2021 (11) TMI 916 - AT - Income Tax

Understatement of sales - search and seizer operation were carried wherein the certain loose papers were found and seized - second round of appeal before tribunal - CIT-A deleted the addition - HELD THAT - AO made addition only by making the arbitrary calculation on the basis of above loose papers without bringing any positive, corroborative evidence on records in support he has proceeded on his own imagination, assumptions, presumptions or guess work - when the Assessing officer himself recorded the statements of Marketing manager Sh. Ankit Jain who was handling the sales was recorded on 21/10/2010 U/s 131 wherein he has clearly explained and stated about the size of flats are 1001 sq ft.(built up area) and 1126 sq ft. (built up area) only. He also explained about the size of flats mentioned in the broacher i.e. 1666 and 1484 sq ft. that this was nothing but super built up area of both type of flats constructed by the Company. Regarding charging of rates by the assessee Company from the customer in question No.5 he has clearly stated the facts that the rates per sq ft are charged on built up area only In all the agreements the built area as well as total sale consideration has been mentioned clearly. When all these explanation, documents were before the AO, he must bring on record any contrary evidence, he must have made the inquiry from the purchasers when the data or details of the purchasers were before him, before making the addition on account of understatement of sales. The Assessing Officer has not brought on record any contrary evidence except these loose papers. The Notarized sales agreements cannot be discarded in front of loose rough estimated papers without bringing any contrary evidences to rebut the same. On this preposition, we draw strength from the decision of the Hon ble MP High court in the case of CIT v/s Dolphin Builders (P) Ltd . 2013 (6) TMI 103 - MADHYA PRADESH HIGH COURT wherein it was held that Department had not examined any purchaser or flat owner to verify correctness of noting that some higher amount was paid by said purchaser to B Builders or fact that actual price was much higher to price which was recorded in account books. The Tribunal had also found that if any amount was collected in excess to the agreed price then B could have been liable for that and not the assessee. Aforesaid reasoning of the Tribunal was reasonable. Though there might be some doubt about the price of the flats but until and unless it could have been proved by some evidence, aforesaid doubt could not take place of proof. Until and unless such noting was corroborated by some material evidence, the AO erred in making addition in the income. AO made the addition own guess work, assumption, presumption and suspicion by using rough estimated cutting noting which were prior to the A.Y. s under consideration which was not desirable in the eye of law. Hence also no were liable to be made. CIT-DR has not brought on record any new facts or circumstances to controvert the findings so recorded by the ld. CIT(A) qua this issue, therefore, considering all, we do not see any reason to interfere to deviate from the findings so recorded by the ld. CIT(A) qua this issue, accordingly, we uphold the same. - Decided against revenue.

Issues Involved:
1. Understatement of sale consideration of flats.
2. Validity of additions based on loose papers and assumptions.
3. Relevance of seized documents from a different assessment year.

Issue-Wise Detailed Analysis:

1. Understatement of Sale Consideration of Flats:

The primary issue in both appeals was whether the CIT(A) was right in deleting the additions made by the AO on account of understatement of sale consideration of flats. The AO had made these additions based on loose papers seized during a search operation, which allegedly indicated higher sale prices than those recorded in the books.

The Tribunal noted that the AO had inferred the sale consideration from rough calculations on seized loose papers, which lacked any corroborative evidence. The AO had not brought any evidence on record to prove that the assessee received more consideration than what was mentioned in the sale deeds. The Tribunal emphasized that the AO's additions were based on assumptions and presumptions without any concrete evidence.

2. Validity of Additions Based on Loose Papers and Assumptions:

The Tribunal observed that the loose papers were rough estimates, unsigned, undated, and did not reflect any actual transactions. The AO's reliance on these papers for making additions was deemed arbitrary and without any supporting evidence. The Tribunal upheld the CIT(A)'s finding that such loose papers could not be used as a basis for determining the assessee's income.

The Tribunal cited several judicial precedents to support its conclusion that additions cannot be made based on assumptions, presumptions, or guesswork. It emphasized that the AO must bring on record concrete evidence to substantiate any claims of understatement of income.

3. Relevance of Seized Documents from a Different Assessment Year:

The Tribunal also addressed the issue of the timing of the seized documents. The search operation was conducted on 10.03.2010, relevant to the assessment year 2010-11, but the additions were made for the assessment years 2011-12 and 2012-13. The Tribunal found that the seized documents pertained to the earlier assessment year and could not be used to justify additions in subsequent years without any supporting evidence.

The Tribunal reiterated that the AO had not made any independent inquiries or brought any contrary evidence to support the additions. The Tribunal upheld the CIT(A)'s decision to delete the additions, emphasizing that the AO's approach was based on suspicion rather than concrete evidence.

Conclusion:

The Tribunal dismissed the appeals filed by the revenue, upholding the CIT(A)'s orders to delete the additions made by the AO. The Tribunal emphasized the importance of concrete evidence and the inadmissibility of assumptions, presumptions, and rough estimates in determining the assessee's income. The Tribunal's decision was based on a thorough analysis of the facts, submissions, and relevant judicial precedents.

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