The Commissioner Of Income Tax, Patiala (Punjab v. Shri Harpal Singh

IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH Income Tax Appeal Nos.474 & 475 of 2007DATE OF DECISION: JANUARY 31, 2008 The Commissioner of Income Tax, Patiala (Punjab) .....APPELLANT Versus Shri Harpal Singh ....RESPONDENT CORAM:HON'BLE MR.JUSTICE SATISH KUMAR MITTALHON'BLE MR.JUSTICE RAKESH KUMAR GARG --- Present:Mr. Yogesh Putney, Advocate,for the appellant. .. SATISH KUMAR MITTAL, J. This order shall dispose of two appeals i.e. ITA Nos.474 and475 of 2007 filed under Section 260A of the Income Tax Act, 1961 by theDepartment against the order dated 9.3.2007 passed by the Income TaxAppellate Tribunal, Chandigarh (hereinafter referred to as `ITAT') in ITANos.363 & 364/Chd/2005 preferred against the respondent/assessee forthe years 2001-02 and 2002-03, raising the following substantialquestions of law for consideration of this Court:- (i) Whether the ITAT was right in confirming the order ofCIT(A) in favour of the assessee by stating that theseller has retracted his statement based on which theA.O. had made the addition in view of the fact that theassessee cannot be allowed to retract from an earlieradmission by mere statement?CIT(A) in favour of the assessee by stating that theseller has retracted his statement based on which theA.O. had made the addition in view of the fact that theassessee cannot be allowed to retract from an earlieradmission by mere statement? (ii) Whether the ITAT was right in confirming the order ofCIT(A) in favour of the assessee by stating that theassessee was not provided opportunity to cross examinethe seller in view of the fact that the right to crossCIT(A) in favour of the assessee by stating that theassessee was not provided opportunity to cross examinethe seller in view of the fact that the right to cross I.T.A.Nos.474 & 475 of 2007 -2- examine is not necessarily a part of reasonableopportunity? In the present case, the assessee purchased 17.5 and 21 acresof agricultural land on 14.12.2000 and 9.4.2001, on behalf of Avtar Singhand Smt.Satinder Kaur (NRIs.), situated at village Kalalmajra from oneSatinder Pal Singh for a consideration of Rs.38,35,000/- andRs.46,32,500/-, respectively, @ Rs.2,30,000/- per acre. The payment ofthe sale consideration was made from NRI account No.01190057727belonging to aforesaid Avtar Singh and Smt.Satinder Kaur. The Assessing Officer on receiving the information from theAssistant Director of Income Tax (Investigation), Ludhiana along with acopy of statement of the seller Satinder Pal Singh, recorded by theInvestigating Wing of the Department in which the seller had admittedthat he had sold the land in question @ Rs.4.00 lacs per acre, but the saledeed was got registered @ Rs.2.30 lacs per acre, issued notices underSection 148 of the Income Tax Act (hereinafter referred to as `the Act')for the assessment years 2001-02 and 2002-03. After hearing the assessee,the Assessing Officer while relying upon the statement of Satinder PalSingh recorded by the Investigating Wing of the Department, which hesubsequently retracted, assessed the value of the land purchased by theassessee @ Rs.4.00 lacs per acre and framed the assessment while addingRs.38.65 lacs for the assessment year 2001-02 and Rs.46,32,500/- for theassessment year 2002-03 under Section 69B of the Act by treating thesame as investment from undisclosed sources. Aggrieved against the aforesaid order of assessment, theassessee filed two separate appeals before the Commissioner of Income I.T.A.Nos.474 & 475 of 2007 -3- Tax (Appeals), Patiala which were allowed by the Appellate Authority on3.2.2005 while making the following observations:- Aggrieved against the aforesaid order of assessment, theassessee filed two separate appeals before the Commissioner of Income I.T.A.Nos.474 & 475 of 2007 -3- Tax (Appeals), Patiala which were allowed by the Appellate Authority on3.2.2005 while making the following observations:- “....The Ld. AO has heavily relied upon the statementrecorded by the ADI (Inv), Ludhiana on 18.9.2001 in whichthe seller has deposed that apart from the registration deed hehad received Rs.72,00,000/- from the appellant in fiveinstallments. This statement has been perused by me and it isfound that the contents of this statement regardingdeclaration of extra money received from the purchasers hadnot been substantiated by him either in the same statement orthrough his subsequent conduct. Neither the ADIT (Inv) northe Ld. AO has brought any adverse material to substantiatethe contents of the said statement relied