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Income Tax Appellate Tribunal, DEHRADUN CIRCUIT BENCH: DEHRADUN
PER M.BALAGANESH, AM: This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals), Haldwani, [hereinafter referred to as ‘Ld. CIT(A)’, in short] in Appeal No.66/CIT(A)/HLD/2015-16 dated 31/03/2017 against the order of assessment passed u/s 143(3)/147 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30/03/2015 by the Income Tax Officer-1(1), Haldwani, (hereinafter referred to as ‘Ld.
AO’).
The only issue on merits to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the addition made in the sum of Rs 55,40,000/- on account of alleged unexplained investment towards purchase of land, in the facts and circumstances of the case.
The assessee had filed her return of income for the Asst Year 2009-10 on 01.03.2010 declaring total income of Rs 2,18,800/-, which was processed u/s 143(1) of the Act. The assessee had bought 13 bighas of agricultural land at Padampur Village, Devalia , Tehsil Lalkuan District, Nainital from Shri Udham Singh and Shri Braham Singh during the year under consideration. The assessee paid Rs 2,00,000/- as advance by cheque vide Cheque No. 024041 and 024042 drawn on The Nainital Bank, Haldwani for Rs 1,00,000/- each. The assessee furnished registered agreement of purchase of land before the ld. AO. Remaining Rs 5,00,000/- was paid to the sellers vide Cheque Nos. 024044 and 024045 of Rs 2,50,000/- each. The assessee also incurred stamp duty of Rs 45,500/- on the total consideration paid of Rs 7,00,000/-. The assessee furnished registered purchase deed before the ld. AO. The assessment was sought to be reopened vide issuance of notice u/s 148 of the Act on 29.03.2014 on the basis of information obtained by the ld. AO that assessee had made certain cash payments also for purchase of the said agricultural lands and accordingly concluded that income of the assessee had escaped assessment warranting reopening. The reasons recorded by the ld. AO as communicated to the assessee are as under:-
“To Dated:09/02/2015 Smt. Adesh Agarwal W/o Shri Ved Prakash Gupta Near Khatu Shyam Mandir Haldwani Subject: Application for reason for selection the case u/s 148 of the I.T. Act, 1961-regarding:- Please refer to your letter dated; 11/04/2014 2. Vide the above mentioned letter which furnished in the office of the undersigned on 06/02/2015, you were requested to provide the reasons for selection the case u/s 145 of the IT Act, 1961 in this regard, the reason for issuing the notice u/s 145 to assess/re-assess the income of the assessee for the A.Y. 2009-10 is as under:
The office is in possession of the information that the assessee had made payments in cash to the amount of Rs.9.50 Lacs & Rs.9.90 Lacs on 11/09/2008 & 15/09/2008 respectively to Shri Udham Singh Tewatia against the purchasing of land. Since the assessee did not disclosed her source of investment to that extent, therefore the amount of Rs. 19.40 Lacs has been treated as escaped assessment within the meaning of section 147 of the 1.T.Act, 1961. -Sd- (Avdnesh Kumar) Income tax Offficer-1(1) Haldwani
The assessee filed her objections to the reasons recorded by stating that the assessee is not provided with the copy of any document which had been relied upon by the ld. AO which lead to the formation of belief that income of the assessee had escaped assessment. These objections were admittedly not disposed of by the ld. AO by way of a separate speaking order. The ld. AO however, proceeded with the re-assessment proceedings and sought further details vide notice u/s 142(1) of the Act. From the perusal of the agreement copy furnished by the ld. AO to the assessee during the course of re-assessment proceedings, the assessee while furnishing reply to notice u/s 142(1) of the Act, categorically denied the fact of entering into any agreement with Shri Braham Singh and Shri Udham Singh for purchase of the impugned agricultural land prior to the registration. The assessee also stated that the agreement furnished was not in her knowledge and that the same was neither registered nor properly stamped. Even the signature of the assessee was not present in the said agreement furnished by the ld. AO, which fact was also accepted by the ld. AO. It was submitted that Xerox copy of agreement which is on a Rs 50 stamp paper which is non-registered. It was also pointed out that the alleged agreement was not even notarized. It was specifically pointed out that the said non-registered agreement does not bear the signature of either the assessee or her husband. Accordingly, the same does not have any legal validity and hence cannot be relied upon for drawing an adverse inference on the assessee.
