2013 (8) TMI 704 - HC - Income Tax

Undisclosed income - Undervaluation registration of property - Whether the amount deposited in bank is part of sales consideration or undisclosed income liable to addition u/s 68 - Assessee himself made complaint about it - A.O. applied proceedings u/s 68 - Held that - assessee as an honest citizen not only made a complaint to the registering authority that the sale deed has been registered at a value much below the amount, which he has actually received, he deposited the entire amount in the bank and voluntarily filed return. There was no material whatsoever or any circumstance, which could have suggested that this amount was received by him from any other source. The deposition of witness of the sale deed, the Bank Manager and the evidence filed with regard to valuation of the property was more than sufficient to discharge the burden, which the A.O. had unreasonably placed on the assessee. The A.O. in disbelieving the evidence has not given any reasons whatsoever to discard the statement of the witnesses, deposit of the entire sale consideration in bank and the deposition of the Bank Manager. The assessee had not only deposited the entire amount in the bank but also informed the registering authority of the deficiency of the stamp in the sale deed - from the facts and circumstances on the record that in the present case the Income Tax Officer did not act in bonafide manner. The assessee led substantial evidence to establish that the amount treated to be undisclosed income by the A.O. was the sale consideration of sale of his agricultural land, which he had deposited in the bank and had voluntarily filed return disclosing his income. Overwhelming evidence led by him was discarded without giving any reasons at all. The assessment was framed only on the ipse dixit of the A.O., which gives us reason to believe that he had exceeded his authority with some ill will or with ulterior motive - Decided against Revenue.

Issues Involved:
1. Justification of ITAT in deleting the addition by holding that it is prevalent practice in land transactions not to show full consideration.
2. Ignoring the provisions of Section 68 by ITAT.
3. Deleting the addition of Rs.77,80,000/- without evidence of total consideration of Rs.1,20,00,000/-.
4. Testing the case of the assessee under the provisions of Section 68.
5. Deleting the addition of Rs.77,80,000/- without the assessee proving the source of cash deposit in the bank.

Issue-wise Detailed Analysis:

1. Justification of ITAT in Deleting the Addition:
The ITAT was justified in deleting the addition by considering the prevalent practice in land transactions where the full consideration is often not shown in the sale deed. The ITAT found the evidence provided by the assessee, including the statements of witnesses and the bank manager, credible. The assessee had sold agricultural land for Rs.1,20,00,000/- but the sale deed showed only Rs.22,20,000/-. The ITAT concluded that the real sale consideration was Rs.1,20,00,000/- based on the evidence and the prevalent practice in land transactions.

2. Ignoring the Provisions of Section 68:
The ITAT did not ignore the provisions of Section 68. Instead, it evaluated the evidence provided by the assessee, which included statements from witnesses and the bank manager, and found that the source of the deposit in the bank was the sale of agricultural land. The ITAT determined that the explanation provided by the assessee was satisfactory and that the amount could not be treated as income from undisclosed sources.

3. Deleting the Addition of Rs.77,80,000/-:
The ITAT deleted the addition of Rs.77,80,000/- after considering the substantial evidence presented by the assessee. The assessee had deposited Rs.1,08,32,752/- in the bank, which he claimed was from the sale of his agricultural land. The purchasers denied paying Rs.1,20,00,000/- and claimed they paid only Rs.22 lacs. However, the ITAT found the assessee's evidence, including witness statements and bank records, credible and concluded that the sale consideration was indeed Rs.1,20,00,000/-.

4. Testing the Case of the Assessee under Section 68:
The ITAT tested the case of the assessee under Section 68 and found that the explanation provided by the assessee regarding the source of the deposit was satisfactory. The ITAT noted that the assessee had provided substantial evidence, including witness statements and bank records, to support his claim that the deposit was from the sale of agricultural land.

5. Proving the Source of Cash Deposit:
The ITAT found that the assessee had sufficiently proved the source of the cash deposit in his bank account. The evidence included statements from witnesses and the bank manager, as well as documentary evidence showing the land's value and the sale transaction. The ITAT concluded that the assessee had discharged his burden of proof and that the addition of Rs.77,80,000/- was not justified.

Conclusion:
The High Court upheld the ITAT's findings, noting that the evidence provided by the assessee was credible and that the addition of Rs.77,80,000/- was not justified. The court observed that the Income Tax Officer had acted unreasonably and without bona fide intentions, discarding substantial evidence without proper justification. The court directed an enquiry into the conduct of the Income Tax Officer involved in the case. The income tax appeal was dismissed.

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