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Facts
The assessee, a property broker, faced additions of Rs. 4,29,92,220/- and Rs. 1,61,98,000/- to his income for AY 2012-13, based on entries found in 'Day Book' and 'Trison Ledger' diaries during a Section 133A survey. The assessee contended these amounts represented third-party transactions related to property brokerage and not his unexplained income. The AO and CIT(A) upheld the additions, citing the assessee's failure to provide corroborative evidence or produce original documents/third parties during remand proceedings.
Held
The ITAT held that the assessee had adequately demonstrated his role as a property broker and that the impounded documents related to transactions of third parties. It noted that the tax authorities possess sufficient powers to summon individuals or obtain original documents if genuineness is doubted, and the burden of proof cannot be stretched to an impossible extent for the assessee. Therefore, additions based on general assumptions without further inquiry were deemed unsustainable, and the impugned additions were deleted.
Key Issues
Whether additions made under Section 143(3) based on impounded documents found during a Section 133A survey can be sustained if the assessee, acting as a property broker, explains them as third-party transactions, and whether the CIT(A) was justified in confirming these additions despite the assessee's explanation and the department's failure to exercise its powers to verify the claims.
Sections Cited
139, 143(3), 133A, 292C, 234A, 234B, 234C, 234D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES: F : NEW DELHI
Before: SHRI ANUBHAV SHARMA
Assessment Year: 2012-13 Shri Pawan Agarwal, Vs DCIT, H.No.1183, Sector-15, Circle-1, Faridabad. Faridabad. PAN: AFHPA6241D (Appellant) (Respondent) Assessee by : Dr. Rakesh Gupta, Advocate & Shri Somil Agarwal, Advocate Revenue by : Ms Harpreet Kaur Hansra, Sr. DR Date of Hearing : 29.07.2025 Date of Pronouncement : 29.08.2025 ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the assessee against the order dated 23.03.2020 of the Commissioner of Income-tax (Appeals), Faridabad (hereinafter referred to as the ld. First Appellate Authority or ‘the Ld. FAA’ for short) in Appeal No.10108/2015-16 arising out of the appeal before it against the order dated 18.03.2015 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the DCIT, Circle-I, Faridabad (hereinafter referred to as the Ld. AO).
Heard and perused the records. The facts in brief are that the return u/s 139 of the Act for AY 2012-13 was filed by the appellant declaring income of Rs.5,40,470/- on 23.07.2012. Subsequently, the case was selected through CASS for complete scrutiny. The assessment u/s 143(3) was completed on 18.03.2015 at an assessed income of Rs.6,00,95,560/-.
Now what comes up is that there are two additions which are in dispute first of Rs. 1,61,98,000/- as ground nos. 3&4 and another addition of Rs.4,29,92,220/- covered by ground nos. 1&2. The background to these is the allegation of revenue that a survey u/s 133A of the Act was conducted in the case of the appellant on 27.09.2011 at J-97, Sector-10, Faridabad. During the course of survey, a diary named as Day Book was found in the briefcase of the appellant. In the said diary, there were total transactions of Rs.4,29,92,220/- in cash from 14.09.2010 to 26.09.2011. Allegedly, the appellant admitted that the Day Book belonged to him but did not explain the transactions therein. During the assessment proceedings again, the appellant was confronted to explain the transactions contains therein. It was stated by the appellant before the AO that amount of Rs. 4,29,92,220/- does not represent any amount of cash balance for cash in hand and if was balance due to be paid to Mr. Garg etc. entered with GWC infrastructure, etc. The deal of Mr. Garg etc, was for Rs.8,80,00,000/- as the appellant was consultant in the said deal, it was necessary for him to maintain net balance due or paid from the buyer of the property to avoid confusion at a later stage. It was explained that the appellant only received 2 commission @1% which has been already shown as income in F.Y. 2013-14. The AO observed that the appellant was engaged in dealing with the real estate himself or through many companies in which he was a director. The AO thus held that the appellant could not explain cash balance of Rs.4,29,92,220/- recorded in the Day Book and, therefore, held the same as unexplained and made the corresponding addition.
