2017 (6) TMI 727 - AT - Income Tax

Addition on advance towards sale consideration - addition based on statement recorded during the survey - Held that - No corroborative evidence was brought on record by the AO to show that the sum of ₹ 20 lakhs was paid as advance towards sale consideration to Shri. Chandre Gowda. Neither the sale deed, nor the statement confirming the receipt of ₹ 20 lakhs as advance, nor any statement from the attesting witnesses to the sale deed were brought on record. Further, there is also no evidence in respect of advance paid to Shri. Chunche Gowda. There is no evidence brought on record in the form of agreement to sale, wherein it was agreed that the total sale consideration of ₹ 29,38,000/- was agreed by the assessee to be paid to Shri. Chunche Gowda, out of which ₹ 5 lakhs was paid to him as advance. Neither Shri. Chunche Gowda was examined nor any other document was produced on record. Therefore, in the absence of any evidence, the additions were made merely on the basis of statement recorded during the survey. In our view, it is the duty of the AO to bring on record the corroborative evidence for the purpose of making the addition. Merely on the basis of the statement recorded during the survey or after survey, the addition cannot be made as held by the Hon ble Supreme Court in the matter of S. Khader Khan Son (2013 (6) TMI 305 - SUPREME COURT ), as also so notified by the Board vide Circular, F. No.286/98/2013 IT (Inv.II), dt.18.12.2014. Thus the additions for ₹ 25,00,000/-made on account of advances given to Shri.Chandre Gowda and Shri. Chunche Gowda are deleted. In respect of Smt. Giriyamma once the assessee filed a confirmation letter confirming the transaction that no sum of ₹ 8 lakhs was paid in cash to Smt. Giriyamma, then it is the solemn duty of the assessee to give all the details of her like date of her death, date of confirmation, Pan no, address etc. In the light of the above, we do not think the explanation given by the assessee is plausible and can be accepted. In view thereof, we uphold the order passed by the CIT (A) with respect to addition of ₹ 8 lakhs. Difference in cost of construction of residence, as well as upstairs - Held that - The cost of construction of the property at Hammasandra as well as the first floor of residence at Joggihalli, Chikkanayakanahalli, were required to be based on some material. The ld AO has not made the addition based on some material or basis rather had made solely on the basis of the statement and an estimation. In our view, the whole basis of making the addition by the authorities below is the statement recorded during the course of survey on 04.02.2010 and there is no corroborative material available before the authorities below. On the other hand assessee had filed valuation report before the authorities below and the said report of approved valuer was not disputed or rejected by the authority below. Hence relying upon the judgment of the Hon ble Supreme Court in the case of S. Khader Khan Son (supra), we are of the opinion that this addition made by the authorities below also was without any basis. Therefore the same is not sustainable in the eyes of law. - Assessee s appeal is partly allowed.

Summary

Issues:
- Appeal against order of CIT (A) for assessment year 2008-09.
- Addition to income based on survey and statement recorded.
- Admissibility of additional income declared by assessee.
- Corroborative evidence requirement for additions.
- Validity of additions without corroborative evidence.
- Appeal based on lack of evidence and judgment of Supreme Court.
- Validity of additions for advances and construction costs.
- Reliability of valuation report in determining construction costs.

Analysis:
The appeal was filed against the CIT (A)'s order for the assessment year 2008-09. The assessee initially declared an income of ?45,89,180 but later allegedly admitted to additional income during a survey. The AO proposed adding back ?38,85,200 to the income, which was later increased to ?39,97,305. The CIT (A) confirmed the addition, leading to the appeal. The appellate tribunal noted that the additions lacked corroborative evidence beyond the statement recorded during the survey. The assessee relied on a Supreme Court judgment emphasizing the necessity of cogent evidence for additions. The tribunal found that the AO failed to provide corroborative evidence for the additions related to advances given and construction costs. The tribunal highlighted the importance of evidence and deleted the additions made without proper basis, granting relief to the assessee.

The tribunal emphasized that the AO must present corroborative evidence to support additions to income. Merely relying on statements recorded during surveys is insufficient, as evidenced by a Supreme Court ruling and a circular from the Board. The tribunal found the additions made without supporting evidence for advances given to individuals were unjustified and deleted them. Similarly, the tribunal ruled that the additions for construction costs lacked a proper basis and were solely based on estimations, contrary to the valuation report submitted by the assessee. As the AO failed to dispute the valuation report, the tribunal concluded that these additions were also unwarranted and deleted them. The tribunal partially allowed the assessee's appeal, highlighting the necessity of substantiated evidence in making income additions and emphasizing the importance of following legal precedents and valuation reports in such matters.

In conclusion, the tribunal's decision focused on the requirement of corroborative evidence for income additions, as highlighted in legal judgments and circulars. The tribunal stressed the need for a factual and evidentiary basis for such additions, emphasizing the importance of following legal precedents and relying on valuation reports when determining income adjustments. The tribunal's decision to delete the additions without proper evidence showcased a commitment to upholding legal standards and ensuring a fair assessment process for the assessee.