2017 (6) TMI 347 - AT - Income Tax

Addition on sale of land - unexplained investment - evidence of cash deposits in the bank account - Held that - In view of the circumstantial evidence collected by the Assessing Officer during the course of assessment proceedings and both the examination by the Assessing Officer and the cross-examination of Shri Rajansingh undertaken by the assessee, wherein he admitted to the cash receipts on the sale of his agricultural land, no further queries were raised by the assessee, then the said Kararnama and the circumstantial evidence of cash deposits in the bank account establishes the case of Revenue. The affidavit of assessee as to not having paid any other amount other than ₹ 2 lakhs mentioned in the sale deed is a self serving document and cannot be relied on especially in view of statement of purchasers having accepted cash against the sale of his land. The said land was admittedly sold for ₹ 30 lakhs and now after period of two months, the same cannot be sold only for ₹ 2 lakhs in the agreement. There is no merit in the plea of assessee in this regard. Reliance placed upon the other sale transactions in the area is not correct, especially where the case under consideration is of cash payment over and above the price declared in the sale deed. The CIT(A) has elaborately referred to each of the issues raised by the assessee and has also made reference to the statements in the cross-examination of various persons and the affidavit of assessee. Upholding the order of CIT(A) the claim of assessee is dismissed. One aspect which needs to be emphasized is the receipt of ₹ 5 lakhs along with Kararnama which is a document found and considered by the authorities below as against the statement of Shri Ayub that he did not pay anything. In case, he was not party to the transaction, then there was no necessity for him to bgrounds of appeal raised by the assessee are thus, dismissed.ecome consenting party to the sale deed between Shri Rajansingh and the assessee. In the totality of the above said facts and circumstances, addition of ₹ 28,88,125/- is upheld. - Decided against assessee.

Summary

Issues Involved:
1. Whether the addition of ?28,88,125/- was justified.
2. Whether the principles of natural justice were followed.
3. Whether the amount of ?28,88,125/- was an unexplained investment.
4. Whether the addition was based on surmises and ignored evidence on record.

Detailed Analysis:

1. Addition of ?28,88,125/-
The primary issue in this appeal revolves around the addition of ?28,88,125/- to the assessee's income. The Assessing Officer (AO) reopened the assessment under Section 147/148 of the Income Tax Act, 1961, based on information from the assessment proceedings of another individual who had initially agreed to sell land to a third party for ?30,88,125/-. The land was eventually sold to the assessee for ?2 lakhs. The AO inferred that the land was undervalued in the assessee’s books, given the significant cash deposits in the seller’s bank account around the time of the transaction. The assessee contested this, maintaining that the land was purchased for ?2 lakhs, but the AO rejected this explanation, citing circumstantial evidence and cash deposits as corroborative evidence.

2. Principles of Natural Justice
The assessee argued that the addition was made without following the principles of natural justice, as he was not given a chance to cross-examine the seller and the initial buyer. The Commissioner of Income Tax (Appeals) [CIT(A)] remanded the matter to the AO to allow the assessee an opportunity for cross-examination. During the cross-examination, the seller confirmed receiving ?5 lakhs as advance and ?23,50,000/- in cash, along with ?2 lakhs by cheque. The CIT(A) noted that the assessee did not further examine the seller on these points, implying acceptance of the seller’s statements.

3. Unexplained Investment
The AO and CIT(A) both concluded that the amount of ?28,88,125/- was an unexplained investment. The CIT(A) observed that the seller, a small-time salaried employee, had no other means to deposit such large sums of money in his bank account. The seller’s admission during cross-examination that he received cash over and above the sale consideration mentioned in the sale deed further supported the AO’s conclusion. The assessee’s affidavit denying any cash payment was deemed self-serving and unreliable.

4. Addition Based on Surmises and Ignored Evidence
The assessee contended that the addition was based on surmises and ignored evidence on record, such as other sale transactions in the area where land was sold at similar rates. However, the CIT(A) rejected this argument, noting that the specific circumstances of this case, including the "Kararnama" and the cash deposits, were strong indicators of the actual transaction value. The CIT(A) emphasized that the seller’s consistent statements and the documented advance payment were more credible than the assessee’s claims.

Conclusion:
The Tribunal upheld the addition of ?28,88,125/-, agreeing with the CIT(A) that the balance of convenience favored the seller’s version of events. The Tribunal found no merit in the assessee’s arguments regarding the principles of natural justice, unexplained investment, and the addition being based on surmises. The appeal was dismissed, and the addition was confirmed.

Order pronounced on this 2nd day of June, 2017.