Income Tax Appellate Tribunal - Indore
Ag-8 Ventures Ltd., Bhopal vs Acit, Central-1, Bhopal on 16 February, 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.83,84,86,87,109,110/Ind/2019,
Assessment Years: 2008-09, 2009-10, 2011-12, 2012-13, 2013-
14 & 2014-15
M/s. AG8 Ventures Ltd,
JCIT (OSD), Central-1 Vs. 206, Shrishti Complex,
Zone-II,
Bhopal
M.P. Nagar, Bhopal
(Revenue ) (Appellant)
PAN No.AADCA1214E
IT(SS)A No.90,91 & ITA No.922 &923/Ind/2019
Assessment Years: 2013-14 & 2014-15
M/s. AG8 Ventures Ltd,
206, Shrishti Complex, Vs. JCIT (OSD), Central-1
Zone-II,
Bhopal
M.P. Nagar, Bhopal
(Appellant) (Revenue )
PAN No.AADCA1214E
Revenue by Shri S.S. Mantri, CIT
Appellant by S/Shri Ashish Goyal N.D. Patwa,
ARs
Date of Hearing 06.01.2021
Date of Pronouncement 16.02.2021
ORDER
PER BENCH The above captioned appeals by the revenue pertaining to Assessment Years 2008-09, 2009-10, 2011-12, 2012-13 and cross appeals by the assessee and revenue for Assessment Years 2013-14 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
and 2014-15 are directed against the yearwise orders of Ld. Commissioner of Income Tax(Appeals)-3, Bhopal (in short Ld. 'CIT(A)') dated 25.02.2019 (A.Y. 2008-09), 25.02.2019 (A.Y. 2009-
10), 27.02.2019 (A.Y. 2011-12), 27.02.2019 (A.Y. 2012-13), 25.03.2019 (A.Y. 2013-14) and 25.03.2019 (A.Y. 2014-15); against the consolidated assessment order u/s. 153A / 143(3) of the Income-tax Act, 1961 (In short the 'Act') passed on 30.03.2016 framed by DCIT-Central-I (in short Ld. 'A.O'). Further, assessee's appeal in ITA 922/Ind/2019 is the penalty appeal u/s. 271(1)(c) for A.Y. 2013-14 against the penalty levied by the Ld. CIT(A) vide his order dated 22.07.2019. Also, assessee's appeal ITA 923/ Ind/ 2019 is the penalty appeal u/s. 271AAB(1)(c) for A.Y. 2014-15 against the penalty levied by the Ld. CIT(A) vide his order dated 09.08.2019.
2. Briefly stated facts as culled out from the records are that the assessee company is engaged in the business of real estate developer and builder. On 06.08.2013, a survey u/s. 133A was carried out at the premises and Buidling Projects run by the assessee-company. Subsequently, a search u/s. 132 was also 2 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
carried on 29-31 January 2014 at the business place of assessee company and residential premises of Directors. Various books of accounts and documents were seized.
3. After the search and survey operation, notice u/s. 153A was issued for filing of return. Returns of income were thereafter filed by the assessee as under:
A.Y. PB Date of Total Income Date of Total income Addl filing filing in Return Income return u/s. return u/s. u/s. 153A 139(1) 153A 2008-09 12-44 27.02.2009 2,08,45,740 23.09.2015 2,08,45,740 Nil 2009-10 47-68 26.12.2009 3,22,68,100 23.09.2015 3,22,68,100 Nil 2010-11 71-98 01.04.2011 7,94,27,760 23.09.2015 7,94,27,760 Nil ** 2011-12 146-166 30.09.2011 12,72,20,780 23.09.2015 12,72,20,780 Nil 2012-13 167-206 31.03.2013 17,41,09,640 23.09.2015 17,41,09,640 Nil 2013-14 213-245 12.11.2014 11,04,36,150 23.09.2015 11,04,36,150 Nil 2014-15 257-291 12.11.2014 8,48,71,480 N.A. 8,48,71,480 Nil ** The appeal of department has been dismissed on account of low tax effect.
4. After considering all the documents and after detailed inquiries, a consolidated assessment order was passed u/s. 153A r/w section 143(3) on 30.03.2016, making addition on various grounds. Thereafter the assessee preferred an appeal before the ld CIT(A) who vide the year-wise impuged orders deleted part of the 3 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
additions. Against the orders of ld CIT(A) both the assessee and department are in appeal.
The following grounds have been raised by the department:-
IT (SS)A 83/Ind/2019 A.Y. 2008-09
1. On the fact and in the Circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 75,00,000/- made by the A.O. on account of disallowance u/s 40A(3) of income Tax Act 1961.
2. On the fact and in the Circumstances of the case the case the Ld. CIT(A) has erred in deleting the addition of Rs. 23,00,000/- made by the A.O. on account of Unexplained expenditure.
3. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,60,73,981/- made by the A.O. on account of disallowance claimed u/s 80IB (10) of income Tax Act. 1961.
4. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,29,271/- made by the A.O. on accounts of disallowance of expenses u/s 14A r. w. r. 8D of the income Tax Rules.
IT(SS)A 84/Ind/2019 A.Y. 2009-10
1. On the fact and in the Circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 4,96,677/- made by the A.O. on account of unaccounted payments to Rajeev Soni.
2. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting of Rs. 67,51,000/- made by the A.O. on account of unexplained expenditure.
3. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition o Rs. 3,56,08,183/- made by the A.O. on account of disallowance of deduction claimed u/s 80IB (10) of income Tax Act, 1961.
4IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
4. On the fact and in the Circumstances of the Ld. CIT(A) gas erred in deleting the addition of Rs. 25,36,515/- made by the A.O. on account of disallowance of expenses u/s 14A r.w.r. 8D of the Income Tax Rules. IT(SS)A 86/Ind/2019 A.Y. 2011-12
1. On the fact the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 43,38,292/- made by the A.O. on account of investment not fully disclosed in books of accounts. Reliance is placed on the decision of Hon,ble M.P. High Court in the case of CIT vs Abeeson Hotels Pvt. Ltd. (2004) 191 CIT MP 263.
2. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 5,00,000/- made by the A.O. on accounts of unaccounted receipts.
3. On the fact and in the Circumstances of the Ld. CIT (A) has erred in deleting the addition of Rs. 21,00,000/- made by the A.O. on accounts of unexplained investment.
4. On the fact and in the Circumstances of the case Ld. CIT (A) erred in deleting the addition of Rs. 3,16,00,000/- made by the A.O. on account of unexplained investment.
5. On the fact in the Circumstances of the Ld. CIT (A) has erred in deleting the addition of RS. 3,16,00,000/- made by the A.O. on account of unexplained expenditure.
6. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 5,96,000/- made by the A.O. on account of unaccounted payments to Rajeev Soni.
7. On the fact and in the Circumstance of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 30,00,000/- made by the A.O. on account of unaccounted expenditure.
5 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
8. On the fact and in the Circumstances of the case of the Ld. CIT (A) has erred in deleting the addition of Rs. 79,22,875/- made by the A.O. on account of disallowance of deductible expenditure.
9. On the fact and in the Circumstance of the Ld. CIT (A) has erred in deleting the addition of Rs. 1,56,43,283/- made by the A.O. on account of on money payments on the sale of units/plot of Highland project.
10. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of RS. 2,68,13,834/- made by the A.O. on account of disallowance of deduction claimed u/s 80IB (10) of Income Tax Act, 1961.
11. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 1,19,22,476/- made by the A.O. on account of disallowance of expenses u/s 14 r.w.r 8D of the Income Tax Rules. IT(SS)A 87/Ind/2019 A.Y. 2012-13
1. On the fact and in the Circumstance of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 4,18,74,359/- made by the A.O. on account of investment not fully disclosed in books of account. Reliance is placed on the decision of Hon'ble M.P. High Court in the case of CIT vs Abeeson Hotels Pvt. (2004) 191 CTR MP 263.
2. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 68,50,000/- made by the A.O. on account of unaccounted receipts.
3. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 54,62,000/- made by the A.O. on account of unexplained investment.
4. On the fact and in the Circumstance of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 51,000/- made by the A.O. on account of disallowance u/s 40A (3) of Income Tax Act, 1961. 6 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
5. On the fact and in the Circumstance of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,81,00,000/- made by the A.O. on account of unexplained expenditure.
6. On the fact and in the Circumstance of case the Ld. CIT (A) has erred in deleting the addition of Rs. 4,00,00,000/- made by the A.O. on account of unexplained expenditure.
7. On the fact and in the Circumstance of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 5,96,000/- made by the A.O. on account of unaccounted payments to Rajeev Soni.
8. On the fact and in the Circumstance of the case the Ld. CIT (A) has erred in deleting the additional of Rs. 1,16,60,000/- made by the A.O. on account of unexplained expenditure .
9. On the fact and in the Circumstance of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 1,77,65,000/- made by the A.O. on account of unexplained expenditure.
10. On the fact and in the Circumstance of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 70,08,192/- made by the A.O. on account of disallowance of deduction expenditure.
11. On the fact and in the Circumstance of the Ld. CIT (A) has erred in deleting the addition of Rs. 15,00,000/- made by the A.O. on account of unaccounted receipts.
12. On the fact and in the Circumstance of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 2,67,71,771/- made by the A.O. on account of on money payment on the sale of units/plot of Highland Project.
13. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 1,51,98,000/- made by the A.O. on account disallowance of expenses u/s 14A r.w.r 8D of the Income Tax Rules. IT(SS)A 109/Ind/2019 A.Y. 2013-14 7 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
1. On the fact and in the Circumstance of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 6,17,61,538/- made by the A.O. on account of investment not fully disclosed in books of account.
2. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 1,20,00,000/- made by the A.O. on account of unaccounted cash receipts.
3. On the fact and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 1,20,00,000/- made by the A.O. on account of unexplained money.
4. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 1,28,64,700/- made by the A.O. on account of unaccounted receipts.
5. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 55,24,697/- made by the A.O. 0n account of unaccounted expenditure.
6. On the fact Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 8,50,000/- made by the A.O. on account of unaccounted receipts.
7. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 60,000/- made by the A.O. on account of disallowance u/s 40A(3).
8. On the fact and in the Circumstances of the case Ld. CIT (A) has erred in deleting the addition of Rs. 1,34,78,580/- made by the A.O. on account of unexplained expenditure.
9. On the fact and in the Circumstances of the case the Ld.CIT (A) has erred in deleting the addition of Rs. 5,96,000/- made by the A.O. on account of unaccounted payments.
10. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 4,00,000/- made by the A.O. on account of unexplained expenditure.
8 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
11. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 1,00,000/- made by the A.O. on account of unexplained expenditure.
12. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 6,39,49,728/- made by the A.O. on the account of disallowance of deductible expenditure.
13. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 10,00,000/- made by the A.O. on account of unaccounted receipts.
14. On the fact and the Circumstance of the Ld. CIT (A) has erred in deleting the addition of Rs. 2,11,43,000/- made by the A.O. on account of disallowance of expenses u/s 14A r.w.r. 8D of the Income Tax Rule. IT(SS)A 110/Ind/2019 A.Y. 2014-15
1. On the fact and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 14,77,100/- made by the A.O. on account of unexplained money.
2. On the fact and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 11,78,40,913/- made by the A.O. on account of investment not fully disclosed in books of account
3. On the fact and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 5,40,06,795/- made by the A.O. on account of unaccounted receipts.
4. On the fact and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 7,12,72,179/- made by the A.O. on account of unexplained expenditure.
5. On the fact and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 10,00,000/- made by the A.O. on account of unaccounted receipts.
9 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
6. On the fact and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 5,96,000/- made by the A.O. on account of unaccounted payments.
7. On the fact and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 5,00,000/- made by the A.O. on account of unexplained expenditure.
8. On the fact and in the circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 40,00,000/- made by the A.O. on account of unaccounted receipts.
9. On the fact and the Circumstance of the Ld. CIT (A) has erred in deleting the addition of Rs. 2,09,10,000/- made by the A.O. on account of disallowance of expenses u/s 14A r.w.r. 8D of the Income Tax Rule.
5. Following grounds have been raised by the assessee:-
IT(SS)A 90/ Ind/ 2019 A.Y. 2013-14
1. The order passed u/s. 153A/ 143(3) by lower authorities is illegal, invalid, and untenable in law. The same be kindly cancelled
2. On the facts and in the circumstances of the case, the ld. CIT(A) was not justified in making any enhancement of Rs. 2.00 crore and in adjusting the same against the increase in excess profit on the sale of Aakriti High land plots at Rs. 4,34,08,100/-.
3. On the facts and in the circumstances of the case, the ld. CIT(A) was not justified in adopting the plot sale value of Aakriti High land at Rs.
43,40,81,000/- of booking value in place of registered value of Rs. 1,33,27,660/-.
4. On the facts and in the circumstances of the case, the ld. CIT(A) was not justified in not accepting the alternative proposal of the appellant that it 10 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
may be held that the appellant got 5% or 7.50% excess money on the sale of 5% or 7.50% plots of Aakriti High Land.
5. The appellant carves leave, to add, to alter and/ or to modify the grounds of appeal on or before the date of hearing.
IT(SS)A 91/ Ind/ 2019 A.Y. 2014-15
1. The order passed u/s. 143(3) by lower authorities is illegal, invalid, and untenable in law. The same be kindly cancelled.
2. On the facts and in the circumstances of the case, the ld. CIT(A) was not justified in confirming the addition of Rs. 87,97,113/- and enhancing the said addition to Rs. 28.00 crore by making the addition of Rs. 27,16,02,887/- simply on the basis of half hearted and retracted statement recorded in the midnight of one of the directors.
3. On the facts and in the circumstances of the case, the ld. CIT(A) was not justified in confirming/ making the addition of Rs. 28.00 crore without having any collaborative and supportive evidence for the said income of the assmt. year 2014-15.
4. The appellant carves leave, to add, to alter and/ or to modify the grounds of appeal on or before the date of hearing.
6. We will first take the revenue's appeals year-wise and if common grounds are raised for multiple years, same will be dealt together.
11 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
7. Ground No. 1 for A.Y. 2008-09 in the revenues appeal in IT(SS)A 83/IND/2019 relates to disallowance u/s. 40A(3) of the Income-tax Act, 1961 to the tune of Rs. 75,00,000/-.
8. The facts as culled from the records are that the Learned Assessing Officer (In short "Ld.AO") found during the assessment proceedings u/s. 153A that the appellant made cash payments to some sellers i.e. Smt. Ayodhya Patidar, Shri Ramkuwar Patidar and Krishna Patidar, during the current year, for the purchase of 3.95 acres of agricultural land situated at village Salaiya in the F.Yr. 2007-08. The Ld. AO treated the cash payments for purchase of land at Rs.75,00,000/- as a disallowable expense u/s.40A(3) of the Act since it being part of stock in trade and claimed as revenue expenditure . The ld. Assessing officer had raised the objections to the explanations filed by the appellant vide his order in para 19.3 at page 65-66, which are reproduced as under:-
i. "The cash payments are made for purchase of land which is stock in trade of the assessee and therefore, the provisions of sec. 40A(3) are clearly applicable in assessee's case.
ii. The assessee's case is not covered u/r. 6DD of the IT rule r.w.s. 40A(3) 12 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
iii. The assessee's contention that cash payments are made in extreme circumstances and on insistence of the payee is without any supporting documentary evidences. No such instance has been quoted by the asseesee in its written submission.
iv. The assessee has not brought on record any instance of refusal of seller to accept payment by cheque."
The Ld. Assessing Officer therefore made the addition of Rs.
75,00,000 making disallowance u/s. 40A(3) of the Income-tax Act, 1961.
9. Against this addition the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A) placed reliance on the judgement of Hon'ble Apex Court in the case of Attar Singh Gurmukh Singh v. ITO [1991]191ITR 667 and deleted the addition. Relevant extract is reproduced below:-
4.2.9 Thus considering the facts and affidavits of the sellers it is evidently clear the transactions were made at a place where the seller/s did not have a bank account, thus, the case of assessee falls within the exception of Clause (g) (j) (k) of rule 6DD of the Rules. Therefore, on the facts, the case of assessee being within the purview of Rule 6DD (j) of the Rules, no addition under Section 40A(3) of the Act was justified. Thus, judiciously following the above cited case laws, I am of the considered opinion that the AO was not justified in disallowing payment made to sellers u/s 40A(3) of the IT Act, when the case of appellant in covered under exception 13 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
provided in Rule 6DD (j) as held in the case of Attar Singh Gurmukh Singh (supra). Thus the addition made by the AO u/s 40A(3) amounting to Rs. 75,00,000/- is Deleted. Therefore, appeal on this ground is Allowed."
10. Against this deletion, the revenue is in appeal before us. During the course of hearing, the Ld. CIT(DR) relied on the findings of the Ld. AO and submitted that it is uncontroverted fact that the payment for purchase of land was made in cash. Further, the assessee, being builder and developer, the purchase of land is a business expenditure, therefore section 40A(3) of the Act was clearly attracted. Assessee could not prove that the case of the assessee falls under Rule 6DD. The disallowance done by the Ld. Assessing Officer is therefore justified.
11. On the other hand, the Ld. Counsel for the assessee at first challenged the addition on legal ground submitting that the present proceedings are not regular assessment proceedings but are u/s. 153A r/w section 143(3) which is an outcome of the search u/s.
132. On the date when the search was initiated the position of regular assessment was as under:
14
IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
A.Y. Return of PB Status on date of search Remarks Income u/s. 139 2008-09 27.02.2009 PB 12- Assessment u/s. 143(3) Assessment 13 completed dt.16.12.2010 order PB 45- 46 2009-10 26.12.2009 PB 47- Assessment u/s. 143(3) Assessment 49 completed dt. 29.12.2011 order PB 69- 70 2010-11 01.04.2011 PB 71- Assessment u/s. 143(3) Assessment 73 dt. 14.03.2013. Appeal order PB 99-
decided by Hon'ble ITAT. 107.
ITAT Order -
PB 125-145 2011-12 30.09.2011 PB 146 No assessment. Due date for notice u/s. 143(2) expired on 30.09.2012.
2012-13 31.03.2013 PB 167- No assessment. Due date 169 for notice u/s. 143(2) expired on 30.09.2013.
2013-14 12.11.2014 PB 213 Return filed after search. 2014-15 12.11.2014 PB 257 Return filed after search. Thus, the assessment for A.Y. 2008-09 was already concluded assessment and therefore, it was a non-abated assessment. He therefore relying on various judgments submitted that the scope of the proceedings u/s. 153A would be limited to only those incriminating material which were found during the course of search. He submitted that in respect of present addition, no incriminating document was found during the search. The transaction for purchase of land was duly recorded in the books of 15 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
the assessee. Thus, the addition itself was without any basis and liable to be deleted. He relied on following cases:
i. CIT vs Continental Warehousing Corporation 58 taxmann.com 78 (Bom.) ii. Om Shakthy Agencies (Madras) P Ltd. 157 ITD 1062 (Trib.
Chennai) iii. Parag M. Sanghvi 63 taxmann.com 118 (Trib. Mumbai) iv. CIT vs Kabul Chawla 380 ITR 573 (Del.) v. CIT vs Lata Jain (Del HC)
12. As regards disallowance u/s. 40A(3), Learned counsel for the assessee submitted that during the current A.Y., assessee made payment of Rs. 75,00,000 in cash for purchase of 3.95 acres of agricultural land from three persons in village Salaiya:
a. Smt. Ayodhya Patidar b. Smt. Ramkunwar Patidar c. Smt. Krishna Patidar The reasons for payment in cash was also mentioned as they were unaware of assessee-company and also there was no branch of bank in village Salaiya at that time. He relied on Rule 6DD(g) for contending that since the payment was made at a place which was not served by any bank, therefore the payment was allowable. Ld. 16 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Counsel for the assessee submitted that an affidavit in this regard was placed at PB 337-339 to contend that there was no banking facility in village Salaiya. He submitted that the affidavits were confronted to the ld Assessing Officer, who did not deny the same in the remand proceedings.
13. Ld. Counsel for the assessee further submitted that the expenditure is duly recorded in the books of account. The land purchased was developed for making housing projects later on. In the affidavit filed by the sellers at PB 337-339, they have clearly stated that they were not much aware of the assessee company and therefore the transaction was done in cash. Thus, the payment was made in cash, as the parties demanded the payment in cash. He relied on the case of Gurdas Garg vs CIT in TS-5374-HC-2015(P & H) that the conditions mentioned in Rule 6DD are not exhaustive and are only illustrative. In a case of business expediency, the expenditure is allowable. He further relied on the judgment of Tirupati Construction vs DCIT (Trib. Indore) copy of which was placed at PB 373-399. He therefore concluded his arguments by submitting that in the present case, having regard to the 17 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
"considerations of business expediency" the payment is made in cash, as the sellers were insisting payment in cash. Ld. Counsel for the assessee therefore submitted that the disallowance u/s. 40A(3) is uncalled for.
14. We have considered the rival submissions and gone through the orders of authorities below, and the evidences on record. We find that the Learned counsel for the assessee is correct in contending that the scope of the present proceedings shall be limited to the evidences found during the course of search. The contention of the assessee is supported by the case of CIT vs Kabul Chawla 380 ITR 573 (Del.) whereby it has been held as under:-
"37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".18
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iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."
v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."
15. In the present case, Ld. AO has not brought any evidence in regard to any incriminating material found during the course of search relating to the addition in dispute before us. It is undisputed that the transaction for purchse of land was duly recorded in the books of the assessee. The returns for the current A.Y. 2008-09 were already filed; and the assessment was also concluded on 16.12.2010. Thus, the addition could have been made only in respect of incriminating material found during the course of 19 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
search u/s.132 of the Act.. The present addition is therefore not justified.
16. In any case, even on merits, clause (g) of Rule 6DD reads as under:
"(g) where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town;"
It has been submitted by the assessee before the Ld. Lower authorities that the payment is made in village Silaiya, which at that time was not served by any bank. In support of his contention an affidavit was also filed, which is placed at PB 337-339. Even in the remand proceedings, the affidavits were confronted to the Ld. AO, who did not deny the same in the remand proceedings. Thus, the expenditure which is covered under Rule 6DD(g) is allowable. Further Learned counsel has submitted that the expenditure is genuine and is not doubted by the department. He relied on Gurdas Garg vs CIT in TS-5374-HC-2015(P & H) to contend that the conditions mentioned in Rule 6DD are not exhaustive and are only illustrative. In a case of business expediency, the expenditure is allowable. He further relied on the judgment of Indore Bench of Tribunal in the 20 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
case of Tirupati Construction vs DCIT, ITA 522/ Ind/ 2014, where vide order dated 14.07.2016, it was held as under:
"Thus, we find that the assessee has made payment of purchase under exceptional circumstances out of business expediency and also filed all the relevant documents and evidence in support of the same before both the lower authorities and the lower authorities have not brought any material on record by verifying the same that they are false, bogus or unreliable. Therefore, in the given circumstances, we are of the view that the assessee is covered by the exceptions in the proviso below sub- section (3A) to section 40A(3) and no disallowance u/s 40A(3) can be made in the hands of the assessee."
17. We therefore respectfully following the judgment in the case of Gurdas Garg (supra) and Tirupati Construction (supra) hold that having regard to business expediency, the payment in cash for purchase of land through registered deed was allowable. Thus, considering the facts and the circumstances of the case, the expenditure was allowable as Learned AO could not have questioned the allowability of expenditure without any incriminating document in the assessment u/s. 153A; the payment was covered under Rule 6DD(g); and that the payment was a genuine expenditure and was made under business expediency. The order of the Ld. CIT(A) is therefore sustained on this issue. Thus 21 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Ground No.1 of Revenue's Appeal for Assessment Year 2008-09 is dismissed.
18. Now we take up the common Ground 2 of revenue's appeal for A.Y. 2008-09 which deals with 'on-money' payment of Rs. 23,00,000/-
19. The facts relating to this issue as culled out from the records are that during the course of search at the office premises of AG8 Ventures Ltd., located at F-11, Plot No. 201, Shrihti Complex, Zone- I, M.P. Nagar, Bhopal, 21 registries were found. Further, 6 sale deeds were impounded from the office of Aakriti Aqua City Gram- Chhan 11th Mile Hoshangabad Road, Bhopal. During the course of assessment, Ld. AO examined the various parties from whom the assesee purchased the land, and found that 'on-money' has been paid by the assessee for various transactions. The assessee submitted that no on-money has been paid, however, Ld. AO rejected the submission of the assessee holding as under at para 24.4 page 114 of his order:-
(i) "The extensive and elaborate enquiries have proved that the asseseee has made unaccounted cash payments for the purchase of lands to the sellers over and above the registered sale consideration 22 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
(ii) The statements of sellers /farmers have been recorded on oath in which many of them have stated that they have utilized the cash receipts from the assessee for purchasing other lands and properties and invested in construction of houses, vehicles and marriages of family members etc.
(iii) The bank accounts of the farmers have been analysed , which are awash with cash deposits around the time sale of lands. They have explained that the cash deposits are out of on money received by them from the assessee.
(iv) The contents of the ledger named 'New Land of Phanda" as scanned above stand proven as most of the persons named therein have attended in compliance to summons issued by this office and have confirmed of having received cash.
(v) The assessee has been confronted with the statements of the sellers and copies of the same have been supplied to it. The assessee has not been able to refute the facts contained in these statements".
20. In respect to the instant year, Ld. AO found that the assessee had purchased 1.89 acres of agricultural land at Village Phanda, from Shri Bhairu Singh. The registry for same was done on 27-08- 2007 for Rs. 9,50,000/- and the payment was made through DD No. 005309. During the assessment, Ld. Assessing officer recorded the statement of Shri Prakash S/o. Shri Bhairu Singh on 05-02- 2016 on behalf of his father Shri Bhairu Singh. Shri Prakash admitted that his father had received Rs. 23,00,000/- in cash from the assessee as sale consideration for the above said transaction. 23 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
He, therefore, disallowed Rs. 23,00,000/- and added to the total income of the assessee.
21. Assessee challenged the addition before the Ld. CIT(A). Ld. CIT(A) deleted the addition examing the facts in the light of judicial pronouncements.
22. Now, the revenue is in appeal against this order. Learned Department Representative submitted that there was clear-cut evidence in the form of statement to establish on-money payment. He further submitted that the extensive and elaborate enquiries have proved that the asseseee has made unaccounted cash payments for the purchase of lands to the sellers, over and above the registered sale consideration. The statements of sellers /farmers have been recorded on oath in which many of them have stated that they have utilized the cash receipts from the assessee for purchasing other lands and properties and invested in construction of houses, vehicles and marriages of family members etc. He therefore contended that the order of the Ld. AO may kindly be restored and the addition may kindly be confirmed. 24 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
23. Per Contra the Ld. Counsel for the assessee submitted that during the course of search, although the purchase deeds were found, but all the land purchases were duly recorded in the books. No evidence was found during search to show that there is any "on- money" payment by assessee-company. During the current year, assessee purchased 1.89 acres of agricultural land at village Phanda from one Bhairu Singh for Rs. 9,50,000 (by banking channels) on 27.08.2007. During assessment proceedings on 05.02.2016 behind the back of assessee statement u/s.131 of the Act of Prakash S/o. Bhairu Singhed was recorded, who stated that Bhairu Singh received "on-money" for sale of land in cash, which was deposited in bank at a later date. The bank statement, as contended was never brought on record. Assessee requested to the ld Assessing Officer to provide cross-examination; but same was not provided thus defying the principles of Natural Justice and is supported in favor of assessee by the following decisions:-
i. Kishinchand Chellaram 125 ITR 713 (SC) ii. P.S. Abdul Majeed v. Agrl. ITandSTO [1994] 209 ITR 821 (Ker.) iii. CITv. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal.) iv. Hirji Nagji and Co. v. CIT [1976] 105 ITR 286 (Ori.) 25 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
v. J.K Synthetics Ltd. v. ITO [1986] 19 ITD 102 (Delhi) vi. CIT v. Biju Patnaik [1991] 190 ITR 396 (Ori.)". It is unknown why statement of seller himself was not taken, but of his son was taken. Son's statement would not have any evidentiary value in the transaction where he was not a party to the transaction. He contended that the disposition of making "on- money" payment is merely a bald allegation which is not corroborated. Statement of third person, which is not corroborated by any evidence, has no evidentiary value and in support of this contention on following decisions:-
i. ACT vs Prabhat Oil Mills 52 TTJ 533 (Ahd);
ii. Chironjilal Steel Rolling Mills vs CIT 84 ITR 222 (P&H).
iii. CBI vs V.C. Shukla 1998 SCC 410; iv. Ashwini Kumar 39 ITR 183 (Del.); v. Satnam Singh Chhabra 74 TTJ 976 (Luck.); vi. Ashadevi 101 TTJ 332 (Ahd.); vii. ACIT vs Kamla Prasad Singh 3 ITR (Trib.) 533 (Pat.); viii. Sheth Akshya Pushpavandan 130 TTJ 42 (Ahd.); ix. Balram Jakhar 98 TTJ 924 (Asr.); x. Common Cause (SC), following V.C. Shukla (supra)
24. We have considered the rival submissions and gone through the orders of the Ld. Lower authorities and the evidences on record.
Through Ground no.2, Revenue has challenged the finding of Ld.CIT(A) deleting addition of Rs.23,00,000/-for alleged On-Money 26 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
made by the Ld.AO. We observe that the registries were found during the course of the search. But the transaction value in the the registry was same as the transaction value recorded in the books. Like in the present year, the transaction with Shri Bhairu Singh as per the registry at PB 420-429 is at Rs. 9,50,000; and the transaction in the books is recorded at PB 437 which is at same value i.e. Rs. 9,50,000. Thus, there was no infirmity in the transaction recorded in the books and the transaction as per the registry value. In other words, no incriminating material was found during the course of search to show on-money payment. It was subsequently, during the course of assessment proceedings that the statement of the sellers were recorded. In the present case, ironically when the seller Shri Bhairu Singh was available, it is unknown why the statement of third person, Shri Prakash, who was the son of Shri Bhairu Singh was recorded. Further, Ld AO mentioned in his order that the bank statement of the farmers were brought on record to prove that the on-money was deposited by them in their bank statement. The assessee has submitted that no such bank statement was ever produced. Even in the department's 27 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
paper book, no such bank statement has been filed. The ld counsel for the assessee also submitted that during assessment, assessee requested for cross-examination of the parties, who accepted on- money payment by the assessee. Ld. Counsel for the assessee referred to reply filed by the assessee before the Ld. Assessing Officer. He specifically referred to PB 2161 where a request was made by the assessee for granting cross-examination. No such cross-exmaination was granted. Relevant part of the order of Ld.CIT(A) deleting the addition is extracted below:-
4.3.7 In view of the above, firstly, the AO ought to have given opportunity of cross examination to the appellant. The appellant has strongly contended that why statement of Shri Prakash was recorded when actual seller i.e. Shri Bhairu Singh was alive. Secondly, the AO should have brought evidences having direct nexus with the alleged on money payment of Rs. 23,00,000/-. Last but not the least, the loose papers were found in possession of Shri Yashovardhan Jain and not from appellant. Thus, keeping in view the above discussion and judiciously following the decision of Hon'ble Supreme court in the case of Krishinchand Chellaram (super), the AO was not justified in making addition of Rs.28
IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
23,00,000/-. Thus, addition made by the AO amounting to Rs. 23,00,000/- is Deleted. Therefore, appeal on this ground is Allowed."
