2017 (11) TMI 1728 - AT - Income Tax

Tribunal overturns tax addition for unexplained investment in real estate, emphasizes need for concrete evidence

The Tribunal allowed the appeal by the corporate entity engaged in real estate, deleting the addition of Rs. 101.25 lakhs for unexplained investment in ... Unexplained expenditure u/s 69C - loose paper folders seized - explanation of seized material - Held that:- Additions could not be made merely on the basis of entries in loose papers without bringing on record any cogent material to substantiate the same and further additions could not be made merely on the basis of doubts, conjectures or surmises. Hence, we delete the impugned additions and allow assessee’s ground of appeal. Issues involved:Appeal against addition on account of alleged unexplained expenditure in lands u/s.69C of the Income Tax Act.Analysis:Issue 1: Alleged unexplained expenditure in lands u/s.69CThe appeal by the assessee contested the addition made on account of alleged unexplained expenditure in lands u/s.69C of the Act. The assessee, a resident corporate entity engaged in real estate, was assessed for the AY 2009-10, where an addition of Rs. 101.25 lakhs was made for unexplained investment. This addition was based on incriminating evidence seized during search and seizure operations related to a group involved in real estate operations. The seized documents indicated unaccounted cash payments made by the assessee towards land acquisition. The Ld. CIT(A) confirmed the addition, citing similar cases where such additions were upheld. The assessee, aggrieved by this decision, appealed further.Issue 2: Judicial Precedents and Tribunal OrdersThe assessee's counsel argued that similar additions made in other cases were deleted by the Tribunal and upheld by the Bombay High Court, indicating that the addition in this case should not be sustained. The Tribunal examined relevant documents and judicial pronouncements, including cases like Avkash Land Realty Pvt. Ltd. vs. DCIT and others, and Timble Realty Pvt. Ltd. vs. ITO and others. The Tribunal referred to a Delhi High Court decision in the case of Malik Brothers Pvt. Ltd. vs. CIT, where additions were not justified based solely on loose papers without concrete evidence. The Tribunal concluded that the impugned additions should be deleted, following the principles established in previous judgments.Issue 3: Tribunal's DecisionAfter considering the rival contentions and relevant material on record, the Tribunal found merit in the assessee's arguments based on judicial precedents and ordered the deletion of the impugned additions. The Tribunal highlighted that additions cannot be made solely on the basis of entries in loose papers without substantial evidence. Consequently, the appeal by the assessee was partly allowed, and the addition on account of alleged unexplained expenditure in lands u/s.69C was deleted.In conclusion, the Tribunal's decision was based on the principles established in previous judicial pronouncements, emphasizing the need for concrete evidence to support additions made under u/s.69C of the Income Tax Act.