Saturday, 28 January 2017

Whether additions can be made on account of investment merely on basis of statement of original owners, in absence of evidences to show transfer of sale consideration - NO: HC

THE ISSUE IS - Whether an addition can be made on account of investment in property, merely on basis of statement of the original owners, when there is no evidence to show transfer of any sale consideration. NO is the verdict.  


Facts of the case:
The assessee filed return of income for A.Y. 2008- 09 declaring total income at Rs.46,02,780/-. Assessment order u/s 143(3) was passed determining total income at Rs.2,00,31,830/- making after additions on account of Investment in purchase of land at Adalaj, Disallowance of interest and Disallowance u/s.14A. On appeal, CIT(A) deleted addition made by the A.O. on account of investment in purchase of land at Adalaj of Rs.74,50,000/- and confirmed the disallowance of interest of Rs.48,74,798/- out of total interest disallowance of interest of Rs.73,05,794/- and deleted the balance interest expenses of Rs.24,30,996/-. On further appeal, Tribunal allowed the appeal of the assessee and directed AO to delete addition of Rs.48,74,798/- made on account of disallowance of interest expenses. Tribunal dismissed the appeal preferred by the revenue against the order passed by CIT(A) deleting addition made by AO on account of investment in purchase of land at Adalaj.
On appeal, the HC held that,
++ so far as both the assessees are concerned, they have never purchased the land situated at Adalaj from the original land owners i.e., Mr. Gandaji Thakore and others. As per their case and even sale deed produced on record, both the assessee purchased the land from one Mr.Hemendra Shah vide registered sale deed. It has come on record that said Mr.Hemendra Ahsh purchased the land situated at Adalaj from power of attorney holder of the original land owners – Mr.Gandaji Thakore and others and thereafter said Mr.Hemendra Shah sold the said land to the assessee. There is no iota of evidence on record to suggest that the assessee paid Rs.2.10 Crores to said Mr.Hemendra Shah. Solely on the basis of statements of the original land owners – Mr.Gandaji Thakore and others that they received sale consideration from Mr.Champavat, in whose favour sale deed was executed by them in the year 2008, as rightly held by CIT(A) and tribunal, A.O. was not justified in making addition on account of investment in purchase of land at Adalaj of Rs.74,50,000/-. We are in complete agreement with the view taken by tribunal in deleting addition made by the A.O. on account of investment in purchase of land at Adalaj of Rs.74,50,000/-.

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