THE DY. COMMR. OF INCOME TAX, CIR.-1(1), RAJKOT-GUJARAT vs. SMT. KRUSHNABA P. JADEJA,, RAJKOT-GUJARAT

Succinct facts qua ground Nos. 1 and 2 are that assessee before us is an individual, and filed the return of income, showing income of Rs.44,99,170/-, on 29.09.2012. The assessee, is engaged in the business of finance and also deals in the real estate. The assessee has also shown agricultural income of Rs.40,68,913/-. The assessee’s case was selected for scrutiny through CASS and notice u/s. 143(2), dated 06.08.2013 of the I.T. Act, was issued and which was duly served upon the assessee. Subsequently, notice u/s 142(1) of the Act dated 14.08.2014, was issued and served on the assessee, calling for various details relevant to the assessment. In response to said notices, the A.R. of the assessee attended from time to time and furnished the details called for, before the assessing officer. During the course of assessment proceedings, the AR of the assessee filed written submissions, before the assessing officer, on dated 06.10.2014, 17.10.2014, 13.11.2014 and on dated 10.02.2015, with supporting documents and evidences. During the year under consideration, the assessee has sold altogether 38 plots of land for an aggregate consideration of Rs. 2,79,06,710/-, on which the assessee has shown “Short Term Capital Gain" of Rs. 45,03,271/-.

The Assessing Officer, after going through the balance-sheet of the assessee, as on 31.03.2012, noticed that a sum of Rs.99,76,000/-, was shown by assessee under the head "Sundry Creditors". On being asked to furnish the details of the amount, it was explained by the assessee that the amount of Rs.99,76,000/-, so mentioned in the balance-sheet, represents the amount of money received as advance, being a sum of Rs.48,25,000/- against the Satakhat, that is, Agreement to sale (Kabja Vagar) of the proposed sale of agricultural land, at Survey No. 517/1 paiki land &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja admeasuring 2 Acre and 20 Guntha and advance of Rs. 51,51,000/-, was against the proposed sale of land, at Survey No. 504 paiki land admeasuring 2 Acres and 20 Gunthas. The Assessing Officer noticed that a sum aggregating Rs.48,25,000/- was claimed to have been received in cash for the Satakhat, dated 28.03.2012, for the proposed sale of agricultural land, at Survey No. 517/1 paiki land, admeasuring 2 Acre and 20 Guntha from the following 8 persons:

Shri Anilsinh Chandubha Jadeja 437018 25.02.2013 5,70,000/- 2. Shri Ashoksinh Chandubha Jadeja 437019 25.02.2013 5,70,000/- 3. Shri Girirajsinh Chandubha Jadeja 437020 25.02.2013 5,70,000/- 4. Shri Mahipalsinh Harishchandrasinh 437021 25.02.2013 5,70,000/- Jadeja 5. Shri Bhagvatsinh Tapubha Jadeja 437022 25.02.2013 5,70,000/- 6. Shri Jogendrasinh Bhagvatsinh Jadeja 437023 25.02.2013 5,70,000/- 7. Shri Rushirajsinh Bhagvatsinh Jadeja 437024 25.02.2013 5.70,000/- 8. Shri Chatursinh Ranubha Jadeja 437025 25.02.2013 5,70,000/- 9. Shri Bhavubha Khengarji Jadeja 437026 25.02.2013 5,91,000/- Total 51,51,000/- 10. In this connection, an attempt has been made by the Assessing Officer to verify the genuineness of the transactions claimed to have been made with the aforesaid persons by recording the statements u/s. 131 of the Act and by making enquiry with the bank. The outcome of the enquiry so made is reproduced by the Assessing Officer in the assessment order Page No. 6 of assessment order.

However, the Assessing Officer rejected the above submissions of the assessee and observed that the assessee has introduced her own unaccounted money aggregating Rs. 99,76,000/-, in the guise of advances received from the aforesaid 17 persons.

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has deleted the addition made by the Assessing Officer. Before, ld CIT(A), the assessee submitted that whole amount was refunded to those persons, in next year as these persons could not make balance payment, as agreed in the said Satakat (agreement). The assessee also submitted that all the persons are having substantial land holdings and all have confirmed having made advances to the assessee and have also confirmed having received the refund of their advances and these persons have confirmed the transactions, even in their &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja statement recorded by the assessing officer. The ld CIT(A) observed that assessee has discharged her onus by proving the identity, creditworthiness and genuineness, as the receipt of advances and refund of advances are also proved by confirmations/statements of the persons concerned. The ld CIT(A) also observed that the confirmations by these persons are the most important evidence in this regard and by no means the Setakat (agreement) in question can be said to be legally invalid. The ld CIT(A) also noticed that Assessing Officer has not brought any material on record, which even indicates that the advances shown are in fact the assessee's own money. Based on these facts and circumstances, the learned CIT(A) deleted the addition.

Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.

Learned CIT-DR of the Revenue, argued that all persons are agriculturist and not having any PAN number. These creditors were not filing any return of income. The money (advance) was taken from these 17 persons based on the Satakat (agreement), which was not genuine. The Ld. D.R. also contended that since the Assessing Officer did not call other 14 parties, therefore, the genuineness of these 14 parties have not been proved, by the assessee. Therefore, the assessee has failed to prove the creditworthiness and genuineness of the transaction and hence the addition made by the Assessing Officer should be confirmed.

On the other hand, Shri D.M. Rindani, Ld. Counsel for the assessee submitted that out of 17 persons, three persons were summoned, during the assessment proceedings and they have produced the required documents and details before the Assessing Officer, which is placed at Paper Book Page No. 28-29 and remaining 14 persons were not summoned by the &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja Assessing Officer, therefore, the Assessing Officer cannot draw adverse conclusion against these 14 persons, based on Satakat (Agreement). The Satakat does not require registration, moreover, the Satakat may be cancelled based on the desire of the parties to the Satakat. Besides, order under section 143(3) of the Act, in the case of assessee, under consideration was made for subsequent assessment year (A.Y.) 2013-14, wherein the AO deleted the addition based on the same facts, (vide assessment order under section 143(3) of the Act, for A.Y. 2013-14, dated 15.01.2016 in assessee’s own case). The Ld. Counsel for the assessee also submitted that Mr. Desai was not the employe of the assessee, therefore, statement of Shri Desai is not application to the assessee’s case. Apart from this, assessee has proved the source successfully, as the assessee’s case pertains to A.Y. 2012-13, therefore, the assessee need not to prove the source of source. The Ld. Counsel also submitted that for receiving of money, the provisions of Section 68 does not apply, therefore, on these facts, the Ld. CIT(A) has deleted the addition and hence, order of the Ld. CIT(A) may be confirmed.

We have heard the rival parties and have gone through the material placed on record. We note that during the assessment proceedings, out of these 17 persons, three persons were summoned u/s 131 of the Act, and they have replied to the Assessing Officer, with documentary evidences, therefore, no adverse conclusion can be drawn in respect of other 14 persons, as the Assessing Officer never summoned to these 14 persons and never asked any details and documents and information from them. The Assessing Officer has not summoned, during the proceedings under section 143(3) of the Act, therefore, no any adverse conclusion can be drawn about these 14 persons, hence transactions done by the assessee, with these 14 persons, cannot be treated bogus. Moreover, the agreement (Satakat) does not require registration if the parties to the agreement decided to cancel it, they may cancel the agreement (Satakat) with mutual consent. We note that &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja in the assessee’s case, in the subsequent assessment year (A.Y.) 2013-14, the Assessing Officer framed the assessment, on the assessee, by making no any addition in the hands of the assessee, in respect of similar transactions. Therefore, no any adverse inference should be drawn against the assessee, as all the creditors filed confirmation and accepted the transaction in their statement before the Assessing Officer.

The Ld. CIT-D.R. contended that since the Assessing Officer did not call other 14 parties, therefore, the genuineness of these 14 parties have not been proved, by the assessee, is not acceptable, because when the Assessing Officer, has himself decided not to examine these 14 parties and on test check basis, the Assessing Officer selected 3 parties and examine them in detail, in these circumstances, the assessee cannot dictate to the assessing officer to issue notice (summon) to rest, 14 parties. It is prerogative power of the Assessing Officer to decide, in what way, the parties should be examined, the Assessing Officer, may scrutinize the transaction on sample basis, that is, test check bases, therefore, no adverse inference can be drawn against these 14 parties. We noted that the entire amount was repaid on 25-02- 2013 and 27-02-2013, by bearer cheques, as the parties to the agreement failed to make balance payment. At the cost of repetition, we note that out of 17 creditors/depositors, only 3 were summoned by Assessing Officer, all 3 persons attended, their statements were recorded by the Assessing Officer, all three confirmed the payments and fact of cancellation of agreement and all three had substantial land holdings and agricultural income, the Assessing Officer has nowhere held them to be men of no means and all three have confirmed having executed written agreements. If the Assessing Officer chose not to call other 14 parties, no adverse inference could have been drawn against them. The existence and validity of written agreements gets established and the assessing officer has not disproved the same with any cogent counter- &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja evidence. The registration of Agreements to Sell is optional in law; agreements are not disproved by the Assessing Officer. As regards refund of advance and withdrawal of bearer cheques by cash by one Mr. Deven Desai, he was not employed by this assessee; even assessing officer has not so proved, though he has so stated; there is no evidence that the cash drawn by Mr. Desai, flew back to the assessee. It is well established that if the money trail is not established, no transaction can be disbelieved by inference only. It is relevant to note that no question was asked by the assessing officer to any of the three buyers about Mr. Deven Desai; and in absence thereof, no adverse inference could have been drawn against this assessee. When what is received by assessee stands explained, what is refunded in same transactions cannot be a ground to disbelieve.

