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Facts
The assessee, a retired ex-serviceman, sold ancestral agricultural land for Rs. 61.60 Lakhs, receiving Rs. 7 Lakhs by cheque and Rs. 54.33 Lakhs in cash, which was deposited the next day. The Assessing Officer added the cash deposit as unexplained investment under Section 69 and Rs. 2 Lakhs as forfeited advance under Section 56 from a prior, failed agreement of sale. The CIT(A) confirmed these additions, leading to the present appeal.
Held
The Tribunal held that the cash deposit was directly linked to the sale of agricultural land, deposited immediately after the sale, and the assessee had no other substantial income. Citing judicial precedents, it ruled that the payment of on-money, when properly explained and deposited, is part of the sale consideration and not unexplained income. Therefore, the additions made by the lower authorities were not justified, and the appeal was allowed.
Key Issues
Whether cash received and deposited immediately after the sale of agricultural land can be treated as unexplained investment, and whether an advance for an initial, failed land sale agreement should be treated as forfeited income.
Sections Cited
69, 115BBE, 56, 68, 144, 147
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Income Tax Appellate Tribunal, COCHIN BENCH : COCHIN
Before: SHRI INTURI RAMA RAO & SHRI SOUNDARARAJAN K.
PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 30/08/2023 in respect of the A.Y. 2017-18 and raised the following grounds: “1. The order of the Commissioner (Appeals) is against Law and facts of the case.
2. The appellant owned ancestral agricultural plot of 23.28 Ares of land in Klappana Village, Karunagappally. The appellant due to advancing age an inability to carry on cultivation had decided to sell the land and hence entered into an agreement of sale with one Mr.Vijayan on 10.06.2016. Later Mr. Vijayan backed out of the agfeemeot stating that he could not find any buyers for the property and hence was not honoring the contract. However, later Mr.Vijayan introduced the appellant to a Swamy of Amritanandamayi Mattom who completed the deal by paying Rs.7,00,000/- by cheque as advance on 05.08.2016 and Rs 54 60,000/- by cash on the same day. Out of this amount Rs 5433000/- was deposited into the bank on the same day. Thus the cash deposit into the bank was actually consideration of sale of land owned by the appellant and deposited into the bank on the same day on which the consideration as per Stamp Act was paid by the buyer. The Commissioner of Income Tax failed to appreciate that the appellant was only retired service person whose only source of income was pension from the Defense Ministry of Govt. of India and the source of the deposit on the same day as the sale of the land would only be the balance sale consideration.
The Commissioner of Income Tax (Appeals) also failed to appreciate that Mr.Vijayan had confirmed to a letter that he had facilitated the sale of land to the representative of Amritanandamay Mattom when the same value as that mentioned in the agreement of sale entered into by him with the appellant, which would also confirm the fact that the deposit into the bank was only part to the sale of consideration of the land received by the appellant over the registered value.
3. The commissioner of Income Tax (Appeals) is not justified in confirming the addition of Rs.2,00,000/- in the advance received by the appellant from Mr.Vijayan on the ground of forfeiture of advance, even when a letter confirming that the advance paid by the appellant was received back by him was filed before the CIT(A) who however chose to ignore it and confirm the additions merely on the suspicion that the advance paid to the appellant would have been forfeiture and was not paid back.
PRAYER For these grounds and such other grounds that may be urged at the time of hearing, it is prayed that the additions sustained by the Commissioner(Appeals). NFAC. may be deleted.”