upon by them despitethe retraction of the same. Unless, some money orconsideration is proved to have been actually passed on tothe seller, mere controversial one time confession of theseller that had been retracted by him later on, cannot help thedepartment in view of the ratio of Hon'ble Supreme Court inthe famous case of KP Vergese. Moreover, the Ld. AO hadalso not given any opportunity to the appellant in the interestof natural justice to cross examine the seller. Since, it is acase of an agent working for NRI masters and no concreteevidence has been brought on record to strengthen his case, itis difficult to concur with the views of the Ld. AssessingOfficer that the appellant had indeed paid any amount overand above the registered sale deed. There is no dispute thatthe seller was not able to tell the appropriation of money asto where he invested the alleged money and also that no assethad been found by the ADI (Inv), Ludhiana in consonancewith so called confession to corroborate his view and supportthe passing of any money. Clearly in the instant case, theDepartmental stand has not been substantiated with properevidence. Rather, in the case of the seller Sh. Satinder PalSingh who is being assessed with ITO, Ward-III, Khanna, the I.T.A.Nos.474 & 475 of 2007 -4- Ld. AO while completing his assessment after detailedscrutiny has categorically accepted that he had sold the landto the appellant in the capacity of agent of NRIs for a sum ofRs.38,35,000/- only in this year. 6.1 In view of the above discussion, I am of the consideredopinion that the Ld. AO was not justified in adding the sumof Rs.38.\,65,000/- in the hands of the appellant treating thesame as investment from undisclosed sources. Hence thesame is deleted.” The Department being not satisfied with the orders of the Commissioner of Income Tax (Appeals), filed two separate appeals beforethe ITAT. The said appeals were dismissed by the ITAT on 9.3.2007 bythe impugned order while observing as under:- I.T.A.Nos.474 & 475 of 2007 -4- Ld. AO while completing his assessment after detailedscrutiny has categorically accepted that he had sold the landto the appellant in the capacity of agent of NRIs for a sum ofRs.38,35,000/- only in this year. 6.1 In view of the above discussion, I am of the consideredopinion that the Ld. AO was not justified in adding the sumof Rs.38.\,65,000/- in the hands of the appellant treating thesame as investment from undisclosed sources. Hence thesame is deleted.” The Department being not satisfied with the orders of the Commissioner of Income Tax (Appeals), filed two separate appeals beforethe ITAT. The said appeals were dismissed by the ITAT on 9.3.2007 bythe impugned order while observing as under:- “....After considering the entire conspectus of facts and thelegal position, we are inclined to hold that in so far as factualposition is concerned, there is no clinching evidence ormaterial with the revenue to justify the inference that theassessee has made investment in the purchase of lands overand above the amount stated in purchase deed. The entirecase of the revenue is built on the statement made by theseller before the ADI (Inv.), Ludhiana on 18.9.2001 in whichit is deposed that he has received money over and above theamount stated in the registered Purchase/Sale Deed. We areunable to accept the veracity of the said statement for morethan one reason. Firstly, the said statement has subsequentlybeen retracted that such retraction was very much before theADI (Inv.), Ludhiana. The said statement as well as thesubsequent retraction was also before the assessing authoritywho had assessed the return of income filed by the seller Sh.Satinder Pal Singh. We have perused the said assessmentorder placed at pages 13 to 29 of the paper book and findthat the stated consideration has been accepted. TheAssessing Officer in the case of the seller has referred to the I.T.A.Nos.474 & 475 of 2007 -5- information received from the Investigating Wing in para 1itself, therefore, it is not a case where the said assessingauthority was unaware of the information gathered by theInvestigating Wing of the department. In spite of the same,the assessing authority has independently verified theposition and has not inferred that no consideration over andabove the stated consideration has changed hands. thirdly,we also notice that the present assessee, in the course ofassessment proceedings, specifically contested the allegedadmission by Sh. Satinder Pal Singh and requested that theassessee be allowed to cross examine the said person. Thereis nothing on record to indicate the reasons as to why theassessing authority failed to allow cross examination,specially when the only evidence with the assessingauthority was the alleged statement of the seller. Therefore,the said statement has been put to use by the revenue withoutit being tested. For all the above reasons, we are inclined toaffirm the conclusion of the CIT (A) that the aforesaid pieceof evidence cannot be used to justify the impugned addition.8. Apart from the aforesaid, the issue can also be seen froma different angle. In this case, it is an accepted position thatthe GPA holder has purchased the property for and on behalfof two NRIs. In this connection, the NRI namely, Sh. AvtarSingh explained before the assessing authority the details ofthe sources of funds. It is evident from the submissions madebefore the income tax authorities that the funds ofinvestment in land purchase came out of the bank accountsmaintained by the said NRI with State Bank of India, Sector17, Chandigarh. The entire credit and debit entries credit inthe said accounts were also sought to be explained. The saidSh. Avtar Singh also placed an affidavit to state that theentire amount used for purchasing the land was remittedfrom abroad. Therefore, the entire factual position in thisregard was before the assessing authority. In the face of such I.T.A.Nos.474 & 475 of 2007 -6- evidence, there is no material with the revenue as to thesource from where the assessee in question could haveutilized money from undeclared sources. In fact, in the entireexercise, the Assessing Officer has not even made anyattempt to inquire the sources from where the assessee couldhave met the requirements of payment of on-money.Therefore, the presumption that whatever is stated on theregistered deed is correct unless the contrary is proved bycredible evidence, clearly applies in the instant case.”Against the said order, the aforesaid two appeals have been filed. After hearing the counsel for the appellant and going throughthe impugned orders passed by the ITAT, we are of the opinion that theITAT has recorded a pure finding of fact after taking into considerationthe evidence/material available on the record to the effect that before theAssessing Officer there was no material or evidence to conclude that theassessee had paid a consideration over and above the amount mentionedin the registered sale deed, i.e.@ Rs.2.30 lacs per acre and the additionmade by him was without any basis. The only evidence/material availablebefore the Assessing Officer was the so called statement of Satinder PalSingh, which was recorded by the Assistant Director of Income Tax(Investigation), Ludhiana on 18.9.2001 in which he had deposed that hehad sold the land in question @ Rs.4.00 lacs per acre, and apart from theamount mentioned in the registered sale deed, he had received Rs.72.00lacs cash from the assessee in five installments. Undisputedly, saidSatinder Pal Singh subsequently retracted from his statement before theAssistant Director of Income Tax (Investigation), Ludhiana itself wherebyhe had confirmed that he had not received any amount over and above theconsideration stated in the sale deed. Further, it is also undisputed position that before the Assessing Officer said Satinder Pal Singh did notappear and made any statement nor an opportunity was granted to theassessee to confront the sale deed and cross-examine Satinder Pal Singhon the statement which he had made before the Assistant Director ofIncome Tax (Investigation), Ludhiana. In spite of all this evidence, theAssessing Officer made the addition under Section 69B of the Act only onthe basis of conjectures while observing that it is a well known practicethat the sale deeds of immovable properties are being registered at themuch lower rates than the rates prevailing in the markets. It is alsoundisputed fact that after selling of the land, Satinder Pal Singh wasassessed under the Act and at that time the sale value of the said land wastaken as indicated in the registered sale deed and that assessment hadbecome final. In our opinion, the ITAT has duly appreciated theevidence/material available on the record and various contentions raisedby the parties, and then came to the aforesaid conclusion, which in ourview, is a pure finding of fact which does not require any interference bythis court. Therefore, in our opinion, in these appeals no substantialquestion of law is arising from the impugned order for consideration ofthis Court. Hence, both the appeals are dismissed. (SATISH KUMAR MITTAL) JUDGE (RAKESH KUMAR GARG) JUDGE