Revenue's appeal dismissed for unaccounted profit additions from flat sales without proper evidence or valuation

ITAT Ahmedabad dismissed Revenue's appeal regarding unaccounted profit additions from flat sales. During survey under section 133A, only loose paper was found without other incriminating documents. AO failed to refer valuation to District Valuation Officer under section 55A, instead relying on Inspector's report for fair market value determination. Purchasers' statements under section 131 showed no on-money payments to developer. Without incriminating evidence, books of account rejection, or seized unaccounted money, additions based solely on Inspector's report were unsustainable. Court cited SC precedents emphasizing no additions can be made on suspicion without proper evidence.

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Issues Involved:
1. Addition of Rs. 4,51,00,000/- on account of unaccounted profit from business.
2. Addition of Rs. 1,46,12,500/- on account of unaccounted profit from the sale of penthouses.

Issue 1: Addition of Rs. 4,51,00,000/- on account of unaccounted profit from business

The Revenue's appeal challenges the deletion of an addition of Rs. 4,51,00,000/- made by the Assessing Officer (AO) based on the Inspector's report, which claimed that flats were sold at Rs. 50,00,000/- each, contrary to the assessee's declared prices ranging from Rs. 18 Lakhs to Rs. 43.75 Lakhs. The AO did not find any defect in the books of accounts nor did he reject them. The CIT(A) observed that the AO failed to refer the matter to the Department's Valuation Officer for fair market valuation and relied solely on the Inspector's report, which lacks legal standing. The CIT(A) concluded that the AO did not bring any material evidence to support the suppression of consideration or receipt of on-money. Consequently, the addition was deleted.

Issue 2: Addition of Rs. 1,46,12,500/- on account of unaccounted profit from the sale of penthouses

The Revenue also appealed against the deletion of an addition of Rs. 1,46,12,500/- made by the AO based on a rough plan sketch found during the survey, which suggested a higher sale price for penthouses. The assessee provided detailed submissions explaining that the sale price varied based on the type of penthouse, quality of materials, and other factors. The CIT(A) noted that the AO did not record any statements to identify the significance of the figures on the rough sketch and failed to link it specifically to the assessee. The CIT(A) emphasized that no incriminating evidence was found during the survey, and the confirmations from buyers were consistent with the declared prices. Therefore, the addition was deleted.

Conclusion:

The Tribunal upheld the CIT(A)'s decision, stating that the AO's reliance on the Inspector's report without corroborating evidence or a proper valuation process was not sustainable. The Tribunal cited precedents from the Jurisdictional High Court and the Supreme Court, which emphasize that additions based on suspicion, surmises, and without corroborative evidence are not permissible. The appeal by the Revenue was dismissed, and the order pronounced in open court on 12-01-2024.

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