Income Tax Appellate Tribunal - Indore
The Acit (Central) Ii, Bhopal vs M/S Signature Colonisers P Ltd., Bhopal on 8 January, 2021
आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER
AND HON'BLE MANISH BORAD, ACCOUNTANT
MEMBER
IT(SS)A.No.184 to 186/Ind/2018
Assessment Years 2012-13 to 2014-15
M/s Signature Builders,
18-19 Kolar Castla,
Chna Bhatti Square,
Bhopal
PAN : ABVFS1486Q : Appellant
V/s
ACIT (Central)II,
Bhopal : Revenue
IT(SS)A.No.174 to 176/Ind/2018
Assessment Years 2012-13 to 2014-15
ACIT (Central)II,
Bhopal : Revenue
V/s
M/s Signature Builders,
18-19 Kolar Castla,
Chna Bhatti Square,
Bhopal
PAN : ABVFS1486Q : Appellant
IT(SS)A.No.02/Ind/2019
Assessment Year 2012-13
M/s Signature Builders & Ors
ITA No.184 to 186/Ind/2018 & Ors
ACIT (Central)II,
Bhopal : Revenue
V/s
M/s Signature Infra,
18-19 Kolar Castla,
Chna Bhatti Square,
Bhopal
PAN : ABWFS9995F : Appellant
IT(SS)A.No.187 to 188/Ind/2018
Assessment Years 2013-14 & 2014-15
M/s Signature Infra,
18-19 Kolar Castla,
Chna Bhatti Square,
Bhopal
PAN : ABWFS9995F : Appellant
V/s
ACIT (Central)II,
Bhopal : Revenue
IT(SS)A.No.13/Ind/2019
Assessment Year 2014-15
ACIT (Central)II,
Bhopal : Revenue
V/s
M/s Signature Colonisers Pvt. Ltd,
18-19 Kolar Castla,
Chna Bhatti Square,
Bhopal
PAN : AAQCS8839Q : Appellant
2
M/s Signature Builders & Ors
ITA No.184 to 186/Ind/2018 & Ors
Revenue by Smt. Ashima Gupta, CIT
Assessee by Shri S.S. Deshpande, CA
Date of Hearing 09.11.2020
Date of Pronouncement 08.01.2021
ORDER
PER MANISH BORAD, A.M
The above captioned appeals filed at the instance of the assesse(s) and Revenue pertaining to Assessment Years 2012-13 to 2014-15 are directed against the orders of Ld. Pr. Commissioner of Income Tax, Bhopal (in short 'Ld. CIT], Bhopal dated 30.10.2018 & 24.12.2018 which are arising out of the order u/s 153A r.w.s. 143(3) of the Income Tax Act 1961(In short the 'Act') dated 23.03.2016 and 14.03.2016 framed by ACIT (Central) II, Bhopal.
2. In the case of M/s Signature Builders, Assessee is in appeal for Assessment Year 2012-13 to Assessment Year 2014-15 raising following grounds of appeal.
IT(SS)A No.184/Ind/2018 (Assessment Year 2012-13).
1. That on the facts and in the circumstances of the case of the assessee the Ld Commissioner of Income Tax (A), was not justified in holding that the AO was justified in making addition even when the assessment proceedings were not pending and no incriminating material was found during the course of search.
2. That on the facts and in the circumstances of the case of the assessee the Ld Commissioner of Income Tax (A). was not justified in holding that the AO was justified in making addition of Rs. 12,00,000/- treating the unsecured loans received by the assessee 3 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors as unexplained.
3. That the assessee craves leave to add, alter, delete or modify any ground( s) of appeal during or before the hearing of appeal. IT(SS)A No.185/Ind/2018 Assessment Year 2013-14
1. That on the facts and in the circumstances of the case of the assessee the Ld Commissioner of Income Tax (A), was not justified in holding that the AO was justified in making addition of Rs.25,00,000/- said to be income declared by the assessee u/s 132(4).
2. That the assessee craves leave to add, alter, delete or modify any ground ( s) of appeal during or before the hearing of appeal. IT(SS)A No.186/Ind/2018 Assessment Year 2014-15
1.That on the facts and in the circumstances of the case of the assessee the Ld Commissioner of Income Tax (A), was not justified in holding that the AO was justified in making addition of Rs.300,00,000/- said to be income declared by the assessee u/s 132(4).
2.That the assessee craves leave to add, alter, delete or modify any ground( s) of appeal during or before the hearing of appeal.
3. Revenue has raised following grounds of appeal:-
Revenue is in appeal in the case of M/s Signature Builders for Assessment Year 2012-13 to Assessment Year 2013-14 raising following grounds of appeal:-
IT(SS)A No.174/Ind/2018 Assessment Year 2012-13 (1) On the facts and in the circumstances of the case, the Id. ClT(A) erred in deleting the addition of Rs. 2,73,48,559/- made by the Assessing Officer on account of undisclosed investment u/s 69B as per DVO's report.
(2) On the facts and in the circumstances of the case, the ld. CIT(A) erred in Directing the Assessing Officer to provide deduction/set off of the addition made u/s 69B of the Income Tax Act,1961 in view of the spirit of section 115BHE of the Income Tax Act 1961.
(3) On the facts and in the circumstances of the Case, the Id. CIT(A) erred in deleting the addition of Rs. 10,00,000/- made by the Assessing Officer 4 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors on account of undisclosed investment in purchase of land.
(4) The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal.
IT(SS)A No.175/Ind/2018 Assessment Year 2013-14 (1) On the facts and in the circumstances of the case, the Id. ClT(A) erred in deleting the addition of Rs. 5,32,58,155/- made by the Assessing Officer on account of undisclosed investment u/s 69B as per DVO's report. (2) On the facts and in the circumstances of the case, the ld. CIT(A) erred in Directing the Assessing Officer to provide deduction/set off of the addition made u/s 69B of the Income Tax Act,1961 in view of the spirit of section 115BHE of the Income Tax Act 1961.
(3) The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal. IT(SS)A No.176/Ind/2018 Assessment Year 2014-15 (1) On the facts and in the circumstances of the case, the Id. ClT(A) erred in deleting the addition of Rs. 4,38,32,956/- made by the Assessing Officer on account of undisclosed investment u/s 69B as per DVO's report. (2) On the facts and in the circumstances of the case, the ld. CIT(A) erred in Directing the Assessing Officer to provide deduction/set off of the addition made u/s 69B of the Income Tax Act,1961 in view of the spirit of section 115BHE of the Income Tax Act 1961.
(3) On the facts and in the circumstances of the Case, the Id. CIT(A) erred in deleting the addition of Rs. 1,43,910/- made by the Assessing Officer on account of unexplained cash u/s 69A of the Income Tax Act, 1961. (4) The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal.
4. In the case of M/s Signature Infrastructure assessee has raised following grounds of appeal:-
5
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors IT(SS)A No.187/Ind/2018 Assessment Year 2013-14
1.That on the facts and in the circumstances of the case of the assessee the Ld Commissioner of Income Tax (A), was not justified in holding that the AO was justified in making addition of Rs.50,00,000/- said to be income declared by the assessee u/s 132(4).
2.That the assessee craves leave to add, alter, delete or modify any ground( s) of appeal during or before the hearing of appeal.
IT(SS)A No.188/Ind/2018 Assessment Year 2014-15
1.That on the facts and in the circumstances of the case of the assessee the Ld Commissioner of Income Tax (A), was not justified in holding that the AO was justified in making addition of Rs.300,00,000/- said to be income declared by the assessee u/s 132(4).
2.That the assessee craves leave to add, alter, delete or modify any ground( s) of appeal during or before the hearing of appeal.
5. In the case of Signature Infra Revenue has raised following grounds of appeal:-
IT(SS)A No. 02/Ind/2019 Assessment Year 2012-13 (1) On the facts and in the circumstances of the case, the Id. ClT(A) erred in deleting the addition of Rs. 3,36,13,000/- made by the Assessing Officer on account of undisclosed investment u/s 69B as per DVO's report.
(2) On the facts and in the circumstances of the Case, the Id. CIT(A) erred in deleting the addition of Rs. 4,32,40,000/- made by the Assessing Officer on account of unexplained investment in purchase of land at village Bagli..6
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors (3) On the facts and in the circumstances of the Case, the Id. CIT(A) erred in deleting the addition of Rs. 98,35,000/- made by the Assessing Officer on account of disallowance u/s 40(A) of the Income Tax Act, 1961 . (4) The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal.
6. In the case of M/s M/s Signature Colonisers Pvt. Ltd Revenue has raised following grounds of appeal:-
IT(SS)A No. 13/Ind/2019 Assessment Year 2014-15 (1) On the facts and in the circumstances of the case, the Id. ClT(A) erred in deleting the addition of Rs. 2,45,00,000/- made by the Assessing Officer on account of unsecured loan which was not confirmed by the impugned order..
(2) On the facts and in the circumstances of the case, the Id. CIT(A) did not appreciate the fact that the assessee failed to corroborate the whole amount of Rs.2,45,00,000/- received from Sh. Rajesh Sadhwani and could only substantiate receipt of an amount of Rs.2,21,50,000/-through D.D out of total amount of Rs.2,45,00,000/-
(3) The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal.
7. As the instant appeals relates to the assessee(s) from same Signature Group wherein search was conducted u/s 132(4) of the Act on 29.01.2014 and the issues raised in various grounds and facts involved are mostly common, we have heard these appeals together. Since there is no objection by both the parties, all these appeals are being disposed off by this common order for the sake of 7 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors convenience and brevity. As submitted by Ld. Counsel for the assessee and also by Ld. Departmental Representative M/s Signature Builders is the lead case.
8. Cross appeals have been filed for Assessment Years 2012-13 to 2014-15.
9. Brief facts of the case as culled out from the records are that the appellant is a partnership firm incorporated on 17.11.2009 and is part of the Signature Group of Bhopal engaged in the business of builders & developers. Search and seizure operations u/s 132 of the I.T. Act, 1961 was conducted on the business premises of the assessee group and its associate concerns as well as on the residential premises of the partners and persons related to these concerns on 29.01.2014. Consequently, notice u/s 153A of the I.T. Act was issued to the assessee to file the returns of income. In response to the notice the assessee has filed returns of income on 28.03.2015. Details relating to return of income for A.Ys 2012-13 to 2013-14 are as under:-
8
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors A.Y Date of Total Date of Total Additional filing of income filing of income income return (in Rs) return declared offered (In u/s u/s 153A in return Rs.) 139(1) u/s 153A (In Rs.) 2012-13 26.02.13 16,650 28.03.15 16,560 NIL 2013-14 28.09.13 22,97,250 28.03.15 22,97,250 Nil
10. Regular return of income for A.Y 2014-15 was filed on
29.11.2014 declaring total income of Rs. 47,85,080/-. Thereafter notices u/s 143(2) as well as 142( 1) of the Act were issued from time to time asking the assessee to furnish details/explanation. A consolidated assessment order was passed u/s 143(3) r.w.s 153A of the Act on 23.03.2016 after making additions on account of undisclosed investment in the project, undisclosed investment as per DVOs report. Unexplained unsecured loan, cosh found during search and income declared in the statement recorded u/s 132(1) but not shown in the return. The details of the assessed income and its computation are given below:
9
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors A.Y. 2012-13 Income shown in the return Rs 16,560/-
Add: Undisclosed investment in purchase Rs. 10,00,000/-
of land Undisclosed investment u/s 69B as Rs. 2,73,48,559/-
per DVO's report
Unexplained unsecured loans Rs. 36,00,000/-
Total income assessed Rs. 3,19,65,199/-
A.Y. 2013-14
Income shown in the return Rs 22,97,250/-
Add: Admission of undisclosed income Rs. 25,00,000/-
u/s 132(4)
Undisclosed investment u/s 69B as Rs. 5,32,58,155/-
per DVO's report
Total income assessed Rs. 5,80,55,405/-
A.Y. 2014-15
Income shown in the return Rs 47,85,080/-
Add: Unexplained cash u/s 69A Rs. 1,43,910/-
Interest of Income tax Rs. 68,665/-
Admission of undisclosed income Rs. 3,00,00,000/-
u/s 132(4)
Undisclosed investment u/s 69B as Rs. 4,38,32,956/-
per DVO's report
Unexplained unsecured loans Rs. 15,00,000/-
10
M/s Signature Builders & Ors
ITA No.184 to 186/Ind/2018 & Ors
Total income assessed Rs. 8,03,30,611/-
11. Against this impugned assessment order passed u/s 153A r.w.s 143(3)/143(3), the assessee has preferred appeals before Ld. CIT(A) and partly succeded.
12. Now both the assessee(s) and Revenue are in appeals against the finding of Ld. CIT(A).
13. As regards Ground No.1 of assessee appeal in the case of Signature Builders vide ITA No.184/Ind/2018 for Assessment Year 2012-13 since the same has not been pressed this ground is dismissed as not pressed.
13. As regards Ground No.2 of assessees appeal in the case of Signature Builders vide ITA No.184/Ind/2018 for Assessment Year 2012- 13 assessee has challenged the finding of Ld. CIT(A) confirming the addition u/s 68 for the unexplained unsecured loan of Rs.12,00,000/-
from Rimsha Maheshwari Ld. Counsel for the assessee submitted that;
The assessee has taken a loan of Rs.12,00,000/- from Smt. Rimsha Maheshwari. The assessee submitted the confirmation from the said party. The ld. A.O. made the addition on the ground that the bank statements and the copies of the ITR are not filed. 11 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Before the ld. CIT(A) the bank statement was filed but the copy of the ITR was not filed. The ld. CIT(A) dismissed the appeal on the ground that the credit worthiness has not been proved.
ARGUMENTS It is humbly submitted that the confirmation has been filed. The bank statement of the lender has been filed. (pg.158) Since the transactions are routed through the banking channel. It is further submitted that from the bank statement it can be seen that the lender is a salaried person and the amounts in the bank are credited by cheques which consequently prove that the lender is a person of means. Under these circumstances the addition is uncalled for.
14. Ld. Departmental Representative vehemently argued supporting the orders of lower authorities.
15. We have heard rival contentions and perused the records placed before us and carefully gone through the decisions relied by Ld. Counsel for the assessee. Through Ground No.2 for Assessment Year 2012-13 the assessee has challenged the finding of Ld. CIT(A) confirming the addition of unexplained unsecured loan of Rs.12,00,000/- on the ground that the assessee failed to prove the creditworthiness of the cash creditor Rimsha Maheshwari. On perusal of record we observe that in order to prove the identity, genuineness and creditworthiness of the cash creditor Rimsha Maheswhari, assessee had been provided sufficient opportunity. Inspite of 12 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors that assessee has only provided copy of confirmation letter and copy of bank account which too is not legible. There is no evidence to show the Permanent Account Number, identity details, details of bank account, Income Tax Return and salary certificate. The copy of bank statement provided at page 159 of paper book shows that assessee is receiving salary of Rs.21,666/- per month but assessee has been unsuccessful to provide the details of other credit entries. In this situation we are of the considered view that the assessee has failed to discharge its onus to prove the identity and creditworthiness of the cash creditor. In these given facts and circumstances of the case we find no reason to interfere in the finding of Ld. CIT(A) confirming the addition for unexplained loan of Rs.12,00,000/- received from Rimsha Maheshwari. Thus Ground No.2 of the assessee's appeal for Assessment Year 2012-13 stands dismissed.
16. Ground No.3 of the assessee's appeal for Assessment Year 2012-13 is general in nature which needs no adjudication.
17. Now we take up Ground No.3 raised for Assessment Years 2013-14 and 2014-15 in the case of Signature Builders vide ITA No.185&186/Ind/2018 through which common issue has been raised by the assessee contending that Ld. CIT(A) was not justified in confirming 13 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors the addition made by the Ld. A.O for the amount declared by the assessee as additional income of Rs.25,00,000/- and Rs.3,00,00,000/- for Assessment Year 2013-14 and 2014-15 respectively in the statement given during the course of search u/s 132(4) of the Act.
18. Brief facts relating to this common issue as culled out from the records and as narrated by the Ld. Counsel for the assessee are that a search was conducted at the premises of the Signature Group on 29.01.2014 and also at the premises of the assessee firm. In the case of the assessee the search commenced on 29.01.2014 at 08.45 A.M and was concluded at 08.00 AM on 02.02.2014. The proceedings continued for 4 days (96 hours) without any break. The statement of Mr. Raj Kumar Khilwani commenced on 01/02/2014 and was concluded on 02/02/2014. During the course of the statement, the assessee declared the additional income of Rs.25,00,000/- for the A.Y. 2013-14 and Rs. 3 crores for the A.Y. 2014-15 (Pg.222-240 of PB at page 239). In the statement Q.27 was asked as "during the course of search at Bhopal and Raipur many loose papers have been found for which no satisfactory answer and explanations have been given. In relation to these papers, an 14 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors opportunity is given for explanation after consulting the other partners/ directors. The assessee gave a reply as I have seen the loose papers of Raipur office and consulted the partners/ directors. For these loose papers and for receipt of unaccounted money for sale of some units I offer a sum of Rs.11 crores as undisclosed income for F.Y.2013-14 in the following firms a. Signature Developers b. Signature Infrastructure c. Signature Builders d. Signature Builders and Colonisers
19. The additional income disclosed in various cases has been mentioned by the ld. A.O. at Pg.9 of the order which included the amount of Rs.3,25,00,000/- in the case of the assessee.
20. It was submitted before the ld. A.O. that in absence of any incriminating paper, no addition can be made. However, the ld. A.O. has made the addition simply on the basis of the statement recorded during the course of the search. The ld. A.O. has narrated number of documents found during the course of the search at Pg. 14 & 15 of the order. None of these documents pertains to the assessee. In para 9 the ld. A.O. has merely relied on the statement 15 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors recorded u/s 132(4). On pg.24 he has merely stated that several incriminating documents were confronted for which the assessee was unable to explain. On the sole ground of the declaration in the statement the addition has been made. The ld. CIT(A) upheld these additions relying on the evidence and holding that the declaration made u/s 132(4) is binding on the assessee.
21. Now the assessee is in appeal before the Tribunal.
22. Ld. Counsel for the assessee submitted that no addition was warranted as the surrender has not been made with reference to any loose paper seized during the course of search and was accordingly not in accordance with the provisions of section 132(4) of the Act. The AO has failed to bring on record any specific instance of the assessee having earned any undisclosed income or having made any unexplained investment which could justify the addition under reference. The sole basis for making the addition is the statement made by one of the partners. The Ld. A.O. has made various additions for the documents found. Thus, all the loose papers and the investments have been considered by the A.O. and 16 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors accordingly he has made the additions under various heads. After making the additions on the basis of various papers there remains no scope for making the addition on the basis of declaration made in the statement. It could be observed that the question asked and the answer given in the statement recorded were both vague and general in nature and were not with reference to any specific document or asset found during the course of search which would indicate the acceptance of the assessee of earning of any unrecorded income. Rather the assessee has made a categorical unambiguous statement that the assessee has not earned any unrecorded income. Reference in this regards may be made to the statement of Mr. Rajkumar Khilwani recorded on 01-02/02.2014 Q-9: Do you take any payment from customers in cash other than the sale price mentioned in the registree and additional charges recovered.
A-9: No. No additional payment is taken in cash in addition to above
23. It is further submitted that no addition can be made without finding any incriminating material merely on the basis of the declaration. In this connection the attention is drawn to the direct judgment of the Hon'ble Indore Tribunal in the case of Shri Sudip 17 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Maheshwari in ITA 524/IND/2013 pronounced on 13/02/2019 and in the case of M/s Ultimate Builders in ITA 134/2019 pronounced on 09/08/2019. The Hon'ble Tribunal has relied on the various judgments of the various High Courts specially the decision of the Hon. Jharkhand High Court in the case of Shri Ganesh Trading co. v/s. CIT (2013), 257 CTR 0159 and the decision of Hon. Gujrat High Court in the case of Kailashben Mangarlal Choksi v/s. CIT (2008) 14 DTR 257. Under these circumstances the additions sustained by the ld. CIT(A) are bad in law. In view of this, it is humbly prayed that the addition sustained by the Ld. CIT(A) deserves to be deleted.
24. Per contra Ld. Departmental Representative vehemently argued supporting the order of lower authorities and submitted that the statement given by various persons on behalf of the assessee company was the statement on oath given u/s 132(4) of the Act and there was no coercion or undue influence and no pressure by the revenue authorities for making such surrender. Further there was no retraction within the reasonable time and the action of the assessee was an after thought. Ld. CIT(A) has rightly confirmed the addition and same needs to be upheld.
