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TMI Blog2016 (8) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... ed investment u/s 69B of the Act by not considering photocopy of agreement to sell as an evidence when subsequently some of the cheques mentioned in the said agreement were found debited in the bank statement of Sh. Mohinder Singh Bajwa (Purchaser). a. Whether the ld. CIT(A) is right to hold that the fair market value of asset as on date of transaction exceeds full value of consideration declared by the assessee then it is for the AO to prove that the value declared by the assessee is understated. Whereas three cheques dated 10.05.2007 No.148467 Rs. 15 lacs No.148468 Rs. 15 lacs, No.148469 Rs. 10 lacs as mentioned in the page 2 of the said photocopy of agreement have been found debited in bank account of Sh.Mohinder Singh Bajwa, bank statement of which were obtained u/s 133(6) of the I.T. Act, 1961 from the Citizen Urban Cooperative Bank Limited, Mithapur Road, Jalandhar. This copy of agreement is very valid evidence to prove that the value declared by the assessee is understated. b. Whether the ld. CIT(A) is right to hold that the AO is entirely dependent upon the documents found and seized not in the case of the appellant but from unrelated party. The ld. CIT(A) failed to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he required detail and documents. Assessment u/s 153A r.w.s. 143(3) of the Act was framed on 24.03.2014, at Rs. 2,51,52,675/-, as against the returned income of Rs. 10,04,250/- . Thus, the AO made addition of Rs. 2,41,48,425/- on different accounts. 4. The ld. CIT(A), partly allowed the appeal of the assessee. 5. Aggrieved, now the department is in appeal before this Bench against the order of the ld. CIT(A). 5. The ld. DR relied on the order of the Assessing Officer. However, as regards the first issue relating to deletion of addition of Rs. 2,27,00,000/-, he submitted that the addition was made by the AO on account of unaccounted and undisclosed investment u/s 69B of the I.T. Act, by considering the photocopy of agreement to sell as an evidence, when some of the cheques mentioned in the said agreement were found debited in the bank statement of Sh. Mohinder Singh Bajwa (Purchaser). He further submitted that the ld. CIT(A) is not justified in deleting the addition. 6. The ld. counsel for the assessee, on the other hand, strongly supported the impugned order. He contended that the addition was made on account of an agreement which was neither found from the residence of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of every other buyer of land in the same village or similarly located land. The presumption u/s 132 (4A) is to be invoked in the case of M/s PISCO Ltd. from whom the document or valuables are found and seized and even in the said case such a presumption is rebuttable. However, it is clear that no evidence whatsoever has been found from the appellant during the course of search operation which could even suggest that there has been unaccounted investment in the purchase of land to the tune of Rs. 2.27 Crore. The presumption made by the Assessing Officer on the basis of the seized documents in the case of M/s PISCO Ltd. in respect of the impugned deal recorded in the said document could definitely be made but same presumption can not be extended to in the case of every other consequentiaI sale of land by "M/s PISCO Ltd. The Assessing Officer has clearly observed in the assessment year that the sale consideration as recorded in the seized copy of agreement of sale has been taken for the purposes of comparative rate at village Birring only and the land purchased by the appellant was different than the one mentioned in the impuqned seized documents. This issue has been clarified by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) 516 is also on similar issue as is clear from following head note: - "Search and seizure-Block assessment-Computation of undisclosed income-Addition of premium allegedly paid over and above the cost of plot mentioned in the registered deed- Seized documents on the basis of which the impugned addition were made not found at the residence of the assessee but at the residence of a third party- Same have not been specifically confronted to the assessee before making the addition-Explanation given by assessee not controverted by AO-AO has not given any reason for either not accepting the explanation of the assessee or for finding the explanation as unsatisfactory-Thus, AO did not comply with the conditions stipulated in s. 69-Addition deleted-Remand of the case not called for-Power of remand under s. 254 is required to be exercised in a disciplined and responsible manner-Same cannot be invoked in a case where AO has not cared to follow the basic provisions of s. 69/69B." 13. The decision of the jurisdictional ITAT Amritsar in the case of ITO vs. Sh. Surinder Singh is directly on the similar facts as certain documents seized from the third party M/s Dreamland Co-operative which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o made in the same year is not enough in the absence of any link in the list of payment. We concur with the view of the Ld. CIT(A) and the cases relied upon by him that presumption is available against the person from whose possession a seizure is made but the same cannot be extended to others. Accordingly, the Ld. CIT(A) has rightly deleted the addition made by the Assessing Officer and we find no infirmity in his order. Thus all the grounds of the revenue are dismissed." 