2021 (11) TMI 673 - AT - Income Tax

Unexplained investment in properties - Additions had been made by the A.O. on the basis of notings on some documents / loose papers in search - HELD THAT - A search was conducted at the residential premises of the assessee on 18/02/2011, during the course of search no documents in the form of agreement to sell or registered sale deed, evidencing unaccounted purchase / sale of the property by the assessee had been found. However the additions had been made by the A.O. on the basis of notings on some documents / loose papers but in those notings, nowhere name of the assessee was mentioned. In the present case it is noticed that the A.O. in his remand report stated that it is the modus-operandi of the property dealers that generally they do not purchase the property by way of registration deed but only by way of Power of Attorney and the same land is sold on the basis of the said power of attorney, hence their name did not appear in the registered sale deed or in the revenue record. However neither any Power of attorney in the name of the assessee, relating to any property alleged to be mentioned at the location in the seized document was impounded during the course of search proceedings, nor the revenue authority reported any such instance when the enquiries were made by the A.O. from those authorities and no such sale deeds were found where in the name of the assessee was appearing as power of attorney holder. During the course of search no valuable or cash was found or seized except 200 gms of gold and no document in the form of agreement to sell or registered sale deed had been found evidencing any unaccounted purchase / sale by the assessee. This fact has been categorically stated by the Ld. CIT(A) in para 5 at page 37 of the impugned order. Therefore the Ld. CIT(A) was not justified in presuming that certain transactions were carried on by the assessee particularly when he himself admitted that no documents in the form of agreement to sell or registered sale deed had been found evidencing any unaccounted purchase / sale by the assessee. A.O. made the additions only on the basis of certain documents on which there were some notings but neither the possession nor the ownership of any property mentioned in those loose slips could be proved to be belonging to the assessee, therefore keeping in view the ratio laid down in RAVI KUMAR 2007 (7) TMI 45 - HIGH COURT, PUNJAB AND HARYANA no addition could have been made in the hands of the assessee. Neither the dates pertaining and relevant to the year under consideration were mentioned on the loose papers / documents found during the course of search nor the notings were backed by direct or corroborative evidence that the notings have materialized into sale / purchase of property or there was any agreement to sell, which clearly shows that there was no corroborative / demonstrative evidence to justify the additions so made / sustained.- Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion and sustenance of additions on account of alleged unexplained investment in properties for A.Y. 2011-12.
2. Deletion of addition on account of alleged unexplained investment in properties for A.Y. 2007-08.

Detailed Analysis:

1. Deletion and Sustenance of Additions on Account of Alleged Unexplained Investment in Properties for A.Y. 2011-12:

Department's Appeal:
The Department raised multiple grounds challenging the deletion of various additions by the CIT(A) on account of alleged unexplained investments in properties. The grounds included specific amounts such as ?11,23,17,600, ?14,49,14,000, ?5,42,82,079, ?13,46,94,265, ?1,34,37,000, ?20,00,000, ?32,50,00,000, ?34,00,000, ?1,42,28,500, and ?21,00,000. The Department argued that the CIT(A) erred in law and on facts by not appreciating the seized documents, which contained meticulous details of various transactions.

Assessee's Appeal:
The Assessee contested the sustenance of the addition of ?6,51,97,000 by the CIT(A), arguing that the addition was based on arbitrary interpretation of dumb documents.

Findings:
- The CIT(A) observed that the documents found during the search were not sufficiently descriptive and lacked corroborative evidence to establish the veracity of the transactions.
- The CIT(A) directed the AO to conduct further investigations, including inquiries with land revenue authorities, which revealed no unaccounted transactions by the assessee.
- The CIT(A) concluded that the documents were dumb documents and could not be the basis for additions.
- The CIT(A) sustained the addition of ?6,51,97,000 based on the summary recorded at page no. 27, which was considered as representing the actual state of affairs.

Tribunal's Decision:
- The Tribunal noted that no corroborative evidence was found during the search to support the additions.
- The Tribunal highlighted that the AO's additions were based on presumptions and not backed by direct or corroborative evidence.
- The Tribunal referred to various judicial precedents, including the Hon'ble Jurisdictional High Court's decision in CIT Vs. Ravi Kumar, which emphasized that additions could not be made based on loose slips without proving possession or ownership.
- The Tribunal concluded that the addition sustained by the CIT(A) amounting to ?6,51,97,000 was not justified and deleted the same.

2. Deletion of Addition on Account of Alleged Unexplained Investment in Properties for A.Y. 2007-08:

Department's Appeal:
The Department challenged the deletion of the addition of ?6.32 crore made on account of undisclosed income of the assessee. The grounds were similar to those raised for A.Y. 2011-12, focusing on the alleged meticulous details in the seized documents and the non-cooperative attitude of the assessee.

Findings:
- The Tribunal noted that the issues and facts were identical to those in A.Y. 2011-12.
- The Tribunal reiterated its findings from the former part of the order, emphasizing the lack of corroborative evidence and the reliance on presumptions by the AO.

Tribunal's Decision:
- The Tribunal found no merit in the Department's appeal for A.Y. 2007-08 and upheld the CIT(A)'s decision to delete the addition.

Conclusion:
The Tribunal dismissed the Department's appeals for both A.Y. 2011-12 and A.Y. 2007-08 and allowed the assessee's appeal for A.Y. 2011-12, deleting the sustained addition of ?6,51,97,000. The Tribunal emphasized the need for corroborative evidence to support additions based on seized documents and rejected the reliance on presumptions and arbitrary interpretations.