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Facts
A search under section 132 of the Income Tax Act, 1961, led to the seizure of a photocopy of an agreement to sale, allegedly between the assessee and sellers, involving a cash payment. The Assessing Officer (AO) added this amount as unexplained investment. The assessee contended that the document was not signed by them, was a photocopy found from a third party, and that they never entered into such an agreement or made such a payment.
Held
The Tribunal held that the addition was made solely on the basis of an unsigned photocopy of a sale agreement found from a third party's premises, with no corroborative evidence. It was further held that the AO violated principles of natural justice by not allowing cross-examination of the person from whom the document was seized and by not confronting the assessee with the material collected behind their back. The Tribunal cited various judgments emphasizing that photocopies have little evidentiary value and that suspicion cannot substitute for evidence.
Key Issues
Whether the addition of Rs. 1,62,35,000/- made on account of unexplained investment under Section 69 of the Income Tax Act, 1961, based on an unsigned photocopy of an agreement to sale seized from a third party, is sustainable in law, and whether principles of natural justice were violated.
Sections Cited
69, 132, 153C, 143(3), 139(1), 292C
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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 08/11/2024 Date of Order – 10/02/2025
O R D E R PER V. DURGA RAO, J.M.
This appeal by the Revenue is directed against the impugned order dated 22/06/2023, passed by the learned Commissioner of Income Tax (Appeals)–3, Nagpur, [“learned CIT(A)”], for the assessment year 2017–18.
2. Following grounds have been raised by the Revenue:–
“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,62,35,000/- made on account of unexplained investment u/s 69 of the IT Act, 1961, without appreciating the facts that the addition made by A.O. was based on the seized document {Annexure A/3, Page 4 to 7} and the said documentary had the evidentiary value. 2 On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,62,35,000/- made on account of unexplained investment u/s 69 of the IT Act, 1961, without appreciating the facts that the payment made by the cheques were duly credited in the 2 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023 respective bank accounts and the Stamp Vendor had confirmed that the stamp paper in which the agreement to sale was executed was also purchased by the assessee himself. 3 Any other grounds and fact to be raised at the time of appeal.”
3. The sole issue arose from the aforesaid grounds of appeal is, whether or not the learned CIT(A) was justified in deleting the addition of ` 1,62,35,000, made by the Assessing Officer on account of unexplained investment under section 69 of the Income Tax Act, 1961 ("the Act").
Facts in Brief:– The assessee herein is an Individual. A search and seizure action under section 132 of the Income Tax Act 1961 (“the Act”) was conducted in case of Shri Parag Suresh Vakharia on 11/07/2019, in connection with the action on Swami Fuels Pvt. Ltd. Group. During the search proceedings, various documents were found and seized at the residence of Shri Parag Vakharia, pertaining to the assessee. Accordingly, in response to a notice under section 153C of the Act dated 09/08/2021, was issued and served to the assessee, the assessee filed his return of income for the year under consideration on 31/10/2018, under section 139(1) of the Act, declaring total income of ` 7,51,82,010. Subsequently, the assessee, in response to the notice under section 153C of the Act, submitted that the return of income filed under section 139(1) of the Act may be treated as return of income under section 153C of the Act. Thereafter, various statutory notices were issued and served upon the assessee. The Assessing Officer completed the assessment on 29/09/2021, under section 143(3) r/w section 153C of the Act determining total assessed income of ` 9,14,17,010, after making addition of ` 1,62,35,000 under section 69 of the Act on account of 3 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023 unexplained investment under section 69 of the Act. The assessee being aggrieved by the assessment order passed by the Assessing Officer under section 143(3) r/w section 153C of the Act, the assessee carried the matter before the first appellate authority.
Before the learned CIT(A), the assessee made following submissions to counter the addition made by the Assessing Officer, which are culled out from the impugned order:– “1. Assessee is an individual deriving income from business of Finance Broking. He filed return of income for AY 2017-18 u/s 139(1) on 31.10.2017 declaring income of Rs.7,51,82,010/-. The return was accepted vide intimation u/s 143(1) of IT Act.
The assessee purchased a property bearing Plot no.51, at Central Road Section–III scheme of NIT, Hiwari, Nagpur vide sale deed dated 29.9.2017 (related to AY 2018-19) for a total consideration of Rs. 1,41,00,000 from Shri Wardhman Sahakari Griha Nirman Samiti Ltd. In the transaction, Shri Suresh C. Vakharia, Shri Shailesh C. Vakharia and Shri Mahaveer C. Vakharia are Consenters.
