2018 (7) TMI 824 - AT - Income Tax

Addition u/s 69 - undisclosed sales consideration - sale of property - Held that - The statement of the Vendor cannot be believed in view of the documentary evidence in the form of lease deed between the Assessee and the tenants after the transfer of the property in favour of the Assessee - Since no actual investment was made by the Assessee but he merely acknowledged liability to return security deposit to the tenants, no addition u/s. 69 can be made as the condition precedent for invoking those provisions are that the Assessee should have made an investment in the sense there ought to have been an outflow of funds from the Assessee, which condition is not fulfilled in the present case. The CIT(A) was therefore correct in deleting the addition made by the AO. We find no ground to interfere with the order of the CIT(A) and hence ground No.2 raised by the Revenue is dismissed. Consideration received towards fixtures and furniture - We are of the view that the documentary evidence in the form of confirmation by M/s. Stone Art and M/s. IQCP India Pvt. Ltd., the tenants of the property that whatever furniture and fixtures exist in the property it is their own and not provided by the Vendor, has to be believed. The statement of the vendor has been denied by the Assessee in his statement. In such circumstances, the claim of the Vendor, which is the only basis of the impugned addition, cannot be believed. There are no other circumstances, which can compel us to take a view different from the view taken by the CIT(A). Consequently, Gr.No.3 raised by the Revenue is dismissed. Cash over and above the sale consideration stated in the registered document has been denied - Held that - The basis on which the impugned addition was made by the AO and sustained by the CIT(A) is the statement of the Vendor and the circumstance that the value of the property as per the Registering Authorities for the purpose of stamp duty and registration was much higher than the value stated in the sale deed and therefore there was a probability of the statement of the Vendor being true and further circumstance that the Vendor has offered the sum in question as income in her return of income filed for the relevant assessment year. The learned counsel for the Assessee has brought to our notice a decision of the Hon ble Gujarat High Court in the case of Prl.CIT Vs. Vivek Prahaladbhai Patel (2015 (12) TMI 1287 - GUJARAT HIGH COURT) wherein the Hon ble Allahabad High Court on identical set of facts held that addition cannot be sustained. - Decided in favour of assessee

Summary

Issues Involved:
1. Addition of ?68,00,000 as unexplained investment in the purchase of property.
2. Addition of ?65,52,800 as unexplained investment in furniture and fixtures.
3. Addition of ?15,00,000 as cash payment over and above the sale consideration.

Detailed Analysis:

1. Addition of ?68,00,000 as Unexplained Investment in Property:

The Assessee purchased a non-residential property for ?3,80,00,000, while the Registrar of Assurances valued it at ?4,48,00,000. The AO issued summons to the Vendor, who claimed she received ?4,84,00,000. The AO added ?68,00,000 as unexplained investment under Section 69 of the Income Tax Act, 1961, based on the difference between the sale deed value and the stamp duty valuation.

The Assessee contended that the ?68,00,000 included security deposits of ?25,00,000 and ?28,00,000 from tenants, and ?15,00,000 allegedly paid in cash. The CIT(A) accepted that only ?30,00,000 (?10,00,000 from Stone Arts and ?20,00,000 from IQPC India Pvt. Ltd.) was the actual security deposit, not ?53,00,000 as claimed by the Vendor. The CIT(A) deleted the addition of ?53,00,000, stating no actual investment was made by the Assessee, merely an acknowledgment of liability to return the security deposit.

The Tribunal upheld the CIT(A)'s decision, noting the lack of evidence for the ?53,00,000 deposit and confirming that no outflow of funds occurred from the Assessee. The Revenue's ground on this issue was dismissed.

2. Addition of ?65,52,800 as Unexplained Investment in Furniture and Fixtures:

The AO added ?65,52,800 based on the Vendor's statement that this amount was paid for furniture and fixtures. The Assessee denied the existence of such furniture and provided confirmations from tenants that the furniture belonged to them. The CIT(A) deleted the addition, finding no evidence of such furniture and fixtures in the property or lease agreements.

The Tribunal agreed with the CIT(A), emphasizing the lack of evidence and the tenants' confirmations. The Revenue's ground on this issue was dismissed.

3. Addition of ?15,00,000 as Cash Payment Over and Above Sale Consideration:

The AO added ?15,00,000 based on the Vendor's statement and the higher stamp duty valuation. The CIT(A) upheld this addition, citing the Vendor's statement and the difference in valuation.

The Assessee appealed, referencing the Gujarat High Court's decision in Prl.CIT Vs. Vivek Prahaladbhai Patel, which held that suspicion cannot replace evidence. The Tribunal found this decision applicable and noted the lack of concrete evidence for the cash payment. The addition of ?15,00,000 was deleted.

Conclusion:

The Tribunal dismissed the Revenue's appeal (ITA No.1793/Bang/2016) and allowed the Assessee's appeal (ITA No.1697/Bang/2016), deleting the additions of ?68,00,000, ?65,52,800, and ?15,00,000. The judgment emphasized the necessity of concrete evidence over mere suspicion in tax assessments.