Prakash Chandra Dosi Vs ITO (ITAT Indore)
Unexplained investment cannot be sustained merely on an unsigned agreement to sell and the seller’s affidavit without independent evidence establishing actual payment by the assessee; Section 69 – Unexplained investment based on an unsigned agreement to sell, a disputed cash-payment claim and a property ultimately registered in another person’s name.
Summary: The Indore ITAT allowed Prakash Chandra Dosi’s appeal and directed deletion of a ₹10 lakh unexplained investment addition relating to agricultural land. The Tribunal held that the disputed unsigned agreement, especially one dated before its stamp paper was purchased, did not by itself prove payment by the assessee. Reassessment followed information obtained in proceedings concerning Shri Dhannalal Patel. The purported agreement dated 10 January 2010 recorded consideration of ₹40 lakh, including cash payments of ₹24 lakh and ₹10 lakh. The stamp paper was purchased on 10 February 2010. The assessee denied executing the agreement, knowing the seller, or paying the disputed sum. The Revenue cited the seller’s affidavit and registrar information. But the property was eventually conveyed to Smt Kesar Bai, who paid ₹6 lakh by cheque. The Tribunal found no sufficient independent evidence connecting the alleged ₹10 lakh payment to the assessee, notwithstanding the cumulative circumstances relied upon by the Revenue. Following the reasoning in Kanta Devi Jain and Anil Bala Goyal, the Tribunal directed deletion of the addition. The appeal was allowed.
Core Issue: Whether an addition of ₹10,00,000 as unexplained investment can be sustained on the basis of an unsigned agreement to sell and the seller’s affidavit alleging cash payments, without independent corroborative evidence establishing that the assessee actually made the payment.
Fact: The assessee, an individual earning agricultural income, was reassessed for AY 2011-12 under section 147 read with section 143(3) after the Assessing Officer found an alleged agreement to sell agricultural land and an affidavit of the seller, Shri Dhannalal Patel, during assessment proceedings in the seller’s case. The agreement, purportedly dated 10 January 2010, recorded cash payments of ₹24,00,000 and ₹10,00,000 by the assessee, with a balance of ₹6,00,000. However, the agreement was not signed by the assessee, and the stamp paper was purchased on 10 February 2010, after the stated date of the agreement. The seller’s affidavit alleged receipt of the cash payments from the assessee. The remaining ₹6,00,000 was paid by Smt. Kesar Bai through cheque, and the registered sale deed dated 19 October 2010 was executed in her favour for that consideration. The assessee denied entering into any transaction with the seller and filed an affidavit denying the alleged agreement.
AO / CIT(A) Finding: The Assessing Officer treated ₹10,00,000 as unexplained investment on the basis of the disputed agreement and the seller’s affidavit, as the assessee had not explained the source of the alleged investment. The CIT(A) confirmed the addition, holding that the assessee had made the payment to the seller and had failed to explain its source.
ITAT Finding: The Tribunal observed that the agreement was unsigned by the assessee and bore a date earlier than the purchase of the stamp paper, materially affecting its evidentiary reliability. Although the seller’s affidavit and the Registrar’s information regarding purchase of the stamp paper in the assessee’s name had to be considered cumulatively, the property was ultimately registered in favour of another person. The assessee had specifically denied the transaction. In the absence of sufficient independent and credible evidence establishing the actual payment of ₹10,00,000 by the assessee, the disputed agreement and the seller’s affidavit were insufficient to sustain the addition. Following the reasoning in Kanta Devi Jain v. DCIT and Anil Bala Goyal v. DCIT, the Tribunal directed deletion of the addition.
Outcome: The assessee’s appeal was allowed. The addition of ₹10,00,000 made as unexplained investment and confirmed by the CIT(A) was deleted. The challenge to reassessment was treated as general and did not require separate adjudication.
Cases Discussed
- Kanta Devi Jain v. DCIT, ITA No. 860/JP/2024 (ITAT Jaipur) — relied on for insufficiency of unsigned agreements without verification.