We find that ld. CIT(A) held that the identity of the persons concerned is not in doubt. The creditworthiness of the persons is not in doubt. The receipt of advances and refund of advances are also proved by confirmations/statements of the persons concerned. The confirmations by these persons are the most important evidence in this regard and cannot be brushed aside. Necessarily having PAN is not a legal requirement to make or receive advance against sale or to prove the genuineness of such advance so long as the source is satisfactorily explained. By no means the Setakat (agreement) in question can be said to be legally invalid. Therefore, we find that Assessing Officer has simply concluded only on the basis of suspicion/doubt, not on the basis of any cogent material available with him, hence, we are not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so deleted by ld.CIT(A) is upheld, and ground Nos.1 and 2 raised by the Revenue, are dismissed.

The brief facts qua the issue are that Assessing Officer noticed that during the year under consideration, the assessee has claimed to have received a sum of Rs.83,00,000/-, as unsecured loan, from six different persons, as summarized hereunder: Sr.No. Name of depositors Amount 1. Shri Hakumatsinh Jadeja 6,00,000/- 2. Shri Jaipalsinh Jadeja 6,00,000/- 3. Shri Mayursinh Jadeja 6,00,000/- 4. M/s. Saturn Enterprises 40,00,000/- 5. Shri Hitesh Ratilal Patel 10,00,000/- 6. M/s. Shree Associates 15,00,000/- Total 83,00,000/- In this connection, the assessee was requested, vide notice of Assessing Officer u/s. 142(1) dated 14.08.2014, to furnish the confirmation of the said depositor along with other relevant evidences, like acknowledgement for return of income, copy of bank account, statement of the aforesaid depositors, creditworthiness and identity of the depositors etc. However, it was noticed by Assessing Officer that since the amounts have been credited into the books of account of the assessee, the onus to prove the genuineness of the said transactions lies upon the assessee. However, in the given facts and circumstances, the assessee has lamentably failed to discharge the onus cast upon her and therefore the transactions respecting the amount of Rs.83,00,000/- credited into the books of account remain unexplained. The assessee was therefore vide Assessing Officer letter No. DCIT/Cir.1(1)/KP Jadeja/SC/2012-13 dated 20.01.2015 required to show cause as to why the amount of Rs. 83,00,000/-, credited into the books of account during the year under consideration in the name of the aforesaid 6 persons should not be treated as unexplained and why it should not be treated as the income within the meaning of section 68 of the Act.

However, the Assessing Officer, rejected the above contention of the assessee and observed that assessee has failed to prove identity, &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja genuineness and creditworthiness of the transactions, therefore, made addition of Rs. 83,00,000/- u/s. 68 of the Act.

On appeal, by the assessee, the CIT(A), had deleted the addition partly. The ld CIT(A) noticed that the assessee has taken total loan of Rs.83,00,000/- from following six persons, namely: (i) Shri Hakumatsinh Jadeja Rs. 6,00,000/-, (ii) Shri Jaipalsinh Jadeja Rs. 6,00,000/-, (iii) Shri Mayursinh Jadeja - Rs. 6,00,000/-, (iv) Shri Hitesh Ratilal Patel - Rs. 10,00,000/-, (v) M/s Saturn Enterprise - Rs. 40,00,000/- and (vi)M/s. Shree Associates Rs. 15,00,000/- The ld.CIT(A) observed that identity, creditworthiness and genuineness of the first three parties have not been proved by the assessee. That is, first three loan creditors (Shri Hakumatsinh Jadeja Rs 6,00,000/-, Shri Jaipalsinh Jadeja-Rs. 6,00,000/- and Shri Mayursinh Jadeja Rs. 6,00,000/-), have not been able to produce, even basic information like confirmation, address and bank detail, etc, neither before the Assessing Officer nor before the ld. CIT(A). Therefore, ld CIT(A) held that the assessee has failed to discharge her onus to prove the identity, genuineness and creditworthiness of transactions. Therefore, ld. CIT(A) held that Assessing Officer had rightly added this amount of Rs.18,00,000/- (Rs. 6,00,000 + Rs. 6,00,000+ Rs.6,00,000) to the total income of the assessee. So far as other loan creditors viz. M/s Saturn Enterprises (PAN-ABQFS5140Q), Shri Hitesh R Patel (PAN-AELPP3629) and M/s Shree Associates (PAN- AAMRP3899E) are concerned, the ld CIT(A) observed that the assessee has submitted their confirmations, bank details, PAN, etc, which are enough to conclude that the assessee has discharged her onus of proving identity, creditworthiness and genuineness of creditors. The Assessing Officer has &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja not brought anything on record which even indicates that the loan amount in question really belongs to the assessee. Hence, the loans taken from these persons cannot be added to the total income of the assessee u/s 68. Accordingly, the addition of these three loan credits of Rs.65,00,000/- (Rs.10,00,000 + Rs.40,00,000+ Rs.15,00,000) were deleted by ld CIT(A) and addition of Rs.18,00,000/- was confirmed by ld. CIT(A). This way, the ld. CIT(A), partly allowed the ground of the assessee.

Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.

Learned CIT-DR for the Revenue, submitted that assessee has taken loan of Rs.83,00,000/-, from six persons and these six persons has not proved the creditworthiness. Out of six persons three persons have replied with documentary evidences, however, rest three persons, have not submitted enough documentary evidences. The Ld. CIT-D.R. also submitted that during the appellate proceedings, the assessee submitted additional evidences also, in respect of last parties and Ld. CIT(A) did not call the remand report. Therefore, this issue may be remanded back to the file of the Assessing Officer for fresh adjudication.

On the other hand, Ld. Counsel for the assessee submitted that in respect of all persons, the bank statements were submitted which is on the record. The Ld. Counsel took us through the bank statement in the Paper Book Page No. 185 and stated that if there is a cash deposited in these bank accounts, then there is a cash withdrawal also. The Ld. Counsel also took us through Paper Book Page No. 152 and 162 wherein bank statements of the first party is placed. In respect of the second party, the relevant documents including bank statements and other documents were submitted during the assessment proceedings. About third party, the Ld. Counsel took us through Paper Book Page No. 178 and stated that the assessee has &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja submitted primary documents and therefore, discharged the onus to prove identity, creditworthiness and genuineness of the transaction. Besides, Ld. Counsel also submitted that the amount was received in the same year and the amount was paid in the same year (vide Paper Book Page No. 172 relevant bank statement), therefore, genuineness of the transactions with these parties should not be doubted, and hence no addition should be made in the hands of the assessee.

We have heard both the parties and perused the material available on record. We find that the assessee has explained with the documentary evidences and with bank statement, all these transactions. We note that in the bank statement there is a cash withdrawal and simultaneously there is a cash deposit also, hence no adverse inference can be drawn against the assessee. For the purpose of the business, the assessee, when she needs, cash has been withdrawn, as well as cash was deposited in the bank account, that is, the assessee has been depositing the cash in the bank account regularly and also withdrawing the cash from the bank regularly. We note that Ld. CIT(A) has upheld addition of Rs.18,00,000/- for three depositors, as the assessee did not submit the sufficient evidences. We also find that assessee's appeal is not pressed by ld. Counsel for the assessee, therefore we confirm the addition made by Ld. CIT(A) to the tune of Rs.18,00,000/- . And about the balance amount deleted by Ld. CIT(A) to the tune of Rs.65,00,000/- (83,00,000 – 18,00,000/-), we confirm the findings of Ld. CIT(A). The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss ground Nos.3 to 5 raised by the Revenue.

In Ground Nos. 6 and 7, the Revenue has raised the issue that expenses of Rs.1,19,29,140/-, made by the assessee for vacating the land and &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja removing encroachment, were without any supporting documentary evidences.

The brief facts qua ground Nos. 6 and 7, are that during the year, the assessee has sold plots of land admeasuring 3976.38 Square Yards and numbering 38, in all for an aggregate consideration of Rs. 2,79,06,710/-, on which assessee has shown 'Short Term Capital Gain' of Rs. 45,03,271/-. It was noticed that the land ad measuring 7339.74 Square Yards, at Survey No. 59/3, was purchased by the assessee on 18.01.2011, for a consideration of Rs.78,71,170/- (Rs.75,00,000/- cost and other expenses like stamp duty, registration fee etc, of Rs.3,71,170/-). Out of the total land area of 7339.74 Square Yards, area ad measuring 3976.38 Square Yards consisted of 38 plots, which have been sold during the year, for an aggregate consideration of Rs.2,79,06,710/- as per the particulars summarized hereunder: Sr. No. Name of purchasers Plot Nos. Total Amount 1. Smt. Vajiben Shingala 2 19,94,300/- 2. Shri Dilipbhai Dholaria 3 to 7 27,62,500/- 3. Labhuben Lunagaria 8 5,52,000/- 4. Shri Devjibhai Gondaliya 9 to 12 22,10,000/- 5. Shri Bhagvanji Mungar 13 & 14 13,26,000/- 6. Shri Naimish Leela 17 8,54,600/- 7. Bhavnaben Ramani 18 7,83,000/- 8. Shri Ashok Devda 19 & 20 16,32,000/- 9. Shobhanaben Sanjaybhai 21 9,15,000/- 10. Nitaben Ponkiya 22 9,15,000/- 11. Jashuben Vyas 23 10,27,000/- 12. Shri Bhagvanjibhai Mungar 24 & 25 27,54,510/- 13. Shri Nileshbhai Ralyani 26 6,03,500/- 14. Shri Bhikhabhal Ranpariya 27 6,03,500/- 15. Manishaben Ginaya 28 6,03,500/- 16. Shri Bharatbhal Sheladiya 29 5,68,000/- 17. Leenaben Sakhiya 30 5,68,000/- 18. Shri Bhikhabhai Kamani 31 & 32 11,36,000/- 19. Shri Pravinbhai Tarpada 34 6,03,500/- 20. Shri Veljibhai Bhut 33 6,03,500/- 21. Shri Nailmishbhai Leela 36 6,03,500/- 22. Shri Hardikbhai Ramani 37 6,03,500/- 23. Shri V.G. Raiyani 38 to 40 18,10,500/- 24. Shri Hareshbhai Raiyani 41 & 42 18,73,200/- Total amount 2,79,06,710/- &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja It was further noticed by the Assessing Officer that against the sale consideration of Rs.2,79,06,710/-, for the land ad measuring 3976.38, consisted of aforesaid 38 plots, the assessee has claimed to have incurred cost of acquisition, cost of improvement and other related expenses aggregating Rs.2,34,03,439/-, as summarized by Assessing Offier on Page No. 17 of the assessment order.

