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Income Tax Appellate Tribunal, DELHI BENCH: E: NEW DELHI
Before: SHRI CHANDRA MOHAN GARG & SHRI PRADIP KUMAR KEDIA
ORDER PER CHANDRA MOHAN GARG, J.M. This appeal has been filed against the order of CIT(A)-26 New Delhi dated 26.08.2021 for AY 2010-11.
The grounds of revenue are as follows:- i. Whether the Ld. CIT(A) has erred in law and on facts of the case by deleting the addition of Rs. 1.50 Cr. Made as unexplained money u/s69A of the IT, 1961 by ignoring the established facts that seized document found during search has permissibility as per the provision of presumption u/s292C of the IT Act, 1961. ii. Whether the Id. CIT(A) has erred in law and on facts by ignoring facts that the contents of ATS where all other details like past ownership of plot, details of director of these companies, details of cheque of Rs.50 lakhs, the issuing bank branch etc. were all matching and parties denied only the cash components of agreement. iii. Whether the Ld. CIT(A) were right in discarding the unsigned agreement to sell (ATS) without appreciating the fact that all other details were exacting matching with the particulars of parties and bank account receipt/payments in this respect. iv. Whether in law and facts of the case, the order of the CIT(A) is erroneous and not tenable in law and on facts.
We have heard argument of both the sides and carefully peruse the relevant material placed on record inter alia paper book filed by assessee spread over 88 pages. The ld. CIT(DR), supporting the assessment order submitted that Ld. CIT(A) has erred in law and on facts of the case by deleting the addition of Rs. 1.50 Cr. Made as unexplained money u/s69A of the IT, 1961 (for short the ‘Act’)by ignoring the established facts that seized document found during search has permissibility as per the provision of presumption u/s292C of the IT Act, 1961. He further submitted that the Id. CIT(A) has erred in law and on facts by ignoring facts that the contents of ATS where all other details like past ownership of plot, details of director of these companies, details of cheque of Rs.50 lakhs, the issuing bank branch etc. were all matching and parties denied only the cash components of agreement. Drawing our attention towards orders of the authorities below the ld. CIT(DR) also submitted that the Ld. CIT(A) were right in discarding the unsigned agreement to sell (ATS) without appreciating the fact that all other details were exacting matching with the particulars of parties and bank account receipt/payments in this respect.
The ld. CIT(DR) has placed reliance on the following judgments and orders to support the addition made by the Assessing Officer u/s. 69 of the Act:- 1. [2021] 128 taxmann.com 414 (Delhi) – Jatinder Pal Singh vs. DCIT, Central Circule-9. 2. [2021]f 126 taxmann.com 82 (Gujarat)- Heval Navinbhai Patel vs. ITO, Ward 3(2)(2). 3. [2019] 107 taxmann.com 464 (SC)- Krishan Kumar vs. ITO, Patiala 4. [2014] 49 taxmann.com 101 (Gujarat) CIT-1 vs. Sarwankumar Sharma. 5. [2014] 45 taxmann.com 276 (Allahadbad)- Swami Sharan Garg vs. CIT, Meerut. 6. [2005] 148 Taxman 569 (Madhya Pradesh)- Kantilal Prabhudas Patel vs. DCIT- Investigation, Circle-2. 7. R. Malika vs CIT [2017] 79 taxmann.com 117(SC). 8. Ashokbhai H Jariwala vs ACIT [2017] 84 taxmann.com 196 (SC)/[2017] 250 taxman 14 (SC) 5. Replying to the above, the learned authorised representative of assessee (AR) submitted that the provision of section 69A of the Act cannot be invoked in a vacuum only on the standalone basis of a unsigned document found from the computer of document writer which was never acted upon either by the assessee or by the other party. Drawing our attention towards relevant part of the assessment as well as first appellate order the ld. AR submitted that the ld. CIT(A) has noted facts pertaining to the unsigned agreement to sale (ATS) seized in the soft copy from the computer of a deed writer who was a third party and existence of the same was denying by the both parties to it including the assessee. The ld. CIT(A)also noted that the cheque amount and details are verifiable from the parties to the agreement and there was no evidence on record of any cash exchange between the parties and mention in the ATS. The ld. counsel submitted that the said ATS never culminated into a complete transaction by M/s. J P Holding & Leasing Pvt. Ltd. but in fact the same was sold to M/s. Luv Luxmi Land Developers ltd. under the registered sale deed executed on 26.06.2014 and capital gain have been shown by the assessee in the written of income for FY 2014-15 pertaining to AY 2015-16.
