HARPREET KAUR,BHOPAL vs. INCOME-TAX OFFICER, 5(2), BHOPAL, BHOPAL

आदेश/O R D E R

Per B.M. Biyani, A.M.:

2. The background facts leading to present appeal are such that the AO, on the basis of AIR information revealing that a cash deposit of Rs.

Page 1 of 43 2008-09, initiated proceeding of assessment u/s 147 through notice dated 23.03.2016 u/s 148. In response, the assessee filed return declaring a total income of Rs. 1,11,387/- rounded off to Rs. 1,11,390/- (consisting of taxable capital gain of Rs. 44,018/-, bank interest income of Rs. 7,369/- and tuition income of Rs. 60,000/-). The assessee declared taxable capital gain of Rs. 44,018/- from sale of a residential property to the purchaser “Shri Rajesh Rathore” for Rs. 13,21,000/- on 05.02.2009 after deduction of costs and exemption u/s 54. The AO issued notices u/s 143(2)/142(1) which were complied with by assessee. During proceeding, when the AO asked assessee to explain the source of cash deposit of Rs. 13,21,000/- in bank a/c, the assessee filed a copy of “sale-agreement” dated 20.12.2008 entered with Shri Rajesh Rathore [“Purchaser”] and claimed that the impugned cash deposit was made from the proceeds of sale received from purchaser. However, the AO found that the “registered sale-deed” dated 05.02.2009 executed between assessee and purchaser showed the sale consideration of Rs. 4,10,000/- only. Therefore, due to mis-match, the AO made enquiries from purchaser, once by way of a notice u/s 133(6) and again by way of summon u/s 131. Ultimately, the AO accepted the sale consideration at Rs. 4,10,000/- as per ‘registered sale-deed’ (valuation by stamps authority at Rs. 4,18,000/-) and worked out taxable capital gain at Rs. Nil (Para 3 of assessment-order). At the same time, the AO made working of cash availability with assessee at Rs. 4,60,000/- [by giving credit of the Page 2 of 43 estimated cash of Rs. 30,000/- available with assessee from tuition income after household expenses (+) advance of Rs. 20,000/- received by assessee from purchaser as per sale-agreement] and treated excess cash deposit of Rs.

8,61,000/- [Rs. 13,21,000 (-) Rs. 4,60,000] as unexplained money u/s 69A.

With these adjustments, the AO completed assessment. Aggrieved, the assessee carried matter in first-appeal but did not get any success. Now, the assessee has come in next appeal before us.

3. At first, we deem it fit to re-produce the relevant portion of assessment-order passed by AO for a better understanding of case:

“2. Unexplained cash deposit:

2.1 As per AIR information the assessee has deposited cash to the extent of Rs. 13,21,000/- in her saving bank account maintained with the SBI, Bharat Nagar. Hence, vide query no. 06 of questionnaire issued u/s 142(1) dated 27/04/16 the assessee was asked to explain the source of such cash deposits alongwith documentary evidences. 2.2 In response to the said query the assessee vide reply dated 17/05/2016 submitted that she has sold a piece of land admeasuring area 1800 Sq. ft bearing Khasra No. 528/1,528/3/1/2/1 Vill. Godermau, Near Reliance office, before Gandhi Nagar Chowk, Patwari Halka no.04, R.I.Div-01, Tehsil Huzoor, Bhopal. The sale proceeds of this land was received in cash and has been deposited in my saving bank account. Thus the source of the cash deposit is out of the sale proceeds received from the land so sold. She further submitted that out of this sale proceeds she has further purchased a piece of land admeasuring area 1500 Sq. ft on 27/07/09 at the consideration of Rs. 653400/- and made construction of building thereon. 2.3 When computation annexed with the ITR filed dated 24/05/16 was perused, it was found that the assessee has shown in her ITR sale consideration received from the property under consideration at Rs. 13,21,000/- and after indexation it has claimed exemption of Rs. 10,50,000/- u/s 54. For the sake of clarity, the computation shown by the assessee in her ITR is reproduced as under-

Page 3 of 43 AY 2009-10 Long Term Capital Gain (Other than Securities (General) Residential Property Sale consideration (Date of Transfer 05/02/09) Rs.1321000/- Sale Value U/s 50C Rs. 1321000/- Full Value of consideration Rs.1321000/- Sale Expenses Rs.25000/- Net Sale Consideration Rs. 1296000/- Acquisition Cost (2004-05) after indexation - Rs. 166583 * 582/480 = Rs.201982/- Balance Rs. 1094018/- Exemption u/s 54 = Rs. 10,50,000/- Net LTCG = Rs. 44018/- Total LTCG other than Securities(General) Income from Capital Gain Rs.44018/- 2.4 However, having gone through the sale deed of the land bearing Khasra No.528/1,528/3/1/2/1 Vill. Godermau, Near Reliance office, before Gandhi Nagar Chowk, Patwari Halka no.04, R.I.Div-01, Tehsil Huzoor, Bhopal it was found that the said land has been sold by the assessee to Shri Rajesh Rathore on 05/02/2009. The sale consideration has been reflected in the sale deed of Rs. 4,10,000/-. However, Market Value of the said land has been revealed at Rs. 4,18,200/-. It has been claimed in the said sale deed that entire sale consideration of Rs. 4,10,000/- has been paid in cash in past and nothing has to be given henceforth. The facts inured from the sale deed was quite contrary to the claim of the assessee that sale consideration amounting to Rs. 13,21,000/- has been received in lieu of the sale of the land under consideration. Hence, vide note sheet entry dated 26/05/2016 the assessee was categorically asked to explain that as per registered deed the property has been sold at Rs. 4.10 lac, its M.V. adopted by the state government authority was found at Rs.4.18 lac but as per your claim you have sold the same at Rs. 13.21 lac, please explain this discrepancy and produce the person to whom the said land was sold, if possible. In response to the said query, the assessee vide reply dated 01/09/2016 submitted that as per Sec. 50(1) of the 'Act' when a property is sold then its market value or value received as consideration whichever is higher is taken as deemed sale consideration. Accordingly, in lieu of sale of the property as mentioned earlier, I have received a consideration of Rs. 13,21,000/- and has deposited the same in my saving bank account. If the AO has any doubt regarding this transaction, then he may opt to make valuation of the property so sold or information may called from the office of registrar to ascertain the genuineness of the transactions. She further submitted that out of the consideration so received she has purchased another plot and within a period of two years has constructed a residential house thereon. In support of her claim she submitted the land so purchased

