V.NAGARAJAN,LALGUDI vs. ITO, WARD 1(1), TRICHY

आदेश आदेश /O R D E R आदेश आदेश

PER MAHAVIR SINGH, VP:

This appeal by the Assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-1, Trichy in I.T.A.

No.158/2017-18/CIT(A)-1/TRY dated 01.02.2019. The Assessment was framed by the Income Tax Officer, Ward-1(1), Trichy for the Assessment Year 2015-2016 u/s.143(3) of the Income Tax Act,

1961, (hereinafter ‘the Act’) vide order dated 28.12.2017.

2. The only issue in this appeal of the Assessee is against the order of the CIT(A) confirming the action of the Assessing Officer in making an addition of Rs.2.20 crores as unexplained cash deposits in the Bank account, despite the Assessee giving evidences that the cash deposits are out of sale consideration of agricultural land of assessee’s mother. For this, the Assessee has raised the following grounds 1 to 9, as under.

3. The learned Commissioner of Income Tax (Appeals) erred in treating the entire cash deposits were not of the sale consideration, though the Assessee has provided proof for connection between the money deposited in the bank account and the money mentioned in the sale agreement.

4. The total sale consideration was Rs.2,80,75,800/- and because of insistence of the buyer to save the stamp duty, the sale consideration was disclosed in the sale deed as Rs.60,75,800/-

5. The learned Commissioner of Income Tax (Appeals) failed to consider that the Assessee is not having any other sources of income so as to generate undisclosed income of Rs.2.20 crores.

6. Mere rejection by the purchaser regarding the “on-money” though entered into a sale agreement is not the reason for addition as other sources.

7. The Commissioner of Income Tax (Appeals) failed to consider that the entire sale consideration was received and deposited on the same date and there is link between cash deposits and sale of agricultural land, as per the sale agreement.

8. The Commissioner of Income Tax (Appeal) failed to consider that the sale proceeds of the said agricultural land is not a capital asset as per Section 2(14) of the Income Tax Act, 1961.

9. Section 68 has application, when no explanation is offered or the explanation offered is not satisfactory, I have corroborative

:: 3 :: Agreement for sale and deposit of cash on the day of executing the sale deed.

Hence, notice u/s.143(2) of the Act was served and the Assessee appeared. The Assessee was to explain the source of cash deposits made in the Savings Bank Account maintain with Punjab National Bank [PNB] bearing ID No.1093000100056467 amounting to Rs.2.20 crores on 22.09.2014. The Assessee, before the Assessing Officer explained that the Assessee’s mother Mrs. V. Dhanalakshmi Ammal had an agricultural land at Pudukudi Village, Lalgudi Taluk, Ariyalur District bearing S.F. No.134/25C measuring 1.78 acres which was acquired by her in inheritance on the death of her mother Mr. Rajamani Ammal on 08.02.1999. The said land was sold by mother of the assessee to SRM Institute of Science and Technology for a sum of Rs.2,80,75,000/- on 22.09.2014 and out of the above consideration, a sum of Rs.2.20 crores received from mother by the assessee in cash, which was deposited on behalf of his mother and the balance consideration was :: 4 :: Assessee by cheque as under:

Sl.No. Names Amount [1] Mrs. V. Dhanalakshmi Rs.20,75,800/- [2] Mr. V. Mohan Rs.20,00,000/- [3] Mr. V. Nagarajan Rs.20,00,000/- (on 22.09.2014)

4. The Assessing Officer after examining Dr. R. Shivakumar the Chairman of SRM Institute of Science and Technology and also examining Smt. V. Dhanalakshmi Ammal, the mother of the Assessee made an addition of this amount Rs.2.20 crores as unexplained cash deposits in the hands of the Assessee. The Assessing Officer has not believed the statement of Smt. V. Dhanalakshmi Ammal, the mother of the Assessee but believed the statement of Dr. R. Sivakumar.

Aggrieved, the Assessee preferred an appeal before the CIT(A).

