2016 (6) TMI 980 - HC - Income Tax

Undisclosed investment - Addition on the basis of documents (MoU) seized during the course of search / survey - Held that - On the record, there is nothing to establish the factum of actual payment of purchase price at the rates as mentioned in MoUs by the assessee to the sellers for lands covered by the Agreements for Sale or the MoUs. On the contrary, the Affidavits of all the six sellers found and seized during the search, itself confirm that none of them had received any amount in excess of the amounts mentioned in the Affidavits, which were with respect to lands covered by Agreements for Sale dated 26.02.1996 and had not received any single penny towards the sale price of lands covered by MoUs and that saledeeds for lands covered by MoUs had not been executed. In the presence of the aforesaid documents evidence, the assumption or presumption arrived at by the Assessing Officer is uncalled for and bad in law. - it was absolutely illegal for the Assessing Officer to presume the factum of payment for those lands and that too at the rate mentioned in the MoUs. The Tribunal was completely justified in deleting the addition - Decided in favour of assessee

Summary

Issues:
Appeal challenging order of Income Tax Appellate Tribunal on addition of undisclosed income based on seized documents during search.

Analysis:
1. Jurisdiction of Assessing Officer under block period assessment: The case involves block period assessment under Chapter XIVB of the Income Tax Act, where the Assessing Officer's jurisdiction is limited to evidence, books of accounts, or documents found and seized during the search. This jurisdictional difference is crucial as it restricts the Assessing Officer's scope of assessment.

2. Documents seized during search: Various documents, including Agreements for Sale, MoUs, receipts, and affidavits, were seized during the search. The differentiation between documents related to lands covered by Agreements for Sale and MoUs is essential for assessing undisclosed income accurately.

3. Assessment of lands covered by Agreements for Sale: The Assessing Officer's computation of undisclosed income based on rates mentioned in MoUs for lands covered by Agreements for Sale was deemed unjustified. The lack of examination of sellers or parties regarding the authenticity of Agreements for Sale and Affidavits led to the deletion of the addition by the CIT(A).

4. Valuation of lands under MoUs: The Assessing Officer's estimation of undisclosed income for lands under MoUs was found to be illegal. The absence of evidence showing actual payment at the rates mentioned in MoUs, coupled with sellers' denial of receiving any payment, rendered the assessment baseless and contrary to law.

5. Evidence for undisclosed income: The absence of concrete evidence of payment at MoU rates and sellers' denial of receiving any amount beyond what was documented in Affidavits invalidated the Assessing Officer's presumption of undisclosed income. This lack of evidence undermined the assessment's validity and legality.

6. Tribunal's decision: The Tribunal's decision to delete the addition and allow the assessee's appeal while rejecting the Revenue's appeal was based on the inadequacy of evidence supporting the Assessing Officer's computation of undisclosed income. The Tribunal's ruling favored the assessee due to the lack of substantiated evidence justifying the additions made by the Assessing Officer.

7. Final verdict: The High Court upheld the Tribunal's decision, dismissing both appeals and ruling in favor of the assessee. The judgment emphasized the importance of concrete evidence and adherence to legal procedures in determining undisclosed income during block period assessments.