Indian Kanoon - Search engine for Indian Law

Income Tax Appellate Tribunal - Delhi

Ramesh Chand, Prop., Faridabad vs Department Of Income Tax on 25 July, 2014

          IN THE INCOME TAX APPELLATE TRIBUNAL
               (DELHI BENCH ' F', NEW DELHI)

       BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND
            SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
                      I.T.A. No.2842 /Del/2008 &
                        I.T.A.No. 1678/Del/2009
                 Assessment year : 2005-06 & 2006-07
ACIT, Circle I,               Vs.         Shri Ramesh Chand
Faridabad                                 Prop. RAS Traders,
                                          Mathura Road, Faridabad
                                          GIR / PAN: ACTPC7226M

                          C.O. No.168/Del/2009
                       in I.T.A.No. 1678/Del/2009
                       (Assessment year 2006-07)

Shri Ramesh Chand,                     Vs.        ACIT, Circle I,
Prop. RAS Traders,                                Faridabad
Mathura Road, Faridabad

            (Appellant)                      (Respondent)

                  Department by :      Ms. Parminder Kaur, Sr. DR
                  Assessee by :        Shri J.P. Gulati, Adv.

                                       ORDER

PER T.S. KAPOOR, AM:

These are two appeals filed by the Revenue against separate orders of Ld. CIT(A) dated 30.06.2008 and 23.02.2009 respectively. The assesses has also filed cross objection in assessment year 2006-07 against partial upholding of addition by Ld. CIT(A).

2. The brief facts of the cases are that a survey u/s 133A was conducted on 26.09.2005 at the business premises of the assessee and on the basis of some incriminatory documents & on the basis of statements recorded, the assessee had surrendered a total amount of Rs.70 lacs which was to be added in the income of the assessee in assessment years 2005-06 & 2006-07 as per the following details:

      On account of excess stock                    Rs.23.95 lacs
      On account of unexplained
      construction of property                      Rs.29.95 lacs
      On account of unexplained
      investment in jewellery                       Rs.13.05 lacs
      On account of excess cash found               Rs.03.05 lacs
                                    Total           Rs.70.00 lacs

2.1 However, the above statement and surrender was retracted vide a letter written to CIT received by his office on 03.10.2005, a copy of which is placed at paper book page 10. The Assessing Officer while completing assessment for assessment year 2005-06 and 2006-07 has made the following additions:

Assessment year 2005-06:

      On a/c of purchase of plot                           Rs.17,49,625/-
      On a/c of cash of construction                       Rs.18,74,408/-
      Assessment year 2006-07:
      Addition on a/c of excess stock                      Rs.01,20,000/-
      Addition on a/c of investment in jewellery           Rs.13,05,000/-
      Addition on a/c of excess cash found                 Rs.03,05,000/-

2.2 The Ld. CIT(A) in response to appeals filed by the assessee, deleted the additions except in respects of partial upholding of addition in respect of cash found.

2.3 In assessment year 2005-06, the revenue has taken two effective grounds of appeal wherein it has challenged the deletion of Rs.17,49,625/-

made by Ld. CIT(A) on account of difference in valuation of a plot as per valuation report and as per declaration by the assessee. The second grievance of the Revenue is deletion of addition of Rs.18,74,408/- which the Assessing Officer had made on account of undisclosed amount of construction on a building. During the assessment year 2006-07, the Revenue is aggrieved with the action of Ld. CIT(A) by which he had deleted the addition of Rs.13,05,000/- made on account of unexplained investment in purchase of jewellery. The revenue is further aggrieved by the action of Ld. CIT(A) by which he had partly allowed relief to the assessee on account of addition of cash made by the Assessing Officer. In the cross objection, the assessee is aggrieved with the action of Ld. CIT(A) in partial upholding of addition made by Assessing Officer on account cash found at the time of survey.

3. Ld. D.R. at the outset submitted that additions were made to the income of the assessee on account of surrender of total Rs.70 lacs which was made by the assessee at the time of survey. Ld. D.R. submitted that as per the Government valuer, the piece of plot was valued at Rs.25 lacs whereas the assessee had declared the same at Rs.7,50,375/-. It was argued that the land for purchase on 18.04.2004 for Rs.7,50,375/- cannot become Rs.25 lacs by the end of December 2004. Therefore, it is apparent that the assessee had declared lesser amount in his books of account as compared to market value and, therefore the Assessing Officer had rightly made the addition. Ld. D.R. further submitted that the assessee had accepted the additions on account of undisclosed construction as per details of material and amount in respect of construction material and building which was written on a piece of paper and which the assessee had not recorded in his books of accounts.

