2014 (3) TMI 355 - AT - Income Tax

Addition on undisclosed income Sale of land Held that - The contention of the assessee that no addition can be made on the basis of unsigned documents is not tenable because unsigned documents are not the only evidence but they are corroborated by entries made in the books of accounts of M/s Sainath Estates thus, assessee s contention that it has not received sale consideration of Rs.16.20 crores is not believable - when assessee was given opportunity to cross examine Sri Prema Sagar Rao, neither the assessee nor Sri Prema Sagar Rao appeared - The entries made in the books of accounts of Sainath Estates and payments reflected in seized payments vouchers coupled with the fact that assessee himself has also accepted a part of the cash payment clearly establish that sale consideration of Rs.16.20 crores recorded in the books of accounts of M/s Sainath Estate is the actual amount received by the assessee and his son - The payment vouchers are corroborated by other evidences which demonstrate payment of sale consideration of Rs.16.20 crores thus, there was no infirmity in the order of the CIT (A) Decided against Assessee. Valuation of property Fair market value Held that - Neither the Assessing Officer nor the CIT (A) have correctly adopted the FMV of the property as on 1-4-1981 - While the CIT (A) was correct in rejecting the FMV of Rs.10 per sq. yard adopted by Assessing Officer on the basis of SRO guidelines, but the FMV of Rs.100 per sq. yard as on 1-4-1981 adopted by him is also without any basis - Neither the Assessing Officer nor the CIT (A) conducted necessary enquiry and brought on record comparative instances of sale of land in that locality or nearby area which could have thrown some light on the FMV of the property as on 1-4-1981 - FMV of a property at Nacharam cannot be determined on the basis of few instances of sale at Banjara Hills as it is not in the immediate vicinity - Revenue as well as the assessee have failed to factually establish the FMV of the land as on 1-4-1981 the matter is remitted back to the AO for ascertain the FMV of the land as on 1-4-1981 Decided in favour of Assessee. Claim of deduction u/s 54F of the Act Held that - The CIT (A) held that as the built up areas registered under two separate sale deeds were contiguous and adjacent and were having a common wall, deduction u/s 54F cannot be restricted to one of such residential built up area The CIT (A) has allowed the deduction claimed by the assessee u/s 54F of the Act by directing the Assessing Officer to treat it as one residential house thus, it is totally unnecessary to go into the issue whether it is actually one residential house registered as two units under two separate documents by the builder M/s Sainath Estates for claiming deduction u/s 80IB there was no infirmity in the order of CIT(A) Decided against Assessee. Allowability of deduction u/s 54F of the Act on all the flats Held that - The computation of income filed along with the return of income the assessee had claimed deduction u/s 54F in respect of one house - During the assessment proceeding also assessee never claimed deduction u/s 54F in respect of all flats - Even before the CIT (A) the assessee never raised any issue with regard to deduction u/s 54F in respect of all the flats - at the belated stage the assessee cannot be permitted to raise this issue before us for the first time - investigation into/ consideration of new facts cannot be done in an additional ground as held in National Thermal Power Company vs. CIT 1996 (12) TMI 7 - SUPREME Court Decided against Assessee.

Summary

Issues Involved:
1. Addition of Rs.1,52,90,250 as undisclosed income.
2. Adoption of Fair Market Value (FMV) of the property as on 1-4-1981.
3. Deduction under section 54F of the IT Act in respect of residential flats.

Detailed Analysis:

1. Addition of Rs.1,52,90,250 as Undisclosed Income
The primary issue was the addition of Rs.1,52,90,250 as undisclosed income based on alleged extra consideration from the sale of land. The assessee contested the addition, arguing that the amount represented by unsigned receipts was never received. The department, however, relied on statements and seized documents indicating a higher sale consideration.

The tribunal noted that the assessee initially denied receiving any cash payments but later admitted to receiving Rs.1,85,00,000 in cash when confronted with signed vouchers. The tribunal found that the unsigned vouchers, corroborated by entries in the books of M/s Sainath Estates, supported the department's claim. The tribunal upheld the addition but directed the Assessing Officer to verify and correct any excess addition.

2. Adoption of Fair Market Value (FMV) of the Property as on 1-4-1981
The assessee argued for an FMV of Rs.56,14,000 before indexation, as valued by a registered valuer, while the department adopted Rs.10 per sq. yard based on SRO information. The CIT (A) estimated the FMV at Rs.100 per sq. yard, rejecting both the department's and the registered valuer's valuations.

The tribunal found that neither the Assessing Officer nor the CIT (A) had conducted a proper inquiry to determine the FMV. The tribunal remitted the matter back to the Assessing Officer for a fresh determination based on comparative instances of sale in the locality or nearby areas, ensuring a reasonable opportunity for the assessee to be heard.

3. Deduction under Section 54F of the IT Act in Respect of Residential Flats
The assessee claimed a deduction under section 54F for multiple flats, arguing that they constituted a single residential unit. The Assessing Officer allowed the deduction for only one flat, but the CIT (A) allowed it for both flats, considering them as contiguous and forming one residential unit.

The tribunal upheld the CIT (A)'s decision, noting that the flats were adjacent and had a common wall, thus qualifying as a single residential unit for the purpose of section 54F. The tribunal also addressed additional grounds raised by the assessee, ultimately dismissing them as they required investigation into new facts not previously considered.

Conclusion
The tribunal's decision involved a detailed examination of the evidence and legal principles, ultimately upholding the department's addition of undisclosed income while remitting the FMV issue for further inquiry and allowing the section 54F deduction for contiguous flats. The tribunal's approach emphasized the importance of corroborative evidence and proper valuation procedures in tax assessments.