Considering these facts, during the assessment proceedings, the Assessing Officer issued a notice to the assessee, to explain the expenses of encroachment. In response to the notice of the Assessing Officer, the assessee submitted it’s reply before the Assessing Officer, with documentary evidences, which is reproduced below: “I. During the preceding year on 18.01.2011 assessee has purchased agriculture land in survey no: 59/3 of Rajkot for total consideration of Rs. 78,71,170/- after purchasing land it was converted in non-agricultural land. As per non-agricultural order total saleable land area of 7339.4 Square yards. II. Whenever assessee has purchased said land it was entire encroached by so many persons. Some un-authorized persons have created, viz, Shri Gail Krupa Society (Proposed) and sold plots by issuing share certificates. Detail of said society and plot holders has been submitted with my previous submission dated 20.11.2014. III. It is quite natural that, to get vacate possession and relinquishment of their rights in land; assessee has to pay some amounts to said plot holders. To get mental peace and avoid other legal litigation assessee decided to pay Rs. 3000/- per Square Yards to each certificate holder and get the original certificate. Details of payments to plot holders and Xerox copy of share certificate, on the back side of the each certificates containing the receipt of payments made by the assessee where submitted with submission dated: 20.11.2014. IV. It is hard core truth that un-authorized encroached can not vacate without payment of handsome amounts. And particularly when owner of the land is female. V. It is a prevailing system that, without vacate possession of land neither market price or good price received nor reputed buyer buy the land. It is very common in Rajkot city and it is a famous and known city for encroachment, made fraudulent documents, etc, in land transactions. Moreover, it is a fact &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja that, disputed land on encroach land shall sale at less than half price of prevailing price. VI. Complete name of the persons have been given. However, it is not possible to give the address of the persons, because assessee is not in touch with the said persons. They were laymen and anti-social elements and it is not possible to produce persons to whom payments made. Assessee has tried her best source to contact the persons to whom payments made. But unfortunately, she could not contact them. Considering the said facts and circumstances an amount of Rs. 1,19,29,140/- should not disallowed."”

However, the Assessing Officer rejected the above contention of the assessee and observed that assessee has not proved the transactions with documentary evidences. Therefore, Assessing Officer noticed that in the absence of any documentary evidence, the assessee's claim for expenses of Rs.1,19,29,140/-cannot be allowed. Accordingly, the expenses to the extent of Rs.1,19,29,140/- were disallowed and added to the total income of the assessee.

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has deleted the addition made by the Assessing Officer. The ld.CIT(A) noticed that it is an open secret that land grabbing or encroachment is quite common and it is a cumbersome process to get the land back without paying or litigating. However, the litigation takes a lot of time, money and energy, but while paying directly to the encroachers, it takes very less time. More the prime property more the demand from the encroachers. Besides, the sale value of encroached property, is normally less than the property, which is not encroached. The buyer has no option but to pay the encroachers, in cash because generally they do not want to receive money in cheque. In addition to this, the Assessing Officer has himself observed on page 22 of para 9.5 that there may some encroachment on the land. The ld CIT(A) noticed that &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja this part of land has been sold at Rs.2,79,06,710/- and it is obvious that the sale value is almost seven times of the purchase cost. It simply indicates that the assessee purchased the land at throw away price, but because of either litigation or encroachment for which the assessee might have spent substantial amount in getting the land vacated from encroachers, but how much amount has actually been paid is the bone of contention because neither the claim of payment made by the assessee is fully verifiable in absence of the whereabouts of the payees nor the Assessing Officer has anything on record or any logic to disprove the claim of the assessee completely. Hence in such a situation, the ld.CIT(A) estimated payment made to encroachers at Rs.2,500/- per square yard instead of Rs.3000/-, as claimed by the assessee but not allowed at all by the Assessing Officer. Accordingly, the ld CIT(A) allowed the ground of the assessee, partly, and directed the Assessing Officer to recompute the cost of acquisition.

