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May 15, 2021

Don’t burden Taxpayer with unfair additions: ITAT Chandigarh

Don’t burden Taxpayer with unfair additions: ITAT Chandigarh

Fact and Issue of the case

The relevant facts of the case are that an addition of Rs.40 lakhs was made in the hands of the assessee on account of deposits found made in the assessee’s bank account. The assessee explained the same as being sourced from sale of land measuring 11.28 Marla (Muraba No. 51, Kila No. 4/1/1 Khewat No. 246, 277)sold to Shri Mehar Singh S/o Shri Babu Ram of Pehowa, who was the purchaser. The relevant extract from the assessment order reads as under:

“cash of Rs 40.00.000/- was deposited in his bank account out of sale of property to Sh Mehar Chand S/o Sh Babu Ram, Pehowa during the financial year 2009-10 relevant to assessment year 2010-11. From the perusal of lkrarnama dated 02.06 2010, it is noticed that agreement was made between mother of the assessee. Smt Krishna Devi W/o Sh Ramesh Kumar R o Pehow and Shri Mehar Chand S’oShBabu Ram. Pehowaon 02,06.2010 to sell land measuring 11.28 Marla (Muraba No. 51, Kila No. 4/1/1 Khewat No. 246, 277) for Rs 40,00,000/- and the whole amount of Rs 40,00,000/-has been received in cash”

However, the purchaser as per record denied having paid ‘Biyana’ in terms of ‘Ikrarnama’ to the assessee in his statement given to the AO. In view of this statement, addition was made in the hands of the assessee.

The assessee carried the issue in appeal before the CIT(A) and also advanced an alternate argument namely that the deposits made were from his known sources of business. The said submission was dismissed holding that the claim could not be said to be explained by filing of a mere affidavit. Aggrieved the assessee is before the ITAT.

Observation of the Tribunal

The tribunal addressed the manner in which the documentary evidence, namely the ‘Ikrarnama’ – Agreement to Sell and the Affidavits are to be considered where the basic/primary facts itself are missing namely whether the ownership of the specific and ever vested with the assessee/his mother or not and if yes, was it ultimately sold and i f yes, then again to whom and at what price, I am alive to the possibility that the necessary queries and findings may also throw up some contrary facts not placed on record. It needs be addressed that the presumption that claims are correctly made are open to verification and in case the ownership of the land by the mother of the Assessee itself is disputed, then the assessee may be forewarned of the possible consequences that would come into play. No doubt, the correctness of the alternate claim be examined on merits.

However, in case the ownership at the relevant time is established and further sale thereof is also an accepted fact then keeping the prevalent malpractices and deprecating them for the purposes of the present proceedings since only the correct income is to be brought to the tax, in addition to the test of human probabilities, it may be necessary to examine what was the correct value of the specific and at the relevant point of time. This enquiry in the facts is necessary and crucial for determining the source of cash deposit and its taxability. I t needs to be borne in mind that not to so enquiry would tantamount to placing an unfair and impossible burden on a Seller to plead with the purchaser to acknowledge and accept the fact that part payment may have been from his/ purchasers unaccounted money. The tax authority at least for semi-l iterate economically depressed agricultural land holders stand in the position of locus parent is as they may not be aware of the manipulative practices and being interested only in receiving the payment, for sale of their land may simply sign on the dotted line.

In such transactions, it is the wily purchasers who would take advantage of honest seller who has deposited the entire Sale consideration including that received in cash in their banks. I t is not difficult to visualize the motives a purchaser may have to record different amounts in the Sale Deed vis-à-vis Agreement to Sell only to escape the rigors of tax laws and reduce Stamp Duty etc., and then, after the Sale stands concluded, to subsequent ly very conveniently deny the correctness of the Agreement to Sell ‘Ikrarnama’ . I f the document has been signed and signatures are not denied consequences follow. In case, signatures are denied then forensic examination becomes necessary. Hence in such circumstances the correctness of the ‘Ikrarnama’ cannot be out rightly discarded and the authenticity of the same, including the signatures of the parties need to be forensically examined and the witnesses to the document also would need to be examined. Parties cannot be al lowed to treat the document/agreement entered into between them casual ly or disown them at their convenience as such actions may invite criminal consequences for the crimes of forgery and perjury.

In the facts of the present case, the tax authorities therefore need to ascertain and verify whether the signatures on the Agreement to Sell ‘Ikrarnama’ have been disowned by the purchaser as a forgery. These are al l relevant issues for consideration and the tax authorities cannot evade the responsibility to ensure that only correct and due taxes are collected and no taxpayer lacking in proper legal advice/suffering a handicap on account of proper legal advice is burdened with unfair additions and steam rolled in the haste for collection of taxes. In the facts of the present case, it appears on record that the assessee apparently did not have the benefit of proper advice as perjury and forgery are serious issues which cannot be tolerated and treated lightly by a law abiding economic society.

The issue, accordingly, in view of the above detailed reasons is set aside back to the file of the CIT(A) who is directed to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard after making necessary enquiries etc. for arriving at a conclusion.


The tribunal made decision in favour of the assessee and the appeal of the assessee is allowed for statistical purposes.

Read the full order from below


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