Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 26.04.2021 passed by learned Commissioner of Income-Tax (Appeals)-3 [“CIT(A)”], which in turn arises out of assessment-order dated 20.12.2018 passed by learned ITO (IT & TP), Bhopal [“AO”] u/s 143(3)/147 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2011-12, the assessee has filed this appeal on following grounds:
“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition of Rs. 37,75,000/- made by the AO (the Ld. AO) without appreciating that the ld. AO has made addition merely on the basis of surmises and conjectures and the reasons assigned for doing so are wrong and Page 1 of 10
Mohd. Hussain Kagdi , Ratlam vs. ITO (IT & TP), Bhopal I.T.A.No. 120/Ind/2021 – A.Y. 2011-12 contrary to the facts of the case and provisions of the Act. Thus, the addition of Rs. 37,75,000/- is liable to be deleted.
2. On the facts and in the circumstances of the case and in law, the ld. AO has erred in treating the amount of Rs. 37,75,000/- as unexplained investment of the assessee u/s 69 of the Act and the Ld. CIT(A) has further erred in treating the same as unexplained cash in hand u/s 69A/69B of the Act which is wrong and contrary to the facts of the case and provisions of the Act. Thus, the addition of Rs. 37,75,000/- is liable to be deleted.
3. On the facts and in the circumstances of the case and in law, the ld. AO has erred in reopening the assessment u/s 147 of the Act which is wrong and contrary to the provisions of section 147, section 148 and section 149 of the Act and provisions of the Act. Thus, the reassessment proceedings and the assessment order u/s 143(3) r.w.s. 147 of the Act is liable to be quashed.
4. On the facts and in the circumstances of the case and in law, the ld. AO has erred in reopening the assessment without obtaining prior approval of the Pr. CIT in accordance with the provisions of Section 151 of the Act. Thus, the reassessment proceedings are liable to be quashed.”
This is a re-called matter. Originally, this appeal was decided by ITAT, Indore Bench through order dated 12.01.2023. Subsequently, the Respondent/Revenue filed M.A. No. 30/Ind/2023 requesting for recalling of order in terms of Section 254(2) of the Act. The said M.A. was decided vide order dated 28.11.2023 wherein the original order of ITAT dated 12.01.2023 was re-called and the original appeal was re-stored for hearing with original registration number. Accordingly, this appeal has come before us for hearing and we proceed to dispose of by this order.
The background facts are such that the assessee is an individual who derives rental income, share profit from partnership firm and agricultural
Mohd. Hussain Kagdi , Ratlam vs. ITO (IT & TP), Bhopal I.T.A.No. 120/Ind/2021 – A.Y. 2011-12 income. For the relevant AY 2011-12, the assessee filed his return of income on 27.12.2012 declaring a total income at Rs. 1,52,250/- which was duly assessed. Subsequently, on receipt of information that the assessee alongwith his brother Mohd. Mustafa Kagdi had purchased an agricultural land situated at Ratlam and also made other investments, the AO re-opened assessment u/s 147 through notice u/s 148. In response, the assessee re- filed return repeating the same income of Rs. 1,52,250/-. Thereafter, the AO issued statutory notices u/s 143(2)/142(1) and show-caused assessee regarding sources of investments. The assessee filed replies which are noted by AO in assessment-order. Ultimately, the AO completed assessment at a total income of Rs. 48,73,210/- after making certain additions aggregating to Rs. 47,20,960/-. Aggrieved, the assessee filed first-appeal to CIT(A), Ahmedabad whereupon the CIT(A), vide impugned order dated 26.04.2021, deleted all additions except one addition of Rs. 37,75,000/- made by AO u/s 69 on account of 50% share in the purchase-consideration of Rs. 75,50,000/- of the property at Ratlam jointly purchased by assessee with his brother as aforesaid. Still aggrieved, the assessee has come in next appeal before us.
During hearing before us, the Ld. AR for assessee did not press ground Nos. 3 & 4 which assail the legality of proceedings undertaken by AO u/s 147. Therefore, those grounds are dismissed as non-pressed. Now we are left with only ground Nos. 1 & 2 in which the assessee has challenged
Mohd. Hussain Kagdi , Ratlam vs. ITO (IT & TP), Bhopal I.T.A.No. 120/Ind/2021 – A.Y. 2011-12 the addition of Rs. 37,75,000/- made by AO u/s 69 on account of unexplained investment in agricultural land at Ratlam.
