Income Tax Appellate Tribunal - Delhi
M/S Orchid Infrastructure Developers ... vs Acit, New Delhi on 11 July, 2019
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E": NEW DELHI
BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No. 2494/Del/2010
(Assessment Year: 2005-06)
M/s. Orchid Infrastructure Vs. ACIT,
Developers Private Limited, Central Circle-II,
1011, Surya Kiran Building, New Delhi
19, KG Marg, New Delhi
PAN: AAACB0370M
(Appellant) (Respondent)
ITA No. 2674/Del/2010
(Assessment Year: 2005-06)
DCIT, Vs. M/s. Orchid Infrastructure
Central Circle-II, Developers Private Limited,
New Delhi] 1011, Surya Kiran Building,
19, KG Marg, New Delhi
PAN: AAACB0370M
(Appellant) (Respondent)
ITA No. 2912, 4665 & 5863/Del/2011
(Assessment Year: 2006-07 and 2009-10)
ACIT, Vs. M/s. Orchid Infrastructure
Central Circle-II, Developers Private Limited,
New Delhi] 1011, Surya Kiran Building,
19, KG Marg, New Delhi
PAN: AAACB0370M
(Appellant) (Respondent)
C.O. No. 198/Del/2011
(In ITA No. 2912/Del/2011)
(Assessment Year: 2006-07)
M/s. Orchid Infrastructure Vs. ACIT,
Developers Private Limited, Central Circle-II,
1011, Surya Kiran Building, New Delhi
19, KG Marg, New Delhi
PAN: AAACB0370M
(Appellant) (Respondent)
Assessee by : Shri Amol Sinha, Adv
Page | 1
Shri Ashu Goel, CA
Revenue by: M/s. Parmita M. Biswas, CIT DR
Date of Hearing 22/04/2019
Date of pronouncement 11/07/2019
ORDER
PER PRASHANT MAHARISHI, A. M.
1. These are the six appeals pertaining to the Assessee for AY 2005-06, 2006- 07 and 2009-10 filed by both the parties involving certain common issues; both the parties argued the matter together for all the appeals and same is disposed of by this common order.
AY Preferred by ITA No AO Order CIT (A) Order
2005-06 Assessee 2494/Del/2010 ACIT Central CIT (A) -III New
2005-06 Revenue 2674/Del/2010 Circle -2, Delhi
New Delhi Appeal No
dated 30-12- 480/08-09
2008 u/s
143(3) rws
153C of the
act
2006-07 Revenue 2912/del/2011 U/s 143(3) CIT (A)-III, New
2006-07 Assessee Co 198/Del/2011 rws 153C Delhi Appeal No
dated 30-12- 481/08-09
2008 dated
7/3/2011
2006-07 Revenue 4665/Del/2011 u/s 153A CIT (A)-III
rws 14393) dated
of the Act 5/8/2011 in
dated Appeal No
30/12/2010 681/10-11
2009-10 Revenue 5863/del/2011 Passed u/s Passed by the
153A read Commissioner
with section of income tax
143 (3) of the (A) -III dated
income tax 14/10/2011 in
act dated appeal number
30/12/2010 684/10 - 11
2. First , we address the appeals of assessment year 2005 - 06 wherein both the parties have filed the cross appeals against the order of The Commissioner Of Income Tax (Appeals) -III, New Delhi [ The ld CIT (A)] dated 25/3/2010.
3. The assessee has raised the following grounds of appeal in ITA No. 2494/Del/2010 for the Assessment Year 2005-06:-
Page | 2 "1. On the facts and in the circumstances of the case, the Ld CIT (A) was not correct in holding date assessment proceedings are validly initiated and further holding that assessment order was not illegal and invalid
2. Without prejudice to above, that ld CIT(A) has erred on facts and in law in not holding that present: assessment is without jurisdiction and void ab initio in so far as no documents or material seized during various searches could be said to be belonging to assessee and as such assessment deserves to be annulled.
3. Without prejudice to above, that ld CIT (A) has erred on facts and in law in holding that jurisdiction u/s 153A r/w 153C is validly initiated in so far as there is no satisfaction recorded by AO in file and record of persons searched U/s 153A as mandated by Income Tax Act 1961. As such assessment be annulled.
4. Without/prejudice to above, that ld CIT(A) has erred on facts and in law in not holding that the present assessment is without jurisdiction in so far as there is no record of handing over and taking over of record from file of persons searched to assessee as mandated by Income Tax Act‟1961.
5. Without prejudice to above, the ld CIT (A) has erred on facts and in law in holding that jurisdiction U/s 153A r/w 153C of Income Tax Act 1961 is validly initiated in so far there is absence of two separate AO‟s i.e. one having jurisdiction over assessee searched and other having jurisdiction over assessee in whose case jurisdiction U/s 153C initiated. As such assessment be annulled.
6. That the order of ld CIT (A) is against the law, facts, circumstances, natural justice and all the other principles and rules of law.
7. That the ld CIT(A) has erred in law in confirming an addition based on material collected by AO which were mere conjectures only and using them as evidence against assessee ignoring the facts, submission and material placed on record by the assessee which is in the violation of principles of natural justice and applicable law, as such all the findings are vitiated and additions so made are not maintainable in law and liable to be deleted.
8. That the ld CIT (A) erred in confirming additions of Rs. 15 lakhs which is perverse, based on surmises and conjectures and is contrary to the facts and provisions of law, as such is bound to be deleted."
4. The revenue has raised the following grounds of appeal in ITA No. 2674/Del/2010 for the Assessment Year 2005-06:-
"1. Whether on the facts and in the circumstances of the case, the CIT (A) has erred in law and on facts in deleting the addition of Rs. 43.61 Crores out of Rs. 43.76 Crores made by the AO on account of receipt of cash payments?
2. Whether on the facts and in the circumstances of the case, the CIT (A) has erred in law and on facts by not appreciating the fact that the addition made in the case of M/s Vipul Ltd. stands confirmed by the CIT (A) himself on the same issue as well as on the basis of same evidences'.‟ Page | 3
3. Whether on the facts and in the circumstances of the case, the CIT (A) has erred in law and on facts in ignoring the fact that the assessee company is a co partner of M/s Vipul Ltd in various projects and was in receipt of equal amount of cash component as received by M/s Vipul Ltd.?
4. The order of the CIT(A) is perverse and not tenable in law and on facts."
5. The brief fact shows that assessee is a company engaged in the business of construction of residential flats in Gurgaon. Search and seizure action u/s 132 of The Income Tax Act [the Act] was carried out in Vipul group of cases on 1/6/2006 and survey at the business premises of the assessee u/s 133A of The Act. During the course of search, certain documents allegedly belonging to the assessee were seized and therefore after recording the satisfaction the learned assessing officer proceeded under section 153C of the act. The learned assessing officer also provided the copy of satisfaction note to the assessee. Pursuant to that assessee filed its return of income declaring income of INR 9801350/- on 2/6/2008. At the time of commencement of the assessment proceedings, assessee objected to the proceedings initiated u/s 153C, however the learned assessing officer noted that the documents are „belonging to‟ the assessee were seized and after recording the satisfaction proceedings u/s 153C were initiated. He further noted that the assessee company has also undertaken to develop various building projects in joint collaboration with M/s Vipul Ltd and the documents seized during the course of search also related to these projects and therefore the action u/s 153C of the act was properly taken.
6. The assessee company was incorporated on 2/4/1993 and engaged in the business of real estate developers and contractors. It has entered into a joint venture with M/s Vipul infrastructure developers Ltd for development of several projects having 50% share in all the projects except in one case where the assessee company was having only 37.5 percent shares. During the course of search on 01/06/2006 at the residence of Shri Moti S Masand, director of M/s Vipul Ltd, several documents were seized which are MIS receipts of collection of customers money for different projects of Vipul Ltd and assessee. During the course of search, the statement of Mr. Moti S Masand was recorded wherein he has admitted that he has prepared the same on the basis of data gathered from the management Page | 4 Information Systems statements from the account section of Vipul Ltd. He further offered the sum of as his additional income. Based on the analysis of the seized documents the learned assessing officer held that those papers contain details of total receipts against all the projects of M/s Vipul group. He further noted that documents revealed that the payment in cash amounting to INR 40.56 crore has been received by M/s Vipul Limited up to 31/3/2005 as its share of cash receipts. As the assessee was jointly developing the projects having equal share in those projects, assessee company share in cash receipt too was stated to be as per LD AO at INR 40.56 crores. Therefore, the learned AO gave a copy of the statement along with the seized documents to the assessee to rebut the above findings. The opportunity of cross-examination was also given. During the course of hearing, assessee stated that those documents have neither been prepared by the assessee not seized from the possession of the assessee and they are not in the handwriting of any employees of the assessee company. He further stated that the statement of Mr. Masand has no reference about the assessee company and in the seized documents; the name of the assessee is not appearing. It was further stated that Mr. Masand has accepted that he has never collected any and has not indicated any definite source of the documents on the figure mentioned therein. Assessee also stated that that Mr. Masand has never handled financial part of M/s Vipul Ltd and was only associated with the execution of the projects as an engineer. Assessee stated that the documents seized from that person are dumb documents and there is no authentic source of the said documents and figures written therein. It was further stated that projects were being developed and marketed by M/s Vipul Ltd and during the course of search, afterward in any confessional statement it has not been admitted that the cash was being received and assessee also stated that the statement of the purchasers have not been recorded to examine the veracity of the statement of that man. The learned assessing officer rejected the argument of the assessee. The learned AO held that the document seized from the residence of that man was in his own hand writing who is a director of M/s Vipul Ltd and was holding a very important post , signing the balance sheet and cheques and was a key management personnel of that company. The Page | 5 learned AO also noted that it is a known fact that the amount received as own money is neither recorded in the conveyance deed nor accounted for in the books of accounts. Therefore the argument of the assessee that the purchaser of these commercial spaces have not been confronted and their statements were not recorded is totally ridiculous as no purchaser would come forward and admit that they had paid over and above the price shown in the sale deeds. The learned AO further noted that the cash is an integral part of transaction hence in property deal is evident from various document seized during the course of search. Therefore, based on the above fact and details available from seized documents, learned assessing officer made an addition of Rs. 43.76 crores in the hands of the assessee company as undisclosed income. The learned assessing officer further noted that during the course of search in the residential premises of Mr. Aman Sharma annexure A - 1, page number 434 seized which is a receipt dated 8/5/2004 of INR 30 lakhs signed by Sri Raj Singh, Dharmveershinh and Sri Surinder Singh. This amount has been paid by M/s Vipul infrastructure developer‟s private limited and another company of orchid group. The assessee was asked to correlate the same with the books of account and further explain as to why the amount of INR 15 lakhs being 50% share of the investment made by the assessee company should not be treated as unexplained investment. The assessee submitted a detailed reply challenging the authenticity of the receipt. The assessee also contended that it has not been signed by any of the directors and is not backed by any confessional statements. The learned assessing officer rejected the contention of the assessee stating that it has no validity as a normal practice the proposed sale deeds are made with the representative and in property deals the „Kaccha sale agreements‟ are normally prepared which is also proof of the property having exchanged the hands. Therefore, he made the addition of INR 1500000/- being half of the share of INR 3,000,000 as undisclosed income of the assessee. However he did not make any separate addition with respect to the above sum because of the addition made by the assessing officer of undisclosed cash receipt of INR 40.58 crore has been made, which subsumes it. Accordingly, assessment order u/s 143 (3) read with section 153C of the income tax act was passed on 30/12/2008 Page | 6 determining the total income of the assessee at Rs. 447401350/- against the returned income of INR 9 801350/- wherein an addition of Rs. 43.76 crores have been made as undisclosed income of the assessee.
7. The assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT - A- III, New Delhi. He passed on detailed order on 25/3/2010. As per para number 4.3 onwards of his order he deleted the above addition of Rs. 43.76 crore . However, he sustained the addition of INR 1,500,000 as per para number 5.2 of his order. Therefore the revenue is in appeal before us contesting the deletion of the addition of INR 43.76 crores and assessee is in appeal contesting confirmation of addition of INR 1,500,000.
8. Now we first take up the appeal of the LD AO. The learned departmental representative vehemently supported the order of the learned assessing officer and stated that there are documents found of the cash receipt by M/s Vipul Ltd and therefore as the assessee is the 50% owner of that particular project the balance 50% is required to be added in the hands of the assessee.
9. The learned authorised representative submitted that the coordinate bench in case of Vipul Ltd has deleted the addition of Rs. 43. 76 crores made in the hands of M/s Vipul Ltd by the learned assessing officer and confirmed by the learned CIT - A on the same set of material seized from the control in possession of Mr. Moti S Masanad as per order dated 24/5/2013. Therefore, he submitted that that the issue is squarely covered in favour of the assessee. He further referred to the order of the coordinate bench at para number 39 of the order wherein it has been held that cumulative appreciation of all these factors makes it clear that the calculation made by Mr. Masand on page number 52 does not reflect true business affairs of the assessee. These are the details, which are for income determined by him for calculating his growth in case he has worked as an independent consultant instead of an employee, so these details are not worth of credence to make the addition. He therefore submitted that in view of the above finding recorded by the coordinate bench has deleted the whole addition. Therefore, the issue is squarely covered in favour of the assessee.
Page | 7
10. We have carefully considered the rival contention and perused the orders of the lower authorities. The brief fact shows as M/s Vipul limited and assessee company are 50 % partners in the project, identical issue arose in case of M/s Vipul Limited which reached up to the level of coordinate bench as identical addition has been made by the learned assessing officer in the hands of M/s Vipul Ltd on the same set of seized documents found from the residence of Mr. Moti S Masand , which has been deleted by the coordinate bench vide order dated 24/5/2013 in ITA number 2403 and 5999/del/2010 dated 24/5/2013 as per para number 17 - 39 which is as under:
"17. Now, we take ground Nos. 4 to 13. In these grounds of appeal, assessee is impugning addition of Rs.48.76 crores. The brief facts of the case that search and seizure operation was carried out at the business premises of the assessee on 1st of June 2006 under sec. 132 of the Income-tax Act, 1961 along with the residential premises of its directors. It emerges out from the assessment order that Vipul Group is controlled by Shri Puneet Beriwala and Orchid Group is controlled by Shri Rajiv Gupta. They have constructed severai projects in joint venture. With effect from 1st of October 2005, both these groups have separated and transferred all the assets and liabilities available as on 3 of September 2005. According to the Assessing Officer, as a result, the various projects were taken over by Orchid Group and the details have been noticed on page 4 of the assessment under:-
Vipul Ltd., Orchid Infrastructure Developers Pvt. Ltd., Plaza Centre Agora Petals Belmonte Sohna Road (Orchid Business Park) Greens Villanova (Residential) Villanova (Residential) Zirakpur Project (Punjab) Garden Aurobindo Marg, New Delhi Ludhiana (Punjab)
18. In the assessee‟s company, there was a director, namely, Shri Moti S. Masand, who according to the Assessing Officer was a highly respected and renowned technocrat having an expenses of more than 30 years. He holds master degree in civil engineering. He was looking after the engineering and construction work of Vipul Group. Learned Assessing Officer further observed that he was a close confident and associate person of Shri Punit Beriwal, MD of Vipul Group. He was also authorized to sign the bank cheque books and the audited balance sheet, profit and loss account of M/s. Vipul Ltd., M/s. Mab Finlease Ltd. His residence comprised at 12/8, Sarvepriya Vihar, New Delhi was covered under sec. 132, on 1st of June 2006 itself. During the course of search, incriminating documents were found and seized. They were inventorized as page Nos. 43 to 47, 50 to 55 of Annexure Al by search party B-3. Statement of Shr Moti S. Masand was recorded under sec.
132(4) of the Act. Learned Assessing Officer has also recorded his Page | 8 statement on 27.8.2008 during his assessment proceedings initiated under sec. 153A. He also sworn an affidavit on 3rd of September 2008. On an analyses of all these loose papers in the light of the statement given by Shri Moti S. Masand, Learned Assessing Officer has formed an opinion that assessee was receiving money in cash for sale of flats on which Shri Masand was receiving incentive @ 0.5%. Shri Masand has admitted receipt of incentive and made a surrender of Rs. 2 crores winch was offered for tax in assessment years 2006-07 mid 2007-08. On an interpretation of page No. 52 of Annex-'e A1; learned Assessing - Officer formed an opinion that assessee has received money in cash which is to be quantified at Rs. 68.40 crores. He made an addition of Rs. 47.76 in this assessment year and rest in other assessment years, where corresponding sales are shown. In the assessment year 2006-07 an addition of Rs. 11 crores has been made.
19. On appeal, assessee has made detailed submissions. Learned first Appellate Authority has reproduced the assessment order from page Nos. 2 to 14 of the impugned order. Thereafter, Learned First Appellate Authority has reproduced the grounds of appeal taken by the assessee and its written faster submissions. Learned GIT(Appeals) thereafter recorded following findings which include the scanned copy of page No. 52 of Annexure A1 found at the residence of Shri Moti S. Masand. This page has been reproduced on page 60 of the impugned order. The finding of the Learned CIT(Appeals) read as under:
"4.6 I have carefully considered the facts of the case, submissions of the appellant, remand report of the AO dated 06,112009 and the rejoinder filed by the appellant on the last day of the proceedings. It is observed from-the factual matrix of the ease that search m/s 132 of the Act was conducted on 01.0612006 at the business premises of the company as well as residential premises of its directors. The search at the residential premises of Sh. Moti S. Masand led to seizure of various incriminating documents namely 4. To 47, 80, 51, 53, 54 in Annexure A/1. These documents are daily collection reports, MIS collection sheets of different projects of M/s Vipul Ltd. The document no. 50 & 51 reflect the progressive collection as on 31.3.2005 and 30.9.2005 respectively. The scanned version of document no. 52 in annexure A/1 is reproduced below:-
This documents contains 13 columns. Sh. Masand explained the various columns in his statement recorded u/s 132(4) of the Act on 01.06.2006 which is reproduced below:-
"Q. During the course of search and seizure operation cash amounting to Rs. 10,88,100 has been found from your residence. Please state the source of such cash?
