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Facts
The assessee's premises were searched, leading to a notice under Section 153A. The Assessing Officer (AO) made an addition of Rs. 13,00,000 based on an unsigned agreement to sell for a plot of land. The assessee contended the agreement was unexecuted, not registered, and lacked corroborative evidence.
Held
The Tribunal held that an addition cannot be made solely on the basis of an unsigned and unregistered agreement to sell, especially when no independent inquiry was conducted by the AO, no cross-examination was allowed, and the property remained in the seller's name. The addition was deemed unsustainable in law.
Key Issues
Whether an addition based on an unsigned and unexecuted agreement to sell, without corroborative evidence or proper investigation, is sustainable in law.
Sections Cited
132, 153A, 143(3), 153Aa(1)(b)
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Income Tax Appellate Tribunal, CHANDIGARH BENCH “A”, CHANDIGARH
Before: SHRI. RAJPAL YADAV, VP & SHRI. KRINWANT SAHAY, AM
िनधा�रती की ओर से/Assessee by : Shri Rohit Kapoor, Advocate & Shri Virsain Aggarwal, ITP राज� की ओर से/ Revenue by : Shri Manav Bansal, CIT, DR सुनवाई की तारीख/Date of Hearing : 07/08/2025 उदघोषणा की तारीख/Date of Pronouncement : 10/09/2025 आदेश/Order
PER KRINWANT SAHAY, AM:
This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-3, Gurgaon dt. 24/07/2024 for the Assessment Year 2017-18.
In the present appeal Assessee has raised the following grounds:
1. The CIT(A) erred in confirming the addition of Rs. 1300000/- made by the AO under the head Income from other sources on account of unexplained investment in plot No 3, Divine Enclave, Near Model Town, Phase 3, Part 2 Bhatinda. The order passed by the CIT(A) is contrary to the facts and circumstances of the case.
2. That the CIT(A) has erred in confirming the addition of Rs. 1300000/- made by the AO ignoring the fact that the assessment framed u/s 153Aa(1)(b) r.w.s 143(3) is bad in law since the same is without mentioning DIN which is a mandatory requirement.
3. That the Ld. CIT(A) erred in confirming the addition made by the AO on the basis of seized agreement to sell which was neither signed by the appellant nor signed by the witnesses.
4. That the CIT(A) erred in confirming addition made by the AO based on unexecuted agreement to sell. That the CIT(A) has erred in not appreciating the fact that the property in question till date stands in the name of seller Sh. Manish Kumar.
5. That the Ld. CIT(A) erred in confirming the addition by presuming that the seized agreement to sell was registered and notarized. That the assumptions made by the CIT(A) are contrary to the facts and circumstances of the case. 6. That the Ld. CIT(A) erred in confirming the addition made by the AO rejecting the explanation of the assessee that the agreement to sell was merely a proposal which was never executed. 7. That the Ld. CIT(A) erred in confirming the addition made by the AO without bringing on record any material to prove that the assessee was owner of the property in question and also the agreement was ever executed. 8. That the CIT(A) erred in confirming the addition made by the AO without appreciating that the assessee was not provided with the opportunity of cross examination in spite of specific request made by the assessee. 9. That the CIT(A) erred in confirming the addition made by the AO without making any enquiries from the owner Sh. Manish Kumar and without recording any statement of seller in respect of the seized document. 10. The appellant requests permission to add or amend the grounds of appeal before the appeal is heard and disposed off.
3. The brief facts of the case, as recorded in the order of the learned CIT(A) for Assessment Year 2017-18, are as follows. The assessee was subjected to a search under Section 132 on 28.01.2021 at both his residential as well as business premises. Pursuant to the notice issued under Section 153A on 22.09.2021, the assessee filed his return of income on 12.11.2021. The case framed by the Assessing Officer is primarily based on an unsigned agreement to sell, which was unearthed during the course of the search. In this regard, it becomes imperative to critically examine the contents of the seized document, particularly to ascertain whether any sale deed was actually executed on the basis of the said unsigned agreement to sell. The relevant details in this respect are provided below. Particulars Dated Seller Purchaser Consideration Remarks Sale deed 01.08.2016 Chiman Sukhraj 1600000 Related of plot No 2, Lal S/o Singh S/o to son of Divine Nathu Balwant the Enclave, Ram Singh appellant Near Model Town, Phase 3, Part 2 Bhatinda Sale deed 01.08.2016 Chiman Manish 1600000 Not of plot No 3, Lal S/o Kumar S/O related to Divine Nathu Jagdish appellant Enclave, Ram Near Model Town, Phase 3, Part 2 Bhatinda Unsigned 19.09.2016 Manish Balwant 1300000 Related Agreement Kumar S/O Singh S/O to the to Sell plot Jagdish Dalip Singh appellant No 3, Divine but the Enclave, same was Near Model not Town, Phase executed. 3, Part 2 Bhatinda 3.1 The AO on the basis of the said seized unsigned agreement to sell made an addition of Rs. 13,00,000/- to the returned income.
4. Against the order of the AO the assessee went in appeal before the Ld. CIT(A) challenging the authenticity and evidentiary value of the unsigned and unexecuted agreement to sell.
However, the Ld. CIT(A) rejected the assessee’s submissions and upheld the addition of Rs.13,00,000 made by the Ld. AO.
Against the order of the Ld. CIT(A) the assessee raised several grounds challenging the erroneous addition sustained by the Ld. CIT(A). The summary of the submissions is as under:
a) The alleged seized agreement relied upon by the Ld. AO is unsigned and unregistered, and therefore not legally enforceable under the Indian Registration Act. b) No registry was executed pursuant to the said document, and the ownership of the property remained with Shri Manish Kumar (seller), as supported by records. c) The unsigned agreement relied upon by the AO was executed merely on a Rs.50 stamp paper, contrary to applicable stamp duty provisions, making it inadmissible as evidence. d) The statement of the seller, Shri Manish Kumar, was neither recorded to verify the contents of the agreement. That the cross- examination was not allowed to the appellant in spite of request made by the appellant. e) The Ld. AO did not conduct any independent inquiry from Shri Manish Kumar to ascertain the authenticity of the alleged agreement. f) Latest Electricity bill dated 07.05.2024, were furnished, which clearly established that the property continued to remain in the name of Shri Manish Kumar and was never transferred to the appellant.
The Ld. AR also submitted that no addition can be made merely on the basis of an unsigned and unexecuted agreement, in the absence of any corroborative evidence of actual payment, the addition made in the hands of the assessee is wholly unwarranted and liable to be deleted and relied upon the following case laws:- Deputy Commissioner of Income-tax (Central-2) vs. Sanjay Agrawal [2025] 174 taxmann.com 108 (Raipur - Trib.)[16-08-2024] Commissioner of Income-tax, Central -II v. AKME Projects Ltd. [2014] 42 taxmann.com 379 (Delhi HC) Krishan Kumar Jhamb v. Income-tax Officer. [2009] 179 Taxman 141 (Punjab & Haryana) DCIT, Central -II, Bhopal Vs. M/S. Signatures Colonisers Bhopal 2022 (2) TMI 318 - (ITAT Indore) Rajvee Tractors (P.) Ltd. Vs. ACIT [2022] 143 taxmann.com 330 (Ahmedabad - Trib.) CIT, Bangalore vs. Ajje Gowda [05-08-2014] (Karnataka High Court) CIT vs. Gian Gupta [2014] 46 taxmann.com 372 The ACIT, Central Circle-14, New Delhi Vs. M/s Mayfair Resorts India Ltd.. 2023 (8) TMI 917 - ITAT DELHI Shri Bhavnoor Singh Bedi Vs. ACIT, Central Circle-2, Jalandhar and DCIT, Central Cicle-1, Jalanndhar Vs. Shri Bhavnoor Singh Bedi , Shri Jatinder Singh Bedi 2023 (4) TMI 528 - ITAT Amritsar DCIT Vs. Brindesh Goverdhandas Agarwal. In dt. 10/02/2025 (2025) 39 NYPTTJ 321 (Nagpur) Deputy Commissioner of Income-tax v. Rajat Agarwal [2012] 27 taxmann.com 166 (Jaipur - Trib.) 7. Per contra, the Ld. CIT DR relied upon the order of CIT(A) and argued that the addition made by the AO should be confirmed.
We have heard the rival contention of both the parties and the material available on the record. We have carefully considered the arguments advanced by the Ld. Counsel for the assessee, the paper book filed, the judicial precedents relied upon, as well as the brief synopsis submitted. We have also taken into account the submissions of the Ld. CIT–DR, the assessment order, and the order of the Ld. CIT(A). On perusal of the record, we find merit in the submissions advanced by the Ld. Counsel. The alleged agreement relied upon by the Ld. AO is admittedly unsigned and unregistered and, therefore, cannot be regarded as a legally enforceable document in view of the settled position of law. No registry was ever executed pursuant thereto, nor was any corroborative evidence brought on record to establish transfer of ownership or actual flow of consideration. The property, as evidenced from the electricity bills and purchase invoices, including the latest bill dated 07.05.2024, continued to remain in the name of Shri Manish Kumar. Further, the Ld. AO neither conducted any independent inquiry from the said owner nor afforded any opportunity of cross-examination to the appellant. Considering the judgments of the jurisdictional High Courts in Krishan Kumar Jhamb vs ITO (179 Taxman 141) and CIT Central vs Akme Projects (42 taxmann.com 379), it is well settled that no addition can be made merely on the basis of an unsigned or draft agreement to sell, especially where no investigation has been conducted by the department. In the present case, the agreement to sell relied upon by the AO does not bear the signature of the appellant, and therefore its authenticity remains unsubstantiated. It is also undisputed that the property continues to be registered in the name of the seller, which further undermines the contention of any transfer. In view of the above facts and legal position, the addition made by the AO and sustained by the Ld. CIT(A) is without basis and is accordingly directed to be deleted, being unsustainable in law.
Further, all the other grounds are kept open as ground no. 3 has been allowed. Therefore, no comments are being given on the other grounds at this stage.
In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court on 10/09/2025.