Case Law Details
Hari Krishan Thaman Vs ITO (ITAT Chandigarh)
ITAT Chandigarh set aside the addition u/s 69 of the Income Tax Act to the file of AO to test the enforceability of agreement to sell as per relevant statue vis-à-vis fresh affidavit.
Facts- The assessee had deposited cash amounting to Rs. 43,15,000/- as auction money with M/s GLADA against sale of trees standing at Sidwa Kanal to MC Limit Ferozepur Road, Ludhiana. Basis the said information, the reasons for reopening were recorded and notice under section 148 was issued and served on the assessee on 30/03/2018. In response to the notice, the assessee filed his return of income on 05/09/2018 declaring total income of Rs. 1,59,910/-. Subsequently, notices under section 143(2), 142(1) and detailed questionnaire were issued, and after taking into consideration the submissions and documentation filed by the assessee, the AO made an addition of Rs. 43,15,000/- being amount paid to M/s GLADA for purchase of trees/ timber treating the same as unexplained investment under section 69 of the Act.
Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who have since confirmed the said addition and against the findings of the Ld. CIT(A), the assessee is in appeal before us.
Conclusion- The explanation of the assessee explaining the source of cash payment have to be tested on the touchstone of enforceability of such agreement to sell as per relevant statue and only where it is determined that such an agreement to sell is enforceable in hands of both the parties and/or the parties have actually taken certain steps to enforce their respective rights emanating from such agreement to sell, the same can act as a relevant and credible evidence in support of the explanation of the assessee. On perusal of records, we however find that there is no explanation of the assessee in this regard and in the interest of justice, it would be relevant to allow an opportunity to the assessee and consider his submissions and it would be appropriate that the matter is set-aside to the file of the AO to examine the same after providing reasonable opportunity to the assessee. Further, we find that the affidavit of the buyer is already available on record and a fresh affidavit of Shri Naveen Goyal has been filed before us. The AO is also directed to consider these affidavits while examining the enforceability of the agreement to sell. The matter is accordingly set-aside to the file of the AO and the ground no. 3 is thus allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is an appeal filed by the assessee against the order of the Ld. CIT(A)- 3, Ludhiana wherein the assessee has taken the following grounds of appeal:
1. That on the facts and the circumstances of the case, the Order of Learned CIT is bad in law.
2. That the Learned Commissioner of Income Tax has erred in validating the reopening of the case of the Appellant by the AO under section 148 of the Income Tax Act, 1961.
3. That the Learned Commissioner of Income Tax has erred in confirming that the Cash of Rs. 43,15,000/- paid by the Appellant as Auction Money against Sale of Trees as Unexplained Investment under Section 69 of the Act.
4. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
2. Briefly the facts of the case are that the assessee had deposited cash amounting to Rs. 43,15,000/- as auction money with M/s GLADA against sale of trees standing at Sidwa Kanal to MC Limit Ferozepur Road, Ludhiana. Basis the said information, the reasons for reopening were recorded and notice under section 148 was issued and served on the assessee on 30/03/2018. In response to the notice, the assessee filed his return of income on 05/09/2018 declaring total income of Rs. 1,59,910/-. Subsequently, notices under section 143(2), 142(1) and detailed questionnaire were issued, and after taking into consideration the submissions and documentation filed by the assessee, the AO made an addition of Rs. 43,15,000/- being amount paid to M/s GLADA for purchase of trees/ timber treating the same as unexplained investment under section 69 of the Act.
3. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who have since confirmed the said addition and against the findings of the Ld. CIT(A), the assessee is in appeal before us.
4. During the course of hearing, the Ld. AR submitted that the assessee has made a cash payment of Rs. 43,15,000/- to M/s GLADA against sale of trees during the period 14/03/2011 to 23/03/20 1 1. It was submitted that the assessee had shown opening cash in hand of Rs. 43,87,272/- as on 01/04/2010 in his books of account out of which he has claimed to have made payment of Rs. 43,15,000/- to M/s GLADA.