5. The CIT(A) on the same set of facts confirmed the action of the Assessing Officer in making the addition of Rs.2.20 crores as unexplained cash deposits in the bank account but the CIT(A) has not at all gone into the details nor examined the relevant details filed by the Assessee and for confirming the addition, he observed in paragraph nos.3.1 to 5, as under:

“3.1. The assessment was completed u/s.143(3) dated 28.12.2017 against which the Assessee has filed an appeal by Form No.35, dated 31.01.2018. The Assessee had deposited Rs.220 lakhs (Rs.2.20 crores) in Bank accounts in cash for which the case was selected and the Assessee submitted that he had an agreement for sale of the land to M/s. SRM Institute of Science and Technology which had agreed to pay them Rs.2.80 crores. However, the registered value of the land was only Rs.60,75,800/- and only this amount was received by cheque. The land was actually sold by the mother of the Assessee who also claimed before the Assessing Officer that she had received Rs.224.25 lakhs in cash apart from Rs.60.75 lakhs in cheque and that she had given Rs.220 lakhs to Shri V. Nagarajan of the Assessee.

Aggrieved, the Assessee is now before the Tribunal.

:: 6 :: Assessee, written submissions filed by the Revenue and other relevant documents including the Assessment Order and the order of the CIT(A).

This land is used for agricultural purposes. Since then, the Assessee’s mother Smt. V. Dhanalakshmi Ammal, the Assessee Mr. V. Nagarajan along with his brother, Mr. V. Mohan are residing in the same house and doing basically agricultural activity and is also engaged in petty electrical repair and plumbing works.

Twenty Lakhs Seventy Five Thousand and Eight Hundred Only). 2. By the purchaser of you, the 1st person among us in the name of V. Dhanalakshmi received cheque No.139587 dated 21.09.2014 of City Union Bank, Chennai Tambaram Branch for Rs.20,00,000/- (Rupees Twenty Lakhs Only). 3. By the purchase of you, the 1st person among us in the name of V. Dhanalakshmi received Cheque No.139588 dated 21.09.2014 of City Union Bank, Chennai Tambaram Branch for Rs.20,00,000/- (Rupees Twenty Lakhs only)”

Thilagavathy, wife of Shri Vivekanandan residing at Flat No.4, Pillaithottam, Vallalar Nagar, Karaikkal, Pudhucherry State and Smt. M.

Bhuvaneswari, wife of Shri Mathiazhagan residing at North Street, Annalai Village, Thirupparayathurai Post, Pettavaithalai Taluk, Karur District were the seller parties, despite the fact that the actual owner of the land is Smt. V. Dhanalakshmi Ammal. The purchaser party was SRM Institute of Science and Technology through Dr. R. Sivakumar, S/o Shri T.V. Rajagopal residing at Prakasam Street, Janaki Nagar, Valasaravakkam, Chennai – 600 087. This agreement for sale, though not registered, signed by the five seller parties and the Chairman of SRM Institute of Science and Technology, Trichy Campus and as per this sale agreement the total considered fixed was Rs.2,80,75,800/- The relevant recital of the agreement reads as under:

“The properties which belong to the 1st party, as mentioned above, and which has been described in the schedule of property, is negotiated to be sold and conveyed to the 2nd party, and fixed for a sale consideration of Rs.2,80,75,800/- (Rupees Two Crores

Eighty Lakhs Seventy Five Thousand and Eight Hundred only).”

Dhanalakshmi Ammal. In lieu of this agreement, a sale deed was registered (a copy of the original sale deed which is in Tamil language and a copy of the true translation is filed before us). From the true translation copy of the sale deed, it is noted that the same is executed on 22.09.2014 and as per the sale deed, the Assessee’s mother along with her sons and daughters became party and executants of this sale deed and the land was sold to Dr. R.