The learned AR further drew our attention towards para 5.6 to 5.8 of first appellate order and submitted that the ld. CIT(A) has rightly relied on the order of ITAT Delhi Bench dated 25.01.2019 in the case of Shri Bhagat Singh vs. ACIT wherein by relying on the judgment of Hon’ble jurisdictional High Court of Delhi in the case of Smt. Vineeta Chaurasia the addition has been deleted based on dumb document by holding that since the document was not found and seized from the assessee during search & seizure operation and the same was seized and found in the soft copy from the computer of a deed writer Shri Naresh Gupta, who was a third party, therefore presumption u/s. 292C(1)(i) of the Act cannot be drawn against the assessee that the same belongs to the assessee. The ld. AR lastly submitted that the ld. CIT(A) was right in deleting the baseless addition therefore the first appellate order may kindly be uphold by dismissing the ground of revenue.
On careful consideration of above rival submissions, first of all, we find it appropriate to reproduced the findings of the ld. CIT(A), which are as follows:- 5.2 Facts of the case: (i) The search & seizure action was carried out in AN group of cases, during which search was carried at the residence of Sh. Naresh Gupta who is a deed writer and advocate by profession. (ii) In the hard disc seized from the residence of Sh. Naresh Gupta, an unsigned Agreement to Sell (ATS) between the appellant and M/s JPHLPL for the property belonging to the appellant, as per the details in the above table, was found. (iii) The appellant and M/s JPHLPL, both have denied the existence of this ATS as well as any amount of cash exchanged as mentioned in this ATS. There is no evidence on record that the amount of Rs. 1.5 cr. had actually exchanged hand between these two parties. (iv) The AO had invoked presumption us 292C against the appellant on the basis of the unsigned ATS seized from the third party. (v) The AO had not mentioned the section under which addition had been made by it, however from the wording of addition made, it appears that the addition had been made u/s 69A of IT Act, 1961. 5.3. Let us examine the legal position vis-a- vis the facts of the present case w.r.t presumption of section 292C.
(i) Hon'ble Jurisdictional Delhi High Court vide its order dated 10.02.2016 in the case of Pr. CIT VS M/s Delco India Pvt. Ltd. reported at (2016) 2 TMI 607 (Del.) wherein it has been held as under: "17. Section 292C of the Act, inter alia, provides that where any books of accounts or other documents are found in possession or control of any person in the course of search under Section 132 or survey under Section 133A of the Act, it may be presumed that such books or documents belong to such person. Undisputedly, such presumption is rebuttable. As per this judgment, the presumption u/s 292C and 132 rebuttable. (ii) The ITAT Mumbai Bench in the case of Sh. Pandoo P. Naig vs ACIT in IT Nos. 7089 & 7364/Mum/2011 and & 6672/Mum/2012 (supra) vide order dated 24.06.2016 had held, as under: "14. We find that the wording of the section 292C which supposes the presumption to be taken is qualified with the words 'may be, hence, it, may or may not be presumed that such documents belong to the person searched. Firstly, the section uses the word 'may presume and not 'shall presume', hence the presumption of facts under section 292C is not a mandatory or compulsory presumption, but, discretionary presumption; secondly, such a presumption is not a conclusive presumption but is a rebuttable presumption because it is a presumption of fact not a presumption of law. The presumption u/s 292C and 132 are not presumption of law, but facts and are rebuttable. (iii) In the case of Vijay Kumar Aggarwal vs. ACIT, Central Circle- 12, New Delhi [No.- ITA No. 1182/Del/2011 dated 17/02/2017], the Hon'ble ITAT Delhi had held as under: "12. From the observations made in the aforesaid referred to orders, it is clear that the presumption of facts us 292C of the Act is not a mandatory or compulsory presumption but a discretionary presumption. Since, the word used in the said Section is " may be" and not "shall". Secondly, such a presumption is rebuttable presumption and not a conclusive presumption because it is a presumption of fact not a presumption of law. 5.3.1 The ratio-decidendi on section 292C emerging from the above judicial precedents is that: (a) The presumption of facts u/s 292C of the Act is not a mandatory or compulsory presumption but a discretionary presumption. Since, the word used in the said Section is "may be" and not "shall". (b) Such a presumption is rebuttable presumption and not a conclusive presumption because it is a presumption of fact, not a presumption of law.