25. We therefore find that in absence of any incriminating material found during the course of search, and further in absence of any direct or corroborative material even during the assessment, except for the statement of son, who was not a party to the transaction; and whose statement has no evidentiary value for this transaction; and further the fact that cross-examination was not granted; the addition has no legs to stand. The Ld. CIT(A) was justified in deleting the addition. No interference is thus called for . The ground No.2 of Revenue's appeal for AY 2008-09 dismissed.
26. The next common ground of appeal relates to deduction u/s. 80IB(10); whereby in Ground No. 3 of A.Y. 2008-09; Ground No. 3 of A.Y. 2009-10; Ground No. 10 of A.Y. 2011-12, the revenue has challenged the deletion of addition in respect of section 80IB(10) amounting to Rs. 1,60,73,981; Rs. 3,56,08,183; and Rs. 2,68,13,834 respectively.
27. The facts as made out from the assessment order are that during the course of assessment proceedings, Ld Assessing Officer 29 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
noted that the assessee had claimed deduction u/s. 80IB(10) in respect of the following two projects:-
i. Flamingo, Aakriti Eco City, Bhopal
ii. Aakriti High Rise, Aakriti Eco City, Bhopal.
Ld. AO denied the deduction u/s.80IB(10) of the Act making following observation in para 29.4 onwards pg. 125 of his order:
"29.4 Contention of the assessee is not acceptable in view of the facts and circumstances of the case as discussed in the preceding paragraphs. The assessee has stated that it cannot be treated as a contractor. However, in view of the facts of the case mentioned above, it is clear that the assessee has first sold structure and thereafter acted as a contractor for construction work of the residential unit after entering into an agreement with the purchaser as mentioned in the sale deed of the structure. It has been further noticed that the assessee has not derived profit from developing and building housing project but on account of construction activities undertaken as a contractor after selling the structure. During the course of the assessment proceedings, the assessee has claimed that it had entered into an agreement for construction and sale of residential units with the customers and has handed over the complete residential unit after completion of construction. It has been argued by the assessee that this amounts to sale of the residential unit.
29.5 Contention of the assessee is not acceptable in view of the provisions of section 17(1A) of the Registration Act, 1908 which makes it clear that w.e.f. 24.09.2001, if any agreement for transfer of an immovable property for consideration is not registered under the 30 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Registration Act, it shall have no effect for the purpose of section 53A of the Transfer of Property Act, 1882.
29.6 In view of the discussion, it is clear that the assessee has not derived profit from development and construction of housing project. Hon'ble ITAT, Indore Bench, Indore in the case of Sky Builders and Developers vs ITO 1(1), Bhopal (2011) 14 taxmann.com 78 has decided that where the assessee has sold plots respective customers by registering sale deed and thereafter constructed residential houses on those plots at an agreed price, it had to be concluded that the assessee had merely acted as a contractor and not a developers and therefore, it is not eligible for deduction under section 80IB(10) of the Income-tax Act, 1961.
29.7 Further the measurement report scanned above has established that the total built-up area of the constructed units has exceeded the celling of 1500 sq ft in case of both the units separately. Thus, the assessee has violated the mandatory statutory condition for eligibility to claim deduction under section 80IB(10) as the total built-up area of the two units which are part of Flamingo Project and on the profit of which deduction has been claimed."
28. Aggrieved assessee filed appeal before the ld CIT(A). Ld. CIT(A) considering the facts and the submissions, deleted the addition at para 4.4.8 to 4.4.12 at pg. 58-63 of his order. Relevant finding is extracted below:
4.4.11 Nevertheless, the building permission as well as the completed certificate was granted for the entire project and not for any individual bungalow flat. Registration of plots/unfinished units/structure is not permitted by the sub-registrar when the 31 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
permission is granted for the construction of row houses/flats. The Completion Certificate has been granted for the project as a whole and not for individual houses/ flats. The same stands testimony to the fact that the appellant has constructed all the houses as a single project and not as a contractor. It may also b seen that the developer/builder has handed over the colony as a whole to the Municipal Corporation and not individual houses at different points of time. The Assessing Officer has not brought on record even a single instance where the house had been later constructed by the customer himself or by a different contractor or is still lying un- constructed. Each and every house has been built by the appellant alone. This being the case it only means that the appellant is the developer and builder of the project as a whole and not a contractor for individual customer. The possession letters and the sale deeds have been examined by the Registries have been taken place accordingly, no deficiencies, whatsoever, have been points out by them ever since the project has been started. In the light of the above facts on record it is clear that the case cited by the Assessing officer (Sky Builders & Developers Vs ITO, Bhopal 2011 14 taxman.com 78) is not applicable to the issue at hand as the facts and circumstance of the two cases are entirely different. The Sky Builders' case been decided on the issue of non-granting of completion certificate with in the financial year which is not the case of the appellant. Furthermore, the same bench of ITAT Indore has come out clearly on the identical issue in favour of the assessee in the case of M/s Vardhman Builders and Develpers vs ITO in I.T.A No. 559/Ind/2010 dated 09/05/2012.
4.4.12 The following cases wherein the Hon'ble ITAT's have opined in favour of the appellant in identical issues referred to them: 32
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a. Green Associates Vs ITO, Wd. 5(2) Baroda; I.T.A No. 882/AHD/2013;
b. Satsang Developers I.T.A. No. 1011, 2498 and 1221 of 2012 order dated 12.11.2013;
c. D.C.I.T SMR Builders (P) Ltd. (2012) 24 Taxman.com 194 (Hyd.); d. ITO. Vs. Meghal Developers I.T.A. No. 296/AHD/2013; e. M/s Nagma Developers, Baroda vs ITO Wd. 2(5) Baroda I.T.A. No. 2385/Ahd./2012;
f. Narayan Realty Vs. D.C.I.T. in I.T.A. No. 2293/Ahd./2012 and 2095/Ahd/2013 vide Order dated 02.02.2014.
Thus it is proved beyond doubt that the appellant had acted as a builder and developer and not a contractor of the customer, and the view has been upheld by all the Courts including the ITAT, Indore. Hon'ble ITAT, Indore vide ITA No. 472 & 473/Ind/2015 AY 2007-08 & 2010-11 in the case of appellant has allowed claim of deduction u/s 80IB(10) of the IT Act.
The appellant has carried only the eligible business during the year under consideration. The Assessing Officer after reading few line of sale deed has mis-interpreted entire facts of the case. Thus, in the light of plethora of judgments cited above and decision of Hon'ble ITAT, Indore in the case of appellant and others, the appellant is eligible for deduction u/s 80IB(10) of the I.T. Act and was acting as a developers and builder and not mere a contractor. Similar view has also been up held in the case of appellant for AY 2007-08 & AY 2010-11 by Hon'ble ITAT, Indore vide ITAT No. 472 & 473/Ind/2015 dated 08.01.2019. Therefore, the disallowance made by the AO amounting to Rs. 1,60,73,981/- is Deleted. The appeal on these grounds is Allowed."33
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29. Now the Revenue is in appeal before the Tribunal. Ld. Departmental Representative relied upon the assessment order and submitted that the assessee is merely a contractor. He relied on the judgment of Sky Builders and Developers vs ITO 1(1), Bhopal (2011) 14 taxmann.com 78 and submitted that since the registry was done only at structure level and a separate agreement for construction was done, the assessee acted merely a contractor. Further, he submitted that during the assessment measurement of two units located in the Flamingo Project was got done from the registerd valuer Shri Nilesh D. Mathrani. Scanned copy of the measurement report is available at pg. 123 of the Assessment Order. From the report it is evidently clear that the total built-up area of the constructed units has exceeded the ceiling of 1500 sq ft in case of both the units separately. Thus, the assessee has violated the mandatory statutory condition for eligibility to claim deduction under section 80IB(10) as the total built-up area of the two units which are part of Flamingo Project and on the profit of which deduction has been claimed.34
IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
30. On the other hand, Ld. Counsel for the assessee defended the order of Ld. CIT(A) and contended that the same may be confirmed. He submitted that the claim of deduction u/s. 80IB(10) was already a subject matter of regular assessment. He submitted the following chart:
A.Y. Amount Status in regular Assessment
2004-05 (1) Deduction u/s. 80IB(10) found allowable by
to 2007- Hon'ble ITAT. PB 438-447. Specific PB 440 08 para 6. Issue of developer vs contractor raised by ld AO; but ld CIT(A) decided that assessee is a developer. Said issue not challenged by department before Hon'ble ITAT.
(2) Further, A.Y. 2007-08 disputed by department in 147 proceedings later-on, on the issue of developer vs contractor. Allowed by Hon'ble ITAT in favour of assessee. PB 125- 145. 2008-09 1,60,73,981 Allowed in regular assessment u/s. 143(3). PB 45-46/ I. 2009-10 2,24,27,273 Allowed in regular assessment u/s. 143(3). PB 69-70/ I. 2010-11 3,56,08,183 Disputed by department on issue of developer vs contractor. Allowed by Hon'ble ITAT in favour of assessee. PB 125-145.
2011-12 2,68,13,834 Before search, time limit for initiating regular assessment lapsed. Return on income filed on 30.09.2011 (PB 146); time limit for notice u/s.
143(2) lapsed on 30.09.2012.
35 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
He therefore contended that during search, no incriminating material was found, and the claim which was already claimed and allowed in appeal upto the level of Tribunal was again agitated by the department in the proceedings u/s. 153A. Ld. Counsel for the assessee contended that so far as the issue of developer vs contractor is concerned the issue was already decided by the Hon'ble ITAT in ITA No. 472 & 473/ Ind/ 2015, vide order dated 08.01.2019. He further contended that it is a regular practice in construction industry to do the registry at the structure level or of the plot and thereafter do the construction under an agreement. This is done to facilitate the buyer to avail loan facility from the banks. He relied on Paras Housing Pvt Ltd. 22 ITJ 273 (Trib. Indore) where it was held:-
"7. As per the prevailing practice in the market normally all the prospective buyers purchase flat/ bungalow, are interested to avail housing loan facility from different financial institutions/ banks. The financial institutions/ bank insist for the execution of the sale deed before completion of the units to safeguard their interest. These agreements have been executed by the assessee before execution of sale deed and in the agreement for sale, the total cost of flat is mentioned and nowhere the bifurcation of the amount of plot and amount of finished work has been mentioned. We also found that builders are asking the buyers to pay the total amount of flat at different stages 36 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
based on the progress of the project. it is evidenct from the agreements submitted before the Assessing Officer that entire cost of flat and other charges were demanded from the buyers within a period of two months which further indicate that the flats were already completed and the possession was handed over to the buyers immediately after receiving the entire amount. The contention of the Assessing Officer that the assessee is acting as a contractor is merely on the basis of execution of sale deed at a lower price than the agreed price. There is no merit in Assessing Officers contention in so far as the buyers having incurred any expenditure on construction of said flats during the year under consideration and the assessee is a developer and builder since inception which has not only been accepted by the Department but also by the Tribunal in its order dated 19.12.2006".
He also referred the judgment of Vardhaman Builders and Developers 20 ITJ 277 (Trib. Indore) and Mahendra Builders & Developers (ITA 371, 372/ IND/ 2012).
31. In respect of built up area of two units, Ld. Counsel for the assessee submitted that before the search, DVO measured the built up area of the units on 18.02.2013 and found that all the units have a built-up are less than 1500 sq ft as prescribed under section 80IB(10). The report of the DVO has been placed at PB 452A-452B. Later on, during the search, valuation was got done from a private valuer on 31.01.2014. This measurement was in 37 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
the absence of any authorised person of the assessee-company. He contended that the report of the private valuer in the absence of any authorised person of the assessee was not reliable moreover when the DVO had clearly mentioned that the built-up area is less than 1500 sq ft. Ld. Counsel for the assessee, therefore, submitted that the order of the Ld. CIT(A) may be confirmed.
32. We have considered the rival submissions and gone through the orders of the lower authorities and the facts and evidences on record. Revenue has challenged the finding of Ld.CIT(A) allowing the claim of assessee of deduction u/s. 80IB(10) of the Act at Rs. 1,60,73,981; Rs. 3,56,08,183; and Rs. 2,68,13,834 raising Ground No. 3 of A.Y. 2008-09, Ground No. 3 of A.Y. 2009-10 and Ground No. 10 of A.Y. 2011-12 repectively.
At the first instance, we observe that learned Assessing office has not referred to any incriminating material found during the course of search u/s.132 of the Act to establish disallowance of deduction u/s. 80IB(10). Further, we find that the claim of deduction u/s. 80IB(10) was already a subject matter of regular 38 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
assessments in preceding years.. In the A.Y. 2004-05 to 2007-08 the deduction was impugned before this Tribunal and the same was decided in favor of assessee and copy of order is placed at PB 438-
447. Further, in A.Y. 2007-08, the issue of deduction was disallowed again in proceedings u/s. 147. The matter again travelled before this Tribunal and in ITA No. 472 & 473/ Ind/ 2015, vide order dated 08.01.2019 deduction u/s.80IB(10) of the Act was allowed. The order has been placed in the assessee's paper book at PB 125-145. Further in A.Y. 2008-09, which is impugned before us, the assessment was completed u/s. 143(3) and the claim of deduction u/s. 80IB(10) was allowed by the Ld. AO (The Assessment order is placed at PB 45-46). Also, in A.Y. 2009-10, the claim was allowed in the assessment u/s. 143(3) by the Ld. AO. The Assessment order is placed at PB 69-70. In A.Y. 2010-11, the issue of developer and contractor travelled to ITAT. The claim was allowed by the ITAT, Indore Bench, Indore and the order is placed at PB 125-145. Thus, the issue as regards the deduction u/s. 80IB(10), so far as the assessee is concerned, has already been settled in various proceedings. The department in the proceedings u/s. 153A is trying 39 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
the re-agitate this issue, which is not permissible. The relevant finding of the this Tribunal in ITA 472 & 473/ IND/ 2015, order dated 08.01.2019 squarely applicable on the instant issue is reproduced below:
"5. We have heard rival submissions, perused the materials available on record and gone through the orders of the authorities below. Objection of the A.O. is that the assessee is not undertaking development and construction of housing projects. The assessee is not owner of the land of which project is claimed to have been undertaken. The similar issue was before the Hon'ble Gujarat High Court in the case of CIT Vs. Radhe Developers 341 ITR 403, wherein the Hon'ble High Court was of the view that the ownership of the land is not sine-qua-non for claiming deduction u/s 80IB(10) of the Act. Therefore, in our considered view, this objection of the A.O. is contrary to the judicial pronouncements cannot be sustained. Further, the A.O's objection that the assessee is merely acting as a contractor to the customer to whom land is independently sold and there after construction is being done as per agreement. This issue was examined by the Tribunal in original proceedings, wherein it has been decided in favour of the assessee. There is no change into facts and circumstances. Hence, this objection is also not sustained and lastly the A.O. of the 40 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
view that when the permission from the Nagar Nigam is not valid since same has been taken before acquiring the land, since we have not sustained the objection of the A.O. that ownership of land on which project is claimed to have been undertaken, we therefore, do not find any merit into this objection of the A.O. This objection is also not sustainable. Hence, same is rejected. In view of the above discussion, we do not see any infirmity in the finding of the Ld. CIT(A). Same is hereby upheld."
33. Further, we find that the valuation was done by private valuer in the absence of the assessee or any authorised and responsible person/ employee of the assessee on 31.01.2014. It is pertinent to note that the District Valuation Officer had already taken the measurement on 18.02.2013 and found the same to be in order. The report of the DVO is placed in assessee's paper book at PB 452A-452B. It cannot therefore be said merely on this report of private valuer, in the absence of the assessee and that too measuring only two houses; that the built-up area is exceeding 1500 sqfts. Merely on such report the deduction u/s. 80IB(10) cannot be disallowed.
34. We therefore conclude that the issue of deduction u/s.80IB(10) of the Act, which has already been settled earlier by 41 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
this Tribunal for various preceeding Assessment Years in the case of assessee; and that no incriminating material was found in the case of the assessee, claim of deduction u/s.80IB(10) of the Act cannot be denied in present proceedings u/s. 153A r/w. Section 143(3). We respectfully following our own order in ITA 472 & 473/ Ind/ 2015 allow the claim of the assessee. The order of the ld CIT(A) is hereby sustained and the deletion of addition for A.Y. 2008-09, A.Y. 2009-10, A.Y. 2011-12, amounting to Rs. 1,60,73,981; Rs. 3,56,08,183; and Rs. 2,68,13,834 respectively, is hereby confirmed. The appeals of the revenue on this ground is therefore dismissed.
35. Now we proceed to Ground No. 4 of the revenue's appeal for A.Y. 2008-09, relating to disallowance u/s. 14A to the tune of Rs. 1,29,271, and similar issue is raised in Ground No. 3 of A.Y. 2009- 10; Ground No. 10 of A.Y. 2011-12; Ground No. 13 of A.Y. 2012-13; Ground No. 14 of A.Y. 2013-14; Ground No. 9 of A.Y. 2014-15 amounting to Rs. 25,36,515; Rs. 1,19,22,476; Rs. 1,51,98,000; Rs. 2,11,43,000; and Rs. 2,09,10,000 respectively . For adjudication 42 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
purpose we will take the facts for A.Y.2008-09 and our finding shall apply to the grounds raised on this common issue.
36. Ld. AO during the assessment proceedings u/s. 153A, held that the assessee company is engaged in the business of development and construction of housing projects. It is seen from the balance sheet of the assessee company that it has shown investments in equity shares/ share application of various group companies such as
1) Kareli Sugar Mills Pvt.Ltd.
2) Maa Bhagwati Sugar Mills Ltd.
3) Rewa Kripa Sugars Pvt Ltd.
The investment was shown as advance for purchase of land. Further the group companies had allowed equity shares subsequently against the advances mentioned against their name. The dividend from such investment is exempt under section 10(34/35) of the Income-tax Act, 1961. In these circumstances, it was held that section 14A is clearly attracted and expenditure for earning exempt income shall not be allowable. Since no such disallowance was done by the assessee, ld AO proceeded to make 43 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
disallowance u/s.14A of the Act read with Rule 8D of the Income Tax Rules, 1962.
37. Against this disallowance, assessee filed appeal before the ld CIT(A). The ld CIT(A) considering the facts and the submissions and various case laws, deleted the addition at page 64 of his order, at para 4.5.2 to 4.5.7 relying on various decisions including CIT V/s Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom.) and , Cheminvest Limited Vs. CIT (2015) 378 ITR 33 (Del) .
38. The department is in appeal against the order of ld CIT(A). The Ld. CIT(DR) relied on order of the Ld. Assessing Officer and contended that the disallowance u/s. 14A r/w rule 8D is justified. He contended that since equity shares have been issued by the sister companies, the dividend is therefore exempt, and thus, expenditure for earning dividend income has rightly been disallowed.
39. On the other hand, the ld Counsel for the assessee defended the order of the ld CIT(A). He contended that in respect of disallowance u/s. 14A, no incriminating material was found during the course of search. He further submitted that it is a settled 44 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
proposition of law that if no exempt income has been earned, no disallowance u/s. 14A could be done. He relied on following cases:-
i. Ravi Seeds and Research Pvt. Ltd vs ACIT in ITA Nos. 976 and 978 /Ind/2016 as reported on [2018] 33 ITJ 416 (Trib. Indore) ii. Cheminvest Ltd 61 taxmann.com 118 (Del.).
iii. Shivam Motors P Ltd 55 taxmann.com 262 (All.); iv. CIT vs Corrtech Energy Pvt Ltd. 45 taxmann.com 116 (Guj.); v. CIT vs Lakhani Marketing 49 taxmann.com 257 (P & H). vi. ACIT vs M. Baskaran 152 ITD 844 (ITAT Chennai) Ld. Counsel for the assessee, further submitted that there were sufficient interest free funds available with the assessee for making investment in shares and loans to sister concerns. He submitted that since sufficient interest free funds are available, interest free funds were given to sister concern and hence no disallowance u/s. 14A could be done.
40. The Ld. Counsel for the assessee therefore submitted that the order of Ld CIT(A) be confirmed.
41. We have considered the rival submissions, and the order of the ld Lower authorities, facts of the case and various case laws pointed during the course of the proceedings. Common issue relating to deletion of disallowance u/s.14A of the Act has been raised by the Revenue for various assessment years as stated above. We observe 45 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
that Learned CIT(A) has deleted the disallowance in the light of the facts of the instant case placing reliance on decisions squarely applicable on the instant issue observing as follows:-
"4.5.2 I have considered the facts of the case, evidences on recorded and assessment order, The assessing Officer out of total interest paid of Rs. 2,01,00,302/- has only disallowed Rs. 1,29,271/- being investment made in sister concerns and alleged that investment in sister concerns was made only for earning exempted dividend income. On perusal of balance sheet of appellant it was observed that amount of Rs. 27,98,240/- was invested Equity shares of M/s. Kareli Sugar Mills Pvt. Ltd. however, appellant has interest free funds of Rs. 9,71,59,683/- as on 31.03.2008. Thus, the appellant was having sufficient interest free funds of Rs. 9,71,59,683/-, thus presumption has to be drawn that investment were out of interest free founds. On the flip side, the assessee has also successfully proved that borrowed funds were used in normal taxable income generating activity & were not used in making investment giving rise to exempt income. It has been decided by various courts that in absence of nexus being established by the Assessing officer that interest bearing funds were used are more than the investment made to earn exempt income, then presumption would arise that investment were made out of 'own funds' and not out of borrowed funds,. Thus, the reasoning adopted by Id. AO is fallacious and not in accordance to stated law. Reliance placed on the decision of Hon'ble Gujarat High Court in the case of CIT V/s UTI Bank (2013)32 taxman. Com 370 (Guj) which laid down that "Where the assessee had sufficient interest free funds to meet its tax free investment yielding exempt income, it could be presumed that 46 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
such investments were made from interest free found and not from loan funds, and thus no disallowance under section 14A being warranted."
Further reliance has been placed by the Ld. ARs on the decision of Hon'ble Bombay High Court in the case of CIT V/s Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom.) wherein it was held that:-
"If there be interest-free funds available to an assessee to meet its investment and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available."
Further reliance has been placed by the Ld. ARs on the decision of Hon'ble Bombay High Court in the case of CIT V/s HDFC Bank Ltd. (2014) 366 ITR 505 (Bom.) wherein it was held that:-
"where assessee's capital, profit reserves, surplus and current account deposit were higher than the investment in tax-free securities, it would have to be presumed that investment made by the Assessee would be out of the interest-free funds available with assessee and no disallowance was warranted u/s 14A."
Besides this reliance could also be placed upon the decision of Hon'ble Gujarat High Court in the case of PCIT V/s India Gelatine & Chemicals Ltd. (2016) 66 taxman.com 356 (Guj.) wherein it has been held that where the assessee is having sufficient interest-free funds to cover the investments, no portion of the interest expenditure can be disallowed u/s. 14A r.w.r. 8D. Similar ratio have been propounded in the decisions of Hon'ble Gujarat High Court in the cases of CIT V/s Torrent Power Ltd. (2014) 363 ITR 474 (Guj.) and CIT V/s Hitachi Home & Life Solutions (I) Ltd. (2014) 221 Taxman 109 (Guj.) and Jurisdictional High Court in the case of JCIT V/s Beekay Engineering Corporation 38 DTR 289 (Chhattisgarh). Applying the ratio laid down by above-cited case law 47 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
to the facts of this case, I reach to the conclusion that the assessee having more tax-free funds than the amount of investments capable of earning 'exempt income', presumption needs to be drawn in favour of the assessee that interest free funds were used for investment capable of earning exempt income not other way rounded made u/s 14A of the Act was not justified on facts and in law on this count. 4.5.3 Another facet of contention put forth by the Ld. AR is that the appellant has claimed that it had not incurred any expenditure for purpose of earning the above mentioned exempt incomes in respect of Assessment years where exempted income was earned. With regard to interest paid on borrowed funds, the appellant has provided the break-up of borrowed funds mainly from ICICI Bank, Bank of India, Bank of Baroda, Hudco Ltd. & on unsecured loans as appearing in computation of total income, balance sheets etc. Besides these details, the appellant has stated that the investment in shares has been only for controlling the business of company and was without any motive of earning exempt dividend income. Hon'ble Apex Court in the case of Maxopp Investment Ltd. V/s. CIT (2018) 91 taxmann.com 154 has held that:-
"If an expenditure incurred has no causal connection with the exempted income, then such as expenditure would obviously be treated as not related to the income that is exempted from tax, and such expenditure would then be as business expenditure. To put, it differently, such expenditure would then be considered as incurred in respect of other income which is to be treated as part of the total income."
4.5.4 After carefully analyzing the facts of the aforesaid cases, I am of the considered view that the issue relating to disallowance made u/s 14A of the I.T. Act in respect of the aforesaid appeals is covered in favour of the appellant by a catena of decisions of various courts 48 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
wherein it has been held that in the absence of exempt income, disallowance u/s. 14A could not be made. The relevant case laws are as under:-
a. CIT V/s. Winsome Textile Industries Ltd. (2009) 319 ITR 204 (P & H) b. CIT V/s. Larketing Incl. (2014) 272 CTR 265 (P&H HC) c. CIT V/s. Hero Cycles (2009) 323 ITR 518 (P&H HC) d. CIT V/s. M/s. Shivam Motors (P) Ltd. (2014) 89 CCH 59 (All.) e. CIT V/s. Holcim India Pvt. Ltd. (2014) 90 CCH 81 (Del.); f. CIT V/s. Corrtech Energy (P) Ltd. (2014) 223 Taxman 130 (Guj.); g. Cheminvest Limited V/s. CIT (2015) 378 ITR 33 (Del.) h. Redington India Ltd. V/s Addl. CIT (2016) 97 CCH 219 (Mad.) i. PCIT V/s. IL & FS Energy Developments Co. Ltd. (2017) 84 taxman.com 186(Del.) 4.5.5 Reference may be made to the decision of Hon'ble Gujarat High Court in case of CIT vs. Corrtech Energy (P) Ltd. (supra) and also to the decision of Hon'ble Punjab & Haryana High Court in the case of CIT V/s Winsome Textile Industries Ltd. (supra.). In the above decisions, it has been held that where assessee did not make any claim for exemption of income, provision of section 14A could have no application. It is an undisputed fact that the appellant has neither claimed any exempt income nor has claimed deduction for any expenditure in relation to exempt income nor has claimed deduction for any expenditure in relation to exempt income. The issue is also covered by the decision of Hon'ble Delhi High Court in the case of CIT V/s. Shivam Motors Pvt. Ltd. (supra) and Cheminvest Ltd. Vs. CIT (supra) supporting the same ratio laid down by the Hon'ble Gujarat High Court. In a decision rendered by the Hon'ble Madras High Court in the case of Redington India Ltd. V/s. Addl. CIT (supra), it was held that Circular No. 5/2014 Dtd. 11.02.2014 does not lay down the correct law. The provisions of section 14A is 49 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
clearly relatable to the earning of actual income and not notional or anticipated income. The computation of total income in terms of Sec.5 of the Act. is on real income and there is no sanction in law for the assessment or admittedly notional income, particularly in the context of effecting a disallowance in connection therewith. Thus, accepting the submission of the Revenue that s. 14A would be attracted even to exempt income 'includable' in total income would result in imposition of an artificial method of computation on national and assumed income and this would be carrying the artifice too far. In a recent decision rendered by the Hon'ble Delhi High Court in the case of PCIT V/s. IL & FS Energy Development Co. Ltd. (supra), the Court was not persuaded with the interpretation placed by the Circular No. 5/2014 Dtd. 11.02.2014 and it was held that what is taxable u/s.5 is the "total income" which is neither notional nor speculative. It has to be 'real income' earned as claimed by the Assessee has to be in relation to the income earned in 'such previous year' and if there is no exempt income earned in the particular assessment year' the question of disallowance of expenditure incurred to earn exempt income in terms of section 14A and Rule 8D would not arise. In view of the above discussion, I agree with the argument of the Ld. ARs that on this logic that 'no disallowance can be made u/s 14A of the Act 'when' no exempted income claimed;. On this count, disallowance u/s 14A of the Act made in by the AO needs to be deleted being unsustainable on facts and in law.
4.5.6 Continuing with this cue, the Ld. ARs have further extended the same agreement of "no exempt income" leading to "no disallowance u/s. 14A of the Act" referring to another facts of the same agreement by saying that disallowance u/s.14A of the Act can be made only to the extent of "exempt income" earned during the year. In support, Ld. 50 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
ARs have placed heavy reliance on the Judgment of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. Vs. CIT reported in (2018) 91 taxmann.com 154 wherein principally affirming the ratio of Hon'ble Punjab & Haryana High Court in the case of PCIT V/s. State Bank of Patiala (2017) 391 ITR 218 (P&H) restricting the disallowance to the extent of exempt income, it was held that-
"we rate from the facts in the state Bank of Patiala cases that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8D of the Rules holding that section 14A of the Act would be applicable...Therefore, on facts, the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of the ITAT."
Reliance in support is also placed upon the following decisions:-
• Joint Investment Ltd. Vs. CIT (2015) 372 ITR 694 (Del.) • PCIT V/s. Empire package (P.) Ltd. (2016) 286 CTR 457 (P&H) 4.5.7 Since this is unequivocally clear that appellant did not claim any exempt income during the assessment year, so the amount of disallowance has to be restricted to zero i.e. in the year no disallowance should have been made. I find considerable force in the arguments of the Ld. AR in this regard. Respectfully following the binding precedents, I am of the considered opinion that the disallowance made to the tune of Rs. 1,29,271/- by invoking the provisions of section 14A of the Act is not tenable on the ratio laid down by case laws cited supra. 14A of the Act is not tenable on the ratio laid down by case laws cited supra. Accordingly, the appellant deserves full relief in this count itself and hence, the disallowances 51 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
made u/s14A amounting to Rs. 1,29,271/ is Deleted. Therefore, appeal on this grounds is Allowed. "
42. It is also not in dispute that during search, no incriminating material was found to establish that disallowance u/s. 14A ought to have been made and no dividend income was earned out of the investment made in the group companies.
43. We further notice that there was sufficient interest free funds available with the assessee for making investment in shares of sister concerns. The following chart elaborates the same:
A.Y. Investment in Shares and Loan Available interest of sister concern free funds Shares Loans and (Share Cap. + advances Reserves+ unsecured loans) (1) (2) (3) (5) 2008-09 27,98,240 - 11,29,50,195 2009-10 6,82,39,760 1,71,87,000 16,57,71,581 2011-12 23,19,25,600 4,27,15,103 39,02,74,444 2012-13 25,30,75,600 7,40,00,071 49,40,65,000 2013-14 24,45,16,000 8,65,10,734 55,74,89,000 2014-15 24,45,16,000 14,54,74,836 1,16,58,50,000 The above chart clearly demonstrates that sufficient interest free funds were available for making investment in shares of sister 52 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
companies. Ld Counsel for the assessee relied on following cases to contend that disallowance u/s. 14A is not called for as sufficient interest free funds were available:
(i) CIT V/s UTI Bank (2013)32 taxman. Com 370 (Guj)
(ii) CIT V/s Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom.)
(iii) CIT V/s HDFC Bank Ltd. (2014) 366 ITR 505 (Bom.)
(iv) PCIT V/s India Gelatine & Chemicals Ltd. (2016) 66 taxman.com 356 (Guj.)
44. It is an established fact in the instant case that no interest disallowance u/s.14A of the Act is called for in the years under dispute before us as the assessee had sufficient interest free funds in the form of Share Capital and accumulated Reserve and Surplus to cover the investment in equity shares. However as regards the disallowance as per limb (iii) of Rule 8D of IT Rules, we direct the Assessing officer to sustain the disallowance to the extent of dividend income earned during the year or 0.5% of average investment in equity shares at the end of each assessment year in question before us, whichever is less. Respectfully following the various judgments, we partly confirm the order of ld CIT(A) as per terms indiciated above. Thus Ground No. 4 for A.Y. 2008-09, 53 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Ground No. 3 of A.Y. 2009-10 , Ground No. 10 of A.Y. 2011-12), Ground No. 13 of A.Y. 2012-13 , Ground No. 14 of A.Y. 2013-14 and Ground No. 9 of A.Y. 2014-15) are partly allowed as per terms indicated hereinabove.
46. Now we take up common Ground relating to addition made on the basis of loose paper LPS A-14 page no. 38, which is Ground No. 1 of Department's appeal in A.Y. 2009-10 (Rs. 4,96,677/-), Ground No. 6 for A.Y. 2011-12 (Rs. 5,96,000/-), Ground No. 7 for A.Y. 2012-13 (Rs. 5,96,000/-), Ground No. 9 for A.Y. 2013-14 (Rs. 5,96,000/-) and Ground No. 6 for A.Y. 2014-15 (Rs. 5,96,000/-).
47. The facts in brief are that during the course of search, a loose paper LPS A-14, page no. 38 was found and seized. This was a handwritten document, whereby details of salary, Vehicle driver etc were written in respect of Shri Sunil Soni, Sri Rajeev Soni, Smt. Manju Soni, Shri Swayam Soni and Ms. Anshul Soni. In this sheet, particulars of third row were written under the head 'B' part, which contended certain amounts like "5=00", "00=10", "1=20" etc, against the above individuals. Ld. AO concluded that these are salary and perquisite payments to the employees/ directors, which is not 54 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
recorded in the books. Ld AO concluded that an amount of "5=96"
has been paid annually in 'B' part in the form of salary "5=00" and vehicle facility ("0=96"). Ld. AO stated that Shri Rajiv Soni was appointed as director in AG8 Ventures Ltd. On 26.06.2008 and he therefore computed the unaccounted salary payment to Shri Rajiv Soni from that date annually. He therefore added the amount as under:
A.Y. Amount
2009-10 4,96,667
(10 months i.e.
June to March)
2010-11 5,96,000
2011-12 5,96,000
2012-13 5,96,000
2013-14 5,96,000
2014-15 5,96,000
48. Against this order, the assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) deleted the addition giving findings on pg. 29 para 4.2.2 to 4.2.6.
49. Against this finding the department is in appeal. The Ld. CIT(DR) relied on the order of assessment and submitted that the Ld. AO was justified in making the addition which was based on 55 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
non corroborated loose paper. On the other hand, Ld. Counsel for the assessee relied on the finding of the Ld. CIT(A).
50. We have considered the facts of the case, considered the rival submissions and gone through the orders of the lower authorities.
Revenue is aggrieved with the finding of Ld.CIT(A) deleting addition made by the Ld.AO on the basis of loose papers LPS A-14 ,Page 38 found during the course of serach We observe that although the loose paper was found from the premises of the assessee-company, but this document was undated, handwritten document. It was unknown as to whose handwriting was it. It was unknown as to for what purpose it was made. Relevant extract of the finding of Ld. CIT(A) deleting the addition treating the alleged document as dumb document not calling for any addition reads as follows:-
4.2.5 This is an undisputed fact that neither any incriminating material was found or seized during search proceedings nor the payer has ever admitted about payment of Rs. 4,96,677/-. In absence of any corroborative evidence to prove that there was any exchange of money by CASH/Kind, AO has no locus to assume that appellant has paid Rs. 4,96,677/-.
It is settled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The AO is not justified in presuming certain facts without having anything to corroborate. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 56 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
(SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. V/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex court in the case of Dhiraj Lal Girdharilal v/s CIT (1954) 26 ITR 736 (SC).
4.2.6 In view of the above discussion, material evidences on record and case laws cited, firstly, the AO ought to have examined other directors whose names are also written on the impugned loose paper in order to find genuineness and trueness of the loose paper under consideration. Secondly, the loose paper or rather say it as dumb document should be a speaking one having direct nexus with the assessee, which was not in the case appellant. Lastly, the loose document is undated and unsigned. My findings on the issue under consideration are based on the various conclusions drawn by me which have been discussed in the above paras. Therefore, the AO was not justified in making addition of Rs. 4,96,677/- as unaccounted payment. Thus, the addition made by the AO amounting to Rs. 4,96,677/- is Deleted. Therefore appeal on this ground in Allowed."
51. We also observe that Ld AO failed to corroborate his contention that any additional salary was paid by the assessee-company and therefore find no reason to interfere in the finding of Ld CIT(A) that the alleged document is a dumb documents. Further, in numerous other case laws Coordinate Benches and Hon'ble courts (as referred in the finding of Ld CIT(A) extracted above) have consistently upheld 57 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
the view that no addition could be made in the hands of the assessee on the basis of the dumb loose papers seized during search, in absence of any corroborative material. Some of the case laws are as under:-
I. M M Financiers (P.) Ltd. Vs. DCIT (2007) 107 TTJ (Chennai) 2000 Held that 'no addition could be made in the hands of assessee on the basis of the dumb loose slips seized from his residence, in the absence of any corroborative material to show payment of any undisclosed consideration by the assessee towards purchase of land". II. Monga Metals (P) Ltd. Vs. ACIT 67 TTJ 247 (All. Trib) Holding that Revenue has to discharge its burden of proof that the figures appearing in the loose papers founds from assessee's possession constitute undisclosed income, [in the present case, loose papers were not even seized from assessee's possession].
III. Pooja Bhatt Vs. ACIT (2007) 73 ITD 205 (Mum. Trib) Held that where documents seized during search was merely a rough noting and not any evidence found that actual expenditures were not recorded in books of account, additions not justified. [In the instant case, similarly no other corroborative evidence was found in search to prove that details/figures mentioned on notings on page 117 to 119 to A/1 represent 'on money payments by the assessee].
IV. Atul Kumar Jain Vs. DCIT (2000) 64 TTJ (Del. Trib) 786- Held that additions based on chit of paper, surmises, conjectures etc could not be sustained in the absence of any corroborative evidence supporting it. [Similarly in present case, neither either parties have admitted payment/receipt of 'on money' nor any corroborative evidence was seized to support the findings of the AO].58
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V. S K Gupta Vs. DCIT (1999) 63 TTJ (Del Trib) 532
Held that
"that additions made on the basis of torn papers and loose sheets cannot be sustained as same do not indicate that any transaction ever took place and does not contain any information in relation to the nature and party to the transaction in question."
52. We therefore respectfully following the decisions referred above and in view of the fact that the alleged document is dumb in nature and no nexus is established by the ld AO find no reason to interfere in the finding of Ld.CIT(A) which needs to be confirmed. Accordingly Ground No. 1 of Department's appeal in A.Y. 2009-10 (Rs. 4,96,677/-), Ground No. 6 for A.Y. 2011-12 (Rs. 5,96,000/-), Ground No. 7 for A.Y. 2012-13 (Rs. 5,96,000/-), Ground No. 9 for A.Y. 2013-14 (Rs. 5,96,000/-) and Ground No. 6 for A.Y. 2014-15 (Rs. 5,96,000/-) are dismissed.
53. Now we take up Ground No. 2 of Department's appeal for A.Y. 2009-10 whereby the department has challenged the deletion of addition Rs. 67,51,000 in respect of LPS A-13 relating to "on- money" in respect of 21 registries found from the office assessee- company and 6 registries found from the site office of Aakriti Aqua City.
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54. The facts are that during the current year, assessee purchased following lands from respective persons:
Name of farmers Land Serial Date of sale Regd. sale Market Addition Remarks by A.O. situated at No. and considerati value made by A.O. Area P .No. of on towards assmt. unexplained order Rs. Rs. expenditure Amt. (Rs.
Late Shri Laxmi Vill. Salaiya S.No.1 26.04.2008 12500000 12500000 6,48,000.00 Shri Laxminarayan S/o.
Narayan Total 2.538 Shri Champalal attended
S/o.Shri Champalal hectre land P.No.99 the office on 05-05-2014
i.e. 6.268 and statement
PB 614-639 acres recorded . In his
statement (sic- remarks
of AO are incomplete)
Smt. Ayodhya Bai Vill. Salaiya S.No.2 27.12.2008 6700000 10400000 37,00,000.0 Shri Thakur prasad
Patidar W/o. Shri Total 1.60 attended the office on
Kailash Narayan hect i.e. P. No .99 26-02-2015and
3.Smt. Ramkuwar 3.95 acres statement recorded . In
w/o. Shri Harinaryan his statement (sic-
Patidar remarks of AO are
4.Shri Krishna Patidar incomplete)
w/o. Shri Thakur
Prasad
PB 337-372
Shri Arjun S/o. Shri Vill. Chhan S. No.3 24.04.2008 2625000 3328125 2,00,000.00 Shri Arjun
Hariprasad ,Vikas P.No.1 s/o shri Hariprasad
Khand, 11 attended the office and
PB 640-656 Fanda statement recorded on
Distt. 25-04-2014
Huzur
total
1.75 acres
Shri Shyamnarayan Vill. Chhan S.No.5 17-04- 4829000 5541250 21,71,000.00 Shyamnarayan S/o.
S/o.Shri Patwari , P.No.1 2008 Shri swaroop
Swaroopchandra Vikas 11 Chandra
Khand, r/o. Vill. Chhan
PB 657-674 Fanda attended the office
1.15 and statement
60
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hect.ie. recorded on 29-04-
Total 2.84 2014.
acres
55. Ld. AO relied on the statements of the parties and contended that "on-money" was paid by the assessee-company. He therefore made addition in respect of on-money.
56. Against this addition, assessee filed appeal before the Ld. CIT(A). Ld. CIT(A) deleted the addition at pg. 57 para 4.3.5 to 4.3.10 who had deleted the additions as under:
"4.3.5 Due consideration is given to the submission filed by the appellant inter alia the evidences furnished. Let me first summaries the basis on which additions have been made by the AO. The AO has safely relied upon statements recorded either of seller or of any third party i.e. Shri Thakur Prasad or has made addition made by the AO are purely hypothetical and without any independent corroborative evidence. The AO also did not provide opportunity of cross examination to the appellant. The AO has consistently harped on the statements of sellers/third party. 4.3.6 This is admitted fact that statements of 21 sellers were recorded. This is also an admitted fact these statements were recorded behind the back of appellant. No opportunity of cross-examination was allowed to the assessee though specifically asked for by the assessee. It has been held by hon'ble Gujrat High Court in the case of DCIT V/s Mahendra Ambala Patel & CIT V/s Kantilalbhai Ravidas patel that statement has no evidentiary value if opportunity of cross-examination is not allowed. Besides this, 61 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
apparently the AO did not independently verified the facts about the genuineness of the said party as well as the impunged Purchased transaction. It is not understandable as to how independently and impartially, the AO could reach to the final conclusion that on money amounting totaling to Rs. 67,51,000/- correctly as Rs. 67,19,000/- was paid for purchase of land from different sellers without even bringing a single iota of positive evidence on record. Hence, the addition made by the AO was based on mere guess work, conjuctures and surmises which has no place in tax jurisprudence. In sum & substance, action of the AO is neither sustainable on facts nor in law, being based on Third party statement or sellers.
4.3.7 It is a settled legal principal that addition cannot be simply made on the basis of third party statement and without giving any opportunity of cross examination. The following judicial pronouncement supports the case of appellant:-
• CIT v. J.M.D. Communications P. LTD (2010) 320 ITR 17 (ST) (SC) (ITA NO 106 OF 2007 DT 16-1-2009 (Delhi)(HC).
Persons who was issued the bills has given the statements that he was carrying on the business of issuing bogus accommodation bills on commission basis with the assessee, and this was not put to the assessee for rebuttal or cross-examination, High Court held no substantial question of law. On SLP by revenue the Court held that if the AO wants to use some statements made before him, then on request by the assessee, is bound to put the deponent for cross axamination. • Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) Though the proceedings under the income-tax Act are not governed by the strict rules of evidence, the department is bound to afford an opportunity to controvert and cross examine the evidence on which the department places its reliance. Opportunity of cross examination must be given. The 62 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
consequence of breach of natural justice is that either the addition is void or matter may have to be to be remanded to lower authorities.
• Hon'ble Delhi High Court in the case of Basudev Garg Vs. Commissioner of Customs.
• Hon'ble Delhi High Court in the case of CIT Vs. Ashwani Gupta, 322 ITR 396 (Del) • Hon'ble ITAT, Delhi in the case of DCIT Vs. Heminder Kumari in ITA No. 4210-4213/Del/2013 Date of order 29.08.2014.
• Hon'ble Rajsthan High Court in the case of Commissioner of Income-Tax- I, Jaipur vs. A.L. Lalpuria Construcation (P) Ltd. • Hon'ble Calcutta High Court in the case of Commissioner of Income Tax Vs. Eastern Commercial Enterprises (1994) 210 ITR 103 (Cal.)(HC) • Commissioner of Income Tax Vs. Sunrise Tooling System (P) Ltd. [2014] 47 TAXMANN 20 (Delhi Court)-
"Where Assessing Officer made addition to assessee's income on basis of statement recorded by director of company in course of survey to effect that said amount represented non-existent transaction, since statement so made did not have any evidentiary value and, moreover, Assessing Officer had not even rejected assessee's books of account while treating transaction in question to be bogus, impugned addition deserved to be deleted"
• Hon'ble Gujarat High Court in the case of Pr. Comm. Of Income Tax-I vs. Chartered Speed Pvt. Ltd. and also Hon'ble Gujarat High Court in the case of CIT Vs. Indraji Singh Suri (2013) 33 TAXMANN 281 (Guj.) -
"Where additions were made on basis of statements of person who were not allowed to be cross examined by assessee, additions were not sustainable."63
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• Radha Madhav Ind. (P) Ltd. Vs. Commissioner of Central Excise, Raipur (2015) 54 TAXMANN 404 (New Delhi - CESTAT)-
"Non-supply of documents and not allowing cross-examination of said witnesses would violate principal of natural justice' • CIT v. Eastern Commercial Enterprises (1994) 210 ITR 103 (Cal.) (HC) -
"The assessee is entitled to cross-examited the person who was examined by the A.O. Cross- examination is the sine qua non of due process of taking evidence and no advance inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied the contents of all such evidence both oral and documentary, so that he can prepare to meet the case against him.
• Decision of Hon'ble Gujarat High Court in the case DCIT Vs. Mahendra Ambala Patel Tax wherein the Hon'ble Court held as under:
"Though the AO has placed reliance upon the statements of Shri Manoj Vadodaria and Shri G.C. Patel for the purpose of taxing the amount in the hands of the assessee, despite specific request being made by the assessee for cross-examining both the said persons, the AO has not permitted the assessee to cross-examine them. In the circumstances, no relince could be placed upon the statements of the said persons as the respondent assessee had no opportunity to cross-examine them. The statements made by the aforesaid persons would have no evidentiary value and as such, would not be admissible in evidence."
• Decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Kantibhai Revidas Patel Tax wherein it was held as under: 64
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"The Ld. A.O. had used this statement without allowing cross examination of Vikas A. Shah which is against the principal of natural justice."
4.3.8 The AO further presumed that appellant has paid consideration over and above the registered value. Hon'ble Rajasthan high Court in the case of CIT vs. Bhanwarlal Morwatiya (2008) 215 CTR 489 (Raj) has held as under:-
"Apart from the fact, that even if, it were to be assumed that the price of the land was different than the one recited in the sale deed unless it is established on record by the department, that as a matter of fact the consideration as alleged by the department did pass to the seller from the purchaser it cannot be said that the department had any right to make an addition. If the case of the appellant stands in a much better footing in as much as there is no iota evidence found in course of search that the appellant had paid more money than what was stated in the purchase document. In the case of the appellant the exercise carried out by the assessing officer is without the authority of law and therefore the same cannot be a basis for addition.
Hon'ble Bombay High Court in the case of Mrs. Nirmal Laxminarayan Grover v. Appropriate Authority, 223 ITR 572. The relevant portion of the judgment is extracted below:
"However, as regards the contention raised on behalf of the petitioner that the market rate fixed for the area in question at the relevant time in the land rates fixed by the Nagpur Municipal Corporation, Nagpur, as well as by the stamp authority for the purposes of levy of stamp duty on registration of the documents was Rs. 1,500 per sq. meter, i.e., Rs. 145 per sq. ft. and therefore, the rate of Rs. 225 per sq. ft. agreed to between the parties for purchase of the suit land was more than the market rate for such land, it may be seen that the rates of properties maintained by the above authority or officers for the purposes of checking evasion to stamp duty upon transfer 65 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
deeds are not pursuant to the provision in any statute, relating even to stamp duty. At any rate it cannot be a basis for determination of the market value for acquisition or for compulsory purchase of any land where the usual test is of a prudent buyer and a prudent seller determined by the evidence of sale transaction, if available in the vicinity, of the land in question whose market rate is to be determined possessing the same or more or less similar advantageous features. This is the view taken by the Supreme Court in the case of Jawajee Nagnatham v. The Revenue Devisional officer [1994] 2 JT (SC) 604; AIR 1994 SCW 2852. The submission on behalf of the petitioners based upon the rates of properties maintained by the State Government for the purposes of checking evasion of stamp duty on transfer deeds cannot, therefore be accepted.
4.3.9 I find it important to quote decision of Hon'ble jurisdictional ITAT, Indore in the case of Shri Parshwanath Construction vs ITO in appeal no ITA/379/Ind/2013 dated 18.07.2014 wherein it has been held that "the only admissible evidence regarding the terms of such contract/agreement, available before us, is the registered deed itself, therefore, the oral evidence loses its credibility in view of section 92 of Indian Evidence Act. further Hon'ble Supreme Court in the case of Morarka PropaertiesP Ltd. vs Biharilal Murarka & Ors AIR 1978 SC 300 it has been held that in the face of the documentary evidence on record, the oral evidence is not entitled to any weight. Similar view was also taken in the case of Paramjeet Singh vs ITO (2010) 323 ITR 588 (P&H) by Hon'ble Punjab and Haryana High Court.
4.3.10 In view of the above, firstly, the AO ought to have given opportunity of cross examination to the appellant. Secondly, the AO should have brought evidence having direct nexus with the alleged payment of Rs. 67,51,000/- (correctly as Rs. 67,19,000/-). Thirdly, the additions made by the AO are on assumption and presumption basis. Fourthly, the loose papers were found 66 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
in possession of Shri Yashovardhan Jain and not from appellant. My findings are based on the findings given in above mentioned paras. Thus, keeping in view the above discussion and judiciously following the decision of Hon'ble Supreme court in the case of Kishanchand Chellaram (supra) and decision of Hon'ble jurisdictional ITAT, Indore I the case of Shri Parshwanath Construction vs ITO (supra), the AO was not justified in making addition of Rs. 67,51,000/-. Thus, addition made by the AO amounting to Rs. 67,51,000/-is Deleted. Therefore, appeal on this ground is Allowed."
57. Against this order of Ld. CIT(A), the department is in appeal.
58. Ld. Counsel for the revenue has relied on the order of the Ld. AO. He contended that in the case of Shri Laxmi Narayan, he stated in his statement that "on-money" was paid of Rs. 6,48,000. In respect of purchase from Smt. Ayodhya Patidar, Krishna Patidar and other, he contended that statement of Thakur Prasad Patidar, who was husband of Smt. Krishna Patidar was recorded. He also confirmed that the land was purchased for Rs. 85 lakhs and on- money was paid. In respect of Shri Arjun Patidar, he contended that the purchase consideration was below stamp value, although Arjun Patidar denied on-money. Lastly, in respect of purchase of land from Shri Shyam Narayan, Ld. CIT(DR) stated that he stated to have 67 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
received on-money to the tune of RS. 21,71,000. He therefore contended that addition made by Ld. AO may kindly be restored.
59. On the other hand, Ld. Counsel for the assessee relied on his submissions made in respect to Ground No. 2 for A.Y. 2008-09 above. He contended that the registries were found during the course of search. The transaction mentioned in the registries were duly recorded in the books. All payments to the parties were made by cheque. No incriminating material to show on-money was found during search. Subsequent inquiry conducted by the ld AO was not relating to incriminating material found during the search. Further, Ld. AO denied cross-examination of the parties, before using the statement against the assessee. Further, in case of Smt. Ayodhya Patidar, it is unknown as to why statement of the sellers were not taken, but statement of Shri Thakur Prasad Patidar, who was husband of one of the sellers was taken. In the case of Shri Arjun Patidar, he also denied of having paid "on-money". In the case of Shri Laxmi Narayan Patidar, his statement seems to have been made under some confusion. An amount of Rs. 6,48,000 as alleged was paid to him, but it was paid in respect of another land 0.106 68 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
acres purchased from him. This fact would be clear from his statement itself, where in reply to Question 9 and 10 he has stated this fact. Further, it was contended that the ld AO has stated that the bank accounts of the sellers were available, but the same was never brought on record. In the Department's paper book also, the same was not made available. Further, it was contended that a statement of third person was not binding in the case of assessee.
60. We have considered the rival submissions and the orders of the Ld. Lower authorities. It is an uncontroverted fact that the registries were found during the course of search, but it is also true that the consideration mentioned therein was already recorded in the books. No evidience of "on-money"was found during the course of search. In any case, it is a settled law that before using the statement of third person against the assessee, an opportunity of cross-examination shall be provided to the assessee. In the present case, no opportunity of cross-examination was provided. Further as held in the case of CBI vs V.C. Shukla 1998 SCC 410 and Chironjilal Steel Rolling Mills vs CIT 84 ITR 222 (P&H). the statement of third person, which is not corroborated by any evidence is not binding on 69 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
the assessee. The fact that the amount was deposited in the bank statement of the sellers is unproved by the Ld AO. If the bank statements as alleged by the ld AO were there, why the same were not brought on record; why a copy of same was not provided to assessee; or why the same were not even brought on record in the Department's paper book before us. We have gone through the statement of Shri Laxmi Narayan also. It seems that he gave the statement about on-money in confusion, as another land was purchased for a consideration of Rs. 6,48,000/-, the same amount which is alleged to have been paid as on-money. Further, in respect of Smt. Ayodhya Patidar, Smt. Krishna Patidar and other, it is unknown as to why statement of sellers were not recorded, but a statement of third person, who was not a party to the trasaction was recorded. Infact Thakur Prasad Patidar made different statements on different occasions. In his first statement, at PB 362 in question 6 he stated that he was not aware of the consideration. In his second statement, he stated at PB 367 question 11 that the consideration was Rs. 67 lakhs, thus there was no on-money. In his third statement, he stated that the consideration was Rs. 85 lakhs 70 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
and thus there was on-money of Rs. 17 lakhs. Since his statements changed now and then hence his tesdtimony did not inspite confidence. Interestingly, Ld AO added the difference between the transaction value and stamp value i.e. Rs. 104 lakhs less Rs. 67 lakhs. Further in respect of Shri Arjun Patidar he denied on-money. The addition is merely based on a guess work of the ld AO that the buyer "would have paid" on-money.
61. Considering the entirety of the facts and detailed finding of fact by Ld.CIT(A) in light of settled judicial precedence, we find no infirmity in the finding of Ld.CIT(A) and thus addition made by the Ld.AO cannot sustain. Ground No. 2 of Department's appeal for A.Y. 2009-10 stands dismissed.
62. Now we discuss the common ground of the department relating to addition made the Assessing office on the basis of valuation report given by Departmental Valuation Officer (in short DVO). The same issue is taken up by the Revenue in Ground No. 1 for A.Y. 2011-12 (Rs. 43,38,292); Ground No. 1 for A.Y. 2012-13 (Rs. 4,18,74,359); Ground No. 1 for A.Y. 2013-14 (Rs. 6,17,61,538) and Ground No. 2 for A.Y. 2014-15 (Rs. 11,78,40,913). 71 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
63. The facts relating the common grounds of appeal are that during the course of search on 31.01.2014, valuation of the investment in the property was got done from the registered valuer by the Investigation Wing. Later on, during assessment u/s. 153A r/w. Section 143(3), report of DVO was also called for. Based on the report of the DVO dated 22.03.2016, ld. AO held that undisclosed investment was made in the construction of following properties as under:
Aakriti Aqua City , Vill. Chhan , Bhopal F.Yr. A.Yr. As per As per DVO Addition Assessee (Rs.) (Rs.) (Rs.) 2011-12 2012-13 17,86,00,000 20,24,51,877 2,38,51,877 2012-13 2013-14 22,12,00,000 25,09,83,109 2,97,83,109 2013-14 2014-15 43,88,00,000 50,03,05,682 6,15,05,682 TOTAL 83,86,00,000 95,37,40,668 11,51,40,668 Aakriti Highlands , Vill. Phanda , Indore Road, Bhopal F.Yr. A.Yr. As per As per DVO Addition Assessee (Rs.) (Rs.) (Rs.) 2011-12 2012-13 10,04,00,000 11,01,54,626 97,54,626 2012-13 2013-14 25,12,00,000 27,53,24,240 2,41,24,240 2013-14 2014-15 21,85,00,000 23,94,47,186 2,09,47,186 TOTAL 57,01,00,000 62,49,26,052 5,48,26,052 72 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Aakriti Exotica ,vill. Phanda , Indore -Bhopal Road, Bhopal.
F.Yr. A.Yr. As per As per DVO Addition
Assesse (Rs.) (Rs.)
(Rs.)
2009-10 2010-11 87,00,000 1,10,08,211 23,08,211
2010-11 2011-12 1,00,01,000 1,36,03,753 36,02.753
2011-12 2012-13 1,05,00,000 1,47,60,305 42,60,305
2012-13 2013-14 1,07,00,000 1,57,00,578 50,00,578
2013-14 2014-15 1,51,00,000 2,21,56,890 70,56,890
TOTAL 5,50,01,000 7,72,29,737 2,22,28,737
Aakriti Natures Cure Center , vill. Phanda , Bhopal F.Yr. A.Yr. As per As per DVO Addition Assesse (Rs.) (Rs.) (Rs.) 2010-11 2011-12 46,27,000 53,62,539 7,35,539 2011-12 2012-13 2,64,16,000 3,04,23,551 40,07,551 2012-13 2013-14 2,39,31,000 2,67,84,611 28,53,611 2013-14 2014-15 2,87,13,000 3,11,32,155 24,18,155 TOTAL 8,36,87,000 9,37,02,856 1,00,14,856 Sprout (School Building), E-8, Extention, Bawadiya Kalan, Bhopal F.Yr. A.Yr. Declared by Estimated Addition by assessee by DVO AO PB 751-760 (3) - (4) 2013-14 2014-15 1,05,01,000 3,64,13,000 2,59,12,000
64. Against the order of the ld AO, an appeal was filed before the ld CIT(A). Ld. CIT(A) deleted the addition at page 74 para 4.2.8 to para 4.2.11, holding as under:
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"4.2.8 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:
a. Admittedly, the assessee company maintained its regular books of accounts supported by bill/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 different projects of appellant. Most importantly, AO has not even rejected the books of accounts even after receipt of valuation report. In view of these facts, valuation report obtained from DVO cannot from 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 item/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 DVO.
b. The AO 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 from his belief that the appellant had under stated the cost of construction referred for valuation. It is very relevant to understand that the appellant was subject to search and seizure action u/s 132 of the Act which apparently did not yield to seizure of any incriminating papers/documents suggesting unaccounted investment in the different projects of appellant. 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 action simply made on the basis of DVO's report is even more unjustified and unwarranted.74
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c. 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 of the fact that at the end of the day, cost derived by DVO in his report is nothing but an 'estimate which is bound of have amount of estimation, guess work & opinion involved and estimate cannot be 'exact'. After all it is an estimate done by an expert 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, AO 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 if 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.
d. It is important to note that DVO has prepared his report based on DPAR- 2007 after applying cost index on above DPAR as base 100. Interestingly, DVO has applies same rate for cost of construction of the project even though the investment is spread over many years. As per appellant, DVO should have adopted MPPWD rates after 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 Kumar 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 kumara Murdiya 296 ITR 508 (Raj) wherein hon'ble court refused to interfere in the order of ITAT holding difference between CPWD rated at 20-25%. Similar views have been expressed in the case of 75 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
ITO v//s Nilesh Maheshwari (2011) 53 DTR 43 (ITAT) Jaipur). In view of this, a difference of 20-25% between cost shown in books and estimated by DVO falls within 'tolerance band' as held by various courts. Further, appellant purchase material on wholesale basis which bring 'economy of scale' into construction cost which as per appellant would result into saving upto 25-30%. AO has acknowledged this aspect but did not provide any relief while making addition. Appellant has also argument about saving in cost of construction for other reasons as well i.e. self-supervision, consultancy etc. however, AO failed to allow any benefit to the assessee on any of the count which is not justified.
e. I am of the view that as a consequence of such under reporting, the AO is required to reject the books of accounts before making a 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/s Dreamland enterprises 80 Taxman 143 (ITAT Abd) 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 by bringing any specified material on record, the CIT(A) was fully justified in holding that on addition could be validly made on account of any understatement of cost of construction merely because of difference as 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.
f. 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. 76 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
"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 Court, discussed earlier.
g. 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.
h. 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 was directed to furnish the copy of construction account and supporting vouchers for verification which was duly complied by the assessee.
4.2.9 It is interesting to note that valuation of the property under consideration was done by the DVO after applying cost index on the basis of DPAR-2007 (as base).It is settled law that DPAR rates adopted by DVO are higher than PWD rates. Hon'ble High Court of Rajasthan in the case of CIT v/s Prem Kumari Murdiya 296 ITR 344 (Raj) refused to interfere in the order of ITAT holding that appropriate rate to be taken into consideration would be PWD rates and holding difference between CPWD rate and PWD rates at 20-25%. Similarly, in the case of ITO v/s Nilesh Maheshwari (2011) 53 DTR 43 (ITAT) Jaipur) held after relying on the decision of Tek 77 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Chand v/s ITO 51 TTJ (JPR) 607 that there is variation in local PWD rates and CPWD rate by margin of 20-25%. 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 repost of DVO. Ld AR also placed reliance on the decision of CIT v/s VS pratap Singh Amro Singh (1993) 200 ITR 788 (Raj) that addition to income could not be made on the basis of the repost of the Valuation Officer.
4.2.10 As far as case laws relies upon by the A.O. are concerned, on perusal it is seen that none of the case laws relied upon by the AO are applicable to the facts of this case. The case laws referred by AO are as under:-
a. CIT v Omprakash Bagaria (HUF) 287 ITR 523 (MP) In this case the AO issued a commission under s. 131(1)(d) to District Valuation Officer 23rd Aug, 1996, to determine the cost of construction of the building of the purpose of making an estimate of the investment referred to in s. 69, additions were made on this basis and the assessee had filed an 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 capital asset and mo reference can be made 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 made 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 as 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 78 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
reference. Thus the issue for decision before the Court in that case was whether amended provisions of section 142A made in 2004 can be made applicable to cases in which assessments are already completed. Thus it would be seen that the said judgment has no applicability to the case of the assessee.
b. Shakti Tourist Home v CIT 308 ITR 228 (kerala): the citation mentioned in the assessment order is not correct. The correct citation is 308 ITR 0028 In this case the issue before the High Court was whether it can make changes in the valuation made and whether the addition towards unexplained investment made 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 can be granted only if it is proved that the investment is made 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.
c. CIT v A Oli 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 made was restricted to Rs, 9 lakh ant too was directed to be spread over a period of 5 years by the CIT(A) and the ITAT both. This was challenged by the department before the High Court and the 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"
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d. CIT vs. P. Mohanakala (2007) 210 CTR (SC) 20: (2007) 291 ITR 278 (SC), referred to by the High Court held "that whenever there is a concurrent factual finding by the authorities below, the same 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 4.2.11 In view of the above discussion, the comparative picture of investment shown by the assessee and that estimated by the DVO after allowing margin of 30% (25% for difference in CPWD and PWD rates and 5% for self supervision) Comes out as under:-
A.Y. Declared by 70% of estimate Difference
Asssessee (Rs.) made by the DVO
2011-12 1,46,28,000/- 1,32,76,404/- -
Since, the assessee has already shown more than 70% of that estimated by DVO, therefore, I do not find any merit in the addition of Rs. 43,38,292/- in A.Y. 2010-12 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 different projects of the assessee company. Thus, the addition amounting to Rs. 43,38,292/- is Deleted. Therefore, appeal on this ground is Allowed."
Similar findings were given for subsequent assessment years. 80 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
65. Against this order of the Ld. CIT(A), the department is in appeal. The Ld. CIT(DR) during the course of hearing, submitted that during the search and post search inquiries, valuation report was obtained from the Valuation Officer. The report of the Valuation Officer clearly demonstrates that the cost of construction shown by the assessee was below the actual expenses incurred in construction of the properties. The difference in the value shall therefore be treated as undisclosed expenditure and shall be added.
66. On the contrary, the Ld. Counsel for the assessee submitted that:-
"Submissions:
WHY REFERENCE NOT JUSTIFIED?
1. Reference to DVO in 153A proceedings not tenable; moreover as no incriminating document showing unaccounted investment.
Kabul Chawla (supra) and others CIT vs Khushal Chand Nirmal Kumar 263 ITR 77 (M.P.) PB 766-769 CIT vs Manoj Jain 287 ITR 285 (Del.) PB 770-771 CIT vs Sadhna Gupta 352 ITR 595 (Del.) PB 772-774
2. In the absence of any material found during the course of search, no addition can be made simply on the basis of valuation Report. CIT vs Lasha Construction 357 ITR 671 (Del.) PB 775-776 CIT v. Nishi Mehra' [2015] 56 taxmann.com 89 (Delhi) CIT v. Abhinav Kumar Mittal [2013] 30 taxmann.com 357 (Delhi) 81 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
3. Books not rejected.
Sargam Cinema 328 ITR 513 (SC) PB 764-765
CIT vs Vijaykumar D. Gupta 365 ITR 470 (Guj.) PB 777-779
4. It is also brought on record that at that time, there was no provision in the law as regards getting valuation of immovable property during search. This provision was introduced only by Finance Act 2017 w.e.f. 01.04.2017 by introducing clause (9D) in section 132: -
"(9D) The authorised officer may, during the course of the search or seizure or within a period of sixty days from the date on which the last of the authorisations for search was executed, make a reference to a Valuation Officer referred to in section 142A, who shall estimate the fair market value of the property in the manner provided under that section and submit a report of the estimate to the said officer within a period of sixty days from the date of receipt of such reference."
The said amendment came into effect only from 01.04.2017. The memorandum explaining the Finance Bill explained the amendment as under:
"In order to enable correct estimation and quantification of undisclosed income held in the form of investment or property by the assessee by the Investigation wing of the Department, it is further proposed to insert a new sub-section (9D) in the said section to provide that in a case of search, the authorised officer may, for the purpose of estimation of fair market value of a property, make a reference to a Valuation Officer referred to in section 142A, for valuation in the manner provided under that sub-section. It also provides that the Valuation Officer shall furnish the valuation report within sixty days of receipt of such reference.
......
These amendments will take effect from lst April, 2017."82
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It is submitted that prior to this amendment, no reference was possible during the course of search. Thus, in the present case, the reference to valuation officer was illegal.
IN ANY CASE, FOLLOWING DEDUCTIONS SHALL BE GIVEN
5. No deduction for self-supervision by ld AO. Same should have been given. Ld CIT(A) gave 5% deduction for self-supervision.
6. Lower deduction for self-procurement of materials.
7. DPAR Rates 2007 vs MP PWD rates.
CIT vs Raj kumar 182 ITR 436 (All.) PB 780 CIT vs Smt. Prem Kumari Murdia (Raj.) PB 782
8. Chart (PB 761-763) explaines the details of rate and amount of extra items adopted by DVO, which are not covered in DPAR 2007.
9. In case of incomplete construction, DVO has taken very high value.
10. Estimational 15% difference is reasonable. The valuation by department itself at two different points yielded wide differences. C.B. Gautham 199 ITR 530 (SC)
11. Omprakash Bagaria (HUF) 287 ITR 523 and other cases, relied by ld AO. Discussed and distinguished by ld CIT(A) pg. 79 para 4.2.10."
67. We have considered the facts of the case, rival contentions, report of the Valuation officers, the case laws relied on and the orders of the Ld. Lower authorities. Ld.CIT(A)'s finding of deleting the addition made by the Ld AO on account of alleged excess investment in construction arrived at on the basis of valuation report of DVO for AY 20011-12 to AY 2014-15 has been challenged 83 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
by the Revenue. In the present case, the valuation was done during the course of search by Registered Valuer on 31.01.2014. Subsequently, during course of assessment u/s. 153A, ld Assessing Officer made reference to DVO u/s. 142A on 23.12.2015 again to estimate the investment in cost of construction. DVO submitted his report dt. 22.03.2016 estimating year-wise valuation. We find a drastic difference in the approach of Valuation Officers during search and after search. The Valuation during and after search is summarised as under:
(Rs. In crores) Sr. Building Nature of Investm Spot Valuation by No Construction ent by verifitcation DVO during . assessee during Search assessment PB Amou PB Amoun nt t (1) (2) (3) (4) (5) (6) (7) (8)
1. Aakriti Aqua Duplex 83.86 1320 57.83 1304 95.37 City, Village - Residential Chhan building
2. Aakriti High Duplex 57.01 1324 3.83 1315 62.49 Lands, Village Residential Phanda building
3. Aakriti Exotica, Farm houses 5.50 740 11.01 735 7.72 Village Phanda
4. Aakriti Natures Natures cure 8.37 NA. NA 756 9.37 Cure Center, center Village Phanda
5. Sprout (School School 1.05 NA NA 1847 3.64 Building) Building 84 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
68. The drastic difference as above is unexplained. To demonstrate, during search, Aakriti High Lands, Village Phanda was valued at Rs. 3.83 crores, whereas during assessment, it was valued at Rs. 62.49 crores. The assessee itself has shown the cost at Rs. 57.01 crores. It is not understandable as to why the DVO adopted different approach at the time of search and when the valuation was referred to DVO during the assessment proceedings. Now in this background, how the report of DVO during assessment can be accepted at the face value. Further, it has been held by the jurisdictional High Court in CIT vs Khushal Chand Nirmal Kumar 263 ITR 77 (M.P.) that since no incriminating material was found during the course of search, reference to DVO could not have been made. Further, in CIT v. Nishi Mehra' [2015] 56 taxmann.com 89 (Delhi) it was categorically held that if no incriminating material was found during the course of search, merely on the report of the DVO addition cannot be made. Further, we agree with the approach of Ld. CIT(A) who gave 5% deduction for self-supervision and also 25% deduction considering the difference in the rate as per the Delhi Plinth Area Rate (DPAR) and the rate existing in M.P. PWD and the 85 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
self-procurement of materials by the builder himself. Ld. CIT(A) relied on the judgment of CIT vs Raj kumar 182 ITR 436 (All.) and CIT vs Smt. Prem Kumari Murdia (Raj.). Considering overall facts, Ld. CIT(A) therefore was justified in reducing the Valuation of the DVO by 30%. After giving the deduction of 30% as above, the valuation as per the ld CIT(A) came as under:
F.Yr. A.Yr. Declared by Estimated by Addition by Estimation Net assessee DVO AO by DVO after addition deduction for PB 1298- (3) - (4) self- (3) - (6) 1309 supervision and CPWD vs PWD rates (4) - 30% (1) (2) (3) (4) (5) (6) (7) 2010-11 2011-12 1,46,28,000 1,89,66,292 43,38,292 1,32,76,404 -
2011-12 2012-13 31,59,16,000 35,77,90,359 4,18,74,359 25,04,53,251 - 2012-13 2013-14 50,70,31,000 56,87,92,538 6,17,61,538 39,81,54,777 - 2013-14 2014-15 71,16,14,000 82,94,54,913 11,78,40,913 58,06,18,439 -
69. We therefore respectfully following the judgment of Hon'ble Jurisdictional High Court in the case of CIT vs Khushal Chand Nirmal Kumar (Supra) and that of Hon'ble Delhi High Court in the case of CIT v. Nishi Mehra (supra) and also considering the facts of the case that there is a huge difference in Valuation by the Registered Valuer and that of the DVO, both being appointed by the department, the addition after giving deduction for self-supervision, self-procurement of materials and the 86 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
deduction for rate difference in PWD and DPAR rates and that no incriminating material was found during the course of search to show any unaccounted expenditure, find no reason to interfere in the finding of Ld. CIT(A) and thus dismiss Revenue's Ground No. 1 for A.Y. 2011-12, Ground No. 1 for A.Y. 2012-13, Ground No. 1 for A.Y. 2013-14 and Ground No. 2 for A.Y. 2014-15 .
70. Now we take up Ground No. 2 for A.Y. 2011-12 of the department's appeal dealing with unaccounted receipts of Rs. 5,00,000 covered in LPS A-2.
71. The facts of the case are that during the course of search a document marked as LPS A-2 pg. 29 was found which was allegedly a memorandum account of one customer Shri Rajkumar Gupta. As per this page, it was mentioned that the consideration for flat was Rs. 16,00,000. The paper also mentioned the date, installment amount and mode of payment. An amount of Rs. 5,00,000 was mentioned to be received in cash, and thus total amount received was shown at Rs. 16,00,000. Ld. CIT(A) deleted the addition holding that as per the books of accounts Rs. 16,00,000 was only received. Thus, there was no difference in the amount received as per the 87 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
books and as per the loose paper. The only difference was in the mode of receipt. Further, no inquiry was conducted from the customer to inquire into the truth of the matter, moreover when the assessee had clearly denied to have received any cash amount from the customer.
72. Ld. CIT(DR) relied on the order of Ld. AO, whereas Ld. Counsel for the assessee relied on the order of Ld. CIT(A).
73. We have considered the facts of the case and do not find any discrepancy in the order of the Ld. CIT(A). Ld. CIT(DR) could not point out any evidence to prove that any amount was received in cash from the customer. The amount received as per the books tallies with the amount received as per the loose paper. The addition is uncalled for. We therefore dismiss this ground of department's appeal.
74. Now we take up Ground No. 3 of Department's Appeal for A.Y. 2011-12 relating to unexplained investment of Rs. 21,00,000 as per LPS 3 pg. 23 to 39.
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75. The facts relating to this Ground of appeal are that during the course of search action at the residence of Shri Hemant Kumar Soni, who was the CMD of the assessee company, a Joint Development Agreement between M/s. Aashirwad Sky Heights Pvt Ltd. and M/s. AG8 Ventures Ltd for development of a land at Indore was found and seized. As per this document payment of Rs. 5,92,00,000 was to be made including inter-alia a payment of Rs. 21,00,000 which was in cash. The alleged payment was stated to have been made on 11.08.2010. Rest of the payments were stated to be by cheques as per this agreement. Ld. AO noted that this cash payment of Rs. 21,00,000 was not recorded in the books. He therefore added this sum of Rs. 21,00,000.
76. Against this addition, the assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) deleted the addition at page 96 to 98 holding as under:
"4.4.2 I have consideration the facts of the case, evidence on record and findings of the AO. This is an undisputed fact that appellant has entered into an agreement with M/s. Aashirwad Sky Heights Tower Pvt. Ltd. The AO has alleged that appellant has paid sum of Rs. 21,00,000/- towards security deposit as per agreement. However, appellant has contended that all the payments were made through cheque to the tune of Rs.89
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4,80,00,000/- and no transaction was made in cash. Appellant has also brought to may notice that statement of Shri Mahendra Singh Namdeo was also recorded wherein, he has admitted that the all the payments of Rs. 4,80,00,000/- were received thought cheque and the balance amount is still outstanding. After considering the facts interalia plea raised by the appellant it can be safely held that the AO has no cogent/corroborative evidence on record which could prove that any such exchange of cash actually took place. Further, neither the appellant or its director nor Shri Mahendra Singh Namdeo has ever stated/admitted that a sum of Rs. 21,00,000/- was received from appellant company towards the security deposit. The entire adition has been made on assumption and presumption basis which is neither justified nor correct in the eyes of law. It is a settled facts that presumption how strong may cannot take place of evidence. 4.4.3 Nevertheless, the AO has grossly erred in making addition simply of the basis of guess work, assumption and presumption. It is well settled that no disallowance can be made as a leap in the dark. The AO has is not entitled to make a guess without evidence. The assessment of any particular year cannot be based on mere suspicion or bare guess, but on a legitimate material from which a reasonable inference of any expenditure being of the disallowable nature could be drawn and that the initial burden of finding such material is on the AO as held by Hon'ble High Court Orissa in the case of Bansidhar Onkaramall Vs. CIT (1953) 23 ITR 353 (Orissa). Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s. CIT (1954) 26 ITR 775 (SC) has hold that although strict rules of evidence Act do not apply to income tax proceeding, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expessed by Apex court in the case of Dhiraj Lal Girdharilal v/s CIT (1954) 26 ITR 736 (SC). Also, once the assessee has discharged its onus of 90 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
proving that the parties under consideration are genuine, now the ball lies in the court of AO to prove that the claim of appellant is false and incorrect. Further, Shri Mahendra Singh Namdeo has never stated that a sum of Rs. 21,00,000/- was received in cash from appellant against the security deposit. Thus, in view of the above, the AO was not justified in making addition without bringing any clinching evidence on record which could prove any such exchange of cash took place. Thus, keeping in view the various case laws cited above, the addition made by the AO amounting to Rs. 21,00,000/- is Deleted being made on assumption and presumption basis. Therefore appeal on this ground is Allowed."
77. Against this order of Ld. CIT(A), the department is in appeal. Ld. Counsel for the revenue contended that during search, the Joint Development Agreement was found, which clearly stated that a payment of Rs. 21,00,000 was made in cash. The addition is therefore justified. Ld. Counsel for the assessee, on the other hand submitted that no cash payment of Rs. 21,00,000 was made as stated in the agreement. A payment of Rs. 4,80,00,000 was made upto the date of search, which was made by banking channel. This fact was also confirmed by Shri Mahendra Singh Namdeo of Aashirvad Sky Heights Tower Pvt Ltd. in his statement recorded u/s. 131 on 29.05.2014. Shri Mahendra Singh Namdeo denied cash receipt from assessee company, and also the cash payment was denied by assessee company. Ld. Counsel contended that the 91 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
writing in the agreement was not corroborated. He therefore relied on the order of Ld. CIT(A).
78. We have considered the facts of the case, the orders of the Ld. Lower authorities and the evidence on record. It is an undisputed fact that appellant has entered into an agreement with M/s. Aashirwad Sky Heights Tower Pvt. Ltd. The Ld. AO has alleged that assessee has paid sum of Rs. 21,00,000/- towards security deposit as per agreement. However, assessee has contended that all the payments were made through cheque to the tune of Rs. 4,80,00,000/- and no transaction was made in cash. Assessee has also brought to our notice that statement of Shri Mahendra Singh Namdeo was also recorded wherein, he has admitted that the all the payments of Rs. 4,80,00,000/- were received through cheque and the balance amount is still outstanding. We find that although the agreement raises suspicion that cash payment was made by assessee company of Rs. 21,00,000; but this suspicion is not confirmed by the department by providing any evidence on record. Both the parties to the transaction denied this cash payment. In the books of M/s. Aashirvad Sky Heights Tower Pvt Ltd, this amount is 92 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
not shown to have been received. On being asked, it was informed that no action was taken in the case of M/s. Aashirvad Sky Heights Tower Pvt Ltd. The addition therefore lacks merits. We therefore dismiss this ground of appeal of the department.
79. We now take up Ground No. 4 of A.Y. 2011-12 (Rs. 3,10,00,000) and Ground No. 3 of A.Y. 2012-13 (Rs. 54,62,000) of revenue's appeal relating to Loose paper LPS A-28 page 75 dealing with unaccounted investment in shares of M/s. Maa Bhagwati Sugar Mills Ltd (MBSM).
80. The facts of the case are that during the course of search at the office premises of the assessee company, a loose paper LPS A-28 page no. 75 was seized. The title was "Details of Investment in Shares of Ma Bhagwati Sugar Mills Ltd." On the upper part of the loose paper some details were mentioned showing cheque payments for investment in MBSM which was computer generated. On the lower part of the loose sheet, a hand written jotting was mentioned whereby it was mentioned as under:
Total Sale Consideration 575.62 Less Paid till 20.03.11 350 93 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Cash 310 Cheque due 40 Balance due in cheque 171
Balance must have been paid in 'B' 54.620
(Not accounted)
Pls confirm?
81. On the basis of this handwritten noting, it was contended by the Ld. AO in his order that on-money was paid at Rs. 310 lakhs in the F.Y. 2010-11 and Rs. 54.62 lakhs in the F.Y. 2011-12. Ld. AO further referred to an unsigned MOU found between Shri Bharat Bhushan Patel and assessee-company. As per this unsigned document, it was mentioned that both the parties would destroy certain documents and in case the document is found from either of the parties, any losses to the party because of such discovery would be the responsibility of the party from whose possession such documents were found. Ld AO therefore concluded that unexplained investment were made by assessee company in acquisition of shares of M/s. Ma Bhagwati Sugar Mills Ltd and he added Rs. 3,10,00,000 in A.Y. 2011-12 and Rs. 54,62,000 in A.Y. 2012-13.
94 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
82. Against this addition, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) deleted the addition at page 101-112, vide para 4.5.3 onwards: Similar finding was given by Ld.CIT(A) dealing with the same issue for A.Y. 2012-13 deleting the addition of Rs. 54,62,000.
83. Against this order, the revenue is in appeal. At the outset, Ld. CIT(DR) referred to the Loose paper LPS A-28 page no. 75 and contended that it clearly mentions that Rs. 310 lakhs is paid in cash till 20/3/11. Further, against balance Rs. 54.62 lakhs as mentioned at the end of the page, it is mentioned "Balance must have been paid in 'B' (Not accounted)". This document is clinching document to establish on-money payment. He further stated that the MOU found also stated that certain documents would be destroyed later on. He therefore submitted that the addition for unexplained investment as done by the Ld. AO be confirmed.
84. On the contrary, Ld. Counsel for the assessee submitted that it is uncontroverted that assessee company purchased the shares of Maa Bhagwati Sugar Mills (in short 'MBSM') from Bharat Bhushan Patel and his family members. The transaction was made by cheque 95 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
and were duly recorded in the books. He referred to the Balance sheet of 31.03.2009, at PB 64 and stated that the investment in MBSM was recorded at Rs. 6.59 crores. Further, at PB 88, in Balance Sheet of 31.03.2010, the investment in MBSM was reflected at Rs. 9.27 crores. Further, at PB 163, in Balance sheet of 31.03.2011, investment in MBSM of Rs. 20.47 crores was reflected. Further, at PB 188, in the Balance sheet of 31.03.2012, investment in MBSM was reflected at Rs. 21.72 crores. He also referred to PB 232, which was the balance sheet of 31.03.2013, where the investment in MBSM was reflected at Rs. 21.72 crores. Ld. Counsel for the assessee submitted that although this loose paper was found from the premises of the assessee company, the printed document referred to the cheque payments, which were duly recorded in the books. However, at the bottom of the page, some handwritten rough noting was made. He submitted that who made the rough noting and for what purpose the same was made was unknown and was never enquired by the department during and after search. Further, no enquiry was made from Shri Bharat Bhusan Patel regarding alleged cash payment. During search, Shri 96 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Hemant Kumar Soni was asked about the alleged document and he stated that no cash payment was made. So far as the MOU was concerned, it was contended that neither the parties, nor the witness have signed it. The document had no value, as it was a mere type written document. Who made it and for what purposes it was made is unknown. It was found from the residence of one employee Shri Yashovardhan Jain. The MOU stated only the proposed payments through post dated cheques. It does not say that any excess amount was paid by the assessee company. It was further contended that MSBM was in losses, as stated before the search party and later during assessment. The construction of building was also going on. Thus, there was no reason for making any excessive payment. It was contended lastly, that no excessive payment was made, and the amount recorded in the books was already higher than the amount mentioned in the loose sheet. Thus, the allegation of unexplained expenditure was baseless.
85. We have considered the facts of the case, the rival submissions, evidence on record and the arguments of both the parties. After carefully examining the contents of the document, 97 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
alongwith the books of accounts, we find that this document is nothing but a dumb document. The investment in shares of MBSM was recorded in the Balance Sheet at Rs. 9.27 crores on 31.03.2010. On 31.03.2011, the investment was reflected at Rs. 20.47 crores. Thus there was an increase of Rs. 11.20 crores. Similarly on 31.03.2012, the investment was reflected at Rs. 21.72 crores; and thus there was an increase of Rs. 1.25 crores. This loose paper mentions the consideration of Rs. 5.75 crores. The figure in the loose paper is substantially lower than that recorded in the books. The transaction mentioned in the loose paper does not correlate with the accounted transaction; moreover, the accounted transaction is at a higher value. It seems that there was some rough noting on this loose paper by some unknown person, which Ld. AO has interpreted as unaccounted payment. Had the maker of the loose paper and the purpose for which it was made been enquired, the transaction therein could have been deciphered. No effort was made by the Ld. AO in this regard. A transaction which is already at Rs. 11.20 crores in F.Y. 2010-11 and Rs. 1.25 crores in F.Y. 2012- 13, how can such transaction be compared with the loose jotting 98 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
which states the transaction at Rs. 5.75 crores, moreover when it is unknown as to who wrote it and for what purposes. In so far as the MOU is concerned, we agree with the contention of the Ld. Counsel for the assessee that the document is unsigned by any of the parties, and not even signed by the witnesses. The document is a mere typewritten document, not even found from the office of company. This MOU stated only the proposed payments through post dated cheques and does not state about any excess amount paid by assessee company. No inquiry what-soever was brought on record to have been conducted from Shri Bharat Bhushan Patel. Relevant extract of finding of Ld.CIT(A) deleting the impugned addition reads as follows:-
"4.5.3 I have considered the factual matrix of the case, written submission filed and assessment order. During the course of search page no. 75 of LPS- A-28 was found and seized from office premises of appellant which is also scanned on page no 61 of assessment order. The impounded paper i.e. page no75 of LPS-A-28 is a MOU for purchase of share of M/s Maa Bhagwati Sugar Mills Ltd and is a document which contain some rough nothings/jottings in the bottom of the page. Appellant during appellate proceedings submitted that no over and above consideration was paid in addition to what is disclosed in books of account. The impuged loose paper found in possession is an undated, unsigned and only represents rough working/jottings/scribbling. After considering the entire factual matrix and 99 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
evidence/material on record inter alia written submissions filed. I reach to conclusion that impunged addition was made on the basis of assumption and presumption which neither sustainable on facts nor in law. The AO has reached to conclusion that appellant has made unexplained investment of Rs. 3,10,00,000/- in purchase of shares of M/s Maa Bhagwati Sugar Mills Ltd. Appellant during appellate proceedings has strongly contented that appellant never paid any amount over and above that is mentioned in audited books of account.
This document has been scanned on page 61 of assessment order. On a plain and cursory look would make it amply clear that this paper is relating to "some working on investment in shares of M/s Maa Bhagwati Sugar Mills Ltd". The AO has alleged that sum of Rs. 3,10,00,000/- was paid in cash by the appellant to Bharat Bhushan Patel and Others. On the contrary appellant submitted that the presumption made by the AO is without any incriminating material on record which could prove that sum of Rs. 3,10,00,000/- was paid over and above the consideration as mentioned in books of account. Appellant has argued that the rough workings as mentioned in the bottom of loose paper cannot be made basis of addition, until and unless any cogent or incriminating document is found in support of transaction. Further, the AO has neither examination Bhart Bhushan Patel nor his brother or family member regarding the impunged loose paper and the entire addition has been made on sheer presumption and assumption basis. Further, the AO has also failed to bring on record any cogent evidence, creating direct nexus of receipt of Rs. 3,10,00,000/- by the appellant. Therefore, in absence of any cogent evidence having direct nexus with the impunged transaction, the said impunged paper i.e. page no 75 of LPS-A-28 cannot be used against the assessee.
4.5.4 This is settled legal position that any 'dumb document' cannot be used as an evidence to draw an adverse inference against the assessee.100
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4.5.5 The AO has made allegation against the assessee that the has received that he has received Rs. 3,10,00,000/- to Shri Bharat Bhushan patel and other as mentioned on loose papers 75 of LPS-A- 28 in cash. In absenceof any admission any entire by Shri Bharat Bhushan patel and other or any incriminating documents/paper to establish that assessee has paid sum of Rs. 3,10,00,000/-. In cash, the impunged addition is not sustainable in the eyes of laws. The appellant has also stated that the AO by making a general observation has stated that previous promoters has paid some consideration in cash to the seller party. Appellant has brought to my notice that another loose paper (another MOU, undated and unsigned) was found in possession of Shri Yashovardhan Jain i.e. page no. 64 which states that appellant shall pay sum of Rs. 1,41,00,000/- towards purchase of share of Maa Bhagwati Sugars Mill Ltd. has been accepted as true by the AO without any thorough examination.Thus, the only inference which can be drawn from this is that the seized loose paper is nothing but represent rough workings/jottings/scribbling. It is settled legal position that onus of proof is on the person who makes any allegation and not on the person who has to defend. As per legal maxim "affairmanti non neganti incumbit probation" means burden of proof lies upon him who affirm and not upon him who denies. Similarly as per doctrine of common law "incumbit probation qui digit non qui negat" i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. The loose paper i.e. page 75 of LPD-A-28 is rough working/jotting. The AO has filed to discharge his onus of proof especially when addition has been made under "deeming fiction". In view of this lacune on the part of AO, impunged addition is legally not sustainable. As held in the case of CIT v/s KP Varghese 131 ITR 574 (SC) by Hob'ble Apex Court in absence of 101 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
evidence that actually assessee paid more amount than declared in regarded deed, no addition can be made. In the case of Bansal Strips (P) Ltd. & Ors Vs. ACIT (2006) 99 ITD 177 (Del) it has been held that:-
"If an income not admitted by assessee is to be assessee in the hands of the assessee. The burden to establish the such income is chargeable to tax is on the AO. In the absence of adequate material as to nature and ownership of the transactions, undisclosed income cannot be assessed in the hands of the assessee merely by arithmetically totally various figures jotted down on loosed documents".
4.5.7 In view of the above discussion, material evidences on record and case laws cited, firstly, the AO ought to have examined beneficial i.e. Shri Bharat Bhushan patel and order who were actually involved in the impugned transaction Secondly, the AO should have done independent enquiry regarding the impugned transaction. Thirdly, the loose paper or rather say it as dumb documents should be a speaking one having direct nexus with the assessee, which was not in the case of appellant. Fourthly, the AO being of considered opinon that vash of Rs. 3,10,00,000/- was paid by the appellant company for purchasing shares of M/s Maa Bhagwati Sugar Mill Ltd. Should have rejected books of account of the appellant which was also not done. Fifthly, it is settled legal pronouncement that presumption how strong may, cannot take place of evidence. Last but not the least, neither the beneficery nor any of the partner of appellant has ever stated that such transaction actually occurred. My findings on the issue under consideration are based on the various conclusions drawn by me which have been discussed in the above paras. Therefore, the AO was not justifies in making addition of Rs. 3,10,00,000/- being on sheer assenting and presumption basis. 102 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Thus, the addition made by the AO amounting to Rs. 3,10,00,000/- is Deleted. Therefore appeal on this ground is Allowed."
86. In the given set of facts and circumstances of the case and settled judicial precedents followed by Ld.CIT(A), we are of the view that Ld. CIT(A) was justified in holding that this document was not sufficient to make addition for unaccounted investment, against the assessee company. Thus no interference is called for in the finding of Ld.CIT(A) .In the result, Revenue's Ground no. 4 and Ground no.3 for A.Y. 2011-12 and A.Y. 2012-13 respectively are dismissed.
87. Now we take up common Ground No. 5 for A.Y. 2011-12 (Rs. 3,16,00,000); and Ground No. 5 (Rs. 1,81,00,000) and Ground No. 6 (Rs. 4,00,00,000) for A.Y. 2012-13 of the Department's appeal. Ground No. 5 for A.Y. 2011-12 and A.Y. 2012-13 relate to unexplained investment as per LPS 1/3 pg. 99 to 103 found from the residence of Shri Yashovardhan Jain, General Manager Finance of assessee company. Further Ground No. 6 for A.Y. 2012-13 relate to alleged commission payment in respect to the same loose paper. Since all these issues are interconnected these grounds are adjudicated together.
