Addition Solely Based On Photocopy Of Sale Agreement Is Completely Unjustifiable: Delhi High Court

The Delhi High Court has held that an addition solely based on a photocopy of the sale agreement is completely unwarranted and unjustifiable.

The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the entire foundation of the addition was laid down on the basis of the photocopy of the alleged agreement to sell. The original copy of the document has not seen the light of day. There is no other evidence to support the veracity of the recitals made in the alleged agreement. Therefore, it cannot be construed as a sustainable basis for adding to the income of the assessee.

The AO received the information in the form of a photocopy of an alleged agreement to sell dated March 5, 2010. The photocopy of the agreement to sell indicated that the land in Ghittorni, Delhi, was to be purchased against a total consideration of Rs. 11,00,00,000, wherein the assessee/respondent was described as a co-purchaser. It has been alleged that the assessee paid a sum of Rs. 2,75,00,000 as an advance for the purchase of the land, which amounted to 25% of the total consideration. Out of the amount, a sum of Rs. 1,38,00,000 was stated to have been paid by way of a check, and the remaining amount, i.e., Rs. 1,37,00,000/-, was allegedly paid in the form of cash at the time of the execution of the agreement to sell.

A notice under Section 148 of the Income Tax Act, 1961, was issued to the assessee. The assessee appears to have filed the ITR, declaring a total income of Rs. 44,676 for AY 2010–11. Consequently, proceedings under Section 143(3) read with Section 147 were initiated against the assessee. The AO, while relying on the photocopy of the agreement to sell, made an addition of Rs. 9,00,00,000 to the income of the assessee on account of the purchase of the said land from undisclosed sources.

The assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The CIT(A) restricted the addition of Rs. 9,00,000 to Rs. 1,37,00,000 on the ground that it is only the amount that can be attributed to the income of the assessee for the relevant AY. However, the veracity of the photocopy of the alleged agreement to sell was not doubted by the CIT (A). The order of the CIT(A) led to the filing of cross-appeals by the Revenue and the assessee both before the ITAT.

The ITAT dismissed the appeal preferred by the department, and the appeal of the assessee was allowed.

The issue raised was whether a photocopy of a document, or some part of the information or facts recorded on it found to be correct in verification, could be treated as a valid document or not in the absence of the original.

The court held that the ITAT has rightly opined that under the facts of the present cases, sustaining an addition on the basis of a photocopy of the alleged agreement to sell would be completely unwarranted and unjustifiable. The appeals were, therefore, dismissed.

Counsel For Petitioner: Shlok Chandra

Counsel For Respondent: Ved Jain

Case Title: PCIT Versus Rashmi Rajiv Mehta

Citation: 2024 LiveLaw (Del) 374

Case No.: IT A 984/2019

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