5.3.2 The above judgments of various courts had held that the presumption available in section 292C of the Act is a rebuttable presumption, Mere possession of documents perse does not warrant any addition on the basis of values in non executed documents. The AO cannot make any addition simply on the basis of this presumption but need to bring other corroborative evidences on record. 5.4 There are other judicial pronouncements on the issue of burden of proof, corroborative evidences of actual payments, applicability of deeming provisions etc. in such circumstances. Some of these are as under: (i) The Hon'ble Madras High Court in the case of CIT vs. P.V. Kalyanasundaram (2006) 282 IT 259 (Madras) has held as under : "The burden of proving actual consideration in such transaction is that of the revenue. The Tribunal had given factual finding and, inter alia, held that the Apex Court in K.P. Varghese v. ITO (19911 131 ITR 597 | 7 Taxman 13 held that the burden of proving actual consideration in such transaction is that of the revenue. The Assessing Officer did not conduct any independent enquiry relating to the value of the property purchased. He merely relied upon the statement given by the seller If he would have taken independent enquiry by referring the matter to the Valuation Officer, the controversy could have been avoided. Failing to refer the matter was a fatal one. In view of the above, there was no error in the order of the Tribunal and required no interference. The Hon'ble Supreme Court in the case of CIT vs. P.V. Kalyanasundaram (2007) 294 IT 49 (SC has confirmed the above Judgment of the Hon'ble Madras High Court by dismissing the Departmental Appeal. (ii) In the case of CIT vs. Provestment Securities (P.) Ltd. [20161 65 taxmann.com 69 (Delhi), the Hon'ble Delhi High Court has held as under: - "14. At this stage it is necessary to refer to Section 69 of the Act, which reads as under:- "69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year."
It is apparent from the plain language of Section 69 of the Act that in order for any addition to be made under Section 69 of the Act, the following conditions must be met: (a) It is established as a fact that the Assessee has made an investment:
(b) That the investment made is not recorded in the books of the Accounts, if so maintained; and (c) The Assessee offers no explanation as to the nature and source of investment made or the explanation offered by the Assessee is, in the opinion of the AO, not satisfactory.
Thus, first and foremost, A0 must come to a conclusion that an Assessee had, in fact, made an investment. Once an AO finds that an investment has been made, he has to examine the Assessee's explanation as to the source of that investment. It is only in cases where the Assessee is unable to explain the source of the investment made that provisions of Section 69 of the Act can be applied to tax the value of the investment made.
In the circumstance, we are inclined to agree with the Tribunal that the question whether an investment had been made or not is a matter of fact and the same cannot be presumed. " The ratio of the aforesaid decision is squarely applicable to the facts of the present case of the appellant. The AO has not been able to establish through any evidence that the appellant had, in fact, received any amount for which the addition had been made in the assessment order. Once this primary and basic condition of section 69/69A has not been fulfilled, as held by the Hon'ble High court in the above case, provisions of Section 69/69A of the Act cannot be applied. (iii) In the case of Pr. Commissioner of Income Tax-III, Ahmedabad Versus Vivek Prahladbhai Patel 2015 (12) TMI 1287 - GUJARAT HIGH COURT the hon'ble high court had held as under: - 8. For the reasons stated hereinabove, this court is in complete agreement with the findings recorded by the Tribunal upon appreciation of the evidence on record and finds no reason to take a different view. In the opinion of this court, having regard to the evidence which has come on record, which reveals that there is an agreement to sell executed between the assessee and the sellers, which shows the price of the plots of land in question to be a much higher figure than the documented price and the fact that the sellers have stated that they have received higher amounts by way of on-money and have also shown receipt of such amount in their income tax returns, the circumstances do raise a suspicion. However, as held by the Supreme Court in Commissioner of Income tax v. Daulatram Rawatmull, (1964) 53 IT 574 (SC), even if circumstances raise a suspicion, suspicion cannot take the place of evidence. The facts of the case of the appellant are even stronger. There is neither any evidence of any consideration received by the appellant over and above the amounts mentioned in books nor there is any confession/admission by the proposed sellers/purchasers of having received any amount over and above the amount recorded in the books. Applying the ratio of the aforesaid decision on the present case of the appellant, the AO could not have drawn any adverse inference. (iv) In the case of ACIT V. Rakesh Narang, 64 taxmann.com 332 (Del), the Court had held as under: - 4. We have heard the rival submissions and perused the relevant material on record. It is noticed that the extant addition was made by the AO us 69B of the Act. The relevant part of this section stipulates that: 'Where in any financial year the assessee has made investments or and the Assessing Officer finds that the amount expended on making such investments or ... exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.' The pre-requisite conditions for making an addition under this section are that firstly, the