2021 (10) TMI 546 - AT - Income Tax

Unexplained investment in purchaser of land - lands purchased at higher prices but in the registry actual amount paid by them was not declared - purchase consideration paid being less than the guideline value - as during the year under appeal assessee purchased lands at Rau and value as per registry was as different from guideline value - as loose papers found and seized from the premises of Shri Mukesh Jhaveri and also gave reference to the statement of some of the sellers who accepted to have received on money - HELD THAT - As decided by CIT-A addition has been made on the basis of the statements of the sellers of the land which have neither been provided to the appellant nor opportunity of cross examining the sellers giving to the appellant. AO has not brought any evidence on record to show that the appellant had paid any amount over and above the amount mentioned in the sales deed. AO during the assessment proceeding had given a show cause notice in which it was proposed to add the difference between the guideline value and the purchase price mentioned in the purchase deed as undisclosed investment. For making an addition the requirement is that the assessee should have incurred expenditure, offers no explanation about the source of such expenditure and the explanation offered by him is not satisfactory in the opinion of the Assessing Officer. Section 69C can be invoked only when there is evidence of unexplained expenditure. AO has made the addition on account of undisclosed receipts. The appellant's real estate project is still in progress and no land had been sold for the period under consideration and clearly this is not a case of undisclosed receipts. For the assessment year under consideration there was no statute in the Income Tax Act for taxing the purchase consideration paid by assessee if it is less than the guideline value. As held that additions made on account of alleged undisclosed investment for purchase of land on account of the purchase consideration paid being less than the guideline value cannot be sustained. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of the addition of ?5,93,51,700/- on account of unexplained investment in the purchase of land.
2. Opportunity of cross-examination and provision of statements to the assessee.
3. Reliance on guideline value versus registry value for tax assessment.

Issue-wise Detailed Analysis:

1. Deletion of the Addition of ?5,93,51,700/- on Account of Unexplained Investment in the Purchase of Land:

The Revenue challenged the deletion of the addition of ?5,93,51,700/- made by the Assessing Officer (AO) on account of unexplained investment in the purchase of land. The AO based the addition on the difference between the registry value of ?4,42,91,300/- and the guideline value of ?10,36,43,000/-. The AO argued that the assessee paid an additional amount (referred to as 'on money') not disclosed in the registered sale deed. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, observing that the AO relied on statements from sellers and seized documents without providing these to the assessee or allowing cross-examination. The CIT(A) found no evidence of payment over and above the registered amount. The Tribunal upheld the CIT(A)'s decision, noting the lack of corroborative evidence and the failure to provide the statements to the assessee.

2. Opportunity of Cross-Examination and Provision of Statements to the Assessee:

The CIT(A) emphasized the principle of natural justice, noting that the statements of sellers were not provided to the assessee, nor was the opportunity for cross-examination granted. The Tribunal supported this view, highlighting that the AO's reliance on statements without allowing cross-examination or providing copies to the assessee violated natural justice principles. The Tribunal cited several judicial precedents, including decisions from the Supreme Court and High Courts, reinforcing that statements made without cross-examination cannot be the sole basis for additions.

3. Reliance on Guideline Value Versus Registry Value for Tax Assessment:

The AO's addition was partly based on the difference between the guideline value and the registry value of the land. The CIT(A) and the Tribunal both noted that there was no statutory provision in the Income Tax Act for taxing the difference between the guideline value and the purchase price in the hands of the purchaser. The Tribunal referred to the Supreme Court decision in K.P. Varghese vs. ITO, which held that the onus lies on the Revenue to establish that an assessee has understated the consideration for the transfer of immovable property. The Tribunal concluded that without evidence of actual payment over the registry value, the addition could not be justified.

Conclusion:

The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s deletion of the addition. The Tribunal found no infirmity in the CIT(A)'s findings and emphasized the importance of providing statements to the assessee and allowing cross-examination. The Tribunal also noted the lack of statutory basis for taxing the difference between guideline and registry values in the hands of the purchaser. The appeal was dismissed, and the CIT(A)'s decision was upheld.