INDER SINGH,NEW DELHI vs. ITO, NEW DELHI

01 This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-15, New Delhi for Assessment Year 2009-10. Following grounds of appeal are raised.

2.1. The Ld. CIT(A) failed to appreciate the fact that the cash was deposited out of cash withdrawn from the bank accounts and advance received back from Three persons to whom advance was given by the assessee in preceding year for the purchase of agricultural land, who confirmed the return of advance to the assessee in response to notice u/s 133(6) of the Act and subsequently in their statement recorded by the Id. ITO u/s 131 of the Act.

2.2 The Ld. CIT(A) failed to appreciate the fact that the Assessee has income only from "Other sources‟- bank interest and „Agricultural and the Assessee has no business; and therefore, the Assessee is neither required by law nor is maintaining book of accounts and therefore, addition u/s 68 of the Act is bad in law; and without prejudice the deposit in Bank account cannot be added u/s 68 of the Act.

02 The brief facts of the case is that the assessee is an agriculturist and has source of income from agricultural activities and interest from savings bank account. The assessment in the case was completed on 22/12/2011 at Rs. 5,47,660/- against the returned income of the assessee of Rs. 4,47,600/-. Subsequently, the Ld. CIT(A), Delhi passed an order u/s 263 of the Act on 28/3/2013 cancelling the assessment originally passed u/s 143(3) of the Act and directed the Ld. Assessing Officer to pass fresh order. Consequent to that assessment u/s 143(3) read with Section 263 of the Income Tax Act was passed by the Ld. A.O. on 31/3/2014 computing the total income of the assessee at Rs. 1,67,43,260/- against the returned income of the assessee of Rs. 4,47,660/-. 03 During the assessment proceedings, it was found that the assessee has deposited a sum of Rs. 1,59,15,000/-in his bank account in cash. The assessee maintained three bank accounts in which this sum was deposited. The A.O. asked the assessee to furnish the source of the cash deposits. The assessee explained that a sum of Rs. 37,85,000/- is his income from agricultural produce and balance Rs. 1,21,30,000/- was repayment of amount from Shri Rajbeer Singh, Dilbar Singh & Shri Devi Das to whom the assessee has given sums for purchase of agricultural land earlier. Before the Assessing Officer, assessee did not file any agreement to sale , copy of the income tax return and bank statement of those parties. No specific details about the date and the purpose of cash payments were also filed. Therefore, the Ld. A.O. held that this amount deposited by the assessee is unexplained income of the assessee. With respect to the agricultural income, assessee filed only evidence in the form of a letter from Sarpanch that assessee is having agricultural land. The Assessing Officer did not accept the fact, however, because of the holding of the land the A.O. allowed a sum of Rs. 30 lacs as income from agricultural produce. The balance sum of Rs. 7,85,000/- was also added along with the bank deposits u/s 68 of the Act. Therefore, out of the cash deposited in the bank accounts of Rs. 1,59,15,000/-, ld A.O. made an addition of Rs. 1,29,15,000/-. 04 The Assessing Officer further found that during the year the assessee has purchased property of Rs. 73.85 lacs as per the sale deed furnished. For the purpose of the valuation, matter was referred to the DVO. However, valuation could not be obtained because of non-cooperation by the assessee. Therefore, the A.O. deputed an Inspector who submitted a report on 10 March 2014, upon the local enquiries. He submitted that market value of such property is Rs. 1 Crore. Therefore, the Ld. Assessing Officer made an addition of Rs. 26,15,000/- to the total income of the assessee. 05 Assessee challenged the order of the A.O. before the Ld. CIT(A) who confirmed the addition of Rs. 1,29,15,000/- on account of cash deposit in the bank account. With respect to the addition of Rs. 26,15,000/- on account difference in valuation of properties purchased, He also upheld the addition. Therefore, the assessee is aggrieved with his order, has filed this appeal. 06 The Ground No. 1 is general in nature and therefore, it is dismissed. 07 The Ground No. 2 is against the addition of Rs. 1,29,15,000/- u/s 68 of the Act. The Ld. Authorized Representative reiterated the submissions made before the Ld. Assessing Officer and the CIT(A). He referred to Para No. 6 of the order of the Ld. CIT(A) to show that the assessee submitted the additional evidence before the Ld.

