Income Tax Appellate Tribunal - Jaipur
Chandra Kala Sharma, Jaipur vs Ito, Jaipur on 15 November, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 29/JP/2017
fu/kZkj.k o"kZ@Assessment Year :2010-11
Chandra Kala Sharma, cuke ITO,
75, Mahaveer Nagar, Tonk Vs. Ward-6(3),
Phatak, Jaipur
Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AIDPS4009C
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by : Shri Rajeev Sogani (CA)
jktLo dh vksj ls@ Revenue by : Smt Neena Jeph (Addl.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 27/08/2018
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 15/11/2018
vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-5, Jaipur dated 16.09.2016 for A.Y. 2010-11 wherein the assessee has taken following grounds of appeal.
"In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of ld. AO in taxing a sum of Rs. 16,39,500/- as alleged unexplained deposits in bank u/s 69 of Income Tax Act, 1961. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 16,39,500/.2 ITA No. 29/JP/2017
Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur
2. At the outset, the ld. AR requested for permission to raise additional ground of appeal as under:-
"In the facts and circumstances of the case and in law, the ld AO has erred in making the addition of advance money received u/s 69 without recourse to section 51. Action of the ld AO is illegal . Relief may please be granted by quashing the assessment order being illegal and void ab initio."
3. It was submitted that the additional ground is a purely legal ground and all relevant facts are on record and are emerging out of the order of the Assessing officer u/s 143(3) of the Act. After hearing both the parties, the additional ground being a purely legal ground, the same is being admitted for adjudication.
4. During the course of hearing, the ld AR submitted that the facts of the case are that the appellant had a house property situated at Plot No. 16, Vinayak Vihar Colony, Durgapura, Jaipur. This house property was agreed to be sold vide Ikrarnama dated 01.05.2009 to Shri Laduji Kharbas S/o Shri Laduji Kharbas S/o Shri Ghisaji Kharbas, resident of Chimanpura, Tehsil Sanganer, District Jaipur. The total sale consideration agreed to between the parties was Rs. 35,00,000. The buyer had paid Rs. 15,00,000/- as advance at the time of execution of Ikrarnama and rest of the consideration was to be paid within 2 months of execution of Ikrarnama. It was agreed that on payment of balance consideration within the stipulated time of two months, the appellant (seller) would execute / register sale deed in favour of buyer. It was specifically agreed between the seller and the 3 ITA No. 29/JP/2017 Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur buyer that if balance consideration is not paid within the stipulated time, the Ikrarnama would stand cancelled. The appellant deposited the cash received of Rs. 15,00,000/- as mentioned above, in her bank account. Before the ld. AO, it was explained that the cash deposited in the bank account was out of the advance money received for sale of house property as above. Source of the money advanced by the buyer was explained by way of submitting Khatoni and Girdawari. The buyer Shri Laduji Kharbas could not be produced as he had expired on 22.12.2010. However, his son Shri Gopal appeared before the ld. AO on 18.1.2013 and confirmed the amount paid by his father to the appellant. Ld. AO was not convinced and he added the amount of Rs. 16,39,500/- deposited in the bank observing that identity, creditworthiness and genuineness is not proved.
5. It was further submitted by the ld AR that Lower authorities have doubted the genuineness of Ikrarnama for the reasons that it was on a plain paper and that it was neither registered nor notarized. It is humbly submitted that it is general practice in real estate transactions to execute such ikrarnama on plain paper without having it registered or notarized. When ultimate sale is made, on compliance of conditions, formal sale deed is executed. It is also submitted that law of evidence is not strictly applied to the provisions of Income Tax Act, 1961 as had been laid down by the Hon'ble Supreme Court in the case of Chuharmal vs CIT (1988) 172 ITR 250 (SC). It was further submitted that the ld. lower authorities have doubted the genuineness of the transaction, for the reason that neither the land is sold nor money is returned. It is submitted that ikrarnama clearly 4 ITA No. 29/JP/2017 Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur mentioned that the same would stand cancelled if balance payment is not made by the buyer within the stipulated time of two months. Since, buyer could not make the payment within the stipulated time, he lost the right to get the refund. It was further submitted that the lower authorities have invoked the human probabilities relying on the judgment of Hon'ble Supreme Court in the case of CIT vs Durga Prasad More 82 ITR 540 (SC) and Sumati Dayal vs CIT 214 ITR 801 (SC). It is humbly submitted that it is not human improbable that the buyer failed to make the payment within the stipulated time and, consequently, lost the right to get the refund. It was further submitted that the lower authorities have confirmed the addition treating it as the case of fresh cash credits. It is humbly submitted that advance against sale of property is not akin to cash credit. A person, who has received advance against sale of property, cannot be fastened with an onus to prove the source of the buyer.
