SH. HARINDER SINGH,LUDHIANA vs. ITO, W-VII(1), LUDHIANA

The assessee has raised the following grounds:

That the Ld. Commissioner of Income Tax (A)-3, Ludhiana has erred in confirming the addition of Rs. 1,72,82,855/- on account of alleged unexplained investment in acquisition of land from undisclosed sources. 2. That the Ld. CIT(A) has confirmed the addition on the basis of his earlier orders for Asstt. Year 2006-07 & 2008-09 and which orders of the CIT (A) were reversed by the Hon'ble ITAT, Chandigarh Bench, Chandigarh in ITA Nos. 505 & 506/Chd/2014 vide order, dated 18.12.2015. 3. That the confirmation of addition by the CIT (A) is not correct because, similar additions were made in Asstt. Year 2006-07 & 2008-09 by the Assessing Officer and which were confirmed by the CIT (A), but, such additions were deleted by the Hon'ble ITAT, Chandigarh Bench and the facts and circumstances of making the addition and confirmation by the CIT (A) in the above said year are same as in Asstt. Year 2006-07 & 2008-09.

Brief facts of the case are that assessee Shri Harindcr Singh alongwith Suresh Kumar Khanna and Sahibjit Singh Directors, of M/s Basera Realtors Pvt. Ltd. had entered into agreements for the purchase of land in Village Jhande, Teh. & Distt. Ludhiana during the financial year relevant to the asstt. year 2007-08 as per details given below:-

The issue involved for the A.Y. in question is the addition of Rs. 1,72,82,855/- as unexplained investment in the acquisition of land. 5. The Ld. CIT(A) has dismissed the appeal of the assessee. 6. Before us Ld. DR relied on the decision of the Coordinate Bench of ITAT, Chandigarh in ITA NO. 505 & 506/CHD/2014 dt. 18/12/2015 in favour of the assessee for the pre and post Assessment Years i.e; 2006-07 & 2008-09. For the sake of brevity the relevant portion of the order of ITAT Chandigarh Bench is reproduced hereunder:

In assessment year 2006-07, the assessee challenged the re-opening of the assessment under section 147/148 of the Income Tax Act and addition of Rs. 93,63,000 on account of unexplained investment in purchase of land.

In assessment year 2008-09, the assessee similarly challenged the re- opening of the assessment under section 147/148 of the Income Tax Act and addition of Rs. 1,28,36,000/- on account of unexplained investment in purchase of land and alleged addition of Rs. 2,98,39,000/- on account of profit of sale of alleged residential plots.

Briefly the facts of the case are that as per information received from DCIT, Central Circle-I, Ludhiana dated 30.09.2011, it has been revealed that Shri Harinder Singh alongwith Shri Suresh Kumar Khanna and Shri Sahibjit Singh, Directors of M/s Basera Realtors P.Ltd. had entered into agreement for purchase of land in village Jhande, Tehsil & District Ludhiana during the financial year relevant to the assessment year 2006-07, details of same are noted at page 2 of the assessment order. The date of agreements are 30.01.2006 and 05.10.2005. The agreement dated 30.01.2006 is alleged to have been entered into between the sellers S/Shri Inderjit Singh, Jasbir Singh, sons of Shri Gurmeet Singh, Amarjot Singh S/o Shri Surinder Singh, Shri Manohar Singh S/o Shri Harnek Singh and the purchers are Shri Harinder Singh (assessee), Shri Suresh Khanna with half share each. The agreement dated 05.10.2005 is executed between the sellers Smt. Harjinder Kaur, Shri Balwinder Singh and Shri Bhupinder Singh with the purchasers Shri Sahibjit Singh S/o Shri Amarjit Singh and Shri Harinder Singh (assessee) in equal shares. The total consideration is also noted at page 2 of the assessment order. The Assessing Officer, therefore, observed that assessee was having half share of investments made in these properties which for assessment year 2006-07 worked out to Rs. 93,63,000/-.

