DCIT Vs Thiyagarajan Ravindran (ITAT Chennai)
Loose Sheet Valuation Can’t Create Income – ITAT Chennai Deletes ₹32.72 Cr Addition Based on Notional Net-Worth Difference
A search u/s 132 was conducted in the case of Thiyagarajan Ravindran, partner in M/s Revathi Thanga Maligai & M/s Revathi Stores. Two loose sheets found during search showed his net-worth as ₹14.44 crore on 31.03.2017 & ₹47.16 crore on 31.07.2018. AO treated the difference of ₹32.72 crore as unexplained investment u/s 69, doubting the genuineness of the family settlement under which the Assessee received properties from his mother & brothers.
Before CIT(A), Assessee clarified that the later net-worth statement was drawn on market value basis only for bank-loan purposes, while the books carried historical cost. The properties were received by registered settlement deeds from relatives without consideration, which is exempt u/s 56(2)(x).
CIT(A) found the addition to be purely notional, as the AO had compared book value with market value, and deleted the addition.
On Revenue’s appeal, the ITAT upheld the deletion, holding that:
- The seized sheets were merely valuation statements, not evidence of real investments;
- No outflow of money or new acquisition was proved;
- Transfers among relatives were genuine settlements exempt u/s 56(2)(x);
- Increase in net-worth based on market valuation does not constitute income.
Held: Addition of ₹32.72 crore u/s 69 was unsustainable; CIT(A)’s order deleting the same upheld. Revenue’s appeal dismissed.
