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Income Tax Appellate Tribunal, DELHI BENCHES : A : NEW DELHI
Before: SHRI S. RIFAUR RAHMAN & SHRI ANUBHAV SHARMA
This is an appeal preferred by the Assessee against the order dated 12.10.1993 of the Commissioner of Income-tax (Appeals), NFAC, Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No.CIT(A), Noida-1/10801/2018-19 arising out of the appeal before it against the order dated 23.12.2018 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ACIT, Circle-2(1)(1), Ghaziabad (hereinafter referred to as the Ld. AO).
At the outset, the ld. AR has submitted that there was a delay in filing of the appeal to the extent of 238 days for which an application for condonation of delay has been filed along with an affidavit wherein it is mentioned that the assessee has suffered cardiac arrest and relevant records are filed. We are satisfied that the same sufficiently justify the delay. The application for condonation of delay is allowed and the appeal is admitted for hearing.
Briefly stated facts as culled out from the records are that the appellant is an Individual running a proprietorship firm Nandini Processors who is engaged in to business of job work and processing of dyeing of fabric The appellant has filed its return of on 15/10/2016 declaring income of Rs. 16,38,670/-. Later, the case was selected for limited scrutiny under CASS to examine source of investment of capital introduced by proprietor and booking 3 BHK flat with Prateek Realtor at Ghaziabad. The case was opted for e-proceeding and submissions were made. The AO after examining the submitted documents accepted the submissions partially and made additions on account of amount introduced as capital during the year because of non satisfaction of source of fund form which capital was brought in to business. The appellant agreed to sale agricultural land located Village Taalsurah, Distt Balia, Uattar Pradesh which belongs to him and his father against which they received sale proceeds, which 2 was brought into business as capital. The appellant also filed ownership documents Khatiani copy and is in possession of copies of agreements entered with various parties. The appellant is also in possession of ownership documents sale agreements transaction details passbooks, buyers ID proof and details.
4. However, the AO was not satisfied and made the addition doubting the source of capital introduced in the business if at all was of sale proceeds of agricultural land. The ld. CIT(A) was also not satisfied in the appeal and dismissed the appeal with the following findings:- “9.1 I have perused the assessment order & other documents submitted by the appellant. As regards with the above addition of Rs. 2,15,73,388/-, the appellant has refuted the observation of the AO and reiterated his contention that the source of capital introduced in the business was of sale proceeds of agricultural land. In support of his contention, the appellant has submitted profit and loss account, balance sheet, agreements to sell for Rs.2,15,73,388/- and Sellers and Buyers PAN and Photo ID address. 9.2 On a perusal of assessment order, I find that the AO has considered the above documents furnished by the appellant at the time of assessment proceedings and found not acceptable with the following observations:-
1. 1. The assessee has not even clarified whether the agricultural land sold belonged to his father or was inherited by him and then sold by him in his personal/individual capacity.
2. The copy of sale deed of the alleged agricultural land was not filed. The nature of land and the exact sale consideration received from such sale can only be verified from the copy of the ale deed.
3. The filing of land holding documents in the joint name of assessee’s father and his brother/relatives only proves that the father of the assessee, jointly, owned some agricultural land. Whether such agricultural land was sold by him, for what consideration and whether or not it was a capital asset (as per section 2(14) of IT Act) is not ascertainable from the details filed.
