2025 (11) TMI 888 - AT - Income Tax

Deletion of additions upheld where estimated-cost document alone failed to prove investment or escaped income under section 69C

ITAT upheld CIT(A)'s deletions and dismissed the Revenue's appeal, holding that additions based solely on an 'Estimated Cost' document were unsustainable. ... Addition in respect of the investment made by the assessee company in land purchased - addition made solely on the basis of figures mentioned in the document Estimated Cost of Project Pushap Vatika - HELD THAT:- Document is merely an estimate and under any circumstances cannot form the sole basis for determining the applicable rate or the quantum of income alleged to have escaped assessment, unless it is supported by strong corroborative evidence. A case in point is the transaction with S. Teja Singh, where the original notarized agreement to sell was impounded and the transaction value was clearly mentioned, thereby providing reliable supporting evidence. Whereas in other cases, this vital fact that the original notarized agreement to sell was executed, is missing. Thus, no addition can be made solely on the basis of figures mentioned in the document Estimated Cost of Project Pushap Vatika, whose heading itself suggest that it was just an 'Estimate'. In view of the binding decision of Paramjit Singh [2010 (2) TMI 262 - PUNJAB & HARYANA HIGH COURT] wherein, it has been held that the amount stated in the registered sale deed is conclusive and must be accepted for the purpose of assessment. Accordingly, no addition can be made merely on the basis of an estimate, in the absence of any other reliable and corroborative evidence to support such estimation. Addition pertaining to land measuring 25 Kanal 5 Maria purchased - Commissioner of Appeals has thoroughly examined the facts in detail and demonstrated a careful and reasoned application of mind in the matter. In contrast, the AO failed to consider material facts available on record and proceeded to make addition on mere surmises and conjectures without bringing on record any concrete positive material on record other than an 'Estimate'. AO has failed to consider the denial of agreement to sell in the statements recorded by his office from the sellers namely, S. Jagroop Singh, S. Malkiat Singh, and others-who categorically denied having executed any such agreement to sell or having any knowledge of its existence. Importantly, this fact has never been disputed by the departmental authorities at any stage of the proceedings, including before this Bench. On the basis of the facts mentioned above, acceptance of book results by the AO and in view of the blank stamp paper found and impounded during the survey used for the purported agreement to sell, the view taken by Commissioner of appeals is correct and not required to be interfered with, hence this addition is not found sustainable and therefore, deleted. The appeal of the Revenue stands dismissed on this ground. Addition made for land purchased from Sh. Sukhminder Singh, this land was purchased through registered sale deed - CIT(A) has produced detailed facts in this matter. He concluded that no addition can be made solely on the basis of figures mentioned in the document Estimated Cost of Project Pushap Vatika, whose heading itself suggest that it was just an 'Estimate'. Therefore, on the basis of the facts mentioned above and in the absence to any agreement to sell, this addition is not found sustainable and therefore deleted. Addition on account of interest paid treated as unexplained expenditure u/s 69C - document 'Document No. 1 - i.e. 'Estimated cost of Project Pushap Vatika', has been held to be an estimate but not actual investment. AO has not detected any other source of income to prove interest payment made by the assessee and there is nothing on record as to when and through which mode the interest was paid by the assessee. The departmental authorities have neither found any agreement to sell nor submitted any documentary evidence to prove so called unexplained payment of interest to seller. Further the concerned authorities have failed to establish any agreement to sell was actually executed prior to execution of sale deed. Therefore, under the facts & circumstances of the case, this addition is not found tenable made on account of alleged interest payment being unwarranted and against the facts of the case. ISSUES PRESENTED AND CONSIDERED 1. Whether a pre-project 'Estimated Cost' document prepared prior to actual transactions can, by itself, constitute reliable evidence to determine unexplained investment and serve as basis for additions under section 147/69C. 2. Whether figures in a registered sale deed are conclusive for assessing investment and can override estimates or later-produced agreements to sell. 3. Whether a photocopied purported agreement to sell and an impounded blank stamp paper (with denial of execution by sellers) constitute sufficient corroborative material to sustain additions based on the estimate. 4. Whether interest payments treated as unexplained expenditure under section 69C can be upheld in absence of proof of existence/timing of any pre-sale agreement, mode of payment, or alternative source of funds. 5. Whether the Assessing Officer's reliance on documents seized during a section 133A survey (absent other corroboration) amounts to a proper application of mind or amounts to conjecture/surmise warranting appellate interference. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Evidentiary Value of an 'Estimated Cost' Document Legal framework: Assessment additions under section 147/69C require that escaped income/investment be established on reliable material; estimates may be used only when supported by corroborative evidence. Precedent treatment: The Tribunal relied on binding jurisdictional authority that the amount stated in a registered sale deed is conclusive for assessment purposes and that mere estimates cannot supplant documentary evidence of actual transactions. Interpretation and reasoning: The Court examined the timing and content of the Estimated Cost document (prepared in 2011) vis-à-vis the dates of actual transactions (financial year 2012-13 and later). The document contained entries for parcels not ultimately acquired by the assessee, demonstrating its preparatory/indicative character. The Tribunal held that, being pre-transaction and containing inaccuracies (lands not purchased), the document is inherently an estimate and cannot independently establish the quantum of unexplained investment unless strong corroboration exists. Ratio vs. Obiter: Ratio - An estimate prepared prior to actual transactions, which includes parcels not acquired and lacks contemporaneous corroboration, cannot alone form the basis for additions under sections 147/69C. Conclusion: The estimate was not a reliable standalone basis for additions; absent corroborative evidence, additions based solely on it are unsustainable. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Conclusiveness of Registered Sale Deeds Legal framework: Registered instruments are prima facie conclusive as to transaction value and are entitled to evidentiary primacy in assessing investment value. Precedent treatment: The Tribunal applied the binding pronouncement of the jurisdictional High Court that the amount stated in a registered sale deed must be accepted for assessment purposes. Interpretation and reasoning: Where registered sale deeds pre-date or contemporaneously record the transaction consideration, those figures supersede speculative estimates. The Tribunal observed registered sale deeds showing consideration significantly lower than figures relied upon by the Assessing Officer via the estimate/impugned agreement, and found no credible material to displace the registered deed value. Ratio vs. Obiter: Ratio - Registered sale deed consideration is conclusive evidence of the transaction value for assessment absent cogent rebuttal. Conclusion: Registered sale deed amounts were to be accepted; estimates could not override them. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Sufficiency of Photocopied Agreement and Impounded Blank Stamp Paper Legal framework: To displace the conclusive effect of registered deeds or to justify additions, any purported agreement relied upon must be established as authentic, executed, and supported by corroborative evidence (execution by parties, consideration, and consistent documentary trail). Precedent treatment: Consistent with evidentiary principles, photocopies and materials seized in surveys must be tested for authenticity and corroboration before being used to make adverse additions. Interpretation and reasoning: The impugned agreement to sell was a photocopy; the original stamp paper bearing the serial number was impounded but found blank; sellers denied execution in statements recorded by the Assessing Officer. The Assessing Officer failed to mention sellers' denials in the assessment order; no positive material established execution or consideration under the alleged agreement. Given these deficiencies, the photocopied agreement and blank stamp paper were deemed unreliable and insufficient to sustain additions inconsistent with registered deeds. Ratio vs. Obiter: Ratio - A photocopied document and an impounded but blank stamp paper, coupled with sellers' denials, do not provide sufficient corroboration to replace registered deed values or justify additions. Conclusion: The purported agreement and blank stamp paper lacked probative value; additions based thereon were deleted. ISSUE-WISE DETAILED ANALYSIS - Issue 4: Treatment of Alleged Interest Payments as Unexplained Expenditure under Section 69C Legal framework: For treating payments as unexplained under section 69C, the Department must show (a) existence of payment, (b) recipient, (c) mode/timing, and (d) lack of known source or bona fide explanation; documentary proof of an antecedent obligation (e.g., executed agreement) and receipt is material. Precedent treatment: Absent proof of antecedent agreement or receipt, unexplained expenditure additions cannot be sustained merely on estimates or uncorroborated entries. Interpretation and reasoning: The alleged interest pertained to an earlier period (01.04.2012-30.12.2012) whereas the registered sale deed and payment occurred on 04.01.2013. The seller denied execution of any prior agreement and denied receipt of interest in statements recorded on oath. No documentary evidence established timing or mode of the alleged interest payments, nor was any alternate source or corroboration produced. Consequently, the Assessing Officer failed to discharge the evidentiary burden to characterize these payments as unexplained under section 69C. Ratio vs. Obiter: Ratio - Interest alleged to have been paid cannot be treated as unexplained expenditure under section 69C without proof of antecedent obligation/agreement, receipt, and mode/timing of payment. Conclusion: Addition of interest under section 69C was unsustainable and deleted. ISSUE-WISE DETAILED ANALYSIS - Issue 5: Adequacy of the Assessing Officer's Application of Mind to Survey Material Legal framework: Material seized during a section 133A survey can be used, but its evidentiary value depends on authenticity, corroboration, and consistent application of mind; reliance on survey papers alone without positive corroboration amounts to conjecture. Precedent treatment: Authorities emphasize that survey material must be corroborated by independent evidence before making additions; assessment cannot rest on mere surmises derived from preparatory documents. Interpretation and reasoning: The Tribunal found that the Assessing Officer selectively relied on portions of the estimate and an unauthenticated agreement while ignoring exculpatory material (sellers' denials, registered sale deeds, blank impounded stamp paper). The AO's approach was characterized as pick-and-choose and conjectural rather than founded on positive corroborative material. The CIT(A) undertook a fact-finding exercise, considered sellers' statements and registered deeds, and applied legal principles; the Tribunal found no reason to disturb that analysis. Ratio vs. Obiter: Ratio - A survey-seized document cannot sustain additions in absence of corroboration and where the AO ignores material exculpatory evidence; such reliance constitutes conjecture. Conclusion: The AO's approach was inadequate; appellate deletion of additions was justified. OVERALL CONCLUSION On the totality of facts - primacy of registered sale deed values, the preparatory/indicative nature of the estimated project cost, sellers' denials, lack of authenticated/corroborative agreement evidence, and absence of proof regarding interest payments - the Tribunal upheld the appellate authority's deletions and dismissed the Revenue's appeal. The findings that supported deletions constitute the operative ratio; ancillary observations regarding the limited use of estimates are consistent obiter reasoning applied to the facts.