2024 (9) TMI 86 - AT - Income Tax

Gain on sale of agricultural land - real owner - on the basis of the cross examination of the appellant and witness AO held that the assessee was not able to prove that the amount actual paid to the seller - assessee argued rules of cross examination has been flouted by the AO and addition cannot be made only on the basis of statement of Sri S. Dhanabal (son of deceased seller) - non reference the matter to DVO for ascertainment of value. HELD THAT - There is no documentary evidence unearthed by the AO which could show that the assessee had paid huge amount over and above the sale consideration mentioned in both sale deeds dated 09.02.2010. Market value of the property fixed by the Sub-Registrar office is Rs. 9,99,000/- for the both are find mentioned in last page of each sale deeds. On first principles and on general law, the principles of evidence Act has not been applied by the AO in this case. In this case, questions were asked by the AO and had been simultaneously, replied by the witness and assessee. It is settled practice that after chief examination of witness the other party is entitled to cross examination as per provisions of evidence Act which has not been done in this case. Evidence of a witness through examination or cross-examination is required to be done as per Sections 137 to 154 of the Indian Evidence Act. In this case, we observe that there was no separate examination or cross examination done. The Hon ble supreme court in the case of Chuharmal 1988 (5) TMI 1 - SUPREME COURT held that the Evidence Act does not apply to proceedings under the Income-tax Act. The Supreme Court pointed out that the rigours of rule of evidence contained in the Evidence Act were not applicable to the Income-tax Act, but on first principles and on general law, the principles of Evidence Act can be applied to proceedings under the Income-tax Act. Nothing concrete found against the assessee during so called cross examination and both parties contradicts veracity of statement of each other. Other two sons of deceased seller were not examined. If we accept the version of sons of deceased seller then why they had not filed their respective return of income despite receipwhich were taxable income. Therefore, we reject the contention of buying LIC policies from the unaccounted receipt. Further, if we accept the version of AO then why no action had been taken by the AO against those persons who had receipt of Rs. 25,00,000/- each and had not filed their respective return of income. Apex Court in Damodhar Narayan Sawale (D) through LRs. Vs. Shri Tejrao Bajirao Mhaske Ors 2023 (5) TMI 1276 - SUPREME COURT held that provisions of TOPA along with the provisions of Registration Act and further emphasized that a Sale Deed, when registered and executed in due compliance, shall confer a valid and legitimate title to the receiver. In supra case it was noted that, the execution and registration of Sale Deed was not in dispute however, the dispute was only for nature of the transaction. It was noted that registered Sale Deed having recitals for transfer of right, title and interest in favour of recipient along with recitals of sale considerations shall give a presumption of valid title. Therefore, it is entirely upon the Defendants to establish otherwise and to prove that it did not reflect the true nature of transaction. In Vimal Chand Ghevarchand Jain v. Ramakant Eknath Jajoo, 2009 (3) TMI 997 - SUPREME COURT it is held that the registered deed carries a presumption that the transaction was a genuine one; Sec. 114 of the Evidence Act allows the Court to presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case. No inquiry had been been done by the AO regarding circle rate. No comparable had been taken by the AO of the adjacent agricultural land. AO miserably had failed to refer the matter to DVO for ascertainment of value. Thus, if the testimony of one witness is discredited, there was no material with the Department on the basis of which it could justify its action, as the unsubstantiated statement of the witness was the only basis of making addition. Hence, we allow the appeal of the assessee and delete the addition. Decided in favour of assessee.

Summary

Issues:
Assessment of income from agricultural land purchase, validity of income tax assessment, cross-examination in income tax proceedings.

Analysis:

1. Assessment of Income from Agricultural Land Purchase:
The case involved the assessment of income from the purchase of agricultural land by the assessee. The assessing officer alleged that the assessee had not filed the income tax return for the relevant assessment year, leading to the reopening of the case under section 147 of the Income Tax Act. The AO made an addition of Rs. 84,55,000 based on discrepancies in the sale consideration of the land. The appellant challenged this addition before the CIT(A), who upheld the AO's decision based on the evidence gathered during the investigation.

2. Validity of Income Tax Assessment:
The appellant further appealed the decision to the Appellate Tribunal, arguing that the addition was made solely based on the statement of one witness and that the principles of cross-examination were not followed by the AO. The Tribunal found several discrepancies in the AO's approach, including the lack of concrete evidence showing that the assessee had paid an amount over and above the sale consideration mentioned in the sale deeds. The Tribunal also noted that the AO did not conduct a proper cross-examination as per the provisions of the Evidence Act.

3. Cross-Examination in Income Tax Proceedings:
The Tribunal highlighted the importance of cross-examination in income tax proceedings and emphasized that both parties should have the opportunity to present and challenge evidence. It pointed out that the AO failed to examine all relevant witnesses, did not consider the presumption of validity conferred by registered sale deeds, and did not take into account various legal precedents and provisions such as the Evidence Act, circle rate inquiry, and valuation by DVO. The Tribunal concluded that the addition made by the AO lacked a solid basis and, therefore, allowed the appeal of the assessee, deleting the addition of Rs. 84,55,000.

In conclusion, the Appellate Tribunal set aside the addition made by the AO, emphasizing the importance of following proper procedures, conducting thorough investigations, and considering all relevant legal provisions and precedents in income tax assessments.