Further during the course of survey, a diary, namely, Trison Ledger was found from the drawer of the appellant. On page No., 15-16 of the said diary, there were balance of Rs.1,61,98,000/- in respect of Shri Bharatpal. The AO required the appellant to explain the cash balance of Rs.1,61,98,000/-. It was explained that the said transaction was out of transaction of Rs.8.80 crores entered on behalf of M/s LRG Developers Pvt. Ltd. It was further stated that the amount might be balance either from Shri Bharatpal or to Shri Bharatpal from either to Mr. Garg etc. or from Mr. Garg etc. The appellant relied upon an agreement dated 15.02.2011 between Shri Bharatpal Singh and Mr. Garg family, copy of which was made available from page No. 4 to 9 of the paper book. The AO found the explanation of the appellant was vague and, therefore, held the same as income of the appellant.
During the appellate proceedings before the Ld. CIT(A), it was explained by the assessee that he is a director of M/s LRG Developers Ltd. and engaged in the business of property brokerage, it was explained that the documents relied by the AO were in relation to brokerage from Plot No. E-1/5, Sector-11 D, 3 Faridabad belonging to M/s KBM Land Developers Pvt., Ltd. (seller) and the buyer was Shri Kulbir Singh whose initials are appearing on the said document. It was further stated that there is reference of cheques of Rs.25 lacs + Rs. 45 lacs i.e. = Rs. 70 lacs, which was issued from the bank account of Shri Bharatpal or his proprietary concern M/s Bharat Constructions to the bank account of M/s K.P.Buildtech (P) Ltd. It was thus argued that the documents relied by the AO clearly belonged to the appellant but in the capacity of property broker.
The said explanation of the assessee was made available to the AO for his comments and necessary report. The AO in the remand report vide letter No 257 dated 19.09.2016 stated that the appellant could not produce any corroborative evidence during remand proceedings in order to explain the said documents and contained transaction on behalf of Shri Bharatpal Singh. The AO stated that the copy of agreement (page 4 to 9 of the paper-book) was a photocopy and in the absence of its original, its genuiness could not be verified. Similarly, the other documents furnished by the appellant as additional evidence could not be verified, as the appellant failed to make available the original documents and also failed to produce Shri Bharatpal to substantiate the explanation furnished. In the rejoinder, it was stated by the assessee that the AO has not required the appellant to produce Shri Bharatpal or any original documents. In view of these facts, the appellant was required by CIT(A) vide order sheet entry dated 02.12.2016 to produce the original documents referred in the written submission 4 and also to produce the appellant and Shri Bharatpal for examination in order to find the genuineness of the submissions made during the appellate proceedings. As per the impugned order, the appellant, however, failed to make compliance to the above directions. In the meantime copy of the rejoinder of the appellant was also made available to the AO for his comments. The AO vide report dated 03.05.2019 stated that numerous opportunies were given to the appellant during the remand proceedings. The AO further made reliance upon the provision of Section 292C of the Act. The said report of the AO was made available to the appellant on 21.06.2019. It was explained that the said transactions contained in the impounded documents in respect of Shri Bharatpal (who was director of M/s GWC infrastructure Pvt. Ltd.), the company which had entered into an agreement to purchase a property from the Garg family and all such transactions relate to Shri Bharatpal in connection with the said property transaction. On this account, it was explained that Shri Bharatpal paid an aggregate amount of Rs.1.52 crores (Rs. 50 lacs + Rs. 50 lacs + Rs. 50 lacs + Rs. 1 lac + Rs. 1 lac) to the Garg family through cheques. Therefore, it was argued that the transaction contained in the referred material of the impounded documents were having no relation with the appellant except in the capacity of property broker.
