under Section 132(4A) is rebuttable. The appellant provided sufficient evidence, including the DVO report and signed agreements, to rebut the presumption that the unsigned document is true. The Tribunal noted that the AO did not provide reasons for disregarding the DVO report, which valued the property at ?7.11 Crore, much lower than the value in the unsigned agreement.

4. Validity of the Assessment Orders of the Sellers and Valuation of the Property:
The Tribunal observed that the sale consideration of ?8,00,00,000/- was accepted by the department in the hands of the sellers, who declared capital gains based on this amount. The property was purchased by Bluebird Software Pvt. Ltd. for ?6.80 Crore a few months before the unsigned agreement, which further supports the appellant's contention. The Tribunal also noted that the AO did not consider the DVO report, which was obtained after informing the valuer about the unsigned agreement.

Conclusion:
The Tribunal concluded that the addition of ?6,98,00,000/- was not justified. The AO ignored crucial evidence, including the DVO report and signed agreements, which supported the appellant's claim. The presumption under Section 132(4A) was successfully rebutted by the appellant. Consequently, the addition made by the AO and upheld by the CIT(A) was deleted, and the appeal of the assessee was allowed.

Judgment:
The appeal of the assessee in ITA No. 608/DEL/2012 is allowed. The addition of ?6,98,00,000/- as unaccounted investment is deleted. The order was pronounced in the open court on 27.12.2017.