2019 (1) TMI 1135 - AT - Income Tax

Addition on account of long term capital gains - statements of purchaser u/s 131 in order to bring the truth on record - Held that - In the present case, the department is heavily relied upon the receipt in question with regard to taking sale consideration of the property in question at ₹ 2.25 crores which fact is contradicted by the sale agreement found during the course of search and the sale deed executed by the parties. Since the receipt in question is not signed by the seller and the purchaser, therefore, it was duty of the A.O. to record the statement of Shri L.C. Madan, Shri Pawan Khurana and Shri Vikram Sharma u/s 131 in order to adjudicate upon the issue between the parties. In this view of the matter, we are of the view that the matter requires reconsideration at the level of the A.O. The decisions relied upon by the D.R. in the written submissions would not support the case of the Revenue because of the findings above. We, accordingly, set aside the Orders of the authorities below and restore the matter in issue to the file of A.O. with a direction to make proper enquiry into the matter by recording statements of Shri L.C. Madan, Shri Vikram Sharma and Shri Pawan Khurana under section 131 of the I.T. Act with regard to sale consideration mentioned in the receipt in question - Appeal of Assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of ?1.44 crores on account of long-term capital gains.
2. Validity and authenticity of the receipt indicating sale consideration of ?2.25 crores.
3. Presumption under Section 132(4A) and Section 292C of the Income Tax Act.
4. Adequacy of the investigation conducted by the Assessing Officer (A.O.).

Issue-wise Detailed Analysis:

1. Addition of ?1.44 crores on account of long-term capital gains:
The Assessee challenged the addition of ?1.44 crores made by the A.O. on account of long-term capital gains. The original return filed by the Assessee declared income from various sources, including business, profession, and capital gains. During a search operation, an agreement for the sale of property at ?81 lakhs was found. However, a receipt indicating a sale consideration of ?2.25 crores was also seized. The A.O. computed the capital gains based on the higher amount, leading to the disputed addition.

2. Validity and authenticity of the receipt indicating sale consideration of ?2.25 crores:
The receipt in question was allegedly issued by the Assessee's father, Shri L.C. Madan, who was not authorized to deal with the property. The Assessee argued that the receipt was not signed by either the seller or the buyer and that the sale deed executed was for ?81 lakhs. The A.O. and CIT(A) relied on the receipt to determine the sale consideration as ?2.25 crores. The Assessee contended that the statement made under pressure during the search was incorrect and that there was no legal basis for considering the receipt as valid evidence.

3. Presumption under Section 132(4A) and Section 292C of the Income Tax Act:
The A.O. applied the presumption under Section 132(4A) and Section 292C, which states that documents found in possession during a search are presumed to be true and correct. The Assessee rebutted this presumption by denying the execution of the receipt and arguing that the burden of proof was discharged. The Tribunal noted that different versions of the sale consideration emerged during the search, and the Assessee's initial denial created doubt about the receipt's authenticity.

4. Adequacy of the investigation conducted by the Assessing Officer (A.O.):
The Tribunal found that the A.O. did not conduct a thorough investigation. The A.O. relied heavily on the presumption under Section 132(4A) without recording statements from key individuals involved, such as Shri L.C. Madan, the broker Shri Vikram Sharma, and the purchaser Shri Pawan Khurana. The Tribunal emphasized the need for a detailed inquiry to ascertain the true sale consideration and directed the A.O. to re-investigate the matter by recording relevant statements and providing the Assessee with an opportunity to be heard.

Conclusion:
The Tribunal set aside the orders of the lower authorities and remanded the matter back to the A.O. for a fresh assessment. The A.O. was directed to conduct a thorough investigation by recording statements from the relevant parties and giving the Assessee a fair opportunity to present evidence. The appeal of the Assessee was allowed for statistical purposes, emphasizing the need for proper adjudication based on comprehensive evidence.