Merely because a registered sale deed was not executed, the genuineness of consideration received under agreement to sell cannot be doubted
Recently, ITAT Delhi in the case of Anand Prakash Singh vs. ACIT, Circle-2, Ghaziabad – ITA No. 3537/Del/2024 | Order dated 21 November 2025 was having an issue of unexplained Capital Introduction under Section 68 wherein source of investment was linked to Sale of Ancestral Agricultural Land.
Let us have a Short Overview of the case:
The assessee, an individual proprietor of M/s Nandini Processors, filed the return declaring income of ₹16,38,670 for AY 2016-17. The case was selected for limited scrutiny to examine:
• Source of capital introduced into business, and
• Investment in a residential flat.
During assessment proceedings under section 143(3), the assessee explained that the capital introduced amounting to ₹2,15,73,388 originated from the sale of ancestral agricultural land situated in Balia district, Uttar Pradesh.
To substantiate, the assessee filed:
• Revenue land ownership records (“Khatiyan” copies),
• Multiple agreements to sell,
• PAN and ID proofs of buyers and sellers,
• Copies of bank transaction records.
However, the Assessing Officer disbelieved the claim primarily because:
• Registered sale deed was not produced,
• Ownership details were not conclusively proved to AO’s satisfaction,
• Agricultural land status under Section 2(14) could not be verified.
Accordingly, the AO treated the capital introduced as unexplained income under Section 68 read with Section 115BBE, and the addition was confirmed by CIT(A).
Arguments and Observations Before the Tribunal:-Before the Tribunal, the assessee argued that:
• The land sold was part of larger joint ancestral holdings.
• Execution of sale deed was pending due to family partition disputes among co-owners.
• However, full consideration was received and possession delivered, evidenced through agreements to sell.
The Department contended that:
• Agreements to sell were inchoate documents,
• No valid title transfer occurred, hence no credible source was proved.
Tribunal’s Findings:- 1. Agreements to sell were already furnished before lower authorities, as declared in the paper book certification.
2. These agreements clearly reflected:
• Names and identity proof of parties,
• Consideration paid,
• Delivery of possession.
3. While agreements may not transfer legal title for stamp duty purposes, they are valid evidence for explaining financial transactions.
4. The Tribunal held that once the assessee discharged the initial burden of explanation and documentation, the tax authorities were obligated to conduct further enquiry, rather than reject documents merely because:
“Sale deed was not executed.”
5. The Tribunal accepted the legal doctrine that in joint ancestral land, a co-owner may transfer his undivided share, even if survey-wise segregation is pending.
“Merely because a registered sale deed was not executed, the genuineness of consideration received under agreement to sell cannot be doubted when identity of parties, nature of asset and transaction details are furnished and remain uncontroverted.”
The copy of the order is as under:
