Income Tax Appellate Tribunal - Delhi
Sanjay Mohan Uniyal, Dehradun vs Assessee on 30 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G" NEW DELHI
BEFORE SHRI R.P. TOLANI AND SHRI B.C. MEENA
ITA No. 3641/Del/2012
Asstt. Yr: 2007-08
Shri Sanjay Mohan Uniyal Vs. ACIT, Circle-1,
132, Jhanda Mohalla, Dehradun. Dehradun.
( Appellant ) ( Respondent )
Appellant by : Shri Ashwani Taneja CA
Respondent by : Smt. Y.S. Kakkar Sr. DR
ORDER
PER R.P. TOLANI, J.M :
This is assessee's appeal against CIT(A)'s order dated 30-03-2012 relating to A.Y. 2007-08. Various grounds are raised, out of which assessee has pressed only ground no. 2, which is as under:
"2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of Rs. 43,67,000/- claimed by assessee on account of removal of encroachment expenses."
Rest of the grounds stand dismissed being not pressed.
2. Brief facts about the controversy are that the assessee sold a piece of land admeasuring 2.480 hectares situated at Mauza Danda Lakhaund, Pargana Parwadoon, Dehradun to Prateek Resorts & Builders (P) Ltd., Dehradun ("company" in short) for Rs. one crore with conditions that the 2 ITA 3641/Del/2012 Sanjay Mohan Uniyal land will be delivered with clean title and possession. The land was acquired by the assessee in financial year 2003-04 and 2004-05 for an amount of Rs. 18,98,610/-. The assessee claimed that it had to incur liability to pay an amount of Rs. 43,67,000/- for removal of encroachment as a dispute arose on area of .955 hectare which was claimed to be in possession of some farmers who raised objections for mutation of the land in Company's name. Due to this dispute out of 2.480 hectares, only 1.485 hectare of land could be mutated in Company's name. To avoid protracted litigation about the dispute on possession of .955 hectare and to ensure that a clear title and peaceful possession free from all encumbrances as agreed, is delivered top the vendee Company, the following amounts were agreed to be paid by the assessee to remove the encroachments:
Shri Pradeep Bahuguna 1085000 S/o Shri Har Dev Bahuquna, Villaqe & P.O. Thano, Dehradun Shri Jai Kishan Bhatt 1097000 S/o Shri I.M.Bhatt, Winq No.712/2, Prem Naqar Dehradun Shri Upender Singh Negi 1095000 slo Shri Vijay Sinch Neql, Vlllaoe Tunwala, Dehradun Shri Rajat Kumar 1090000 S/o Shri Ajit Kumar, 12/3, Bhandari Baqh, Dehradun.
Total 4367000 2.1. Some amounts were paid and some of the amounts remained pending till the date of assessment part thereof was paid in subsequent year. The 3 ITA 3641/Del/2012 Sanjay Mohan Uniyal assessee claims that it could not get the entire amount of Rs. 1 crore in this year as When the company failed to get .995 hectare of land (sold by the assessee to it) mutated in its name, it approached the assessee. On 31.10.2009, they entered into a Memorandum of Understanding (MOU) as per which the assessee agreed to compensate the company. Under the terms of the MOU, his wife Mrs. Beena Uniyal would sell her land measuring .4620 hectare to the company. The price of this land was fixed at Rs. 60,00,000/-. An amount of Rs. 4,00,000/- was paid by the company before signing of the MOU. Payment of Rs. 1,00,000/- was contingent upon removal of some minor error in the title deed of the land. Balance amount of RS.55,00,000/- would be paid if the assessee was able to clear the dispute in respect of the land sold by him to the company. If he failed to do so, the company would not pay the said sum of RS.55,00,000/-. 2.2. Assessing officer, in order to verify the claim of the assessee issued notices u/s 131 to the above persons who appeared, gist of their appearance is as under: -
(i) Shri Pradeep Bahuguna appeared and deposed before assessing officer confirming the deal but non-receipt of the part of payment.
However, in further questions he stated that out of the amount received from the assessee a major portion was paid to the person to free the encroachment of land and he did not know much about 4 ITA 3641/Del/2012 Sanjay Mohan Uniyal the particulars of the land due to lapse of time and he never visited the land. He did not now know the names and addresses of the persons to whom the amount was paid.
(ii) Shri Jai Kishan Bhatt also deposed on the same lines.
(iii) Shri Upender Singh Negi also confirmed the deal and replied that there was no document with the encroachers regarding the possession of the land. Besides, there was no pending court case in relation to this dispute. He had not taken any help of police or advocate for removal of encroachment.