Sivakumar, vide PAN No. AALPS 4307B, (Cell No.99400- 26012), as purchaser in the capacity of Chairman, SRM Institute of Science and Technology. The total consideration as per the sale deed fixed is Rs.60,75,800/- and the details of the payments are given in the above paragraph no.8. It is seen that the names of the vendors, purchaser and witnesses and drafter is written on the sale deed, as under:

Sl. Vendors Purchaser No. [1] Sd/- V. Dhanalakshmi For SRM Institute of Science and Technology

Dr. R. Sivakumar Chairman [2] Sd/- V. Mohan [3] Sd/- V. Nagarajan [4] Sd/- V. Thilagavathy [5] Sd/- M. Bhuvanewari Witnesses : [1] Sd/- S/o Parthasarathy, Thirumanacherri [2] Sd/- S/o Muthusamy, Musuri Drafted By : [1] N. Muruganantha, Ttattanur L.No.1017/AYR/1999

One more unique feature that was found was that the stamp duty paid at R.4,25,310/-(Rupees Four Lakhs Twenty Five Thousand Three Hundred and Ten Only) and this is certified by the Sub-Registrar, Lalgudi vide Registered Document No.3437 of 2014 in Book No.1. Further, the shortage of stamp duty was paid under Section 42 of the Indian Stamp Act amounting to Rs.2,10,830 (Rupees Two Lakhs Ten Thousand Three Hundred and Ten Only) by the Sub-Registrar and District Collector u/s.42 of the Indian Stamp Act on 27.09.2014. The land sold by Smt. V. Dhanalakshmi Ammal as the sole owner of the property but other legal heirs, i.e. two sons and two daughters were made parties to the sale deed as vendors. This land sold by Smt. V. Dhanalakshmi Ammalwas is claimed to be an agricultural land and the complete details of the agricultural land is as under:

“Thiruchirappalli District, Ariyalur Re-District, Lalgudi Sub-District, Lalgudi Taluk, Pudhukudi Village, Ion Nanjai, S.No.134/25C extent 0.72.0 Acres , Ac 1.78, Eastern Side 0.61.0 Acres, Ac.1.50 cents is sold to you and its four boundary details:-  For our balance land - East  For Harrip Bai Land - West  For Irrigation Canal - North  For Harrip Bai land - South within this Ac.1.50.

And for the above land usual pathway, included for this 705400 Sq.ft (00607580) and Patta No.449.”

First issue as to what should be the sale consideration. 11.

Now, the first disputed point is what is the actual sale consideration of this land and whether it is sold for Rs.2,80,75,000/- as narrated in the agreement to sale executed on 14.08.2014 or the sale consideration mentioned in the sale deed executed on 22.09.2014 at Rs.60,75,800/-. It is to be mentioned that the Assessee’s mother, Smt. V. Dhanalakshmi Ammal also received Rs.1,00,000/- at the time of execution of the agreement to sell.

The Assessing Officer during the course of the scrutiny assessment examined Smt. V. Dhanalakshmi Ammal by summoning u/s.131 of the Act dated 19.12.2017; wherein in her statement while answering Question No.6, she stated that she sold her agricultural land for Rs.2,85,00,000/- and that she received a sum of Rs.2,24,25,000/- in cash apart from Rs.60,75,000/- by way of cheque as mentioned in the sale deed. She also admitted that, out of the sum of Rs.2,24,25,000/-, she had given a sum of Rs.2.20 crores to her son, Shri. V. Nagarajan, the Assessee. However, Dr. R. Sivakumar, was also summoned u/s.131 of the Act on 01.11.2017; wherein he totally denied that the land sold by Smt. V. Dhanalakshmi Ammal was for Rs.2.85 crores, whereas according to him, he has made payment by way of cheque for an amount of Rs.60,75,800/- as mentioned in the sale deed. While giving answer to Question No.12, he stated so and the relevant question No.12 and the answer for it reads as under:

“Q.No.12: During the course of assessment proceedings of Shri V. Nagarajan of Esanakorai for the Assessment Year 2015-2016, it was noticed that an amount of Rs.2,20,00,000/- was deposited in the Savings Bank Account of Shri V. Nagarjan in Punjab National Bank, Pitchandarkoil Branch. In this regard, in the Sworn Statement given by Shri V. Nagarajan on 20.10.2017, while answering to Q.No.7, he stated that out of the total consideration of Rs.2,85,00,000/-, an amount of Rs.60,75,800/-, as per the sale deed was given by cheque and the balance amount of Rs.2,24,24,200/- was given by cash on the day of registration at his home by a person as a representative on behalf of the SRM and a broker from Musiri. Do you agree with the statement of Shri V. Nagarajanof Esanakorai?