4.1 It was submitted that during the course of assessment proceedings, the assessee through his Counsel vide submissions dt. 18/12/2018 submitted a copy of Agreement to Sell with respect to shop measuring 100 Sq. Yds for which Rs. 45,00,000/- has been claimed to have been received by the assessee from Mr. Kuldeep Singh Grewal in the month of March, 2010 and the same was claimed to be the source of the opening cash in hand of Rs. 43,87,272/- as on 01 /04/201 0. It was submitted that the assessee also submitted an Affidavit from one of the witnesses of the said Agreement to Sell affirming the details mentioned in the above said Agreement to Sell.
4.2 During the course of assessment proceedings, the buyer Mr. Kuldeep Singh also sent his Affidavit to the AO directly through speed post affirming the details mentioned in the Agreement to Sell. However the AO decided that the Agreement to Sell was not proper and made an addition of Rs. 43,15,000/-.
4.3 Regarding the findings of the AO that the Agreement to Sell is on a plain paper and not on any Stamp Paper and the same had not been even registered with the Competent Authority, it was submitted that the Indian Contract Act, 1872 does not make stamping and registration of the Agreement compulsory, nor does it deem an unstamped or unregistered Agreement / Contract invalid and unenforceable and even if they are not stamped or registered, even then they will still be enforceable against the parties who have signed the same.
4.4 It was submitted that the Indian Contract Act, 1872 provides that all Agreements that fulfill the essential conditions of free consent, lawful consideration and lawful object are valid and enforceable and even oral agreements are held to be valid contracts under the Indian Contract Act, 1872 provided that they fulfill the essentials of a Contract.
4.5 It was submitted that in the instant case, the Agreement to Sell is in writing however on a plain paper but what matters is that whether the Parties of the Agreement affirm the above said Agreement or not, and in our case, the Agreement is affirmed by the assessee as well as the buyer and also affirmed by the witnesses to the said Agreement.
4.6 Regarding the findings of the AO that both the Affidavits of the witnesses and the buyer talks about two shops instead of one shop, it was submitted that the same was an inadvertent clerical mistake committed by the Counsel of the assessee during the course of assessment proceedings. It was submitted that the Affidavit of the witnesses namely Mr. Naveen Goyal was written by the Counsel of the assessee and electronic copy was given to him which was then printed on a Stamp Paper and signed by him. Instead of writing one shop, the Counsel of the assessee by mistake has wrote two shops. In this regard it was submitted that a fresh Affidavit from Mr. Naveen Goyal is hereby submitted which may be taken on record.
4.7 Regarding the Affidavit of the buyer, it was submitted that the assessee approached him telephonically to provide the above said Affidavit confirming the facts given in above Agreement to Sell. Initially he was not ready to give but later on agreed and called for the format of the Affidavit from the Counsel of the assessee as the copy of Agreement to Sell was not traceable due to huge time gap of eight years. The Counsel of the assessee sent him the electronic draft format of Affidavit but due to wrong impression instead of writing “one shop” in the details “Two” shops were mentioned. It was however submitted that there is no error in both the Affidavits regarding the Area of the Property to be sold i.e, 100 Sq. Yds, Consideration amount of Rs. 50,000/- per Sq. Yds, total consideration of Rs. 50,00,000/-, advance given by Mr. Kuldeep Singh of Rs. 45,00,000/- on 01/03/2010 and Registration agreed to be executed till 30/04/2012. It was submitted that both Mr. Naveen Goyal and Mr. Kuldeep Singh though their Affidavits affirmed the Agreement to Sell was entered into and that the advance money was given to the assessee.
4.8 Further the Affidavit of the Counsel of the assessee admitting that he made the mistake mentioning two shops instead of one is also placed on record and the assessee should not be penalized for the mistake committed by the Counsel of the assessee.