Aggrieved by the order of the CIT(A), the Revenue is in appeal before us.

Learned CIT-DR for the Revenue submitted that the encroachment expenses paid by the assessee is abnormal in nature, therefore, it should not be believed. Further, the encroachment expenses were paid in cash, therefore, genuineness of these expenses are doubted. The Ld. CIT-DR also submitted that assessee has not submitted the name and address and PAN No. of the payee. In order to remove the encroachment, the assessee has paid the huge amount and identity of these persons to whom the assessee paid such amount have not been proved. No water connection, no electricity connection is there in respect of persons, who were holding the land of the assessee illegally. No any FIR has been filed by the assessee that these persons have encroached the land in illegal manner and not a single person was produced before the Assessing Officer for cross- &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja examination. Therefore, in this situation, the addition made by the Assessing Officer should be confirmed.

On the other hand, Ld. Counsel for the assessee submitted that in case of encroachment, there was a society which was not registered. These persons (payee) did not have identity, because all these persons were below the poverty line and did not have PAN number. Therefore, in order to remove these persons from the land, the assessee paid this amount to the society members and in turn, the society members paid the amount to these persons. The Ld. Counsel also submitted that land was purchased at a cheaper rate and including the cost of the encroachment, and if the sale price of Rs.8500 sq.mt. of the land is compared, with total cost including the cost of the encroachment, then it comes far more than the original cost and encroachment payment, therefore, assessee has shown huge profit. The assessee`s sale at very higher price is accepted by the Department therefore, genuineness of these encroachment payments should not be doubted. Besides, the ld. CIT(A) has estimated the encroachment expenses at a reasonable rate, therefore, order of the ld. CIT(A) may be upheld.

We have heard the rival contentions and perused the material available on record. We not that the encroachment expenses were paid by the assessee to the members of unregistered society and the relevant documents of each person and the name and address of each person to whom the assessee paid the amount, on account of encroachment, has been shown and filed before assessing officer. We note that assessee had claimed @ Rs.3000/- per sq. yard; encroachment expenses and CIT(A) allowed @ Rs.2500/- per sq, yard. We find that Assessing Officer himself (vide Page 22, Para 9.5 of assessment order) acknowledged the encroachment expenses and likely payment by assessee. Therefore, based on the findings of the Assessing Officer, the ld. CIT(A) has passed a reasoned order and &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja allowed the payment on estimated bases at Rs.2500/- per sq, yard. As regards, affidavit of Mr. Gosai, as additional evidence, we note that Ld.CIT(A) has also called for the remand report, hence ground no. 5 of revenue should not survive, vide order of CIT(A) Page 9, Para 6. Mr. Gosai as a promoter of proposed society, has accepted the fact of payment to various persons and he has confirmed the transactions. We note that the Inspector visited the site after nearly 3 years and by that time, there was lot of development, hence his inspection has no meaning and the said Inspector was not a valuer or an expert. Therefore, considering these facts, the amount estimated by the learned CIT(A) should not be doubted.

We note that assessee under consideration, along with her son Shri Axitsinh Jadeja and daughter Miss Alpnaba Jadeja purchased 4 acres 32 guntha of agricultural land at survey no. 59/3 and 59/4 on 18.01.2011 and later on, got that land converted into non- agricultural land. Out of total land purchased, land ad measuring 7339.74 square yards belonged to the assessee. As per the order of the Land Revenue Authority, the total saleable land measured 7339.74 square yards. Out of this, the assessee sold 3976.38 square yards (comprising 38 plots) to 24 persons during the year in question for a total consideration of Rs.2,79,06,710/-, on which a Short Term Capital Gain of Rs.45,03,271/- was shown by the assessee in her return of income. Further the assessee has claimed Rs.1,19,29,140/- as cost of acquisition of the land which is approx. 54% of saleable land sold during the year. This payment is claimed to have been made by the assessee at the rate of Rs.3000/- @ per square yard in cash to 50 persons for vacating the land encroached by them. Although total payment made to get the total land vacated has been claimed to be Rs.2,20,20,500/-, but the cost of acquisition has been claimed only on the land sold during the year on proportionate basis. Further regarding payment, it has been submitted before the &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja Assessing Officer as well as before the ld. CIT(A) that the payment was made through one person namely, Shri Devendragiri A. Gosai, who basically handled this on behalf of all the encroachers. The Assessing Officer disallowed this claim of cost of acquisition on the ground that the assessee could not produce the complete name and address of the persons to whom payments were made. In response to the show- cause notice by the Assessing Officer, the assessee submitted that the land in question was entirely encroached by these persons. Some unauthorised persons had created Shri GailKrupa Society (proposed) and sold plots by issuing share certificates details of which were submitted by the assessee, before the Assessing Officer.

