ORDER
Krinwant Sahay, Accountant Member.- Both the above appeals have been filed by the Assessee against the separate orders of Ld. CIT(A)-3, Gurgaon each dt. 30/09/2024 pertaining to Assessment Years 2020-21 and 2021-22 respectively.
2. Since both the above appeals were heard together therefore they are being disposed off by this consolidated order for the sake of convenience and brevity.
3. The assessee has raised following grounds in its appeal in ITA No 1164/Chd/2024 for the Assessment Year 2020-21:
| 1. | | That the order passed under Section 250(6) of the Income Tax Act, 1961 is bad in law and against the facts of the case. |
| 2. | | That the CIT (A) has erred in confirming addition to the tune of Rs. 400000/- out of total addition of Rs. 800000/- made by the AO u/s 69C on account of unexplained expenditure on foreign travelling. |
| 2.1 | | That the CIT (A) has erred in confirming addition to the tune of Rs. 400000/- without appreciating that the said expenditure was incurred on leisure trip to Canada out of regular income earned during the year under consideration and common pool of funds of the family members. |
| 2.2 | | That the CIT (A) has erred in confirming addition on adhoc basis without any cogent or credible evidence much less incriminating evidence. |
| 2.3 | | That the CIT (A) has erred in confirming addition on ad hoc basis without appreciating that all the expenses in respect of fare, hotel stay, lodging and food were incurred by assessee’s daughter who resided in Canada and as such, the addition confirmed to the tune of Rs. 400000/- is non tenable. |
| 3. | | That the CIT (A) has erred in confirming addition of Rs. 277415/- out of total addition of Rs. 693536/- made by AO on account of disallowance of vehicle running and maintenance expenses. |
| 3.1 | | That the CIT (A) has erred in confirming addition of Rs. 277415/- without appreciating that the vehicle was solely used for business purposes. |
| 3.2 | | That the CIT (A) has erred in confirming addition of Rs. 277415/- ignoring the nature of business conducted by the assessee which is a consumer oriented business and requires image building for which the vehicle was exclusively used. |
| 3.3 | | That the CIT (A) has erred in confirming addition of Rs. 277415/- without appreciating that more than 85% of the vehicle expenses account for insurance, interest on car loan and depreciation. That the CIT(A) has erred in not appreciating that the car was purchased specifically for the business and as such disallowance of expenses which relate to insurance, depreciation and interest on car loan is bad in law. |
| 4. | | That without prejudice to the aforesaid, the disallowance on account of use of vehicle for personal purposes can only be made in respect of vehicle running and maintenance expenses and not insurance, depreciation and interest on car loan. |
| 5. | | That the CIT (A) has erred in confirming addition to the tune of Rs. 34110/- made by the in respect of unexplained investment in jewelry. |
| 5.1 | | That the CIT (A) has erred in confirming addition to the tune of Rs. 34110/- on account of unexplained investment in jewelry without appreciating that the said investment was made out of amount withdrawn from proprietorship concern M/s Barn Foods. |
| 6. | | That the CIT (A) has erred in confirming addition to the tune of Rs. 711525/- on surmises and conjectures in the absence of incriminating material on record. |
| 7. | | That the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off. |
4. The assessee has raised following grounds in its appeal in ITA No 1165/Chd/2024 for the Assessment Year 2021-22:
| 1. | | That on the facts and circumstances of the case and in law, the CIT(A) has erred in confirming a part of the additions made by the AO vide order passed u/s 143(3) of the Income Tax Act, 1961 dated 31.03.2022 which is without jurisdiction. |
| 2. | | That the CIT(A) has erred in not appreciating that the assessment order passed without adhering Digital Evidence Investigation Manual and without following the procedure as per section 65B of Indian Evidence Act, 1872 (Indian Evidence Act) is bad in law. |
| 3. | | That on the facts and circumstances of the case and in law, the CIT(A) has erred in confirming the addition to the tune of Rs. 1,49,00,000/- made by the AO on account of ON MONEY in respect of cash receipts on sale of immovable property. |
| 3.1 | | That the CIT(A) has erred in confirming the addition of Rs. 1.49 crore made by the AO without appreciating that the AO failed to record the statements of purchaser or witnesses. |
| 4. | | That the CIT(A) has failed to appreciate the fact that the seized document relied upon by the AO could not be considered to be correct as the sale deed was executed in the name of firm M/s Krishna Poultries and the seized document is in the name of Latiza Singla. |
| 4.1 | | That on the facts and circumstances of the case and in law, the CIT(A) has erred in brushing aside the recitals so recorded in the validly executed registered sale deed against the seized agreement which was not in the name of the buyer. |
