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Facts
The Department appealed the deletion of an addition of Rs. 77,27,500 made by the AO on account of unexplained investment for purchase of SCO. The AO had relied on valuation reports submitted by SCO holders to their bankers. The assessee's appeal was against the addition of Rs. 4,18,267. A search was conducted at the premises of the assessee and Homelife Buildcon Pvt. Ltd.
Held
The Tribunal held that the addition made by the AO, based on valuation reports used for raising loans, was not sustainable. It noted that a similar addition in the case of Homelife Buildcon Pvt. Ltd. was deleted by the CIT(A) and confirmed by the ITAT. Regarding the Cross Objection, the Tribunal found that the loose slip on which the addition of Rs. 4,18,267 was based lacked specific connection to the assessee and was not corroborated by any evidence.
Key Issues
Whether the addition made based on valuation reports for loan purposes is sustainable, and whether a loose slip without corroboration can form the basis of an addition.
Sections Cited
132(4), 115BBE, 69B
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Income Tax Appellate Tribunal, CHANDIGARH BENCH “A”, CHANDIGARH
Before: SHRI. RAJPAL YADAV, VP & SHRI. KRINWANT SAHAY, AM
Order
PER KRINWANT SAHAY, AM:
The present appeal is filed by the Department and Cross Objection is filed by the Assessee against the order of the Ld. CIT(A)-5, Ludhiana dt. 13/11/2024 pertain to Assessment Year 2022-23.
Following grounds are raised by the Department in for the A.Y. 2022-23: "1. Whether upon facts and circumstances of the case and in law, the Ld. CIT (A) was justified to deleted the addition of Rs.77,27,500/- made by the A.O on account of unexplained investment for purchase of SCO on the basis of logical & rational extrapolation based on evidences ?
2. Whether upon facts and circumstances of the case and in law, the valuation report by valuer, various documents found during search and 2 statements of persons recorded u/s 132(4) not constitute incriminating documents for determining true purchase price of the property?
3. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid rounds of appeal at any time before or at the time of hearing of appeal."
2.1 Following grounds were raised by the Assessee in C.O. No. 7/Chd/2025 for the A.Y. 2022-23:
1. That the Ld. CIT(A), has erred in upholding the addition of Rs, 4,18, 267/- as per para 5.3,.3 of the order
2. That the upholding of addition of Rs. 4,18, 267/- is against the facts and circumstances of the case.
3. That respondent craves leave to add or amend the grounds of cross objections before the appeal is finally heard or disposed off."
3. The facts, in brief are that the assessee is an individual and is one of the promoters in Homelife Buildcon Pvt. Ltd. There was search and seizure operations at the business premises of Homelife Buildcon Pvt. Ltd. and the assessee on 16.11.2021.
4. The facts leading to the unexplained investment in the purchase of SCO have been discussed by the AO in para 4 of his order. The assessee had purchased one SCO from the Homelife Buildcon Pvt. Ltd. and during post search investigation, certain valuation reports as obtained by some SCO holders were found. They were considered by the AO and the valuations they had given to their bankers for raising loan for the construction of SCO, that was adopted as the sale consideration of the SCO.
5. Similar addition was made in the case of Homelife Buildcon Pvt. Ltd., wherein on the basis of such valuation reports, the addition was made at the enhanced value of SCO sold by the company. In the Assessment order, the Ld. AO has mentioned that similar addition was made in the case of M/s Homelife Buildcon Pvt. Ltd. as per the following finding given by the AO:-
"Paqe 14 para 4.2
3 Accordingly, following the action taken in the case of M/s Homelife Buildcon Pvt.Ltd. in AY 2021-22 and AY 2022-23, it is concluded that Homelife Buildcon Pvt. Ltd. had sold its plots as well as SCOs at much higher rates than registered price and hence, addition in the hands of Homelife Buildcon Pvt.Ltd. was made on account of 'on money' from sale of plots/SCOs in respective years. It establishes that assessee who has purchased SCO during the year under consideration, has also paid 'on money' on making the said investment in SCO."
The Assessing Officer, thereafter, made an addition of unexplained investment to the tune of Rs. 77,27,500/- and the applied the provisions of section 115BBE as per finding given by him in para 4.7 of the order at page 25, which is being reproduced as under: - "4.7 Therefore, in view of the above discussion, it is established that the assessee had purchased SCO at much higher rates as compared to registered rates and difference was paid as 'on money' Accordingly, an addition of Rs. 77,27,500/ (Rs. 99,27,500- 22,00,000) is hereby made on account of unexplained investment made for purchase of SCO u/s 69 B of the Act and accordingly tax to be charged as per provisions of section 115BBE of the Act as the assessee had failed to fully disclose this investment and source of the same remains unexplained."