103 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
88. The facts relating to these grounds of appeal are that during the course of search and seizure action, at the residential premises of Shri Yashovardhan Jain, General Manager (Finance) of the assessee company, copy of agreement dated 09/02/2012 was found marked as LPS 1/3 page no. 99 to 103. The said agreement was duly signed and on stamp paper for assignment of rights to purchase 13.314 hectares (32.89 acres) of land at Village Phanda between M/s. Citi Infraventure Pvt. Ltd. and Shri Kunal Agrawal (Assigner/ First Party) and M/s. AG8 Ventures Ltd. (Assignee/ Second party). Ld. AO stated that as per Annexure A of the agreement, the total consideration for the land between the first party and the Bhumi Swamis was Rs. 11,97,08,000 out of which Rs. 2.30 crores had already been paid by the first party. These land were sold by the assigner under this agreement to assessee company for Rs. 51.51 lakhs per acre totalling to Rs. 16,94,16,000. Thus, as per this agreement, difference amount of Rs. 4,97,08,000 has to be paid by the assessee company to the first party for the said land. Further, Ld. AO referred to LPS 1/2 page no. 67 which was ledger of 'Munna Agrawal - Highland Land' for the period 104 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
01.04.2011 to 07.06.2013. This ledger allegedly contained date wise entries of cash payment to Munna Agrawal at Rs. 1,52,00,000 . Further LPS 1/2 page no. 65 was ledger account of Pradeep Agrawal. As per this ledger cash payment of Rs. 75,00,000 was paid to him. LPS 1/2 page 56 was also reffered by Ld. AO. As per this loose sheet it was mentioned 'Month wise Amount paid'. Total amount payable was "Rs. 225 + 470.03 = 695.03". Month-woie amount paid for Feb 12 to June 13 was Rs. 377.00 lakhs. Ld. AO further referred to LPS 1/2, page 55 which contained details of "Agreement revised area - 31.20 acres" dated 07.06.2013. Ld. AO further referred to BS-1/2 page no. 7 which was a page of diary on which certain hand written notings have been made. Ld. AO therefore alleged that unaccounted payment was made by the assessee company to M/s. Citi Infraventures Pvt Ltd. through their Directors Shri Pradeep Agrawal and to Shri Kunal Agrawal. He therefore added Rs. 3,16,00,000 in A.Y. 2011-12 and Rs. 1,81,00,000 in A.Y. 2012-13. Further, Ld. AO noted that in the Annexure A to the agreement, it was mentioned that "both side commission paid by AG8 (4 crores) from 1 Feb. 2012. Agreement Amt 105 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
(9 crore) Intt. Will be charge 3% Per month". Ld. AO further added commission Rs. 4 crores on the basis of said noting which is covered in Ground no. 6 for A.Y. 2012-13.
89. Against the addition of unaccounted payment for purchase of land, assessee preferred appeal before the Ld. CIT(A) who deleted the addition in view of his finding at page 119 to 134 of the impugned order.
4.6.9 This is an undisputed fact that neither any incriminating material was found or seized during search proceedings nor Shri Pradeep Agarwal or any of the farmer/seller has ever admitted about payment of Rs. 4,97,00,000/- by the appellant in cash. On the contrary, not only from the five farmers/bhuswamis whose names as mentioned on page no 99 of LPS- 1/3 but from various other farmers/bhuswamis, appellant has directly purchase agricultural land in village Phanda Kalan, Bhopal. The payment made for purchase of lands are duly recorded in books of account and through cheques. In absence of any corroborative evidence to prove that there was any exchange of money by CASH, AO has no locus to assume that appellant has paid sum of Rs. 4,97,00,000/- to M/s Citi Infraventures P.Ltd.
It is settled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The AO is not justified in presuming certain facts without having anything to corroborative. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the 106 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex Court In the case of Dhiraj Lal Girdharilal v/s CIT (954) 26 ITR 736 (SC).
4.610 In view of the above discussion, material evidences on record and case laws cited, firstly, the AO ought to have provided opportunity of cross examination of Shri Yashovardhan Jain. Secondly, the AO should have examined Shri Pradeep Agarwal and Shri Munna Agarwal before making any addition to the income of the appellant. Thirdly, the AO should have brough some independent evidence suggesting exchange of cash of Rs. 4,97,00,000/-. Fourthly, the impubged loose paper 55, 56, 65 & 67 of LPS- 1/3 were found in possession of Shri Yashovardhan Jain and not in possession of appellant. Fifthly, none of the loose paper under consideration is signed by the appellant or any of its authorized representative. Sixthly, the impunged loose paper should be speaking one without having any second interepration, which is not in the case of appellant. Seventhly, the AO has also relied upon the statement of farmers/sellers, who during appellant proceedings had filed affidavits stating that no cash was received from appellant company against the sale of their land. One of the seller has stated that he was under pressure and therefore, has accepted cash receipt of Rs. 5,00,000/- from appellant before the AO. My findings on the issue under consideration are based on the various conclusions drawn by me which have been discussed in the above paras. Therefore, the AO was not justifies in making addition of Rs. 3,16,00,000/- being on sheer assenting and presumption basis. Thus, the addition made by the AO amounting to Rs. 3,16,00,000/- is Deleted. Therefore appeal on this ground is Allowed."
107 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Similar findings were given for deleting the addition of Rs. 1,81,00,000 for A.Y. 2012-13.
90. In respect to addition of Rs. 4,00,00,000 on account of commission payment, Ld. CIT(A) deleted that addition as per page 144 to 150 of his order as under:-
The AO has made allegation against the assessee that the has made payment of Rs. 5,96,000/- towards Part B and salary of drive. In absence of any admission by Shri Rajeev Soni or order directors of appellant company or any incriminating document/paper to establish that assessee has made payment of Rs. 5,96,000/- It is settled legal position that onus of proof is on the person who makes any allegation and not on the person who has to defend. As per legal maxim "affairmanti non neganti incumbit probation" means burden of proof lies upon him who affirm and not upon him who denies. Similarly as per doctrine of common law "incumbit probation qui digit non qui negat" i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. It is important to note that Shri Rajeev Soni was appointed director of M/s Aakriti Dwelling Pvt. Ltd. on 28.06.2008 and not on 26.06.2008 as alleged by the AO. Further, the loose paper i.e. page no 38 of LPS-A-14 is rough working/jotting. The AO has filed to discharge his onus of proof especially when addition has been made under "deeming fiction". In view of this lacune on the part of AO, impunged addition is legally not sustainable. As held in the case of CIT v/s KP Varghese 131 ITR 574 (SC) by Hob'ble Apex Court in absence of evidence that actually assessee paid more amount than declared in 108 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
regarded deed, no addition can be made. In the case of Bansal Strips (P) Ltd. & Ors Vs. ACIT (2006) 99 ITD 177 (Del) it has been held that:-
"If an income not admitted by assessee is to be assessee in the hands of the assessee. The burden to establish the such income is chargeable to tax is on the AO. In the absence of adequate material as to nature and ownership of the transactions, undisclosed income cannot be assessed in the hands of the assessee merely by arithmetically totally various figures jotted down on loosed documents".
4.7.5 This is an undisputed fact that neither any incriminating material was found or seized during search proceedings nor the payer has ever admitted about payment of Rs. 5,96,000/-. In absence of any corroborative evidence to prove that there was exchange of money by CASH/Cheques/Kind, AO has no locus to assume that appellant has paid Rs. 5,96,000/-.
It is settle law that AO connot make any addition merely on basis of suspicion, however stong it may be. The AO is not justified in presuming certain facts without having anything to corroborative. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex Court In the case of Dhiraj Lal Girdharilal v/s CIT (954) 26 ITR 736 (SC).
4.7.6 In view of the above discussion, material evidences on record and case laws cited, firstly, the AO ought to have provided completed details of beneficiaries who has received commission of Rs. 4,00,00,000/- from appellant. Secondly, the AO should have done independent enquiry regarding the impunged transaction. Thirdly, no corroborative evidence was 109 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
found during serach suggesting payment of commission of Rs. 4,00,00,000/- by the appellant. Fourthly, the nothing/scribbling on loose paper should be a speaking one having direct nexus with the assessee and transaction mentioned therein, which was not in the case of appellant. Fifthly, the AO being of considered opinon that cash Rs. 4,00,00,000/- was paid by the appellant company toward commission for purchasing lands, should have rejected books of account of the appellant which was also not done. Sixthly, the AO failed to bring on record vital details such as date of payment, name of beneficiary. Commission paid against which land, mode of payment of commission etc. My findings on the issue under consideration are based on the various conclusions drawn by me which have been discussed in the above paras. Therefore, the AO was not justifies in making addition of Rs. 4,00,00,000/- being on sheer assenting and presumption basis. Thus, the addition made by the AO amounting to Rs. 4,00,00,000/- is Deleted. Therefore appeal on this ground is Allowed."
91. Against these finding, the revenue is in appeal. Learned Departmental Representative submitted that during the course of search at the residential premises of Shri Yashovardhan Jain, General Manager (Finance) of the assessee-company a document on stamp paper was found, which was duly signed by the parties. As per Annexure A of the document, it was clear that the assessee company purchased 32.89 acres of land @ 51.51 lac/ acre from M/s. Citi Infra ventures Ltd. The amount payable to the farmers was Rs. 11,97,08,000 and therefore excess amount of Rs. 110 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
4,97,00,000 was paid in excess by the assessee-company. Further, he referred to LPS 1/2 page no. 55, 56, 65, and 67 and further BS- 1/2 page no. 7 and contended that the documents further gave the details of payments made to Shri Munna Agrawal alias Shri Pradeep Agrawal, and Shri KBL Agrawal. He therefore submitted that sufficient evidences were found during the course of search to establish the payment of Rs. 4.97 crores as on-money to M/s. Citi Infraventures Pvt Ltd. In respect of commission payment , he further referred to Annexure A of the agreement and submitted that the fact of commission payment of Rs. 4 crores was clearly mentioned in the agreement. He therefore submitted that the order of the Ld. AO may kindly be restored and addition so made may be confirmed.
92. Per Contra Ld. Counsel for the assessee, on the contrary, submitted that the impunged MOU contains details of agreement signed between M/s City Infraventures Pvt. Ltd. and AG8 Ventures Limited on 09.02.2012 for assigning rights to purchase 13.314 hectare (32.89 acres) of land at village Phanda kalan, Bhopal. According to the agreement the total consideration to be paid by the 111 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
M/s City Infraventures P Ltd. to the farmers/bhuswamis was Rs. 11,97,08,000/- out of which sum of Rs. 2.30 crores have already been paid. The agreed sale rate for the assessee company was finalised at Rs. 51.51 lacs per acres and the total cost for the assessee company would come out at Rs. 16,94,16,000/-. He submitted that although, the assessee wanted to acquire the land for its project and therefore entered into an agreement with M/s. Citi Infraventures Ltd, yet later the land was purchase directly from different farmers subsequently. Therefore, this agreement was later not registered. The farmers were examined on oath and they accepted that the transaction was done with assessee company. Further statement of Shri Pradeep Agrawal and Shri Kunj Bihari Lal Agrawal of M/s. Citi Infraventures Ltd. was also recorded by the Ld. AO. In their statement also, they accepted that this transaction was directly done by assessee-company with the farmers. Further in respect of the allegation of received on certain amount in cash by the farmers, Ld. Counsel for the assessee tried to summarise the allegeation of cash received in the following chart:- 112
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Name of farmer Khasara no Date of Sale Summary of Statement
and details registry consideration recorded
of
land/Area
Shri Deep Singh 346/1 & 16.02.201 2,43,44,000 1. On 05.02.2016 S/o Late Shri 348 7.10 2 Recived cash of Rs. 10 lac.
Gurubk Singh acres (PB 867- (PB 880-885)
877) 2. On 08.02.2016
No Cash received (PB 886-
888)
3. on 12.02.2016
No Cash received (PB 889-
891)
4. on 26.02.2016 Shri
Dinesh S/o Deep Singh that
cash of Rs. 3,64,000/- was
received.(PB 892-894)
Affidavit - PB 879 No cash
received
- Smt. Harkuwar 359 & 16.06.201 1,66,72,000 1. On 04.02.2016 &
Bai w/o Shri 350/2 2 08.02.2016 - No cash
Gurubaksh received. (PB 949-966)
- Shri Bhagwan 6.52 acres (PB 924- 2. Affidavit from Bhagwan Singh S/o Shri 948) Singh and Soram Bai Gurubaksh (PB.967-968) that no cash
- Smt Soram bai received from sale of land.
and Smt
- Sugan Bai d/o Gurubaksh Shri Suresh s/o 362/21 01.11.201 1,20,00,000 1. On 05.02.2016 that no Shri Ram Singh 3 acres 2 cash received. (PB 1025- 113 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
1029)
(PB 1004- 2. Affidavit - PB 1030, No
1024) cash received.
Shri Rajmal s/o 362/1/2/ 24.05.201 1,90,00,000 No recorded.
Shri Shambhulal & 375 2
6 acres (PB 898-
919)
Shri Govind 362/1/1 13.09.201 1,75,20,000 1.On 28.04.2014 no cash
Singh s/o Shri 4.38 acres 2 received.
Shambhulal 2. On 26.02.2016 stated
(PB 973- that cash of Rs. 5 lac
993) received. (PB 999)
2. Affidavit on 11.05.2018
that no cash was received.
(PB 994)
Ld. Counsel for the assessee submitted that none of the sellers accepted to have received any amount in cash. In respect of two sellers, who had accepted to have received cash, they subsequently filed affidavit stating that no such cash was received. Further, in respect of the allegation regarding payments to Shri KBL Agarwal against purchase of land at village Phanda, Bhopal, Ld. Counsel referred to the copy of ledger account of Shri Kunj Behari Lal Agarwal and copy of registered deed for land at village Phanda, Bhopal. He submitted that assessee company purchased 9 acres of 114 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
land from Shri KBL Agarwal for a total sale consideration of Rs. 3,67,59,000/-. All the payments were made through different cheques. This transaction was recorded in books. This transaction was different. Further, referring to LPS 1/2 page nos. 55, 56, 65 & 67 it was submitted that the maker of these documents was not known. It was not enquired as to who had written it. The same were even not found from the premises of assessee company. Further, Ld. Counsel for the assessee submitted that no commission as mentioned in the Annexure A was paid. It was unknown as to who wrote it, and why such scrubbling was made. Further, Ld. AO did not enquire as to when such commission, if any was paid, and to whom such commission was made. Merely on a rough scrubbling this addition of huge amount of Rs. 4 crores was made. Ld. Counsel therefore relied on the order of Ld. CIT(A) and contended that the same may be confirmed.
93. We have considered the rival contentions, evidences on record and the orders of the Ld. Lower authorities. We find that assessee company entered into an agreement with M/s. Citi Infraventures Ltd. for purchase of land. The land was to be purchased for Rs. 115 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
16,94,16,000/-. As per this agreement, M/s. Citi Infraventures Ltd. had already entered into an agreement with the farmers for purchase of the land for Rs. 11,97,08,000/- of which Rs. 2.30 crores were paid to the farmers. Ld. AO therefore alleged that the difference between Rs. 16,94,16,000 Less Rs. 11,97,08,000 i.e. Rs. 4,97,08,000 was on-money paid by the assessee company. Ld. AO relied on various documents to corroborate his conclusion that on- money was paid. However, when enquired from the farmers, they stated that the land was directly sold to the assessee company. The sale deeds also state that the sale was directly by those farmers to the assessee company. Ledger accounts of the farmers have been filed, whereby payments have been made by the assessee company to the farmers. Even Shri Pradeep Agrawal and Shri KBL Agrawal were enquired and both accepted that the land deal was directly done by the assessee company with the farmers. The basis of the Ld. AO in the present case remains the agreement which is on stamp paper and duly signed by the parties. However, in our humble opinion, this agreement was never executed. All the parties denied the transaction as per the agreement. The sale deeds and 116 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
other evidences prove the contrary. Had the parties intended to execute this agreement, it would have been registered. So far as the evidence regarding the payment to KBL Agrawal is concerned, the assessee accepted payment to KBL Agrawal, but in respect of purchase of another land. Further, the department is contending that payment to Munna Agrawal is payment to Pradeep Agrawal. No evidence has been produce to establish that Munna Agrawal is the alias name of Pradeep Agrawal. Infact this fact was denied by Pradeep Agrawal in his statement. In respect of on-money received by the farmers, the farmers have already denied to have receive on- money. In respect of Shri Deep Singh, his statement was recorded on multiple occasions. On 05.02.2016, he stated that he received on money of Rs. 10 lakhs. Further, on 08.02.2016 and 12.02.2016 he stated that no cash was received. Later, in his statement on 26.02.2016, he stated on money of Rs. 3,64,000 received. He further denied the same by filing affidavit. How his statement can be relied. In respect of Smt. Karkuwar Bai and others. Statement were recorded on 04.02.2015 and 08.02.2016, whereby the sellers denied on-money; and further reaffirmed the fact by filing affidavit. 117 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
In respect of Shri Suresh, he denied on money receipt and thereafter reaffirmed the fact in affidavit. Also, in respect of Shri Rajmal, his statement was not recorded. Lastly, in respect of Shri Govind Singh, his statement was recorded on two occasions. On 28.04.2014, he denied to have received on-money. Later, on 26.02.2016, he accepted receipt of on-money of Rs. 5 lakhs. However, subsequently, he retracted receipt of on-moeny by filing affidavit. In these circumstances, all the sellers have either not accepted to have received any on-money or the same was later retracted. In these given facts and circumstance we do not find any infirmity in the finding of Ld. CIT(A) on the issue under consideration deleting the addition of Rs.3,16,00,000/- and Rs.1,81,00,000/- and the same stands confirmed.
94. Further, in respect of commission, since at the first instance we have held that the agreement was not acted upon, therefore the commission mentioned therein cannot be said to have been paid. Also, the notings in the agreement are mere rough scrubbings. Who wrote it, and commission, if any, was paid to whom was never 118 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
enquired upon. We therefore confirm the order of Ld. CIT(A) on this ground also.
95. In the result Ground No. 5 for A.Y. 2011-12 (Rs. 3,16,00,000); and Ground No. 5 (Rs. 1,81,00,000) and Ground No. 6 (Rs. 4,00,00,000) for A.Y. 2012-13 of the Department's appeal are hereby dismissed.
96. Now we move to Ground no. 7 of the Department's appeal for A.Y. 2011-12, which relates to addition of Rs. 30,00,000 in respect of LPS A-13 relating to on-money in respect of 21 registries found from the office assessee-company and 6 registries found from the site office of Aakriti Aqua City.
97. The facts relating to this is ground are that out of the total 27 registries found, one registry in respect of purchase of land from Shri Narayan Singh and Shri Jairam Singh was found. The assessee had purchased 10.70 acres of land on 29.10.2010 for a total sale consideration of Rs. 6,33,18,000 from Shri Narayan Singh and Shri Jairam Singh. During the post search inquiries, statement u/s. 131 was recorded of both Shri Narayan Singh and Shri Jairam Singh in May 2014. In their statement, they stated that they have 119 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
received Rs. 15 lakhs each over and above the recorded consideration. Thus total amount of Rs. 30 lakhs was held by the Ld. AO to be on-money payment by the assessee.
98. Against this addition, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) at page no. 158 para 4.8.5 onwards of his order deleted the addition as under:
"4.8.5 Due consideration is given to the submission filed by the appellant inter alia the evidence furnished. Let me first summarise the basis on which additions have been made by the Assessing Officer. The AO has solely relied upon statement recorded of sellers Shri Narayn Singh and Shri Jai Ram Singh. The addition made by the AO are purely hypothetical and without any independent corroborative evidence. The AO has consistently harped on the statements of sellers.
This is an admitted fact that statements of 21 were recorded. This is also an admitted fact these statements were recorded behind the back of appellant. No opportunity of cross-examination was allowed to the assessee though specifically asked for the assessee. It has been held by hon'ble High Court in the case of DCIT V/s Mahendra AMbbalal Patel & CIT V/s Kantilalbhai Ravidas Patel that statement has no evidentiary value if opportunity of cross-examination is not allowed. Besides this, apparently the AO did not independently verified the facts about the genuineness of the said party as well as the impunged purchase transaction. It is not understandable as to how independently and impartially, the AO could reach to the final conclusion that on money amounting totaling to Rs. 30,00,000/- was paid for purchased of land from different sellers without even bringing a single iota of positive evidence on record except the 120 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
statement of farmers which was also recorded behind the back of assessee. Hence, the addition made by the AO was based on mere guess work, conjuctures and surmises, which has no place in tax jurisprudence. In sum & substance, action of the AO is neither sustainable on facts nor in law, being based on statement of sellers.
4.8.7 It is a settled legal principal that addition cannot be simply made on the basis of third party statement and without giving any opportunity of cross examination. The following judicial pronouncement supports the case of appellant.
• CIT v. J.M.D. Communications P. LTD (2010) 320 ITR 17 (ST) (SC) (ITA NO 106 OF 2007 DT 16-1-2009(Delhi)(HC).
Person who has issued the bills has given the statement that he was carrying on the business of issuing bogus accommodation bills on commission basis with the assessee, and this was not put to the assessee for rebuttal or cross-examination, High Court held no substantial question of law. On SLP by revenue the court held that it the AO wants to use some statement made before him, then on request by the assessee, is bound to put the deponent for cross examination. • Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) Though the proceedings under the income tax Act are not governed by the strict rules of evidence, the department is should to afford an opportunity to controvert and cross examine on which the department places its reliance. Opportunity of cross examination must be given. The consequence of breach of natural justice is that either the addition is void or matter may have to be to be remanded to lower authorities. • Hon'ble Delhi High Court in the case of Basudev Garg Vs. Commissioner of Customs.
• Hon'ble Delhi High Court in the case of CIT Vs. Ashwani Gupta, 322 ITR 396 (Del) 121 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
• Hon'ble ITAT, Delhi in the case of DCIT Vs. Heminder Kumar in ITA No. 4210-4213/Del/2013 Date of order 29.08.2014.
• Hon'ble Rajasthan High Court in the case of Commissioner of Income- Tax-I, Jaipur Vs. A.L. Lalpuria Construaction (P) Ltd. • Hon'ble Calcutta High Court in the case of Commissioner of Income-Tax Vs. Eastern Commercial Enterprises (1994) 210 ITR 103 (Cal.)(HC) • Commissioner of Income-Tax Vs. Surise Tooling System (P) Ltd. [2014] 47 TAXMANN 20 (Delhi High Court)-
"Where Assessing officer made addition to assessee's income on basis of statement recorded by director company in course of survey to effect that said amount represented non-existent transaction, since statement so made did not have any evidentiary value and, moreover, Assessing Officer had not even rejected assessee's books of account while treating transaction in question to be bogus, impugned addition deserved to be deleted"
• Hon'ble Gujarat High Court in the case of Pr. Comm. Of Income Tax -I vs. Chartered Speed Pvt. Ltd. and also Hon'ble Gujarat High Court in the case of CIT Vs. Indrajit Singh Suri (2013) 33 TAXMANN 281 (Guj.)-
"where additions were mad on basis of statement of persons who were not allowed to be cross examined by assessee, additions were not sustainable."
• Radha Madhav Ind. (P) Ltd. Vs. Commissioner of Central Excise, Raipur (2015) 54 TAXMANN 404 (New Delhi - CESTAT)-
"Non-supply of documents and not allowing cross-examination of said witnesses would violate principles of natural justice"
• CIT v. Eastern Commercial Enterprises (1994) 210 ITR 103 (Cal.) (HC)-
122 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
"The assessee in entitled to cross-examine the person who was examined by the A.O. Cross- examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplies the contents of all such evidence both oral and documentary, so that he can prepare to meet the case against him.
• Decision of Hon'ble Gujarat High Court in the case DCIT vs. Mehendra Ambalal Patel Tax wherein the Hon'ble High Court held as under:
"Though the AO has placed reliance upon the statements of Shri Monoj vadodaria and Shri G.C. Patel for the purpose of taxing the amount in the hands of the assessee, despite request being made by the assessee for Cross-examining both the said persons, the AO has not permitted the assessee to Cross-examining them. In the circumstances, no reliance could be placed upon the statements of the said persons as the respondent assessee had no opportunity to cross-examine them. The statements made by the aforesaid persons would have no evidentiary value and as such, would not be admissible in evidence."
• Decision of Hon'ble Gujarat High Court in the case CIT Vs. Kantibhai Revidas Patel Tax wherein it was held as under:
"The Ld. AO had used this statement without allowing cross examination of vikas A. shah which is against the principle of natural justice."
4.8.8 The AO further presumed that appellant has paid consideration over and above the registered value. Hon'ble Rajasthan high Court in the case of CIT vs. Bhanwarlal Morwatiya (2008) 215 CTR 489 (Raj) has held as under:-
"Apart from the fact, that even if, it were to be assumed that the price of the land was different than the one recited in the sale deed unless it is 123 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
established on record by the department, that as a matter of fact the consideration as alleged by the department did pass to the seller from the purchase it cannot be said that the department had any right to make an addition. If the case of the appellant stands in a much better footing in as much as there is no iota evidence found in course of search that the appellant had paid more money than what was stated in the purchase document. In the case of the appellant the exercise carried out by the assessing officer is without the authority of law and therefore the same cannot be a basis for addition.
Hon'ble Bombay High Court in the case of Mrs. Nirmal Laxminarayan Grover v. Appropriate Authority, 223 ITR 572. The relevant portion of the judgment is extracted below:
"However, as regards the contention raised on behalf of the petitioner that the market rate fixed for the area in question at the relevant time in the land rates fixed by the Nagpur Municipal Corporation, Nagpur, as well as by the stamp authority for the purposes of levy of stamp duty on registration of the documents was Rs. 1,500 per sq. meter, i.e., Rs. 145 per sq. ft. and therefore, the rate of Rs. 225 per sq. ft. agreed to between the parties for purchase of the suit land was more than the market rate for such land, it may be seen that the rates of properties maintained by the above authority or officers for the purposes of checking evasion to stamp duty upon transfer deeds are not pursuant to the provision in any statute, relating even to stamp duty. At any rate it cannot be a basis for determination of the market value for acquisition of for compulsory purchase of any land where the usual test is of a prudent buyer and a prudent seller determined by the evidence of sale transaction, if available in the vicinity, of the land in question whose market rate is to be determined possessing the same or more or less similar advantageous features. This is the view taken by the Supreme Court in the case of Jawajee Nagnatham v. The Revenue Devisional officer [1994] 2 JT (SC) 604; AIR 1994 SCW 2852. The submission on behalf of the petitioners 124 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
based upon the rates of properties maintained by the Sated Government for the purposes of checking evasion of stamp duty on transfer deeds cannot, therefore be accepted.
4.8.9 In view of the above, firstly, the AO ought to have given opportunity of cross examination to the appellant. Secondly, the AO should have brought evidence having direct nexus with the alleged on money payment of Rs. 30,00,000/-. Thirdly, the additions made by the AO are on assumption and presumption basis. Fourthly, the loose papers were found in possession of Shri Yashovardhan Jain and not from appellant. Fifthly, the statements were recorded by the then ADIT who was not appropriate jurisdictional officer. My findings are based on the findings given in above mentioned paras. Thus, keeping in view the above discussion and judiciously following the decision of Hon'ble Supreme Court in the case of Krishinchand Chellaram (supra), the AO was not justified in making addition of Rs. 30,00,000/-. Thus, addition made by the AO amounting to Rs. 30,00,000/- is Deleted being on the basis of statement recorded behind the back of appellant and no meaningful opportunity of cross examination was provided. Therefore, appeal on this ground is Allowed."
99. Against this order of the Ld. CIT(A), the department is in appeal. Ld. Counsel for the revenue, during the course of hearing, submitted that the Ld. AO was justified in making the addition. He referred to the statements of Shri Narayan Singh and Shri Jairam Singh and contended that the order of Ld. CIT(A) may be set-aside and the addition made by the Ld. AO may be restored.
100. On the contrary, Ld. Counsel for the assessee contended that assessee had purchased the land for Rs. 6,33,18,000 from Shri 125 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Narayan Singh and Shri Jairam Singh. The purchase was duly recorded in the books of the assessee. All the payments were made by cheque. No evidence was found during the search showing any on-money. In the post search inquiries, the seller, Shri Narayan Singh and Shri Jairam Singh, for reasons best known to them stated that on money was paid Rs. 30,00,000. This statement was not corroborated by bringing any material on record. Further, Ld. AO did not grant opportunity of cross-examination of these persons. He therefore contended that the mere statement of third persons, therefore, cannot be relied on for making the addition.
101. We have considered the rival submissions, the order of the Ld. Lower authorities and the evidences on record. We find that Ld. CIT(A) was justified in deleting the addition. At the first instance, no incriminating material was found during the course of search. The addition in search cases, shall be limited to incriminating material found during the course of search. The transaction for purchase of land was duly recorded in the books. It was only in the statement recorded later on, after the search, the fact of on-money was stated. Secondly, cross-examination of the sellers was not granted by the 126 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Ld. AO. The statement of the sellers cannot be relied as cross- examination was not granted. Thirdly, there is no corroborative material, brought on record, except the statement of the sellers. In these circumstances, we find merit in the finding of Ld CIT(A) which is duly supported by various decision squarely applicable on the instant issue and thus hold that the addition cannot be sustained. This Ground no. 7 of the Department's appeal for A.Y. 2011-12 is therefore dismissed.
102. Now we takeup common Grounds relating to disallowance of expenditure covered in Ground no. 8 of A.Y. 2011-12, Ground No. 10 of A.Y. 2012-13, Ground No. 12 of A.Y. 2013-14 amounting to Rs. 79,22,875; Rs. 70,08,192; and Rs. 6,39,49,728 respectively.
103. The facts relating to these grounds of appeal are that the assessee company had booked expenditure towards purchase of sand, building material and for certain job works from M/s. Maa Mahima Traders, M/s. S.K. Contractors and M/s. Lake City Suppliers P Ltd. The expenditure were done during the A.Y. 2011- 12 to A.Y. 2013-14. The details of expenditure done party-wise were as under:-
127
IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Name & Address of party A.Y A.Y A.Y
2011-12 2012-13 2013-14
Lake City Suppliers Pvt Ltd, 0 0 60,083,427
Flamingo 21, Aakriti Eco city,
Bhopal
Maa Mahima Traders, C-171, 39,33,900 70,08,192 38,66,301
Rajat vihar, Hoshangabad Road,
Bhopal
S.K. Contractor, E-6-J-222, 39,88,975 0 0
Asha Niketan, Arera Colony,
Bhopal
Year wise total 79,22,875 70,08,192 6,39,49,728
104. Ld. AO referred to the post search inquiries conducted against the aforesaid parties and concluded that the whereabouts of these parties could not be ascertained. In respect of M/s. Lakecity Suppliers Pvt Ltd., Ld. AO stated that it is a non-descript entity, and had no real economic existence. In the assessment order, Ld. AO referred to the visit by Inspector and he stated that as per the Inspector's report, no such party was found at the address of the aforesaid party. The neighbours informed that, premises was on rent and it was informed that a family resides at the premises. Also, Ld. AO referred to the statement of Shri Verghese Joseph, owner of the premises, to contend that the same was not given on rent to M/s. Lake City Suppliers Pvt Ltd. In respect of M/s. Maa Mahima Traders, Bhopal, Ld. AO referred to Inspectors report and 128 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
contended that no such party resided at the given address. Instead the house was residential house and it was locked everytime Inspector visited. As enquired from the neighbours, some students resided there on rent, and they used to come during late evening and leave the premises early in the morning. Lastly, in respect of M/s. S.K. Contrator, Bhopal, Ld AO again referred to Inspector's report and stated that no such party resided at the address. The premises was occupied by one family for last 7-8 years. The statement of owner of the premises Smt. Malti Gaur was also recorded, and denied to have known M/s. S.K. Contractors. Ld. AO therefore made the addition treating the expenditure as bogus.
105. Against this addition, an appeal was preferred by the assessee before the Ld. CIT(A). Ld. CIT(A) deleted the addition at page nos. 169 to 171 of his order, holding as under:
"4.9.5 I have considered the facts of the case, various case, law replied upon by the appellant and findings of the AO. The appellant during the year FY 2010-11 has purchased send material of Rs. 39,33,900/- from M/s Maa Mahima Traders and plaster work was done by M/s SK Contractor of Rs. 39,88,975/-. The AO during assessment proceedings deputed Inspector of Income Tax in order to unearthing correct facts regarding that transaction made with these parties. The Inspector of Income Tax visited the address of 129 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
these parties as provided by the appellant, however, was not able to trace either of them. Therefore the AO required assessee to explain the transaction and produce these sellers for examination on oath. The AO has alleged that appellant failed to prove genuineness as well as during appellant proceedings has filed copies of bills and vouchers, supporting ledger account, part bank account statement of these parties, PAN No, TIN No, TDS certificate, name and address and mobile No of these parties. 4.9.6 It is important to mention here that the AO in para 25.6 (i) of assessment order has stated that "none of the three parties have responded to the summons issued by this office for verification of the transaction with the assessee company." This statement of AO prime-facia shows that the summons were served upon these parties, however, they deliberately did not responded for whatever reason. Thus, the AO has continuously harped upon the fact that the assessee failed to produce the impugned parties for examination on oath. Hon'ble Supreme Court in the case of LIC of India v/s CIT (1996) 216 ITR 410 (SC) has held that the law does not compel a man to perform. In the present case, it was impossible for assessee to produce the parties who are not willing to appear before the AO. Law does not expect a man to do impossible. I find it suitable and appropriate to quote decision of Hon'ble Bombay High Court in the case of CIT vs. Nikunj Exirnp Enterprieses (P) Ltd. [2013] 216 Taxman 171 (Bom.) which is very similar to the case of appellant wherein it has held that where sales supported the purchases and payment was made through banks, merely because suppliers has not appeared before AO, the purchase could not be treated as bogus.
4.9.7 Nevertheless, the AO has grossly erred in making addition simply of the basis of guess work, assumption and presumption. It is well settled that no disallowance can be made as a leap in the dark. The AO is not entitled to make a guess without evidence. The assessment of any particular year cannot be based on mere suspicion or bare guess, but on a legitimate 130 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
material from which a reasonable inference of any expenditure being of the disallowable nature could be drawn and that the initial burned of finding such material is on the AO as held by Hon'ble High Court Orissa in the case of Bansidhar Onkarmall Vs. CIT (1953) 23 ITR 353 (Orissa). Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. V/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex court in the case of Dhiraj Lal Girdharilal v/s CIT (1954) 26 ITR 736 (SC). Also, once the assessee has discharged its onus of proving that the parties under consideration are genuine, now the ball lies in the court of AO to prove that the claim of appellant is false and incorrect.
Further, the AO has neither done any independent enquiry even when PAN No, TIN No, bank account statement of these parties were provided to AO. Thus, in view of the above, the AO was not justified in disallowing payments to various parties simply on the basis of assumption, presumption and surmise basis. The AO ought to have brought on record any clinching evidence which could prove that the payments were brought on record made against bough bills and vouchers. Thus, keeping in view the various case laws cited above, the addition made by the AO amounting to Rs. 79,22,875/- is Deleted. Therefore, appeal on this ground is Allowed." Similar findings were given in A.Y. 2012-13 and A.Y. 2013-14.
106. Against these findings of the Ld. CIT(A), the department is in appeal. Ld. Counsel for the revenue referred to the Assessment Order and submitted that detailed inquiries have been done by the 131 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Ld. AO. The reports of the Inspector and the statement of the owner of the premises clearly establish that the parties are non-existing. The addition made by the Ld. AO may therefore be confirmed.
107. On the contrary, Ld. Counsel for the assessee relied on the order of the Ld. CIT(A). He contended that the purchases from the parties were duly verifiable. He submitted the following chart.
M/s. Maa Mahima Traders M/s. S.K. Contractor Lake City Suppliers Pvt. Ltd Prop: Tularam Chouhan Prop: Zakir Hussain Flamingo-21, Aakriti Eco City, C-171,Rajat Vihar, Hoshanagabad E-6, J-298, Asha Niketan , Arera Bhopl.
Road, Bhopal Colony, Bhopal R.N. Sahu & Praveen Misra
Contact No. 9630707251 Contact No. 9507516087 Contact No.
,998103138 PAN : - AAUPH9884R PANo.AACCL2144H
PAN: -AIHPC0618D TIN - 23924008615 TIN. 23839046908
TIN - 23273606568 Purchase of 50% shares of the
company is proved by seized paper
Nature of Sand supplier Plaster work and other job work. Building material supplier
transaction (mainly Iron & Cement)
Assmt. year 2011-12 2012-13 2013-14 2011-12 2012-13 2013-14 2011-12 2012-13 2013-14
Addition 3933900 7008192 3866301 3988975 - - - - 60083427
TDS deducted TDS not applicable 11474
TDS certificate and copies of a/c of
S.K. Contractor in the books of the
appellant for A.yrs.2011-12 to
2013-14 are enclosed.
Evidences to prove PB 1060-1154 PB 1155-1196 PB 1444-1509
transaction
Ld. Counsel for the assessee submitted that the transactions with the above parties were duly recorded in the books. The payments were made by cheques. The same were duly reflected in the bank 132 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
accounts of the assessee and also in the bank accounts of those parties. He stated that for the expenditure, the assessee had given following evidences:
(a) Address (as available with assessee)
(b) PAN (all were income-tax assessees and their address on record of Income-tax department was same)
(c) Telephone Nos.
(d) Nature of expenditure
(e) VAT Registration No.
(f) Payments were subjected to TDS
(g) All payments were through banking channels.
(h) TDS Certificates
(i) Bank accounts of parties and of assessee.
(j) Ledger of assessee in their books and cross-accounts.
He further submitted that Ld. AO's reliance on the Inspector's report and the statement u/s. 131 is bad in law, as the same were never brought on record. Copy of the same were not provided and no opportunity of cross-examination was granted. He therefore, submitted that these evidences cannot be relied on. He further referred to the statement of Shri Hemant Soni, CMD of the company, as recorded during search, and later the affidavit filed by him and contended that it has been submitted time and again that the expenditure is genuine. He further submitted that the fact that 133 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
construction was done, has been verified and accepted by the department during search and no discrepancy has been found in the same. He therefore submitted that these grounds of the department may be dismissed.
108. We have considered the rival submissions, arguments of the parties and the order of the Ld. Lower authorities. Issue of disallowance of expenditure deleted by Ld.CIT(A) is for adjudication before us. At the first instance, the primary evidences in support of the transactions in the form of PAN and TIN of the parties were available, bank statements, bills etc were on record and these transactions were already recorded in the books, before the search was conducted. No evidence whatsoever has ever been stated by the department to have been found out during the course of search to show that the expenditure was bogus. Secondly, Ld. AO referred to the report of the Inspector during the assessment. However, the said Inspector's report was never brought on record. Even in the Department's Paper Book before us, the same has not been filed. If such report is available, why the department has never brought the same on record. Similarly, the statement recorded on oath of Shri 134 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Verghese Joseph and Smt. Malti Gaur has never been brought on record. In the absence of the same, the reliance of the Department on these evidence is uncalled for. If the department intended to use any evidence against the assessee, it was incumbent on the department to provide the copy of the same to the assessee and allow assessee to rebut the same. The Ld AO failed to do so. Thus, these evidences cannot be used against the assessee. Thirdly, we notice that a search was conducted at the premises of the assessee. No discrepancy was found in the work done. Rather the department got the valuation done by the Registered Valuer and later by the DVO. The department on one hand contended that work done was more as disclosed in the books; but on the other hand, they are doubting the expenditure towards work done. The stand of the department is contradictory and inconsistent. We therefore in absence of any concrete evidence placed before us the Revenue authorities and also since Learned Departmental Representative being unable to disprove the evidences filed by the assessee to support of genuineness of expenditure, find no merits in the action of Ld AO making disallowance of expenditure. Thus no interference 135 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
is called for in the finding of Ld.CIT(A) . In the result, Ground no. 8 for A.Y. 2011-12; Ground No. 10 for A.Y. 2012-13; and Ground No. 12 for A.Y. 2013-14 of the Revenue's appeals are dismissed.
109. The next common ground of the revenue, Ground No. 9 for A.Y. 2011-12 and Ground No. 12 for A.Y. 2012-13 relates to addition for "on-money" received on Highland Project, amounting to Rs. 1,56,43,283 and Rs. 2,67,71,771 respectively.
110. The facts leading to this ground of appeal are that during the course of search, certain discrepencies were noticed in the transactions relating to Highland project of the assessee. When confronted, MD of the assessee company Shri Hemant Soni in the statement u/s 132(4), admitted that company has received 5-10% on money on sale of plots of highland project. The relevant question is as under:
"Q30. इन ोजे ट म या आपक क पनी वारा on money (on accounted receipt) भी #लये जाते है । य(द हो थो इसके बारे म जानकार द ।
मेर क पनी के अंतग-त .व#भ न ोजे ट चल रह है । इसम से कुछ residential है । एवं चक ु ये ोजे ट ब3क .व#भ न #ल4डं6स ब3क वारा supported अतः customers वारा इसनका पण ू - भग ु तान चैक वारा ह करता है । इसम 9कसी तरह क on money क पनी को ा:त नह ं होती है । मेर क पनी का एक ोजे ट आ9;<त हाई लै ड भी <नमा-णाधीन है ।136
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िजसमे :लाट एवं आवासीय इकाइय? का <नमा-ण हो रहा है । मै यह भी जानकार दे ना चाहता हूँ। 9क इस ोजे ट 9क से इकाइय? 9क .व#भ न ब3को वारा supported है । इसम भी 9कसी तरह क on money नह ं ल जाती है । मै यह जानकार दे ना चाहता हूँ 9क हाई लै ड ोजे ट 9क :लाट (भ-ू खBड) के .व;य के समय बहुत थोड़ा सा on money ा:त होती जो कभी कम तथा कभी Dयादा होता है ओर मेर समझसे यह 5% से 10% के बीच होना चाइये यह 5% से 10% :लाट 9क वाGत.वक Hब; मI ू य का होता है "
Based on this categorical admission and the discrepencies found during the course of search, Ld. AO added 10% of the total sale proceeds of Highland Proceeds of Highland project as on-money receipts. The addition, inter-alia was made as under: -
A.Y Total sales On-Money @
value of Plots of 10% of sales
Highland
Project
2011-12 15,64,32,831 1,56,43,283
2012-13 26,77,17,714 2,67,71,771
111. Against, this addition, an appeal was filed by the assessee before the Ld. CIT(A). The assessee contended that, in the Highland project, there were sale of Land as well as sale of constructed properties. The categorical statement during search stated only about the on-money in respect of sale of 'land'. During the A.Y. 2011-12 and A.Y. 2012-13, there was no sale of land in the 137 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Highland project. Considering the same, the Ld. CIT(A) deleted the addition holding as under:-
4.10.2 I have consideration the facts of the case, written submission filed by the appellant and finding of the AO. During the course of search statement of Shri Hemant Soni was recorded on oath wherein he has stated that on money of 5-10% was received on Sale of Plots of project Highland.
The relevant extract of statement of Shri Hemant Soni is as under:-
From the above the above statement it is very clear that Shri Hemant Soni has only admitted on money on sale of plots and not for sale of flats/duplex of project Highland. However, the AO erred in presuming that on money @ 10% has been received on entire project. Now the main question which arise from the above finding is that whether any Plot was sold in FY 2010-11 relevant AY 2011-12 in project High Land. In this regard , appellant was required to file chart showing sale of plots of project Highland. Appellant in compliance has filed chart showing sale of plots of project highland along with affidavit of Shri Hemant Soni. The details filed by the appellant are as under:-
A.Y. Total sales of On-money @ Onmoney recd
plots of 7.5% on sale of @ 7.5% as per
Highland Plots as per appellant (sic
Peroject as per appellant - Profit on
appellant same @ 5%)
2011-12 NIL 0 0
2012-13 NIL 0 0
2013-14 434081000 32556075 1627804
Thus, from the above it is very crystal clear that appellant company has not sold any plot in AY 2011-12, therefore, no on money would have been received by the appellant in AY 2011-12. Further the addition made by the AO was on 138 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
presumption basis because once the assessee has clearly narrated in his statement given on oath that he has received on money on sale of project then the AO has no locus to assume that on money was received on entire project. In view of the above discussion, the AO was no justified in making addition simply on guess work and presumption. It is settled legal principal that presumption how strong may cannot take place of evidence. Thus, the addition made by the AO amounting Rs. 1,56,43,283/- is Deleted, firstly, on account that no plot was sold by the appellant company during the year under consideration and secondly that the addition were made on presumption basis. Therefore, appeal on this ground is Allowed ."
112. Against this, the revenue is in appeal. The Ld. CIT(DR) relied on the order of the Ld. AO and contended that the same may be confirmed. On the contrary, the Ld. Counsel for the assessee contended that there was no evidence except the statement of Shri Hemant Soni. No material has been brought on record. He inter- alia, contended that the categorical statement was made whereby it was stated that on-money was received on the sale of 'land' in the highland project. Since no land was sold in the highland project during the year, no addition is called for in any case.
113. We have considered the rival contentions and the facts on record. On a plain reading of the statement as reproduced above, it is very clear that the acceptance in any case, was only in respect of on-money received in respect of the sale of 'land' on the Highland 139 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
project. It is uncontroverted fact, that no sale of 'land' took place during the A.Y. 2011-12 and A.Y. 2012-13. Thus, there exists no basis for assessing on-money during the current years. We therefore confirm the order of Ld. CIT(A) and dismiss the Ground No. 9 for A.Y. 2011-12 and Ground No. 12 for A.Y. 2012-13 of the revenue's appeal.
114. The next ground is Ground No. 2 of the Department's appeal for A.Y. 2012-13 relating to addition on account of unaccounted receipts LPS A-2 of Rs. 68,50,000.
115. The facts relating to this ground of appeal are that certain loose papers marked as LPS A-2 were found during the course of search from the office premises of the assessee company. These loose papers purportedly covered details of amount received from the customers against the sale of units to them. In these loose sheets, certain amounts were mentioned to be received in cash. On verification for the same with the books of accounts, Ld. AO noticed that the cash receipts were not recorded in the books. He therefore added the cash receipts from the customers. In the current year, Ld. AO added amount as under:
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Sl. No. Name of Cash Date of LPS/ Page
customer Transaction Transaction no.
1. Shalini Jain 4,00,000/- 29.03.2012 A-2/33
2. Smt. Nirmala 20,00,000/- 30.09.2011 A-2/21
Chandra
3. Smt. 16,00,000/- 02.09.2011 A-2/17
Sadhana 4,00,000/- 09.09.2011
Tiwari 3,50,000/- 21.09.2011
Total:
23,50,000/-
4. Shri Vinod 4,00,000/- 15.09.2011 A-2/13
Semwal & 3,00,000/- 19.09.2011
Archana 6,00,000/- 29.09.2011
Semwal 5,00,000/- 30.09.2011
3,00,000/- 24.03.2012
Total Rs.
21,00,000
116. Against this addition, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) after considering the evidences and the law, deleted the addition on page 90 to 101, holding as under:
The AO has made allegation against the assessee that the has received that he has received Rs. 68,50,000/- from various customer as mentioned on loose papers 13,17,21 & 33 of LPS-A-2 in cash. In absence of any admission by either of the customer/payer or any incriminating documents/paper to establish that assessee has received sum of Rs. 68,50,000/-. The assessee 141 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
has filed copy of ledger ledger account of these customer wherein it is seen that appellants has received advance from Smt Nirmala Chnadra, Smt Sadhana Tiwari Shri Vinod Semwal & Semwal of Rs. 50,000/- each through cheque and the same has been returned through cheque onlyt. The advance received from Smt. Shalini Jain of Rs. 28,00,000/- is still outstanding in books of account. Thus, the only inference which can be drawn from this is that the seized loose paper is nothing but represent rough workings/jottings/scribbling. It is settled legal position that onus of proof is on the person who makes any allegation and not on the person who has to defend. As per legal maxim "affairmanti non neganti incumbit probation" means burden of proof lies upon him who affirm and not upon him who denies. Similarly as per doctrine of common law "incumbit probation qui digit non qui negat" i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. The loose paper i.e. page13,17,21 & 33 of LPS-A-2 is rough working/jotting. The AO has filed to discharge his onus of proof especially when addition has been made under "deeming fiction". In view of this lacune on the part of AO, impunged addition is legally not sustainable. As held in the case of CIT v/s KP Varghese 131 ITR 574 (SC) by Hob'ble Apex Court in absence of evidence that actually assessee paid more amount than declared in regarded deed, no addition can be made. In the case of Bansal Strips (P) Ltd. & Ors Vs. ACIT (2006) 99 ITD 177 (Del) it has been held that:-
"If an income not admitted by assessee is to be assessee in the hands of the assessee. The burden to establish the such income is chargeable to tax is on the AO. In the absence of adequate material as to nature and ownership of the transactions, undisclosed income cannot be assessed in the hands of the assessee merely by arithmetically totally various figures jotted down on loosed documents".
4.3.5 This is an undisputed fact that neither any incriminating material was found or seized during search proceedings nor the payer has ever 142 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
admitted about payment of Rs. 68,50,000/- On the contrary the advance received by the appellant was either due to cancellation or the same is duly reflected in books of account. In absence of any corroborative evidence to prove that there was any exchange of money by CASH, AO has no locus to assume that appellant has received Rs. 68,50,000/-. It is settled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The AO is not justified in presuming certain facts without having anything to corroborative. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex Court In the case of Dhiraj Lal Girdharilal v/s CIT (954) 26 ITR 736 (SC).
4.3.6 In view of the above discussion, material evidences on record and case laws cited, firstly, the AO ought to have examined the customer in question from whom as alleged the impugned cash has been received. Secondly, the AO should have done independent enquiry regarding the impugned transaction. Thirdly, the loose paper or rather say it as dumb document should be a speaking one having direct nexus with the assessee and transaction mentioned therein, which was not in the case of appellant. Thirdly, the AO did not reject books of account of the appellant. Fourthly, neither the customer nor any of the partner of appellant has ever stated that such transaction actually occurred. Last but not the least, the impugned loose papers were not found in possession of the appellant. My findings on the said issue under consideration are based on the various conculsions drawn by me which have been discussed in the above paras. Therefore, the AO was not justified in making addition of Rs. 68,50,000/- being on sheer 143 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
assumption and presumption basis. Thus, the addition made by the AO amounting to Rs. 68,50,000/- is Deleted. Therefore appeal on this ground is Allowed."
117. Against these findings of Ld. CIT(A), the revenue is in appeal. Ld. Counsel for the revenue relied on the order of Ld. AO and submitted that the loose sheets were found from the office of assessee company. Cash receipts were duly recorded in the loose sheets, which could not be verified from the books. Thus the addition ought to have been confirmed. On the contrary, Ld. Counsel for the assessee submitted that in respect of alleged amount received from Smt. Nirmal Chandra, Rs. 20,00,000; the booking had already been cancelled and the amount was refunded to her. The books showing the cancellation are at PB 1339-1340. Thus in any case, since the booking had been cancelled and the amount refunded, no income in fact arose to the assessee. Similarly in case of Smt. Sadhana Tiwari, Rs. 23,50,000; the booking was cancelled. Cancellation is at PB 1333-1334. Further in case of Shri Vinod Semwal & Smt. Archana Semwal, Rs. 21,00,000; the booking had been cancelled and amount refunded PB 1336-1337. It was therefore submitted that in these cases, since the income was not booked from these parties and the entire amount was refunded, in 144 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
any case, no addition could be made. Further, Ld. Counsel for the assessee submitted that these all LPS are some computer generated sheets and are unsigned. The maker of the document is unknown and for what purpose same were made are unknown. Had the Ld. AO any doubt as to the amount received from the customers, he could have enquired the facts from the customers. Ld. AO did not do so. Further, the assessee submitted that the amount received from Smt Shalini Jain was a booking advance. Therefore, even if the amount is treated as unaccounted, it can be taxed in the year in which the income is booked on mercantile basis. He therefore relied on the order of Ld. CIT(A) and contended that the order of Ld. CIT(A) be confirmed.
118. We have considered the rival submissions, facts of the case and the arguments of the parties. We find that the assessee is correct in contending that in respect of amount received from Smt. Nirmala Chandra, Smt. Sadhana Tiwari and Shri Vinod Semwal and Smt. Archana Semwal; the amount received, if any was refunded as the booking was cancelled. We therefore have no doubt in confirming the order of the Ld. CIT(A) and dismissing the ground of 145 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
revenue in respect of these three parties. So far as the amount of Rs. 4,00,000/- alleged to be received from Smt. Shalini Jain, we find that in the loose sheet found from the office premises of the assessee, Rs. 4,00,000 it was clearly mentioned as received in cash. Analysis of the paper established that the assessee has received this amount from Smt. Shalini Jain. This amount of Rs. 4,00,000 ought to be treated as unaccounted receipt of the assessee. We therefore confirm the addition of Rs. 4,00,000 as done by the Ld. AO, and to this extent the order of Ld. CIT(A) is reversed. However, we notice that assessee have not booked income from sale of this unit in the current A.Y. We therefore remand this issue to the file of Ld. AO to verify as to when the income from sale of unit has been booked in the case of Smt. Shalini Jain and add the amount in the hands of assessee in that year.
119. As a result, this ground of appeal of the revenue is partly allowed for statistical purpose. Deletion of Rs. 64,50,000 by the Ld. CIT(A) is accepted and balance amount Rs. 4,00,000 shall be treated as income of the assessee in the year the sale of the unit to Smt. Shalini Jain is treated as income.
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120. Now we take up Ground No. 4 of the Department's appeal for A.Y. 2012-13 relating to addition u/s. 40A(3) of Rs. 51,000.
121. During the course of hearing, Ld. Counsel for the revenue submitted that assessee purchased 5.20 acres of agricultural land from Shri Lakhan Singh and Smt. Shanti Bai for Rs. 2,57,40,000. Out of this amount Rs. 51,000 was paid by cash as per the sale deed. He took us to Paper Book page 1343, whereby in the sale deed Rs. 51,000 was paid by cash. Ld. Counsel for the assessee, on the other hand, stated that entire amount of Rs. 2,57,40,000 was paid by cheque. The same is clear from the ledger in the books of assessee at PB 1363-1365. Ld. Counsel submitted that although it was mentioned that Rs. 51,000 would be paid in cash in the sale deed, but no amount was paid in cash. Ld. Counsel further referred to the affidavit of the sellers placed at PB 1369 and contended that since there was no non-compliance of the section 40A(3), no disallowance was called for.
122. We have considered the rival submissions and the evidences on record. The fact that Rs. 51,000 was paid in cash was mentioned in the sale deed. This resulted in confusion, and therefore addition. 147 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
However, the fact can very well be verified from the ledger account that entire amount was paid by cheque. Further, the affidavit of the sellers support this fact. No addition is therefore called for. We therefore confirm the order of Ld. CIT(A) on this ground and dismissed Ground No. 4 of department's appeal for A.Y. 2012-13.
123. Now we take up common Grounds being Ground No. 8 of Department's appeal for A.Y. 2012-13 (Rs. 1,16,60,000) and Ground No. 10 of Department's appeal for A.Y. 2013-14 (Rs. 4,00,000). These grounds relate to addition on account of unexplained expenditure as per Loose papers LPS 1/2 page no. 69-
71.
124. The facts relating to these grounds of appeal are that during the course of search and seizure, at the residential premises of Shri Yashovardhan Jain, General Manager (Finance) of the assessee company, a loose paper titled as "New Land at Phanda" was found. The same was marked as LPS 1/2 page no. 69 to 71. This was a computer generated ledger noting whereby certain amount was stated to be paid and received. Ld. AO noted that on being confronted, Shri Hemant Soni could not explain the entries 148 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
contained therein. Further, some persons named therein were identified and called and their statements on oath had been recorded. They had accepted on-money. Ld. AO on the basis of same, held that the same represents on-money paid by the assessee in respect of purchase of land at Phanda. He therefore added Rs. 1,16,40,000 in A.Y. 2012-13 and Rs. 4,00,000 in A.Y. 2013-14.
125. Against this addition, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) in his order, deleted the addition, discussing the issue at page 163 to 175 of his order, Similar findings were given in A.Y. 2013-14.
126. Against the findings of the Ld. CIT(A), the department is in appeal. Ld. Counsel for the revenue submitted that during the course of search at the residential premises of the General Manager (Finance), Shri Yashovardhan Jain were also searched. At his residence, loose paper LPS 1/2 page 69 ot 71 was found, which contained a ledger account of cash paid for the purchase of land at Phanda. Thus, loose paper contains the details of payment made. 149 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
He therefore relied on the detailed findings of the Ld. AO in this regard.
127. On the contrary, Ld. Counsel for the assessee submitted that the document was not found from the premises of the assessee company. The same was found from the residence of Shri Yashovardhan Jain. The said document was a computer sheet, which was unsigned in a ledger form. It was unknown as to who created it and for what purposes it was made. He further contended that most of the entries in the said document were dumb, it was mentioned as to "CASH PAID THRU M D SIR"; but to whom cash was paid and for what purposes was unknown. Ld. Counsel further submitted that the entries made in the loose sheet were not corroborated and no effort was made to correlate these entries with any unaccounted payment as alleged. Ld Counsel further contended that the Ld. AO adopted an approach of pick and choose and choose some entries for making the addition while ignored other entries. The basis for such pick and choose was unknown. He therefore contended that the document found was a mere dumb 150 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
document and the entries in the document were not corroborated by the revenue with any document.
128. We have considered the rival submissions, and gone through the orders of the Ld. Lower authorities. The document marked as LPS 1/2 page 69 to 71 was found during the course of search at the residence of Shri Yashovardhan Jain, General Manager (Finance) of the assessee company. However, no enquiry was ever brought on record as to who was the maker of the document, for what purposes it was made. The entries in the document were incomplete. It was unknown to whom cash was paid. The entries in any case could not be corroborated by bringing any material on record. It is also unknown as to why Ld. AO adopted a pick and choose method and added some entries while not making addition on other entries. In any case, in respect of on-money payment for purchase of land at Phanda, Ld. AO has already made addition in respect of 27 registries found and the same shall be dealt by us in subsequent paras. In respect to the purchase of land, separate discussion is made in respect of the statements of the parties. The entire approach of making addition based on this document seems to be 151 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
uncalled for. We therefore are in full agreement with the following finding of Ld. CIT(A) (relevant extract):
4.9.2 I have consideration the plea raised by the appellant and findings of the AO. It is seen that loose paper i.e. page no. 69 to 71 of LPS-1/2 was found in possession of Shri Yashovardhan Jain. The impounded paper i.e. page no. 69 to 71 of LPS-1/2, contain details of cash payment for purchase of new land of Phanda, is a document which is not signed by appellant or its authorized representative and contain some rough nothing/jottings.
Appellant during appellate proceedings submitted that the AO relied upon the statement given by Shri Yashovardhan Jain and other sellers. The Sellers who has given statement under presume as retracted and has fuiled affidavit stating that no cash has been received from the appellant compant. This is admitted fact that statements of 21 sellers were recorded. This is also an admitted fact these statements were recorded behind the back of appellant. No opportunity of cross-examination was allowed to the assessee though specifically asked for by the assessee. It has been held by hon'ble Gujrat High Court in the case of DCIT V/s Mahendra Ambala Patel & CIT V/s Kantilalbhai Ravidas patel that statement has no evidentiary value if opportunity of cross-examination is not allowed. Besides this, genuineness of impunged loose paper. It was Shri Yashovardhan Jain who has to prove that hoe the transaction mentioned in the loose papers were executed. It is not understandable as to how independently and impartially, the AO could reach to final conclusion that on money amount totaling to Rs. 1,16,60,000/- was paid for purchase of land from different sellers without even bringing a single iota of positive avidence on record. Hence, the addition made by the AO was based on mere guses work, conjuctures and surmises which was no place in tax jurisprudence. In sum & substance, action of the AO is neither sustainable on facts nor in law, being based on either Third party 152 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
statement or statement sellers who lateron retracted from their statements by staing that statements given before AO were given under pressure. 4.9.6 In view of the above, firstly, the AO ought to have given opportunity of cross examination to the appellant. Secondly, the AO should have brought evidence having direct nexus with the alleged on money payment of Rs. 1,16,60,000/- for purchase of land. Thirdly, the addition made by the AO are on assumption and presumption basis. Futher, the loose papers were found in possession of Shri Yashovrdhan Jain and not from appellant. Fifthly, statements of sellers/owners of lands were recorded, the appellant has filed copies of their Affidavit, dully retracting their earlier statements recorded by the AO, wherein they have denied receipt of any cash over and above the amount as mentioned in registered sale deed. This has been held by the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise Kolkata in Civil Appeal No. 248 of 2006 that in absence of cross-examination of parties, the assessment proceedings to be quashed. My findings are based on the findings given in above mentioned paras. Thus, keeping in view the above discussion and judiciously following the decision of Hon'ble Supreme Court in the case of kishanchand Chellaram (supra) & Andaman Timber Industries Vs. Commissioner of Central Excise Kolkata (supra), the AO was not justified in making addition of Rs. 1,16,60,000/- on deemed fiction and without giving opportunity of cross examination to the appellant. Thus, the 153 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
addition made by the AO amounting to Rs. 1,16,60,000/- is Deleted. Therefore appeal on this ground is Allowed..
We therefore dismiss ground no. 8 of Department's appeal for A.Y. 2012-13 and Ground No. 10 for A.Y. 2013-14.
129. The next ground of appeal is Ground No. 9 for A.Y. 2012-13 of the department's appeal whereby the department has challenged the deletion of addition Rs. 1,77,65,000 in respect of LPS A-13 relating to on-money in respect of 21 registries found from the office assessee-company and 6 registries found from the site office of Aakriti Aqua City.
130. The facts are that during the current year, assessee purchased following lands from respective persons:
Name of farmers Land Serial Date of Regd. Market Addition Remarks situated No. sale sale value made by at and consider A.O. Area P .No. ation towards of Rs. unexplaine assmt. Rs. d order expenditure Amt. (Rs.
Smt. Rajshwari Deepdi S.No.6 26-07- 325100 3251000 2900000 Mukesh
S/o. Anand Patwari 2011 0 patidar
Rawat Halka P. No . s/o.shri
154
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Smt. Sonali Total 101 PB 1376- shivcharan
W/o/Shri Mohit 0.81 1392 patidar power
Kumar & hectre of attorney
smt.Shano devi 2. 00 holder
w/o. Hari acres recorded the
Prakash Saxena statement that
vill. Rapadia he received
the. Huzur, Rs. 28,34000
Bhopal through in cash against
power of two land
attorney holder
Mukesh Patidr
/s. Shri
/shivcharan
Patidar
Deep Singh Vikash Sl. No. 16-02- 243440 24344000 364000 Statement
Khand 7 2012 00 recorded on
Vill.. Phanda Phanda P.NO. 26-02-2015 .
kalan Distt. 2.876he 101 PB 867- 7.10 acres
Huzur, Bhopal cre 897 agri.land Rs.
