Tribunal rejects addition based on uncorroborated statement, upholds construction cost for capital gains.

The Tribunal upheld the CIT (A)'s decision, ruling that the addition made by the AO solely based on a statement recorded under Section 132(4) without corroborative evidence was not justified. The cost of construction for calculating capital gains was accepted at Rs. 1600/- per sq. ft., supported by evidence from a confirmation letter and a construction agreement. The Tribunal emphasized that confessions during search operations without credible evidence are unreliable. Consequently, the appeal filed by the Revenue was dismissed.

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Issues Involved:
1. Whether the cost of construction should be taken at Rs. 2200/- per sq. ft. or Rs. 1600/- per sq. ft. for calculating capital gains.
2. The validity of the addition made by the Assessing Officer based on the statement recorded under Section 132(4) of the Income Tax Act without corroborative evidence.
3. The acceptance of the assessee's computation of capital gains and the cost of land foregone.

Detailed Analysis:

1. Cost of Construction for Calculating Capital Gains:
The Assessing Officer (AO) noted that during a search and seizure operation, the director of the assessee company stated that the cost of construction was Rs. 2500/- per sq. ft., which was later revised to Rs. 2200/- per sq. ft. The assessee, however, filed a return of income under Section 153A, computing the capital gain by taking the cost of construction at Rs. 1600/- per sq. ft. The AO did not accept this and made an addition based on the initial statement.

2. Validity of Addition Based on Section 132(4) Statement:
The CIT (A) deleted the addition made by the AO, stating that the AO relied solely on the statement given under Section 132(4) without any corroborative evidence. The CIT (A) noted that the AO did not bring any incriminating material on record to prove the cost per sq. ft. was Rs. 2200/-. The CIT (A) emphasized that additions based on statements under Section 132(4) without substantiating evidence do not stand the test of addition, citing various judicial decisions.

3. Acceptance of Assessee's Computation of Capital Gains and Cost of Land Foregone:
The CIT (A) accepted the assessee's computation of capital gains, which considered the cost of construction at Rs. 1600/- per sq. ft., based on a confirmation letter from the developer M/s Namishree Infratech. The CIT (A) also considered the construction agreement entered by the developer with other landowners, which mentioned the construction cost as Rs. 1600/- per sq. ft. The CIT (A) found that the AO disregarded this evidence without any justification.

Tribunal's Decision:
The Tribunal upheld the CIT (A)'s decision, agreeing that the addition made by the AO was based solely on the statement recorded under Section 132(4) without any corroborative evidence. The Tribunal noted that the CBDT instructions and various judicial decisions emphasize that confessions during search and seizure operations, if not based on credible evidence, are often retracted and do not serve any useful purpose. The Tribunal found that the assessee provided cogent evidence, including a confirmation letter from the developer, which the AO did not rebut. Therefore, the Tribunal dismissed the appeal filed by the Revenue.

Conclusion:
The Tribunal concluded that the addition made by the AO based on the statement recorded under Section 132(4) without corroborative evidence was not justified. The cost of construction for calculating capital gains should be taken at Rs. 1600/- per sq. ft., as supported by the confirmation letter from the developer and the construction agreement with other landowners. The appeal filed by the Revenue was dismissed.

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