A search u/s 132 of IT Act (Act) was conducted at residence of one Shri Parag Suresh Vakharia on 11.07.2019 wherein some document, titled as Agreement to sale inventoried as A-3 pages & to 6, allegedly pertaining to the assessee was found and seized. This document is a photocopy of some agreement purported to be executed between Shri Suresh C. Vakharia, Shri Shailesh C. Vakharia and Shri Mahaveer C. Vakharia as sellers and Shri Brindesh Agrawal as purchaser. The so-called document mentioned cash payment of Rs.1,62,35,000/- by purchaser to the seller. Based on this document assessee's case was centralized and notice u/s 153C of the Act was issued. In response to 153C notice assessee filed return declaring same income that was returned originally u/s 139(1) of the Act. During the course of assessment proceeding, it was submitted that the assessee has never ever executed any agreement to sale with the "Vakharia" or Shri Wardhaman Sahakari Samiti for purchase of the said property. The documents titled as "Agreement to sale" alleged to be found from premises of Parag Suresh Vakharia is not within the knowledge of the assessee. The assessee is neither party to it nor assessee has executed/signed any such document. It seems to be a unilateral act of Shri Suresh Vakharia and Shri Shailesh Vakharia for the reasons best known to them. The assessee reiterated that he has not entered into any agreement to sale with Shri Suresh and Shailesh Vakharia as allegedly mentioned in the said document on pages 4 to 6 and therefore no cognizance of the said document should be taken in assessee's case.
4 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023
4.1 It was further submitted that the assessee has never ever paid any cash to the Suresh and Shailesh Vakharia as mentioned in the said document. The said document is a bogus document which cannot be relied upon. Even the payment by cheques as mentioned in the alleged Agreement to Sell are not mentioned in the actual sale deed executed on 29.09.2017. It was also submitted that if the department is in possession of any corroborative document, then the same shouldbe supplied to the assessee before taking any adverse decision against the assessee. The assessee also requested to provide copy of statement of the person from whose possession the said document was found and seized. 4.2 The Id. Assessing Officer (AO), however, made some inquiry from stamp vendor and concluded that the stamp paper, on which alleged agreement to sale is executed, was purchased by assessee. AO passed the order u/s 143(3) r.w.s. 153C on 29.09.2021 and made an addition of Rs. 1,62,35,000/- being unexplained investment u/s 69 of the Act to the returned income, treating the contents of this document as true. Appellant's submissions- 5. The appellant assessee vehemently disputes the totally illegal, arbitrary, and unwarranted action of the Id. AO in making the above addition and also disputes his liability to pay such tax unjustly imposed and demanded from him. 5.1 Relied document does not belong to the assessee & incorrect assumption of jurisdiction: The said document found from possession of Shri Parag Suresh Vakharia is a photocopy which does not belong to the assessee. The Assessee places reliance on the judgement of the Hon'ble Bombay High Court, the jurisdictional H.C., in the case of CIT Vs. Arpit Land Pvt. Ltd., wherein it has been held that in case of assessment under section 153C of the Act it is required that the documents found during search should "belong" to the assessee. It is a condition precedent and a jurisdictional issue. The non-satisfaction of the condition renders the entire proceedings null and void. It is respectfully submitted that the Id. AO has clearly acquired the jurisdiction u/s 153C illegally and has proceeded to finalize the assessment on the basis of a usurped jurisdiction in total disregard to and in violation of the binding decision of the jurisdictional H.C. It is respectfully submitted that, and for this reason alone, the impugned order is unsustainable in law. 5.2 Nature & unreliability of the document: As regards the said "document" on the basis of which the assessee has been saddled with the huge demand is concerned, the assessee most respectfully invites attention of your honour to the following facts which are totally ignored by the Id. AOin making an unjust, illegal and unsustainable addition as above. a) This loose paper treated as a document is actually a photocopy with no original to verify its authenticity.
5 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023 b) This loose paper treated as a document by the Id. AO is neither signed/executed by the Assessee nor it belongs to the Assessee so as to make the Assessee liable for the same. c) The Assessee has categorically denied its authenticity. The said document not being signed by the Assessee and further found from the premises of a third person who is not a party to said alleged agreement, no adverse inference can be drawn against the Assessee based on such dumb document. d) The said 'document' is merely a fabricated photocopy. It is most respectfully submitted that 'n' number of such documents can be created with malicious and malafide intents. Reliance is placed on CIT Vs. Vivek Aggarwal (2015) 121 DTR 241 (Delhi HC) wherein it has been held that no addition can be made on the basis of undated and unsigned document. e) Material facts like the payment by cheques as mentioned in the document are not mentioned in the actual sale deed executed on 29.09.2017 and registered under law contents of the document are therefore not true. f) The amounts mentioned in the said document are handwritten which have not been countersigned as is required under law. Any contents subsequently added or modified cannot be an acceptable piece of evidence unless the same has been ratified by countersignatures which has not been done in the present case. g) By no stretch of imagination the said document can be taken to be a conclusive or a direct evidence that the assessee has ever paid any cash to the Suresh and Shailesh Vakharia as mentioned in the said document. 5.3 Presumption u/s 292C: Presumption under section 292C of the Act is also not applicable in the present case as the same is available to the AO only in a case where any books of account, other documents or assets are found in the possession or control of any person in the course of search and not in relation to any person on whom the search has not been conducted. 6 No evidence of alleged cash payment: Your honour will appreciate that the document is completely suspect and by treating the same as irrefutable evidence, the Id. A has caused great injustice to the assessee. The Id. AO has not brought any evidence to establish that theassessee has, in fact, made any cash payment as per the document to Mis Suresh and Shailesh Vakharia.
Glaring violations of the principles of natural justice 7.1 Opportunity of cross-examination denied by id. AO. The assessee specifically requested the Id. AO to provide copy of statement of the person from whose possession the said document was found and seized. However, despite repeated requests the Id. AO has passed the assessment order without providing the required statement and in the process denied the 6 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023
assessee the opportunity to cross examine the person from whose possession the document was found. This is in gross violation of the principles of natural justice and, therefore, the addition is illegal and unsustainable in law. In this context assessee relies on judgment in the case of Addl. CIT. Miss Late Mangeshkar [1974] 97 ITR 696 (Bom.) wherein it was held that, "Revenue has got a tendency to make an addition on the basis of entries appearing in the books of a third party or a statement recorded from a third party or loose papers seized from a third party. In all such cases, it is imperative to afford an opportunity to the assesse a cross-examine the said third party." 4.2 Enquiry conducted behind the back of the assessee: The Id AO on pages 8, 9 & 10 of the impugned order has narrated the enquiries conducted with the stamp vendor to establish that the said stamp paper on which the said agreement is recorded was indeed purchased by the assessee. The appellant assessee vehemently denies this assertion and reiterates that the assessee has got nothing to do with it. The paper was not purchased by the assessee. No such register/paper was ever signed by the assessee. The Id. AO did not inform the assessee of this enquiry conducted behind his back. The Id. AO also erred grievously in not confronting the assessee with the said 'evidence' collected behind his back and which has also been put to use against him. This also is in gross violation of the principles of natural justice. In this context reliance is placed on judgment in the case of TLG India (P) Ltd. [2019] 109 taxmann.com 261 (Bombay), the jurisdictional HC, wherein it is held that principle of natural justice is violated if AO didn't put material before assessee based on which he passed the order, The Hon. HC set aside the order for this reason. 7.3 For the aforesaid gross violations of the principles of natural justice alone the case is bad in law and cannot be sustained. The Hon. Supreme Court in the case of Surinder Nath Kapoor v. Union of India [1988] 39 Taxman 374 had observed: "16. There can be no doubt that when an order is made for the payment of a fictitious sum without giving any opportunity to the person against whom the order is made, to show cause, against the passing of such an order for the said sum, the order is nullity. In other words, in the eye of law it will be deemed that there was no existence of such an order and any step taken pursuant to or in enforcement of such an order will also be a nullity...." (p. 380)" 7.4 Strict adherence to the principles of natural justice is the cornerstone of justice: On innumerable occasions these principles have been enunciated, explained and invoked by our esteemed courts. The elementary principle of Natural Justice in the Law of Taxation is that the assessee should have knowledge of the material which is being used against him by the assessing officer so that he may be able to meet it.
7 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023 In the case of Ram Chander, the Income Tax Appellate Tribunal relied on certain data supplied by the Income Tax Department behind the back of the assessee and without giving an opportunity to the assessee to rebut the same. The Apex Court in the said case of Ram Chander vs Union of India &Ors 1986 SCC (4) 12 held as under: "In principle, there ought to be an observance of natural justice called equally at both stages......If natural justice is violated at the first stage, the right to appeal is not so much a true right of appeal as a corrected initial hearing, instead of fair trial followed by appeal, the procedure is reduced to unfair trial followed by fair trial". It is relevant to refer to the case of Dhakeswari Cotton Mills Ltd. vs. CIT 1955 AIR 65, wherein the Apex Court emphasizing the requirement of application of principles of natural justice, observed thus: "It is surprising that the Tribunal took from the representative of the department statement of gross profit rates of other cotton mills without showing the statement to the assessee and without giving him an opportunity to show that the statement had no relevancy whatsoever to the case of the mill in question." 7.4.1 Following excerpt from Kirtilal Kalidas & Co. v. Deputy Commissioner of Income-tax. [1998] 67 ITD 573 (Mad) merits attention. "35. The principles of natural justice" demand that no man should be condemned without any hearing and that nothing should be done behind the back of any person who is likely to be adversely affected. This is based on the very well accepted maxim Audi AltemmPartem, ie, hear the other side. The fundamental idea of observance of the principles of natural justice is the recognised basic right of a human being to a fair trial or fair play in action or faimess in decision-making process whether it is administrative, judicial or quasi-judicial. The observance of the principles of natural justice was sanctified by the Supreme Court, first in the year 1967 while rendering the decision in the case of State of Orissa v. Dr. (Miss) Binapani Dei AIR 1967 SC 1269 and later on again in the year 1970 in the case of A.K. Kraipak (supra) as an essential part of any enquiry, function, act or process irrespective of its nature. This trend was further fortified by the Supreme Court in its landmark judgment in the year 1978 in the case of Smt. Maneka Gandhi (supra) and later in the case of Mohinder Singh Gill (supra).
It is now a well-established tenet laid down by the Supreme Court in the judgments rendered in the case of Swadeshi Cotton Mills v. Union of India AIR 1981 818 and in the case of Liberty Oil Mills v. Union of India AIR 1984 SC 1271 Following the decisions rendered in the cases of Dr. (Miss) Binapani Dei (supra), A.Κ. Kraipak (supra) and Smt. Maneka Gandhi (supra), that not only the principles of natural justice should be followed in all administrative and quasi-judicial processes and functions but 'breach' or 'violation' of the 'principles of natural justice' will render any decision or order void and a 'nullity"(emphasis supplied) 8. The Law of Evidence: It is most respectfully submitted that the Id. AO has acted upon a mere suspicion and has grossly erred in treating the suspicion as an irrefutable evidence. The Id. AO has chosen to forget that mere suspicion is not enough.
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The Id. AO has not brought on record any evidence to show that the assessee has, in fact, made any cash payment as per the document to Mr. Suresh and Shailesh Vakharia. Suspicion cannot take place of proof. (AIR 1994 SC 110) Surjeetsingh vs. State of Punjab.In the case of Daulatram Rawatmull [1964] 53 ITR 574 (SC) it is held that suspicion could not take the place of evidence. It is trite law that suspicion however strong cannot be a substitute for evidence. 1.1 In the case of Principal Commissioner of Income-tax, Central Ahmedabad v. Ajay Surendrabhai Patel, [2016] 69 taxmann.com 309 (Gujarat), it is held that where revenue failed to bring any material on record to show that assessee had paid any amount higher than amount stated in registered deed of sale of plots, impugned addition made was to be deleted. In that case One 'S' entered into agreement to sell various plots of land with 'V'. Some of plots were disputed lands which could not be transferred to 'V' due to pending civil suits. Said plots were ultimately transferred by 'S' to assessee. In case of search carried out at premises of "S', certain documents were seized. On basis of seized documents, Assessing Officer opined that assessee had paid certain amount over and above amount specified in agreement to sell which represented unexplained investment. Tribunal found that assessee was not a party to seized agreement of sale which was basis of making entire addition. Moreover, revenue could not bring any material on record to show that assessee actually paid any amount more than amount stated in registered deed of sale. On these facts, Tribunal deleted addition made by Assessing Officer. The Hon. H.C. found that findings recorded by Tribunal did not require any interference. 1.2 It is respectfully submitted that on identical facts wherein an addition was made based on photo copy of unsigned Agreement to Sale found from the premises of the assessee during action under section 132 of the Act the ITAT Hyderabad 'B' bench in the case of DCIT (Central Circle)-6 Vs. B. Vijay Kumar in & 931 of 2009 held the issue in favour of the assessee as under. "11. We have heard rival submissions, perused the material submitted before us and also perused the orders of the revenue authorities. On a reading of the assessment order, it is absolutely clear that the addition has been made entirely on the basis of the photocopy of the sale agreement seized from the residence of the assessee in course of search and seizure operation. Undisputedly, the sale agreement is only photocopy and has not been signed by the assessee. The assessee has also raised serious allegation regarding the seizure of the impugned document and filed affidavit before DDIT (Inv.) asserting that the said document was planted by an officer of the department also named by the assessee in the affidavit. However, such allegation of the assessee has not at all been enquired into and has been met with complete silence by the department. From the materials on record, it is very clear that the AO has failed to lay his hands on any credible evidence to establish the fact that the assessee has purchased the property for a consideration of Rs. 1,68,00,000/- as mentioned in the photo copy of sale agréernent seized in course of search andseizure operation, The assessee has produced before the AO registered sale deeds in support of its claim that they had purchased the property for a consideration of Rs. 23.50 lakhs. When the AO alleges that the assessee has paid more than what has been declared in the registered sale deed because the fair market value of the asset as on the date of transaction exceeds full value of consideration declared by the assessee then it is for the AO to prove that the value declared by the assessee is understated. In the 9 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023 appeal before us, excepting the photocopy of sale agreement, there is no other evidence on record found as a result of search or brought on record on the basis of enquiry conducted by the AO which could establish the fact that the actual consideration passed between the parties is not as mentioned in the registered sale deed but as per the sale agreement found during search operation. It is also an interesting fact to note that in the statement recorded from the assessee u/s 132(4) the revenue authorities have not put any question with regard to the sale agreement seized at the time of search and seizure operations. Smt. P. Nalini Devi also in her statement further clearly stated that the property was sold at Rs.23.50 lakhs and not at the rate of Rs. 1.68 crores. The Hon'ble Supreme Court in the case of K.P. Verghese reported in 131 ITR 597 has held that onus is on the department to prove that the assessee has understated the value of the property and has paid more than what is mentioned in the registered sale deed. The Hon'ble Supreme in the case of Moosa S. Madha and Azam S. Madha vs. CIT(89 ITR 65) has held that photo copies have little evidentiary value. Therefore, photocopies of any document cannot by itself be considered as evidence for purpose of making addition in assessment proceedings. The AO is required to bring further evidence on record to show that the sale agreement was actually acted upon by the parties. This is because of the fact when the AO is going to make an addition, there should be sufficient evidence brought on record to support such addition. No addition can be made on conjectures and surmises."
The learned CIT(A), considering the submissions made by the assessee as aforesaid, deleted the addition of ` 1,62,35,000, made by the Assessing Officer under section 69 of the Act by observing as under:–
“The appellant has raised Nine grounds of appeal out of which ground no.1, ground no. 2, ground no. 4, ground no. 5, ground no. 6, ground no. 7, ground no. 8 and ground no. 9 are general in nature and not adjudicated. Hence these grounds of appeal are hereby dismissed. Ground no.
3. This ground is regarding the addition of Rs. 1,62,35,000/-u/s
69. The appellant purchased a property bearing Plot No. 51 at Central Road Section III scheme of NIT, Hiwari, Nagpur vide sale deed dated 29.9.2017 (related to AY 2018-19) for a total consideration of Rs. 1,41,00,000/- from Shri Wardhman Sahakari Griha Nirman Samiti Ltd. In the transaction, Shri Suresh akharia, Shri Shailesh C. Vakharia and Shri Mahaveer C. Vakharia are Oasenters. During search proceedings a document regarding agreement to sale was seized from the residence of Shri Parag Suresh Vakharia. This document is a photocopy of some agreement purported to be executed between Shri Suresh C. Vakharia, Shri Shailesh C. Vakharia and Shri Mahaveer C. Vakharia as sellers and Shri Brindesh Agrawal as purchaser. The document mentioned cash payment of Rs. 1,62,35,000/- by purchaser to the seller. On the basis of this document AO passed the order u/s 143(3) r.w.s.153C on 29.09.2021 and made an addition of Rs. 1,62,35,000/- being unexplained investment u/s 69 of the Act to the returned income, treating the contents of this document as true. There is no corroborative evidence in the case to fasten the liability on the 10 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023 appellant. Insofar as the presumption under section 292C of the Act, it is now a settled law that the section imposes a rebuttable presumption. Of course, the appellant has to bring out clearly the reasons why reliance cannot be placed on the document. On perusal and careful consideration of the appellant submission I find merit in the arguments advanced in this behalf. The document is actually a photocopy seized from the premises of a third party and contents of this document cannot be verified independently as no original document of this nature has been found. The appellant has pleaded that a number of such photocopies can be prepared with malicious intent by the persons from whose custody the document has been recovered. Since the document has not been seized from the custody of the appellant it cannot be said to be belonging to the appellant. The document has not been signed by the appellant, the same is an undated document and it does not bear any imprint of the appellant to infer that the appellant was indeed in know of the document. settled law that the section imposes a rebuttable presumption. Of course, the appellant has to bring out clearly the reasons why reliance cannot be placed on the document. On perusal and careful consideration of the appellant submission I find merit in the arguments advanced in this behalf. The document is actually a photocopy seized from the premises of a third party and contents of this document cannot be verified independently as no original document of this nature has been found. The appellant has pleaded that a number of such photocopies can be prepared with malicious intent by the persons from whose custody the document has been recovered. Since the document has not been seized from the custody of the appellant it cannot beThe appellant has also painstakingly brought out that material facts like the payment by cheques as mentioned in the document are not mentioned in the actual sale deed executed on 29.09.2017 and registered under law. Further, the amounts mentioned in the said document are handwritten which have not been countersigned by the appellant as is required under law to presume that the contents are true. I also find that no evidence linking the appellant to the handwriting on the document is available. It is noteworthy that the document does not bear signatures of all other parties to the transaction also. From the assessment order it is seen that the AO made some inquiry from stamp vendor and concluded that the stamp paper, on which alleged agreement to sale is executed, was purchased by appellant. The appellant has vehemently denied this assertion and has categorically stated that he has got nothing to do with it. The paper was not purchased by the appellant. No such register/paper was ever signed by the appellant. It has also very forcefully argued that the Id. AO did not inform the appellant of this enquiry conducted behind his back. Further, the AO also erred grievously in not confronting the appellant with the said 'evidence' collected behind his back and which has also been put to use against him. This also is in gross violation of the principles of natural justice. The appellant has placed reliance on the decision of the Hon. Jurisdictional H.C. in the case of TLG India (P.) Ltd. [2019] 109 taxmann.com 261 (Bombay) wherein it is held that principle of natural justice is violated if AO didn't put material before appellant based on which he passed the order. The Hon'ble HC set aside the order for this reason. In the case of Ram
11 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023
Chander, the Income Tax Tribunal relied on certain data supplied by the Income Tax Department behind the back of the appellant and without giving an opportunity to the appellant to rebut the same. The Apex Court in the said case of Ram Chandervs Union of India &Ors 1986 SCC (4) 12 held as under: "In principle, there ought to be an observance of natural justice called equally at both stages...... If natural justice is violated at the first stage, the right to appeal is not so much a true right of appeal as a corrected initial hearing, instead of fair trial followed by appeal, the procedure is reduced to unfair trial followed by fair trial". The appellant has also relied on Surinder Nath Kapoor v. Union of India [1988] 39 Taxman 374, Dhakeswari Cotton Mills Ltd. vs. CIT 1955 AIR 65, KirtilalKalidas& Co. v. Deputy Commissioner of Income-tax.[1998] 67 ITD 573 (Mad), etc in support. From the assessment order it is clear that the material collected by the AO from the said enquiry with the stamp vendor was never put before the appellant for his rebuttal. The ratios of various decisions cited supra including the one of the Hon. Jurisdictional H.C. can lead to only one conclusion that this indeed is a fatal flaw and the assessment order suffers from the vice of serious violation of natural justice. The AO has not brought on record any evidence in support of his claim that the appellant did pay a sum of Rs. 1,62,35,000/- over and above the value and amount mentioned in the registered sale deed for the purchase of property. of the assessment order I find that there is no confession from any of the sellers that he/they actually received Rs. 1,62,35,000/- in addition to amount mentioned in the registered sale deed. There is no such evidence coming from the person from whose custody and premises the impugned document has been seized. I also find that no corroborative evidence has been mentioned in the assessment order by the assessing officer. It is clear from the assessment order that the only evidence which has been relied upon by the assessing officer is the seizure of the impugned document. On facts, a very heavy reliance has been placed by the appellant on the decision of the ITAT Hyderabad 'B' bench in the case of DCIT (Central Circle)-6 Vs. B. Vijay Kumar in & 931 of 2009. On perusal of this decision it is seen that in that case also the addition was made entirely on the basis of a photocopy of an agreement seized during search operation. That photocopy was also not signed by the appellant In that case also the assessing officer did not have any credible evidence to establish any payment over and above the registered document. In para-11 of the order the honourable ITAT has held that, "In the appeal before us, excepting the photocopy of sale agreement, there is no other evidence on record found as a result of search or brought on record on the basis of enquiry conducted by the AO which could establish the fact that the actual consideration passed between the parties is not as mentioned in the registered sale deed but as per the sale agreement found during search operation" In that case also there was no evidence coming from the second party to the transaction that amount over and above that mentioned in the registered document had changed hands. The honourable ITAT in para 11 of the order further held that "The Hon'ble Supreme Court in the case of Moosa S. Madha and Azam S. Madha vs. CIT (89 ITR 65) has held
12 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023 that photo copies have little evidentiary value. Therefore, photocopies of any document cannot by itself be considered as evidence for purpose of making addition in assessment proceedings. The AO is required to bring further evidence on record to show that the sale agreement was actually acted upon by the parties. This is because of the fact when the AO is going to make an addition, there should be sufficient evidence brought on record to support such addition. No addition can be made on conjectures and surmises." Considering all the above facts and circumstances of the case and especially that there is no corroborative evidence to fasten a liability on the appellant. The impugned addition of Rs. 1,62,35,000/- made u/s. 69 of the Act is therefore ordered to be deleted. Hence this ground of appeal is hereby "allowed".”
7. The learned Departmental Representative relied on the assessment order passed by the Assessing Officer.
The learned Counsel for the assessee reiterated the submissions made before the learned CIT(A) and prayed that the impugned order passed by the learned CIT(A) be upheld.
We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. We find that the Assessing Officer made addition on the basis of photocopy of sale deed where there is no signature of the assessee which was found at the residential premise of Shri Parag Suresh Vakharia. Further we find that the case of the assessee before us is, the assessee purchased a property through a registered sale deed dated 15/04/2017, for a consideration of ` 1,41,00,000, from Shri Wardhman Sahakari Griha Nirman Samiti Ltd. The assessee submitted that the no addition can be made on the basis of photocopy of sale agreement in view of the judgment of the Hon’ble Supreme Court in Moosa S. Madha and Azam S. Madha v/s CIT, 89 ITR 65 (SC). It is the argument of the learned counsel for the assessee that once the property is acquired through a 13 Shri Brindesh Goverdhandas Agrawal ITAn o.258/Nag./2023 registered sale deed, it is a conclusive proof for the sale mentioned in the sale deed which is final unless contrary is proved. We also find that the unsigned photocopy of sale agreement found at the premises of third party which the Assessing Officer has not allowed the assessee to cross–examine, therefore, the addition cannot survive. The Assessing Officer has relied on the paper which was found at the premises of third party, the assessee ought to have been provided opportunity by the Assessing Officer to cross–examine and no such cross–examination was provided which is clear violation of the law laid down by the Hon’ble Supreme Court rendered inAndaman Timber Industries v/s CIT, (2015) 62 taxmann.com 003 (SC), wherein the Hon’ble Supreme Court held that when statements of witnesses are made basis of demand, not allowing assessee to cross-examine witnesses, is a serious flaw which makes order nullity, as it amounts to violation of principles of natural justice. Accordingly, we hold that no interference is warranted in the order passed by the learned CIT(A) which is hereby upheld by dismissing the grounds raised by the Revenue.
In the result, appeal by the Revenue stands dismissed. Order pronounced in the open Court on 10/02/2025