6. It was further submitted that the Ld. CIT(A) has doubted the creditworthiness of the buyer. Ld CIT(A) based on website "eandsdacnet.nic.in" and calculated the annual income at Rs. 5742 for the relevant year. Website "eandsdacnet.nic.in" / is managed by "Directorate of Economics and Statistics", Government of India. This website gives statistics of average of all India and not related to any particular area and therefore is not relevant. Otherwise also, the calculation are full of errors.
7. It was further submitted that the Ld CIT(A) further observed that is improbable that such large amount of saving of Rs. 15 lacs would have been kept at the residence of the buyer, based on 5 ITA No. 29/JP/2017 Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur statements of the son of buyer that advance was given out of savings and no loan was taken for this purpose. It is humbly submitted that source of above advance could only be explained by the buyer and not by his son. It is possible that son does not know the full facts of the source of advance.
8. Regarding the additional ground of appeal, the ld. AR submitted that ld. lower authorities have misdirected themselves in taxing the sum u/s 69 for not fulfilling three conditions i.e. identity, Creditworthiness and Genuineness. It is humbly submitted that amount received towards advance for transfer of capital asset cannot be taxed u/s 69 of I.T. Act, 1961. There are specific sections to deal with the forfeited amount in case of sale of property. Section 51 is reproduced below for ready reference:
"51. Advance money received.
Where any capital asset was on any previous occasion the subject of negotiations for its transfer, any advance or other money received and retained by the assessee in respect of such negotiations shall be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition:
Provided that where any sum of money, received as an advance or otherwise in the course of negotiations for transfer of a capital asset, has been included in the total income of the assessee for any previous year in accordance with the provisions of clause (ix) of subsection (2) of section 56, then, such sum shall not be deducted 6 ITA No. 29/JP/2017 Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition."
In view of above specific section 51, the advance money received and retained by the appellant in pursuance of negotiations shall be deducted from the cost of asset, whenever such asset is sold. Appellant has not yet sold the aforesaid house property. Whenever, she will sell aforesaid house property, such advance amount will be deducted from the cost of house property.
9. It was submitted by the ld AR that the advance money, if forfeited is brought to tax u/s 56(2)(ix) of I.T. Act, 1961 by the Finance Act, 2014 w.e.f. 01.04.2015 i.e. AY 2015-16. Section 56(2)(ix)is reproduced below for ready reference.
"56: Income from other sources (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :--
(ix)any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if,--
(a) such sum is forfeited; and 7 ITA No. 29/JP/2017 Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur
(b) the negotiations do not result in transfer of such capital asset;
Therefore, such forfeited advance money cannot be taxed as 'Income from Other Sources for the relevant year. In view of the above, the action of Id. AO in invoking section 69 is bad in law and, therefore, relief may please be deserved to be quashed.
