2022 (9) TMI 1016 - AT - Income Tax

Undisclosed investment u/s 69B - additions made solely on the basis of DVO Report - HELD THAT - We find that this Tribunal in the case of M/s. Golden Realities Ors. 2021 (11) TMI 561 - ITAT INDORE has already held that the additions made solely on the basis of DVO Report are not sustainable especially in a circumstance when the assessee had clearly demonstrated various discrepancies in the DVO s report. We further find that in the aforesaid decision, this Tribunal, after considering the various decisions on the issue, had allowed a rebate of 35% (being 25% on account of CPWD/PWD rates and 10% on account of self-supervision charges) against the total valuation made by the DVO. We note that in the instant case, the ld. CIT(A), after considering the earlier decisions on this issue, has allowed a margin of 30% from the DVO s report. In such eventuality, we do not find any infirmity in the order of the ld. CIT(A) giving relief to the assessee on this count. Therefore, the finding of the ld. CIT(A) in deleting the additions so made by the AO is confirmed. Accordingly, the ground No. 1 raised by the Revenue on this issue raised for the Assessment Years 2010-11 to A.Y.2012-13 under appeal are hereby dismissed. Unaccounted cash expenditure u/s. 69C - Addition on the basis of some jottings found made in a diary seized during the course of search from the residence one of the partners of the assessee firm - HELD THAT - We are of the considered view that the impugned addition for unaccounted cash expenditure has rightly been deleted by the Ld. CIT(A) as they were merely based on the rough jottings on the alleged seized loose papers which do not convey either receipt/ payment, mode thereof, nature of transaction etc.. Undisputedly, neither during the course of the assessment proceedings nor during the course of submission of remand report before the ld. CIT(A), the AO was able to bring any single cogent material or evidence on record to justify the addition made on the basis of uncorroborated jottings in the diary. Therefore, the alleged seized loose papers are only Dumb documents and no addition could have been made on such dumb documents. We therefore, do not find any reason to interfere in the findings of the ld. CIT(A) deleting the addition made in the assessee s income for A.Y. 201011. Accordingly, the ground No. 2 of the Revenue for A.Y. 201011 is dismissed. Unaccounted cash payments to Partner on the basis of jottings made in a diary seized during the course of search from the residence - HELD THAT - We find that the AO despite giving a finding that certain jottings were containing transactions of cheques, could not bring on record any single instance to establish any correlation with the transactions of the assessee firm. We find that the AO had not conducted any independent enquiry from the partners of the assessee firm. We also noted that during the course of search, none of the partners had admitted that the jottings made in the said diary are pertaining to the transactions of the assessee firm. Such fact has duly been conceded by the ld. CIT(DR) before us. We observe that except relying upon the jottings made on page no. 13 to 20 of the diary LPS-12, the AO has not brought any cogent material on record to substantiate that any unaccounted cash payment was made by the assessee to its partners. We find that the AO neither during the course of the assessment proceedings nor during the course of submission of his Remand Report before the ld. CIT(A) could bring any corroborative evidence to justify his action for making the impugned addition in the hands of the assessee firm. We are of the considered opinion that the jottings made in the diary are only rough jottings which do not convey either receipt/ payment, mode thereof, nature of transaction, amount of transaction whether in hundreds, thousands or lakhs etc.. Thus, the said diary could only be termed as a dumb document. We also consciously uphold the findings of the ld. CIT(A) in deleting the additions made by the AO on account of unaccounted cash payments to Partners Smt. Sunita Maheshwari and Shri Suresh Kumar Maheshwari. Accordingly, the Ground are hereby dismissed. Unaccounted cash payments to Shri Sushil Kumar Bajpai - HELD THAT - As there is sufficient merit in the contention of the assessee that the AO, except solely relying upon the uncorroborated draft agreement, had not conducted any independent enquiry from the persons whose names were found noted in such agreement by issuing summons u/s. 131 or letters u/s. 133(6) to such persons. ld. CIT(A),of his Order, had given a finding that upon verification from online land revenue records, it was found by him that no such joint venture actually executed for construction of duplex bungalows and the lands bearing khasra were still owned by Shri Sushil Kumar Bajpai, Shri Vaibhav Sharma and Shri Upendra Singh. We are thus in agreement with the findings of the ld. CIT(A) to the effect that the onus of proof lies upon him who affirms and not upon him who denies. We find that the Ld.AO grossly failed to bring on record any cogent material to establish the execution of the proposed Joint Venture Agreement and has merely ventured into making the impugned addition in the hands of the assessee. In such circumstances, we find sufficient force in the contention of the ld. counsel for the assessee that the said loose papers inventorized are not legally admissible documents and therefore, the same could not have been used against the assessee. Thus, considering the facts and circumstances of the case, we do not find any infirmity in the findings of the ld. CIT(A) in deleting the addition for A.Y. 2009-10, made by the AO on account of unaccounted cash payments to Shri Sushil Kumar Bajpai. Accordingly, the Ground No. 1 of the Revenue for A.Y. 200910 is hereby dismissed. Addition on substantive basis, on account of unaccounted cash loans given - HELD THAT - We consider it appropriate to hold that there is no evidentiary value of the impugned loan agreement especially in a circumstance when the AO had neither brought any corroborative material on record nor made any independent enquiry from Shri Bhav Singh Rajput to whom the loan has allegedly been given. Thus, considering the facts and circumstances of the case, we do not find any infirmity in the findings of the ld. CIT(A) in deleting the additions made by the AO, on substantive basis, on account of unaccounted cash loans given to Shri Bhav Singh Rajput. Accordingly, the Ground No. 2 of the Revenue is hereby dismissed. Once it has been held that the assessee did not give any cash loan, there does not arise any question of earning any unaccounted interest income thereon by the assessee. In such eventuality, the additions respectively for A.Y. 2012-13 and A.Y. 2013-14, made by the AO, on substantive basis, on account of unaccounted interest income on the cash loans given to Shri Bhav Singh Rajput has rightly deleted by Ld. CIT(A). Accordingly, the Ground No. 3 of the Revenue for A.Ys. 2012-13 and 2013-14 is also dismissed. Unaccounted investment in construction of hostel building u/s. 69B - HELD THAT - We find that the assessee had constructed a hostel building in the city of Bhopal, Madhya Pradesh. During the course of assessment proceedings, the AO referred the matter to the DVO who submitted his report to the AO. The assessee filed her detailed objections before the AO pointing out the various discrepancies in the DVO s report. The AO neither sent the objections to the DVO for his comments nor the AO himself controverted the objections of the assessee and instead, the AO relied upon the DVO s report and accordingly made the addition to the total income of the assessee on account of undisclosed investment in construction of hostel building. Assessment u/s 153A - Whether the impugned addition has been made by the AO without having recourse to any incriminating material? - We find that the impugned addition made by the AO on account of unaccounted investment in construction of hostel building in a completed assessment year without having recourse to any incriminating material found during the course of the search. Such fact has also been fairly admitted by the ld. CIT (DR). Therefore, in light of the findings of the decision of Hon'ble Delhi High Court in case of CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT we are of the considered view that proceedings initiated u/s 153A of the Act for A.Y. 2009-10 being non-abated and completed assessments deserved to be quashed since no incriminating material was found during the course of search thereby warranting initiation of proceedings u/s 153A of the Act for these years.

Summary

Issues Involved:
1. Undisclosed investment under Section 69B.
2. Unexplained expenditure under Section 69C.
3. Unaccounted payments to partners.
4. Unaccounted cash receipts.
5. Unaccounted loans and interest.
6. Unaccounted cash payments.
7. Jurisdiction and validity of assessments under Section 153A and 153C.
8. Incriminating material and completed assessments.

Detailed Analysis:

1. Undisclosed Investment under Section 69B:
The Revenue challenged the deletion of additions made on account of undisclosed investments in housing projects "Regal Mohini" and "Abhinav Homes Phase-III Extension". The AO based the additions on the DVO's valuation reports, which estimated higher investments than those declared by the assessee. The CIT(A) deleted these additions, noting that the AO failed to provide any incriminating material justifying the reference to the DVO and relied solely on the DVO's report. The CIT(A) also observed discrepancies in the DVO's valuation, such as the use of CPWD rates instead of state PWD rates, and allowed a margin of 30% for differences. The Tribunal upheld the CIT(A)'s decision, emphasizing that additions solely based on DVO reports are not sustainable without corroborative evidence.

2. Unexplained Expenditure under Section 69C:
For A.Y. 2010-11, the AO made additions based on jottings in a seized diary, indicating unaccounted cash expenditures. The CIT(A) deleted these additions, noting that the AO did not conduct any independent inquiries to verify the diary entries and relied solely on presumptions. The Tribunal upheld the CIT(A)'s decision, citing that additions based on uncorroborated jottings in a diary are not sustainable.

3. Unaccounted Payments to Partners:
The AO made additions for unaccounted cash payments to partners based on diary entries. The CIT(A) deleted these additions, noting that the diary entries were not corroborated by any evidence and that one of the partners had admitted the amounts as his unaccounted income before the ITSC. The Tribunal upheld the CIT(A)'s decision, emphasizing that the diary entries were "dumb documents" and not sufficient to justify the additions.

4. Unaccounted Cash Receipts:
The AO made protective additions in the hands of Shri Suresh Kumar Maheshwari for unaccounted cash receipts from the partnership firm. The CIT(A) deleted these additions, and the Tribunal upheld the decision, noting that the substantive additions in the partnership firm's case were already deleted.

5. Unaccounted Loans and Interest:
The AO made additions based on an unsigned and undated loan agreement found during the search, alleging unaccounted cash loans and interest income. The CIT(A) deleted these additions, noting that the agreement was a draft and not executed, and the AO did not conduct any independent inquiries. The Tribunal upheld the CIT(A)'s decision, emphasizing that additions based on unsigned and undated documents are not sustainable.

6. Unaccounted Cash Payments:
For A.Y. 2009-10, the AO made additions based on a joint venture agreement indicating unaccounted cash payments. The CIT(A) deleted these additions, noting that the agreement was not signed by all parties and was not legally enforceable. The Tribunal upheld the CIT(A)'s decision, emphasizing that the onus was on the Revenue to provide corroborative evidence, which was not done.

7. Jurisdiction and Validity of Assessments under Section 153A and 153C:
The assessee challenged the validity of assessments under Section 153A and 153C, arguing that no search was conducted in his case and no incriminating material was found. The Tribunal upheld the CIT(A)'s decision, noting that the AO had valid jurisdiction and the assessments were based on incriminating material found during the search.

8. Incriminating Material and Completed Assessments:
The Tribunal emphasized that no additions could be made in completed assessments without incriminating material found during the search. This principle was applied in various cases, leading to the deletion of additions made without such material.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions in most cases, emphasizing the need for corroborative evidence and the unsustainability of additions based solely on valuation reports or uncorroborated diary entries. The Tribunal also reinforced the principle that no additions could be made in completed assessments without incriminating material found during the search.