आदेश / O R D E R
PER MANISH BORAD: The above captioned appeal at the instance of Revenue is directed against the order of Ld. Commissioner of Income Tax(Appeals)-3, (in short 'CIT(A)'), Bhopal dated 14.08.2020 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the 'Act') dated 18.02.2015 framed by DCIT-Central-I, Bhopal.
1
The Revenue has raised following grounds of appeal:
1.On the facts and in the circumstances of the case, the ld. CIT(A) has erred in law in deleting the addition of Rs.3,53,80,000/- made by the AO on substantive basis on account of unexplained investment u/s 69 of the Income Tax Act 1961.
2. Brief facts of the case as culled out from the records are that the assessee is a partnership firm engaged in the business of builder and developer. Nil income was shown in the return filed on 12.02.2014. Notice u/s 148 of the Act was served followed with serving of notices u/s 143(2) & 142(1) of the Act. During the course of assessment proceeding Ld. AO enquired about the issue of unexplained investment in property. Search action was carried out u/s 132 of the Act in M/s. Sagar Group. Various incriminating documents were found. Based on the seized documents Annexure LPS-3 page 62 to 75 it was observed that the assessee through its partner Sanjeev Agrawal purchased 1.495 hectare land located at Gram Katara, Patawari Halka No.25, RI No.03, Vikashkhand, Fands, The-Huzur Bhopal from Shri Pankaj Mikhija, Shri Pradeep sharma and Shri Pradeep Hirani Power of Attorney (POA) holder of Smt. Rekha Bai, Shri Lala Ram and Shri Devi Singh and Agarwal Buildcon through partner Shri Sanjeev Agarwal. During post search enquiry summons were issued to the sellers. Smt. Rekha Bai, shri lalaram and Shri Devi Singh attended before DDIT(Investment) and statements recorded on oath on 30.10.2011. During the statement, these persons produced agreement dated 27.11.2010 between Shri Raj Kumar Hirani, Shri Pradeep sharma and Shri Lalaram, Shri Devi Singh and Smt. Rekkha bai for purchase of 1.495 acres of land
2
located at Gram katara, Patwari halka No.25, RI No.03, Vikashhand, Fanda, The-Huzur, Bhopal for total sale consideration of Rs.5,03,68,500/-. The said land was sold to shri Rajkumar Hirani and Shri Pradeep sharma for sale consideration of Rs.5,03,68,500/- and sum of Rs.4,03,68,500/- was paid on different dates. Further it was mentioned that out of entire sale consideration sum of Rs.3,30,68,500/- was paid in cash and balance amount of Rs.1,73,00,000/- was paid through cheque by Shri Pradeep sharma and Shri Pradeep Hirani. Therefore, the land was sold by Shri Pradeep Hirani, Shri Pankaj Mikhija and Shri Pradeep Sharma to the appellant for sale consideration of Rs.1,76,50,000/-. During the course of assessment proceeding, the seller Shri Pradeep sharma and Shri Pradeep Hirani stated that they were broker for the said land and the entire deal was for Rs.5,30,30,000/- and they have received their commission. Therefore, the AO during the course of assessment proceedings required the assessee to explain source of investment of Rs.3,53,80,000/- paid in cash for purchase of land. The assessee in reply submitted that no over and above consideration was paid to the amount mentioned in registered sale deed. Further, the land was purchased from Shri Pradeep Sharma and Pradeep Hirani and has no knowledge of agreement dated 27.11.2010. The AO after considering reply of the assessee did not find the same acceptable and made additions for unexplained investment u/s 69 of the act for alleged 'on money' paid at Rs.3,53,80,000/- for purchase of the above said land through its partner Shri Sanjeev Agrawal and further observed that the payment
3
of 'on money' in cash is not recorded in the books of account of the assessee nor in the books of account of the partner Shri Sanjeev Agrawal. After making alleged addition u/s 69 of the Act income assessed at Rs.3,53,80,000/-.
3. Aggrieved assessee preferred an appeal before the ld. CIT(A) and stated that during the course of search registered deeds were found relating to appellant firm but during the post search inquiry summons u/s 131 of the Act were issued only to the broker and his statements were recorded but the statements of seller was not recorded who is alleged to have received 'on money' from the assessee. Further the appellant's request for providing opportunity of cross examination was declined by the Ld. AO and thus the additions were made on assumption in presumption. Ld. CIT(A) after considering the submission of the assessee deleted the addition observing that the additions were made merely on the basis of statement of seller but no opportunity of cross examination was provided and the additions made only on the basis of oral evidences and the same are on assumption basis without having any incriminating material on record.
4. Aggrieved revenue is now in appeal before this Tribunal.
5. Ld. counsel for the assessee vehemently argued supporting the order of Ld. AO and heavily relied on the detailed finding of Ld. CIT(A) and the decisions referred and relied in the appellate order. Reference was also made to the paper book dated 11.01.2022
4
containing 44 pages providing details for sale deed, agreements, statement of Rekha Bai, copy of audited financial statements and reasons for reopening.
6. We have heard rival contentions and perused the records placed before us. Revenue's sole grievance raised in ground no.1 relates to deletion of addition by ld. CIT(A) of Rs.3,53,80,000/- made by the ld. AO on account of unexplained investment u/s 69 of the Act. The transaction in question is purchase of 1.495 hectare land located at at Gram Katara, Patawari Halka No.25, RI No.03, Vikashkhand, Fands, The-Huzur Bhopal which by assessee from Shri Pankaj Mikhija, Shri Pradeep sharma and Shri Pradeep Hirani POA holder of Smt. Rekha Bai, Shri Lala Ram and Shri Devi Singh. On behalf of the assessee the transaction was carried out by the partner Mr. Sanjeev Agarwal during post search inquiry statement of the broker Mr. Pradeep Sharma and Mr. Pradeep Hirani were recorded wherein they stated that the entire deal was Rs.5,30,30,000/- out of which Rs.3,53,80,000/- was paid in cash for purchase of land and the remaining by cheque. Based on this statement addition for 'on money' was made in the hands of assessee.
7. When the matter travelled before the ld. CIT(A) impugned addition was observing as follows:
4.2.2 I have considered the facts of the case, written submissions filed by the appellant and findings of the AO. This is an undisputed facts that during the course of search at premises of appellant registered deed for purchase of the said land were found and seized. The Ld AR has vehemently challenged the arbitrary approach of the AO mainly on four major Counts:
(a) The AO erred in making additions simply the basis of statements of sellers lPOA holders;
5
(b) The AO erred in making additions on the basis of statement of sellers and without providing opportunity of cross examination before making such additions;
(c) The AO erred in making additions on the basis of oral evidences;
(d) The AO erred in making additions on assumption and presumption basis and without having any incriminating material on record;
(a) Additions made on the basis of statement of third party/seller:-
This is an admitted fact that statements of sellers were recorded by DDIT(Inv), Bhopal and not by the AO. Now, let me discuss each and every point in detail regarding the findings of the AO and plea raised by the appellant. The brief details of statement of sellers recorded by DDIT(Inv), Bhopal and my findings are as under:-
(i) Shri Lalaram, Shri Devi Singh and Smt Rekha Bai:-
During post search enquiry statements of Shri Lalaram, Shri Devi Singh and Smt Reha Bai were recorded on oath by DDIT(Inv )-1, Bhopal on 30.10.2011. An agreement dated 27.11.2010 was brought on record stating that the impunged land was to be sold by Shri Lalaram, Shri Devi Singh and Smt Reha Bai to Shri Raj Kumar Hirani & Shri Pradeep Sharma. Against sale of this land the has received sum of Rs. 5,03,68,5001- on various dates which includes Rs. 1,72,99,998/- though cheque and Rs. 3,30,68,502/- in cash. It is important to mention that during statement in reply to Q.No. 9 it was admitted that all the three person have no
connection with the appellant or its group i.e. Sagar Group. Further, registry was also done through POA holders, therefore,
statement given by all the three persons is doubtful in nature and cannot be relied upon. The appellant has strongly contended that statement of the seller was recorded by the DDIT(Inv) in the post search proceedings and was recorded behind the back of the appellant. Further, the statement recorded DDIT(Inv) is without authority of law. Reliance has been placed on the decision of Hon'ble ITAT Allahabad Bench in the case ofVVS Alloys Ltd vs ACIT 68 TTJ (All) 516. No other corroborative evidence is on record suggesting on-money payment by appellant to these persons. The AO did not make any independent enquiry and has solely relied upon the statement of third party without having any cogent evidence on record having direct nexus of impunged on money payment.