A.No.12: I gone through the statement. I don’t agree with the contention of the said Shri V. Nagarajan. Apart from the amount of Rs.60,75,800/- stated in the deed, I

:: 12 :: Shri V. Nagarajan.”

Ld Counsel’s argument that, from these petty jobs on that very same day, the Assessee cannot earn this huge amount of Rs.2.20 crores and that there is a direct and clear evidence of sale of the agricultural land by the mother, where the Assessee is one of the party. The Assessee received this amount of Rs.2.20 crores given by way of cash by Dr. R.

Sivakumar, that is on account of sale of the agricultural land. Hence, according to Assessee, circumstantial evidences clearly indicates that this amount is out of the sale of the agricultural land and for this he relied on the decisions of the Hon’ble Supreme Court in the case of Sumathi Dayal Vs. Commissioner of Income Tax reported in [1995] 214 ITR 801 and in the case of Commissioner of Income Tax Vs. Durga Prasad More (1971) 82 ITR 540 (SC)].

:: 14 :: account. The learned Senior Departmental Representative argued that the Assessee’s mother did held a Bank account on the date of transfer of land because she accepted from the seller a sum of Rs.20,75,800/- by way of account payee cheque. The he also argued that the land registration deed dated 22.09.2014 clearly reflects the fair market value of the land under sale as Rs.60,75,000/-. Therefore, any consideration received over and above the fair market value, prevailing on the date of sale of the land, the same cannot be attributable to be paid for the land value. He argued that the sum of Rs.2.20 crores received by the Assessee in cash could be for some other services or consideration other than the consideration payable directly towards the land costs. The learned Senior Departmental Representative stated that he has verified the Assessee’s Bank account and noticed that the Assessee has various debit amounts out of this Rs.2.20 crores on various dates to various persons and this indicates that this sum has not been received by the Assessee on behalf of the Assessee’s mother.

Therefore, the learned Senior Departmental Representative requested the Bench to uphold the order of the Assessing Officer and that of the CIT(A).

:: 15 :: 1) The first question is that, what is the actual sale consideration of this land and whether it is sold for Rs.2,80,75,000/- as narrated in the agreement to sale executed on 14.08.2014 or the sale consideration mentioned in the sale deed executed on 22.09.2014 at Rs.60,75,800/-.

2) The next question is that, in case the land sold is at a sum of Rs.2.80 crores, the amount of Rs.2.20 crores received by Shri. V. Nagarajan from his mother, Smt. V. Dhanalakshmi Ammal is on account of sale of agricultural land or from any other source of income

First of all, we noted that neither the Assessing Officer nor the CIT(A) has at all examined the parties to the transactions in full. He examined Dr. R. Sivakumar on behalf of the SRM Institute of Science and Technology and Smt. V. Dhanalakshmi Ammal. All other parties, namely sons and daughters including the Assessee who were parties to the sale deed were not examined, except the Assessee. Further, there are other parties, namely witnesses, i.e. Shri. Parthasarathy and Shri.

Muthusamy. We noted that the agreement to sell executed on 14.08.2014 was not before the Assessing Officer. Further, this agreement was produced before the CIT(A) for the first time but the CIT(A) simply brushed aside the agreement to sell without even examining the veracity of the same. Hence, definitely the CIT(A)’s order suffers from infirmity and even the Assessing Officer has not applied his mind to the facts of the case.

:: 17 :: unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence. As in the present case, either there is a co-incidence or this is a reality that the Assessee deposited the cash of Rs.2.20 crores out of the transaction of sale of land or there is a windfall or he has earned this huge amount from meager sources of income, i.e. electrical repairs and plumbing works.