assessee should have made investment and then the AO should find that the amount actually expended on making such investment is more than the amount recorded in the books of account. In other words, there should be some positive evidence with the AO to find that the assessee had, in fact, invested more amount than that actually recorded in the books of account. Such a finding by the AO can be based on some positive evidence about the making of more investment than that declared in the books of account. This section cannot be triggered on a mere presumption of the AO. When the legislature has unambiguously provided so, it is impermissible to substitute such a finding with a presumption about actual investment having been made by the assessee at a level higher than that depicted in the books of account. Only some positive and irrefutable evidence converts a presumption into a finding. Absent affirmative evidence, what remains is a mere supposition of unexplained investment etc., which cannot take the place of a finding of the AO towards unexplained investment. (v) In the case of CIT vs Dinesh Jain HUF, IT no. 610/2012, Dated 19.10.2012 (Del), the Court had held as under:- "This Court in its order dated 28.9.2012 held that (a) Section 69B in ) terms requires the assessing officer to first prove that the assessee has actually expended an amount which he has not fully recorded in his books of account; (b) there has to be a finding that such amount was actually paid by the assessee over and above the declared consideration and the extra amount was not recorded in the assessees books of account; (c) the provisions of the Wealth Tax Act and Schedule III thereto cannot be Section 69B because the enquiry under o the Wealth. Tax Act is towards estimating the market value of the property which is different from the actual price paid for the property; (d) Section 69B does not permit an inference to be drawn from the circumstances surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in this books of account, because such an inference could be very subjective and could lead to the taxation of notional or fictitious income contrary to the strict provisions of Article 265 of the Constitution of India as held by the Supreme Court in the case of K P Verghese Vs. ITO (1981) 131 ITR 597" (vi) In the case of CIT vs. Naresh Khattar (HUF) 261 IT 664 (Del), the Court had held as under:- "8. There is no gainsaying that to invoke the provisions of section 69B of the Act, the burden is on the Revenue to prove that the real investment exceeds the investments shown in the books of accounts of the appellant. As observed by the Apex Court in K.P. Varghese v. ITO /19811 131 ITR 597', to throw the burden of showing that there is no understatement of the consideration received, on the appellant would be to cast an almost impossible burden upon him to establish in negative, namely, that he did not receive any consideration more than what has been declared by him. Therefore, if the Revenue seeks to hold that the appellant 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 some material on record. (vii) In the case of CIT vs. Kulwant Rai reported in 291 IT 36, Delhi High Court had held as under: "12. Coming to the facts of the present case with regard to the addition of Rs. 17,00,892/- made by the Assessing Officer as undisclosed income of the Assessee for the block period, we may refer to the findings of the Tribunal on this point and the relevant portion reads as under:- "On consideration of the matter we find that the addition has been made by the learned Assessing Officer on the basis of surmises and guess work. He has ignored the fact that the agreement was found in possession of the Assessee. ...The reasoning given by the learned Assessing Officer is entirely guess work. It is well settled legal position in respect of income tax assessment proceedings that although strict rules of Evidence Act do not apply to Income-tax proceedings, assessments cannot be made on the basis of imagination and guess work. Reference in this respect may be made to the judgment of Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 IT 775 (SC) and a host of Supreme Court and High Court's judgments thereafter on the subject. We, therefore, direct deletion of the sum of Rs.17,00,892/- assessed by the Assessing Officer by way of half share of the Assessee in the alleged earnest money.
13. It is an admitted fact that the present Assessee had not signed the agreement in question and since the Assessee had not signed the agreement, no liability can be attributed qua that agreement towards the Assessee since he is not party to the agreement till he had signed the same. The mere fact that this agreement was found in the possession of the Assessee does not lead us anywhere. We find no hesitation in holding that this addition of Rs. 17,00,892/- made by Assessing Officer is based on surmises and guess work and on this point case of Dhakeswari Cotton Mills Ltd v. Commissioner of Income Tax, (1954) 26 IT 775, may be referred to.. (viii). In the case of CIT vs. Mother India Refrigeration Industries (P.)v Ltd - SC- 155 ITR 711 Hon'ble Supreme Court observed that - "10. It is true that proviso (b)to section 10(2)(vi)( Corresponding to section 32(2) of Income Tax Act 1961) creates a legal fiction and under that fiction unabsorbed depreciation either with or without current year's depreciation is deemed to be the current year's depreciation but it is well settled, as has been observed by this Court in Bengal Immunity Co. Ltd. v. State of Bihar (1955] 2 SCR 603 at p. 606, that legal fictions are created only for some definite purpose and these must be limited to that purpose and should not be extended beyond that legitimate field.