Page 4 of 43 AY 2009-10 and construction made thereon. The permission received from the competent authority for such construction and property tax deposited by her for this house substantiating her claim that construction was completed within the permissible time limit. 2.5 She also tried to justify the allowability of her claim made u/s Sec.54. Having gone through the submissions filed by the assessee ex facie some merits was found as regards the claim of LTCG and allowability of Sec.54. But before answering the crucial questions remains in the case that whether the buyer has paid Rs.13,21,000/- in cash to the assessee in lieu of such sale contrary to the sale consideration of Rs. 4,10,000/- appeared in the registered deed? It would be futile to discuss on the merits of the claim of the assessee as regards Sec.54. As the consideration received in cash as claimed was nearly 3.20 times to the actual consideration mentioned in the registered deed and possibility of Stamp evasion was also appearing in the case. Hence, it was the matter of verification as to whether buyer has paid so much excess consideration as appeared in the sale deed. Accordingly, vide letter F.No. ITO-5(2)/BPL/ 133(6)/2016-17/504/219 dated 08/11/2016, following information u/s 133(6) of the 'Act' were called for from Shri Rajesh Rathore (the purchaser): (i) Details of the land purchased by you during the Fy 2008-09 from Smt. Harpreet Kaur and Shri Deepak Soni. Also furnish the copy of purchase deed of the said land. (ii) What consideration was paid by you in lieu of the property so purchased. (iii) Whether such consideration was paid in cash or through bank Quantify separately and furnish the date wise payment of consideration. Also furnish your bank statement reflecting the withdrawal or payment details therein (iv) Mention your PAN, whether you have filed ITR for the A.Y.2009-10, if yes furnish the same alogwith copy of computation. In response the said query letter Shri Rajesh Rathore the purchaser through his AR Shri Manoj Ayachit, CA submitted as under - Reply1. The assessee had purchased the property for a consideration of Rs. 4,10,000/- (copy of the sale deed enclosed). Reply2. The assessee had paid the said consideration in cash amounting to Rs. 4,10,000/- The assessee had withdrawn the major amount from bank account of himself Rs. 1,70,000/- on 04/04/2008 and Rs. 2,34,000/- from the account of his mother Mrs. Kamla devi Rathore on 16/02/2008. The reason for delay payment after the drawings from bank account is that the assessee was in search of right property at that time and for this purpose he had drawn money from the bank accounts. Till he get the property he had kept the Page 5 of 43 AY 2009-10 amount so drawn with himself. Copy of bank statement are being enclosed herewith. Reply3. Copy of the ITR for the A.Y.2009-10 and PAN details is enclosed." 2.6 Having gone through the reply of the buyer, prima facie the claim of the buyer that he has paid only Rs. 4,10,000/- in cash, in lieu of the sale of the property under consideration was found as robust. As there appears not much source in his kitty so that he may pay a hefty consideration of Rs. 13,21,000/- for a plot of land Market Value of which has been determined by the State government authority at Rs. 4,18,000/- only. Further, as regards source of payment is concerned, reply of Shri Rahesh Rathore was not found as much convincible. As the sale deed of the property under consideration has been executed on 05/02/09 and the purchaser is claiming his source withdrawal of Rs. 2,34,000 from mother account on 16/02/08 and from Self account on 04/04/08 at Rs. 1,70,000/-, which is beyond the believe that a person having withdrawal almost 10 to 12 months prior to the purchase was searching the right property with the bare cash kept in his pocket. However, from the available facts, it is evident that the purchaser has not sufficient fund to buy the property at much higher rate. 2.7 With view to give further opportunity on the information so gathered, vide notice issued u/s 142(1) dated 23/11/16 the assessee was required to furnish her reply by 28/11/16. On the given date Shri Deepak Soni and the assessee Smt. Harpreet Kaur appeared and furnished copy of a sale agreement made on 20/12/08 between the purchaser Shri Rajesh Rathore and the Seller Smt. Harpreet Kaur. As per the said sale agreement Sale consideration of the property under consideration was mutually decided at Rs. 13,50,000/-. It was also mentioned therein that Token Money of Rs. 20,000/- has been paid in cash on date of Sale agreement i.e. on 20/12/08. Sensing the gravity in the claim of the assessee, Summons u/s 131 of the "Act' dated 05/12/16 were issued to Shri Rajesh Rathore requiring him to appear before this office on 12/12/16. Complying the summons so issued Shri Rajesh Rathore appeared on 13.12.2016 and he was examined on oath. 2.8 While making statement on oath, Shri Rajesh Rathore in response to the query no 5 confirmed that vide sale agreement dated 05/02/09 (date should be 20.12.2008) sale consideration was agreed between them at Rs. 13,50,000/- and on the same date he paid Rs. 20,000/- to make come in existence the sale deed so executed. In the same reply, he further stated that subsequently from Municipal Corporation, Bhopal it was come to his notice that the land under consideration has been located in the project of the Municipal Corporation, Bhopal at the location of Garden hence necessary approval to construct residential house may not be given on this land. So, he verbally conveyed the assessee that he shall only pay the consideration of the Page 6 of 43 AY 2009-10 said land as much value as would be adopted by the State government authority at the time of making registry and accordingly on 05/02/2009 he paid the consideration of Rs.410000/- which has duly been mentioned in the sale deed. 2.9 Further, when queried vide query no.06 about the source of payment of sale consideration of Rs. 4,10,000/-, Shri Rajesh Rathore vide reply no. 06 stated that the source of payment was collected from his relatives. The amount received from the relatives as well as their source of income is summarised as under:- Sr. Name of the person and Amount and Mode Occupation relation of receipt 1 Smt. Seema Rathore, Wife Rs.60,000/- Cash House wife 2 Shri Aatma Ram Ji, Father-in- Rs.40,000/- Cash --- law 3 Shri Vijay, Brother-in-law Rs.40,000/- Cash -- 4 Smt. Sunita Rathore, Sister- Rs.50,000/- cash House Wife in-law 5 Late Shri C.L. Rathore Rs.100000/-, cash Tea & Curd shop 6 Smt. Kamla Devi, Mother Rs.80,000/-, Cash House wife 7 Shri Dharmendra Rathore Rs.15000/- Cash Self employed Younger brother 8 Self Saving Rs.25000/-, Cash Rs.4,10,000/- 2.11 Having gone through the facts of the case, submissions filed by the assessee, information called for u/s 133(6) from the purchaser Shri Rajesh Rathore and his statement recorded u/s 131 of the 'Act', it is evident that sale agreement was come in force between the assessee and the buyer Shri Rajesh Rathore on 20/12/2008. The consideration was decided between the both at Rs. 13,50,000/-. The sale agreement so executed was not registered before any competent authority. As claimed by the purchaser, it might be possible that being found that land under consideration falls under garden in the ongoing project of Municipal Corporation Bhopal and he unilaterally conveyed the assessee from his separation from the agreement. But it can't be said definitely as the assessee (should be ‘purchaser’ in place of ‘assessee’) has not furnished any documentary evidence in this regard. The said claim of the purchaser is also hard to digest looking to the fact that no Seller can be compelled to discharge his property at the conditions laid down by the buyer. However, crucial question remains to be answered in this case that nowhere in the registered deed, consideration as mentioned in the sale agreement has been mentioned. So the facts proves the nullity of the sale agreement executed dated 20/12/2008. Had the consideration been received so much higher in lieu of the sale and it would have been mentioned in the sale deed properly then there was no scope of any suspicion or doubt on the claim made by the assessee. Looking to the fact that consideration is being received in cash, it was necessary to mention which has not been made. Now

Page 7 of 43 AY 2009-10 the other limb remains to prove the genuineness of transactions of Rs. 13,50,000/- of the land under consideration is the creditworthiness of the purchaser. As without verifying the creditworthiness of the purchaser, genuineness of this transactions can't be established. From the reply received u/s 133(6) of the "Act” as well as ITR filed by the purchaser for the A.Y. 2009-10 and from perusal of statement given u/s 131 of the 'Act' it is evident that purchaser has not adequate source of fund so as to enable to pay him the consideration 3.22 times of the fair market value of the land under consideration. Whatever, source has been explained by him in response to the notice issued u/s 133(6) of the 'Act' as well as while making statement u/s 131 of the 'Act' although it was not found fully convincible but from the facts so surfaced it is evident that the buyer has not adequate source of fund to buy the property even at the consideration of Rs. 4,10,000/-. Hence, by no stretch of imagination it can be construed that a person not having adequate source of fund would have been paid hefty consideration of Rs. 13,21,000/- in comparison to the Sale consideration of Rs. 4,10,000/- as mentioned in the Sale deed dated 05/02/2009. In light of the facts as outlined above and looking to the fact that sale consideration of Rs. 4,10,000/- has only been mentioned in the Sale deed and corroborative evidence has not been surfaced during the course of assessment proceedings which may prove the authenticity of the claim of the assessee. Accordingly, I have no other option to consider the sale consideration of the land under consideration at Rs. 4,10,000/- instead of Rs. 13,21,000/- as claimed by the assessee. Hence, Sale consideration of Rs. 4,10,000/- is found as explained. Further, it was found that the assessee has earned Rs. 67,369/- from tuition income as well as interest income. As Rs. 7,369/- has been earned by saving bank interest which has directly been credited in her bank account and Rs. 60,000/- has been earned from tuition income which has received in cash, hence 50% of the said income is considered as personal expenses and remaining Rs. 30,000/- is considered as explained cash. Further, Registry has been made within the 2 months from the date of sale agreement and as per agreement Rs. 20,000/- was received by the assessee as a token money on 20.12.2008, hence considering the facts that the said amount has also been conserved by the assessee till the date of registry for any possible retaliation by the buyer hence Rs. 20,000/- is also found as explained. Finally, Rs. 410000 + 30000 + 20000 = Rs. 460000/- is considered as explained cash in the hands of the assessee and remaining worked out as Rs. 13,21,000 (–) 4,60,000 = Rs. 8,61,000 is treated as unexplained money in the hands of the assessee and is taxed u/s 69A of the 'Act'. Accordingly, an addition of Rs. 8,61,000/- is made to the total income of the assessee. I am satisfied that the has furnished inaccurate particulars of her income to the extent of Rs. 8,61,000/- by wrongly claiming the same receipt out of sale proceeds of the land sold on 05/02/2009. By committing so has defaulted within the purview of the Sec. 271(1)(c) of the 'Act' and accordingly penalty proceedings u/s 271(1)(c) of the 'Act' are initiated separately. After rejection of claim LTCG as claimed by the assessee is being computed separately in forthcoming paras of the body of the assessment order. Addition - Rs.8,61,000/-.

