DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, LIC BUILDING vs. MADHU CHORDIA, C-SCHEME

2. The appellant craves leave or reserves right to amend, modify, alter, add or forgo any grounds) of appeal at any time before or during the hearing of appeal.”

3. As the issue involved in both the appeals is common, we deem it fit to dispose it off by this common order. We are taking as the lead case.Succinctly, the fact as culled out from the records is that a search & seizure operation under section 132(1) of the Income Tax Act, 1961 (hereinafter ‘the Act’) was carried out on 19.01.2021in the case of “Chordia Group” to which the assessee belongs. Consequent to search action, the case of the assessee was 3.1 Assessee is an individual and had filed her return of income u/s 139 of the Act on 28.03.2016 declaring total income of Rs. 26,91,090/-. Consequent to notice u/s 153A of the Act was issued on 22.10.2021 and in compliance thereto, return was filed on 22.12.2021 declaring total income of Rs. 12,32,390/-. Statutory notices were issued and served upon the assessee calling for the details and the assessee in response to those notice furnished the details / information / documents / which were examined with respect to claims made in the return of income. Subsequently, order u/s 153A of the Act was passed on 30.05.2022 wherein addition of Rs. 3,30,00,000/- was made alleging undisclosed investment u/s 69 of the Act by the respondent.

3.2 Ld. AO on the basis of a soft copy of agreement found in the laptop of Nitin Chordia, son of the assessee, in respect of purchase of property, i.e. Plot No.C-60, Sangram Colony, Jaipur, comparing it with the registered conveyance deeds of these properties, made the addition u/s 69 for the difference found in the consideration paid by the assessee. 3.3 We find that the said property belonged to four co-owners divided into four distinct and identifiable portions. Two of these portions were purchased and & 1525/JPR/2024 Madhu Chordia, Jaipur. registered in FY 2014-15 while the other two were purchased and registered in FY 2016-17. The AO noted that there was a difference in the consideration stated in the soft copies of agreements retrieved from the laptop and the respective sale deeds. He was of the view that it is a general practice in real estate transactions that first agreement is executed and thereafter the sale deed is executed and the agreement depicts the true picture. The Ld.AO brushing aside the reply/explanation put forth by the assessee, made the addition presuming the same to be on-moneypaid in cash by the assessee.

4. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: “6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under: - … Decision of Ld. CIT(A):- There are three kind of seized material in the present case, (i) typed soft files from laptop, (ii) registered sales deed and (iii) letter from seller Sh. Prakash Dayal. The ld. AO has treated the transaction value mentioned in the typed soft files as correct whereas the appellant has contended that such soft files cannot be relied upon and has relied upon the registered sales deeds and seized letter from seller Sh. Prakash Dayal. It is noticed from the soft files that these are unsigned and incomplete documents. The details of payment cheque are left blank. Further the appellant has also highlighted some factual errors in these soft files. Soft word files are of 06.10.2013, whereas property was purchased from four parties on 13.10.2014 (Prabhat Dayal HUF), 11.02.2015 (Prabhat Dayal), 02.09.2016 (Prakash Dayal) and 02.11.2016 (Anjali Lodha). Property has been purchases after a substantial gap of 1 to 3 years.