The brief facts of the case are that the assessee is an Ex-Servicemen aged about 76 years and he filed his return of income on 05/08/2017. Later on, the return was selected for scrutiny and notice was issued to the assessee seeking the explanation for the source of cash deposit of Rs. 54,33,000/- in his bank account. The assessee explained the source that he had sold 23.28 ares of agricultural land in Klapana Village to Amrithanandamayi Madom and received a total sale consideration of Rs. 61,60,000/- out of which Rs. 7 Lakhs was paid by cheque and the balance consideration was paid by cash. The balance consideration was deposited in his bank accounts on the date of execution of the sale deed. The assessee also explained that there was an agreement between him and one Mr. Vijayan for the sale of the said agricultural lands at the rate of Rs. 1,10,000/- per cent for which the advance of Rs. 2 Lakhs was received by the assessee. Since the said Mr. Vijayan was not able to find out a buyer, he arranged the sale to the said Madom at the same price as agreed between him and the assessee. Therefore the assessee submitted that the cash deposits made into his bank accounts are nothing but the sale proceeds received by him by the sale of his agricultural lands to Amrithanandamayi Madom on 06/08/2016. The AO not satisfied with the said explanations and relied on the sale consideration mentioned in the sale deed. The AO also pointed out that the said sale was also not effected on 10/06/2016 for Rs. 54,33,000/- but the sale was effected only on 05/08/2016. Therefore, the AO had treated the cash deposits made into his bank accounts as from unknown sources and made an addition u/s. 69 of the Act as unexplained investment. The AO further added the advance amount received from the said Mr. Vijayan since the transaction was not completed within the period of 3 months and therefore the said amount has been forfeited by the assessee and treated the said income as income from other sources u/s. 56 of the Act.
As against the said order, the assessee filed an appeal before the Ld.CIT(A) and explained the sequence of events and also submitted that the actual consideration was Rs. 61,60,000/- but the guideline value of the government for the said property has been mentioned in the sale deed as Rs. 7 Lakhs and the balance consideration was received by cash. Before the Ld.CIT(A), the assessee filed the sale deed dated 05/08/2016, the copy of the bank statement and an affidavit from the said Mr. Vijayan who was acting as an agent and the other documents furnished by the assessee to show that the property sold by the assessee would fetch a sum of Rs. 61,60,000/-. The Ld.CIT(A) dismissed the appeal on the ground that the assessee had not furnished anything concrete in support of the sources of cash deposits emanating from the transfer of the capital assets. The Ld.CIT(A) also confirmed the addition made u/s. 56 of the Act in respect of the alleged advance amount forfeited by the assessee.
As against the said order, the assessee is in appeal before this Tribunal.
At the time of hearing, the Ld.AR submitted that the assessee is a senior citizen and also retired Navy pensioner and therefore decided to sale the ancestral agricultural lands and further submitted that apart from the sale consideration of the said property, the assessee has no other income. The Ld.AR further submitted that the various documents filed before the authorities are not accepted without verifying the trustworthiness of the said documents and also without proving that the assessee had other sources of income. The Ld.AR also filed a paper book enclosing the argument notes, sale agreement made with Mr. Vijayan and the copy of the sale deed dated 05/08/2016 and the copy of the Canara Bank account statement and the notarised sworn affidavit filed by the said Mr. Vijayan. In the paper book, the assessee also enclosed the Hon’ble Allahabad High Court judgment and the Tribunal orders and prayed to allow the appeal filed by the assessee.
The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeal.
We have heard the arguments of both sides and perused the materials available on record.
Before going into the issue on hand, we will consider the submissions made by the assessee before the Ld.CIT(A) by way of written submissions which reads as follows:
From the above said submissions made by the assessee, we came to understand that the assessee is a senior citizen and retired service personnel from the Indian Navy and received only pension from the Navy, except that he has no other means of income. Because of his old age, he decided to sale the property to one Mr. Vijayan at the rate of Rs. 1,10,000/- per cent and received an advance amount of Rs. 2 Lakhs towards the sale of his ancestral agricultural lands of 23.28 ares. But unfortunately, the said Mr. Vijayan could not complete the sale within the period mentioned in the sale agreement and therefore he arranged to sell the agricultural property to the Amrithanandamayi Madom. Naturally, the purchaser would pay the stamp duty and other document charges and therefore they insisted for putting the guideline value of the property as fixed by the government. Therefore in the present case, the guideline value was mentioned in the sale deed whereas the sale agreement with Mr. Vijayan would show that the market value of the property would be at Rs. 1,10,000/- per cent. If we take the market value of the property is Rs. 1,10,000/- per cent, the 23.28 ares i.e. 56 cents approximately would fetch an amount of Rs. 61,60,000/-. To prove the value of the land sold by the assessee, the assessee had produced another sale deed in which 16.84 cents in the same vicinity of the village were sold for a total consideration of Rs. 25 Lakhs. The assessee had filed the said sale deed before the Ld.CIT(A) and from the said sale deed, we worked out the sale value of the land sold at Rs. 1,48,456/- per cent. Even the reverse indexation is applied, the value of the property sold would be about Rs. 1,30,207/- per cent. The AO as well as the Ld.CIT(A) has no other evidences to show that the land sold by the assessee would fetch only Rs. 7 Lakhs for 56 cents whereas the assessee had produced sale deeds executed during the year 2020-21 and estimated the sale value of the property by the reverse indexation method at Rs. 1,30,207/- per cent. Further, in support of the contention of the assessee, the assessee had proved that the balance sale consideration received by cash was deposited in their bank account on 06/08/2016 itself, the next date on which the sale deed was executed.