(iv) Shri Ajit Kumar appeared who also deposed on the same lines, could not tell the names of the encroachers. It was also deposed that there was no construction on land, which was vacant. 2.3. The assessing officer carried out the inquiries through Inspector Shri Inder Jeet who submitted following report:
"In this regard, as per your directions, I along with Shri. Sanjeev Sachdeva, Sr. T.A of this office, visited the vii/age Danda Lakhond,· Paragana Doon, Dehra Dun, on Sunday i.e. on October 24, 2010 regarding enquiries in the case of Shri. Sanjay Mohan Uniyal for nearly 32 Bigas of land situated at Vii/age Danda Lakhond. The vii/age is on the road going to Sahashtra and the land is 11 situated nearly ~ to 1 Km. from the main Sahashtra Road. There is no pacca road to the land. On local enquiries and spot inspection, it was gathered that there was no boundaries on the land and no crops of structure etc were there on the land. Exactly near the land or attached to the land, there was no house or pakka structure etc. As it was stated that there is encroachment on the land, I found no such type of encroachment on the land. There was grass and other wild bushes on the land. I remained about M an hour on the 5 ITA 3641/Del/2012 Sanjay Mohan Uniyal land, and during this period only two three persons with some cows etc came, when I asked them that is someone does any type of farming on the land, they stated that no one does any type of farming on the land, and there is no encroachment on the land.
I was also directed to enquire about someone Shri. Anil Sharma, in the area. I asked from two three shopkeepers, and in many houses and no one was able to tell any where about of Shri. Anil Sharma, thus the notice of Shri. Anil Sharma is being remained unserved, which is being returned "
2.4. Assessing officer thereafter issued a notice to the assessee u/s 142(1) dated 8-12-2010 confronting the above statements. The assessee on 16-12- 2010 submitted following reply:
6(iv) The assessee replied to the show cause notice on 16.12.2010 as under:
"Your goodse/f has recorded the statements of all the four person with whom the assessee has entered into the agreement for the purpose of removal of encroachment. We have gone through the statements recorded by you and provided to us along with your above said notices. All the four Person have Confirmed the following that they a/l know Shri Sanjay Mohan Uniyal, they have al/ entered into an agreement for the purpose of removal of encroachment from the land situated at Danda Lakhond Dehradun, the amount of agreement, the payments received by them so far, how the payments were made to them, confirmed that they have issued receipts also for the payments received by them. They also confirmed that they have paid the amount to person who have encroached the above said land.
Now the question arises that the assessee submitted four agreements with your goodself carrying necessary details. Your goodself has cross examined the parties to the agreements. It is also beyond doubt that all the four persons 6 ITA 3641/Del/2012 Sanjay Mohan Uniyal appeared before your goodself and confirmed all those details which the assessee has submitted with your goodself.
The assessee has entered into agreement with these Four persons to avoid any sort of dispute be it legal, or otherwise with the encroachers and as a result of the agreements all these Four persons have taken the liability for removal of encroachment.
Now your goodse/f has Pointed out that there is no Proof of any expenditure made for removal of encroachment. The assessee has Provided the agreement which were confirmed by all the other Four Parties and they stand by the agreement even today and confirmed that they have received money from the assessee and also confirm that they are regularly in touch with the assessee for the balance Payments of money. As per all the materials available it is proved beyond doubt that the assessee has genuinely entered into agreements with these Four Person who confirmed it to and all the details as per agreement and as submitted by the assessee were also confirmed by them. Now if these persons have failed to provide details such as Names & addresses of the person who encroached the land, nature of disputes, evidences of payments made by them, agreements with the persons who encroached the land, and agreement of vacation of such land etc. They failed to show these amounts in there return of incomes. All this failure on the part of other parties cannot lead to the fact that the claim of the assessee is not genuine. The onus which lies on the assessee has been duly discharged and the name, Addresses, Identity details and contents of agreements were confirmed and provide beyond doubt. The assessee has duly discharged the onus lies on him and Proved that his claim is bonafide and should be allowed to him.
Your goodse/f fill appreciate that the Failure on the part of other parties could not held the assessee responsible and deprived him of his bonafide claim.
7 ITA 3641/Del/2012 Sanjay Mohan Uniyal Further your goodse/f some local enquiries and found that the land is free from any encroachment. It is respectfully submitted that kindly provide the details such as Names. Addresses, of the persons from whom these information were gathered which leads to the conclusion that the land was free from any encroachments.
In view of the above said submissions it is respectfully submitted that the expenditure claimed by the assessee is a genuine claim and not a bogus expenditure. Your goodself is requested to allow the expenditure."
