A simple addition under Section 69A based on an unsigned agreement is not viable

Fact and issue of the case

The Ld. Representative both the sides agreed that in these two appeals sole ground of assessee has been based on identical facts and circumstances therefore we are taking up ITA No. 1 553/Del/202 1 Smt. Anil Bala Goyal case as a lead case.

The learned assessee representative (AR) submitted that the issue is squarely covered in favour of the assessee by the order of the Tribunal dated 10.10.2022 passed by ITAT Delhi Bench in the case of Smt. Shashi Yadav & Poonam Yadav vs. DCIT Central Circle Ghaziabad, in ITA No. 1123 & 1121/Del/2021 respectively for A.Y. 2018-19 arising out of the order of Ld. CIT(A) Kanpur-4 dated 12.08.2021. The Ld. AR explained that the additions in the present case as well as in the case of Smt. Shashi Yadav & Smt. Poonam Yadav has been based on so called incriminating material LP-70 & 71 found at the place of the assessee for the similar kind of shops. The Ld. AR drawing our attention towards para 90 to 95 of the Tribunal order (supra) submitted that the Tribunal categorically held that there was no corroborated evidence, no cross examination of assessee’s statement and no evidence that fair market value is higher than that recorded in the sale deed. The Ld. AR also pointed out that in the absence of such findings with supportive evidences, any addition made on the basis of presuming that the figures written on a loose sheet of paperbook is the fair market value of the property, would not be justified and against the law laid down by the various judgment of Hon’ble Supreme Court and High Court and order of the Tribunal including judgment of Hon’ble Supreme Court in the case CBI vs V C Shukla reported as (1998) 3 SCC 410.

Replying to the above the Ld. DR place strong reliance on the order of the A.O. as well as the Ld. CIT(A) and submitted that the incriminating material clearly revealed that the assessee has made payment of own money for purchase of shop no. 385 in the Habitat Centre Indirapuram, Ghaziabad therefore the addition may kindly be sustained. However he did not controvert that on the identical facts and circumstances the ITAT Delhi Bench in the cases of Smt. Shashi Yadav & Smt. Poonam Yadav vs. DCIT (supra) has granted relief to the said assessee’s and he could not show us any dissimilar for different facts and circumstances from the present appeals of Smt. Anil Bala Goyal and Maanya Goyal.

On a careful consideration of our submissions from the order of the ITAT Delhi Bench in the case of Smt. Shashi Yadav & Smt. Poonam Yadav vs. DCIT (supra) we observe that for the same A.Y. 2018-19 the identical issue has been decided in favour of the assessee with following observations and findings:- 90. AO has noted that during the course of search proceedings u/s 132 of the Act at the residential premises of Shri B. B. Goel at Indirapuram Habitat Centre, Ghaziabad, Pages 70 & 71 of Annexure – LP -1 was found and seized. The assessee was asked to submit the explanation as her name appeared on page 71 of the annexure. AO has noted that the aforesaid Annexure displayed the description of the Shop Nos. 387, 382 & 383 that were found to be in the name of family member of the assessee. It was further noted that Shop No.384 which was shown in the name of the assessee had mention about the figure of Rs. 1,73,84,500/- which the AO considered to be the cost but as per the assessee the investment was of Rs. 63,67,496/-. Therefore the AO was of the view that the difference of Rs. 1,09,87,004 which was approximately 60% of the total value, alleged to have been paid in cash from unaccounted money. Assessee was asked to explain as to why aforesaid difference not be added to the income as unexplained investment. Assessee inter alia denied having any information with respect to the documents seized. However, during the course of assessment proceedings, it was noted by AO that assessee along with her son Shri Manish Yadav was having a joint venture in M/s. Clavecon India Pvt. Ltd. wherein assessee and Shri Yugank Goel were directors in the company. AO also noted that the Shri B. B. Goel is a contractor in Irrigation department where Shri Rajeshwar Yadav, husband of the assessee worked as a Superintending Engineer. AO therefore concluded that families of Shri B. B. Goel and the assessee knew each other. AO was further of the view that Page 71 of Annexure – LP – 1 found at the residential premises of Shri B. B. Goel indicated that the family of Shri B. B. Goel and the family of the assessee had jointly invested in a project namely the Habitat Centre and it also reflected that the cost of shop was at Rs.25,000/- per sq.ft. for which according to AO, approximately 60% of the cost was paid in cash from unaccounted money. A. O. noted that no convincing reply was furnished by the assessee about the difference. He therefore treated the difference of the amount found in Annexure LP1 and the amount disclosed by the assessee amounting to Rs. 1,09,87,004/- as unexplained investment towards purchase of shop No. 384 and made its addition u/s 69 of the Act.

91. Aggrieved by the order of AO assessee carried the matter before CIT(A), who upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now before us.

