2003 (8) TMI 161 - AT - Income Tax

Tribunal upholds deletions by CIT(A) due to lack of evidence

ASSISTANT COMMISSIONER OF INCOME TAX. Versus RADHEY SHYAM PODDAR (HUF).

ASSISTANT COMMISSIONER OF INCOME TAX. Versus RADHEY SHYAM PODDAR (HUF). - TTJ 086, 558, Issues Involved:1. Deletion of addition of Rs. 8,97,000 on account of unaccounted investment in property.2. Deletion of addition of Rs. 2,21,000 on account of under-statement of sale consideration of property.3. Deletion of addition of Rs. 11,000 on account of low household withdrawals.Issue-wise Detailed Analysis:1. Deletion of Addition of Rs. 8,97,000 on Account of Unaccounted Investment in Property:The Department appealed against the deletion of an addition of Rs. 8,97,000 made by the AO on account of unaccounted investment in the purchase of a property in Aggar Nagar, Ludhiana. The AO had referred the valuation of the property to the valuation officer, who valued it at Rs. 22,97,200, leading the AO to treat the difference of Rs. 8,97,200 as an investment from undisclosed sources under Section 69 of the IT Act.The CIT(A) deleted the addition, observing that there was no provision in the law to enhance the actual consideration paid as per the registration deed based on the Valuation Officer's report. The CIT(A) relied on the Supreme Court's decision in CIT & Anr. vs. George Henderson & Co. Ltd., which stated that 'actual consideration' means the price bargained by the parties, not the market value. The CIT(A) noted that Section 69 presupposes an unrecorded investment, which can be deemed as income only if the assessee offers no satisfactory explanation. Since the AO's action was based on mere estimation without concrete evidence, the addition was unjustified.The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to provide substantial evidence that the assessee paid more than the declared amount. The valuation by the DVO was based on estimates, and the AO did not examine the seller to confirm any additional payment. Thus, the addition was based on conjecture and not tenable under the law.2. Deletion of Addition of Rs. 2,21,000 on Account of Under-Statement of Sale Consideration of Property:The AO added Rs. 2,21,000 to the assessee's income, considering it as an understatement of the sale consideration of a property sold for Rs. 9,50,000. The AO referred the case to the DVO, who valued the property at Rs. 11,71,000, leading to the addition under Section 69 of the IT Act.The CIT(A) deleted the addition, stating that no receipt can be taxed merely because the DVO estimated a higher sale consideration than that shown in the registration deed. The CIT(A) emphasized that only real income, which is received or accrued, can be taxed. The Tribunal agreed with the CIT(A), noting that Section 69 pertains to unexplained investments, not to the sale of property. The assessee had sold the property and invested the entire sale proceeds in purchasing another house, claiming exemption under Section 54 of the IT Act. The AO failed to prove that the assessee received more than Rs. 9,50,000. Therefore, the addition was unjustified.3. Deletion of Addition of Rs. 11,000 on Account of Low Household Withdrawals:The AO added Rs. 11,000 to the assessee's income, estimating household expenses at Rs. 96,000 based on the previous year's withdrawals and cost inflation index, as opposed to the Rs. 85,000 shown by the assessee.The CIT(A) deleted the addition, stating that the withdrawals were adequate and there was no material evidence to conclude that the assessee incurred more expenses than disclosed. The Tribunal upheld the CIT(A)'s decision, noting that the AO's addition was based on mere estimates without concrete evidence. The difference in withdrawals compared to the previous year was minimal, and the AO did not point out any specific suppressed expenses. Therefore, the addition was not justified.Conclusion:The Tribunal dismissed the Department's appeal, upholding the CIT(A)'s deletions of the additions made by the AO on account of unaccounted investment, under-statement of sale consideration, and low household withdrawals. The decisions were based on the lack of substantial evidence and reliance on mere estimates by the AO.