Loading judgment…
Facts
During a search operation, the AO found an unsigned agreement for the sale of Plot No. 233, indicating a consideration of Rs. 37,26,500/-, while the assessee had declared Rs. 6,44,000/-. The AO made an addition of Rs. 30,82,500/- as undisclosed capital gains based on this discrepancy and a statement from the assessee's son under Section 132(4). The CIT(A) upheld the addition, leading the assessee to appeal to the Tribunal.
Held
The Tribunal acknowledged similarities between the unsigned agreement and the registered sale deed and the Section 132(4) statement, but ruled that the unsigned document could not be solely relied upon without corroborative evidence of Rs. 13,00,000/- payment through banking channels. The matter was restored to the AO for verification of this payment; if confirmed, the addition might be sustained, otherwise not.
Key Issues
Whether an addition for undisclosed capital gains can be sustained based on an unsigned agreement of sale and a Section 132(4) statement without corroborative evidence of the alleged higher consideration received through banking channels.
Sections Cited
132, 143(2), 143(3), 132(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Shri Ravish SoodShri Madhusudan Sawdia
(िनधा�रण वष�/Assessment Year: 2023-24) Smt. Nomula Narmada Vs. Dy. CIT Reddy, Hyderabad Central Circle 3(3) PAN:ABLPN5320J Hyderabad (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri C. Maheshwar Reddy, CA राज� व �ारा/Revenue by:: Shri Waseem UR Rehman, Sr. DR सुनवाई की तारीख/Date of hearing: 03/12/2025 घोषणा की तारीख/Pronouncement: 12/12/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.:
This appeal is filed by Smt. Nomula Narmada Reddy (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad (“Ld. CIT(A)”) dated 28.06.2025 for the A.Y.2023-24. 2. The assessee has raised the following grounds of appeal:
3. The brief facts of the case are that the assessee is an individual and filed her return of income on 30.12.2023 for the Assessment Year 2023–24 admitting a total income of Page 2 of 7 Rs.76,83,250/-. A search and seizure operation under section 132 of the Income Tax Act, 1961 (“the Act”) was conducted on 15.03.2023 in the group cases of M/s. Bala Vikasa Social Service Society, in which the assessee was also covered. The case of the assessee was thereafter selected for compulsory scrutiny assessment and accordingly notice under section 143(2) of the Act dated 08.06.2024 was issued by the Learned Assessing Officer (“Ld. AO”). During the year under consideration, the assessee had sold seven plots. On examination of the details furnished, the Ld. AO noticed that in respect of Plot No.233, the assessee admitted sale consideration of Rs.6,44,000/-, whereas an unsigned agreement of sale found during the search mentioned consideration of Rs.37,26,500/-. Relying on the said unsigned agreement of sale, the Ld. AO treated the difference of Rs.30,82,500/- as undisclosed sale consideration and made an addition under the head “Capital Gains.” Accordingly, the assessment was completed by the Ld. AO under section 143(3) of the Act on 09.01.2025 determining the total income of the assessee at Rs.1,07,65,750/-.
4. Aggrieved with the order of the Ld. AO, the assessee filed appeal before the Ld. CIT (A). The Ld. CIT(A) upheld the addition made by the Ld. AO and dismissed the appeal of the assessee.
Aggrieved with the order of the Ld. CIT (A), the assessee is in further appeal before this Tribunal. During the appellate proceedings, the Learned Authorized Representative
Page 3 of 7 (“Ld. AR”) submitted that the unsigned agreement of sale found during the search, placed at page nos. 38 to 42 of the paper book is a dumb document, cannot be relied upon since it is unsigned, the vendor named therein is different, and no corroborative evidence was brought by the Ld. AO to prove receipt of any higher consideration. The Ld. AR submitted that the actual sale deed (placed at page nos. 58 to 69 of the paper book) was executed between the assessee and the purchaser for a consideration of Rs.6,44,000/-, and in the absence of evidence showing receipt of a higher amount, the addition made by the Ld. AO cannot be sustained.
Per contra, the Learned Departmental Representative (“Ld. DR”) submitted that the vendor mentioned in the unsigned agreement of sale, namely Shri N. Ajay Reddy, is the son of the assessee and also executed the actual sale deed as General Power of Attorney holder of the assessee. The Ld. DR further submitted that the property described in the unsigned agreement of sale is the same property sold in the final registered sale deed. It was also submitted that Shri N. Ajay Reddy, during his statement recorded under section 132(4) of the Act on 16.03.2023, admitted the sale consideration of Rs.37,26,500/- and confirmed that a portion of the consideration was received in cash. The Ld. DR submitted that under these circumstances the unsigned agreement of sale cannot be treated as a dumb document and the addition was rightly made.
We have heard the rival submissions and examined the material available on record. On perusal of the unsigned agreement of sale (placed at page nos. 38 to 42 of the paper book) and the actual registered sale deed (page nos. 58 to 69 of the paper book), we find that there are significant similarities in both the documents. The name of the vendee, namely Shri Badepally Lakshmaiah, is the same in both documents. The property sold is also the same. Further, the vendor mentioned in the unsigned agreement of sale, namely Shri N. Ajay Reddy, is the son of the assessee and also signed the final registered sale deed as General Power of Attorney holder on behalf of the assessee. We also find that during the statement recorded under section 132(4) of the Act on 16.03.2023, Shri Ajay Reddy admitted to the sale consideration of Rs.37,26,500/- and also stated that certain portion of the consideration was received in cash. However, notwithstanding the above similarities, the unsigned agreement of sale cannot automatically be treated as establishing higher sale consideration unless corroborated by independent evidence. In this regard, we have gone through page no. 2 of the unsigned agreement of sale placed at page no. 39 of the paper book, the relevant portion of which is to the following effect:
On a perusal of the above, we found that the document clearly mention that an amount of Rs.13,00,000/- had already
Page 5 of 7 been paid by the vendee to the vendor. In the absence of corroborative evidence showing receipt of this amount through identifiable banking channels either by the assessee or by Shri N. Ajay Reddy, the unsigned document cannot be treated as a reliable basis for determining sale consideration for the purpose of computation of capital gains. Therefore, in our considered view, there is a need for verification as to whether the amount of Rs.13,00,000/- mentioned in the unsigned agreement of sale has been received through cheque or other banking mode either by the assessee or Shri N. Ajay Reddy. If such receipt of Rs.13,00,000/- is found on verification, then the unsigned agreement of sale cannot be treated as a dumb document, and the inference drawn by the Ld. AO may warrant confirmation. However, if no such receipt is found to be received, then the addition made by the Ld. AO on the basis of the unsigned agreement of sale cannot be sustained. In view of the above, we restore the matter to the file of the Ld. AO with a direction to verify whether the amount of Rs.13,00,000/- has been received through banking channels either by the assessee or by Shri N. Ajay Reddy. The Ld. AO shall thereafter pass a fresh order in accordance with law, after granting due opportunity of being heard to the assessee. The assessee shall cooperate in the proceedings and shall not seek unnecessary adjournments.
In the result, the appeal of the assessee is allowed for statistical purposes.