11. Such being the purpose for which the legal fiction is created, it is difficult to extend the same beyond its legitimate field and will have to be confined to that purpose. It is, therefore, not possible to accept the contention of the counsel for the assesses that because of the legal fiction the unabsorbed carried forward losses should be given preference not merely over the unabsorbed carried forward depreciation but also over the current year's depreciation. There is, thus, no modification of nor deviation from the basic and well recognised principle of commercial accountancy by the statute as is contended by the counsel for the (ix). The Hon'ble Supreme Court in the case of CIT vs. Moon Mills Ltd - 59 ITR 574 [larger bench of 3 judges] held that – But the fourth proviso introduces a fiction that in case any insurance, salvage or compensation money received in respect of the said property exceeds the difference between the written down value and the scrap value, so much of the excess as mentioned therein will be deemed to be the profits of the previous year in which such money is received. Though in fact the said compensation represents a capital asset, to the extent mentioned in the proviso, the compensation is deemed to be the profits of the previous year in which such money is received. The proviso, therefore, introduces a fiction. What is not a profit in the previous year is... deemed to be a profit in that year. The previous year is that year in which such moneys were received. The fiction is an indivisible one. It cannot be enlarged by importing another fiction, namely, that if an amount was receivable during the previous year it must be deemed to have been received during that year. So too, in the instant case, the fiction serves the purpose, if the said compensation was deemed to be the profits of the previous year or of the year in which it was received. This fiction cannot be enlarged by giving the expression "received" a technical meaning which it may bear in the mercantile system of accountancy. (x) In the case of ACIT vs. M/s Vatika Greenfield (P) Ltd. IT 113 (AT) (Del), the court had held as under:- "21. A conjoint reading of the above decisions suggests that taxing statutes have to be interpreted strictly. In the deeming provision what is prescribed is to be deemed and deeming provision cannot be extended beyond the legislative scope. The presumption as envisaged in s. 292C is limited to the correctness of the documents found at the time of search or survey, but that presumption has not been extended by the statute to be presumed to be the income of the assessee. If it is so, then unless some evidence/material is brought on record by the Revenue to say that what is stated in the seized document is not correct, state of affairs, the state of affairs stated in the impounded document has to be presumed to be true. It has already been observed that there is no material/evidence on record to suggest alleged excess payment of Rs.1 crore received by the assessee from Raja Singh Sethi was in any way in the shape of income and not an unsecured interest-free loan. Therefore also, the argument of learned Departmental Representative that on the basis of s. 292C, the action of the AO should be upheld, cannot be accepted. Therefore, we find no material to interfere in the decision arrived at by the CIT(A) vide which impugned addition has been deleted. " 5.5 It is observed that in the present case: (i) There is no original ATS, but a soft copy, which is not on any stamp paper, not signed by any party to the ATS, including any witness. (ii) The ATS had been seized in the soft copy from the computer of a deed writer, which is a third party. (iii) The existence of this ATS had been denied by both the parties to it. (iv) Only cheque amounts & their details are verifiable from the parties to the agreement. There is no evidence on record of any cash exchanged between the parties as mentioned in ATS, to which appellänt is the receiving party as seller of property.
(v) The deed writer had not given any adverse statement to the contents of this ATS, as nothing had been reproduced in the assessment order. (vi) This ATS never culminated into the sale deed. Infact, the appellant had sold this property later on at value of Rs3,61,00,000/- to another party M/s Luv Laxmi Land Developers (P) Ltd. as per the sale deed dated 26.6.2014 submitted by the appellant and capital gains have been shown in the return of income filed by the appellant for AY 2014-15. 5.6 In the situation where the ATS is unsigned, not on any stamp paper and had been denied by all the parties to it and had been found from the computer of a deed writer ( a third party on which the appellant had no control), the contents & purpose of this allegedly partly executed ATS is not fully established. In these circumstances, the presumption u/s 292C, for the cash amounts exchanged between the parties, as mentioned in the ATS cannot be taken on the face value and had to be corroborated with other independent evidences. Further it had been held in various judicial pronouncements cited above that the presumption of section 292C cannot be raised and the deeming provisions of sections 68/69/69/69B/69C cannot be applied, without evidences of actual payments/investments or any adverse statements on record. Thus, the presumption u/s 292C the presumption is rebuttable and cannot be raised in the case of the appellant, in case the document have been found from the premises of the third party, unless there are corroborative evidences. Further, the deeming provision of section 69/69A cannot be invoked against the sellers/buyers only on presumption, in the absence of any evidence of money actually paid/received had been brought on record. (i) The above judgments of various courts had held that the presumption available in section 292C of the Act is a rebuttable presumption, mere possession of documents perse does not warrant any ran addition and the AO cannot make any addition simply on the basis of this presumption. In the case laws cited above, the courts have mentioned that presumption cannot be made for the value mentioned in ATS even if it belongs to the same parties. (ii) In order to invoke the provisions of Section 69/69A of the Act, the AO ought to have established that the Appellant is the owner of money during the above assessment year. Section 69A cannot be invoked on the basis of suspicion. It is for the AO to prove that assessee has made received cash payment over and above the amount mentioned in the proposed unsigned agreement. (iii) In the present case, the assessment order is completely silent as to how and in which manner the AO had invoked the provisions of Section 69A of the Act. There are no details in the assessment order of the unexplained amounts received and added by