Description Amount Computation Full value of Consideration (sale Rs.410000/- consideration received in lieu of sale of land located at vill-Godarmou) Rs.418000/- Fair market Value adopted by the State Govt. Authority Nil Less: Expenditure incurred wholly or exclusively Less: Cost of acquisition (2004-05) Rs.201982/- 166583*582/480 Rs.216018/- Gross LTCG Less: Exemption if available u/s 54 Rs.10,50,000 Long Term Capital Gain Nil

4. In light of the discussions held as above total income of the assessee is assessed as under-

Income shown as per ITR filed Rs.111387/- Less: Capital gain as shown Rs.44018/- Add: Unexplained Cash Deposit Rs.861000/- Total assessed income u/s 143(3) of the I.T. Act 1961 Rs.928369/-

[Emphasis supplied]

4. Now, we re-produce the adjudication made by CIT(A) in first-appeal:

“5.1.2. The appellant's arguments have been carefully considered. While the appellant repeatedly asserts that the Assessing Officer (AO) should not rely on the contradictory statements made by the buyer, Shri Rajesh Rathore, regarding a payment of Rs. 4,10,000/- for the land sale, the crucial issue remains unaddressed. The appellant has failed to provide any documentary evidence proving that the cash deposit of Rs. 13,21,000/- indeed came from Shri Rajesh Rathore. Simply questioning the AO's actions without supporting documents does not invalidate the order. It is well-established that the burden of proving the source of deposited cash lies with the taxpayer. Unfortunately, the appellant did not submit any such evidence during either the assessment or appellate proceedings. Furthermore, the appellant's reliance on the case of Dhara Singh vs. Income Tax Officer is misplaced, as Page 9 of 43 AY 2009-10 the facts in that case differ significantly from the present situation. Consequently, the AO's decision to add Rs. 8,61,000/- to the appellant's income is upheld. 5.1.3 The appellant submitted details of expenses supposedly in support of the exemption under Section 54. However, upon review of these details, it was found that the appellant claimed expenses amounting to Rs. 4,73,507/- during the financial year 2009-10 (relevant to assessment year 2010-11). Unfortunately, no supporting bills or vouchers were provided for these expenses. Additionally, the claimed exemption under Section 54 is Rs. 10,50,000/-, but no relevant supporting documents have been submitted. Given the fact that the expenses filed do not correspond to the FY relevant to AY 2009-10 and the fact that no bills & vouchers of expenses incurred during the FY relevant to AY. 2009-10 have been furnished, it is held that the appellant is not entitled to the exemption under Section 54.”

5. The assessee has raised following grounds before us to assail the above orders of lower-authorities:

Original grounds raised in Form No. 36:

“1. That, on the facts and in the circumstances of the case, the action of the learned CIT(A) in confirming the action of the AO for determining the income of the appellant at Rs.9,28,369/- for the relevant assessment year as against the returned income of Rs. 1,11,387/-, is quite unjustified, unwarranted and bad-in-law.

2. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the ld.AO for making an addition of Rs.8,61,000/- in the appellant's income u/s 69A of the Act on the allegation of unexplained cash deposits in bank account without properly considering and appreciating the facts and circumstances of the case of the appellant and as also, without properly considering the submissions of the appellant made before both the authorities below along with relevant documentary evidences.

3. That, the appellant further craves leave to add, alter or amend the foregoing ground of appeal as and when considered necessary.” Further Ground raised through Application dated 13.05.2025:

“4. That, the learned CIT(A) has grossly erred, both on facts and in law, in rejecting the claim of the appellant under s. 54 of the Income-Tax Act, 1961 without properly considering and appreciating the material fact that the claim so made by the appellant u/s. 54 of the Act was duly supported by documentary evidences filed before the ld. AO which, after due verification, was also duly allowed by the ld. AO."

Page 10 of 43 Ground No. 1 to 3:

7. Ld. AR for assessee submitted that by means of these grounds, the assessee has challenged the addition of Rs. 8,61,000/- made by AO and upheld by CIT(A) u/s 69A on account of unexplained cash deposit in bank a/c.

8. Arguing for this issue, Ld. AR at first narrated that it is a normal trend in real estate transactions that the registered sale-deeds are made at lower prices and the actual price is not documented. He submitted that the Govt. has taken several steps even in Income-tax law by introducing section 43CA, 50C, etc. from time to time but still this practice is rampant for variety of reasons suitable to the sellers or buyers or both. He submitted that he need not explain such reasons but it is a fact that such practice exists. He submitted that such practice of course results in evasion of stamp duty also but all those points are not to be looked by this court while adjudicating the limited issue of source of cash deposits made by assessee in bank a/c.

9. With this background, Ld. AR proceeded to submit that the assessee in present case entered into a ‘sale-agreement’ dated 20.12.2008 with the purchaser which is on stamp paper, duly signed by both parties, notarized and witnessed (Paper-Book Page 23-25). Further, in Para 2.8 of assessment- order the AO has made a clear noting that in reply to Q.No. 5 of Statements

Page 11 of 43 Further, the AO has himself given credit of advance receipt of Rs. 20,000/- as mentioned in ‘sale-agreement’. Therefore, the existence of ‘sale- agreement’ is not in doubt at all. He submitted that in condition No. 3 of ‘sale-agreement’, the purchaser has clearly agreed for consideration of Rs.

13,50,000/-, paid advance of Rs. 20,000/- and agreed to pay balance consideration of Rs. 13,30,000/-. Further, it is also mentioned therein that the balance consideration shall be paid by purchaser at the time of registry and the registry shall be done within 2 months. The ‘registered sale-deed’ is dated 05.02.2009 which is within 2 months from ‘sale-agreement’ dated 20.12.2008. The cash deposit of Rs. 13,00,000/- was also made in assessee’s bank a/c on very same date of 05.02.2009 plus a further cash deposit of Rs. 21,000/- was made in bank a/c on 09.02.2009; the entries of deposits are manifest from bank statement filed in Paper-Book Page-3. Thus, there is a perfect alignment of timings mentioned in ‘sale-agreement’, ‘registered sale-deed’ and ‘date of deposit in bank a/c’.

10. Ld. AR then invited our attention to following flaws in the order of AO which according to him are very serious and make the AO’s order unsustainable in the eyes of law:

(i) When the AO took proceedings of section 133(6)/131 against purchaser, the purchaser found it most convenient to submit that a payment of Rs. 4,10,000/- was only made to assessee. The purchaser further stated that the impugned land was located in a garden area of Page 12 of 43 assessee that “he shall only pay consideration of the said land as much value as would be adopted by the State government authority at the time of making registry”. However, the purchaser did not give any evidence whatsoever to the AO either in support of location of land in a garden area of municipal corporation or any communication having been made to the assessee for payment equal to the valuation of registry and still the AO has relied on such bald, one-sided and factually wrong submission of purchaser. Neither the AO conducted any enquiry from municipal corporation nor the AO provided any opportunity of cross-examination of purchaser to assessee.

(ii) It is strange that the AO has himself noted the falsity in the submissions made by purchaser and still taken an adverse view against assessee. Initially, in response to the notice u/s 133(6), the purchaser submitted that the cash withdrawn from his and his mother’s bank a/c was utilized for making payment to assessee. But when the AO found this explanation of purchaser as “not convincible” because of time gap of more than 10 months between cash withdrawals and payment to assessee and for that reason the AO issued summon u/s 131 to the purchaser, the purchaser made a new version that he received cash from as many as seven (7) persons for making payment to assessee and his self-saving was just Rs. 25,000/-.

