THE DY. COMMR. OF INCOME TAX, CIR.-1(1), RAJKOT-GUJARAT V. SMT. KRUSHNABA P. JADEJA, RAJKOT-GUJARAT

ITA 577/RJT/2015

AI Insights

The case involves cross appeals by the assessee, Krushnaba Pravinsinh Jadeja, and the Revenue against the order of the CIT(A), Rajkot, pertaining to the assessment year 2012-13. The primary issues revolved around the disallowance of amounts under section 68 of the Income Tax Act, 1961, related to sundry creditors and unsecured loans, and the allowance of expenses related to land development and encroachment. The Tribunal examined the evidences and submissions made by both parties, including the documentary evidences and the statements recorded by the Assessing Officer. The Tribunal's decision was based on the sufficiency of evidence provided by the assessee to substantiate the claims made in the appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713226 (ITAT-RAJKOT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2012-2013
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D.M. RINDANI; LD; SANJAY PUNGLIA; LD.
• Keywords: Additional evidence; Cost of acquisition; Onus to prove; Share purchase agreement; Bogus
• Section: 143(3); 142(1); 68; 131

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No.572/RJT/2015 (Ǔनधा[रण वष[ / Assessment Year: 2012-13) Krushnaba Pravinsinh Jadeja, C.o. R.K. Shukla & Co., 201, 2nd Floor, Opera Tower, Jawahar Road, Rajkot-360 001 Vs. Deputy Commissioner of Income Tax, Circle-1(1), Rajkot, Aaykar Bhavan, Race Course Ring Road, Rajkot-360 001 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: ACYPJ 6178 N (Assessee) (Respondent) आयकर अपील सं./ITA No.577/RJT/2015 (Ǔनधा[रण वष[ / Assessment Year: 2012-13) Deputy Commissioner of Income Tax, Circle-1(1), Rajkot, Aaykar Bhavan, Race Course Ring Road, Rajkot-360 001 Vs. Krushnaba Pravinsinh Jadeja, C.o. R.K. Shukla & Co., 201, 2nd Floor, Opera Tower, Jawahar Road, Rajkot-360001 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: ACYPJ 6178 N (Assessee) (Respondent) Assessee by : Shri D.M. Rindani, Ld. AR Respondent by : Shri Sanjay Punglia, Ld. CIT-DR Date of Hearing : 03/06/2025 Date of Pronouncement : 30/07/2025 आदेश / O R D E R Per, Dr. A. L. Saini, AM: Captioned cross appeals filed by the assessee and Revenue, pertaining to Assessment Year (A.Y.) 2012-13, are directed against the common order passed by the Learned Commissioner of Income tax (Appeals)-1 Rajkot, which in turn arise, out of a common assessment order, passed by the Assessing Officer, under section 143(3) of the Income Tax Act, 1961, vide order dated 17.02.2015. Printed from counselvise.com Page | 2 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja 2. At the outset, Learned Counsel for the assessee, informs the Bench that assessee does not wish to press appeal in ITA No.572/Rjt/2015 for assessment year (A.Y.) 2012-13, therefore, we dismiss assessee’s appeal in ITA No. 572/Rjt/2015, as not pressed. 3. Now we shall take the Revenue’s appeal in ITA No. 577/RJT/2015 for A.Y. 2012-13. 4. Grievances raised by the Revenue, in ITA No. 577/RJT/2015 for A.Y. 2012-13, are as follows. “1. The ld. CIT(A) has erred on facts and in law in not appreciating the factual and legal matrix for the disallowance made of Rs. 99,76,000/-, out of sundry creditors u/s. 68 of the I.T. Act. 2.The ld. CIT(A) has erred on facts and in law in not appreciating that the persons shown as sundry creditors had even failed to fulfill the basic onuses cast upon them. 3.The ld. CIT(A) has erred on facts and in law in not appreciating the factual and legal matrix for the disallowance made of Rs. 83,00,000/- u/s. 68 of the I.T. Act. 4.The ld. CIT(A) has erred on facts and in law in not appreciating the fact that the assessee failed to fulfill the onus of justifying the credit worthiness of the depositor, identity and genuineness of the transaction. 5.The ld. CIT(A) has erred on facts and in law in entertaining new evidence in this regard without giving opportunity to the AO. 6.The ld. CIT(A) has erred on facts and in law in allowing expenses of Rs. 1,19,29,140/- out of vacating land encroachments, without any supporting documentary evidences. 7.The ld. CIT(A) has erred on facts and in law in deleting the disallowance on a mere surmise that the land was purchased at throw away price and was sold at high premium which indicates that there ought to be some litigation or encroachment. Such surmise can never take the place of truth. 8.The Id. CIT(A) has erred on facts and in law in allowing land development expenses of Rs. 41,34,254/- (which was after allowing reasonable expenditure by the AO during assessment proceedings) although the assessee had failed to prove the same with supporting documents. 9.The assessee craves for leave to alter, amend and/or add any ground of appeal subsequently.” 5. We shall take above grounds of the revenue, one by one, as follows: Printed from counselvise.com Page | 3 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja 6. Ground Nos. 1 and 2, relate to disallowance of Rs.99,76,000/-, out of sundry creditors, under section 68 of the Act. 7. Succinct facts qua ground Nos. 1 and 2 are that assessee before us is an individual, and filed the return of income, showing income of Rs.44,99,170/-, on 29.09.2012. The assessee, is engaged in the business of finance and also deals in the real estate. The assessee has also shown agricultural income of Rs.40,68,913/-. The assessee’s case was selected for scrutiny through CASS and notice u/s. 143(2), dated 06.08.2013 of the I.T. Act, was issued and which was duly served upon the assessee. Subsequently, notice u/s 142(1) of the Act dated 14.08.2014, was issued and served on the assessee, calling for various details relevant to the assessment. In response to said notices, the A.R. of the assessee attended from time to time and furnished the details called for, before the assessing officer. During the course of assessment proceedings, the AR of the assessee filed written submissions, before the assessing officer, on dated 06.10.2014, 17.10.2014, 13.11.2014 and on dated 10.02.2015, with supporting documents and evidences. During the year under consideration, the assessee has sold altogether 38 plots of land for an aggregate consideration of Rs. 2,79,06,710/-, on which the assessee has shown “Short Term Capital Gain\" of Rs. 45,03,271/-. 8. The Assessing Officer, after going through the balance-sheet of the assessee, as on 31.03.2012, noticed that a sum of Rs.99,76,000/-, was shown by assessee under the head \"Sundry Creditors\". On being asked to furnish the details of the amount, it was explained by the assessee that the amount of Rs.99,76,000/-, so mentioned in the balance-sheet, represents the amount of money received as advance, being a sum of Rs.48,25,000/- against the Satakhat, that is, Agreement to sale (Kabja Vagar) of the proposed sale of agricultural land, at Survey No. 517/1 paiki land Printed from counselvise.com Page | 4 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja admeasuring 2 Acre and 20 Guntha and advance of Rs. 51,51,000/-, was against the proposed sale of land, at Survey No. 504 paiki land admeasuring 2 Acres and 20 Gunthas. The Assessing Officer noticed that a sum aggregating Rs.48,25,000/- was claimed to have been received in cash for the Satakhat, dated 28.03.2012, for the proposed sale of agricultural land, at Survey No. 517/1 paiki land, admeasuring 2 Acre and 20 Guntha from the following 8 persons: Sr. No. Name of the persons 1. Shri Dharmendrasinh Pathubha Jadeja 2. Shri Narpatsinh Pathubha Jadeja 3. Shr Anilsinh Pathubha Jadeja- 4. Shri Mahendrasinh Pathubha Jadeja 5. Shri Dayvantsinh Anopsinh Jadeja 6. Shri Sidhdharajsinh Velubha Jadeja 7. Shri Lakhdirsinh Manubha Jadeja 8. Shri Vanrajsinh Revtubha Jadeja In support of the claim, the assessee has produced a copy of Satakhat dated 28.03.2012, executed by the assessee with the aforesaid 8 persons. Likewise, a sum aggregating Rs.51,51,000/- was claimed to have been received in cash for the Satakhat dated 28.03.2012, for the proposed sale of agricultural land, at Survey No. 504 paiki land admeasuring 2 Acre and 20 Guntha from the following 9 persons: Sr. No. Name of the