Income Tax Appellate Tribunal - Delhi
Dimsy Food And Chemicals (P) Ltd., Delhi ... vs Deputy Commissioner Of Income Tax on 27 April, 2007
Equivalent citations: (2007)110TTJ(DELHI)450
ORDER
R.C. Sharma, A.M.
1. These are three appeals filed by the assessee against the separate orders of CIT(A) dt. 20th April, 2005 and 15th April, 2005 for the block assessment years 1st April, 1990 to 14th Feb., 2001, in the matter of orders passed under Section 158BD of the IT Act, 1961, wherein following grounds of appeal have been raised:
Grounds in IT(SS)A No. 347/Del/2005:
1. On the facts and in the circumstances of the case, the CIT(A) has erred in law in confirming the addition made on account of purchase of land at Village Chawla. The transaction relating to the purchase of property having been disclosed in regular IT return filed by the assessee. The same could not be considered for block assessment. The addition of Rs. 45,43,233 (addition made by the AO) deserves to be deleted.
2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in observing 'if as a result of search or on the basis of material information made available after the search it is found that the fact or the inferences shown in the return were wrong, then it cannot be said that Section 158BB does not apply'. Change of opinion being not permissible under the law and no new facts or evidences having come in possession of the Department as a result of search, the addition on account of purchase of land at Village Chawla deserves to be fully deleted.
3. On the facts and in the circumstances of the case, the AO has erred in making addition of Rs. 50,000 on account of commission, mutation charges, NOC charges, etc. in computing the total cost of land purchased at Chawla by holding that the same have not been shown in the return but paid as per seized document without appreciating the fact the amount incurred by the appellant on the stamp duty etc. amounting to Rs. 2,59,185 at the time of purchase of land at Chawla includes the actual amount paid for commission, mutation charges, NOC charges etc. Therefore, addition of Rs. 50,000 made by the AO as unexplained investment in land is liable to be fully deleted.
4. On the facts and in the circumstances of the case, the AO had no jurisdiction to pass an assessment order under Section 158BD of the IT Act, 1961, since no search had taken place in the case of the appellant and satisfaction as required by Section 158BD of IT Act, 1961 had not been recorded. The order of AO being without jurisdiction requires to be cancelled on this ground.
5. On the facts and in the circumstances of the case, the AO has erred in initiating penalty proceedings under Section 158BFA(2) of IT Act, 1961. The same is liable to be dropped.
6. The CIT(A) has erred in law in confirming the addition made on account of purchase of land at Village Chawla. The transaction was done at arm's length at prevailing prices at the time of purchase and copy of lease deed executed in the same locality at these prices had also been furnished.
7. A document seized at the time of search could not form the basis for forming opinion on cost of purchase which had taken place a few years back.
8. The circle rates of these properties even now are at much lower rates.
9. The appellant craves leave to amend, modify or alter any of the grounds of appeal stated above either before or at the time of hearing of the appeal.
Grounds in IT(SS)A No. 346/Del/2005:
1. On the facts and in the circumstances of the case, the CIT(A) has erred in law in confirming the addition made on account of purchase of land at Village Chawla. The transaction relating to the purchase of property having been disclosed in regular IT return filed by the assessee. The same could not be considered for block assessment. The addition of Rs. 1,60,40,042 (addition made by the AO) deserves to be deleted.
2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in observing 'if as a result of search or on the basis of material information made available after the search it is found that the fact or the inferences shown in the return were wrong, then it cannot be said that Section 158BB does not apply'. Change of opinion being not permissible under the law and no new facts or evidences having come in possession of the Department as a result of search, the addition on account of purchase of land at Village Chawla deserves to be fully deleted.
3. On the facts and in the circumstances of the case, the AO has erred in making addition of Rs. 50,000 on account of commission, mutation charges, NOC charges, etc. in computing the total cost of land purchased at Chawla by holding that the same have not been shown in the return but paid as per seized document without appreciating the fact the amount incurred by the appellant on the stamp duty etc. amounting to Rs. 1,80,080 at the time of purchase of land at Chawla includes the actual amount paid for commission, mutation charges, NOC charges, etc. Therefore, addition of Rs. 50,000 made by the AO as unexplained investment in land is liable to be fully deleted.
4. On the facts and in the circumstances of the case, the AO had no jurisdiction to pass an assessment order under Section 158BD of the IT Act, 1961, since no search had taken place in the case of the appellant and satisfaction as required by Section 158BD of IT Act, 1961 had not been recorded. The order of AO being without jurisdiction requires to be cancelled on this ground.
5. On the facts and in the circumstances of the case, the AO has erred in initiating penalty proceedings under Section 158BFA(2) of IT Act, 1961. The same is liable to be dropped.
6. The CIT(A) has erred in law in confirming the addition made on account of purchase of land at Village Chawla. The transaction was done at arm's length at prevailing prices at the time of purchase and copy of lease deed executed in the same locality at these prices had also been furnished.
7. A document seized at the time of search could not form the basis for forming opinion on cost of purchase which had taken place a few years back.
8. The circle rates of these properties even now are at much lower rates.
9. The appellant craves leave to amend, modify or alter any of the (grounds of) appeal stated above either before or at the time of hearing of the appeal.
Grounds in IT(SS)A No. 345/Del/2005:
1. On the facts and in the circumstances of the case, the CIT(A) has erred in law in confirming the addition made on account of purchase of land at Village Chawla. The transaction relating to the purchase of property having been disclosed in regular IT return filed by the assessee, the same could not be considered for block assessment. The addition of Rs. 84,58,680. (addition made by the AO) deserves to be deleted.
2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in observing 'if as a result of search or on the basis of material information made available after the search it is found that the fact or the inferences shown in the return were wrong, then it cannot be said that Section 158BB does not apply'. Change of opinion being not permissible under the law and no new facts or evidences having come in possession of the Department as a result of search, the addition on account of purchase of land at Village Chawla deserves to be fully deleted.
3. On the facts and in the circumstances of the case, the AO has erred in making addition of Rs. 50,000 on account of commission, mutation charges, NOC charges, etc. in computing the total cost of land purchased at Chawla by holding that the same have not been shown in the return but paid as per seized document without appreciating the fact the amount incurred by the appellant on the stamp duty etc. amounting to Rs. 1,13,800 at the time of purchase of land at Chawla includes the actual amount paid for commission, mutation charges, NOC charges, etc. Therefore, addition of Rs. 50,000 made by the AO as unexplained investment in land is liable to be fully deleted.
4. On the facts and in the circumstances of the case, the AO had no jurisdiction to pass an assessment order under Section 158BD of the IT Act, 1961, since no search had taken place in the case of the appellant and satisfaction as required by Section 158BD of IT Act, 1961 had not been recorded. The order of AO being without jurisdiction requires to be cancelled on this ground.
5. On the facts and in the circumstances of the case, the AO has erred in initiating penalty proceedings under Section 158BFA(2) of IT Act, 1961. The same is liable to be dropped.
6. The CIT(A) has erred in law in confirming the addition made on account of purchase of land at Village Chawla. The transaction was done at arm's length at prevailing prices at the time of purchase and copy of lease deed executed in the same locality at these prices had also been furnished.
7. A document seized at the time of search could not form the basis for forming opinion on cost of purchase which had taken place a few years back.
8. The circle rates of these properties even now are at much lower rates.
9. The appellant craves leave to amend, modify or alter any of the grounds of appeal stated above either before or at the time of hearing of the appeal.
2. Rival contentions have been heard and record perused. In all these appeals, grounds are common and the additions have been made while framing assessment under Section 158BD r/w Section 158BC, on the basis of very same document marked as Annex. AD-46. We have, therefore, heard all the appeals together and are now disposing the same by this consolidated order for the sake of convenience and brevity. Facts in brief are that the search action under Section 132 of the IT Act, 1961 was carried out on 14th Feb., 2001 at various premises pertaining to companies belonging to Usha Group promoted by Shri Anil Rai and Shri Vinay Rai. During the course of search number of loose documents were found and seized, few of which also pertain to assessee company. Notice under Section 158BD for the period 1st April, 1990 to 14th Feb., 2001 i.e. comprising asst. yrs. 1991-92 to 2001-02 (upto 14th Feb., 2001) was issued to the assessee company. While framing assessment under Section 158BD, the AO observed that during the course of search at A-41, Mohan Co-operative Industrial Estate, Badarpur, New Delhi, Annex. AD-46, which is a bunch of loose documents was seized, p. 20 of which shows that the actual cost of land at Village Chawla was @ Rs. 20 lakhs per acre (copy attached as Annex. A-l to his order). As per AO, this page also bifurcates the consideration of purchase of land into cash and otherwise. The contents of this seized documents are reproduced as under:
Land purchase at village Chhawla, New Delhi l. Total and 3 bighas - 12,50,000 2,50,000 1,00,000 Rate 20,00,000 p.a.
2. Stamp duty 8% 20,400 20,000 400
3. Writer 2 No. S.D. 10,000 --- 10,000
4. Mutation 10,000 --- 8,000
5. NOC 8,000 --- 8,000
6. Commission 25,000 5,000 20,000
7. Miscellaneous 6,000 --- 600 G. Total 13,24,000 2,75,000 10,49,000
3. In respect of the above seized documents, the AO commented that the seized document clearly gives in column-2 the total consideration for the purchase of land at Village Chawla and then bifurcates it in the consideration to be shown in records (column-3) and the consideration over and above the disclosed consideration which is reflected in column-4. On the basis of above analysis, the AO inferred that the total consideration of land at Village Chawla, shown in the books was around 20 per cent of the actual consideration i.e. the actual consideration is around 5 times the consideration as per books. Therefore, vide questionnaire dt. 23rd April, 2004, assessee company was asked to show-cause as to why the difference between Rs. 20 lakhs per acre, the acquisition price as shown on seized document and the acquisition price per acre as shown by the assessee company in the IT returns should not be added as unexplained investment for the block period.
4. The assessee filed its reply vide letter dt. 17th May, 2004 and it was contended that the document was seized during the course of search of a third party. Also, the document is neither signed nor dated and no name is mentioned on this document. Therefore, the noting made on this document cannot in anyway be related to the assessee company. Also, it was submitted that it is not known as to what does "P.A." as mentioned on the seized document stands for. The legal presumption under Section 132(4A) of the IT Act, 1961 regarding the document/books of account, etc. found during the course of search is available against the person in whose possession or control such documents were found during the course of search. Since the document was found during the course of search at premises A-41, MCIE, Badarpur, New Delhi, therefore, it cannot be presumed that the document belongs to the assessee company and therefore, under the law no adverse inference can be drawn against the assessee company. In support of this contention assessee has also referred to number of case law.
5. The AO did not accept the assessee's contention and observed that in the return of income filed by the assessee, the assessee had shown purchase of land at Village Chawla. He, therefore, applied the rate of Rs. 20 lakhs per acre with respect to the land holding and made addition on account of difference between the value shown by the assessee in the return of income vis-a-vis the value estimated by the AO by applying rate of Rs. 20 lakhs per acre.
6. By the impugned order, the CIT(A) confirmed the addition by observing that the seized document i.e. page No. 20 Annex. AD-46 was seized from the office of Dr. M.C. Gupta, who was looking after the real estate division of the Usha Group. He further observed that the assessee has not brought any evidence on record to prove as to how the contents of these documents are not true and how the apparent is not real. He, therefore, concluded that the detailed calculations made in the seized paper in question have nothing in doubt that the land was purchased at Rs. 20 lakhs per acre, the document also contends (sic) that for the purchase of stamp duty @ 8 per cent, the consideration shown for three bighas of land was only Rs. 2,50,000 whereas actually price paid for 3 bighas land @ Rs. 20 lakhs per acre was Rs. 20,50,000.
7. Aggrieved by the above order of the CIT(A), the assessee is in further appeal before us.
8. It was contended by the learned Authorised Representative, Shri Ajay Vohra that the document referred by the AO was the dumb document, it was neither written nor signed by any of the directors or employees of the company. There was also no date on the document, nor the name of the company or any person to whom such document was belonging. As per learned Authorised Representative since the document was seized during the course of search of a third party, the same was not having any name to whom it belongs, therefore, noting made on the said document could not in anyway be related to the assessee company. Therefore, he totally denied of having any connection with the said document or that the noting made on the said document had any appearance on the assessee. For this proposition, he relied on various decisions of the Tribunal and the Hon'ble High Court as contained in the paper book placed on the record.
9. On the other hand, learned CIT (Departmental Representative), Shri L.M. Pandey, contended that during the course of search at Usha Group of companies, in the premises situated at A-41, MCIE, Badarpur, which was used as a corporate office of Usha Group, where corporate office of all the concerns of Usha group were located, this important document marked as Annex. AD-46 was found. Furthermore, this document was seized from the office of Dr. M.C. Gupta, who was looking after the real estate division of the group, the importance of this document cannot be underestimated. As per learned Departmental Representative, this seized document clearly indicates the prevailing market rate of land situated at Village Chawla and a further bifurcation has been done with reference to the amount at which registration is to be done and entry to be made in the books of account, vis-a-vis the amount which was paid in cash over and above the value recorded in books of account. As per the learned Departmental Representative, the entire document is to be considered and it is a well known fact that in real estate business, the registration is being done at a lower value than the actual price at which these transactions are actually entered into. Since the document was found indicating the actual price at which transaction was entered into, the AO was perfectly justified in applying the rate of land noted on the seized document so as to find out the unaccounted money invested by the various group companies.
10. We have considered the rival contentions, carefully gone through the orders of the authorities below and also perused the seized documents placed on the record. We had also deliberated on the case law relied by the lower authorities in their respective orders, as well as cited by the learned Authorised Representative and Departmental Representative during the course of hearing before us, in the context of factual matrix of the instant case. Uncontroverted facts in case of all the assessees are that whatever investment was made by them in the land, the same were properly recorded in the regular books of account and the same were also filed along with their return of income. Fact of assessee having and owning the land was within the knowledge of the Department as per the returns filed by the assessee. There is no dispute to the well-settled legal proposition that assessment made under Chapter XIV-B is in addition to the regular assessment and such special assessment needs to be restricted to compute the undisclosed income based on the evidence found as a result of search or requisition of books of account, etc., and such other materials or information as are available with the AO and relatable to such evidence. The combined reading of the provisions of Sections 158BA and 158BB shows that the AO has to prove on the basis of evidence found as a result of search and such other material or information as are available with him and relatable to such evidence that the 'assessee had the undisclosed income chargeable to tax in the block assessment. In block assessments, additions can be made on the basis of concrete material and not on suspicion or surmises. Suspicion, however strong, cannot take place of proof. In the case of CTT v. Khushlal Chand Nirmal Kumar (2003) 183 CTR (MP) 503 : (2003) 263 TTR 77 (MP), it is held that even after the amendment to Section 158BB w.e.f. 1st July, 1995, emphasis has been given to the fact that evidence must have been found during search and only thereafter the question of gathering any material information would arise based on search inquiry/material. The undisputed facts in the instant case are also that the document so found during the course of search marked as Annex. AD-46, on the basis of which addition was made by the AO, was neither signed nor dated, on this document no name was mentioned so as to relate the same to some person. It was also not known as to who had written or prepared the said document. As per provisions of Section 158BD, where the AO is satisfied that any undisclosed income belongs to any person other than a person with respect to whom search was made, then the document seized shall be handed over to the AO having jurisdiction over such other person for proceeding against such other person. Thus, prima facie, the AO is required to be satisfied with the document found during search as belonging to some other person. Unless the name of such other person is noted on the document so found and seized, or any noting is found on such document which can reasonably be co-related with such other person, such dumb document cannot be made the basis for making addition in the hands of such other person under Section 158BD of the Act. The document so seized, in the instant case, during the course of a third party did not bear the name of any of the assessee company in whose hands the AO had made addition under Section 158BD of the Act nor the noting on the seized paper indicated any unaccounted money having been invested by the assessee in the purchase of land which was duly disclosed in the regular returns much prior to the date of search. Even during the course of search or thereafter, the Department has not recorded any statement of the person from whose possession the document was found, so as to find out as to whom this document belongs. No corroborative material of any nature whatsoever was brought on record by the AO to indicate that noting on the seized paper was related to the assessee. This document was seized from the office of Dr. M.C. Gupta, but neither during the course of search nor even thereafter the Department has tried to record his statement to substantiate their stand that document was belonging to any of the companies in whose hands the addition was made. This document indicated transaction in respect of 3 bighas of land, alleged to be purchased from three persons, but in the books of none of the assessees there was any such transaction for 3 bighas, so as to corroborate the same with seized document. Furthermore, the Department itself has carried out the valuation of the land shown by the assessee in their regular returns, by its own valuation cell, which has also valued the same near to the price at which these were shown by the assessee in their books of account. The registering authorities have also registered the land purchased by the assessee at the price shown in the sale deed. Thus, neither the State Government being the registering authorities supports the value taken by the AO on the basis of dumb document, nor the valuation cell of the IT Department itself supports the rate of land shown in the document so found. To substantiate the rate of land mentioned in the seized document, the AO has also not tried to record the statements of persons from whom assessee had purchased the land. Undisputedly, the land so purchased by the assessee situated in Village Chawla, was registered by the stamp authorities at the prevailing price of land situated in that area, and the source was comparable with the rate at which assessee had actually purchased the land. No extra stamp duty was imposed while registering the land on the plea of higher value than the value at which land was actually purchased as per sale deed entered between the assessee and owner of land. Valuation cell of the IT Department is entrusted with the responsibility to find out fair market value of capital asset, as and when any reference is made by the AO. AO may refer the valuations of capital asset to a Valuation Officer when he finds that the value of the asset as claimed by the assessee is less than fair market value. In the instant case to find out the fair market value of land, so as to co-relate the same with the rate of land stated in the document so found, the AO had referred the matter to its valuation cell, however instead of supporting the AO's allegation, the Valuation Officer indicated the fair market value of land at the price recorded by the assessee in its books of account, that was the reason that AO did not give copy of such valuation report, in spite of written request of the assessee. The assessee vide its letter dt. 17th May, 2004, asked the AO to give copy of valuation report, however the AO declined to give copy of valuation report prepared by the officers of his Department i.e. valuation cell. The AO stated in his order that valuation report is erroneous insofar as it relies on the comparable instances for purchase of similar properties i.e. it goes by the registration value of the comparable instances of purchases does not take into account the market value.
11. Applying the propositions laid down by the various authorities as referred by the learned Authorised Representative during the course of hearing, to the facts and circumstances of the present case where addition has been made on the basis of dumb document, the AO could not corroborate the document or its contents with any other information or evidence, whereas on the contrary the documents/information so gathered by the AO goes against the Department, we do not find any merit in the additions so made by the AO and confirmed by the CIT(A), in case of all the assessees. We therefore direct for deletion of all these additions.
12. With regard to ground taken for not recording of satisfaction as required by Section 158BD, the learned Departmental Representative during the course of hearing shown the statement of satisfaction so recorded, the learned Authorised Representative therefore did not press this ground of appeal. The same is, therefore, dismissed in limine.
13. Ground taken with regard to initiation of penalty proceedings under Section 158BFA(2), being premature is dismissed in limine.
14. In the result, all the three appeals of the assessee are allowed in terms indicated hereinabove.