(ii) Shri Pradeep Sharma and Shri Pradeep Hirani:-
During the course of assessment proceedings statements of POA holders namely Shri Pradeep Sharma and Shri Pradeep Hirani was also recorded on oath on 18.12.2013 & 20.12.2013. Both of the POA holders ahs admitted that the land was sold to the apepllant for sale consideration of Rs. 5,30,00,0001-, however, the registry was made at Rs. 1,76,50,0001- only. Both of them has earned brokerage of Rs. 26,31,5001- and has surrendered. The appellant has strongly contended that statement of any third party i.e. Smt Rekha Bai, Lalaram and Devi Singh was recorded and no statement of the seller was recorded. Further, the document relied by the AO were brought on
6
record by Smt Rekha Bai, Lalaram and Devi Singh and not be the impunged sellers. It is very important to mention that the seller before the Registrar has accepted that sum ofRs. 1,76,50,0001- was received against sale of land and the same has been mentioned in the registered deed. No other corroborative evidence is on record suggesting on-money payment by appellant. The AO did not make any independent enquiry and has solely relied upon the statement of third party without having any cogent evidence on record having direct nexus of impunged on money payment.
Hon'ble Supreme Court in the case of CIT vis KP Varghese 131 ITR 574 (SC) has held that in absence of evidence that actually assessee paid more amount than declared in registered deed, no addition can be made. In the case of Bansal Strips (P) Ltd & Ors Vs. ACIT (2006) 99 lTD 177 (Del) it has been held that :-
"If an income not admitted by assessee is to be assessed in the hands of the assessee, the burden to establish the such income is chargeable to tax is on the AO. In the absence of adequate material as to nature and ownership of the transactions, undisclosed income cannot be assessed in the hands of the assessee merely by arithmetically totally various figures jotted down on loosed document".
(b) No opportunity of cross examination given:-
Statement of third party was recorded by DDIT(Inv), Bhopal who is not the authorized authority to issue summons uls 131 of the Act. Nevertheless, statements of third party were recorded and evidences brought by them were solely relied by the AO and subsequently additions were made to the total income of the appellant without providing any opportunity of cross examination either by the DDIT(Inv), Bhopal or by the AO. It may be a case that the documents brought on record may be fabricated or may have been prepared after registry or during the course of assessment proceedings. Appellant during appellate proceedings has strongly contended that no opportunity of cross examination was given by the AO. I find force in the contentions of the appellant that no proper and. meaningful opportunity of cross examination was provided to the appellant. This is also an admitted fact that statement of sellers/POA holders were recorded behind the back of the appellant. No opportunity of cross-examination was ever allowed to the assessee. This has been held by the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise Kolkata in Civil Appeal No.248 of 2006 that in absence of cross-examination of parties, the assessment proceedings to be quashed. Further, the Hon'ble Gujarat High Court in the case of Praful Chunilal Patel Vs, M.J. Makwana [236 ITR 832 (Guj)] and JCIT & Ors. Vs. George Willimson (Assam) Ltd. [258 ITR 126 (Guj)] has held that statement of third party cannot be relied upon without having any corroborative evidence. Similarly, Hon'ble Supreme Court in the case of Kishanchand Chellaram Vis. CIT 125 ITR 713 (SC) has held that adverse inference cannot be drawn against the assessee from the statement of third parties. Similarly, Ld. AR of the assessee has relied
7
upon the decision of jurisdictional High Court in the case of CIT Vis. Indrajit Singh Suri (2013) 33 Taxmann 281 (Guj.) that where additions were made on the basis of statements of persons who were not allowed to be cross examined by the appellant, additions were not sustainable. It is a serious flaw which renders the order a nullity.
