Dhiraj Rawal vs Income Tax Officer

PER M. BALAGANESH, A. M.:

The appeal in ITA No.8785/Del/2025 for AY 2012-13, arises out of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 11.12.2025 against the order of assessment passed u/s 147 r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.11.2019 by the Assessing Officer, ITO, Ward-44(8), New Delhi (hereinafter referred to as ‘ld. AO’).

Though the assessee has raised several grounds of appeal, the preliminary issue to be decided is whether the learned CITA was justified in confirming the addition made by the learned AO in the sum of Rs 90,00,000 in the facts and circumstances of the instant case. The assessee has also challenged the validity of reopening under section 147 of the Act on the ground that there was no income escaping assessment at all in the hands of the assessee.

We have heard the rival submissions and perused the material available on record. The return of income for the assessment year 2012-13 was filed by the assessee on 28-07-2013 declaring total income of Rs. 2,06,700 declaring business income and income from other sources . Later based on the Tax Evasion Petition (TEP) received from Investigation Wing, Delhi in the form of copy of FIR No. 0748 dated 26-10-2015 registered under section 154 of Cr PC with Police Station Paschim Vihar, New Delhi was received. In that FIR, the assessee had alleged that he had entered into an agreement to purchase / sell dated 15-01-2012 with Shri Sudhir Arora, S/o Late Shri Deshraj Arora, resident of BB-45A, Janakpuri, Delhi and Smt Sheetal Arora, W/o Shri Sudhir Arora, resident of BB-45A, Janakpuri, Delhi in respect of Property No. B-3/459, 2nd floor, Paschim Vihar, New Delhi -110063. The sale consideration was agreed at Rs. 1,20,00,000, out of which the assessee had paid sumptuous advance of Rs. 90 lakhs to Shri Sudhir Arora and Smt Sheetal Arora. Later on these persons neither executed the sale/ purchase nor refunded the money to the assessee. Based on this information in the form of tax evasion petition, the case of the assessee was sought to be reopened under Section 147 of the Act vide notice under Section 148 of the Act dated 28-03-2019, after obtaining the prior approval of the Learned Principal Commissioner of Income Tax-14 Delhi.

The assessee filed his income tax return on 4-11-2019 declaring the same total income of Rs. 2,06,700 comprising of business income and income from other sources in response to the notice under Section 148 of the Act. Notice under Section 142(1) and 143(2) stood duly issued to the assessee. Since there was no response to the various statutory notices, a show-cause notice dated 15-11-2019 stood issued to the assessee. Later final show-cause notice dated 21-11-2019 was issued, show-causing the assessee as to why the sum of Rs. 90 lakhs paid by the assessee be not treated as unexplained money in the hands of the assessee for the assessment year 2012-13. The assessee duly replied to this final show-cause notice by filing its reply in the ITBA portal, wherein it was pointed out that the FIR No. 748/2015 was filed at Police Station Paschim Vihar as a result of misunderstanding between assessee and Shri Sudhir Arora. It was submitted that a consensus was reached between assessee and Shri Sudhir Arora for purchase of property bearing No. B-3/459, Paschim Vihar, Delhi and the consideration amount was also settled at Rs. 90 lakhs. Even an agreement was also made for the said purpose. However, the agreement was actually not acted upon. However, Mr. Sudhir Arora got another good deal and he refused to act upon the agreement already entered into. Thus, no money was actually paid to Mr. Sudhir Arora or Sheetal Arora. However, it was submitted that assessee got infuriated with the conduct of Mr. Sudhir Arora as he had agreed to sell the property to assessee but later on sold the same to someone else. Accordingly, the assessee contacted a lawyer who had advised him to file a complaint with the police by mentioning that sum of Rs. 90 lakhs had been paid to Mr. Sudhir Arora and Sheetal Arora. Though initially the assessee was not willing to lodge such complaint, but in anger, the assessee had agreed to lodge the complaint mentioning the fact that he had paid Rs. 90 lakhs to Mr. Sudhir Arora and Sheetal Arora. But factually the same was not at all paid. The assessee categorically denied having made any payment of Rs. 90 lakhs to Mr. Sudhir Arora and Sheetal Arora, in support of which, the assessee also filed an affidavit on oath.

The Ld AO noted that assessee had neither filed any evidence to withdraw the FIR filed with the police station or brought on record any documentary evidence to prove the fact of that FIR reaching some conclusion. Accordingly, the ld AO proceeded to complete the reassessment by making an addition of Rs. 90 lakhs as unexplained money under Section 69A of the Act. This action of the ld AO was upheld by the ld CITA.

The aforesaid facts are not in dispute. It is a fact that the assessee had intended to purchase a property bearing no. B-3/459, Paschim Vihar, Delhi and the total consideration amount was also fixed at Rs 1,20,00,000. The assessee had to obtain bank loan for making payment for the same. In order to process the bank loan, the parent documents were to be produced by the seller Mr Sudhir Arora to the assessee which was not done. The agreement was to be effected by payment of initial amount on the production of the list of papers in the form of property documents after 3 days. But before that time, Mr Sudhir Arora refused to hand over the documents sought for and also refused to receive the initial amount from the assessee, but instead proceeded to sell the property to someone else. The assessee got infuriated with the behaviour of Mr Sudhir Arora and lodged a FIR with Paschim Vihar Police Station that Mr Sudhir Arora having received Rs 90 lakhs as advance in cash from assessee had not come forward to fulfil his promise to sell the property. In the instant case, the assessee had filed evidence to prove that Mr Sudhir Arora was acquitted for the offence punishable under section 420 / 120B of Indian Penal Code. The evidence in this regard is enclosed in Page 5 of the Paper Book. Further we find that Mr Sudhir Arora had also filed an affidavit duly confirming that no payment of Rs 90 lacs in cash was ever paid by the assessee as advance for property. In the said affidavit, he had also confirmed that since FIR was lodged by the assessee on him, he in turn had forwarded the FIR compliant to the Income Tax Department to take action against the assessee herein. The said affidavit dated 27-8-2025 is enclosed in pages 6 to 8 of the Paper Book. Further we find that the entire name and address together with the PAN of Mr Sudhir Arora and Sheetal Arora was available with the ld AO. No enquiry whatsoever was ever carried out by the ld AO with the alleged seller of the property i.e Mr Sudhir Arora and Sheetal Arora to understand the facts. In these circumstances, the explanation given by the assessee that he had not paid any cash of Rs 90 lacs to the alleged seller of the property becomes a plausible explanation and needs to be accepted. This is also supported by an affidavit from the assessee and further supported by an affidavit from Mr Sudhir Arora. Even the agreement copy where this alleged payment of Rs 90 lacs in cash by the assessee was not brought on record by the revenue before us. The assessee on his part had duly discharged his onus by denying the fact mentioned in FIR. This is also confirmed by Mr Sudhir Arora. The sole basis for reopening and making the addition in the hands of the assessee is only the FIR. Other than this, there is absolutely no other corroborative document either in the form of alleged agreement to sell, payment receipt for cash of Rs 90 lacs etc. We find that the entire reopening has been done based on borrowed satisfaction of the FIR compliant. In our considered opinion, FIR is merely an allegation and does not substantively indicate any evidence of payment. It cannot be construed as a proof of actual transaction. FIR is to be tested in the court of law. The contents of the FIR were retracted by an affidavit from both assessee (complainant) as well as Mr Sudhir Arora (accused). Hence we hold that there is absolutely no case for the revenue for making an addition of Rs 90 lacs in the hands of the assessee as unexplained money under section 69A of the Act in the facts and circumstances of the instant case. Accordingly, the grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.