Ans. It is part of the incentive received from the company for various projects.
Q. I am showing you page No. 43 to 55 of Annexure A-l found and seized from your residence. Please explain the entries reflected in all pages one by one?
Page | 9 Ans. Page 43 contains the collection report of the company of different commercial projects dated 25.03.2006. Q. Page No. 49 of the annexure is shown to you. Please state in whose handwriting entries have been made, what has been worked put at the rate of 0.5, who has written less comm.. Sona across 32.15 lacs. Who has written 59L, receipt- 5L 1.9.05-54L, 5.12.05-4L?
Ans. Figures are in my own handwriting.
Q. Please explain the entries made on this page ?
Ans. These are the calculations made for Various projects, The figures were calculated as that in case of salaries, employee if I would have worked as a consultant, how many would have been calculated as incentive.
Page No. 52 of this annexure is shown to you. On tills page in front there are notings in ink arid with pencil on the backside, please state in whose handwriting these notings have been made and for what these notings stand for.
Ans: These are the figures indicating the receipts of the projects of the company from various projects and they are written in my own handwring.
Q. In front of this page at bottom a working of 236.152 as total receipts is written of 236 at the rate of 0.5% 1.18 crores have been worked out. Below this figure less receipts 2638500 is written and balance has been drawn at 9116500 as on 25.5.2005. Below this transferred to Sona Road, Commercial 32.15 lacs is written and balance has been drawn at 5946500. Please after receipts 1.9.05-5 lacs is written and balance has drawn to 5446500. Below this transferred to commercial 1.2.06- 50 lacs and balance has drawn to nil. Please explain all these things?
Ans.. These are the figures calculated for incentive for the period 1.7.01 to 31.3.06, calculated on page 43 to 55 w.r.t incentive I would like to declare additional income of rs. 2 crore to remain in peace and avoid litigation. The cash found at my residence is the part of my income.
This was further confirmed by Sh. Moti s. Masand in his statement recorded u/s 131 of the act by the A.O. on 27.08.20Q8. The relevant questions and answers are reproduced below:
Q. - Page No. 52 of Annexure A-l ccntain detail of total receipts made in collaboration with M/s Orchid and other land owners. As the products were marketed by M/s. Vipul has the share of amount received in cash was being transferred to M/s. Orchid M/s Vipul is marketing agent and selling share of orchid also. This page contains detail of shim of Vipul as far as my knowledge as I was entitled to received incentive on sale proceed of share of Vipul. How the cash component and other amount Page | 10 was shared between Orchid and Vipul is best know to management of Vipul and Orchid.
Q. Do you have anything specific to state how the amount of share of cash was being shared between Vipul and Orchid ?
Ans. I am a Director have knowledge of the marketing the entire project including the shares of Orchid Group has been done by Vipul Ltd. However, I don‟t know about the sharing the proceeds between Orchid and Vipul.
This was further confirmed by Sh. Masand by filing the affidavit dated 03.09.2008. It is observed from the document no. 52 in annexure a-1 that there are 13 columns. The column no. 1 gives the details of the projects executed by the appellant in joint venture with M/s Orchid Infrastructures and Developers Pvt. Ltd. The column number 5 on the document entails the details of the cash receipts of Rs. 48.76 crore. This document as discussed above was seized from the possession of Sh. Moti S. Masand who was working is Technical director with M/s Vipul Ltd. The Section 132(4A) of the Act cast a rebuttable presumption on Sh. Moti SI Masand to explain the contents of the documents seized from his residence. Sh. Masand gave a detailed statement on the nature of the document This was further explained by him in the statement v/s 131 of the Act recorded on 27.0o.2008. The affidavit dated 3rd September 2008 further confirmed the facts Sh. Moti S Msand rebutted the presumption cast on him by virtue of provisions of sub-section 4A) of Section 132 of the Act. He categorically explained that the documents seized from his possession contain the financial details of M/s Vipul Ltd. Where he is working as a technical director. He further admitted that the commission received by him on the basis of entries made in the various documents especially document No: 52 in annexure A-l is not recorded in the books of accounts.
4.7 The AO vide order sheet entry dated 10.10.2008 confronted the appellant with the seized documents, copy of the statement of Sh. Masand during the search, the copy of the statement recorded u/s 131 of the Act during the assessment proceedings on 27.08.-2008 and gave the appellant an opportunity to cross examine Sh. Masand, if so desired. The appellant had denied the receipt of Cash and submitted that the figures in the document are nothing but the imagination and assumptions of Sh. Masand. The Counsel of the appellant in the rejoinder has referred to the documents seized during the search as "dumb documents" and relied on number of case laws. The case laws relied on by him are distinguishable on facts. It is further submitted that the amount of 148.76 crore has no basis and is without any relation to any of the seized material on record. There is no such amount existing in. document no. 52 in annexure A-l which has been referred to by the A.O. the figures have been taken by the AO arbitrarily without appreciating the submissions made by the appellant.
Page | 11 The analysis of the document number 52 in annexure A-l reveals the following:
1. It is written by the Technical Director in his own handwriting and Sh. Masand was holding a very important position in the company. He was authorized to sign bank books etc.
2. These notings have been made during ordinary course of business
3. The entries recorded in the document are incriminating and related to the business conducted by the appellant.
4. The document is not dumb as claimed by the appellant.
5. St is self speaking. St contains the financial transactions of the projects executed by the appellant. The other documents seized are MIS sheets arid circulated among the directors of the company on regular basis.
6. The transactions made through cheques noted therein are cross verifiable.
7. The receipt of cash is mentioned against the each project undertaken by the appellant and there are other documents seized during the search which indicate that cash transactions are integral part of the business conducted by the appellant.
8. Sh. Moti S. Masand admitted having earned the undisclosed income which is not recorded in the books of accounts and paid the taxes thereon.
4.8. In view of the overwhelming evidence and statements of Sh. Moti S. Masand, there is no force in the arguments of the appellant that the document is figment of imagination of Sh.
Masand. It is worth mentioning here that Sh. Masand admitted the incriminating character of the documents seized during the search. It was reconfirmed on 27.08.2008 while he was examined u/s 131 of the Act Finally, an affidavit dated 03.09.2008 was filed to reconfirm the statement given by him during the search, on 01.06.2006 whereas the appellant had brought nothing on record to show that the entries made in the document have not actually taken place. There is no evidence on record to show that the documents are not real. The appellant vide order sheet entry dated l0.10J2008wasgiven the copy of seized documents, copy of statement recorded during the search, copy of statement recorded during the assessment proceedings on. 27.08.2008 and was offered to cross examine Sh. Masand. during the assessment proceedings which was denied by the appellant.
4.9 After considering the overwhelming evidenced seized during the search the statements of Sh. Masand, the contents of the affidavit and submissions of the appellant, it is observed that Sh Masand was working as a Director with the company. Apart Page | 12 front being a technical man, He was also looking after the financial affairs. This is borne out from the fact that he was assigned the power to sign cheques. The documents seized during the search show the financial details on different dates. The appellant had failed to rebut the cogent evidence gathered during the' search. The details of the projects executed by the appellant are clearly identifiable with the details mentioned in the document. In view of the evidence gathered in the search and judicial precedents as discussed; it is held that the AO has rightly .made the addition of Rs. 48.76 crore to the income of the appellant."
20. While impugning the order of Learned CIT(Appeals), learned counsel for the assessee submitted that the addition of Rs.48.76 chores has been made by the Assessing Officer, primarily on the basis of loose papers found from the residence of Shri Moti S. Masand, a director in the assessee‟s company, coupled with the statement given by him during the course of search as well as during the course of his assessment proceedings. The learned counsel for the assessee submitted that this man came from Unitech and went back to Unitech. He worked with the assessee company from 1st of July 2001 to December 2006. He was taken on-the Board of Directors by the group in the capacity of a technical person. This confirm by Shri. Moti S. Masand, while, giving reply to. question No, 3. The learned, counsel for the assessee took/us through the statement of Shii Moti S. Masand. According to the learned counsel for the assessee, he was a disgruntled employee and, therefore, the papers found from the premises of a director cannot be considered for working additions in the hands of the assessee. For buttressing his contentions, he relied upon the order of the ITAT, Mumbai in the case of ACIT Vs. Shalesh S. Shah reported in 63 TTD 15. He further submitted that it is for the revenue to establish that loose papers constitute income of the assessee. In order to buttress this proposition, he relied upon the order of the ITAT, Chennai in the case of ITO vs. M.A. Chhidambram reported in 63 ITD 203. The learned counsel for the' assessee further submitted that if reply; of-the assessee dated 2d2.2008andl2JO.2009 are considered then it would reveal that alleged loose papers along with the statement of Shri Moti S. Musand do not goad the adjudicating authority to any logical conclusion. The figure stated In the loose papers..primarily page No.52 of Annexure AI are hypothetical figure without any supporting any material on record. The learned counsel for the assessee in order to. demonstrate inconsistency In the figures available on page 52 and how they do not lead to any logical conclusion took us through the ^detailed reply submitted by the assessee on 02.12.2008 before the Assessing Officer. Copy of the. reply is , available, on pages 144 to 152 of the paper book. It is advantageous to take note of this reply. It reads as under:
To, The Assistant Commissioner of Income Tax Central Circle II New Delhi Subject: Reply to Show Cause Notice Dated 10110/2008 issued to Mis Vipul Limited Page | 13 In continuation to cur earlier submission we submit further of the /remaining, issues as under:-
Reply to Point Number 1 and - 2 of Questionnaire Dated 16110/2008 This is in connection with the query number I in the questionnaires related to the documents which had been seized during the course of search at the residence of Sk Moti S. Masand at 12/8, Sarvpriya Vih&r, New Delhi (Party B-3). The documents are numbered as pages 49, 52 and backside and 55 of Annexure A-I, the copies of which are forming part of the seized material. These papers are stated to contain some figures alleged as receipts in cash as well as cheque. against various projects. It has been mentioned in the questionnaire that Shri Moti Mdsaad was holding a very important position in the organisation and he has worked out the, so called incentive to be received/ receivable by him from the* company and the assessee has been asked to show cause why the same should not be treated as undisclosed IT come in the hands of the assessee. In this connection, it is submitted that Sh. Moti S; Masand was a director of the company at the time of the search and he left the company. Presently he does not have any common interest with that of the company.- His statement was recorded during die course .‟of the search as well as during the recent assessment proceedings u/s 153A initiated against him. In the return of income, he has included a sum of Rs. 2 Crore in the round figure as, additional income from incentives. He has included Rs. 26 lakhs in his income in A.Y 06- 07 being part of Rs. 2. cr. and the remaining in the Assessment Year 2007-08. The said amount of surrender of the incentive received / receivable by Mm cannot be made the basis of addition in the hands of assessee company because there may be hundred reasons for any person, to surrender but to make additions in the hands of assessee company, it has to be proved beyond doubt that the assessee co has income on that account. It is deemed expedient to refer certain important depositions made by him which are as under:-
Statement of Moti S . Masand dated 27/08/2008 In the answer to the Question number 2, he has deposed that he is presently working with Unitech Reality Investors (India) Pvt Ltd. as the M.D. and CEO from December 2006. Prior to that, he was working as a director with Vipul Ltd from Ist July 2001 to December 2006. In reply to Question number 3, he further deposed that in Vipul Group, he was looking after the engineering section and the planning and execution etc. of various projects. In the answer forming part of paragraph I on page 4 of the statement He further stated that:-
Page | 14 I was mainly responsible for engineering activities, but at times when Shri Fimit Berhvala, Director was not available, I used to sign financial statements, Balance Sheets etc. which were put up for signatures. However, I have no idea about financial transactions Calculation of incentive as made by Mr. Moti Masand on Page 52 of the seized material.
Total Receipts = 242.752 + 47.4+= 290.152
Less: 02-03 46.000
244.152
Less: Return (to Customers) 8.000
[email protected]% 1,18,00,000
Less received 26,38,500
9116500/-
As on 29.05.2005
Transferred to Solum Road Commercial 32,15,000
Received 01.09.2005 59,46,500
50000
54,45,500
05.12.2005 4,00,000
50,46,500
Transferred to commercial 01.02.2006 50,00.000
Nil
On the perusal the above alleged calculations made on ' seized documents on page 52, it can be inferred from the fi mures that 242.752 is derived from Column-6 on Page 52, which depicts probably the net turnover as on 31/03/2005 and the figure of 47.4 is derived from Column 6 which again is on 31.03.2005, thereby, giving a total of 290.152 .We assume that this is the turnover of the organization being depicted by Mr. Masand.
The next line reduces 46 out of the total figure which is assumed to be the turnover till 31/03/03 (in analysis of these figures and on perusal of document at Serial no. - 50, which is a daily collection report dated 31/03/05, it is deduced that the figures in1 CoIunm-2 have been taken from Column-3 of Page 50. In Column-4, Mr. Masand Eas made some .assumptive percentage shares against these turnovers attributed to Vipul and calculated his share in Column-6. On perusal of the audited balance sheet -from 2002-2003 up to 31/03/05, the revenue recognized by "Vipul Ltd was as follows:-
Financial year Turnover in crores
2002-03 22.809
2003-04 39.669
2004-05 96.996
Total 159.484
The balance unadjusted advance received from customers against all the projects of Vipul were outstanding to the amount of 111.837 crore, which makes the total collections as per the Page | 15 audited books of accounts of the assessee as on 31/03/05 at Rs. 271.32 crore, thereby showing that the figure assumed by Mr. Moti Masand in his assumptive sheet is falling short by approximately 29 crore, if all these assumptive figures are taken in crores.
He has further reduced the collections for 2002-2003 out of the total receipts by 46 crore, whereas, the total revenue recognized for 2002-2003 was 22.819 crore . and the unadjusted advances from customers for all projects were Rs. 4.582 crore, thereby making the total collections for 2002-2003 at 27.401 crore which falls short of Mr. Moti Masarid's calculations fry 19 crore. Returns to customers have been assumed to be 8 crore, which, even the accounting people may not be able to calculate over a period of 3 years out of the customers* accounts as to what the figures of returns to customers can be. It is a voluminous exercise to calculate tins kind of information, out of the thousands of customers for various projects as the bookings keep happening and keep getting cancelled as a routine every day and it is a Herculean task to calculate the cumulative refunds to various customers over a period of 3 years. How Mr. Mati Masand could juggle such figures out of the maze of accounts is anybody‟s guess. What this figure of returned amounts means is not understood and whatever refunds have been made are a part of the audited books of accounts. ;
Mr. Masand, then,, calculates his assumptive 0.5% incentive on the net collection of 236 crore making a /total incentive of Rs.
1)8,00,000/- to himself. Mr. Masand has then gone on to.....
incentive allegedly received by him from the assessee. In the; said calculation on Page 52 he has shown to1 have received Rs. 26,38,500/ which does not give any details of the dates and the mode. Further, he has got an amount of Rs. 32.15 lac adjusted against the Sana Road Commercial flat, a sum of Rs. 5 lac has been received by him on 01/09/2005. Another sum of Rs. 4 lac has been deductged on 05/12/2005 and an commercial (Dell Commercial flat) on 01/02/06/ thereby, assuming to have writing off an amount of Rs 46,500, which was the balance and as per this document Mr. Masand had adjusted all of his calculated alleged incentive of Rs. 1.18 Crores as on 01/02/061 We have analyzed all the adjustments of this statement in the prism of his statements at the time of search and another made 27/08/08 as well as his return of his income filed u/ s 153A and the show cause notice issued on 10.10.2008 and our observations are as under:
On the perusal of the above details, it is evident that whatever alleged incentive Mr. Masand has detailed for himself, it was received by Mm as on 01/02/06, which means that his return of income for F. Y. 2005- 06 relevant for the Assessment Year 2006- 07 should have depicted the total incentive received from the Page | 16 assessee at Rs. 1.18 crore, whereas, Mr. Masand has declared an incentive of only 26 lac in His return of income for the said Assessment Year.
Further, on the perusal of the statement given by Mr. Masand on 27/08/2008, Question No.8 of the same is being reproduced as under:-
Question:- On the basis of toted receipts reflected in this document you have calculated incentive received/ receivable of Rs. 1.18 crores. Please give details of amount received and mode of payment.
Answer:- Entire amount of Rs. 1.18 crores was received, part of which was received by cheque as apparent from page No. 55, These cheques were received in the shape of salary from M/s. Entrepreneurs (Calcutta) Private Limited. This company was a sister concern of M/s. Vipul Ltd registered at Calcutta. However, 1 was hot working in any capacity with M/s. Entrepreneurs Mr. Masand has categorically stated that he was an employee of M/s Entrepreneurs (Calcutta) Private Limited, drawing salary from there which he now denies. In addition to the salary, Mr. Masand was given art amount of Rs; 10,00,000 as an advance which is recoverable from him till date as per the company's books of accounts and the recovery proceedings for Rs. 10,0000 have been initiated already by the company to recover its advanced amount. Argumentatively, in case the amounts advanced were incentives as I alleged by Mr. Masand, due tax would have been deducted from the amount paid as is applicable and the net amount should have been paid. Mr. Masand, himself, was a (Calcutta) Private Limited and ismotmt received from this company was in the form of adjustment for incentive payable by Mis Vipul Ltd. as far as I understand. "
As per our earlier submissions and the calculations made on Page 52, it is clear that alleged Rs. 1.18 crafe was received and / or adjusted / credited to Mr. Masand's account as per his own submissions and records.
He also mentions in his reply to Question No.- 8 on-Page 6 of his statement that: 1his 1.18 crore is partly by cheque" which means these cheques would have been received before 01/02/2006, by the time, this entire amount of 1.18 crare was adjusted as per his statement. However, as per the show-cause issued by your goodself, on Page 2, it is detailed that the various' cheques received by Mr. 'Masand but adjusted against incentive were only received in the months of August, September and October 2006, which means that the alleged receipts against Rs. 1.18 crores of incentives could not have been received by cheque, which further denotes that either the statement of Mr. Masand is erroneous or the details on Page 52 are assumptive and figments of Mr. Masand's imagination.