- Anil Bala Goyal v. DCIT, ITA No. 1533/Del/2021 (ITAT Delhi) — relied on concerning unsigned agreements and uncorroborated cash payments.
- Dhakeshwari Cotton Mills Ltd. v. CIT, 26 ITR 775 (SC) — quoted within precedent concerning suspicion and guesswork.
- CIT v. Ravi Kumar, (2008) 168 Taxman 150 (P&H HC) — cited in reproduced precedent.
- Kantilal Chandulal & Co. v. CIT, (1992) 136 ITR 889 — cited in reproduced precedent.
- PCIT v. Nexus Builders and Developers (P.) Ltd., (2022) 134 taxmann.com 82 (Bombay HC) — discussed in reproduced precedent concerning hypothetical additions.
- Monohar Lal Rattan Lal v. DCIT, 2004 (2) TMI 275 (ITAT Amritsar) — discussed in reproduced precedent concerning unsigned agreements.
- Saamag Developers (P.) Ltd. v. ACIT, (2018) 90 taxmann.com 20 (ITAT Delhi; source citation incomplete) — discussed concerning corroboration.
- DCIT v. Rajat Agarwal, (2012) 27 taxmann.com (source citation incomplete) — cited in reproduced precedent.
- DCIT v. Signature Colonisers, Bhopal, ITA Nos. 218 and 219/Ind/2020 — cited in reproduced precedent; decision date not established.
- M.M. Financiers (P.) Ltd. v. DCIT, (2007) SOT 5 (Chennai) (URO; citation as supplied) — cited in reproduced precedent.
- Anil Kumar Bhatia v. ACIT, (2010) 1 ITR (T) 487 (Delhi) — cited in reproduced precedent.
- CIT v. Tips Industries (P.) Ltd., (2010) 321 ITR 154 (Bombay HC) — cited in reproduced precedent.
- S.K. Gupta v. DCIT, (1999) 69 TTJ (Delhi) 535 — cited in reproduced precedent.
FULL TEXT OF THE ORDER OF ITAT INDORE
This appeal has been filed by the assessee against the order dated 29.05.2025 passed by the Commissioner of Income Tax Appeal Addl/JCIT (A)-1 Visakhapatnam, [hereinafter referred to as “the ld. CIT(A)”] for Assessment Year 2011-12 arising out of assessment order framed under section 147 read with section 143(3) of the Income-tax Act, 1961 (“the Act”).
2. The assessee is an individual earning income from agriculture. The case was reopened by issuing notice u/s 148 of the Act dated 28.02.2018. In response the assessee filed return of income on 27.03.2018 declaring total income of Rs. NIL but the assessee had not filed the return of income under section 139(1) of the Income-tax Act, 1961 for A.Y. 201112. During assessment proceedings in the case of the Shri Dannalal Patel, the Assessing Officer came across an agreement to sell relating to agricultural land, purportedly dated 10.01.2010, along with an affidavit furnished by the Shri Dannalal Patel. On the basis of the said material, proceedings under section 147 of the Income Tax Act 1961 were initiated in the case of the assessee and an addition of 10,00,000/- was made as unexplained investment and assessed the income Rs 10,00,000/- on 26.02.2018.
3. Aggrieved by the assessment order the assessee is now in appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal on the ground that the assessee has made payment of Rs.10,00,000/- to the seller for the purchase of property on 14.06.2010, as the assessee has not explained the source of the investment and reopening of assessment u/s 147 of the Act.