Before dealing with the facts of this case, we may advert to the principles which should govern the decisions of the court in such like cases. Findings on questions of pure fact arrived at by the Tribunal are not to be disturbed by the High Court on a reference unless it appears that there was no evidence before the Tribunal upon which they, as reasonable men, could come to the conclusion to which they have come; and this is so, even though the High Court would on the evidence have come to a conclusion entirely different from that of the Tribunal. In other words, such a finding can be reviewed only on the ground that there is no evidence to support it or that it is perverse. Further, when a conclusion has been reached on an appreciation of a number of facts, whether that is sound or not must be determined, not by considering the weight to be attached to each single fact in isolation, but by assessing the cumulative effect of all the facts in their setting as a whole [Sree Meenakshi Mills Ltd. v. Commissioner of Income Tax, Madras].

:: 18 :: When a court of fact acts on material partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arises. Likewise, if the court of fact bases its decision partly on conjectures, surmises and suspicions and partly on evidence, in such a situation an issue of law arises [see Dhirajlal Girdharlal v. Commissioner of Income Tax, Bombay] In the case of Edwards (Inspector of Taxes) v. Bairstow and Another, the House of Lords dealt with this aspect of the matter. Viscount Simonds, in that case observed : "For it is universally conceded that, though it is a pure finding of fact, it may be set aside on grounds which have been stated in various ways but are, I think, fairly summarised by saying that the court should take that course if it appears that the Commissioners have acted without any evidence or upon a view of the facts which could not reasonably be entertained." Lord Radcliffee expressed himself in the following words "If the case contains anything ex facie which is bad law and which bears upon the determination, it is obviously erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene." The above observations were relied upon by Bhagwati J. (speaking for the majority) in the case of Mehta Parikh & Co. v. Commissioner of Income Tax, Bombay. The following proposition was laid down in that case : "It follows, therefore, that facts proved or admitted may provide evidence to support further conclusions to be deduced from them, which conclusions may themselves be conclusions of fact and such inferences from facts proved or admitted could be matters of law. The Court would be entitled to intervene if it appears that the fact finding authority has acted without any evidence or upon a view of the facts, which could not reasonably be entertained or the facts found are such that no person acting judicially and properly instructed as to the relevant law would have come to the determination in question."

…………. ………….. ………….. The onus to prove that the apparent is not the real is on the party who claims it to be so. As it was the department which claimed that the amount of fixed deposit receipt belonged to the respondent firm even though the receipt had been issued in the name of Biswanath, the burden lay on the department to :: 19 :: Biswanath. A simple way of discharging the onus and resolving the controversy was to trace the source and origin of the amount and find out its ultimate destination. So far as the source is concerned, there is no material on the record to show that the amount came from the coffers of the respondent firm or that it was tendered in Burrabazar Calcutta branch of the Central Bank on November 15, 1944 on behalf of the respondent. As regards the destination of the amount, it has already been mentioned that there is nothing to show that it went to the coffers of the respondent. On the contrary, there is positive evidence that the amount was received by Biswanath on January 22, 1946. It would thus follow that both as regards the source as well as the destination of the amount, the material on the record gives no support to the claim of the department.

The Hon’ble Supreme Court has given a simple example and held that “from the simple fact that the explanation regarding the source of money furnished by A, in whose name the money is lying in deposit, has been found to be false, it would be a remote and far-fetched conclusion to hold that the money belongs to B. There would be in such a case no direct nexus between the facts found and the conclusion drawn therefrom.

:: 21 :: Rs.2.20 crores are arising out of sale of agricultural land by the assessee’s mother including assessee and hence, this cannot be treated as unexplained cash deposit. This issue, we concluded.

The amount deposited by assessee in PNB account is out of sale of agricultural land and source is established. Hence, the same cannot be assessed in the hands of the assessee as unexplained cash deposit.

We reverse the orders of lower authorities and delete the addition.

Order pronounced in the court on 18th May, 2022 at Chennai.