The assessee had thus established his case that the agricultural land was sold for a sale consideration of Rs. 61,60,000/- and in support of his case that the assessee also produced a sale deed from which the value of the land during the period was arrived at Rs. 1,30,207/- per cent. It is not a new practice adopted by the assessee and most of the transactions of sale were done like this. When the assessee has produced some documents including the notarised sworn affidavit of the said Mr. Vijayan, the authorities below had rejected the said contentions without having any other proofs with them. The assessing officer being a quasi judicial authority, has every powers to verify the submissions made by the assessee by sending the summon to the registered authority of the locality to find out the market value of the property sold by the assessee. The assessing officer had not taken any steps to find out the genuineness of the claim made by the assessee. The assessee being a retired navy personnel and also received only pension, he would not have any other source to make such a huge deposits in his bank accounts. It is not the case of the AO also that the assessee has some known sources of income and therefore the plea of the assessee could not be accepted.
We have also perused the judgments of the Hon’ble Allahabad High Court in the case of CIT vs. Daya Chand Jain Vaidya reported in [1975] 98 ITR 280 and in the case of CIT vs. Intezar Ali reported in [2015] 372 ITR 651 which was relied on by the assessee. In case of CIT vs. Daya Chand Jain Vaidya cited supra, the Hon’ble Allahabad High Court had accepted the finding of the Tribunal that the revenue could succeed only in case they had brought on record materials from which it could be concluded that the deposit made by the wife and two major sons were in fact made by the assessee. When this has not been done, and as such the amount could not be added to the income of the assessee.
In the second judgment in case of CIT vs. Intezar Ali cited supra, the Hon’ble Allahabad High Court has held as follows:
“13. Before parting with the case we may observe here that from the facts and circumstances on the record that in the present case the Income Tax Officer did not act in bonafide manner. The assessee led substantial evidence to establish that the amount treated to be undisclosed income by the A.O. was the sale consideration of sale of his agricultural land, which he had deposited in the bank and had voluntarily filed return disclosing his income. Overwhelming evidence led by him was discarded without giving any reasons at all. The assessment was framed only on the ipse dixit of the A.O., which gives us reason to believe that he had exceeded his authority with some ill will or with ulterior motive.
14. We, therefore, find it appropriate to direct the Registrar General of the Court to forward a copy of this judgment to the Chairman of the Central Board of Direct Taxes to cause an enquiry into the conduct and motives of Shri Yaduvansh Yadav, Income Tax Officer, Ward-1, Hapur in framing the assessment and raising demand of income tax against the petitioner.”
