Enforceability of Agreement to Sale cannot be denied Unless Fresh Affidavits are Verified: ITAT deletes Addition u/s 69 [Read Order]

The Chandigarh Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition under Section 69 of the Income Tax Act, 1961 holding that the enforceability of agreement to sale could not be denied unless fresh affidavits are verified.

Assessee Hari Krishan Thaman had deposited cash as auction money with GLADA against sale of 2 trees standing at Sidhwa Kanal to MC Limit. Based on the said information notice was issued.

 After taking into consideration the submissions and documentation filed by the assessee, the AO made an addition being the amount paid to GLADA for purchase of trees/ timber treating the same as unexplained investment under Section 69 of the Income Tax Act.

The assessee also submitted an Affidavit from 3 one of the witnesses of the said Agreement to Sell affirming the details mentioned in the above said Agreement to Sell and during the course of assessment proceedings, the buyer Mr. Kuldeep Singh also sent his Affidavit to the AO directly through speed post affirming the details mentioned in the Agreement to Sell.

However the AO decided that the agreement to sell was not proper and made an addition. The sale agreement was on a plain paper and the matters was that whether the Parties of the agreement had affirmed the above said agreement or not, and in our case, the Agreement was affirmed by the assessee as well as the buyer and also affirmed by the witnesses to the said Agreement.

Gaurav Sharma on behalf of the assessee submitted that the assessee had shown opening cash in his books of account out of which he has claimed to have made payment to GLADA.

Regarding the findings of the AO, he submitted that both the Affidavits of the witnesses and the buyer talks about two shops instead of one shop.

It was submitted that the same was an inadvertent clerical mistake committed by the Counsel of the assessee during the course of assessment proceedings. He further submitted that assessee should not be penalised for the mistake committed by the Counsel of the assessee.

Manpreet Kaur, appeared on behalf of the revenue.

A Single Member Bench of Vikram Singh Yadav, (Accountant Member) allowed the appeal filed by the assessee holding that in the interest of justice, it would be relevant to allow an opportunity to the assessee and consider his submissions and it would be appropriate that the matter to be set-aside to the file of the AO to examine the same after providing reasonable opportunity to the assessee.

Further, the tribunal Bench held that the affidavit of the buyer was already available on record and a fresh affidavit of the witness Shri Naveen Goyal had been filed. Hence the AO was also directed to consider these affidavits while examining the enforceability of the agreement to sell.

To Read the full text of the Order CLICK HERE

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