Thus, there is a gross contradiction in the responses given by Page 13 of 43

Para 2.11, the AO has noted his own dis-satisfaction qua the responses given by purchaser by mentioning “Whatever, source has been explained by him in response to the notice issued u/s 133(6) of the 'Act' as well as while making statement u/s 131 of the 'Act' although it was not found fully convincible but from the facts so surfaced it is evident that the buyer has not adequate source of fund to buy the property even at the consideration of Rs. 4,10,000/-”. If that be the case, the AO ought to have taken a punishment proceeding against purchaser for giving contradictory/ false responses to department as also for making payment to assessee from undisclosed sources but instead of doing so, the AO has lent support to the purchaser by accepting purchaser’s version that he purchased property for Rs.

4,10,000/- only. Ld. AR submitted that the AO has wrongly placed the assessee in difficult position by accepting the false and contradictory responses of purchaser and rejecting the true factual position submitted by assessee. Thus, the AO’s order suffers from serious flaws and not sustainable.

(iii) That, on one hand the AO has himself given credit of Rs. 20,000/- advance received by assessee as per ‘sale-agreement’ and on other hand, the AO is not ready to take cognizance of ‘sale-agreement’. Thus, there is a gross contradiction in AO’s approach itself.

01.09.2016 to get the valuation of property done but the AO did not carry out such exercise.

11. Finally, Ld. AR relied upon certain decisions to support assessee’s case and filed copies of respective orders in a “Judgement Compilation Book”; the most relevant decisions are:

(i) ITAT, Mumbai – Mrs. Malini Ramnath Rele Vs. Third Income-tax Officer (1994) 49 ITD 43 (Bom) (TM): “Per G.K. Israni, Judicial Member –

By this appeal, the assessee has challenged the order of the learned Commissioner of Income-tax (Appeals) dated November 6, 1986, for the assessment year 1985-86.

2. The arguments of learned counsel for the assessee and the learned Departmental Representative were heard.

3. The solitary question raised in this appeal relates to the addition of Rs. 4,10,000 being the cash found in the possession of the assessee at the time of the search and treated as income from undisclosed sources. On January 22, 1985, a search was conducted at the residential premises of the assessee. During the search operations, cash of Rs. 4,15,000 was seized from two bank lockers and a fixed deposit receipt for Rs. 55,000 was also found. During the search operations, a statement of the assessee was recorded under Section 132(4) of the Act. In that statement, she disclosed that she had sold her house property to one Shri V.D. Maru for a price of Rs. 5,00,000. Out of this, the sale deed was signed for a consideration of Rs. 1,00,000 on December 17, 1984, between the assessee and Shri Maru in the presence of one Shri L. P. Patil. Out of the sale price of Rs. 1,00,000, an amount of Rs. 10,000 was received as earnest money on November 19, 1984, and the balance of Rs. 4,00,000 was received in cash on December 17, 1984. She further disclosed that the sum of Rs. 1,00,000 was deposited with the Central Bank of India and the balance of Rs. 4,00,000 was kept in lockers. According to her, the sale price was delivered at her residence by Shri Vadilal Maru in the presence of her grandson on December 17, 1984, before they went to the Registrar's office to complete the formalities of the transfer of property. During the investigation, Shri Vadilal Maru was also examined and cross-examined on March 21, 1984. During that examination Shri Maru denied the suggestion that he had paid Rs.

Page 15 of 43 AY 2009-10 4,00,000 in addition to the stated price of Rs. 1,00,000 to the assessee. On the basis of the material available before him, the Income-tax Officer came to the conclusion that the entire unexplained cash of Rs. 4,10,000 found in her possession is to be treated as income from undisclosed sources. On the basis of this finding, he made an addition of this sum as income from undisclosed sources. The assessee's appeal before the learned Commissioner of Income-tax (Appeals) has failed.

4. During the course of the arguments, learned counsel for the assessee made a reference to the following circumstances :

(i) The assessee has never been a taxpayer either before or after the raid. She is not shown to be connected with any business and there was no known source of her income. (ii) The assessee was an old widow of about 68 years of age and was not physically fit to earn any income. (iii) The property which was valued by the architect at Rs. 2.4 lakhs could not have been sold by the assessee for a mere sum of Rs. 1,00,000, (iv) The assessee could not have suffered any loss or disadvantage by stating the full price of Rs. 5,00,000 in the sale deed. The understatement of the sale price in the sale deed could have been done at the instance of the buyer and, therefore, the testimony of the buyer should not be given any credence.

5. On the basis of the above circumstances, it was submitted by learned counsel for the assessee that the assessee's explanation that she acquired this sum of Rs. 4,10,000 out of the sale proceeds of the house property should have been accepted by the two Revenue authorities. In support of his argument, learned counsel for the assessee placed reliance upon the decision of the Kerala High Court in the case of CIT v. Smt P. K. Noorjehan [1980] 123 ITR 3 and the decision of the Calcutta High Court in the case of Tara Devi Goenka v. CIT [1980] 122 ITR 14.

Per V. DONGZATHANG, A.M. –

7. I fully agree with my learned brother that the amount has to be assessed as income of the assessee. The assessee herself did not deny the fact and had conceded to that extent right from the beginning. The only further issue is under which head the income is to be assessed.

Page 17 of 43 AY 2009-10 9. It was, therefore, claimed that the said income should be assessed as income arising out of the transfer of the property as the assessee had no other source of income. She claimed that she was not assessed to income-tax either before or after the raid. She was an old widow of about 65 years and was physically unfit to run any business for earning income.

Page 18 of 43 AY 2009-10 12. This view which I am adopting is all the more apposite in view of the fact that the Revenue has not come forward with the information in its possession which impelled the action under Section 132 of the Act. Adverse inference against the Revenue can reasonably be drawn in this regard as the failure appears to be deliberate.

15. Having regard to all these peculiar facts and circumstances of the case, I hold that the assessee is entitled to the benefit of being assessed on the income under the head "Income from capital gains". The Assessing Officer will recompute the income on this basis. In doing so, reasonable opportunity should be given to the assessee.

ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961

Page 19 of 43 AY 2009-10 "Whether on the facts and in the circumstances of the case, the cash amount of Rs. 4,10,000, which under Section 69A is deemed to be the income of the assessee for the financial year under appeal, should be treated and taxed as capital gain?"

THIRD MEMBER ORDER

3. The relevant facts are not too many to assimilate or too difficult to grasp. The assessee is the widow of R.C. Rele, 68 years old, and first became an income-tax assessee on the death of her husband as a successor to the estate left by her husband. Her husband was an income-tax assessee and his income consisted of income from property, income from shares and income from fixed deposits. Her husband died on November 16, 1983, and she inherited the immovable property known as "RELE NIWAS" at 22, D.L. Vaidya Road, Dadar, Bombay-28. This property was partly rented and partly self- occupied. This property was sold to one Vadilal Maru for a consideration of Rs. 1 lakh as stated in the document of sale. This sale took place on December 17, 1984. According to the story of the assessee, out of this Rs. 1 lakh, an amount of Rs. 10,000 was received by cheque as earnest money on November 19, 1984, and the balance of Rs. 90,000 was received by cheque on the date of registration, i.e., December 17, 1984. Now, the story of the assessee further goes on to say that although the stated sale consideration was only Rs. 1 lakh over and above that, a sum of Rs. 4 lakh was paid in cash as part of the sale consideration without stating it in the deed of sale. That sum along with another sum of Rs. 15,000 accumulated out of savings was kept in two bank lockers, i.e., Oriental Bank of Commerce and State Bank of India. The issue in this case is as to the nature of the sum of Rs. 4,10,000 as to whether it constituted income from undisclosed sources or income from capital gains.