4. Being aggrieved by the aforesaid order, the assessee is in before the Tribunal and the grounds of appeal are as under:-
“The below mentioned grounds of appeal are independent and without prejudice to each other:
1. The Ld. Jt. CIT(A), Visakhapatnam has erred in confirming the addition of Rs. 10,00,000/- made by the Ld. AO on account of alleged unexplained investment:
1.1 On the facts and in the circumstances of the case and in law, the Ld. Joint Commissioner of Income Tax (Appeals), Visakhapatnam [‘the Ld. Jt. CIT(A)’] has erred in confirming the action of the Ld. Assessing Officer (‘the Ld. AO’) by upholding the addition of Rs. 10,00,000/- made by the Ld. AO which is wrong and contrary to the facts of the case and provisions of the Act. Thus, addition of Rs. 10,00,000/- is liable to be deleted.
1.2 On the facts and in the circumstances of the case and in law, the Ld. AO has erred in making addition of Rs. 10,00,000/- on the basis of photocopy of alleged agreement without considering that the same is not signed by the assessee even the agreement is not authentic as even the stamp has been issued on 10.02.2010 in respect of agreement dated 10.01.2010 and the same is nothing but a ‘dumb document’ and addition cannot be made on the basis of such ‘dumb document”. Thus, the addition of Rs. 10,00,000/- is liable to be deleted.
2. The Ld. AO has erred in initiating the reassessment proceedings:
2.1 On the facts and in the circumstances of the case and in law, the Ld. AO has erred in initiating the reassessment proceedings without any evidence against the assessee and in a mechanical manner without appreciating that the alleged agreement is not signed by the assessee. Thus, the reassessment proceedings are liable to be quashed.
2.2 On the facts and in the circumstances of the case and in law, the reassessment proceedings are wrong and contrary to the provisions of Section 147, Section 148 and Section 151 of the Act.”
5. Ld. Counsel for the assessee submitted that as per the above said agreement to sale, the total sale consideration was stated at 40,00,000/-. It records payment of Rs. 24,00,000/- in cash on 24.02.2010 and Rs. 10,00,000/- on 14.06.2010 by the assessee to Shri Dannalal Patel in the presence of witnesses, leaving a balance of Rs. 6,00,000/- payable by 19.10.2010. However, the agreement of sale does not bear the signature of the assessee. The balance amount of Rs. 6,00,000/- was subsequently paid by another Smt Kesar Bai to the Shri Dannalal Patel through cheque No 039389 drawn on central bank of India dated 19.10.2010, and registered the sale deed dated 19.10.2010 was ultimately executed in favour of Smt Kesar Bai person for a stated consideration of Rs. 6,00,000/-. By way of affidavit furnished by Shri Dannalal Patel, in assessment proceedings, stated that he had received Rs. 24,00,000/- and Rs. 10,00,000/- in cash from the assessee. The Ld AO issued a letter on 08.10.2018 u/s 133(6) of the Income Tax Act, 1961 to the District Registrar office, Neemuch requesting the details of stamp Number N927227. On 09.10.2018 the Sub registrar, Neemuch has submitted that the above said stamp number issued through stamp vendor Shri Omparkash Agrawal on 10-02-2010 in the name of shri Praksh Chand and the Shri Dhannalal Patel.
6. The learned AR contended that the alleged agreement is neither genuine nor reliable, since it is unsigned by the assessee and, further, the stamp paper itself was purchased after the date appearing on the agreement executed. It was submitted that this document is a dump document and could neither constitute valid material for reopening nor establish unexplained investment by the assessee. The assessee also furnished an affidavit denying execution of any agreement or transaction with the Seller and stating that he had never met or known Shri Dhannalal Patel. Ld. AR relied upon the decision of the Co-ordinate bench of Jaipur in the case of Kanta Devi Jain vs. DCIT ITANo.860/JP/2024 and the Coordinate Bench of Delhi in the case ofAnil Bala Goyal vs. DCIT ITANo.1533/Del/2021.
7. On the other hand, Ld. DR submitted that the agreement cannot be viewed in isolation. According to the Revenue, purchase of the stamp paper in the name of the assessee, reference to Shri Dhannalal therein, the contents of the agreement, Shri Dhannalal’s affidavit and the subsequent registered conveyance constitute interconnected circumstances corroborating the transaction.