14. The issue of alleged understatement of sale consideration in the registration deed has to be proved by the revenue and the same can be done by leading positive evidence either in the form of some documents found during the course of search or otherwise which could prove that consideration over and above the registration deed had been passed on from buyer to seller. The evidence relied upon by the Assessing Officer in the instant case represents a photocopy of an agreement to sell with regard to a deed between two other persons in respect of different piece of land and on a different date. The Assessing Officer on the basis of the said seized documents, which has been denied by all the constituents mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or disclosed by him, section 52(2) is immediately attracted, subject of course to the fulfillment of the condition of 15% or more difference, and the Revenue is then not required to show what is the precise extent of the understatement or in other words, what is the consideration actually received by the assessee. That would in most cases be difficult, if not impossible, to show and hence sub-section (2) relieves the Revenue of all burden of proof regarding the extent of understatement or concealment and provides a statutory measure of the consideration received in respect of the transfer. It does not create any fictional receipt. It does not deem as receipt something which is not in fact received. It merely provides a statutory best judgment assessment of the consideration actually received by the assessee and brings to tax capital gains on the footing that the fair market value of the capital asset represents the actual consideration received by the assessee as against the consideration untruly declared or disclosed by him. 15. The said judgment of Hon'ble Apex Court has been consistently followed various High Court and Tribunals on the issue of understatement of sale consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... known principle that no oral evidence is admissible once the document contains all the terms and conditions. Secs. 91 and 92 of the Indian Evidence Act, 1872 (for brevity 'the 1872 Act') incorporate the aforesaid principle. According to section 91 when terms of a contract, grants or other disposition of property have been reduced to the form of a document then no evidence is permissible to be given in proof of any such terms of such grant or disposition of the property except the document itself or the secondary evidence thereof. According to section 92 of the 1872 Act once the document is tendered in evidence and proved as per the requirements of section 91 then no evidence of any oral agreement or statement would be admissible as between the parties to any such instrument for the purposes of contradicting, varying, adding to or subtracting from its terms. According to illustration 'b' to section 92 if there is an absolute agreement in writing between the parties where once has to pay the other a principal sum by specified date then the oral agreement that the money was not to be paid till the specified date cannot be proved. Therefore, it follows that no oral agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation wing of the department based on a photocopy of an agreement disowned by the assessee. No evidence on record to show that assessee had received more than what was disclosed on the registered instrument, the burden for which is on revenue. No addition can be made on the basis of the photocopy of a document when the transaction is separately evidenced by a registered sale deed." 20. The Hon'ble Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh in the case of I.T.O. v. Shri Manjit Singh reported in (2010) 128 TTJ (Chd)(UO) 82, held:- "In the absence of any evidence to show that the assessee had received any consideration over and above what is stated in the sale deed, addition could not be made by disregarding the 'full value of the consideration' declared by the assessee simply because another portion of land has been sold by the assessee along with his brother at a higher rate," 21. The Hon'ble Madras High Court in the case of Sivakami Co. Pvt. v. CIT (1973) 88 ITR 311 (Mad) has held that the burden of proving that certain sales were effected with the object of avoidance or reduction of tax on capital gains is on Revenue and it is not enough i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tamp duty. It means that the full value of consideration as evidenced by the registered document can be constituted for the value meant for the purposes of stamp duty as per section 50c. This section has been introduced by Finance Act 2002 , w.e.f. 1.4.2003 and has been titled "special provision for full value of consideration in certain cases" which means that the full value of consideration can be substituted only if the conditions as stipulated in the provisions of section 50C are fulfilled. Apart from the provisions of section 50C, the sale consideration as reflected in the registered document can be substituted by a higher figure if there is evidence on record to suggest that amount over and above the one recorded in the registered documents had passed on from the buyer to the seller." 23. The Hon'ble High Court of Delhi in the case of Commissioner of Income Tax Vs. Dinesh Jain HUF reported in 254 CTR (Del) 534, held:- "Section 69B in terms requires that the Assessing Officer has to first "find" that the assessee has "expended" an amount which he has not fully recorded in his books of account. It is only then that the burden shifts to the assessee to furnish a satisfacto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he simple reason that such an inference could be very subjective and could involve the dangerous consequence of a al or fictional income being brought to tax contrary to the strict visions of Article 265 of the Constitution of India and Entry 82 in List 1 of the seventh schedule thereto which deals with "Taxes on income other than agricultural income." For the purposes of Section 69B it is the burden of the Assessing Officer to first prove that there was understatement of the consideration (investment) in the books of account. Once that undervaluation is established as a matter of fact, the Assessing Officer, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extent of understatement of the investment. One such yardstick can be the fair market value of the property determined in accordance with the Wealth Tax Act. The error committed by the Income Tax authorities in the present case is to jump the first step in the process of applying section 69B- that of proving understatement of the investment- and reply the measure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income Tax Vs. Harpal Singh reported in (2008) 3 DTR 254, held:- "Tribunal has recorded a pure finding of fact after taking into consideration the evidence/material available on the record to the effect that before the Assessing Officer there was no material or evidence to conclude that the assessee had paid a consideration and above the amount mentioned in the registered sale deed, i.e. @ Rs. 2.30 lacs per acre and the addition made by him was without any basis. The only evidence/material available before the Assessing Officer was the so called statement of 'S', which was recorded by the Asstt. Director of IT (Inv.), on 18th Sept., 2001 in which he had deposed that he had sold the land in question @ Rs. 4 lacs per acre, and apart from the amount mentioned in the registered sale deed, he had received Rs. 72 lacs cash from the assessee in five installments. Undisputedly, said 'S' subsequently retracted from his statement the Asstt. Director of IT (Inv.) itself whereby he had confirmed that he had not received any amount over and above the consideration stated in the sale deed. Further, it is also undisputed position that before the Assessing Officer sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect. In a subsequent statement recorded on 20th Nov., 2000 Rajarathinam again reverted to his earlier portion and deposed that the sale price was Rs. 34.85 lakhs. The AO concluded that the sale consideration was actually Rs. 34.85 lakhs and not Rs. 4.10 lakhs as had been recited in the sale deed. He accordingly adopted the aforesaid enhanced figure for the purpose of assessment and made an addition of Rs. 3,75,005 as undisclosed income for the broken period Ist April, 1998 to 8th Dec., 1998. The matter was thereafter taken to the CIT(A), who after examining the entire matter, observed that the statements given by Rajarathinam could not be relied upon more particularly as the floor price fixed by the authorities for such property was much lower than the value which would result if the sale deed had been registered at Rs. 34.85 lakhs. The CIT accordingly deleted the addition made. An appeal was thereafter preferred by the Revenue against the order of the CIT before the Tribunal. The Tribunal in its order dt. 6th July, 2005 held that the notings on the loose pieces of paper on the basis of which the initial suspicion with regard to the undervaluation had been raised were vague and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been dealt with by the High Court in that perspective and it was therefore appropriate that the matter be remitted for fresh decision. The learned counsel representing the assessee respondent has however pointed out that the CIT in particular, had after a very elaborate discussion of the matter, concluded on a finding of fact with regard to the nature of the transaction and this view had been accepted by the Tribunal as well, has accordingly submitted that no substantial questions of law have been raised in this matter and the issues raised were purely questions of fact. We have heard the learned counsel for the parties and have gone through the record. It is true that the Division Bench of the High Court has borrowed extensively from the orders of the Tribunal and the CIT and passed them off as if they were themselves the authors. We feel that quoting from an order of some authority particularly specialized one cannot per se be faulted as this