Tribunal overturns tax additions due to lack of evidence, emphasizes need for proof

The tribunal held that the addition of Rs. 74,57,194/- for "on-money" receipt and the disallowance of Rs. 12,77,786/- for cost of improvement were not sustainable. The tribunal found that the Assessing Officer and Commissioner of Income Tax (Appeals) failed to provide sufficient corroborative evidence for the additions, relying solely on rough notings and presumptions. Citing legal precedents, the tribunal emphasized the lack of conclusive evidence and overturned the additions, deeming them based on conjectures. The appeals were disposed of accordingly.

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Issues Involved:
1. Legality of the assessment order under Section 153A/143(3) of the Income Tax Act.
2. Addition of long-term capital gain based on rough paper.
3. Disallowance of cost of improvement.

Issue-wise Detailed Analysis:

1. Legality of the Assessment Order under Section 153A/143(3):
The appellant challenged the assessment order framed under Section 153A/143(3) of the Income Tax Act, claiming it was "bad in law and against the facts and circumstances of the case." The appellant argued that the assessment was not sustainable on various legal and factual grounds. However, the tribunal did not specifically address this issue in its judgment, focusing instead on the substantive issues of the addition of long-term capital gain and disallowance of cost of improvement.

2. Addition of Long-term Capital Gain Based on Rough Paper:
The tribunal examined the addition of Rs. 74,57,194/- (and Rs. 60,07,194/- in the related appeal) made by the Assessing Officer (AO) based on rough notings in a seized diary. The AO interpreted these notings as evidence of "on-money" transactions related to the sale of property. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition, interpreting the figures in the diary as coded forms of the actual sale consideration.

The tribunal found that the AO and CIT(A) failed to substantiate the addition with corroborative documentary evidence. The tribunal noted that the sale deed registered with the Sub-Registrar clearly showed the sale consideration as Rs. 1,10,00,000/-, and there was no evidence to suggest any payment over and above this amount. The tribunal emphasized that the rough notings in the diary, without any supporting evidence, could not be used to presume "on-money" transactions under Section 292C of the Act. The tribunal cited several judicial precedents, including "Central Bureau of Investigation vs. V. C. Shukla" and "CIT v/s Sh. Praveen Juneja," which held that loose sheets of paper or uncorroborated documents could not be used as conclusive evidence for making additions.

3. Disallowance of Cost of Improvement:
The AO disallowed the cost of improvement claimed by the appellant and restricted it to Rs. 12,77,786/-. The appellant argued that this disallowance was made without any logical reasoning and was based on presumptions. The tribunal noted that no incriminating material was found during the search related to the cost of improvement. The tribunal held that in the absence of any incriminating material, the disallowance made by the AO was not permissible in law. The tribunal cited the case of "Krishna Kumar Mittal Vs. DCIT" to support its decision that no addition could be made in the absence of incriminating material.

Conclusion:
The tribunal concluded that the addition of Rs. 74,57,194/- on account of "on-money" receipt for computation of long-term capital gain and the disallowance of Rs. 12,77,786/- on account of cost of improvement were not sustainable. The tribunal deleted both additions, holding that they were based on presumptions and conjectures without any corroborative documentary evidence. The tribunal's observations and findings in I.T.A. No. 683/Asr/2019 were applied mutatis mutandis to I.T.A. No. 682/Asr/2019. The appeals were disposed of accordingly.

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