Loading judgment…
Facts
The Revenue filed an appeal against the CIT(A)'s order deleting additions made by the Assessing Officer (AO) concerning investment in land and interest expenditure. The AO had made these additions based on an 'Estimated Cost of Project Pushap Vatika' document and an agreement to sell, which the assessee contested.
Held
The Tribunal held that the 'Estimated Cost of Project Pushap Vatika' document was merely an estimate and could not form the sole basis for additions. The Tribunal found that sale deeds were executed for the lands, and the alleged agreements to sell were either post-dated or not substantiated with valid evidence.
Key Issues
Whether additions made by the AO based on an estimated cost document and unsubstantiated agreements to sell are sustainable, or if registered sale deeds should be considered conclusive evidence.
Sections Cited
133A, 147, 148, 69C
AI-generated summary — verify with the full judgment below
आदेश/Order Per Krinwant Sahay, A.M.:
Appeal in this case has been filed by the Revenue against the order dt. 12.08.2022 of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana [herein referred to as ‘CIT(A)’] pertaining to assessment year 2013-14.
Grounds of appeal are as under:
674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 2
1. That the Ld. CIT(A) erred on facts and law, in deleting addition of Rs. 2,25,04,090/- made by the Assessing Officer in respect of the investment made by the assessee company in land purchased from Sh. Malkit Singh and Sh. Lakhvir Singh.
2. That the Ld. CIT(A) erred on facts and law, in deleting addition of Rs. 33,25,950/-made by the Assessing Officer in respect of the investment made by the assessee company in land purchased from Sh. Sukhminder Singh.
That the Ld. CIT(A) erred on facts and law, in deleting addition of Rs. 3,57,353/-made by the Assessing Officer in respect of the interest expenditure incurred by the assessee company to Sh. Sukhminder Singh for the relevant AY. 4. That the Ld. CIT(A) erred on facts and law, in failed to acknowledge that the document impounded from the office premises of the assessee company during the course of survey dated 17.02.2020 is sound documentary evidence. 3. Brief facts of the case as per the written submissions of the Assessee are as under:-
a) The assessee is a company engaged in the business of real estate. It filed its return of income for the Assessment Year 2013-14, declaring a total income of Rs. 2,06,980/-. Subsequently, a survey was conducted under section 133A of the Income Tax Act on 674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 3
17.02.2020, during which certain documents were found which to the mind of Assessing Officer were incriminating. Based on the findings of the survey, the Assessing Officer formed the belief that income chargeable to tax had escaped assessment and accordingly initiated reassessment proceedings under section 148 of the Act. b) The assessment under section 147 was completed by the ACIT/DCIT, Central Circle, Patiala, vide order dated 30.09.2021, determining the total income at Rs. 4,15,59,373/-, thereby making an addition of Rs. 4,13,52,393/- (comprising Rs. 4,09,95,040/- on account of unexplained investment and Rs. 3,57,353/- on account of unexplained expenditure under section 69C of the Act) for the year under consideration. c) Subsequently, the assessee contested the additions by filing appeal before Commissioner of Income Tax (Appeals)-5, Ludhiana, who vide order dated 2.08.2022, granted partial relief of Rs. 2,61,87,393/-, and sustained an addition of Rs. 1,51,65,000/-. d) Against the additions so sustained, the appellant filed an appeal before the Income
674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 4
Tax Appellate Tribunal, Chandigarh, bearing ITA No. 658/CHD/2022. The appellant later opted for the Direct Tax Vivad Se Vishwas Scheme, 2024 (DTVSV) in respect of the sustained addition and filed Form DTVSV-3 on 27.01.2025, requesting withdrawal of the appeal. Accordingly, the Hon'ble ITAT, Division Bench (A), Chandigarh, disposed of as withdrawn. Therefore, the issue in that appeal was not considered in this order. e) The Assessing Officer (ACIT, Central Circle, Patiala) has filed a separate appeal against the relief of Rs. 2,61,87,393/- granted to the appellant by the CIT(Appeals). As this relief is the subject matter of the present appeal, the same has been duly considered, discussed, and disposed of accordingly in this order.
The ld. CIT(A) in his order has given findings on the issues raised by the Assessee which are as under: -
"Regarding the veracity of 'Document No. I, Estimated Cost of Project Pushap Vatika, the AR submitted that the same is not reliable because of the following reasons: i. This estimated cost of project Pushap Vatika zvas prepared in 2011 as the dates of 2011 are mentioned in this 674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 5 estimate and all the sale deeds for land purchased was executed after a long time in Financial Year 2012-13 & 2013- 14 onwards. ii. In this agreement there was mention of certain lands as appearing at Serial No. 3 & 6 which have not been purchased by the assessee at any point of time and were sold to third parties. The land at Serial No. 6, belonging to Sardar Nachhatar Singh measuring 26 Kanal 7 Maria was sold on 20.01.2012 @ Rs. 26 lacs per acre to third party namely M/s. Business Plan Infrastructure Pvt. Ltd. Similarly, the land at Serial No. 3, belonging to Smt. Tej Kaur, Sukhminder's mother measuring 7 Kanal 19 Maria was also sold later on to some third party but to the assessee. iii. No development expenses as mentioned in the estimated cost of project Pushap Vatika was ever paid by the assessee and the AO has also not taken any adverse view regarding this amount. Similarly, no interest was paid to the outsiders as mentioned in the document and on this also, the AO has not taken any adverse view. Thus as per the AR, the AO has also adopted a pick & choose approach. Therefore the arguments of the AR are found acceptable that no addition can be made solely on the basis of figures mentioned in the document 'Estimated Cost of Project Pushap Vatika', whose heading itself suggest that it was just an estimate. Some of the lands
674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 6 mentioned in the document were never purchased by the assessee, hence, it gives support to the fact that this was just an estimate prepared by the assessee before undertaking the project and the details mentioned therein are not sacrosanct and cannot be used independently for making addition in the hands of the assessee. This can however be used as supporting document if there are other evidences/ documents found during the course of survey or unearthed by the AO during the assessment proceedings. The addition wise arguments of the AR have been considered and to sum-up, regarding the addition of Rs. 2,25,04,090/- in respect of land measuring 25 Kanal 5 Maria purchased from Sh. Jagroop Singh, Sh. Malkit Singh, Sh. Lakhvir Singh and Sh. Jasbir Singh, the AR has submitted that this land was purchased through registered sale deed dated 08.06.2012 & 09.07.2012 for Rs. 48,08,410/- but the AO has made the addition on the basis of an agreement to sell which is of a later date i.e. 20.07.2012 and argued that if the land was already registered on 08.06.2012 & 09.07.2012 why the agreement to sell was required to be signed on 20.07.2012. This argument of the AR has merits because if the land was already registered on 08.06.2012 and 09.07.2012, then there was no purpose of writing an agreement on 20.07.2012. Hence, the agreement dated 20.07.2012 cannot be a basis for making addition in respect of purchase of land whose registry was done before this date. It is also submitted by the AR that the agreement to sell dated
674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 7
20.07.2012 was a photocopy and the original Stamp Paper No. E392369 was impounded which is lying 'blank'. It is also submitted by the AR that the statement of the seller was recorded by the AO in which he has denied signing of any such agreement to sell but this fact has not been 'mentioned by the AO in the assessment order and the AR enclosed the photocopy of the same. The arguments of the AR are found acceptable that no addition can be made solely on the basis of figures mentioned in the document Estimated Cost of Project Pushap Vatika, whose heading itself suggest that it was just an estimate. On the basis of the facts mentioned above and in view of the blank stamp paper found & impounded during the survey used for the purported agreement to sell dated 20.07.2012 (but the registration of the land has already been done by registered sale deed dated 08.06.2012 & 09.07.2012), this addition of Rs. 2,25,04,090/- is not found sustainable and therefore deleted. Regarding the addition of Rs. 33,25,950/- in respect of land measuring 2 Kanal 13.66 Maria (0.335 Acre) purchased from Sh. Sukhminder Singh, the AR has submitted that this land was purchased through registered sale deed dated 04.01.2013 and no agreement to sell was executed prior to registered sale deed and the same facts was also stated by the seller in his statement recorded before the AO, however the AO has not mentioned this fact in the assessment order and the AR enclosed a photocopy of the statement. The arguments of the AR are found acceptable that no addition can be made
674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 8 solely on the basis of figures mentioned in the document Estimated Cost of Project Pushap Vatika, whose heading itself suggest that it was just an estimate. So, as per decision of Punjab & Haryana High Court consideration mentioned in registered sale deed is conclusive evidence hence it only to considered to calculate actual investment. Therefore, on the basis of the facts mentioned above and in the absence to any agreement to sell, this addition of Rs. 33,25,950/- is not found sustainable and therefore deleted."
Against the order of the ld. CIT(A), the Revenue has filed this appeal before the Tribunal.
The Ld. DR has argued that the ld. CIT(A) could not appreciate the facts in totality and, therefore, he deleted the addition of Rs. 2,61,87,393/-. The ld. DR also argued that performa / documents found during the survey conducted u/s 133A of the Act were very relevant from the point that they were incriminating in nature, therefore, the additions made by the Assessing Officer on the basis of such documents should have been confirmed by the ld. CIT(A).
Per contra, the ld. Counsel for the Assessee argued that the CIT(A) has rightly rejected some papers found during the survey which were not relevant from the point of view of 674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 9 making assessment on their basis. The ld. Counsel for the Assessee also relied on the order of the Ld. CIT(A).
We have considered the findings given by the Assessing Officer in the assessment order and by the Id. CIT(A) in the appellate order. During proceedings before us, the Counsel of the assessee company submitted a reconciliation of land sold with agreement to sell. We find that the Ld. CIT (Appeals) has duly considered all the facts as well as legal position presented by both the assessee and the Assessing Officer and has passed a well-reasoned order. In our view, the document titled ‘Document No. 1 -Estimated Cost of Project Pushap Vatika’ was prepared in 2011, i.e., prior to 01.04.2012. Notably, no sale deeds were actually executed during the relevant financial year 2011-12, the transactions actually took place in financial year 2012-13 and thereafter. The lower authorities have also undertaken a fact-finding inquiry with respect to the assessee's claim that certain parcels of land mentioned in the said document were not purchased by the assessee. For instance, the land mentioned at Serial No. 6 in the Estimated Cost document was, in fact, sold to a third party, M/s. Business Plan Infrastructure Pvt.
674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 10 Ltd., before the start of the financial year, i.e. prior to 31.03.2012. Similarly, the land listed at Serial No. 3, belonging to Smt. Tej Kaur (mother of Shri Sukhminder), was also later sold to a third party and not to the assessee.
These facts clearly establish beyond doubt that the said document is merely an estimate and under any circumstances cannot form the sole basis for determining the applicable rate or the quantum of income alleged to have escaped assessment, unless it is supported by strong corroborative evidence. A case in point is the transaction with S. Teja Singh, where the original notarized agreement to sell was impounded and the transaction value was clearly mentioned, thereby providing reliable supporting evidence. Whereas in other cases, this vital fact that the original notarized agreement to sell was executed, is missing. Thus, no addition can be made solely on the basis of figures mentioned in the document Estimated Cost of Project Pushap Vatika, whose heading itself suggest that it was just an 'Estimate'.
11 In view of the binding decision of the Hon'ble Jurisdictional Punjab & Haryana High Court in the case of 674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 11 ‘CIT versus Paramjit Singh’ reported in 383 ITR 583 (2010), wherein, it has been held that the amount stated in the registered sale deed is conclusive and must be accepted for the purpose of assessment. Accordingly, no addition can be made merely on the basis of an estimate, in the absence of any other reliable and corroborative evidence to support such estimation. The detailed conclusion is as under:-
Keeping in view the totality of facts, nature and circumstances, case laws brought on record by the Counsel of the Assessee, we hereby conclude as follows:
12.1 With respect to the addition of Rs. 2,25,04,090/- pertaining to land measuring 25 Kanal 5 Maria purchased from Sh. Jagroop Singh, Sh. Malkit Singh, Sh. Lakhvir Singh, and Sh. Jasbir Singh, it is noted that the land was acquired through registered sale deeds dated 08.06.2012 and 09.07.2012 for a total consideration of Rs. 48,08,410/-. The Assessing Officer has made the addition on the basis of a photocopy of an agreement to sell dated 20.07.2012 and alleged agreement to sell was executed on a subsequent date. When the sale deeds had already been registered on 08.06.2012 and 09.07.2012, there would have been no 674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 12 rationale or necessity for executing a separate agreement to sell on 20.07.2012.
Furthermore, the alleged agreement to sell was purportedly executed on a photocopy of stamp paper bearing serial number E392369. Notably, this stamp paper was impounded and found to be unsigned by the sellers, with no consideration amount mentioned therein. Furthermore, the original stamp paper bearing the serial number E392369 which was impounded was found to be blank.
These facts have never been disputed by the Departmental authorities at any stage of the proceedings. The Commissioner of Appeals has thoroughly examined the facts in detail and demonstrated a careful and reasoned application of mind in the matter. In contrast, the Assessing Officer failed to consider material facts available on record and proceeded to make addition on mere surmises and conjectures without bringing on record any concrete positive material on record other than an 'Estimate'. The Assessing Officer has failed to consider the denial of agreement to sell in the statements recorded by his office from the sellers- namely, S. Jagroop Singh, S. Malkiat Singh, and others-who
674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 13 categorically denied having executed any such agreement to sell or having any knowledge of its existence. Importantly, this fact has never been disputed by the departmental authorities at any stage of the proceedings, including before this Bench. On the basis of the facts mentioned above, acceptance of book results by the Assessing Officer and in view of the blank stamp paper found and impounded during the survey used for the purported agreement to sell, the view taken by Commissioner of appeals is correct and not required to be interfered with, hence this addition of Rs. 2,25,090/- is not found sustainable and therefore, deleted. The appeal of the Revenue stands dismissed on this ground.
12.2 In respect of the addition of Rs. 33,25,950/- made for land purchased from Sh. Sukhminder Singh, this land was purchased through registered sale deed dated 04.01.2013 and no agreement to sell was executed prior to registered sale deed and the same facts was also admitted by the seller in his statement recorded before the Assessing Officer, however, while accepting book results, the Assessing Officer has not mentioned this fact in the assessment order. The CIT(A) has produced detailed facts in this matter. He
674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 14 concluded that no addition can be made solely on the basis of figures mentioned in the document Estimated Cost of Project Pushap Vatika, whose heading itself suggest that it was just an 'Estimate'. Therefore, on the basis of the facts mentioned above and in the absence to any agreement to sell, this addition of Rs. 33,25,950/- is not found sustainable and therefore deleted.
12.3 Regarding the addition of Rs. 3,57,353/- on account of interest paid treated as unexplained expenditure u/s 69C of the Act, The Commissioner of Appeals has held that this interest was for the period 01.04.2012 to 30.12.2012, whereas, the seller S. Sukhminder Singh has executed sale deed on 04.01.2013 and made payment on same day and no agreement to sell was executed by said person with the company before this date. The seller S. Sukhminder Singh in his statement on oath recorded by Assessing Officer also denied to have executed any agreement to sell prior to execution of sale deed and denied to receive any interest from the assessee. The document 'Document No. 1 - i.e. 'Estimated cost of Project Pushap Vatika', has been held to be an estimate but not actual
674-Chd-2022 M/s Gazebo Construction Private Limited, Patiala 15 investment. The Assessing Officer has not detected any other source of income to prove interest payment made by the assessee and there is nothing on record as to when and through which mode the interest was paid by the assessee. The departmental authorities have neither found any agreement to sell nor submitted any documentary evidence to prove so called unexplained payment of interest to seller. Further the concerned authorities have failed to establish any agreement to sell was actually executed prior to execution of sale deed. Therefore, under the facts & circumstances of the case, this addition of Rs. 3,57,353/- is not found tenable made on account of alleged interest payment being unwarranted and against the facts of the case.
In the result, Revenue’s appeal is dismissed.
Order pronounced on 07.07.2025.