Therefore, the action of Ld. CIT(A) disregarding these documents, was not justified. Arguing the appeal for the assessment year 2006-07, the Ld. D.R. submitted that during survey, a piece of paper was found wherein the fact of having purchased jewellery worth Rs.13.05 lacs was written. The assessee, during his statement recorded during the course of survey, had offered the same as his income. Therefore Ld. CIT(A) had wrongly deleted the addition. Arguing the ground No.2, Ld. D.R. submitted that the cash found at the time of survey was already surrendered by the assessee during the course of statement recorded at the time of survey proceedings in the presence of his advocate, therefore, the part deletion was not justified.

4. Ld. A.R. on the other hand submitted that the assessee was forced to surrender total amount of Rs.70 lacs during survey on 26.09.2005 and was made to sign the statement and affidavit in this respect. It was submitted that the assessee had signed the statement under pressure and, therefore, on 03.10.2005 itself, the assessee retracted from his statement and, therefore the statement recorded during the survey is of no legal value. Regarding merits of the case, the Ld. A.R. submitted that 50% of the land was purchased in the year under consideration and 50% was purchased in the preceding year and, therefore the Assessing Officer wrongly took the value of the entire land in one year which itself shows that the Assessing Officer did not apply his mind while passing the assessment order and simply relied upon the documents seized during the survey and the statement of the assessee which itself was recorded under pressure. Arguing the second ground in assessment year 2005-06, the Ld. A.R. submitted that there was no investment in the year under consideration as the certificate for completion of property was applied on 13.12.2000 itself as held by the Assessing 5 ITA No.2842/Del/2008 I.T.A.No. 1678/Del/2009 C.O.No.168/Del/2009 Officer in the assessment year 1999-2000 and as noted by Ld. CIT(A) in his order at page 25. Therefore, simply relying upon the piece of paper to make the addition without verifying the actual facts, is not tenable in law and Ld. CIT(A) has rightly deleted the same. Replying for Revenue's appeal in assessment year 2006-07, Ld. A.R. submitted that surrender of jewellery was also made on account of a piece of paper wherein no items of jewellery were mentioned and assessee was only forced to sign the same. It was argued that the nature of jewellery, from where it was purchased and its rate was not mentioned on the piece of paper and the Assessing Officer simply on the basis of a forced surrender has made the addition. As regards the 2nd ground regarding cash, Ld. A.R. submitted that Ld. CIT(A) himself in his concluding remarks has held that like other additions, the cash found at the time of survey was also coked up story and, therefore should have deleted the entire amount instead of giving partial relief.

5. Ld. D.R. in her rejoinder and replying to cross objections submitted that Ld. CIT(A) has held that surrender at the time of survey was totally a cooked up story which is not possible as the advocate of the assessee was also present during survey and his signatures were also obtained on the surrendered amount. In this respect, she submitted that complete survey folder was available for inspection which can be examined.

6. We have heard rival parties and have gone through the material placed on record. We find that the survey was conducted on 26.09.205 and within a period of less than 10 days i.e. on 03.10.2005, the assessee had retracted from his statement made during survey proceedings. Therefore, the statement recorded during survey proceedings cannot be solely relied upon for making the additions in the case of the assessee where other 6 ITA No.2842/Del/2008 I.T.A.No. 1678/Del/2009 C.O.No.168/Del/2009 corroborating material is not there. As regards the addition on account of value of land declared by the assessee and as per valuation report obtained, we find that firstly, the land as declared in the books represent only 50% of the land. The Assessing Officer without verifying this fact, had made the addition on account of market value as obtained from valuer which itself describes the non application of mind by the Assessing Officer. Moreover, we find that the addition simply on account of difference in valuation report and as per declared value of land canto be made. Ld. CIT(A) on the basis of submissions of the assessee and relying upon various case laws has held as under:

