Commissioner Of Income Tax (Central) Jaipur v. Shri Prabhati Lal Saini

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR 1. D.B. Income Tax Appeal No. 140 / 2014 Commissioner of Income Tax (Central) Jaipur ----Appellant Versus Shri Prabhati Lal Saini S/o Shri Birda Ram Saini Dhani Naharwali,Pithawas, vilage- Hathoj, Kalwar Road, Jaipur. ----Respondent Connected With 2. D.B. Income Tax Appeal No. 141 / 2014 Commissioner of Income Tax (Central) Jaipur ----Appellant Versus Shri Sedu Ram Saini S/o Shri Birdha Ram Mali Dhani Naharwali, Pithawas, Vilage- Hathoj, Kalwar Road, Jaipur. ----Respondent 3. D.B. Income Tax Appeal No. 143 / 2014 Commissioner of Income Tax (Central) Jaipur Versus ----Appellant Shri Mangla Ram Saini S/o Shri Sunda Ram Saini Dhani Naharwali,Pithawas, Vilage-Hathoj, Kalwar Road, Jaipur. ----Respondent 4. D.B. Income Tax Appeal No. 144 / 2014 Commissioner of Income Tax (Central) Jaipur ----Appellant Versus Shri Nanag Ram Saini S/o Shri Suraj Mal Saini Dhani Naharwali, Pithawas, Vilage-Hathoj, Kalwar Road, Jaipur. ----Respondent 5. D.B. Income Tax Appeal No. 148 / 2014 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Shri Sunda Ram Saini, (HUF) through Karta Shri Hanuman Sahai Saini, Naharwali Dhani, Vilage hathoj, Mangalam City, Kalwad Road, Jaipur. ----Respondent 6. D.B. Income Tax Appeal No. 150 / 2014 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Shri Gopi Ram Saini (HUF) through Karta Shri Hanuman Sahai Saini, Naharwali Dhani, Vilage hathoj, Mangalam City, Kalwad Road, Jaipur. ----Respondent 7. D.B. Income Tax Appeal No. 151 / 2014 Commissioner of Income Tax (Central) Jaipur. ----Appellant Versus Shri Luna Ram Saini S/o Shri Birda Saini Dhani Naharwali, Pithawas, Vilage-Hathoj, Kalwar Road, Jaipur. ----Respondent 8. D.B. Income Tax Appeal No. 157 / 2014 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Shri Gopi Ram Saini, Naharwali Dhani, Vilage hathoj, Mangalam City, Kalwad Road, Jaipur. ----Respondent 9. D.B. Income Tax Appeal No. 230 / 2016 Pr Commissioner Of Income Tax, Jaipur-3, Statue Circle, C-Scheme, Jaipur. ----Appellant Versus Shri Sedu Ram Saini, Naharwali, Pithawas, Vilage-Hathoj, Kalwad Road, Jaipur, A.Y: 2005-06 ----Respondent _____________________________________________________ For Appellant(s) : Mr. Anil Mehta with Mr. Sameer Sharma & Mr. Gaurav Gaur Mr. Anuroop Singhi with Mr. Aditiya Vijay For Respondent(s) : Mr. R. P. Garg, Mr. Gunjan Pathak with Mr. Aditiya Bohra & Ms. Ishita Rawat _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 19/09/2017 1. In all these appeals since identical questions of law and factsare involved, they are decided by this common judgment. For theconvenience of the court, we have taken facts from Income TaxAppeal No. 140/2014. 2.By way of these appeals, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasallowed the appeal of the assessee. 3.This court while admitting the appeals framed the followingquestion of law:- 1. D.B. Income Tax Appeal No. 140/2014 "Whether ITAT is perverse in deleting the addition ofRs.67,49,680/- on account of Capital gains, ignoring theincriminating documents seized fromthe residence of theassessee and other persons, admission of key persons ofthe Group u/s 132(4) and the valuation report of theDVO proving that on-money was received on sale of landby the assessee." 2. D.B. Income Tax Appeal No. 141/ 2014 2.By way of these appeals, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasallowed the appeal of the assessee. 3.This court while admitting the appeals framed the followingquestion of law:- 1. D.B. Income Tax Appeal No. 140/2014 "Whether ITAT is perverse in deleting the addition ofRs.67,49,680/- on account of Capital gains, ignoring theincriminating documents seized fromthe residence of theassessee and other persons, admission of key persons ofthe Group u/s 132(4) and the valuation report of theDVO proving that on-money was received on sale of landby the assessee." 2. D.B. Income Tax Appeal No. 141/ 2014 “Whether the order of Tribunal is perverse indeleting the addition of Rs.69,12,400/- on account ofcapital gains on sale of land, ignoring the incriminatingdocuments seized, admission of the key persons of theGroup u/s 132(4), and the valuation report of the DVO, which proved that on-money was received on sale ofland by the assessee?” 3. D.B. Income Tax Appeal No.143/2014 “Whether ITAT is perverse in deleting the addition ofRs.76,81,215/- on account of Capital gains, ignoringthe incriminating documents seized from the residenceof the assessee and other persons, admission of keypersons of the Group u/s 132(4) and the valuationreport of the DVO proving that on-money was receivedon sale of land by the assessee.” 4. D.B. Income Tax Appeal No.144/2014 “Whether ITAT is perverse in deleting the additionof Rs.35,91,863/- on account of Capital gains, ignoringthe incriminating documents seized from the residenceof the assessee and other persons, admission of keypersons of the Group u/s 132(4) and the valuationreport of the DVO proving that on-money was receivedon sale of land by the assessee.” 5. D.B. Income Tax Appeal No.148/2014 “Whether on the facts and circumstances of the caseand in law the Hon’ble Tribunal has not acted perverselyin deleting the addition of Rs.4,19,82,789/- on accountof long term capital gain, ignoring the incriminatingdocuments seized from the residence of assessee andother persons, admission of key persons of the Groupu/s 132(4) and the valuation report of the DVO provingthat on-money was received on sale of land by theassessee?” 6. D.B. Income Tax Appeal No.150/2014 “(i) Whether on the facts and circumstances of the caseand in law the Hon’ble Tribunal has not actedperversely in deleting the addition of Rs.77,20,722/- onaccount of long term capital gain, ignoring theincriminating documents seized from the residence ofassessee and other persons, admission of key personsof the Group u/s 132(4) and the valuation report of theDVO proving that on-money was received on sale ofland by the assessee? (ii) Whether on the facts and circumstances of the caseand in law the Hon’ble Tribunal has not actedperversely in not deciding the ground relating todeletion of addition of Rs.30,00,000/- made by the A.O.u/s 68 of the Act on account of unexplained cashcredits?” 7. D.B. Income Tax Appeal No. 151/ 2014 “Whether ITAT is perverse in deleting the additionof Rs.67,26,150/- on account of Capital gains, ignoringthe incriminating documents seized from the residenceof the assessee and other persons, admission of keypersons of the Group u/s 132(4) and the valuationreport of the DVO proving that on-money was receivedon sale of land by the assessee.” 8. D.B. Income Tax Appeal No.157/2014 “Whether on the facts and circumstances of the caseand in law the Hon’ble Tribunal has not actedperversely in deleting the addition of Rs.1,28,26,725/-on account of long term capital gain, ignoring theincriminating documents seized from the residence ofassessee and other persons, admission of key personsof the Group u/s 132(4) and the valuation report of theDVO proving that on-money was received on sale ofland by the assessee?” 8. D.B. Income Tax Appeal No.157/2014 “Whether on the facts and circumstances of the caseand in law the Hon’ble Tribunal has not actedperversely in deleting the addition of Rs.1,28,26,725/-on account of long term capital gain, ignoring theincriminating documents seized from the residence ofassessee and other persons, admission of key personsof the Group u/s 132(4) and the valuation report of theDVO proving that on-money was received on sale ofland by the assessee?” 9. D.B. Income Tax Appeal No.230/2016 “Whether the Tribunal is justified in law in deleting thedisallowance of Rs.16,38,750/- made by the AO u/s54B despite the fact that the assessee did not purchasenew agricultural land in his name”. 4. Briefly stated, the facts of the case are tht a search and seizureoperation was conducted u/s 132 of the Income-tax Act, 1961,['the Act', for short] on 23.07.2004 at the residentia premises ofthe assessee at Dhani, Naharwali Pithawas, Village Hatoj, KalwarRoad, Jaipur. Consequent upon this search, a Return of Income(ROI) was filed by him on 11.09.2006 declaring total income ofRs. 4,09,788/-. From agricultural activities, an income of Rs.45,000/- for rate purposes was also shown. The assessee hasshown income from capital gain on the sale of land. The assesseesold a piece of land measuring 105.56 bighas by 14 personsjointly to Smt. Tara Gupta w/o Shri N.K. Gupta & Smt.Chandrakanta Agrawal w/o Shri Ram Gopal Saraf. The details of land sold alongwith the name(s) of the purchaser and seller(s),are as under: Sr. No.Name of theName(s) ofKharsra No.AreadofPurchaserthe Sellerland1Smt. TaraS/Shri Luna438 to 44524.45 bighaGuptaSaini,& 447PrabhatSaini & ShriSedu Saini2SmtTaraS/Shri438 to 4456.98 bighaGuptaMangal Ram& 447Saini3Smt. TaraS/Shri Gopi438 to 445 24.45 bighaGupta Saini&& 447Nathu RamSaini4Smt.S/Shri438 to 44541.91 bighaChandrakanHanuman& 447ta AgarwalSaini, ChotuSaini, GyarsiSaini,PanchuSaini,ShankarSaini,& Tribunal held as under:- 8. We have gone through the order 31.10.2011 [P.B33 to dated 47] passed by the settlementcommission. From this order it is apparent thatwhile considering the case of settlement of the'Mangalam Group' who had purchased this landfrom the Saini Group, that the rate or Rs. 10.68lakhs per bigha is the maximum rate and cannot bemade a basis for valuing the entire land of thisgroup. The farmers of that area have stated thatthe orders ranging between Rs. 2 lakhs to Rs. 10.68lakhs per bigha are prevalent in the area. TheSettlement Commission has clearly observed thatthe rates adopted by the department cannot beaccepted. We value the submission of the ld. CIT(DR) that other than Shri Narang Ram and ShriBodu Ram Saini, all other persons had theirundivided share in 97.90 bighas of land comprisedin Khasra Nos 438 to 445 and 447;then the ratesgiven cannot be different. He has supported theabove contention with the submission that in thecases of this group evidence supporting ratesadopted by the department have been found apartfrom the statement of one of them recorded u/s132(4) of the Act. However, we cannot accept theabove contention of the ld. CIT in its entirety.Firstly, the settlement has been done qua the sameland which has been purchased by the MangalamGroup and sold by the same Saini Group. So, two yardsticks cannot be applied to the sametransactions. Secondly, the statement recorded u/s132 (4) is not of the assessee and is of the thirdperson. Now let us examine the nature ofincriminating evidence found during the search.During the search, certain incriminating documentswere found from the residential premises of theassessee suggesting that on-money in cash wasreceived by the assessee. The assessee in hisstatement, has not accepted this fact but statementwas given by Shri Rajesh Mali s/o Shri Sedu Ram.An unsigned agreement executed with Shree KarniImpex by Sunda Ram HUF was found wherein landwas agreed to be sold @Rs. 11,21,000/- per bigha.The DVO has assessed the rate of the land at Rs9,31,625/- per bigina. The assessee has alsopurchased land by making cash payment andwithout making any cash withdrawals from thebank. In our considered opinion the above pieces ofevidence may be relevant but not decisive for thepurpose of making huge additions. When all theabove evidence are pitted against the order andfinding of the settlement commission in the case ofpurchaser, the Mangalam Group, differential viewcannot be taken in the cases of sellers, as hassuggested by the ld. CIT (DR). The assessee isundisputedly an illiterate person. Thus, muchimportance cannot be given to the statementsrecorded u/s 132(4) of the Act when it is stated bythe reasonings of the Settlement Commission.Admittedly, no cash was found during the course ofsearch and even the buyer was not interrogated inthis regard. Therefore, the statement recorded u/s132(4) cannot be relied on to make the addition.Further, Shri Rajesh Mali is not a party to thesetransactions. No opportunity to cross examine hiswas given to the assessee. In the case of shri SeduRam, admittedly similar additions made have beendeleted by the ld. CIT (A). Therefore, thecumulative effect of all the above facts and thecircumstances is that the impugned addition is