| 4.2 | | That on the facts and circumstances of the case and in law, the CIT(A) has erred in not appreciating that the photocopy of document is not a permissible evidence in terms of Indian Evidence Act 1872. That the CIT(A) has erred in not appreciating that the AO has erred in not following the manual for the use of digital evidence. |
| 5. | | That the CIT(A) has erred in disregarding the fact that the land in question was always agreed to be sold for Rs. 94 lacs only and the balance consideration was on account of birds, stock, equipments, shed etc which was renegotiated at Rs. 18,80,000/-instead of Rs. 1,49,00,000/- due to death of birds in bird flu. |
| 5.1 | | Without prejudice to the aforesaid grounds, the CIT(A) has totally erred in confirmed the impugned addition of Rs 1,49,00,000/-in the hands of appellant as even in the worst-case scenario, the addition could have been made only to the tune of Rs. 1,30,20,000/- as per the documentary evidences submitted to the tune of Rs. 94,00,000/- and Rs. 18,80,000/-. |
| 4. | | That on the facts and circumstances of the case and in law the ld. A.O. has erred in making the impugned addition of Rs. 4,02,605/-in the hands of appellant u/s 69 on account of unexplained investment in jewelry. |
| 4.1 | | That on the faces and circumstances of the case and in laws the Ld. AO has totally erred in making such impugned addition of Rs. 4,02,605/- In the hands of appellant rejecting the submissions made by the appellant that such jewelry was refurbished and in the worst-case scenario also, the addition could have been made is only for the making charges and nothing else. |
| 5. | | That the CIT (A) has erred in confirming addition to the tune of Rs. 191074/- out of total addition of Rs. 477686/- made by the AO on account of disallowance of vehicle running and maintenance expenses. |
| 5.1 | | That the CIT (A) has erred in confirming addition to the tune of Rs. 191074/- without appreciating that the vehicle was solely used for business purposes. |
| 5.2 | | That the CIT (A) has erred in confirming addition to the tune of Rs. 191074/- ignoring the nature of business conducted by the assessee which is a consumer-oriented business and requires image building for which the vehicle was exclusively used. |
| 6. | | That the CIT (A) has erred in confirming addition to the tune of Rs. 191074/- without appreciating that more than 85% of the vehicle expenses account for insurance, interest on car loan and depreciation. That the CIT(A) has erred in not appreciating that the car was purchased specifically for the business and as such disallowance of expenses which relate to insurance, depreciation and interest on car loan is bad in law. |
| 6.1 | | That without prejudice to the aforesaid, the disallowance on account of use of vehicle for personal purposes can only be made in respect of vehicle running and maintenance expenses and not insurance, depreciation and interest on car loan. |
| 7. | | That on the facts and circumstances of the case, the Ld. Additional Commissioner of Income Tax, Range Central failed to apply due application of mind in giving approval u/s 153D of the Act and as such the order deserves to be quashed on this ground alone. |
| 8. | | That the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off. |
5. Brief facts of the case as per the order of the Ld. CIT(A) for AY 2020-21 and AY 2021-22 are as under:
5.1 That the appellant was covered under the search action so conducted over M/s Universal Educational Society &Desh Bhagat Memorial Educational Trust (‘UES’&’DBMET’ for short). The jurisdiction of this case was transferred to the office of Ld. A.O. – ACIT- Central Circle II, Chandigarh vide order under section 127of the Income Tax Act, 1961.
5.2 Accordingly, assessment in the case under consideration has been made u/s 153A r.w.s 143(3) of the Act, vide order dated 31.03.2022 by the Ld. A.O.
5.3 During the course of assessment for AY 2020-21, total addition of Rs.85,68,276/- has been made by the Ld. AO. Thereafter, 154 application was made and the additions after giving effect of 154 order were restricted to 18,47,276/- The issues regarding the additions made in the impugned order by AO are as under:
| Sr. No. | Brief regarding Issues of Addition | Amount (Rs.) |
| 1. | Adhoc addition on account of foreign travelling expenditure | 8,00,000/- |
| 2. | Disallowance of expenses claimed on vehicle running and maintenance to 50% extent | 6,93,536/- |
| 3. | Disallowance on adhoc basis for interest payment on loans (through proper banking channels) raised from Guneet Singh Sandhu and Sukhwinder Singh Sandhu during the year | 3,19,630/- |
| 4. | Undisclosed investment in jewelry | 34,110/- |
5.4 For the Assessment Year 2021-22, the addition was made on the basis of a photocopy of an agreement to sell, allegedly retrieved from WhatsApp chats of the appellant’s husband, Mr. Sukhwinder Singh. The said agreement pertained to the sale of a poultry farm to Ms. Latiza, wife of Shri Abhinav Singhla, for a consideration of Rs.2,43,00,000/-, as against the declared sale consideration of Rs.94,00,000/- made to “Krishna Poultries” as per the regular books of account. Accordingly, an addition of Rs.1,49,00,000/- was made. In addition to the above, the Assessing Officer further made disallowances on account of personal expenses, including vehicle usage of Rs.4,77,686/- and investment in jewellery of Rs.4,02,605/-.
