DCIT, CENTRAL CIRCLE-1, JAIPUR, JAIPUR vs. GYAN CHAND AGARWAL, JAIPUR

2. The applicant craves leave to add, amend or withdraw any of the ground of appeal during the course of appeal proceedings.”

& 666/JPR/2025 3 Dhanlaxmi Enclave Pvt. Ltd. & Ors., jaipur. 4 At the beginning of the hearing of the appeal the Ld. A.R. brought to our notice that both the appeals filed by the revenue are defective and deserve to be rejected in lamine as the ground taken by the revenue challenging the deletion of addition by CIT (A) is completely irrelevant to the issues involved in the case. The issue involved in the case is whether the assessee received unaccounted payment of Rs. 3,00,00,000/- in cash from Shri Raju Sharma against sale of plots on the basis of copy of agreement found & seized during search on Raju Sharma Group at Page 43 to 45 of Exhibit-11 of Annexure-AS, which was never acted upon and the assessee was also not owner of the plots. As against this issue the revenue has raised ground challenging the deletion of addition of Rs. 4,28,00,000/- on account of unsecured loan u/s 68. It was pointed out that the grounds so taken by the revenue are not at all pertaining to the case of the assessee and have no correlation with the facts of the case of the assessee or findings given by ld AO or CIT(A). It was submitted by ld AR that both the appeals filed by the revenue are defective and should be rejected on this count as non-maintainable. On being asked by the bench from Ld. CIT D.R. regarding this defect, he admitted that the ground raised in appeal memos has no relation with the facts of the case and findings of AO/CIT(A). The ld CIT DR submitted that an opportunity to re-file the appeal should be allowed to the revenue.

& 666/JPR/2025 4 Dhanlaxmi Enclave Pvt. Ltd. & Ors., jaipur.

6. Although, we have rejected the appeal treating the same as defective, however, in the interest of the justice and to avoid repetitive litigation, we are deciding the issue involved in both the cases on merit also and for this purpose we are first taking up the case of M/s Dhan Laxmi Enclaves Pvt. Ltd. (ITA No. 666/JPR/2025) as in this case the addition has been made on substantive basis.

6.1 The ld. CIT(A) has stated the relevant facts in his order at Page 37 and the same not controverted by both the parties. Therefore, for the sake of ready reference the facts narrated by CIT (A), is reproduced as under: - “The brief facts as per assessment order are that a search & seizure operation under section 132(1) of the Income-tax Act, 1961 (hereinafter "the Act") was carried out on 02-08-2017 at the various premises of Raju Sharma Group, Jaipur. Residential premises of Shri Raju Sharma, who is the key persons of this group was also covered.

& 666/JPR/2025 5 Dhanlaxmi Enclave Pvt. Ltd. & Ors., jaipur. During the course of search & seizure operation copy of agreement dated 21.06.2013 executed between Shri Raju Sharma and Shri Gyan Charid Agarwal as a Director of the assessee company was found and seized as page No. 43 to 45 to Exhibit-11 of Annexure-AS. As noted by the ld. AO, the said document was signed by the seller party i.e. by appellant through the Director Shri Gyan Chand Agarwal. As per this agreement dated 21.06.2013 an amount of Rs. 3,00,00,000/- in cash was received by Shri Gyan Chand Agarwal as a Director on behalf of appellant company against sale consideration of three Plots (Plot Mo. E-702, 703 and EC-101) measuring total land of Rs. 25,83,.81 sq. yards situated at Narayan Vihar Scheme, Village Asarpura, Tehsil, Sanganer, Jaipur.” 6.2 Relying on the above seized agreement dated 21.06.2013 the Ld. A.O. made the addition of Rs. 3,00,000,00/- in the hands of Dhanlaxmi Enclaves Pvt Ltd on substantive basis and the same addition was also made in the hands of shri Gyan Chand Agarwal on protective basis. The concluding finding of Ld. A.O., as given in the case of Dhanlaxmi Enclaves Pvt Ltd is at Para 5.2 of the assessment order, wherein the Ld. A.O. held as under: - “On a plain reading of the above document it can clearly be deduced that each and every detail in respect to the transaction is clearly been mentioned such as area of each plot as well as consolidated area, further it has also been mentioned that the documents in respect to these plots are also handed over to the purchase i.e. Shri Raju Sharma S/o Chote Lal Sharma. Further, it is a common practice of real estate business that only agreement of sale is executed and as and when the actual buyer who want to get the document registered the same got registered with the Stamp authorities i.e. with respective Sub-Registrar. Therefore, contention of the assessee is not acceptable and it is held that the assessee has sold the above property for a consideration of Rs. 3,00,00,000/- which were received in cash. Since this transaction is not reflected in books of accounts of the assessee, hence it is held as unaccounted receipts of the assessee accordingly the amount of Rs. 3,00,00,000/- is added back to the total income of the assessee as undisclosed receipts against sale of property (on Substantive basis).” 6.3 The above addition was contested by assessee before ld. CIT(A) and filed its submission before ld. CIT(A). The Ld. CIT(A) summarized the submission & 666/JPR/2025 6 Dhanlaxmi Enclave Pvt. Ltd. & Ors., jaipur. of the assessee, as given to him at page 38 to 39 of the order and the same is reproduced as under: - “In the appeal, the appellant has contended that this alleged agreement is not a sales deed and only agreement to sales, which does not show that the transaction mentioned therein has actually been materialized or not, therefore in absence of proving this vital fact, no adverse interference can be taken in the hands of the assessee and no addition can be made solely on the basis of this agreement. Further that the seized document is only a purported agreement to sale and not the sales deed and as per this agreement the possession of the property was also not handed over to the party, therefore the captioned transaction does not come into the ambit of transfer of property, as defined in section 2(47)(v) of Income Tax Act. It is an admitted position of law that the agreement to sales is only a gist of terms &conditions, upon fulfillment of which the underlying transaction would be completed in future. The appellant has further contended that seized document is only a draft agreement to sale, which was never acted upon and shown amount was never received to assessee or company in which he is a director. This agreement to sale is neither signed by another party of the agreement nor by any witnesses, which show that this agreement to sale was never acted upon. As, this agreement was incomplete therefore, not enforceable by law and no action cannot be taken on the basis of this agreement. The appellant has contended that these plots were not owned by the assessee or itscompany but these plots were owned by Khatedar of Narayan Vihar E Block. Since,the assessee was in acute need of funds so it thought that on the basis of thisagreement, it could have received money from Shri Raju Sharma and it will purchasethese plots from Khatedar and gave them to Shri Raju Sharma if the deal is finalized.So, the assessee prepared an agreement to sale for these plots which actually werenot owned by the assessee but he represented to the prospective buyer Shri RajuSharma that he was the owner of these plots. Later on, after preparing theagreement, the director of the assessee alongwith the prospective buyer Shri RajuSharma went at physical site of these plots where the Khatedar was also present andit has come to the knowledge of Shri Raju Sharma that the assessee company wasnot owner of the plot but Khatedar was the owner of the plot and a fake agreementhas been prepared by the assessee claiming its ownership over the plot. When thecorrect facts came to the knowledge of the buyer, hot arguments were started and hedid not give any money to the assessee and the whole agreement became a paperwhich was not executed upon by both the parties. The appellant has relied upon number of judgements in support of the arguments. The appellant has further contended that during the course of search on Shri RajuSharma, except to this agreement no other documents of whatsoever nature wasfound from the possession of Shri Raju Sharma, which may prove that & 666/JPR/2025 7 Dhanlaxmi Enclave Pvt. Ltd. & Ors., jaipur. transactionwas ever materialized and the captioned payment was ever made to the assessee.The papers of the plots were also not found from the possession of Shri RajuSharma, which also shows that the deal under the agreement was actually did notmaterialized. The appellant has further contended that Shri Raju Sharma filed the petition beforeHon’ble Settlement Commission and the same was filed before the initiation ofassessment proceeding in the case of the assessee. In such petition Shri RajuSharma categorically denied of making the payment as mention in the seizedagreement. To verify the veracity of these facts, Hon’ble Interim Board for Settlement (in shortIBFS) ordered to Ld. A.O. to make the inquiry regarding the ownership of the plots.For making such inquiry from the Shri Gyan Chand Agarwal (director of assesseecompany), the Ld. A.O. (as the AO of assessee and Shri Raju Sharma were sameperson) issued notice dated 28.02.2023 (Copy at PB Page 28-29), wherein thespecific detail/documents regarding the ownership for the plot were sought from theassessee. The spot inquiries were also carried out by the Ld. A.O. The reply of theabove-mentioned notice, along with requisite documents, was filed by Shri GyanChand Agarwal (director of assessee company)on 13.03.2023 (Copy at PB Page 30to 35). After considering the reply filed by the assessee and also on the basis of spotinquiry made by him the Ld. A.O. submitted the factual report of Hon’ble IBFS andthe same is mentioned at para 5.1 (page 18) of order of Hon’ble IBFS. The relevantpart of the same reads as “The inspector visited the site on 3.5.2023 and submittedhis report wherein it is stated that the property (Plot No. E-702, E-703 and EC-101,Narayan Vihar Block-E, Village Asarpura, Tehsil-Sanganer, Jaipur) situated onKhasra No. 15 and 17/490 of land at Village Asarpura are still under possession ofland owners, who are running a marriage garden and a weighing bridge(Dharamkanta) on their land.”. The appellant has contended that in view of above factual report, it is undoubtedlyclear that (i) the assessee or his director never owned the captioned plots, (ii) theplots were in possession of their owners and (iii) the captioned deal under seizedagreement was not acted upon. And further that Hon’ble Interim Borad for Settlementin the case of Shri Raju Sharma accepted that the captioned agreement was neveracted upon and no amount was paid by Shri Raju Sharma to assessee. 6.4 The ld.CIT(A), after considering the facts of the case and submission of the assessee deleted the addition made by A.O. by giving the following elaborate finding at Page 40 to 41 of his order: - “From the perusal of the material it is seen that the seized material is an agreement to sell under which the appellant is shown to have received advance from Sh. Raju Sharma. This agreement is not a sales deed and only agreement to sales, which does & 666/JPR/2025 8 Dhanlaxmi Enclave Pvt. Ltd. & Ors., jaipur. not show that the transaction mentioned therein has actually been materialized or not. In case of advance received for agreement to sell the same is per se advance and such advance per se is not taxable and becomes taxable only on the final transfer/sale. It is also mentioned in the agreement that in case the land possession is not handed over to the buyer in that case the money received shall be returned. The appellant has contended that these plots were neither owned by the director of the company nor by the appellant company. The agreement was prepared with incorrect information to get the advance from prospective buyer Sh. Raju Sharma and the appellant had planned to purchase the land out of the cash from advance received from Sh. Raju Sharma. However such advance was not received. The agreement is not signed by any witness and is not signed by buyer and was not found from possession of appellant/appellant's director. Further the issue was also raised in the Rule 9 Report in the settlement proceedings of Sh. Raju Sharma in whose search this document was found. The contentions of the Department are mentioned at para 3.4 of the order of the Hon’ble IBS and the contentions of the applicant objecting to the addition in this regard are mentioned that the 3.4.1 of the said order. From the perusal of para 8 of the order of Hon’ble IBS it is seen that the additions have been made in the order on the issues which are discussed in paragraphs 6.1, 6.2 and 6.3 of the order of the Hon’ble IBS and different issues having different amounts are discussed in these three paragraphs. Thus no addition has been made in the hands of Sh. Raju Sharma by the Hon’ble IBS on account of impugned above referred unaccounted cash of Rs. 3 Cr. given to the appellant company or to the director of the appellant company i.e. It has not been upheld that the unaccounted cash transaction took place in this regard. Further, the contention of the appellant that these plots were not owned by the director or company but these plots were owned by Khatedar of Narayan Vihar E Block has been found to be correct through the Inspector report as submitted during the proceedings before the Hon’ble Interim Board for Settlement. As the inspector gave the report that land was still under possession of land owners and they were running a marriage garden and dharamkanta. The relevant part of the order of Hon’ble Interim Board for Settlement is as under: “In respect of issue -1above, the PCIT vide letter dated 08.05.2023 has submitted his report and stated that the owners of this land are S/Shri Motiram, Chittar Ram, Ramjeevan, Govind Ram and Nathuram, in whose names the land is appearing Jamabandi (records maintained by Land Revenue Department of State Government). Regarding document found and seized from the premises of applicant (pages 43-45 of Annexure As-11), Shri Gyan Chand Agarwal submitted that these plots were proposed to be sold to Shri Raju Sharma but the same actually could not be finalized and materialized. For execution of this document, he submitted that he was in need of fund and he represented himself as owner of these plots to the prospective buyer Shri Raju Sharma under the belief that if buyer agrees to purchase the plots, he will purchase the same from the owners of the plots (Khatedar) and subsequently he will sell it to Shri Raju Sharma, but somehow dispute arisen and Shri Raju Sharma did not sign the agreement and no deal was executed between them. Further, in order to & 666/JPR/2025 9 Dhanlaxmi Enclave Pvt. Ltd. & Ors., jaipur. ascertain the physical status of the property in question, Inspector of this office has been deputed. The Inspector visited the site on 03.05.2023 and submitted his report wherein it is stated that the property (Plot No.E-702, E-703 and EC-101, Narayan Vihar, Block-E Village Asarpura, Thesil- Sanganer, Jaipur) situated on Khasra No.15 and 17/490 of land at village Asarpura are still under possession of land owners, who are running a marriage garden and a weighing bridge (Dharmkanta) on their land.” When the land was not owned by the appellant or by the director of the appellant company, the question of selling such land does not arise and thereby the question of taking unaccounted cash on such sale also does not arise. Further, the possession was found to be with the land owners. There is no statement from land owners in support of assessment order. The addition is made in assessment order without third party inquiries. In view of the above discussion and respectfully following the order of Hon’ble IBS, the addition made in the assessment order in this regard is hereby directed to be deleted.” 6.5 The Ld. CIT- DR submitted that the department has carried out search operations over Shri Raju Sharma on 02-08-2017 and seized the agreement from Shri Raju Sharma duly signed by Shri Gyan Chand Agarwal director of the company, which clearly demonstrate that the assessee has received Rs. 3,00,00,000/- in consideration of sale of impugned plots and supported the order of the AO and submitted that the addition deserves to be sustained. On the other hand, the ld AR submitted that the ld CIT(A) deleted the addition after considering the factual findings of Interim Board for Settlement (in short IBFS), factual report of inspector on ownership and possession of plots and rule 9 report of the PCIT submitted to IBFS in the case of Shri Raju Sharma, which has not been controverted by ld CIT DR. The ld. AR of the assessee relied on the submission filed before ld. CIT(A), which is available in the order of ld. CIT A) at page 27-37 of the order and also relied upon the finding of ld. CIT(A).

& 666/JPR/2025 10 Dhanlaxmi Enclave Pvt. Ltd. & Ors., jaipur. 6.6 We have heard the rival contention of both the parties, perused the material available on record and also considered the facts of the case and findings of lower authorities. The notable fact of the case, on the basis of which the ld. CIT(A) deleted the addition are that : - i) The seized agreement, relying on which the impugned addition was made, is not a sales deed and only agreement to sales, which does not show that the transaction mentioned therein has actually been materialized or not. ii) The agreement to sale was found during search at Shri Raju Sharam, whose case by finalized by Interim Board for Settlement (IBFS). In the case of Shri Raju Sharma considering the evidence submitted by the party and on the basis of inquiry conducted through the Income Tax department, no addition has been made in the hands of Sh. Raju Sharma by the IBFS on account of impugned above referred unaccounted cash of Rs. 3 Cr. alleged to be given to the assessee company or to the director of the assessee company i.e. Thus, it has not been upheld by IBFS that the unaccounted cash transaction took place in this regard. iii) Further, on inquiry by the department itself, the contention of the assessee that these plots were not owned by the director or company but these plots were owned by Khatedar of Narayan Vihar E Block, has been found to be correct through the Inspector report as submitted during the proceedings before the Hon’ble Interim Board for Settlement in the case of Shri Raju Sharma. As the inspector gave the report that land was still under possession of land owners and they were running a marriage garden and dharamkanta. The ld CIT- DR has not controverted the findings of ld. CIT(A) by bringing any material before the Tribunal. The ld. CIT(A) has deleted the addition on the basis of findings of Hon'ble IBFS given in the case of alleged & 666/JPR/2025 11 Dhanlaxmi Enclave Pvt. Ltd. & Ors., jaipur. buyer of the plots Shri Raju Sharma. The ld. CIT DR has not controverted the inquiry made by the department as regard ownership and possession of the impugned plots in the settlement proceedings in the case of Shri Raju Sharma. In view of the facts narrated above, we concur with the finding of ld. CIT(A) that when the land was not owned by the assessee or by its director, the question of selling such land does not arise and thereby the question of taking unaccounted cash on such sale also does not arise. Further, the possession was found to be with the land owners. There is no statement or inquiry by the department from land owners to support the finding of A.O. Therefore, we concur with the finding of Ld. CIT(A) and are of the opinion that the addition made by A.O. was not correct and not sustainable and the ld. CIT(A) has rightly deleted to such addition. Therefore, we sustain the findings of ld. CIT(A) given in his appeal order.

Shri Gyan Chand Agarwal (ITA No. 665/JPR/2025)