notjustified. The report of the DVO has no relevance inthis case. It is also a fact that no direct evidenceregarding on money payment has been foundduring the search. Therefore, in view of thejudgment of the Hon'ble Rajasthan High Courtrendered in the case of CIT Vs. Raja Narendrareported as 210 ITR 250 [Raj] and that of theHon'ble Supreme Court in the case of CIT vs.Sivakami P). Ltd. 159 ITR 71 is not justified,de hors and proof [direct evidence] found duringsearch. Regarding cash payment allegedly made by the assessee to Smt. Badami Devi and ShriGangaram for purchasing their land is found to benot supported. In fact, the assessee purchased landfrom one Shri Birdichand on 31.7.2004 for aconsideration of Rs. 3 lakhs for which there is awithdrawal from the bank on the same date. Wecannot ignore the contention that in the purchasedeed from Shri Ganga Ram and smt. Badami Devidated 2.8.2004 for Rs. 11 lakhs where it ismentioned that cash was given on the date ofregistration but the cash could not be withdrawnand the document was registered as the partieswere know and had faith in each other. Inagricultural community, this is not an unusual thing.This version stands fortified by the affidavits of Smt.Badami Devi and Shri Ganga Ram which remaineduncontroverted. In the case of Shri Sunda RamSaini - HUF [one of the assessee's group] theld.CIT(A) has deleted the similar addition by makingthe following observations: "(i) From the facts of the case it appears that theonly basis for not accepting the sale considerationshown by the appellant is a document found fromthe residence of appellant coparcener during thecourse of search. It has been admitted by the AOthat the document is unsigned. As admitted thefacts written in the agreement were not foundcorrect. Neither the party appearing as a purchaserin agreement was found actual purchaser nor thatparty was examined by the A O. The cash receipt asshown in the agreement were also not founddeposited anywhere. The cheque mentioned in theagreement were also not found depositedanywhere. (ii) The very fact that the land was not sold to M/sKai Impex as appearing in the agreement bat soldto M/s. Manglam Group and there is no relationshipbetween M/s. Karni Impex and Manglam Group alsoindicate that the agreement has nothing to do withthe sale under consideration. (iii) None of the parties, mentioned in agreement,have accepted that they have entered into anyagreement with M/s. Karni Impex. (iv) Regarding the statement of some ofcoparceners most of the persons whose statementswere recorded are not coparcener of the appellantHUF. No evidence was established by Ao whichconfirmed the statement of Shri Mangla Ram. (v) Circumstantial evidences would have playedvital role had there been no search. Once a searchaction has taken place at the premises of the appellant and no evidence was found regarding thereceipt of cash or deposits of any cheque or anyinvestments made by the appellant HUF or itscoparcener only on the basis of third party'sstatement which is also not supported by any otherindependent evidence addition will not be justified.Addition cannot be made only on the basis ofstatement of some person unless it is substantiatedwith material on record. The AO had no suchindependent material on record. A search action u/s132 is supposed to be the last resort to collectmaterial against the assessee and in the presentcase search action has not resulted into anyrecovery of incriminating evidence or undisclosedinvestment in any form including deposits in Bankaccounts. vi) An unsigned agreement disowned both by theparties, not supported by any evidence and most ofthe fact proved to be wrong, cannot be relied upon.Addition not supported by material on record,deserve to be deleted. 