7.10 3480000 per
acres acre sold to
AG8 ventures
ltd
Shri Lakhan Gram Sl.No. 14.03.20 257400 25740000 51000 Shri
singh S/o. shri Phanda 8 12 00 Lakhansinghs/
Kamla Singh Kalan P.No. o. Kamal singh
Smt. Shanti Bai 2.108 102 PB 1393- admitted that
W/o. Kamal hectre 1412 he received
singh 5.20 Rs.51000 in
acres cash .
statement
recorded o 26-
02-2015
155
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Smt. Mathri Bai Vill. Sl. No. 23-03- 710000 8100000 900000 Statement
w/o Shankarlal Phand 9 2012 0 recorded by
shri premnarayn kalan Rajmal s/o.
shri Rajmal both The. PB 1413- Shankarlal on
were s/o. Huzur, 1421 05-02-2016
Shankarlal Bhopal that he
0.810 received
hectre 900000 in cash
Rs. 51000 as
advance and
Rs. 849000 at
the time of
registry.
42,15,000
131. Ld. AO relied on the statements of the parties and contended that on-money was paid by the assessee-company. He therefore made addition of Rs. 1,77,65,000 in respect of on-money.
132. Against this addition, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) deleted the addition, observing as under at page 191 onwards of his order:-
4.10.3 Due consideration is given to the submission filed by the appellant inter alia the evidence furnished. Let me first summaries the basis on which additions have been made by the AO. The AO ha solely relied upon statements recorded of seller or POA holder. The addition made by the AO are purely hypothetical and without any independent corroborative to the 156 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
appellant. The AO also did not provide opportunity of cross examination to the appellant. The AO has consistently harped on the statements of sellers. This is an admitted fact that statement of 21 were recorded behind the back of appellant. No opportunity of cross-examination was allowed to the assessee though specifically asked for by the assessee. It has been held by hon'ble Gujrat High Court in the case of DCIT V/s Mahendra AMbbalal Patel & CIT V/s Kantilalbhai Ravidas Patel that statement has no evidentiary value if opportunity of cross-examination is not allowed. Besides this, apparently the AO did not independently verified the facts about the genuineness of the said party as well as the impunged purchase transaction. It is not understandable as to how independently and impartially, the AO could reach to the final conclusion that on money amounting totaling to Rs. 1,77,65,000/- (correctly Rs. 42,15,000/-)was paid for purchase of land from different sellers without even bringing a single iota of positive evidence on record except the statement of farmers or POA holder which was also recorded behind the back of assessee. Hence, the addition made by the AO was based on mere guess work, conjuctures and surmises,which has no place in tax jurisprudence. In sum & substance, action of the AO is neither sustainable on facts nor in law, being based on Third party statement or sellers.
4.10.8 In view of the above, firstly, the AO ought to have given opportunity of cross examination to the appellant. Secondly, the AO should have brought evidence having direct nexus with the alleged on money payment of Rs. 1,77,65,000/- (correctly Rs. 42,15,000/-). Thirdly, the addition made by the AO are on assumption and presumption basis. Futher, the loose papers were found in possession of Shri Yashovrdhan Jain and not from appellant. Fifthly, statements were recorded by the then ADIT who was not appropriate jurisdictional officer. My findings are based on the findings given in above mentioned paras. Thus, keeping in view the above discussion and judiciously following the decision of Hon'ble Supreme court in the case 157 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
of Kishanchand Chellaram (supra), the AO was not justified in making addition of Rs. 1,77,65,000/- (correctly Rs. 42,15,000/-). Thus, addition made by the AO amounting to Rs. 1,77,65,000/- is deleted being on the basis of statement recorded behind the back of appellant and no meaningful opportunity of cross examination was provided. Therefore, appeal on this ground is Allowed."
133. Against this findings, the revenue is in appeal. Ld. Counsel for the revenue submitted that there were sufficient evidences in the form of statement of the sellers to make addition for on-money payments. He further submitted that the cash received by the sellers were deposited in the bank accounts, and hence the payment of on-money was corroborated. He therefore relying on the Assessment order contended that the addition as made by Ld. AO shall be confirmed.
134. On the contrary, Ld. Counsel for the assessee submitted that the addition is uncalled for. At the outset, he submitted that the addition made is Rs. 1,77,65,000; but the total of the on-money as per the chart came to Rs. 42,15,000. Hence the balance addition has no legs to stand. Now in respect of the addition of Rs. 42,15,000, he submitted that during the year the assessee 158 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
purchased land from four sellers. In respect of first seller Smt. Rajeshwari w/o Shri Anamd Rai (addition Rs. 28,34,000), 2 acres of land was purchased. Statement allegedly of one Shri Mukesh Patidar was recorded. Ld. Counsel for the assessee took us to PB 1385 and submitted that it is unknown that it was statement of Shri Mukesh Patidar or Shri Arjun Patidar as the same is not clear from the statement itself. Further, he submitted that in either case, neither Shri Mukesh Patidar nor Shri Arjun Patidar had any relation with the transaction. Why ld AO choose not to record statement of seller herself is unknown. Further, the fact of payment of on-money was not corroborated. In respect of the second seller Shri Deep Singh (addition Rs. 3,64,000), Ld. Counsel for the assessee submitted that 7.10 acres of land was purchased by the asssessee for Rs. 2,43,44,000. All the payments were made by cheque. No incriminating material was found during the course of search to show on-money. Subsequently, his statement was recorded. He stated total consideration as correct i.e. Rs. 2,43,44,000; but stated amount received in cash Rs. 3,64,000 as on-money. Thus, the statement itself was contradictory. Further, 159 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
the said statement was not corroborated by producing any bank account as alleged by ld AO. In respect of third seller Shri Lakhan Singh and Smt. Shanti Bai (addition Rs. 51,000), Ld. Counsel contended that 5.20 acres of land was purchased from them. There was no on-money payment and all the payment was by cheque and duly recorded in the books. No evidence was found during the course of search to show on-money. Subsequently, the statement of the seller was recorded. The statement as available at Page 110 - 112 of the Assessment Order does not refer to any on-money payment. How the Ld. AO arrived at this figure is unknown. Further, an affidavit of the seller was also filed to establish that there was no on-money. In respect of the fourth seller Smt Mathri Bai w/o Shri Shankarlal, Shri Rajmal and others (addition Rs. 9,00,000), it was submitted that 2 acres of land was purchased by the assessee for Rs. 71 lakhs. All the payments were by cheque and the transaction was duly recorded in the books. No evidence was found during the course of search to show any on-money. Subsequently, statement of only one seller, Shri Rajmal was recorded. In his statement, he wrongly mentioned that Rs. 9,00,000 160 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
was received in cash as on-money. However, later-on he filed an affidavit denying to have received any on-money. Ld Counsel lastly submitted that the Ld. AO contended that the bank statements were given by the sellers to show that amount was deposited in their bank. No such bank statements were ever brought on record. The same is not filed in the Department's paper book also. It was therefore contended that such bank statement, if any, cannot be relied on.
135. We have considered the rival submissions, evidences on recorded and orders of the Ld. Lower authorities. At the outset, it is noted that the Ld. AO made addition of Rs. 1,77,65,000. However, the basis for making such addition is not clear. The total of addition as per the Ld. AO himself shall comes to Rs. 42,15,000. Thus balance addition is baseless. Now in respect of addition for on- money, we notice that during the course of search, 27 registries were found. The transactions mentioned therein were duly recorded in the books. No evidence showing on-money was found. Thus, in the proceedings u/s. 153A r/w section 143(3), no addition can be made in respect of on-money payment. The addition therefore is not 161 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
sustainable. In any case, we observe that the addition is not justified. In respect of purchase of land from Smt. Rajeshwari, statement of Shri Mukesh Patidar and Shri Arjun Patidar who are not connected with the transaction would be futile. Further, in respect of Shri Deep Singh, there is an apparent contradiction in his statement, as at one place he is stating the total consideration at Rs. 2,43,44,000 as recorded in books and paid by cheque, but on the contrary he stated that Rs. 3,64,000 was paid in cash as on- money. In respect of Shri Lakhan Singh and Smt. Shanti Bai, there is no confession of on-money in the statement available on record. In respect of Smt. Matri Bai, Shri Rajmal and others, the confession of on-money was later retracted by the seller himself. It is a settled law that the statement of third parties, which are not corroborated cannot bind the assessee. No corroborative evidence has been brought on record to show on-money. Ld. AO stated that amount was deposited in the bank by the sellers; but why such bank statements were not brought on record and confronted to the assessee. At this stage also, no such bank statements were produced. We therefore are fully in agreement with the findings of 162 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Ld. CIT(A) and therefore confirm the order of Ld. CIT(A). In the result, Ground No. 9 of the Department's appeal for A.Y. 2012-13 is hereby dismissed.
136. The next ground of appeal is Ground No. 11 of the Departments' appeal for A.Y. 2012-13 relating to addition of Rs. 15,00,000 in respect of unaccounted cash transactions with Shri Vishnu Gupta.
137. The facts relating to this ground of appeal are that during the course of survey u/s. 133A at the premises of the assessee company in August 2013, a document LPS 16 page 42 was found. This document was a computer generated document and related to purchase of one flat "AR 01 302 DL". As per the Ld. AO, a consultancy fees of Rs. 10 lakhs was credited by the assessee company in the memorandum ledger relating Shri Vishnu Gupta, who acted though his company, M/s. VSP Consultants P Ltd. Further, on 17.09.2011, it has been mentioned that Rs. 5,00,000 in cash "Has been paid". Thus, ld AO contended that assessee company has received Rs. 15,00,000 from Shri Vishnu Gupta 163 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
acting though his company M/s. VSP Consultants P Ltd. He therefore added Rs. 15,00,000 in the hands of the assessee.
138. Against this addition, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) deleted the addition at page nos. 205 to 208, holding as under:
"4.12.3 I have considered the facts of the case, written submission filed by the appellant and finding of the AO. During the course of survey page no. 42 of LPS-16 was impunged from business premises of appellant. This impunged loose paper is an unsigned copy of ledger account of M/s VPS Consultants P. Ltd. M/s VPS Consultant has booked a flat in the name of his direct Shri Vishu Gupta at project Aster Royal of appellant company on 20.04.2011 for a total sale price of Rs. 51,00,000/-. Shri Vishnu Gupta is a financial consultancy to the appellant company from past many years. When the consultancy work got completed M/s VSP Consultants P. Ltd a company of Shri Vishu Gupta raised bill of Rs. 62,92,160/- on the assessee company for consultancy services being provided by Shri Vishnu Gupta. Further, Shri Vishnu Gupta issued two cheques of Rs. 1,00,000/- and Rs. 5,00,000/- to the appellant company for purchased of flat as mentioned above, the same fact is also narrated account of Shri Vishnu Gupta in the books of appellant. Thereafter, sum of Rs. 11,00,000/- was received by the appellant from Shri Vishun Gupta on 28.12.2011 out of which Rs. 6,00,000 was returned back through RTGS on 28.12.2011. Further, sum of Rs. 6,00,000/- & 5,00,000/- were also returned on 24.07.2013. Thus, the entire receipt from Shri Vishnu Gupta were return back by appellant as the fact at project Aster Royal was purchase by Shri Vishnu Gupta. Appellant during appellant proceedings has strongly contended that cash amounting to Rs.164
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5,00,000/- was neither received nor paid by the appellant to M/s VSP Consultants P. Ltd. Appellant has also submitted that the AO has only relied upon the impunged unsigned rough paper found during the course of survey, without having any corroborative evidence on record showing payment/receipt of chash of Rs. 5,00,000/-. Appelant in support has placed reliance on the decion of Hon'ble Supreme Court in the case of CBI vs VC Shukla (1980) 3 SCC 410 wherein it has been held that loose cannot be considered as books.
4.12.4 On considering the entire factual matrix of the issue, inter-alia submissions filed by the appellant I reach to a conculsion that the additions made by the AO are on presumptive belief that sum of Rs. 5,00,000/- was received by appellant from M/s VSP Consultants P. Ltd. As discussed above, all the amount received by the appellant from Shri Vishnu Gupta was retuned back by appellant because the flat was not purchased by Shri Vishnu Gupta. Therefore, no prudent will pay huge sum of Rs. 5,00,000/- for no reason to the appellant company. A bill was raised by M/s VSP Consultants P Ltd. for consultancy services provided by team to the appellant of Rs. 51,00,000/- on 14.02.2004 for total agreegate professional consultancy charges of Rs. 62,92,160/-. The appellant has paid entire amount of consultancy charges to Shri VPS Consultants P. Ltd. throught cheques.
4.12.5 It is important to mention here that flat which was earlier proposed to be purchased by Shri Vishnu Gupta was lateron purchased by his wife Smt Sunita Gupta. All the payments were made through cheques on different dates, therefore, on cash was also paid by Smt Sunita Gupta. Thus, the only inference which can be drawn on this impunged loose paper is that, the AO has made addition under deemed fiction and without having any corroborative evidence on record which could establish that there was exchange of cash for purchase of flat by Shri Vishnu Gupta/ M/s VPS Consultants P. Ltd. Hon'ble Supreme Court in the case of CIT v/s KP 165 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Varghese 131 ITR 547 (SC) has held that in absence of evidence that actually assesse paid more amount than declared in registered deed, no addition can be made.
It is settled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The AO is not justified in presuming certain facts without having anything to corroborative. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex Court In the case of Dhiraj Lal Girdharilal v/s CIT (954) 26 ITR 736 (SC). It is also very important to point out that neither the seller nor the buyer has ever admitted that sum of Rs. 5,00,000/- was paid/received. Thus, in view of the above discussion, I find no merit in the addition made by the AO on the basis of assumption and presumption and without any corroborative evidence on record having direct nexus with the impunged recipt/payment. Further as per the impunged loose paper or rather say dum document sum of Rs. 10,00,000/- represents recipts and sum of Rs. 5,00,000/- represents payment, however, the AO has treated the payment to be recipt.
4.12.6 In view of the above, the addition made by the AO on account of assumption and presumption basis and in absence of any congent evidence amounting to Rs. 15,00,000/- is Deleted. Therefore, appeal on this ground is Allowed."
139. Against these findings of Ld. CIT(A), the department is in appeal. During the course of hearing, Ld. Counsel for the revenue 166 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
took us to the Assessment order in the case of Shri Vishnu Gupta, and referred to the loose paper found. He contended the fact of the receipt was mentioned in the loose paper and therefore, such unexplained receipt ought to be added.
140. On the contrary, Ld. Counsel for the assessee submitted that the correct fact of the transaction is that Shri Vishnu Gupta was a financial advisor to the assessee-company and has been providing financial consultancy to the assessee company from past many years. When the consultancy work got completed, M/s. VSP Consultants P Ltd a company of Sh. Vishnu Gupta raised bill of Rs. 62,92,160 on the assessee company for consultancy services being provided by Sh. Vishnu Gupta. Further, Shri. Vishnu Gupta issued two cheques for purchase of flat. The same fact is also narrated in the ledger of Sh. Vishnu Gupta in the books of assessee. Thereafter, sum of Rs. 11,00,000 was received by the appellant from Sh. Vishnu Gupta on 28.12.2011 out of which Rs. 6,00,000 was returned back through RTGS on 28.12.2011. Further sum of Rs. 6,00,000 and Rs. 5,00,000 were also returned on 24.07.2013. Thus, the entire receipt from Sh. Vishnu Gupta were returned back 167 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
by assessee as the flat at project Aster Royal was not purchased by Shri Vishnu Gupta. These tansactions were through banking channels; further there was no on-money receipt from Shri Vishnu Gupta. The booking of flat infact got cancelled and therefore this amount was returned back. It was submitted that, later on the flat was purchased by wife of Shri Vishnu Gupta, and the payment for same was made by cheques. There was no evidence to establish any cash receipts from Shri Vishnu Gupta.
141. We have considered the rival submissions, and gone through the order of Ld. Lower authorities. During the course of survey at the premises of the assessee-company, page no. 42 of LPS-16 was found from business premises of appellant. This impunged loose paper is an unsigned copy of ledger account of M/s VPS Consultants P. Ltd. On consideration of the facts on record, it is clear that M/s VPS Consultants P Ltd. has booked a flat in the name of his Director Shri Vishu Gupta at project Aster Royal of appellant company on 20.04.2011 for a total sale price of Rs. 51,00,000/-. Shri Vishnu Gupta was a financial consultant to the appellant company from past many years. When the consultancy 168 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
work got completed M/s VSP Consultants P. Ltd a company of Shri Vishu Gupta raised bill of Rs. 51,00,000 plus service tax totalling to Rs. 62,92,160/- on the assessee company for consultancy services being provided by Shri Vishnu Gupta. The payment of consultancy fees was made later on by banking channel. Since huge consultacy fees was due to Shri Vishnu Gupta during the period, instead of insisting on the payment, a credit in advance used to be given, anticipating the professional fees. So far that amount received for booking of flats was concerned, same was received by banking channels and the same was returned by banking channels when the booking was cancelled. Consultancy fees was also paid by cheque. The same facts are also narrated by Shri Vishnu Gupta. There was no cash receipt from Shri Vishnu Gupta. In the given facts, we therefore confirm the findings of Ld CIT(A). This ground of the revenue is therefore rejected.
142. Now we take up Ground No. 2 of the Department's appeal for A.Y. 2013-14 relating to addition of Rs. 1,20,00,000 as unaccounted receipts under LPS 1/2 page no. 68.
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143. The facts relating to this ground of appeal are that during the course of search at the residential premises of Shri Yashovardhan Jain, a computer printed sheet was found. It was written in the sheet "Cash Bhopal" against various dates as "Dr" and amounts were written on credit side of this document. The total of this sheet was Rs. 1,20,00,000. Ld. AO contended that since the document was found at the residence of General Manager (Finance), Shri Yashovardhan Jain and the said document could not be explained, hence he added Rs. 1,20,00,000.
144. Against this addition, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) deleted the addition, at page 71-92 by detailed findings as under:
"4.3.2 I have considered the factual matrix of the case, written submissions filed and assessment order. During the course of search page nos 68 & 54 of LPS- ½ were found from residential premises of Shri Yashovardhan jain, employee of the appellant company. The impunged loose paper 68 of LPS - 1/2 , scanned on page no 32 of assessment order, is a unsigned ledger account with title 'AG8' and loose paper 54 of LPS - 1/2 , scanned on page no 35 of assessment order, is a document containing details of 'details collection for march 13'. The AO has alleged that both the impunged loose papers represent unaccounted receipts and pertains to the appellant company. However, appellant has strongly contended that both has been 170 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
held by the Hon'ble Supreme Court in the case of During the course of search statement of Shri Yashovardhan Jain was also recorded on oath wherein he was also confronted with these loose papers. Shri Yashovardhan Jain submitted that there loose papers belongs to M/s AG8 Venture Ltd. and he is unaware of fact whether these are entered in the books of account. On the contractry appellant has strongly contended that no opportunity of cross examination was given by the AO to the appellant and no person/employee is allowed to take any document to his house. I find force in the contentions of the appellant that no proper and meaningful opportunity of cross examination was provided to the appellant. This is also as admitted fact that statement of Shri Yashovardhan jain was recorded behind the back of the appellant. No opportunity of cross-examination was ever allowed to the assessee. This has been held by the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise Kolkata in Civil Appeal No. 248 of 2006 that in absence of cross-examination of parties, the assessment proceedings to be quashed. Further, the Hon'ble Gujarat High Court in the case of Praful Chunilal Patel Vs. Makwana [236 ITR 832 (Guj )] and JCIT & Ors. Vs. George Willimson (Assam) Ltd. [258 ITR 126 (Guj)] has held that statement of third party cannot be relied upon without having any corroborative evidence. Similarly, Hon'ble Supreme Court in the case of kishanchand Chellaram V/s. CIT 125 ITR 713 (SC) bhas held that adverse inference cannot to drawn against the assessee from the statement of third parties. Similarly, Ld. AR of the assessee has relied upon decision of jurisdictional High Court in the case of CIT V/s. Indrajit Singh Suri (2013) 33 taxmann 281 (Guj.) that where additions were addition were made on the basis of statement of persons who were not allowed to be cross examined by the appellant, addition were not sustainable.171
IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Since, the impunged loose papers 68 & 54 of LPS-1/2 were found in possession of Shri Yashovardhan Jain, the appellant cannot be blamed to be owner of the transaction.
After considering the entire factual matrix and evidence/material on record inter alia written submission filed, I reach to conclusion that impunged addition was made on the basis of assumption and presumption which neither sustainable on facts nor in law. The appellant was also not given any opportunity of cross examination. Appellant during appellate proceedings has strongly contented that appellant did not receive any such cash and the impunged loose paper represent rough working by employee of other unknown person. Further, the AO has also failed to bring on record any cogent evidence, creating direct nexus of receipts of impunged cash as alleged by the AO. Therefore, in absence of any cogent evidence having direct nexus with the impunged transaction, the said impungad paper i.e. page no 68 & 54 of LPS-1/2 cannot be used against the assessee. 4.3.5 This is an undisputed fact that neither any incriminating material was found or seized during search proceedings nor Shri Yashovardhan Jain has ever admitted about receipt of Rs. 1,20,00,000/- and Rs. 1,04,88,000/- by the appellant in cash. On the contrary, no incriminating document was found suggesting receipt of cash as mentioned on these impunged loose papers. In absence of any corroborative evidence to prove that there was any exchange of money by CASH, AO has no locus to assume that appellant has received sum of Rs. 1,20,00,000/- and Rs. 1,04,88,000/-. Furher, the AO has also alleged that amounts mentioned under column 'B' represents unaccounted receipts and assessee has also admitted onmoney in project High land. However, the AO failed to explain elaborately whether these payments are related to project Highland or some other project. Further, the onmoney received in project has already been confirmed vide para 4.13 of this order of this order. Nevertheless, It is settled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The 172 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
AO is not justified in presuming certain facts without having anything to corroborative. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex Court In the case of Dhiraj Lal Girdharilal v/s CIT (954) 26 ITR 736 (SC).
4.3.6 In view of the above discussion, material evidence on record and case laws cited, firstly, the AO ought to have provided opportunity of cross examination of Shri Yashovardhan Jain. Secondly, no incriminating material was found during the course of search suggesting receipt of case as per impunged loose paper. Thirdly, the AO should have brought some independent evidence suggesting exchange of cash of Rs. 1,20,00,000/- and Rs. 1,04,88,000/-. Fourthly, none of the loose paper under 54 & 68 of LPS-1/3 were found in possession of Shri Yashovardhan Jain and not in possession of appellant. Fifthly, none of the loose paper under consideration is signed by the appellant or any of its authorized representatives. Sixthly, the impunged loose paper should be speaking ne without having any second interepration, which is not in the case of appellant. My findings on the issue under consideration are based on the various conclusions drawn by me which have been discussed in the above paras. Therefore, the AO was not justified in making addition of Rs. 1,20,00,000/- & Rs. 1,04,88,000/- being on sheer assumption and presumption basis. Thus, the addition made by the AO amounting to Rs. 1,20,00,000/ & Rs. 1,04,88,000/- are Deleted. Therefore appeal on this ground is Allowed." 173 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
145. Against these findings of Ld. CIT(A), the revenue is in appeal before us. Ld. CIT(DR) submitted that Shri Yashovardhan Jain was General Manager (Finance) of the assessee company. At his residence the document was found. The document showed "Cash receipts" on different dates, totalling to Rs. 1,20,00,000/-. The same was unexplained, and hence the Ld. AO was justified in making the addition.
146. On the contrary, Ld. Counsel for the assessee submitted that the document was a printed sheet. It was unsigned and it was unknown as to who created it and for what purposes it was created. The document was found from the residence of Shri Yashovardhan Jain and if he was unable to explain the same, how it can be deemed to be the unaccounted receipts of the assessee company. Further, the entries therein are mere dumb, only date is written and "Cash Bhopal" is written. It is not even clear whether it was cash balance, cash received or cash paid. Who received it, from whom it was received, for what purposes the cash was received, if any, was never enquired. Ld. Counsel for the assessee therefore submitted that the entries in these documents were inconclusive. He relied on 174 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
the order of Ld. CIT(A) and contended that the Ld. CIT(A) was justified in deleting the addition.
147. We have considered the rival submission, orders of Ld. Lower authorities and the facts on record. We find that a document was found with the heading "AG8 Bhopal" at the residence of Shri Yashovardhan Jain. This document contained certain entries against particular dates mentioning "Cash Bhopal". How Ld. AO alleged the same to be cash receipt could not be comprehended. Whether this represents cash receipt or payment or cash balance is also not clear. The document can at best be said to be a dumb document in absence of any enquiry by the Ld. AO. We find that once such document was found from the premises of one employee, Ld AO ought to have enquired as to the contents of the documents. Ld. AO merely choose to make his own conclusions. Going by the verison of the Ld. AO himself, it cannot be known as to cash was received from whom and for what purposes. We therefore are in full agreement with the finding of Ld CIT(A) deleting the addition holding the said document as a dumb document.
175 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
148. Therefore, Ground No. 2 for A.Y. 2013-14 of the Department's appeal deserves to be rejected.
149. The next Ground of Appeal is Ground No. 3 of Department's appeal for A.Y. 2013-14 amounting to Rs. 1,04,88,000 relating to unexplained money marked as LPS 1/2 page 54.
150. The facts of the present ground are that during the course of search at the residence of Shri Yashovardhan Jain, a computer printed document titled as "Daily collection sheet" was found. The document contained certain notings related to March 2013 and had two columns A & B. In this sheet, date wise entries from 1st March to 17th March were made. Amount in column A was 785.7 and amount in column B was 104.88. Ld. AO concluded that 'B' denotes unaccounted and therefore treated this as unaccounted received of the assessee company.
151. Against this addition, an appeal was filed before Ld. CIT(A). Ld. CIT(A) discussed this addition alongwith addition for LPS 1/2 page 68, and deleted the addition. The findings of Ld. CIT(A) are reproduced alongwith Ground No. 2 of A.Y. 2013-14 above. 176 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
152. Against this, the department is in appeal before us. Both the parties made similar submissions as made in Ground No. 2 above. Ld. Counsel for the assessee further submitted that the name of assessee company was nowhere written on this document. This document was not found from the possession of assessee company. Therefore, Ld. AO could not have co-related this document with the assessee company.
153. We have considered the rival submissions, order of the Ld. Lower authorities and the facts on record. The document, LPS 1/2 page no. 54 was not found from the office of assessee company. It was found from Shri Yashovardhan Jain, who was an employee of assessee company. There was no mention on this document that it is related to assessee. It is a computer generated sheet, which is unsigned. The maker of this document is unknown and the purpose for which it was made was unknown. This document, even if related to the assessee company, cannot be correlated with any unaccounted cash receipts. Certain figures were written on this document as A and B. How Ld. AO concluded that these figures are in lakhs is unknown. Further, it cannot be correlated as to from 177 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
whom it was received, for what purpose it was received, if any. No enquiry whatsoever was conducted by the Ld. AO. This document may raise a suspicion that there is some 'B' part, but this suspicion had to be established by certain corroborative evidences to be produced by the department to establish this allegation. No inquiry as to who created it, what was the purpose, from whom it was received, how the figures are in lakhs has been done. Are these estimates of receipts or actual receipts, if any. In the present situation, the document remains a mere dumb document and no addition can be made on same. We are in agreement with the Ld. CIT(A) that this dumb document cannot be a basis for making addition in the hands of the assessee. We therefore dismiss Ground No. 3 of the Department's appeal for A.Y. 2013-14.
154. The next common grounds are Ground No. 4 Department's appeal for A.Y. 2013-14 (Rs. 1,28,64,700) and Ground No. 3 of Department's appeal for A.Y. 2014-15 (Rs. 5,40,06,795) which relate to unaccounted receipts. Further, Ground No. 5 of Department's appeal for A.Y. 2013-14 (Rs. 55,24,697) and Ground No. 4 of Department's appeal for A.Y. 2014-15 (Rs. 7,12,72,179) 178 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
relate to unaccounted investments. This all grounds are related to document LPS 1/2 page no. 14 to 23 found during the course of search.
155. The common facts related to these grounds of appeal are that during the course of search at the residence of Shri Yashovardhan Jain, loose sheet LPS 1/2 page no. 14 to 23 were found and seized. This sheet was a computer generated sheet. The columns therein were Sr. No., date, name, narration, Dr., Cr. And remark. There were 477 entries in the sheet. The column date was empty. However, against certain entries date were written in handwriting. Ld. AO concluded that the entries on the debit side related to unaccounted investments and added the same. Further, entries on the Credit side related to unaccounted receipts and therefore he added the same.
156. Against these additions, the assessee preferred an appeal to Ld. CIT(A). Ld. CIT(A) at pages 105 to 116 of his order, deleted the addition, holding as under:
"4.4.2 After considering the entire factual matrix and evidence/material on record inter alia written submissions filed, I reach to conclusion that 179 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
impunged addition was made on the basis of assumption and presumption which neither sustainable on facts no in law. The AO has reached to conclusion that appellant received Rs. 1,28,64,700/- as unaccounted receipts and has made payment of Rs. 55,24,697/- as unaccounted investment. Appellant during appellate proceedings has strongly contented that appellant never received/paid any such amount which are duly audited u/s 44AB of the Act. The loose papers under consideration are the same which were found durng the course of survey in August 2013. The AO found that the documents represent unaccounted cash receipt/unaccounted investment of the appellant company. However, appellant has contended that neither such amount was received by the appellant nor was paid, infact, the loose papers were found from possession of Shri Yashovardhan Jain who has left company of the appellant. Appellant has also placed reliance on the decision of Hon'ble ITAT Mumbai in the case of Straptex (India) Pvt. Ltd. 84 ITD 320 (Mum) wherein ithas been held that the presumption u/s 132(4) is applicable only against the person from whom possession the books of account or other documentary evidence were found and not against any other person.
These documents have been scanned on page 38 to 48 of assessment order. On A plain and cursory look would make it amply clear that this paper is relating to "some ledger account statement various customers". Appellant has argued that the said transaction has never taken place through appellant. Further the AO failed to establish direct nexus as to when the amount was received/paid by appellant company and from whome amounts were received and to whom amounts were paid, the AO has also failed to bring on recorded any cogent evidence, creating direct nexus of receipt of Rs. 1,28,64,700/- and payment of Rs. 55,24,697/- by the appellant. Therefore, in absence of any cogent evidence having direct nexus with the impunged transaction, the said impunged papers i.e. page nos 14 to 23 of LPS-1/2 found from possession of Shri Yashovardhan Jain cannot 180 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
be used against the assessee. These loose papers are rough jotting/scribbling and rough jottings without direct nexus with the assessee cannot be used against him.
