2010 (8) TMI 594 - AT - Income Tax

Assessee's Explanation Rejected, Appeals Dismissed for Unexplained Income

The Tribunal upheld the CIT(A)'s decision, ruling that the assessee did not adequately explain the origin of the Rs. 5.50 lakh. The documents provided ... Search and seizure - Addition - assessee had credited a sum of Rs. 5,50 lakh in the capital account on or about 10-7-2002 - This confirmation does not contain detailed facts about purchase of land, part payments made, and final fate of the agreement - The question of testing the veracity of documents arises only when such documents are prima facie believable - as the documents are unbelievable and the conduct of the parties is against the conduct expected of a normal prudent person, it is held that the assessee has failed to furnish satisfactory explanation regarding the nature and source of the receipt of Rs. 5.50 lakh - In the result, the appeals for both the years are dismissed Issues Involved:1. Addition of Rs. 5,50,000 to the income of the assessee.2. Authenticity and evidentiary value of the agreement to sell and confirmation of payment.3. Conduct of the parties in relation to the agreement and payment.Issue-wise Detailed Analysis:1. Addition of Rs. 5,50,000 to the income of the assessee:The primary issue revolves around the addition of Rs. 5,50,000 to the assessee's income for the assessment year 2003-04. The assessee declared a total income of Rs. 76,100, but the Assessing Officer (AO) added Rs. 5.50 lakh to the total income, computing it at Rs. 6,26,100. This addition was based on an alleged increase in capital from an agreement to sell land. The CIT(A) confirmed this addition, leading the assessee to appeal.2. Authenticity and evidentiary value of the agreement to sell and confirmation of payment:The assessee presented an agreement to sell land and a confirmation letter from Shri Vimal Sharma to substantiate the receipt of Rs. 5.50 lakh. However, the CIT(A) found several discrepancies in these documents:- The agreement was on plain paper, not stamp paper, and lacked witnesses' addresses and dates.- The agreement mentioned a payment of Rs. 5.50 lakh on 10-7-2002, but the final registration was not completed even after eight years.- The confirmation letter from Shri Vimal Sharma was undated and lacked proof of identity.- The agreement and confirmation did not align fully, raising doubts about their authenticity.The CIT(A) concluded that these documents did not satisfactorily explain the accretion to the capital account, suggesting that they were prepared to create evidence supporting the cash receipt story.3. Conduct of the parties in relation to the agreement and payment:The conduct of the parties further cast doubt on the genuineness of the transaction:- Despite the agreement, the sale deed was not executed, and the land possession was not handed over.- The money received was not returned to the buyer, and no reasons were provided for the delay in registration.- The agreement was not found during the search operations, raising questions about its authenticity.The Tribunal noted that the behavior of the parties was inconsistent with that of prudent individuals, who would typically ensure the execution and registration of the sale deed promptly.Conclusion:The Tribunal upheld the findings of the CIT(A), affirming that the assessee failed to provide a satisfactory explanation for the nature and source of the Rs. 5.50 lakh receipt. The documents presented did not evoke confidence in their genuineness, and the conduct of the parties further undermined their credibility. Consequently, the appeals for both assessment years 2003-04 and 2004-05 were dismissed.Pronouncement:The order was pronounced in the open court on 20th August, 2010.