9. In the case of Shri Luna Ram Saini, the followingobservations have been made by the ld. CIT (A) "Here the main issue is determination of actualreceipts of sale value of agricultural land on saleother than registered value by the registeringauthority shown by the assessee. The AOdetermined the sale value on the basis of ratesfollowing the unsigned agreement paper, calculationnotings and various statements of various persons.On the other hand no material could be brought onthe record by the A o the amount of actual receiptsby the assessee overhand above the value shown inthe registration by the registering authority. Thematerial discussed by the A.O in his order isundoubtedly good for presumption of rate of price ofsale of land but it is not the material for theevidence of actual receipts other than the valueshown in the registered deed which is vital necessityfor validly presumption of sale value receipts isother than the registered value in sale deed. Nomaterial could be brought to substantiate the actualreceipts of sale value more than registered value insearch and seizure operation. It is also fact that no opportunity for crossexamination was given to the assessee to crossexamine the statements of various persons usedagainst the assessee. The persons mentioned in theloose papers with the Some calculation sheet arealso not examined. It is also act that the unsignedagreement with Karni Impex is found to be not It is also fact that no opportunity for crossexamination was given to the assessee to crossexamine the statements of various persons usedagainst the assessee. The persons mentioned in theloose papers with the Some calculation sheet arealso not examined. It is also act that the unsignedagreement with Karni Impex is found to be not related with this transaction and in the remandreport the relationship between the Karni Impexand Mangalam Group, the actual purchaser couldnot be established. The transactions through chequementioned in the unsigned agreement is also notestablished in the bank statements of Karni Impexas per remand report. None of the partiesmentioned in agreements have accepted that theyentered into any agreement with M/s Karni Impexthere is mathematical equation tallying in thenotings the amount received by cheque and amountreceived in cash in the loose paper, it cannot be solebasis for addition unless and until the amount issubstantiated in material. No material wasestablished by the A o which confirm the receipt ofconsiderations more than the amount shown in theregistered value. The circumstantial evidences couldhave played a vital role had there been no search.Once search action is taken place at the premises ofthe appellant and no evidence, was found regardingthe receipt of cash or deposits or any cheques orany investments made by the appellant or its familymembers, only on the basis of third partystatements, own retracted statements which is alsonot supported by any other independent evidence,the addition cannot be justified. Addition cannot bemade on the basis of statements of some personsunless it is substantiated with material on record.The A. O had no such independent material onrecord. A search action u/s 132 is supposed to bethe last resort to collect material against theassessee and in present case search action has notresulted into any recovery of any incriminatingevidence or undisclosed investments in any formincluding deposits in bank accounts or cash in hand.An unsigned agreement disowned by both theparties not supported by any evidence cannot berelied upon. The only ground of valid presumption ofthe cash so received night be invested in newagricultural land purchased by way of cashpayment. In that case also there is no tax t as suchit is protected by provisions of section 54B of theincome-tax Act, 196 so there is no point to havesuch presumption also." 9.1 The above observations of the ld. CIT(A), infact, help the case of this assessee. In this case alsono concrete evidence that the assessee has receivedany on-money has been found. The followingobservations made by the ITAT in the case of ShriRajendra Prasad Saini vs. ITO in ITA No821/JP/2005 order dated 27.7.2007 is alsorelevant: 9.1 The above observations of the ld. CIT(A), infact, help the case of this assessee. In this case alsono concrete evidence that the assessee has receivedany on-money has been found. The followingobservations made by the ITAT in the case of ShriRajendra Prasad Saini vs. ITO in