Page | 17 "Question:- Please state in what made the amount has been given to you and for which year this payment relates to ? Answer:- This incentive receipts for various projects completed up to 2005-06. The mode of payment was cash.
In reply to a Question on Page 2, this is being reproduced here under:-
Ouestion:-Please state your sources of income? Answer:- As a director of Vipul Ltd., draw salary 18 or 19 lacs (Eighteen or nineteen, lacs) perannum. I also draw salary of Rs. 12 lacs (Twelve lacs) per annum from Entrepreneurs Calcutta. I also enjoy rental income from my another house No.- M-42, South City-!, approximately thirty two thousand monthly. In addition to it, I also earn interest income.
Mr. Masan has categorically stated that lie was an employee of M/s. Entrepreneurs (Calcutta) Private Ltd., drawing salary from there which he now denies. In addition to the salary, 'Mr. Masand was given an amount of Rs.10,00,000 as an advance which is recoverable from him till date as per the company‟s books of account and the recovery proceedings . for Rs. 10,00,000 have been initiated already by the company to recover its advanced amount Argumentatively,' in case the amounts advanced were incentives as allocated by Mr. Masand, due tax would have been deducted from the amount paid as is applicable and the net amount should have been paid/ Mr. Masand, himself, was a working director there add would have taken Care of these legal requirements in case it was intended to be an incentive. It was a pure advance made for his personal requirements which was. to be paid back by him as and when demanded by the company. In conformity to his other statements, it seems to be an afterthought and not. relevant to the facts on record.
Further, Me Moti Masand, in his statement on Page 52 has shown an adjustment of Rsl 32,15,000/ - as adjustment of the alleged incentive with the Sons Road - commercial flat. Firstly, in reply to the Question on Page 8 which is being reproduced here under:-
"Questions-I am showing Page No. 39 -which contains details of some property and figures. Please explain.
Answer:' These contain details of total cost' of projects I properties and details of amount paid which are duty reflected m regular return of income. The details are as under.-
(i) Dell Commercial tentative total cost is 254 lacs, out of which, 25 lacs has been paid.
(ii) Commercial Sana tentative cost is s. 53 lacs, out of which 25 lacs have been paid."
Page | 18 Against the second property, the tentative cost against commercial flat on Sona Road is Rs. 53 lac, out of which, Rs 25 Lac has been paid. In case the alleged adjustment against incentive on Page 52 is considered correct, argumentatively, then, an amount of Rs. 32,15,000/ - should have been stated to his credit as paid in addition to Rs. 3,00,000/- paid by him by cheque. But, Mr. Moti S. Masand claims to have paid only Rs. i25 lac against the said property. Further, as per the records of the assessee, Mr. Masand had surrendered this flat to the company on 1 st February, 2006 and a refund cheque for this amount was paid by the. company by cheque, was refunded back to him. As per prudent norms, in case he had surrendered the said commercial fiat, the alleged cash incentives adjusted against this property would have also been refunded back to him immediately, thereby, his cash receipts Com incentives going up by that amount in Financial Year 2005-06. But, Mr. Masand has declared only Rs. 26 laC as the incentive received by him during this financial year which is contradictory and.; does not hold good on the basis of the evidence available.
The second adjustment of Rs. 50 lac against the Dell Commercial flat as per Page 52 on 01/02/2006 also is. „suspect. In his answer to the Question on Page 8 of his statement on 27/08/08, he his specified the total value of Dell commercial flat at Rs.r54 Lac, out of which, he has stated that Rs. 25 lac hks been paid. As per the company records, .Mr. Masand has made a payment of Rs. 25 lac to the company against this flat. Mr. Masand has alredy Rs. 25 lac by cheque how Rs. 50 lac could be adjusted additionally out of incentives. Only an amount of Rs. 29 lac to the maximum could have been adjusted against the alleged incentive. However, an amount of Rs. 50 lac has been adjusted on 01/02/2006, whereby, Mr. Masand in his own admission has paid a total amount of 75 lac for a property costing 54 lac which is hot .a plausible explanation, thereby forcing us to conclude that either Mr. Msand is lying under oath or the page 52 is an assumptive sheet prepared by mr. Msaand for his own purpose.
In his first statement on Page 11, we reproduce the questions and answers given by Mr. Masand on 02/06/06:-
"Question:- Page No. 49 of this annexure is shown to you. Please state in whose handwriting entries have been made. What has been worked out at the rate of 0.5. Who has written less commercial Sohna across 32A15 lacs. Who has written 59 L. received 5 L, l/>/05 - 541, 5/IV05- 4L?
Answer:- Figures are in my own handioring.
Question:- Please explain the entries made on this page? Answer:- These are the calculations made for various projects.
Page | 19 The figures were calculated to ascertain that in case of salaried employee, if I would have worked as a consultant, how money would have been calculated as incentive. "
On the perusal of the second answer, Mr. Masand has categorically admitted that these were assumptive figures calculated only for Ids own purpose that was to ascertain that in Ills case, he switched to a consultant mode and is offered an incentive of 0.5%, instead of his salary, then, how much benefit can accrue to him in those circumstances. The figures on these various Pages are concoctions of the various collection figures of the assessee coming. to him as MIS and assumptions of the cash, receipts which might have been there to arrive at presumptive conclusions to decide on his own future course of relationship who and half truthful submission. On another page of the seized material he has specifically Answer:- These contain details of total cost- of projects / properties and details of amount paid which are duly reflected in regular return of income. The details are as under:-
(i) Dell Commercial tentative: total cost is 254 lacs, oat of which, 25 lacs has been paid.
(ii) Commercial Sona tentative cost is s. 53 lacs, out of which 25 lacs have been paid.
Against the second property, the tentative cost against Commercial flat on Sona Road is Rs. 53 lac, Out of which, Rs 25 Lac has been paid. In case the alleged adjustment against incentive on Page 52 is considered correct, argumentatively, then, an amount of Rs. 32,15,000/- should have been stated to his credit as 'paid in addition to Rs. 3,00,000/- paid by him by cheque. But, Mr. Moti S. Masand claims to have paid only Rs. 25 lac against the said property. Further, as pet the records of the assessee, Mr. Masand had surrendered this flat to the company on 1st February, 2006 and a refund cheque for this amount was paid by the. company by cheque, was refunded back to him. As per prudent norms, in case he had surrendered the said commercial flat, the alleged cash incentives adjusted against this property would have also been refunded back to him immediately, thereby* his cash receipts from incentives going up by that amount in Financial Year 2005-06. But, Mr. Masand has declared only Rs. 26 lac as the incentive received by him daring this financial year which is contradictory and does not hold good on the basis of the evidence available.
The second adjustment of Rs. 50 lac against the Dell Commercial flat as per Page 52 on 01/02/2006 also is suspect.
In his answer to the Question on Page 8 of his statement on 27/08/08, he has specified the total value of Dell commercial flat at Rs. 54 Lac, out of which, he has stated that Rs. 25 lac has been paid. As per the company records, Mr/ Masand has made a. payment of Rs. 25 lac to the company against this flat.
Page | 20 Assessee Mr. Masand has already paid Rs. 25 lac by cheque, how Rs. 50 lac could be adjusted additionally out of incentives. Only an amount of Rs. 29 lac to the maximum could have been adjusted against the alleged incentive. However, an amount of Rs. 50 lac has been adjusted on 01/02/2006, whereby, Mr. Masand in his own admission has paid a total amount of 75 lac for a property costing 54 lac which is hot .a plausible explanation thereby forcing us to conclude that either Mr. Masand is lying under oath or the Page 52 is an assumptive sheet prepared by Mr. Masand for his own purpose.
In his first statement on Page 11, we reproduce the questions and answers given by Mr. Masand on 02/06/06:-
"Question:- Page No. 49 of this annexure is shown to you. Please state in whose handwriting entries have been made. What has been worked out at the rate of 0.5. Who has written less commercial Sohna across 32A15 lacs. Who has written 59 L. received 5 L, l/>/05 - 541, 5/IV05- 4L?
Answer:- Figures are in my own handioriing.
Question:- Please explain the entries made on this page? Answer:- These are the calculations made for various projects. The figures were calculated to ascertain that in case of salaried employee, if I would have worked as a consultant, how money would have been calculated as incentive. "
On the perusal of the second answer, Mr. Masand has categorically admitted that these were assumptive figures calculated only for his own purpose that was to ascertain that in Ills case, he switched to a consultant mode and is offered an incentive of 0.5%, instead of his salary, then, how much benefit can accrue to him in those circumstances. The figures on these various Pages are concoctions of the various collection figures of the assessee coming. to him as MIS and assumptions of the cash, receipts which might have been there to arrive at presumptive conclusions to decide on his own future course of relationship with the assessee company. None of these figures have nay relevance to that facts on record except Mr. Masand‟s half hearted and half truthful submission. On another page of the seized material, he has specifically Answer:- These contain details of total cost- of projects I properties and details of amount paid which are duly reflected in regular return income. The details are as under
(i) Dell Commercial tentative: total cost is 254 lacs, oat of which, 25 lacs has been paid.
(ii) Commercial Sona tentative cost is s. 53 lacs, out of which 25 lacs have been paid.
Against the second property, the tentative cost against Commercial flat on Sona Road is Rs. 53 lac, Out of which, Rs 25 Lac has been paid. In case the alleged adjustment against Page | 21 incentive on Page 52 is considered correct, argumentatively, then, an amount of Rs. 32,15,000/- should have been stated to his credit as 'paid in addition to Rs. 3,00,000/- paid by him by cheque. But, Mr. Moti S. Masand claims to have paid only Rs. 25 lac against the said property. Further, as pet the records of the assessee, Mr. Masand had surrendered this flat to the company on 1st February, 2006 and a refund cheque for this amount was paid by the. company by cheque, was refunded back to him. As per prudent norms, in case he had surrendered the said commercial flat, the alleged cash incentives adjusted against this property would have also been refunded back to him immediately, thereby* his cash receipts from incentives going up by that amount in Financial Year 2005-06. But, Mr.1 Masand has declared only Rs. 26 lac as the incentive received by him daring this financial year which is contradictory and. does not hold good on the basis of the evidence available.
The second adjustment of Rs. 50 lac against the Dell . Commercial flat as per Page 52 on 01/02/2006 also is suspect. In his answer to the Question on Page 8 of his statement on 27/08/08, he has specified the total value of Dell commercial flat at Rs. 54 Lac, out of which, he has stated that Rs. 25 lac has been paid. As per the company records, .Mr/ Masand has made a. payment of Rs. 25 lac to the company against this flat. In case of Mr. Masand has already paid Rs. 25 lac by cheque, how Rs. 50 lac could be adjusted additionally out of incentive. Only an amount of Rs. 29 lac to the mentioned Assumed against certain figures, which shows the assumptive nature of the whole documentation.
Argumentatively, considering that the alleged amount adjusted against Dell Commercial flat of Rs. 50 lac was rightly" adjusted against that property, Mr. Masand has, while filing his return, admitted" that this alleged incentive of Rs. 50 lac was received by him in cash in F.Y. 2006-07 relevant to the A.Y. 2007-08. This could have only been possible if Mr. Masand had surrendered this Dell Commercial "property to the assessee company and the company, in turn, would have refunded the entire amount to the credit of Mr. Masand by cheque or in cash. However, interestingly, Mr. Masand continues to own this property till date, enjoying the rental income from this property: It seems like a benevolent thought that the company would have paid Rs. 50 lac of the alleged incentive to Mr. Masand in-F.Y. 2006-07 relevant to the A.Y. 2007-0S without getting Mr. Masand 1a surrender the said property. Since the same has not happened, where Mr. Masand received solid cash incentive is purely a matter of speculation.
Further, on page-52 of the seized material, it would be noticed by your goodself that In column 12, the cash received, till 30/09/2005 from Plaza project was written as Rs. 5 crore, Page | 22 whereas, as per the backside of Page 52, the total cash received till April 2006 from Plaza project was 3 crore .
Identically, the alleged cash receipt from Agora project as per Page 55. was Rs.2 crore till April 2006, but, as per Column 12 of Page 52 it was Rs. 3 crore till The alleged cash received against Sona Road Project till April, 2006 was Rs.3 crores as per Page; 55, whereas, Nil as per Column 12 and 13 of Page 52 till 31/03/2005.
The perusal of all these documents raid the above facts very clearly point out that all these figures floating around in these documents are -nothing, bid the imagination and assumption of Mr. Masand, since/not having to do anything with the financial affairs of the company and only' to do with the engineering and technical aspects of the company. Mr. Masand dreamed of becoming a consultant and earning incentives on the total receipts of the company and to calculate those assumptive incentive receipts, he was assuming certain cash receipts which might have been received by their company, purely assuming out of his little knowledge of financial facts.
Additionally; Rs. 10 crore has been shown as amount received from the project bf Vipul World on an estimated basis upto 31/03/16, whereas, the alleged cash details against various projects on Page 55 and on the back of Page 52 do not find any mention of this amount. However, the assessee company has already surrendered the amount of cash received against the project of Vipul World in its returns for the assessment years ?. H0Q6-07 and 2007-08 and the same does not carry any relevance to the figures depicted by Mr. Masand. Further, on Page 6 of his statement taken on 27/08/08, Question No. 7 is being reproduced as under:-
"Question:- As per this page, there, is detail of amount recorded in cash of 47.4- crore upto 31/03/06. Please give details from whom these figures have been obtained and whether these have been accounted for in books of accounts against receipt from projects by Mjs Vipid Ltd.
Answer:-. These figures were obtained project wise for the accounts. In support of the figure's reflected in this document, there are various support sheets. Page No. - 50 and 51 giving details of receipt from projects. However, the figures reflected in cash are not reported in project wise receipts reflected in his sheet.
On the perusal of the answer given by Mr. Masand and on the perusal of Page 50 and 51, it is evident that. these two pages do not contain any details of the alleged cash receipts on Page' 52, Therefore, wherefrom these cash receipts are corroborated or detailed, except in the mind of Mr. Masand is anybody's guess. In regard to the above it is stated that the cash mentioned therein do not contain any detail except the rourid figures from the Page | 23 different projects. There is no detail of where it was received from, when was It received and the details thereof. There is no authenticity of this page as it is not signed contains no date, year or any ether detail regarding the receipt of cash would not be justified to infer anything without any further corroboration with any other material either on record is seized from the assessee. There is no document either on record or seized from. the premises of the 'assessee which support that the cash was actually received. Neither there is any material to substantiate the application , of these alleged cash receipts not any actual cash has been found during the course of search or survey proceedings except the cash accounted for in the books of accounts and surrendered during the course of proceedings, on the complete basis of all the seized records during the search & survey. The assessee's stand is vindicated by the fact & further established in the absence of any corroboration, whatsoever. In the light of our detailed submissions we unequivocally deny the contents of these alleged papers and the conjecture of Mr. Masand as a figment of this imagination, which lacks any corroborative value due to inherent contradictions between these alleged papers, his dichotoxnous statements under oath and the incomes declared u/s.153A; In view of the above it would not be justified to take any cognizance of the scribbling and conjectured figures assumed by Mr. Masand and such cursory details without any corroboration shall be disregarded for submitted in the next two days approximately.
Thanking yon,
For Arora.& Bansal" '
21. The learned counsel for the assessee- further took through the statement of Shri Moti S. Masand and pointed out that he himself admitted that he was responsible for engineering activities. He has nothing to do with the Finance Department. The Finance Department was handled by Mr. Raj Kaushik and whose statement was not recorded by the revenue. According to the learned counsel for the assessee, if the documents relied upon by the Assessing Officer do not lead to any logical conclusion then these documents be termed as dumb documents and on the basis of such documents, no addition can be made. He put reliance upon the order of the ITAT in the case of Ashwani Kumar reported in 39 1TD 183. It was also contended that there is no corroborative evidence collected by the revenue in support of these documents found from the residential premises of a director. The revenue ought to have reconciled these documents with any other material available at the premises of the assessee, only, then it could be held that they are connected with the assessee. For buttressing this purpose on learned counsel for the assessee relied upon 72 ITD 34 (Mumbai in the case of DA Patel Vs. DCIT 40 TTJ 668 in the case of Brij lal Rool Chand Vs. Vs. rtO and 63 TTJ 535 in the case of SK Gupta Vs. DOT, it was also contended that once the document is unsigned, it is merely a loose Page | 24 paper and if such document has been found, from the-possession of a third party then unless there is a corroborative evidence on the record, no addition can be made in me hands of the assessee. In support of this contention, decision of Hobble Delhi High Court in the case of CIT vs. Kulwant Rai reported in 291 ITR 36 was relied upon. The learned counsel for the assessee further submitted that statement of Shri Moti S. Masand cannot be relied upon because it was recorded from the back of the assessee. He pointed out that one statement was recorded during the course of search, the other statement was recorded during the assessment proceedings of Shri Moti S. Masand and no statement was recorded in assessment proceedings of the assessee. Learned Assessing Officer had taken an affidavit from Shri Masand but the copy of the affidavit was not supplied to the assessee during the course of assessment proceedings. It was only supplied during the appellate proceedings but assessee was not granted opportunity to cross-examine. In order to support his contention that material collected from the back of assessee should not be relied upon, unless an opportunity to rebut or cross examine the witness was given, he relied upon the judgement of Hon‟ble Punjab & Haryana High Court in the case of Chranji Lal Steel Rolling Mil vs. CIT reported in 84 ITU-222.
22. In the next fold of his submissions, learned counsel for the assessee contended that complete details have been submitted before the learned Assessing Officer. He did not make any inquiry from the ultimate buyers, therefore, no addition on account of unexplained money received in cash for sale of property can be made. He relied upon the judgment of Hon‟ble Allahabad High Court in the case of Nathu Ram Prem Chand vs. CIT reported In 49 ITR 561. He also submitted that the details purchase along with addresses are placed on page Nos. 85 to 280 of paper book No.2. According to the learned counsel for the assessee, once preliminary burden was discharged by the assessee, it was for the Assessing Officer to prove that the assessee has received on money against sale of the flat. In brief, the proposition raised by the learned counsel for the assessee is that when no inquiry was conducted with the person to whom premises had been sold by the assessee company, it cannot be said that there was any consideration received over and above the same declared in the books of account of the assessee company. For. buttressing this proposition, assessee relied upon the judgment of Hon‟ble Delhi High Court in die case of CIT vs. Ved Prakash Chander reported in 305 ITR 245. The learned counsel for the assessee also submitted that during the course of search no Incriminating documents- or any unaccounted cash, jewellery or valuables found, therefore, the Assessing Officer ought to have not drawn the inference that assessee has received cash over and above the sale proceeds stated in the books of account.
23. In the next fold of submissions, learned counsel for the assessee while assessment order submitted that the Assessing Officer has not assigned any reason or any method how he allocated the sum of Rs.48.76 crores against different projects. He drew our attention towards details of Vipul Square Project. Against this project learned Assessing Officer has estimated the receipts of Rs. 5 crores in cash. The Page | 25 learned counsel for the assessee pointed out that this project was completed in financial year 2003-04, Sales have been recognized at Rs.7,57,63,512 in financial year 2003-04 and at Rs.2281,93,565 in financial year 2002-03. This project was completed lip to 73% in financial year 2002- 03 by 73%, Thus in the year in consideration, no sales have been made nor any sales have-been recognized, .how, learned Assessing Officer can say that a sum of Rs 5 crores was received in cash against this project in this year. Similarly, he pointed out that Vipul Floors Projects was completed 82.66% in Financial year 2003-04. Vipul Project was completed in financial year 2004-05 at 88.51%. Taking us through all 13 projects, learned counsel for the assessee raised an alternative argument that in case it was found that the Assessing Officer has proved about the receipt of on money, then, at the most sum of Rs. 12.13 crores can be alleged to have been received in cash, because out of 10 projects against whom cash receipts have been estimated on sale of space only in four projects sales are booked in this year. Thus, Assessing Officer has failed to look into all these aspects. Learned counsel raised one more alternative contention that in the, assessment order, learned Assessing Officer has discussed /about an addition of Rs. 15 lacs. Though, this amount was not added separately on the ground that addition of Rs.48.76 crores would take care of this unexplained expenditure.
24. Learned DR on the other hand submitted that first proposition raised by the learned counsel for the assessee is that Shri Moti S.. Masand is a disgruntled employee who came from Unitecli and went back to Unitech. He drew our attention towards annual report for assessment year 2002-03 and pointed out that at page.Mo- 10 of the paper book and page No. 5 of the annual report, it has been observed that Shri Moti. S. Masand, a highly respected .technocrat He has experience of 30 years various disciplined of civil engineering. He was. taken as a whole-time -director. He was authorised to sign blank cheque, audit report etc, The assessee has filed a civil suit against Shri Masand for recovery of Rs. 25 lacs. In that civil suit also assessee has stated that he was a knowledgeable man, having 30 years of experience. This civil suit has been filed in the year 2009 i.e. after Shri Masand has left the job with the assessee. Thus, there is no basis with the learned counsel for the assessee to say that Shri Masand is a disgruntled employee. In order to buttress his arguments, Learned DR took us specifically paragraph No.6 of .the plaint filed by the assessee against Shri Masand for recovery of Rs. 23,48,658, According to, the Learned DR, Unitech is a better group then the assessee and he joined a better group after he left the job with the assessed. As far as non- grant of gross exemption is concerned, Learned DR drew our attention towards para No. 9 of page No. 11 of the assessment order. According to the learned Assessing. Officer, an opportunity to cross examine ;was granted to the assessee but it was not availed. He further submitted that learned counsel for the assessee argued that affidavit was filed but copy was not given to the assessee, if that be so, then how assesses came to know about the filing of the affidavit. He pointed out that appeal was filed 011 29.122009. The plea of cross-examination was raised by the assesses on 05.03.2010, when Learned Page | 26 GIT(Appeals) was going to decide the appeal. The appeal has been decided on 22.03.2010. He submitted that index of paper book No. 2 indicates that all the documents i.e. page Nos. 51 and 52 etc were given to the assessee well in time but request for the cross-examination, was made after 05.03.2010-i.e. after six months. The documents were not seized from a third person. Shri Moti S. masand was very much on the board of directors on the date of search. Thus, papers were seized from the residence of a director. Learned DR took us through the statement of Shri Moti S. Masand. He pointed out that, learned counsel for the assessee took an objection that Vopul Sqbare is not mentioned, it is only square. He pointed out that while considering page No. 52 at page 60 of the Learned CIT(Appeals)?s order, square is mentioned at Sr. No.l. Learned Assessing Officer has also estimated five crores rupees as received by project square. There Is no basis for the assessee to say that it is not Vipul Square. The documents considered by the Assessing Officer duly disclosed receipt of on money, they are not dumb documents, page 52. is in the handwriting of Mr. Masand who is highly qualified technical He would not write the details without disclosing any meaning. The transfer to Sona Road, 13.2 is a clinching evidence on page 52. Learned DR submitted 'that conclusions are to be arrived at by weight the setting of ail the material available on the record as 'a whole including the statement of Shri Punit Beriwal. The importance not to be attached to a single page in isolation. If that approach is adopted then it would reveal that assessee was indulged in accepting on money which was not recorded in the books.
25. During the course of hearing, we put a query to the Learned DR thatfrom these documents, it was stated that payment was made to Shri Moti S. Masand even in the month of November 2007. Why an assessee would pay alleged incentive to a person who has left the job one year back. Learned DR was unable to give any reply to this query. It was also put to the Learned DR that a sum of Rs.25 lacs was alleged tq have paid as incentive by the assesses through cheque. Why an assessee who is in business would not record such payment, because all of payments which were made during the course of business and through cheque assessee would claim as a business expenditure. Learned DR was unable to reply this question also.
26. The learned counsel for the assessee while rebutting the arguments of the Learned DR submitted that statement was given during the course of assessment proceedings but affidavit was not given. The affidavit is dated 3rd of September 2008. Assessment order was passed on 31.12.2008. He further submitted that that the learned DK has alleged that Mr. Masand has joined Unitech which is a bigger group. He pointed out that before joining the assessee, Mr Masand was working with Unitech. The Finance Department was managed by. Shri Raj Kaushik tut the statement of Shri Raj Kaushik was not recorded, either during the course of search or during the assessment proceedings. He easily explained the alleged MIS sheet relied upon by the Assessing Officer and annexed with the assessment order which are pages nos. 50 and 51 of the seized material at Annexure A1.
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27. We have duly considered the rival contentions and gone through the record carefully. The basic question required to be adjudicated by us in these grounds of appeal' is, "whether the evidence possessed by the learned Assessing Officer, in the shape of document page Nos. 49 to 55 of Al found at the residence of director Sim Mori Si Masand, his disclosure statement given under sec. 132(4), are sufficient to hold that assessee was indulged in receiving money in cash on sale of fiats".
28. The documents referred by the learned Assessing Officer in the assessment order are loose paper sheets marked as page Nos. 43 to
55. Let us first analysis these pages. Copy of page No. 43 is available on page No. 170 of paper book. This paper contains details in tabular form. At the top of the page, "March 06" is written. The next line reads "daily collection report commercial dated 25.3.2006". It contains four columns. In the first column, the names of the projects are noted, in the second column, collection for the day against each project are noted, in the third column, collections for the month against each project are noted and in the last column, collection up to 25.3.2006 against each project are noticed; At the end, copy of these details are forwarded to MD/Mr. Raj. The details mentioned on this page dully tallied with the books of the assessee. The copy of this page has been forwarded to managing director Shir Punil Beriwal and financial manager Shri Raj Kaushik. This document does not through light of any discrepancy. It is just referred by the leanred Assessing Officer in the assessment order. No inferences are drawn nor it is used for corroboration purposes. Thus, this document is neither here nor there for the purpose of the controversy.
29. Next page is page No. 441 ft is available on page 171 of the paper book. It contains daily collection of Vipul Garden. It is also for the month of March 06. Name of two customers Dalbir Singh and Amar Mahajan who booked Unit 6A, 8B in Tower GH-6 are noticed. They have paid Rs. 47,329 and Rs. 1,75,000 respectively. In the remarks column, revised area and car parking are respective rewritten. This paper is also of no help. These Details a duly recorded in the books. The next page is page No. 45, it is available on pager 172 of the paper book. It shows daily collection for the; project /.Green". Details of 243.2006 are noticed. In these details, name of four customers who have booked unit Nos.. 801,1101, 1010 in Tower No. 12,12,10 and 17 are noticed. This page is also neither here nor there for the; : purpose of the controversy in hands. Next page is page No, 46. It shows daily collection report in respect Bell Monte. Two customers „Sanjay Jain and Rejesh Chawla booked Unit Nos. 501 and 602 in Tower No. 10 and 9 respectively. They made the payments which has been duly noted and recorded in the books.
30. Next page is page No. 47. It is related to Vipul Limited. It shows daily collection report dated 243.2006 with respect to five residential projects. It also contains four columns; namely, project names, collection for the day, collection for this month and collection till fill date. Copy of this: page7 was forwarded to MD/ Mr. Masand/Raj Kaushik. The details are duly disclosed in the books of account. Thus, this paper is of no use for the Assessing Officer even for corroboration, Next page is Page | 28 page No. 48. This page is a report dated 31.12.2004. It contains project report 19th July 2003 etc. When this page was put to Shri Masand, he explained that these are entries of the project receipts as on 31.12.2004 updated up to 31.03.2005. The calculation available on the extreme right column by the pencil were also put to Shri Masand. He disclosed that these figures written in ink are percentage of total mention. These must have been written by any executive of the organization. This page has also not been used by the Assessing Officer for making the addition.
31. Next page is page No. 49. This page is in the handwriting of Mr. Masand. He has written names of the project receipt up to 31.03.2005, how much is the shares of the company in the project in terms of percentage etc. When search party confronted him them in response to Question No. 39, he explained these entries as under:-
Q. 39 Please explain the entries made on this page? Ans: These are calculations made for various projects. The figures were calculated to ascertain that in case of salaried employee, if I would have worked as a consultant, how much money would have been calculated as incentive."
32. No questions are put to Shri Masand about this page at the time of search. We will discuss the impact of this page while we will be discussing Page No. 52 because these two pages are the material pages which led the Assessing Officer to make Assessing Officer to make the addition. Before commenting on, these pages we would like to take note the details of other pages i.e. page Nos, 50 and 51. On page - 50, details of daily collection report dated 31.3.2005 are written. It contains-again-four columns, namely, name of the project, collection for the day, collection for the month and collection till date. Similar are the details available on page 51 but they are: for the month of September 2005. Copies of both these pages are forwarded to Shri Punit Beriwal, Shri Masand and Shri Dliurva. Next is the page No, 52 Which Contains details in tabular form in the handwriting of Shri Masand. This page has thirteen columns. This page has been annexed by the Assessing Officer with the assessment order along with other pages. Learned CIT (Appeals) has placed the scanned copy of this page on page No. 60 of .the order. Shri Masand has explained this page in a statement recorded during the course of Search as also id his statement recorded under sec. 131 on 27.8.2008 during his assessment proceedings.
33. Let us evaluate page Mo. 52 imd; statement of Shri Moti S, Masand. There are two statements of Shri Moti S. Masand; first recorded under sec. 131 dated 27.08.208 during his assessment proceedings. When the first statement was record he was a director of the company. While evaluating the evidentiary value as well as loose papers containing entries in his handwritings. It Is to be kept in mind that his noting and disclosures are being used for burdening an independent entity' With tax liability. Thus, if he has made noting while performing his duties as a director and then he made disclosure establishing a nexus between his noting and disclosures; which goad a person of an ordinary prudence to believe about existence of those facts Page | 29 or a situation as discernible in the noting then the company with whom Shri Masand has relationship of employer and employee will be burdened with liability. But, if the director has made noting in a pensive mood for calculating his future planning and imagination which are relevant for his personal growth and which have no direct nexus with his duties as a director then without any corroborative evidence, it is not advisable to put the employer company with liability. It is not a strict rule of interpretation or flowing from any statute, it is not advisable to put the employer company with liability. It is not a strict rule of interpretation or flowing from any statue, it is of prudence, because where there is any guess work, it is not a safe to put the third entity with liability.
34. It is also to be kept in mind that Shri Masand has left the job with the assessee in the month of December 2006. At this residence, unexplained cash of Rs. 10,88,100 was found and seized. He made a disclosure of Rs. 2 crores. Explanation 5 to Section 271(1)© of the Act contemplates a situation where an assessee is absolved from the rigorous provisions of penalty with respect to any money, bullions, jewellery or valuables found in the possession of the assessee or under his control which was acquired out of his income and which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in section 139 and he offered such income for tax and pays the tax with interest and also disclosed the manner in which such income has been derived then he will be absolve from the penalty. The important aspect is that assessee has to disclose the manner which such income was derived. Thus, in order to save his own skin, Mr. Moti S. Masand was found to disclose the manner of earning Rs. 2 crores. This situation put him in the category of an interested witness, hence, took him out from the duty of an independent director. While dealing with the taxability of the assessee‟s income, this aspect has to be kept in mind while evaluation his statement.
35. In reply to question No.7 in the statement records, under sec, 132 of the Income tax Act, 1961, Shri Moti S Masand has disclosed his duties, Question No. 7 and reply reads as under:-
Question No. 7; Please state your qualifications and what do you have look after in the above mentioned company?
Ans: I am a bachelor of Engineering (C), only major and main duty is to look after construction and engineering work of the concerned company. Question No5: In the statement recorded under section 131 on 27.08.2008 Question-Please elaborately explain what other areas of-work being lock after by him fid M/s. Vipul Limited, as there are some balance sheet, other documents which stand signed by him?
Ans:- I was mainly responsible for engineering activities but at times when Shri Limit Berlwal, director was not available, I , used to sign financial statements and balance sheets etc. which were put up for signatures. However, I have not idea about the financial transactions.
Page | 30 Questions: On the basis of total receipts reflected in this document, you have calculated incentive received/ receivable of Rs. 1.18 crore. Please give details of amount received and mode of payment.
Answer:- Entire amount of Rs. 1.18 crore was received, part of which was received by cheque as apparent from Rage no. 55. These cheques were received in the shape of salary from M/s Entrepreneurs (Calcutta) Private limited. This company was a sister concern of M/s Vipul Ltd. registered at Calcutta. However, I was not working in any capacity with M/s Entrepreneurs. Written 59 L, received 5L 1/9/05-54, 5/12/05-4L Answer:- Figures are in my own handioriing.
Question: Please explain the entries made on this page Answer:- These are the calculations made for various projects. The figures were calculated to ascertain that in case of salaried employee, if I would have worked as a consultant, how money would have been calculated as incentive.
Question:- Page No. 49 of this annexure is shown to you. Please state in whose handwriting entries have been worked What has been worked out at the rate of 0.5. Who has written less commercial Sohna across 32.15 lacs. Who has written 59 L. received 5 L, 1/9/05-54 L,5/12/05- 4L?
Answer:- Figures are itt iny own handwritings?
Question:- Please explain the entries made on this page? Answer:- These are the calculations made for various projects. The figures were calculated to ascertain that in case of salaried employee, if would have worked as a consultant, how money would have been Calculated as incentive.'
36. At the cost of repetition, we would like to refer explanation of the assessee in its reply dated 02.12.2008 for explaining the discrepancy in page 52 of Annexure A1. It is worth to take note of the following explanation again:-
Calculation of incentive as made, by Mr. Moti Masand on 'Page- 52 of the seized material:
Total Receipts= 242.752+ 47.4 = 290.152
Less: 02-03 46.000
244.152
Less: Return, (to Customers) 8.000
[email protected]% = 1,18,00,000
Less: Received .= 26,38,00
91,16,500
As on 29.05.05
Transferred to Sohna Road commercial 32,15,000
59,46,500
Received 01.09.2005 5,00,000
Page | 31
54,46,500
05.12.2005 4,00,000
50,46,500
Transferred to commercial 01.02.2006 50,00,000
Nil
On the perusal the above alleged calculations made on seized documents on page 52, it can be inferred from the figures .that 242.752 derived from Column-6 on - f*age 52, 'which depicts probably the net turnover as on 31/03/05 and the figure of 47.4 is derived from. Column-S which again is as on 31/03/05, thereby, giving a total of 290.152 .We assume that this is the turnover of the organization being 'depicted by Mr. Masand.
The next tine reduces 46 out of the total figure which is assumed to be the turnover till 31/03/03. On analysis of these figures and on perusal of document at Serial no. - 50, which is a daily collection report dated 31.03.2005, it is deduced that the figures in Column 2 have been taken from Coumn 3 of page 50.
In Column-4, Mr. Masand has made some assumptive percentage shares against these turnovers attributed to Vipul and calculated his share in Columm. On perusal of the audited balance sheet from 2002-2003; Up to 31/03/05, the revenue recognized by Vipul Ltd .was as follows:-
Financial year Turnover in crores
2002-2003 22.819
2003-2004 39.669
2004-2005 96.996
TOTAL 159.484
The balance unadjusted advance received from customers against all the projects of Vipul were outstanding to the amount of 111.837 crore, which makes the total collections as per the audited books of accounts of the assessee as on 31/03/05 at Rs. 271.32 crore, thereby showing that the figure assumed by Mr. Moti Masand in his assumptive sheet is falling short by approximately 29 crore, if all these assumptive figures are taken in crores.
He has further reduced the collections for 2002-2003 out of the total receipts by 46 crore, whereas, the total revenue recognized‟ for 2002-2003 was 22:819 crore and the unadjusted/advances from customers for all projects were Rs. 4.5.82 crore, thereby malting the total collections for 200242003 at 27.401 crore which falls Short of Mr. Moti Masand's calculations by 19 crore. Return to customers have been assumed to be 8 crores, which, even the accounting people may not be able to calculate over a period of 3 years out of the customers accounts as to what the figures of returns to customers can be. It is voluminous. exercise to calculate this kind of information out of the thousands of customers for various projects as the bookings keep happening Page | 32 and keep getting cancelled as a routine every day and it is a Herculean task to calculate die cumulative refunds to various customers over a period of 3 years. How Mr Masand could judge, such figures out of the c of accounts is anybody‟s guess. What this figure of retuned amounts means is net understood and whatever refunds have been made are a part of the audited books of accounts.
Mr. Masand, then, calculates his assumptive 0.5% incentive on the net collection of 236 crores making a total incentive of Rs. 1800000/- to himself. Mr. Masand has then, gone on to explain as to how this incentive was allegedly received by him from the assessee.
In the said calculation on Page 52, he has shown to have received Rs. 26,38,500/ which does not give any details of the dates and the mode. Further, he has got the amount of Rs. 32.15 lac adjusted against the Sand Road Commercial flat a sum of Rs. 5 lac has been received by him on 01/09/2005. Another sum of Rs. 4 lac has been deducted on 05/12/05 and an amount of Rs 50 lac has been, transferred to Commercial (Dell Commercial flat) on 01/02/06, thereby, assuming to have writing off an amount of Rs 46,500, which was balance and as per this document, . Mr. Masand bad adjusted all of Ms calculated alleged incentive of Rs. 1.18 crores as on 01.02.2006.
We have analyzed all the adjustments of this statement in the prism of of his statements at the time of search and another made on 27/08/08 as well as his return of his income filed u/s 153A and the show cause notice issued on 10.10.2008 and our observation are as under:
On the perusal of the above details, it is evident that whatever alleged incentive Mr. Masand has detailed for himself, it was received by him as on 01/02/06, which means that his return of income for F. Y, 2005-06 relevant for the Assessment 2006-07 should have depicted the total incentive received from the assessee at Rs. 1.18 crore, whereas, Mr. Masand has declared an incentive of only 26 lac in his return of income for the said assessment year.
37. The above explanation of the assesses is self-explanatory. This, explanation has neither been dealt by the learned Assessing Officer nor by the leanred CIT(Appeals) in an analytical way. This page-52 has not come -from any working sheet of tire assessee company. It is totally prepared by Shri Moti S. Masand. The entries interpolated in it could be' relevant if the part of the main entry are also reflecting in the books of account of the assessee. The assessee has pointed out that in column No, 6 W page 52, a figure of 242.752 has been written. It is considered as net turnover of all the projects as on 3 1.3.2005. Figure of 47.4 worked out in column No. 5 is again as on 313.2005. Total of these figures have been taken in second half of page 52 where a figure of Rs.290.152 has been worked out In the next line, a figure of 46 has been deducted. Against this figure, "less 02-03 is written". According to Page | 33 the assessee, this may be assumed turnover till 31.3.2003. The figure in Col. No. 2 are taken from column No. 3 of page 50 which is available on page 177 of the paper book. According to the assessee it has recognized total collection as on 31.3.2005 as per the audited books of account at Rs.271.32 whereas Mr. Masand has worked out it at Rs.236.152. His calculation falls short by approximately Rs. 29 crores.
The assessee also explained that Mr. Masand took returns to the customers at Rs. 8 crores. According to the assessee, ev^n the accounting people may not be able to calculate over a period of three years out of 2000 customers in 13 projects as to What the figures of returns to the customers can be. It is a voluminous exercise to calculate this kind of information. The bookings kept happening and being cancelled as a routine every day and it is quite difficult to calculate the cumulative refund to various customers over a period of three years. According to the assessee it is practically not possible to work out the refund of Rs. 8 crores by Mr. Masand. It is his imaginative calculation. We find that while considering die explanation of the assessee, learned Assessing Officer has observed that contentions of the assessee is not correct as the figures of collection in the documents written by Shri Masand was on the basis of MIS sheets prepared, by Accounts Department of the assessee company. He made reference of page Nos. 50 and 51 of the Annexure Al. Learned Assessing Officer lost sight that these pages are duly reflected in the books of account He is not making the addition on the basis of these pages. The dispute is whether there is a nexus between the outcome of the result on the basis of these pages and calculations made by Mr Masand. The assessee has demonstrated that total collections as per the audited books of account as oh 313.2005 was at Rs. 271.32 crores. The calculations of Mr. Masand are short by 29 crores. If the money was accepted in cash‟ then total collection would have been worked out at a higher figure then not on a lesser figure.
38. The assessee has further demonstrated as to how the theory of receipt of of incentive by Mr. Masand does not go parallel with his return of income, It is duly discernible in the reply of the assessee, extracted supra. Shri Masand has worked out incentive of Rs. 1.18 crores as on 1st of February 2006 whereas in his return for assessment year 2006-07, he has declared incentive of only 26 lacs. His calculations and disclosures are not in coherence with each other.
39. The disclosure made by any person would always be against his interest. His disclosures can never bind a third concern. The addition in die hands of third concern has to be made on the basis of merits of the evidence and not on the basis of any concession given by any person. Mr. Masand has rendered an income of Rs. 2 crores. He, has offered it for tax and also paid the tax, Such a surrender could be seen against Ms own interest. It can be corroborative piece of evidence but it cannot be a sole evidence- to fix the liability of third concern, i.e. assessee. Shri Klasandhas alleged that he has received some incentive by -cheque. We fail to understand why a business entity would pay an amount by cheque, without recorded in the books which otherwise will be an admissible deduction to that entity. As observed earlier, in order to Page | 34 avoid penalty Ws. 271(1 )(c) on the declared income of Rs. 2 crores Shri Masand has to disclose the manner of earning also. Therefore, his admission or disclosure has to be used with corroboration. The assessee has also demonstrated discrepancy in the statement of Shri Moti S. Masand while disclosing the details of total cost of project and his investment in the Dell Commercial. We have noticed this discrepancy on pages: 36 and 37 of this order while taking note of assessee reply. Thus, cumulative setting of all these factors makes it clear that calculations made by Shri Moti. S. Masand on page NO. 52 do not reflect true business affairs of the assessee. These are the details which have been compiled by him for calculating his growth in case he has worked as an independent consultant instead of an employee. The details are not worth of credence to make the addition. Therefore, we allow these grounds of appeal and delete the addition."
11. We have also perused the order of the coordinate bench and found that on the same seized material the addition has been deleted by the coordinate bench in case of the Vipul Ltd who is also the 50% owner of the various projects. The facts and circumstances of the case of the addition in the hands of the assessee are identical and are on the same seized material and the statement of the party. The learned departmental representative could not controvert the above fact and could not show us any reason to deviate from the decision of the coordinate bench. In view of this, respectfully following the decision of the coordinate bench, we direct the learned assessing officer to delete the above addition of Rs. 43.76 crore in the hands of the assessee based on the seized paper found from Mr. Moti S Masand. In view of this, we confirm the order of the learned CIT - A in deleting the addition of Rs. 43.61 Crores out of INR 437,600,000 made by the learned assessing officer on account of receipt of cash payment. Accordingly, ground numbers 1 - 3 of the appeal of the learned assessing officer are dismissed.
12. Ground number 4 and 5 of the appeal of the learned AO are general in nature and therefore there dismissed.
13. Accordingly, appeal of the learned assessing officer is dismissed.
14. Now we come to the appeal of the assessee in ITA no 2494/Del/2011 for AY 2005-06. As per ground number 1 - 7 of the appeal are raised on the issue of assumption of jurisdiction u/s 153C of the income tax act.
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15. Ground number 1 of the appeal of the assessee is general in nature. No specific arguments were advanced by both the parties. In view of this, we dismiss ground number 1 of the appeal.
16. Ground number 2 of the appeal relates to proceedings u/s 153C of the income tax act stating that the learned Commissioner of income tax (A) has erred on facts and in law in not holding that the present assessment is without jurisdiction and void ab initio , insofar as, no documents and material seized during the various searches could be said to be „belonging to‟ the assessee and as such assessment deserves to be annulled.
17. The learned authorised representative referred to the various seized materials referred to by the learned assessing officer in specific, satisfaction note recorded on 10/1/2008 for assuming jurisdiction u/s 153C of the income tax act. He further referred to the material seized from Mr Moti Masand and material seized from Mr Aman Sharma and Vipin Sharma. He further referred to the provisions of section 153C of the act as it existed prior to 1/6/2015, and stated that in the present case the notice u/s 153C was issued to the assessee on 10/1/2008, which is prior to 1/6/2015. Therefore the earlier provisions will apply to it. He further referred to the decision of the honourable Delhi High Court in case of Renu constructions Private Ltd ITA 32/2012 , Canyon financial services Ltd Wp © 3241/2015 dated 10/7/2017 and Ganapathi fincap Services private limited 82 Taxmann.com 408. It was further stated that that the documents seized from Mr Moti S Masand does not belong to the assessee as held by the coordinate bench wherein it has been specifically stated in para number 39 of the order that these documents are used by him for his own purposes. In view of this he stated that the addition made by the learned assessing officer in the hands of the assessee based on these documents could not be made u/s 153C of the income tax act as those documents does not belong to the assessee. He further referred to the finding of the learned CIT - A wherein it has been stated that the subject documents seized from the residence of Mr Moti S Masand do not belong to the appellant, as nothing pertaining to the appellant as mentioned in those documents. He further submitted that these documents are found from control in possession of Mr Masand who admitted that the said material Page | 36 belongs to him and were prepared in his own handwriting as per the statement recorded during the search and affidavit submitted. He stated that he is the director of M/s Vipul Ltd and has confirmed in his statement that the seized papers were prepared on the basis of the data available from the management information system collected from the accounts department of M/s Vipul Limited for working out incentive receivable by him. In none of the seized material, the name of the appellant company is mentioned. Further neither the same is seized from the employee or director of the appellant company and also the person from whom it is seized has not named the appellant. In view of this, it was stated that the documents seized from Mr Moti M Masand does not belong to the assessee and therefore the assumption of jurisdiction u/s 153C of the income tax act by the learned assessing officer is devoid of any merit.
18. With respect to the material seized from Mr Aman Sharma and Vipan Sharma, the satisfaction note refers to page number 49 of annexure A - 1 which is a receipt of payment made by Mr Raj Singh, Dharmveeringh and SUrinder Singh. It was further stated that the above document content name of the Vipul infrastructure Ltd as well as the other person and that does not contain name of the assessee. It was further stated that the above document was seized from the possession and control of Mr Aman Sharma and Vipin Sharma during search on them. He further stated that there is no name of the appellant mentioned in the seized material and therefore same cannot be treated as „belonging to‟ the appellant. He further submitted that in the satisfaction note the learned assessing officer has not shown any reason why he is of the opinion that the documents belong to the other person and not the searched person though the documents contained the name of more than one persons. In view of this he submitted that the documents seized from the possession of Mr Sharma does not belong to the assessee and the learned assessing officer has incorrectly assumed jurisdiction u/s 153C of the income tax act. He further stated that there is a reference of an agreement dated 1/3/2004 in the seized material but the said agreement was not found during the search nor a copy of the same was given to the appellant to substantiate his claim. Further, the said agreement pertains to assessment year 2004 - 05 and does not pertain to Page | 37 assessment year 2005 - 06. He further stated that assessee has never purchased any agricultural land in the so-called village as per agreement dated 1/3/2004. He therefore submitted that the assumption of jurisdiction by the learned assessing officer u/s 153C of the income tax act with respect to the above document is devoid of any merit. With respect to the other seized material, he also reiterated his arguments and stated that they do not belong to the appellant.
19. The learned departmental representative vehemently supported the order of the lower authorities.
20. We have carefully considered the rival contention and perused the orders of the lower authorities. We have also perused the satisfaction note recorded by the learned assessing officer, which is placed at page number 22 - 23 of the paper book. The learned CIT - A has dealt with the above issue whether the documents seized by the income tax department belongs to the assessee or not to correctly assumed jurisdiction u/s 1 53C of the act as under :-
"3.2 adverting back to the facts of the case, it is noted that search u/s 132 of the income tax act in the case of Messer‟s Vipul Ltd and its directors was conducted on 1/6/2006. The assessing Ofc having jurisdiction over the case of Sri Moti S Masanad and Messer‟s Vipul Ltd recorded the satisfaction that documents seized during the search belong to the person other than the person referred to in section 153A of the act. The documents were handed over to the assessing Ofc having jurisdiction over the case of such other person. The assessing officer after considering the satisfaction note issued the notice u/s 153C read with section 153A of the act. The documents 43 to 47, 48, 49, 50, 51, 52 in annexure A - 1 seized from the residence of Sri Masand does not show at all any transaction conducted by the appellant. However the document number 43 in annexure A - 1 seized during the search from the premises of Mr Aman Sharma and Mr Vipin Sharma the notes that cash of INR 3,000,000 has been paid on 08/05/2004 in pursuance to agreement dated 15/03/2004 by the appellant. The judicial precedents discussed in the earlier paragraphs make it clear that the term " belonging to" implied something more Page | 38 than the idea of casual association. It involves the notion of continuity and indicates one more on less intimate connection with the person over a period of time. The expression belonging to the assessee connotes both the complete ownership and limited ownership of interest. The term belonging to is capable of, connoting interest, which is less then the absolute perfect legal title. However there should be some limited ownership of interest, if it is to be permitted that the assets belong to the assessee. Applying these principle to the facts of the instant case, it can be safely concluded that the subject documents seized from the residence of Sri Moti S Masand do not belong to the appellant has nothing pertaining to the appellant is mentioned in the document, however, the document number 43 in annexure A - 1 seized from the possession of Sri Aman Sharma and Sri Vipin Sharma was kept by them as evidence for the cash payment received by the sellers in pursuance to agreement dated 15/3/2004 for the sale of land in village Tikri, Gurgaon. This gets further support from the fact that Sri Aman Sharma and Sri Vipin Sharma are real estate brokers and doing business with the appellant. In the aforesaid scenario, the document number 43 shows close association and complete ownership of the appellant. In view of this, it is held that there is no force in the argument of the appellant and the AO has rightly held that the document number 43 in annexure A
- 1 seized during the search belong to the appellant. The ground raised by the appellant in this regard is dismissed."
21. The document seized from the residence of Mr Moti S Masand are placed at page number 22 - 27 of the paper book filed by the assessee. The learned departmental representative could not show us from the documents seized from Shri Moti Masand that there is any reference of the assessee in those documents. Therefore, it is apparent that they do not belong to the assessee. As such we have confirmed the order of the learned CIT - A wherein the addition of Rs. 43.76 crores have been deleted following the order of the coordinate bench in case of Vipul Ltd, Even Otherwise those documents does not belong to the assessee. Thus, no addition can be made Page | 39 in the hands of the assessee based on these documents. The assumption of jurisdiction by the ld Ao u/s 153 C of the act is also devoid of merit.
22. With respect to the document found from Sri Aman Sharma and Sri Vipin Sharma, which is placed at page number 28 of the paper book, is a receipt dated 08/05/2000 for wherein it has been mentioned that "Received with thanks from M/s Vipul infrastructure and developers Ltd and Messer Bhudeep uilders and exporters private limited having office at 28, community Centre, sac 8, New Delhi 110017 a sum of INR 3,000,000 (INR Thirty Lakhs only) in cash as part payment of sale consideration of agricultural land village Tikri, Tehsil & Distt. Gurgaon details mentioned in agreement dated 1/3/2004."
23. The receipt is signed by Mr Raj Singh, Dharmveer Singh and Surendra Singh. The claim of the assessee is that assessee does not own any such land as mentioned in the receipt and further, nothing has been mentioned about the assessee. On perusal of para number 40 of the order of the coordinate bench in case of M/s Vipul Ltd in ITA number 2403 and 5999/del/2010 for assessment year 2005 - 06 and 2006 - 07, it has been held that Messer Bhudeep builders and exporters private limited belongs to the orchid group. However, on careful consideration of the above document it is apparent that the above receipt did not mention the name of the assessee and therefore even that document does not belong to the assessee. Even if it is presumed that M/s orchid group is involved in the transaction then there is a specific name of Messer Bhudeep builders and exporters private limited, and not the appellant. The company that is namely Bhudeep Builders and Exporters Pvt Ltd is separately assessed to income tax and is an altogether different entity and therefore even if any recourse is required to be taken it has to be taken in the hands of that company. Even otherwise, In the order of the coordinate bench in Vipul Ltd also, it did not discuss whether the above document belongs to the assessee or not. Therefore, in view of this we are of the opinion that above document does not belong to the assessee at all.
24. Accordingly, ground number 2 of the appeal of the assessee is partly allowed.
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25. Ground number 3 - 5 of the appeal of the assessee is with respect to the recording of satisfaction note by the assessing officer in the file of the person searched as well as in the file of the person covered u/s 153C of the income tax act.
26. Authorised representative in his submission and stated that ground number 3, 4 and 5 are relating to the recording of satisfaction note by the learned assessing officer in case of the person searched before handing over seized material to the assessing officer of the other person, even if the assessing Officer of searched person and other person is the same, is a mandatory requirement. . He further stated that these grounds are pressed. However, in view of the decision of the honourable Delhi High Court in Ganapathi Fincap Services private limited 82 taxmann.com 408 ( Del), where same held to be held against the appellant. However, it is stated that as there is no decision of the honourable Supreme Court on this point of law as on the date, the appellant would like to keep its right to pressing the above said ground as it is of the view that the said ratio laid down by the honourable High Court is contrary to the provisions of section 153C of the income tax act 1961.
27. The learned departmental representative vehemently supported the order of the learned assessing officer and stated that the honourable Delhi High Court has covered this issue in favour of the revenue as stated by the learned authorised representative.
28. On careful consideration of the rival arguments it is apparent that the issue is squarely covered against the assessee in view of the decision of the honourable Delhi High Court in case of Ganapathi Fincap services private limited 82 taxmann.com 408 (del), therefore these grounds (3 - 5) of appeal are dismissed.
29. Ground number 6 of the appeal is general in nature and no specific arguments were advanced before us. Therefore, same is dismissed.
30. Ground number 7 of the appeal is against the confirmation of the addition by the learned CIT - A based on the material collected by the assessing officer in violation of principles of natural justice and ground number 8 is with relation to addition of INR 1,500,000 confirmed by the learned CIT - A. Page | 41
31. The learned authorised representative submitted that as the impugned document based on which the addition has been made by the learned assessing officer does not belong to the assessee, assumption of jurisdiction u/s 153C of the income tax act is itself bad in law. Even otherwise, he submitted that there is no such payment received by the assessee as assessee did not own any such property.
32. The learned departmental representative vehemently supported the order of the lower authorities and submitted that identical issue in the case of Vipul Ltd has been considered by the coordinate bench where in para number 40
- 41 the coordinate bench set aside the whole issue in the case of Vipul Ltd back to the file of the learned assessing officer. He extensively referred to para number 41 of the order of the coordinate bench.
33. We have carefully considered the rival contention and perused the orders of the lower authorities. In the present case, as we have already held that the receipt found from the residence of Mr Aman Sharma and Vipin Sharma does not belong to the assessee and therefore the provisions of section 153C does not apply to the assessee at all. We are of the view that such addition cannot be made under the provisions of section 153C of the income tax act. Coming to the order of the coordinate bench in case of M/s Vipul Ltd wherein at page number 66 - 67 of the order in para number 40 - 41 the coordinate bench has considered the 50% of the above addition in the hands of M/s Vipul Ltd and set aside the whole issue back to the file of the learned assessing officer as per direction contained specifically in para number 41 of the order. However, the facts in the case of M/s Vipul infrastructure Ltd are quite different as the name of that company was mentioned in that receipt, however so far as the case of the assessee is concerned in this appeal, its name was not mentioned therein and therefore we have held that the above receipt found from the residence of Mr Aman Sharma and Mr Vipin Sharma does not belong to the assessee. Therefore, the impugned addition made in the hands of the assessee deserves to be deleted. Accordingly we reverse the order of the learned CIT - A and allow ground number 8 of the appeal of the assessee. Accordingly, ground number 7 of the appeal of the assessee becomes redundant and therefore it is dismissed.
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34. In the result, appeal of the assessee is partly allowed.
35. Accordingly, appeal of the revenue for assessment year 2005 - 06 is dismissed and appeal of the assessee is partly allowed.
ITA No 2912/Del/2011 A Y 2006-07 By Ld AO & Co no 198/del/2011 By Assessee in 153C proceedings.
36. Now we come to the appeals for assessment year 2006 - 07. The 1st appeal for assessment year 2006 - 07 is filed by the learned Assistant Commissioner Of Income Tax, New Delhi (the learned Assessing Officer) in ITA number 2912/del/2011 against the order of the learned Commissioner Of Income Tax (Appeals) -III, New Delhi dated 7/3/2011.
37. The brief facts of this appeal shows that appellant is engaged in the business of construction of commercial spaces and flats in Gurgaon. The appellant in joint venture with Vipul Ltd develop various projects. The search u/s 132 of the income tax act was conducted in the case of M/s Vipul Ltd and its directors and certain incriminating documents from the residence of Mr. Moti Masand , working as a technical director with Vipul Ltd. Survey under section 133A was also conducted in the business premises of the assessee. The document number 43 - 47, 48, 49, 5, 52 in annexure A - 1 was seized from the possession of that gentleman. His statement was recorded u/s 132 (4) of the act. In the statement, he admitted that the documents contain the details of commission earned by him on the sales made by M/s Vipul Ltd. The document number 52 in different columns contain the details of the project, realization made in cheque and cash on different dates and the working of the commission earned by the gentleman. He admitted that para number 5 contain the details of cash receipt from the respective projects. Therefore, the notice u/s 153C of the Act was issued to the assessee and the copy of the satisfaction note was also given. The assessee filed its return of income declaring income of Rs. 21000442/- on 02/6/2008. The original return under section 139 of the act was also filed on 13/12/2006 at the same income. Consequent to that the learned assessing officer made an addition of INR 8 crores in the hands of the assessee as undisclosed income being the undisclosed income received by the assessee in the joint project with Page | 43 M/s Vipul Ltd in case of project plaza of INR 5 crores and project Agora of INR 3 crores till 30/9/2005. Accordingly, this addition of INR 8 crores was made on the same facts and circumstances as in assessment year 2005
- 06.
38. Further during the course of survey u/s 133A at the business premises of Mr SVS prop Mark private limited, annexure A - 7 was impounded wherein page number 1 - 41 of these annexure showing the chart of the details of land purchased at Zirakpur from various persons. The document reveals that the part payment of purchase of land amounting to INR 23716250/- has been made in cash. The above project was transferred to the assessee appellant company subsequent to partition with M/s Vipul Ltd on 30/9/2008. Assessee was accorded opportunity to reconcile the same with the books of account and to show as to why the total amount of cash paid of INR 2 3716250/- should not be treated as unexplained investment u/s 69B of the income tax act.
39. The assessee submitted that the above documents have not been seized from the possession of the company or its director and no statement of Shri Vipin Sharma & Sri Aman Sharma from whom the documents have been found been recorded on the seized document. The document is a dumb document that was the claim of the assessee and therefore no addition because of these documents can be made in the hands. Assessee further stated that no land has been purchased at any point of time through Messer SVS prop Mark private limited. It was further claimed that there is no connection of the assessee with respect to the above documents. The assessee has also filed copy of purchase did in respect of land at Zirakpur and contended that land has been purchased as per conveyance deed registered with the sub- registrar and consideration was paid by account payee cheques which has been duly recorded in the register documents. It was further claimed that no statement of seller has been recorded to substantiate the fact that the cash over and above the declared consideration has been paid by the assessee. The learned assessing officer rejected the contention of the assessee and made the addition of 50% of INR 2 3716250/- on this account. However, no separate addition was made of the above sum in view of the addition of Rs. 8 crores as undisclosed Page | 44 assets has been made by the learned assessing officer, therefore, cash receipt of INR 8 crore can subsume the payment of INR 11858125/-. Accordingly the assessment u/s 153C read with section 143 (3) of the act was passed on 30/12/2008 at INR 101000442/- against the returned income of Rs. 21000442/-.
40. The assessee being aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT - A, who relying on the order of the learned CIT - A for assessment year 2005 - 06 , in case of assessee, deleted the addition of INR 8 crores on account of undisclosed cash received. With respect to the 2nd addition of Rs. 11858125/-, he held that that the adverse inferences has been drawn by the learned assessing officer on the basis of the document seized from the premises of 3rd party and the request of the assessee to examine the 3rd party or to cross-examine him was negated. It was further held that the learned assessing officer also did not get any valuation done by the learned departmental valuation officer to determine the fair market value of the land purchased by the assessee and Ao has also not examined the sellers of the land. He further recorded the statement of Shri Vipin, at the back of the assessee and neither confronted the same to the assessee nor allowed any opportunity for cross- examination. Therefore he relying upon the decision of the honourable Supreme Court held that the addition as made by the learned assessing officer cannot be sustained on the basis of untested documents seized from 3rd party. Accordingly, he deleted the above addition. Therefore both additions were deleted by the learned CIT - A, therefore, the learned assessing officer aggrieved with that order has preferred appeal before us.
41. The AO has raised the following grounds of appeal in ITA No. 2912/Del/2011 for the Assessment Year 2006-07:-
"1. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs 8.0 crores made by the A.O on account of receipt of cash payments
2. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts by not appreciating the fact that the addition made in the case of M/s Vipul Ltd. stands confirmed by the CIT(A) himself on the same issue as well as on the basis of same evidences'?
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3. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law and in facts in ignoring the fact that the assessee company is a co partner of MJs Vipui Ltd. in various projects and was in receipt of equal amount of cash component as received by M/s Vipul Ltd.
4 Whether an the facts and in the circumstances of the case, the CIT (A) has erred in law and in facts in deleting the addition of Rs. 1,18,58,125/- by the AO on account of undisclosed payments."
42. Assessee has also filed cross objection rasing following grounds in Cross objection No. 198/Del/2011 for the Assessment Year 2006-07:-
"1. That Id CIT(A) has erred on facts and in law in not holding that present assessment without jurisdiction and void ab ignition in so far as no document or material seized during various searches could be said to be belonging to assessee and as such assessment deserves to be annulled.
2. That ld CIT(A), on facts and law, have held that document NO. 43 in Annexure A-1 seized during search belongs to appellant which is erroneous in law.
3. Without prejudice to above, that ld CIT(A) has erred on facts and in law in holding that jurisdiction u/s 153A r/w 153C is validly initiated in so far as there is no satisfaction recorded by AO in file and record to persons searched u/s 153A as mandated by Income Tax Act, 1961. As such assessment be annulled.
4. Without prejudice to above, that the ld CIT(A) has erred on facts and in law in not holding that the present assessment is without jurisdiction in so far as there is no record of handing over and taking over of record from file of persons searched to that of assessee as mandated by Income Tax Act, 1961.
5. Without prejudice to above, the ld CIT(A) has erred on facts and in law in holding that jurisdiction u/s 153A r/w 153C of Income Tax Act, 1961 is validly initiated in so far there is absence of two separate AO‟s i.e. one having jurisdiction over assessee searched and other having jurisdiction over assessee in whose case jurisdiction u/s 153C initiated as such assessment be annulled."
43. We 1st address the appeal of the learned assessing officer wherein the learned AO has made an addition of INR 80,000,000 in the hands of the assessee which is deleted by the learned CIT appeal and therefore contested by the learned assessing officer as per ground number 1 of this appeal.
44. The learned departmental representative relied upon the order of the learned assessing officer and submitted that the learned assessing officer has given his own reason for making the above addition based on the documents seized from Mr Moti S Masand, which showed that the unaccounted receipt has been earned by the assessee along with Vipul Ltd Page | 46 in joint projects. Therefore the addition of INR 80,000,000 which is based on the similar facts as in Ay 2005-06, learned assessing officer has made addition which should be sustained.
45. The learned authorised representative submitted that the facts and circumstances in the case of the appeal of the learned assessing officer with respect to the ground number 1 - 3 are similar to the issue in the appeal of the revenue for assessment year 2005 - 06 wherein the learned CIT - A has deleted the addition. He therefore submitted that the issue squarely covered in favour of the assessee as the addition has already been deleted by the coordinate bench in the case of M/s Vipul Ltd for assessment year 2005 - 06 on identical facts and circumstances.
46. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that the ground number 1 - 3 of the appeal of the learned assessing officer are identical to ground number 1-3 of the appeal of the learned assessing officer for assessment year 2005 - 06. As we have already upheld the order of the learned CIT - A deleting the addition for assessment year 2005 - 06, considering the same seized material and also respectfully following the decision of the coordinate bench in case of M/s Vipul Ltd, we also for the same reasons dismiss ground number 1 - 3 of the appeal of the revenue, uphold the order of the learned CIT - A and direct the learned assessing officer to delete the addition of INR 8 crore made on account of receipt of cash payments. Accordingly, ground number 1 - 3 of the appeal of the learned assessing officer are dismissed.
47. Now we come to ground number 4 of the appeal wherein the learned CIT - A has deleted the addition of Rs. 11858125/- made by the learned assessing officer on account of undisclosed payments for the purchase of the land at from various persons.
48. The learned departmental representative supported the order of the learned assessing officer and stated that the addition has been made based on the documents found during the course of search. He further submitted that the assessee is having 50% share in the joint venture and therefore the addition to that extent has been made by the learned assessing officer.
49. Learned authorised representative submitted that the material is impounded during survey under section 133A of the act on SVS Pro Mart Page | 47 Private limited. It was not seized from the premises of the appellant company and not from its employees are directors. The document has not been authored by any of the person related to the assessee and it does not contain name of the author, appellant or any of its employees are directors. It does not contain the purpose for which the same was prepared. In view of this, it was stated that the seized document does not pertain to the assessee. It was further stated that the land mentioned in the seized document is located at Zirakur whereas the land owned by the assessee is located at RajPura. Hence, he submitted that there is no connection between the document found in the transaction of the land owned by the assessee. He further stated that as per the marking of the seized documents it is stated that it is related to assessment year 2005 - 06 where the addition has been made in assessment year 2006- 07. He further stated that neither the seller was examined by the learned assessing officer nor the valuation report of the property has been obtained by the learned assessing officer to determine the fair market value of the land. He therefore stated that the transaction of the value of the land is at consideration recorded in the sale deed. He further referred to the assessment order and stated that the learned assessing officer himself as mentioned that the consideration paid by cheque almost matches with the amount mentioned in the chart therefore it is the addition, which has been made on the suspicion and the conjectures and surmises. He further referred to the order of the learned CIT - (A) para number 7.3 of his order and stated that the learned CIT - A has given the detailed reason for deleting the above addition. He therefore submits that there is no infirmity has been pointed out by the learned departmental representative in the order of the learned CIT - capital and therefore the addition has been correctly deleted. He otherwise stated that the opportunity of cross-examination has not been given to the assessee and therefore on this reason the addition does not survive.
50. We have carefully considered the rival contention and perused the orders of the lower authorities. Apparently in this case the documents are based on which the addition has been made are not seized from the possession of the appellant but are seized from Messer SVS Promart private limited being a property dealer. It neither has the reference of the appellant or any of its Page | 48 employees. Furthermore the document seized shows the land at Zirakpur and the land owned by the assessee is at Raj para therefore there is a locational difference also between the documents seized and the actual facts. The learned CIT - A further noted that the documents have been seized from a third-party and in spite of the request made by the assessee for examination of that party, no such opportunity was given to the assessee. Further, the learned assessing officer also did not examine the sellers of the land to find out whether there is any consideration received by them. The statement of the estate broker Shri Vipin, is recorded at the back of the assessee and never confronted to the assessee to rebut the same. In fact, actually the addition made by the learned assessing officer is not supported by any material credible evidence. Therefore, the addition was deleted. The learned departmental representative could not show us any reason that a. when there is a locational difference between the situs of the land as per the document and the actual ownership of the land by the appellant, b. without confronting the assessee the statement of Mr Vipin, c. Without giving an opportunity of cross-examination to the assessee the addition can be made. In view of this we do not find any infirmity in the order of the learned CIT - A in deleting the addition of INR 1 1858125/- on account of undisclosed investment under section 69B of the act for the purpose of purchase of land at the Zirakpur along with Vipul Limited. Accordingly, ground number 4 of the appeal of the learned assessing officer is dismissed.
51. In the result ITA number 2912/Del/2011 filed by the learned assistant Commissioner of income tax, central circle - 2, New Delhi for assessment year 2006 - 07 is dismissed.
52. Now we come to the cross objection filed by the assessee in the above appeal. As per ground number 1 and 2 of the appeal the assessee has challenged that no documents and material so seized are belonging to the assessee including document number 43 of annexure A - 1, and therefore the assumption of jurisdiction u/s 153C of the income tax act by the learned assessing officer is erroneous.
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53. The learned authorised representative submitted that the documents have already been discussed in the appeal of the assessee for assessment year 2005 - 06, and of the assessing officer for the same assessment year wherein it has been stated by the learned authorised representative that these documents does not belong to the assessee and therefore no addition can be made in the hands of the assessee on the basis of these documents. He referred to the various seized documents, which were also part of the paper book filed by the assessee for assessment year 2005 - 06.
54. The learned departmental representative vehemently stated that documents belong to the assessee and the assumption of the jurisdiction has been rightly assumed by the learned assessing officer.
55. We have carefully considered the rival contention and perused the orders of the lower authorities. In appeal of the assessee and revenue for assessment year 2005 - 06 , we have already held that the document seized from Mr Moti S Masand does not belong to the assessee and therefore no addition can be made in the hands of the assessee as the jurisdiction on the basis of those documents under section 153C of the income tax act assumed by the assessing officer is invalid. Further with respect to the documents found from Shri Vipin Sharma and Sri Aman Sharma , we also held that those documents does not have any reference of the transaction made by the assessee or name of the assessee. Therefore, these documents also does not belong to the assessee. In view of this ground number 2 of the cross objection succeeds.
56. Ground number 1, 6, 7 and 9 of the appeal are general grounds, no specific arguments were advanced by the assessee and hence they are dismissed.
57. With respect to ground number 3 and 4 which are related to the recording of the satisfaction in the file of the searched person and absence of any recording of handing over and taking over of the seized material, ground number 5 is with respect to the recording of satisfaction twice by the assessing Officer being the jurisdictional assessing officer of the person searched and the person whose documents were found, all these grounds in view of our decision in the appeal filed by the learned assessing officer as well as dealing with ground number 2 of the cross objection by the assessee has merely become academic and therefore they are dismissed.
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58. In view of this the cross objection number 198/del/2011 filed by the assessee is partly allowed.
59. Accordingly, for assessment year 2006 - 07 the appeal of the learned assessing officer in ITA number 2912/del/2011 is dismissed and cross objection filed by the assessee in CO number 198/del/2011 filed by the assessee is partly allowed.
ITA No 4665/del/2011 AY 2006-07 ( By AO) U/s 153 A
60. Now we come to ITA No 4665/Del/2011 For AY 2006-07 filed by the learned Assistant Commissioner Of Income Tax, Central Circle - 2, New Delhi (the assessing officer) against the order of the learned Commissioner Of Income Tax (Appeals) -III, New Delhi dated 5/8/2011 wherein additions made by the learned AO are deleted.
61. The brief facts for assessment year 2006 - 07 shows that pursuant to search and seizure action u/s 132 of the income tax act carried out in Sri Ram Hari Ram group of cases of 26/02/2009 in the case of the assessee was also covered under search. Consequently, notice u/s 153A was issued on 28/8/2009 and assessee in response to that filed return of income on 27/11/2009 declaring income of Rs. 21000442/-. The learned assessing officer passed an assessment order u/s 153A read with section 143 (3) of the income tax act on 30/12/2010 determining total income of the assessee at INR 101115990/- wherein an addition of on account of undisclosed cash receipt of INR 80,000,000 was made. Further addition on account of undisclosed cash payment of INR 11858125/- was also made however considering the overall addition of INR 80,000,000 the same addition was not separately made. The assessee preferred an appeal before the learned CIT - A -III, New Delhi who passed an order dated 5/8/2011. He deleted the addition of INR 80,000,000 as same has already been deleted in the appellate order for assessment year 2006 - 07 by the learned CIT - A on identical facts and circumstances, in view of the orders earlier passed by the learned assessing officer u/s 153C of the act on 31/12/2008. With respect to the further addition of INR 115548 was also deleted. Thus the appeal of assessee was allowed.