procedure can often help in making for brevity and precision, but we agree with Mr. Vahanavati to the extent that any 'borrowed words' used in a judgment must be acknowledged as such in any appropriate manner as a courtesy to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for in a case of transaction consequential to the transaction mentioned in the agreement seized. xviii) There is no evidence of unaccounted investment by the assessee. xix) The AO himself clarified to the assessee that the sale consideration in the agreement seized was taken for the purpose of comparative rate only. xx) The land purchased by the assessee was different from that mentioned in the agreement seized. xxi) It is the burden of the department to prove under-statement of sale consideration. xxii) This burden has not been discharged. xxiii) There is no positive evidence against the assessee. xxiv) Thus, the AO's presumption did not materialize into conclusive evidence against the assessee. xxv) Such a presumption cannot be accorded the status of foolproof evidence against the assessee. xxvi) Such a presumption cannot lead to a conclusion of under investment by the assessee, liable for addition. 9. The ld. CIT(A) has duly considered all the above said facts as well as the relevant case laws. There has been no effective rebuttal to the well reasoned elaborate findings recorded by the ld. CIT(A). 10. In view of the above discussion, we are of the considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration assessee has made certain advances to the relative persons as sundry debtors, sister concerns of the assesee and also to the outsider to the tune of Rs. 1,16,59,000/- listed in para 5 at page no. 12 of the assessment order and on this outstanding amount of Rs. 1,16,59,000/- as on 31.03.2009 interest @ 12% to the tune of Rs. 14,00,000/- has been disallowed. Sir, it is submitted that while framing assessment the Ld. Assessing Officer stated that "no explanation on the above issue has been received till date, since the assessee has used the interest bearing funds for non-business purpose by the way of loan/advances to the Relative/sister concern of the assessee as discussed in para 2 of show cause dated 13.01.2014. In view of the above, it is proved that the assessee has nothing to say in this regard as the issue raised on account of disallowance of interest amounting to Rs. 14,00,000/- as discussed above is disallowed u/s 36(i)(iii) of the Act, 1961 by relying upon the decision of Abhishek Industries vs. CIT and Rs. 14,00,000/- is being added to the total income of the assessee".Sir, in this regard it is submitted that assessee has duly filed his submission before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom that in the terms of the balance sheet there was a further availability of Rs. 398.19 crores including Rs. 180 crores of share capital. In this context, the finding of facts recorded by CIT(A) and tribunal as to availability of interest free funds really cannot be faulted. If there be interest free funds available with assessee which is sufficient to meet its investment and at the same time the assessee had raised a loan it can be presumed that investment were from the interest free funds available. Sir, facts of the case cited above are similar to our case as in our case assessee company is having about Rs. 2,84,34,305/- interest free funds whereas if for argument sake it is admitted that assessee advance Rs. 1,16,59,000/- as interest free loans even then following the decision of Hon'ble Bombay high court no addition can be made. But in the present case we have not made advances which are interest free but these are trade advances so, it is requested that addition made by the Ld. Assessing Officer may kindly be deleted." 27. The AR of the appellant further submitted calculation of interest in respect of amounts given free of interest and interest in respect of amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case, the basis of addition made by the Assessing Officer and the arguments of the AR on the issue. It is seen that the entire set of circumstances show that the appellant has avoided to give data from the books of account to show the business use of interest bearing funds. In the circumstances the view of the Assessing Officer that the interest bearing funds have been diverted to advance interest free loans cannot be said to be arbitrary. In the circumstances the disallowance is restricted to Rs. 10,,95,795/-, in view of the comments of the undersigned in para 21 of this appellate order." 15. It is seen that the ld. CIT(A) has duly taken into consideration and given credit to the assessee, of interest payable @ 12% on credit balances of Himsons Exports Rs. 36,000/-, Jalandhar Construction Co. Ltd. Rs. 60,000/-, Jaswant Singh & Sons Rs. 60,000/-, Rajindra Deposits & Advances Ltd. Rs. 66,960/- and Harpreet Singh Rs. 1,62,000/-. The ld. CIT(A) has also taken cognizance of the interest chargeable @ 12% on the debit balances of advance for Satpal Cold Rs. 12,000/-, Dalbir Singh Rs. 12,000/-, Gurbachan Singh Rs. 50,400/-, Harman Builders Pvt. Ltd., Rs. 8,96,835/-, Inderpal Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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