We have also perused the order of the Coordinate Bench of this Tribunal in the case of ITO vs. Shri Abraham Varghese Charuvil in by order dated 26/04/2017 in which the similar issue came up for consideration. The Coordinate Bench had given the following finding: “7.1 According to the assessee, the total sale consideration is Rs.70,79,500/- and because of insistence of the buyer to save stamp duty, the sale consideration was disclosed in the sale deed at Rs.30,59,500/-. It was stated that Rs.30,59,500/- was circle rate fixed by the Kerala Government. It was submitted that the entire sale consideration of Rs.70,79,500/- was deposited in Federal Bank on 16/04/2012 and 17/07/2012. On perusal of the bank accounts with Federal Bank, I notice that there is not much of transaction in the bank account of the assessee either before or after the sale transaction of agricultural land. The assessee is not having any other source of income so as to generate undisclosed income of Rs.39 lakhs. The assessee was an NRI and on his retirement, he was doing agricultural activities. Most importantly, I notice that there is no concealment, because in the income tax return filed before the IT authorities, the assessee and his wife had disclosed the entire value of sale transaction amounting to Rs.70,79,000/- (including the on-money). A copy of the income tax return filed by the assessee and his
wife alongwith computation statement for the assessment year 2013-14 are enclosed at pages 7 to 19 of the paper book filed by the assessee. In the peculiar facts and circumstances of the case, I have no hesitation to hold that the receipt of on-money was in no way different from the receipt amount shown in the sale deed. The Assessing Officer has not disputed the source of cash receipts. Her only contention is that balance value of the property not shown in the sale deed can only be considered as unaccounted money/on-money and the same has to be brought to tax as 'income from other sources'.
………… ………... 7.3 As mentioned earlier, the assessee is an aged person, who had settled down in his native place. He was engaged in agricultural activities on his retirement and there is nothing on record to suggest that the assessee alongwith his wife were in a position to generate unaccounted income of Rs.39 lakhs other than on-money on account of sale of agricultural land. The payment of on- money is an unfortunate practice in most part of our country, and none can deny this factual situation. It is the case of the assessee that the buyers were insisting on reducing the sale consideration to be disclosed in the sale deed for the purpose of reducing stamp duty payment. This contention of the assessee cannot be totally brushed aside. I also place reliance on the order of the Cochin Bench of the Tribunal in the case of ITO vs. Dr. Koshy George (supra), wherein it was held by the Tribunal that any surplus money arising to an assessee on sale of agricultural land would partake the character of agricultural income itself.
7.4 For the aforesaid reasoning, I hold that the order of the CIT(A) is correct and in accordance with law and no interference is called for. It is ordered accordingly.”
We have also perused the order of the Hon’ble Chandigarh Bench of the Tribunal in the case of Jagir Singh vs. ACIT reported in [2023] 106 ITR (Trib) 233 wherein the Tribunal had accepted the excess sale consideration than the consideration mentioned in the sale deed and held that the same is not an unexplained credit or unexplained income. To come to the above conclusion, the Tribunal also relied on the circumstantial evidences and also the fact of the deposit of cash in the bank account immediately after the sales took place.
We have also considered the another order of the Hon’ble Jaipur Tribunal in case of Shri Pappu Ram Saran vs. ITO in vide order dated 03/09/2020 in which it was held as follows: “6. We have considered the rival submissions as well as relevant material on record. The AO has made addition on account of cash deposit of Rs. 27,50,000/- in the bank account of the assessee on 09.04.2009. Since the assessee has not appeared before the AO nor made compliance to the various notices issued by the Assessing Officer, therefore, the assessment was completed ex-parte U/s 144 r.w.s. 147 of the Act. Before the ld. CIT(A) the assessee produced sale deed as well as bank account and also detailed submissions in respect of the source of cash deposit made in the bank account. The ld. C(IT(A) called for remand report wherein the AO has pointed out that the sale deed dated 08.04.2009 shows the sale consideration of Rs. 6,45,000/-. The ld. CIT(A) has consequently allowed the claim of the assessee only to the extent of Rs. 6,45,000/- as stated in the sale deed. The Bench has raised a query about the discrepancy in the name mentioned in the sale deed and the name of the assessee appearing in other records. The ld. AR has pointed out that the assessee Shri Pappu Ram is also known as @ Prabhu Ram. Thus, in the sale deed of the name of the assessee appearing as Shri Prabhu Ram. After verification of the record we are satisfied that the name appearing in the sale deed alias name of the assessee. The AO has also not disputed the fact that the assessee is one of the joint owners of the land which was sold vide sale deed 08.04.2009. We further note that the cash of Rs. 27,50,000/- was deposited in the bank account of the assessee with Oriental Bank of Commerce, Kishangarh on 09.04.2009. The date of cash deposit is subsequent to the date of sale deed dated 08.04.2009 which prima facie shows that the source of cash deposit has a direct nexus with the sale transaction of the land sold by the assessee jointly with other co- owners vide sale deed dated 08.04.2009. Though the sale deed shows the sale consideration of Rs. 6,45,000/- which is also the Stamp Duty Valuation however, once the assessee has brought on record the relevant facts as well as nexus between transaction of sale and deposit in bank account then only
inference can be drawn from these facts and circumstances of the case is that the source of deposit of Rs. 27,50,000/- is the sale consideration of the land. The Assessing Officer has not brought anything contrary on the record during the remand proceedings such as examination of the purchaser. Therefore, in the absence of any contrary material the explanation of the assessee regarding source of cash deposit in the bank account cannot be disputed. This Tribunal in case of M/s OM Plantation vs. ITO (supra) has considered an identical issue in para 6 as under:- “6. We have considered the rival submissions as well as the relevant material on record. The assessee purchased the land situated at Bhankrota, Jaipur vide two sale deeds both dated 11/8/2005 for a total consideration mentioned in the sale deeds at Rs. 1,76,34,000/-. However, the Assessing Officer received the report of the DDIT(Inv) alongwith the details of the cash deposits in the bank accounts of the sellers and their relatives and further an agreement to sell dated 11/5/2005 wherein the consideration @ Rs. 28,25,000/- per bigha was agreed upon between the parties and part consideration was stated to have been paid at the time of agreement in cash as well as in cheque. The Assessing Officer has computed the total purchase consideration by adopting the rate of Rs. 28,25,000/- per bigha as stated in the agreement to sell dated 11/5/2005. Though the said agreement is not signed by both the parties and it was signed only by the seller, however, we find that the details given in the agreement regarding the agricultural lands, its khasaras numbers as well as the part consideration of Rs. 15,50,000/- through a cheque No. 582863/- dated 10/6/2005 is not in dispute. The deailsof the said cheque also find place in the registered sale deed dated 11/8/2005. Thus, the contents of the agreement to the extent of part payment of consideration has been established by the sale deed dated 11/8/2005. Therefore, even if the said agreement is not enforceable in law due to the non-bearing of the signature of the assessee and further due to non-registration, the contents of the said agreement which has been proved and corroborated by the sale deed go to establish the existence of the agreement between the parties. Further the details of the cash deposited in the bank account of the sellers and their relatives has been reproduced by the Assessing Officer in the assessment proceedings at page No. 4 and 5 of the assessment order as under:
S. Name of person Bank Deposited Date Relation with the No. account cash amount seller No.
1. Smt. Dhapu Devi 210501000 32,74,000/- 12/08/2005 Seller of land Meena 00001 2. Sh. Dulharam Meena 1007813 1,50,000/- 14/05/2005 Do 10,00,000/- 12/08/2005 1,60,000/- 16/08/2005 3. Sh. Ballu Ram Meena 1007108 4,00,000/- 14/05/2005 Do 11,70,666/- 12/08/2005 4. Sh. Harphool Meena 1004534 11,70,667/- 12/08/2005 Do 5. Sh. Satendra 1007978 14,00,000/- 12/08/2005 Son of Sh. Basanwal Bagwataram Seller 6. Sh. Rajendra Kumar 1003946 1,50,000/- 12/05/2005 Do Meena 14,00,000/- 12/08/2005 7. Sh. Om Prakash 1004337 1,50,000/- 12/05/2005 Do Meena 14,00,000/- 12/08/2005 8. Sh. Ashok Kumar 1001168 14,00,000/- 12/08/2005 Do Meena 9. Sh. Roshal Lal Meena 1006877 1,50,000/- 12/05/2005 Grandson of Sh 14,00,000/- 12/08/2005 Bagwataram, Seller 10. Sh. Jagdish Pd. 100131 7,50,000/- 12/08/2005 Son of Smt. Dhapu Meena Devi Meena, Seller 11. Sh. Manna Lal Meena 1008064 7,15,800/- 12/08/2005 Son of Smt. Dhapu Devi Meena, Seller 12. Sh. Nemi Chand 1005293 7,50,000/- 12/08/2005 Son of Smt. Dhapu Meena Devi Meena, Seller 13. Smt. Sushila Meena 210501000 7,50,000/- 12/08/2005 W/o- Sh. Prabhu W/o Prabhu Dayal 07726 Dayal Meena, S/o- Meena Smt. Dhapu Devi Meena, Seller