the AO. No material has been brought on record by the AQ, except for presuming that the appellant must have received the amounts mentioned in the unsigned ATS. (iv) From the above decisions at (viii) to (x) in para above, following noteworthy principles follow - Every fiction created under law has a purpose and the meaning of expressions used in said deeming provision should be considered in ordinary sense, in which purpose, deeming provision is created serves the purpose. • If the technical meaning ascribed to the expressions used in legal fiction enlarges the original scope for which legal fiction was introduced, in such case, such (technical) meaning should not be considered. • If the terms used in the deeming provision are defined somewhere else in the Act and if adopting such meaning would facilitate working of the Act in accordance with the object of such deeming provision, then such meaning should be adopted. However, the intent and purpose of bringing deeming provision cannot be allowed to be whittled down by bringing into play the meaning of terms used somewhere else in the Act by the legislature. There cannot be deeming within deeming while interpreting deeming provision. 5.7 In the similar circumstances, on the basis of same search and same hard disc seized from residence of Sh. Naresh Gupta (same as in the case of the appellant), in the case of Shri Bharat. Singh, New Delhi vs ACIT, New Delhi & 3256/De1/2017, in the order dated 25 January, 2019, the ITAT Delhi had held as under: "5.8 As regard to the argument that no presumption can be made under section 292C of the Act against the assessee, we find that presumption made us 292C of the Act that contents of documents are true, can be invoked when the document is found in the possession or in the control of the person in the course of search or survey proceedings. But, in the instant case, the said document in the form of draft agreement to sell has been found from the possession of third party i.e. Sh. Naresh Gupta. Hon'ble Delhi High Court in the case of Vinita Chaurasia (supra) in the identical circumstances held that presumption can be drawn only against the search person. The relevant part of the judgment is reproduced as under: "
In the present case, however, it is nobody"s case other than the Revenue that the document found in the premises of Mr. Lalit Modi belongs to the Assessee. Mr. Shivpuri referred to Section 292 C of the Act for the purposes of drawing two presumptions (i) the one contained in Section 292 C (1) (i) to the effect that the document found in possession of a person should be presumed to belong to such person.As far as this is concerned, clearly, since the document was found in possession of Mr. Modi, the presumption, if at all, is attracted only qua Mr. Lahti Modi and not the Assessee herein.
5.9 The finding of the Assessing Officer the document has been requisitioned under section 132A of the Act and, thus, provisions of section 292C(2) would apply in the case is also not correct, as no such record has been produced before us to show that the said document has been requisitioned by the Assessing Officer in terms of section 132A of the Act. Accordingly, we hold that the addition in dispute cannot be sustained on the ground that the assessee failed to rebut the presumption under section 132(4) or presumption under section 292C of the Act. 5.10 Further, we find that the conclusion of the Ld. CIT(A) that the assessee received cash payment of Rs.83,50,000/-, is based on the presumption that said draft agreement to sell was prepared on the direction of the assessee. The Assessing Officer has recorded the statement of Sh. Naresh Gupta, a copy of which is available on page 85 to 88 of the paper book. The relevant part of his statement is reproduced as under: "Q.12 I am showing you printouts taken from the hard disk seized from your office premises R- 36 GK Part -1, New Delhi, in which contain various agreements to sell and sale deeds. In view of the fact and circumstances (a) Why these document should not be treated as belong to you us 132(4A) of the I T Act, 1961. (b) Why those should not be treated as true? Ans. The printouts of the documents shown to me taken from the hard disk from my office is pertaining to my various clients, it does not pertain to me in many manner whatsoever. These documents are drafted under the instruction of my various clients in discharge of my professional duty/obligation. Any other information/actual details of money transaction is not my knowledge. Any other details pertaining to the same is protected under the privileged communication under the Indian evidence Act. " 5.11 Subsequently, the assessee filed a letter from Sh. Naresh Gupta, wherein he has submitted that said draft deed was as a result of preparation of document by way of cut-and-paste of IT No.2001 & 3256/Del/2017 paragraphs from other documents. A copy of the said letter is available on page 3 of the paper book. Content of the said letter are reproduced as under: Dated: 19.03.2016 "The ACIT, Circle 26, New Delhi, Sub: In the case of Bharat Kumar, for the assessment year 2008-2009, (Reference property No. J-31, N.D.S.E.-I, New Delhi), Sir, I state that I am in to profession of providing consultancy services to my various Clients j regarding Real Estate Matters. During the course of consultancy, I do draft various documents under the instruction Clients. Sometimes under the instructions of seller, sometimes under the instructions of Purchaser and sometimes under the instructions of Real Estate Agents. I do not remember as to under whom instruction I drafted the document picked-up from my hard disk, regarding property No. J-31, situated N.D.S. E.-I, New Delhi. That during the course of drafting of various instruments, data from the Master Document is copied and sometimes during such cutting/ pasting, data of some other file is also copied by mistake, which shows various discrepancies/variance as per the actual figures/ amounts/ terms. Therefore simply picking Up file from thehard disk of the Computer will not reflect true nature of the contract. True nature of the contract can only be gathered from the contracting parties only. Regards Sd/- NARESH GUPTA (ADVOCATE)" 5.12 On perusal of the statement and letter of Sh. Naresh Gupta, we find that though he initially admitted that draft document was prepared on the direction of the assessee, however, he has denied of any knowledge of information/actual details of money transaction between the buyer and assessee. No other evidence corroborating the payment in cash by the buyer to the assessee has been either found in the course of the search or collected in the course of assessment proceedings by the Assessing Officer, which could substantiate receipt of alleged cash amount recorded in the draft agreement to sale.
5.13 It is undisputed that the draft agreement to sell is not signed either by the purchaser or the seller. The author of the draft has denied any knowledge of alleged payment recorded in the draft. No other evidence, like a statement of the buyer or any valuation report regarding the sale value of the property are available on record. In our opinion, unless there are enough corroborative evidence to show that the payments as noted in the draft agreement to sell was actually received by the assessee, no addition can be made in the hands of the assessee merely on the basis of unsigned draft agreement to sale. The finding of the Ld. CIT(A) that part of the document is found to be true and thus the balance should also be treated as true is not correct and instant case the entire document found is a draft prepared by the deed writer, which is not signed by any of the party mentioned in the said draft. Such an unsigned document cannot be made basis of presumption that the assessee received cash on sale of the property. The assessee has been subjected to search but no other documentary evidence of receipt of cash by the assessee has been found in the course of the search. We also note that no attempt has been made by the Assessing Officer to make an enquiry from the buyer or to ascertain the prevalent market value of the property sold by the assessee.
5.14 In view of the aforesaid discussion, we are of the opinion that no addition can be sustained only on the basis of the unsigned draft agreement to sell found from the premises of the third party and that too without any corroborative evidences. Accordingly, we set aside the order of the Ld. CIT(A) and the Assessing Officer on the issue in dispute and direct the Assessing Officer to delete the addition of Rs.83,50,000/- for alleged cash received on sale of 1st floor of the property under reference. The grounds No. 2 and 3 of the appeal are, accordingly, allowed. ……… 7. In the result, appeal of the assessee is allowed partly. 5.8 It is observed that the facts in the above case, the nature of ATS seized (without any signatures & from the third party) and the deed writer from whom it had been seized, are same as in the case of the appellant. In fact in the case of the appellant, the ATS did not culminate into any sale deed, whereas in the above case, it culminated into sale deed at a lower value than mentioned in the ATS, with same parties as in ATS. After the detailed discussion and various case laws, the ITAT Delhi had concluded that no addition can be sustained only on the basis of the unsigned draft agreement to sell found from the premises of the third party and that too without any corroborative evidences. This decision of the ITAT Delhi is squarely applicable to the facts of the present case. Therefore, respectfully following the decision of ITAT Delhi in the case of Shri Bharat Singh Vs ACIT, New Delhi, it is held that no addition can be sustained only on the basis of the unsigned unexecuted draft agreement to sell found from the premises of the third party and that too without any corroborative evidences. Accordingly, the addition made by the AO of Rs 1,50,00,000/- is hereby deleted and this ground of appeal is allowed.
8. At the very outset, we find that the wording of the section 292C which supposes the presumption to be taken is qualified with the words 'may be', hence, may or may not be presumed that such documents belong to the person searched. Firstly, the section uses the word 'may presume and not "Shall presume, hence the presumption of facts under Section mandatory or compulsory presumption, discretionary presumption; secondly, such a presumption is not a conclusive presumption but is a rebuttable presumption because it is a presumption of fact not a presumption of law.
9. Now, we proceed to adjudicate the grounds of revenue. So far as presumption u/s. 292C of the Act, is concerned this issue has been dealt by the ld. CIT(A) in para 5.7 of the first appellate order wherein he has referred to the order of co-ordinate bench of ITAT Delhi in the case of Bhagat Singh vs. ACIT (supra) and thereafter observed that the nature of agreement to sale seized clearly reveals from the documents its which has not been signed by the parties and hence the same was found without signature in the soft copy of deed writer that is third party Shri Naresh Gupta. It is not a case of the Assessing Officer or CIT(A) that the said ATS was acted upon by ATS by execution of sale deed and thus we have to agree with the contention of the ld. AR that the ATS was never acted upon and never culminated into transfer of property by way of execution of registered sale deed in favour of second party i.e. M/s. J P Holding & Leasing Pvt. Ltd. and in fact the assessee sold the property to a third party later against the consideration of Rs. 3.61 crores to M/s. Luv Luxmi Land Developers Pvt. Ltd. on 20.06.2014 during FY 2014-15 and also shown capital gain in its return of income for AY 2015-16 as these facts have not been controverted by the ld. Senior DR by way of any other adverse positive material or evidence which may lead us to take a different view in favour of the revenue.