(c) Addition made on oral evidence:-
The AO apart from the statement of the third party has nothing on record to establish that appellant has paid on money to the sellers. Hon'ble Punjab and Haryana High Court in the case of Paramjeet Singh vs ITO (2010) 323 ITR 588 (P & H) has held that no oral evidence is admissible once the document contained all the terms and conditions. Section 91 & 92 of the Indian Evidence Act, 1872 incorporate the principle. Hon'ble IT AT Indore in the case of Shri Parshwanath Construction vs ITO (ITAl3791Ind/2013 dated 18.07.2014 wherein it has been held that:-
As per the provision of Section 54 of the Transfer of Property Act, any tangible immovable property for an amount exceeding Rs.100 can be transacted only through a registered instrument and since the registered document is duly signed by the parties i. e. sellers and the purchasers and duly witnessed by independent persons, that too, in the presence of registering authorities, therefore, oral statement loses its credibility, more specifically when at pages 2 & 3 of each sale deed, there is a receipt/mentioning of consideration amount agreed between the parties. When the documents are reduced in writing then provision of Section 91 & 92 of 18 the Indian Evidence Act expressly bars/prohibits acceptance of oral evidence against such documents, more specifically when the registered documents are duly admitted to be correct by both the parties. The only admissible evidence regarding the terms of such contract/agreement, available before us, is the registered sale deed itself, therefore, the oral evidence loses its credibility in view of Section 92 of the Indian Evidence Act. Section 54 of the Transfer of the Property Act and Section 91 of the Indian Evidence Act conjointly says that the proof about terms of such contract can only be adduced by only placing the documents in evidence and no other evidence except the document itself is admissible.
Similar view has also been taken by Hon'ble ITAT Agra in the case of V Ramchandra Construction Pvt Ltd vs ACIT (2011) 18 ITJ 590 (Trib Agra). Thus, it is not settled legal principle that oral evidence have evidentiary value in criminal proceedings, but in income tax proceedings the oral evidence can only be accepted when there is no written evidence. Therefore, in view of the above judicial pronouncements it is the registered sale deed which has more evidentiary value than the oral statements of the sellers.
(d) Additions made on assumption and presumption basis:-
Before embarking upon the discussion on the issue, it is important to discuss certain undisputed facts. This is an undisputed fact that nothing was brought on record to prove that assessee paid more amount than the amounts disclosed in the purchase deed and books of accounts. It is also not
8
the case of AO that the sellers received more amounts and having disclosed more amount than shown in sale deed in their books or returns. It is a proven fact that AO has made the addition only on the basis of difference in consideration shown in purchase deed and market value of the land as determined by Stamp Valuation Authority or on the basis of statement of the third party. At the outset, ld. AR of the assessee has strongly opposed to the applicability of provision of Section 69 of the Act because there was not even an iota of evidence to establish that investment was not fully recorded in the books of account. Onus of proof is on the department to prove that appellant made some unaccounted investment in purchase of these properties. It is undisputed fact that the AO has failed to discharge his onus and simply by applying the' deeming fiction' and on guess work, presumption and suspicion basis, addition in this regard has been made. I agree with the contention of the appellant that the A.O. is not justified in making the addition simply on assumption and presumption basis. It would be pertinent to refer to the decision of Hon'ble Apex Court in the case of Umacharan Saha & Bros Co. vis CIT 37 ITR 21 (SC) wherein it was held that suspicion, however, strong cannot take place of proof. It would be most pertinent to refer to the decision of Hon'ble Supreme court in the case ofK P Varghese vis ITO (1981) 131 ITR 597(SC) wherein it was held that assessee must be shown to have received more than what is disclosed by him as consideration. In the present case, onus probandi is on the department. There is legal maxim which says affirmanti non neganti incumbit probation means burden of proof lies upon him which affirms not upon him who denies. Here the ratio of the above cited case is squarely applicable to the facts of this case, the AO is required to bring some tangible and positive material on record to prove that assessee has paid more consideration than disclosed by it in the books. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd vis CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, assessment cannot be made on the basis of imagination and guess work. Similar views have been expressed by Apex court in the case of Dhiraj Lal Girdharilal vis CIT (1954) 26 ITR 736 (SC). 4.2.3 Nonetheless, Hon'ble ITAT Indore in the case of Shri Lokesh Gadia vs ACIT (2019) 35 ITJ 301 (Trih-Indore) has held as under:-
28. In the instant case the assessee is not maintaining any books of accounts nor the land in question is purchased by him. Even otherwise the amount of investment in land shown by Natural Gadia Real Estate Pvt. Ltd is duly supported by various documentary evidences referred above and payment made through account payee cheque duly mentioned in the registered sale deeds.