4.9 It was submitted that in any case, the mistake in the Affidavit cannot be taken to have superseded the Agreement to Sell. As the Agreement to Sell is the main evidence and the spirit of the Affidavit of the Parties to the above said Agreement are the most important evidence to confirm the facts of the above said Agreement.
4.10 It was further submitted that the Affidavit of the buyer was sent directly through the speed post and the AO has only found one mistake of mentioning of two shops as against one shop and the source of cash paid by Mr. Kuldeep Singh was never questioned by the Ld. A.O.
4.11 Regarding the findings of the AO and the Ld. CIT(A) that the Stamp Paper was purchased by Mr. Naveen Goyal on 24/12/2018 whereas the Affidavit has been signed on 18/12/2018 which is quite impossible, it was submitted that the contents of the Affidavit of Mr. Naveen Goyal were provided by the Counsel of the assessee electronically on 18/12/2018 and therefore the electronic document contained the date of 18/12/2018, whereas Mr. Naveen Goyal purchased the Stamp Paper on 24/12/2018 and the date so mentioned of 18/12/2018 is again a mistake and the same should not be form the basis of denial to the genuine explanation furnished by the assessee.
4.12 Regarding the AO’s findings that the both the Affidavits have been attested by Mr. Ashwani Jolly, Notary Public, Ludhiana and the Serial Number of the Register is not mentioned in the Affidavit, it was submitted that Mr. Ashwani Jolly is the most renowned Notary Public in the New Courts, Ferozepur Road, Ludhiana and his premises are at the entrance of the Courts and therefore most of the people go to him for Notary Public services and therefore the fact that the same Notary Public has attested both the Affidavits cannot be a reason to reject the Affidavit and non mentioning of the Serial Number on the Affidavit, if at all is mistake the same is on the part of such Notary Public and the assessee again cannot be penalized for such technical breach in the Affidavit so submitted.
4.13 It was accordingly, submitted that the assessee has furnished the necessary explanation regarding the source of the money deposited by way of Auction Money M/s GLADA against sale of trees and therefore the addition so made by the AO and confirmed by the Ld. CIT(A) be directed to be deleted and the appeal of the assessee be allowed.
5. Per contra, the Ld. DR submitted that it is incorrect to assert that the Assessing Officer had erred in making addition of 43,15,000/- for the A.Y. 2011-12. As per information available on record, M/s GLADA has received cash amounting to Rs. 43,15,000/- via auction money against sale of trees standing at Sidwa Kanal to Mc Limit Ferozepur Road, Ludhiana from the assessee Sh. Hari Krishan Thaman. As per cash book as on 31.03.2011 submitted by the assessee there is opening cash in hand amounting to Rs. 43,87,272/-. Out of said cash in hand, the assessee had made cash payments of Rs. 43,15,000/- to M/s GLADA on account of purchase of timber. Therefore, the assessee was asked to explain the source of Rs. 43,87,272/- with documentary evidence.
5.1 In response to the show cause notice, the assessee representative submitted a copy of agreement to sell of 1 shop measuring 100 sq. yard out of area 563.11 sq. yard property No.B-1 8/326/1, khasra no. 744/7/1, 744/7/2, hadbast no. 161, area karabara tehsil, Ludhiana locality Bharat Nagar to Bus Stand Road, Ludhiana.
5.2 As per the agreement, the assessee has received Rs. 45,00,000/- as advance money on 01.03.2010 and the balance amount of Rs. 5,00,000/- at the time of registration of sale deed. During the course of assessment proceedings, the AR of the assessee has filed affidavit of Sh. Naveen Goyal who has claimed to be the witness of the agreement to sell of the property. Another affidavit of Sh. Kuldeep Singh S/o Sh. Puran Singh R/o YPO Threekay Ludhiana was received through speed post who has claimed to be the buyer as per agreement to sell. While finalizing the assessment, the Assessing Officer has duly considered all the replies and submissions made by the assessee and clearly held that the assessee has made a concocted story with a view to conceal the fact that the amount of Rs. 43,87,272/- recorded in his books of account is his own unexplained cash.