Apropos to the ground Nos. 1 & 2, the Ld. AR for assessee carried us to Para No. 3 of assessment-order and the documents filed in Paper-Book to explain the AO’s stand and also assessee’s submission. Ld. AR submitted that the assessee alongwith his brother purchased an agricultural land at Ratlam vide registered-deed dated 04.02.2011, copy of deed is filed at page nos. 14-24 of Paper-Book. Then, Ld. AR drew our attention to page no. 5 of the said registered-deed (page no. 22 of Paper-Book.) where it is categorically mentioned that the consideration of Rs. 75,50,000/- was paid through six cheques having Nos. 083958 to 083963 of Rs. 12.50 lakhs each, drawn on State Bank of India, Ratlam. Simultaneously, Ld. AR also took us to para no. 3 of assessment-order where the AO has himself noted the details of all those six cheques alongwith their respective dates of clearing from assessee’s bank a/c as under:
Cheque No. Name of Bank Presented on Amount (Rs.) 83958 State Bank of India 28/06/2013 12,50,000 83959 State Bank of India 27/06/2013 12,50,000 83960 State Bank of India 10/12/2013 12,50,000 83961 State Bank of India 22/04/2013 12,50,000 83962 State Bank of India 28/12/2013 12,50,000 83963 State Bank of India 07/01/2013 12,50,000 Total 75,50,000
Mohd. Hussain Kagdi , Ratlam vs. ITO (IT & TP), Bhopal I.T.A.No. 120/Ind/2021 – A.Y. 2011-12 Ld. AR also carried us to page nos. 25-30 of Paper-Book where a copy of statement of bank a/c no. 30176710518 with State Bank of India, Ratlam in joint name of assessee and his brother is filed. Inviting our attention to all three documents, namely the sale-deed, the detailed noted by AO in assessment-order and the debit entries appearing in bank statement, Ld. AR successfully demonstrated that the six cheques issued by the assessee and his brother to the sellers of land were post-dated cheques, which were cleared from assessee’s bank a/c on various dates as mentioned above during period 07.01.2013 to 10.12.2013. Having shown thus, Ld. AR submitted that when the purchase-consideration was paid through cheques and those cheques were cleared in assessee’s bank account subsequently on different dates, how can department say that the investment in purchase of land was made from unexplained or undisclosed sources during the financial year 2010-11 relevant to AY 2011-12 under consideration. Ld. AR submitted that the registered-deed was executed in AY 2011-12 but the purchase consideration was paid through cheques which had been subsequently cleared from assessee’s regular bank a/c which is fully disclosed, then in such a situation where is the question of applying section 69 by authorities?
Ld. AR then carried us to para no. 5.7 of the order of first-appeal wherein the CIT(A) has rejected the assessee’s claim by mentioning thus:
“5.7 As to the addition of Rs. 37,75,000/- (as per para 3 of the assessment order), it has been submitted by the appellant that the Mohd. Hussain Kagdi , Ratlam vs. ITO (IT & TP), Bhopal I.T.A.No. 120/Ind/2021 – A.Y. 2011-12 copy of bank statement were filed on 14.12.2018 alongwith reply but the AO did not take the same into consideration. It is the case of the appellant that the (6) cheques were presented with the SBI a/c no. 30176710518 for payments (of Rs. 75,50,000/- for the appellant and his brother) on the dates mentioned in the reply dated 14.12.2018. However, I do not find the explanation of the appellant that payment of Rs. 75,00,000/- was made through post dated cheques (as the sale deed was registered on 04.02.2011) convincing because no prudent person will sell and also execute the sale deed for registration based on post dated cheques only. It defies the preponderance of probabilities. At the best post dated cheques can be accepted only if there is security for realization of sale consideration and only payment of cash in full equivalent to post dated cheques is paid, can be a prudent alternative and that such cash received will be returned as and when the post dated cheques are cleared by the bank. Thus, in my considered opinion the payment of cash in advance and as a security for post dated cheques must have been made by the appellant and such amount is required to be treated as unexplained cash in hand which is liable to be treated as deemed income u/s 69A/69B of the Act. Under the circumstances, I am not inclined to grant relief to the appellant on the issue of addition of Rs. 37,75,000/- which is confirmed and the related ground is dismissed.”
Ld. AR submitted that the CIT(A) has also wrongly upheld the addition made by AO on self-made presumption that the assessee must have paid consideration in cash and subsequently received cash when the cheques were cleared. This presumption by CIT(A) is baseless and the authorities do not have any piece of evidence or proof to establish the same. Ld. AR submitted that the AO/CIT(A) have rejected assessee’s registered sale-deed and bank a/c only upon assumption, presumption or suspicion and made/upheld addition but it is a trite that no addition can be made on mere suspicion or presumption as held in Dhakeshwari Cotton Mills Limited Vs. CIT (1954) 26 ITR 775 (SC), Omar Salay Mohd. Sait vs. CIT (1959) 37 ITR 151 (SC) and Umacharan Shaw & Bros. Vs. CIT (1959) 37 ITR 271 (SC).