"12.1 I have very carefully gone through the assessment order, the written submissions, counter-comments of the AO and Rejoinder thereto. In my considered opinion, the AO has miserably failed to bring on record any worthwhile evidence or material which may suggest that the appellant has paid any amount over and above the amount mentioned in the sale deeds. So much so, the AO has not taken care to notice that 50% of the investment in the purchase of plot of land pertained to A.Y. 2004-05 and not to the A.Y. 2005-06. Apparently, the AO has erred in law in holding that valuation of plot of land, as per report dated 13/1212004 of the Govt. Approved Valuer at Rs.25 lakhs is the investment and relevant to A.Y. 2005-06, when admittedly as per purchase deeds dated 23/5/2003 and 18/6/2004, the cost including stamp duty was paid at Rs.7,50,375/-. The onus lies on the AO to prove that the appellant has paid any amount over and above the amount recorded in the purchase deed( s) and thus the onus has not been discharged, and no inquiry, whatsoever has been made by the AO from the vendors or any property dealer or from any other source.

12.2. The jurisdictional High court in CIT v. Nitin Kumar (2001) 248 ITR 478 ( P& H) has held that addition on a/c of unexplained investment could only be made u/s 69 of the Act and that there was no material evidence to establish that the appellant made investment over and above than recorded in the sale deed and in the absence of any such evidence, no addition could be made under section 69 of the 7 ITA No.2842/Del/2008 I.T.A.No. 1678/Del/2009 C.O.No.168/Del/2009 Income tax Act and the Revenue has also not made any enquiries from the property dealers, vendors, etc., to establish that the appellant paid any amount, over and above the apparent consideration in purchase of the said plots. The Delhi High Court in CIT v. Naresh Khattar(HUF) 261 ITR 664 (Del.) relying upon the ratio laid by the Supreme Court in K.P.Varghese 131 ITR 59 (SC) has also held that the statement of the assessee's counsel in civil suit would not be sufficient material to come to the conclusion that Rs.13 crores odd represented actual investment. Applying the ratio laid by the Jurisdictional High Court and in view of the Delhi High's judgement, referred to above, and other case-laws relied upon by the Appellant and discussed extensively in the written submissions, I find that since the AO has not led any evidence to discharge his onus either at the time of assessment or even at the stage of appeal before me to prove that the appellant has paid any amount over and above the amount recorded in the sale deeds, I hold that the AO was legally not justified to make an addition of Rs.17,49,625/- on a/c of alleged unexplained investment in the purchase of Plot No.506/16A. Accordingly, the same is cancelled. Ground No.l.1 and 1.2 are thus allowed."

7. We find no infirmity in the order of Ld. CIT(A) as regards ground No.1, therefore, Ground No.1 is dismissed.

8. The findings of Ld. CIT(A) with regard to Ground No.2 are at page 25 where vide para 16.1, ld. CIT(A) had deleted the addition. The relevant findings are reproduced as under:

"I have carefully gone through the assessment order, written submissions, AO's counter comments and the Rejoinder. In my considered opinion, the AO was not justified to rely only on the jottings of Rs.29,95,282/- made on a piece of paper alleged to be found during survey and admittedly not bearing date/month/year and no corroborative material was found during survey, and the appellant had rescinded by filing an affidavit dated 03110/2005 before the CIT/Addl. CITI ITO Incharge Survey from his statement dated 2610912005, wherein he had agreed to the addition for AY. 2006-07. The AO's reference in the assessment order of the affidavit of Shri J.K.Garg, Advocate, does not lead to any evidence/credibility that 8 ITA No.2842/Del/2008 I.T.A.No. 1678/Del/2009 C.O.No.168/Del/2009 investment in the construction of H.No.506/16A and Property No.217/9 was relevant to AY. 2006-07 at Rs.29,95,282/- as agreed by the appellant in the statement recorded on 26/9/2005. The contents of the affidavit are thus not relevant, particularly when the AO has assessed investment forH.No.506116A in AY. 2005-06 and as per the assessment order of AY. 1999-2000, completion certificate for Property No.217/9 was applied on 13.12.2000. It is thus evident that the AO has committed a grave and patent error in relying exclusively on the jotting of the figures of 29,95,282/- the credibility of which is shaken and not substantiated. I also find that the AO by estimating an amount of Rs.l3,24,125/- , purely on imaginations, on account of items left over in the jottings of 29,95,282 i.e. on account of sari a, sand etc. has unnecessarily added another imaginative figure, instead of thrashing the issue with wisdom, judicial and a rational approach. So much so, the AO has not given any counter-comment on the relevant and vital objections raised in para 37 of the written submission, discussed in para 15 supra. It is well settled principle of law that no addition can be made on imagination, guess work, suspicion, surmises and conjecture. I am therefore, of the considered opinion and hold that the AO has completely erred both on facts and in law in making an addition of Rs. 18,74,408/- i.e. difference between the amounts of Rs.29,95,282 +13,24,125 minus 7,20,000 on a/c of unexplained investment in the construction of House No.506116A , whereas the appellant had declared investment at Rs.17,25,000/-."