The assessee took up the matter to the CIT(A) and made a detailed submissions. The CIT(A) had earlier deleted the addition in respect of addition made in the case of company M/s Homelife Buildcon Pvt. Ltd. on similar facts and circumstances vide appeal No. 10241/2020-2021/IT/CIT(A)-5/Ldh/2023-24 vide order, dated 19.07.2024 following his own order in the case of Homelife Buildcon Pvt.Ltd., he deleted the addition of Rs. 77,27,500/- as made by the AO. Finding has been given by the CIT(A) at page 19 of his order.
The Department has filed the appeal against such deletion and it was brought to our notice by the Ld. Counsel of assessee that the ITAT in the case of Homelife Buildcon Pvt.Ltd. in assessee's appeal bearing and in department appeal bearing ITAT No.1036/Chd/24 has since the confirmed the order of the CIT(A) deleting the addition in respect of sale price of SCO, which had been enhanced on the basis of valuation reports submitted by the purchaser of the SCO to the banker. The finding of the Tribunal in para 66, at page
4 53 in the case of Homelife Buildcon Pvt. Ltd.is being reproduced for ready reference:-
"67. As regards, the deletion of addition of Rs.4,54,00,000/-, the same has been deleted by the CIT(A) as per ground of appeal
4 in department appeal, we have considered the finding of CIT(A) on this issue from page 94 to 97 of his order and the facts are the same in, as much as, on the basis of valuation report submitted by purchaser of SCO to the bankers. The rate of sale of SCO have been adopted for the year under consideration at enhanced value. These facts are identical to our findings with regard to deletion of addition, while dealing with the Ground No. 1 to 3 of the department appeal and ground No. 1 of the assessee's appeal. We have held that no such basis can be adopted on such valuation reports and neither any extrapolation can be made. Thus, this ground of appeal in the department appeal is dismissed as per our finding given above while deciding ground No. 1 to 3 of the department appeal."
9. The Ld. DR relied upon the order of AO.
10. We have gone through the order of the AO, order of the CIT(A) arguments of both the sides and the order of ITAT in the case of Homelife Buildcon Pvt. Ltd. as cited supra. We find that in the hands of company i.e. Homelife Buildcon Pvt.Ltd., similar addition was made on the basis of same facts and that addition did not find favour with the CIT(A), who relied upon his earlier order and when the matter came before the ITAT, the order of CIT(A) deleting the addition was confirmed, the ITAT has deleted the addition in the case of Homelife Buildcon Pvt. Ltd. on account of SCO and on similar facts and circumstances, the said addition of Rs. 77,27,500/- is not liable to be sustained in the case of purchaser of SCO and, as such, the departmental appeal is dismissed.
11. In the Cross Objections, the only ground raised by the assessee is with regard to the addition of Rs. 4,18,267/- as confirmed by the CIT(A) in para 5.3.3 of the order.
It was argued by the Ld. Counsel of the assessee that during the course of search, one loose slip, which have been reproduced
5 at page 23 of the order of CIT(A) was found and for the sake of clarity, the same is being reproduced as under:-
The Ld. Counsel argued that in the said slip, there is no name of the assessee, no signatures of the assessee. So, there is no connection of the assessee with the seized document. It was argued that some person may have left the paper at his residence by mistake. Further, it was stated that though, the presumption u/s 132(4) is against the assessee, but it is a rebuttable presumption and there is no corroborated material or any evidence about such alleged cash payment relating to assessee. Further, the AO had not made any enquiry with regard to the names as per that loose slip, thus, no addition was liable to be made.
The Ld. DR stated the said slip has been found from the residence of assessee and, as such, the addition has rightly been confirmed by the CIT(A).
6 15. We have gone through the orders of Assessing Officer, CIT(A) and arguments of the DR and the loose slip as found from the residential premises of the assessee. It is an accepted fact that no enquiries had been made by the AO/CIT(A) about the contents as noted on the loose slip, where there is even no name of assessee and certain signatures are there of the some 'third party' namely 'Sanjeev Joshi' and telephone of Sanjeev Joshi is also there on this loose slip. The AO should have made certain enquiries to find out the truth. Merely since the document has been found from the premises of the assessee, the addition cannot be justified, since the presumption u/s 132(4) is rebuttable. We also find that no corroborated evidence has been found during the course of the search and neither there is evidence that the assessee has entered into some transaction with 'Stylish Bath' as per noting on the slip. Thus, under such circumstances, the addition as confirmed by the CIT(A) is deleted.
In the result, Revenue appeal is dismissed and Assessee’s appeal is allowed.