25. We have heard rival contentions and perused the records placed 18 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors before us and carefully gone through the decisions relied by Ld. Counsel for the assessee. Through Ground No.3 raised for Assessment Years 2013-14 & 2014-15 assessee has challenged the finding of Ld. CIT(A) confirming the addition of Rs.25,00,000/- and Rs.3,00,00,000/- made by the Ld. AO for Assessment Years 2013-14 & 2014-15 respectively for the amount declared by the assessee u/s 132(4) of the Act contending that the same is without corroborating with any incriminating material found during the course of search.
26. We observe that the search was conducted on Signature Group including the assessee on 29.1.2014. Certain loose papers were seized. Additional income of Rs.3,25,00,000/- (Rs. 25,00,000/- + Rs.3,00,00,000/-) was offered for Assessment Years 2013-14 and 2014- 15 respectively. However in the return of income filed post search u/s 153A of the Act such additional income of Rs.25,00,000/- and Rs.3,00,00,000/- was not offered in the return of income. During the assessment proceedings it was submitted that various loose papers and documents narrated by the Ld. A.O found during the course of search does not pertain to the assessee. Since there was no such incriminating material relating to the assessee found during the course of search 19 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors relating to the addition in question the alleged addition was made purely on the basis of the statement given u/s 132(4) of the Act.
27. We also observe that in the assessment order as well as order of the first appellate authority there is no mention of any incriminating material having its nexus with the alleged income declared u/s 132(4) of the Act. The Ld. A.O has failed to prove on record any specific instance with support of incriminating material found during the course of search which could show that the assessee has earned the alleged undisclosed income. It is not in dispute that various other additions have been made by the Ld. A.O for the undisclosed investment u/s 69B, undisclosed investment in projects of land and unexplained unsecured loan as well as unexplained cash u/s 69A of the Act. However specifically with regard to the addition of Rs.25,00,000/- and Rs.3,00,00,000/- made for the Assessment Years 2013-14 and 2014-15 the same is purely based on the statement given on oath u/s 132(4) of the Act by the authorised representative on behalf of the assessee which was collectively surrendered as additional income on behalf of various group concerns. But without the support of any incriminating material on which the revenue authorities were able to lay their hands, this addition totalling to 20 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Rs.3.25 crores (Rs.25,00,000/- + Rs.3,00,00,000/-) is based only on the statement given u/s 132(4) of the Act.
28. Now the moot question remains that "whether the Ld. A.O was justified in making the addition purely on the basis of statement given u/s 132(4) of the Act without proving on record any corroborative evidence or incriminating material found during the course of search which could have direct nexus with the alleged addition of Rs.3.25 crores".
29. We observe that similar issue came up before this Tribunal in another group concern M/s Ultimate Builders V/s ACIT ITA No.134/Ind/2019 order dated 09.08.2019. M/s Ultimate Builders was also subjected to search u/s 132 of the Act on 29.1.2014 being part of the same Signature group. From perusal of the impugned order of Ld. CIT(A) in the case of M/s Signature Builders observed at page 64 & 65, Ld. CIT(A) has given the brief details of the additional income admitted by the authorised person of M/s Signature group which is as follows;
S.No Concern/F.Y 2012-13 2013-14 Total 1 Signature Infrastructure 50 300 350 2 Signature Builders 25 300 325 3 Signature Builders and 25 300 325 21 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Colonisers 4 Signature Developers 100 100 Total 1100 5 Om Builders 275 275 6 Om Construction 50 750 800 7 Sainath Infrastructure P Ltd 25 25 Total 1100 8 Ultimate Builders 225 225 9 Virasha Infrastructure 225 225 Total 450 10 M/s Sainath Colonizers Pvt. 110 110 Ltd 11 Shri Anil Kered Khilwani 40 40 Total 150
30. From the above we find that in the case of M/s Ultimate Builders also additional income was surrendered in the statement given u/s 132(4) of the Act for which the addition was made by the Ld. A.O without corroborating it with any incriminating material and the addition was confirmed by Ld. CIT(A). When the matter travelled before this Tribunal the addition of Rs.2.25 crores was deleted by this Tribunal observing as follows:-
"9. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments referred to and relied 22 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors by both the parties. The sole grievance of the assessee raised in Ground No.1 of the instant appeal is against the order of Ld. CIT(A) confirming the addition of Rs.2,25,00,000/- made by the Ld. A.O on account of undisclosed income surrendered during the course of search by the partner of the assessee firm.
10. At the cost of repetition we would like to recite and recapitulate the facts once more. The assessee is a partnership firm engaged in real estate business. It is the part of Signature Group. Search action was initiated in the Signature Group and its associates on 29.1.2014. The assessee's association with the Signature group is on account of the common partners in various concerns. Assessee is separately assessed to tax. Search u/s 132(4) of the Act was initiated in the case of the assessee on 29.1.2014 and was concluded on 31.1.2014. This fact is proved on the basis of "panchanama" prepared by the officer of the search team which is placed at page 62-64. No surrender was made in the statements taken by the search team during the course of search from 29.1.2014 to 31.1.2014. There is no mention of any incriminating material referred by the Ld. A.O on the basis of which additions have been made.
11. The search action in the case of Signature Group continued ever after 31.1.2014. On 02.02.2014, Mr. Vipin Chouhan who is the partner of the assessee firm gave a statement before the search team wherein he made surrender of Rs.2,25,00,000/- on behalf of the appellant firm and agreed to offer it to tax. In the very same statement he also made surrender on behalf of another firm M/s. Virasha Infrastructure in the capacity of a partner. In the very same statement he also made surrender on behalf of other companies of Signature Group. Ld. A.O during the course of assessment proceedings observed that the assessee has not offered surrendered income of Rs.2,25,00,000/- for tax and confronted the assessee. During the assessment proceedings u/s 143(3) of the Act, assessee made the retraction by submitting that no such undisclosed 23 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors income was earned and therefore no such income was required to be offered to tax. However, Ld. A.O giving reference to the statement of Mr. Vipin Chouhan, partner of Ultimate Builders and also giving reference to the seized documents found during the search at Signature Group made addition for undisclosed income. When the matter came up before Ld. CIT(A) addition was confirmed. However the basis of addition was accepted to have been made only on the basis of the statement of Mr. Vipin Chouhan. No reference was made to any incriminating material having its bearing on the surrendered income. During the course of hearing before us Ld. Counsel for the assessee contended that during the course of search i.e. between 29.1.14 to 31.1.2014 no cash or unrecorded assets was found, no incriminating material was found and no income was offered to tax in the statement recorded u/s 132(4) of the Act of the person found to be in the possession and control of the books of premises. Relevant questions asked about the loose paper found were duly replied in the statement.
12. Ld. Counsel for the assessee further contended that since the search in the case of assessee was concluded on 31.1.2014 the alleged statement of the partner Mr. Vipin Chouhan taken on 02.02.2014 cannot be construed as a statement given during the course of search u/s 132(4) of the Act so far as relating to the assessee since the search in its case already concluded on 31.1.2014. He further submitted that no incriminating material was found during the course of search and as held by Hon'ble Tribunal in the latest decision in the case of ACIT(1) vs. Sudeep Maheshwari (supra) that "no addition was called for which has been made merely on the basis of the statement without correlating the disclosure made in the statement with the incriminating material gathered during the course of search".
13. So the contention of the Ld. Counsel for the assessee can be summarised that the addition cannot be made merely on the basis of 24 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors statement which too was taken after conclusion of the search and no correlation has been made with the incriminating material found during the course of search.
14. On the other hand Departmental Representative gave reference to various judgements referred above. She mainly placed emphasis on the judgment of Hon'ble High Court of Madras in the case of Kishore Kumar V/s DCIT (supra) holding that "when there was a clear admission of undisclosed income in the statement sworn in u/s 132(4) of the Act there is no necessity to scrutinise the documents".
15. Now so far as the first contention of the assessee that the statement relied on by the revenue authorities cannot be construed as a statement given u/s 132(4) of the Act, we will like to first reproduce the provisions of Section 132(4) of the Act;
"(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is fond to be in possession or control of any books of account, documents, money, bullion, jewellery to other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act.
1 Explanation.- For the removal of doubts, it is hereby declared that the examination of any person under this sub- section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act."
16. The above sub Section 4 of Section 132 of the Act starts with reference to "authorised officer", which means that the Officer who is authorised to conduct search on the assessee. In the instant case it is 25 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors stated before us that the authorised officer of the assessee and that of the other concerns of Signature Group are different.
17. After the word the authorised officer it reads "during the course of search or seizure, examination of both the person". During the course of search is a period during which the search is initiated and concluded. In the instant case the search was initiated on 29.1.2014 and concluded on 31.1.2014 by a authorised officer for the assessee which is verifiable from the Panchanama framed by the search team. The statement of Mr. Vipin Chouhan was taken on 02.02.2014 by another authorised officer and this date is after the conclusion of the search in the case of the assessee on 30.01.2014.
18. There may have been some force in the contention of the revenue authorities if the statement u/s 132(4) of the Act was taken during the course of search at the assessee's premises or during the continuation of search, the statement may have been recorded on other places but the fact is that so far as the assessee M/s. Ultimate Builders is concerned the search concluded on 31.01.2014 and before the conclusion of the search no surrender of undisclosed income was made in the statement recorded u/s 132(4) of the Act by the persons available at the assessee's business premises.
19. As regards the statement of Mr. Vipin Chouhan given on 02.02.2014 is concerned, we find that this statement contains the surrender for various group concerns and not specifically for the assessee M/s. Ultimate Builders. Reference was also given to other business concerns namely M/s. Virasha Infrastructure, Signature Infrastructure, Signature Builders and Signature Builders and Colonisers. Certainly the search in the case of concerns other than the Ultimate Builders did not conclude on 02.02.2014 but at that point of time on 02.02.2014 the search in the case of Ultimate Builders stood concluded two days before on 31.1.2014. 26 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
20. We therefore are of the considered view that the alleged statement given by Mr. Vipin Chouhan on 02.02.2014 may be construed as the Section 132(4) of the Act for all the other concerns named above except for the assessee i.e. M/s. Ultimate Builders. Therefore the statement referred to by the Ld. A.O on the basis of which the addition have been made in the hands of the assessee in our view cannot be construed as the statement u/s 132(4) of the Act.
21. Coming to the issue of addition made by the Ld. A.O on the basis of the statement but no reference been given to the incriminating material, we find that in the assessment order Ld. A.O has referred to various seized documents but none of them is directly related to the assessee. These seized documents are of the Signature Group and Ld. A.O has only mentioned the details of the seized document without uttering a word about their nexus with the business transaction carried out by the assessee or by pointing out assessee's connection with the seized document in name or otherwise. Thus it can be safely concluded that the addition made by the Ld. A.O was not on the basis on the incriminating material found during the course of search but only on the basis of statement of Mr. Vipin Chouhan given on 02.02.2014.
22. Recently the Co-ordinate Bench in the case of ACIT(1) VS. Sudeep Maheshwari (supra) in which the undersigned was also a co-author while adjudicating the issue that "whether addition can be made merely on the basis of statement given during the course of search without correlating the statement with incriminating material", we have decided the issue observing as follows:-
"6. It is the case of the assessee that during the course of search & seizure, no incriminating material or undisclosed income or investments were found. It is stated that the assessee was under mental pressure and tired. Therefore, to buy peace of mind, he accepted and declared Rs.3 crores in personal name. It is also stated that the case laws as relied by 27 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors the A.O. are not applicable on the facts of the present case. The assessee has relied on the decision of the Hon'ble Supreme Court rendered in the case of Pullangode Rubber Produce Co. Ltd. 91 ITR 18 (SC), wherein the Hon'ble Court has held that admission cannot be said that it is conclusive. Retraction from admission was permissible in law and it was open to the person who made the admission to show that it was incorrect. However, reliance is placed on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT Vs. Chandrakumar Jethmal Kochar (2015) 55 Taxmann.com 292 (Gujarat), wherein it has been held that merely on the basis of admission that few benami concerns were being run by assessee, assessee could not be basis for making the assessee liable for tax and the assessee retracted from such admission and revenue could not furnish any corroborative evidence in support of such evidence. It was further urged by the assessee that admission should be based upon certain corroborative evidences. In the absence of corroborative evidences, the admission is merely a hollow statement. We have given our thoughtful consideration to the rival contentions of the parties. It is undisputed fact that the statement recorded u/s 132(4) of the Act has a better evidentiary value but it is also a settled position of law that the addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the contents of the statement. In the case in hand, revenue could not point out as what was the material before the A.O., which supported the contents of the statement. In the absence of such material, coupled with the fact that it is recorded by the Ld. CIT(A) that the assessee himself had surrendered a sum of Rs.69,59,000/- and Rs.75,00,000/- in A.Y. 2008-09 and 2009-10 respectively. The A.O. failed to co-relate the disclosures made in the statement with the incriminating material gathered during the search. Therefore, no inference is called for in the finding of the Ld. CIT(A) and is hereby affirmed. Ground raised by the revenue is dismissed."28
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
23. Hon'ble Gujarat High Court in the case of Kailashben Mangarlal Chokshi vs. CIT - (2008) 14 DTR 257 (Guj.), held that merely on the basis of admission, the assessee could not have been subject to additions, unless and until some corroborative evidence is found in support of such admission.
24. Hon'ble Jharkhand High Court Shree Ganesh Trading Co. V/s Commissioner of Income-tax, Tax Case No.8 of 1999 order dated 03.01.2013 held as under;
"4. We considered the submissions of the learned counsel for the parties and perused the reasons given in the impugned orders as well as reasons given in the case of Kailashben Manharlal Chokshi (supra).
5. It appears from the statement of facts that there was a search in the business premises of the petitioner's firm as well as in the residential premises of its partner, Shri Sheo Kumar Kejriwal, on 24th September, 1987. During the course of search, the statement of Shri Sheo Kumar Kejriwal had been recorded under section 132(4) of the Income Tax Act and in the statement, he stated that he was partner in the Ganesh Trading Company, i.e. the present assessee-firm in his individual status and that he surrendered Rs. 20 lacs for the assessment year 1988-89 as income, on which tax would be paid. He further stated that other partners would agree to the same; otherwise it would be his personal liability. However, in the returns filed after search, the income of Rs. 20 lacs surrendered by Shri Sheo Kumar Kejriwal was not declared by the assessee-firm. On being asked to explain the reason for not showing the surrendered amount in the returns, it was submitted by the assessee that declaration made by the partner was misconceived and divorced from real facts. It was contended that the declaration was made after persuasion, which, according to the learned counsel for the assessee, Shri Binod Poddar, in fact, was because of coercion exerted by the search officers. In explanation, it was submitted that the firm or the individual had no 29 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors undisclosed income. The assessee's said retraction was not accepted by any of the authorities below on the ground that the statement given by the assessee appears to be voluntarily given statement disclosing undisclosed income of Rs. 20 lacs. According to the learned counsel for the assessee, Shri Binod Poddar, the Assessing Officer had full jurisdiction to proceed for further enquiry and could have collected evidence in support of alleged admission of undisclosed income of the assessee.
6. We are of the considered opinion that statement recorded under section 132(4) of the Income Tax Act, 1961 is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Drawing inference from the facts is a question of law. Here in this case, all the authorities below have merely reached to the conclusion of one conclusion merely on the basis of assumption resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) of the Income Tax Act and when there is incriminating admission against himself, then it is required to be examined with due care and caution. In the judgment of Kailashben Manharlal Chokshi (supra), the Division Bench of Gujarat High Court has considered the issue in the facts of that case and found the explanation given by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific reason has been given for rejection of the assessee's contention by which the assessee has retracted from his admission. None of the authorities gave any reason as to why Assessing Officer did not proceed further to enquire into the undisclosed income as admitted by the assessee in his statement under section 134(2) in fact situation where during the course of search, there was no recovery of assets or cash by the Department. This fact also has not been taken care of and considered by any of the authorities that in a case where there was search operation, no assets or cash was recovered from the assessee, in that situation what had prompted the assessee to 30 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors make declaration of undisclosed income of Rs. 20 lacs. Mere reading of statement of assessee is not the assessment of evidentiary value of the evidence when such statement is self-incriminating. Therefore, we are of the considered opinion that in the present case, a wrong inference had been drawn by the authorities below in holding that there was undisclosed income to the tune of Rs. 20 lacs.
7. In view of the above reasons, without answering the question about retrospective operation of the proviso to section 134(4), we are holding that the authorities below have committed error of law in drawing inference from the materials placed on record, i.e. admission of the assessee coupled with its retraction by the assessee. The Revenue may now proceed accordingly".
25. In the light of ratio laid down in various judgments referred above including one in the case of ACIT(1) Vs. Sudeep Maheshwari (supra) decided by us wherein also we, after referred various judgments of Hon'ble High Courts have held that additions cannot be sustained merely on the basis of statement given during the course of search without correlating the addition with the incriminating seized material. Therefore the decision relied by Ld. Departmental Representative laying down the ratio that addition can be made even on the basis of statement given during the course of search u/s 132(4) of the Act irrespective of the fact whether any incriminating material is found or not, will not support Revenue in the instant case.
26. In the given facts and circumstances of the case and respectfully following the judgements and decisions referred above we find that firstly the statement given by Mr. Vipin Chouhan u/s 132(4) of the Act on 02.02.2014 cannot be considered as the statement given u/s 132(4) of the Act in the instant case of the assessee firm since the search action in case of assessee was concluded on 31.1.2014 by the Authorised Officer. Secondly as regards to other business concerns referred by Mr. Vipin 31 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Chouhan in his statement given on 02.02.2014 and in case of such business concern wherein search action u/s 132 of the Act was continuing the said statement dated 02.02.2014 will be considered as the statement u/s 132(4) of the Act. Thirdly, no reference has been given by the Revenue Authorities to any incriminating material found during the course of search at the business premises of the assessee, which could be correlated to the alleged surrendered income earned by the assessee from undisclosed sources.
27. We therefore are of the considered view that the finding of Ld. CIT(A) needs to be set aside and the addition of Rs.2,25,00,000/- deserves to be deleted since it has been made on the basis of a statement not given u/s 132(4) of the Act and without referring to any incriminating material found during the course of search. Addition for undisclosed income of Rs.2,25,00,000/- is deleted. Accordingly Ground No.1 raised in the appeal by the assessee is allowed."
31. From perusal of the above finding of this Tribunal in the case of M/s Ultimate Builders (supra), we find that the common issue raised in Ground No.3 of M/s Signature Builders is identical to the issue raised and adjudicated in the case of M/s Ultimate Builders (supra). We therefore respectfully following the same and also in view of the identical fact that impugned addition of Rs.25,00,000/- and Rs.3,00,00,000/- made by the Ld. A.O was purely based on the statement given u/s 132(4) of the Act and there was no reference to any incriminating material found during the course of search which 32 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors could support the impugned addition, we thus delete the addition of Rs.25,00,000/- for Assessment Year 2013-14 and Rs.3,00,00,000/- for Assessment Year 2014-15 and set aside the finding of both the lower authorities and accordingly allow Ground No.3 raised in assessee's appeal for Assessment Years 2013-14 and 2014-15 raised in ITA No.185-186/Ind/2018.
32. In the result assessee's appeal for 2012-13 (ITA No.184/Ind/2018) is dismissed and appeal for Assessment Year 2013-14 and Assessment Year 2014-15 (ITA No.185&186/Ind/ 2018) are allowed.
33. Now we take up the Revenue's appeal vide ITA No.174 to 176/Ind/2018 for Assessment Years 2012-13 to 2014-15 in the case of M/s Signature Builders.
34. Through Ground No.1 raised for Assessment Years 2012-13 to 2014-15 common issue has been raised by the Revenue challenging the finding of Ld. CIT(A) deleting the addition of Rs.2,73,48,559/-, Rs,5,32,58,155/- and Rs.4,38,32,956/- made for Assessment Years 2012-13, 2013-14 and 2014-15 respectively which was made by the Ld. A.O. on account of undisclosed investment u/s 69B of the Act based on the Departmental Valuation Officer Report. 33 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
35. Brief facts relating to this issue as culled out from the records are that during the course of search operations on the Group, the valuation of the project Signature Residency, Near JK Hospital, Kolar Road, Bhopal was done by the registered valuer on 30.01.2014 and accordingly valuation report was furnished by the registered valuer. As per the valuation report, the total value of the project was ascertained at Rs.50.46 crore. This fact was confronted with Shri Vipin Chauhan, partner of the assessee firm, during the course of his statement recorded on 24.07.2014 and he was requested to reconcile the value ascertained by the registered valuer with the books of account of the firm and explain the differences. A copy of the report of the registered valuer was also provided. In the statement he has stated that the actual cost incurred in the project has been shown in the books of the firm, which is approximately Rs.29.08 crore. As regards the difference, he stated that since the valuation was done on the basis of estimation therefore detailed explanation regarding the difference will be submitted after examining the valuation report in detail. In view of the above, during the course of assessment proceedings, to ascertain the exact quantum of such investment in construction of above project, 34 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors reference was made to DVO, Bhopal vide letter dated 22.12.2015 by this office and the valuation report was submitted by him on 14.03.2016. As per the Ld. A.O there were differences in the value of construction of building as valued by DVO and as per the books of account of the assessee. The year wise difference in investment in construction of building as per the DVO report is as under:-
F.Y A.Y Declared by the Examined by
assessee valuation cell
2010-11 2011-12 2,05,72,030/- 3,05,54,517/-
2011-12 2012-13 5,52,89,531/- 8,26,38,090/-
2012-13 2013-14 11,19,18,795/- 16,76,76,950/-
2013-14 2014-15 15,05,33,868/- 22,43,66,824/-
2014-15 2015-16 15,91,35,825/- 23,52,43,301/-
2015-16 2016-17 6,20,29,565/- 9,25,62,317/-
(31.01.2016)
Total 55,95,79,614/- 83,30,42,000/-
36. Copy of the valuation report supplied to the assessee for comments. The assessee was also required to show cause as to why the difference should not be added as undisclosed investment in the hands of assessee for relevant assessment years.
