Income Tax Appellate Tribunal - Bangalore
M/S Ashed Valmark , Bangalore vs Department Of Income Tax on 3 April, 2014
ITA No.1366 of 2012 Messers Ashed Valmark Bangalore
IN THE INCOME TAX APPELLATE TRIBUNAL
Bangalore 'C'Bench, Bangalore
Before Shri George George K. Judicial Member
and Shri Jason P. Boaz, Accountant Member
ITA No.1366/Bang/2012
(Assessment year: 2008-09)
Asstt. Commissioner of Vs. M/s. Ashad Valmark
Income Tax, No.807 Barton Centre, 8th
Central Circle-1(1) Floor, No.84, MG Road
Bangalore Bangalore 560001
PAN: AACTA 0157 C
(Appellant) (Respondent)
C.O. No.67/Bang./2013
(Arising out of ITA No.1366/Bang/2012)
M/s. Ashad Valmark Vs. Asstt. Commissioner of
No.807 Barton Centre, 8th Income Tax,
Floor, No.84, MG Road Central Circle-1(1)
Bangalore 560001 Bangalore
PAN: AACTA 0157 C
(Cross Objector) (Respondent)
Department by: Shi Biju M.K. (DR)
Assessee by: Shri K. Sheshadri, CA
Date of Hearing: 03/04/2014
Date of Pronouncement: 11/04/2014
ORDER
Per George George K. J.M.
1. This appeal of the Revenue as well as the Cross Objection of the assessee is directed against the order of the CIT (A)-VI, Bangalore, dated 30.7.2012. The relevant assessment year is 2008-09.
Page 1 of 12ITA No.1366 of 2012 Messers Ashed Valmark Bangalore
2. The Revenue has, in its Memorandum of Appeal, raised a solitary issue, namely, 'that the CIT (A) had erred in deleting an addition of Rs.3,39,22,177/- made by the Assessing Officer.'
3. The assessee had, in its Cross Objections, contested that, (i) the assessment order u/s 147 r. w. s. 143(3) was not valid in law and requires to be cancelled; (ii) no notice u/s 143(2) was issued and failure of issuance of said notice is not curable u/s 292BB; & (iii) and that the order of the AO was a non-speaking order etc.,
4. As the Revenue's appeal as well as the assessee's cross objections being related to the same assessee, for the sake of convenience, they were heard together and disposed of in this consolidated order.
5. Before venturing to analyse the issues raised by either of the party, it was observed that there was a delay of 21 days in preferring the Cross Objections by the assessee. The assessee, in its affidavit dated 16.7.2013, has submitted as under:
"4. That initially rule 27 of the Appellate Tribunal Rules was thought to be adequate to support the order of the learned CIT (A) in respondent's favour based on various judicial precedents including the judgment of the Hon'ble Supreme Court in Hukumchand Mills Ltd. V. CIT (63 ITR 232);
5. that however, a subsequent judgment of Hon'ble Bombay H.C in B.R. Bamasi v. CIT (83 ITR 223) has taken a view which appears to limit the ambit of rule 27;Page 2 of 12
ITA No.1366 of 2012 Messers Ashed Valmark Bangalore
6. That consequently as a matter of abundant precaution the cross objections have been filed, on the advice of Sr. Advocate though with a delay of 21 days;
7. that in this manner, there is a delay of 21 days for which a letter of condonation has been filed along with Memorandum of Cross Objections on 26 June, 2013;
8. that delay in filing the Memorandum of C O is because of a genuine belief of the applicability of a particular provision and the subsequent advice of the Sr. Advocate; &
9. that there was no intention to jeopardise the interest of the revenue by delaying the filing of the Memorandum of cross objections."