As per Agreement to Sell executed on 05.10.2005, Smt. Harjinder Kaur, Shri Balwinder Singh and Shri Bhupinder Singh had agreed to sell their land measuring 4 Bighas 8 Biswas 16 Biswasi i.e. 13476 sq.yds. in village Jhande, Ludhiana to Shri Harinder Singh, assessee and Shri Sahibjit Singh Director of M/s Basera Realtors P.Ltd. @ Rs. 47.80 lacs per acre i.e. 4840 sq. yds. The total sale consideration as per this agreement worked out to Rs.1,96,91,711/-. there is another Agreement to Sell dated 30.01.2006 in terms of which, Shri Inderjit Singh & Shri Jasbir Singh, sons

It was noticed that assessee has not filed return of income for assessment year under appeal, therefore, reasons were recorded under section 148 for re- opening of the assessment but no return has been filed by the assessee in response to the notice under section 148 of the Income Tax Act. The assessee also did not comply with other statutory notices. The summons under section 131 were issued for personal attendance of the assessee but assessee, instead of appearing before Assessing Officer asked for copy of the reasons recorded under section 148 of the Income Tax Act. Since no return was filed by assessee, therefore, assessee was not supplied the reasons for re-opening of the assessments. The assessee, later on intimated that return has been filed for assessment year under appeal in response to notice under section 148 on 05.02.2013. Therefore, assessee asked for copy of the reasons. The assessee, for the first time, on 01.03.2013, appeared before the Assessing Officer and his statement was recorded regarding the investments, if any made by him in the acquisition of lands individually or in partnership with others in financial year relevant to the assessment year under appeal. The relevant questions put to him and replies given by him have been reproduced at page 5-6 of the assessment order in which the assessee explained that he has not done any transaction of purchase and sale of immovable properties with M/s Basera Realtors P.Ltd. during the assessment year under appeal and has not done any transaction. He has denied to have purchased any property with the aforesaid parties. He has further explained that he came to know from his counsel who was attending the proceedings and after going through the copies of the same agreements, he explained that his name had been misused without his consent and knowledge. He has further explained that registry was not done in his name though his name is written in the agreement. This would show the intention of other party who was manipulating the agreements. He has explained that since M/s Basera Realtors P.Ltd. are in similar line of business of purchase and sale of immovable properties in Ludhiana and he has introduced Shri Suresh Kumar Khanna, Director of M/s Basera Realtors P.Ltd. and other Directors Shri Sahibjit Singh and Shri Rupinder Deep Singh, land-owners, Shri Manohar Singh and his family members, therefore, he has not made any investments.

The Assessing Officer, in view of the statement of the assessee observed that although the assessee has denied having entered into any agreement for purchase of land with M/s Basera Realtors P.Ltd. or Directors but the conduct of the assessee in not cooperating with the Department is clear that he was avoiding to attend the Income Tax proceedings. It was observed that the statement of the assessee shows that Shri Manohar Singh and his family members were acquainted with the assessee and that is why they decided to sell their land. Therefore, assessee introduced them to the Directors of M/s Basera Realtors P.Ltd. The assessee was, therefore, asked to explain investment in a sum of Rs. 93,63,000/- through these two agreements in question. The Assessing Officer recorded statement of Shri Manojar Singh, one of the sellers of the land on dated 07.03.2013 and relevant portion is reproduced in the assessment order in which he has explained that he, alongwith other co-owners have sold agriculture land to the assessee and Shri Suresh Khanna in equal shares at village Jhande and also

The Assessing Officer also noted that in post search enquiries by DCIT, Central Circle-I, Ludhiana, the Directors of M/s Basera Realtors P.Ltd. came forward and disclosed that investments in acquisition of land as discussed above, had been made by the assessee and their company in equal shares of 1/2 and also disclosed total profit derived by them on sale of residential plots craved out of the said land. The Assessing Officer, therefore, noted that since 50% profit has been disclosed by the company, therefore, balance 50% profit belongs to the assessee.

On merits, ld. counsel for the assessee referred to PB-2 which is Agreement dated 05.10.2005, PB-18 which is copy of the agreement dated 30.01.2006. The ld. counsel for the assessee submitted that agreement dated 30.01.2006 has not been signed by the assessee. It contained signature of Shri Rupinder Deep for Shri Harinder Singh. He has, therefore, submitted that admittedly, agreement dated 30.01.2006 is not signed by the assessee. During the course of arguments, ld. DR was directed to verify this fact from the agreement in question and ld. DR, after going through agreement in question also confirmed this fact that the agreement dated 30.01.2006 is signed by Shri Rupinder Deep for Shri Harinder Singh. The ld. counsel for the assessee, further submitted that no document was found from the possession of the assessee to prove that assessee made any investment in purchase of the properties. These agreements were recovered from the Directors of M/s Basera Realtors P.Ltd. The statement of the assessee was recorded by Assessing Officer on 01.03.2013, copy of which is placed on record in which the assessee denied to have made any investment in the properties alongwith M/s Basera Realtors P.Ltd. He has also denied any transaction of purchase of property. He has explained that one of the agreement has his name but his name has been misused without his consent and knowledge. The ld. counsel for the assessee also submitted that in his statement, assessee explained that he was a commission agent dealing in real estate. He has submitted that assessee only explained to have introduced the property owners to the Directors of M/s Basera Realtors P.Ltd. He has referred to PB-3 page 14-21 which are the Sale Deeds of properties in question which have not been executed in favour of the assessee. He has submitted that all the payments have been made by cheque by purchasers and assessee has nothing to do with these properties. He has referred to PB-1-17 which is the copy of the full and final agreement which contains the stamp of M/s Basera Realtors P.Ltd. He has, therefore, submitted that all the transactions were carried out by M/s Basera Realtors P.Ltd. and signatures of the assessee have been forged and fabricated. On the agreement dated 05.10.2005 and admittedly other agreement dated 30.01.2006 did not contain signatures of the assessee. PB-1/41 is the report of Handwriting Expert dated 18.03.2013 which was filed before Assessing Officer in which the Handwriting Expert on comparison of signature on agreement dated 05.10.2005 and signatures of the assessee with Branch Manager of Axis Bank, Ludhiana has opined “that both these signatures are not in the handwriting of one and the same person and the disputed signatures is product of copied forgery”. The ld. counsel for the assessee submitted that Assessing Officer have not considered

On the other hand, ld. DR relied upon orders of the authorities below and submitted that both the agreements in question were found during the course of search in the case of Directors of M/s Basera Realtors P.Ltd. which contained specific information about investments made by the assessee. Information was received by the Assessing Officer from DCIT, Central Circle, Ludhiana, therefore, such information was sufficient for re-opening of the assessment because assessee did not file any return of income to explain any investments in the property. He has, therefore, submitted that re-opening was validly done in the matter. As regards merits, ld. DR relied upon orders of the authorities below and submitted that statements of two of the owners/sellers were recorded by Assessing Officer i.e. S/Shri Manohar Singh and Gurmit Singh and their copies were supplied to the assessee in which they have confirmed to have entered into Agreement to Sell with the assessee and others. Therefore, addition was rightly made in the hands of the assessee because assessee failed to cross-examine both these sellers before Assessing Officer. The ld. DR further submitted that even though proceedings under section 263 have been conducted in the case of M/s Basera Realtors P.Ltd. by the department but assessee has 50% share in the entire

We have considered the rival submissions and perused the material on record. The entire case is revolving around the two agreements in question dated 05.10.2005 and 30.01.2006. These agreements were recovered during the course of search in the cases of Directors of M/s Basera Realtors P.Ltd. No document was found from the possession of the assessee to prove that assessee made investments in these properties under reference. The copies of both the agreements are filed in Paper Book. The agreement dated 05.10.2005 is stated to have been entered into between Smt. Harjinder Kaur Shri Balwinder Singh and Shri Bhupinder Singh, sellers and Shri Sahibjit Singh, one of the Director of M/s Basera Realtors P.Ltd. and stated to be with 50% share of assessee. The assessee when appeared before Assessing Officer on 01.03.2013 at the assessment proceedings, his statement has been recorded ‘on oath’. Copy of the statement is placed on record and relevant questions are also reproduced in the assessment order. The assessee in his statement while answering the questions with reference to the agreement in question has specifically denied to have done any transaction of purchase and sale of immovable property with these persons and with M/s Basera Realtors P.Ltd. in assessment year under appeals. The assessee also denied his signatures on the agreement in question and stated that though his name contained on the agreement but his name has been misused without his consent. He has explained that his name has been manipulated and that he did not do any joint transaction with M/s Basera Realtors P.Ltd. He has explained that he has introduced the Directors of M/s Basera Realtors P.Ltd. to the sellers as a Commission Agent only. The Assessing Officer did not appreciate the entire statement of the assessee in proper perspective. The assessee, in order to support his statement, has filed report of Handwriting Expert dated 18.03.2013 before Assessing Officer. Copy of the same is filed at page 41 of the Paper Book in which handwriting expert has examined the signatures of the assessee on the agreement dated 05.10.2005 and compared the same with the attempted signatures of the assessee from the signatures available with the Branch Manager of Axis Bank, Ludhiana. The handwriting expert in his opinion has stated that both the signatures are not in the handwriting of one and the same person and the disputed signature is a product of copied forgery. On the face of the report of the handwriting expert, if Assessing Officer was not satisfied with the explanation of the assessee, then the Assessing Officer should have referred the matter to some Government Agency or authorized handwriting expert/FSL for comparison of signatures of the assessee but Assessing Officer did not conduct any proper investigation in the matter and have not obtained the report of another handwriting expert on the matter in issue. Thus, the evidences and material on record clearly proved that the assessee disputed the signature on the agreement dated 05.10.2005 since beginning and has produced sufficient material on record to justify his explanation that his signatures have been forged by some person. Since, assessee was not aware of the fact as to who has forged the signature of the assessee on this agreement, non action by assessee against the forgery would not be relevant criteria in income tax proceedings to reject the explanation of the assessee.

Further, the assessee has produced copies of Sale Deeds in respect of the transactions carried out through these agreement to sell and the sale deeds have been executed between the sellers and one Mr. Deepak Chauhan, Veena Jindal, Vijay Jain etc. and all the payments are made through cheques. Therefore, the copies of sale deed would disclose that assessee was not a party to any of the transactions otherwise the sale deed of 50% as alleged by Revenue Department should be executed in the name of the assessee as well. The assessee also filed copies of the jamabandi of the property in question which shows that after the sale of properties in question, mutation have been made in the name of purchasers and the name of the assessee did not contain in any the jamabandi. This fact would also strengthen the case of the assessee that assessee was not party to any of the agreement in question and did not make any investment.

Further, the case of Assessing Officer had been that assessee made investments in these properties having half shares of investment i.e. 50% of the entire transaction. 50% transaction was considered as undisclosed investment in the case of M/s Basera Realtors P.Ltd. and their Directors. The Assessing Officer passed the orders in the case of the company and later on, the orders in the case of the company have been set aside by the CIT under section 263 of the Act and Assessing Officer was directed to consider entire investments/passing of the consideration for purchase of the properties in the hands of M/s Basera Realtors P.Ltd.. M/s Basera Realtors P.Ltd. filed appeal before ITAT Chandigarh against the order under section 263 of the Act and their appeals have been dismissed. The Assessing Officer in pursuance to the order passed under section 263 again had taken the assessment proceedings in the case of M/s Basera Realtors P.Ltd., copy of the assessment order is filed at page 133 of the Paper Book in which again, same facts have been considered and Assessing Officer did not accept contention of the company that 50% of the shares belong to Shri Harinder Singh, assessee because M/s Basera Realtors P.Ltd. has not submitted any evidence of 50% shares of assessee for the purpose of making the addition. The Assessing Officer, therefore, made entire addition of undisclosed investment in the case of M/s Basera Realtors P.Ltd. Thus, Revenue Department has taken a very clear and specific stand on the identical facts that the entire undisclosed investment in property through these agreements in question relate to M/s Basera Realtors P.Ltd. therefore, no addition could be made in the hands of the present assessee otherwise, it would also amount to double addition.

Considering the above discussion in the light of the material on record, we are of the view authorities below are not justified in making and confirming the addition of Rs. 93,63,000/- on account of undisclosed investment in purchase of the land in question through these agreements. The orders of authorities below are accordingly, set aside and addition of Rs. 93,63,000/- is deleted in assessment year 2006-07.

In the result appeal of the assessee is allowed.