2.5. Assessing officer, however, disallowed the claim of the assessee by following observations:
6(v) From the reply of the assessee and statement recorded under section 131 of the above four persons it is held that the expenditure is bogus, it is not made for the removal of encroachment from the said land as there is no dispute at all Shri Pradeep Bahuguna never visited the land and not knowing about the land then it is understood that he has not done any efforts for removal of encroachment as there is no encroachment at all.
As per the statement these persons could not clearly disclose the identity and address of the encroachers. Based on the facts and statement it is held that expenditure is bogus and accordingly expenditure Rs.43,67,0001- is disallowed which is claimed by the assessee as expenditure made for removal of encroachment from the said land. Penalty proceeding are also being initiated under section 271(1)(c) for furnishing inaccurate particulars of income."
8 ITA 3641/Del/2012 Sanjay Mohan Uniyal 2.6. Aggrieved, assessee preferred first appeal, where CIT(A) confirmed the addition. Aggrieved, assessee is before us.
3. Ld. Counsel for the assessee contends that the assessee has filed return of income on the basis of income from sale and purchase of land, short term capital gains, interest income and salary income. The assessee maintains books of accounts on mercantile system and disclosed the amount of sale value of land at Rs. 1 crore, qua which the liability of Rs. 43,67,000/- was claimed for removal of the encroachment in respect of this land. The liability incurred for determent of title and possession is allowable deduction The mutual agreement between the assessee and the said Company about clean title and possession could not be implemented in respect of .995 hectare of land as for the mutation thereof some of the local farmers had lodged their protests as being in possession of the respective piece of land and the assessee in order to avoid any unpleasant situation and protracted litigation in declaration of possession, solicited services of above four persons to resolve this issue amicably. These persons are local leaders/social workers who have influence over the farmers/ residents of that area. All the persons appeared and confirmed the transactions and having received the part payments from assessee and given to the encroachers to free the land. Thus, the recipients have admitted having entered into agreements with the 9 ITA 3641/Del/2012 Sanjay Mohan Uniyal assessee for removal of encroachment. All of these persons have confirmed the deals and stated before assessing officer that they were yet to receive some balance payment from the assessee for which repeated demands were made. The written agreements were filed by the assessee apart from their confirmation letters.
The assessee is following mercantile system of accounting; liability is allowable as the same was duly accrued by way of written agreements and entered in books. All the four persons appeared and accepted having rendered the services and distributed the amount, thus assessee has discharged its burden to establish the accrual of liability. Besides, subsequently actual payments have been made which have not been disputed. The entire premise of the disallowance by assessing officer and CIT(A) is based on suspicion and nothing more. It is a settled proposition of law that suspicion how so ever strong cannot take the place of positive evidence.
3.1. The Inspector was deputed after two years of the land deal and he has stated that there is no construction or encroachment on the land. Assessing officer failed to appreciate that for claiming possession what was required for farmers to lodge formal objections before the mutation authority. In open fields there cannot be a permanent structure or a visible proof of physical 10 ITA 3641/Del/2012 Sanjay Mohan Uniyal possession or presence of human being. Besides, when the amounts were already incurred, there was no purpose of any farmer remaining present on the site and claiming that he was earlier in possession, as the issue of possession was already settled. Thus, the Inspector's report does not reveal anything material at all to dislodge assessee's version. 3.2. Assessing officer has only drawn adverse inference further claimed that the four persons could not clearly disclose the identity and addresses of encroachers, the same cannot deny the claim inasmuch as the assessee has discharged its burden by producing the parties to whom assessee owed the money. They confirmed the deal along with written agreementsThe assessee did not owe any money to the encroachers directly but to the above 4 persons with whom the deals were made. Besides, the matter relates to F.Y. 2006-07 whereas statements of 4 persons were recorded in 2010. In these circumstances, the assessee cannot be put to jeopardy for the failure of the persons who entered into transactions with assessee in explaining to assessing officer further facts after a gap of four years. Except raising suspicion, surmises and conjectures, assessing officer has not brought on record any cogent evidence that the dispute did not exist or deals for removal of encroachments were not made with these 4 persons.
11 ITA 3641/Del/2012 Sanjay Mohan Uniyal 3.3. Besides, no inquiries have been carried out from the said Company M/s Prateek Resorts & Builders (P) Ltd., whether they have been given free possession of the land in one vow or there was any dispute about .995 hectare of land, which was settled letter.
3.4. Ld. Counsel for the assessee thus sums up his arguments:
(i) That the agreement between assessee and M/s Prateek Resorts & Builders (P) Ltd. has not been disputed.
(ii) The fact about problem and mutation of .995 hectare of land between assessee and M/s Prateek Resorts & Builders (P) Ltd.has not been disputed.
