2022 (5) TMI 1479 - AT - Income Tax

Unexplained capital gain - Addition based on Saudha Chitthi found during the course of search - ownership in the land mentioned in the sauda chithi - HELD THAT - These facts clearly prove that the sauda chithi is a dumb document as far as the assessee is concerned. Hence, the additions cannot be made on the basis of such dumb documents. CIT(A) relied on the judgment of Hon'ble Supreme Court of India in the case of Common Cause (A Registered Society) Others Vs. Union of India Others 2017 (1) TMI 1164 - SUPREME COURT And CBI Vs. V.C. Shiukla 1998 (3) TMI 675 - SUPREME COURT As the additions has been made by the Assessing Officer on the basis of dumb documents, these additions deserves to be deleted. CIT(A) observed that land has not been transferred to any one by registering the sale deed and it is in the name of the assessee and other two coowners which is seen even from the report of DVO submitted on 29.12.2018. These facts prove that the transfer of the land under consideration has not taken place, as sale deed has not been registered and as per the binding judgment in the case of CIT vs. Ashaland Corporation 1981 (7) TMI 57 - GUJARAT HIGH COURT in which it has been held that the transfer of the immovable property take place on the date, sale deed is registered. The assessee s case is further found covered by the judgment in the case Alapati Venkatararniah vs. CIT 1965 (3) TMI 21 - SUPREME COURT in which it has been held that title to immovable assets could not pass till conveyance was executed and registered. The possession of the land is also with the assessee; hence it is not a case of part performance as covered by section 53A of Transfer of Property Act. In the assessee's case, there is no proof that the assessee has received any consideration on sale of this land. CIT(A) deleted the addition. We have gone through the findings of ld CIT(A) and noted that there is no infirmity in the order of ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on these additions are, therefore, upheld and the grounds of appeal of the Revenue are dismissed.

Issues Involved:
1. Deletion of addition based on "Saudha Chitthi."
2. Evidentiary value of "Saudha Chitthi."
3. Valuation Report of the DVO versus incriminating documents.
4. Opportunity for cross-examination.
5. Ownership and transfer of the property.
6. Powers of the CIT(A) under section 251 of the Income Tax Act.
7. Application of the principles of natural justice.

Detailed Analysis:

1. Deletion of Addition Based on "Saudha Chitthi":
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 13,86,85,279/-, which was based on incriminating documents (Saudha Chitthi) found during search proceedings. The Tribunal noted that the Saudha Chitthi did not contain the name or signature of the assessee and was found from a third party. The Tribunal upheld the CIT(A)'s decision, stating that the Saudha Chitthi is a "dumb document" as it does not pertain to the assessee.

2. Evidentiary Value of "Saudha Chitthi":
The Revenue argued that the Saudha Chitthi had solid evidentiary value. However, the Tribunal observed that the document was found from a third party and did not mention the assessee. The Tribunal emphasized that the document cannot be used to fasten tax liability on the assessee without concrete evidence linking it to the assessee.

3. Valuation Report of the DVO Versus Incriminating Documents:
The Tribunal noted that the DVO's valuation report valued the property at Rs. 6,57,36,000/-, significantly lower than the amount mentioned in the Saudha Chitthi. The Tribunal found that the DVO's report should be relied upon as it provided a more accurate valuation. The Tribunal also observed that the Assessing Officer accepted the DVO's valuation in the subsequent assessment year, which further supported the CIT(A)'s decision to delete the addition.

4. Opportunity for Cross-Examination:
The Tribunal highlighted that the assessee was not provided with an opportunity to cross-examine Shri Manoj C. Patel and Shri Jayantibhai Babariya, whose statements were relied upon by the Assessing Officer. The Tribunal cited the Supreme Court's rulings that not allowing cross-examination violates the principles of natural justice, making the addition unsustainable.

5. Ownership and Transfer of the Property:
The Tribunal noted that the land in question was still registered in the name of the assessee and two co-owners, and no sale deed had been executed. The Tribunal emphasized that for capital gains to arise, there must be a transfer of the capital asset, which did not occur in this case. The Tribunal also noted that there was no evidence of the assessee receiving any consideration for the sale of the land.

6. Powers of the CIT(A) Under Section 251 of the Income Tax Act:
The Revenue argued that the CIT(A) failed to exercise the powers conferred under section 251 to strengthen the addition. The Tribunal found that the CIT(A) acted within his jurisdiction and correctly deleted the addition based on the evidence presented.

7. Application of the Principles of Natural Justice:
The Tribunal reiterated the importance of adhering to the principles of natural justice, including providing an opportunity for cross-examination. The Tribunal found that the Assessing Officer's failure to provide such an opportunity rendered the addition unsustainable.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 13,86,85,279/- based on the Saudha Chitthi, citing the lack of concrete evidence linking the document to the assessee, the reliance on the DVO's valuation report, and the violation of natural justice principles. The Tribunal dismissed the Revenue's appeals, affirming that the additions were not justified.

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