'On-Money' No Basis To Make Addition On Sale Of House Property Sans Absence Of Reference To DVO U/s 55A: Ahmedabad ITAT

On finding that the AO has failed to refer the case to District Valuation Officer u/s 55A of Income Tax Act 1961, the Ahmedabad ITAT deleted the addition made by AO on account of on-money received by the assessee on the sale of duplex pent house.

The Bench comprising T.R. Senthil Kumar (Judicial Member) and Annapurna Gupta (Accountant Member) observed that “the AO has merely relied upon the report given by his Inspector and determined the fair market value of the flats and pent houses, which is against the provisions of the Act. The Inspector attached to the AO is not an expert to determine the fair value of the flats and Duplex Pent houses. Further when the AO summoned the various purchasers of the flats and recorded their statements u/s. 131, none of the purchasers having said to have paid on-money to the developer/assessee, except to having agreed the prices entered with the developer.” (Para 5.1)

The Coram further added that “The Assessing Officer do not find any infirmity in the books of account maintained by the assessee, thereby he has not rejected the books of account. Thus, in the absence of any incriminating evidence found during the course of survey, the additions made by the AO based only on Inspector's report is not sustainable in law”. (Para 5.1)

As per the brief facts of the case, there was a survey action in the business premises of the assessee during which certain piece of loose paper found and impounded. Pursuant to the survey, the purchasers of the flats were summoned u/s. 133(1) and their statements were recorded by the AO. None of the purchasers having admitted to pay extra money or on-money, other than agreed prices entered with the developer/ assessee. Having not satisfied with the statements recorded, the AO sent his Inspector for inquiry. Based on the report submitted by the Inspector, the AO held that there is an unexplained income involved. Consequently, the AO made addition to the income of Assessee.

On appeal, the CIT(A) deleted such additions by observing that the report of Inspector does not have any sanction of the Income-tax Act and acceptance of the Court that it can be sole basis for any adverse inference and for making any addition to the total income.

The Coram noted that there is no incriminating document except the piece of loose paper found during course of survey.

The Bench stated that to determine the value of the flat and to determine the Fair Market Value, the AO ought to have referred the matter to the prescribed authority namely District Valuation Officer u/s 55A.

The Bench observed that there is no unaccounted money found and seized by the Authorities in the business premises of the assessee.

The Bench further observed that only based on loose paper information and without corresponding evidences, the entire addition is made which is not permissible in law.

Referring to the decision of Supreme Court in case of Omar Salav Mohamed Sait (1989) [37 ITR 151] (SC), the Coram reiterated that no addition can be made on the basis of surmises, suspicion and conjectures.

Referring to the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull [87 ITR 349], the Bench further reiterated that, “the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect.”

Therefore, on not finding any infirmity in the order passed by the CIT(A), the ITAT rejected the Revenue's appeal.

Counsel for Appellant/ Department: Sudhendu Das

Counsel for Respondent/Taxpayer: S.N. Soparkar

Case Title: Deputy Commissioner of Income-tax verses M/s. Aarya Developers

Case Number: ITA No. 973/Ahd/2019

Click here to read/ download the Order