2020 (3) TMI 48 - HC - Income Tax

Undisclosed income allegedly being profit on sale of plot - HELD THAT - The document seized showed account as on 31.10.2001 while the registered sale deed of the plot was dated 23.5.2002. It was not the case of the revenue that the circle rate was more than what had been disclosed. No unaccounted cash was found to be paid by the buyer to the seller. There is no statement of the seller regarding obtaining the money and therefore the addition was not sustained. As noted at this stage that it is not the case of the department that the property was owned by the appellant or M/s Reliance Estate Agency. The case set up was that apart from the amount mentioned in the registered sale deeds or the payment received by cheques, there were certain cash transactions which were divided between the assessee and the Managing Director of the seller-company. Without having any quarrel with the issue that there may be a possibility that the assessee could apart from commission earn profit in a sale-purchase transaction but the basic issue would be that some cash amount would have been paid by the purchaser. The addition on said account made on the buyer never withstood the scrutiny in appeal. There is nothing on record to show that any addition was made in hand of the seller or the Managing Director of the seller-company for the alleged cash amount received. In this background, it would not be appropriate to hold that only intermediatory or the broker can be saddled with the additions. The contention of learned counsel for the revenue that the role of the appellant was more than that of a broker and he had earned profit also does not enhance the case of the revenue for the reasons mentioned above.- Decided in favour of assessee.

Summary

Issues:
1. Whether the addition of undisclosed income on the sale of property can be upheld based on loose papers?
2. Whether the assessment under Section 153A was conducted in violation of natural justice principles?
3. Whether the addition made on the buyer can be sustained when the same addition on the purchaser was deleted?
4. Whether the appellant, acting as a broker, can be held responsible for the alleged profit on the sale of property?

Analysis:

Issue 1:
The appellant challenged the addition of undisclosed income on the sale of industrial plots based on loose papers. The Assessing Officer calculated the profit based on seized documents and divided it between the appellant and the Managing Director of the seller-company. However, the Tribunal noted discrepancies and lack of conclusive proof in the seized documents. The Tribunal emphasized that the additions were not sustainable as they were based on tentative figures and lacked concrete evidence of on-money transactions. The Tribunal cited legal precedents to support its decision, emphasizing the burden of proof on the Revenue in cases of alleged understatement or concealment.

Issue 2:
The appellant raised concerns about the assessment conducted under Section 153A, alleging violations of natural justice principles. The Tribunal found that the additions made on the buyer were deleted on technical grounds and lacked substantial evidence to support the alleged transactions. The Tribunal highlighted discrepancies in the seized documents and the lack of corroboration from the seller regarding on-money transactions. Consequently, the Tribunal ruled in favor of the appellant, emphasizing the lack of concrete evidence to sustain the additions.

Issue 3:
The central controversy revolved around whether the addition made on the buyer could be upheld when the same addition on the purchaser was deleted. The Tribunal found that the deletion of the addition on the buyer was due to technical grounds and did not establish the veracity of the transactions. The Tribunal emphasized that the seized documents lacked conclusive proof of on-money transactions and discrepancies in dates further weakened the Revenue's case. Therefore, the Tribunal ruled in favor of the appellant, highlighting the lack of evidence to sustain the additions.

Issue 4:
The appellant's role as a broker in the sale of the property raised questions regarding his liability for the alleged profit. The Tribunal noted that while the appellant could potentially earn profit apart from commission in a sale-purchase transaction, the lack of evidence regarding cash payments by the buyer to the seller weakened the Revenue's case. The Tribunal emphasized that no additions were made in the hands of the seller or the Managing Director of the seller-company, casting doubt on holding only the broker responsible for the alleged profit. Ultimately, the Tribunal allowed the appeals, ruling in favor of the appellant and rejecting the Revenue's contentions regarding the appellant's role and liability for the alleged profit.