Before the ld. CIT(A), the assessee submitted that in order to avoid litigation, she paid this amount after great negotiation. It is open secret that unauthorised encroachment cannot be vacated without paying handsome amount and such encroachment in very common in Rajkot city, that is, the city is famous for fraudulent land documents, encroachments of land, and other such things related to land. It is a fact that encroached land is sold at very less price. Regarding complete address of the persons, it was submitted that it is not possible to find them out because the assessee is not in touch with them, however receipts are available, about the payment made to them. Further, the persons involved in encroachments were layman and anti- social elements. During appellate proceeding an affidavit from Shri Devendragiri A. Gosai, was also submitted as evidence to support her claim of payment made through him. The submission along with the said affidavit was forwarded to the Assessing Officer, for this comment and he was also directed to examine, Shri Devendragiri A. Gosal, if he deems fit. The Assessing Officer, submitted his remand report dated 06-08-2015 before they ld. CIT(A).

The learned CIT(A), after considering the remand report, and after considering the submissions of the assessee on the remand report, observed that at the time of assessment proceedings, it was neither possible for the assessee to prove beyond doubt that the encroachment was there not possible for the revenue to disprove the claim of the assessee or to prove beyond doubt that there was no encroachment especially after lapse of so much of time. In such a situation there is no option but to consider some of the following ground realities which can help in arriving some reasonable conclusion: (a) This is an open secret that land grabbing or encroachment is quite common. It is a cumbersome process to get the land back without paying for litigat. But litigation takes a lot of time, money and energy while paying directly to the encroachers, it takes very less time. More the prime property more the demand from the encroachers. (b) This is well known fact that the sale value of encroached property is for less than property which is not encroached. (c)The buyer has no option but to pay the encroachers in cash because generally they do not want to receive money in cheque. This is also a well known fact.

The ld CIT(A) also noticed that Assessing Officer himself has observed on page 22 of para 9.5 that: "there must be some encroachment upon the property and the assessee must have paid the money to vacate that encroachment. But in absence of any documentary evidence or circumstantial evidence no credence can be attached to the claim of the assessee."

Ground Nos. 8 raised by the Revenue, relate to development expenses of Rs.41,34,254/-.

Brief facts qua ground No. 8 raised by the Revenue, are that during the assessment proceedings, it was noticed by Assessing Officer that the assessee has claimed a sum aggregating Rs.79 95,500/-, towards cost of improvement of the said land ad measuring 7339.74. Accordingly, average expenses incurred on this count comes to Rs.1090/-, per Square Yard. These expenses are claimed to have been made in respect of leveling of land, laying of roads landscaping and such other works. During the year, the assessee has shown sales of altogether 38 plots ad measuring 3976.38 Square Yards, out of the total land ad measuring 7339.74 Square Yards. Accordingly, the assessee has claimed a sum of Rs.43,34,254/- [Rs.1090/- *3976.38 Square Yards] as expenses incurred on this count on the area of land ad measuring 3976.38 Square Yards sold during the year under consideration. In this connection, the assessee was required to furnish the complete name and address of all the persons who carried out the said works and also the copies of bills/vouchers in support of these expenses.

In response to the notice of the Assessing Officer, the assessee submitted it’s reply with documentary evidences, during the assessment proceedings, which is reproduced below: “regarding disallowance the expenses to the extent of Rs. 42,34,254/-claimed towards the payments for improvement of land under consideration and not &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja payments to the persons having encroached upon the said land as mentioned in Para No: 9.4 of the said notice. I. It is a crystal clear from facts that, the land under subject is entirely encroached by anti-social elements and they build small huts and kacha houses on land.