persons 1. Shri Anilsinh Chandubha Jadeja 2. Shri Ashoksinh Chandubha Jadeja 3. Shri Girirajsinh Chandubha Jadeja 4. Shri Mahipalsinh Harishchandrasinh Jadeja 5. Shri Bhagvatsinh Tapubha Jadeja 6. Shri Jogendrasinh Bhagvatsinh Jadeja 7. Shri Rushirajsinh Bhagvatsinh Jadeja 8. Shri Chatursinh Ranubha Jadeja 9. Shri Bhavubha Khengarji Jadeja In support, the assessee has produced a copy of Satakhat, dated 28.03.2012 executed with the aforesaid 9 persons. Printed from counselvise.com Page | 5 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja 9. The Assessing Officer observed that the assessee has claimed to have received a sum of Rs.48,25,000/-, in cash, against the Satakhat dated 28.03.2012, for the proposed sale of agricultural land at Survey No. 517/1 paiki land admeasuring 2 Acre and 20 Guntha from the following 8 persons: Sr. No. Name of the persons 1. Shri Dharmendrasinh Pathubha Jadeja 2. Shri Narpatsinh Pathubha Jadeja 3. Shri Anilsinh Pathubha Jadeja 4. Shri Mahendrasinh Pathubha Jadeja 5. Shri Dayvantsinh Anopsinh Jadeja 6. Stiri Sidhdharajsinh Velubha Jadeja 7. Shri Lakhdirsinh Manubha Jadeja 8. Shri Vanrajsinh Revtubha Jadeja The Assessing Officer noticed that the assessee has produced a copy of Satakhat, dated 28.03.2012, made in favour of the aforesaid 8 persons. On being asked to furnish the evidence regarding subsequent transfer /sale of the impugned property, the assessee has stated that the deal did not materialize and therefore she had to return the amount of Satakhat to the aforesaid persons by way of cheques, as per the following particulars: Sr. No. Name of person in whose favour cheque is drawn Cheque No. Date Amount 1. Dayvantsinh Anopsinh Jadeja 437027 27.02.2013 6,00,000/- 2. Dharmendrasinh Pathubha Jadeja 437028 27.02.2013 6,00,000/- 3. Narpatsinh Pathubha Jadeja 437029 27.02.2013 6,00,000/- 4. Anilsinh Pathubha Jadeja 437030 27.02.2013 6,00,000/- 5. Mahendrasinh Anopsinh Jadeja (signed as Mahendrasinh Pathubha Jadeja) 437031 27.02.2013 6.00,000/- 6. Siddhrajsinh Velubha Jadeja 437032 27.02.2013 6.00.000/- 7. Lakhdirsinh Manubha Jadeja 437033 27.02.2013 6,00,000/- 8. Vanrajsinh Revtubha Jadeja 437034 27.02.2013 6.25,000/- Total 48,25,000/- Likewise, a sum aggregating Rs. 51,51,000/-, was claimed to have been received in cash for the Satakhat, dated 28.03.2012, for the proposed sale of agricultural land, at Survey No. 504 paiki land admeasuring 2 Acre and 20 Guntha from the following 9 persons: Printed from counselvise.com Page | 6 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja Sr. No. Name of the persons 1. Shri Anilsinh Chandubha Jadeja 2. Shri Ashoksinh Chandubha Jadeja 3. Shri Girirajsinh Chandubha Jadeja 4. Shri Mahipalsinh Harishchandrasinh Jadeja 5. Shri Bhagvatsinh Tapubha Jadeja 6. Shri Jogendrasinh Bhagvatsinh Jadeja 7. Shri Rushirajsinh Bhagvatsinh Jadeja 8. Shri Chatursinh Ranubha Jadeja 9. Shri Bhavubha Khengarji Jadeja The Assessing Officer noted that the assessee has produced a copy of Satakhat, dated 30.03.2012, made in favour of the aforesaid 9 persons. On being asked to furnish the evidence, regarding subsequent transfer /sale of the impugned property, the assessee has stated that the deal did not materialize and therefore she had to return the amount of Satakhat to the aforesaid persons by way of cheques as per the following particulars: Sr. No. Name of person in whose favour cheque is drawn Cheque No. Date Amount 1. Shri Anilsinh Chandubha Jadeja 437018 25.02.2013 5,70,000/- 2. Shri Ashoksinh Chandubha Jadeja 437019 25.02.2013 5,70,000/- 3. Shri Girirajsinh Chandubha Jadeja 437020 25.02.2013 5,70,000/- 4. Shri Mahipalsinh Harishchandrasinh Jadeja 437021 25.02.2013 5,70,000/- 5. Shri Bhagvatsinh Tapubha Jadeja 437022 25.02.2013 5,70,000/- 6. Shri Jogendrasinh Bhagvatsinh Jadeja 437023 25.02.2013 5,70,000/- 7. Shri Rushirajsinh Bhagvatsinh Jadeja 437024 25.02.2013 5.70,000/- 8. Shri Chatursinh Ranubha Jadeja 437025 25.02.2013 5,70,000/- 9. Shri Bhavubha Khengarji Jadeja 437026 25.02.2013 5,91,000/- Total 51,51,000/- 10. In this connection, an attempt has been made by the Assessing Officer to verify the genuineness of the transactions claimed to have been made with the aforesaid persons by recording the statements u/s. 131 of the Act and by making enquiry with the bank. The outcome of the enquiry so made is reproduced by the Assessing Officer in the assessment order Page No. 6 of assessment order. Printed from counselvise.com Page | 7 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja 11. Therefore, during the assessment proceedings, the Assessing Officer issued a show-cause notice to the assessee to explain the above transactions. In response to the show-cause notice, the assessee has submitted written submission along with documentary evidences, before the Assessing Officer, which are reproduced below: “1. First issue is regarding satakhat receipts of Rs. 99,76,000/-, as per para No: 3 to 7 of said notice. The amount of Rs. 99,76,000/- credit into my books of accounts should not be treated as my income within the meaning of section 68 of the Act. Detail objections and contentions is as under (i). The land in question is prime agricultural land situated at revenue survey no: 504 and 517/1 Paiki. Assessee is an absolute owner of said agricultural land since many years. And appeared in her balance-sheet. (ii). During the year under consideration, the assessee was in need of substantial amounts for some payments. Hence assessee enter in sale transactions of said agricultural land. Assessee has sale said agricultural land as under - Survey No: Sale Consideration 504 Rs. 1,78,00,000/- 517/1 Rs. 1,91,00,000/- Assessee made satakhat i.e. agreement to sale of said land on stamp paper of Rs. 100/- on 30.03.2012 and 28.03.2012 respectively. Xerox copy of same has been submitted in my previous submission. (iii). Against the satakhat of the proposed sale of agricultural land I have received following amounts as advances from various persons - Survey No: Date Amounts 504 30.03.2012 Rs. 51,51,000/- 517/1 28.03.2012 Rs. 48,25,000/- (iv). During the assessment proceedings summons has been issued to the purchase and out said some purchase attended and statement recorded. (v). Due to shortage of liquid funds, said purchasers could not made balance payments as a condition of satakhat. Satakhat has been cancelled on 25.02.2013 and 27.02.2013 as per Cancellation of Satakhat and paid amounts by bearer cheques to each person. A Xerox copy of cancellation of satakhat documents and details of payments has been submitted with my previous submission. (vi) There are three nature of evidence lead in order to show genuineness of the cash credit, which is as under - a) Identity of lender Printed from counselvise.com Page | 8 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja b) Capacity of the lender, and c) Genuineness of the transactions In the case of assessee all the said three conditions is proved. (a) Lender i.e. advance received against sale of land. Persons has been summoned u/s 131 of the Act, and in response to the same attended before your honour and statement recorded. (b) Amounts of each persons is very small i.e. about Rs. 6,00,000/- All the persons are agriculturist and having substantial agricultural land. Land revenue record i.e. 7/12 and 8A has been produced and kept on record. Considering the prevailing prices of agriculture product and holding of land by lender it is proved the capacity of lender. (c) Transaction i.e. agreement to sale is duly recorded on non-judicial stamp paper of Rs. 100/- and signed and verified by both the parties which proved genuineness of the transaction. (vii). Moreover as para 5.4 regarding repayment to 8 persons and 9 persons aggregating Rs. 48,25,000/- and Rs. 51,51,000/- respectively. Withdraw by a single person namely Shri Deven M. Desai as mentioned by bank manager. Deven M. Desai may be known to said persons and to avoid hardship of lender he withdraw the said amounts and handed over to lender. Mr. Devendra M. Desai is not assessee's relative or employee. Said facts shown to indicate that any part of the fund given by the assessee to this parties come back to the assessee in any form.\"” 12. However, the Assessing Officer rejected the above submissions of the assessee and observed that the assessee has introduced her own unaccounted money aggregating Rs. 99,76,000/-, in the guise of advances received from the aforesaid 17 persons. 13. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has deleted the addition made by the Assessing Officer. Before, ld CIT(A), the assessee submitted that whole amount was refunded to those persons, in next year as these persons could not make balance payment, as agreed in the said Satakat (agreement). The assessee also submitted that all the persons are having substantial land holdings and all have confirmed having made advances to the assessee and have also confirmed having received the refund of their advances and these persons have confirmed the transactions, even in their Printed from counselvise.com Page | 9 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja statement recorded by the assessing officer. The ld CIT(A) observed that assessee has discharged her onus by proving the identity, creditworthiness and genuineness, as the receipt of advances and refund of advances are also proved by confirmations/statements of the persons concerned. The ld CIT(A) also observed that the confirmations by these persons are the most important evidence in this regard and by no means the Setakat (agreement) in question can be said to be legally invalid. The ld CIT(A) also noticed that Assessing Officer has not brought any material on record, which even indicates that the advances shown are in fact the assessee's own money. Based on these facts and circumstances, the learned CIT(A) deleted the addition. 14. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 15. Learned CIT-DR of the Revenue, argued that all persons are agriculturist and not having any PAN number. These creditors were not filing any return of income. The money (advance) was taken from these 17 persons based on the Satakat (agreement), which was not genuine. The Ld. D.R. also contended that since the Assessing Officer did not call other 14 parties, therefore, the genuineness of these 14 parties have not been proved, by the assessee. Therefore, the assessee has failed to prove the creditworthiness and genuineness of the transaction and hence the addition made by the Assessing Officer should be confirmed. 16. On the other hand, Shri D.M. Rindani, Ld. Counsel for the assessee submitted that out of 17 persons, three persons were summoned, during the assessment proceedings and they have produced the required documents and details before the Assessing Officer, which is placed at Paper Book Page No. 28-29 and remaining 14 persons were not summoned by the Printed from counselvise.com Page | 10 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja Assessing Officer, therefore, the Assessing Officer cannot draw adverse conclusion against these 14 persons, based on Satakat (Agreement). The Satakat does not require registration, moreover, the Satakat may be cancelled based on the desire of the parties to the Satakat. Besides, order under section 143(3) of the Act, in the case of assessee, under consideration was made for subsequent assessment year (A.Y.) 2013-14, wherein the AO deleted the addition based on the same facts, (vide assessment order under section 143(3) of the Act, for A.Y. 2013-14, dated 15.01.2016 in assessee’s own case). The Ld. Counsel for the assessee also submitted that Mr. Desai was not the employe of the assessee, therefore, statement of Shri Desai is not application to the assessee’s case. Apart from this, assessee has proved the source successfully, as the assessee’s case pertains to A.Y. 2012-13, therefore, the assessee need not to prove the source of source. The Ld. Counsel also submitted that for receiving of money, the provisions of Section 68 does not apply, therefore, on these facts, the Ld. CIT(A) has deleted the addition and hence, order of the Ld. CIT(A) may be confirmed. 17. We have heard the rival parties and have gone through the material placed on record. We note that during the assessment proceedings, out of these 17 persons, three persons were summoned u/s 131 of the Act, and they have replied to the Assessing Officer, with documentary evidences, therefore, no adverse conclusion can be drawn in respect of other 14 persons, as the Assessing Officer never summoned to these 14 persons and never asked any details and documents and information from them. The Assessing Officer has not summoned, during the proceedings under section 143(3) of the Act, therefore, no any adverse conclusion can be drawn about these 14 persons, hence transactions done by the assessee, with these 14 persons, cannot be treated bogus. Moreover, the agreement (Satakat) does not require registration if the parties to the agreement decided to cancel it, they may cancel the agreement (Satakat) with mutual consent. We note that Printed from counselvise.com Page | 11 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja in the assessee’s case, in the subsequent assessment year (A.Y.) 2013-14, the Assessing Officer framed the assessment, on the assessee, by making no any addition in the hands of the assessee, in respect of similar transactions. Therefore, no any adverse inference should be drawn against the assessee, as all the creditors filed confirmation and accepted the transaction in their statement before the Assessing Officer. 18. The Ld. CIT-D.R. contended that since the Assessing Officer did not call other 14 parties, therefore, the genuineness of these 14 parties have not been proved, by the assessee, is not acceptable, because when the Assessing Officer, has himself decided not to examine these 14 parties and on test check basis, the Assessing Officer selected 3 parties and examine them in detail, in these circumstances, the assessee cannot dictate to the assessing officer to issue notice (summon) to rest, 14 parties. It is prerogative power of the Assessing Officer to decide, in what way, the parties should be examined, the Assessing Officer, may scrutinize the transaction on sample basis, that is, test check bases, therefore, no adverse inference can be drawn against these 14 parties. We noted that the entire amount was repaid on 25-02- 2013 and 27-02-2013, by bearer cheques, as the parties to the agreement failed to make balance payment. At the cost of repetition, we note that out of 17 creditors/depositors, only 3 were summoned by Assessing Officer, all 3 persons attended, their statements were recorded by the Assessing Officer, all three confirmed the payments and fact of cancellation of agreement and all three had substantial land holdings and agricultural income, the Assessing Officer has nowhere held them to be men of no means and all three have confirmed having executed written agreements. If the Assessing Officer chose not to call other 14 parties, no adverse inference could have been drawn against them. The existence and validity of written agreements gets established and the assessing officer has not disproved the same with any cogent counter- Printed from counselvise.com Page | 12 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja evidence. The registration of Agreements to Sell is optional in law; agreements are not disproved by the Assessing Officer. As regards refund of advance and withdrawal of bearer cheques by cash by one Mr. Deven Desai, he was not employed by this assessee; even assessing officer has not so proved, though he has so stated; there is no evidence that the cash drawn by Mr. Desai, flew back to the assessee. It is well established that if the money trail is not established, no transaction can be disbelieved by inference only. It is relevant to note that no question was asked by the assessing officer to any of the three buyers about Mr. Deven Desai; and in absence thereof, no adverse inference could have been drawn against this assessee. When what is received by assessee stands explained, what is refunded in same transactions cannot be a ground to disbelieve. 