The ld. AO during the course of re-assessment proceedings summoned the seller Mr. Udham Singh and recorded a statement on 27.02.2015 wherein the seller admitted that the lands were sold to assessee for Rs 62,40,000/-. Out of this consideration of Rs 62,40,000/-, a sum of Rs 7,00,000/- was paid in cheque and remaining Rs 55,40,000/- was paid in cash which was deposited in the Oriental Bank of Commerce bank account maintained by the seller. Based on this statement, the ld. AO directly proceeded to make an addition of Rs 55,40,000/- as unexplained investment made in purchase of agricultural lands, in the hands of the assessee on protective basis. The ld. AO in the said assessment order did not mention the fact as to in whose hands, the addition is to be made on substantive basis.
The assessee raised serious objections before the ld. CIT(A) by reiterating her submissions apart from stating that the ld. AO relied on an unregistered agreement which was not even signed by her or by her husband. Apart from this, the ld. AO had not stated the fact as to in whose hands, the addition is proposed to be made on substantive basis. Further it was submitted that the ld. AO merely relied on the statement of the seller taken during the course of re- assessment proceedings on 27.02.2015 wherein the seller had confirmed the fact of making certain cash deposits in his bank account to have been sourced by the assessee towards purchase of agricultural land. It was submitted that the ld. AO did not even bother to cross verify the witnesses mentioned in the unregistered agreement, which would have revealed the facts further. It was submitted that the statement recorded from the seller was not even provided to the assessee for her rebuttal.
The ld. CIT(A) converted the protective addition made in the hands of the assessee to substantive addition by stating that the assessee’s husband Shri Ved Prakash had signed the agreement and that he had entered into the agreement for purchase of 13 bighas of land at Rs 4,80,000/- per bigha totaling to Rs 62,40,000/-. The ld. CIT(A) observed that the seller appeared before the ld. AO on 27.02.2015 in response to summons issued to him and produced the bank statements of Oriental Bank of Commerce Account No. 06902011000687 with Haldwani branch and that the seller furnished the complete details of cash deposits made in his bank account. The ld. CIT(A) however categorically observed that the unregistered agreement was not signed by the assessee but it was signed by the assesese’s husband in the presence of two witnesses Shri Jagvir Singh and Shri Sunil Singh.
The ld. CIT(A) also heavily relied on the statement given by the seller wherein he had stated that the cash deposits were made by him in his bank account out of cash sale proceeds of land received from the assessee herein. With these observations, the ld. CIT(A) upheld the addition made by the ld. AO and converted the protective addition into substantive addition in the hands of the assessee. Aggrieved, the assessee is in appeal before us.
We have heard the rival submissions and perused the materials available on record. From the above narration of facts, it is very clear that the addition in the sum of Rs 55,40,000/- has been made in the hands of the assessee based on some agreement to sell which was unregistered, which was not signed by assessee or her husband. In this regard, the ld. CIT(A) has observed that the assessee’s husband Shri Ved Prakash had signed the said unregistered agreement. The copy of the said agreement is enclosed in Page 30 of the Paper Book. From the perusal of the same, it is clear that the assessee’s signature is not reflected therein. Only the name of the assessee’s husband Shri Ved Prakash is reflected in the top of the said agreement, which is purportedly written by the document writer as the handwriting of the document writer exactly matches with the handwriting in which Shri Ved Prakash Gupta name is mentioned in Hindi. In any case, no party would sign an agreement at the top of the stamp paper. The parties if they agree on some terms , they would only affix their signature at the bottom after the contents are written. The assessee had pleaded that her husband Shri Ved Prakash would always sign only in English and had enclosed his Income tax return as a proof for the same. This itself goes to prove beyond reasonable doubt that the assessee had been unnecessarily implicated in the entire transaction by the revenue. It is a fact that certain monies in cash were found deposited in Oriental Bank of Commerce bank account of the Seller.