10. The ld DR is heard who has vehemently argued the matter and relied on the findings of the lower authorities.
11. We have heard the rival contentions and pursued the material available on record. We donot see any infirmity in the findings of the ld CIT(A) which has elaborately examined the matter in light of evidences brought on record as well as on the theory of human probability and his findings which are contained at Para 2.3 and 2.4 are hereby confirmed which reads as under:
" 2.3 I have considered the facts of the case, the assessment order and the submissions of the appellant. The brief facts of the case are that the assessee had deposited cash amounting to Rs. 16,39,500 in his Bank accounts with Malviya Urban Co-operative Bank and Oriental Bank of Commerce on various dates from 05-05-2009 to 31-03-2010. On being questioned about the source of such cash deposit, the assessee stated that she had received cash of Rs. 15 lakh as advance against sale of one of her properties at Durgapura. No explanation was furnished in relation to the balance amount of cash deposit of Rs.8 ITA No. 29/JP/2017
Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur 1,39,500. The AO noted that in respect of the claimed cash advance of Rs. 15 lakh, the assessee filed a copy of an agreement dated 01-05- 2009 as per which it was agreed to sell the property for Rs. 35 lakh to the purchaser namely Sh. Ladu Kharvas. The AO observed that the said agreement was on a plane paper which has neither been notarised nor has it been registered. It was also noted that the purported purchaser died on 22-12-2010 and also that the agreement was finally cancelled apparently due to the death of the purchaser. It was further noted that the cash advance of Rs. 15 lakh was not returned back by the assessee to the legal heirs of the purchaser. In view of the peculiar facts of the case the AO asked the assessee to establish the identity and creditworthiness of the person from whom the amount was received as well as the genuineness of the transaction. In this regard the AO observed that the fact as to whether the signature on the agreement is of Sh. Laadu or someone else could not be established since the agreement is on a plane paper and is neither registered nor notarised. The AO concluded that the purported agreement was only a self serving document which cannot be relied upon. Regarding the creditworthiness of the creditor, the assessee produced the son of Sh. Laadu Kharvas whose statement was recorded by the AO. It was stated by Sh. Gopal, son of Sh. Laadu Kharvas, that Sh. Laadu was deriving income from the crop of Bajra cultivated on 51 'Bignas' of land owned by the family consisting of more than 12 persons. Sh. Laadu was not assessed to tax and his son expressed ignorance about the quantum of income derived from Agriculture. It was however stated by Sh. Gopal that his father used to keep his savings at home and the payment for the proposed purchase of land was made out of such savings. The AO 9 ITA No. 29/JP/2017 Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur noted that no tangible evidence was produced by the son of Sh. Laadu regarding availability of cash of Rs. 15 lakh with Sh. Laadu. The AO also questioned Sh. Gopal on the issue of refund of cash advance by the assessee since it was surprising that the sons of deceased purchaser had not made any attempts to recover the said amount from the assessee. In reply Sh. Gopal stated that talks were going on for recovery but the said amount has not been recovered. During the appellate proceedings it was confirmed by the AR that the amount has not been refunded till date which is around 7 years from the claimed transaction. Further no evidence regarding any efforts made to reclaim the amount were furnished by either Sh. Gopal or the assessee. The AO therefore noted that the subsequent conduct of the alleged buyer and seller showed that agreement in question was concocted and an after thought of the assessee in order to simply explain the cash deposits. In rejecting the version of the assessee the AO has applied the ratio of the decisions of Honourable Apex Court in the case of CIT vs. Durga Prasad More 82 ITR 540 (SC) and Sumati Dayal vs. CIT 214 ITR 801 (SC), since there is no tangible evidence to show that the alleged agreement had actually been entered into. The AO further observed that third ingredient of genuineness of transaction is also not established given the fact that the alleged transaction is in cash and not through the bank channel. Again applying the test of human probabilities as laid down by the Apex Court, the assessee failed miserably in proving the genuineness of cash transaction as well as the agreement itself.
2.4 After considering the submissions of the appellant as well as 10 ITA No. 29/JP/2017 Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur facts and issues stated by the AO, I find that the AO is justified in treating the impugned cash deposits as unexplained. The alleged agreement which is the only evidence put forth by the assessee, suffers from serious lacunae which renders the agreement to be beyond the realm of human probabilities. Firstly the agreement is neither registered nor notarised. The same is typed on 2 pages being plane papers. The signature of the alleged buyer is on the second page of the agreement, on which there is no mention of the amounts of agreement and advance allegedly given. The first page of the agreement which talks of the cash advance of Rs. 15 lakh does not bear any signature of either the buyer or the seller or any stamp of authority, and is hence totally susceptible to manipulation. The impugned agreement is therefore not a credible evidence for the reasons discussed above. It is also important to note that in cases where there is complete lack of evidence and verifiability of facts, the case has to be examined in the light of principle of human probabilities as laid down by the Honourable Apex Court in the judgements cited supra. The assesse's version is full of facts which are beyond the realm of human probabilities. Firstly the agreement itself is doubtful for the reasons stated earlier. This fact is further reinforced by the subsequent events viz. non completion of the terms of agreement and final sale of land as well as non refunding of the alleged cash advance and absence of any evidence of efforts being made by legal heirs of the buyer to recover the advance for a long period of 7 years. Another important aspect to be examined in such cases is the creditworthiness of the person giving such advances. The Girdawari record filed by the assessee shows that the crop of Bajra was cultivated in 51 `Bighas' of 11 ITA No. 29/JP/2017 Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur land belonging to the family of the creditor. It is claimed that the cash advance was made out of savings from agricultural income derived therefrom. Sh. Gopal has not stated the quantum of income derived by the family of Sh. Laadu. In this regard it is noted from the Government of India publication " Agricultural Statistics at a glance 2014" available at website " eands dacnetnic.in" , that the yield of Bajra in financial year 2009-10 was 71 kg per hectare. Since the creditor held 8.26 hectares of land, the yield of Bajra comes to 6038 kg or 6.038 quintal for the year under consideration. From the same website the price of Bajra is noted as Rs. 915 per quintal in 2009 and Rs. 951 per quintal in 2010 in Rajasthan. Taking the price as Rs. 951 per quintal for the year under consideration, the gross income derived by the creditor comes to Rs. 5742 for the year under consideration. Even if the cost of agricultural operations is not subtracted from this amount, the income derived by the creditor is inadequate even to support more than 12 persons of family, let alone result in substantial savings of the magnitude claimed by the assessee. It is thus improbable that the creditor had accumulated savings of Rs. 15 iakh out of such agricultural operations. it is further improbable that such a large amount of savings would have been kept at the residence of the creditor for years together. In his statement Sh. Gopal has specifically stated that cash advance was given out of savings only and no loans were taken for this purpose. As noted earlier the creditor was not assessed to tax. Hence the quantity of income and savings of the creditor needed to be examined from the angle of human probabilities. For the reasons stated above the assessee has failed to establish the creditworthiness of creditor. The AO has thus rightly concluded that none of the three 12 ITA No. 29/JP/2017 Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur essential conditions of identity, creditworthiness and genuineness could be established by the assessee. It is therefore held that the amount of cash deposits of Rs. 15 lakh as well as further deposits of Rs. 1,39,500 in respect of which no explanation has been furnished, aggregating to Rs. 16,39,500 are unexplained Accordingly the addition of Rs. 16,39,500 made by the AO is upheld."
12. Regarding the additional ground of appeal and the contention of the ld AR regarding applicability of 51 and insertion of section 56(2)(ix) by the Finance Act, 2014, we find that where the purported transaction for transfer of house property itself has been challenged and not accepted and the assessee has failed to establish that any such transaction was contemplated and acted upon, the explanation of the assessee regarding receiving advance against the said transfer of house property and subsequent forfeiture does not arise at first place cannot be accepted. In light of the same, the contentions so raised by the ld AR cannot be accepted and are hereby dismissed.
In the result, appeal filed by the assessee is dismissed.
Pronounced in the Open Court on 15/11/2018.
Sd/- Sd/-
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(Vijay Pal Rao) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 15/11/2018.
*Ganesh.
13 ITA No. 29/JP/2017
Chandra Kala Sharma, Jaipur Vs. ITO, Jaipur
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Chandra Kala Sharma, Jaipur
2. izR;FkhZ@ The Respondent- ITO, Ward-6(3), Jaipur
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No. 29/JP/2018} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar