2021 (10) TMI 748 - AT - Income Tax

Reopening of assessment u/s 147 - unaccounted income - AIR information that the assessee had made cash deposit in his bank a/c - whether the value of sale of agricultural land shown in the unregistered agreements viz a viz sale deed duly supported with the affidavit of the assessee is true to explain the source of cash deposit in the ICIC bank account of the assessee? - HELD THAT - Admittedly the assessee is an agriculturist who had no source of income other than agriculture income. It is also not disputed that the assessee has sold an agricultural land in the joint ownership to his brother under two unregistered agreement and a registered sale deed under the signature of two independent witnesses. The competent authority in this regard is the ld. CIT(A)who had just rejected the evidentiary value of the unregistered sale agreements without examine the facts and rebuttal of AO in terms of apparent may not be real always. He merely held that such a recourse by the appellant is not permitted in law as per provisions contained in chapter VI of the Indian Evidence Act, 1 872, which prohibits admission of oral evidence to contradict the contents of a contract reduced into writing and registered as per law subject to certain exceptions like fraud, misrepresentation, etc. Such approach of the Ld. CIT(A) can not be justified and approved. He was required to examine the veracity of the unregistered documents by way of verification from the witnesses, Sh. Kavar Jeet Singh, Purchaser of Agricultural land, and prevailing market value of the land in the neighborhood/ vicinity. AR, contention that details required by the CIT(A) were submitted but same was not taken on record by him. Considering the ld. AR contentions that the assessee s additional evidence be considered by the CIT(A) with independent application of mind to the facts of the case and verification of the respective witnesses,purchaser of land and factual field verification would reveal the actual sale consideration and in turn the actual amount of sale consideration received by the assessee. Considering the principles of natural justice, in our view, the assessee should get one more chance to prove its case before the Ld. CIT(A) - Assessee appeal is allowed for statistical Purpose.

Summary

Issues Involved:
1. Legitimacy of proceedings under Sections 147/148 based on suspicion of undisclosed income.
2. Validity of the explanation for cash deposits being from the sale of agricultural land.
3. Consideration of the taxpayer as a pure agriculturist with no other income sources.
4. Department's failure to trace the cash deposit to other income sources.
5. Overall legality and factual correctness of the order.

Issue-wise Detailed Analysis:

1. Legitimacy of Proceedings under Sections 147/148:
The appellant argued that the proceedings under Sections 147/148 were initiated merely on suspicion of undisclosed income based on AIR information from the bank, rendering them void ab initio. The CIT(A) upheld the initiation of proceedings, stating that the bank deposits indicated potential undisclosed income.

2. Validity of Explanation for Cash Deposits:
The appellant contended that the cash deposits in the bank were from the sale proceeds of agricultural land. The CIT(A) rejected this explanation, emphasizing that the sale deed, which showed a lower sale consideration, was the only valid document. The unregistered agreements and oral evidence presented by the appellant were not admissible under Chapter VI of the Indian Evidence Act, 1872, which prohibits contradicting a registered contract with oral evidence unless exceptions like fraud or misrepresentation apply.

3. Consideration of the Taxpayer as a Pure Agriculturist:
The appellant claimed to be a pure agriculturist with no other income sources. The CIT(A) dismissed this claim, focusing on the discrepancy between the registered sale deed and the unregistered agreements. The appellant provided additional evidence, including affidavits and unregistered agreements, to support the claim that the cash deposits were from the sale of agricultural land.

4. Department's Failure to Trace Cash Deposit to Other Income Sources:
The appellant argued that the department failed to trace the cash deposit to any other income sources. The CIT(A) did not address this argument in detail, relying instead on the registered sale deed's validity. The appellant suggested that the department could have verified the buyer's identity and the sale agreements through handwriting experts or direct inquiries, but this was not done.

5. Overall Legality and Factual Correctness of the Order:
The appellant challenged the overall legality and factual correctness of the order, citing the failure to consider additional evidence and the lack of inquiry into the buyer's identity. The Tribunal found that the CIT(A) had not adequately examined the unregistered agreements and other evidence. The Tribunal emphasized the need for a thorough verification of the unregistered documents, witnesses, and prevailing market value of the land.

Judgment:
The Tribunal concluded that the CIT(A) should have examined the veracity of the unregistered documents and the appellant's additional evidence. The case was remanded to the CIT(A) for a fresh consideration, with instructions to verify the evidence and provide the appellant with an opportunity to present their case. The appeal was allowed for statistical purposes, and the order was pronounced in the open court on 14.10.2021.