CIT(A) for deposit of cash in various bank accounts. He submitted that when the assessee has given the complete details with respect to the various cash deposits received, there is no reason to make an addition. He submitted that complete details were submitted with respect to Shri Rajbeer Singh, Dilbar Singh & Shri Devi Das. He further stated that all of them have confirmed that they have given this money to the assessee. In view of this, he submitted that the addition made by the Ld. CIT(A) is not sustainable. With respect to the agricultural produce, he submitted that the assessee has shown agricultural income of Rs. 37,85,000/- out of which the Assessing Officer has already accepted Rs. 30 lacs and there is no reason to not to accept the balance sum when the assessee is found to be the owner of the huge agricultural land. 08 The Ld. Departmental Representative vehemently supported the order of the Ld. A.O. and the CIT(A). 09 We have carefully considered the rival submission and perused the order of the Lower Authorities. The assessee is an agriculturist who has deposited a sum of Rs. 1,59,15,000/- in his saving bank account maintained with Punjab National Bank, Punjab & Sindh Bank & HDFC Bank. To show the source of the cash deposit, the assessee submitted that Rs. 1,21,30,000/- was repayment of amount from three persons namely Shri Rajbeer Singh, Dilbar Singh & Shri Devi Das whom the assessee has given cash for purchase of agricultural land earlier. The assessee submitted the date wise chart of cash deposit and the source of deposit of the cash. He further stated that summons u/s 131 was issued to all three persons who attended and they confirmed that they have received the money from the assessee in Assessment Year 2007 to make arrangement for purchase of an agricultural land and, therefore, as the land could not be purchased sum was returned. The Ld. CIT(A) has dealt with the whole issue vide Para No. 8 & 9 of his order as under.

“8. I have considered the facts of the case, remand report of the AO and submissions of appellant. Firstly, I take the issue of explaining the source of cash deposits out of money received from Sh. Devi Dass, Sh. Rajbir Singh & Sh. Dalbir Singh amounting to Rs. 41,90,000/-, Rs. 50,40,000/- and Rs. 29,00,000/- respectively. During the assessment proceedings, no submissions were given by appellant in this regard but during appellate as well as remand proceedings, it has been submitted that money was advanced by appellant to these three persons for purchase of land and since the purchase was not materialized, money was returned back by these persons to appellant and the same was deposited in his bank accounts. However, as investigated by AO during the remand proceedings and in view of the facts emerged during recording of statements of aforesaid persons, there are many discrepancies in the version of appellant. As reported by AO in his remand report and as emerged from the statements recorded on oath, Shri Devi Dass does not own any land. He has taken land measuring six and half acres from the assessee against the payment of rupees ten thousand per acre per annum from which we earns net income of Rs. 80-90 thousand. In addition to this, he has claimed to have running a dairy and out of selling milk he earns 4-4.50 lacs per annum. He maintains his family of six persons out of this income. However, as claimed by him, he filed return of income disclosing income below taxable limit. it has been further claimed by him during the statements that the cash money of Rs. 41,90,000/- was taken by him from appellant in the year 2007 but did not remember the dates or months and also failed to submit any document/evidence in support of his claim. On enquiry about why the sale could not be materialized, he stated that the joint owners of the land could not reach to a common consensus. There is a mention of the 'Bayana Slip' also but neither the assessee nor Sh. Devi Dass could produce any such document. The claim of Sh. Devi Dass that he had submitted letter dated Nil to erstwhile AO mentioning specific amount and dates on which he returned the money to appellant, could also not be established as neither such letter was found on record nor Sh. Devi Dass could adduce any such evidence. In the statements recorded, Shri Devi Dass categorically stated that he does not do property-dealing business, thus, he was not having any experience in this line. Thus, whatever was stated by Shri Devi Dass before AO, was not supported with any factual details or documentary evidence. Similarly, in the case of Shri Rajbir Singh, the reason given by him for not materializing the sale that the joint owners of such land could not reach to a common consensus, is repetition of same reasons given by Sh. Devi Dass, as above. In the statements recorded, Shri Rajbir Singh categorically stated that he does not do property-dealing business, thus, he was not having any experience in this line. He further admitted that despite having bank account, he did not deposit the money of such a large sum, but kept with him only. Here also, Sh. Rajbir Singh submitted a letter dated Nil, similar to one submitted by Sh. Devi Dass, allegedly written to erstwhile AO was neither found on the record nor any evidence could be produced by Sh Rajbir Singh to establish that any such letter was furnished by him. In the case of Shri Dalbir Singh, son of the appellant Sh. Inder Singh, he has admitted to have income below taxable limit. He also has claimed to receive Rs 29 Lakhs from his father to purchase the land in 2007 but did not remember the date or month. He also has repeated the same reason for not purchasing the land and returning the money to appellant that the joint owners of the land could not reach a common consensus for selling the land. He also admitted in the statement that he has no document/evidence to establish the aforesaid transactions. Thus, in all three cases, none of the persons could furnish any real time evidence, which could be verified from the transactions allegedly entered into by the appellant and these persons. All the three persons and appellant have concocted the story of advancing the money in cash for purchase of non- existing land and receiving back the sale money. All four persons have bank accounts opened in their names but transactions claimed to have been made in cash only which are not verifiable with any documentary evidence. Despite having bank accounts, they have kept amounts of cash in their hands for such a longer period, which is difficult to believe. None of these three persons is having experience of purchase and sale of property but they took advance in cash from appellant for purchase of unidentified land and till the date of recording the statements by A.O., not a single piece of land was purchased by them for appellant. There is no agreement, third party witness or third party evidence wherefrom the cash transactions entered into by appellant with these parties could be verified. All the evidence furnished by appellant is self-serving evidence, which lack all sorts of credibility. Thus, in view of aforesaid discussion, it is held that the appellant has failed to explain the source of cash deposits of Rs. 41,90,000/-, Rs. 50,40,000/- and Rs. 29,00,000/-in the names of Sh. Devi Dass, Sh. Rajbir Singh & Sh. Dalbir Singh respectively. The conclusion drawn by AO is hereby substantiated to this extent.

9. The balance amount of Rs. 7,85,000/-, treated by AO as unexplained cash credits, relates to the agricultural income. During the assessment proceedings, it was observed by AO that appellant has claimed the amount of Rs. 37,85,000/- as agricultural income. In absence of any details on behalf of assessee in support of the said agricultural income, he treated the amount of Rs. 30,00,000/- as unexplained agricultural income and balance amount of Rs. 7,85,000/- as his undisclosed income and added to his income.

9.1. During the appellate proceedings, it is submitted by appellant that he has been showing agricultural income in preceding years as well as subsequent years also. Further, in support of agricultural activity carried out by him, copies of Form J showing the sale of agricultural produce on sample basis and Khasra Girdawari on sample basis have been submitted with the submissions that the balance income of Rs. 7,85,000/- also be considered as agricultural income.