Ld. CIT(A) took aforesaid into consideration and by following observations, dismissed the appeal of assesse; “17. The facts of the case and material on record have been gone through in Detail. A survey u/s 133A of the Act was carried out at the premises of the appellant on 27.09.2011 and certain documents were found 5 impounded. The appellant has owned up such documents and contents therein on the basis of which additions of Rs,4,29,92,220/- and Rs. 1,61,38,000/- have been made by the AO. It has been explained by the appellant that these documents were maintained by him in the capacity of property broker and relate to M/s KBM Land Developers Pvt. Ltd., (Shri Bharatpal) and Shri Kulblr Singh. The appellant has merely stated that the transactions contained in the said documents thus relate to both of them and these additions in his hand could not have been made. At this stage, it is relevant to refer to provision of Section 292C of the Act. The onus was on the appellant to corroborate his explanation that the transactions contained in the impounded documents belonged to Shri Bharatpal group and Shri Kulbir Singh in respect of a property transaction. The appellant was given the opportunity to discharge such onus during remand proceedings before the AO as well as by this office during the appellate proceedings. The Learned AR of the appellant was specifically required on 02.12.2016 to produce the original of the documents as relied by the appellant. Shri Bharatpal and the appellant himself. However, no compliance was made in this respect The Learned AR even failed to produce the appellant for examination. In such circumstances, whatever explanation the appellant has given that remained uncorroborated. Thus, the appellant could not discharge the onus as he has felled to explain the transactions contained in the documents found during the course of survey satisfactorily.”
Assessee is in appeal raising following grounds:- “
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. in making addition of Rs.4,29,92,220/- by treating it as income from unexplained sources and that too by recording incorrect facts and findings and by disregarding the evidences / submissions filed by the assessee and without providing adequate opportunity of being heard and in violation of principles of natural justice.
2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs. 4,29,92,220/- allegedly by treating it as income from unexplained sources is bad in law and against the facts and circumstances of the case.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. in making addition of Rs. 1,61,98,000/- by treating it as income from unexplained sources and that too by recording incorrect facts and findings and by disregarding the evidences / submissions filed by the assessee and without providing adequate opportunity of being heard and in violation of principles of natural justice.
4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs, 1,61,98,000/- allegedly by treating it as income from unexplained sources is bad in law and against the facts and circumstances of the case.
5. That in any case and in any view of the matter action of Ld. CIT(A) in confirming the action of Ld. A.O in making the impugned additions are bad in law and against the facts and circumstances of the case.
6. That having regard to the facts and circumstances of the case, Ld. CIT(A ) has erred in law and on facts in confirming the action of Ld. A.O. in passing the impugned order and that too without giving adequate opportunity and without observing the principle of natural justice. 7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. in charging interest u/s 234A, 234B, 234C. and 234D more so when such interest could not be levied under the law. 8. That the appellant craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other.”
9. Ground No. 3 & 4: As argued first, we take these grounds prior to ground no. 1 and 2 and it can be observed that ld. AO has discussed this issue at page 8-11 of the Assessment Order and CIT(A) has discussed this issue at page 34-39 of the appeal order. The case of assessee is that he is property broker as noted by AO at page 2 of the assessment order and also is director in property brooking company namely LRG Developers P Ltd. Statement was recorded in Survey on 27.9.2011 where in also he admits that appellant was earning income from property broking as referred at page 2 of the assessment order. PB 27, 30, 37 is the statement of the appellant at the time of Survey admitting property broking income.
10. This impugned addition was made on the basis of Document Trison Ledger reproduced at page 9 of the Assessment Order. This document was in connection with a property transaction between Bharat Pal, Director in GWC Infrastructure P Ltd & Garg Family and ld. Counsel has submitted that appellant was acting merely as Property Broker. In this context we find that at PB 4-9 there is the copy of Agreement between GWC & GARG family which makes evident from various covenants showing cheques debited from Bharat PAL’s bank account. Referring to paper book ld. Counsel has demonstrated PB 8 clearly shows that appellant PAWAN as property Dealer was to earn commission. PB 1-2 is the bank statement of Bharat Pal showing 50 lacs 3 payments & 2 payments of Rs. 1 lac each aggregating to Rs. 1,52,00,000/- all dated 28.1.2011 & 1.2.11 & 3.2.11 which match with agreement placed at PB 6 & 9 and also cheque numbers are also matching. Page 9 of the assessment order which reproduces Ledger account of “Bharat Pal” also shows sum of Rs. 1,52,00,000/- on 27.1.2011. Page 9 of the assessment order that reproduces the ledger of Bharat Pal also contains two entries of 2 cheque entries of Rs. 1 lac & 6 lacs which matches with Bharat Pal’s bank account at PB 3. These detailed submission were filed before the ld. CIT(A) and copy is provided at PB 47-50.