The dates of deposit of cash as well as cheques in the bank accounts of the sellers, their sons, grandsons and wife are clearly matching to the dates of agreement to sell and sale deed i.e. 11/5/2005 and 11/8/2005. All the deposits of cash in the bank accounts of these persons were made on the very next day of execution of agreement and sale deed respectively. In absence of any other source of income of the sellers, the only inference which can be drawn from the details of the bank accounts and particularly the deposits made on the particular dates which is just one day after the execution of the agreement to sell and sale deeds that the cash deposits in the bank accounts of the sellers and their relatives is only from the sale consideration received against the sale of agricultural lands in question. There is no other transaction either on those dates or in around those dates of deposits in the bank accounts other than the present transaction of sale of lands by the sellers. Further the Assessing Officer has reproduced the statements of the branch manager wherein the amounts were deposited as well as the relatives of the sellers who have confirmed the receipt of cash and deposit of the same in the bank account. Thus, we find that the assessment framed by the Assessing Officer is not solely based on the statements recorded by the Investigation Wing but there was tangible material in the shape of the bank accounts statements, agreement to sell and sale deeds which are of course not in dispute. The only dispute raised by the assessee is regarding the photo copy of the agreement and its evidentiary value, however, it is not the issue of legal enforceability of the said agreement and the claim under the agreement but the contents of the agreement which are to the extent corroborated by the independent evidence being sale deeds and further the bank statements of the sellers cannot be denied on the technical ground of admissibility. Therefore, once the payment of cash is reflected from all these documents as well as statements of the parties then the technical objection raised by the assessee will not help the case of the assessee." In view of the facts and circumstances of the case when the deposit of cash in the bank account is contemporaneous to the transaction of sale of land then in the absence of any contrary material the source explained by the assessee cannot be rejected. Hence, the addition sustained by the Ld. CIT(A) is deleted.”
In the present case also, the assessee had explained that he received the excess sale consideration from the Amrithanandamayi Madom. Infact the assessee had entered into an agreement with one Mr. Vijayan on 10/06/2016 for selling this land at Rs. 1,10,000/- per cent and also received an advance of Rs. 2 Lakhs from him. Thereafter, the said Mr. Vijayan could not find the purchasers within the period mentioned in the agreement and the said Mr. Vijayan himself arranged the sale to the said Amrithanandamayi Madom and got the sale deed executed on 05/08/2016. There is no dispute that the assessee is a senior citizen and received pension of Rs. 1,75,000/- per annum as an Ex-Servicemen and received some interest on the bank deposits made out of the retirement benefits. It is a fact that the assessee had no other source of income and the department also not established the fact that the assessee had other sources of income apart from the pension and other incomes.
As seen from the sale agreement executed with the said Mr. Vijayan, the lands are fetching value of Rs. 1,10,000/- per cent. Similarly the sale deed of the lands in the same vicinity also exhibits the fact that the land value is of Rs 1,30,207 per cent. Therefore the sale consideration mentioned in the sale deed would be the guideline value fixed by the government which is far below the market value of the property. We have also considered the practice adopted by the purchasers and sellers while executing the sale deed in which the purchaser would insist for the guideline value to be shown in the sale deed for obvious reasons. Therefore the sale consideration mentioned in the sale deed could not be taken as a correct one when there are other evidences to show that the property would fetch more value than the amount shown in the sale deed. We have also considered the fact that after the date of the execution of the sale deed i.e. on 06/08/2016, the assessee had deposited the balance sale consideration of Rs. 54,33,000/- in his bank account. There is a correlation between the date of sale as well as the date of deposit of the cash and therefore the explanation offered by the assessee could not be brushed aside in toto. On the other hand, the department is not having any other records / documents to show that the assessee had earned income through other sources. By taking into consideration of all the facts and also the principles laid down by the Hon’ble Allahabad High Court, the order of the Coordinate Bench and other orders of the Tribunal, we are in total agreement with the assessee and allow the appeal filed by the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 15th July, 2025.