6. Against all the additions made by the AO, the assessee has preferred an appeal before the CIT(A), who has partly allowed the appeal and partly confirmed the additions made by the AO for AY 2020-21 and 2021-22. The summary of the additions confirmed by the CIT(A) for AY 2020-21 are as under: –
| Sr | Nature of additions | Amount (IN Rs.) |
| 1. | Adhoc addition on account of foreign travelling expenditure | 4,00,000/- |
| 2. | Estimated disallowance for Personal use of vehicle (Restricted to 20% as against 50% made by the AO) | 2,77,415/- |
| 3. | Jewelery | 34,110/- |
| Total addition | 7,11,525/- |
7. The summary of the additions confirmed by the CIT(A) for AY 2021-22 are as under: –
| Sr.No | Nature of additions | Amount (IN |
| 1. | Alleged Cash received from sale of immovable property | 14,90,00,00/- |
| 2. | Estimated disallowance for Personal use of vehicle (Restricted to 20% as against 50% made by the AO) | 1,91,074/- |
| 3. | Jewelry | 4,02,605/- |
| Total addition | 1,54,93,679/- |
8. That the facts in both the appeals are common and, for common issues, the counsel has preferred to take up the appeal for the assessment year 2020-21 as the lead case, specifically relating to the disallowance of foreign travel expenditure, estimated use of vehicle, and jewellery.
9. That the Ld. counsel argued that the addition of Rs.4,00,000 made on account of foreign travel, as confirmed by the CIT(A) for AY 2020-21, was made merely on an estimated basis without proper verification. It was further submitted that all the travel expenses relating to Canada were borne by the husband, Shri Sukhwinder Singh, and in support of this, a copy of the bank statement from Indian Bank has been enclosed at page no. 21-26 of the paper book, where the payment made to the travel agent (Grand Travelers) amounting to Rs. 1,12,144/- is clearly reflected.
10. The Ld. counsel also submitted that no material was found during the course of the search relating to other boarding and lodging expenses. It was further explained that the daughter of the appellant is a permanent resident of Canada, and all the boarding and lodging expenses were borne by her. The said fact has also been accepted by CIT (A) while giving the partial relief.
11. The AR also submitted that the provisions of Section 69C of the Income-tax Act, 1961 cannot be invoked in the present case, as there is no evidence on record indicating that any expenditure was actually incurred by the assessee. Both the Assessing Officer and the CIT(A) have proceeded merely on presumptions, without any tangible material to support the estimation. In the absence of any concrete evidence and in view of the accepted fact that the trip was funded by the daughter, the addition made in the hands of the assessee is wholly unwarranted and liable to be deleted and relied upon the following case laws:-
| (a) | | ACIT v. Naresh Tharesh Tharani 2024 (1) TMI 479 – (ITAT Indore). |
| (b) | | Dy. CIT v. Chander Sheikhar 2024 (12) TMI 895 -ITAT Amritsar |
| (c) | | Adarsh Cooperative Bank Ltd. v. ACIT 2017 (6) TMI 1303- ITAT Jodhpur |
| (d) | | Pawan Kumar Jaggi v. ACIT 274 (Delhi)/ 2022(6) TMI 1527-ITAT Delhi |
| (e) | | Dr. Balbir Singh Tomar v. ACIT 2018 (4) TMI 1988 -ITAT Jaipur |
12. The Ld. CIT DR relied upon the order of CIT(A) and argued that the estimated addition on account of foreign travelling expenses should be confirmed.
13. We have carefully considered the arguments advanced by the Ld. Counsel for the assessee, the paper book filed, the judicial precedents relied upon, as well as the brief synopsis submitted. We have also taken into account the submissions of the Ld. CIT-DR, the assessment order, and the order of the Ld. CIT(A). The fact of search and seizure operation conducted on 28.01.2021 is not in dispute. It was further explained that the daughter of the assessee is a permanent resident of Canada and that all her boarding and lodging expenses were borne by her. It was also submitted that the travel expenses relating to Canada were borne by the husband, Shri Sukhwinder Singh, and in support thereof, a copy of the bank statement from Indian Bank has been placed at page nos. 21-26 of the paper book, wherein the payment made to the travel agent (Grand Travelers) amounting to Rs.1,12,144/- is clearly reflected. In the absence of any cogent evidence brought on record by the Revenue to the contrary, and considering the explanation tendered by the assessee, we are of the view that the addition of Rs.4,00,000/- sustained by the Ld. CIT(A), merely on estimation basis, particularly in a search case, is not justified. Such an addition, being without supporting material, cannot be sustained in law and is accordingly directed to be deleted.
14. That the Ld. CIT(A) confirmed an addition of Rs.2,77,415 for Assessment Year 2020-21 on account of alleged personal use of vehicle, and Rs.1,91,074 for Assessment Year 2021-22 on the same ground. The Ld. CIT(A) sustained these additions by restricting the estimation to 20% of the total vehicle expenditure debited in the regular books of account for both years. The assessee has challenged these additions before us.
15. It was submitted by the AR that the disallowance @20% confirmed by the CIT(A) was purely on an estimated basis, without bringing any cogent evidence on record to demonstrate that the vehicle in question was actually used for personal purposes.