5.1. After careful consideration of the assessee's submissions on the issue (supra), the delay in filing the cross objections by the assessee is condoned and proceed to adjudicate the revenue's appeal as well as the assessee's cross objections, as under:
Briefly stated, the facts of the issue are as below:
The Assessee is a AOP. It has two members namely M/s Ashad Properties and Investments Pvt Ltd (APIPL) and Valmark Builders. Consequent on a search conducted u/s 132 of the Act in the premises of Zeenath Transport Company, Bellary, M/s. Ashad Properties and Investments Pvt. Ltd, a member of the assessee was surveyed u/s 133 A on 25-02-2009. Based on survey on the member of the assessee, assessment of the assessee was reopened by issuance of notice u./s 148 of the Act. In compliance to the issuance of a notice u/s 148 of the Act, the assessee furnished a return of income, admitting a total income of Re. NIL. During the course of assessment proceedings u/s Page 3 of 12 ITA No.1366 of 2012 Messers Ashed Valmark Bangalore 147 of the Act, the assessee was required to explain the difference between the market value of Rs.6,79,18,477/- and the actual cost of Rs.3,39,96,600/- (recorded in sale deed) made to Shri B.G.Chennappa and Sri Jagadeeshchandra Ankalagi and as to why the same should not be added as its income for the relevant AY under consideration, by holding that the difference was an 'on money payment'. After taking into account the assessee's submissions as recorded in the assessment order, the AO had, however, added a sum of Rs.3.39 crores to the taxable income of the assessee for the following reasons:
"The show-cause notice was sent to the assessee proposing the additions based on the impounded materials and the assessee has not produced any additional evidences in support of its claim. The tax liabilities in case of suspicious transactions have to be assessed on the basis of the material available on record, surrounding circumstances and human conduct and preponderance of probability. Therefore, the claim of the assessee is not accepted and an amount of Rs.3,39,22,177/- is added to the total taxable income of the assessee for the assessment year........."
[Refer: Pages 4 & 5 of the asst. order]
6. Aggrieved, the assessee took up the issue, in an appeal, before the CIT (A). After having considered the contentions put-forth by the assessee as well as the remand report of the AO and the rejoinder of the assessee on the issue, the CIT (A) deleted the addition made by the AO for the following reasoning:
"(On page 14).....................the details furnished by the assessee, the accounts that has been presented Page 4 of 12 ITA No.1366 of 2012 Messers Ashed Valmark Bangalore before me and the remand report has been given, the following situation emerge:
1. The AO has added Rs.33922177/- based on a table prepared by ADIT (Investigation), Belgaum. The table was based on impounded excel sheets prepared one year after the purchase transaction. The excel sheets when read together establish that these were internal calculations of estimated sales and cost bases/estimates to facilitate an overall view of the finance and the viability of the project. In the calculations construction costs have also been taken into account. The cost bases of the land being the prevailing FAR cost are not relatable to the purchase transaction/values. The consideration as per the registered sale deed is shown in books of account and audited financial statements. The books of account have not been rejected by the AO. The full name and address of the vendor along with PAN numbers are available in the sale deed.
2. The basic features that emerge are that the cost to the appellant is 3.39 crores plus stamp duty. The calculations on which the ADIT/ACIT has relied are calculations made 1 year after the actual transaction.
These clarifications were available with the ADIT and also before DCIT (Central) and, therefore, the DCIT (Cerntral) erred in relying on ADIT's conclusion rather than making his own independent enquiries. No independent corroborative enquiries have been made and no evidence has been brought on record by the assessing officer to establish the genuineness of the transaction or the loose sheets.
The AO did not bring on record any corroborative evidence in support of his claim that there was unaccounted payment. Vendors have not been summoned and examined for ascertaining the facts.
3. The AO has relied on a statement made by Mr Mehmood Aga to ADIT Belgaum and treated it as an admission. Mr Aga had given the statement that - 'The acquired value mentioned on this computer sheet is the value which we have paid to the land owner for Page 5 of 12 ITA No.1366 of 2012 Messers Ashed Valmark Bangalore purchase of the relevant properties. The amount shown as market value is our own calculation based on the present market rates of the said property.' The fact is that APIPL has nothing to do with these transactions. This is clear from assessment orders also. It is obvious that there are misconceptions and confusion in the minds of both Mr Aga and the questioner, ADIT (Inv), Belgaum;
Excel sheets give computations with reference to the property of Mr Srinivasa Raju also thought the appellant did not buy any property from him. There is no reason for the appellant to record 'on money' transacted with him in appellant's records especially more than two years after the sale deed when the two have had no transaction with each other. This supports appellant's contentions that the sheets give internal calculations only. Under the circumstances, the statement of Mr Aga cannot be treated as an admission.
