2017 (11) TMI 1903 - AT - Income Tax

Addition u/s 69 - unexplained source of cash deposited in saving fund account - Transaction of development envisaged in the JDA - only source of cash deposited by the assessee are the sale proceeds of agricultural land in earlier years because the assessee has no other source of income - assessee did not acquire any right to receive income - HELD THAT - As decided in BALBIR SINGH MAINI CS ATWAL 2017 (10) TMI 323 - SUPREME COURT if an agreement to sell is not registered then it shall have no effect in law for the purposes of Section 53A. In short there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act and that in order to qualify as a transfer of a capital asset under Section 2(47)(v) there must be a contract which can be enforceable in law under Section 53A of the Transfer of Property Act. Any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act 1882 (4 of 1882) can only be subjected to taxation. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law that as unregistered Agreement there is no contract which can be taken cognizance of for the purpose specified in Section 53A. therefore it can be easily construed as has been stated above there is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. While coming to the instant case undisputedly the agreement to sell was not registered and in law without registering agreement to sell and /or the sale deed the same can not be relied upon for any purposes therefore claim of the Assessee that the Assessee got money from his father on the basis of agreement to sell which undisputedly unregistered can not be relied upon hence claim of the Asseeee qua unregistered documents does not survive. At the maximum the amount which generated from the registered sale deeds can be taken into consideration to be received by the Assessee s father and given to the assessee as gift. Hence we feel it appropriate to remand the case to the file of the Assessing Officer to examine the registered sale deeds only and deduct the consideration amount thereof from the amount as added in the assessment orders. Appeal is allowed for statistical purposes

Summary

Issues Involved:
1. Addition of Rs. 9,00,000 to the income declared by the assessee.
2. Alleged unexplained source of cash deposited in the savings account.
3. Consideration of agricultural income and sale proceeds of agricultural land as sources of cash deposits.
4. Validity and relevance of unregistered sale deeds as evidence.

Issue-wise Detailed Analysis:

1. Addition of Rs. 9,00,000 to the Income Declared by the Assessee:
The appellate order dated 30.06.2015 confirmed the addition of Rs. 9,00,000 to the income of Rs. 9,175 declared by the assessee. The assessee argued that this addition was against facts and law. The Assessing Officer (AO) had made this addition under Section 69 of the Income Tax Act, 1961, treating the amount as unexplained income. The Ld. CIT (A) upheld this addition due to the lack of documentary evidence provided by the assessee to substantiate the source of the cash deposits.

2. Alleged Unexplained Source of Cash Deposited in the Savings Account:
The AO issued a notice under Section 148 of the I.T. Act upon discovering that the assessee had deposited Rs. 25,00,000 in cash in his savings account during the Financial Year 2008-09. The assessee claimed that Rs. 9,00,000 of this amount was received as a gift from his father. However, the AO and subsequently the Ld. CIT (A) found the explanation unsatisfactory due to the absence of supporting documents such as a gift deed or any other substantive evidence.

3. Consideration of Agricultural Income and Sale Proceeds of Agricultural Land:
The assessee contended that his only sources of income were bank interest and agricultural income. He argued that the cash deposited was from the sale proceeds of agricultural land in earlier years. However, the AO enhanced the expenses on crops sold from 12% to 30%, resulting in an addition of Rs. 2,72,973, which the Ld. CIT (A) later deleted. The Ld. CIT (A) did not find any documentary evidence supporting the claim that the cash deposits were from the sale of agricultural land, thereby confirming the addition of Rs. 9,00,000.

4. Validity and Relevance of Unregistered Sale Deeds as Evidence:
The assessee relied on six sale deeds executed between 2004 and 2007, totaling Rs. 6,63,000, to justify the cash deposits. The Tribunal noted that these sale deeds were unregistered and thus could not be relied upon as valid evidence following the amendments in the Registration Act in 2001. The Tribunal referred to the Supreme Court's judgment in CIT v. Balbir Singh Maini, which clarified that unregistered documents have no legal effect for the purposes of Section 53A of the Transfer of Property Act, 1882. Consequently, the claim that the cash deposits were from the sale of land based on unregistered sale deeds was not accepted.

Remand and Directions:
The Tribunal remanded the case to the AO to re-examine the registered sale deeds only and deduct the consideration amount from the Rs. 9,00,000 added in the assessment orders. The AO is restricted to deal with this specific issue, and the assessee is not entitled to raise any other ground or issue before the AO.

Conclusion:
The appeal filed by the assessee is allowed for statistical purposes, with specific directions to the AO to re-examine the registered sale deeds and adjust the addition accordingly.