ITA No821/JP/2005 order dated 27.7.2007 is alsorelevant: "Considering the arguments advanced by theparties, we fully agree with the submission of theId. DIR that it is common practice in the case oftransaction of the property that undisclosed amountis paid in advance and remaining amount shown asconsideration of the property is paid at the time ofregistration of sale deed of the property. Butaddition cannot be made solely on the presumptionof this practice in absence of corroborative evidencein support. There is no doubt that there was somenarration about receipt of Rs. 13.25 lacs against thesale of house property in question on the paperseized during the course of survey operation butwhile relying upon the same, to justify an additionin income of the assessee the other factors cannotbe totally ignored. These material facts are that theseized paper was neither dated nor signed by theassessee or the seller of the property, the paperwas vague in as much as balance amount wasstated at Rs. 10,000 lacs and not Rs. 1 lacs and anagreement was also entered which was dulyattested by the Notary on 17.9.2001, a copywhereof has been placed at pages 48 to 50 of thepaper book regarding the sale of the property inquestion. In this agreement it has been specificallymentioned that the seller of the property hasreceived Rs. 10,000/- in cash at the time of signingthe agreement andRs. 9.90 lacs would bereceived in seven days at the time of registration.Thus in view of the agreement and sale deed, thecontents of paper seized, loose its reliabilitybesides, the sellers in their affidavit (pages 30 to 31o the paper book) have affirmed that the agreedconsideration for the sale of the property was Rs. 10lacs only. It is also established position of law thatan addition cannot be made solely on the basis ofsurrender made during the course of search orsurvey in absence of corroborative evidence insupport. Therefore, we order to delete the impugned additionand allow the appeal of the assessee. ITA No 1506 & Co 162 SHRI NANAG RAM SAINI 10. The Revenue has raised the following grounds: "1. In the facts and in the circumstances of thecase, the ld. CIT (A) has red in reducing the saleconsideration from Rs. 48,59,400/- to Rs.45,7o,000/- ignoring the statement of the assesseeu/s 132(4) supported by other corroborativeevidence. 2. On the facts and in the circumstances of thecase, the ld. CIT (A) has erred in increasing theinvestment eligible for deduction u/s 54B from Rs.8,14,000/- to Rs. 31,50,000/- relying on thestatement of the assessee u/s 132(4) without anysupporting evidences." 10.1 The assessee has raised the following crossobjection: "On the facts and in the circumstances of the case,the ld. CIT(A) has erred in confirming the action ofthe A.O of adopting the indexed cost of acquisitionat Rs. 53,597/- as against Rs. 17,28,000/- claimedby the assessee arbitrarily without appreciating thesubmissions made and evidence produced thus theaction of the id. CIT (A) being illegal and unlawfuldeserves to be struck down and the indexed cost ofacquisition declared by the assessee be allowed asdeduction for the purpose of computing capitalgains." With similar reasoning as we have given in the caseof Prabhati Lal Saini, we allow the cross objectionand dismiss Revenue's appeal. 6. In our considered opinion, the observations which are madeby the Tribunal are based on appreciation of facts and Tribunalbeing the last fact finding authority, no interference is called for. 7.In view of above, the issue in answered in favour of assesseeagainst the department. 8. All the appeals are dismissed. With similar reasoning as we have given in the caseof Prabhati Lal Saini, we allow the cross objectionand dismiss Revenue's appeal. 6. In our considered opinion, the observations which are madeby the Tribunal are based on appreciation of facts and Tribunalbeing the last fact finding authority, no interference is called for. 7.In view of above, the issue in answered in favour of assesseeagainst the department. 8. All the appeals are dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Gourav-B.M. G /74-82