29. We, therefore in the given facts and circumstances of the case are of the considered view that both the lower authorities erred in confirming the addition of Rs.l, 75,00,0001- by wrongly invoking provisions of Section 69B of the Act, as the alleged transaction of sale of land by two sellers to the buyer Mis. Natural Gadia Real Estate Pvt. Ltd was entered into at a
9
consideration of Rs.95,00,0001- only and no corroborative evidence is placed on record by the revenue authorities as well as Ld Departmental Representative which could prove that "on money" ofRs.l, 75,00,0001- was paid over and above the stated sale Lokesh Gadia ITA No.854IInd/2017 41 consideration in the registered sale deed We, therefore set aside the finding of Ld CIT(A) and delete the addition of Rs.l, 75,00,0001- made in the hands of the assessee by Ld A.O uls 69B of the Act and allow Ground No. 2(a) & 2(b) of the assessee.
Further, Hon'ble Supreme Court in the case ofRoop Kumar Vis Mohan Thedeni (2003) 6 SCC 595 has observed as under:-
"It is likewise a general and most inflexible rule that wherever written instruments are appointed, either by the requirement of law, or by the contract of the parties, to be the repositories and memorials of truth, any other evidence is excluded from being used either as a substitute for such instruments, or to contradict or alter them. This is a matter both of principle and policy. It is of principle because such instruments are in their own nature and origin, entitled to a much higher degree of credit than parol evidence. 4.2.4 Thus, in view of the above discussion, the AO was not justified in making additions on account of on money paid to sellers U/S 69 of the Act in absence of any corroborative evidence and simply on the basis of statement of third party. Therefore, the addition made by the AO amounting to Rs. 3,53,80,000/- is Deleted. Therefore, appeal on this ground is Allowed.
4.3 Ground No. 5:- Through these grounds of appeal the appellant has challenged the charging of interest under section 234A, 234B and 234C of IT Act, 1961. The charging of interest is mandatory and consequential in nature. However, the AO is directed to recalculate the interest while giving effect to this order. Therefore, the appeal on this ground is Dismissed.
4.4 Ground No. 6:- These grounds of appeal are general in nature which does not require any specific adjudication. 8. From perusal of the above finding wherein Ld. CIT(A) has referred to various settled judicial precedents, we find that Ld. DR failed to
controvert the facts that firstly the additions were made simply on
the basis of statement of power of attorney holders, secondly the
addition was made without providing any opportunity of cross
examination to the assessee with the 3rd party on whose statement
addition has been made, thirdly, the additions are made merely on
the basis of oral evidences and there is no evidence on record which
10
could prove that the seller has received 'on money' and offered the same before the revenue authorities and lastly the addition seems to be made on assumption and presumption as except the registered sale deed no other incriminating material was found during search proceedings which could indicate that the alleged 'on money' has been paid by the assessee.
9. We, therefore, respectfully following the decision/judgments referred hereinabove in the finding of ld. CIT(A) are inclined to hold that no addition u/s 69 of the Act was called for in the hands of assessee. Thus, find no infirmity in the finding of ld. CIT(A) and the same is confirmed. Sole ground raised by the revenue is dismissed.
10. In the result, Appeal of the revenue in ITANo.39/Ind/2021 is dismissed.
Order pronounced as per Rule 34 of I.T.A.T., Rules 1963 on … 28.01.2022.
Sd/- Sd/-
(MAHAVIR PRASAD) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore; दनाकं Dated : 28/01/2022 Patel/Sr.PS
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order
Assistant Registrar, Indore 11
11