16. As per the submissions of the Ld. AR, the present case pertains to a search assessment, wherein no incriminating material was found or brought on record to support such estimation-based disallowance. Despite this, the Ld. CIT(A), while partly allowing the appeal and restricting the disallowance to 20%, failed to appreciate that the assessee’s capital account reflects total withdrawals of Rs.3,37,489/- and Rs.1,57,74,074/- for AY 2020-21 and AY 2021-22, respectively, which are sufficient to meet the household and personal expenses. Furthermore, it was submitted that expenses for other personal vehicles, including fuel, have already been separately debited in the capital account. Therefore, the confirmation of disallowance to the extent of 20% by the Ld. CIT(A) is without justification and is liable to be deleted. In support of the contention, the Ld. AR also placed on record the copy of the capital account.
17. The Ld. AR further relied upon judicial precedents and contended that no addition can be sustained in the absence of any incriminating material found during the course of search. In this regard, reliance has been placed on the following case laws:
| (a) | | UEM India (P.) Ltd. v. Addl. CIT 387 (Delhi – Trib.), |
| (b) | | Arpit Marbles (P.) Ltd. v. Asstt. CIT 52 (Jaipur – Trib.), |
| (c) | | A.B. Hotels Ltd. v. Asstt. CIT 156/68 SOT 255 (Delhi – Trib.) |
| (d) | | ACIT v. Jindal Poly Films Ltd536 (Delhi – Trib.) |
| (e) | | CIT v. S.S.P. (P.) Ltd. 386 (Punjab & Haryana), |
18. The Ld. CIT DR relied upon the order of CIT(A) and argued that the estimated addition on account of travelling expenses should be confirmed.
19. We have carefully considered the arguments advanced by the Ld. Counsel for the assessee, the paper book filed, the judicial precedents relied upon, as well as the brief synopsis submitted. We have also taken into account the submissions of the Ld. CIT-DR, the assessment order, and the order of the Ld. CIT(A). The fact of search and seizure operation conducted on 28.01.2021 is not in dispute. In the absence of any cogent evidence brought on record by the Revenue to the contrary, and considering the explanation tendered by the assessee, we are of the view that the additions of Rs.2,77,415/-and Rs.1,91,074/-, sustained by the Ld. CIT(A) for AYs 2020-21 and 2021-22 respectively, merely on estimation basis, are not justified. The assessee has already demonstrated sufficient withdrawals to meet household requirements, and in the context of a search assessment, such ad hoc disallowances, without any supporting material, cannot be sustained in law. Accordingly, the additions sustained by the Ld. CIT(A) are directed to be deleted.
20. The Ld. CIT(A) has confirmed an addition of Rs.34,110/- in respect of jewellery for the assessment year 2020- 21 by relying upon a jewellery bill dated 28th October 2020. Similarly, for the assessment year 2021-22, the CIT(A) has confirmed an addition of Rs.4,02,605 based on jewellery bills seized during the course of search.
21. As per Ld. AR the addition of Rs.34,110/- for AY 2020-21 is uncalled for, as the said amount represents investment sourced from withdrawals of Rs.1,57,489/-, separately reflected in the capital account of the assessee’s proprietorship concern, M/s Baron Foods. The Ld. CIT(A), however, without properly appreciating the facts and without considering that the amount stood duly accounted for in the capital account, proceeded to confirm the addition in respect of jewellery. That as per AR the addition of Rs.34,110/- is unwarranted and deserve to be deleted.
22. It was further submitted by the AR that the assessee has been regularly filing income tax returns for the past 15 years and has consistently disclosed reasonable household drawings amounting to Rs.29,96,242/- from the proprietorship business, which clearly establishes the financial capacity to acquire the jewellery in question. Similarly, the assessee’s husband has also been regularly filing his return of income and has made total withdrawals of Rs.56,37,761/- over the last 10 years. Thus, the aggregate family withdrawals of Rs.86,34,003/- are more than sufficient to explain the jewellery addition of Rs.4,02,605/- for AY 2021-22.Moreover, it has been held in various judicial pronouncements that while considering additions on account of jewellery, the Assessing Officer should also take into account the status, customs, and traditions of the family.
23. It is also submitted by the AR that the husband of the assessee made a withdrawal of Rs.10,55,000 during the financial year 2019-20, and this withdrawal, when coupled with the assessee’s own funds, clearly establishes the availability of sufficient funds.
24. In support of this contention, the Ld. AR placed reliance on the following case laws:
| i. | | Ankit Sharma v. Dy. CIT, Central 2023(10) TMI 1406 (ITAT- Del) (Relevant para 14,15,19) |
| ii. | | Ashok Chaddha v. ITO 387/[2011] 337 ITR 399 (Delhi)/(2011) 7 TMI 142 – (Delhi HC) (Relevant para 3, 4) |
| iii. | | Mrs. Jasmine Anand v. ACIT, Central (2023) 10 TMI 1056 (Relevant para 18,22,24) |
| iv. | | Ganga Saran Sharma v. Dy. CIT (2023) 10 TMI 1405 (ITAT-Delhi) (Relevant para 8, 11) |
| v. | | Ms. Pooja Shree Chouksey v. ACIT (2020) 1 TMI 1134 (Relevant para 8,11) (ITAT Indore) |
| vi. | | Smt. Chhavi Anand v. ACIT (2021) 10 TMI 657 – (ITAT Delhi) (Relevant para 13) |
25. The Ld. CIT DR relied upon the order of CIT(A) and argued that the addition on account of jewellery bill amounting to Rs. 34110 for AY 2020-21 and 402605 for AY 2021-22 should be confirmed.
26. We have carefully considered the arguments advanced by the learned counsel, the paper book filed, the judicial precedents relied upon by the assessee, as well as the brief synopsis submitted by the AR. It is noticed that the total withdrawals of the family members over the past 10 years amount to Rs.86,34,003, which are more than sufficient to explain the jewellery bills of Rs.34,110 and Rs.4,02,605. Further, it is noted that the husband of the assessee made a withdrawal of Rs.10,55,000 during the financial year 2019-20, as per the paper book at page nos. 28-29, which is sufficient to explain the jewellery expenses, particularly when considered in the light of the family’s status, past returns, and customary practices. Moreover, the jewellery bills found during the course of search are not substantial, and the total value of jewellery held by the family members was below the threshold prescribed in CBDT Instruction No. 1916.
26.1 At this stage, reliance is also placed on the judgment of the Hon’ble Delhi High Court in Ashok Chaddha (supra), wherein it was held that jewellery found during search, not being very substantial, could not be treated as unexplained, especially considering that the assessee was married for more than 25-30 years and that it is a normal custom for women to receive jewellery in the form of “stree dhan” or on other occasions such as marriage, birth of a child, etc. Following the ratio laid down therein, and considering the holistic facts of the present case, we are of the view that the addition sustained by the CIT(A) is without basis and is directed to be deleted.
27. That the CIT(A), relying upon a photocopy of the agreement to sell, confirmed the addition by stating that the assessee had received an amount over and above the registered sale consideration of Rs.1,49,00,000.The CIT(A) further held that the total deal was made for Rs.2.43 crores, whereas the registry was executed for Rs.94,00,000. The assessee’s arguments that due to bird flu all the birds died, the price was negotiated at Rs.94 lakhs, and no cash was received, were not accepted by the CIT(A), considering the digital evidence and a handwritten payment schedule recovered from the husband of the assessee. Accordingly, the CIT(A) confirmed the addition made by the Assessing Officer.
28. That for AY 2021-22, the Ld. AR submitted a brief synopsis and contended that the addition confirmed by the Ld. CIT(A) is bad in law, particularly in view of the fact that the registered sale deed was executed with “Krishna Poultries,” whereas the seized agreement to sell was with Smt. Latiza and, therefore, cannot be relied upon. It was further submitted that during the relevant period, there was an outbreak of bird flu, and these facts were duly brought to the notice of the Investigation Officer by the husband of the assessee. The Ld. AR also argued that no statement of either the assessee or the alleged buyer was recorded during the course of search or assessment proceedings in relation to the seized photocopy of the agreement retrieved from the mobile phone.
| (a) | | That the entire case has been built solely on the basis of a single photocopy of scanned agreement to sell, allegedly retrieved from the whats app chat between assessee’s husband, Shri Sukhwinder Singh and Abhinav Singla. |
| (b) | | That the said photocopy of the agreement to sell dated 08.09.2020, relied upon by the department, is alleged to be between the appellant as the seller and Ms. Latiza w/o Abhinav Singla as the buyer, for a consideration of Rs.2,43,00,000/-. |
| (c) | | It is further submitted that as per the contents of the said unverified agreement to sell, a sum of Rs.63,00,000/- is stated to have received as advance—out of which Rs.20,00,000/- was purportedly received by cheque (No cheque number mentioned) and Rs.43,00,000/- in cash. The agreement further mentions that an additional Rs.40,00,000/- was to be received by 10th November 2020, another Rs.40,00,000/- by 10th December 2020, and the remaining balance was to be paid at the time of registration of the sale deed. |
| (d) | | Further, the department has also placed reliance on a slip dated 27.10.2020 allegedly retrieved from the mobile phone of Shri Sukhwinder Singh, which was purportedly sent by one Mr. Abhinav to Sukhwinder Singh. An attempt has been made to link this slip with the aforesaid unverified photocopy of the agreement to sell.(Please refer page no 6 and 7 of the Assessment Order). |
| (e) | | The slip relied upon the department neither mentions the name of the property or poultry farm nor provides any details regarding the payment purportedly to be received. It also fails to specify whether the figures indicated are in lakhs or crores. In the absence of such essential particulars, the slip is vague, unsubstantiated, and lacks any evidentiary value. |
| (f) | | It is a matter of record that the sale deed of the said land in question was executed in the name of the partnership firm M/s Krishna Poultries, in which Ms. Latiza is one of the partners. This clearly indicates that the transaction, if any, was undertaken by the partnership firm and not with the party with whom the agreement to sell was made. (Please refer page no 6 of the Assessment Order). Therefore, no adverse inference can be drawn against the appellant on the basis of agreement to sell as ultimate sale was made with different seller. |