8. We have heard the rival submissions and perused the material available on record. The principal question arising for consideration is whether the material relied upon by the Ld AO is sufficient to establish that the assessee actually made the alleged investment/payment. We find that it is undisputed fact that the agreement relied upon by the Revenue does not bear the signature of the assessee. There is also an apparent chronological discrepancy inasmuch as the agreement is stated to have been executed on 10.01.2010, whereas the stamp paper on which it is recorded was purchased subsequently on 10.02.2010. These circumstances materially affect the evidentiary reliability of the document and require proper examination.
9. At the same time, the document cannot be treated as wholly isolated material merely because it is unsigned. The Revenue has also relied upon Shri Dhannalal Patel affidavit specifically attributing cash payments to the assessee and the Registrar’s information regarding purchase of the stamp paper in the assessee’s name. These pieces of evidence are required to be examined cumulatively rather than independently.
10. Further, the ultimate registered sale deed was admittedly executed in favour of another person Smt Kesar Bai, who paid the balance consideration of 6,00,000/- by cheque. Therefore, a material link remains to be established between the alleged cash payments attributed to the assessee and the property ultimately conveyed to another person Smt Kesharbai.
11. The assessee has specifically denied the transaction and has furnished an affidavit stating that he neither executed the agreement nor knew Shri Dhannalal Patel. Consequently, the addition cannot rest merely upon the recitals contained in an unsigned document or upon an untested statement/affidavit of Shri Dhannal Patel. The evidentiary value of Shri Dhannal Patel statement has to be considered together with the assessee’s denial and other independent corroborative material available on record. Accordingly, the sustainability of the addition would depend upon whether the Revenue has brought sufficient independent and credible material on record establishing that the alleged amount was actually paid by the assessee. Mere reference to the assessee’s name in the disputed agreement, particularly in view of its being unsigned and bearing a date preceding the purchase of the stamp paper, would not by itself conclusively establish unexplained investment in the hands of the assessee.
12. Considering the totality of the facts and circumstances, we find that the addition of Rs. 10,00,000/- made by the Ld AO as unexplained investment cannot be sustained merely on the basis of the impugned agreement to sell. The agreement does not bear the signature of the assessee and, significantly, though it is purportedly dated 10.01.2010, the stamp paper was purchased subsequently on 10.02.2010. Further, the property was ultimately registered in the name of another person Smt Kesar Bai, who paid the consideration of Rs. 6,00,000/- by cheque. Though Shri Dhannal Patel, by way of affidavit, has attributed the alleged cash payments to the assessee, the assessee has specifically denied having executed the agreement or entered into any transaction with Shri Dhannalal Patel. In the absence of sufficient independent corroborative evidence establishing the actual flow of Rs. 10,00,000/- from the assessee to Shri Dhannalal Patel, the disputed agreement and Shri Dhannalal Patel affidavit, by themselves, are insufficient to conclusively establish unexplained investment in the hands of the assessee.
13. We further find that the Ld. AR cited the decision of the Coordinate Bench of Delhi in the case of Anil Goyal vs. DCIT (supra) & decision of Coordinate Bench of Jaipur in the case of Kanta Devi Jain vs. DCIT (Supra) wherein the coordinate bench held that:
“8. We have heard the rival contentions and perused the material placed on record. The only dispute raised by the assessee in this appeal is the addition of Rs. 5 lac made by the ld. AO and sustained by the ld. CIT(A). The brief facts related to the dispute is that the assessee filed her regular return of income u/s 139 of the Act on 03.02.2015 declaring a total income at Rs. 8,42,670/-. The residential premises of the assessee were subjected to search on account of the fact that the assessee is one of the member of the Jain Plywood House Group. In that search a copy of Ikrarnama dated 30.08.2013 between Shri Harinarayan Sharma (as a seller resident of Village -Balawala, Tehsil – Sanganer) and Smt. Kanta Devi Jain (as buyer) regarding sale of agricultural land at Balawala for Rs. 70 lacs per bigha was found and seized as Page no. 1-4 of Exhibit-2 where amount of Rs. 5 lac has been paid advance in cash by Smt. Kanta Devi Jain.