It is for the Seller to explain the source of those cash deposits and if the same is not satisfactorily proved by him, then suitable action should be taken on the Seller in the manner known to law by the revenue. Yet another reliance placed by the revenue is the statement recorded on oath from the Seller on 27.02.2015 during the course of re-assessment proceedings, which was never put to the assessee by the ld. AO. Hence any statement taken behind the back of the assessee and the said statement not tested by cross- examination by the assessee has got no evidentiary value and the same cannot be used against the assessee. Even if the said unregistered agreement relied upon by the revenue needs to be taken cognizance, it is expected of the revenue to atleast examine the witnesses Shri Jagvir Singh and Shri Sunil Singh. This was admittedly not done by the revenue in the instant case. Hence we have no hesitation to hold that the unregistered agreement , which is not notarized, which does not contain the signature of the assessee or her husband , cannot be used against the assessee for framing the addition in the hands of the assessee. We find that the entire addition has been framed in the hands of the assessee herein by considering the statements given by the Seller to be sacrosanct without even affording an opportunity to the assessee to rebut the same. We find that the ld. AR had rightly placed reliance on the decision of Chandigarh Tribunal in the case of Manoj Mittal vs. ACIT reported in 47 CCH 0496 Chd Trib in dated 20.07.2016 wherein it was held that sicne the assessee had not signed the agreement found during course of search, no liability could be attributed qua agreement towards assessee since he was not party to agreement till assessee had signed agreement. Seized agreement to sell was not recovered from power and possession of assessee, therefore, no presumption u/s 292C drawn against assessee. Further the ld. AR had rightly placed reliance on the decision of Hon’ble Delhi High Court in the case of CIT vs Kulwant Rai reported in 291 ITR 36 (Del) , wherein, it was held as under:- 12. Coming to the facts of the present case with regard to the addition of Rs. 17,00,892 made by the Assessing Officer as undisclosed income of the assessee for the block period, we may refer to the findings of the Tribunal on this point and the relevant portion reads as under :— "On consideration of the matter we find that the addition has been made by the learned Assessing Officer on the basis of surmises and guess work. He has ignored the fact that the agreement was found in possession of the assessee. Had the vendee made substantial payment of Rs. 34,01,784 he would have taken care of not leaving the documents behind with vendors only. The learned Assessing Officer has also ignored the fact that the agreement was not complete, inasmuch as the assessee had not signed the agreement. The reasoning given by the learned Assessing Officer is entirely guess work. It is well-settled legal position in respect of income-tax assessment proceedings that although strict rules of Evidence Act do not apply to income-tax proceedings, assessments cannot be made on the basis of imagination and guess work. Reference in this respect may be made to the judgment of Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 and a host of Supreme Court and High Court's judgments thereafter on the subject. We, therefore, direct deletion of the sum of Rs. 17,00,892 assessed by the Assessing Officer by way of half share of the assessee in the alleged earnest money."
It is an admitted fact that the present assessee had not signed the agreement in question and since the assessee had not signed the agreement, no liability can be attributed qua that agreement towards the assessee since he is not party to the agreement till he had signed the same. The mere fact that this agreement was found in the possession of the assessee does not lead us anywhere. We find no hesitation in holding that this addition of Rs. 17,00,892 made by Assessing Officer is based on surmises and guess work and on this point case of Dhakeswari Cotton Mills Ltd. (supra) may be referred to, in which held :— "In making an assessment under section 23(3) of the Indian Income-tax Act, the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a court of law, but the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab [1944] 12 ITR 393 ." (p. 776)
In view of the aforesaid observations and respectfully following the various judicial precedents relied upon hereinabove, we have no hesitation in deleting the addition made in the sum of Rs.55,40,000/- in the hands of the assessee on merits.
The Ground No. 3 raised by the assessee was stated to be not pressed by the ld. AR and the same is reckoned as a statement made from the Bar and accordingly dismissed as not pressed.
Since relief is granted to the assessee on merits, the other grounds raised by the assessee challenging the validity of reopening the assessment need not be gone into and they are left open.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 15th September, 2023.