| (g) | | It is a matter of record that Sh. Abhinav Singla, from whose mobile number the alleged WhatsApp message was sent, is not a partner in the partnership firm M/s Krishna Poultries, in whose name the sale deed was executed. Therefore, any communication originating from his number cannot be attributed to in the hands of the appellant as the poultry farm along with land was ultimately sold to Krishna Poultries and not to Latiza. |
| (h) | | It is a matter of record that the statement of the appellant’s husband Sukwinder Singh as recorded under Section 131(1A) dated 15.07.2021, wherein he categorically clarified that no cash was received in as mentioned in the agreement to sell. He further explained that the transaction involved the sale of the poultry farm along with the birds; however, due to an outbreak of bird flu, the birds perished prior to completion of the sale.(Please refer page no 24 of the Assessment Order) Consequently, the final sale consideration for the land, inclusive of the poultry infrastructure, was renogotiated at Rs.1,12,80,000/-, and the same was duly reflected in the books of accounts. |
| (i) | | It is a matter of record that sale deed and separate agreement for sale of birds dated 12.01.2021 was executed by the appellant in favour of the partnership firm M/s Krishna Poultries, amounting to Rs.94,00,000/- and Rs.18,80,000/- respectively. Accordingly, the total sale consideration for the poultry farm including land aggregated to Rs.1,12,80,000/-. The AO erred in comparing the agreement with only sale deed of Rs. 94 Lakhs. |
| (j) | | Your Honour will appreciate that the Ld. CIT(A), while confirming the addition, has failed to take into account the fact that there exists a separate and independent agreement for the sale of poultry birds and feed grains, executed on 12th January 2021, for a consideration of Rs.18,80,000/-. This agreement predates the date of search and is a contemporaneous document available on record. Accordingly, by no stretch of imagination can it be alleged that the explanation offered by the assessee is an afterthought or a concocted story. The said agreement is duly supported by payment received through banking channels, which further reinforces the genuineness of the transaction and establishes the factual correctness of the assessee’s explanation |
| (k) | | At para 25, page 28 of the assessment order, the Ld. AO has rejected the assessee’s explanation by observing that the bird flu outbreak occurred between December 2020 and January 2021, whereas the alleged agreement to sell is dated 8th September 2020, and hence, the explanation is an afterthought. The said assertion of the Ld. Assessing Officer is incorrect and misplaced, particularly in light of the fact that a separate and duly executed agreement for the sale of birds existed well before the date of search, as has already been brought on record. Moreover, the assumption of AO is not acceptable, particularly in view of the fact that this is a search case, and no undisclosed asset or investment was found during the course of the search to support the allegation that cash, allegedly received under the agreement, was utilized or deployed elsewhere. Therefore, the rejection of the assessee’s explanation is arbitrary and without factual foundation. |
| (l) | | The Ld. AO has further stated that even if it is assumed that the assessee’s explanation regarding the loss of birds in December 2020 to January 2021 was merely an error of recollection (Relevant Page No 28 of Assessment Order), the plea is still not acceptable due to the absence of documentary evidence regarding the number of birds and their death. It is respectfully submitted that the Assessing Officer has rejected the assessee’s explanation solely on the basis of lack of documentary evidence, without appreciating the exceptional circumstances prevailing at that time. That the Ld. Assessing Officer has failed to appreciate and give due credence to the statement of the assessee’s husband as well as the separate agreement entered into for the sale of birds with the firm M/s Krishna Krishna Poultries. Both pieces of evidence are contemporaneous and directly relevant to the issue at hand, and the disregard of the same renders the assessment order perverse and unsustainable in law. Even otherwise during the relevant period, there was a severe outbreak of bird flu in poultry farms across various parts of India, compounded by restrictions due to the COVID-19 pandemic. The situation was widely reported in mainstream media and social platforms, and the events of that period are matters of public knowledge. Hence, the assessee’s explanation is not only bona fide but also supported by the agreement to sell. |
| (m) | | During the appellate proceedings before the Ld. CIT(A), it was categorically submitted that no statement of the alleged buyer was ever recorded either during the assessment proceedings or thereafter. Further, no proceedings have been initiated or reopened in the case of the buyer. It is a settled principle of law that parties to the same transaction or agreement cannot be subjected to different treatments by the department. Accordingly, in the absence of any adverse material or action against the buyer, the sale consideration as stated in the registered sale deed should be accepted as the correct and final transaction value, and not the unverified figure mentioned in the alleged agreement to sell. |