In our considered view, Hon’ble jurisdictional High Court in the case of PCIT vs. Smt. Vinita Chaurasia judgment dated 18.05.2017 in of 2015 & 1005 of 2015, which was followed by the co-ordinate bench of ITAT Delhi in the case of Shri Bhagat Singh vs. ACIT (supra), held that the presumption under section 292C (1)(i) of the Act cannot be drawn against the assessee on the basis of the document found in the possession of third party i.e. Shri Naresh Gupta who was a deed writer in the present case. Therefore the case laws relied by the ld. CIT(DR) having distinct and dissimilar facts and circumstances are not applicable to the present case in favour of the assessee.
In our humble view, the burden of proving receipt of cash by the assessee under ATS is that of the revenue. The Hon’ble Supreme Court in the case of K.P. Varghese v. ITO [1991] 131 IT 597 / 7 Taxman 13 held that the burden of proving actual consideration in such transaction is that of the revenue. The Assessing Officer did not conduct any independent enquiry relating to the value of the property purchased. He merely relied upon the ATS copy of unsigned ATS found and seized from the third party i.e. deed writer without any examination of the second party i.e. J.P Holding. If he would have taken independent enquiry by referring the matter to the Valuation Officer, the controversy could have been avoided. Failing to refer the matter was a fatal one.
In the present case the Assessing Officer had made addition of Rs. 1.50 crore by observing that the credit of said amount not disclosed by the assessee in its books of accounts from the grounds raised by the assessee before CIT(A) in form no. 35 we also note that the assessee has challenge the addition made by the Assessing Officer without mentioning any charging section. Further, from operative para 5.8 it is also discernable that the ld. CIT(A) has deleted the addition without mentioning any section. Be that as it may, however from the grounds raised by the revenue in Form no. 36 we note that the revenue has alleged that the CIT(A) has erred in deleting the addition made by the Assessing Officer as unexplained money u/s. 69A of the Act, which applies to a situation when assessee is found to be the owner any money bullion etc. not recorded in the books of accounts of assessee. As per facts gathered and alleged by the Assessing Officer we note that the main contention of the Assessing Officer based on ATS is that the credit of cash payment of Rs. 1.50 crore was not found to be recorded in the books of accounts of assessee which attracts the provision of section 69 of the Act.
At this stage it is necessary to refer to Section 69 of the Act, which reads as under:- "69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.
From the plain language of Section 69 of the Act that in order for any addition to be made under Section 69 of the Act, the following conditions must be satisfied:- (a) It is established as a fact that the Assessee has made an investment; b) That the investment made is not recorded in the books of the Accounts, if so maintained; and as (c) The Assessee offers no explanation as to the nature and source of investment made or the explanation offered by the Assessee is, in the opinion of the AO, not satisfactory. Thus, first and foremost condition for invoking sec. 69 of the Act is that the Assessing Officer must come to a conclusion that an Assessee had, in fact, made an investment. Once an AO finds that an investment has been made, he has to examine the Assessee's explanation as to the source of that investment. It is only in cases where the Assessee is unable to explain the source of the investment made that provisions of Section 69 of the Act can be applied to tax the value of the investment made.
15. In the case of Shri Bhagat Singh vs. ACIT (supra), under identical facts and circumstances the co-ordinate bench held that no addition can be sustained only on the basis of the unsigned draft agreement to sale found from the premises of the third party and that too without any other collaborative evidence showing the cash payment as mentioned therein. However, we also note that the details of cheque mentioned in the ATS has been accepted and confirmed by the assessee which has not been disputed by the Assessing Officer but the assessee as well as the buyer has confirmed that no amount of in cash has been received by the assessee from the buyer. This fact has not been controverted by the Assessing Officer that the advance of Rs. 50 lac received through cheque from M/s. J P Holding & Leasing Pvt. Ltd. was returned through 18.12.2010 vide cheque no. 118 drawn on syndicate bank and the deal was finally terminated. In view of foregoing discussion we reach to a logical conclusion that the ld. CIT(A) was right in holding that no addition can be made and sustained only on the basis of unsigned unexecuted draft agreement to sale found from the premises of third party i.e. deed writer without any other collaborative evidence supporting the factum of receipt of cash by the assessee under the alleged document. We are unable to see any ambiguity, perversity or any other valid reason to interfere with the findings recorded by the ld. CIT(A) and thus we uphold the same. Accordingly, grounds of revenue being devoid of merits are dismissed.