5.3 In view of the findings of the Assessing Officer, it is incorrect to assert that the addition made by the Assessing Officer on account of unexplained investment u/s 69 of the 1.1. Act, 1961 are wrong. On perusal of the explanation and submissions made by the assessee during the course of assessment proceedings, the following defects are highlighted in the financial transactions made by the assessee: –
(i) The agreement to sell of property is written on white plain paper.
(ii) The agreement is not written on stamp paper nor it has been got registered with competent authority.
(iii) Cash in hand as per balance sheet as on 3 1.03.2009 was Rs. 6,93,557/- and cash in hand as per balance sheet as on 3 1.03.2010 was Rs. 43,87,272/-.
(iv) Certified copy of sale deed/registration deed of shop sold in lieu of agreement mentioned above has not been filed by the assessee.
5.4 It was submitted that other important facts/observations as per the assessment order are as under:-
i. Agreement to sell shop for total sale consideration of Rs. 50,00,000/- is written on 01.03.2010.
ii. As per this agreement out of the total sale consideration Rs. 45,00,000/- is received in cash as advance on 01.03.2010.
iii. It is agreed to get the registered sale deed executed by 30.04.2012.
iv. It is very illogical and fails the test of probability that 90% of the payment is received in advance in cash and the sale deed is to be executed after two years
v. No evidence of sale deed having been executed in respect of this sale is filed during the course of assessment proceedings, even through the Assessing Officer specifically asked for it.
5.5 From the above observations, it is abundantly clear that the assessee made an un-successful attempt to build up the cash in hand as on 01.04.2010 to explain/give source of the payment made in cash to GLADA as auction money against sale of standing trees.
5.6 Another interesting observation made by the Assessing Officer is with regarding to available cash in hand in the preceding year, the details of which were requisitioned. The position of cash in hand as under: –
31 .03.2009 – Rs. 69,35,57/-
31 .03.2010 -Rs.4,38,72,72/-
5.7 The other defects as noticed by the Assessing Officer and as tabulated by the Assessing Officer in the assessment order in Para 9 at page 8 viz-a-viz the documents filed to prove the existence of the transaction are as below:-
“9. Instead of furnishing a certified copy of sale deed/ registration deed in lieu of agreement to sell submitted by the assessee on 18.12.2018, the assessee has filed an affidavit given by someone Sh. Naveen Goyal who has been claimed by the assessee as a witness of the agreement to sell. Second affidavit has been received by speed post vide consignment no.EP4989787041N which has been posted from head post office, Ludhiana by someone Sh. Kuldeep Singh who has claimed by the assessee to be the purchaser in lieu of agreement to sell. From the perusal of agreement of sell and both the above mentioned affidavit, the following facts have been noticed:
i. As per the agreement to sell, the agreement has been executed for sale of one shop measuring 100 sq. yard out of area 563.11 sq. yard property No.B-18/3726 and 3726/1, khasra no.744/ 7/1, 744/7/2, hadbast no. 161, area karabara tehsil, Ludhiana locality Bharat Nagar to Bus Stand Road, Ludhiana. The agreement to sell is written on a plane white paper. It has not been written on stamp paper nor it has been got registered with competent authority.
ii. Whereas, as per both the affidavits agreement to sell was executed for sale of two shops measuring 100 sq. yards. Further, the property number and khasra number has not been mentioned in the affidavits.
iii. It is noticed from point no. 5 of the affidavit of Sh. Naveen Goyal that the possession of two shops was transferred to the buyer on 30.04.20 12 and as per point no.6 the balance amount was agreed to paid and the registration of two shop was agreed to be executed till 30.04.2012. It means that the sale deed was executed before giving possession to the buyer as the same has been mentioned in the agreement to sell in question that the possession will be handed over at the time of registration of sale deed. It is further noticed that the stamp paper has been purchased by the by Sh. Naveen Goyal on 24.12.2018 from the Anil Kumar stamp vender and the affidavit has been written on 18. 12.2018 which is quite impossible.
