2016 (1) TMI 1514 - HC - Income Tax

Addition made on account of estimated on money received on sale of flats - AO estimating the undisclosed income in respect of 37 flats even in the absence of specific evidence and only on the basis of evidence found in respect of other 39 flats during search and which has been accepted by the respondent assessee - HELD THAT - We are of the view that the decision of Esufali, H.M. Abdulali 1973 (4) TMI 49 - SUPREME COURT would have no application to the present facts. It was a case of the regular books i.e. bills etc. being disowned by the assessee and the Authority resorting to best judgment assessment. This is not a case of not a best judgment assessment and wherever documents indicate that there was some additional consideration received by the respondent assessee, the same was offered to tax. However, in the absence of any evidence merely on the basis of suspicion, it is not open to add any amount as income. Revenue, was unable to explain the basis on which only the consideration received in respect of 37 flats was added to the extent of Rs. 500/- per sq.ft. and not in respect of certain other flats when there was no evidence in both the above class of cases. No explanation is forthcoming nor found in the orders. Decided in favour of assessee.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding addition of estimated on money received on sale of flats.

Analysis:
The appeal under Section 260A of the Income Tax Act, 1961 challenges the order of the Income Tax Appellate Tribunal (the Tribunal) for Assessment Year 2008-09. The Revenue questions whether the Tribunal was justified in directing the Assessing Officer to delete the addition made on account of estimated on money received on sale of flats without appreciating the facts of the case. The Assessing Officer estimated on money received on sale of 39 flats based on seized documents, and the respondent assessee offered an amount to tax. However, the Assessing Officer also added on money received for 37 flats without any evidence, resulting in an estimated undisclosed income. The Commissioner of Income Tax (Appeals) deleted the addition for the 37 flats due to lack of evidence. The Tribunal upheld this decision, stating that the additions made by the Assessing Officer were based on suspicion and lacked material or evidence.

On further appeal, the Revenue argued that the Assessing Officer was correct in estimating undisclosed income for the 37 flats based on evidence from the other 39 flats. The Revenue relied on a previous court decision, Commissioner of Income Tax Vs. Esufali, H.M. Abdulali, (1973) 90 ITR 271. However, the court found that this case was different as it involved best judgment assessment when the assessee disowned regular books. In the present case, without specific evidence, adding income based on suspicion alone is not valid. The court noted that the Revenue failed to explain why only the consideration for 37 flats was added and not for others, without evidence in both cases. The impugned order essentially reiterated the findings of the Commissioner of Income Tax (Appeals).

The court concluded that the decision of the Commissioner of Income Tax (Appeals) and the Tribunal was not shown to be perverse. The question raised did not give rise to any substantial question of law. Therefore, the appeal was dismissed with no order as to costs.