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62. Aggrieved with the order of the learned CIT - A, the learned assessing officer has preferred this appeal raising following grounds of appeal in ITA No. 4665/Del/2011 for the Assessment Year 2006-07:-
"1 On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs. 8 Crores made by the AO on account of receipt of cash payments.
2 On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts by not appreciating the fact that the addition made in the case of M/s. Vipul Ltd. stands confirmed by the CIT(A) on the same issue as well as on the basis' of same evidences. 3 On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in ignoring the fact that the assessee company is a co partner of M/s. Vipul ltd. in various projects and was in receipt of equal amount of cash component as received by M/s. Vipul ltd. 4 On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.1,18,58,125/- made by the AO on account of undisclosed payments.
5 On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,15,548/- on account of interest paid on the bank overdraft utilized for non-business purpose.
6. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts In holding that no disallowance / addition can be made in an assessment u/s 153A which is not based on any incriminating document seized during search.
7 The order of the Id. CIT(A) is erroneous and is not tenable on facts and in law."
63. The ground number 1 of the appeal is with respect to deletion of the addition of INR 80,000,000 made by the assessing officer because of receipt of cash payments. Both the parties submitted that this is identical to ground number 1 -3 in the appeal of the learned assessing officer for assessment year 2006 - 07 in ITA number 2912. The learned authorised representative also submitted that the learned assessing officer has already made this addition in the order passed u/s 153C of the income tax act for the same assessment year and as this is the order u/s 153A of the income tax act pursuant to different search and therefore the learned assessing officer has repeated the same addition.
64. We have carefully considered the rival contention and perused the orders of the lower authorities. We have already dealt with this issue in appeal of the learned assessing officer for assessment year 2006 - 07 wherein in the order Page | 52 passed by him, he has made the addition of INR 80,000,000 in the hands of the assessee on account of 50% of the project on account of cash received along with Vipul Ltd. While deciding ground number 1 - 3 of the appeal of the learned assessing officer in ITA number 2912/del/2012, we have deleted this addition relying on the decision for the assessment year 2005 - 06 in the case of the appeal of the learned assessing officer for that year and of the coordinate bench in case of M/s Vipul Ltd for assessment year 2005 -
06. In view of this ground number 1 - 3 of the appeal does not survive and hence there dismissed.
65. Now we come to ground number 4 of the appeal, which is against the deletion of the addition of Rs. 11858125/- made by the learned assessing officer on account of undisclosed payment for purchase of land for 50% share in the hands of the assessee. Both the parties admitted that this is identical to ground number 4 of the appeal of the learned assessing officer for assessment year 2006 - 07 in ITA number 2912/del/2011 wherein identical additions were made by the learned assessing officer while passing order u/s 153C of the income tax act for this assessment year. It was further stated that to keep the issue alive the assessing officer has also made the similar addition u/s 153A of the income tax act for the same assessment year once again.
66. We have carefully considered the rival contentions and perused the orders of the lower authorities. The learned assessing officer has repeated this addition in this assessment order passed u/s 153A of the income tax act, which was already made by him under section 153C of the income tax act for the same assessment year. This has happened due to the fresh search carried on by the revenue on the assessee on 26/2/2009. We have given our detailed reasons while deciding ground number 4 of the appeal for assessment year thousand 6 - 07 in case of the assessee wherein we have deleted this addition. Therefore, for the same reasons we delete this addition also as there is no change in the facts and circumstances of the case and there are no further documents found with respect to the above addition. Accordingly, ground number 4 of the appeal is dismissed.
67. Now we come to ground number 5 of the appeal of the learned assessing officer wherein the learned assessing officer is aggrieved with the order of Page | 53 the learned CIT - A in deleting the disallowance of Rs. 115548/- on account of interest paid on the bank overdraft utilized for non business purposes. The brief facts of the case shows that vide para number 4 of the assessment order, the learned AO found that assessee has claimed interest paid of Rs. 115548/- in the profit and loss account. He found that loans and advances given by assessee were for non business purposes. Therefore the learned assessing officer was of the view that the assessee has taken the loan and used for giving interest free advances to other parties therefore he disallowed the sum of Rs. 115548/- holding that it is not for the business purposes . The assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT - A contesting the above disallowance. The learned CIT deleted the above disallowance for the reason that company had interest free funds of more than 280.87 Crores because and these funds exceeded the interest free advances of only INR 118.5 crores. For deleting the disallowance the learned CIT - A relied upon the decision of the honourable Bombay High Court in Reliance utilities Ltd 313 ITR 340. Therefore, the AO is aggrieved and has preferred this ground of appeal.
68. The learned departmental representative relied upon the order of the learned assessing officer.
69. The learned authorised representative vehemently relied upon the order of the learned CIT - A.
70. We have carefully considered the rival contentions and perused the orders of the lower authorities. In the present case, the interest free funds available with the assessee far exceeded the alleged non-interest-bearing advances given by the assessee to other parties. In view of this the presumption arises in favour of the assessee that the amount of interest free advances given are out of non-interest-bearing funds available with the assessee which have far exceeded the amount of non-interest-bearing advances. The learned CIT - A deleted the above disallowance relying upon the decision of the honourable Bombay High Court in 313 ITR 340. The learned departmental representative could not point out any infirmity in the order of the learned CIT - A. In view of this we also do not find any infirmity in the order of the learned CIT - A and confirm his order deleting the addition of Page | 54 INR 1 15548/- because of interest paid to the banks. In the result ground number 5 of the appeal is dismissed.
71. Ground number 6 - 8 are general in nature and therefore they are dismissed.
72. In the result ITA number 4665/del/2011 filed by the learned AO is dismissed.
ITA No 5863/Del/2011 A Y 2009-10 By Revenue
73. The facts resulting into the appeal number 5863/del/2011 by the assessing officer shows that search and seizure action u/s 132 of the income tax act was carried out in Sri Rama Hari ram group of cases was conducted on 26/2/2009 and the assessee was covered under that search. The assessee has originally filed its return of income on 28/11/2009 declaring income of INR 376986590/-. On the basis of the search one Mr Raj Gupta disclosed an amount of INR 50 crore and later on he filed a letter in the office of the Deputy Director of investigation in which we has offered unaccounted income of INR 315,000,000 in the case of the assessee. Assessee did not submit any explanation of additional income until the end of the assessment proceedings and has not identified any seized material related to the additional income disclosed.
74. Further during the course of search at the residential premises of Sri Balkishan Saraf , an accountant, main person of the assessee on 26/2/2009 certain loose papers and notebook et cetera were found and seized as per inventory Annexure A of the panchnama. The learned assessing officer analyzed annexure A - 2, page number 48 of the seized documents and found that it is one kind of fund flow statement. The contents of the seized documents are reproduced at page number 3 and 4 of the assessment order. Based on the above document the learned assessing officer found that there is clear details of inflow and outflow of the funds mentioned on those papers. The learned AO further referred that there are a reference of RTGS in those documents and therefore these are actual receipts and payments of funds therefore the assessee was directed to explain the above document. The assessee submitted that these are the dumb document and Sri Balkishan stated that they related to the past period and are merely financial planning and has no undisclosed income, which could be connected to the assessee. The learned assessing officer Page | 55 considered the above issue as per para no 5.5 - 5.14 of his order and consequently made an addition of Rs. 112142000/- on substantive basis in the hands of the assessee and protective basis in the hands of Shri Bal Kishan Saraf as under :-
"5. Analysis of seized materials 5.1 In this case search action u/s 132 of the I.T. Act was carried out at the residential premises of Shri BalKishan Saraf accountant and main person of the assessee Company on 26.02.2009. During the course of Search proceedings certain loose papers/note book etc. found, seized and inventorised as annexure A of the panchnama from the residential premises of Shri Bal Kishan Saraf.
5.2 In this regard, Shri BalKishan Saraf vide this office letter dated 24.06.2010 has been requested to explain the contents related to him in the materials and electronic data from which were seized/impounded during the course of search/survey. The list of the premises which were covered under search/survey has been provided to him and the copies of the seized/impounded materials have also been provided to him as required. However he has not submitted his reply after several reminders. Shri BalKishan Saraf ultimately submitted the reply at the fag end of the period on which the assessment going to get time bar to lid the further inquiries related to the loose papers/documents/diaries/books of accounts found and seized/impounded during the course of search proceedings. The residential premises of the Shri BalKishan Saraf also covered under search and books of accounts/documents have also been found and seized from his premises but he has not filed the explanation of the documents so found/seized till 24.12.2010. The important seized papers are discussed hereunder:
5.3 Annexure A/2 Page No. 48( annexed to this order as annexure A) This paper is prepared like a fund flow statement. The details are mentioned in a tabular form having 4 columns. Two for incoming fund such as Dr.(Particular and amount) and other two columns are for the outgoing funds such as Cr. Side (Particular and amount). The contents of this paper are mentioned hereunder:
11 SHRI HARI II
75 oidpl chq 75 Bhop SG 250 170 RTGS JG holding bhop 25 280 Tinnulala bhop 50 100 AK 100 BK 800 325 475 tommarrow RTGS 50 Page | 56 bahetiji 125 Paharimata 83 73.5 BK Bank Bal. 16.5 Cash bal. 274 548.5 548.5 Bal 0 Note Captive shares pur 20L Auto impex shares pur 5.4 On perusal of the details and pattern mentioned in this paper it is clear that the details of inflow and outflow of the funds have been mentioned on this paper. This fact is further cemented by the amount of 170 mentioning „RTGS JG holding‟, it means 170 is the amount which has been electronically transferred/paid/received from/to JG holding (some company). Therefore, these calculations are actual receipt and payment of funds. Shri BalKishan Saraf has made total of left side at 800 means funds received and the right side total i.e. outflow of fund of 325, this outflow is reduced from the incoming fund of 800 as mentioned in left side (inflow of funds) the balance remains at 475 which is correctly carried forward as opening balance in left side immediately under 800. The further receipt(inflow of funds) at 73.5 if added with opening balance of 475, the total comes at 548.5 which tallies with the total mentioned in left hand side i.e inflow of funds. This total inflow of funds is Worked out at 873.50(800+73.5). In the same way, the right hand side, some payments(outflow of funds) is also worked out at 873.50(325+548.50). During the course of search Sh. Bal Kishan Saraf was asked to explain the contents of the above seized material which he did not explain. Since the names appearing on this paper are related to the assessee company and hence, the assessee as well as Sh. Bal Kishan Saraf also were requested to explain the contents of this paper and furnish reason for preparation of this paper. The assessee was asked on several occasions during the course of assessment proceedings to furnish the explanation. The assessee did not file any satisfactory reply. On the other hand, in the explanation regarding the notes on this paper Shri BalKishan Saraf has mentioned as under:
"the document is again merely a dumb document in so far as it is not decipherable as to who is the author of the seized document, when the document was prepared and what the seized documents represents. In this regard your attention is further drawn towards the statement of assessee Q.No. 13 & 14 recorded during the course of search on 26.02.2009 where it was admitted by Balkishan Saraf that „Tjis pertains to financial planning related to past period'. As such this document merely financial planning and has no undisclosed income which could be connected to assessee "
5.5 I have carefully considered the reply of Shri BalKishan Saraf and found not acceptable. First of all, as per the language of the reply it is clear that the paper pertains to the assessee company/Bal Kishan Page | 57 Saraf, as in the reply he has stated that that the paper pertains to financial planning. Shri BalKishan Saraf has simply mentioned that this is meant for financial planning but failed to prove that which type of planning made by him and what was the necessity of such planning. This cannot be a planning because these transactions include a transaction of 170 RTGS JG holding‟ in left side (inflow of funds) and also in right hand side (outflow of funds) „tomorrow RTGS 50‟, therefore, RTGS was executed by some bank for 170 and for 50 might to be executed tomorrow. RTGS is the system by which the funds are transferred from one bank account to another bank account electronically and this type of physical transaction if form part of a calculation on that sheet cannot be claimed by the assessee a future planning. Moreover, in the table word „tomorrow‟ is mentioned it means the assessee has mentioned the transactions of a day and next day only. On this calculation sheet the closing balance of the transactions is brought down for next day and out of the balance he has shown outflow of fund. In the planning the balance and tomorrow is not considered. In the planning simply the details of estimate of incoming fund and outgoing fund are mentioned. But the word tomorrow and as he has brought down the balance fund in the next day clearly proves that this is nothing but account of funds received by the assessee and details of outflow of such funds in two days. The contention of Shri Bal Kishan Saraf that this paper is a dumb paper cannot be accepted. This is nothing but an afterthought. Shri Bal Kishan Saraf tried to save his skin as well as the skin of the assessee company by not explaining the contents of this paper which is a statement of inflow and outflow of funds for some actual transaction. Neither the assessee company nor assessee‟s main person managing its account Mr. Bal Kishan Saraf has furnished any satisfactory reply regarding the transactions recorded on this paper.
5.6 It is pertinent to mention here that most of the name mentioned in the paper such as Paharimata, oidpl (M/s Orchid Infrastructure Development Pvt. Ltd.) is known concern of Shri BalKishan Saraf in which he is closely associated. However Shri Bal Kishan Saraf has further failed to explain as to why the name of his known concerns are reflected in this paper. In this paper cash balance is also mentioned. As, Shri Bal Kishan Saraf has accepted in his statement recorded during the course of search that he takes care of accounting and tax filing of group companies of Sh. Rajiv Gupta. The assessee company is one of the flagship company of Sh. Rajiv Gupta and Sh. Bal Kishan Saraf had accepted in his statement that he takes care of accounting and tax filing of the assessee company also. As such this paper is certainly related to the assessee company as it was seized from the premises of Sh. Bal Kishan Saraf who has accepted that he takes care of accounting and tax filing of the assessee. Moreover, many names appearing on the paper are persons i.e Sangeeta Gupta, OIDPL(the assessee company), Paharimata etc who are associated with the assessee company. Accordingly, it is held that the income reflected in these documents belong to the assessee company on substantive basis. The assessee has totally failed to explain this seized paper. It is worthwhile to mention here that U/S 292C of the IT Act, 1961 whatever Page | 58 cash, jewellery, papers, documents etc. found during the course of search, onus always rest on the assessee company and his main accountant Sh. Bal Kishan Saraf to prove the genuineness of such materials with supporting evidences. The assessee has to prove that this is only a dumb/useless paper whatever amounts have been mentioned on the paper specially when it is prepared in the nature of account and accounting term such as in a tabular form left side (inflow of funds) and right hand side (outflow of funds) and closing and opening balance has been mentioned, total of both sides tallies, RTGS, Cash Bal has been specifically mentioned on the paper, for which he has failed. Therefore, on the basis of narrations mentioned in this papers and terms used for preparation of this paper, it clearly indicates the nature of the paper as inflow and outflow of funds for some transaction which has neither been recorded by the assessee company nor explained during assessment proceedings.
5.7 As per the facts mentioned above it is proved that this paper is prepared for monitoring the funds and without proper explanation this is unaccounted funds for receipt and payment. Moreover, as discussed hereunder the modus operandie of Shri BalKishan Saraf related to the assessee company as he used to mention the money in lacs of rupee. Such as if 5 is written represents the amount of Rs. 5,00,000/-. Further Shri BalKishan Saraf is closely attached with the assessee company which is a well known real estate company. The transactions of the group are normally in the lacs of rupee. Moreover, Shri Bal Kishan Saraf also admitted unaccounted income in crore of rupee on the basis of documents seized during the course of search proceedings which clearly indicating that the transactions of Jacs of rupees'are mentioned in the papers seized from the premises of Shri BalKishan Saraf. The assessee was also required to explain the same and correlate with the regular books of accounts for which they failed.
5.8 On this paper period has not been mentioned. However, the paper is found as on 26.02.2009 and as per the situation of the paper it is noticed that the paper had prepared recently and near the date of search. As per the facts this paper pertains to the current period i.e. for the A.Y. 2009-10. On this paper the fund flow seems to be 873.5 and converting it to the lacs of Rupee the involved amount on this paper is worked out to Rs.8,7.3,50,000 (873.5-X 1,00,000). Considering the facts of the seized material, it is noticed that Mr. Balkishan the main accountant of the assessee company ,was knowing the identity of the persons as noted in the seized material. It is further noticed that first inflow of fund was of Rs.75,00,000 from oidpl (the flagship concern of the group & assesssee) and on the other hand first out flow of the fund was of Rs 2,50,00,000 to SG. As such the assessee company had invested its unaccounted income of Rs. 1,75,00,000 ( Rs. 2,50,00,000 - Rs 75,00,000 ) in the first transaction itself. As such the balance amount on the day one comes to Rs.6,50,00,000 ( Rs.4,75,00,000 + Rs. 1,75,00,000) . On the day two, the assessee added unaccounted fund of another Rs. 73,50,000. Accordingly total unaccounted and unexplained income of the assessee company comes to Rs.7,23,50,000 ( Rs.6,50.00,000 + Rs.73,50,000) , which has not been Page | 59 mentioned/reflected in assessee‟s regular books of accounts in the year under consideration hence added to the total income of the assessee company on substantive basis on account of the said seized document as the transactions known/prepared by the assessee company / its accountant. As these transactions are related to it and it is main earning source of the group. Persons noted in the seized material are closely associated with the assessee company as can be found from the statement of Shri Bal Kishan Saraf.
Penalty proceedings u/s 271 (1) ( c) of the Act is being initiated separately, as the assessee has filed inaccurate particulars of income and concealed his income.
5.9 Page No.46 of Annexure A/2: (Annexed as annexure B with this order) This page was found from the residential premises of Shri BalKishan Saraf which prepared on 08/01/2009 The heading of this page is "To do list on:-08/01/2009. This summary is in a tabular form and a print out obtained from the computer. Below this summary/table of To do list, certain amounts has been mentioned.
