2013 (5) TMI 637 - AT - Income Tax

Addition of trading results - @10% of gross profits as against 8.03% reflected by the assessee - CIT(A) deleted the addition - Held that - The Assessee in this case is executing small contracts. The contracts are of same nature and regular books are maintained. No specific defect has been pointed out in the books maintained. It is further noted that on similar facts, AO has not made any addition in the assessment order passed u/s. 153A for A.Y. 2001-02, 2004-05, 2005-06 & 2006-07. As such there is a clear contradiction in the approach of the AO. Furthermore, reference to net profit in the case of Vijay Kumar Kataria assessee s husband and assessee in the past is factually incorrect, as this is a case of search and assessment order was passed u/s. 153A. It is noted that no incriminating material or evidence was found or seized at the time of search and there is no reference to the same in the AO s order. Also see All Cargo Global Logistics Ltd. vs. DCIT 2012 (7) TMI 222 - ITAT MUMBAI(SB) wherein with reference to the assessment u/s. 153A it was held that any assessment that are abated, AO retains the original jurisdiction as well as jurisdiction conferred on him u/s. 153A for which assessment shall be made for each assessment year separately. In favour of assessee. Unexplained investment in property - CIT(A) deleted the addition - Held that - No finding by the CIT(A) as to what was the source of investment. Merely because the payment was made through the bank account, it could be presumed that the source is explained and verified. Further the investment in this case as reflected in the assessee s statement of account needs to be corroborated from the books of accounts and records maintained by the assessee. As the books of accounts and records do not corroborate the investments, the addition has been made in this case. Hence, assessee s contention that no addition can be made in the absence of any incriminating material found is not germane here. Hence, in the interest of justice, remit this issue to the file of the AO to consider the issue afresh, in light of the submissions made by the assessee. Addition made upon the valuation done by the DVO - value of the property in this case as reflected in the registered sale deed was Rs. 33,00,000/-. Reference u/s. 142A was made to the DVO who determined the value of the property at Rs. 63,74,700/- as against Rs. 33,00,000/- shown by the assessee. Hence, there was difference of Rs. 30,74,700/-. This was added to the income of the assessee. CIT (A) deleted the addition as there was no evidence of adverse material regarding payment of under hand consideration - Held that - As no other incriminating material was found during the course of search CIT(A) is correct in this regard. Addition in this case has been made pursuant to search on the basis of Valuation Report of the DVO. It has been settled that in case of search in the absence of any incriminating material found during search, no addition can be made on the basis of Report of the DVO. See K.P. Varghese vs. ITO, Ernakulam & Anr. 1981 (9) TMI 1 - SUPREME Court ,C.I.T. vs. Abhinav Kumar Mittal 2013 (1) TMI 629 - DELHI HIGH COURT , C.I.T. vs. Mahesh Kumar 2010 (8) TMI 64 - DELHI HIGH COURT . Thus in the absence of any evidence that the assessee has invested more than value declared in the registered sale deed of property purchased, the addition in this regard on the basis of Valuation Report by the DVO is not sustainable.

Summary

Issues Involved:
1. Acceptance of trading results and estimation of net profit.
2. Unexplained investment in property.
3. Difference in purchase price and fair market value of property.

Issue-wise Detailed Analysis:

1. Acceptance of Trading Results and Estimation of Net Profit:
The Revenue challenged the Ld. Commissioner of Income Tax (A)'s decision not to accept the trading results of 10% of gross receipts added to the income of the assessee. The Assessing Officer (AO) estimated the net profit at 10% of the gross receipt against the declared net profit rate of 8.03%, citing the lack of contract-wise books of accounts, higher profit rates in the case of the assessee's husband, and the assessee's own declaration of 10% in some years. The Ld. Commissioner of Income Tax (A) observed that the assessee had been consistent in her accounting system over the years and found no basis for the AO's estimation. The Tribunal noted that no specific defects were pointed out in the books maintained, and the AO had not made similar additions in other assessment years under section 153A. It was also highlighted that no incriminating material was found during the search. The Tribunal upheld the Ld. Commissioner of Income Tax (A)'s order, affirming that there was no case for estimation of trading results.

2. Unexplained Investment in Property (A.Y. 2003-04):
The AO added Rs. 17,29,000/- as unexplained investment in property, noting a shortfall between the sale proceeds of a property and the investment in a new property. The Ld. Commissioner of Income Tax (A) found that the entire investment was supported by bank statements and deleted the addition. The Tribunal remitted the issue back to the AO for fresh consideration, emphasizing the need to corroborate the investment with books of accounts and records maintained by the assessee.

3. Difference in Purchase Price and Fair Market Value of Property (A.Y. 2003-04):
The AO made an addition of Rs. 30,74,700/- based on the Valuation Officer's report, which determined a higher fair market value than the declared purchase price. The Ld. Commissioner of Income Tax (A) deleted the addition, noting the absence of any incriminating material or evidence of underhand consideration. The Tribunal upheld this decision, referencing case laws that support the position that no addition can be made based on a valuation report alone in the absence of incriminating material found during the search.

4. Unexplained Investment in Property (A.Y. 2006-07):
The AO added Rs. 13,30,000/- as unexplained investment in property, noting a shortfall between the sale proceeds of a property and the investment in a new property. The Ld. Commissioner of Income Tax (A) found that the entire investment was supported by bank statements and deleted the addition. The Tribunal remitted the issue back to the AO for fresh consideration, emphasizing the need to corroborate the investment with books of accounts and records maintained by the assessee.

5. Difference in Purchase Price and Fair Market Value of Property (A.Y. 2006-07):
The AO made an addition of Rs. 15,36,000/- based on the Valuation Officer's report, which determined a higher fair market value than the declared purchase price. The Ld. Commissioner of Income Tax (A) deleted the addition, noting the absence of any incriminating material or evidence of underhand consideration. The Tribunal upheld this decision, referencing case laws that support the position that no addition can be made based on a valuation report alone in the absence of incriminating material found during the search.

Conclusion:
The Tribunal dismissed the appeal for A.Y. 2002-03, and partly allowed the appeals for A.Y. 2003-04 and A.Y. 2006-07 for statistical purposes, remitting the issues of unexplained investment back to the AO for fresh consideration. The Tribunal upheld the Ld. Commissioner of Income Tax (A)'s decisions regarding the estimation of trading results and the additions based on valuation reports in the absence of incriminating material.