TaxTMI 
TaxTMI 
2018 (1) TMI 1409
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....rder. ITA Nos. 665 and 474 are in relation to quantum additions whereas ITA No.666 is relation to the penalty levied u/s 271(1) (c) of the Income Tax Act. First we take up the appeals relating to the quantum additions. ITA No.665/Chd/2016 & 474/Chd/2017: 2. These appeals are interlinked as the impugned additions relate to the same transaction of sale and purchase of property. Assessee Mohinder Singh (since deceased through his legal heirs) was the seller of the property whereas assessee Malkiat Singh was the purchaser of the property. 3. The brief facts relevant to the issue under consideration are that during the election days, a police party intercepted the vehicle of Shri Mohinder Singh, assessee (since deceased, now represented through his legal heirs) and recovered the cash amount of Rs. 2,46,30,000/-. The information was also given to the income tax authorities who reached the police station and recorded the statement of Shri Mohinder Singh u/s 131 (1A) of the Income Tax Act. In his statement, Shri Mohinder Singh stated that he was an agriculturist and that the source of the aforesaid cash was from the sale of his agricultural land at Village Deelwal to one Shri Malkiat S....
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....t was concluded that Shri Malkiat Singh could not satisfactorily explained the source of the aforesaid amount and that the same was required to be assessed as unaccounted income u/s 69 of the I.T. Act in the hands of Shri Malkiat Singh. In the case of Shri Mohinder Singh, it was observed that had the cash not been seized by the police and requisitioned by the income tax department, Shri Mohinder Singh would never had paid capital gains tax. The Dy. Director of Income Tax (Investigation), Patiala accordingly in his appraisal report suggested the assessing officer to go through the relevant statements and the evidences an assess the unaccounted income of Rs. 2,46,30,000/- in the hands of Shri Malkiat Singh and Shri Mohinder Singh. The assessment proceedings accordingly were carried out in the case of Shri Mohinder Singh u/s 143(3) read with section 153A of the Act, [though mentioned by the AO as 153 B (1)(b)]. The assessment in the case of Shri Malkiat Singh was also reopened u/s 147 of the Act. 4. During the assessment proceedings in the case of Shri Mohinder Singh, the AO concluded that in the registered sale deeds the sale proceeds were mentioned at Rs. 42,37,500/- and the AO tre....
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....in the alleged sale deeds). He observed that the subsequent sales started immediately on the execution of the first sale deed and even prior to the execution of second sale deed by Shri Mohinder Singh (seller) to Shri Malkiat Singh (purchaser). He observed that such a huge profit was not possible in a short span of 3 days from the execution of first sale deed on 23.11.2012. The ld. CIT(A) observed that it could not be presumed that Mohinder Singh was unaware of the market rate of land sold to Shri Malkiat Singh. The Ld. CIT(A) further observed that even if, it is assumed that the assessee Sh. Mohinder Singh was not aware of the market price of his land at the time of execution of first sale deed but he could have refused the execution of second sale deed on 28.12.2012 at the rate of Rs. 730/- per square yard whereas, the purchaser Sh. Malkiat Singh had sold the land measuring 1300 square yards at a price of Rs. 3,899/- per square yard purchased by way of first sale deed at the rate of Rs. 625/- per square yard. The Ld. CIT(A) further observed that it was a general practice prevalent in rural area to execute sale deed at the circle rate rather than at actual settled sale considerati....
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.... and that the same was correctly written in the sale deeds. That there was no evidence that any extra money has been paid by Shri Malkiat Singh. That when the terms of a deed are required to be reduced into writing and also the said writing is required to be registered under the law, then the oral evidence in relation to the terms of such registered sale deed was not admissible. That even the amount was recovered from Shri Mohinder Singh on 26.2.2013 i.e. after a gap of 94 days of the execution of the first sale deed and after a gap of 22 days from the execution of the last sale deed on 4.2.2013. That the addition, if any is warranted, that has to be made in the hands of the persons from whom the cash was seized. The reliance of the lower authorities on the oral evidence of the seller and his son was misplaced as they were interested parties. That even during the assessment proceedings, Shri Mohinder Singh seller, did not appear before the AO rather a reply was filed by Shri Jasvir Singh, on his behalf, even that was not a sufficient or reliable evidence to assume that any consideration higher than that was depicted in the sale deed was paid by Shri Malkiat Singh to Shri Mohinder S....
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....as seized u/s 132 A from the person of Shri Mohinder Singh (seller). He explained that the entire amount was received as consideration on the sale of his agricultural land to Shri Malkiat Singh, however, the sale deed was executed at circle rate i.e. at Rs. 42,37,500/-. Further that the deal was settled in the office of Sh. Jagdev Singh, Prop. J.P. Property dealer. That prior to the execution of sale deed, an agreement to sell was also entered into and that Sh. Jagdev Singh was also witness to that agreement. ii) Statement of Sh. Mohinder Singh was instant and he had been consistent throughout on his aforesaid statement / explanation. iii) The aforesaid contention of Shri Mohinder Singh, the seller was further corroborated with the statement of Shri Jagdev Singh, Prop. of M/s J.P. Property Dealer. Even Shri Jasvir Singh S/o Shri Mohinder Singh, who was also a witness to the aforesaid sale deeds, reaffirmed the aforesaid averments in his reply to the assessing officer during the assessment proceedings in the case of Shri Malkiat Singh. iv) Shri Malkiat Singh, Seller, though purchased the land at a low rate of Rs. 600 to Rs. 800/- per square yard, but immediately sold it at a m....
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.... concerned, we find that the Sh. Jasvir Singh in his letter filed on 5.11.2015 (copy placed at pages 26 & 27) of the paper book) has mentioned that his father Sh. Mohinder Singh was critically ill and hospitalized in Sadhbhawna Hospital and that no adverse view in this respect be taken. Further a perusal of the impugned order of CIT(A) in the case of Sh. Mohinder Singh reveals that Sh. Mohinder Singh got expired on 10.11.2015 that is within next five days. Under the circumstances, no adverse inference is called for in this respect. Moreover Sh. Jasvir singh s/o Mohinder Singh was also a witness to all the three sale deeds in question, but the assessee Malkiat Singh did not choose to confront him in this respect. Except his own statement, Sh Malkiat Singh failed to produce any other plausible evidence to rebut the circumstantial evidences on the file that he had paid the amount over and above the sale consideration mentioned in the registered deed. From the above discussion, it can be concluded that an amount of Rs. 20392500/- was paid by Sh. Malkiat Singh to Sh. Mohinder Singh which was over and above the amount of Rs. 4237500/- depicted in the sale deed. 14. Now we have to examin....
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....1, then no evidence of any oral agreement or statement would be admissible as between the parties to any such instrument for the purposes of contracting, varying, adding to or subtracting from its terms. Whereas in section 92 of the evidence Act, the oral evidence is prevented for the purpose of varying the terms of the contract as between the parties to the contract, however, no such limitations are imposed under section 91 of the Act. Hence, even if a third party wants to establish a particular contract between certain others which has been reduced into writing or is required by law to be reduced into writing, can prove such contract only by production of such writing. (Meenakshisundram Pillai v. S.T. Chenchu Mudaliar and another AIR, 1928 M 459:109 IC 18). Further, it is settled law that unstamped or insufficiently stamped document cannot be used for any purpose. Section 35 of the Indian Stamp Act prohibits the use of any instrument chargeable with duty unless it is duly stamped. Even the Ld. counsel for the assessee Shri Malkiat Singh has placed reliance on the decision of Hon'ble Punjab & Haryana High Court in the case of 'Paramjit Singh Vs ITO' (supra). The Hon'ble High Cour....
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.... parties to the transactions chose to get it registered at a lower rate than actually agreed to? The answer, obviously, is to avoid payment of higher stamp duty, in other words, to defraud the state exchequer. The seller as well as the purchaser connived with each other to falsely represent to the concerned public authority / land revenue officer entrusted with the work of registration and collection of stamp duty about the sale consideration at a far less amount than that was actually agreed to. In our view, It is not fraud or misrepresentation to that that public officer in person, rather the same is with the 'State' as the said officers being its employee act on behalf of the 'State'. The aforesaid act of misrepresentation regarding the sale consideration has not caused any personal loss to the aforesaid official, but financial loss to the State Exchequer. The income tax authorities being revenue officials are also the public authorities appointed for the collection of income tax revenue for the state exchequer. The question before us is when a person commits fraud with the State or the Govt. at one stage misrepresenting to an employee/ public authority of one department of the ....
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....ngs under the Income Tax Act was that the rigour of the rules of evidence contained in the Evidence Act, was not applicable but that does not mean that when the taxing authorities were desirous in invoking the principles of the Evidence Act in proceedings before them, they were prevented from doing so. The Hon'ble Supreme Court further observed that salutary principle of common law jurisprudence embedded in the Evidence Act could be applied to the taxation proceedings. 17. As discussed above, the provisions of sections 91, 92 and 115 of the Evidence Act are based on the principles of public policy, morality and ethics. Sections 91 and 92 are based on the "Best Evidence Rule" preventing the admission of inferior evidence when the superior evidence is available so as to prevent the fraud, future controversy, bad faith or treacherous memory. Similarly section 115 of the evidence Act enshrines in it the principle of 'estoppel' which is again based on public policy, equity, justice, morality and faith. Hence the principles laid down in sections 91,92 and 115 of the Evidence Act, in our view, can be well applied to the case in hand. 18. Even the contention of the seller that it is gene....
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....d in (1981) 7 taxman 13 (SC): "16. This construction which we are placing on subsection (2) also marches in step with the Gift Tax Act, 1958. If a capital asset is transferred for a consideration below its market value, the difference between the market value and the full value of the consideration received in respect of the transfer would amount to a gift liable to tax under the Gift Tax Act, 1958, but if the construction of sub-section (2) contended for on behalf of the Revenue were accepted, such difference would also be liable to be added as part of capital gains taxable under the provisions of the Income Tax Act, 1961. This would be an anomalous result which could never have been contemplated by the legislature, since the Income Tax Act, 1961 and the Gift Tax Act, 1958 are parts of an integrated scheme of taxation and the same amount which is chargeable as gift could not be intended to be charged also as capital gains." 20. Though section 52 of the Income Tax Act referred to by the hon'ble Supreme court stood omitted and even the Gift Tax Act also stood repealed, but the above proposition laid down by the hon'ble Supreme Court can be well applied in the facts and circumsta....
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....d by Sh. Mohinder Singh, over and above the sale consideration mentioned in the registered document, is ordered to be assessed as income from other sources. The order of the CIT(A), in the case of Shri Mohinder Singh is hereby set aside. The appeal of the revenue is accordingly treated as allowed. 22. Now coming to the quantum of additions liable to be made into the income of the purchaser Shri Malkiat Singh, we have already held that it has been established that he had paid amount over and above the consideration mentioned in the registered sale deed. As discussed above, the said amount paid over and above the consideration mentioned in the registered deed cannot be considered as consideration paid for the purchase of land in question from Sh. Mohinder Singh. The assessee, Sh. Malkiat Singh will also be not entitled to claim the said amount paid over and above the consideration mentioned in the deed as cost of acquisition of land or otherwise. Though the AO has observed that Shri Malkiat Singh has failed to disclose the source of the entire amount paid over and above the sale consideration mentioned in the sale deeds, however, a fact on the file that cannot be ignored is that Sh....