2019 (4) TMI 1235 - HC - Income Tax

Unaccounted cash payments - search u/s 132 - two draft agreements found mentioning different sales consideration of same property - AO alleged that difference received in cash - HELD THAT - The assessee pointed out that the agreement was never acted upon since later on it was found that the land was subject to several reservations of the Government departments such as the water supply department, fire department etc. Part of the land was also occupied by encroachers. The land was also found to be of new tenure which would imply that unless the same was converted into old tenure, the development on such land would not be possible. Inter-alia on such grounds, the Tribunal accepted the assessee's contention that the draft agreement was never acted upon by the parties Entire issue is factual. The Tribunal took into account the relevant facts and came to the conclusion that the addition of said sum of ₹ 1.53 crores by the Assessing Officer was not sustainable. No question of law arises in this respect. Addition based on the basis of loose papers found during search - HELD THAT -While deleting the additions, the Tribunal assessed the material on record there is no evidence about the payment of amount of ₹ 20 lakh by cheque about which the investigation wing/search party has made thorough investigations, then the presumption about the payment of cash cannot be drawn under such circumstances. The additions solely on the basis of suspicion, how strong it may be, in our view, are not sustainable in the eyes of law. We therefore set aside the impugned additions made by the lower authorities. The appeal of the assessee is therefore allowed

Summary

Issues:
1. Addition of undisclosed income based on draft agreement of sale.
2. Deletion of additions made on the basis of loose papers found during search.

Analysis:

Issue 1:
The first issue pertains to the addition of undisclosed income amounting to ?1.53 crores based on a draft agreement of sale. The Assessing Officer believed that the price difference between two draft agreements indicated cash payments received by the assessee. However, the Tribunal deleted the addition after considering the assessee's explanation. The Tribunal noted that the draft agreement was never acted upon due to various government reservations and encroachments on the land. It was also found that the land was of new tenure, requiring conversion to old tenure for development. The Tribunal concluded that the addition was not sustainable based on factual grounds, and no legal question arose.

Issue 2:
The second issue involves the deletion of additions made by the Assessing Officer based on loose papers found during the search. The Tribunal analyzed the loose papers indicating payments made to an individual and noted discrepancies in the payment details. The Assessing Officer alleged a cash payment of ?1.50 crores, but the Tribunal found inconsistencies in the evidence. The Tribunal highlighted that the Assessing Officer failed to prove a cheque payment of ?20 lakh, and the assessee explained that part of the payment was returned. The Tribunal emphasized that additions based on suspicion, without concrete evidence, are not legally sustainable. As the issue was deemed factual with no identified perversity, the Tribunal dismissed the Income Tax Appeal.

In conclusion, the High Court upheld the Tribunal's decision to delete the additions in both issues, emphasizing the importance of factual analysis and concrete evidence in tax assessments.