Addition can’t be made on the basis of a Fake Sale Deed: ITAT [Read Order]

While allowing appeal filed by assessee, the Income Tax Appellate Tribunal on 17^th November 2017 ruled that additions cannot be made on the basis of a fake sale deed and quashed the order of CIT.

Both the appeals in the present case were filed by assessee against the order of CIT-I, Ahmedabad. The assessee is dealing in cloths. During the course of assessment proceedings various details in relation to the income derived by the assessee have been called for. Based on the verification of details and submissions furnished by the assessee, the assessment proceeding was completed. The total income filed in the return and total assessed income shows the same amounted to Rs. 2,31,950/-.

Thereafter, the CIT has called for and examined record of assessment proceedings for the AY 2008-09 and declared that total income at Rs.2, 31,950/- was erroneous in so far as it was prejudicial to the interest of Revenue ,raised the following ground.

"The assessee had only accounted for the sale of land valued at Rs 3.70 crores and not accounted for the capital gains arising from the Sale deed of superstructure valued at Rs.1.37 crore. The assessee had taken a plea that Sale deed of Rs. 1.37 crores executed on 31.01.2008 was ultimately cancelled as per the cancellation deed dated 31.12.2010 and hence, the assessee did not receive any amount resulting in capital gains.

The CIT issued a notice by stating that assessee is likely to be well aware while executing the two deeds and there is no scope of believing that the deed of Rs.1.37 crores was executed by mistake.

The AR contended before the tribunal that the assessee came to know about the second sale document  for the first time only on receipt of notice from the AO and also added that purchasers of the property had filed affidavits stating that they paid only Rs.3.70 crores and that the sale deed of Rs. 1.37 crores was executed by mistake.

But the CIT was no agreed with contentions of the assessee and directed the AO to make fresh assessment of total income of the assessee for the said assessment year.

The judicial member Shri.Mahavir Prasad and Amarjit Singh observed that during the assessment proceedings under section 143(3), the AO issued a notice to the assessee that another sale deed was also registered for this property for Rs.1.37 crores vide entry no.1231.but the appellant was not aware of the sales deed, made an affidavit confirming that second sale deed was fake and also filed a civil suit against the purchaser of the property for committing fraud.

Finally the bench found the said document as invalid, non est, illegal and not binding to the plaintiff. Therefore the tribunal ordered to quash the order passed by the CIT and declared not to make additions on fake sale deed.

To Read the full text of the Order CLICK HERE