iv. The affidavit sent by Sh. Kuldeep Singh S/o Sh. Puran Singh R/o Village and post office, Threeke, Ludhiana has itself turned down as he is aware that the agreement to sell was executed for one shop measuring 100 sq. yard and also in the light of facts mentioned in para (iii) above.
v. Both the affidavits have been attested by Sh. Ash wani Jolly Notary Public, Ludhiana. Sr. number of register has been not the mentioned of affidavit. Affidavit of Sh. Kuldeep Singh has been attested on 24.12.2018 and the affidavit of has been attested on 25.12.2018.2
5.8 Both the facts of the case and the circumstantial evidences go to prove that the appellant has made an unsuccessful attempt to create the cash in hand in the books to explain the source of the payment made to GLADA of Rs. 43,15,000/-.
5.9 As the assessee has failed to explain the source of Rs. 43,87,272/-shown as opening balance in the cash book as on 31.03.2011 therefore, the Assessing Officer has treated the investment of Rs. 43,15,000/- made in purchase of trees/timber from GLADA as unexplained investment u/s 69 of the I.T. Act, 1961.
5.10 While deciding the similar ground of appeal, raised before the Ld. CIT(A) during appellate proceedings, it was observed that in Para 5.3 at page no. 14 of the order which is reproduced as under for your kind reference:-
5.3 “As part of this agreement on 01/03/2010, the assessee has received Rs. 45,00,000/@-, in presence of the witness. The balance amount of Rs. 50,000/- was be received at the time of registration of sale deed. The Assessing Officer observed during assessment proceedings that the above-mentioned agreement to sale of property was written on white plain paper. It was not registered with any competent authority and it was not written on stamp paper. The assessee was asked to furnish his books of accounts, copy of sale deed in continuation of this agreement and other financial details. However during the assessment proceedings the Assessing Officer vide paragraph 5 onwards, of the assessment order has mentioned, that the assessee has completely failed to file the details and explanation in support of his claim of receipt of huge opening cash in hand.
5.11 The Ld. CIT(A) has further given findings on the issue under discussion in Para 5.4 at page 16 which is reproduced herewith for your kind reference : –
“5.4 After carefully considering the assessee@s submission filed the time of appellate proceedings and I do not find myself in agreement with the assessee@s contention. The assessee has merely reiterated almost same arguments even at the time of assessment proceedings. It is also seen that at the time of assessment proceedings the assessee had been given ample opportunities to furnish necessary evidence, however the assessee has failed completely to furnish the same. The Assessing Officer has also pointed out the glaring mistakes appearing in one of the affidavit filed by Shri Kuldeep Singh the alleged purchaser and one of the witness Shri Naveen Goyal. As per alleged agreement relied upon by the assessee for explanation of source of huge opening cash balance as stated by appellant having received as advance against purchase of shop. The Assessing Officer has also pointed out that in one of the affidavit it has been stated that the agreement has been executed for sale of two shops however, as per the other agreement it has been stated to be against sale of two shops. Both of the affidavits have been found to be contradictory to each other. The agreement has been written on plain paper -sale of paper, and has not been registered with any competent authority.