"It was, therefore, considered necessary to allow the assessee to cross- examine Shri Vadilal Maru and accordingly an opportunity was allowed to the assessee, vide this office letter No. G/9-M(3)/85-86, dated March 17, 1986. Here again the assessee could not come out with any concrete evidence or convincing statement to establish that the sum of Rs. 4,15,000 seized during the search operation under Section 132 represented the amount received from Mr. Vadilal Maru.

Considering this above facts, the said sum of Rs. 4,00,000 + Rs. 10,000 alleged to have been received as on money is considered as assessee's income from undisclosed sources."

6. I have heard the parties at great length and perused the orders passed by my learned brothers, the Departmental officers and the paper book. This is a Page 21 of 43 AY 2009-10 case where the issue involved is to be decided on the basis of probabilities, i.e., if I may put it that way, circumstantial evidence, because direct evidence of a clinching nature is not available. First and foremost, it is to be considered whether the old lady of 68 years of age had at any time embarked upon any business dealings of any kind including speculation in shares or did her husband at any point of time engage himself in business. It is an admitted fact that the income of the assessee was not different from the income of her husband except variations in the quantum. From the assessment order, it is seen that the income of the assessee consisted of a meagre sum of interest on bonds, another meagre income from property, dividend income, interest on fixed deposit receipts and bank interest, dividend income and interest on fixed deposit receipts being a little more at Rs. 18,000 and Rs. 22,000, respectively (leaving the 100s). Can an assessee with this structure of income be said to have any income from undisclosed sources, in the sense that that income could be attributed to anyone of these sources or business sources? The income from interest on bonds and the income from property are so small being Rs. 430 and Rs. 1,616, respectively, as to even remotely suggest that any income would be accumulated to be kept as income from undisclosed sources aggregating to the magnitude of Rs. 4 lakhs either separately or in conjunction with income from other sources.

Page 22 of 43 AY 2009-10 8. But, the probabilities, predominant and preponderant, to hold it as income from capital gains are, therefore, very likely. Again, the search was conducted by the Department closely after the sale of the house. Therefore, the search must have some relation to the proceeds realised on the sale of the house. Under Section 132 of the Income-tax Act, where the officials mentioned therein have, in consequence of information in their possession, reason to believe that a person could not produce, or cause to be produced, any books of account or other documents or omitted or failed to produce, or cause to be produced, such books of account or other documents as required by summons or notice or will not and would not produce any books of account or documents which will be useful for, or relevant to, any proceedings under the Indian Income-tax Act, 1922, or is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922, then they may authorise a search subject to the conditions provided for in the subsequent provisions of Section 132. It is, therefore, possible that the Department has information in its possession that the assessee has money or jewellery which has not been, or would not be, disclosed for the purposes of the Indian Income- tax Act, 1922, and that such money or jewellery represents either wholly or partly income which has not been, or would not be, disclosed. Unless this information was in the possession of the concerned officers inducing in them the belief that the sum in question would not be disclosed, they cannot authorise the search. I do not know what was the information in consequence of which the search was authorised. Since the search was authorised so close on the sale of the house, the normal expectation would be that it has nexus to the sale of the house. This is one probability. The second probability is that one can take judicial notice of the fact that sales of immovable properties are taking place on a large scale in our country involving change of black money by understating the sale consideration in the documents offered for registration and to the Department. Had it not been for this evil of nefarious activity and the proliferation of black money in this way, the Legislature would not have enacted Chapter XX-C and its predecessor Chapter XX-A for the acquisition of properties raising certain presumptions where the stated consideration in the document should be deemed to be less than the supposed prevailing fair market value. Such being the case, it is common to understate the sale consideration to avoid income-tax payment as capital gains tax, registration fees, stamp duty, etc. Therefore, if the purchaser denies having paid any money over and above the stated consideration, that does not conclusively prove that his statement was sacred and not false and that he was telling the truth. Thirdly, no attempt has been made by the Department to individually value the property sold on December 17, 1984, whether a property consisting of 750 sq. ft. in Dadar would be sold only for Rs. 1 lakh and not for anything more, and that too for delivering vacant

Page 23 of 43 AY 2009-10 possession. The sale value of this property of such a magnitude in such an area, could not have been sold just for Rs. 1 lakh that too with vacant possession. Now, the Department had examined, as now transpired before me, the grandson of the assessee in whose presence it was stated that the sum of Rs. 4 lakhs was paid. He categorically corroborated the statement of the assessee that a sum of Rs. 4 lakhs was paid in cash, but he gave a different date, namely, November 19, 1984, while the assessee gave the date as December 17, 1984. The discrepancy of the variation in the dates apart, the statement of the grandson was corroborative that the sum was being paid by the assessee. It is unfortunate that the discrepancy in the dates was never got clarified by the Department and that shows that the Department has ignored the corroborative part relating to the receipt of cash of Rs. 4 lakhs in toto, relying only on the discrepancy in the dates. One has to remember that these are not memory tests. Either the grandson might have got confused about the date or the old lady. Both are possible. This is another probability. Interesting but telling recollections have come out of cross-examination between the assessee and the purchaser, Vadilal Maru, which were recorded by the Income- tax Officer on March 21, 1986. In response to a question by the assessee whether the purchaser remembered that he had brought cash of Rs. 4 lakhs in a cotton bag along with his brother, S.D. Maru, on November 19, 1984, and that the cash was mostly in Rs. 100 denomination and the cash was counted and found to be in order and that the bundles were tied with rubber band and pinned up, the reply of the vendee, Vadilal Maru, was that there was no question of remembering anything when there was no cash payment. This shows that the cash of Rs. 4 lakhs must have passed to the assessee only on November 19, 1984, and not on December 17, 1984, and, therefore, the statement of the grandson that the money was received on November 19, 1984, could not be discounted as unreliable. May be on account of old age and confusion as a result of prolonged proceedings recording statements after statements, the assessee might have said the date of receipt as December 17, 1984. Secondly, the next four questions are more revealing :

"By Mrs. M. Rele : You are not telling the truth, because you and your brother Shri S. D. Maru, had agreed that this cash would be paid. You have first met me in August, 1984, regarding the dealing of this property, before that I was contemplating to sell this property after the death of my. husband, who expired in the month of November, 1953. By Mr. V.D. Maru : I am telling the truth. I met you alone in the month of August, 1953, first, and nothing was decided about the cash payment. By Mrs. M. Rele : You are not telling the truth. Cash payment to this extent was decided because you were not ready to pay more than Rs. 1,00,000 by cheque. Even the architect's valuation is Rs. 2.40 lakhs.

Page 24 of 43 AY 2009-10 By Mr. V. D. Maru : There is no question of my telling anything false. About the valuation by architect, I am not aware. By Mrs. M. Rele : How can I sell it for Rs. 1,00,000 only when I had given vacant possession of my own flat at the 4th floor and two rooms on 3rd floor."

This shows that, when the valuation of the property by the architect was at Rs. 2.40 lakhs, even though the vendee denied it, which he could not have, in the face of the report of the architect, a property worth Rs. 2.40 lakhs would not have been sold for Rs. 1 lakh.

Page 25 of 43 AY 2009-10 property, profits and gains of business or profession, capital gains and income from other sources, that is to say, that the money, bullion, etc., found, of which the assessee is the owner, for which there was no satisfactory explanation, could be deemed to be the income under any one of these heads which includes capital gains too. I think, the Income-tax Officer also has a share of the burden of the onus, as the case may be, to show as to under what head this income would fall and that the discharge of the burden or onus must be on acceptable material and strong probabilities. I am, therefore, of the opinion that, in this area, the probabilities shown by the Income-tax Officer are not strong enough to justify his conclusion that the sum in question may be treated as income of the assessee from undisclosed sources and the probabilities are more in favour of it treating as income from capital gains. I am, therefore, of the opinion that the view expressed by the learned Accountant Member is more rational, logical and justifiable and I agree with him. The learned Judicial Member has gone only by the document without paying adequate consideration to the other probabilities and also without taking into account the surrounding circumstances of proliferation of black money in the garb of understatement of sale consideration whenever real estate has changed hands in the country, to curb which evil the Legislature have even to intervene.

10. The matter will now go before the regular Bench for disposal of the appeal in accordance with the opinion of the majority.”

- Income-tax Officer 4(4),

Indore Vs. Late Hariram Bhagirath (L/H Shri Ghanshyam), order dated 20.07.2012:

“2. During hearing, the learned Senior DR, Shri R.A. Verma, contended that the learned first appellate authority while deleting the addition erred in considering that it is immaterial whether the assessee has other source of income or not especially when the broker denied the transaction. On the other hand, the learned counsel for the assessee, Shri SS. Solanki strongly defended the impugned order by submitting that firstly there is no other sour of income of the assessee except the agricultural income.

Page 26 of 43 AY 2009-10 added the cash deposit as unexplained cash credit/income of the assessee. appeal, Commissioner of Income Tax (Appeals) deleted the addition which is under challenge before this Tribunal. Before coming to any conclusion, we are reproducing hereunder relevant portion of the order of Commissioner of Income Tax (Appeals):- "4.1 The appellant has contended that a sum of Rs.30,00,000/- was received in cash in addition to the cheque of Rs. 26,30,000/- from Shri Jaikumar Bajaj who was examined by the A.O. u/s 131. He has refused to have any involvement in the transaction. The AO has also noted that from his statement, the fact of receipt of cash of Rs. 30,00,000/- from the purchaser of the agricultural land is not proved. The appellant has cited several decisions support of his contentions. In all the cases cited by the appellant, the concerned assesses had only agricultural income and additions made by A.O. were deleted on the ground that the assessee had no other source of income. It is argued during the course of hearing of appeal that the transaction of sale of the agricultural land was done by late Hariram and deposits in bank account were made by him only during his life time. As such complete details of the sale transaction and bank deposits were only in his knowledge and the legal heirs could explain only such facts as came to their knowledge personally from the deceased prior to his death. 4.2 The AR of the appellant referred to the decision of Hon'ble Supreme Court in CIT vs. Nooretten (PK) and submitted that the facts of the case of appellant are identical to those of the case of Sooryehan. In the case of appellant, his father Shri Hariram expired after making the transaction of sale of land and deposits in bank account and the legal heirs were explain the investment in bank deposits made by late Hariram. The AR submitted that considering the social status and living standard and other attendant circumstances, the only inference that should have been drawn by the A.O. must have been in favour of the credibility explanation rather than the materiality of evidence, as held by the Apex Court. The legal heirs of late Hariram have deposed in affidavit dtd. 27.11.2010 Rs. 26,30,000/- that the amounts of deposited in bank account by late Hariram. The deponents have further stated that Hariram was doing agricultural operations and they used to work as labourers and there was no other source of income of the family. The amount of Rs. 56,30,000/- deposited in Bank of India, Simrol branch was out of only the sale proceeds of agricultural land and no other source of income was there. It is further stated in the affidavit that the purchaser got the sale deed registered at Rs. 26,30,000/- as per prevalent guideline and no reference of Rs. 56,30,000/- was made in registration document for the reason that the purchaser may to have pay more stamp duty. The affidavit was submitted before the A.O. and Rs. 30,00,000/- were the on during assessment proceedings. 29.11.2010. The A.O. has not rebutted the contentions made in the affidavit. xxxxxx xxxxxxx xxxxxxxx

Page 27 of 43 AY 2009-10 4.5 Considering all the relevant facts and circumstances of the case it is found that there was no other source of income of the appellant except agricultural income and keeping in view the ratio of the Apex Court in the case of Noorjehan (PK) and aforesand decision of Hon'ble ITAT, the explanation of the assessee is found satisfactory and the addition of Rs. 30,00,000/-made by the A.O. is not found to be in order and the same is deleted."

4. If the observation made in the assessment order, conclusion drawn in the impugned order and the assertion made by the learned respective counsels are analysed, we find that there is a categorical finding in para 4.5 of the impugned order that there was no other source of income to the assessee except agricultural income. The learned CIT(A) applied the decision from Hon'ble Apex Court in the case of P.K. Noorjahan, decision in the case of Mrs. Malini Ramnath Rele vs. ITO 49 ITR 43 (TM) (Bom), the relevant portion of the said order has been extracted in the impugned order and allowed the appeal of the assessee. This factum that the assessee is having no other sources of income except agricultural income, therefore, there is no reason to deviate from the view of the learned CIT(A), therefore, we find no merit in the appeal of the Revenue. It is dismissed.”

13. Per contra, Ld. DR for revenue defended the orders of lower authorities by making following submissions:

(i) That, the Para No. 3 of ‘registered sale-deed’ clearly mentions that the consideration of Rs. 4,10,000/- was only paid by purchaser to seller.

He submitted that the ‘registered sale-deed’ is the only document acceptable in the eyes of law. For this proposition, he relied upon

Suraj Lamp & Industries Pvt. Ltd. Vs. State of Harayana, AIR

2012 (Supreme Court) 206.

Page 28 of 43 payments but he did not change his stand qua the amount of consideration which he accepted at Rs. 4,10,000/- only.

(iii) That, the AO has noted in assessment-order that the ‘sale-agreement’ is not referred in ‘registered sale-deed’.

(iv) It is not discernible from assessment-order that the assessee demanded cross-examination of purchaser.

(v) Under the scheme of Act, the AO can make reference for valuation of property for limited purposes like for sections 50C, 56, etc. The AO is not required to make reference for valuation in this case. Therefore, the assessee’s demand for making a reference for valuation is not valid.

14. In rejoinder, Ld. AR submitted that the assessee requested the AO for reference to valuer so that the fair value of property would come out and it will help in resolution of assessee’s case by discovering the falsities in the replies made by purchaser.

Page 29 of 43 from purchaser Shri Rajesh Rathore but the AO accepted part source to the extent of Rs. 4,60,000/- and treated remaining deposit of Rs. 8,61,000/- as unexplained money. Hence, there is a dispute between assessee and AO.

The genesis of dispute is the mis-match in the amount of sale consideration mentioned in the ‘registered sale-deed’ and ‘sale agreement’ entered by parties. While the revenue authorities are claiming that the assessee received sale consideration of Rs. 4,10,000/- as mentioned in ‘registered sale-deed’, the assessee is claiming that she received higher consideration of Rs. 13,21,000/- from purchaser and in support the assessee relies upon ‘sale-agreement’. We have already re-produced the orders of lower authorities and the vehement arguments made by learned Representatives before us. On a careful consideration, we find much strength in the contentions of Ld. AR for assessee due to following reasons:

(i) The primary reason is that there are serious flaws in the action of AO, as successfully demonstrated by Ld. AR, which make the order of AO as unsustainable in the eyes of law. While we appreciate that the AO made two attempts by way of section 133(6) & 131 to get correct information from the purchaser of property but the AO has seriously erred in deriving contradictory and wrong conclusions against assessee. The first infirmity in AO’s action is such that during proceedings of section 133(6) & 131, the purchaser accepted the existence of ‘sale agreement’ entered by him with the assessee but,

Page 30 of 43 assessee. The purchaser further submitted that that subsequent to ‘sale-agreement’, he came to know that the impugned land was located in a garden area of municipal corporation and hence necessary approval to construct residential house may not be given on this land.

The purchaser also stated to have made a verbal communication to assessee that “he shall only pay consideration of the said land as much value as would be adopted by the State government authority at the time of making registry”. However, the purchaser did not give any evidence whatsoever to the AO either in support of location of land in a garden area of municipal corporation or any communication having been made to the assessee for payment equal to the valuation of registry and still the AO has accepted such replies of purchaser and that too without conducting any enquiry from municipal corporation nor even providing any opportunity of cross-examination of purchaser to assessee. The reply made by purchaser that he will pay consideration of “as much value as would be adopted by the State government authority at the time of making registry” itself shows that the purchaser wanted to protect his skin because the purchaser knew very well that he would have to suffer income-tax complications for differential in the consideration mentioned in ‘sale-agreement’ and ‘registered sale-deed’, if he did not stuck to the ‘registered sale-deed’.