| (n) | | It was further submitted that not even the statement of any witness to the alleged agreement was recorded to confirm the transaction. In the absence of examination or verification of the witnesses named in the purported agreement, the document remains uncorroborated and lacks evidentiary value. This further weakens the foundation of the addition made solely on the basis of an unverified photocopy of the alleged agreement to sell. |
| (o) | | Additionally, no inquiry whatsoever was conducted by the Assessing Officer from the alleged buyer during the assessment proceedings. The failure to examine the buyer—who is an essential party to the purported agreement—renders the entire addition unsupported by any independent verification or corroborative evidence, thereby making it arbitrary and unsustainable in law. |
| (p) | | It is most respectfully submitted that no statement of the appellant, who is the alleged seller under the purported agreement to sell, was recorded either during the course of the search or in the post-search proceedings. The said agreement to sell was confronted to the appellant only during the assessment proceedings. In the absence of any contemporaneous statement or verification during the search, and without any corroborative evidence, reliance on an unverified photocopy of the agreement is unjustified and renders the addition legally untenable. |
| (q) | | It is a matter of record that the partnership firm was constituted on 11th September 2020, whereas the agreement relied upon by the department is dated 8th September 2020. This clearly establishes that the alleged buyer, as mentioned in the agreement to sell, was not a party to the transaction as mentioned in the sale deed. That the firm did not exist on the date of the purported agreement. Hence, the agreement to sell cannot be attributed to the sale deed, and no legal sanctity can be attached to such a document in relation to the parties to the sale deed. |
| (r) | | It is a settled position of law, as upheld by various judicial pronouncements, that a mere photocopy of an agreement— without any corroboration or verification—cannot be treated as valid evidence for making an addition. In the absence of the original document or confirmation from the parties involved, such a photocopy lacks evidentiary value and cannot form the sole basis for assessing undisclosed income. |
| (s) | | In this regard, reliance is placed on the judgment of Harvinder Kaur v. Asstt. CIT [ITA Nos. 691 and 692 of 2023]/(2025) 39 NYPTTJ 798 (chd) decided by the Hon’ble ITAT, Chandigarh Bench, wherein it was held that no addition can be made solely on the basis of an image of a document recovered from a mobile phone, in the absence of any statement recorded during the search or post-search proceedings, and where no independent enquiry was conducted to verify the authenticity of the document. The Hon’ble Tribunal further held that in the absence of any corroborative evidence showing receipt of on-money or unaccounted consideration, such addition is unsustainable in law. (Page No 1-4 of Case Law Paper book) |
| (t) | | Similarly, reliance is placed on the judgment of the Hon’ble Bombay High Court in the case of Principal CIT v. Umesh Ishrani 437 (Bombay), wherein it was held that no addition can be made solely on the basis of a loose paper without conducting any inquiry or verification from the alleged seller of the property. The Hon’ble Court emphasized that in the absence of independent inquiry, from the seller/shops of the developers and solely relying upon digital record cannot be the basis for making an addition. (Page No 5-6 of Case Law Paper book) |
| (u) | | This view has been consistently followed by the Hon’ble ITAT, Mumbai in the case of Asstt. CIT v. layer Exports (P.) Ltd. 620 (Mumbai) IN THE ITAT MUMBAI BENCH ‘A’ Assistant Commissioner of Income-tax, Central Circle-21, Mumbai v. layer Exports (P.) Ltd. wherein it was held that no addition could be sustained merely on the basis of uncorroborated notings and scriblings on loose sheets of paper without making proper inquiry. (Page No 7-56 of Case Law Paper book) |
| (v) | | Furthermore, reliance is also placed on the judgment of the Hon’ble ITAT, Surat Bench in the case of ACIT v. Shanker Nebhumal Uttamchandani 536 (Surat-Trib.) (Relevant para 7), where it was categorically held that no addition can be made on the basis of images retrieved from digital evidence unless the department brings on record corroborative and conclusive evidence to prove the receipt of unaccounted or on-money. |
| (w) | | Furthermore, reliance is also placed on the judgment of CIT v. Khandelwal Shringi & Co 410/398 ITR 420 (Rajasthan), where it was categorically held that |
Unexplained investment in purchase of agricultural land – sale agreement and other documents found and impounded during the course of survey under section 133A – Held that:- In the absence of evidence on record, higher price for sale of land cannot be presumed from the consideration shown in registered sale deeds and rates of property fixed by the Stamp Valuation Authority for registration purposes cannot be taken to be the price for which the property might have been sold. Thus, there was no justification for the Assessing Officer to use the agreement to sell 13.25 hectares of land at Rs. 8.25 crores that was never executed, and the offer to purchase 10.21 hectares, a part of the same 13.25 hectares, for Rs. 7 crores that was not accepted and taken to a logical conclusion, as evidence of fair market value of the land in question. Besides these two the Assessing Officer did not bring any other evidence to show that the market value of the impugned 10.21 hectares was Rs. 7 crores.