9.2. I have considered the facts of the issue and submissions of appellant. As it is clear from the submissions of appellant, he has submitted the copies of documents in support of ownership of land. However, there are prescribed rules for computing the agricultural income to be shown as exempt in the return of income. As per Rule 2 of the Finance Act of that year, agricultural income of the nature referred in sub- clause (b) or sub-clause '(c) of clause (1A) of Section 2 of I.T. Act 1961. shall be computed as if it were income chargeable to income tax under the Act under the head "Profits and Gains of Business and Profession" and the provisions of Sections 30, 31, 32, 36, 37,38,40,40A [other than sub section (3) and (4) thereof], 41,43,43A,43B and 43C of I. T. Act shall, so far as may be, apply accordingly. Thus, the agricultural income has also to be computed as business income and profit and loss has to be prepared by assessee. But in the case of appellant, he has merely disclosed the net figure of agricultural income but failed to disclose the gross receipts out of sale from the agricultural produce. He has not even furnished the details of various expenses incurred by him under the head such as purchase of seeds, irrigation expenses, labour expenses, purchase of fertilizers, transport expenses etc. to arrive at the net figure of agricultural income. The item wise details of expenses have also not been furnished by appellant. In absence of all these details, the figure of agricultural income disclosed by appellant cannot be accepted. In my opinion, the estimation by AO of the amount of Rs. 30 lacs would be reasonable as agricultural income taking into consideration the facts and circumstances of the case and submissions given by appellant. The balance amount of Rs. 7,85,000/- is treated as income from undisclosed sources under the head other sources. Thus the additions made by AO are confirmed and ground taken by appellant is dismissed.”

10 The Ld. CIT(A) found that the statement recorded of those persons disclosed many discrepancies. One person who received the money from the assessee did not own any land. Further, they also do not remember the dates or months on which they received the money from the assessee, which is now returned. Further, the „Bayana Slip‟ was also not produced. Further, the earlier letters written to the Assessing Officer as claimed by the assessee were also not found on the record by the ld CIT (A) . In another person‟s case, the same reasons were found which were explained by the assessee with respect to the third person who is son of the assessee also did not remember any reference of cash receipt from the assessee. In absence of any such evidences about the receipt of the cash and repayment of the cash despite those persons having proper bank account and absence of any purchase of land by the assessee, whole explanation of the assessee lacks credibility . With respect to the agricultural income, the reasons given by the ld CIT (A) are sound. Merely possession of land does not entitle assessee to claim any amount of income as agricultural income. The agricultural income is also required to be demonstrated by proper evidences which assessee has failed to show. In view of this, we do not find any infirmity in the order of the Ld. CIT(A) in confirming the addition of Rs. 12915000/- u/s 68 of the Act. Accordingly, Ground No. 2 of the appeal is dismissed. 11 Ground No. 3 of the appeal is with respect to the addition of Rs. 2615000/- u/s 69B of the act. The Ld. Authorized Representative submitted that addition has been made based on the valuation of property based on local inquires by the Income Tax Inspector who is not a competent person to make valuation of the properties. He further submitted that the Ld. CIT(A) has also confirmed the addition on the said available material. He, therefore, submitted that the addition made by the A.O. based on the valuation report of the Inspector is not sustainable.

12 The Ld. Departmental Representative vehemently relied upon the order of the Ld. Lower Authorities. He submitted that Assessee has thwarted the inquiry by DVO by not replying him or not giving information called for . Hence, AO did not have any other sources to make inquiry and he deputed the Inspector for local Inquiries. He stated that inspector has not valued the property but it is his inquiry made which shows that market value of the property purchased is much higher. 13 We have carefully considered the rival contentions and find that the assessee has invested substantial sum in purchasing of several immovable properties for Rs. 7385000/-. The Assessing Officer tried to find out the correct valuation of the properties and, therefore, he referred the matter to the Ld. District Valuation Officer. Because of the non cooperation of the assessee, valuation Officer could not make valuation of the properties and, therefore, ld AO deputed the inspector who on the basis of the local enquiries reported that the market value of the property purchased by the assessee is of Rs.1 crore and, therefore, the addition of Rs. 26,50,000/- was made to the total income of the assessee. The Ld. CIT(A) also confirmed the addition. In the present case, it is apparent that the Ld. Assessing Officer referred the valuation of the properties to the Ld. Departmental Valuation Officer but due to non-cooperative attitude of the assessee, no reply was given of the letters and queries of the DVO. The A.O. did not have any other option but to conduct the local enquiries through the Inspector for finding out the valuation of those properties. Even before the Ld. CIT(A), the assessee did not furnish any evidence to show that valuation adopted by the A.O. is in correct. He has also not challenged before us also about the valuation of those properties.

The procedure adopted by the A.O. was also not controverted. The Ld. CIT(A) has dealt with the whole issue vide Para No. 10 of the order wherein he confirmed the addition as under:-

“10. Ground No. 3 taken by appellant relates to the addition of Rs. 26,15,000/- on account of unexplained investment u/s 69B of the Act. As mentioned above, during the assessment proceedings, it was observed by AO that the assessee has invested in properties valued at Rs. 73,85,000/- and to verify the actual investment, he referred the matter to District Valuation Officer to which appellant did not respond. On the basis of the report of ITI he estimated the aggregate value of the properties at Rs. 1.00 crore against the investment of Rs. 73,85,000/- as shown by assessee. Consequently addition of Rs. 26,15,000/- was made by AO u/s 69B of the Act. During the j appellant proceedings, appellant gave his submissions as under:-

“14 It is submitted that the case of the Id.ITO is that the Inspector on the basis of local enquiry has estimated the market value / purchase consideration at Rs. 1.00.00.000/- whereas the declared consideration is Rs. 73.85.000/- and therefore, made addition of Rs. 26,15,000/- on account of unexplained investment in purchase of the various properties listed at page 2 of the assessment order u/s 69B of the Act.

In this regard, at the outset, it is submitted that there is no direction by the Id. ITO to the Inspector to visit the plots and find the estimated value.

It is further submitted that the Inspector has not mentioned the name of any local resident or. property dealer, from whom the purported enquiry was made.

It is also submitted that out of the six plots under consideration the sale of the deed is only in respect ofplort at serial No.3 (AO page 2) and in respect of other plots there is no sale deed, but agreement to sell,etc. are there: and therefore, the statement that the sale deeds were shown to the local residents and proprety dealers is factually incorrect.

“In this regard kind attention of your honour is drawn to the cases mentioned below:

1) CIT Vs. Puneet Sabharwal, IT A No. 758/2005 decided on 03-12- 2010 (Del - HC) (page 40 to 44), CIT V s. Rashmi Chauhan, (2) 1 0 decided on 26-11- 2010 (Del- HC) (page 45 to 47), CIT Vs. Lahsa Construction (P.) Ltd., 357ITR 671 (3)

(Del), K. P. Varghese V. ITO. (1981) 7 Taxman 13 (4) (SC) = (1981) 24 CTR 358 =(1981) 131 ITR 597. (5) CIT v. Naresh Khattar (HUF), (2003) 261 ITR 664 (DEL) (2003) 183 CTR 317:

Therefore. if the Revenue seeks to hold that the assessee has received more than what has been declared by him in respect of the assessment in question, the onus would lie on the Revenue to prove this fact by bringing seme material on record.

We feel that the Tribunal was correct in holding that merely because counsel for the assessee made a statement in a civil court that the total investment in the property was Rs. 13 crores and odd, it would not be sufficient material to come to the conclusion that the said figure represents the actual investment.

(6) Ms. Madhu Sharma V. ITO. (2004)91 TTJ 894 (DEL)

"we have also examined the legal position whether the sale consideration declared by the assessee can be discarded by the Revenue without bringing anything on record. For this issue we may refer to the order of the Tribunal till the case of Sanjay Chawla v. ITO. (2004) 82 TTJ 407 (Del) in which the Tribunal has examined various judgments including the landmark judgment of the apex Court till the case of K. P. Varghese V.ITO (supra) on this issue and arrived at a conclusion that without bringing anything on record that some money over and above have passed over to the seller the A.O. cannot estimate his own fair market value. The Tribunal has gone to the extent by saying that even if the market value of the property appears to be higher than the consideration declared by the assessee in the sale document, this cannot by itself be a sale ground for treating the difference between the declared consideration and market value as unexplained investment/receipt. The Revenue is saddled with the onus to establish that higher consideration has been paid over and above the consideration indicated ill the sale documents. In support of this contention, we may refer to the judgment of the jurisdictional High Court in the case of CIT v. Ms. Sushila Mittal & Ors.(2001)250 ITR 531 (Del) and CIT v. Shri Gulshan Kumar (2002) 175 CTR (Del) 416. In the instant case, the Revenue has not brought anything on record to form an opinion that some higher amount than the consideration declared by the assessee in the sale documents was passed over to the assessee. The AO has simply made reference to the valuation officer, who valued the fair market value of the property on the basis of certain instances of sales of plots in a different Locality. In the light of these facts the fair market value estimated by the AO on the basis of the valuer's report does not appear to us to be correct. We. therefore, set aside the order of the lower authorities on this aspect and direct the AO to adopt the value of the property declared by the assessee in the sale deeds.

10.1 I have considered the facts of the issue and submissions of the appellant, it is apparent from the facts that during the assessment proceedings, nothing was submitted by the assessee in this regard. Rather, no submission at all were given during the assessment proceedings by the assessee. When the matter was referred by AO to DVO oh to ascertain the correct valuation of the properties, again, known cooperative attitude was adopted by the assessee and no reply was given to the letters/reminders of the DVO. Since nothing was coming out from assessee in respect of correct valuation of property, AO deputed his ITI to make local enquiries and ascertaining market value of the properties and on the basis of the report of I T I, investment in the properties was ascertained by AO and difference of Rs. 2 6, 15, 000/– was treated as unexplained investment under section 69B of the act. During the appellate proceedings also, appellant has failed to discharge the onus and no evidence was given by him to establish that the AO has wrongly estimated the valuation of properties. He has only objected to the procedure adopted by AO for valuation of property though he himself did not follow any procedure laid down by the income tax law will stop the onus was on appellant to counter the procedure adopted by AO and valuation of the property estimated by him, but he failed to do so. In view of this, I hold that the addition made by AO is justified. The ground taken by the appellant is dismissed."

14 On careful analysis of the order of the Ld. CIT (A), it is noted that appellant has never disputed that how the valuation of properties backed by local enquiries by the inspector is incorrect. The issue raised by the assessee that Inspector reports were not made available to him by the AO and therefore that cannot be refuted before him. However, this argument is devoid of any merit, as even before the CIT appeal or before us, it was not stated that which property was valued higher by the assessing officer. It is further affect that most of the properties are merely backed by agreement to sell and therefore there cannot be any document price for sale. However, the argument of the assessee with respect to property No. 551, 552 and 553 at village Dindarpur which were purchased in the auction from the debt recovery tribunal the valuation of same cannot be different from the value shown by the assessee. However, such facts were not produced by the assessee before the assessing officer. In view of this to the extent of the valuation of property purchased by the assessee in auction cannot have different market value. The addition made by the Ld. assessing officer for that property is Rs., 5, 15,000/- as assessee has shown the purchase consideration of Rs. 14.85 Lacs whereas the assessing officer has valued at Rs. 20 lakhs cannot be sustained. Therefore we direct the Ld. assessing officer to delete the addition of Rs. 5, 15, 000/– out of the total addition of Rs. 2 6, 15, 000. For the balance addition of Rs. 21 Lacs, We do not find any infirmity in the order of the Ld. CIT(A). Hence, the addition made by the Ld. Assessing Officer is confirmed to the extent of Rs. 21 lakhs only. In view of this, Ground NO. Three of the assessee‟s appeal is partly allowed .

15 For Ground No. 4 to 10, no specific arguments were advanced before us. In view of this, we dismiss the same. 16 In the result, the appeal filed by the assessee is partly allowed.

Order pronounced in the Open Court on 23rd August, 2018.