(iii) The fact that assessee had to deliver clear title and free possession to M/s Prateek Resorts & Builders (P) Ltd. has not been disputed.
(iv) The assessee has produced all the four parties to whom the amount was owed and subsequently paid for removal of encroachment.
Their statements were recorded before the assessing officer after four years. They confirmed the transactions and complained also that they were yet to receive some of their payments. In view of these facts, the incurring of the liability on mercantile system by the assessee cannot be doubted.
(v) The Inspector's report carries no value as it does not specifically deal with the issue of the earlier encroachment dispute and its settlement. It only vaguely hints at no presence of any encroachers, no physical structures and possession of any farmer. The fact of the matter is that encroachment was already removed at the time of his 12 ITA 3641/Del/2012 Sanjay Mohan Uniyal visit and in open field no encroacher would be found after settlement of disputie.
(vi) No corroborative evidence have been collected by assessing officer from M/s Prateek Resorts & Builders (P) Ltd.
(vii) The statements, confirmations and agreements filed by the above 4 persons have been ignored by the lower authorities without any justifiable reasons and disregarded only on guess work, surmise and conjectures. It is pleaded that the accrued liability being in respect of the land deal which is accepted by assessing officer, evidenced by books of accounts, written agreements, personal attendance of the recipients and their confirmations, the deduction should be allowed.
5. Ld. DR on the other hand contends that the assessee could not give any details about the names of the encroachers, the nature of the encroachment, the pieces of the land encroached. The Inspector's report clearly indicates that her was neither physical encroachment found nor the existence of any encroacher. Since the assessee failed to discharge its burden, the amount has been rightly disallowed.
6. We have heard rival contentions and perused the material available on record. The burden of the assessee to prove a fact is to be ascertained on the basis of material available on record. From the foregoings, it emerges that all the four persons who are claimed by the assessee to have been 13 ITA 3641/Del/2012 Sanjay Mohan Uniyal entrusted with the work of freeing the land from encroachment appeared before the assessing officer in response to summons u/s 131 after 4 years. They confirmed having helped the assessee in freeing the encroachment at the same time also complained that some of the amount was yet to be received. Copies of agreement between assessee and these persons were also filed. These entries are incorporated in assessee's books of accounts and it appears that assessee explained before assessing officer that in subsequent years some amounts are further paid to these persons. 6.1. Apropos this direct evidence, the objections of assessing officer are based on the observations that these four persons were not very elaborative in their statements and they did not give specific details of the land encroached. Further reliance has been placed on the Inspector's report, in our considered view, Inspector's report does not demonstrate any evidentiary value inasmuch as when the Inspector visited the fields, the encroachment was already removed i.e. that the sale took place. In land encroachment there cannot be any permanent structure and when such encroachment was already removed, there is no question of finding any encroacher physically present there. In these circumstances, we are unable to attach any importance to Inspector's report.
14 ITA 3641/Del/2012 Sanjay Mohan Uniyal 6.2. Coming back to assessing officer's adverse inference that the four persons could not spell out the further details about encroachment, raises some issue but at the same time the fact is to be ascertained by weighing the evidence produced by the assessee and observation of the assessing officer. The assessee claims that the inability of these four persons to give reply further question by assessing officer cannot put its claim in jeopardy inasmuch as from assessee's side sufficient direct evidence has been adduced, which is detailed above. Therefore, it becomes now a question about the weightage of direct evidence produced by the assessee and the inference being drawn by the assessing officer and CIT(A). In our considered opinion, the assessee maintains books of accounts and deals in land. The fact about mutation of .995 hectare of land between assessee and M/s Prateek Resorts & Builders (P) Ltd. has not been disputed by the assessing officer. On the scales of weighing of evidence and in these facts and circumstances of the case the weightage of evidence tilts in favour of the assessee in considerable terms as against the adverse inference of assessing officer. Direct evidence is to be considered and the adverse inferences which is drawn on questions after a lapse of time. In this situation, some issue about further corroboration are bound to arise but they do not wash away the evidentiary value of direct evidence produced by the assessee.
15 ITA 3641/Del/2012 Sanjay Mohan Uniyal 6.3. In the entirety of facts and circumstances mentioned above, we are inclined to hold that the assessee has discharged its primary burden to establish that this amount has been incurred for the above liability of free possession of sale of the land for Rs. 1 crore to M/s Prateek Resorts & Builders (P) Ltd. Thus it is to be allowed as a deduction.
7. In the result, assessee's appeal is partly allowed. Order pronounced in open court on 08-08-2013.
Sd/- Sd/- ( B.C. MEENA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 08th August 2013. MP Copy to : 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR