2015 (7) TMI 165 - AT - Income Tax

Tribunal dismisses Revenue's appeals, stresses need for concrete evidence, criticizes AO's reliance on presumptions.

The Tribunal dismissed the Revenue's appeals for AY 2004-05 and AY 2005-06, upholding the deletions made by the First Appellate Authority. The Tribunal ... Unexplained investment in property - CIT(A) deleted the addition - Held that:- The entire addition is based on the presumption that the assessee must have received an amount of ₹ 18,79,500/- being the difference between the value of the property estimated by the D.V.O. and the amount declared as consideration in the sale deed of the property, which as per the AO is unaccounted receipt of cash for sale of property. There is not even an iota of evidence with the AO to come to a conclusion that the assessee has actually received cash, over and above the amount declared by it for the sale of this property. This is not a case where Sec.50C has been invoked. It is an addition made u/s 68. It is not a case of computation of capital gains. The factual finding of the Ld.CIT(A) could not be controverted by the Revenue. Thus both legally and factually the order of the First Appellate Authority is to be upheld - Decided against revenue. Addition u/s 68- CIT(A) deleted the addition - Held that:- S.68 cannot be invoked under the facts and circumstances of the case. A hypothetical and imaginary addition has been made by the A.O.The departmental Valuation Officer has on reference made u/s 142A of the Act valued the property at ₹ 46.96 lakhs, which is marginally higher than the purchase consideration of ₹ 45 lakhs disclosed by the assessee. The difference is negligible. Taking evaluation report value, arrived at 2 years after the date of transaction and then arbitrarily modified the value and thereafter treating this amount as sale. Under the circumstances no addition can be sustained on the ground that banker’s valuer, after two years after the date of transaction, valued the property at a particular amount when no material is found in support of the AO’s conclusion that the assessee had made unaccounted investments in purchase price. The AO can not ignore the DVO’s report. The addition has been made on conjectures and surmises and without any basis. Hence the First Appellate Authority has rightly deleted the said addition.- Decided against revenue. Issues Involved:1. Deletion of addition on account of unexplained investment in property for AY 2004-05.2. Deletion of addition on account of unexplained investment in property for AY 2005-06.Issue-wise Detailed Analysis:1. Deletion of Addition on Account of Unexplained Investment in Property for AY 2004-05:The Revenue appealed against the deletion of Rs. 1,87,99,500/- addition made by the AO on account of unexplained investment in property. The AO based this addition on the difference between the declared sale consideration and the valuation by the DVO. The AO presumed that the assessee must have received the difference in cash, which was not accounted for. The First Appellate Authority deleted this addition, stating that the valuation report under section 142A is meant for estimating the cost of investment under sections 69/69A/69B and not for determining the sale consideration of an asset. The authority highlighted that the reference should have been made under section 55A for ascertaining the fair market value of a capital asset.Further, the sale deed did not indicate any higher stamp duty, implying that section 50C was not applicable. The absence of circle rates during the transfer period also negated the applicability of section 50C. The comparable sale instance used by the Valuation Officer was not appropriate as it was an auctioned property at a better location. The First Appellate Authority concluded that there was no evidence of unaccounted cash receipt, and thus, the addition was deleted.The Tribunal upheld the First Appellate Authority's decision, noting that the Revenue could not provide evidence to counter the factual findings. The Tribunal emphasized that the addition was based on presumption without any supporting evidence and was not a case of invoking section 50C or computing capital gains. Hence, the appeal for AY 2004-05 was dismissed.2. Deletion of Addition on Account of Unexplained Investment in Property for AY 2005-06:For AY 2005-06, the AO made an addition of Rs. 2,87,00,000/- under section 68 based on the valuation of a property purchased by the assessee. The property was purchased for Rs. 45 lakhs, but a bank valuer later valued it at Rs. 4,86,00,000/-. The AO adjusted this value to Rs. 3,32,00,000/- considering depreciation and treated the difference as unaccounted income. The First Appellate Authority deleted this addition, stating that no incriminating documents were found to prove unaccounted investment. The DVO's valuation was Rs. 46,96,000/-, which was close to the declared purchase price of Rs. 45 lakhs. The authority criticized the AO for ignoring the DVO's report and relying on a bank valuer's report from two years after the purchase.The Tribunal agreed with the First Appellate Authority, stating that section 68 could not be invoked based on hypothetical and imaginary additions. The Tribunal noted that the DVO's valuation was close to the declared price, and there was no material evidence to support the AO's conclusion of unaccounted investment. The Tribunal cited judgments from the Jurisdictional High Court, emphasizing that references to the DVO must be based on material evidence and not mere suspicion. Consequently, the appeal for AY 2005-06 was dismissed.Conclusion:The Tribunal dismissed the Revenue's appeals for both AY 2004-05 and AY 2005-06, upholding the deletions made by the First Appellate Authority. The Tribunal emphasized the need for concrete evidence to support additions under sections 68 and 142A, and criticized the AO's reliance on presumptions and hypothetical valuations.