2023 (2) TMI 454 - AT - Income Tax

Undisclosed capital gain - As per DR addition have been made after discovery of incriminating material - CIT(A) deleted the addition by noting that in appellate proceedings, additions in the hands of the other parties have been deleted - HELD THAT - CIT(A) has passed very short and laconic order. He has only mentioned about the CIT(A) s order in purchasers case without discussing any detail thereof and deleted the addition. These orders of Ld. CIT(A) of other parties were never before the AO. Assessee has furnished one of the purchaser s order, wherein, ITAT has deleted the addition on the ground that no corroborative material has been found. We note that we do not have benefit of the AO s order in the case of those sellers. In the present case, the AO has mentioned incriminating material referred in Investigation Wing report. In these circumstances, in our considered opinion these additional materials were never before the AO. We note that interest of justice demands that the matter may be remitted back to the file of the AO. The AO shall examine the case with reference to the additional material in the shape of appellate orders in purchaser s case and thereafter decide as per law. This appeal filed by the Revenue stands allowed for statistical purposes.

Summary

Issues:
1. Addition on account of undisclosed capital gain based on seized documents.
2. Application of decision in the case of purchasers to the case of the seller.
3. Evidentiary value of seized documents in computing sale consideration.

Issue 1: Addition on account of undisclosed capital gain based on seized documents:
The case involved an appeal by the Revenue against the order of the ld. CIT (Appeals) for the Assessment Year 2006-07. The Assessing Officer reopened the assessment based on information that the assessee had sold her share in land, leading to an alleged capital gain. The AO relied on electronic storage devices recovered from another individual's premises, indicating cash transactions not declared by the assessee. The AO made additions to the assessee's income based on these findings. However, the CIT (Appeals) deleted the addition, citing similar deletions in cases of other parties. The Revenue appealed this decision, leading to a hearing before the ITAT. The ITAT noted the absence of documentary evidence to substantiate the cash transactions, emphasizing the burden of proof on the Revenue. The ITAT concluded that the AO failed to collect evidence supporting the cash transactions, leading to the deletion of the addition by the CIT (Appeals).

Issue 2: Application of decision in the case of purchasers to the case of the seller:
The Revenue argued that the CIT (Appeals) erred in deleting the addition without considering the fact that the purchasers were different entities. The Revenue contended that the decision in the purchasers' case should not apply to the seller's case. However, the ITAT, after considering various case laws and analyzing the factual matrix, concluded that the burden of proof lay with the Revenue to establish the cash transactions. The ITAT highlighted that the Revenue's presumption lacked substantiation and that the seized material did not conclusively prove the cash transactions. The ITAT upheld the CIT (Appeals)'s decision to delete the addition, emphasizing the need for corroborative evidence to support the Revenue's claims.

Issue 3: Evidentiary value of seized documents in computing sale consideration:
The Revenue argued that the seized documents, including an Excel sheet, provided evidence of undisclosed cash transactions forming part of the sale consideration. However, the ITAT found that the Revenue failed to corroborate the seized material with concrete evidence. The ITAT emphasized that the burden of proof rested with the Revenue and that mere presumptions without substantiation could not lead to additions in the assessee's income. The ITAT referred to various legal precedents supporting the need for concrete evidence to support additions based on presumptions. Ultimately, the ITAT allowed the Revenue's appeal for statistical purposes, remitting the matter back to the AO for further examination based on additional material from the purchasers' cases.

In conclusion, the judgment addressed the issues of undisclosed capital gain, application of decisions to different parties, and the evidentiary value of seized documents in computing sale consideration. The ITAT emphasized the importance of concrete evidence and burden of proof on the Revenue, leading to the deletion of the addition by the CIT (Appeals) in the absence of substantiated claims. The matter was remitted back to the AO for further examination based on additional material from related cases.