2023 (12) TMI 805 - AT - Income Tax

Disallowance under the Capital Gain - Understated sale consideration on sale of property - material seized from the possession of the purchaser - CIT(A) deleted the addition - HELD THAT - AO in the course of assessment relied upon a loose paper no.15 found from the possession of the purchaser at the time of search which reflected the sale consideration to be Rs. 40,00,00,000/- as against Rs. 36,00,76,400/- declared by the assessee. Based on material seized from the possession of the purchaser, the AO confronted the loose paper/document no.15 and also another loose paper/document no.54 to the assessee. The explanation of the assessee on the propriety of the sale consideration was called for. Summon to the purchaser was also simultaneously issued for personal deposition and to illicit information on contents of such loose paper found from their possession. AO in the assessment order has noted that neither summon to the purchaser were complied nor the assessee has offered any clarification on the issue. Apart from raising some counter question upon the AO, the assessee has not offered any worthwhile explanation. CIT(A) in first appeal however referred to pleading of behalf of the assessee and relied upon the contents of loose paper no.54 showing sale consideration as per registered deed and accepted the version of the assessee towards sale consideration of Rs. 36,00,76,400/- declared by the assessee. We observe that while holding in favour of the assessee, the CIT(A) has not discussed as to how a tangible document/ loose paper no.15 found from the possession of the purchaser in course of drastic action of search is unworthy of any reliance. The overwhelming characteristic of contents of such notings/loose paper showing part payments against the agreed sale consideration and resultant outstanding was totally ignored. CIT(A) has also not made any discussion on non-compliance of summons issued to the purchaser u/s 131 of the Act. A hand written document found from the premises of purchaser, without being disowned, called for due weight. CIT(A), to our mind, merrily accepted mundane and stereotyped defenses raised on behalf of the assessee in a perfunctory manner without seeking any comment from the AO and without traversing glaring facts. Thus, while the AO, to our mind, has discharged his quasi judicial duties in a just and proper manner, the CIT(A), on the other hand, has failed to adhere to legitimate expectation and has passed a nondescript and cryptic order without dealing with the fundamental aspects of the matter. It is surprising that a noting/ document reflecting not only sale consideration but also showing part payments and outstanding amounts has been found to be unworthy of any reliance. Scope of powers vested to the CIT(A) u/s 251 are co- terminus and co-extensive with that of AO exercising quasi judicial functions. The CIT(A) is not only an appellate authority but also possess the powers of an adjudicating authority similar to that of an AO. The powers of enquiry thus in a sense, runs concurrently. Proper appreciation of all material placed before him was incumbent in law. The CIT(A) ought to have made suitable enquiries on the proprietary of sale consideration declared in the light of document seized instead of brushing aside the action of the AO in a lopsided manner. The order of CIT(A) lacks comprehension. The CIT(A) has omitted to expound the facts in perspective while displacing the order of AO. The fallacy in action of the CIT(A) is quite visible and hence the impugned first appellate order cannot be countenanced in law. The appellate order of the CIT(A) is thus set aside and matter is restored back to the file of the CIT(A) for fresh determination of the issue in accordance with law after making enquiries or causing enquiry through the AO in this regard. Appeal of the Revenue is allowed for statistical purposes

Summary

Issues Involved:
1. Deletion of disallowance under Capital Gain by CIT(A).
2. Validity of sale consideration declared by the assessee.

Summary:

Issue 1: Deletion of disallowance under Capital Gain by CIT(A)
The Revenue filed an appeal against the First Appellate Order of the CIT(A), which had deleted the disallowance made by the AO amounting to Rs. 3,99,23,600/- under the Capital Gain. The AO had observed that the assessee company, engaged in the business of purchase, development, and sale of properties, had understated the sale consideration of a property sold to M/s. UTC Softech Pvt. Ltd. The AO based this on seized documents indicating a sale consideration of Rs. 40,00,00,000/- instead of Rs. 36,00,76,400/-. Consequently, the AO proposed to assess the difference as undisclosed income. However, the CIT(A) reversed the addition, relying on another seized document that supported the declared sale consideration.

Issue 2: Validity of sale consideration declared by the assessee
The Revenue challenged the CIT(A)'s decision, arguing that the CIT(A) overlooked significant evidence and failed to appreciate the AO's efforts to justify the higher sale consideration. The CIT(A) had relied on document No.54, which matched the registered sale deed, rather than document No.15, which suggested a higher sale consideration. The Tribunal noted that the CIT(A) did not adequately address why the tangible document No.15 was unworthy of reliance and ignored the non-compliance of summons issued to the purchaser. The Tribunal emphasized that the CIT(A) should have made suitable enquiries to verify the sale consideration instead of dismissing the AO's findings.

Conclusion:
The Tribunal found the CIT(A)'s order lacking in comprehensive analysis and set it aside. The matter was restored to the CIT(A) for fresh determination, with instructions to make necessary enquiries and provide the assessee an opportunity to present evidence and explanations. The appeal of the Revenue was allowed for statistical purposes.