This agreement shows that the assessee has paid an amount of Rs 5,00,000/- in cash to Shri Harinarayan Sharma for the purchase of the above land. The bench noted that the agreement is dated 30.08.2013 found after four year of search. The assessment is conducted in December 2019.In between revenue could not establish that this unilateral agreement in fact is real transaction undertaken by the assessee. As contended by the assessee that this is merely an offer made by the seller Mr. Ghan Shyam Sharma which was never accepted and executed even till the date of search the agreement was never agreed and signed by the assessee, as is evident from the copy of agreement furnished.
The ld. AO though the document in possession since 28.09.2017 to till the completion of the assessment till 27.12.2019 did not controvert the contention of the assessee that he has in fact not undertaken the transaction. Though the land is agreed to purchase at 70 lac per vigha he satisfied by making addition of Rs. 5 lac only and that too without making any efforts of finding the truth by making independent inquiries from the seller rather or of the witness but he opted for making the impugned addition of Rs. 5 lacs merely on surmises and conjectures.
The bench noted that signature on agreement of all the parties to the agreement is very important without which it cannot be treated as executed and enforceable by law. The consent of all parties to an agreement is one of the essential aspect for a valid agreement which is not present in the present case as the appellant has not given her consent by signing the agreement.
An agreement not enforceable by law and is void agreement as per section 2(g) of the Indian Contract Act, 1872. Thus, when there is no inquires conducted to controvert the submission made by the assessee the same cannot be considered as evidence against the assessee. The apex court in the case of Dhakeshwari Cotton Mills Ltd. 26 ITR 775 held that “a suspicion remains a suspicion unless the same is established and can never take place of reality. Assessment cannot be made on guesswork without any reference to any material on record.”
The ld. AR cited recent decision of the co-ordinate bench of Delhi in the case of Anil Bala Goyal in ITA no. 1533/Del/2021 wherein the coordinate bench held that :-“32. On careful consideration of rival submissions first of all from the relevant part of the assessment order, we observe that the A.O. in para 5 has reproduced some parts of agreement LP-1 pages no. 3539. The A.O. at page 5 drew a table from the said agreement wherein the payment of Rs. 54,00,000/- has been shown at serial no.3 but no cheque/UTR no. has been mentioned against said amount. At the same time we observe that an amount of Rs. 50,000/- each has been shown to have been paid by the assessee through cheque no. 100095 and 100096 which has been admitted by the assessee before the A.O. with an explanation that it was token amount but thereafter the assessee changed his mind and came out from the deal of purchase of property. The said agreement was not signed by the assessee and the same was only signed by the builder, except this agreement there was no documentary evidence in the hands of A.O. in support of his claim that the assessee has paid of Rs. 54,00,000/- in cash out of his income from other undisclosed sources treating the same as unexplained money under provision of 69A of the Act. Undisputedly, the document was found and seized from the possession of the assessee but only on the standalone basis of such document which was not signed by the assessee and never acted upon by the assessee. The provision of section 69A of the Act cannot be pressed into service against the assessee. We may also point out that it is not a case of the A.O. or Ld CIT(A) that in the said agreement there was mentioning of Rs. 54,00,000/- in cash or any other document, dairy or notings were found to support of this allegation was found and seized during the search operation. Only on the basis of such document which cannot be branded or labelled as an agreement in absence of signature of both the parties no addition can be in the hands of the assessee u/s. 69A of the Act. To support this proposition the Ld.AR has relied on various orders and judgments of Hon’ble High Courts and coordinate benches of Tribunal which are listed below:-
