2017 (2) TMI 1542 - AT - Income Tax

Addition of unexplained investment towards purchase of plot - on money on the purchase of the vacant plot - as per assessee agreement made in respect of plot did not materialise - As per revenue cancellation agreement was found in post search operations and is fabricated document - HELD THAT - The assessee is an individual. The assessee is in the business of colonization. The assessee purchases agricultural land from farmers and then the formalities of the Rajasthan Land Revenue Act and JDA Act is completed for conversion of land from agricultural to non agricultural use and further colony is planned and map is got approved from JDA. Subsequently, the plots of different size are sold to the customers and development work like construction of road, providing electric line water supply etc are done by the assessee as per the norms of JDA - The assessee filed regular return u/s 139(1). The seller Shri Subhash Chand Bansal had given a statement on oath that he had received Rs. 65 lacs only. The agreement with construction was cancelled and the cancellation agreement was also seized during the search operation. The seller stated that there was no construction and no water and electric connection which is also established by Google earth Maps and photographs placed in the paper book. There is no evidence of payment of any on money on the purchase of the vacant plot. No statement of assessee was recorded during search operation while she was present at the time of search. The cancellation agreement was found and seized during search operation itself. Therefore, its authenticity cannot be doubted when the Revenue had not been able to establish otherwise. Therefore, looking all we find that the lower authorities have erred in confirming the addition of Rs 76.00 lacs on account of unexplained investment in purchase of Plot No. 281, 10B, Gopal Pura Bye Pass, Jaipur. Thus we do not concur with the findings of the ld. CIT(A). Hence ,the ground raised by the assessee are allowed.

Summary

Issues Involved:
1. Authenticity of the cancellation agreement found during post-search operations.
2. Addition of Rs. 76,00,000/- as unexplained investment in the purchase of Plot No. 281, 10-B, Gopal Pura Bye Pass, Jaipur.
3. Validity of the assessment order and whether it was time-barred.

Issue-Wise Detailed Analysis:

1. Authenticity of the cancellation agreement found during post-search operations:
The assessee argued that the cancellation agreement was seized by the Income Tax Department and is not a fabricated document. The document was found during the course of search operations which started on 22-09-2010 and continued until 12-10-2010. The assessee contended that the document should be presumed correct as per section 132(4A) of the Income Tax Act. The CIT(A) held that the document was fabricated, noting that it was found on plain paper without witness signatures, unlike the other agreements which were on stamp paper and had witness signatures. The Tribunal, however, found that the cancellation agreement was indeed seized during the search and its authenticity cannot be doubted without concrete evidence to the contrary.

2. Addition of Rs. 76,00,000/- as unexplained investment in the purchase of Plot No. 281, 10-B, Gopal Pura Bye Pass, Jaipur:
The AO added Rs. 76,00,000/- to the assessee’s income as unexplained investment based on an agreement dated 25-06-2008 which indicated a sale consideration of Rs. 1,41,00,000/-. The assessee argued that this agreement included construction costs, which the seller later could not fulfill, leading to the cancellation and the final sale deed being executed for Rs. 65,00,000/-. The seller confirmed receiving only Rs. 65,00,000/- and stated that no significant construction was done on the plot. The Tribunal noted that the seller's statement, corroborated by Google Earth images and photographs showing the plot as vacant, supported the assessee’s claim. The Tribunal found no evidence of the alleged on-money payment and concluded that the addition was based on assumptions and not supported by concrete evidence.

3. Validity of the assessment order and whether it was time-barred:
The assessee initially raised an additional ground under rule 11 of ITAT, Rules 1963, arguing that the assessment order was not served within the time specified in the Act as the annexures were not attached to the assessment order. However, this ground was withdrawn by the assessee’s representative during the hearing and was dismissed as withdrawn by the Tribunal.

Conclusion:
The Tribunal concluded that the lower authorities erred in confirming the addition of Rs. 76,00,000/- as unexplained investment. The Tribunal allowed the grounds raised by the assessee, finding that the cancellation agreement was genuine and that there was no evidence of any on-money payment. Consequently, the appeal of the assessee was partly allowed. The order was pronounced in the open Court on 14-02-2017.