2020 (5) TMI 110 - AT - Income Tax

Tribunal rules in favor of Assessee on capital gains and income addition disputes

The Tribunal dismissed all appeals by the Revenue and partly allowed the Cross Objections filed by the Assessee. In the first issue regarding the deletion ... Long term capital gain computation - determination of value of the land - whether the assessee has sold the land in dispute as per the Sanakhat found during the course of search under section 132 or as disclosed in the registered document - HELD THAT:- The provisions of section 48 of the Act does not refer to take the fair market value as the sale consideration. Entire thrust of the AO for making the addition was based on Sanakhat found during the course of search. But the AO has not brought anything on record for any movement of the fund received by the assessee over and above the value declared in the registered documents. Regarding the receipt of money of ₹2.65 crores from Rajat Finance private Ltd, we find that such money was returned back by the assessee in the subsequent year and this fact was not doubted by the authorities below. Accordingly, the receipt of such money cannot be treated as consideration received by the assessee against the transfer of the land. Even the value determined by the DVO suggest the fair market value at ₹ 13.87 Lacs only. Thus we are of the view that the value as adopted by the AO for ₹ 4.65 crores treating the sale consideration is not sustainable. The impugned transaction cannot be treated as colourable device adopted by the assessee to escape from the income tax liability. Accordingly we are of the opinion that the principles laid down in the case of McDowells[1985 (4) TMI 64 - SUPREME COURT] cannot be applied in the case on hand. In view of the above, the ground of appeal of the Revenue is dismissed. Addition being the income admitted during the search action - whether the amount mention in the seized documents represents the income of the assessee as alleged by the AO? - HELD THAT:- Information contained in the seized documents are just the information without any support and therefore no credentials can be given to such information until and unless it is based on some materials. As such, seized loose documents found during the search should be read in association with the other materials before reaching to the conclusion that such seized material represent the income of the assessee. We also note that the lose paper found during the course of search did hold evidentiary value unless the same is supported by cogent material. See COMMON CAUSE (A REGISTERED SOCIETY) AND OTHERS VERSUS UNION OF INDIA AND OTHERS [2017 (1) TMI 1164 - SUPREME COURT] Documents seized during the search proceedings is nothing but representing the dumb documents and therefore no additions based on the same can be made in the hands of the assessee. No reason to interfere in the order of the ld. CIT-A and direct the AO to delete the addition made by him. - Decided against revenue. Issues Involved:1. Deletion of addition on account of differential long-term capital gain on sale of land.2. Deletion of addition of income admitted during the search action.Detailed Analysis:Issue 1: Deletion of Addition on Account of Differential Long-Term Capital Gain on Sale of LandFacts of the Case:- The assessee, an individual engaged in the business of running a petrol pump and trading in furnace oil and LDO, was subjected to a search on 15/09/2009.- During the search, documents (Annexure BS-10) were found indicating a sale of land at Mota Mava, Rajkot District, for Rs. 4.65 crores, but the assessee claimed to have sold it for Rs. 12.61 lakhs.- The AO added Rs. 4,52,39,000 to the assessee's income, treating the sale price as Rs. 4.65 crores based on the documents found.Contentions of the Assessee:- The transactions with Rajat Finance Ltd. were not real but accommodation entries.- The land was sold to Hitraj Developers Pvt. Ltd. for Rs. 12.61 lakhs, and the sale consideration should be taken as per the registered document.Findings of CIT (A):- The sale consideration should be taken as per section 48 of the Act, and not the fair market value.- The DVO determined the value of the land as Rs. 13.87 lakhs.- No evidence suggested the assessee received more than Rs. 12.61 lakhs.Tribunal's Decision:- The AO's basis for the addition was the Sanakhat found during the search, but no evidence of funds received over and above the declared value was found.- The provisions of section 48 mandate taking the actual consideration received.- The value determined by the DVO was Rs. 13.87 lakhs, not Rs. 4.65 crores.- The transaction could not be treated as a colorable device to escape tax liability.- The appeal by the Revenue was dismissed.Issue 2: Deletion of Addition of Income Admitted During the Search ActionFacts of the Case:- During the search, the assessee admitted unaccounted income of Rs. 2.50 crores, with Rs. 2.10 crores pertaining to AY 2009-10 and Rs. 40 lakhs to AY 2010-11.- The AO added Rs. 2.10 crores to the total income based on a seized document indicating receipt of Rs. 2 crores from M/s J.Y. Resources Pvt. Ltd.Contentions of the Assessee:- The disclosure was made under pressure and retracted within 41 days.- The seized document did not represent actual receipt of cash.- No corroborative evidence was found during the survey of M/s J.Y. Resources Pvt. Ltd.Findings of CIT (A):- The receipt of Rs. 2 crores was against the money provided by the assessee to M/s J.Y. Resources Pvt. Ltd.- Additions based solely on statements without corroborative evidence are not justified.- The addition of Rs. 2.10 crores and Rs. 40 lakhs for AY 2009-10 and AY 2010-11 respectively was deleted.Tribunal's Decision:- The presumption under section 292C is rebuttable, and no corroborative evidence supported the receipt of cash.- The seized documents alone, without supportive evidence, do not hold probative value.- The addition based on the seized document was not sustainable.- The appeal by the Revenue was dismissed, and the Cross Objection by the assessee was partly allowed.Combined Results:- All appeals by the Revenue were dismissed.- Cross Objections filed by the Assessee were partly allowed.Order Pronounced in Open Court on 28/02/2020.