2022 (6) TMI 1425 - AT - Income Tax

Tribunal dismisses Revenue's appeal on unexplained investment, citing lack of evidence

D.C.I.T. Central Circle-3, Surat Versus Shri Pravinchandra Hiralal Shah

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision to delete the addition of Rs. 1.50 crore as unexplained investment. The ... Unexplained investment - Department was in possession of the incriminating documents in the form of MOU seized during the course of search proceedings which clearly showed the name of the assessee and share of the assessee in the said property - co-owners of the property has admitted the fact of unexplained investment in accordance with his share in the property in the statement recorded on oath - CIT(A) deleted the addition - AO made addition by taking a view that as per MOU, the assessee was having 24% share in the land and Param Properties was having 4% share - HELD THAT:- CIT(A) noted that extrapolation on the basis of part period or part value is not permissible. CIT(A) further noted that no evidence during the course of search or statement of any person which proved that the assessee had paid Rs. 1.50 crore for purchase of land. AO made addition without having any documentary or oral evidence. AO made addition without any basis of evidence. There is no document found during the course of search which may contain details of payment of Rs. 1.50 crore paid by assessee for purchase of land. On the basis of the said observation, the CIT(A) deleted the entire addition. We find that the Ld. CIT(A) on proper appreciation of fact correctly held that the additions made by the assessing officer is not based on evidence on record. No contrary facts or law is brought to our notice to take other view, hence, we affirm the order of Ld. CIT(A). in the result, the grounds of appeal raised by the revenue are dismissed. Issues Involved:1. Validity of the order under Section 153C read with Section 143(3) of the Income Tax Act.2. Addition of Rs. 1.50 crore as unexplained investment based on an unsigned Memorandum of Understanding (MOU).Detailed Analysis:1. Validity of the Order under Section 153C read with Section 143(3):The assessee contested the validity of the order under Section 153C, arguing that the notice was illogical. The Commissioner of Income Tax (Appeals) [CIT(A)] rejected this objection, noting that the assessee admitted to paying Rs. 50.00 lacs in cash for the land purchase, which was later returned when the deal was canceled. The CIT(A) held that since the assessee admitted to the investment, the notice under Section 153C was justified. This view was upheld by the Tribunal, affirming the CIT(A)'s decision that the order's validity was properly established.2. Addition of Rs. 1.50 Crore as Unexplained Investment:The core issue was the addition of Rs. 1.50 crore as unexplained investment based on an unsigned and unregistered MOU. The Assessing Officer (AO) argued that the MOU, which mentioned the assessee's name and a 24% share in the property, indicated an investment of Rs. 1.50 crore. This conclusion was drawn from the statement of a partner of Param Properties, who admitted to a cash investment of Rs. 25.00 lacs for a 4% share, leading the AO to extrapolate the total property value to Rs. 6.25 crores.The assessee contended that the MOU had no evidentiary value as it was unsigned and unregistered. It was also argued that no payment was made according to the MOU, and the deal was never executed. The CIT(A) accepted these arguments, noting that no evidence was found during the search to prove the payment of Rs. 1.50 crore. The CIT(A) emphasized that extrapolation based on a part value is not permissible and that the AO's addition lacked documentary or oral evidence.The Tribunal upheld the CIT(A)'s decision, agreeing that the addition was not supported by evidence. The Tribunal noted that the AO's conclusion was based on assumptions rather than concrete proof, and the MOU's unsigned nature further weakened its reliability. Consequently, the Tribunal affirmed the CIT(A)'s order to delete the entire addition of Rs. 1.50 crore.Conclusion:The Tribunal dismissed the appeal by the Revenue, affirming the CIT(A)'s decision to delete the addition of Rs. 1.50 crore as unexplained investment. The Tribunal found that the AO's addition was not based on substantial evidence and that the unsigned MOU had no evidentiary value. The appeal was dismissed, and the CIT(A)'s order was upheld.Order Pronouncement:The order was pronounced on 13/06/2022 in open court, and the result was placed on the notice board.