19. We find that ld. CIT(A) held that the identity of the persons concerned is not in doubt. The creditworthiness of the persons is not in doubt. The receipt of advances and refund of advances are also proved by confirmations/statements of the persons concerned. The confirmations by these persons are the most important evidence in this regard and cannot be brushed aside. Necessarily having PAN is not a legal requirement to make or receive advance against sale or to prove the genuineness of such advance so long as the source is satisfactorily explained. By no means the Setakat (agreement) in question can be said to be legally invalid. Therefore, we find that Assessing Officer has simply concluded only on the basis of suspicion/doubt, not on the basis of any cogent material available with him, hence, we are not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so deleted by ld.CIT(A) is upheld, and ground Nos.1 and 2 raised by the Revenue, are dismissed. Printed from counselvise.com Page | 13 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja 20. Ground Nos. 3 to 5 raised by the Revenue, relate to addition of Rs.83,00,000/-, on account of unsecured loan. 21. The brief facts qua the issue are that Assessing Officer noticed that during the year under consideration, the assessee has claimed to have received a sum of Rs.83,00,000/-, as unsecured loan, from six different persons, as summarized hereunder: Sr.No. Name of depositors Amount 1. Shri Hakumatsinh Jadeja 6,00,000/- 2. Shri Jaipalsinh Jadeja 6,00,000/- 3. Shri Mayursinh Jadeja 6,00,000/- 4. M/s. Saturn Enterprises 40,00,000/- 5. Shri Hitesh Ratilal Patel 10,00,000/- 6. M/s. Shree Associates 15,00,000/- Total 83,00,000/- In this connection, the assessee was requested, vide notice of Assessing Officer u/s. 142(1) dated 14.08.2014, to furnish the confirmation of the said depositor along with other relevant evidences, like acknowledgement for return of income, copy of bank account, statement of the aforesaid depositors, creditworthiness and identity of the depositors etc. However, it was noticed by Assessing Officer that since the amounts have been credited into the books of account of the assessee, the onus to prove the genuineness of the said transactions lies upon the assessee. However, in the given facts and circumstances, the assessee has lamentably failed to discharge the onus cast upon her and therefore the transactions respecting the amount of Rs.83,00,000/- credited into the books of account remain unexplained. The assessee was therefore vide Assessing Officer letter No. DCIT/Cir.1(1)/KP Jadeja/SC/2012-13 dated 20.01.2015 required to show cause as to why the amount of Rs. 83,00,000/-, credited into the books of account during the year under consideration in the name of the aforesaid 6 persons should not be treated as unexplained and why it should not be treated as the income within the meaning of section 68 of the Act. Printed from counselvise.com Page | 14 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja 22. During the course of assessment proceedings, the Assessing Officer issued a notice to the assessee to explain the transaction. In response to the notice of the Assessing Officer, the assessee submitted written submission along with documentary evidences which are reproduced below: “Fourth issue is regarding un-secured loans of Rs. 83,00,000/-. Detail as per Para No: 10 of the said notice. I. Assessee attached here with detail ledger copy accounts with confirmation and PAN No. of following persons. II. a) Hakumatsinh Jadeja Rs. 6,00,000/- Jaipalsinh Jadeja Rs. 6,00,000/- Mayursinh Jadeja Rs. 6,00,000/- Said persons are relative of assessee. (Page No: 15 to 18) b) M/s Saturn enterprise : Rs. 40,00,000/-Confirmation letter with PAN No. and bank statement of Bank of India, Gandhidham branch is attached herewith. Looking to the said statements, said person received by RTGS of Rs. 1,00,00,000/- on 04.02.2012 and out of said amounts given loan of Rs. 40,00,000/- to assessee by issuing cheque on 07.02.2012. (Page No: 19 to 32) c) Shri Hitesh Ratilal Patel : Rs. 10,00,000/- It is a Squared up accounts, Ledger copy of accounts with confirmation is attached herewith. (Page No: 33) d) M/s Shree Associates :Rs. 15,00,000/-It is a squared up accounts. Ledger copy of accounts, contra copy of accounts and copy of bank statement of HDFC Bank from which cheque has been issued is attached herewith. Looking to the said bank statement said M/s Shree Associates has received Rs. 15,00,000/- by transfer amount on 06.07.2011 and issued cheque to assessee on 08.07.2011. Assessee has repaid said amounts of Rs. 15,00,000/- by issuing cheque No: 068708 on 21.10.2011, said cheque deposited in same bank accounts of HDFC. (Page No: 34 to 36) II. Considering the said facts all the three conditions fulfilled. It is a well settled acid test is that where an identity is established, the genuineness of the transaction is given, capacity of the lender, transaction not regarded, sufficient explanation given by the assessee and justification of satisfactory entries in books of accounts prove genuineness of cash credit and should not be treated as income of assessee within the meaning of section 68 of the Act.\"” 23. However, the Assessing Officer, rejected the above contention of the assessee and observed that assessee has failed to prove identity, Printed from counselvise.com Page | 15 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja genuineness and creditworthiness of the transactions, therefore, made addition of Rs. 83,00,000/- u/s. 68 of the Act. 24. On appeal, by the assessee, the CIT(A), had deleted the addition partly. The ld CIT(A) noticed that the assessee has taken total loan of Rs.83,00,000/- from following six persons, namely: (i) Shri Hakumatsinh Jadeja Rs. 6,00,000/-, (ii) Shri Jaipalsinh Jadeja Rs. 6,00,000/-, (iii) Shri Mayursinh Jadeja - Rs. 6,00,000/-, (iv) Shri Hitesh Ratilal Patel - Rs. 10,00,000/-, (v) M/s Saturn Enterprise - Rs. 40,00,000/- and (vi)M/s. Shree Associates Rs. 15,00,000/- The ld.CIT(A) observed that identity, creditworthiness and genuineness of the first three parties have not been proved by the assessee. That is, first three loan creditors (Shri Hakumatsinh Jadeja Rs 6,00,000/-, Shri Jaipalsinh Jadeja-Rs. 6,00,000/- and Shri Mayursinh Jadeja Rs. 6,00,000/-), have not been able to produce, even basic information like confirmation, address and bank detail, etc, neither before the Assessing Officer nor before the ld. CIT(A). Therefore, ld CIT(A) held that the assessee has failed to discharge her onus to prove the identity, genuineness and creditworthiness of transactions. Therefore, ld. CIT(A) held that Assessing Officer had rightly added this amount of Rs.18,00,000/- (Rs. 6,00,000 + Rs. 6,00,000+ Rs.6,00,000) to the total income of the assessee. So far as other loan creditors viz. M/s Saturn Enterprises (PAN-ABQFS5140Q), Shri Hitesh R Patel (PAN-AELPP3629) and M/s Shree Associates (PAN- AAMRP3899E) are concerned, the ld CIT(A) observed that the assessee has submitted their confirmations, bank details, PAN, etc, which are enough to conclude that the assessee has discharged her onus of proving identity, creditworthiness and genuineness of creditors. The Assessing Officer has Printed from counselvise.com Page | 16 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja not brought anything on record which even indicates that the loan amount in question really belongs to the assessee. Hence, the loans taken from these persons cannot be added to the total income of the assessee u/s 68. Accordingly, the addition of these three loan credits of Rs.65,00,000/- (Rs.10,00,000 + Rs.40,00,000+ Rs.15,00,000) were deleted by ld CIT(A) and addition of Rs.18,00,000/- was confirmed by ld. CIT(A). This way, the ld. CIT(A), partly allowed the ground of the assessee. 25. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 26. Learned CIT-DR for the Revenue, submitted that assessee has taken loan of Rs.83,00,000/-, from six persons and these six persons has not proved the creditworthiness. Out of six persons three persons have replied with documentary evidences, however, rest three persons, have not submitted enough documentary evidences. The Ld. CIT-D.R. also submitted that during the appellate proceedings, the assessee submitted additional evidences also, in respect of last parties and Ld. CIT(A) did not call the remand report. Therefore, this issue may be remanded back to the file of the Assessing Officer for fresh adjudication. 27. On the other hand, Ld. Counsel for the assessee submitted that in respect of all persons, the bank statements were submitted which is on the record. The Ld. Counsel took us through the bank statement in the Paper Book Page No. 185 and stated that if there is a cash deposited in these bank accounts, then there is a cash withdrawal also. The Ld. Counsel also took us through Paper Book Page No. 152 and 162 wherein bank statements of the first party is placed. In respect of the second party, the relevant documents including bank statements and other documents were submitted during the assessment proceedings. About third party, the Ld. Counsel took us through Paper Book Page No. 178 and stated that the assessee has Printed from counselvise.com Page | 17 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja submitted primary documents and therefore, discharged the onus to prove identity, creditworthiness and genuineness of the transaction. Besides, Ld. Counsel also submitted that the amount was received in the same year and the amount was paid in the same year (vide Paper Book Page No. 172 relevant bank statement), therefore, genuineness of the transactions with these parties should not be doubted, and hence no addition should be made in the hands of the assessee. 28. We have heard both the parties and perused the material available on record. We find that the assessee has explained with the documentary evidences and with bank statement, all these transactions. We note that in the bank statement there is a cash withdrawal and simultaneously there is a cash deposit also, hence no adverse inference can be drawn against the assessee. For the purpose of the business, the assessee, when she needs, cash has been withdrawn, as well as cash was deposited in the bank account, that is, the assessee has been depositing the cash in the bank account regularly and also withdrawing the cash from the bank regularly. We note that Ld. CIT(A) has upheld addition of Rs.18,00,000/- for three depositors, as the assessee did not submit the sufficient evidences. We also find that assessee's appeal is not pressed by ld. Counsel for the assessee, therefore we confirm the addition made by Ld. CIT(A) to the tune of Rs.18,00,000/- . And about the balance amount deleted by Ld. CIT(A) to the tune of Rs.65,00,000/- (83,00,000 – 18,00,000/-), we confirm the findings of Ld. CIT(A). The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss ground Nos.3 to 5 raised by the Revenue. 29. In Ground Nos. 6 and 7, the Revenue has raised the issue that expenses of Rs.1,19,29,140/-, made by the assessee for vacating the land and Printed from counselvise.com Page | 18 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja removing encroachment, were without any supporting documentary evidences. 30. The brief facts qua ground Nos. 6 and 7, are that during the year, the assessee has sold plots of land admeasuring 3976.38 Square Yards and numbering 38, in all for an aggregate consideration of Rs. 2,79,06,710/-, on which assessee has shown 'Short Term Capital Gain' of Rs. 45,03,271/-. It was noticed that the land ad measuring 7339.74 Square Yards, at Survey No. 59/3, was purchased by the assessee on 18.01.2011, for a consideration of Rs.78,71,170/- (Rs.75,00,000/- cost and other expenses like stamp duty, registration fee etc, of Rs.3,71,170/-). Out of the total land area of 7339.74 Square Yards, area ad measuring 3976.38 Square Yards consisted of 38 plots, which have been sold during the year, for an aggregate consideration of Rs.2,79,06,710/- as per the particulars summarized hereunder: Sr. No. Name of purchasers Plot Nos. Total Amount 1. Smt. Vajiben Shingala 2 19,94,300/- 2. Shri Dilipbhai Dholaria 3 to 7 27,62,500/- 3. Labhuben Lunagaria 8 5,52,000/- 4. Shri Devjibhai Gondaliya 9 to 12 22,10,000/- 5. Shri Bhagvanji Mungar 13 & 14 13,26,000/- 6. Shri Naimish Leela 17 8,54,600/- 7. Bhavnaben Ramani 18 7,83,000/- 8. Shri Ashok Devda 19 & 20 16,32,000/- 9. Shobhanaben Sanjaybhai 21 9,15,000/- 10. Nitaben Ponkiya 22 9,15,000/- 11. Jashuben Vyas 23 10,27,000/- 12. Shri Bhagvanjibhai Mungar 24 & 25 27,54,510/- 13. Shri Nileshbhai Ralyani 26 6,03,500/- 14. Shri Bhikhabhal Ranpariya 27 6,03,500/- 15. Manishaben Ginaya 28 6,03,500/- 16. Shri Bharatbhal Sheladiya 29 5,68,000/- 17. Leenaben Sakhiya 30 5,68,000/- 18. Shri Bhikhabhai Kamani 31 & 32 11,36,000/- 19. Shri Pravinbhai Tarpada 34 6,03,500/- 20. Shri Veljibhai Bhut 33 6,03,500/- 21. Shri Nailmishbhai Leela 36 6,03,500/- 22. Shri Hardikbhai Ramani 37 6,03,500/- 23. Shri V.G. Raiyani 38 to 40 18,10,500/- 24. Shri Hareshbhai Raiyani 41 & 42 18,73,200/- Total amount 2,79,06,710/- Printed from counselvise.com Page | 19 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja It was further noticed by the Assessing Officer that against the sale consideration of Rs.2,79,06,710/-, for the land ad measuring 3976.38, consisted of aforesaid 38 plots, the assessee has claimed to have incurred cost of acquisition, cost of improvement and other related expenses aggregating Rs.2,34,03,439/-, as summarized by Assessing Offier on Page No. 17 of the assessment order. 31. Considering these facts, during the assessment proceedings, the Assessing Officer issued a notice to the assessee, to explain the expenses of encroachment. In response to the notice of the Assessing Officer, the assessee submitted it’s reply before the Assessing Officer, with documentary evidences, which is reproduced below: “I. During the preceding year on 18.01.2011 assessee has purchased agriculture land in survey no: 59/3 of Rajkot for total consideration of Rs. 78,71,170/- after purchasing land it was converted in non-agricultural land. As per non-agricultural order total saleable land area of 7339.4 Square yards. II. Whenever assessee has purchased said land it was entire encroached by so many persons. Some un-authorized persons have created, viz, Shri Gail Krupa Society (Proposed) and sold plots by issuing share certificates. Detail of said society and plot holders has been submitted with my previous submission dated 20.11.2014. III. It is quite natural that, to get vacate possession and relinquishment of their rights in land; assessee has to pay some amounts to said plot holders. To get mental peace and avoid other legal litigation assessee decided to pay Rs. 3000/- per Square Yards to each certificate holder and get the original certificate. Details of payments to plot holders and Xerox copy of share certificate, on the back side of the each certificates containing the receipt of payments made by the assessee where submitted with submission dated: 20.11.2014. IV. It is hard core truth that un-authorized encroached can not vacate without payment of handsome amounts. And particularly when owner of the land is female. V. It is a prevailing system that, without vacate possession of land neither market price or good price received nor reputed buyer buy the land. It is very common in Rajkot city and it is a famous and known city for encroachment, made fraudulent documents, etc, in land transactions. Moreover, it is a fact Printed from counselvise.com Page | 20 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja that, disputed land on encroach land shall sale at less than half price of prevailing price. VI. Complete name of the persons have been given. However, it is not possible to give the address of the persons, because assessee is not in touch with the said persons. They were laymen and anti-social elements and it is not possible to produce persons to whom payments made. Assessee has tried her best source to contact the persons to whom payments made. But unfortunately, she could not contact them. Considering the said facts and circumstances an amount of Rs. 1,19,29,140/- should not disallowed.\"” 32. However, the Assessing Officer rejected the above contention of the assessee and observed that assessee has not proved the transactions with documentary evidences. Therefore, Assessing Officer noticed that in the absence of any documentary evidence, the assessee's claim for expenses of Rs.1,19,29,140/-cannot be allowed. Accordingly, the expenses to the extent of Rs.1,19,29,140/- were disallowed and added to the total income of the assessee. 33. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has deleted the addition made by the Assessing Officer. The ld.CIT(A) noticed that it is an open secret that land grabbing or encroachment is quite common and it is a cumbersome process to get the land back without paying or litigating. However, the litigation takes a lot of time, money and energy, but while paying directly to the encroachers, it takes very less time. More the prime property more the demand from the encroachers. Besides, the sale value of encroached property, is normally less than the property, which is not encroached. The buyer has no option but to pay the encroachers, in cash because generally they do not want to receive money in cheque. In addition to this, the Assessing Officer has himself observed on page 22 of para 9.5 that there may some encroachment on the land. The ld CIT(A) noticed that Printed from counselvise.com Page | 21 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja this part of land has been sold at Rs.2,79,06,710/- and it is obvious that the sale value is almost seven times of the purchase cost. It simply indicates that the assessee purchased the land at throw away price, but because of either litigation or encroachment for which the assessee might have spent substantial amount in getting the land vacated from encroachers, but how much amount has actually been paid is the bone of contention because neither the claim of payment made by the assessee is fully verifiable in absence of the whereabouts of the payees nor the Assessing Officer has anything on record or any logic to disprove the claim of the assessee completely. Hence in such a situation, the ld.CIT(A) estimated payment made to encroachers at Rs.2,500/- per square yard instead of Rs.3000/-, as claimed by the assessee but not allowed at all by the Assessing Officer. Accordingly, the ld CIT(A) allowed the ground of the assessee, partly, and directed the Assessing Officer to recompute the cost of acquisition. 34. Aggrieved by the order of the CIT(A), the Revenue is in appeal before us. 35. Learned CIT-DR for the Revenue submitted that the encroachment expenses paid by the assessee is abnormal in nature, therefore, it should not be believed. Further, the encroachment expenses were paid in cash, therefore, genuineness of these expenses are doubted. The Ld. CIT-DR also submitted that assessee has not submitted the name and address and PAN No. of the payee. In order to remove the encroachment, the assessee has paid the huge amount and identity of these persons to whom the assessee paid such amount have not been proved. No water connection, no electricity connection is there in respect of persons, who were holding the land of the assessee illegally. No any FIR has been filed by the assessee that these persons have encroached the land in illegal manner and not a single person was produced before the Assessing Officer for cross- Printed from counselvise.com Page | 22 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja examination. Therefore, in this situation, the addition made by the Assessing Officer should be confirmed. 36. On the other hand, Ld. Counsel for the assessee submitted that in case of encroachment, there was a society which was not registered. These persons (payee) did not have identity, because all these persons were below the poverty line and did not have PAN number. Therefore, in order to remove these persons from the land, the assessee paid this amount to the society members and in turn, the society members paid the amount to these persons. The Ld. Counsel also submitted that land was purchased at a cheaper rate and including the cost of the encroachment, and if the sale price of Rs.8500 sq.mt. of the land is compared, with total cost including the cost of the encroachment, then it comes far more than the original cost and encroachment payment, therefore, assessee has shown huge profit. The assessee`s sale at very higher price is accepted by the Department therefore, genuineness of these encroachment payments should not be doubted. Besides, the ld. CIT(A) has estimated the encroachment expenses at a reasonable rate, therefore, order of the ld. CIT(A) may be upheld. 37. We have heard the rival contentions and perused the material available on record. We not that the encroachment expenses were paid by the assessee to the members of unregistered society and the relevant documents of each person and the name and address of each person to whom the assessee paid the amount, on account of encroachment, has been shown and filed before assessing officer. We note that assessee had claimed @ Rs.3000/- per sq. yard; encroachment expenses and CIT(A) allowed @ Rs.2500/- per sq, yard. We find that Assessing Officer himself (vide Page 22, Para 9.5 of assessment order) acknowledged the encroachment expenses and likely payment by assessee. Therefore, based on the findings of the Assessing Officer, the ld. CIT(A) has passed a reasoned order and Printed from counselvise.com Page | 23 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja allowed the payment on estimated bases at Rs.2500/- per sq, yard. As regards, affidavit of Mr. Gosai, as additional evidence, we note that Ld.CIT(A) has also called for the remand report, hence ground no. 5 of revenue should not survive, vide order of CIT(A) Page 9, Para 6. Mr. Gosai as a promoter of proposed society, has accepted the fact of payment to various persons and he has confirmed the transactions. We note that the Inspector visited the site after nearly 3 years and by that time, there was lot of development, hence his inspection has no meaning and the said Inspector was not a valuer or an expert. Therefore, considering these facts, the amount estimated by the learned CIT(A) should not be doubted. 38. We note that assessee under consideration, along with her son Shri Axitsinh Jadeja and daughter Miss Alpnaba Jadeja purchased 4 acres 32 guntha of agricultural land at survey no. 59/3 and 59/4 on 18.01.2011 and later on, got that land converted into non- agricultural land. Out of total land purchased, land ad measuring 7339.74 square yards belonged to the assessee. As per the order of the Land Revenue Authority, the total saleable land measured 7339.74 square yards. Out of this, the assessee sold 3976.38 square yards (comprising 38 plots) to 24 persons during the year in question for a total consideration of Rs.2,79,06,710/-, on which a Short Term Capital Gain of Rs.45,03,271/- was shown by the assessee in her return of income. Further the assessee has claimed Rs.1,19,29,140/- as cost of acquisition of the land which is approx. 54% of saleable land sold during the year. This payment is claimed to have been made by the assessee at the rate of Rs.3000/- @ per square yard in cash to 50 persons for vacating the land encroached by them. Although total payment made to get the total land vacated has been claimed to be Rs.2,20,20,500/-, but the cost of acquisition has been claimed only on the land sold during the year on proportionate basis. Further regarding payment, it has been submitted before the Printed from counselvise.com Page | 24 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja Assessing Officer as well as before the ld. CIT(A) that the payment was made through one person namely, Shri Devendragiri A. Gosai, who basically handled this on behalf of all the encroachers. The Assessing Officer disallowed this claim of cost of acquisition on the ground that the assessee could not produce the complete name and address of the persons to whom payments were made. In response to the show- cause notice by the Assessing Officer, the assessee submitted that the land in question was entirely encroached by these persons. Some unauthorised persons had created Shri GailKrupa Society (proposed) and sold plots by issuing share certificates details of which were submitted by the assessee, before the Assessing Officer. 39. Before the ld. CIT(A), the assessee submitted that in order to avoid litigation, she paid this amount after great negotiation. It is open secret that unauthorised encroachment cannot be vacated without paying handsome amount and such encroachment in very common in Rajkot city, that is, the city is famous for fraudulent land documents, encroachments of land, and other such things related to land. It is a fact that encroached land is sold at very less price. Regarding complete address of the persons, it was submitted that it is not possible to find them out because the assessee is not in touch with them, however receipts are available, about the payment made to them. Further, the persons involved in encroachments were layman and anti- social elements. During appellate proceeding an affidavit from Shri Devendragiri A. Gosai, was also submitted as evidence to support her claim of payment made through him. The submission along with the said affidavit was forwarded to the Assessing Officer, for this comment and he was also directed to examine, Shri Devendragiri A. Gosal, if he deems fit. The Assessing Officer, submitted his remand report dated 06-08-2015 before they ld. CIT(A). Printed from counselvise.com Page | 25 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja 40. The remand report was forwarded by ld.CIT(A), to the assessee for her comment. The assessee, vide her letter dated 17-08-2015, submitted her comment in which she reiterated the same things as made in her submissions, during assessment proceeding and appellate proceedings. However, one important point has been mentioned, that is, when the proposed society itself is illegal as plot holders were encroachers so question of documents like application of shareholders, registration as co- operative society, etc, related to legal cooperative societies do not arise. 41. The learned CIT(A), after considering the remand report, and after considering the submissions of the assessee on the remand report, observed that at the time of assessment proceedings, it was neither possible for the assessee to prove beyond doubt that the encroachment was there not possible for the revenue to disprove the claim of the assessee or to prove beyond doubt that there was no encroachment especially after lapse of so much of time. In such a situation there is no option but to consider some of the following ground realities which can help in arriving some reasonable conclusion: (a) This is an open secret that land grabbing or encroachment is quite common. It is a cumbersome process to get the land back without paying for litigat. But litigation takes a lot of time, money and energy while paying directly to the encroachers, it takes very less time. More the prime property more the demand from the encroachers. (b) This is well known fact that the sale value of encroached property is for less than property which is not encroached. (c)The buyer has no option but to pay the encroachers in cash because generally they do not want to receive money in cheque. This is also a well known fact. Printed from counselvise.com Page | 26 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja (d) To expect legal documents from the illegal societies is completely unwarranted, which was made by encroachers. (e) Whether the affidavit filed by Shri Devendragiri is an afterthought or not is not important. The important is whether the facts mentioned in the affidavit are true or not. 42. The ld CIT(A) also noticed that Assessing Officer himself has observed on page 22 of para 9.5 that: \"there must be some encroachment upon the property and the assessee must have paid the money to vacate that encroachment. But in absence of any documentary evidence or circumstantial evidence no credence can be attached to the claim of the assessee.\" The ld.CIT(A) noticed that as per purchase agreement the purchase cost of the property sold is Rs.42,64,270/- (purchase cost of 54% of land which has been sold). This part of land has been sold at Rs. 2,79,06,710/-. It is obvious that the sale value is almost seven times of the purchase cost. It simply indicates that the assessee purchased the land at throw away price, but because of either litigation or encroachment for which the assessee might have spent substantial amount in getting the land vacated from encroachers. But how much amount has actually been paid is the bone of contention because neither the claim of payment made by the assessee is fully verifiable in absence of the whereabouts of the payees nor the assessing officer has anything on record or any logic to disprove the claim of the assessee, completely. Hence, in such a situation the only option left is to estimate considering all aspects of the case. Hence, considering all the discussions made above and also in the interest of justice the payment made to encroachers was estimated at Rs. 2,500/- per square yard by ld.CIT(A), instead of Rs.3000/- as claimed by the assessee but not allowed at all by the Assessing Officer. Therefore, ld. CIT(A) allowed the appeal of the assessee, partly and directed the Assessing Officer, to recompute the cost of Printed from counselvise.com Page | 27 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja acquisition. We have gone through the above findings of the ld. CIT(A) and noticed that there is no infirmity in the conclusion reached by the ld. CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid addition, partly. His order on this addition is, therefore, upheld and the grounds Nos. 6 and 7 of appeal of the Revenue are dismissed. 44. Ground Nos. 8 raised by the Revenue, relate to development expenses of Rs.41,34,254/-. 45. Brief facts qua ground No. 8 raised by the Revenue, are that during the assessment proceedings, it was noticed by Assessing Officer that the assessee has claimed a sum aggregating Rs.79 95,500/-, towards cost of improvement of the said land ad measuring 7339.74. Accordingly, average expenses incurred on this count comes to Rs.1090/-, per Square Yard. These expenses are claimed to have been made in respect of leveling of land, laying of roads landscaping and such other works. During the year, the assessee has shown sales of altogether 38 plots ad measuring 3976.38 Square Yards, out of the total land ad measuring 7339.74 Square Yards. Accordingly, the assessee has claimed a sum of Rs.43,34,254/- [Rs.1090/- *3976.38 Square Yards] as expenses incurred on this count on the area of land ad measuring 3976.38 Square Yards sold during the year under consideration. In this connection, the assessee was required to furnish the complete name and address of all the persons who carried out the said works and also the copies of bills/vouchers in support of these expenses. 46. In response to the notice of the Assessing Officer, the assessee submitted it’s reply with documentary evidences, during the assessment proceedings, which is reproduced below: “regarding disallowance the expenses to the extent of Rs. 42,34,254/-claimed towards the payments for improvement of land under consideration and not Printed from counselvise.com Page | 28 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja payments to the persons having encroached upon the said land as mentioned in Para No: 9.4 of the said notice. I. It is a crystal clear from facts that, the land under subject is entirely encroached by anti-social elements and they build small huts and kacha houses on land. II. It is quite obvious that, after vacate the land it is compulsory to demolish illegal construction and most important to build compound wall to prevent from anti-social elements. And to develop trust to the buyer that land is safe and proper to get good price with consideration of said assessee has built compound wall for entire plot of land. Assessee made proper road (metal road) and development of land i.e. bharati, etc. III. Considering the size of entire plot assessee incurred expenses of Rs. 79,95,500/- and debited under the head of development of land. Detail head- wise expenses, quantity, price, sq. feets of each material is attached herewith. (Page No: 1 to 14) IV. Main reason for disallowance of expenses is enquiry conducted by the inspector of your office Shri Amar Narayan as mentioned in Para No: 9.2 of the said notice. First of all, said land development expenses where incurred during F.Y. 2011-12. Your Inspector personally visited in the month of January 2015 i. e, after 3 years. Assessee has sold open plot of land. However during the visit of your inspector there was developed housing society with proper road, etc. considering above facts how your inspector simply give report that, there is virtually no any materialistic improvement in the condition of land in question. Without visited open land during F.Y. 2011-12 on what basis he compared and said there is no improvement in land. Moreover, your inspector is not technical persons or engineer, etc. Assessee attached herewith detail of each expense, incurred for development. Considering the said estimate of sum of Rs. 25/- per sq. yard is very low. Assessee strongly object for said disallowance of Rs. 42,34,254/-.” 