& 1525/JPR/2024 Madhu Chordia, Jaipur. This prima facie shows that these soft files keeping in view the other seized material & assessment inquiries, are not of such nature that the addition to income could be made in the assessment solely on the basis of these files. Further from the perusal of the soft files it is seen as under:- (i) Soft file regarding sale by Doctor Prakash Dayal (ii) Soft file regarding sale by Sh. Prabhat Dayal (iii) Soft file regarding sale by Prabhat Dayal HUF From the above it is noted that even though it has been mentioned that the part of the consideration was received by the sellers in cheque however the cheque number and date are left blank and at the same time there is no entry of the bank transaction on record which could show that any advance cheque was received by the appellant in the year 2013 in this regard. This & 1525/JPR/2024 Madhu Chordia, Jaipur. shows that these soft files were not executed. Also there is no mention of cash payment in these soft files. Further as per soft files the remaining payment and registry was to be done within 6 months whereas the actual sales have taken place after a gap of 1 year to 3 years. Further, the purchase is meeting the requirement of stamp valuation rates. From the perusal of the assessment order and submissions of the appellant, during the search, no document was found indicating any cash payment or unaccounted payment. Further, it is noted in the assessment order that “during the search proceedings at residence of assessee at 61, Sangram Colony, Jaipur a loose paper (C-1/E-2/75) was also found and seized. This paper is a letter dated 23.05.2015 sent by Shri Prakash Dayal and is addressed to M/s ArihantEnterprises. Vide the above letter Shri Prakash Dayal has demanded balance amount of Rs. 2.00 crores for sale of plot no. 60, Sangram Colony, Jaipur. He has further stated as per clause 2 & 3 of the agreement if the balance amount of Rs. 2.00 crore is not paid to him before 30.05.2015, he will forfeit Rs. 70 lac paid to him by the assessee at the time of agreement” dated 01.04.2015. The said letter is placed at PB page 26. Thus with respect to sale by Shri Prakash Dayal there are three different values and three different documents of different years. The soft file agreement found from laptop of Nitin Chordia is dated 06.10.2013. The Agreement with Arihant Enterprises is dated 01.04.2015. The registry has been done on 02.09.2016. It is also noted in the assessment order that “in this regard, commission u/s.131(1)(d) of the Income Tax Act, 1961 was issued to the DDIT(Inv.)-1, Jodhpur to conduct enquiries in respect of Shri Prakash Dayal. A report dated 27.08.2021 by the DDIT(Inv.)-1, Jodhpur was received in the office office of DDIT(Inv.)-I, Jaipur on 07.09.2021. It has been informed that Shri Prakash Dayal has denied of making any agreement of Rs.3.25 crores for the sale of his portion of plot No.C-60, Sangram Colony. Further, Shri Prakash Dayal has accepted that vide agreement dated 01.04.2015 he has agreed to sale his portion of the plot in Rs.2.70 crores and he has received advance amount of Rs.70 lakhs. He has further accepted that the agreement was not finalised and advance amount of Rs.70 lakhs paid by M/s. Arihant Enterprises was forfieted by him and the same was offered for taxation.” The ld. AO has summarised the position in this regard that “On analysis of the agreements and letter of Shri Prakash Dayal written to M/s. Arihant Enterprises, it is inferred that agreement value for the portion of plot of Shri Prakash Dayal wasRs.3.25 crores and value as per letter was Rs.2.70 crores.” The value as per the letter mentioning 70 lakhs and 2 cr. has been accepted by the seller Shri Prakash Dayal and he has also confirmed that the transaction did not take place and he had offered the forfeited money fortaxation. There is no adverse finding on this in the assessment order. Ld. AR has argued that from the perspective of buyer Arihant Enterprises, it chose forfeiture of advance of Rs. 70 lakhs instead of paying remaining Rs. 2 cr. This shows that at that & 1525/JPR/2024 Madhu Chordia, Jaipur. stage for Arihant Enterprises the value of that part of the property was less than Rs. 2 cr. as the advance was already a sunk cost. Ld. AR has argued that this letter is also a part of seized material and is signed and accepted by seller and corroborated by books and this itself proves that the unsigned soft files / typed file from laptop cannot be relied upon. In the current case, the AO failed to prove the payment in cash by the appellant however the submission of the appellant find support from the statement of one of the seller which also proved the finding of the AO wrong by denying any cash involvement in the property transaction. Hence, in light of the judgement of Hon’ble Supreme court in the case of K P Varghese v/s ITO (1981) 131 ITR 597(SC), burden of proof was on the AO. The appellant has rightly contended that suspicion howsoever strong cannot take place of proof by taking reference of the judgement of Hon’ble Apex Court in the case of Umacharan Saha & Bros Co. v/s CIT 37 ITR 21 (SC). In view of the above totality of the facts and circumstances of the case and considering the ratio of the judgements referred by the appellant in her submissions, the addition made in the assessment order considering the property transaction value as mentioned in the soft files to be the final/actual transaction value and treating the difference as unaccounted cash payment, cannot be upheld and resultantly the same is hereby directed to be deleted. Accordingly this ground of appeal is hereby allowed”.

5. Feeling dissatisfied with the above findings so recorded by the ld. CIT(A) the revenue preferred the present appeal raising a solitary ground of appeal, on the addition deleted by the ld. CIT(A). The ld. DR is heard who heavily relied upon the finding so recorded in the order of assessment.

6. On the other hand, the ld.AR filed a detailed written submission supporting the order of the ld.CIT(A) which is reproduced hereunder-

1. The department ground of appeal is referring to ‘general practice’ in property transaction means it is purely based upon presumption and surmises. Further, is it justified, to make addition under Income Tax Act on the basis of ‘general practices’ followed in the industry rather than on any evidence.

2. Unsigned, incomplete, soft word file, wrongly presumed as agreement: It was alleged by the Ld. AO that three unsigned soft word files were found. The question arises, can these unsigned soft word files(PBP: 1 – 13) can be termed as ‘agreements’? The obvious answer would be No. Since it is neither executed nor signed nor complete and & 1525/JPR/2024 Madhu Chordia, Jaipur. therefore not enforceable under any law. Therefore, Ld. AO had erred in considering these incomplete soft word files as ‘agreement’.The Ld. CIT(A) acknowledged these facts, submitted by the respondent, and considered them while deleting the addition under the current case.In this regard, we placed our reliance on following case laws:  Hon'ble Delhi High Court in the caseof CIT Vs Kulwant Rai 291 ITR 36 held as under: "Held, dismissing the appeal, (i) that, admittedly, the assessee had not signed the agreement in question and since he had not signed the agreement, no liability could be attributed qua that that agreement towards him since he was not aparty to the agreement till he had signed the agreement. The mere fact that this agreement was found in the possessionof the assessee did not lead anywhere. Thus, the addition of Rs. 17,00,892 made by the Assessing Officer by way ofhalf share of the assessee in the earnest money was based on surmises and guess work only and was liable to be deleted."

 In the case of CIT v. Moorti Devi [2010:DHC:4677-DB],the issue pertained to the addition on the basis of seizure of two different set of documents i.e., agreement to sell and sale deed, which signified different purchase considerations; however, the assessee was never confronted with the original documents. This Court, while upholding the finding of the ITAT therein that merely on the basis of an alleged photocopy of a document, it cannot be assumed that the transaction was in fact entered into by the assessee, has held as under:- “7. On a perusal of the order passed by the authorities below, it is luminescent that the original documents were never confronted to the assessee. Nothing has been brought on record as to what happened to the original documents. There is no material even to indicate that the photocopies are the copies of the original documents.

8. In view of the aforesaid, we are of the considered view that the tribunal has correctly held that they do not have any evidentiary value. That apart, no steps were taken to establish the factum of the transaction but time and again reliance was placed on the photocopy of the instrument which pertained to the transaction.” The case under consideration is squarely covered by above referred case laws as in the case in hand also, only soft word files, without any signature, were found. Moreover, there is no reference of any cash payment even in such soft word files.

3. Addition was made relying upon dumb material and based on presumptions and conjectures: a) As stated in point (1) above, the alleged soft word files were without any signature or without even having any intent to make payment in cash. Only reference of payment is through cheque which is also without any cheque number. Moreover, the contents of & 1525/JPR/2024 Madhu Chordia, Jaipur. these soft word files are significantly different from the actual transactions which shows that it is rough or dumb soft copy. For instance: i. Date of purchase of plot no. 60 by P. Dayal is mentioned as 08.11.1960 in the soft copies whereas in the sale deed, it is 05.11.1960;

ii. In the soft copies, the area of plot no. 60 is mentioned as 714.6 Square yard whereas in the sale deed, the area of such plot is 710 square yards. iii. Area of ground floor of Dr. Prakash Dayal is 1400 Square feet in the soft copies which is 800 square feet as per sale deeds. b) Further, there is a significant time difference between actual transaction even as per the alleged date mentioned in soft word files. c) Even for sake of argument, if we evaluate the approach of Ld. AO that there are soft copies of alleged agreement, although not even containing any cheque number(s) rather containing materially incorrect facts. However, same were converted to the agreement and subsequently upon registration of actual sale deeds, these alleged hypothetical agreements were destroyed and the entire alleged cash payment was also made at the time of registration of sale deed. The question arises in this entire hypothesis, no payment was made by cheque or cash but agreement was entered and after long gap of time, based upon such agreement, subsequent sale deed was entered. It shows the entire premise is hollow, without any basis, against the common sense that why a person will enter into an agreement without taking a single penny and why such person would keep the agreement on hold for such a long period of time. Therefore, the entire approach of Ld. AO was imaginary, presumptive and based upon his own hypothesis and conjecture. d) Therefore, in view of the above stated facts, circumstance and jurisprudence, since the whole addition was based upon presumptions of treating soft word files as ‘real agreements’ which are, in fact, nothing more than ‘dumb documents’, the action of the Ld. AO was illegal and accordingly, the addition was rightly been deleted by the Ld. CIT(A).

