2016 (9) TMI 853 - AT - Income Tax

Unexplained investment in agricultural land - Held that - Non-admissibility of the agreement and the receipt, is not required to be adjudicated as in our view there is no investment in the purchase of the agricultural land and merely the statement of the assessee cannot be considered to be admissible piece of evidence to show that the some crystallized right in the form of investment were made by him in the agricultural land. Since we have held that the agreement in the receipt are nonest in the eyes of law, therefore, it cannot be considered as investment, in consequence thereof or there cannot be any investment. The question of investment will only arise when there is a document to support that. Further we find that the assessee has been able to explain, assuming documents are admissible in law, source of investment, which is reflected from the statement given by the father of the assessee and also by the person from whom as well as also by the other persons. The assessee explained that ₹ 11 lacs were received by him from Sh. Hukum Singh and Satveer Singh. This said persons have duly explained the source of the source. Further ₹ 22 lacs were received by the assessee from his father would also be many plausible explanation of receipt of 22 Lacs as sale consideration for the sale of his land from one Sh Gopi Ram. The assessee himself had produced the receipt of the ₹ 6,00,000/-received on account of sale of his Tractor. Thus the assessee was able to explain the complete source of investment of ₹ 50 lacs. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the addition of ?50,00,000 on account of alleged unexplained investment in agricultural land by the assessee is justified.

Issue-wise Detailed Analysis:

1. Addition of ?50,00,000 on Account of Alleged Unexplained Investment in Agricultural Land:

Facts and Background:
The assessee, an agriculturist, filed a return of income showing ?30,760 following a notice under Section 148 of the Income Tax Act, 1961. The Assessing Officer (AO) noted that the assessee purchased six acres of land for ?50 lacs, paid in two installments. The AO questioned the source of this investment, leading to an addition of ?50 lacs to the assessee's income as unexplained investment.

CIT(A) Findings:
The CIT(A) upheld the AO's addition, stating that the assessee failed to furnish credible evidence regarding the sources of funds for the purchase. The explanations and documents provided were deemed self-serving and unsupported by substantial evidence.

Assessee's Arguments:
The assessee argued that the authorities did not consider the evidences properly and acted with a predetermined mindset. The key points raised were:
- The assessee had a half share in the land, supported by a consent deed and affidavits, which were not contested by the AO.
- Contributions from Sh. Hukum Singh (?11 lacs) and Sh. Satveer (?11 lacs) were supported by evidence of land sales and bank withdrawals.
- The assessee's father, Sh. Bharat Singh, contributed ?22 lacs from the sale of his land, corroborated by affidavits and bank statements.
- The assessee sold a dumper for ?6 lacs, evidenced by a sale letter.

Legal Precedents:
The assessee cited the Supreme Court case of CIT vs. P.K. Noorjehan, where it was held that Section 69 of the Act confers discretion on the ITO to treat unexplained investments as income, considering the facts and circumstances of each case. The Tribunal and High Court had ruled that the absence of resources and the specific circumstances of the assessee could justify not treating the unexplained investment as income.

Tribunal's Analysis:
The Tribunal examined the agreement dated 11/7/2008, which was neither signed by the assessee nor registered. It noted that the agreement's terms indicated no transfer of property had occurred. The AO did not record statements from the seller or verify the revenue records to confirm the transfer of land. The Tribunal found that the agreement and receipt were not admissible in law and could not substantiate the investment claim.

Source of Investment:
Assuming the documents were admissible, the Tribunal found the assessee had explained the source of investment:
- ?11 lacs from Sh. Hukum Singh and Sh. Satveer Singh, supported by affidavits and evidence of land sales.
- ?22 lacs from the assessee's father, Sh. Bharat Singh, corroborated by affidavits and bank statements.
- ?6 lacs from the sale of a dumper, supported by a sale letter.

Conclusion:
The Tribunal concluded that the assessee had adequately explained the source of the ?50 lacs investment. The appeal was allowed, and the addition made by the AO and confirmed by the CIT(A) was deleted.

Order:
The appeal of the assessee was allowed, and the order was pronounced in the open court on 08/08/2016.