2021 (10) TMI 1092 - AT - Income Tax

Undisclosed capital gain - during the course of search and seizure operation u/s 132 carried out on the residential premises of assessee s brother, certain documents relating to the assessee were found - Capital gain returned by the assessee on sale of property jointly owned with his brother - HELD THAT - Only documentary evidence available in the present case is the registered sale deed which records and confirms the sale consideration declared by the assessee of ₹ 68 lacs. No other evidence whatsoever contradicting the sale consideration mentioned in the registered sale deed has been found. Also not denied that no investigation, with regard to the difference in the sale consideration as stated by Shri Surinder Singh Bindra and as recorded in the registered sale deed, was done by the AO. On the contrary, we find, he merely jumped on the oral statement of Shri Surinder Singh Bindra taking it to be a solemn truth merely because it was a statement recorded on oath, totally disregarding the registered documentary evidence being the sale deed. A registered sale deed cannot be summarily dismissed as evidence when juxtaposed with the oral statement alone that too only of one of the parties to the transaction even when made on oath. The statement, to carry weight as evidence needs to be supported with other evidences. The statement at best raises a suspicion about the consideration exchanged in the transaction which should prompt further inquiries, but oral statement even if recorded on oath alone is not sufficient to contradict/displace a duly registered documentary evidence. We agree with the Ld.Counsel for the assessee that the conclusion of the AO that the excess consideration was received, was based on mere surmises and lacked being backed by any evidence documentary or otherwise of any sort. Thus approach of the revenue authorities in treating the oral statement of the searched person as sacrosanct in total disregard to the registered documentary evidence available, is not in accordance with law and the addition made, therefore, by holding that the surplus consideration was received in the impugned transaction in the hands of the assessee is, therefore, directed to be deleted. Ground of appeal raised by the assessee allowed. Addition applying GP rate to contract receipts of the assessee - HELD THAT - In the present case it is not denied that the husband of the assessee, who was the person searched wherein documents relating to his wife, the assessee before us, were found, had himself stated to the authorities of having earned 8% to 9% profits on the receipts. Moreover, as rightly pointed out by the Ld.CIT(A), even Legislature has considered a net profit rate of 8% to be appropriate for contract receipts in the presumptive scheme of taxation. Therefore, we see no reason to interfere in the order of the Ld.CIT(A) restricting the net profit rate of 8% of the contract receipts.

Summary

Issues Involved:
1. Addition on account of undisclosed capital gain.
2. Application of net profit rate on contract receipts.

Issue-Wise Detailed Analysis:

1. Addition on Account of Undisclosed Capital Gain:

In the appeal of Shri Harvinder Singh for the assessment year 2015-16, the primary issue was the addition of ?3,75,000/- on account of undisclosed capital gain. The Assessing Officer (AO) based this addition on a statement made by the assessee's brother during a search operation, which suggested a higher sale consideration for a property transaction than what was recorded in the registered sale deed. The AO inferred that the difference in the sale consideration must have been received in cash and added the assessee's share of ?3,75,000/- to the income returned. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition.

However, the assessee contended that the addition was uncalled for as it was based solely on an oral statement without any supporting documentary evidence. The assessee argued that the registered sale deed, which recorded a sale consideration of ?68 lacs, should prevail over the oral statement. The Tribunal agreed with the assessee, emphasizing that a registered sale deed cannot be summarily dismissed when juxtaposed with an oral statement. The Tribunal held that the addition was based on mere surmises and lacked supporting evidence. Consequently, the addition of ?3,75,000/- was deleted, and the appeal on this ground was allowed.

In the appeal of Smt. Harvinder Kaur for the assessment year 2015-16, similar issues were raised regarding the addition of ?3,75,000/- on account of undisclosed capital gain. The Tribunal applied the same reasoning and decision as in the case of Shri Harvinder Singh, allowing the appeal on this ground.

2. Application of Net Profit Rate on Contract Receipts:

In the appeal of Smt. Harvinder Kaur for the assessment year 2015-16, the AO applied a net profit rate of 10% on the contract receipts based on seized documents and a statement made by the assessee's husband during the search operation. The CIT(A) restricted the net profit rate to 8%, considering it reasonable based on the statement of the assessee's husband and the presumptive tax scheme under the Income Tax Act, 1961.

The assessee contended that a lower net profit rate of 4% or 6% should be applied, citing various case laws. However, the Tribunal held that the net profit rate is a factual matter to be determined based on the specific facts of each case. Given the statement of the assessee's husband and the legislative benchmark of 8% for presumptive taxation, the Tribunal found no reason to interfere with the CIT(A)'s decision to apply an 8% net profit rate. Consequently, the appeal on this ground was dismissed.

For the assessment year 2016-17, the issues raised by Smt. Harvinder Kaur were identical to those in the previous year regarding the application of the net profit rate. The Tribunal applied the same reasoning and decision, dismissing the appeal on this ground.

Conclusion:

In summary, the Tribunal allowed the appeals of the assessees on the issue of undisclosed capital gain, deleting the additions made by the AO. However, the Tribunal upheld the application of an 8% net profit rate on the contract receipts, dismissing the appeals on this ground. All the appeals were partly allowed.