The comparison by the Assessing Officer between qualitatively different agreements with completely different terms and conditions was not appropriate. The Assessing Officer did not bring on record any evidence to show that the appellant had indeed paid Rs. 7 crores to Satya Narain Kanchhal and Rukmani Devi Kanchhal for land admeasuring 10.21 hectares – Decided in favour of assessee.
| (x) | | Furthermore, reliance is being place on the following case laws:- |
| I. | | K.P. Varghese v. ITO 13 (SC)/1981 (9) TMI 1 – SUPREME COURT. |
29. We have carefully considered the arguments advanced by the learned counsel for the assessee, the paper book filed, the judicial precedents relied upon, as well as the brief synopsis submitted by the Ld. AR. We have also taken into account the submissions of the Ld. CIT-DR. After perusing the material available on record and considering the rival contentions, the summary of arguments raised and our final findings thereon are as under:
29.1 Basis of Addition:-
It is observed that the addition has been made solely on the basis of (i) a photocopy of a scanned agreement to sell dated 08.09.2020, allegedly retrieved from WhatsApp chats, and (ii) a slip dated 27.10.2020 retrieved from the mobile phone of the assessee’s husband. Neither of these documents bears independent corroboration, nor has the genuineness of the same been verified from the alleged buyer,seller or witnesses. Reliance on such unverified documents, without inquiry, is legally untenable.
29.2 Nature of the Agreement
The alleged agreement to sell is only a photocopy and is uncorroborated by the signatures of the partners of Krishna Poultries. It also contains vague details regarding the mode of payment. Importantly, the purported cheque numbers are missing, and the alleged cash component is unsupported by any contemporaneous evidence. It is a settled legal position, as held in various judicial precedents, that a mere photocopy or loose sheet, without independent corroboration, cannot constitute admissible evidence for the purpose of making an addition. Furthermore, the partnership firm with whom the actual registered sale deed was executed came into existence only on 11.09.2020, whereas the agreement to sell relied upon by the Revenue is dated 08.09.2020. Reliance on such a document, therefore, is unwarranted and cannot be made the basis for sustaining the addition.
29.3 Parties to the sale deed and parties to the agreement are not common
The record clearly shows that the actual transaction (sale deed) was executed with the partnership firm M/s Krishna Poultries and assessee through a registered sale deed dated 12.01.2021, and not with the individual named Ms. Latiza as alleged in the agreement. As stated above, the firm was constituted on 11.09.2020, whereas the alleged agreement is dated 08.09.2020, when the firm itself was not in existence. This contradiction renders the alleged agreement unreliable.
29.4 Sale Consideration Duly Explained
The assessee has further demonstrated that the poultry farm transaction in fact comprised two distinct components, namely: (i) sale of land and infrastructure amounting to Rs.94,00,000/-, and (ii) sale of poultry birds and feed amounting to Rs.18,80,000/-. Thus, the total consideration of Rs.1,12,80,000/- stands duly reflected in the regular books of account and is supported by corresponding banking records. The Assessing Officer erred in disregarding the second agreement relating to the sale of birds. The contention of the Ld. AR is bona fide and merits acceptance, particularly as the ultimate sale was made to “Krishna Poultries” and not to Smt. Latiza.
29.5 Statement under Section 131(1A)
The statement of Shri Sukhwinder Singh, husband of the assessee, recorded under section 131(1A) of the Act, clearly clarifies that no cash was received and that the final sale value was renegotiated owing to the outbreak of bird flu. This explanation is consistent with the contemporaneous agreements executed between the parties and also aligns with the fact of the bird flu outbreak in December 2020-January 2021, which is a matter of public knowledge. The rejection of such explanation by the Assessing Officer on mere presumptions, without bringing any contrary material on record, is arbitrary and unsustainable in law.
29.6 Failure of Inquiry by Department
The Assessing Officer neither recorded the statement of the alleged buyer nor examined any witness in connection with the purported agreement. Further, no adverse proceedings were initiated in the case of the buyer to corroborate the allegations made. Also, no statement of the seller was recorded. In the absence of such basic inquiries or supporting evidence, the addition made by the Assessing Officer cannot be sustained.
29.7 No Corroborative Evidence from Search
It is also significant to note that this being a search case, no cash, assets, or incriminating investments were found to corroborate the alleged receipt of on-money. The absence of any such discovery during the course of search further weakens and negates the Revenue’s case.
29.8 We are of the considered view that no enquiry was conducted by the Assessing Officer from the buyer, and even the statement of the seller was not recorded. In this regard, reliance is placed on the judgment of the coordinate bench in the case of Harvinder Kaur (supra), wherein it was held that no addition can be made solely on the basis of an image or document recovered from a mobile phone, in the absence of any statement recorded during the course of or post search, and without any independent enquiry being conducted to verify the authenticity of such documents. Accordingly, any addition made under such circumstances is required to be deleted. Similarly, reliance is placed on the judgment of the Bombay High Court in the case of Umesh Ishrani reported in 108 437, where it was held that no addition can be made without conducting proper enquiry and verification from the seller of the property. In the present case, no enquiry has been conducted by the department, and therefore the addition made by the Assessing Officer is unsustainable and liable to be deleted.
30. In view of the above discussion and relying on the judgment relied upon by the Ld. AR, we find no justification for the addition confirmed by the Ld. CIT(A). Accordingly, the additions are directed to be deleted, and the appeal of the assessee is allowed.
31. In the result, both the above appeals of the Assessee are allowed.