37. The assessee gave detailed reply challenging the correctness of the Departmental Valuation report and crux of the assessee's submission can be summarised as follows:-
35
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Thus as the cost the difference between the cost of construction incurred by the assessee and cost of construction estimated by the valuation officer is on account of adopting the constructed area and stage of completion without any meaning full physical verification, considering rates of Delhi Plinth Area Rate which is universally accepted to be a higher rate and by adopting a formula which as detailed above is an arbitrary formula devised simply to enhance the estimated cost, and adopting of unsubstantiated rates the difference is requested to be ignored and the value shown by the assessee be accepted.
Further in case the value estimated by the DVO is adopted than consequential deduction of the same may kindly be allowed from the returned income and thus the addition will become revenue neutral. It may be mentioned that the addition can be made only u/s 69B which does not have any provision for not allowing consequential adjustment to the income.
Provisions of section 69C have no applicability in the case as the assessee is not found to have incurred any expenditure and the difference is only on account of difference in estimate".
As regards, the valuation done by the registered valuer during search proceedings, the assessee has filed the written submission as under:-
"The valuation report prepared by the valuer at the instructions of the Department is a vague report which has been prepared on a rough estimated basis. As per the books of accounts of the assessee the total direct expenses incurred on the project (excluding cost of land) is Rs.33,12,15,143/- as per details below:
F.Y. 2010-11 Rs.2,05,72,030/-
F.Y. 2011-12 Rs.5,52,53,932/-
F.Y 2012-13 Rs.10,48,55,314/-
F.Y 2013-14 Rs.15,05,33,867/-
36
M/s Signature Builders & Ors
ITA No.184 to 186/Ind/2018 & Ors
Total Rs.33,12,15,143/-
It may be mentioned that at the time of search and even today the project is under construction. Valuation of the cost incurred on the project during the course of its implementation is not justified as each flat, each room and each segment of the project is in difference stage of construction/completion and applying of any common formula/rate to determine the cost would not be able to ascertain the actual cost incurred. Accordingly it is requested that the valuers report may kindly be ignored".
38. The reply of the assessee was considered by the Ld. A.O which was not found acceptable based on the following reasons;
i. The reference made on the DVO is as per the law.
Further, the DVO is the Govt. Authority to determine the cost of investment. The method followed by the DVO for valuation is the most scientific method and the valuation has been done by him as per the prescribed procedure & rates laid down by Central Public Works Department. ii. During the course of assessment proceedings the assessee has not submitted any material evidence, which substantiate his claim. The assessee has also not submitted construction account before the assessing officer.
iii. The year wise difference in investment in construction of building as per the DVO's report and as declared by the assessee is as under:-
A.Y Declared by the Examined by Difference (In
assessee valuation cell Rs.)
37
M/s Signature Builders & Ors
ITA No.184 to 186/Ind/2018 & Ors
2011-12 2,05,72,030/- 3,05,54,517/- 99,82,487/-
2012-13 5,52,89,531/- 8,26,38,090/- 2,73,48,559/-
2013-14 11,19,18,795/- 16,76,76,950/- 5,57,58,155/-
2014-15 15,05,33,868/- 22,43,66,824/- 7,38,32,956/-
2015-16 15,91,35,825/- 23,52,43,301/- 7,61,07,476/-
2016-17 6,20,29,565/- 9,25,62,317/- 3,05,32,752/-
55,95,79,614/- 83,30,42,000/- 27,35,62,385/-
39. Further the Ld. A.O after giving set off of addition made for the undisclosed income of Rs. 25,00,000/- and Rs.3,00,00,000/- for Assessment Years 2013-14 and 2014-15 made on the basis of statement given u/s 132(4) of the Act made addition for undisclosed investment u/s 69B of the Act observing as follows:-
"Thus, after considering the evidences placed on record and valuation report submitted by the DVO, Bhopal and the non-submission of satisfactory explanation on the source of such investments and following the cited cases (supra), I am to hold that the investment in construction of the project Signature Residency, Near JK Hospital, Kolar Road, Bhopal, which is not recorded in the books of account of assessee is treated as undisclosed investment and deemed income from undisclosed sources u/s 69B of the Act. Therefore the amount shown in below mentioned table is treated as undisclosed investment u/s 69B of the Act for A.Y 2008-09 to 2014-15:-
A.Y Undisclosed investment (In Rs.)
2011-12 99,82,487/-
2012-13 2,73,48,559/-
2013-14 5,57,58,155/-
2014-15 7,38,32,956/-
Total 16,69,22,157/-
38
M/s Signature Builders & Ors
ITA No.184 to 186/Ind/2018 & Ors
However, since additions on account of undisclosed income of
Rs.25,00,00/- and Rs.3,00,00,000/- for A.Y 2013-14 and A.Y 2014-15 respectively, has already been made on account of admission of undisclosed income during search, in the earlier para of this order, the set off of these additions are given in respect of additions made on account of unexplained investment in construction of the project at Rs.5,57,58,155/- and Rs.7,38,32,956/- for A.Y 2013-14 and 2014-15 respectively. Thus, the net addition on account of unexplained investment in construction of the project for A.Y 2013-14 and 2014-15 works out to Rs.5,32,58,155/- (Rs.5,57,58,155/- (-) Rs.25,00,000/-) and Rs.4,38,32,956/- (Rs.7,38,32,956/- (-) Rs.3,00,00,000/-).Therefore the amount shown in below mentioned table is added to the total income of the assessee on account of undisclosed investment u/s 69B of the Act for A.Y 2011-12 to 2014-15.
A.Y Undisclosed investment (In Rs.)
2011-12 99,82,487/-
2012-13 2,73,48,559/-
2013-14 5,32,58,155/-
2014-15 4,38,32,956/-
Total 13,44,22,157/-
40. Aggrieved assessee preferred appeal before Ld. CIT(A). During the course of hearing before Ld. CIT(A) assessee submitted as under;
1.That the assessee had commenced construction of a project in the name of Signature Residency starting from F.Y 2010-11 which was under
construction even during the course of assessment proceedings. The expenses incurred on the project were duly recorded in the regular books of accounts, were supported by proper supporting evidences and formed 39 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors part of the sales/WIP shown by the assessee. It was further submitted that the assessee has been maintaining regular books of accounts which were duly audited and the audit report along with audited financial statements were duly furnished before the AO during the course of assessment proceedings. Books of accounts and vouchers were produced before the AO during the course of assessment proceedings which is duly confirmed by the AO in Para 2 of the assessment order and no deficiency have been noticed by the AO.
2. It was further submitted that the detailed objections were raised before the AO which have not been considered. A specific request was made to the AO to provide an opportunity to the assessee to cross examine the DVO on the valuation report submitted by him but the request was ignored and no opportunity of cross examination was provided.
Thus, it was submitted that the rates adopted for valuation made by the valuer in other cases are much less than the valuation made by DVO. The DVO has not given any details as to how the rates adopted by him were arrived. The objection of the assessee made before the AO requesting him to direct the DVO to provide the details of the calculations adopted by him was ignored. The rates fixed by collector are fixed for the collection of stamp duty and are considered to be very near to the actual prices/cost and are adopted as conclusive for the purpose of application of section 50C, section 56, and section 43CA of the Act. The rates of constructed area for F.Y 2013-14 fixed by the collector was Rs. 1100/- per square feet as against Rs. 1819 considered by the DVO/AO for unfinished building. It was further submitted that the adoption of CPWD rates of Delhi cannot be adopted in Bhopal which is much cheaper. The DVO has adopted the rate of Rs.9913/- per sq. m. for slit area and Rs.18075/- per sq. m. for each floor. The security room has been valued @ 15073 per sq. m. Thus, it was submitted that the rates adopted by the ld. DVO was unrealistic and very high.
40 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
3.After considering the various objections raised by the assessee and analysing the different case laws, the Ld. CIT(A) allowed the assessee's appeal.
41. Now the revenue is in appeal before the Tribunal.
42. Ld. Departmental Representative vehemently argued and strongly supported the finding of Ld. A.O contending that the impugned addition for undisclosed investment has been rightly made by the Ld. A.O on the basis of Departmental Valuation Officer who has rightly carried out the valuation as per the guidelines provided under respective rules.
43. Ld. Counsel for the assessee relied on the detailed finding of Ld. CIT(A) and also made following written submission:-
In the course of the assessment proceedings all the information as required by the AO from time to time was furnished. The assessee is in the business of real estate, builders and developers. The assessee during the relevant period was developing a residential complex in the name of Signature Residency. The expense incurred on the purchase of land and construction expenses on the project were the business expenses of the assessee. The assessee had maintained regular books of account in which all the expenses including the cost of construction were duly recorded. These books were presented before the AO during the course of assessment proceedings and were duly checked by him and no deficiency was found in the books of account or the records maintained. No evidence was found during the course of search or after words during post search 41 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors enquiry or pre assessment enquiries to suggest that the assessee has incurred any unrecorded expense.
2. During the course of the assessment proceedings a reference was made to the DVO to estimate the cost of construction of the project who gave a highly inflated valuation taking into account unsubstantiated rates and adopting vague procedures. The assessee raised various objections to the valuation made (pg.138 of PB). It was submitted that the DVO has valued the property on the basis of rates of Delhi plinth area without the meaningful physical verification of the property. The assessee also demanded an opportunity to cross examine the DVO (Pg.195(n) of PB).
The AO however, disregarded the objections of the assessee without mentioning any reasons to do so and also ignored the request of the assessee to provide opportunity to cross examine the DVO and made additions of the difference.
ARGUMENTS It is humbly submitted that no incriminating material was found during the course of the search to show that the assessee has incurred any extra expenditure on the construction of buildings. Normally a builder would construct the building incurring the minimum expenditure. No builder would like to show a lesser cost in the construction since the taxable profit would be more if the cost is reduced. During the course of the valuation, the building was incomplete and the exact valuation could not be ascertained. The DVO has valued the unfinished building at an exorbitant rate which is approx. double value as has been done by the Departmental Valuer in other cases. The opportunity for cross examination of the DVO was not granted by the ld. A.O. which would have brought the necessary evidence about the exorbitant valuation. Even today the complexes are constructed at the value of about 1500 42 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors per square feet. The Collectors guideline price is the best norm for determining the value.
Further the additions made are illegal and invalid on the following grounds:
a. The assessee has maintained regular books of accounts which are not found to be incomplete or unreliable. The books of accounts are not rejected. Accordingly addition cannot be made on the basis of DVO Report.
b. Even if reliance was placed on the report of DVO, set off of the corresponding expenses should have been given which would have resulted in NIL addition.
c. No additions could have been made without considering the submissions of the assessee and without providing the assessee with an opportunity to cross examine the DVO specially when the assessee has made a specific request for the same.
d. No exact valuation could have been done till the completion of the project. Further, the DVO has not given the valuation on actual detailed measurement basis.
e. Valuation should have been done taking the local prices in consideration in place of Delhi rates which are universally accepted to be on a higher side.
(i) Reference in this regards may be made to the decision of the Delhi High Court in the case of CIT v Ambience Hotel & Resorts Ltd (2012) 83 CCH 0021 (Delhi HC).
(ii) Reference may also be made to the judgment of the Hon'ble Madras High Court in the case of K.K.Seshaiyer V CIT (2000) 246 ITR 351.
(iii) CIT V Suraj Towers (2015) 230 Taxman 306(Karnataka HC) wherein it was held by the Honble High Court that "Income from undisclosed sources--Addition under s. 69B--
Undisclosed investment in property vis-a-vis report of DVO--Primary 43 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors burden of proof to prove understatement or concealment of income is on the Revenue--Opinion of the DVO, per se, is not an information and cannot be relied upon without the books of account being rejected--Moreover, no evidence much less incriminating evidence was found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the registered purchase deed--Addition not justified"
(iv) In the case of CIT vs. Meerut Cement Co.(P.) Ltd. (2006) 202 CTR (All.) 506 the Hon'ble Allahabad High Court held that the report of the DVO suffered from material defects and the Revenue has not pointed out a single instance of unrecorded expenditure, addition under Section 69B made only on the basis of DVO's report could not be sustained.
The addition is made holding the difference as unexplained investment u/s 69B of the Act. The ld. A.O. relied on the various decisions which are not applicable in the instant case at Page 31 of the assessment order.
In this regards it may be mentioned that in case the AO has formed an opinion that the assessee has incurred some unaccounted expenses on the construction he was duty bound to adjust the construction expenses and should have increased the cost of construction by a similar amount which would nullify the effect of addition, if any. The assessee would be entitled to claim adjustment of expenses, if the addition is made on the count that the appellant had shown lower amount of cost of construction. It would ultimately result into squaring off the whole addition since on one side the addition is made and on the other side the deduction is to be allowed as business expenditure. Thus, the whole exercise would be revenue neutral. In this connection, attention is drawn to the following judgments 44 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
(v) CIT v. Star Builders (2007)294 ITR 338 (Guj.)wherein in Para 4 of the order it was held by the court that:
"Assuming but not accepting that some unexplained income has been invested in the construction, the fact remains that the business of the assessee is construction. If we add on account of unexplained income in the investment, that will give rise to the cost of the construction and the result will remain the same i.e. "zero".
After considering the submissions made by the assessee and the papers filed during the course of the appeal the ld. CIT(A) allowed the appeal.
In view of the above, it is humbly submitted that the order of the ld. CIT(A) is correct in deleting the said addition. Thus, the addition deleted by ld. CIT(A) is correct and may please be upheld.
44. We have heard rival contentions and perused the records placed before us and carefully gone through the orders of Ld. CIT(A) as well as the submissions and various case laws relied and referred to by Ld. Counsel for the assessee. Revenue's sole grievance through Ground No.1 raised in its appeal for Assessment Year 2012-13 to 2014-15 is with regard to the finding of Ld. CIT(A) deleting the addition on account of undisclosed investment u/s 69B of the Act which was made by the Ld. A.O towards the difference in cost of investment in the projects Signature Residency shown in the 45 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors books of accounts vis-a-vis estimated by the Departmental Valuation Officer calculated at Rs.2,73,48,559/-,Rs.5,32,58,155/- and Rs.4,38,32,956/- for Assessment Years 2012-13, 2013-14 & 2014-15 respectively.
45. We observe that during the course of search one of the project namely Signature Residency situated Near JK Hospital, Kolar Road, Bhopal was valued by the registered valuer on 30.01.at Rs.50.46 crores. This fact was confronted before Ld. A.O by Shri Vipin Chouhan, partner of the firm who stated that the actual cost incurred in the project has been shown in the books of the firm at Approx. Rs. 29.08 crores. As regards the difference he stated that since the valuation was done on the basis of estimation, the detailed explanation regarding difference will be submitted after examining the valuation report in detail. This project which was commenced during the Financial Year 2010-11 was under
construction during Financial Year 2015-16. As per the books of accounts total cost of construction declared in the books of accounts for the period Financial Year 2010-11 to Financial Year 2015-16 (Up to 31.01.2016) was recorded at Rs.55,94,79,613/-, whereas subsequent to the reference to the Departmental Valuation 46 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Officer vide letter dated 22.12.2015 the property was inspected on 4.02.2016. This project is spread over an area of 6.6 acre comprising of 96 MIG flats, 336 HIG flats and club house. Within few hours of inspection by the Departmental Valuation Officer on 4.02.2016, the DVO submitted the report on 14.3.2016 estimating the valuation of the cost of construction in the project Signature Residency for the Financial Year 2010-11 to Financial Year 2015-16 (Up to 31.1.2016) at Rs.83,30,42,000/-. Before the assessment was completed on 23.03.2016 the assessee was confronted with the valuation report dated 14.3.2016 to which the detailed reply was filed on 17.3.2016 by the assessee pointing out various anomalies in the valuation report along with challenging the method of valuation i.e cost increasing method adopted by the DVO and also challenged the application of the Delhi Plinth Area Rate. The submission made by the assessee were not sufficient to convince the Ld. A.O and he made the addition for undisclosed investment u/s 69B of the Act. However the Ld. A.O did not rejected the books of accounts and also failed to bring on record any positive material or cogent evidence to establish that the assessee has made 47 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors investment out of books i.e. over and above the amount invested as shown in the books.
46. The issue before us can be summarised in a question that "whether the Ld. A.O was justified to make addition for undisclosed investment in construction of building projects solely on the basis of Departmental Valuation Report without rejecting the books of accounts and without brining on record any material evidence to prove such unaccounted investments in the case of the assessee who was subjected to search u/s 132 of the Act."
47. We observe that Ld. CIT has dealt with the issue in detail examining the facts and also referring to various judgments squarely applicable on the instant issue raised before us by the revenue authorities. The relevant extract of Ld. CIT(A) finding is reproduced below:-
"5.8 As far as merit of this issue is concerned AO made addition of Rs. 99,82,487/-, Rs. 2,73,48,559/-, Rs. 5,32,58,155/- and Rs. 4,38,32,956/- in the year A.Y 2011-12 to 2014-15 towards difference in cost of investment in the project "Signature Residency" shown in the books vis-a-vis estimated by ova. This is an undisputed fact that the impunged addition was made solely on the basis of valuation report and A.O. did not bring any positive material or cogent evidence to establish that actually assessee made investment out of books i.e. 48 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors over and above the amount of investment shown in the books. This is settled law that addition made solely on the basis of valuation report is not sustainable in law. This proposition finds support from the following case laws:-
(1) CIT Vs. Chouhan Resorts359 ITR 394 (P&H )-
Section 698 of the Income-tax Act, 1961 - Undisclosed investments - Assessment year 2007-08 - No addition could be made on account of undisclosed investment in construction of building on basis of report of CVO without books of account being rejected, wherein every expenditure relating to construction was recorded (2) Family of Sp 5.5.5. P- Subramanium Chettiar Vs. ITQ 372 ITR 203(Mad}-
Section 698 of the Income-tax Act, 1961 - Undisclosed investments (Valuation by OVO) - Assessment year 1996-97 - Whether primary burden to prove under statement or concealment of income is on revenue and it is only when such burden is discharged that it would be permissible to rely upon valuation given by District Valuation Officer (OVO) - Held, yes - Whether opinion of CVO, per se, is not an information and cannot be relied upon without books of account being rejected - Held, yes - Whether in instant case, since matter was referred to OVO without rejecting books of account of assessee, Assessing Officer was not entitled to resort to section 698 - Held, yes [Paras 8 and 9]
4. Even though this appeal was admitted on the questions of law referred to supra, the learned counsel on either side fairly concede that the core issue to be determined in this appeal is "Whether the Assessing Officer is entitled to resort to section 698 of the Act and, consequently, refer the matter to the Departmental Valuation Officer, when the books of account were not rejected?"
5. The main plea taken by the learned counsel for the assessee is that the onus probandi lies on the Assessing Officer to establish that the assessee has 49 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors understated or concealed the actual cost of construction and without discharging the onus, the Assessing Officer is not empowered to rely upon the valuation given by the Departmental Valuation Officer, when the books of account were never rejected.
6. The learned standing counsel for the Revenue is not disputing the fact that the books of account furnished by the assessee were never rejected by the Department.
7. In the case on hand, it is beyond any cavil that the books of account furnished by the assessee were never rejected. No explanation was called for from the assessee stating that there was concealment or understatement of amount in the books of account. The initial burden cast on the Department to prove that there was understatement or concealment of income has not been discharged and, therefore, the Assessing Officer is not empowered to refer the matter to the Departmental Valuation Officer or rely on such report.