5.5 After carefully considering the facts of the case, in my considered view, the assessee has not been able to satisfactorily explain the source of huge cash balance appearing in his books of accounts as opening cash in hand as on 01/04.201 1.The assessee has not been able to produce clinching and cogent evidence in support of its contention, that the huge advance of Rs. 45,00,000/- has been received by him on account of advance against agreement to sale of one shop. The assessee has not been able to contradict the anomalies found by the Assessing Officer at the time of assessment proceedings. In my considered view the assessee has merely filed two affidavits at the time of assessment proceedings. The assessee could have produced alleged purchaser Shri Kuldeep Singh at the time of assessment proceedings along with the witness Shri Naveen Goel in support of his contention. The assessee has also not been able to contradict the anomalies found by the Assessing Officer with respect to sale of one or two shops found in affidavits, apart from this the date of purchase of the affidavit in the case of Shri Naveen Goel, is 24/12/20 18, whereas the same has been shown to be written on 18/12/20 18. The assessee has also not been able to contradict Id. Assessing officer@s observation that the both affidavit have been attested by Shri Ashwini jolly, the notary public and the serial number of the register has also not been mentioned in the affidavit.2
5.12 In view of the above, the Assessing Officer has rightly made addition of Rs. 43,15,000/- after considering all information available with him. During the course of reassessment proceedings proper time was given to the assessee to submit the necessary documents and evidences to verify the financial transaction but the assessee failed to file genuine documentary evidence regarding the same. Assessee has failed to discharge the onus cast upon him by the Assessing Officer on account of documentary evidences regarding the unexplained investment u/s 69 of the I.T. Act, 1961 in purchase of trees/timber from GLADA.
5.13 In view of the foregoing discussion, it was submitted that the order of the Assessing Officer and the Ld. Commissioner of Income Tax (Appeals) may be sustained.
6. Heard the rival contentions and purused the material available on record. The assessee, in support of his explanation for explaining the source of making cash payment to GLADA, has submitted a copy of agreement to sell dated 01/03/2010 and in terms of contents thereof, it talks about sale of a shop measuring 100 sq. yard out of area 563.11 sq. yard property No.B-18/326/1, khasra no. 744/7/1, 744/7/2, hadbast no. 161, area karabara tehsil, Ludhiana locality Bharat Nagar to Bus Stand Road, Ludhiana for a total consideration of Rs 50,00,000/- and per the agreement, the assessee had received Rs. 45,00,000/- as advance money on 01.03.2010 and the balance amount of Rs. 5,00,000/- was to be received at the time of registration of sale deed. It is also an admitted fact that subsequently, the sale deed was not executed and the amount of Rs 45,00,000/- was forfeited by the assessee and not refunded to the buyer. The Agreement to sell which is on a plain paper has been questioned by the AO as well as the ld CIT(A) for reasons stated in the impugned order and the ld AR has contended that even a plain paper agreement having satisfied the essential attributes is an enforceable agreement as per the Indian Contract Act. We are intrigued by the fact that the agreement to sell relates to transfer of an immoveable property wherein 90% of the agreed consideration has already exchanged hands at the time of entering into such agreement and at the same time, the handing over the possession has been deferred to the time of registration and which has eventually not happened in the instant case and thus, prima facie reflects a situation which is apparently one-sided at the cost of another party. Having said that, it is relevant to determine the enforceability of such agreement to sell against the assessee in terms of the Indian Contract Act as well as the applicability of the provisions of Transfer of Property Act, Indian Registration Act and Indian Stamp Act. The explanation of the assessee explaining the source of cash payment have to be tested on the touchstone of enforceability of such agreement to sell as per relevant statue and only where it is determined that such an agreement to sell is enforceable in hands of both the parties and/or the parties have actually taken certain steps to enforce their respective rights emanating from such agreement to sell, the same can act as a relevant and credible evidence in support of the explanation of the assessee. On perusal of records, we however find that there is no explanation of the assessee in this regard and in the interest of justice, it would be relevant to allow an opportunity to the assessee and consider his submissions and it would be appropriate that the matter is set-aside to the file of the AO to examine the same after providing reasonable opportunity to the assessee. Further, we find that the affidavit of the buyer is already available on record and a fresh affidavit of Shri Naveen Goyal has been filed before us. The AO is also directed to consider these affidavits while examining the enforceability of the agreement to sell. The matter is accordingly set-aside to the file of the AO and the ground no. 3 is thus allowed for statistical purposes.
7. Ground no. 1 is general in nature and there were no arguments raised regarding ground no.2 and hence, the same are dismissed as infructious.
8. In the result, the appeal of the assessee is partly allowed for statistical
(Order pronounced in the open Court on 15/05/2023)
Author Bio