92. Before us, Learned AR reiterated the submissions made before lower authorities. He further contended that the entire addition has been made purely on the basis of conjectures and surmises without being supported by any incriminating material. He further submitted that admittedly the diary was found at 3rd party’s premises and it is a settled position of law that if anything found in possession of any person then the onus would be on such person to explain the contents of the documents and to prove that it does not belong to such person. In support of his aforesaid contentions, Ld. AR placed reliance on the judgments rendered by Hon’ble Delhi High Court in the case of CIT vs. Praveen Juneja (ITA No. 56/2017 dated 14.07.2017) to buttress the contention that merely on the basis of a single document without making any further inquiries, the addition was not justified. The AO made no attempt to find out that what was the cost of investment by making field inquiries from other similar purchasers of the property. He further contended that since the impugned loose sheets were found at the premises of the third party, the presumption u/s 132(4A) and 292C of the Act thereof cannot be applied against the assessee. He further submitted that since the said papers have not been found from the possession or the premises of the assessee, it cannot be attributed to the assessee. In support of the aforesaid contention, he placed reliance upon the decision of Tribunal in case of Straptex India Pvt. Ltd. vs. DCIT [2003] 84 ITD 320 (Mum), ACIT vs. Kishore Lal Balwant Rai [2007] 17 SOT 380 (Chd.), Jai Kumar Jain vs. ACIT (2007) 11 SOT (Jaipur) (URO), Saif Ali Khan Mansurali vs. ACIT 13 ITR (Trib) 204 (Mum.). He further submitted that law is well settled that mere scribbling/jottings on a piece of paper does not constitute any credible evidence to be used against the assessee, more so, if it is not found from the possession of the assessee. He therefore submitted that the addition made by the AO and upheld by CIT(A) be deleted.

93. Learned CIT-DR opposed the submissions made by Ld. AR and supported the order of lower authorities. He contended that the lower authorities were justified in treating the difference as unexplained investment. He further submitted that it is a normal practice that the part payment of sale consideration is made in cash in property transactions and therefore the registration by the stamp valuation authority at lower rate as per the stamp valuation Act such amount does not reflect the true and correct fair market value of the property. He therefore, submitted that the AO has rightly treated the amount mentioned in diary as unexplained investment.

94. We have heard the rival submissions and perused the material available on record. There is no dispute with regard to the fact that the additions have been made purely on the basis of the certain loose papers found at the premises of third party. It is also undisputed that except the loose papers, there are no other documents suggesting that assessee had entered into an agreement at a higher rate than disclosed in the sale deed. The AO has also not brought any other sale instances of similarly situated properties. The law is well settled that there has to be corroborative evidences to prove any figure written in the loose sheet of paper. Moreover, it has been held by the Hon’ble Supreme Court in the case of CBI vs. V. C. Shukla [1998] 3 SCC 410, that writing in his diary by a third party is not a reliable evidence and same cannot be viewed as an evidence. Moreover, the statement of B. B. Goel also does not support the case of Revenue as he has categorically stated that the figures written are merely projections about future profit. Reliance was placed on the judgement of Hon’ble Delhi High Court in the case of CIT vs. D K Gupta (2009) 308 ITR 230 (Del) to buttress the contention that the burden was on the Revenue to prove that the explanation of Shri B. B. Goel was not correct and that the notings/jottings were in fact related to the investments of the undisclosed amount. Further, Revenue has also not placed any material on record to demonstrate that any action was taken by Revenue in the case of seller of property. Considering the totality of the facts placed on record, it is evident that the lower authorities have made addition purely on the basis of the notings in diary found in the possession of Shri B. B. Goel and the statement recorded in this regard. The Revenue did not provide opportunity of cross examination to the assessee in respect of any statement made by Shri B. B. Goel. The AO has also not brought any other material suggesting the actual fair market value of the property in question is higher than what is recorded in the sale deed. Undisputedly, transfer of a property would always be between two parties one being seller and other the purchaser. It cannot be assumed that one party disclosed correct figure of consideration and the other party concealed the true value of the property. There is no mention about action taken by Revenue in the case of seller who had sold the shops to the assessee. It was incumbent upon the AO to demonstrate the correct fair market value of the property when he was not accepting the value disclosed by the assessee. In the absence of such finding with supporting evidences, any addition made on the basis of presuming that the figures written by the third party in his diary is the fair market value of property, would not be justified and against the law laid down by Hon’ble Supreme Court in the case of CBI vs. V. C. Shukla (supra) and followed in other catena of judgments. We therefore respectfully following the binding precedents on this issue relied by the Ld. AR hold that the addition has been made purely on the basis of surmises and we therefore direct for it deletion. Thus the ground raised by the assessee is allowed.

95. In the result, the appeal of the assessee is partly allowed.

Observation of the court

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.

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.

Ground no. 2 of assessee is consequential regarding levy of tax u/s. 115BBE of the Act. Since in the earlier part of this order we have allowed ground no. 1 of assessee, deleted the base addition u/s. 69A of the Act. Therefore, ground no. 2 of assessee is not being adjudicated upon being consequential and thus having become academic and infructuous. Other grounds of assessee are general in nature which do not require any adjudication.

It the result, ITA nos. 1533, 1534, 1535 & 1536/Del/2021 of the assessee are allowed and ITA nos. 1807 & 1808/Del/202 1 of the revenue are dismissed.