5.10 On this paper amount, cash, Cr. and amounts before that has been mentioned, it proves that these are the recording of some financial and accounting transactions. These may be accounted for or unaccounted transactions in the books of the assessee company. 5.11 In reply Shri BalKishan Saraf has mentioned that "this is an estimate/projection document as it is clear from the head note at the top of the paper as "To do list as on 08.01.2009‟‟. In this regard we also wish to draw-your attention to statement of Balkishan Saraf Q.No. 15 of statement recorded during the course of search where he has admitted that "These reflect the work planning for Orchid Group or Myself‟‟ As such it is a planning/estimate documents. "
5.12 Shri BalKishan Saraf has merely stated that the contents on this paper are " to do list as on 08.01.2009" and nothing but planning and estimated and categorised as dumb documents. This submission cannot be accepted. This is the usual practice that before doing any work the works to be done are mentioned by every person and what is done against those planned events the actual executed acts and facts are mentioned thereafter. Regarding planning and estimates, his contention cannot be accepted because in figures exact addition and subtractions are there for instance the amount mentioned 9292000 less 130, balance tallies with 9200000 plus 91870. Besides, in this paper Shri BalKishan Saraf has striked through some figures and total of such figure are exactly match with the figure of Rs.1.25 crore as mention in this paper as „1.25 cr Meeku bhai‟. Other than the amount of Rs. 1.25 cr.,92,92,000/-, Raghav-lCr and Abheejeet -50 is also mentioned. The assessee either use to mention the amount in full or mentioning in lacs of Rs as evident from the amount strike through which exactly match with the 1.25 cr. The assessee has striked through the figure of 5 nine time, 10 four times and 20 two times {(5x9)+(l Page | 60 0x4)+(20x2) = 125)}. Its prove that shri BalKishan Saraf used coded language representing the figures of amount in lacs of rupee. Hence the valuation of Abhijeet 50 is 50 lacs. The value of amount mention in paper is Rs.39792000/-{12500000 + 9292000 + 130000000 ( in computer printed table at si no 17 it is mentioned 130rs. sheetal international payment given to raghavji and at the end of the page Raghav-1 cr cash is mentioned therefore, the amount of 130 means 130 lac is adopted and set off of 1 cr is given) + 500000}. The assessee has failed to substantiate these financial transactions and also could not correlate with his books of accounts or any other fund. The assessee has been requested to furnish the details of the persons whose names appears in the paper for which the assessee failed.
5.13 Since. Sh. Bal Kishan Saraf is closely associated with the assessee company and as per the facts of the case it is clear that these are the financial transactions. It is obvious that apparently, this paper also relates to the assessee company as it is flagship company of Sh. Rajiv Gupta and for the reason also that Sh. Bal Kishan Saraf takes care of accounting and tax filing of group companies belonging to Sh. Rajiv Gupta. In the circumstances and keeping in view the figures and names written in the above seized document, it is held that the assessee has strike through the figures of 5,10,1 etc. it means he has collected or arranged the fund of Rs. 1.25 crore and given to some Shri Meeku bhai. As such it is proved that whenever, the assessee has not mentioned the amount in figure than the amount represents the figures in lacs as the strike through figure are in lacs and the total of the figure strike through figure is worked out as 1.25 crore as mention in front of the name of Shei Meeku Bhai. This logic also proves that these are the financial transactions noted on this paper which are not planning/estimation and as such this is not a dumb document as stated by Sh. Bal Kishan Saraf. The assessee has also not submitted any satisfactory reply in respect of the seized material and Shri BalKishan Saraf also has totally failed to co relate the figures mentioned in this paper as such the amount mentioned on this paper are unaccounted on the date 08.01.2009. As per the facts of the case, the unaccounted income as mentioned on the page No. 46 of Annexure A/2 of Rs.3,97,92,000/- is added to the total income of the assessee for the year under consideration on substantive basis. 5.14 It is worthwhile to mention here that Sh. Rajiv Gupta and Shri BalKishan Saraf are main person of the assessee company. After several reminders the assessee has not submitted base and bifurcation of the unaccounted income. The total addition on account of unexplained investment on the basis of documents seized during the course of search proceedings is worked out to Rs. 11,21,42,000/- (7,23,50,000 as per para 5.8 above + 3,97,92,000 as per para 5.13 above) in the case of assessee company. As mentioned above, The assessee Company is the main flagship Company of Shri Rajiv Gupta and group. The persons noted in the seized material are closely related to the assessee company. As such, the said addition of Rs. 11,21,42,000, as discussed above, is made in the hands of the Page | 61 assessee company on substantive basis for the period under consideration.
This addition of Rs. 11,21,42,000 is being made in the hands ol M/s Orchid Infrastructure & Development Pvt. Ltd on substantive basis being main business concern of the group and noting of the seized material are directly related to the assessee company. As the material on the basis of which addition has been made, was seized during the course of search from the premises of Sh. Bal Kishan Saraf, hence, the addition of Rs. 11,21,42,000/- is also made in the hands of Bal Kishan Saraf for the A.Y. 2009-10 on protective basis.
I am satisfied that the assessee has furnished inaccurate particulars of income and thereby consealed the income of Rs. 11,21,42,000/-, accordingly, penalty proceedings u/s 271(1 )(c) of the I.T, Act are being initiated separately.
Addition ofRs. 11,21,42,000/-"
75. Consequently the assessment order u/s 153A read with section 143 (3) of the income tax act was passed on 30/12/2010 by the learned assessing officer determining the total income of the assessee at INR 4 89128590/- against the returned income of INR 3 76986590/- wherein the addition of Rs. 112142000/- was made on substantive basis on account of unexplained investment/income on the basis of the documents found from the premises of Sri Saraf.
76. Assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT - A who deleted the above addition as per paragraph number 5 of his order as under:-
"5. Finding on Ground of Appeal Nos. 1 to 13:-
On a consideration of the findings of the A.O. and the submissions made by the appellant as well as upon going through the seized documents, the scanned copy of which is forming part of this appellate order as above, the undisputed position on record is that both these papers have been found from the residential premises of Sh. Bal Kishan Saraf and have not been found / seized from either the premises or possession of the assessee company and is not authored by any of if s Directors. Even Sh. Bal Kishan Saraf in his statement on the date of search on 26.02.09 has admitted that these papers have been authored by him. The same position has been reiterated through letter dated 01.12.10 written by Sh. Bal Kishan Saraf to the AO in his assessment proceedings u/s 153A, the copy of which is placed on pages 93-97 of the paper book.
Now when these documents have been not found from the assessee‟s possession /premises it cannot be straight away held as "belonging" to the assessee, and neither a presumption u/s 292C can be raised against the appellant. This is because section 292C which mandates Page | 62 raising a presumption relating to the truthfulness of the contents of books of accounts and other documents is applicable only when such books of accounts and other documents are found in the possession or control of any person in the course of search. Further while the terminology "belonging to" is explicitly referred to in section 153C of the Act, but in principle this concept cannot be held as alien to a case where the assessment has been made u/s 153Aor Section 143(3). In other words while the AO is required to make an assessment u/s 153 A/143(3) in case of a person who has been subjected to search but no tax liability can be fastened on this person by holding the contents of a document against him, which has been seized from possession and control of a different assessee/ person who is separately subjected to search, without satisfying the test of "belongingness". Moreover in case of Shri. Bal Kishan Saraf it has been noted that Sh. Saraf is neither the employee nor Director of Orchid Infrastructure & Developers P. Ltd. or Orchid group of Companies in so far as he is neither receiving any salary nor any other benefit. That Sh. B.K. Saraf is an old family friend of Sh. Rajiv Gupta of oidpl & looks after accounting and tax matters in an informal & casual manner.
While on the legal interpretation of the word "belonging to" it has been held in the cases of P. Srinivasa Naik.vs. Assistant Commissioner Of Income-tax, Central Circle - 1(2). Bangalore 114 TTJ 856: Meghmani Organics Ltd. I.T.A. 2938 to 2942/AHD/2008Ahd. Tribunal & in Viiavbhai N. Chandrani 231CTR 474 Gujarat High Court that the term "belonging", implies something more than the idea of casual association. It involves the notion of continuity and indicates one more or less intimate connection with the person over a period of time. The expression belonging to the assessee connotes both the complete ownership and limited ownership of interest. Of course belonging to is capable of connoting, interest, which is less than absolute perfect legal title. However, there should be some limited ownership of interest, if it is to be permitted that the assets belongs to the assessee. In the instant case, the documents found and seized during the search cannot be termed to indicate any limited interest of ownership of the appellant in such documents. While there are reference to the words oidpl & SG, which have been admitted by Shri Saraf in his statement as signifying " Orchid Infrastructure development P. Ltd. & Sangeeta Gupta the wife of Shri Rajiv Gupta, but apart from this the other names written in code have not been identified /linked with the assessee, by the AO and therefore on this ground itself for lack of independent corroborative evidence, there is no case for making addition in case of the appellant. The AO has in his order has made references to the fact that the assessee as well as Sh. Bal Kishan Saraf have not come out with full and true explanation relating to the narration in these seized documents. While there is a legal responsibility on part of Sh. Bal Kishan Saraf to come out with valid explanation relating to these documents in view of the presumption applicable u/s 292C of the Act, but in view of the fact that the same are held as "not belonging to the assessee" therefore there can be no burden on the assessee to provide any explanation as the documents have not been found or written by Page | 63 the appellant. Rather Sh. B.K. Saraf too in his statement dated 26.02.09 has not recalled the names like "Bhop"; " Tinnulala".
Therefore on face of such reluctance or loss of memory on part of the writer of the seized document it was incumbent on the AO to have linked & investigated the contents of these documents to the assessee either through other incriminating seized material or through corroborative evidences like entries in Bank A/cs of the assessee and it‟s group concerns/ family members gathered during the search or subsequent assessment proceedings, which have not been carried out. It is noted from ground of appeal no. 12 that the appellant has without prejudice to his arguments as above has contended that the AO is not justified in not giving set off of addition made for Rs. 11,21,42,000/- based on the seized material against income of Rs. 31.50 Crores declared by the assessee, which is contrary to the principles of natural justice and facts borne on record. That alternatively, based on this ground, the action of the AO needs to be undone and set off of the addition made should be allowed against income declared by the assessee. It is seen from para 4 of the AO‟s order that Sh. Rajeev Gupta the Director of the appellant had made a overall disclosure of Rs. 50 Crores during the course of search and subsequently has made an offer of unaccounted income for Rs. 31.50 Crores in the case of the assessee, which has also been declared in the return of income filed by the assessee. However, since the assessee company has not identified any seized material related to the additional income disclosed by it therefore no set off of unaccounted income reflected in the seized material is given to the assessee against the disclosed income. Now in the facts of the case the AO has not referred to any other incriminating document in addition to the unaccounted income based on the aforesaid seized document from the residential premises of Sh. Bal Kishan Saraf, which have already been held as not belonging to the appellant and neither any nexus established by the AO with the appellant. However taking a broader overview of the entire issue and considering the alternate contention of the appellant since there is no other seized material which reflects income exceeding the already disclosed income for Rs. 31.50 Crores on part of the appellant therefore in my considered view a set off for this amount of Rs. 11,21,42,000/- can reasonably be granted to the appellant. In view of the above discussion in totality the addition made for Rs. 11,21,42,000/- is directed to be deleted. Thus Grounds of Appeal No. 1 to 12 are disposed off as all these grounds are essentially on the same issue and have been argued from different perspective.
So far as Ground No. 13 is concerned the contention of the appellant is that the AO has passed his order u/s 153A /143(3) of the Act. That since the date of search is 26.02.2009 therefore section 153A is not applicable for this year and the assessment could have been completed only u/s 143(3) and not under section 153A r.w.s. 143(3). It has therefore been prayed that the assessment order be held as void- ab- initio and should be deleted on this account itself. This plea of the assessee is not found acceptable as there is nothing on record which shows that notice u/s 153A was issued in appellant‟s case. Moreover Page | 64 mention of S. 153A on the first page of the order is at best an inadvertent mistake which does not make the assessment order invalid in terms of section 292B of the Act. Thus Ground of Appeal No. 13 is accordingly disposed off."
77. Therefore the learned assessing officer is aggrieved with the order of the learned CIT - A has preferred this appeal and has raised the following grounds of appeal in ITA No. 5863/Del/2011 for the Assessment Year 2009- 10:-
"1. On the facts and in the circumstances of the case, CIT(A) has erred in law and on facts in deleting the addition made by the AO of Rs. 11,21,42,000/- on account of undisclosed investment/ income on the basis of papers found from the premises of Sh. Bal Kishan Saraf.
2. The order of the ld CIT(A) is erroneous and is not tenable on facts and in law."
78. The learned departmental representative vehemently supported the order of the learned assessing officer and stated that Mr Saraf is an accountant of the assessee from whose possession the documents have been seized on which belong to the assessee and therefore the learned assessing officer has correctly made the addition on substantive basis in the hands of the assessee.
79. The learned authorised representative submitted that the addition has been made by the learned assessing officer based on the material seized from possession and control of 3rd party from the premises which belongs to him in search. He extensively referred to the copy of Punchnama placed at page number 37 - 40 of the paper book and the copy of the seized material at page number 41 - 42 of the paper book filed by the assessee. It was further stated that Mr Saraf has admitted that he was the owner of the seized material and he referred, for this, the copy of the statement of Mr Saraf placed at page number 47 of the paper book. It was further stated that the learned assessing officer has alleged that Mr Saraf is an accountant of the assessee but he is neither an employee nor the director of the assessee company. He further stated that under provisions of section 292C of the act, above seized material cannot be held as belonging to the appellant. It was further stated that Sri bal Kishan Saraf has already offered for tax on the basis of the seized material in his income tax return filed and similar addition has already been made by the learned assessing officer after giving set off of income already declared in his return of income in assessment Page | 65 year 2009 - 10 completed u/s 143(3) of the income tax act. He therefore stated that above income has already been taxed in the hands of Balkishan Saraf and therefore now it cannot be taxed in the hands of the assessee once again. He further referred to the submission made by Mr Saraf during assessment proceedings, which is placed at page number 92 - 108 of the paper book. He further referred to the assessment order passed in case of Mr Saraf u/s 143 (3) of the act which is placed at page number 12 5 - 144 of the paper book wherein the above addition has been made. He further referred to the order of the learned CIT - A at page number 35 - 36 wherein the learned CIT - A has given the detailed reason for deleting the above addition. In view of this, he stated that there is no infirmity in the order of the learned CIT - A in deleting the above addition which has been made by the learned assessing officer on protective basis in the hands of the assessee.
80. We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly, based on the seized material found in the possession of Mr. Saraf the addition has been made in the hands of the assessee. Admittedly, in the present case the assessee has owned and disclosed INR 31.50 crores based on the seized documents. The amount considered by the learned assessing officer is only INR 11.21 crores. Admittedly there are no other evidences of seized material found with the assessee during the course of search based on which the total addition could be more than INR 11.21 Crores . Therefore it is apparent that assessee has already disclosed INR 31.50 crores based on seized material. Amount of addition that has been made by the learned assessing officer of INR 11.21 crores is less than INR 3 1.50 crores. Therefore, at the 1st instance, in absence of any other incriminating material showing concealed income of the assessee, the addition of Rs. 11.21 crores has already subsumed in the total disclosure of INR 31.50 crores. Further, Mr Saraf has already been assessed u/s 143 (3) of the act as per order dated 30/12/2010. The assessee has placed on record assessment order at page number 125 - 144 of the paper book. The learned assessing officer in that particular assessment has made the protective addition of INR 1,88,30,489/- as per para number 4.13 of the order. Meaning thereby that Page | 66 out of the total addition of Rs. 11.21 crores , the addition of INR 9.33 Crores has already been made on substantive basis in the hands of Mr Balkishan Saraf. Thus there is a double addition to the extent of INR 9. 33 Crore Thus in the hands of the assessee the learned AO has not granted the telescoping of Rs. 31.50 Crores disclosed by the assessee company and of INR 9.33 Crores in the hands of Mr Saraf. Therefore, apparently there is higher addition in the hands of the appellant as well as in the hands of Mr Saraf which exceeded the impugned amount involved in the seized documents amounting to Rs. 11.21 Crores. On the merits of the issue, it is apparent that these documents were found from the residential premises of Mr Saraf and not from the possession of the assessee company or any of its employees or directors. These documents are in fact owned by Mr Saraf admittedly in his statement during the course of search on 26/2/2009. The seized documents based on which the addition has been made are reproduced by the learned assessing officer at page number 3 - 4 of his order. The copy of the statement of Mr. Saraf recorded during the course of search is also placed at page number 43 - 53 of the paper book. Apparently as recorded by the learned CIT - A, Mr Saraf could not give the meaning of several terms mentioned in those documents. The document seized from Mr. Saraf placed at page number 41 - 42 of the paper book does not have any reference of the appellant company, the name of the assessee company was not at all mentioned on those documents. Therefore, the learned CIT - A has also held that these documents do not belong to the assessee company. Further, with respect to RTGS mentioned, no correlation or corroboration was made to show that it belongs to the assessee company. The learned departmental representative could not show us that how the seized documents belongs to the assessee. On reading the assessment order itself, the learned assessing officer has also not stated that how these documents belong to the assessee. The learned departmental representative also could not controvert the infirmity in the order of the learned CIT - A. In view of above facts, we confirm the order of the learned CIT - A , for the reason that, a. the disclosure of INR 31.50 crores subsumed the above addition of INR 11.21 crore , Page | 67 b. to the extent of INR 9.33 crore set off to Mr. Saraf has not been granted, c. the seized document does not contain any reference of the appellant company, d. revenue failed to establish that the documents belong to the assessee.
In the result, the ground number 1 of the appeal of the learned assessing officer is dismissed.
81. Ground number 2 and 3 of the appeal are general in nature and therefore they are in absence of any arguments are dismissed.
82. In the result ITA number 5863/del/2011 filed by the learned assessing officer for assessment year 2009 - 10 is dismissed.
83. Accordingly all the 6 appeals are disposed of by this common order.
Order pronounced in the open court on 11/07/2019.
-Sd/- -Sd/-
(H.S.SIDHU) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 11/07/2019
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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