The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has directed re-adjudication on failure to make enquiries on proprietary of sale consideration based on seized documents.
The assessee company, DSL Properties Pvt. Ltd. was engaged in the business of purchase, development and sale of properties and also derives income from interest and capital gains. For the A.Y. 2014-15 in question, in course of the scrutiny assessment, the Assessing Officer observed that the assessee company had inter alia earned Long Term Capital Gains on sale of property. The property was sold to UTC Softech Pvt. Ltd. (UTC) for a stated consideration.
A search and seizure were conducted on 10.10.2013 on Urbtech Group including the purchaser of the property UTC Softech Pvt. Ltd. Certain loose papers, diary, documents were inter alia seized in the search. The AO of the purchaser vide his letter dated 26.02.2016 exchanged the information to the AO of the assessee along with copies of the relevant documents pertaining to the assessee herein.
A show-cause notice was issued by the AO proposing to assess the difference in the hands of the assessee as undisclosed income attributable to understatement of such sale consideration. Simultaneously, a summons was also served upon UTC and summons so issued however remain un-complied.
It was observed by the AO that the loose paper clearly confirmed that the real consideration paid to the assessee against the sale of property stands at Rs.40 crores and the sale consideration disclosed was a suppressed figure. The Assessing Officer thus alleged suppression of sale consideration and consequent lower reporting of LTCG. The Assessing Officer accordingly enhanced the Long-Term Capital Gain declared to this extent while framing the assessment order
R. S. Singhavi, appearing on behalf of the assessee submitted that the sale consideration shown in registered deed was also much higher than the circle rate notified by the State Revenue Department and thus no adverse inference on the sale consideration is justified based on a dumb document.
He referred to judgement rendered by Delhi High Court in the case of CIT vs. Shri Kulwant Rai 291 ITR 36(Delhi) to contend that assessment cannot be made on the basis of imagination and guesswork, which has been done by the AO in the instant case
Vivek Kumar Upadyay appeared on behalf of the revenue strongly assailing the action of the CIT(A) and defended the order of the AO and had ignored the tell-tale evidence gathered by the department and agreed to the version of the assessee without any justifiable reason.
The two-member Bench of Chandra Mohan Garg, (Judicial Member) and Pradip Kumar Kedia, (Accountant Member) observed that the controversy in the present case related to additions on account of understated sale consideration on sale of property by the assessee in the factual matrix. The issue was essentially factual in nature and is thus wholly dependent upon the examination of facts threadbare.
The CIT(A), on the other hand, had failed to adhere to legitimate expectation and has passed a nondescript and cryptic order without dealing with the fundamental aspects of the matter
The bench allowed the appeal filed by the revenue CIT(A) ought to have made suitable enquiries on the proprietary of sale consideration declared in the light of documents seized instead of brushing aside the action of the AO in a lopsided manner.
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