4. The following decisions are relevant in this context:
(i) In Embassy Classic Pvt. Ltd and Another v. ACIT (7 ITR (Tribunal) 287), the Hon'ble ITAT, Bangalore jurisdictional ITAT - A case of on money should be supported by other details like mode of payment, particulars of on money and calculations (Ref Para 27);
(ii) CIT v. P.V. Kalyanasundaram (282 ITR 259) Hon'ble Madras High Court - upheld by Hon'ble Supreme Court in 294 ITR 49 - Burden of proving actual consideration in such transactions was that of revenue. The assessing officer did not conduct any independent enquiry relating to value of the property purchased. He merely relied on the statement given by the seller. The deletion of the addition was justified. The assessing officer has not discharged his onus of proving the discrepancy of the accounts.
Addition without independent enquiry relying on seller's statement is not sustainable.
Page 6 of 12ITA No.1366 of 2012 Messers Ashed Valmark Bangalore
5. The decision in Hersh W Chadha's case (43 SOT 5440) is inapplicable on facts of the present case and distinguishable.
Chadha's case related to the taxability of commission received abroad in Bofors gun deal. AO in that case relied on substantive corroborative evidence like the enquiry report of Swedish National Audit Bureau, charge sheet filed by CBI, trail demonstrated by the AO, assessee's maintenance and operation of key bank accounts abroad, observations of High Court and Supreme Court, agreements, invoices etc., to tax the commission. This is not the case here.
There is no secrecy in appellant's transaction and buyers/vendors are available locally. Vendors' addresses and PAN numbers are known. Thus, the principles of probability etc., do not apply. There are no international transactions or foreign bank accounts involved.
The addition in Mr Chadha's case was very well substantiated and backed up by independent enquiries of the assessing officer. In the present case, no independent enquiry has been done.
The remand report of the assessing officer states that the report of ADIT (Inv), Belgaum was relied on for the addition. Therefore, there has not been any independent exercise of mind, no enquiries and a non- speaking order.
In light of the observations made above, it is very clear that the only basis for the addition is one statement of Mr Aga on the basis of incorrect appreciation of facts without any enquiry. The assessing officer has not made any independent enquiry and no evidence has been brought on record.
There is no basis for the conclusion arrived at by the assessing authority except for the loose sheet with ad- hoc workings, there is nothing on record to prove that the payment of on-money to the company has been made. There are no supporting evidence available in Page 7 of 12 ITA No.1366 of 2012 Messers Ashed Valmark Bangalore any other seized material to come to a legitimate conclusion that Rs.3,39,22,177/- was on-money. The deposition of Mr.Aga was out of context and had nothing to do with this transaction as the property did not belong to him. Therefore, the statement of Mr Aga did not have much relevance in the total gamut of affairs. Therefore, there was no evidence of on-money payment. Addition on inconclusive facts without any enquiry, without any corroborate evidence is not correct. Therefore, the addition made is deleted."
7. Aggrieved, the Revenue has come up before us with the present appeal. During the course hearing, the learned DR submitted that the CIT (A) had erred on facts and also in law in deleting the addition of Rs.3,39,22,177/- made by the AO on account of unaccounted investment made by the assessee in purchase of the subject property. It was, further, argued that the Director of APIPL had, on oath, admitted that the acquired value mentioned in the seized material (computer sheet) was the value which was paid to the land owners for the purchase of the property by the assessee. This fact has not been disputed by the assessee with any material evidence. The learned DR, further, submitted that the AO, having considered all the relevant facts, came to a right conclusion that there was undeniably unaccounted transaction in the purchase of the subject properties to the extent of Rs.3.39 crores. It was, therefore, urged that the addition requires to be sustained.
7.1. On the other hand, the learned AR submitted that as the Revenue has failed to put-forth any documentary evidence to find fault with the findings of the CIT (A), the stand of the CIT (A) in deleting the impugned addition deserves to be upheld.
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8. We have carefully examined the rival submissions, perused the relevant materials on record and also the exhaustive reasoning of the CIT (A) in deleting the addition made by the AO in the assessee's hand. As already mentioned, it was a fact that there was a proceeding u/s 133A of the Act on the premises of Ashad Group of companies. Ashed Valmark, the assessee is an Association of Persons with two members, sharing profits equally
- Ashed Properties and Investments (P) Limited and Valmark Builders (Valmark). Though the assessee had shared an office space with Ashed Properties and Investments (P) Ltd [APIPL], there was no survey conducted in the assessee's premises. However, during the course of reassessment proceedings u/s 147 of the Act in the assessee's case, based on the survey conducted in the premises of APIPL, a member of AOP and certain documents were impounded during the said operation, the assessee' was required to explain the difference of Rs.3.39 crores between the market value of Rs.6.79 crores and the actual cost of Rs.3.39 crores mentioned in the books of the assessee in respect of the properties purchased from Shri Chennappa and Shri Jagadish Chandra Ankalagi. After due consideration of the assessee's contentions, the AO had, however, treated the difference in cost of the properties purchased as taxable income of the assessee.
8.1. On an appeal by the assessee, the CIT (A) had called for a remand report wherein the AO, admittedly, conceded that the said addition was made in the hands of the assessee purely based on the report of the ADIT (Inv). Surprisingly, the ADIT Page 9 of 12 ITA No.1366 of 2012 Messers Ashed Valmark Bangalore (Inv) came to a conclusion by relying on the statement of Sri Aga, Director of APIPL, on oath.
8.2. As a matter of fact, APIPL had nothing to do with the transaction between the assessee and the sellers of the subject property, namely, Shri Chennappa and Shri Jagadish Chandra Ankalagi. This fact has since been exhaustively verified by the CIT (A) in her findings and came to a conclusion that -
(a) If the statement of Mr Aga were to be treated as 'admission', then also it cannot be a sound footing for sustaining the addition of Rs.3.39 crores in the hands of the assessee;
(b) Obviously, no corroborate documents/evidences were brought on record to justify the addition in the hands of the assessee;
(c) The contentions put-forth by the assessee during the course of re-assessment proceedings have not been effectively contradicted by the AO;
(d) The addition was made based solely on the ADIT(Inv)'s report, as fairly conceded by the AO in his remand report and, thus, it was explicitly true that no attempt was made by the AO to have an independent enquiry to arrive at a factual conclusion;
(e) No attempt was made by the AO bring on record any credible documentary evidence in support of his conclusion that there was indeed an unaccounted payment of Rs.3.39 crores in the land deal;
(f) No attempt was made whatsoever to examine the vendors on oath to bring out the factual facts;
(g) Though the alleged transaction was between the assessee and the land owners, the AO had solely relied on the Page 10 of 12 ITA No.1366 of 2012 Messers Ashed Valmark Bangalore statement of Mr Aga who, admittedly, nowhere concerned with the said dealing;
(h) No attempt was made by the AO to cross-examine the veracity and authenticity of the statement of Sri Aga by summoning the vendors to record their statements.
8.3. Since the issue which has been examined in detail by the CIT (A) has not been disputed by the Revenue with any documentary evidence even during the course of hearing before us, we are of the view that the CIT (A) was justified in deleting the addition made by the AO. It is ordered accordingly.
9. Before parting with, we would like to point out that incidentally, in an identical issue in the case of M/s. Valmark Builders, an addition of Rs.2,50,70,500/- made by the AO based on the statement of Sri Aga before the ADIT (Inv) on oath was deleted by the CIT (A) for almost similar reasons recorded by her in the appellate order for the AY 2007-08. The stand of the CIT (A) has been upheld by the earlier Bench of this Tribunal in ITA No.1365/Bang/2012 dated 13.9.2013.
Cross Objections: (C.O.No.67/Bang/2013)
10. With regard to the assessee's grievance in its Cross Objections, viz., (i) the assessment order was not valid in law; & (ii) no notice u/s 143(2) was issued etc., the learned AR had more or less reiterated what has been represented before the CIT (A). However, no new material has been brought on record to rebut the finding of the CIT (A). We have duly perused the findings of the CIT (A) on both the issues and of the view that Page 11 of 12 ITA No.1366 of 2012 Messers Ashed Valmark Bangalore there are no infirmities in her findings warranting our intervention. It is ordered accordingly.
11. In the result: (i) the Revenue's appeal is dismissed; &
(ii) the Cross Objection of the assessee is dismissed.
Order pronounced in the Open Court on 11th April, 2014.
Sd/- Sd/-
(Jason P. Boaz) (George George K)
Accountant Member Judicial Member
Bangalore dated 11th April, 2014.
Vnodan/sps
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, ITAT, Bangalore
6. Guard File
By Order
Senior Private Secretary
Income Tax Appellate Tribunal,
Bangalore Benches, Bangalore
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