47. After going through the above reply of the assessee, the assessing officer noticed that considering the above facts that some expenses could have been incurred, on whatever the minor works have been carried out, on the said land, the expenses on this count would be no more than Rs. 2,00,000/- for the entire land. Accordingly, a sum of Rs. 25 per Square Yards was proposed to be allowed as expenses on the improvement of the land. This would work out to nearly Rs. 1,00,000/-(Rs.25/-*3976.38 Square Yards) on the total area admeasuring 3976.38 Square Yards sold during the Printed from counselvise.com Page | 29 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja year. The Assessing Officer, further observed that in the absence of any satisfactory evidences in this regards, the claim for expenses to the extent of Rs.43,34,254/- (Rs. 1090/- 3976.381 cannot be allowed. However, considering the fact that some expenses could have been incurred on whatever the minor works have been carried out on the said land and in view of the contentions of the assessee, the expenses on this count is considered at Rs.4,00,000/- for the entire land. Accordingly, a sum of Rs.50 per Square Yards was allowed, as expenses on the improvement of the land. This would work out to nearly Rs.2,00,000/- [Rs.50/-*3976.38 Square Yards] on the total area ad measuring 3976.38 Square Yards sold during the year. The rest of the amount of Rs.41,34,254/- (Rs.43,34,254 - Rs.2,00,000) was disallowed by the Assessing Officer and added to the income of the assessee. 48. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the CIT(A), who has deleted the addition made by the Assessing Officer. Before ld. CIT(A), the assessee submitted that the expenses claimed by the assessee, include demolition as well as removal (of material) expenses of illegal construction, compound wall construction, metal road construction, etc. So far as question of contractor is concerned it has been submitted by the assessee, that none of the works was given to any contractor, all was done on her own employing daily wages labourers. The Inspector had visited in January 2015 after the assessee has sold the open plots of land, on which housing societies have developed. Without having visited the open land, when it was purchased, the Inspector report has no meaning. Moreover, the Inspector is not a technical person to come to such conclusion that \"there is no any materialistic improvement in the condition of the land\". The Assessing Officer has not denied or disproved the bills of material (used in constructing roads as well as compound wall, fillings/levelling, Printed from counselvise.com Page | 30 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja etc.) produced before him. As the Assessing Officer has not brought any cogent material on record to disprove the claim of expenses incurred by the assessee, the disallowance of this expense cannot be sustained, therefore, ld. CIT(A) deleted the addition. Aggrieved by the order of the CIT(A), the Revenue is in appeal before us. 49. Ld. CIT-D.R. for the Revenue submitted that the assessee has not submitted the name and address of the payee and the contractors. Therefore, it is in doubt that to whom the assessee has paid the amount for such land improvement cost. During the assessment proceedings, the inspector was sent by the Assessing Officer, to visit the site and inspector has reported that there is no such improvement made in the land, therefore, this issue may be remanded back to the file of the Assessing Officer for verification of the site, whether the assessee has incurred the expenses on improvement cost or not. 50. On the other hand, Ld. Counsel for the assessee submitted that since assessee has purchased the land and the improvement expenses have been incurred by her. For the purpose of safety, the assessee has made boundary wall and incurred other expenses for improvement of the land. The Ld. Counsel further submitted vide Page No. 28 of the assessment order, wherein the Assessing Officer has himself accepted Rs.4,00,000/-, as a reasonable expenses for improvement and development of land. Therefore, it is a case where Assessing Officer accepted this fact during the assessment proceedings, that the assessee has incurred expenses on improvement. Therefore, the dispute is now is to examine that how much expenses for development and improvement of land was incurred by the assessee, therefore, this issue should not be remitted back to the file of the Assessing Officer, to examine the site to ascertain the development and improvement expenses, because by this time, full building construction had been Printed from counselvise.com Page | 31 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja completed, hence there is no meaning to remit this issue back to the file of the Assessing Officer for verification of the site. 51. We have heard both the parties. We find merit in the submissions made by the ld. Counsel for the assessee, to the effect that “by this time, full building construction had been completed, hence there is no meaning to remit this issue back to the file of the assessing officer for verification of the site”, hence, we are not inclined to remit this issue back to the file of the Assessing Officer. We note that upon conversion of land to non-agricultural land and plotting for sale, such type of expenses, for development and improvement of land, are bound to have been incurred by the assessee. We also find that the Inspector visited the site after 3 years, hence his observation cannot be relied upon, more so, in absence of any corroborating material with the Assessing Officer. We note that during the year, the assessee has claimed Rs.43,34,254/-, as cost of improvement on account of various expenses incurred before the plots were sold. The assessee had submitted the details of materials and quantity used, their prices etc, before the Assessing Officer. Although, we find that the Assessing Officer himself did not deny the cost of improvement completely, but relying upon the departmental Inspector report, he made the addition, which is not acceptable, as the Inspector visited the site after three years, by this time, there was lot of development and improvement in the land, moreover, the Inspector is not a technical person to give the report to the Assessing Officer that how much expenses have been incurred by the assessee on account of development and improvement of the land, such as boundary wall, Road, leveling expenses, soil taste, and removal of temporary structure on the land etc. On a careful reading of the Ld.CIT(A)`s order and the findings thereon, we do not find any valid reason to interfere with the decision and findings of the Ld.CIT(A). Hence, we sustain the order of the Ld.CIT(A) and reject the ground No.8 raised by the Revenue. Printed from counselvise.com Page | 32 ITA Nos.572&577/RJT/2015/AY.2012-13 Krushnaba Pravinsinh Jadeja 52. In combined result, appeal filed by the Assessee, in ITA No.572/RJT/2015, is dismissed as withdrawn, whereas appeal filed by the Revenue in ITA No.577/RJT/2015, is also dismissed. Order is pronounced in the open court on 30/07/2025 Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot Ǒदनांक/ Date: 30/07/2025 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Rajkot Printed from counselvise.com "