We find that Ld. CIT(A) had rightly deleted the addition and we do not find any infirmity in the same. Therefore, ground No.2 is also dismissed.

9. Coming to appeal in assessment year 2006-07, the addition of Rs.13,05,000/- has been deleted by Ld. CIT(A) by holding as under:

"7.11 Therefore, keeping in view the facts of the case, extracted supra, and the position of law, stated above, I consider that the AO was not justified in making an addition of Rs.13,05,000/- for purchase of jewellery relying only on the statement recorded during survey and the statement during survey could not been recorded on oath and that such a statement has no evidential value. However, such an information could be used against the assessee, if some thing positive 9 ITA No.2842/Del/2008 I.T.A.No. 1678/Del/2009 C.O.No.168/Del/2009 had been found that the assessee had actually purchased the jewellery. The AO has not brought on record date/month/year of purchase of jewellery, its description, name of the jeweller and is also not aware if the jewellery in fact existed or not. In my opinion, the surrender of extra income of Rs.13,05,000/-for the alleged purchase of jewellery is similar in nature as was agreed on a/c of unexplained investment in SCO 217/9 and H.No.506116A, discussed supra. It would, however, be relevant to look into the affidavit dated 03.10.2005 submitted by the assessee before the then Commissioner of

1. Tax, Faridabad. It is reproduced below:-

"I, Ramesh Chand son of Shri Dharam Chand aged 60 years resident of H.No.506, Sector 16-A, Faridabad and proprietor of M/s RAS Traders, Mathura Road, Faridabad, do hereby solemnly declare as under.-

1. That Shri N.K.Bansal, ITO, Ward 1(1), Faridabad and other officers/ officials of the 1.T. Deptt: had conducted on 26127.09.2005 survey u/s 133A of the 1.T.Act,1961 and verified books of accounts, documents, stock and cash found at the business premises.

2. That the survey team had prepared inventory of stock and the ITO Incharge came to the conclusion that stock was excess by about Rs.23 lakhs but Shri N. K. Bansal ITO coerced the assessee to make a surrender of Rs.70 Lakhs as extra income and also devised that it should be declared to assessment year 2006-07 in the following manners:-

(i) Acquisition of jewellery at Rs.13.05 lakhs.

(ii) Cash in hand at Rs.3.14 lakhs as against Rs.l4,000/- actually found.

(iii) Rs.30 lakhs spent on the construction of house.

(iv) Excess stock of Rs.23.95 lakhs.

3. That Sh. N.K.Bansal, ITa instilled fear by giving multifarious threats and thereby the deponent had written at his instance the following particulars in a diary. Shri N.K. Bansal, ITa also knew that what he was asking the assessee to write was not correct and the same was false.

(i) "Uchanti Baija 13.05 lacs jewellery purchased"

(ii) " Makkan 506/217 payment made continuation Till date 9/L Uchanti" with imaginary details for the amount of Rs.29,95,282/-

(iii) That cash was found at Rs.3,14,420/- and the same was returned back.

4. Subsequently, Shri N.K.Bansal ITO has called the assessee to his office and handed over a draft of the affidavit, which contain confirmation of the above stated false facts. He has directed that the proposed affidavit should be furnished and incase of failure, dire consequences would follow.

5. That since the affidavit proposed by Shri N. K. Bansal, ITO do not represent the correct facts, the deponent does not want to commit a second blunder by giving a wrong affidavit, the first being committed in the statement given at his instance. 6. That since the earlier statement recorded during survey for surrender of income at Rs.70 lakhs at the instance of Shri N.K.Bansal, ITa was given under threat and fear and based on imaginary writings, the same is thus rescinded.

