2021 (5) TMI 394 - AT - Income Tax

Addition on account of deposits found made in the assessee's bank account - assessee explained the same as being sourced from sale of land - ownership of the specific land with the assessee/his mother; subsequent sale thereof if any, purchaser as per record denied having paid 'Biyana' in terms of 'Ikrarnama' to the assessee in his statement given to the AO - addition was made in the hands of the assessee - HELD THAT - The tax authority at least for semi-literate economically depressed agricultural land holders stand in the position of locus parentis as they may not be aware of the manipulative practices and being interested only in receiving the payment, for sale of their land may simply sign on the dotted line. In such transactions, it is the wily purchasers who would take advantage of honest seller who has deposited the entire Sale consideration including that received in cash in their banks. It is not difficult to visualize the motives a purchaser may have to record different amounts in the Sale Deed vis- -vis Agreement to Sell only to escape the rigors of tax laws and reduce Stamp Duty etc., and then, after the Sale stands concluded, to subsequently very conveniently deny the correctness of the Agreement to Sell 'Ikrarnama'. If the document has been signed and signatures are not denied consequences follow. In case, signatures are denied then forensic examination becomes necessary. Hence in such circumstances the correctness of the 'Ikrarnama' cannot be out rightly discarded and the authenticity of the same, including the signatures of the parties need to be forensically examined and the witnesses to the document also would need to be examined. Parties cannot be allowed to treat the document/agreement entered into between them casually or disown them at their convenience as such actions may invite criminal consequences for the crimes of forgery and perjury. In the facts of the present case, the tax authorities therefore need to ascertain and verify whether the signatures on the Agreement to Sell 'Ikrarnama' has been disowned by the purchaser as a forgery. These are all relevant issues for consideration and the tax authorities cannot evade the responsibility to ensure that only correct and due taxes are collected and no taxpayer lacking in proper legal advice/suffering a handicap on account of proper legal advice is burdened with unfair additions and steam rolled in the haste for collection of taxes. In the facts of the present case, it appears on record that the assessee apparently did not have the benefit of proper advice as perjury and forgery are serious issues which cannot be tolerated and treated lightly by a law abiding economic society. The issue, accordingly, in view of the above detailed reasons is set aside back to the file of the CIT(A) who is directed to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard after making necessary enquiries etc. for arriving at a conclusion.

Summary

Issues Involved:
1. Consideration of amended grounds of appeal by CIT(A)
2. Consideration of new facts not placed during assessment
3. Classification of bank deposits as income or sales/turnover

Issue-wise Detailed Analysis:

1. Consideration of amended grounds of appeal by CIT(A):
The appellant argued that the CIT(A) erred in not considering and appreciating the amended grounds of appeal. The tribunal noted that the tax authorities failed to address the primary facts and evidences presented, including the Agreement to Sell ('Ikrarnama') and the affidavit submitted by the appellant. The tribunal emphasized that the tax authorities must provide a thorough examination and discussion on the evidences before making a decision. The tribunal found that the tax authorities' approach was flawed and lacked a detailed analysis of the amended grounds, leading to the conclusion that the orders were untenable.

2. Consideration of new facts not placed during assessment:
The appellant contended that the CIT(A) did not consider new facts that were beyond the appellant's control during the assessment. The tribunal highlighted that the tax authorities must address and verify the ownership of the land, the sale transaction, and the price at which it was sold. The tribunal stressed that the tax authorities should not arbitrarily reject the affidavit without discussing its contents and providing reasons for its rejection. The tribunal pointed out that the tax authorities failed to examine the nature of the appellant's business and the possibility that the deposits could be explained from known sources of business.

3. Classification of bank deposits as income or sales/turnover:
The appellant claimed that the deposits in the bank account should be considered as sales or turnover, not income. The tribunal noted that the tax authorities did not provide a detailed examination of the Agreement to Sell and the affidavit, which could explain the source of the deposits. The tribunal emphasized the need for a forensic examination of the document and signatures, as well as an inquiry into the prevalent practices of under-reporting sale prices to avoid stamp duty and tax liabilities. The tribunal concluded that the tax authorities must ascertain the authenticity of the Agreement to Sell and verify the claims made by the appellant to determine the correct classification of the deposits.

Conclusion:
The tribunal set aside the issue back to the file of the CIT(A) with directions to pass a speaking order in accordance with the law after making necessary inquiries and giving the appellant a reasonable opportunity to be heard. The tribunal advised the appellant to participate fully and fairly in the proceedings. The appeal was allowed for statistical purposes, and the order was pronounced on 04th May, 2021.