2025 (3) TMI 1432 - AT - Income Tax

ITAT Delhi deletes unexplained investment addition for Sagar Plaza flat sale lacking proper agreement documentation

ITAT Delhi ruled in favor of the assessee regarding unexplained investment in Sagar Plaza flat sold 14.29% above circle rate. The AO and CIT(A) ... Unexplained investment - Sagar Plaza flat having been sold at value 14.29% above the circle rate - AO strangely concluded “kachi parchi” is not rough jotting but an agreement to sell for the immovable property writing down all the conditions for transfer of property - HELD THAT:- There is material substance in the submissions advanced on behalf of the assessee / appellant that hand written kaccha Slip did not exist as not found and seized by the search party and even upon the same, no mention of name of assessee and such a slip is can’t said to be in the handwriting of the assessee / appellant. The contention of the AR having force that upon the slip in question, there is no any name mentioned of witness or also no signature of any witness in order to endorse / establish the veracity of alleged document and above all there is no any signature of the assessee upon it. Strangely, the Ld. CIT(A) confirms the observation of the Ld. AO by treating kachi parchi as agreement to sell and both the lower authorities ignored the basic principles of law, that for a valid agreement to sell of immovable properly, it needs to be in writing include key details like parities, property description, price, payment terms and timelines, and be signed by both parties, ideally with witnesses and registered with the sub-register’s office and in present case it is admitted fact that there is no signature of parties and witnesses upon it. Unless and until, the contents of the documents are proved against a person, the possession of the document or hand writing of that person, on such document by itself cannot prove the contents of the documents. On the basis of above fact situation, we are of the considered opinion that the Ld. AO made addition in question only on the basis of surmises and conjectures, which was erroneously confirmed by the Ld. CIT(A) in quite unsustainable, in the eye of law and deserves to be deleted. Appeal of assessee is allowed ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in the judgment include:Whether the addition of Rs 67,53,135 to the assessee's income based on alleged unexplained investment is tenable in law.Whether the reliance on a screenshot image of a 'kaccha parchi' found on a broker's mobile phone as evidence for the addition is legally valid.Whether the proceedings under sections 153C and 143(3) of the Income Tax Act, 1961, were conducted in accordance with the law.Whether the disallowance of Rs 53,135 under 'Income from House Property' is justified.Whether the principles of natural justice were violated due to non-provision of certain statements and materials to the assessee.ISSUE-WISE DETAILED ANALYSIS1. Addition of Rs 67,53,135 to IncomeRelevant legal framework and precedents: The addition was made under Section 69 of the Income Tax Act, 1961, which deals with unexplained investments. The legal requirement is for the assessee to satisfactorily explain the nature and source of the investment.Court's interpretation and reasoning: The Tribunal found that the addition was based on conjecture and lacked substantive evidence. The primary evidence was a screenshot of a 'kaccha parchi' from a broker's mobile, which was neither signed nor witnessed, and did not mention the assessee's name.Key evidence and findings: The 'kaccha parchi' was not seized during the search, and its authenticity was questionable. An affidavit from the broker, Pravin Jain, indicated that the slip was a personal record and not an agreement.Application of law to facts: The Tribunal concluded that the evidence did not meet the legal standards required to substantiate the addition under Section 69.Treatment of competing arguments: The Revenue argued that the 'kaccha parchi' was an agreement, but the Tribunal rejected this, emphasizing the lack of signatures and witness testimony.Conclusions: The addition of Rs 67,53,135 was not sustainable in law and was directed to be deleted.2. Reliance on 'Kaccha Parchi' as EvidenceRelevant legal framework and precedents: The validity of evidence in tax proceedings requires it to be credible and legally admissible.Court's interpretation and reasoning: The Tribunal highlighted that the 'kaccha parchi' lacked legal sanctity as it was unsigned, unwitnessed, and not seized during the search.Key evidence and findings: The broker admitted in an affidavit that the slip was not an agreement but a personal record.Application of law to facts: The Tribunal found that the slip could not be considered a valid agreement or evidence of cash transactions.Treatment of competing arguments: The Tribunal dismissed the Revenue's argument that the slip was sufficient evidence, citing the lack of corroborative details.Conclusions: The reliance on the 'kaccha parchi' was deemed legally untenable.3. Proceedings under Sections 153C and 143(3)Relevant legal framework and precedents: These sections pertain to assessments and reassessments in cases of search and seizure.Court's interpretation and reasoning: The Tribunal noted procedural irregularities, including the absence of a Document Identification Number (DIN) on satisfaction notes.Key evidence and findings: The procedural lapses were highlighted, questioning the validity of the proceedings.Application of law to facts: The Tribunal emphasized adherence to procedural norms for valid assessments.Treatment of competing arguments: The Tribunal found the procedural lapses significant enough to question the proceedings' legality.Conclusions: The proceedings were deemed procedurally flawed.4. Disallowance under 'Income from House Property'Relevant legal framework and precedents: Section 23 of the Income Tax Act pertains to the determination of income from house property.Court's interpretation and reasoning: The Tribunal did not find sufficient grounds to uphold the disallowance.Key evidence and findings: The disallowance lacked substantive justification.Application of law to facts: The Tribunal found the disallowance unsustainable.Conclusions: The disallowance was deleted.5. Principles of Natural JusticeRelevant legal framework and precedents: The principles require fair hearing and disclosure of evidence used against a party.Court's interpretation and reasoning: The Tribunal noted that the assessee was not provided with certain statements and materials.Key evidence and findings: The non-disclosure was seen as a violation of natural justice.Application of law to facts: The Tribunal emphasized the need for transparency and fairness.Conclusions: The violation of natural justice principles contributed to the decision to delete the additions.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'The reliance on the 'kaccha parchi' as evidence is legally untenable due to its lack of signatures, witness testimony, and the absence of the assessee's name.'Core principles established: Evidence used in tax assessments must be credible, legally admissible, and procedurally sound.Final determinations on each issue: The Tribunal allowed the appeal, directing the deletion of the additions and disallowances made by the lower authorities.