In the absence of the copy of the sale deed or any other evidence like bank from the father (if the land was sold by him father) etc. the very claim of the assessee, that the sum of Rs.2,15,73,388/- introduced as capital, was out of sale proceed of the portion of his father/inherited agricultural land located at Village Taalsurah, District Balia, Uttar Pradesh, remains unproved. Thus, in view of above discussion, the source of capital of Rs. 2,15,73,388/- introduced by the assessee into his proprietorship concern M/s Nandini processor remains unexplained and is added u/s 68 read with section 115BBE of the Act to the returned income of the assessee. 9.3 From the above, I find that at the time of assessment proceeding, the appellant was failed to discharge his duty by not furnishing execution of sale deed even after requisition by AO in order to substantiate his claim. The appellant has taken a separate ground of appeal that he must be given one more opportunity to submit the relevant documents. On perusal of assessment order, I find that the appellant was given sufficient opportunities to furnish requisitioned documents in order to substantiate his claim. However, the appellant had sufficient opportunities to substantiate his claim by submitting execution of sale deeds, but he could not produce the same. Even at the time of appellant proceedings, the appellant had been given various opportunities to furnish relevant documents. But the appellant could not produce the execution of sale deeds or any valid or verifiable documents that could confirm the exact sum of sale proceeds as declared by the appellant, which was introduced as capital into his proprietorship concern i.e. M/s Nandini Processor. The appellant has also not submitted copies of ITRs of the sellers where the said sale proceeds of agricultural lands would have been offered for taxation, however exempted, to substantiate his claim. The mare copies of agreement to sale the agricultural land to the tune of Rs. 2,15,73,388/- cannot be sufficient and valid documents to confirm actual sale proceeds which were offered to State Government for the purpose of charging Stamp Duty as well as before Income Tax Department to assess capital gains/losses. Hence, in my opinion, the appellant was totally failed to discharge his duty to substantiate his claim that the capital introduced amounting to Rs. 2,15,73,388/- was out of sale proceeds of agricultural land. Therefore, I have arrived at the considered decision that the AO was totally justified in treating the introduced capital of Rs. 2,15,73,388/- into his proprietorship concern as unexplained money u/s 68 read with section 115BBE of the Act. Accordingly, an addition of Rs. 2,15,73,388/- is confirmed and ground nos. 2 to 5 are dismissed.”
Now, before us, the ld. Counsel has primarily relied on the copies of the agreements which are made available at page Nos. 3 to 26 of the paper book to contend that various agreements were executed in regard to the family land situated in the district Balia. It was contended that the land sold is part of larger chunk of land and as there is a dispute with regard to the shares, sale deeds could not be executed, otherwise, whole of the consideration stands transacted and possession delivered.
5.1 The ld. DR has primarily defended the impugned orders on the basis that the agreements are inchoate documents and do not vest any title. It is submitted by the ld. DR that these agreements were possibly not filed before the ld. tax authorities below.
At the outset, we observe that while filing the paper book, the ld. counsel for the assessee Shri Mayank Patwari, Advocate has given a declarations that the documents in the paper book are also produced before the AO/CIT(A) so there is no new evidence before us. Thus, that caters to the contention of the ld. DR that possibly the agreements were not shown before the ld. tax authorities below. Further, on going through the agreements to sell we find that these are agreements executed showing complete exchange of the sale considerations. As for the purpose of civil consequences, these agreements may not give rise to any transfer of title in favour of the prospective vendee, but, as for the purpose of explaining the source of funds in the hands of the assessee is a genuine these agreements needed to be rebutted and till that is done the same are sufficient to be considered establishing plausible explanation of the source. The ld. CIT(A) 5 observes in para 9.1 of the impugned order that these agreement to sell and the details of the sellers and buyers including their PAN and photo identity containing addresses are provided. It is unjust to discredit these agreements on the basis of non-execution of sale deeds without actually making any inquiry independently. After the assessee has placed on record relevant pieces of evidences about sale of landholdings, then, without anything coming up in the form of inquiry and rebuttal, merely on a bald assertion of sale deeds being not executed, the source cannot be doubted. There is plausible explanation coming up from the ld. counsel that when there is a joint landholding and they are co- sharers, execution of sale deed with regard to specific survey numbers is not possible and if possession has been delivered on a specific survey numbers of the land, then, the vendee does not get title in those survey numbers of the land, but, only is vested with the share of the vendor in whole of the land which is subject to partition later on. That being the state of affairs for merely non-execution of the sale deed, a transaction of agreement to sell and payment of consideration should not have been doubted. Thus, we are inclined to sustain the ground. The appeal of the assessee is allowed. The impugned addition is deleted. Order pronounced in the open court on 21.11.2025. Sd/- Sd/- (S. RIFAUR RAHMAN) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 21st November, 2025.