NARENDER KUMAR, 251,13 CO GARG KIRYANA STORE, MAIN BAZAR RADAUR, YAMUNANAGAR,HARYANA V. INCOME TAX OFFICER, WARD-5, YAMUNANAGAR, HARYANA

ITA 812/CHANDI/2024

AI Insights

The case involves Narender Kumar, the appellant, who contested the addition of Rs.22,90,104 to his income as confirmed by the CIT(Appeals). The addition was based on the alleged unexplained investment in immovable property during the financial year 2010-11. The Assessing Officer (AO) had reopened the assessment following information from an Annual Information Report indicating that the appellant had purchased a share in an immovable property. The appellant argued that the addition was based on an unregistered agreement and that he had repaid the amount received from the agreement through the sale of other properties. The Tribunal found that the CIT(Appeals) erred in ignoring the unregistered agreement and the repayments made by the appellant.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 35585 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Laws Referred To: Income Tax Act, Indian Registration Act, Transfer of Property Act, Specific Relief Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Additional evidence; Unexplained investment; Reopening of assessment

Judgement Text

"आयकर अपील य अ\u000bधकरण,च\u0010डीगढ़ \u0014यायपीठ, च\u0010डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGRH BENCH, ‘SMC’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT आयकर अपील सं./ ITA No. 812/CHD/2024 \rनधा\u0011रण वष\u0011 / Assessment Year: 2011-12 Narender Kumar, 251/13, C/o Garg Kiryana Store, Main Bazar, Radaur, Yamuna Nagar (Haryana). Vs The ITO, Ward 5, Yamuna Nagar, (Haryana). \u0016थायी लेखा सं./PAN NO: AKNPK0068K अपीलाथ\u001a/Appellant \u001b\u001cयथ\u001a/Respondent Assessee by : Shri Sudhir Sehgal, Advocate Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR Date of Hearing : 28.01.2025 Date of Pronouncement : 20.02.2025 PHYSICAL HEARING O R D E R The assessee is in appeal before the Tribunal against the order of ld. CIT(Appeals) dated 31.05.2024 passed for assessment year 2011-12. Though assessee has taken six grounds of appeal but in brief, his grievance revolves around a single issue namely, ld. CIT(A) has erred in confirming the addition of Rs.22,90,104/- by upholding the re-opening of assessment. ITA No.812/CHD/2024 A.Y.2011-12 2 2. The brief facts of the case are that AO has received information from Annual Information Report, CIB/NMS exhibiting the fact that assessee had purchased an immovable property during the Financial Year 2010-11 relevant to assessment year 2011-12. He has a share of 355/1721 of that immovable property. According to the AO, the contribution of the assessee was worked out to Rs.21,47,750/-. He recorded the reasons and reopened the assessment. According to the assessee, the notice was not served upon him and therefore, he could not appear before the AO. The ld. AO has passed ex-parte assessment order under Section 144/147. He made an addition of Rs.22,90,104/-. It comprised alleged cost of plot = Rs.21,47,750/-, Stamp Duty of Rs.1,39,260/- and Registration Fees of Rs.3094/-. 3. Dissatisfied with the assessment order, assessee carried the matter in appeal before the First Appellate Authority. The assessee has contended that he has entered into an agreement with one Shri Lokinder Chauhan for sale of a residential property. This Agreement was executed on ITA No.812/CHD/2024 A.Y.2011-12 3 18.05.2010. Assessee has received a sum of Rs.20 lacs from Shri Lokinder Chauhan in cash. Out of that, he has purchased the property and later on, the deal with Shri Lokinder Chauhan was not materialized but in this very year he has repaid the amount to Shri Lokinder Chauhan. The repayment was made out of sale proceeds of various properties held by the assessee. Copies of Sale Deeds of all those plots have been filed before the ld. CIT(A) and a permission was sought to lead additional evidence. The ld. CIT(A) called for the Remand Report from the AO but ultimately did not accept the stand of the assessee, simply for the reason that Agreement to Sell with Shri Lokinder Chauhan was not a registered one, hence ld. CIT(A) has confirmed the addition. 4. With the assistance of ld. Representative, I have gone through the record carefully. A perusal of the record would indicate that an unregistered agreement dated 18.05.2010 between assessee and Shri Lokinder Chauhan has been placed on record. By virtue of this agreement, assessee agreed to sell his residential property and received an ITA No.812/CHD/2024 A.Y.2011-12 4 advance of Rs.20 lacs in cash from Shri Lokinder Chauhan. Somehow this deal was not ultimately materialized. Hence, assessee has to repay the amount which was repaid during this very year and the source of such repayment is from sale of the following properties. Copies of the Sale Deeds have been placed on the record. I take note of the details from the Index of the Paper Book filed by the assessee which read as under : 6 Copy of registry for the sale of property measuring 336.35 Sq. Yards dated 28.12.2010 amounting to Rs. 7,40,000/- out of which the assessee has given refund to Shri Lokinder Chauhan on account of cancellation of agreement to sell dated 18.05.2010. 8-15 7. Copy of registry for the sale of property measuring 145 Sq. Yards dated 28.12.2010 amounting to Rs. 3,20,000/- out of which the assessee has given refund to Shri Lokinder Chauhan on account of cancellation of agreement to sell dated 18.05.2010. 16-23 8. Copy of registry for the sale of property measuring 420 Sq. Yards dated 04.11.2011 amounting to Rs. 10,50,000/- out of which the assessee has given refund to Shri Lokinder Chauhan on account of cancellation of agreement to sell dated 18.05.2010. 24-31 5. The sole issue before me is whether genuineness of an un-registered agreement can be denied simply for the reason that it was not registered. The Contract Act does not contemplate that agreement would be registered. Section 17 of the Indian Registration Act do contemplates that as and ITA No.812/CHD/2024 A.Y.2011-12 5 when an immovable property having value of more than Rs.100/- is being transferred, then such immovable property could be transferred by way of a Registered Sale Deed. This Act nowhere provides that Agreement is also required to be registered. If proviso to Section 49 of the Indian Registration Act is looked into, then this proviso empowers the parties to produce such Agreement in evidence in a suit for specific performance. In other words, an unregistered Agreement is a valid document for tendering as an evidence in a civil suit filed for specific performance of contract. The only demerits in an unregistered agreement is that by virtue of such agreement if possession is being taken by the vendee from vendor, then vendee will not be able to protect his possession with the help of Section 53A of Transfer of Property Act because agreement is unregistered. But there is no bar to enforce such unregistered agreement under the Specific Relief Act for persuading the parties for fulfillment of the agreement. Therefore, it is an erroneous approach at the end of the CIT(A) for just ignoring the Agreement o Sell. It is further pertinent to observe that this unregistered agreement was acted upon and assessee has ITA No.812/CHD/2024 A.Y.2011-12 6 made repayment of these advances after sale of his properties. Therefore, I am satisfied that impugned addition is not sustainable. 6. As far as re-opening of assessment is concerned, since revenue was possessing specific information about alleged unexplained investment, therefore, AO has rightly formed a prima facie opinion about escapement of income but on merit, assessee has explained the source of such investment. Thus, re-opening of assessment is upheld but additions on merits are deleted. 7. In the result, appeal is partly allowed. Order pronounced on 20.02.2025. Sd/- (RAJPAL YADAV) VICE PRESIDENT “Poonam” आदेश क\u0002 \u0003ितिलिप अ\tेिषत/ Copy of the order forwarded to : 1. अपीलाथ\u000f/ The Appellant 2. \u0003\u0010यथ\u000f/ The Respondent 3. आयकर आयु\u0014/ CIT 4. िवभागीय \u0003ितिनिध, आयकर अपीलीय आिधकरण, च\u0018डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड\u001c फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "