2022 (3) TMI 724 - HC - Income Tax

Estimation of profit embedded in the total unaccounted on money receipts from real estate business of the assessee - CIT(A) did not approve the AO s estimate of the figure of on money based merely on the two statements of the buyers - HELD THAT - AO estimated the figure of on-money on the basis of statements of two buyers namely Shri Anand Gaur and Sudhirbhai Parikh recorded during the survey. We have further noted that CIT(A) independently examined the statement of both these two flat buyers CIT(A) on examination of their statement held that both the parties stated about the rate of flat booking payment terms money paid from time to time both the buyers nowhere asked in the statement that they have made on money payment. The statement of purchaser cannot alone prove that they were having any agreement with the assessee regarding any payment made outside books of accounts. The contention of assessee that both the buyers paid extra money for extra work agreement is also proved by proof of disbursal of bank loans as well as by extra work agreements. CIT(A) further noted that if the extra work doubted by search or survey party no further investigation was made against those flats owners. The adoption of huge on money without iota of evidence is not justified and deleted the entire addition. We should not disturb the order passed by the Appellate Tribunal dismissing the Appeal filed by the Revenue thereby affirming the findings recorded by the CIT(A).

Summary

Issues:
1. Justification of confirming deletion of addition made by Assessing Officer on estimation of profit from unaccounted money receipts in real estate business.
2. Appreciation of evidences and statements made during search/survey proceedings by the Appellate Tribunal.

Analysis:
1. The Tax Appeal under Section 260A of the Income Tax Act, 1961 was filed by the Revenue against the order of the Income Tax Appellate Tribunal, Surat Bench, which dismissed the appeal against the order passed by the CIT(A) for the A.Y. 2014-15. The Revenue challenged the deletion of an addition of ?5,20,95,322/- made by the Assessing Officer based on the estimation of profit from unaccounted money receipts in a real estate business. The AO's calculation was based on statements made by buyers of flats during search/survey proceedings and admissions by the firm's partners. The Tribunal affirmed the CIT(A)'s decision to delete the addition, emphasizing the lack of documentary evidence to substantiate the receipt of 'on money' and the absence of recovered documents during search/survey proceedings. The Tribunal held that the estimation of profit without concrete evidence was not justified, leading to the dismissal of the Revenue's appeal.

2. The AO's estimation of 'on money' was primarily based on statements made by buyers of flats and partners of the firm during the survey. However, the CIT(A) independently examined these statements and found no explicit mention of 'on money' payments. The buyers' statements about payment terms and extra work did not conclusively prove the existence of agreements for payments outside the books of accounts. The CIT(A) also noted that no further investigation was conducted against flat owners regarding extra work payments. The Tribunal concurred with the CIT(A)'s analysis, highlighting the lack of substantial evidence to support the addition of 'on money.' Consequently, the Tribunal upheld the CIT(A)'s decision to delete the entire addition, emphasizing the necessity of concrete proof to justify such estimations. The appeal filed by the Revenue was dismissed based on these findings, affirming the CIT(A)'s decision.

In conclusion, the High Court upheld the Tribunal's decision to dismiss the Revenue's appeal, emphasizing the importance of concrete evidence to support estimations of profit from unaccounted money receipts in real estate business. The judgment highlighted the significance of documentary proof and thorough investigation in such cases to avoid unjustified additions based solely on statements made during search/survey proceedings.