2016 (2) TMI 835 - HC - Income Tax

Court rules seized documents as projections, not conclusive evidence in tax case

Commissioner of Income Tax, C-I Versus Vatika Landbase Pvt. Ltd.

The High Court upheld the ITAT's decision to delete the addition of Rs. 5,60,73,380 related to the sale of flats, agreeing that the seized documents were ... Undisclosed receipt on sale of flats/space - Sale of flats of VT [Vatika Triangle] - additions made on account of sale of space - application of standard rate - documents found during the search and seizure action relied upon for addition - Held that:- In the present case, there was no material on the basis of which the AO could have applied a standard rate of ₹ 4,800 per sq ft for all the floors of VT [Vatika Triangle]. It was also not open to the AO to draw an inference on the basis of the projection in the document, particularly when the Assessee offered a plausible explanation for the document. The burden shifted to the Revenue to show, on the basis of some reliable and tangible material, how the rate at which the flats on the second and third floors of VT was higher than that indicated in the sales register or the sale deeds themselves. In the circumstances, the Court is of the view that the ITAT was justified in coming to the conclusion that the addition made by the CIT (A) was not sustainable in law. - Decided in favour of assessee Issues Involved:1. Validity of addition of Rs. 31,01,09,834 on account of undisclosed receipt from sale of space/flats in Vatika Triangle.2. Validity of addition of Rs. 13,84,20,000 on account of undisclosed income not declared by the Assessee in its books of account.3. Validity of addition of Rs. 1,04,39,000 on account of accommodation entries taken by the Assessee.4. Whether the order of the ITAT is perverse as it failed to consider the relevant searched material gathered during the search proceedings.Issue-wise Analysis:1. Validity of addition of Rs. 31,01,09,834 on account of undisclosed receipt from sale of space/flats in Vatika Triangle:The AO made an addition of Rs. 31,01,09,834 based on documents seized from the computer of Mr. Sunil Awasthi, an employee of the Vatika Group. These documents indicated that the declared sale consideration was lower than the actual sale consideration. The CIT (A) reduced this addition to Rs. 5,60,73,380, considering only the evidence directly related to the Assessee.The ITAT further deleted this addition, stating that the documents in question were projections and not actual sale figures. The ITAT emphasized that there was no direct evidence indicating the sale of flats at the higher rates mentioned in the documents. The ITAT also noted that the AO did not summon Mr. Awasthi or the purchasers of the flats for examination, which could have corroborated the alleged higher sale rates.The High Court upheld the ITAT's decision, agreeing that the document from Mr. Awasthi's computer was a projection and not conclusive evidence of actual sale rates. The High Court emphasized that the burden shifted to the Revenue to prove the higher sale rates, which it failed to do.2. Validity of addition of Rs. 13,84,20,000 on account of undisclosed income not declared by the Assessee in its books of account:The AO made an addition of Rs. 13,84,20,000 regarding alleged undisclosed receipt from the sale of flats/space in Vatika World. The CIT (A) reduced this addition to Rs. 2,00,14,904, and the ITAT further reduced it to Rs. 1,84,64,904.The High Court did not specifically address this issue in detail, as the primary focus was on the addition related to Vatika Triangle. However, the ITAT's decision to uphold a part of the addition while deleting the rest was based on the lack of direct evidence and corroboration for the higher sale rates.3. Validity of addition of Rs. 1,04,39,000 on account of accommodation entries taken by the Assessee:The AO made an addition of Rs. 1,04,39,000 on the ground of alleged undisclosed income on account of accommodation entries. The CIT (A) sustained an implied confirmation of Rs. 20,00,000, which the ITAT deleted.The High Court did not specifically address this issue in detail, but the ITAT's decision to delete the addition was based on the lack of direct evidence and corroboration for the alleged accommodation entries.4. Whether the order of the ITAT is perverse as it failed to consider the relevant searched material gathered during the search proceedings:The Revenue argued that the ITAT failed to consider the relevant searched material. However, the ITAT and the High Court both emphasized that the documents seized, particularly the projections from Mr. Awasthi's computer, were not conclusive evidence of actual transactions.The High Court reiterated that additions in block assessments under Chapter XIV-B of the Income Tax Act must be based on evidence found as a result of the search. The Court agreed with the ITAT that the seized documents were projections and not actual sale figures. The Court also noted that the AO did not corroborate the alleged higher sale rates by examining the relevant witnesses or purchasers.Conclusion:The High Court upheld the ITAT's decision to delete the addition of Rs. 5,60,73,380 related to the sale of flats in Vatika Triangle, agreeing that the seized documents were projections and not conclusive evidence of actual transactions. The Court emphasized the need for corroborative evidence and the burden on the Revenue to prove the alleged higher sale rates. The appeal by the Revenue was dismissed, with no orders as to costs.