After going through the above reply of the assessee, the assessing officer noticed that considering the above facts that some expenses could have been incurred, on whatever the minor works have been carried out, on the said land, the expenses on this count would be no more than Rs. 2,00,000/- for the entire land. Accordingly, a sum of Rs. 25 per Square Yards was proposed to be allowed as expenses on the improvement of the land. This would work out to nearly Rs. 1,00,000/-(Rs.25/-*3976.38 Square Yards) on the total area admeasuring 3976.38 Square Yards sold during the &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja year. The Assessing Officer, further observed that in the absence of any satisfactory evidences in this regards, the claim for expenses to the extent of Rs.43,34,254/- (Rs. 1090/- 3976.381 cannot be allowed. However, considering the fact that some expenses could have been incurred on whatever the minor works have been carried out on the said land and in view of the contentions of the assessee, the expenses on this count is considered at Rs.4,00,000/- for the entire land. Accordingly, a sum of Rs.50 per Square Yards was allowed, as expenses on the improvement of the land. This would work out to nearly Rs.2,00,000/- [Rs.50/-*3976.38 Square Yards] on the total area ad measuring 3976.38 Square Yards sold during the year. The rest of the amount of Rs.41,34,254/- (Rs.43,34,254 - Rs.2,00,000) was disallowed by the Assessing Officer and added to the income of the assessee.

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the CIT(A), who has deleted the addition made by the Assessing Officer. Before ld. CIT(A), the assessee submitted that the expenses claimed by the assessee, include demolition as well as removal (of material) expenses of illegal construction, compound wall construction, metal road construction, etc. So far as question of contractor is concerned it has been submitted by the assessee, that none of the works was given to any contractor, all was done on her own employing daily wages labourers. The Inspector had visited in January 2015 after the assessee has sold the open plots of land, on which housing societies have developed. Without having visited the open land, when it was purchased, the Inspector report has no meaning. Moreover, the Inspector is not a technical person to come to such conclusion that "there is no any materialistic improvement in the condition of the land". The Assessing Officer has not denied or disproved the bills of material (used in constructing roads as well as compound wall, fillings/levelling, &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja etc.) produced before him. As the Assessing Officer has not brought any cogent material on record to disprove the claim of expenses incurred by the assessee, the disallowance of this expense cannot be sustained, therefore, ld. CIT(A) deleted the addition. Aggrieved by the order of the CIT(A), the Revenue is in appeal before us.

Ld. CIT-D.R. for the Revenue submitted that the assessee has not submitted the name and address of the payee and the contractors. Therefore, it is in doubt that to whom the assessee has paid the amount for such land improvement cost. During the assessment proceedings, the inspector was sent by the Assessing Officer, to visit the site and inspector has reported that there is no such improvement made in the land, therefore, this issue may be remanded back to the file of the Assessing Officer for verification of the site, whether the assessee has incurred the expenses on improvement cost or not.

On the other hand, Ld. Counsel for the assessee submitted that since assessee has purchased the land and the improvement expenses have been incurred by her. For the purpose of safety, the assessee has made boundary wall and incurred other expenses for improvement of the land. The Ld. Counsel further submitted vide Page No. 28 of the assessment order, wherein the Assessing Officer has himself accepted Rs.4,00,000/-, as a reasonable expenses for improvement and development of land. Therefore, it is a case where Assessing Officer accepted this fact during the assessment proceedings, that the assessee has incurred expenses on improvement. Therefore, the dispute is now is to examine that how much expenses for development and improvement of land was incurred by the assessee, therefore, this issue should not be remitted back to the file of the Assessing Officer, to examine the site to ascertain the development and improvement expenses, because by this time, full building construction had been &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja completed, hence there is no meaning to remit this issue back to the file of the Assessing Officer for verification of the site.

We have heard both the parties. We find merit in the submissions made by the ld. Counsel for the assessee, to the effect that “by this time, full building construction had been completed, hence there is no meaning to remit this issue back to the file of the assessing officer for verification of the site”, hence, we are not inclined to remit this issue back to the file of the Assessing Officer. We note that upon conversion of land to non-agricultural land and plotting for sale, such type of expenses, for development and improvement of land, are bound to have been incurred by the assessee. We also find that the Inspector visited the site after 3 years, hence his observation cannot be relied upon, more so, in absence of any corroborating material with the Assessing Officer. We note that during the year, the assessee has claimed Rs.43,34,254/-, as cost of improvement on account of various expenses incurred before the plots were sold. The assessee had submitted the details of materials and quantity used, their prices etc, before the Assessing Officer. Although, we find that the Assessing Officer himself did not deny the cost of improvement completely, but relying upon the departmental Inspector report, he made the addition, which is not acceptable, as the Inspector visited the site after three years, by this time, there was lot of development and improvement in the land, moreover, the Inspector is not a technical person to give the report to the Assessing Officer that how much expenses have been incurred by the assessee on account of development and improvement of the land, such as boundary wall, Road, leveling expenses, soil taste, and removal of temporary structure on the land etc. On a careful reading of the Ld.CIT(A)`s order and the findings thereon, we do not find any valid reason to interfere with the decision and findings of the Ld.CIT(A). Hence, we sustain the order of the Ld.CIT(A) and reject the ground No.8 raised by the Revenue. &577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja 52. In combined result, appeal filed by the Assessee, in is dismissed as withdrawn, whereas appeal filed by the Revenue in , is also dismissed.