i) Commissioner of Income Tax vs. Ravi Kumar [(2008) 168 taxman 150 (Punjab & Haryana)
ii) Kantilal Chandulal & Co. v. Commissioner of Income Tax [1992] 136 ITR 889
iii) PCIT vs. Nexus Builders and Developers (p.) Ltd. (2022) 134 taxmann.com 82 (Bom)
(iv) Monohar lal Rattan lal vs. DCIT [2004 (2) TMI-275-ITAT Amritsar] (v) Saamag Developers (P.) Ltd. vs. ACIT [(2018) 90 taxmann.com 20m (Delhi-Trib) (vi) DCIT vs. Rajat Agarwal [(2012) 27 taxmann.com
vii) DCIT vs. M/s Signature Colonisers, Bhopal [ITA No. 218/Ind/2020 and ITA No. 219/Ind/2020] (ix) M.M Financiers (P.) Ltd. vs. DCIT [(2007) SOT 5 (Chennai) (URO)]
(x) Anil Kumar Bhatia vs. ACIT [(2010) 1 ITR (T) 487 (Delhi)] (x) Anil Kumar Bhatia vs. ACIT[(2010) 1 ITR(T) 487(Delhi)] (xi) Commissioner of Income Tax vs. Tips Industries (P.) Ltd., [(2010) 321 ITR 154 (Bom)
(xii) S.K Gupta vs. DCIT (1999) 69 TTJ Del 535. 33. On careful perusal of above judgments and other we find that the Hon’ble Bombay High Court in the case of PCIT vs. Nexus Builders and Developers (P.) Ltd. (supra) held that there was no evidence found against the respondent and no enquiry was carried out by the A.O. to find out the more details and when the entire addition has been made on hypothetical basis then the Tribunal was right in deleting the addition. In the case of Monohar Lal Rattan Lal vs. DCIT (supra) coordinate bench of ITAT Amritsar held that wherein addition was made on the basis of unsigned agreement then no addition can be made in the hands of the assessee in this order the coordinate bench of Tribunal held that It is true that the finding of this document from the premises of the assessee had raised doubts in the mind of the AO with regard to the actual sale consideration of the said property. But it is not sufficient and enough to hold and sustain the addition. If the AO was not satisfied with the version of the assessee, it was incumbent upon him to examine the seller of the property, and ascertain the facts regarding the actual sales consideration. In the absence of having carried out any such exercise, we are satisfied that a case has not been made out for making the addition. 34. In the similar manner coordinate bench of Delhi ITAT in the case of Saamag Developers (P.) Ltd. vs. ACIT held that when the Assessing Officer has not made any independent enquiry from such persons and in the absence thereof no addition can be made. Especially when the Assessing Officer did not bring any adverse material on record or gave a finding with cogent evidence contrary to the explanation of the assessee and has not brought any independent corroborative material suggesting that the assessee has purchased such land/property and has made payment as recorded in the seize paper. In the present case also the Assessing Officer has made addition merely on the basis of so called agreement which has not been signed by the assessee and the A.O. has not brought on record any other positive or corroborative material to show that the assessee has actually purchased property under this agreement and made payment of Rs. 54,00,000/- in cash out of books of accounts from the income earned from undisclosed sources. Therefore, we reach to a logical conclusion that the addition made by the A.O. and confirmed by the Ld. CIT(A) u/s. 69A of the Act, is not sustainable hence we direct the A.O. to delete the same.”
On being consistent to the finding so recorded by the co-ordinate bench we see no reasons to sustain the addition in the hands of the assessee and therefore, the same is directed to be deleted. Based on these observations ground no. 1 raised by the assessee is allowed. Ground no. 2 being general in nature does not require any adjudication. In the result, the appeal of the assessee is allowed.
Accordingly, on the material presently available on record and finding so recorded by the Co-ordinate Bench we do not find any reasons to sustain the addition in the hands of the assessee therefore, addition of Rs. 10,00,000/- made in the hands of the assessee as unexplained investment made by the Ld AO and further sustained by the CIT(A) is directed to be deleted.
14.In the result, the Appeal of the assessee is allowed.
Order pronounced in the open court on 12/10/2026.
