INCOME TAX OFFICER, WARD - 3(1), GURGAON, INCOME TAX DEPARTMENT V. PAWAN YADAV, GURGAON

ITA 926/DEL/2024

AI Insights

The case involves Pawan Yadav, the respondent, who was assessed for unexplained cash deposits and investments in immovable property for the Assessment Year 2015-16. The Income Tax Officer (ITO) had made additions to the assessee's income based on cash transactions related to property purchases, which were later contested and deleted by the CIT(A). The revenue appealed against this decision, leading to the current proceedings before the Income Tax Appellate Tribunal. The Tribunal examined the validity of the additions made by the ITO and the grounds on which the CIT(A) had deleted them, ultimately agreeing with the CIT(A)'s decision and dismissing the revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470363 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Other Referred Cases: Mobile Communication (India) (P.) Ltd. vs. DCIT, CIT vs. Geneses Commet (P.) Ltd., CIT vs. Daya Chand Jain Vidya
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.C. YADAV
• Assessee Lawyers: HARPREET KAUR HANSRA
• Keywords: Reassessment proceedings; Unexplained investment; Tax effect; Reason to believe
• Section: 147; 148; 143(3); 142(1); 143(2); 69; 13; 69A; 139

Judgement Text

"P a g e | 1 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER ITA No. 926/Del/2024 (Assessment Year: 2015-16) Income Tax Officer, Ward-3(1), 2nd Floor, HSHDC Building, Udyog Vihar, Phase-V, Gurgaon, Haryana 122001 Vs. Pawan Yadav 1718, Sector 31, Housing Board Colony, Gurugram Haryana - 122001 \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No: AANPY6884F Appellant .. Respondent Appellant by : Sh. R.C. Yadav, AR Respondent by : Ms. Harpreet Kaur Hansra, Sr, (DR) Date of Hearing 11.02.2025 Date of Pronouncement 26.03.2025 ORDER PER MADHUMITA ROY, JM: The instant appeal filed by the revenue is directed against the order passed by the Ld. CIT(A)/NFAC, Delhi dated 21.11.2023 for the Assessment Year 2015-16 arising out of the order dated 24.3.2022 passed by the National Faceless Assessment Centre, Delhi under P a g e | 2 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) Section 147 read with Section 144B of the Income Tax Act, 1961 (hereinafter referred as “Act”) on the following grounds:- 1. The Ld. CIT(A) has erred by deleting the addition of Rs. 1,40,00,000/- on account of unexplained cash deposit under Section 69A of the Act. In fact, the assessee has agreed in the order that he was in a possession of the cash amounting to Rs. 1,40,00,000/- for cash transaction related to immovable property but no documentary evidence regarding source of the cash was produced. 2. The Ld. CIT(A) has erred by deleting the addition of Rs. 1,74,34,000/- on account of unexplained cash deposit under Section 69A of the Act. During the assessment proceedings, the assessee has agreed to have been in possession of cash for transaction in immovable property. 3. The Ld. CIT(A) has erred by deleting the addition of Rs. 25,10,000/- on account of unexplained investment by the assessee. The amount was available in bank account of assessee and no evidence was furnished by him to prove the source of this amount used for investment in immovable property. P a g e | 3 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) 4. Further the tax effect involved in this case at Rs. 1,18,98,756/- is above the monetary limit specified in CBDT instruction no. 17/2019 dated 8.8.2019 for filing further appeal to ITAT. 2. Brief facts of the matters are that the assessee had filed his return of income under Section 139 of the Act for the AY 2015-16 on 29.3.2016 declaring total income of Rs. 9,02,820/-. Information in this case of assessee was received from ADIT(Inv)-III, Gurugram that the assessee has made sale and purchase of property amounting to Rs. 3,59,44,000/- during the FY 2014-15 relevant to AY 2015-16. It was noted further by the AO that during the purchase of properties, the assessee had transacted worth of Rs. 1,50,00,000/- in cash also. The same was perused and after analysis of the information received alongwith the information available in ITR filed by the assessee, a reason to believe was recorded regarding escapement of income. Accordingly, the case of the assessee was reopened by issuance of notice under Section 148 of the Act on 31.3.2021 with a reason to believe that the income for the AY 2015-16 has escaped assessment within the meaning of provisions of Section 147 of the Act after recording reasons. In response to the notice under Section 148 of the Act, the assessee furnished return of income on 5.8.2021. Notice P a g e | 4 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) under Section 142(1) dated 9.12.2021 was issued and served upon the assessee calling for certain details. Thereafter, it was noticed by the AO that the assessee has filed return of income on 5.8.2021 and accordingly, a notice under Section 143(2) of the Act dated 17.12.2021 alongwith reason for reopening was issued to assessee. Again a notice under Section 142(1) dated 10.10.2022 was issued to the assessee to which the assessee failed to comply. Thereafter, the assessee filed objection to the issuance of notice under Section 148 on 12.01.2022 and the same was disposed of by the order dated 9.9.2022 by the AO. Thereafter, notice under Section 142(1) of the Act dated 11.2.2022 was issued to the assessee calling for details. As per the information available, the assessee has purchased land for Rs. 1,50,00,000/- on 16.4.2014 from Smt. Shakuntala Devi. On perusal of the agreement, AO noted that the assessee has paid cash of Rs. 1,40,00,000/- on different dates (Rs. 40,00,000 on 1.4.2014, Rs. 50,00,000 on 07.4.2014 and Rs. 50,00,000 on 16.4.2014). The assessee was asked to explain the source of investment and vide reply dated 21.2.2022, 25.2.2022 and 28.2.2022, the assessee explained the same perusal of which it was found to be devoid of any merit by the AO. Accordingly, a draft assessment order was provided to the assessee. In response to the same, the assessee filed a reply on 17.3.2022 and the same was perused by the AO and to no new fact has been brought on record by P a g e | 5 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) the assessee, thus, the AO observed that there is no need to make any variation to the show cause cum draft assessment order. The Ld. AO made the additions of Rs. 1,40,00,000/- Rs. 1,74,34,000/- and Rs. 35,10,000/- and accordingly assessed the total income at Rs. 3,58,67,090/- under Section 143(3) r.w.s. 144B of the Act. Aggrieved by the said order of the AO, the assessee preferred appeal before the Ld. CIT(A), who under the impugned order dated 21.11.2023 allowed the appeal of the assessee with elaborate discussions on the issues in dispute. Hence, the instant appeal by the Revenue before us. 3. Ld. DR relied upon the order of the Assessing Officer and reiterated the contentions raised in the grounds of appeal. 4. Per contra, Ld. AR has relied upon the order of the Ld. CIT(A)/NFAC and submitted that there is no infirmity in the order of Ld. CIT(A), which needs to be upheld. 5. We have heard the rival submissions and perused the records available with us. The case of the assessee is that the assessee had filed his return of income for AY. 2015-16 on 29.3.2016 declaring an income of Ra. 9,02,120/-. We find that the AO received information from ADIT (Inv.)-III, Guragram that the assessee had made sale and purchase of property amounting to Rs. 35,945,000 during the F.Y. P a g e | 6 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) 2014-15 and during the purchase of the properties the assessee had also made transaction in cash of Rs. 1,500,000/-. Based on this information the case of the assessee was reopened by issuing notice under Section 148 on 21.3.2021. During the reassessment proceedings the AO asked the assessee to explain the source of investment in purchasing land from Smt. Shakuntala Devi for Rs. 15,000,000 - (out of which Rs. 14,000,000/- was paid in cash as per the agreement). We note that the assessee in his reply to the AO submitted that he is an owner of agricultural land admeasuring in three parts total 24 bighas in the District of Bikaner, Rajasthan and this land lies on a very prominent location on NH-11 (Bikaner to Jaipur Highway). This land was purchased by him in F.Y 2008-09. He entered into various agreements for the purchase and sale of land which are numbered as 1 to 6 for the purpose of explanation. Agreement No. 1- the assessee entered into an agreement on 5.3.2014 for selling land to 5 persons and received Rs. 10,000,000/- in cash as advance for the same. The agreement was duly notarized Agreement No. 2- the assessee entered into another agreement on 10.3.2014 for selling his land to 4 persons and received an advance of Rs. 8,000,000/- in cash for the same. The agreement was duly notarized Agreement No. 3- the assessee entered into an agreement on 16.4.2014 for purchasing land from Smt. Shakuntla Devi and paid an P a g e | 7 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) advance of Rs. 14,000,000/- in cash on various dates, as advance for the same. This agreement was also duly notansed. Subsequently, Smt. Shakuntla Devi on cancellation of the agreement returned the advance to the assessee; Agreement No. 4- As Smt. Shakuntla Devi had cancelled her agreement with the assessee, he entered into an agreement on 15.10.2014 for purchasing land from Sh. Surat Singh and Ms. BabliKanwar and paid an advance of Rs. 9,000,000/- in cash. This agreement was also duly notarized; Agreement No. 5- the assessee entered into an agreement on 15.10.2014 for purchasing land from Sh. Chhatarpal and paid an advance of Rs. 9,34,000/- in cash. The agreement was duly notarized; Agreement No. 6 - the assessee entered into an agreement with Sh. Chhatarpal, Sh. Subhash, Sh. Suresh and Sh. Ashok Kumar, all brothers, for purchasing their family land. The assessee paid Rs. 7,500,000/- in cash and Rs. 2,000,000/- through RTGS on 29.10.2014. The assessee further submitted to the AO that around January 2015 both the parties cancelled agreement 1 and 2 due to which the assessee had to cancel agreements 4,5 and 6 in order to return the money to buyers in agreement 1 and 2. The Ld. AO was not satisfied with the reply of the assessee. The AO held that the agreement to sell his land pertained to F.Y 2013-14 but the sale proceed has not been disclosed in the return for A.Y. 2014-15. The AO rejected the contention of the P a g e | 8 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) assessee that the land sold was his personal land and that is why the same was not reflected in the balance sheet. The AO further held that the assessee has not produced any cancellation agreement to prove his point. The AO also stated that the agreements were not registered with the state revenue authorities as the unaccounted money has been used to invest in these land parcels. The assessee during the appellate proceedings has reiterated the stand taken before the AO. The assessee has submitted that while making the addition under Section 69 A of Rs. 1,40,00,000/- (which was the advance paid by the assessee to Smt. Shakuntla Devi, the AO has not countered his claim that the assessee had paid the sum out of the advance received by him from the agreement to sell his land. The assessee has assailed the AO for arbitrarily taking cognizance of only agreements to purchase (investment) and rejected the cognizance of agreements to sell (source of investment). The assessee has questioned the AO by contending that when all the agreements are similarly placed i.e., only notarised and NOT registered, how agreements to sell being source can be rejected as non-genuine while agreements to purchase being investment are adjudged genuine and authentic. It was noted that the AO while rejecting the claim of the assessee has stated that the assessee had not disclosed the cash in hand in his balance sheet and also the sale of land was not reflected in his ITR. The assessee has P a g e | 9 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) clarified that he had purchased the land in F.Y. 2008-09. The AO has not disputed this fact. The assessee has further stated that he had entered into an agreement to sell this land which primarily is the source of money advanced in all the agreements that have been entered into by him. The cash was not reflected in the cash in hand as the land was his personal asset and not a part of his business. Also the assessee has also stated that the land in question is still with him and has submitted a copy of jamabandi dated 26.7.2023 to that effect. From the perusal of the assessee’s contention it is clear that the land has not been sold by him. So when the land was not sold there was no requirement as per the law for the assessee to declare the same in his return of income. The AO has not brought out anything in his order to dispute the fact that the land had been sold by the assessee and the possession of the same had been transferred to the buyer. Moreover we agree with the contention of the assessee that as the land was his personal asset there was no obligation on him to disclose the advance received as cash in hand in the books of accounts concerned with his business. It is noted that as per the provisions of Section 69A of the Act, the assessee was required to explain the source of the money in his possession. The assessee discharged his onus by explaining that he had received the money from entering into an agreement to sell his land. By submitting the agreement the assessee has raised the P a g e | 10 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) contention that he was not the owner of the money which was used by him. The Ld. AO ought to have examined the reasoning given by the assessee. He should have examined the source of the money as explained by the assessee. Further that, if the Ld. AO was not satisfied with the explanation of the assessee that he had received the money by entering into an agreement to sell his land, he could have used powers vested in him to examine the genuineness of agreement to sell by making independent enquiry which has not been done. The AO did not discharge his onus but merely rejected the sale agreement as to be not genuine as the same was only notarised and not registered and the sale of land was not reflected in the books and ITR of the assessee. We note that Ld. CIT(A) has drawn support from the decision of the ITAT, Delhi Coordinate Bench wherein, while deciding the case of Mobile Communication (India) (P.) Ltd. vs. DCIT (2010) has relied on the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Geneses Commet (P.) Ltd. (2007)163 Taxmann 482 (Delhi) and recorded the finding that if any officer is not inclined to believe the material placed by the assessee, he could have used statutory powers available to him. It has also been held that, having not exercised the said powers the Ld. AO was not justified to draw, adverse inference on the evidence furnished. As explained in the decision cited above the Ld. AO should have made enquiry into the source of money as P a g e | 11 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) explained by the assessee and established that the assessee was the owner of the money. The assessee has also submitted a copy of the assessment order completed under Section 147 in the case of Smt. Shakuntla Devi. The case of Smt. Shakuntla Devi had been reopened under Section 147 only with the reason that she had entered into an agreement to sell her land for Rs. 15,000,000/- but had not filed her return for A.Y. 2015-16. The AO has accepted the contention of Smt. Shakuntla Devi that she had entered into an agreement to sell her land to the assessee but the said agreement was cancelled and the money was returned to the assessee. After considering the facts of the case and the judgments as cited above it was observed that the Ld. AO has made the addition merely on surmises and conjectures and has failed to prove that the assessee was the owner of the amount of Rs. 14,000,000/-that was paid to Smt. Shakuntla Devi for purchasing her land. Hence, the addition of Rs 14,000,000/- made under Section 69A was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the same and accordingly, reject the ground No. 1 raised by the Revenue. 6. Apropos second addition made by the AO is of Rs.1,74,34,000/- under section 69A.We note that assessee has contended that the source of this money was the Rs. 1,80,00,000/-which he had received P a g e | 12 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) for entering into an agreement to sell his land. Out of the same he had advanced Rs. 1,40,00.000/- to Smt. Shakuntla Devi and entered into an agreement for buying land from her. However Smt. Shakuntla Devi cancelled the agreement and returned him the money. The money received back from Smt Shakunta Devi and Rs. 40,00,000/- which was the amount lying with the assessee from his earlier agreement to sell was the source of advance of Rs. 1,74,34,000/-given by him. The AO had rejected the contention by stating that the agreement was not registered and there was no cancellation agreement. We note that in view of our aforesaid findings, it is crystal clear that AO has not discharged his onus by not examining the agreement to sell his land entered into by the assessee. Also in the assessment proceedings in the case of Smt. Shakuntla Devi it has been accepted by the Ld. AO that she had entered into an agreement to sell her land but later on cancelled the same and had returned the advance money she received from the assessee. Thus, in view of the same the addition of Rs. 1,74,34,000/- made by the AO under section 69 A was righty deleted by the Ld. CIT(A), so as not to warrant interference. Hence, we uphold the same and accordingly, reject the ground No. 2 raised by the Revenue. P a g e | 13 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) 7. As regards third addition made by the AO is of Rs. 35,10,000/- under Section 69, we note that the Ld. AO stated that the total investment made by the assessee was of Rs. 3.59.44.000/-out of which Rs. 3,24,34,000/- had been paid in cash which had been found to be unexplained and as the assessee failed to explain the source of remaining Rs. 35,10,000/- the same was added under Section 69 of the Act as unexplained investment. The assessee in his reply has submitted that the aggregate value of all agreements to purchase entered into by the assessee (agreement Nos. 3,4,5 and 6) was Rs.35,944,000/-, Out of the same, a total of Rs.3,14,34,000 was paid by cash, Rs.20,00,000 was paid by RTGS and Rs. 25,10,000 (as elaborated in table below) remained unpaid which was to be paid at the time of registration. The detailed break up is shown below: TABLE (Details of amount paid by the assessee purchase agreement wise) Agreement No. Total value land (Rs.) Amount paid cash on agreement (Rs.) Amount paid through banks (Rs.) Amount remained unpaid (Rs.) Agreement 3 1,50,00,000 1,40,00,000 0 10,00,000 Agreement 4 96,40,000 90,00,000 0 6,40,000 Agreement 5 10,34,000 9,34,000 0 1,00,000 Agreement 6 1,02,70,000 75,00,000 20,00,000 7,70,000 Total 3,59,44,000 3,14,34,000 20,00,000 25,10,000 P a g e | 14 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) 8. It is noted that the assessee has further submitted that the third addition of Rs. 35,10,000 made to the total income of the assessee was also on the basis of incorrect and factually wrong inference. As per the assessee the inference of the Ld. AO that the total purchases were of Rs.3,59,44,000 was factually wrong as Rs.3,59,44,000 was the aggregate value of all properties. But the amount paid by the assessee in cash was only Rs.3,14,34,000/- and Rs.20,00,000 was paid by RTGS. Therefore Rs. 25,10,000 was unpaid/would had been paid at the time of registration if the deals would not had been cancelled. After the perusal of the reply of the assessee it was noted by the Ld. CIT(A) that it is crystal clear that the total value of the properties to be purchased was Rs. 3.59,44.000/- and out of this Rs. 3,14,34,000/- was paid as cash and Rs. 20,00,000/- was paid via RTGS. Therefore, the amount left to be paid was Rs. 25,10,000/- only and not Rs. 35,10,000/- as mentioned by the AO in his assessment order. The Ld. AO while making the addition has mentioned that Rs.35,10,000/- was the unexplained investment made by the assessee. However, the Ld. AO has not been able to prove that any of the properties has been transferred in the name of the assessee. We note that the Ld. CIT(A) has drawn support from the Hon'ble Allahabad High Court in the case of CIT vs. Daya Chand Jain Vidya (1975) 98 ITR 280 (All.) wherein, it has been that merely because the assessee's explanation regarding the P a g e | 15 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) investments made by his wife and sons is not acceptable the revenue cannot treat the investments as undisclosed income of the assessee. The revenue should bring on record material from which it can be concluded that the investments were in fact made by the assessee. If this was not done, no amount could be added as the undisclosed income of the assessee. In the case in hand, the Ld. AO has not been able to prove that the assessee has made an investment of Rs. 35,10,000/-. Therefore, the observation made by the Ld. CIT(A) that the addition made by the AO is merely on assumption which is not supported by any evidence, and the consequentially deletion of addition of Rs.35,10,000/- made by the AO is, thus, fond to be just and proper so as not to warrant interference. The ground No. 3 raised by the Revenue is, thus, dismissed. 9. In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open court on 26.03.2025 Sd/- (S.Rifaur Rahman) Sd/- (Madhumita Roy ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 26.03.2025 PS: Rohit P a g e | 16 ITA No.926/Del/2024 Pawan Yadav (AY: 2015-16) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "