Addition based on unsigned, undated and unstamped sale and purchase agreement untenable

Chandrakant Chhaganbhai Gondalia Vs DCIT (ITAT Surat)

ITAT Surat held that addition based on unsigned, undated and unstamped Satakhat/ sale and purchase agreement cannot be sustained since such document has no evidentiary value in the eye of law. Accordingly, addition u/s. 69B deleted.

Facts- The case of assessee was reopened u/s. 147 of the Income Tax Act, 1961. The assessment was reopened on the basis of information that a survey action u/s. 133A of the Act was carried out in the office premises of Turnish B Kania, Advocate. One of the Satakhat, it was found that the assessee and Shri Rameshchandra Harjibhai Gondaliya jointly purchased a property from Babyben Budhiyabhai Patel and others out of R.S. No 79/2, Block NO. 223 of village Sarsana, Surat. On the impounded document, sale price of land was shown at Rs. 3.59 crores. However, as per record available, the transaction of land was registered wherein the value of sale consideration by way of cheque is shown at Rs. 1.20 crore. Thus, the Assessing Officer was of the view, the assessee has paid Rs. 2.39 crores in cash. The cash shown on Satakhat was not mentioned on the registered sale deed.

AO treated the difference of Rs. 2.39 crores (Rs. 3.59 – Rs. 1.20 crore) as not recorded in the books of account. The assessee is having 50% share in the land, therefore, half of the impugned investment i.e. Rs. 1.19 crore was treated as undisclosed income and added u/s. 69B of the Act.

CIT(A) upheld the action of AO. Being aggrieved, the present appeal is filed.

Conclusion- Held that Hon’ble Jurisdictional High Court almost on similar set of facts in PCIT Vs Shaileshkumar Ramachandra Shah in Tax Appeal No. 371 of 2019 dated 20.02.2020, while confirming the order of Surat Tribunal in deleting the similar addition based on similar Satakhat found in the search action on Tarnish B Kania, Advocate, wherein such Satakhat were unsigned, undated and unstamped held that such document has no evidentiary value in the eyes of law and dismissed the appeal of revenue. Thus, in view of aforesaid factual and legal discussions, we direct the Assessing Officer to delete the entire addition.

FULL TEXT OF THE ORDER OF ITAT SURAT

This appeal by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals), [in short, the ld. CIT(A)] dated 31/03/2024 for the Assessment Year (AY) 2010­11, wherein the assessee has raised following grounds of appeal:

“1. On the facts and circumstances of the case as well as law on the subject, the ld. CIT(A) has erred in confirming the actions of Assessing Officer in reopening assessment u/s 147 by issuing notice u/s 148 of the I.T. Act,1961.

2. On the facts and circumstances of the case as well as law on the subject, the ld. CIT(A) has erred in confirming the actions of Assessing Officer in making addition of Rs. 1,91,71,00/- on account of cash payment made on purchase of land as unexplained investment u/s 69B of the Act.

3. It is therefore prayed that the additions made by Assessing Officer and confirmed by ld. CIT(A) may please be deleted.

4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

2. Brief facts of the case are that the assessee is an individual, filed his return of income for A.Y. 2010-11 on 12/02/2011 declaring income of Rs. 16,88,300/-. The case of assessee was reopened under Section 147 of the Income Tax Act, 1961 (in short, the Act) on 30/12/2014. The assessment was reopened on the basis of information that a survey action under Section 133A of the Act was carried out in the office premises of Turnish B Kania, Advocate. During the course of survey proceedings, one C.D./Hard disc was impounded. On taking printout from said hard disc, documents containing Annexures- A-1 to A-4 was prepared which contained various Satakhat/sale and purchase agreement and Kabza receipt. One of the Satakhat, it was found that the assessee and Shri Rameshchandra Harjibhai Gondaliya jointly purchased a property from Babyben Budhiyabhai Patel and others out of R.S. No 79/2, Block NO. 223 of village Sarsana, Surat. On the impounded document, sale price of land was shown at Rs. 3.59 crores. However, as per record available, the transaction of land was registered wherein the value of sale consideration by way of cheque is shown at Rs. 1.20 crore. Thus, the Assessing Officer was of the view, the assessee has paid Rs. 2.39 crores in cash. The cash shown on Satakhat was not mentioned on the registered sale deed. The Assessing Officer on the basis of such discrepancies, recorded the reasons that the income of assessee to the extent of cash payment as escaped assessment. Notice under Section 148 of the Act dated 30/12/2014 was served upon the assessee. In response to notice under Section 148, the assessee filed return of income declaring income of Rs. 16,88,300/- on 27/01/2015. The Assessing Officer after serving notice under Section 143(2) of the Act dated 26/08/2015, proceeded for reassessment.