Interestingly, the AO was himself not satisfied with such a reply given

2.11 of assessment-order in these words “As claimed by the purchaser, it might be possible that being found that land under consideration falls under garden in the ongoing project of Municipal Corporation Bhopal and he unilaterally conveyed the assessee from his separation from the agreement. But it can't be said definitely as the assessee (should be ‘purchaser’ in place of ‘assessee’) has not furnished any documentary evidence in this regard. The said claim of the purchaser is also hard to digest looking to the fact that no Seller can be compelled to discharge his property at the conditions laid down by the buyer.” The matter however does not stop here. The next infirmity is such that the AO has himself noted the falsities in the replies of purchaser qua the sources of payments made to assessee. In response to notice u/s 133(6), the purchaser submitted that the cash withdrawn from his and his mother’s bank a/c was utilized for making payment to assessee but the AO has mentioned, in para 2.6 of assessment-order, such reply as “not convincible” because of time gap of more than 10 months between cash withdrawals and payment to assessee and for that reason the AO issued summon u/s 131 to purchaser. During summon proceedings, the purchaser made a totally different submission. He stated to have received cash from as many as seven (7) persons for making payment to assessee and utilized his self-saving of just Rs. 25,000/-. Thus, there was a gross contradiction in the Page 32 of 43 assessee. It is therefore in Para 2.11 of assessment-order, the AO has again termed the reply of purchaser as “not conceivable” by mentioning thus “Whatever, source has been explained by him in response to the notice issued u/s 133(6) of the 'Act' as well as while making statement u/s 131 of the 'Act' although it was not found fully convincible but from the facts so surfaced it is evident that the buyer has not adequate source of fund to buy the property even at the consideration of Rs. 4,10,000/-”. Notably, by making this finding, the AO has gone against the ‘registered sale-deed’ itself! Further, if it is so, the AO ought to have taken appropriate proceeding against the purchaser for not only giving the contradictory/false responses to department but also for making payment from ‘undisclosed sources’.

But instead of doing so, the AO has placed the assessee in a difficult position by accepting the false and contradictory responses of purchaser and rejecting the true factual position submitted by assessee. The next infirmity rightly pointed out by Ld. AR is such that the AO has himself given credit of Rs. 20,000/- being the sum of advance received by assessee as per ‘sale-agreement’ and on other hand, the AO is not ready to take cognizance of very same ‘sale- agreement’. This clearly shows a contradiction in AO’s approach in dealing assessee’s case. It is also a relevant point that when the assessee specifically requested the AO in reply-letter dated 01.09.2016

Page 33 of 43 could be ascertained, the AO did not carry out such exercise which could help the AO in making a better adjudication. On a careful consideration of these points, we find that the AO’s order suffers from serious contradictions and flaws.

(ii) Having noted the contradictions and flaws in the submissions of the purchaser as also the flawed approach of AO in dealing assessee’s case, we now proceed to adjudicate the more important point as to whether the assessee’s claim of receiving higher consideration of Rs.

13,21,000/- from purchaser pursuant to ‘sale-agreement’ should be acceptable or not? Here our attempt, as court of justice, would be to derive a safer and logical conclusion considering the surrounding facts and circumstances. For this, when we look into the factual aspects of events which had taken place in present matter, we find that the assessee entered into a ‘sale-agreement’ dated 20.12.2008 with the purchaser which is on stamp paper, duly signed by both parties, notarized and witnessed. The existence of such ‘sale-agreement’ is accepted by the purchaser in reply to Q.No. 5 of Statements recorded on oath. Further, the AO has himself given credit of advance receipt of Rs. 20,000/- as mentioned in ‘sale-agreement’. Therefore, the existence of ‘sale-agreement’ is not in doubt at all. In condition No. 3 of ‘sale-agreement’ dated 20.12.2008, the purchaser agreed for consideration of Rs. 13,50,000/-, paid advance of Rs. 20,000/- and Page 34 of 43 agreed that the registry shall be done within 2 months. The ‘registered sale-deed’ is dated 05.02.2009 which is within 2 months from ‘sale- agreement’ dated 20.12.2008. The cash deposit of Rs. 13,00,000/- was also made in assessee’s bank a/c on very same date of 05.02.2009 which is evident from bank statement placed in Paper-

Book and a further cash deposit of Rs. 21,000/- was made on 09.02.2009. Thus, there is a perfect alignment of timings mentioned in ‘sale-agreement’, ‘registered sale-deed’ and ‘deposit in bank a/c’.

The impugned transaction is one of sale/purchase of land. Ld. AR has highlighted a trend, although bad and not appreciable but actually prevailing in real estate transactions that the ‘registered sale-deed’ is made at a lower price than the actual price of deal. This submission of Ld. AR has a strength. The revenue authorities cannot deny such a trend in existence. Therefore, when we look into the factual events which have taken place in present case in the light of this categorical submission made by Ld. AR, we find that the assessee’s version to have received a consideration of Rs. 13,21,000/- from purchaser is more credible and more reliable, particularly when the purchaser has made false/ contradictory replies to the AO as discussed earlier.

Therefore, in the situation, we are inclined to accept assessee’s claim.

16. There is yet another serious illegality in the order of AO which needs to be taken into account. Ld. AR has made a strong claim that the AO has Page 35 of 43 purchaser even without providing opportunity of cross-examination of purchaser to assessee and therefore also the order passed by AO is not sustainable in the eyes of law as per settled judicial view. When this argument was raised, the Bench asked Ld. AR as to whether the cross- examination is possible now? In reply, Ld. AR submitted that the purchaser had already died and now cross-examination is not possible. Therefore, the landmark decision of Hon’ble Apex Court in Kalra Glue Factory Vs. Sales Tax Tribunal and Ors. (1987) 167 ITR 498 (SC) becomes relevant. In this decision, the Hon’ble Apex Court while noting that the concerned person (Shri Banke Lal) had already died, allowed assessee’s appeal for the reason that the opportunity of cross-examination of deceased Banke Lal was not given to assessee and remanded matter to Sales Tax Tribunal to re-decide assessee’s case on the basis of documents:

“8. We allow this appeal solely on the ground that the statement of Banke Lal which was not tested by cross-examination was used in order to reach the conclusion that the transaction was an inter-State sale. We are told that Banke Lal has now died. Under the circumstances, we set aside the order of the High Court as also of the Sales Tax Tribunal and remit back the matter to the Sales Tax Tribunal at Meerut. It will be open to the appellant to produce the documents which the appellant has offered to produce before us. The Tribunal will permit the appellant to produce the documents subject to being satisfied the genuineness thereof and to pronounce upon the reliability of the documents and the impact of it on the matter in issue.”

Further, in M/s Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata (2015) 281 CTR 214 (SC), the Hon’ble Supreme Court held thus:

Page 36 of 43 AY 2009-10 “….According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.” In Kishan Chand Chela Ram Vs. CIT, Bombay (1980) 125 ITR 0713 (SC), the Hon’ble Supreme Court held thus:

“……It will therefore be seen that, even if we assume that this letter was in fact addressed by the manager of the Punjab National Bank Limited to the Income Tax Officer, no reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross- examine the manager of the Bank could in the circumstances be sought or availed of by the assessee. It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him. Moreover, this letter was said to have been addressed by the Manager of the Bank to the Income Tax Officer on 18th February 1955 in relation to a remittance alleged to have been sent on 16th October, 1946 and it is impossible to believe in the absence of any evidence to that effect, that manager who wrote this letter on 18th February 1955 must have been in-charge of the Madras Office on 16th October 1946 so as to have personal knowledge as to who remitted the amount of Rs. 1,07,350. What the Manager of the Bank wrote in this letter could not possibly be based on his personal knowledge and it does not appear from the letter as to what were the original documents and papers from which he gathered the information conveyed by him to the Income Tax Officer. The statements contained in this letter addressed by the Manager of the Bank to the Income Tax Officer were in the nature of hearsay evidence and could not be relied upon by the Revenue authorities. The Revenue authorities could have very well called upon the manager of the Bank to produce the documents and papers on the basis of which he made the statements contained in his letter and confronted the assessee with those documents and papers but instead of doing so, the Revenue authorities chose to rely merely on the statements contained in the letter and that too. without showing the letter to the assessee. There is also one other important circumstance which deserves to be noted. It appears that when the letter dated 9th March 1957 was addressed by the manager of the Bank to the assessee, a copy of it was forwarded by the manager to the Income Tax Officer and this copy contained the following endorsement:-

Page 37 of 43 AY 2009-10 "Copy to Mr. T. K. Surendran, 2nd Income-tax Officer, Income-Tax Office, C-IV Ward, Bombay for information with reference to his summons dated 5-3- 1957. One only T. T. for Rs. 1,07,350 was received with particulars as above. Mr. Nathirmal was identified by Mr. B. N. Mallaya, the then Officer in our office."

This copy of the letter dated 9th March 1957 was obviously in the record of the Income Tax Officer but it was not disclosed to the assessee at any stage and according to the Income Tax Officer, it was not traceable until the case came back to him for evidence in connection with the preparation of the supplemental statement of the case. He then seemed to trace it and forwarded it alongwith his report to the Tribunal and it was at the hearing before the Tribunal in connection with supplemental statement of the case that it was shown to the assessee for the first time. It is difficult to understand how this copy of the letter dated 9th March 1957 as also the letter dated 18th February 1955 said to have been addressed by the Manager of the Bank to the Income Tax Officer were not traceable in the records of the Income Tax Officer all this time and they came to be traced only when the supplemental statement of the case was called for by this Court. There is no explanation given by the Revenue as to why these two important documents were not traceable and they were not disclosed to the assessee. The reason perhaps was, and this was the suggestion made by the learned counsel appearing on behalf of the assessee, that the Revenue authorities did not wish to give an opportunity to the assessee to call the manager of the Bank for cross- examination, lest the edifice which they wanted to construct for taxing the assessee on the amount of Rs. 1,07,350 might be jeopardised. It is interesting to note that the endorsement made at the foot of the copy of the letter dated 9th March 1957 sent to the Income Tax Officer clearly shows that the Manager of the Bank was served by the Income Tax Officer with a summons dated 5th March 1957 and one can reasonably presume that the Manager of the Bank must have appeared in answer to the summons before the Income Tax Officer and given his statement. But no such statement has been produced by the Revenue authorities nor are we told as to what happened when the Manager of the Bank appeared in obedience to the summons. It is impossible to believe that the Manager of the Bank should have failed to appear before the Income Tax Officer in answer to the summons and there is no doubt that his statement must have been recorded. The question then is, why has this statement been kept back by the Revenue authorities ? Even if we assume that the Income Tax Officer did not record the statement of the Manager of the Bank, it is difficult to appreciate why he should not have done so and probed into the matter further with a view to finding out what was the basis on which the manager had made the statement that the remittance was sent by the assessee. We are clearly of the view that the letters dated 18th February 1955 and 9th March 1957 did not constitute any material evidence which the Tribunal could legitimately take into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras, and if these two letters are eliminated from consideration, it is obvious that there was no material evidence at all before the Tribunal which could support this finding.

Page 38 of 43 AY 2009-10 But even if these two letters dated 18th February 1955 and 9th March 1957 were to be taken into account, we do not think they supply any reasonable basis for reaching the finding that it was the assessee which sent the remittance of Rs. 1,07,350. It is undoubtedly true that the Manager of the Bank stated in these two letters that the amount of Rs. 1,07,350 was remitted by the assessee through the Madras office of the Bank, but this statement which was obviously not based on the personal knowledge of the manager, which was not supported by any documents or papers produced by the manager and in regard to which it was not known as to what was the material on which it was based, was clearly belied by the original application for remittance which was signed by Tilokchand in his own name and not on behalf of the assessee. The primary evidence before the Tribunal in regard to the remittance of the amount of Rs. 1,07,350 was the application signed by Tilokchand and this application clearly showed that it was Tilokchand and not the assessee which remitted the amount of Rs. 1,07,350 from Madras. There can be no doubt that if the amount had been remitted by Tilokchand on behalf of the assessee, he would have signed the application on behalf of the assessee and not in his own name. We fail to appreciate how, in the face of this primary evidence showing Tilokchand as the person who remitted the amount of Rs. 1,07,350 the Tribunal could possibly accept the unsupported statement of the Manager of the Bank, based on hearsay, that the amount was remitted by the assessee. Unfortunately, the Revenue authorities did not produce copies of the letters dated 14th January 1955 and 10th February 1955 addressed by the Income Tax Officer to the Manager of the Bank. Copies of these letters, if produced, would perhaps have shown that the suggestion that the amount of Rs. 1,07,350 was remitted by the assessee was made by the Income Tax Officer and taking the cue from this suggestion, the Manager of the Bank might have stated that the telegraphic transfer of Rs. 1,07,350 was sent by the assessee. It is to our mind impossible to hold, in the face of the application for remittance signed in the name of Tilokchand, that this amount was sent by the assessee and the finding to that effect reached by the Tribunal must be held to be unreasonable and perverse. What at the highest could be said to be established by the material evidence on record is that Tilokchand remitted the amount of Rs. 1,07,350 from Madras and this amount was received by Nathirmal in Bombay. Even if we accept that Tilokchand and Nathirmal were employees of the assessee as held by the Tribunal, the utmost that could be said is that an employee of the assessee in Madras remitted the amount of Rs. 1,07,350 to another employee in Bombay. But from this premise it does not at all follow that the remittance was made by the employee in Madras on behalf of the assessee or that it was received by the employee in Bombay on behalf of the assessee. The burden was on the Revenue to show that the amount of Rs. 1,07,350 said to have been remitted from Madras to Bombay belonged to the assessee and it was not enough for the Revenue to show that the amount was remitted by Tilokchand, an employee of the assessee, to Nathirmal, another employee of the assessee. It is quite possible that Tilokchand had resources of his own from which he could remit the amount of Rs. 1,07,350 to Nathirmal. It was for the Revenue to rule out this possibility by bringing proper evidence on record, for the burden of showing that the amount was remitted by the assessee was on the Page 39 of 43 AY 2009-10 Revenue. Unfortunately, for the Revenue, neither Tilokchand nor Nathirmal was in the service of the assessee at the time when the assessment was reopened and the assessee could not therefore be expected to call them in evidence for the purpose of helping the Revenue to discharge the burden which lay upon it. We must therefore hold that there was no material evidence at all before the Tribunal on the basis of which the Tribunal could come to the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras and that it represented the concealed income of the assessee. We accordingly allow the appeal, set aside the judgement of High Court and answer the question referred by the Tribunal in favour of the assessee and against the Revenue. The Revenue will pay costs of the assessee throughout.”

Therefore, having regard to the landmark decisions of Hon’ble Apex Court as noted above, we agree that the adverse conclusion taken by AO on the basis of statement of purchaser u/s 131 without giving opportunity of cross- examination to assessee, is not sustainable.

The AO has made an observation in assessment-order “However, crucial question remains to be answered in this case that nowhere in the registered deed, consideration as mentioned in the sale agreement has been mentioned.” We are not in a position to understand how this observation can be accepted when the present case involves a transaction of sale/ purchase of land wherein the consideration mentioned in ‘registered sale- deed’ is lower than the actual consideration and that is why the whole controversy has arisen and that is why there was a need of proper investigation and adjudication by AO.

In present case, the transfer of title of plot from assessee to purchaser is not in question because the parties have already executed a ‘registered sale- deed’. The dispute here is with respect to the source of cash deposit made by assessee in bank a/c and it is the claim of assessee that he received much higher consideration than the amount mentioned in registered sale-deed from purchaser and in support of such source, the assessee has filed a copy of sale-agreement entered with the purchaser. Moreover, as noted in earlier paras of this order, the purchaser himself accepted the existence of sale- agreement entered. Therefore, the decision in Suraj Lamp (supra) is nothing do to with the dispute involved in present case.

Page 41 of 43 income as source for making impugned cash deposits in bank a/c and delete the addition of Rs. 8,61,000/- made on account of unexplained money. Accordingly, Ground Nos. 1 to 3 raised by assessee are allowed.

Ground No. 4:

Thus, he submitted that the AO has not examined/adjudicated the claim of section 54. Ld. AR next referred Para 5.1.3 of CIT(A)’s order (re-produced earlier) to show that the CIT(A) has rejected claim of assessee by stating that no supporting documents have been submitted.

Order pronounced in open court on 22/08/2025