11. Thus, this document belonged to 3rd parties and relation of the appellant with this document was in the capacity of Property Broker and hence, addition based on such document could have beeen made in the hands of the appellant.
12. We are in agreement with contention of ld. Counsel that Section 292C of the Act, is double edged sword. Reliance can be placed on the Hon’ble Kerala High Court decision in the case of CIT vs DAMAC HOLDINGS 401 ITR 495(Ker). If we are to presume that the contents of the document found in Survey are correct then aforesaid discussion establishes that these are the transactions relating to 3rd parties and as such content of document needs to be read in favour of the appellant.
13. As with regard to the contention of ld. CIT(A) that Bharat Pal was not produced and original copy of agreement was not produced. We acknowledge the contention of ld. Counsel that how can assessee as property dealer could have produced the party and originals which are retained by the parties and not by the property dealer. The burden of assesse cannot be stretched to such an extent that ld. Tax authorities expect assesse to perform impossible task while they could had sufficient powers under the Act to have issues processes to concerned for appearance or call for documents. In any case, photocopy of agreement shows bank transactions details which matches the bank statement of Bharat Pal. Thus as such without alleging on the basis of some cogent material or circumstance that same is not credible piece of evidence it should have been relied and assesse should have been benefitted. That being not done, the order of ld. CIT(A) cannot be sustained. Accordingly these grounds are allowed.
Ground No. 1 and 2; We find that similar are the facts relating to this addition which is based on the document reproduced at page 6 of the assessment 9 order. Ld. Counsel has submitted that this document has not been relied and reproduced completely and correctly but in part to the advantage of making out case by the AO. It was submitted that Contents of this document itself would show that these are the transaction between Bharat Pal and Kulbir Singh are in connection with property no. El/5 Sector 1 ID, Faridabad & other properties. He refered to PB 46-47, which are the written submissions before ld. CIT(A) bringing this fact to his notice but same seems to have not been appreciated at all.
15. On going through PB 13-14, which is the impounded document same shows that this has not been reproduced by AO in the assessment order completely and correctly. A part of same was relied and reproduced. At PB 15- 23 A is the copy of Purchase deed of this very property by KMB Land Developers P Ltd in which Bharat Pal was director. PB 13-14 would show that on this document, name of KULBIR is appearing and his initials are also appearing and there is reference of “cheque 25+45. 70” on 3.8 which was cheque issued from the bank account of Bharat Pal or his proprietorship firm Bharat Construction to KP Buildtech P Ltd. Then at PB 24 is the bank statement of K P Buildtech which also shows these two cheques of 25 lacs and 45 lacs on 3.8 and 4.8.11 were debitted. Ld. Counsel has further demonstrated by reffering to PB 13-14, impounded document, that three figures i.e 1.73 crores, 1.40 crore, 1.16 crores total of which comes to 4.29 crore including commission of Rs, 4,25,750/- i.e. 1% of 4.25 crores which is appearing at page 6 of the assessment 10 order at the right side extreme below in the document reproduced by AO in the assessment order. PB 25 is the confirmation from Bharat Pal confirming the cheques issued by him.
16. These circumstances could not have been left unrebutted and on basis of general assumption and presumptions additions could not have been made. Assessee being a property dealer has sufficiently established that the content of impounded document were not self-speaking or patently decipherable to draw a inference against the income being of assesse, and not of persons for whom he was transacting, so needed more inquisitive approach, which ld. Tax authorities failed to proceed with. The assesse needs to be benefitted. The grounds are sustained in favour of assessee.