Sd. Deponent.

Verification The above mentioned deponent hereby confirm and verify that what is stated above is true and correct to be best of my knowledge and belief and nothing is false and nothing has been concealed. Verified today the 3rd October, 2005 at Faridabad.' Sd/- Deponent.

Attested as identified.

Sd/- Notary, Faridabad(haryana) 03 OCT 2005.

7.12. In view of the detailed discussions held supra, in my firm opinion, the AO was not justified in making an addition of Rs.13,05,000/- on the basis of the statement recorded during the survey, particularly when the same was rescinded immediately by filing a grievance petition supported with an affidavit before the Higher Authorities. That, no evidence has been brought on record if the assessee had purchased any jewellery in the financial year 2005- 06 relevant to A.Y. 2006-07. I, therefore, hold that the assessee's explanation submitted before the AO relying upon the Grievance 11 ITA No.2842/Del/2008 I.T.A.No. 1678/Del/2009 C.O.No.168/Del/2009 Petition and Affidavit submitted to the Higher Authorities cannot be brushed aside. Accordingly, the addition of Rs.13,05,000/- is cancelled and Grounds Nos.1.1, 1.2 and 1.3 are allowed."

10. We find that Ld. CIT(A) had elaborately dealt with the issue and has rightly deleted the addition and we do not find any infirmity in the same.

11. As regards the issue of addition of cash found during the year Ld. CIT(A) had partly allowed relief by holding as under:

"8.9. I have very carefully gone through the assessment order and considered the Appellant's written submissions, Grievance petition and affidavit dated 03.10.2005, discussed supra. In my opinion, the assessee's offer for additional income agreed at Rs.70 lakhs, including the alleged unexplained cash of Rs.3,05,0001-stands demolished, as per the detailed discussion made above. However, when I consider the details of cash drawn at Rs.3,14,420/- and its return witnesseth by an advocate, I am not able to comprehend as to why the assessee had put his signatures on the details of cash and why Shri J.K. Garg, Advocate witnesseth it, if he was not his counsel and no power of attorney was executed in his favour. However, in view of the totality of facts, though cash of Rs.3,14,4201- found also seems to be a made-up affair similar to the purchase of jewellery and unexplained investment in construction of H.No.506116A 1 207/9, yet in view of the details of cash drawn and its return acknowledged, I cannot say positively as to what is/was the truth of the matter and thus, I am not inclined to cancel the whole addition. However, I allow benefit of cash at Rs.51 ,646/-on 26.09.2005 on the basis of the cash book, since the AO has not doubted its genuineness, even when cash book was not written at the time of survey. I, therefore, give benefit of Rs,51 ,646/-as against the cash allegedly found at Rs.3,14,4201- and uphold the addition at Rs.2,62,774/- and cancel the addition of Rs.51,646/- [Rs.3,14,420 (-) 2,62,774]. Ground Nos. 2.1 & 2.2 are partly allowed.

10. In the result, the appeal is partly allowed giving a relief of Rs.13,56,646/- (Rs.13,05,000/- + Rs.51,646/-) and confirming the addition of Rs.2,62,774/-

12. Ld. CIT(A) in this regard has partly upheld the addition on account of cash found though he observed that it also looked like a cooked up story but the fact of denomination of cash mentioned on paper and its acknowledgement of having received back from survey party in the presence of advocate influenced him to accept it to be true and, therefore, he had allowed the relief only on account of cash balance as reflected in the books of account of the assessee as on the date of survey, which under the present facts and circumstances is a correct approach and, therefore, we do not find any infirmity in the same.

13. In view of above, both the appeals filed by the Revenue as well as the cross objection filed by the assessee are dismissed.

14. Order pronounced in the open court on 25th July, 2014.

      Sd./-                                                 Sd./-
 (I. C. SUDHIR)                           (T.S. KAPOOR)
JUDICIAL MEMBER                        ACCOUNTANT MEMBER
         th
Date: 25 July, 2014
Sp
Copy forwarded to:-
   1. The appellant
   2. The respondent
   3. The CIT
   4. The CIT (A)-, New Delhi.

5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.

By Order (ITAT, New Delhi).