2024 (1) TMI 695 - AT - Income Tax

Unaccounted profit from business - Addition on account of sale of flat - survey action u/s 133A in the business premise of the assessee - HELD THAT - It is seen from record, there is no any other incriminating document except the piece of loose paper found during the course of survey. The value of the flat and to determine the Fair Market Value, the A.O. ought to have referred the matter to the prescribed authority namely District Valuation Officer u/s. 55A of the Act. But the A.O. has merely relied upon the report given by his Inspector and determined the fair market value of the flats and pent houses, which is against the provisions of the Act. The Inspector attached to the A.O. is not an expert to determine the fair value of the flats and Duplex Pent houses. When the A.O. summoned the various purchasers of the flats and recorded their statements u/s. 131 of the Act, None of the purchasers having said to have paid on-money to the developer/assessee, except to having agreed the prices entered with the developer. AO do not find any infirmity in the books of account maintained by the assessee, thereby he has not rejected the books of account. Thus in the absence of any incriminating evidence found during the course of survey, the additions made by the Ld. A.O. based only on Inspector s report is not sustainable in law. Therefore the addition made by the Assessing Officer on this count is liable to be rejected and we do not find any infirmity in the order passed by the Ld. CIT(A). Thus Ground No. 1 raised by the Revenue is liable to be rejected. Sale of Duplex Pent Houses merely based on Inspector s report - During the course of survey, there is no unaccounted money found and seized by the Authorities in the business premises of the assessee. The assessee submitted confirmation of accounts from various buyers and the Ld. A.O. could not find any defect in those records. However based on loose paper information and without corresponding evidences, the entire addition is made which is not permissible in law. It is appropriate to place on record the Hon'ble Supreme Court decisions in the case of Omar Salav Mohamed Sait 1959 (3) TMI 2 - SUPREME COURT where it is held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull 1972 (9) TMI 9 - SUPREME COURT held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. In the case of Umacharan Shah Bros. 1959 (5) TMI 11 - SUPREME COURT held that suspicion however strong, cannot take the place of evidence. No hesitation in deleting the additions made by the Assessing Officer on account of on-money received by the assessee on the sale of duplex pent house. Appeal filed by the Revenue is hereby dismissed.

Summary

Issues Involved:
1. Addition of Rs. 4,51,00,000/- on account of unaccounted profit from business.
2. Addition of Rs. 1,46,12,500/- on account of unaccounted profit from the sale of penthouses.

Issue 1: Addition of Rs. 4,51,00,000/- on account of unaccounted profit from business

The Revenue's appeal challenges the deletion of an addition of Rs. 4,51,00,000/- made by the Assessing Officer (AO) based on the Inspector's report, which claimed that flats were sold at Rs. 50,00,000/- each, contrary to the assessee's declared prices ranging from Rs. 18 Lakhs to Rs. 43.75 Lakhs. The AO did not find any defect in the books of accounts nor did he reject them. The CIT(A) observed that the AO failed to refer the matter to the Department's Valuation Officer for fair market valuation and relied solely on the Inspector's report, which lacks legal standing. The CIT(A) concluded that the AO did not bring any material evidence to support the suppression of consideration or receipt of on-money. Consequently, the addition was deleted.

Issue 2: Addition of Rs. 1,46,12,500/- on account of unaccounted profit from the sale of penthouses

The Revenue also appealed against the deletion of an addition of Rs. 1,46,12,500/- made by the AO based on a rough plan sketch found during the survey, which suggested a higher sale price for penthouses. The assessee provided detailed submissions explaining that the sale price varied based on the type of penthouse, quality of materials, and other factors. The CIT(A) noted that the AO did not record any statements to identify the significance of the figures on the rough sketch and failed to link it specifically to the assessee. The CIT(A) emphasized that no incriminating evidence was found during the survey, and the confirmations from buyers were consistent with the declared prices. Therefore, the addition was deleted.

Conclusion:

The Tribunal upheld the CIT(A)'s decision, stating that the AO's reliance on the Inspector's report without corroborating evidence or a proper valuation process was not sustainable. The Tribunal cited precedents from the Jurisdictional High Court and the Supreme Court, which emphasize that additions based on suspicion, surmises, and without corroborative evidence are not permissible. The appeal by the Revenue was dismissed, and the order pronounced in open court on 12-01-2024.