2017 (4) TMI 573 - HC - Income Tax

Addition of sum paid to secure the possession of the flat - unexplained investment - Held that - The description of the flat in the loose papers did not tally with the description of the flat at Matunga. It was also not possible to gauge from the loose chits that were seized during the search operations that the flat at Matunga was referred to in the said chits. It was held by the Tribunal that there was no material to hold, as held by the Assessing officer, that the assessee had made the payment of ₹ 66,50,000/for securing the possession of the property from Shri Chokhani. It was also observed that the Assessing Officer could not have disbelieved the version of the Society or the broker on the ground that the Society did not know the whereabouts of Shri Chokhani after he left the flat that he was occupying for a period of ten years. The Tribunal held on an appreciation of the material on record that the addition made on the basis of the indication of purchase of flat and payment based on a piece of paper, cannot be upheld. In the instant case, since the broker had denied the receipt of payment and the Society had also denied the same, the Assessing Officer could not have held that the assessee had paid a sum of ₹ 66,50,000/to Shri Chokhani for securing the possession of the flat though no paper evidencing the payment except a letter of the broker was seized. The findings recorded by the Tribunal are pure findings of facts based on a proper appreciation of the evidence on record. The Tribunal has held on an appreciation of the material on record that there was no evidence, much less any cogent evidence to prove that the assessee had paid sum of ₹ 66,50,000/to secure the possession of the flat. In the circumstances of the case, the question of law is answered in the affirmative and against the Revenue.

Summary

Issues:
Whether the Tribunal was justified in deleting the addition of ?66,50,000 based on lack of evidence?

Analysis:
The case involved a search action under Section 132 of the Income Tax Act at the respondent's residential premises, where certain documents were seized, including letters related to a flat in Mumbai. The Assessing Officer concluded that the respondent had paid ?66,50,000 to acquire tenancy rights based on the seized letters and other evidence. However, the Income Tax Appellate Tribunal disagreed, stating there was no concrete proof of such payment. The Tribunal highlighted discrepancies in the seized documents, the denial of involvement by the broker and the SocietyTrust, and the lack of direct evidence linking the payment to the acquisition of the flat. The Tribunal's decision was based on a thorough evaluation of the evidence, concluding that the addition made by the Assessing Officer lacked a factual basis.

The Tribunal's findings were deemed as factual and well-supported by the evidence on record. It was emphasized that there was a lack of substantial evidence to establish that the respondent had indeed paid ?66,50,000 for obtaining possession of the flat. The Tribunal's analysis focused on the inconsistencies in the documents, the denial of payment receipt by involved parties, and the absence of concrete proof linking the payment to the property acquisition. Consequently, the question of law was answered affirmatively, favoring the respondent and rejecting the Revenue's claim.

In conclusion, the Income Tax Appeal was dismissed, with no costs awarded, as the Tribunal's decision to delete the addition of ?66,50,000 was upheld. The judgment underscored the importance of concrete evidence in tax matters and the necessity for a factual basis to support any additions made by the Assessing Officer. The Tribunal's meticulous evaluation of the evidence led to the rejection of the Revenue's claim, highlighting the significance of substantiated facts in tax assessments and appeals.