3. The Assessing Officer issued a detailed show cause notice to the assessee, contents of such show cause notice is recorded in para 3.1 of assessment order. In the show cause notice, the Assessing Officer narrating the aforesaid fact, asked the assessee as to why Rs. 2.39 crores should not be treated as unexplained investment. In response to such show cause notice, the assessee filed his reply on 20/11/2015. Contents of reply of assessee is recorded in para 3.2 of assessment order. In the reply, the assessee stated that while filing return of income on 20/02/2012, the assessee has shown investment in land in his financial statement filed alongwith return of income as per sale deed registered on 14/10/2009. The assessee is having 50% share in the land and has shown actual investment made in the land. On the survey action carried out under Section 133A of the Act on the office premises of Turnish B Kania, Advocate, the assessee stated that in the survey action, statement of Turnish B Kania was recorded, wherein he has given a general statement and disclosed that C.D. contains format for using for preparation of Satakhat, sale deed, Kabza rashid or Sauda Chhitti etc. Consequent upon survey action, the assessee was summoned and his statement was recorded on 18/03/2013. In response to question No. 3, the assessee answered that in the said Satakhat impounded from Turnish B Kania, the assessee is shown as seller but actually he is a purchaser and he has not executed any Satakhat for sale of such land which is still held by him. Statement of Babyben Budhiyabhai Patel was also recorded on 23/03/2013 wherein she has disclosed that sale deed was prepared by Turnish B Kania but actually she is having only 3% share in the land. She also stated that she does not know about the impugned Satakhat. The assessee made a prayer for supply of printout of hard disc being Satakhat between the assessee and Babyben Budhiyabhai Patel, statement of Turnish B Kania, assessee and Babyben Budhiyabhai Patel, if recorded. The required document was supplied to the assessee. On receipt of such document, the assessee found that in the Satakhat, cash amount of Rs. 3.59 crores is mentioned, there is no date on the said document. Satakhat is not singed by the party nor it was found in the physical form. It was found from the office of third person. The assessee instructed only to prepare sale deed which was registered. The assessee never accepted the contents of Satakhat. The assessee also disputed other contents of show cause notice.

4. Reply of assessee was not accepted by Assessing Officer. The Assessing Officer recorded his reasons for rejection of reply of assessee in para 3.4 of assessment order. The Assessing Officer held that the assessee has purchased the above land with Rameshchandra Harjibhai Gondaliya from Babyben Budhiyabhai Patel and others on 14/10/2009 and on the notary register of Smt. Meera Kania, wife of Turnish B Kania, there was entry at serial No. 152 of 2010 on 29/05/2010 wherein finger prints or signature of purchaser with other purchasers were found in the notary register and at serial No. 267 of 2010 on 17/07/2010, reference of affidavit of seller Babyben Budhiyabhai Patel is found on notary register. It cannot be said that Satakhat has no evidentiary value which contained details of seller and buyer which are actually recorded in a reversed manner but other specification like measurement of land and location are as per registered sale deed. Registered sale deed is drafted by Turnish B Kania, denial is made with the intent of concealment of fact and unexplained investment, ultimate sale deed dated 14/10/2009 and Satakhat has so many correlation/common facts. The Assessing Officer, thus treated the difference of Rs. 2.39 crores (Rs. 3.59 – Rs. 1.20 crore) as not recorded in the books of account. The assessee is having 50% share in the land, therefore, half of the impugned investment i.e. Rs. 1.19 crore was treated as undisclosed income and added under Section 69B of the Act while passing the assessment order on 12/08/2016 passed under Section 143(3)/147 of the Act.

5. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee challenged the validity of reopening under Section 147, issuance of notice under Section 148 and the addition of Rs. 1.19 crore on merit. Before the ld. CIT(A), the assessee filed detailed written submission and also relied upon various case laws as recorded in para 5.1 of impugned order. Contents of written submissions of the assessee are not referred/reproduced by the ld. CIT(A). However, the assessee has filed copy of his submission uploaded/filed before the ld. CIT(A), which we have taken in our consideration. The assessee has also filed copy of screenshot about uploading such document on 21/01/2021 on ITBA Portal. The assessee in his submission, on the validity of reopening, submits that the reasons recorded are factually incorrect, the reasons are contrary to the facts. The unsigned Satakhat was obtained from a computer of Turnish B Kania in the course of survey action. Statement of Turnish B Kania and sale deed was recorded. In the objection, the assessee objected about the validity of reopening. In the objection, the assessee objected that the facts mentioned in the reasons recoded are contrary to the record/Satakhat found from Turnish B Kania. In the reasons recorded, the assessee has shown purchaser and as per impugned agreement to sale, the land is purchased at Rs. 3.59 crores which includes the cash and cheque payment and that the assessee has purchased land at Rs. 1.39 crore. However, in the alleged agreement to sell, the assessee was shown as seller and not as a purchaser, so there was no question of unexplained investment. No date of payment of Rs. 2.39 crore is mentioned. Satakhat/agreement to sell is undated and unsigned. As per the sale agreement, Babyben Budhiyabhai Patel was shown as purchaser but in the registered sale deed, the assessee is seller with 14 other co-owners. Thus, there is infirmity in the agreement/Satakhat vis a vis registered sale deed. The assessee is actually having 50% share in the land, which is correctly shown in the financial statement filed with the return of income. In the reasons recorded, filing of return by assessee is not mentioned. The Assessing Officer has not applied his mind and recorded reasons mechanically. There was no tangible material for making belief that income has escaped assessment. There is glaring mistake in stating wrong fact in the reasons recorded. The belief of Assessing Officer is not correct. To support such contention, the assessee relied on certain case laws. Against the addition on merit, the assessee submitted that in the alleged Satakhat, the assessee and Rameshchandra Harjibhai Gondaliya are mentioned as sellers and not the purchasers. In reply to question No. 5 while recording statement of assessee on 18/03/2013, the assessee answered that he never executed such Satakhat for sale of land. Land is still held by assessee. In the impugned Satakhat, cash amount of Rs. 3.59 crores is mentioned but no date is mentioned. Satakhat is not signed or bears the date was not found in physical form. Satakhat was printed from the C.D., copied from the computer of third person. The person from whose computer, such Satakhat was found, stated that he kept such document for pro-forma. The assessee never accepted undisclosed investment in the land. Turnish B Kania never stated that Satakhat pertains to assessee. The assessee also pointed out the consistency about the date of sale deed and the entry in the notary register of Meera Kania, Advocate. Sale deed is dated 14/10/2019, however, in the register of notary, entry No. 152 of 2010 is of 29/05/2010. The record of entry of notary register and reference of affidavit of seller was not supplied to the assessee. The sale deed is executed on 14/10/2009, therefore, the entry in the notary register on 29/05/2010 is irrelevant. Statement of all the sellers were not recorded except statement of Babyben Budhiyabhai Patel who is having 3% share. Babyben Budhiyabhai Patel denied about execution of Satakhat. If the Revenue/Assessing Officer was of the opinion that Tarnish B Kania has given adverse statement against the assessee, he should have been produced for his cross examination in the course of assessment proceedings. To support his various contentions, the assessee relied upon various case laws.

6. The ld. CIT(A) on considering the submission of assessee, on the issue of validity of reopening, held that the assessment was reopened on the basis of survey action on office premises of Turnish B Kania. The Investigation Wing impounded four files after taking printout from hard disc as Annexure-A-1 to A-4, which contains various Satakhat, copy of purchase and sale deed, Kabza receipt etc. One of the Satakhat is in the name of assessee, the assessee purchased land at village Sarsana for a consideration of Rs. 3.59 crores, out of which Rs. 2.39 crores were paid in cash. Such material disclosed that information received from the Investigation Wing cannot be denied that such report was prepared after survey action and collection of evidence. The expression “reason to believe” occurring in Section 147 would mean and include justification for such reopening and when the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can safely be inferred that he is said to have reason to believe that income had escaped assessment, when there is relevant material with a person of a reasonable prudence would have formed the believe of such escapement, it would suffice that the material is sufficient to arrive such conclusion. The ld. CIT(A) relied on the decision of Hon’ble Gujarat High Court in Pavan Kishanchand Tulsiani Vs Union of India 453 ITR 284 and held that the assessment was reopened on the basis of tangible material found on the basis of independent verification conducted by the Assessing Officer and thus rightly invoked the provisions of Section 147. On the basis of such observation, the ld. CIT(A) confirmed the action of Assessing Officer on reopening. On merit, the ld. CIT(A) held that the assessee has not given any submission in the statement of fact in respect of unexplained cash use for purchase of property despite the time allowed by him. The Assessing Officer conducted detailed investigation and made addition after considering the agreement to sell/Satakhat impounded during the survey and on the basis of statement of Turnish B Kania. Further aggrieved, the assessee has filed present appeal before the Tribunal.

7. We have heard the submissions of the learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue. The ld. AR of the assessee submits that basically he has raised two grounds of appeal, one against validity of reopening and second against addition on merit. Both the grounds of appeal are covered in favour of assessee. The ld. AR of the assessee submits that before starting his submission on merit, he would like to clarify that the ld. CIT(A) while confirming the addition on merit, recorded that no submission was made by assessee, such observation of ld. CIT(A) is contrary to the facts. In fact, the assessee filed appeal on 13/09/2016 as has been mentioned in first line of order of ld. CIT(A). The ld. AR of the assessee submits that on receipt of first notice of hearing of appeal in June, 2018, the assessee filed detailed written submission in physical form, copy of acknowledgment is filed. During the hearing in faceless regime, the assessee furnished detailed written submission in response to notice dated 28/12/2020, copy of acknowledgement is filed on record. The assessee alongwith his written submission has furnished various other documents as reflected in the details of prescription with value of attachment, thus the observation of ld. CIT(A) is perverse. Against the validity of reopening, the ld. AR of the assessee submits that on the basis of similar reasons of reopening which were based on survey action under Section 133A of the Act on Turnish B Kania on 27/12/2012 and on the basis of same C.D., the case of one Ripubhai Kanubhai Sheladiya his PAN No. ADZPS 8577 J was reopened and similar addition on account of unexplained investment was made. Against addition in similar case, the said Ripubhai Kanubhai Sheladiya filed appeal before the Tribunal vide ITA No. 288/Srt/2017 wherein reopening was held to be bad in law. The ld. AR of the assessee submits that in the said case, the Coordinate Bench of Tribunal held that there was no nexus between the statement of Turnish B Kania and the Satakhat so found in his computer as soft copy which does not bear the signature of parties and being a sample template in word format. It was further held that there was no live link or close nexus between the material before the Assessing Officer as there was any failure or omission to disclose fully and truly material facts which is missing in the present case. The ld. AR of the assessee submits that the reasons recorded in his case is similar to the case of Ripubhai Kanubhai Sheladiya (supra). Thus, the reasons were recorded is without application of mind as there was no material for form a belief that income of assessee has escaped assessment. Thus, reopening as well as issuance of notice is bad in law. To support his submission, the ld. AR of the assessee relied upon the following case laws:

> ITO Vs Lakhmani Mewal Das 103 ITR 437 (SC)

> Mitul Gems Vs ACIT 62 taxmann.com 66 (Guj)

> Mumtaz Haji Mohmad Memon Vs ITO 408 ITR 268 (Guj)

> Vijay Harischandra Patel Vs ITO 100 CCH 243 (Guj)

> PCIT Vs Manzil Dineshkumar Shah 95 taxmann.com 46 (Guj)

> Inductotherm India P Ltd. Vs DCIT 36 taxmann.com 401 (Guj)

> Amar Jewellers Ltd. Vs DCIT 92 taxmann.com 4 (Guj)

8. On merit on the case, the ld. AR of the assessee submits that even on merit, his case is covered by the decision of Surat Tribunal in Kalpesh Mafatlal Patel Vs DCIT ITA No. 48 & 49/Srt/2017 dated 19/12/2022. The ld. AR of the assessee submits that. The ld. AR of the assessee submits that in case of Kalpesh Mafatlal Patel Vs DCIT (supra), similar addition was made on the basis of survey action on Turnish B Kania wherein on the basis of similar Satakhat/draft Satakhat, the addition on account of unexplained investment of purchase of land was made, however, the same were deleted, copy of decision is filed on record. The ld. AR of the assessee submits that neither the seller has accepted that any on-money was received from assessee and his co-owner nor there is evidence of actual payment of additional amount by assessee to the seller. The Assessing Officer called only Babyben Budhiyabhai Patel who has having 3% share in the land and no other co-owner/seller was called by Assessing Officer for verification of fact. The case of assessee was reopened that the assessee has made additional investment by making a cash payment. The assessee during the assessment, categorically stated that the assessee is having owner of ¹/₂ of land and remaining land was purchased of Rameshchandra Harjibhai Gondaliya. Neither the case of Rameshchandra Harjibhai Gondaliya was reopened nor any addition in his case was made despite having common information. Thus, the assessee cannot be treated indifferently on similar set of facts. The ld. AR of the assessee thus, submits that the Assessing Officer made addition without bringing any corroborative evidence on merit. The assessee and his co-owner had purchased the land at the Jantri value determined by the Stamp Valuation Authority. There is no allegation in the assessment order that the assessee has shown less consideration than the value of asset determined by the Stamp Valuation Authority.

9. On the other hand, the ld. Sr. DR for the revenue supported the orders of the lower authorities. With regard to ground No. 1 which relates to reopening of the case under Section 147 of the Act, the ld. Sr. DR for the revenue submits that for recording reasons and making belief that income has escaped assessment, the Assessing Officer was having tangible information in the form of report from Investigation Wing that in the survey action, certain incriminating material in the form of Satakhat was found. In one of the Satakhat, the assessee alongwith other persons/sellers have made an agreement to sell of a land for showing sale consideration of Rs. 3.59 crores. The ld. Sr. DR for the revenue submits that though in the Satakhat, the assessee has shown as a seller, in fact, the assessee is a purchaser, however, the fact remained the same, the particulars mentioned on the Satakhat and ultimate transaction of purchase of land are exactly matching with regard to size, location and situation of land in fact, the same land which is mentioned on the Satakhat was produced by the assessee. At the time of recording reason about the escapement of income is sufficient and not the full proof satisfaction of the Assessing Officer. Thus, no fault can be found in the action of Assessing Officer, so far as recording of reasons and issuance of notice under Section 148 of the Act is concerned. Against ground No. 2 of appeal which relates to addition on merit, the ld. Sr. DR for the revenue submits that the assessee ultimately purchased the same land which is shown in the Satakhat. In the sale deed, the assessee, as per Satakhat, has shown a consideration of Rs. 1.20 lacs only. Thus the remaining part of sale consideration shown in the Satakhat is nothing but an unaccounted investment of assessee. No direct evidence are generally found, however, the circumstances of transaction clearly suggests that there is unaccounted investment against the purchase of land.

10. In the short rejoinder submission, the ld. AR of the assessee submits that he has already filed statement of Turnish B Kania recorded by the investigation team who carried out survey action. Turnish B Kania in his statement clearly stated that such documents are kept by him for the purpose of format. The ld. AR of the assessee while referring the copy of such Satakhat which is placed at page No. 138 and 139 of paper book would submit that in the said Satakhat, Babyben Budhiyabhai Patel alone is shown as purchaser, however, the assessee and Rameshchandra Harjibhai Gondaliya is shown as seller. The said document does not bear the signature of parties nor it bears any date of execution. Such document is not supported by any corroborative evidence to strengthen the case of Assessing Officer that any on-money or cash payment or unexplained payment was made by assessee rather it is a waste piece of paper as has been kept by Turnish B Kania for the purpose of draft format as confirmed by him. Facts remained the same, the assessee has purchased the land on a consideration of Rs. 1.30 lacs which is duly recorded in the books of assessee. The assessee has recorded ¹/₂ share of purchase consideration in his books of account.

11. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We have also deliberated on the various case laws relied upon by the ld. AR of the assessee. Firstly, we are considering ground No. 2 of appeal which relates to addition of Rs. 1.19 crore. We find that the Assessing Officer made addition of Rs. 1.19 Crore by taking view that assessee has purchased the above land which is shown in the satakat found from the hard disc of Turnish Kania Advocate. Al the particulars mentioned on the impugned satakat are exactly matching with the ultimate sale deed of the land. It was held that it cannot be said that Satakhat has no evidentiary value which contained details of seller and buyer which are actually recorded in a reversed manner but other specification like measurement of land and location are as per registered sale deed. Registered sale deed is drafted by Turnish B Kania, denial is made with the intent of concealment of fact and unexplained investment. Ultimate sale deed dated 14/10/2009 and Satakhat has so many correlation/common fact. The Assessing Officer, thus treated the difference of Rs. 2.39 crores (Rs. 3.59-1.20 crore) as not recorded in the books of account. The assessee is having 50% share in the land, therefore, half of the impugned investment i.e. Rs. 1.19 crore was treated as undisclosed income and added under Section 69B of the Act. The ld. CIT(A) confirmed the action of Assessing Officer by taking view that the assessee has not filed any submission or explanation against such addition.

12. We find that the assessee has furnished detailed written submission on 19/06/2018 and again on 21/01/2021, copy of acknowledgement of such uploading as well as receipt of such submission is already placed on record. Thus, the observation of ld. CIT(A) is contrary to the facts. However, the detailed written submission filed by assessee has already been recorded by us on the copy of copy of submission placed.

13. We find that on similar set of facts, on similar addition, the Division Bench of Surat Tribunal in case of Alpesh Babubhai Panchal Vs ITO, ITA No. 2078/Ahd/2016, dated 10.0.2019, on the basis of similar survey action in case of Tarnish B Kania and Smt. Meena T Kania, Advocates, similar documents in the form of Satakhat was found in a C.D. (Compact Disk of computer), the Assessing Officer of that assessee made addition of undisclosed investment, which was upheld by the ld. CIT(A). However, the Tribunal deleted the addition by holding that addition is made without any basis and no corroborative evidence is placed on record. The Satakhat was found from the third party and that no addition can be made on the basis of undated, unsigned and unstamped soft copy of Satakhat from a person to whom the assessee has no dealing. Similar view was taken in Kalpesh Mafatlal Patel Vs DCIT in ITA No. 48/Srt/2017, on the basis of similar draft Satakhat found from office of Tarnish B Kania, Advocate by holding that no specific query was raised in respect of impounded Satakhat from Tarnish B Kania, Advocate and held that no addition can be made in respect of unsigned, undated Satakhat found from a person not connected with assessee.

14. We find that SMC Bench of this Tribunal in Mukesh Agarwal (in ITA No. 362/Srt/2022 dated 18.05.2023) while considering the similar addition on the basis of Satakhat found in survey action from the office of Vasudev Goplani Advocate held that the Assessing Officer solely relied on the document found at the business premises of third party. The Assessing officer neither called Tarnish Kania Advocate, during reassessment proceedings nor made any independent investigation on fact from purchaser and deleted the addition.

15. We further find that Hon’ble Jurisdictional High Court almost on similar set of facts in PCIT Vs Shaileshkumar Ramachandra Shah in Tax Appeal No. 371 of 2019 dated 20.02.2020, while confirming the order of Surat Tribunal in deleting the similar addition based on similar Satakhat found in the search action on Tarnish B Kania, Advocate, wherein such Satakhat were unsigned, undated and unstamped held that such document has no evidentiary value in the eyes of law and dismissed the appeal of revenue. Thus, in view of aforesaid factual and legal discussions, we direct the Assessing Officer to delete the entire addition. In the result, the ground No. 2 of the appeal is allowed.

6. Considering the fact that we have allowed ground No.2 and directed to delete the entire addition, therefore, adjudication on ground No.1 have become academic.

17. In the result, this appeal of assessee is allowed.

Order announced in open court on 10^th October, 2024.