2025 (1) TMI 1176 - AT - Income Tax

Unexplained money u/s 69A - difference between agreement to sale value and final sale deed value which has been framed as unexplained money - CIT(A) deleted addition - HELD THAT -Assessee had stated that on the request of customer agreement to sale were prepared for 36, 73, 500 so that the customer can avail maximum possible housing loan amount. The agreement to sale was not registeredWe further find that the assessee had mentioned the same during the assessment proceedings but the same was not been considered by the AO while passing the assessment order and resultantly the addition was made to the income of the assessee. DR could not bring any material or evidence to take a view other than the view taken by the learned CIT(A). The evidentiary value of registered sale deed cannot be dislodged whimsically. Hence keeping this in view we do not find any infirmity in the impugned order passed by CIT(A) which is hereby upheld by deleting the addition. Ground no.1 raised by the Revenue is hereby dismissed. Addition u/s 69A based on loose paper seized during the search - HELD THAT - No addition ought to have been made on account of amount mentioned on loose paper. Assessee had mentioned the same during the assessment proceedings but the AO failed to considered the same while passing the assessment order and resultantly the addition was made to the income of the assessee. W Assessee has enclosed therewith the photocopy of Document and the same entries are reconciled in the books of account and yet the addition was made. Addition to the income cannot be made by the Assessing Officer based on the dumb documents loose paper containing scribbling rough/vague notings in the absence of any corroborative material evidence on record and finding that such dumb documents had materialized into transactions giving rise to income of the assessee which had not been disclosed in the regular books of account by the assessee. No effective arguments could be made by DR to rebut the arguments. Decided against revenue. Undisclosed cash receipts - Addition based on document found and impounded from the business premises of M/s.Tirupati Developers which was framed as unexplained money under section 69A - HELD THAT - We find that the transactions are duly accounted in the books of Tirupati Developers through the capital account of Shri Prashant Bongirwar the common Partner in both the firms. The assessee had mentioned the same during the assessment proceedings but had not been considered by the Assessing Officer while passing the assessment order and addition of 26 lakh was added to the income of the assessee. We also find that the assessee has furnished copy of Capital Account in respect of Shri Prashant Bongiwar who also said to be a common Partner in M/s. Tirupati Developers and the assessee firm where the entries are accounted. Additions to be deleted. Unexplained expenditure u/s 69C - HELD THAT - The transactions are duly accounted in the books of Tirupati Developers through the Capital Account of the common partner in both the firms. Hence no addition ought to have been made on account of unexplained expenditure by the assessee. The assessee had mentioned the same during the assessment proceedings also but the Assessing Officer did not consider the same which resulted in addition of 10 lakh. Even otherwise also we find that the burden squarely lies on the Revenue to establish that the assessee had made alleged payments so as to warrant addition u/s 69C. In fact the Revenue failed discharge the said burden - Additions to be deleted. Whether loose sheets are admissible as evidences on the basis of which the addition is sustainable? - HELD THAT - As decided in Sunil Kumar Sharma 2024 (2) TMI 116 - KARNATAKA HIGH COURT loose sheets/diaries are contrary to law which require to be set aside in these writ appeals as the same are void and illegal. Thus ground dismissed holding that loose sheets are dumb documents. Transactions in agreement to sale are sacrosanct vis a vis registered sale deeds no account that some cheque payments are tallying - HELD THAT - It is manifest from the order that the assessee had duly explained the circumstances explaining the difference in case of Narendra Deshmukh as regards to the difference in cheque payment. No contrary evidences have been placed on record to dislodge the explanations. The contents of registered sale deed cannot be doubted on mere ipse discit of the AO without any corroborate the evidences. Accordingly we are not inclined to interfere in the findings of the learned CIT(A). Consequently grounds is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in the judgment are:

• Whether the additions made by the Assessing Officer (AO) based on seized documents, which were considered as evidence of unexplained money under Section 69A and unexplained expenditure under Section 69C of the Income Tax Act, 1961, were justified.
• Whether the loose sheets and other documents seized during the search have evidentiary value sufficient to support the additions made by the AO.
• Whether the Commissioner of Income Tax (Appeals) [CIT(A)] was correct in deleting the additions made by the AO, based on the explanations and evidence provided by the assessee.
• Whether the transactions noted in the unregistered agreements to sale should be considered over the registered sale deeds for the purpose of determining the actual sale consideration.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Additions based on seized documents

• Relevant legal framework and precedents: Section 69A of the Income Tax Act deals with unexplained money, while Section 69C deals with unexplained expenditure. Both sections require the AO to establish that the assessee is the owner of the money or has incurred the expenditure without proper explanation.
• Court's interpretation and reasoning: The Tribunal found that the AO relied heavily on loose sheets and uncorroborated documents to make additions. The CIT(A) deleted these additions, citing lack of corroborative evidence and the assessee's explanations.
• Key evidence and findings: The seized documents were primarily loose sheets and unregistered agreements to sale, which the assessee argued were not conclusive evidence of undisclosed income.
• Application of law to facts: The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to provide sufficient evidence to substantiate the additions. The explanations provided by the assessee were deemed satisfactory.
• Treatment of competing arguments: The Revenue argued that the seized documents were sufficient evidence of undisclosed income. However, the Tribunal agreed with the assessee that these documents lacked corroborative support.
• Conclusions: The Tribunal concluded that the additions were not justified due to the lack of reliable evidence and corroboration.

Issue 2: Evidentiary value of loose sheets

• Relevant legal framework and precedents: The Tribunal referred to various precedents, including the Supreme Court's decision in V.C. Shukla, which held that loose sheets and unbound documents do not constitute material evidence.
• Court's interpretation and reasoning: The Tribunal found that the loose sheets lacked evidentiary value as they were not part of regularly maintained books of account.
• Key evidence and findings: The loose sheets were considered as dumb documents without corroborative evidence.
• Application of law to facts: The Tribunal applied the principles from the precedents to determine that the loose sheets could not be relied upon for making additions.
• Treatment of competing arguments: The Revenue's reliance on the loose sheets was rejected due to the lack of supporting evidence.
• Conclusions: The Tribunal upheld the CIT(A)'s decision to disregard the loose sheets as evidence.

Issue 3: Validity of unregistered agreements to sale

• Relevant legal framework and precedents: The Tribunal considered the legal distinction between registered sale deeds and unregistered agreements to sale.
• Court's interpretation and reasoning: The Tribunal emphasized the legal presumption in favor of registered documents over unregistered agreements.
• Key evidence and findings: The registered sale deeds were considered more reliable than the unregistered agreements.
• Application of law to facts: The Tribunal found that the AO erred in relying on unregistered agreements to determine the sale consideration.
• Treatment of competing arguments: The Tribunal favored the assessee's argument that the registered sale deeds should prevail.
• Conclusions: The Tribunal upheld the CIT(A)'s decision to rely on the registered sale deeds for determining the sale consideration.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "Loose sheets or scraps of paper cannot be termed as 'book' for they can be easily detached and replaced."
• Core principles established: Loose sheets and uncorroborated documents lack evidentiary value; registered sale deeds take precedence over unregistered agreements.
• Final determinations on each issue: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision to delete the additions made by the AO.