8. 'The above said view of this court is fortified by the following decisions:
(i) In Sarqam Cinema v. CIT {2010/328 ITR 513[2011]197 Taxman 203, the Supreme Court has held as under (page 514) :
"In the present case, we find that the Tribunal decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the ova was misconceived." (emphasis supplied)
(ii) Following the above decision of the supreme Court, a Division Bench of the Delhi High Court in CIT v. 8ajrang Lal 8ansal [20111335 ITR 572/200 Taxman 188 (Maq.}/12 taxmann.com 88, has held as under (headnote) :50
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors "The primary burden to prove understatement or concealment of income was on the Revenue and it was only when such burden was discharged that it would be permissible to rely upon the valuation given by the District Valuation Officer. The opinion of the District Valuation Officer, per se, was not an information and could not be relied upon without the books of account being rejected which had not been done in the assessee's case. Moreover, there was no evidence found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the return of the assessee." (Emphasis1 Supplied)
(iii) In K.K. Keshaiyer v CIT (2000) 246 ITR 351/(2001)114 Taxman 353 (Mad.), a Division Bench of this court held as under (headnote) :
"When the actual cost of construction was duly recorded by the assessee and that cost also was set out in the agreement with the contractor, specifying the rates, and which rates had been accepted by the Tribunal, and there was no finding that the building was larger than the assessee had claimed or had better quality of construction or fixtures than the assessee had recorded in his books, the opinion of the valuer could not be straightaway substituted for the actual cost that was recorded in the assessee's books. The Tribunal had not found that the books maintained by the assessee were not credible. Therefore, the Tribunal was not right in not accepting the valuation of house property submitted by the assessee."
9. In view of the findings recorded above and the law enunciated in the decisions referred to supra, this appeal deserves to be allowed. (3) CITVs. Khushal Chand Nirmal Kumar 263 ITR 77 (M.P) Section 158BC of the Income-tax Act, 1961 - Block assessment in search cases - Procedure for _ Block period 1-4-1986 to 31-3-1996 - Whether no additions could be made in income of assessee merely on basis of report obtained from Departmental Valuation Officer, whose evidence was not found during course of search - Held, yes - Whether, in instant case, since nothing was found during search in assessee's premises with regard to investment in house, Tribunal was justified in deleting additions made by Assessing Officer on account of unexplained investment in construction
- Held, yes 51 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors CIT Vs. Manoj Jain287 ITR 285(Delhi)-
section 158BC of the Income-tax Act, 1961 - Block assessment in search cases - procedure for - Tribunal having found as a fact that search on assessee's premises did not lead to seizure of any incriminating evidence to Suggest that any income had not been or would not have been disclosed for tax purpose, deleted addition made by Assessing Officer on basis of report of valuation Officer in regard to twO of properties purchased by assessee - Whether in view of clear finding of fact by Tribunal no substantial question of law arose for consideration - Held, yes (5) (IT Vs. Sadhna Gupta352 ITR 595 (DelhiJ-
section 69B of the Income-tax Act, 1961 - Undisclosed investments llnvestment in property] - Assessment year 2007-08 _ Whether, where there was no other material to indicate that any extra consideration had passed from assessee, over and above declared value in respect of purchase of property, addition under section 69B could be made based merely on report of District Valuation Officer - Held, no [Para 4] [In favour of assessee] Badar Durrez Ahmed, J. _ This appeal has been filed by the revenue under section260A of the income T" Act, 1961 (hereinafter referred to as the said Act) being aggrieved by the order dated 30.11.2011 passed by the Income Tax Appellate Tribuna1 in ITA No.5266 (Del/2010 relating to assessment Year "
2007·08. It appears that this had been admitted for hearing by an order passed by this, Court on 30.07.2012. However, learned counsel for the parties pointed out that there is some typographical error in the question of law which has been framed. Consequently, we reframe the substantial question of law as under:-52
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors "Whether the Tribunal fell in error in not placing reliance on the district Valuation officer's report under section 142A and thereby deleting the addition of Rs. 2,81,83,000/- mode by the assessing officer under section 69B of the Income Tax Act, 1961?
2. We have heard learned counsel for the parties. The [acts ore that the assessing officer made an addition of Rs.2,81,83,000/- under section 69B of the sad Act on the basis of valuation report which he received from the District Valution Officer, (DVO). This was in respect of purchase of a property by the respondent/assessee at 2-B, Gael lone, Under Hill Road, Civil lines, Delhi. The assessee had disclosed that the said property had been purchased through two sole deed, dated 03.05.2006 for a total sum of Rs.59,50,000/-. The purchase "consideration as per the sole deeds signified a rote of Rs. 8,500/- per sq. yd., which appeared to be low to the assessing office, and, therefore, he referred the matter of valuation to the DVO. The DVO submitted his report and indicated that in his opinion the total fair market value ought to be Rs. 3,41,33,000/- as against the declared value of Rs. 59,50,000/-. The difference of Rs. 2,81,83,000/- was added by the assessing officer by invoking the provisions of Section 69B of the said Act.
3. Being aggrieved by the said addition the respondent assssee preferred an appeal before the CIT(Appeals) who deleted the said addition after referring to the decision K.P. Varghese v ITO (1981) 131 ITR 597/7 Taxman 13(SC). The Commissioner of Income Tax (Appeals) held that the addition had been made on the basis of the valuation report without there being any other material to indicate that any extra consideration had passed in respect of the said purchase of property. Thereafter, the revenue, being aggrieved by the order passed by the CIT(Appeals),preferred an appeal before the Tribunal which has been dismissed by the Tribunal by confirming the deletion made by the CIT 53 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors (Appeals).
4. The only point to be considered is whether the valuation rendered by the DVO is to be taken into account or not. It has been argued by the learned Counsel for the revenue that the assessing officer was justified in referring the matter to the DVO for an opinion with regard to the fair market value of the property and once that opinion has been rendered, the some has to be taken into account and if mot were to be so, the addition of Rs.2,81,83,000/- would be fully justified. Consequently, it was submitted by the learned counsel for the revenue that the Tribunal had erred in deleting the addition. On the other hand the learned counsel for the respondent referred to a Division Bench decision of this Court in the case of CIT v, Puneet Sabharwal (2011) 338 ITR 485 16 taxmann.com 320 /(2012) 204 Taxman16 (Delhi) (Mag.) In that decision a specific question had been raised as to whether the Income Tax Appellate Tribunal was right in holding that notwithstanding the report of the DVO the revenue had to prove that the assessee had received extra consideration over and above the declared value of the same. That question was answered by this Court in favour of the assessee and against the revenue. The Division Bench in the case of Puneet Sabharwal (supra) had also placed reliance on the decision of Supreme Court in K.P. Varghese (supra) as also on another decision of a Division Bench of thisCourt in CIT v. Smt. Sraj Devi(2010) 328 ITR 604/(2011) 197 Taxman 173 (Delhi) (Maq.) wherein this court held that the primary burden was discharged that reliance could be placed on the valuation report of the DVO. There are several other decisions of this court in the same vein. One such case being the case of CIT v Vinod Singhal (IT appeal No.482/2010 decided on 05.05.2010) where, again, reliance was placed on the very same decision of the Supreme Court in K.P. Varghese (supra) and also on a decision of this Court in CIT v. Smt. Shakuntala Devi (2009)316 ITR 46. It was observed that there must be a finding that the assessee had received an amount over and above the 54 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors consideration stated in the sale deed and for this the primary burden was cast on the revenue. It is only when this burden is discharged by the revenue that it would be permissible to rely upon the value as given in the valuation report of the DVO
5. The law seems to be well settled that unless and until there is some other evidence to indicate that extra consideration had flowed in the transaction of purchase of property, the report of the DVO cannot form the basis of any addition on the part of the revenue. In the present case there is no evidence other than the report of the DVO and, therefore, the same cannot be relied upon for making an addition. In these circumstances, the question which has been framed is decided in favour of the assessee and against the revenue. The appeal is dismissed.
(6) CIT Vs Lahsa CPvt. Ltd 357 ITR 671 (Delhi)-
Section 142A of the Income-tax Act, 1961 - Estimate mode by Valuation Officer - Assessment year 1999-2000 _ Whether addition con be mode solely relying upon report of Departmental Valuation Officer - Held, no [Para 5)
1. Revenue in this appeal under Section 260A of the Income Tax Act, 1961 ("Act" for short) impugns order dated 25.06.2010, passed by the Income Tax Appellate Tribunal in the case of M/s Labsa Construction Pvt Ltd.' on the ground of perversity. The appeal pertains to the Assessment Year, 1999-2000. (incorrectly mentioned in the impugned order as assessment year 2006-07).
2. Property in question bearing No.C-20, NDSF, South Ex., Part-II, New Delhi had two sellers. The respondent/assessee- Lahsa Construction Pvt. Ltd. had sold 50 shale of the property in favour of Mrs. Madhu Arora, whereas the second group of owners consisting of four individuals had sold 50 of the property in favour of Mrs. Madhu Arora and her husband 55 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Mr. Om Prakash Arora.
3. It is stated by the counsel for the respondent that Revenue had accepted the order of the Tribunal in the case of said four individual> as addition was mad' solely on the report of the Departmental Valuation Officer,. This statement is not controverted or' accepted by the counsel for the Revenue as he has no information..
4. The Departmental Valuation Officer had opined that the value of the property at the time of purchase was Rs.2,84,72,600/- and this became the basis of the addition made by the assessing officer. The respondent/assessee had disclosed sale consideration of as Rs. 39,00, 000/- for sale of their 50% share, in the property o Mrs. Madhu Arora and Mr. Om Prakash Arora paid an amount of Rs.44,00,000/- to the four individual co-owners for purchase of the balance 50% share. Thus, in all they had shown sale consideration of Rs. 83, 00,000/-, instead of Rs..2,84,72,600/-, as opined by the Departmental Valuation Officer. This property was sold in the period relating to the Assessment Year 2004-05 for Rs.1,00,00,000/- No addition was made by the Assessing Officer on this sale consideration.
5. inaneran addition can be made solely and on the basis of the report of Departmental Valuation Officer, is no longer res integra and is covered by the decision of this court in CIT v S.K. Construction Co (2008)167 Taxman171, CIT v Navin Gera (2OIO) 328 ITR 516/[2011) 198 Taxman 93(Delhi), CIT v. Smt. Suraj Devi (2010) 328 ITR 604/2011 197 Taxman 173 (Delhi) (Mag.) andCIT V Bajrang Lal Bansal (2011) 335 ITR 572/200 Taxman 188 (Mag.)/12 taxmann.,com 88 (Delhi).. It has been repeatedly held that addition cannot be justified solely relying upon the valuation report. Decision of the Supreme Court in the case of K.P. Varghese v ITO (1981) 131 ITR 597/7 Taxman 13 has been followed.
6. In view of the aforesaid position of the Tribunal does not require 56 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors interference. No substantial question of law arises. The appeal is accordingly dismissed. "
(7) CIT v/s Pratap Singh Amrosingh Rajendra Singh 200 ITR 788 Held, that there was no dispute that the assessee maintained proper books of account and the same had been accepted in the past and no defects were pointed out in the books. The expenses were fully supported by vouchers. Fall details were also mentioned in respect of each item In the books Simply because the valuation report was of a high amount, the books could not be said to be unreliable. The Tribunal was therefore, justified in deleting the addition of Rs. 55,780/-
(8) CIT v/s Vijay Kumar D Gupta (2014) 365 ITR 470 (Guj) " ....Moreover, it is apparent that the only reason for making the addition under section 69 of the Act is that there is a difference in the cost of construction as determined by the Valuation Officer and as shown by the assessee. At no stage of the assessment proceedings does the assessing officer appear to have mentioned that the books of accounts are defective or that the cost of construction as shown in the books of account is not the true cost of construction. Thus, while making the reference to the valuation officer, the assessing officer has not recorded any defect in the books of account nor has he rejected the same. Except for the difference in the estimated cost determined by the Valuation Officer and the actual cost as shown by the assessee, the assessing officer has not brought any material on record to establish that the assessee had made any unaccounted investment in the construction of the building in question and that books of account do not reflect the correct cost of construction. Under the circumstances, there was no occasion for the assessing officer to make a reference to the Valuation Officer. As held by the Supreme Court in the case of Sargam Cinema (supra) unless the books of accounts are rejected, 57 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors the assessing officer cannot make a reference to Valuation Officer. The reference made to the Valuation Officer, not being in consonance with the provision of law, was, therefore, invalid. Accordingly, the report made by the Valuation Officer pursuant to such an invalid reference could not have been made the basis for addition under section 69 of the Act.
9 Whether an addition can be made solely and simply on the basis of the valuation report submitted by DVO, is no longer 'res integra' and is covered by the various decision of Hon'ble Courts mentioned below:-
CIT v S.K. Construction Co. (2008) 167 Taxman 171 CIT V Navin Gera (2010) 328 ITR 516/(2011) 198 Taxman93 (Delhi) CIT v Smt. Suraj Devi (2010) 328 ITR 604/(2011) 197 Taxman 173 (Delhi) (Mag.) CIT v Bajrang Lal Bansal (2011) 335 ITR 572/200 Taxman 188 (Mag.)/12taxmann.com 88(Delhi) It has been repeatedly held that addition cannot be justified solely relying upon the valuation report. Decision of the supreme Court in the case of K. P. varghese v. ITO [1981) 131 ITR 597/7 Taxman 13 Nirpalsingh vIs CIT (2013) 3591TR 398 (P & H) Raghuraj Agro Industries (P)Ltd (2013) 38 Taxmann.com 318(AII).
(10) CIT v/s Vridnaban Real estate (P) Ltd (2012) 254 CTR (All)10 Although above cited case pertains to re-opening of the case based on ova's report but ratio laid down is equally applicable to the instant case.
Hon'ble court has deleted the re-opening of assessment u/s 147 by holding that OVO's report perse is not an information for the purpose of 58 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors reopening of assessment u/s147-AO has to apply his mind on the information, if any, collected and must form a belief thereon for re-opening of assessment-there has to be something more than the report of Ova for the belief of AO By observing so, hon'ble court dismissed the appeal of revenue. 5.9 Considering the aforesaid fact and circumstances of the matter and the law as interpreted by several High courts and the Hon'ble supreme Court - the findings on this issue in respect of peculiar facts of this case are as below;
Admittedly, the assessee firm maintained its regular books of accounts supported by bills/vouchers and other records which were subjected to Audit. The AO has neither pointed out any defect in books nor brought any positive material on record to establish alleged unaccounted investment in project "Signature Residency". Most importantly, AO has not even rejected the books of accounts even alter receipt of valuation report. In view of these facts, valuation report obtained from DVO cannot form a foundation ipso facto for making addition towards alleged suppression of cost of investment. Neither DVO nor AO has pointed out that certain expenditure on certain items/construction was incurred which was not recorded in the books maintained by the assessee. Hence, additions made by AO is not sustainable in law being based merely on valuation report received from OVO.
ii) The A.O. has not mentioned any reason in the assessment order or in the reference to the valuation, that he had any incriminating material which led to form his belief that the appellant had under slated the cost of construction referred for valuation. It is very relevant to understand that the appellant was subjected to search and seizure ac1ion u/s 132 of the Act which apparently did not yield 59 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors to seizure of any incriminating papers/documents suggesting unaccounted investment in the project "Signature Residency". Lack of any incriminating material/evidence regarding under reporting of cost of construction being pointed out by the A.O .. in spite of search and seizure ac1ion addition simply made on the basis 01 OVO's report is even more unjustified and unwarranted.
iii) During assessment proceedings, appellant raised several objections with regards to methodology adopted by DVO as well as valuation aspect but AO has totally failed to consider the same. He has mechanically adopted the estimate of value of construction provided by DVO. One should not lose sight pf the fact that at the end 01 the day, cost derived by DVO in his report is nothing but an 'estimate' which is bound of have some amount of estimation, guess work & opinion involved and estimate cannot be 'exact'. After all it is an estimate done by an expert and it is a popular maxim 'to err is human'. It is evident from the very fact that appellant has raised various discrepancies in the DVO's report However. A.O. did not find it appropriate to invite counter comments of DVO on objections raised by the assessee. Although, it is a settled legal position that valuation report submitted by DVO is not binding upon AO, but in the present case AO has adopted and used the valuation report as it is binding on him. Appellant has pointed out several glaring mistakes and omissions in valuation report, on which AO has maintained a conspicuous silence which is unbecoming of a quasi-judicial authority·
(iv) It is important to note that OVO has prepared his report based on DPAR- 2007 after applying cost index on above DPAR as base 100. Interestingly, DVO has applied same rate for cost of construction of the project even though the investment is spread over many years. As per appellant, OVO should have adopted MPPWD rates after 60 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors making certain adjustment for the construction done by the assessee in different assessment years. Hon'ble Allahabad High Court in the case of CIT v/s Raj Kumer 182 ITR 436 (All) has held that value of property under PWD rates is much lower than the cost of value of property as per CPWD rates. Similarly, in the case of CIT v/s Prem kumere Murdlye 296 ITR 508 (Raj) wherein hon'ble court refused to interfere in the order of ITAT holding that appropriate to be taken into consideration would be PWD rates and holding difference between CPWD rates and PWD rates at 20. Similar views have been expressed in the case of ITO v/s Nilesh meheshweri (2011) 53 DTR 43 (ITAT Jaipur). In view of this, a difference of 20 between cost shown in books and estimated by DVO falls within 'tolerance band' as held by various courts. Further, appellant purchased material on wholesale basis which brings 'economy of scale' into construction cost which as per appellant would result into savings upto 25. AO has acknowledged this aspect but did not provide any relief while making addition. Appellant has also argued about savings in cost of construction for other reasons as well i.e. self-supervision. consultancy charges etc. however. AO failed to allow any benefit to the assessee on any of the count which is not justified.
I am of the view that as a consequence of such under reporting, the AO is required to reject the books of accounts of the assesse. In the case of the appellant the AO has neither rejected the books of accounts before making a reference to DVO for valuation of property nor he did after receipt of valuation report from DVO. Apart from the case laws referred in para 5.8 of this order. it is pertinent to refer to the decision of ITO v Is Dreamland enterprises 80 Taxmen 143 (ITAT Ahd)wherein it was held that when the cost of construction declared by the assessee was supported by regular books of accounts and vouchers, correctness of which was not disturbed by the AO or DVO 61 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors by bringing any specific material on record, the CIT{A) was fully justified in holding that no addition could be validly made on account of any understatement of cost of construction merely because of difference as estimated by the DVO. Hence, on this count. I am of the view that addition made merely on the basis of DVO's report is not sustainable.
vi) The valuation report of DVO is not binding on the AO because it is merely an opinion of an expert. In the context of the controversy in issue, it may also be germane to notice the expression used by legislature i.e. "estimate". Thus, resort can be made to the said provision by the AO for the purpose of "estimating" the value of any investment. bullion, jewellery or any valuable article etc. However, this is settled legal position that addition cannot be made solely on the basis of valuation report which is only give an estimate as held by various High Courts, discussed earlier.
vii) It is apparent from record that assessing officer has not brought any material on record to establish that the assessee had made any unaccounted investment in construction of the building in question and that books of accounts do not reflect the correct cost of construction. It is evident that only reason for making the addition u/s 69B of the Act is that there is a difference in the cost of construction as estimated by the valuation officer and as shown by the assessee in its books of accounts.
viii) The AO has mentioned in the assessment order that construction account was not produced before him for verification which is contrary to his statement in Para 2 of the assessment order wherein he has mentioned that books of accounts were produced and verified by him. However during the appeal proceedings the assessee 62 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors was directed to furnish the copy of construction account for the period under consideration and to produce the books of accounts and supporting vouchers for verification which was duly complied by the assessee.
5.10 It is interesting to note that valuation of the property under consideration was done by the DVO alter applying cost index on the basis of DPAR-2007 (as base). It is settled law that DPAR rates adopted by DVO are higher than PWO rates. Hon' ble High Court of Rajasthan in the case of CIT v Is Prem Kumari Murdiya 296 ITR 344 (Raj) refused to interfere in the order of IT AT holding that appropriate rate to be taken into consideration would be PWO rates and holding difference between CPWO rates and PWO rates at 20. Similarly, in the case of ITO v/s Nilesh Maheshwari (2011) 53 DTR 43 (ITAT Jaipur) held alter relying on the decision of Tek Chand v/s ITO 51 TTJ (JPR) 607 that there is variation in local PWD rates and CPWD rate by margin of 20. It has been held in the case of CIT v/s lahsa Construction (P) Ltd (2013) 357 ITR 671 (delhi) that no addition can be made solely on the basis of valuation report of OVO. Ld AR also placed reliance on the decision of CIT v/s VS Pralap Singh Amro Singh (1993) 200 ITR 788 (Raj) that addition to income could not be made on the basis of the report of the Valuation Officer.
5.11 As far as case laws relied upon by the A.O. are concerned, on perusal it is seen that none of the case laws relied upon by the A.O. are applicable to the facts of this case. The case laws referred by AO are as under:-
a. CIT v omprakash Bagaria (HUF) 2871TR 523 (MP) In this case the AD issued a commission under s. 131(1)(d) to District Valuation Officer on 23rd Aug·, 1996, to determine the cost of construction 63 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors of the building for the purpose of making on estimate of the investment referred to in s, 69, additions were mode on this basis and the assessee had filed on appeal before the higher authorities challenging that reference to valuation officer is permissible only u/s 55A of the act to determine the market value of capitol asset and no reference can be mode u/s 131(1)(d), the appeal was pending before the High Court. During the pendency of the appeal before the High court the Finance Act 2004 mode amendment in section 142A providing the AO with power to make a reference to the DVO for estimating the value of investment and the amendment was made effective with retrospective effect from 15.11.72. The proviso to the section provided that the amended section will not apply to assessment which has become final and conclusive on or before 30.09.2004. In these circumstances the court held that os the appeal is pending before it, the assessment has not become final and conclusive and hence the amended section 142A of the act will be applicable as it has been amended w.e,f 15.11.72 and accordingly the reference made to the DVO was a valid reference. Thus the issue for decision before the court in that case was whether amended provisions of section 142A made in 2004 con be made applicable to cases in which assessments ore already completed. Thu' it would be seen that the ,aid judgment ha' no applicable to the case of the assessee.
Shakti Tourist Home v CIT 308 ITR 228 (Kerala): the citation mentioned in the assessment order is not correct. The correct citation is 308 /TR 0028.In this case the issue before the High Court was whether it can make changes in the valuation mode and whether the addition toward, unexplained investment mode by the AO in one year can be spread over many years, in this reference the court held that "we do not find we have any authority to enter into the controversy on valuation of assets which is a pure factual issue" and the court further held that ''The claim for spreading over of the investment for several years con be granted only if it is proved that the 64 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors investment is mode in several years. There is no such evidence in this case". Thus it would be seen that the said judgment has no applicability to the case of the assessee.
CIT v A O Ali Mohammad 296 ITR 570 (Mad) The issue in this case was that the DVO had estimated the cost of construction at Rs.64,88,000/- as against recorded cost of Rs.47,42,629/- . The addition mode was restricted to Rs. 9 lokh and too was, directed to be spread over 0 period of 5 years by the CIT(A) and the ITAT both. This was challenged by the deportment before the High court and the court held that ''The valuation is not a mathematical precision and there is bound to be difference between one valuer to another valuer and it is, only a pure question of fact"
CIT vs, P. Mohonokala (2007) 210 CTR (SC) 20 : (2007) 291 1TR 278 (SC), referred to by the High Court held "that whenever there is a concurrent factual finding by the authorities below, the some should be accepted and no interference should be called for by the High Court"
Thus it would be seen that the issue before the High court was, entirely different 5.12 In view of the above discussion, I do not find any merit in the addition 01 Rs. 99,82.487/-, Rs. 2,73.48,559/-, Rs. 5,32,58,155/- and as. 4,38,32,956/- in A.Y 2011-12 to 2014.15 merely made on the basis of Valuation Report which is nothing but an estimate of valuation of 'cost of investment' and DVO's report cannot be taken as a conclusive proof of undisclosed investment made in the project Signature Residency of the assessee firm. Therefore appeal on this ground is allowed.
48. From perusal of the above detailed finding of Ld. CIT(A) and 65 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors various case laws referred and relied by the Ld. Counsel for the assessee we are of the considered view that the ratio laid down by the decision referred herein above are squarely applicable to the issue and facts raised before us by the revenue authorities with regard to the addition made for unexplained investment u/s 69B of the Act for the amount incurred for construction of the project and addition made solely on the basis of Departmental Valuation Officer report even though books of accounts of the assessee as well as the book results have not been rejected by the Ld. A.O nor any material evidence was unearthed during the course of search and in the assessment proceedings which could prove that unaccounted investment has been made by the assessee in the residential project Signature Residency. We therefore in the given facts and circumstances of the case, respectfully following judicial pronouncements referred and relied by the Ld. Counsel for the assessee and Ld. CIT(A) and also in the light of the fact that firstly the assessee has maintained regular books of accounts which are not found to be incomplete or unreliable and also have not been rejected by the Ld. A.O and secondly Valuation was done of the incomplete project which has been valued not on the basis of local 66 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors price but on the basis of Delhi rates which are universally accepted on higher side. Therefore since no defects were pointed out in the books of accounts regularly maintained by the assessee and are duly audited and no incriminating material was found in the search to show that unaccounted investment in the building project has been made, addition made purely on the basis of Departmental Valuation Report, we find no reason to interfere in the finding of Ld. CIT(A) who was rightly deleted the addition for the alleged undisclosed investment u/s 69B of the Act made by the Ld. A.O at Rs.2,73,48,559/-, Rs.5,32,58,155/- and Rs.4,38,32,956/- for Assessment Years 2012-13, 2013-14 and 2014-15 respectively. We accordingly confirm the finding of Ld. CIT(A) on this issue and dismiss Revenue's common Ground No.1 raised for Assessment Years 2012-13, 2013-14 and 2014-15 in ITA No.174 to 176/Ind/2018.
49. As regards common Ground No.2 of Revenue's appeal for Assessment Years 2012-13, 2013-14 and 2014-15 in case of M/s. Signature Builders the revenue has challenged the finding of Ld. CIT(A) allowing the assessee's claim of set off income against the 67 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors additions made u/s 69B of the Act. During the course of assessment proceedings when the Ld. A.O initiated to make addition u/s 69B of the Act for the unexplained investment in the construction of residential projects it was submitted before the Ld. A.O that provision of section 69C specifically mentions that in case of unexplained expenditure found during the course of assessment and if the assessee is unable to explain the source shall be deemed to be the income of the assessee and the assessee shall not be entitled to claim of deduction under any head of income. However in Section 69B of the Act there is no such provision which implies that in case the addition is made u/s 69B, the assessee is entitled to claim adjustment of such expenses. It was also submitted that the addition made on the count that the appellant had shown lower amount of cost of construction, would ultimately result into squaring off the whole addition since on one side the addition is made and on the other side the deduction is to be allowed as business expenditure. Thus the whole exercise would be revenue neutral. However the Ld. A.O was not satisfied and rejected the claim against which the assessee went an appeal before Ld. CIT(A) and succeeded.
68M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
50. Now the Revenue is in appeal before the Tribunal.
51. Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O.
52. Per contra Ld. Counsel for the assessee supported the finding of Ld. CIT(A).
53. We have heard rival contentions and perused the records placed before us. Revenue through this common Ground No.2 has challenged the finding of Ld. CIT(A) allowing the set off of income against addition made u/s 69B of the Act. We observe that Ld. CIT(A) dealt with this issue observing as under:-
"6.1 The ground is relating to claim of the appellant to allow set-off of income against the additions made u/s 69B of the Act. It is seen that the assessee is mainly involved in the business of development and sale of real estate and in the course of its business it has developed a project in the name of "Signature Residency" which is a residential complex project spread over an area of 6.6 acre which comprised of 96 MIG flats and 336 HIG flats and club house. During assessment proceedings reference was made to the DVO to estimate the construction expenses and addition were made for the difference in value recorded in the books of account and the value estimated by the DVO. The assessee has claimed that the property valued is its stock in hand and any expenses incurred on the project goes to reduce its 69 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors profit. Thus it is argued that if any addition is made towards unexplained investment, the corresponding deduction is required to be allowed. The claim was made by the appellant before the AO, however the same was not accepted and no specific reason for the rejection is assigned by the AO.
6.2 During the appellate proceedings, Id. AR of the appellant has filed the written submissions dated 09.02.2018. The relevant extract of his submission is reproduced as under:
"The addition regarding unexplained investment is made by the AO U/S 69B after making detailed discussion in Page 30-31 of the assessment order. Reliance is placed by him on the judgment of MP. High Court in the case of CIT V Omprakash Bagria (HUF) 287 ITR 523 and various other judgments of the Supreme Court and various other High Courts to substantiate that the addition under consideration is required to be made u/s 69B In this regards it may be mentioned that in case the Aa has formed an opinion that the assessee has incurred some unaccounted investment on the construction he was duty bound to adjust the construction expenses and should have increased the expenses by a similar amount which would nullify the effect of addition if any.
It may be mentioned that provisions of section 69C specifically mentions that in case of unexplained expenditure found during the course of assessment will be deemed to be the income of the assessee and the assessee shall not be entitled to claim the same as deduction under any head of income.
However in section 69B there is no such provision and which implies that in case addition is made u/s 69B, the assessee is entitled to claim adjustment of such expenses. The addition made on the count that the appellant had shown lower amount of cost of construction, would ultimately result into squaring off the whole addition since on one side the addition is made and on the other side the deduction is to be allowed as business expenditure. Thus, the whole exercise would be revenue neutral.
The said contention of the assessee is duly supported by various judgments, some of which are given herein below:70
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors CIT V Suraj Towers (2015) 230 Taxman 306(Karnataka HC) wherein it was held by the Honble High Court that "In terms of S. 69B, excess amount might be deemed to be income of Assessee for financial year-However, when excess amount was in nature of investment on building and that building was sold to prospective purchaser, that investment was in nature of expenditure-Unexplained income has to be set off against expenditure and net tax could be 'nil '-No case for interference was made out-Revenue' s Appeal dismissed"
Similar findings have been given by the Hon'ble Gujarat High Court in the case of C1T v Star Builders (2007)294 ITR 338 wherein in Para 4 of the order it was held by the court that:
"Assuming but not accepting that some unexplained income has been invested in the construction, the fact remains that the business of the assessee is construction If we add on account of unexplained income in the investment, that will give rise to the cost of the construction and the result will remain the same i.e. "zero".
Under the circumstances it is requested that in case the valuation made by the DVO is adopted wholly or partly and additions are sustained on this account than the AO be directed to make corresponding adjustments to the expenses incurred by the assessee on construction.
Discussion and appellate decision:-
6.3 Submission filed by appellant along with the details / material brought on record have been duly considered. Case laws relied upon by the appellant have been perused and considered. Due consideration has been given to the findings arrived at in the assessment order and in the remand report.
It is seen that as per the provisions of section 142A (1) reference can be made to the valuation officer for estimating " .... the value including fair market value, of any asset, property or investment ..
" Thus the Act does not provide for any reference to be made for ascertaining or estimating the unexplained expenses.
Further it is seen that the provision of section 69C provides that where the assessee is found to have incurred any expenditure and he fails to explain the source of such expenditure to the satisfaction of the assessing Officer the expenditure may be deemed to be the income of 71 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors the assessee. The proviso to the section provides that such expenditure will not be allowed as deduction under any head of income.
Similarly provision of section 69 and 69B provide that where the assessee is found to have made any investment, the source of which is not explained to the satisfaction of the Assessing Officer the value of unexplained portion of the investment may be deemed to be the income of the assessee. It is interesting to note here that the proviso regarding allowance of such addition as deduction which is provided in section 69C does not find place in section 69 and 69B.
In case of builders/developers/contractors the expense incurred on account and thus is an expense. Thus provisions of section 69C would be applicable to such cases and if the assessee is found to have incurred any unexplained expense the same will be deemed to be the income of the assessee & the assessee would not be entitled to claim any deduction of the unexplained expense. However the law does not provide any power to the AO to make a reference to the DVO for determination of unexplained expense and in such case the report of the DVO if obtained will have to be ignored and no addition would be permissible on the basis of the DVO report.
The AO in the case of the assessee has made addition u/s 69B of the Act. The said section does not put any restriction on the assessee in making a claim for deduction of the expense incurred. Thus once the assessee is found to have incurred any unexplained expense the same will deemed to be the income of the assessee. However in absence of any restriction u/s 69B, the AO would be duty bound to provide the deduction of the expense incurred. Thus the addition would be revenue neutral and no effective addition can be made in such case.
Reliance in this regards is placed on the following judgments:
ClT V Suraj Towers (2015) 230 Taxman 306(Karnataka HC) wherein it was held by the Honble High Court that "In terms of S. 698, excess amount might be deemed to be income of Assessee for financial year-However, when excess amount was in nature of investment on building and that building was sold to prospective purchaser, that investment was in nature of expenditure-Unexplained income has to be set off against expenditure and net tax could be 'nil'No case for interference was made out-Revenue's Appeal dismissed"72
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors CIT v. Star Builders (2007)294 ITR 338 (Gujarat High Court) wherein in Para 4 of the order it was held by the court that:
"Assuming but not accepting that some unexplained income has been invested in the construction, the fact remains that the business of the assessee is construction. If we add on account of unexplained income in the investment, that will give rise to the cost of the construction and the result will remain the same i.e. "zero".
Thus as per the provisions of the Act and relying on the judgments of the High Courts referred above I am of the firm opinion that the assessee is entitled to claim deduction of any expenses which has been deemed to be its income u/s 69B. Accordingly the AO is directed to provide deduction of the addition made u/s 69B towards unexplained expenditure incurred by the assessee. In view of the above discussion Ground No. 4 for AYs 2011-12 to 2014-15 is hereby allowed.
54. We have perused the above finding of Ld. CIT(A) and find no reason to interfere in the same as it has been arrived at after considering the settled judicial precedence which has not been rebutted by Ld. Departmental Representative. In the result the common Ground No.2 raised by the Revenue for Assessment Years 2012-13 to 2014-15 is dismissed.
55. As regards Ground No.3 of Revenue's appeal in the case of M/s. Signature Builders for Assessment Year 2012-13 the finding of Ld. CIT(A) deleting the addition of undisclosed investment at Rs.10,00,000/- in purchase of land is under challenge. Brief facts relating to this issue are that the assessee had purchased land from 73 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Smt. Kamla Devi Sahu vide registered purchase agreement dated 24.02.2010 for total purchase consideration of Rs.30,00,000/-. During post search enquiries it was observed by the Department that there was cash deposit of Rs. 24,00,000/- and Rs. 10,00,000/- in the bank account of the seller during F.Y 2009-10 and F.Y 2010- 11 respectively. The department had issued summons to the seller who had not responded to the summons and have not appeared before the AO and accordingly no explanation of the source of cash deposit in the account of the seller could be obtained. Under the circumstances the cash deposited in her account was presumed to be cash payment made by the assessee for the simple reason that the dates of the cash deposits were near about the dates on which cheque payments were made by the assessee and addition were made in the hands of the assessee u/s 69 as unexplained investment. The land was registered in the favour of the assessee on 24.02.2010 whereas cash of Rs. 10,00,000/- was deposited in the account of the seller on 10.08.2010 and no prudent unrelated person(seller) will get the property registered in favour of the purchaser without obtaining the cash payments first. The objection of the assessee in this regard was however rejected by the AO 74 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors mentioning that the cash was deposited near about the date of payment by cheque.
56. Before the Ld. CIT(A) the arguments were advanced that there is no proof of any cash payment by the assessee and the deposits of cash in the account of the seller cannot be connected with the assessee. Further if any addition is required to be made, the same should have been made in her hands. The assessee was under no obligation to explain such cash deposit. There is no material on record to suggest that the cash was deposited by the assessee. The department has failed to obtain any such allegation from the seller. After considering the arguments, the ld. CIT(A) has deleted the addition.
57. Now the Revenue is in appeal before the Tribunal.
58. Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O.
59. Per contra Ld. Counsel for the assessee supported the finding of Ld. CIT(A) and further submitted that the addition cannot be made in the hands of the assessee for deposits in other case without any proof or confirmation from anybody which shows that 75 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors the amount is deposited by the assessee and thus the addition made by the Ld. A.O is merely on surmises without any basis of positive evidence.
60. We have heard rival contentions and perused the records placed before us. The revenue has challenged the deletion of addition made by Ld. CIT(A) at Rs.10,00,000/- for undisclosed investment in purchase of land. Ld. CIT(A) after considering the submissions and other relevant material facts deleted the addition observing as under:-
"7.3 Submission filed by appellant along with the details / material brought on record have been duly considered. Due consideration has been given to the findings arrived at in the assessment order. The appellant during assessment proceedings as well as appellate proceedings strongly opposed the addition made by the AO on account of cash deposit in third party account i.e. Smt Kamla Devi Sahu. On perusal of written submission filed by the assessee before AO it has been claimed that the land purchased from Smt Kamla Devi Sahu is adjoining to slum cluster and has been encroached by the slum dwellers therefore, the assessee was not in possession of the said land. The appellant has also filed a suit in the court in order to get the encroachment removed and provide effective possession of the land. The assessee also requested AO to get the status of the land verified. The appellant has also taken an alternate plea that no over and above payment to the registered value was paid and the cash has been deposited in the account of Smt Kamla Devi Sahu so the same may be 76 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors verified from her. Further, appellant stated that no summons were issued to the account holder.
Otherwise also on merits It is seen that the addition is made on the basis of cash found deposited in the bank account of the seller near about the dates on which the property has been purchased by the assessee/payments have been made. Summon were issued to the seller for explaining the source of cash deposits in the bank account but she has not responded to the summons issued and hence no statement of the seller was recorded. No evidence is found during the course of search or during the assessment proceeding to indicate that the assessee has made any unrecorded payment to the seller. The purchase price of the land under consideration is Rs. 30 lakhs as against its market value for the purpose 01 stamp duty being Rs. 1.69 crores and the reason tor difference is explained to be purchase of land at lower value due to encroachment on land tor which suit is claimed to be pending in the courts and the AO had not disputed this factual position. The property has been purchased by registered purchase deed on 24.02.2010 whereas Rs. 10 lakh are deposited in the bank account 01 the seller on 10.08.2010. The cash of Rs. 24 lakh is deposited in the account 01 the seller during F.Y 2009-10 A.Y 2010-
11) & Rs.l0 lakh during F.Y 2010-12l A.Y 2011-12) The onus of explaining the source of cash deposited in the account of the seller was on the account holder i.e. Smt Kamla Devi Sahu) and the same cannot be shifted to the purchaser i.e. appellant) without bringing on record any material evidence to establish that the cash deposited had been paid by the assessee. The cash deposit of 10.08.2010 cannot be linked to the purchase deed registered on 24.02.2010 as it is not probable that a person would agree to take cash for a sale transaction eight months after the execution 0f 77 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors registered sale deed. The additions are accordingly required to be deleted. Further. it is trite law that no addition can be made on account 0f shear presumption. however. how strong the presumption may be. It has been presumed by the AO that cash deposited in the bank account 0f seller was deposited by the appellant and treated the same as unexplained investment made by the appellant. This is potently wrong and unjustified approach on the part of the A.O. because he has made such huge addition simply on presumption and assumption without bringing any positive evidence on record. In the case of CIT v/s Ram Narain Gael 224 ITR 180 (P & H) it has been held that suspicion however strong cannot take the place of evidence.
Hon'ble P & H High Court in the case of CIT v/s faquir Chaman Lal 262 ITR 295 (P & H) has held that it is well settled proposition that the presumption however strong cannot substitute evidence. Similar were the findings of Hon'ble Calcutta High Court in the case of CIT v/s Emerald commercial Ltd & Anr 250 ITR 539( cal), In view of the above discussion additions made by the AO does not hold ground. Thus, addition of Rs, 24,00,000/- in AY 2011-12 and Rs, 10,00,000/- in AY 2012-13 made by the AO on account of unexplained investment in purchase of land is hereby deleted. The appeals on this ground are allowed.
61. From perusal of the above finding of Ld. CIT(A) and examining the facts placed before us, we observe that the addition was made on the basis of cash deposits in the bank account of seller who do not response to the summons of the department nor ever appeared before the Ld. A.O so as to explain the cash deposits in her account. Under these circumstances we find no justification in the 78 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors observation of the Ld. A.O that the cash deposit of Rs.10,00,000/- in the account of seller on 10.8.2010 is in connection with the land sold vide Registry deed in favour of the assessee on 24.02.2010 was paid by the assessee. In these given facts the deposit of cash in the account of the seller cannot be connected with the assessee without any material on record to suggest such transaction. Therefore Ld. CIT(A) has rightly appreciated the facts and deleted the addition. No interference is thus called for. Ground No.3 of the Revenue Appeal (IT(SS)A No.174/Ind/2018) for Assessment Year 2012-13 stands dismissed.
62. As regards Ground No.3 raised by the Revenue (IT(SS)A No.176/Ind/2018) for Assessment Year 2014-15 for the addition of unexplained cash u/s 69A of the Act at Rs.1,43,910/- made by the Ld. A.O and subsequently deleted by Ld. CIT(A), brief facts of the case are that during the course of search cash in hand as shown in the books was Rs.4,06,672/- out of which Rs. 3,00,000/- was claimed to be kept with the partner and balance was claimed to be lying in the office but Ld. A.O did not accept this contention and made addition for Rs.1,43,910/- which was deleted by Ld. CIT(A) 79 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors against which the Revenue is in appeal before the Tribunal.
63. Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O.
64. Per contra Ld. Counsel for the assessee supported the finding of Ld. CIT(A).
65. We have heard rival contentions and perused the records placed before us. Through Ground No.4 revenue has challenged the finding of Ld. CIT(A) deleting the addition of Rs.1,43,910/- made by the Ld. A.O u/s 69A as unexplained cash. We observe that Ld. CIT(A) deleted the addition of Rs.1,43,910/- observing as follows:-
10.2 submission filed by appellant along with the details / material brought on record have been duly considered. Due consideration has been given to the findings arrived at in the assessment order. During the course of search the assessee was found to be in physical possession of cash of Rs. 1,43,910/- at the time of search. The appellant before AO and before me has claimed that as per its books of accounts cash in hand as on date of search was Rs.4,06,672/- put of which Rs. 3,00,000/- was kept by Shri Vipin Chauhan and balance of Rs. 1,06,672/- is part of cash fund at premises of the appellant. The AO had however not accepted the claim of the assessee on the basis that the assessee has not furnished any supporting evidence. It has to 80 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors be appreciated that the cash balance as per books of account maintained in regular course of business is required to be verified from the cash book and no other supporting evidence is required. The AO had not brought on record any observation that the claim of the assessee of having a cash balance of Rs. 4,06,672/- as per the books of account seized and as per the books of account produced before the AO is incorrect. In fact appellant has furnished books of accounts before AO which were duly verified by him. Therefore the addition made by the AO on this account to the tune of Rs. 1,43,910/- is directed to be deleted. The appeal on this ground is allowed.
66. From perusal of the finding of Ld. CIT(A) we find that Ld. CIT(A) has rightly appreciated the facts and deleted the addition of Rs.1,43,910/- which thus calls for no interference and thus Ground No.4 of Revenue stands dismissed.
66A. Thus in the case of Signature Builders, assessee's appeal for Assessment Year 2012-13 is dismissed and that of Assessment Years 2013-14 & 2014-15 are allowed whereas Revenue's appeal for Assessment Years 2012-13 to 2014-15 stands dismissed.
67. Now we take up the appeals in the case of M/s Signature Infrastructure. The assessee(s) appeal pertains to Assessment Year 2013- 14 & 2014-15 vide IT(SS) No. 187 & 188/Ind/2018 and that of Revenue for Assessment Year 2012-13 (IT SS(A) No.02/Ind/2019). In assesse's appeal the common ground raised is against the finding of Ld. CIT(A) confirming the addition made by the Ld. A.O at Rs.50,00,000/- and Rs.3,00,00,000/- for Assessment Years 2013-14 & 2014-15 made on the 81 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors basis of income declared by the assessee in the statement given u/s 132(4) of the Act.
68. At the outset Ld. Counsel for the assessee submitted that similar issue is also raised in the case of another group concern M/s Signature Builders in ITA No.185 & 186/Ind/2018 and the submissions and contentions raised therein may be considered for adjudicating the instant issue in the case of M/s Signature Infrastructure.
69. Ld. Departmental Representative is fair enough to accept that the issue raised by the assessee namely M/s Signature Infrastructure in IT(SS)A No.187&188/Ind/2018 are similar to the issue raised by the assessee namely M/s Signature Builders in ITA No.185&186/Ind/2018 and accordingly supported the finding of both the lower authorities.
70. We have heard rival contentions and perused the records placed before us and carefully gone through the records and submissions made before us. The assessee namely M/s Signature Infrastructure has raised the common issue for Assessment Year 2013-14 and 2014-15 with regard to the addition of Rs.50,00,000/- 82 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors and Rs.3,00,00,000/- confirmed by the Ld. CIT(A) which was made by the Ld. A.O on the basis of income declared by the assessee in the statement given u/s 132(4) of the Act. We observe that in the case of assessee's appeal M/s Signature Builders similar issue was raised for Assessment Year 2013-14 and 2014-15 for the addition made on the basis of income declared by the assessee u/s 132(4) of the Act during the course of search carried out on 29.01.2014. Income was declared by the authorised representative of the Signature group under the name of various concerns in the statement made u/s 132(4) of the Act. Subsequently when the assessee was required to file return of income in response to notice u/s 153A of the Act the impugned income was not shown in the Income Tax Return on the basis of the assessee's observation that there was no incriminating material seized during the course of search which could support the impugned amount. During the course of assessment proceedings also the addition made by the Ld. A.O was purely on the basis of statement given during the course of search. Nowhere in the assessment order the Ld. A.O has brought on record any incriminating material or loose paper seized during the course of search having its nexus with the addition made on the 83 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors basis of statement. We further observe that in one of the group concern M/s Ultimate Builders ITA No.134/Ind/2019 order dated 9.8.2019 similar issue came for adjudication and this Tribunal on the basis of the facts of the case as well as relying on the judicial pronouncements deleted the addition since the same were made without referring to the incriminating material found during the course of search. The finding of this Tribunal in the case of M/s Ultimate Builders has been reproduced in the preceding paras while dealing with the similar issue raised in the case of M/s Signature Builders. Since the issue and facts remains the same Ld. Departmental Representative did not controvert this fact that the impugned addition was not based on incriminating material found during the course of search and is just on the basis of the statement given u/s 132(4) of the Act. We in the case of M/s Signature Builders have held in para 21 of this order as follows:-
21. From perusal of the above finding of this Tribunal in the case of M/s Ultimate Builders (supra), we find that the common issue raised in Ground No.3 of M/s Signature Builders is identical to the issue raised and adjudicated in the case of M/s Ultimate Builders (supra). We therefore respectfully following the same and also in view of the identical fact that impugned 84 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors addition of Rs.25,00,000/- and Rs.3,00,00,000/- made by the Ld. A.O was purely based on the statement given u/s 132(4) of the Act and there was no reference to any incriminating material found during the course of search which could support the impugned addition. We therefore delete the addition of Rs.25,00,000/- for Assessment Year 2013-14 and Rs.3,00,00,000/- for Assessment Year 2014-15 and set aside the action by both the lower authorities and accordingly allow Ground No.3 of assessee's appeal for Assessment Years 2013- 14 and 2014-15 raised in ITA No.185-186/Ind/2018.
71. We therefore respectfully following the decision of this Tribunal in the case of M/s Ultimate Builders (supra) and also other facts of the case are of the considered view that the finding of Ld. CIT(A) deserves to be set aside and addition of Rs.50,00,000/- and Rs.3,00,00,000/- made for Assessment Year 2013-14& 2014-15 is directed to be deleted. Accordingly Ground No.1 raised by the assessee for Assessment Year 2013-14 (IT(SS)A No.187/Ind/2019) and for Assessment Year 2014-15 (IT(SS)A No.188/Ind/2019) are allowed.
72. The other grounds raised by the assessee in the above appeals are general in nature which needs no adjudication.85
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
73. Now we take up Revenue's appeal for Assessment Year 2012- 13 IT(SS)A No.02/Ind/2019. Ground No.1 raised by the revenue reads as follows:-
(1) On the facts and in the circumstances of the case, the Id. ClT(A) erred in deleting the addition of Rs. 3,36,13,000/- made by the Assessing Officer on account of undisclosed investment u/s 69B..
74. Brief facts relating to this ground are that the assessee had purchased 6.40 acres of land at Village Bagli from Shri Motilal vide three registered purchase deeds dated 19.07.2011, 23.01.2012 and 31.05.2012 for a total purchase consideration of Rs. 2,91,62,000/- which was duly recorded in the regular books of accounts of the assessee. During post search investigation statement of Mr. Motilal who was the seller of the land was recorded who stated that he has sold the land under consideration to Mr. Thakur Prasad @Rs. 1 crore per acre. Based on this statement show cause was issued to the assessee proposing an addition of Rs. 3,48,30,000/- as unexplained investment in purchase of the land(Rs. 6.40 crore - 2.92 crore). Detailed submissions were made before the AO on the proposed addition which were found not acceptable and the 86 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors addition was made by the AO after making the following observation:
i. The seller has specifically confirmed the sale at Rs. 1 Crore per acre.
ii. The contention of the assessee that the seller has never had any interaction with them is not relevant as the land has been purchased by the assessee from the sellers and the payments are made by the assessee directly to the seller iii. The assessee's contention regarding not providing the details of utilisation of the sale proceeds is not relevant as the seller has specifically confirmed the sale rate of Rs. 1 crore per acre.
75. A specific request was made for supplying a copy of the statement of the seller and for providing an opportunity to cross examine the seller. However the request was not accepted. It was further submitted before the ld. A.O. that no evidence was found during the course of search or after words to substantiate that the assessee has made any payment over and above the value recorded in the books of accounts. It was further submitted that the assessee is entitled to claim adjustment of such expenses. The addition made on this count would ultimately result into squaring off the whole 87 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors addition since on one side the addition is made and on the other side the deduction is to be allowed as cost of construction.The ld.
A.O. however, did not accept the contention of the assessee and made the addition.
76. In appeal before the Ld. CIT(A) the contentions were raised. The Ld. CIT(A) was pleased to remand the matter and allow the assessee to cross examine the said person. The Ld. CIT(A) has reproduced the copy of the statement at Pg. 13 of the order. For reply to Q.6 the seller specifically said that the land in question has been sold for Rs.1 crore per hectare. The ld. CIT(A) on the basis of this statement concluded that the land in question was sold for Rs.1 crore per hectare and not 1 crore per acre. He further observed that in the remand report the A.O. has not brought on record any convincing material to disbelieve the statement. Accordingly, the CIT(A) has deleted the addition.
77. Now the revenue is in appeal before this Tribunal.
78. Ld. Departmental Representative supported the order of Ld. A.O. 88 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
79. Per contra Ld. Counsel for the assessee heavily relied on the detailed finding of Ld. CIT(A) and submitted that in the first statement of the seller he asserted that the land is agreed to be sold to Thakur Prasad Rajput and he is not in knowledge of the fact that the land is sold to Signature Infrastructure, Bhopal. The statement of the farmer was recorded after the search and the copy of the same was not provided to the assessee. Without providing any opportunity to cross examine, the said statement is not binding on the assessee. The seller also was not able to give the complete account of the sale consideration. During the appellate proceedings the matter was remanded to the Ld. A.O. for giving the opportunity of cross examination. In the cross examination, the seller specifically asserted that the land has been sold for Rs. 1 crore per hectare and not Rs. 1 crore per acre (Pg.14 of ld. CIT(A) order). Thus, it is very clear that the land was sold for Rs.2.8 crores and not Rs.6.4 crores. Thus, the addition was made on the wrong assumption of facts. The ld. A.O. has not been able to bring on record any evidence to show that the land in question was purchased for more than the consideration shown in the registered document. There is no evidence found during the course of search 89 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors which show that the assessee has paid any extra amount. Under these circumstances the ld. CIT(A) was right in deleting the addition.
80. We have heard rival contentions and perused the record placed before us and carefully gone through the submission filed by the assessee. Revenue has challenged the action of Ld. CIT(A) deleting the addition of Rs.3,36,13,000/- made by the Ld. A.O on account of unexplained investment u/s 69 of the Act. We find that during the course of post search investigation it was found that the assessee firm purchased land totalling to 2.59 hectare (6.40 acres) at Village Bagli from Shri Motilal S/o Shri Kaluram Rajpal resident of Village Katara vide 3 registries dated 19.7.11, 23.1.2012 and 31.5.2012 for a total consideration of Rs.2,91,62,000/-. During the course of post search enquiries statement of seller Shri Motital was recorded on oath u/s 131 of the Act on 9.6.2014 wherein he stated that he sold 6.40 acres of land oat village Bagli @ Rs.1 crore per acre. Before Ld. A.O it was submitted by the assessee that the statement of the farmer was recorded after the search and the copy of the same was not provided. Opportunity to cross examine the 90 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors farmer is also not provided. The statement is not reliable and is not unsubstantiated. Also Mr. Motital (seller) had specifically confirmed that he had never interacted with the assessee or his representative and as such the statement is of third party. The market value of the land as per the Collector guideline for the purpose of calculation of stamp duty was Rs.3,04,99,111/- only as against the consideration paid at Rs.2,91,62,000/-. The difference in both the prices is less than 5%. All the payments were made through account payee cheque out of which Rs.1,20,00,000/- was paid to Shri Thakur Prasad (he is the person to whom the seller Mr. Motital has stated to have sold the land who has thereafter sold it to the assessee namely M/s. Signature Infrastructure) and the balance payment was made in the name of the seller. However Ld. A.O was not satisfied with the submissions and he applied the rate of Rs.1 crore per acre on the land purchased by the assessee and accordingly made addition for Rs.3,36,13,000/- for Assessment Year 2012-13 and Rs.20,25,000/- for Assessment Year 2013-14. The instant appeal relates to Assessment Year 2012-13. When the matter travelled before the first appellate authority he after considering the submissions of the assessee called for remand 91 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors report since the assessee was not given the opportunity to cross examine nor copy of the statement was provided to the assessee. The Ld. A.O after giving opportunity to cross examine submitted the remand report on 29.6.2018. In this remand report placed at page 16-17 of the impugned order of Ld. CIT(A) dated 30.10.2008, the statement of the seller Mr. Motilal was again taken. Incidentally in the original statement given during the course of post search enquiry he stated to have sold the land at Rs. 1 crore per acre but in the remand proceedings in reply to Question no. 6 he stated to have sold the land @Rs.1 crore per hactre. The assessee also filed a rejoinder to the remand report on 29.6.2018 which reads as follows:-
The AO was also issued directions to provide the assessee with an opportunity to cross examine Shri. Motilal Rajput. The AO had provided the assessee with an opportunity to cross examine the said person on 20.06.2018 and have submitted her report on the cross examination along with copy of the statement of Mr. Motilal recorded during the course of cross examination. The said person in his initial statements recorded on 09.06.14 during post search proceedings have stated that he has sold the land under consideration to the assessee for Rs. l,OO,OO,000/-(per acre) total sale value Rs. 6.40 croee and have invested the sale proceeds in purchase of 10 acres of land in Obedullaganj, 15 acre in Sultanpur and 6 acre in Jhagaria and the balance amount was stated by him to have been used by 92 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors him in repayments of loans earlier taken. In a separate reply made during the initial statement of 09.06.14 the cost of these investments was mentioned as Rs. 60 lac, Rs.40 Lac & Rs. 180 Lac respectively. The total value of investments recorded in the statement was Rs. 280 lakh. Accordingly after getting the above facts verified from Shri. Moti Lal he was informed that as per the details given by him in his initial statement he has received Rs. 6.40 crore (6.40 acre of land @ Rs. 1 Crore per acre) out of which he has invested Rs. 280 lac and have utilised the balance has been used for repayment of loans taken. The amount of loans claimed by him to have been repaid was mathematically computed and informed to him during cross examination at Rs.360 lakh and he was requested to provide the name of the persons who have given him such heavy loans. In reply to this question he has made a categorical statement that he has neither received any such loan and has nor repaid any loan. He was thereafter told that in such a situation either the sale price stated to have been received by him in his initial statement was wrong or the value of investments mentioned by him were wrong. In reply he made a categorical statement that he has made the sale at Rs.l Crore per hectre and not at Rs.l Crore per acre and also confirmed that the investments stated by him are correct.
Thus Shri.Motilal on cross examination have admitted that the sale price of Rs.1 crore per acre stated by him in his initial statement dated 09.06.14 was not correct and the sale has actually been made by him at Rs. 1 Crore per hecter. Thus the sale value admitted Mr. Motilal is Rs. 2.59 Crore ( 1,00,00,000/2.47*6.40) as against the purchase value recorded in the books of assessee at Rs. 2.92 Crore. It may be mentioned that Mr. Motilal has specifically confirmed that he does not know the assessee and he had sold the property to Mr. Thakurdas who has sold the property to the assessee. Thus admission made solely on the basis of the statement of Mr.Motilal is requested to be deleted.
93 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
81. Ld. CIT(A) after considering the remand report, rejoinder filed by the assessee and other submissions filed during the course of the appellate proceedings and also considering the fact that in the initial statement the seller have stated to sold the land @ Rs.1 crore per acre and in the remand proceedings he stated to have sold @Rs.1 crore per hectre and looking to this fact that 1 hectre is equivalent to 2.47 acre which completely changes the calculation of the investment made by the assessee in the land in question, deleted the addition of Rs.3,36,13,000/- for Assessment Year 2012- 13 observing as follows:-
5.4 Submission filed by appellant along with the details / material brought on record have been duly considered. Due consideration has been given to the findings arrived at in the assessment order and the remand report. It is seen that the addition is made solely on the basis of statement of Mr. Motilal recorded during post search enquiry.
It is seen that during search no paper was found/seized which could indicate that the assessee has purchased the land under consideration for a consideration other than what is mentioned in the registered purchase deed. No evidence of the assessee having made any payment in excess of the amount recorded in the books/registered purchase deed was found. The assessee had purchased the land under consideration for a total purchase consideration of RS.2,91 ,62,000/- as against its market value of Rs. 3,05,99,000/- fixed by 94 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors collector of stamps for the purpose of payment of stamp duty and the difference between the two values is less than 5. 5.5 During post search enquiries statement of the seller Mr. Motilal was recorded on 09.06.14 who stated that he has sold 6.40 acre of land @ Rs. one crore per acre, aggregating to Rs. 6.40 Crore to Mr. Thakurdas against which the assessee has shown the purchase of land at Rs. 2,91,62,000/- The assessee had made a request before the AO to allow cross examination of the said person which was denied for various reasons. However in view of the well settled law that no statement recorded at the back of the assessee can be used against the assessee as evidence without providing the assessee with an opportunity of cross examination, directions were issued to the AO to provide the assessee an opportunity of cross examination of Mr. Motilal, the seller. During cross examination, the seller has retracted from his earlier statement dated 09.06.14 and have stated during cross examination that the land was sold by. him @ Rs. one crore per hectare which was erroneously stated in the earlier statement of 09.06.14 as Rs. one crore per acre. Thus the sale price received by him was Rs. 2.59 crore on sale of 6.40 acre (2.59 hectare). The AO in his remand report has not brought on record any convincing material to disbelieve the statement of the seller recorded during cross examination.
Thus it is seen that the sole basis for the addition was the statement of Mr. Motilal recorded on 09.06.14 and no corroborative evidence was found during search to substantiate the statement and the statement itself having been retracted during cross examination no justifiable reason remains to sustain the addition. The addition is therefore directed to be deleted. In view of the above Ground no 3 for A.Y 2012-13 is allowed. 95 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
82. The above finding of Ld. CIT(A) stands uncontroverted by the Ld. Departmental Representative who has failed to file any evidence in support of its contention and observation of Ld. A.O. We therefore in the given facts and circumstances of the case are of the considered view that the sole basis on which the impugned addition was the price of Rs.1 crore per acre stated by the seller which was subsequently revised/rectified in the remand proceedings by the seller stating at Rs.1 crore per hectare and the same if applied to the transaction under consideration and the same will arrive at 2.59 crores which is less than the actual purchase consideration paid by assessee at Rs.2.91 crores (approx.) and thus do not call for any addition for unexplained investment in the purchase of 2.59 ha of land at Village Bagli by the assessee. Since there is no inconsistency in the finding of Ld. CIT(A) we uphold the same and dismiss Revenue's Ground No.1 for Assessment Year 2012-13.
83. Now we take up Ground.2 for Assessment Year 2012-13 which reads as follows;
(2) On the facts and in the circumstances of the Case, the Id. CIT(A) erred in deleting the addition of Rs. 4,32,40,000/- made by the Assessing 96 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Officer on account of unexplained investment in purchase of land at village Bagli..
84. Brief facts of this issue is that during the course of search four unsigned agreements were found. Out of these two agreements related to purchase of 2.40 acre of land in which sale rates were mentioned @ Rs. 20 lacs per acre and Rs. 1.12 crore per acre. The other two agreements related to purchase of 4.20 acre of land in which sale rates were mentioned @ Rs. 20 lacs per acre and Rs. 1.12 crore per acre.The assessee during the course of assessment submitted that both all the four are draft purchase agreements which were not executed and thus remained unsigned. The assessee also informed the AO that the assessee has purchased 2.19 acre of land out of the land of 2.40 acre mentioned in the draft agreement for Rs. 100 lakh through registered sale deed on 15.10.2011. The assessee also informed the AO that the assessee has purchased 4.01 acre of land out of the land of 4.20 acre mentioned in the draft agreement for Rs. 162 lakh through registered sale deed on 02.11.2011. Thus it was contended that the quantity of land and the rate of sale were both under negotiation which is verifiable from the fact that the land actually purchased 97 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors and the rate actually paid was different than what was appearing in the draft unsigned agreement. The fact that the agreements were draft agreement was also obvious from the fact that the agreements were unsigned. Thus there were three rates available with the AO of Rs. 20 lacs per acre and Rs. 1.12 lac per acre appearing in the draft unsigned agreements and Rs.45.66/40.40 lakh per acre recorded in the registered sale deed duly signed by the seller, the purchaser and the witness in presence of the Registrar. The AO however chose to adopt the purchase rate of Rs. 1.12 crore per acre in preference to the other two rates on the basis of the reasoning that the agreement though unsigned contains very specific information regarding the property details, the parties, rate, total consideration, advance payment etc which establish that the agreements are not draft but have actually been executed and further the property has subsequently been purchased by the assessee. The ld. AO adopted the higher rate and made the addition ignoring the availability of a simultaneous agreement mentioning a much lower rate.
85. The ld. CIT(A) allowed the appeal of the assessee on the ground that the A.O. has failed to consider two sets of agreement and the actual registered sale deed. He further observed that the 98 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors A.O. has failed to bring on record any reason for adopting the agreement which mentions the rate of 1.12 crores per acre in preference to the agreement mentioning the rate of Rs. 20 lakhs per acre. The ld. CIT(A) further observed that none of the parties to these agreements have made any statement that the higher consideration is paid than mentioned in the sale deed. It was observed that the A.O. has failed to bring on record any other sale instances of the same area. Under these circumstances the additions are uncalled for. Thus, the ld. CIT(A) deleted the addition.
86. Now the revenue is in appeal before the Tribunal.
87. Ld. Departmental Representative vehemently argued supported the order of Ld. A.O.
88. Per contra Ld. Counsel for the assessee relied in the finding of Ld. CIT(A) and also made following written submissions;
It is humbly submitted that the draft agreement were unsigned. The complete loose papers have to be considered. The Ld. AO ignored the fact that the sale deed is executed duly signed by the sellers and the purchasers in front of the witnesses. Neither the purchaser nor the seller has confirmed any variation in the sale consideration. No evidence has been found during the course of search or afterwards indicating that the assessee has made any unrecorded payment. Thus the addition made was correctly deleted by the ld. CIT(A).
99 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors In this regards the assessee places reliance on the decision of Rajasthan High Court in the case of CIT v Khandelwal Shringi & Co (2017) 299 CTR (Raj) 437 the head note of the judgment reported is given herein below for ready reference:
"Income from undisclosed sources- addition under s. 69B- Unexplained investment in purchase of land-AO made addition on the basis that the market value of 10.21 hecters of land purchased by the assessee was Rs. 7 Crore as against the declared consideration of Rs. 1.87 Crore- This opinion of the AO was based on an earlier agreement to sale supposedly entered into by the seller with another party for sale of 13.25 hecters of land, including the impugned land, for Rs. 8.25 Crore- on appeal, the CIT(A) found that since the said earlier agreement was never executed, same cannot be taken as evidence of the fair market value of the land in question and that the AO did not adduce any other evidence to show that the market value of 10.21 hecters of land was Rs. 7 Crore- impugned addition rightly deleted by Tribunal."
Without prejudice to the above, it is submitted that in case the AO has formed an opinion that the assessee has incurred some unaccounted investment on the purchase of land he was duty bound to value the stock accordingly which would nullify the effect of addition if any. The attention is drawn to the following judgments:
a. CIT V Suraj Towers 230 Taxman 306 (Karnataka HC) "In terms of S. 69B, excess amount might be deemed to be income of Assessee for financial year--However, when excess amount was in nature of investment on building and that building was sold to prospective purchaser, that investment was in nature of expenditure--100
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Unexplained income has to be set off against expenditure and net tax could be 'nil' b. CIT v. Star Builders 294 ITR 338 (Gujrat) "Assuming but not accepting that some unexplained income has been invested in the construction, the fact remains that the business of the assessee is construction. If we add on account of unexplained income in the investment, that will give rise to the cost of the construction and the result will remain the same i.e. "zero".
In view of the above it is humbly submitted that the order of the Ld. CIT(A) was correct and may please be upheld.
89. We have heard rival contentions and perused the records placed before us. Revenue's grievance in Ground No.2 is against the deletion of addition of Rs.4,32,40,000/- made by the Ld. A.O on account of unexplained investment in purchase of land at village Bagli. The basis of the impugned addition were 4 unsigned agreements found during the course of search. 2 agreements related to purchase of 2.40 acre land in which sale rates were mentioned @Rs.20,00,000/- per acre and Rs.l,12,00,000/- per acre. The remaining 2 agreements relates to purchase of 4.20 acre land out of 101 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors which in one agreement sale rate was mentioned Rs.20,00,000/- per acre and in other 1,12,00,000/- per acre. During the course of assessment proceedings it was submitted by the assessee that the actual transaction place out of the area of khasra mentioned at 2.40 acre and 4.2 acre mentioned in the draft agreements. The assessee purchased 2.19 acre at a consideration of Rs.1 crore vide registered sale deed dated 15.10.11 and 4.01 acre for a consideration of Rs.1.62 crores vide registered sale deed executed on 2.11.2011. The rate per acre of 2.19 acre land purchase deal is at Rs.45.66 lakhs and for the 4.01 acre it is Rs.40,39,900/-. It was also stated that the seized loose papers in the form of 4 agreements were for the purpose of negotiations but the actual transaction took place at price in between the low and high price mentioned in the draft agreement. However, Ld. A.O decided to pick up the higher rate of land per acre mentioned in the draft agreement i.e. Rs.1.12 crores per acre and applied the same in total land purchase by the assessee which resulted in the addition for unexplained investment of 102 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors Rs.4,32,40,000/-only.
90. Ld. CIT(A) while examining the facts in the light of the judgments referred and relied by the Ld. Counsel for the assessee mainly applied the ratio that it was not justified on the part of the Ld. A.O to pick and choose the rates mentioned in the draft agreements thereby taking the higher rate and ignoring the lower rate and accordingly observed as follows:-
"6.3 Submission filed by appellant along with the details / material brought on record have been duly considered. Case laws relied upon by the appellant have been perused and considered. Due consideration has been given to the findings arrived at in the assessment order. It is seen that two sets of unsigned draft agreements were found during the search. In one set of agreements the sale consideration was calculated @ Rs. 1.12 Crore per acre and in the other set the sale value was calculated @ Rs. 20 lakh per acre for the same land. Both the set of agreements were unsigned and were seized during search at the same time and were accordingly having same evidentiary value. Substantial part of these lands were subsequently purchased by the assessee @ Rs. 40.401 45.66 lac per acre through registered purchase deed which were duly recorded in the books of the assessee and source of which was explained. The AO had adopted the sale rate of Rs. 1.12 Crore per acre mentioned in one set of the agreements in . preference to the other set after making the 103 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors following observation "Ihe agreement though unsigned contains very specific information regarding the property details, the parties, rate, total consideration, advance payment etc which establish that the agreements are not draft but have actually been executed. Further the property has subsequently been purchased by the assessee". The AO has however failed to bring on record any reasons for adopting the agreement having a mention of the sale rate at Rs. 1.12 Crore per acre in preference to the agreement mentioning sale consideration at Rs. 20 lakh per acre. Both the agreements were unsigned and similar in its content except for the rates and the observations made by the AO were equally applicable to both. None of the parties to these agreements have made a statement that the consideration paid was in excess of the consideration stated in the registered purchase deed. The AO have also failed to bring on record any instance of sale having been undertaken in the same area for a near about consideration. The logic for drafting an agreement mentioning a value of Rs.20 lacs per acre when the actual purchase has taken place at Rs. 40-45 lac per acre can only be that it was done at a negotiation stage. Thus there was no reason to disbelieve the submission of the assessee that the agreements seized were draft agreements especially when they were unsigned and no evidence of the assessee having made any excess payment has been found in search. The onus of establishing the investment was on the AO and he has failed to discharge his onus.
6.4 It is also seen that the land purchased is" an investment of the assessee and even if any addition is made towards unexplained investment in purchase of land u/s 69B an corresponding adjustment will be required to be made which would be revenue neutral and having no effective addition. Reliance in this regards is placed on the following judgments:104
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors CIT V Suraj Towers (2015) 230 Taxman 306(Karnataka HC) wherein it was held by the Honble High Court that:-
"In terms of S. 698, excess amount might be deemed to be income of Assessee for financial" year-However, when excess amount was in nature of investment on building and that building was sold to prospective purchaser, that investment was in nature of expenditure-Unexplained income has to be set off against expenditure and net tax could be 'nil'-No case for interference was made out-Revenue's Appeal dismissed"
CIT v. Star Builders (2007)294 ITR 338 (Gujarat High' Court) wherein in Para 4 of the order it was held by the court that:-
"Assuming but not accepting that some unexplained income has been invested in the construction, the fact remains that the business of the assessee is construction. If we add on account of unexplained income in the investment, that will give rise to the cost of the construction and the result will remain the same i.e. "zero".
Thus as per the provisions of the Act and relying 'on the judgments of the High Courts referred above I am of the firm opinion that the assessee is entitled to claim deduction of any expenses which has been deemed to be its income u/s 69B. Accordingly the assessee would be entitled a deduction of the addition made u/s 69B towards unexplained expenditure incurred by the assessee (if any) however the addition itself is directed to be deleted this finding remains academic in nature. In view of the above Ground # 4 for A.Y 2012-13 is allowed. 105 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
91. From perusal of the finding of Ld. CIT(A) as well as the ratio laid down by Hon'ble High Court of Karnataka in the case of CIT V Suraj Towers (supra) and the Hon'ble Gujarat High Court in the case of CIT V Star Builders (supra) , we are of the considered view that Ld. A.O failed to discharge its onus and there was no logic in the action of the Ld. A.O for adopting the sale rate of Rs.1.12 crores per acre even from the very same seized records showed the rate of Rs.20,00,000/- per acre was mentioned and further was not justified in accepting the actual purchase consideration paid by the assessee ranging between 40 to 45 lakhs per hectre. Thus there remains no reason to disbelieve the submission of the assessee that the unsigned draft agreements cannot be the basis to make any addition in the hands of the assessee. The judgment of Hon'ble Rajasthan High Court in the case of CIT V/s Khandelwal Shringi & Co (supra) (2017) 299 CTR (Raj) 437 is squarely applicable on the facts of the instant case wherein Hon'ble Court had observed that the Ld. AO had made the addition on the basis of earlier agreement to sale supposedly entered 106 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors into by the seller with another party which was never executed and the same cannot be taken as an evidence of the fair market value of the land in question and further since the Ld. A.O did not adduce any other evidence to show that the market value applied by him, the addition made by the Ld. A.O has been rightly deleted by the Tribunal.
92. In the instant case also the rates mentioned in the unsigned draft agreements is the basis and Ld. A.O had applied the higher rate mentioned in the seized unsigned two draft agreements i.e. 1.12 crores per acre and completely ignored the rate of Rs. 20,00,000/ - per acre mentioned in the other two draft agreements. Ld. A.O has also ignored the actual registered sale deed showing the purchase of land in question at a price in between Rs.40,00,000/ - and Rs.45,00,000/-per hectare. Ld. A.O has failed to bring on record any other documentary evidence to support the fair market value of 1.12 crores adopted by him. In these facts and circumstances of the case we find no justification in the action of the Ld. A.O in making the 107 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors addition for undisclosed investment merely on the basis of unsigned draft agreements which also have not been given equal weightage and the Ld. A.O. has merely picked those documents showing higher purchase consideration which ID our view is not justified. Thus the Ld. CIT(Al has rightly deleted the addition. We thus uphold the same. In the result Ground No.2 of Revenue's appeal stands dismissed.
93. Now we take up Ground No.3 which reads as follows;
(3) On the facts and in the circumstances of the Case, the Id. CIT(A) erred in deleting the addition of Rs. 98,35,000/- made by the Assessing Officer on account of disallowance u/ s 40(A) of the Income Tax Act, 1961
94. Brief facts relating to this issue as narrated by the Ld. Counsel for the assessee are that Ld. counsel for the assessee submitted that during the course of assessment, on verification the registered purchase deeds the Ld. A.O had observed that the assessee had made the under noted payments in cash for purchase of land. All these payments were duly recorded in the regular books 108 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors of account, however disallowance was made by the AO u/s 40A(3) disregarding the factual legal submissions made before him.
Sr.No. Name & address of the Date of Amount paid
seller registry in cash
1 Shri Manphool Singh 24.10.11 32,00,000/-
Bagli
2 Shri ManphoolSingh & 01.06.11 78,00,000/-
others
As regards the payment of Rs.32,00,000/-, it was submitted before the AO that "The property was registered on 24.10.2011. However, the payment was made earlier on 23.10.2011 which is Sunday. This fact is easily verifiable from the copy of ledger account. The correctness of this entry can be verified from the cash book which has been seized during the course of search. Further the purchase deed had specifically mentioned that the payment has been received earlier. Thus, the payment was made on a Sunday and is accordingly covered by the exception provisions of rule 6DD(j). Balance payment of Rs. 765000/- was included in the payment made by cheque issued on 25.06.2011 for Rs. 10,00,000/- and thus no disallowance was called for." As regards the payment of Rs.78,00,000/-, it was submitted before the ld. AO that the payment against the said purchase was partly made by cheque as detailed hereunder:
Amount Paid Ch No Date Drawn on Issued in
109
M/s Signature Builders & Ors
ITA No.184 to 186/Ind/2018 & Ors
the name
of
Rs.50,000/- 6482 14.02.11 HDFC Bank Manphool
Singh
Rs.2,65,000/- 25086 25.06.11 HDFC Bank Manphool
Singh
Rs. 10,00,000 25087 25.06.11 HDFC Bank Gopal
Singh
Rs.50,000/- 6491 14.02.11 HDFC Bank Gopal
Singh
Rs. 10,00,000 25088 25.06.11 HDFC Bank Bala
Prasad
Rs.50,000/- 6486 14.02.11 HDFC Bank Bala
Prasad
Rs. 10,00,000 25085 25.06.11 HDFC Bank Gorelal
Rs.50,000/- 6491 14.02.11 HDFC Bank Gorelal
Thus Rs. 34,65,000/- was paid by cheque against the said purchase and balance of Rs. 4335000/- only was paid in cash. The payment was required to be made in cash because the sellers had insisted that the payment of at least 50,00,000/- should be made to them at the time of registries and have insisted that they should be paid either by draft or cash. As the assessee was not having sufficient time to arrange for draft, the assessee was forced to make payment in cash which was made before the Registrar at the time of registration. Thus, the amount is not disallowable u/s 40A(3).
It was further mentioned that all these payments were found duly recorded in the books of account of the firm and were in conformity with the payments mentioned in the registered sale deeds. All these payments are made by the assessee only in extreme circumstances where the payees were not previously known to the assessee and have insisted on cash payment and the assessee was not in a position to make payments through normal banking channels. 110 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors The details and fact of such cash payment is duly recorded in the registered sale/purchase agreement which contains full particulars of the seller. The documents are registered by the registering authority only after verifying and putting on record the photo, ID Proof and address proof of the parties. Thus the genuineness of these payments and the identity of the parties to the transactions are well established. The ld. CIT(A) has allowed the appeal accepting the contention of the assessee.
95. Now the revenue is in appeal before this Tribunal.
96. Ld. Departmental Representative supported the finding of Ld. A.O.
97. Ld. Counsel for the assessee supported the finding of Ld. CIT(A) and also referred and relied various judgments and following written submissions;
It is humbly submitted that all the transactions are recorded in the books. The identity of the seller is verifiable from the registered document. The transaction is genuine and as such no disallowance could have been made. In this connection, attention is drawn to the following judgments:
a. Gurdas Garg Vs. CIT, Bathinda, 63 taxman. 289 where the identity of the purchaser and the genuineness of the transaction is not in doubt disallowance u/s 40A (3) cannot be made.111
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors b. Harshila Choradia V ITO (298 ITR 349) the exemption contained under rule 6 DD are not exhaustive and that the said rule must be interpreted liberally in case where the genuineness of payment and identity of receiver is established, disallowance u/s 40A (3) is not justified.
The aforesaid judgments in turn are based on the judgment of the Hon'ble Supreme Court in the case of Attar Singh Gurmukh Singh v. ITO [1991] 191 1TR 667.
Without prejudice to the above, it is submitted that the land purchased has been shown as stock. Thus the assessee has not made any claim of expense during the year. As the assessee has not made any claim for allowance of the expenses, there cannot be any disallowance of the same.
98. We have heard rival contentions and perused the records placed before us and carefully gone through the submissions made by the Ld. Counsel for the assessee. Through Ground No.3 revenue is aggrieved with the finding of Ld. CIT(A) deleting the addition of Rs.98,35,000/- made by Ld. A.O on account of disallowance u/s 40A(3l of the Act. We note that the assessee during this course of business made the transaction of purchase for land. In one of such transaction vide registry dated 24.10.11 and 01.06.11 for the land purchased from Mr. Manphool Singh Bagli Payment of cash of Rs.32,00,000/_ and Rs. 78,00,000/- respectively 112 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors was paid. The Ld. A.O show caused for the disallowance u/s 40A(3) of the Act for the cash payment made for purchase. It was stated by the assessee that as regards the registry dated 24.10.2011, the payment was made a day earlier i.e. 23.10.2011 which is Sunday and is thus covered under the exception provided in rule 6DD(j) of the I.T rules. As regards cash payment of Rs.78,00,000/- paid for the purchase of land through registered sale deed dated 1.6.2011 it was stated that part payment was made by cheque and the remaining was in cash. Both the impugned cash payments are part of the transactions carried out through registered sale deed executed before the registering authority. We further note that Ld. CIT(A) after considering the submissions made by the assessee deleted the disallowance observing as follows:-
"7.4Submission filed by appellant along with the details / material brought on record have been duly considered. Case laws relied upon by the appellant have been perused and considered. Due consideration has been given to the findings arrived at in the assessment order and in the remand report. It is seen that the assessee during the assessment proceedings has claimed that though the purchase deed 113 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors was registered on 24.10.2011 the payment of Rs. 24,35,000/- was made earlier on 23.10.2011 which is a Sunday and hence is covered by the provisions of section 6dd(j). The AO had disbelieved the explana1ion of the assessee on the reasoning that:-
"The contention of the assessee that the payment was made on Sunday is not acceptable as the date is not mentioned in the sale agreement and hence it shall always be treated that the payment was made on the date of agreement. The assessee has not produced any supporting document like cash receipt".
On verification of the purchase deed it is observed that the deed had specifically mentioned that the payment has been received earlier ( purv mai bala bala nagad aada kiye gai) thus it is seen that there was no reason for the AO to treat that the cash payment was received on the date of registration. It is further seen that the assessee has claimed that the payment made is duly recorded in the cash book seized during the search and have submitted the copy of seized cash book for verification of this fact. The AO had not disputed the correctness of this claim of the assessee. Thus once the date of payment on Sunday was evidenced from the seized cash book and the purchase deed made a specific mention earlier, the AO was not justified in making disallowance of Rs. 24,35000/- and the disallowance mode is directed to be deleted.
7.5 It is further seen that the genuineness of the payments and the identity of the sellers of the land ore established beyond any doubts and the AO has also not raised any doubt about the some. The only point for consideration is whether the payri1ent though genuine should be disallowed on account of violation of section 40A (3) of the Act and not being covered by the specific exemptions provided in section 6 DD.- 114 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors It is seen that the cash payment and the purchase of land ore duly recorded in the regular books of account. Now the only issue which remains for adjudication is whether a genuine recorded transaction undertaken in cash in the best interest of the business and otherwise allowable can be disallowed only on a mere technical default. Reference in this regards is mode to the decision of the Hon'ble Supreme Court in the case of Attar Singh Gurmukh Singh v. ITO 59 taxmann.com 11 wherein the object of insertion of section 40A(3) and rule 6DD was explained by the Hon'ble Court as under:
"The terms of section 40A (3) are not absolute. Consideration of business expediency and other relevant [actors are not excluded. The genuine and bona fide transactions are not taken out of" the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. it is also open to the assessee to identify the person who has received the cash payment.
Relying on these observation of the Supreme Court Hon'ble Rajasthan High Court in the case of Harshila Chordia vs. ITO 298 ITR 349 has held that list of exceptions provided under rule 600 is not exhaustive. Meaning thereby that more could be read into it, if the same does not violate the reason for which section 40A (3) was introduced, the court held that:-
" .....Apparently, this provision was directly related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequences, which were to he/all on account of non-observation of" sub-section (3) of section 40A must have nexus to the failure of such object. Therefore the genuineness of the transactions and it being free from device of evasion of tax is relevant consideration which has been overlooked by the Tribunal"115
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors The Jaipur Bench of the ITAT in its recent judgment in the case of M/s A Daga Royal arts v ITO (ITA 1065/ JP /2016) delivered on 15.05.2018 have considered various decisions of venous courts and tribunals and concluded that:-
"In the entirety of/acts and circumstances of the case and respectfully following the legal proposition laid down by the various Courts and Coordinate Benches referred supra, we are of the view that the identity of the persons .from whom the various plots of land have been purchased and source of / cash payments as withdrawals from the assessee's bank account has been established the genuineness of the transaction Inn been established as evidenced by the registered sale deeds and lastly, the test of business expediency has been met in the instant case. Further, as held by the Hon'ble Rajasthan High Court in case of Harshila Chordia (supra), the consequences, which were to befall on account of non-observation of sub- section (3) of section 40A must have nexus to the failure of such object. Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax is relevant consideration. The intent and the purpose for which section 40A (3) has been brought on the statute books has been clearly satisfied in the instant case. Therefore, being a case of genuine business transaction, 110 disallowance is called for by invoking the provisions of section 40,A (3) of the Act", The appellant submitted that he had purchased the land from agriculturist, The seller refused to accept the payment by cheque, therefore, the appellant has to make the payment in cash. It has been held in the case of Gurdas Garg v /s The commissioner of Income Tax Appeals, IT Appeal No, 413 of 2014 the hon'ble High court of Punjab and Haryana held that '" The Identity of the payees i.e.: the vendors in respect of the land purchased by the applicant was established ", each of these agreement was certified by the stomp registration Authority ",the transaction were genuine and bar 116 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors against the grant of deduction under section 40A(3) was not attracted.
In case of Rakesh Kumar v /s Asst. C:T The IT AT Amritsar Bench also held that;
...sale deeds of properties were registered with revenue Dept. of' govt.. the payments cannot he disallowed under Section 40A(3) of the Act.
In the present case, the genuineness of payment has not been doubted as Assessing Officer himself has held met sale deeds of properties were registered with the Revenue Department of Govt. Therefore, the case of the assessee is fully covered by the above decision of Hon' ble Punjab and Haryana High Court, The Hon' ble IT AT Indore Bench, Indore vide IT A No. 522/lnd/20 14 dated 14.07,2016 in the case of Tirupati Constructions has allowed complete relief on the aforesaid point of addition to the appellant.
The Hon'ble ITAT Indore bench Indore in the case of Vijay Kumar Jaiswal vs ACIT, 28 IT J 289 In this case H' ble IT AT held that the payment were mode at the direction of the department and the situation was not within the control of the appellant and IT AT deleted the said disallowances.
ITAT Indore bench Indore in the case of ITO Vs Jitendra Kumar Mandleclla, 23 ITJ 644 In this case the facts of the case was as under:
Assessee made payment of business expenditure above Rs.20000/- in cash. AO made disallowance of the same. ITAT held that object behind the provision is that persons are not allowed to show false expenditure for avoiding income tax and therefore, once the genuineness of payment and identity of the payee is established fully, the object is achieved and in such a situation, if the payment has been made looking to the necessity of settlement or difficulty of payee as payee was in need of money after banking hours. The same cannot be said to 117 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors have been made in violation of object of the rules - Expenditure is therefore allowable in present case, as same is genuine and duly recorded and out of business exigencies.
7.6 In the case of the assessee the genuineness 01 the payments are free from doubt and there is no attempt made by the assessee tor evasion of any of its tax liability by making payment In cash and accordingly respecting the judgments of the various Courts mentioned above the addition made of Ps. 98,35,000/- is directed to be deleted. In view of the above, Ground # 5 for A.Y 2012-13 _Allowed.
99. The above finding of Ld. CIT(A) is duly supported by judicial pronouncements referred herein above which are squarely applicable on the facts of the instant case where also the genuineness of the payment were not doubted and there is no iota of evidence to show that the assessee wanted to evade any tax liability and more so the transactions have been carried out before the Registering authority of State Government and impugned cash payments are part of the consideration appearing in the registered deed. We thus respectfully following the judicial precedents referred herein above find no inconsistency in the finding of Ld. CIT(A) deleting the disallowance u/s 40A(3) of the Act for the alleged cash payment of Rs.98,35,000/- u/s 40A(3) of the Act and 118 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors the same is upheld. Revenue's Ground No.3 for Assessment Year 2012-13 (IT(SS)A No.02/Ind/2019) is dismissed.
100. Ground No.4 is general in nature which needs no adjudication.
101. In the result appeal of the Revenue for Assessment Year 2012-13 in the case of Signature Infrastructure vide appeal No. IT(SS)A No.02/Ind/2019 stands dismissed.
102. Now we take up Revenue's Appeal No. IT(SS)A No.13/Ind/2019 for Assessment Year 2014-15 in the case of M/s Signature Colonisers Pvt. Ltd.
103. The sole grievance in Ground No. 1 & 2 of Revenue's Ground No. 1 & 2 revolves around the finding of Ld. CIT(A) deleting the addition of Rs.2,45,00,000/- made by the Ld. A.O u/s 68 of the Act for unexplained unsecured loan received from Non Resident Indian Shri Rajesh sadhwani.
104.Brief facts relating to this issue are a search was conducted on the Signature Group of cases in which a 119 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors search was also undertaken on the assessee. The assessee is a company which was incorporated on 09/01/2012. The assessee has taken a loan of Rs.2,45,00,000/- from Shri Rajesh Sadhwani for the purpose of its business. During the course of the assessment proceedings the confirmation, PAN card was filed. The said creditor is a non-
resident Indian origin, doing the business in Dubai. He is the managing person of the company in the name of Smart Textiles LLC, Al-Fahidi Street, Bur Dubai. All the amounts have been received through banking channels. Some of the relevant documents could not be filed before the AO during the course of assessment proceedings as these were not available with the assessee at that time. However, subsequent to the completion of the Assessment proceedings, the assessee was able to obtain the required papers which were filed before the Ld. CIT(A) with an application under Rule 46A. Ld. CIT(A) accordingly examined the documents placed before it and was satisfied with the identity and creditworthiness of Shri Rajesh Sadhwani who gave unsecured loan to the assessee and deleted the addition 120 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors made u/s 68 of the Act.
105.Now the Revenue is in appeal before the Tribunal.
106.Ld. Departmental Representative vehemently argued and supported the finding of Ld. A.O.
107.Per contra Ld. Counsel for the assessee supported the finding of Ld. CIT(A) and also filed following written submissions:-
While framing the assessment the ld. AO did not doubt the identity of the lender and his creditworthiness. It was submitted before the ld. A.O. that all the transaction were entered through the banking channel. The ld. A.O. however, did not accept the assessee's plea and made the addition with the remark that the confirmation letter has been signed by Shri Manish Idnani as an Authorized person for Shri Rajesh Sadhwani and no documentary evidence for such authorization has been filed. The ld. A.O. further remarked that mere filing of the confirmation does not establish the credit worthiness and the genuineness of the transaction. He therefore, made the addition of Rs. 2,45,00,000/- u/s 68 of the Act. Before the ld. CIT(A) the assessee filed complete details under Rule 46A which consisted of the following papers
1. Copy of pass port
2. Electricity bill of Dubai to prove the address
3. Copy of the PAN card bearing number BHFPS0322A 121 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
4. The amount received through Demand Draft prepared at Dubai.
The advises of DD prepared in the name of the assessee and the name of the lender.
5. On the direction of the ld. CIT(A) the following papers were also filed to establish the creditworthiness of the lender:
a. The lender is carrying on his business under the business name of "Smart Gulf General Trading L.L.C" since 09.03.1988. The copy of license issued by the Dubai authorities as filed.
b. The lender is owning 49% of the shares and balance 51% of the shares have been allotted to local residents of Dubai. It may be submitted that the laws of Dubai requires that any foreign national can do business in Dubai only after taking a local person as partner who should hold the majority share. This fact is readily verifiable from the details of Share Capital appearing in the notes to the financial statements annexed to the financial statements, the copy of the same was filed.
c. The copy of audited financial statements and bank statement of Smart Gulf General Trading L.L.C for the year ended on 31.03.13, 31.3.14 and 31.03.15 was filed to prove that the profits were substantially high. The position of the profits was as under
2013 2014 2015 Share 3000 Lakh 2779 lakh 3177 lakh Capital Net profit 258.37 235.46 240.06 lakh lakh lakh The figures appearing in the audited financial statement in AED are converted into INR by taking conversion rate of 18 INR per AED. It would be observed that in the year 2013 in which the assessee has received the 122 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors funds from the lender, net withdrawals of app 786.40 lakh was made from LLC.
d. The copy of bank statement of the business entity of the lender was filed which showed that the said firm in the normal course held bank balance of Rs. 5 to 10 crores.
e. The copy of bank statement of the lender was filed which showed that the normal bank balances were of Rs. 5 to 10 crores. The above papers were admitted by the ld. CIT(A) under Rule 46A and were sent to the A.O. for his comments (para 3.2 pg.5 of CIT(A)'s order). The ld. A.O. submitted the remand report (pg.1E-1G of the PB). The ld. A.O. in para 4 stated that all the above papers are seen. He however, doubted the genuineness of the transaction on the ground that the ledger account of that person submitted before the AO has described the amount received as receipt towards share capital whereas in the submissions filed the receipt is mentioned as unsecured loan. The ld. A.O. further remarked that the assessee had not filed documents required by the RBI for subscribing to the share capital. It was submitted before the ld. CIT(A) that the amount was remitted by the sender towards his application for issue of share capital. However the authorized capital of the company was only 1 lac and hence shares could not have been issued to the payer and the amount was credited in the loan account. It was further submitted that no agreements could be reached regarding the terms and conditions about the issue of shares and as such it was treated as an unsecured loan. It was further submitted that the genuineness of the transaction of receipt of money is not questioned by the AO, but he has raised doubt regarding the entries in the books as to whether the amount is received as share capital or as an unsecured loan. The addition made is accordingly requested to be deleted. The ld. CIT(A) after considering all the documents allowed the assessee's appeal.123
M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
108. We have heard rival contentions and perused the records placed before us and carefully gone through it. Revenue's sole grievance for 2014-15 in the case of M/s Signature Colonisers Pvt. Ltd is with regard to deletion of addition of Rs.2,45,00,000/- by Ld. CIT(A) which was made by the Ld. A.O u/s 68 of the Act for unexplained cash credit received from Non Resident Indian Shri Rajesh Sadhwani.
109. From perusal of the record we observe that Shri Rajesh Sadhwani is a Non Resident Indian and lives in Dubai and is the managing person of the company in the name of Smart Textiles LLC, A1-Fahidi Street, Bur Dubai.
The impugned amount of Rs.2,45,00,000/- has been received through banking channel. Ld. A.O has not doubted the identity and creditworthiness of the lender. Only because of the confirmation letter was signed by Mr. Manish Idnani has authorized person for Shri Rajesh Sadhwani and no documentary evidence for such authorization having been filed raised doubt in the mind of Ld. A.O about the genuineness of the transaction. 124 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
110. We however observe that during the course of appellate proceedings before Ld. CIT(A) assessee filed other evidences under Rule 46A of the IT rules to be considered for proving the identity, genuineness and creditworthiness of the loan provider namely Shri Rajesh Sadhwani which included copy of Passport, PAN card, electricity bill of Dubai, copy of audited financial statements and bank statements of Smart Gulf General Trading Company, LLC, copy of bank statement. Ld. CIT(A) after examining the same and thereafter going through the remand report dated 22.05.2018 made by the Ld. A.O deleted the impugned addition of Rs.2,45,00,000/- observed as follows:-
4.2 Ground No.2:- Through this ground of appeal the appellant has challenged the addition of Rs 2,45,00,000/- on account of unexplained unsecured loan u/s 68. The AO during assessment proceedings found that assessee has taken unsecured loans of Rs. 4,88,00,000/-. Out of which unsecured loans received from Shri Dinesh kumar Idnani and Shri Manish Kumar Idnani have already been explained before AO. However, no detail what so ever was filed by the appellant with regard to unsecured loan taken from Shri Rajesh Sadhwani. The assessee was asked by 125 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors AO to furnish confirmations, bank account statement and ITR of the creditors. The assessee before AO failed to furnish the desired documents. The appellant during appellate proceedings, furnished confirmation, bank account statement and copy of ITR of Shri Rajesh Sadhwani. A copy of these additional evidences was also forwarded to AO for comments.
Appellant during appellate proceedings submitted that the firm was constituted on 09.01.2012. Appellant during the year under consideration has taken unsecured loan of Rs. 2,45,00,000/- from Shri Rajesh Sadhwani through demand drafts. Shri Rajesh Sadhwani is a NRI having passport of Canada and is residing at Dubai haviug address Flat No 5- 1004, 381IPalm Jumeira, Premises Number 381062953 PO Box No 12741, Dubai and also having pAN No BHFPS0322A. The unsecured loan has been received through demand drafts being prepared in Dubai. The brief details of demand drafts are as under:-
S.N Demand Draft Date of
Amount INR
o No Issue
1 00220061300139 20.06.2013 Rs. 9,00,000
2 00220061300138 20.06.2013 Rs. 9,00,000
3 00220061300136 20.06.2013 Rs. 9,00,000
4 00220061300143 20.06.2013 Rs. 9,00,000
5 00220061300142 20.06.2013 Rs. 9,00,000
6 00220061300141 20.06.2013 Rs, 9,00,000
126
M/s Signature Builders & Ors
ITA No.184 to 186/Ind/2018 & Ors
7 00220061300140 20.06.2013 Rs. 9,00,000
8 00220061300145 20.06.2013 Rs. 9,00,000
9 00220061300144 20.06.2013 Rs. 9,00,000
10 00220061300147 20.06.2013 Rs. 9,50,000
11 00220061300146 20.06.2013 Rs. 9,50,000
12 -- -- Rs. 9,40,000
13 00020069 31.08.2013 Rs. 9,40,000
14 00020070 31.08.2013 Rs. 9,40,000
15 00020071 31.08.2013 Rs. 9,40,000
16 00020072 31.08.2013 Rs. 9,40,000
17 202885 10.l0.2013 Rs.7,00,000
18 202884 10.l0.2013 Rs.7,00,000
19 202875 30.09.2013 Rs. 5,00,000
20 202874 30.09.2013 Rs, 5,00,000
21 202872 30.09.2013 Rs. 9,00,000
22 202871 30.09.2013 Rs.8,50,000/-
23 202870 30.09.2013 Rs.8,50,000/-
24 202869 30.09.2013 Rs.8,50,000/-
25 202901 24.10.2013 Rs.8,00,000/-
26 202900 24.10.2013 Rs.8,00,000/-
2,21,50,000/-
Appellant has filed copy of confirmation received from Shri Rajesh Sadhwani wherein it has been stated that loan ofRs. 127 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors 2,45,00,000/- was given through cheques on different dates. Appellant has also filed copy of passport, electricity bill and PAN card of Shri Rajesh Sadhwani. The appellant during appellate proceedings furnished the details of source of income of creditor in order to prove creditworthiness of the creditor. In reply, appellant submitted that Shri Rajesh Sadhwani is carrying on his business under the name "Smart Gulf General Trading LLC" since 09.03.1988 in Dubai. In support a copy oflicense for doing business issued by Dubai authorities have been filed. Shri Rajesh Sadhwani is owing 49 shares of the company and remaining 51 shares were allotted to different residents of Dubai. According to law of Dubai foreign nationals can do business only when a local person is partner holding majority shares. In support the appellant filed details of share capital and financial statement of the company. Appellant has also filed copy of audited financial statement and bank account statement of Smart Gulf General Trading LLC as on 31.03.2013,31.03.2014 and 31.03.2015. on perusal of filed audited financial statement it is seen that for FY 2013-14 the net profit was 258.37Iacs, for FY 2014-15 net profit was 235.46 lacs and for FY 2015-16 net profit was 240.06 lacs (on taking conversion rate of 18 INR/AED. Thus, loan party furnished the loan confirmation, copy of bank account and proof of filing of the return. By filing the above documents the appellant is able to establish the-
128 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors i. Identity of the creditor - the creditor is income tax payer and filed the loan confirmation.
ii. Genuineness of the transaction- the appellant has taken the loan through banking channel. The appellant is in the receipt of loan by Demand Draft.
iii. Creditworthiness of the creditor the creditor IS income tax payer and filing the income tax return. The person not only given the loan to the appellant but to other parties also. From the above it is clear that the appellant has satisfied all the three conditions required for genuineness of the transaction. The same view has been upheld by Honb'le ITAT in the following cases:-
Umesh Electricals vis Asst. CIT(2011) 18 IT] 635 (Trib.- Agra):
(2011) 131 ITD 127: (2011) 141 TTJ Establishment of identity and credit-worthiness proved-
Assessee produced the bank account of creditor in his bank account on the same day on which loan was given- Assessee furnished the cash flow statement of creditor-Based on inquiry, AO noted that creditor was engaged in providing accommodation entries-HELD- In group cases, it has been held that there was no evidence against the creditor to prove that he was providing accommodation entries-Further, mere deposit of money by the creditor on the same day, does not establish that 129 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors the loan is not genuine-Assessee has proved the source of credit and also the source of source -Addition cannot be made. Aseem Singh v/ Asst. ClT (2012) 19lTJ 52 (Trib.-Indore) Identity and credit-worthiness proved-Assessee took loan of Rs.1,OO,OOO/- confirmation of creditor was filed-Lower authorities made addition u/s 68 holding that amount was deposited in cash in the bank account of lender immediately prior to date of loan - HELD- Assessee has established the identity- The party has confirmed the transaction-If AO doubted the transaction, AO should have called creditor u/s 131- Addition cannot be made.
Thus, appellant has furnished all the required details in order to prove genuineness of the transaction and creditworthiness of the creditor. Therefore, the A0 was not justified in making addition of Rs. 2,45,00,000/on account of unsecured loan from Shri Rajesh Sadhwani. Thus, keeping in view the documentary evidences filed by the appellant and case laws cited above, the addition made by the AO amounting to Rs. 2,45,00,000/- is Deleted. Therefore, the appeal on this ground is Allowed.
111. From perusal of the finding of Ld.CIT(A), various documentary evidences filed by the assessee to support the identity, genuineness and creditworthiness of Shri Rajesh Sadhwani which are in itself sufficient enough to satisfy 130 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors that the alleged amount of Rs.2,45,OO,OOO/- should not have been treated as unexplained cash credit and further in view of the decision of this Tribunal relied by Ld. CIT(A) in the case of Umesh Electricals Vis ACIT (supra) and Aseem Singh V/s ACIT (supra) we are satisfied with the finding of Ld. CIT(A) and of the considered view that since the assessee has furnished all the required details to prove the identity of the lender, genuineness of the transaction and creditworthiness of the lender i.e. Shri Rajesh Sadhwani there is no justification at the end of the Ld. A.O in making the addition for unexplained cash credit of Rs.2,45,00,000/- u/s 68 of the Act. We thus confirm the finding of Ld. CIT(A). In the result appeal of the revenue in Ground No.3 is Dismissed.
112. Remaining grounds of revenue are general in nature which needs no adjudication. Revenue's appeal in the case of M/s Signature Colonisers Pvt. Ltd for Assessment Year 2014-15 is dismissed.
131 M/s Signature Builders & Ors ITA No.184 to 186/Ind/2018 & Ors
113. In the result (i) in the case of M/s Signature Builders, assessee's appeal for 2012-13is dismissed and that for Assessment Year 2013-14 and 2014-15 are allowed whereas the Revenue's appeal for Assessment Year 2012-13 to 2014-15 are dismissed (ii) in the case of M/s Signature Infrastructure, assessee's appeal for Assessment Year 2013- 14 and 2014-15 are allowed and Revenue's appeal for Assessment Year 2012-13 is dismissed and (iii) in the case of M/s Signature Colonisers Pvt. Ltd, Revenue's appeal for Assessment Year 2014-15 is dismissed.
The order pronounced in the open Court on 08.01.2021.
Sd/- Sd/-
( KUL BHARAT) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
दनांक /Dated : 08th January, 2021
/Dev
Copy to: The Appellant/Respondent/CIT concerned/CIT(A)
concerned/ DR, ITAT, Indore/Guard file.
By Order,
Asstt.Registrar, I.T.A.T., Indore
132
M/s Signature Builders & Ors
ITA No.184 to 186/Ind/2018 & Ors
133