& 1525/JPR/2024 Madhu Chordia, Jaipur. In the present case also, agreement, dated 01.04.2015, was entered between Dr. Prakash Dayal and firm, Arihant Enterprises for consideration of Rs. 2,70,00,000/- for the property under consideration. Further, in terms of such agreement, Rs. 70,00,000/- was given as advance through banking channel by Arihant Enterprises to Dr. Prakash Dayal which is also appearing in books of accounts of said firm.

6. Perusal of the findings and decision of Ld. CIT(A), as reproduced hereinbefore, shows thatthe Ld. CIT(A) has rightly accepted the submission of the respondent and noticed as under: a) the soft files are unsigned and incomplete; b) The details of payment cheque are left blank; c) No proof of any advance cheque on record; d) No mention of cash payment; e) Gap of 1 to 3 years between soft files and actual sale; f) Soft files were not executed; g) Actual purchase meeting the stamp valuation rates; h) Submission of the appellant finds support from the statement of one of the sellers which also proved the finding of the AO wrong;

7. We note further, the Ld. CIT(A) has given detailed findings after perusing all the facts, assessment order and submission made before him. The findings given by him and decision arrived at are well reasoned and speaking one, therefore, the respondent strongly place reliance on the said findings and decision.

8. Under the facts and circumstances, considering the facts, circumstances and legal position as narrated above, addition of Rs. 3,30,00,000/- made on account of undisclosed investment u/s 69 of the Act has rightly been deleted by Ld. CIT(A) by passing a well-reasoned speaking orderand we rely on the same. In addition to the above written submission, the assessee also filed a common paper book for both the assessment years, which is as under-

S. No. Nature of Documents Page No.

6. Copy of registered sale deed, dated 13.10.2014, of Plot No. 60, Sangram Colony, C-Scheme, Jaipur executed between Shri Prabhat Dayal H.U.F. 21 – 32 (through Karta: Shri Prabhat Dayal) and the Appellant.

8. Copy of registered sale deed, dated 02.09.2016, of Plot No. 60, Sangram Colony, C-Scheme, Jaipur executed between Shri Dr. Prakash Dayal 55 – 72 and the Appellant.

9. Copy of registered sale deed, dated 22.11.2016, of Plot No. 60, Sangram Colony, C-Scheme, Jaipur executed between Smt. Anjali Lodha and the 73 – 83 Appellant.

7. We have heard the rival contentions and perused the material placed on record. In the present appeal the revenue while challenging the order of ld. CIT(A) raised the only ground related to direction for deleting the addition of Rs.3,30,00,000/- u/s 69 which was based on incriminating material found and seized in the laptop. No addition can be made and sustained only on the basis of an unsigned unexecuted draft agreement to sale found from the premises of the party without any other collaborative evidence supporting the factum of payment of cash by the assessee under the alleged document. The said ATS never culminated into a complete transaction by execution of the registered sale deed and the assessee never purchased the property as per the terms and conditions mentioned in the ATS. The time of purchase as per registered sale deed, the amount of consideration, the advance payment by cheque, are all different and can in no way be linked to the ATS. On this note, it is clearly discernable that the ATS is a dumb & 1525/JPR/2024 Madhu Chordia, Jaipur. document and nothing more. Moreover, in the ATS, there is no mention of any cash payments having been made out of the agreed sale consideration. Going by the AO’s logic that agreement is executed and thereafter sale deed is executed, the practice is also of receiving the on-money in cash, which is duly mentioned in the ATS. There being no such covenant in the ATS, only on the basis of suspicion it can’t be held that the difference in the sale consideration as per ATS and registered sale deed has taken place in cash and the assessee cannot be saddled with tax liability on the basis of such a baseless finding.