Mohd. Hussain Kagdi , Ratlam vs. ITO (IT & TP), Bhopal I.T.A.No. 120/Ind/2021 – A.Y. 2011-12
Per contra, Ld. DR for Revenue submitted that the assessee has purchased the impugned land through a Registered-Deed and not by sale- agreement on 04.02.2011 and still it is being claimed that the payments were made through post-dated cheques cleared after unreasonable gap of about two years. Ld. DR submitted that this situation itself is beyond the human probability. He submitted that it is beyond conceivable thinking that any person who would sell land without taking a single penny and be ready to receive consideration after two years. Ld. DR submitted that the approximate interest of two years itself comes as high as Rs. 7 – 8 lakhs whereas the present deal is for Rs. 75,50,000/- only. He submitted that how can a person ignore the interest amount of Rs. 7 - 8 lakhs and make sale of land on such terms where he receives no interest at all? Ld. DR submitted that had it been a small gap of 2-3 months, it would have been acceptable but the gap of 2 years is so high that the assessee’s claim cannot be accepted. He submitted that the Ld. CIT(A) is very logical in observing that the assessee might have paid consideration in cash and subsequently when the post-dated cheques were presented in bank, the cash must have been returned to assessee. With these submissions, Ld. DR strongly supported the orders of lower authorities and prayed to uphold the same.
In rejoinder, the Ld. AR submitted that it was a mutual understanding between the assessee and the seller to pay consideration through post-dated cheques and the Department cannot make any intervention or interference rejecting the mutual understanding of parties. Ld. AR submitted that many
Mohd. Hussain Kagdi , Ratlam vs. ITO (IT & TP), Bhopal I.T.A.No. 120/Ind/2021 – A.Y. 2011-12 a time, the seller is not able to sell his property and agrees upon the terms acceptable to the buyer. He submitted that there can be hundred and one reasons for making an understanding by two parties, which may appear unreasonable to others or to tax authorities. Ld. AR went on submitting further that both of the seller and assessee/buyer belong to Dowdy Bohra Communities of Muslims and they are blessed with a strong relationship.
Ld. AR further pointed out a categorical fact that the persons of Dowdy Bohra Community do not charge any interest as per their religious customs and they rigorously follow such custom. Therefore, the very claim of Department that no interest had been charged for two years is un-founded in the present case.
We have considered rival submissions of both sides, perused the orders of lower-authorities and the documents filed in the Paper-Book to which our attention has been drawn. On a careful consideration of the contemporary documents, we firstly find that the Page No. 5 of the sale-deed clearly mentions that the consideration of Rs. 75,50,000/- was paid through six cheques serially numbered from 083958 to 083963. The sale-deed is executed and registered by stamps authority and cannot be brushed aside.
Secondly, we find that the bank statement of Stare Bank of India clearly mentions the details of debit entries of those six cheques cleared on various dates as narrated earlier. The bank statement is also a document issued by bank and cannot be brushed aside. Thus, from these documents, it is clearly established that the entire consideration was paid only through
Mohd. Hussain Kagdi , Ratlam vs. ITO (IT & TP), Bhopal I.T.A.No. 120/Ind/2021 – A.Y. 2011-12 cheques. Undoubtedly this clearly shows that there is no passing of cash between the parties. So far as clearance of cheques after about two years is concerned, Ld. AR has made a submission that this was due to a mutual understanding of parties. Ld. AR has further made a clear submission standing at the bar that both parties belong to Dowdy Bohra Community of Muslims where interest is not charged following customary practice. These factors pointed by Ld. AR certainly make a sense and dislodge the apprehensions made by authorities. In any case, the lower authorities have no basis or proof to establish that the assessee or his brother had made any cash payment to the sellers and subsequently recovered the same on clearance of cheques. Such a conclusion taken by authorities is merely based on apprehension, presumption or suspicion. It is an established judicial wisdom that presumption howsoever strong can never become an evidence. Even otherwise, when we have two sets of evidence, one documentary evidence in the form of registered-deed and bank statement showing the factum of payment through post-dates cheques and other a mere presumption that cash mush have exchanged the hands, we must necessary give credence to the documentary evidences and should not be guided by mere presumption. Thus, we do not find any merit in the addition made by authorities based on mere presumption which is not backed by any evidence at all. Consequently, we delete the addition made by authorities.
The assessee succeeds in its grounds.
Mohd. Hussain Kagdi , Ratlam vs. ITO (IT & TP), Bhopal I.T.A.No. 120/Ind/2021 – A.Y. 2011-12
Resultantly, this appeal is allowed.
Order pronounced in the open court on 05.02.2024.