The AO has made allegation against the assessee that the has received that he has received Rs. 1,28,64,700/- and Rs. 55,24,697/- was paid as per details mentioned on loose paper 14 to 23 of LPS-1/2. In absence of any of the person as mentioned on imunged loose paper, Shri Yashovardhan Jain or either of the director of appellant company or any incriminating document/paper to establish that assessee has received sum of Rs. 1,28,64,700/- and has made payment of Rs. 55,24,697/-. In fact these loose papers were found from possession Shri Yashwardhan Jain in his statements stated his these papers are of his one of the client, whose books were written by him. It is settled legal position that onus of proof is on the person who makes any allegation and not on the person who has to defend. As per legal maxim "affairmanti non neganti incumbit probation"
means burden of proof lies upon him who affirms and not upon him who denies. Similarly as per doctrine of common law "incumbit probation qui digit non qui negat". i.e. burned lies upon one who alleges and not upon one who deny the existence of fact. The AO has failed to discharge his onus of proof especially when addition has been made under "deeming fiction". In view of this lacune on the part of AO, impuned addition is legally not sustainable. As held in the case of CIT v/s KP Varghese 131 ITR 574 (SC) by Hon'ble Apex Court in absence of evidence that actually assessee paid more amount than declared in registered deed, no addition can be made. In the case of Banasal Strip (P) Ltd. & Ors Vs. ACIT (2006) 99 ITD 177 (Del) it has been held that:-
"If an income not admitted by assessee is to be assessed in the hands of the assessee, the burden to establish the income is chargeable to tax is on the AO. In the absence of adequate material as to mature and ownership of the 181 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
transactions, undisclosed income cannot be assessed in the hands of the assessee merely by arithmetically totally various figures jotted down on loosed document"
4.4.5 This is undisputed fact that neither any incriminating material was found or seized during search proceedings nor the payers has ever admitted about receipt of Rs. 1,28,64,700/- and payment of Rs. 55,24,697/-. In addition, the AO did not make any independent enquiry about the payers of the unaccounted receipts/payment and has made all allegations on the appellant. Hon'ble Supreme Court in the case of LIC of India v/s India v/s CIT (1996) 216 ITR 410 (SC) has held that the law does not compel a man to perform the act which he cannot possibly perform. In the present case, the documents were found in possession of appellant. It is Shri Yashovrdhan Jain who has to explain the entries on these impunged loose paper and cannot put baseless allegation on the appellant. In absence of any corroborative evidence to prove that these was any exchange of money by CASH/Cheque/Kind, AO has no locus to assume that appellant has received Rs. 1,28,64,700/- and made payment of Rs. 55,24,697/-. It is steeled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The AO is not justified in presumption certain facts without having anything to corroborative. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex Court in the case of Dhiraj Lal Girdharilal v/s CIT (1954) 26 ITR 736 (SC).
4.4.6 In view of the above discussion, material evidences on record and case laws cited, firstly, the AO ought to have done independent enquiries 182 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
from whose as alleged the appellant has received such amounts. Secondly, Shri Yashovrdhan Jain should have been examined and should have been loose papers. Thirdly, the loose paper or rather say it as dumb document should be a speaking one having direct nexus with the assessee, which was not in the case of appellant. Forthly, no incriminating material was found during the course of search relating to the impunged receipts. Fifthly, the loose papers are undated and unsigned. My findings on the issue under consideration drawn by me which have been discussed in the above paras. Therefore, the AO was not justified in making addition of Rs. 1,28,64,700/- as unaccounted cash receipt and Rs. 55,24,697/- as unaccounted investment. Thus, the addition made by the AO amounting to Rs. 1,28,64,700/- & Rs. 55,24,697/- are Deleted. Therefore appeal on these grounds is Allowed."
Similar findings were given in A.Y. 2014-15 by the Ld. CIT(A).
157. Against this order of Ld. CIT(A) the department is in appeal. Ld. Counsel for the revenue submitted that during the course of search at the residence of General Manager (Finance), Shri Yashovardhan Jain, these loose sheets were found marked as LPS 1/2 page 14 to 23. The loose sheets contained the details of expenses/ investments made and the details of receipts. These transactions could not be verified from the books of the assessee- company. The story of the assessee that this document was just a typed version of what was found during the course of survey is a cooked up story. Thus, the addition was clearly called for. 183 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
158. On the contrary, Ld. Counsel for the assessee assessee submitted that the facts of this document are that a loose paper (LPS 1-9) was found during the course of survey in Aug. 2013 at the office of the assessee-company. This paper was handwritten rough noting. It was found from the bag of one employee Reeta Shrivastav. Copy of the said document is placed in the Written Submission as Annexure 1 at pages 201-215. It was not clear whether these are receipts or payments. In many cases, dates were not mentioned. The figures ranged from 1 to 10,00,000. At that time, statement of Reeta Shrivastav was recorded and she said that the said document relates to some rough notings related to assessee-company. Later, the department required the assessee to get the said document typed, with increased two or three zeros as per the will of the IT authorities. Transactions were classified as payment or receipts. The typed version of the said loose papers with some more zeros were found during search at the residential premises of Yashvardhan Jain. This was marked as LPS 1/2 page 14-23. This fact was brought to the notice of the Ld. AO and he accepted this fact during the assessment. Ld. Counsel for the assessee referred to 184 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
pages 2147 and 2150 of the Paper book. He tried to compare Annexure 1 (Page 1 to 9 found during the survey) and LPS ½ page 14-23 to demonstrate that the entires therein are same, except 2-3 zeros. He further submitted that analysis of the said document clearly demonstrates that the document is dumb document. The approach of adding 2 or 3 zeros in some cases and adding on zeros in some cases is totally ad-hoc. He further submitted that the classification of Dr. and Cr. is also totally ad-hoc. Salary has been written on receipt side. Further, in most entries dates are not mentioned, particulars are not mentioned, work is not mentioned. Ld. AO simplisiter added the figures mentioned in the sheet without corroborating any single entry therein. He therefore contended that the addition is uncalled for.
159. We have considered the rival submissions, order of the Ld. Lower authorities and the evidences on records. On going through the paper found during the course of survey u/s. 133A which is at page 201 to 215 of the Written submission filed by the assessee and the LPS 1/2 page 14-23 as placed at PB 1593-1611; we find that the document found during the survey was a handwritten 185 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
document. There was no classification of amount received or paid. Further, it was just a rough scrubbling made by one employee. The document found during the course of search at the residence of Shri Yashovardhan Jain were computer generated, containing the same entries. However, in this classification was done, and further against only a very few entries some dates were written. In many entries 2 or 3 zeros were added. As submitted by learned counsel for the assessee that it seems that Shri Yashowardhan Jain was trying to compile the jottings found during the course of survey for filing reply to the Income-tax Department explaining the entries therein. Before he could have complied the same, this half worked document was found at his premises during the search. Assessee infact brought this fact, in the knowledge of Ld. AO. But the Ld. AO merely ignored this fact Ld. AO did not consider it proper to verify any transaction out of the said sheet, but merely added the figures in the hands of the assessee. The document LPS 1/2 page 14 to 23 in our view is a mere dumb document and nothing else, considering the fact that the same is just a half worked compilation of loose sheet found during survey u/s. 133A. Most transactions are 186 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
undated; in many cases the parties or narration are not written. How such a document can be made a basis for making addition, moreover when the entries therein were not corroborated by the department. We therefore are in full agreement with the findings of the Ld. CIT(A) on this issue.In the result, the Ground No. 4 and 5 of Department's appeal for A.Y. 2013-14 and Ground No. 3 and 4 of Department's appeal for A.Y. 2014-15 are hereby dismissed.
160. The next Ground is Ground No. 6 of Department's appeal for A.Y. 2013-14 amounting to Rs. 8,50,000 relating to unaccounted receipts under LPS A-2 page no. 21. The addition relating to the unaccounted receipts are in respect to LPS A-2 page no. 21 relating to Smt. Nirmal Chandra Rs. 5,00,000 for the current year; and LPS A-2 page 13 in respect of Shri Vinod Semwal & Smt. Archana Semwal Rs. 3,50,000 relating to current A.Y. The issue is already covered by our findings in relating to Ground No. 2 for A.Y. 2012-13 earlier. We therefore dismiss this ground of the revenue's appeal.
161. The next ground of appeal is Ground No. 7 of the Department's appeal for A.Y. 2013-14 relating to disallowance u/s. 40A(3) of Rs. 60,000.
187 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
162. The facts related to this ground of appeal are that asssessee company purchased an agricultural land from one farmer Smt. Resham Bai, at Gram Phanda. The land was purchased for Rs. 36,60,000. Out of the total consideration, an amount of Rs. 60,000/- only was made in cash. Ld. AO held that although the transaction is recorded in the books, yet the expenditure of Rs. 60,000 was in contravention of section 40A(3) and therefore same shall be disallowed.
163. Against this addition, assessee preferred an appeal before Ld. CIT(A). Ld. CIT(A) held that the payment was made in cash as demanded by the sellers. He held that the payment was made on business expendiency and applied the judgment of Tribunal Indore, in the case of Tirupati Construction vide ITA No. 522/Ind/2014 dated 14.07.2016.
164. Against this the department is in appeal. Ld. Counsel for the revenue submitted that the payment is clearly in contravention of section 40A(3) and therefore same was to be disallowed. Ld. Counsel for the assessee however submitted that the transaction was genuine and was duly recorded in the books. Further, he 188 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
contended that cash was required to be paid in the present case as the same was demanded by the sellers. He relied on the judgment of Gurdas Garg vs CIT in TS-5374-HC-2015(P & H) and further on Tirupati Construction vs DCIT (Trib. Indore) copy of which was placed at PB 373-399.
165. We have considered the rival submissions, order of the Ld. Lower authorities and the case laws relied on. We are not in agreement with the contention of the assessee. We have already accepted that the payment if made on business expediency is allowed while discussing Ground no. 1 for A.Y. 2008-09 of the department's appeal. However, in the present ground, the assessee is unable to satisfy the parameter of business expendiency. The assesse had paid Rs. 36,60,000/- in total. However, he contended that the seller was unaware of the assessee-company. Had that been the case, entire payment would have been in cash. It is not possible that for Rs. 36,00,000 the seller accepted the payment by cheque and for balance Rs. 60,000/- he demanded that payment be made in cash. We therefore allow this ground of appeal of the 189 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
department's appeal and hold that the Ld. AO was justified in making addition of Rs. 60,000 u/s. 40A(3).
166. Now we take up Ground No. 8 of Department's appeal for A.Y. 2013-14 amounting to Rs. 1,34,78,580/- relating to unexplained expenditure as per LPS 1/2 page no. 51.
167. The facts relating to this ground of appeal are that during the course of search at the residential premises of the General Manager (Finance) of the assessee-company, Shri Yashovardhan Jain, a loose paper sheet marked as LPS 1/2 page 51 was found and seized. The paper was computer generated and was titled "URGENT PAYMENT REQUIRED". Further, details of project/ party were mentioned at Sr. No. 1 to 4 and amounts were mentioned respectively. A sub- total of "Rs. 94.78580 lac" was made and later it was mentioned "5. Mr. Naresh Bhantia (Paras Singh Bhantia) return of cash part 40.00 Lac Rs. 40.00 Lacs up to 10.03.13". Ld. AO concluded that these are the details of unaccounted payments, and he added both Rs. 94,78,580 as mentioned in Sr. No. 1 to 4 and also Rs. 40 ,00,000 as mentioned in Sr. No. 5. Thus he made addition of Rs. 1,34,78,580/- 190 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
168. Against the addition, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) vide his order, at page 135 to 145, deleted the addition, holding as under(relevant extract):-
"4.7.2 I have considered the factual matrix of the case, written submission filed and assessment order. During the course of search page no. 51 of LPS ½ were found from residential premises of Shri Yashovardhan Jain, employee of the appellant company. The impunged document is title as 'urgent payment required.' On perusal of this loose paper, prime- facts it can be seen that it is relating to some requirement of founds. During the course of serach statement of Shri Yashwardhan Jain was also recorded on oath wherein he was also confronted with these loose paper belongs to M/s AG8 Ventures Ltd. On the contrary appellant has strongly contented that on opportunity of cross examination was given by the AO to the appellant. I find force in the contentions of the appellant that no proper and meningfull opportunity of cross examination was provided to the appellant. This is also an admitted fact that statement of Shri Yashvardhan Jain was recorded behind the back of the appellant. No opportunity of cross-examination was ever allowed to the assessee. This has been held by the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise Kolkata in Civil Appeal No. 248 of 2006 that in absence of cross- examination of parties, the appellant proceedings to be quashed. Further, the Hon'ble Gujrat High Court in the case of Praful Chunilal Patel Vs. M.J. Makwana [ 236 ITR 832 (Guj.)] and JCIT & Ors. Vs. George Willimson (Assam) Ltd. [258 ITR 126 (Guj)] has held that statement of third party cannot be relied upon without having any corroborative evidence. Similarly, Hon'ble Supreme Court in the case of Kishanchand Chellaram V/s. CIT 125 ITR 713 (SC) has held that adverse inference cannot be drawn against the assessee from the statement 191 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
of third parties. Similarly, Ld. AR of the assessee has relied upon the addition decision of jurisdictional High Court in the case of CIT V/s. Indrajit Singh Suri (2013) 33 Taxmann 281 (Guj.) that where additions were made on the basis of statements of persons who were not allowed to be cross examined by the appellant, additions were not sustainable. Since, the impunged loose paper 51 of LPS-1/2 were found in possession of Shri Yashovardhan Jain, the appellant cannot be blamed to be owner and author of the said loose paper.
After considering the entire factual matrix and evidence/material on record inter alia written submissions filed, I reach to conclusion that impunged addition was made on the basis of assumption and presumption which neither sustainable on facts nor I law. The appellant was also not given any opportunity of cross examination. Appellant during appellate proceedings has strongly contented that the loose paper clearly represents estimate for requirement of funds wahich may have been prepared by some unknown person/employee. Further, the AO failed to bring on record any cogent evidence having direct nexus with the impunged transaction, the said impunged paper i.e. page no 51 of LPS-1/2 cannot be used against the assessee.
4.7.5 This is an undisputed fact that neither any incriminating material was found or seized during search proceedings nor the payer has ever admitted about payment of Rs. 1,34,78,580/- by the appellant. In absence of any corroborative evidence to prove that there was any exchange ot money by CASH, AO has no locus to assume that appellant has made unexplained expenditure of Rs. 1,34,78,580/-. It is settled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The AO is not justified in presuming certain facts without having anything to corroborative. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 192 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex Court In the case of Dhiraj Lal Girdharilal v/s CIT (954) 26 ITR 736 (SC).
4.7.5 In view of the above discussion, material evidences on record and case laws cited, firstly, the AO ought to have provided opportunity of cross examination of Shri Yashovardhan Jain. Secondly, the AO should have examined the person whose names are mentioned on the loose paper. Thirdly, the AO should have brough some independent evidence suggesting exchange of cash of Rs. 1,34,78,580/-. Fourthly, the impubged loose paper 51 & of LPS-1/2 were found in possession of Shri Yashovardhan Jain and not in possession of appellant. Fifthly, the loose paper under consideration is signed by the appellant or any of its authorized representative. Sixthly, the impunged loose paper should be speaking one without having any second interepration, which is not in the case of appellant. Seventhly, the loose paper is undated, unsigned. My findings on the issue under consideration are based on the various conclusions drawn by me which have been discussed in the above paras. Therefore, the AO was not justifies in making addition of Rs. 1,34,78,580/- being on sheer assenting and presumption basis. Thus, the addition made by the AO amounting to Rs. 1,34,78,580/- is Deleted. Therefore appeal on this ground is Allowed."
169. Against this, the department is in appeal. Ld. Counsel for the revenue submitted that the loose paper was found from the premises of the General Manager (Finance) of the assessee 193 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
company. The document clearly mentioned that they are the details of urgent payments. The documents mentioned the name of the party/ projects and the amounts. Thus, the Ld. AO was justified in making the addition based on this document.
170. On the contrary, Ld. Counsel for the assessee submitted that this document which is a computer generated document is a rough noting relating to some requirements of the funds for making payment to the parties. The document itself speaks for itself that it relates to requirements of funds. Further, he submitted it might have been created by some employee to ensure that funds are available with the assessee company to make payments. The maker of the document and the purpose for which it was made is not known. He further contended that no enquiry was made by the department regarding the contents of the document from Shri Yashowardhan Jain. He further submitted that in the first part of the document, no date is mentioned. Merely name and amounts are mentioned. In the second part, it is mentioned "Rs. 40 Lac upto 10.03.13". It clearly shows that it is an estimate of fund requirements. He strongly relied on the order of Ld. CIT(A). 194 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
171. We have considered the rival submissions, order of the Ld. Lower authorities and the evidences on record. On going through the alleged document, we find that this document does not relate to payments made by the assessee but to the requirement of funds for making payments. It seems to be some rough jottings anticipating money to be receivable "up to 10.03.13" so that the urgent payments could be made. There is no evidence on record that the money was received or that the payment was made. The rough notings on this document were never enquired by the Ld. AO. Once the rough noting in this document is not corroborated, how it can be used against the assessee. Even it was never enquired into, as to who created this document and for what purposes it was made. This document, as such is a mere dumb document. Out of the 5 entries, 4 entries are without any date. Further, the entry only speaks of some amount to be returned upto 10.03.13. It is not clear whether this amount was to be returned to the assessee or by the assessee. Whether this amount was returned subsequently or not. Same has not been enquired into. We therefore do not find any 195 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
infirmity in the findings of Ld. CIT(A) in treating this document as a dumb document. Ld. CIT(A) was justified in deleting the addition.
172. In the result this ground of appeal of the department is dismissed.
173. Now we take up Ground No. 11 of the Department's appeal for A.Y. 2013-14 amounting to Rs. 1,00,000 in respect of LPS A-13 relating to on-money in respect of 21 registries found from the office assessee-company and 6 registries found from the site office of Aakriti Aqua City.
174. The facts are that during the current year, assessee purchased following lands from respective persons:
LPS Name of farmers Situated at Registry Market Addition Remarks as per Hectre/acr amount value/colle made by A.O. e of agri. (Rs.) ctor rate A.O. land sold (Rs.) and date of registry A-19 Smt. Binda Bai Phanda 14,00,000 48,60,000 1,00,000 Shri Ramsingh 67 to w/o. Shri kalan 0.405 husband of Smt. 81 Ramsingh R/o. vill. hectre PB 1637- Binda Bai attended Kharkhedi Teh. 1.00acre 1665 on 11-04-2014 and Huzur, Bhopal 16.04.2012 recorded statement that the received Rs. 1,00,000 in cash 196 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
A- 20 1. Smt. Sarju Bai Phanda 8,13,08,000 8,13,08,000 2,00,000 Shri Narayan 125 to W/o. Shri Ratan 5.145 Singh and Devi 135 Singh hectre PB 1666- singh attended and
2. Shri Devi Singh 12.71acres 1707 statement recorded S/o Ratan Singh 07.05.2012 on 05/08-02-2016
3. Shri Narayan that they received Singh S/o. Shri Rs. 1,00,000 each Gurubaksh in cash A-31 1.Ram singh Phanda 3,77,00,000 3,77,00,000 1,00,000 Shri Chandra 186 to 2.Shri Chandra Kalan Singh attended 195 singh both are S/o. 1.549 PB 1708- and statement Bahgirath hectre 6.29 1746 recorded on
3.Shri Santosh acres 26.02.2015, that Kumar S/o. 14.05.2012 he received Rs.
Chainsungh 1,00,000 in cash
A- 19 1. Smt. Harkubai Phanda 1,66,72,000 1,66,72,000 Shri Bhagan Singh
46 to w/o. lat Shri Kalan and Smt. Soram
66 Gurubakash 1.549 PB 924- bai attended on
2. Sh. Bhagwan hectre 6.29 972 4/8-02/2016, they
Singh acres admitted that all
3. Smt. Soram Bai 11.06.2012 the payments were
4.Smt. Sugan Bai received through
D/o. Late cheques.
Gurubakash singh
A- 19 Smt. Phanda 2,70,12,000 3,08,04,000 4,50,000 Shri Abhjeet Singh
19 to Gendkuwar w/o. Kalan S/O. of Late Shri
45 Vikram Singh 2.416 PB 1747- late Shri
hectre 5.79 1790 Gendkuwar
acres recorded statement
24.07.2012 on 26.02.2015 that
he received Rs.
4,50,000 in cash
A-18 Shri Govind singh Phanda 1,75,20,000 2,12,76,000 5,00,000 Shri Govind Singh
01 to S/o. Sh. Kalan statement recorded
17 Shambulal 1.779 PB 973- on 26.02.2016 that
hectre 4.40 1003 he received Rs.
197
IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
acres 5,00,000 in cash
13.09.2012
Total 13,50,000
Amount
Ld. AO relied on the statements of the parties and contended that on-money was paid by the assessee-company. He therefore made addition of Rs. 1,00,000 in respect of on-money.
175. Against this addition, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) deleted the addition as per the finding given at pages 183 to 189 of his order, holding as under (extracted):
4.10.8 In view of the above, firstly, the AO ought to have given opportunity of cross examination to the appellant. Secondly, the AO should have brought evidence having direct nexus with the alleged on money payment of Rs.
1,00,000/- (correctly Rs. 13,50,000/-). Thirdly, the addition made by the AO are on assumption and presumption basis. Futher, the loose papers were found in possession of Shri Yashovrdhan Jain and not from appellant. Fifthly, statements were recorded by the then ADIT who was not appropriate jurisdictional officer. Sixthly, all the sellers except Smt Binda Bai filred affidavits stating that all the payments made for purchase of land are duly recorded in books of account. Most importantly, Shri Naryan Singh, Shri Devi Singh, Shri Chandra Singh, Smt Gendhkuwar and Shri Govind vide their affidavits which are on record has stated that the statement given before the Income Tax authorities was given under pressur. My findings are based on the findings given in above mentioned paras. Thus, keeping in 198 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
view the above discussion and judiciously following the decision of Hon'ble Supreme court in the case of Kishanchand Chellaram (supra), the AO was not justified in making addition of Rs. 1,00,000/- (correctly Rs. 13,50,000/-). Thus, addition made by the AO amounting to Rs. 1,00,000/- is deleted being on the basis of statement recorded behind the back of appellant and no meaningful opportunity of cross examination was provided. Therefore, appeal on this ground is Allowed.
176. Against this, the department is in appeal. Ld. Counsel for the revenue contended that the Ld. AO was justified in making the addition for on-money. He relied on the finding of Learned Assessing officer.
177. On the contrary, at the ouset, Ld. Counsel for the assessee supported the finding of Learned CIT (A) and submitted that althougth the Ld. AO mentioned of on-money paid by assessee company amounting to Rs. 13,50,000 in the chart at page 99 of Assessment order, however he added Rs. 1,00,000 only during the current year. The basis of this difference was unknown. The registries were found at the premises of the assessee during the course of search. No incriminating material showing any on-money was found. The transactions mentioned in the sale deeds were duly recorded in the books of accounts. All the payments were through 199 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
banking channels. Thus, no addition for on-money payment can be made in these proceedings u/s. 153A r/w section 143(3).
178. We have considered the rival submissions, orders of the Ld. Lower Authorities and the evidences on record. We find that the very basis of the addition is some statements recorded of the sellers. However, insipte of being asked for, Ld. AO did not provide an opportunity to cross-examine the sellers. Thus, the statements of the sellers cannot be relied on. Further, the statements are not corroborated by bringing any material on record. A mere statement of third person cannot bind the assessee, unless it is corroborated by any evidence on record. Further, Ld. AO relied on the bank statements of the sellers. However, bank statement of not even a single seller was ever brought on record to establish that cash was deposited in their bank accounts. Even in the Paper book filed by the Department, same has not been filed. Thus, no reliance can be placed on same. In respect of Smt. Bindabai, we cannot rely on statement of her husband who was not a party to the transaction. Further, there were contradictions in his statements also as pointed by the Ld. Counsel for the assessee. In respect of Smt. Sarju Bai, 200 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Shri Devisingh and Shri Narayan Singh, both of them later denied on affidavit that on-money was received. Thus their statement simplicitor cannot be relied on. Similarly, in respect of Shri Ram Singh, Shri Chandar Singh and others, Shri Chandar Singh later denied to have receied on-money in affidavit. In respect of Smt. Gendkunwar, statement of Smt. Gendkunwar was not recorded. Her son's statement would not have any evidentiary value. Further, Smt. Gendkunwar filed an affidavit, stating that no on-money was received by her. Thus, considering all the facts and circumstances of the cases, we do not find any infirmity in the order of Ld. CIT(A). In the result, this ground of the revenue is dismissed.
179. Now we take up common grounds Ground No. 13 of the Department's appeal for A.Y. 2013-14 (Rs. 10,00,000) and Ground No. 8 of Department's appeal for A.Y. 2014-15 (Rs. 40,00,000) relating to unaccounted receipts from Shri Vishnu Gupta of M/s. VSP Consultants P Ltd.
180. The facts relating to these grounds of appeal are that during the course of survey u/s. 133A at the premises of the assessee company in August 2013, a document LPS 16 page 39 to 42 was 201 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
found and impounded. These papers contained the details of purchase of one flat Aster Royal 01/ 302 by Shri Vishnu Gupta. At the bottom of page no 40 of LPS 16, it was written on hand sticker "Pl credit Rs. 10 lacs to Aster of Mr. Vishnu Gupta" dated "09.06". Ld. AO concluded that on 09.06.2012 an amount of Rs. 10 lakhs was received from Shri Vishnu Gupta against the purchase of the flat. Similarly there was another hand sticker with a noting "Pl credit Rs. 40.00 L to Aster of Mr. Gupta" dated "18.05.2013". Ld. AO concluded that on 18.05.2013, an amount of Rs. 40 lakhs was received from Shri Vishnu Gupta against the purchase of flat. Since both these receipts were not recorded in the books, Ld. AO added Rs. 10 lakhs in A.Y. 2013-14 and Rs. 40 lakhs in A.Y. 2014-15.
181. Against this addition, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) in pages 203 to 206, deleted the addition, holding as under:
It is also settled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The AO is not justified in presuming certain facts without having anything to corroborate. Hon'ble Supreme Court in the case of Djakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of 202 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong court in the case of evidence. Similar views have been expressed by Apex court in the case of Dhiraj Lal Girdharilal v/s CIT (1954) 26 ITR 736 (SC). It is also very important to point out that neither the seller nor the buyer has ever admitted that sum of Rs. 10,00,000/- was paid/received. Thus, in view of the above discussion, I find no merit in the addition made by the AO on the basis of assumption and presumption and without any corroborative evidence on record having direct nexus paper sum of Rs. 10,00,000/- represent rough jottings/scribbling made by some preson/employee.
4.12.5 In view of the above, the addition made by the AO is no account of assumption and presumption basis and in absence of nay congent evidence having cirect nexus of receipt of Rs. 10,00,000/-. It is also important to mention that the flat which was proposed was not purchased by Shri Vishnu Gupta, therefore, no prudent person will pey huge sum of Rs. 10,00,000/- for no cause. Thus, the AO was not justified in treating rough jottings and scribbling as receipts of appellant, therefore, the addition amounting to Rs.10,00,000/- on this account is Deleted. Therefore, appeal on this ground is Allowed."
Similar findings were given in A.Y. 2014-15.
182. Against this, the department is in appeal before us. Ld. Counsel for the revenue submitted that LPS 16 page 39 to 42 were booking form for the purchase of flat. Shri Vishnu Gupta booked a flat Aster Royal 01/ 302. In this, clearly an advise of receipt of Rs. 10 lakhs and Rs. 40 lakhs from Shri Vishnu Gupta was recorded on 203 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
different dates. Therefore, Ld. AO was justified in making addition of unaccounted receipts in the hands of assessee company.
183. On the contrary, Ld. Counsel for the assessee relied on the finding of Ld. CIT (A) and submitted that the Ld CIT(A) was justified in deleting the addition.
184. We have considered the rival submissions, orders of the Ld. Lower authorities and the evidences on record. We find that apart from a rough jotting "Pl credit Rs. 10 Lacs...." and "Pl credit Rs. 40.00 L....." the Ld. AO has not relied on any other evidence to hold that on-money was received from Shri Vishnu Gupta. This fact that Shri Vishnu Gupta was provided financial services to assessee- company and huge amount was payable to him is verifiable by the fact that bill of Rs. 51 lakhs was raised by him for professional services. After adding services-tax Rs. 62,92,160 was payable to him. In such circumstances, insiting him to pay amounts in respect of booking of flats would have been unjustifiable. The notings do not state that any amount was received, but directs the staff to credit amount. Had Ld. AO any doubt in respect of the noting, Ld AO should have made enquiry as to who made this noting and what 204 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
did the noting interpreted. We therefore are in agreement with the findings of Ld CIT(A) that the addition is uncalled for in the present case. In the result the Ground No. 13 of the Department's appeal for A.Y. 2013-14 (Rs. 10,00,000) and Ground No. 8 of the Department's appeal for A.Y. 2014-15 are rejected.
185. Now we take up Ground No. 1 of the Department's appeal for A.Y. 2014-15 relating to Cash found of Rs. 14,77,100 at the premises of assessee company.
186. The facts relating to the present addition are that during the course of search and seizure operation at the premises of assessee- company, inter-alia, cash of Rs. 14,77,100 was found and seized. Ld. AO treated the said cash as unaccounted and made addition in the hands of the assessee.
187. Against this addition, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) deleted the addition at page 52 of his order, holding as under:-
"4.2.2 I have considered the facts of the case, material evidence on record and findings of the AO. During the course of search cash amounting to Rs. 14,77,100/- was found in possession of appellant and Rs. 9,00,000/- from 205 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
possession of Shri Hemant Soni as claimed by the appellant. Initially, at the time of search Shri Hemant Soni was unable to explain the source of cash and also failed to furnish any documentary evidence in support of his claim. However, at the later stage the appellant has filed detailed explanation regarding the source and acquisition of the impunged cash. Appellant in support has filed copies of cash book from 01.01.2014 to 30.01.2014 before the AO and during the appellate proceedings appellant has filed details of opening and closing cash balance. On perusal of chart showing cash balance it was observed that cash balance as on 01.01.2014 was Rs. 73,93,343/- and closing cash balance as on 31.01.2014 was Rs. 75,01,959/0. Thus, the assessee has discharged its onus of proving that the cash found during the search was part of cash balance as per books of accounts. Now, the onus lies on AO to contradict the say of appellant and produce some or the other documentary evidence suggesting that the cash found during the search is not recorded in books of account, which the AO failed to do. Thus, the AO has no locus of making addition on account of cash found during the course of search being fully disclosed/recorded in books of accounts. It is also very important to mention here that appellant neither pointed out any specific defect in books of account of the appellant nor has rejected books of account of the appellant. Thus, the addition made by the AO amounting to Rs. 14,77,100/- is Deleted. Therefore appeal on this ground is Allowed."
188. Against this, the department is in appeal before us. Ld. Counsel for the revenue submitted that during the course of search cash of Rs. 14,77,100 was found from the assessee company. Further, cash of Rs. 9,00,000 was found from Shri Hemant Soni, 206 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
CMD of the assessee-company. On being confronted, Shri Hemant Soni was unable to explain the same. Therefore, the addition of Rs. 14,77,100 was made by Ld. AO. Ld. Counsel for the revenue therefore relied on the findings of the Ld. AO.
189. On the contrary, Ld. Counsel for the assessee submitted that search took place between 29.01.2014 to 02.02.2014. As on 31.01.2014, the cash in hand as per cash book was Rs. 75,01,959 and was very sufficient to explain the cash found. Further, he contended that on 01.01.2014 also cash in hand was Rs. 73,93,343. He further referred to a chart showing cash in hand reported on 31st march over different years, as under:
A.Y. Balance as Cash balance PB
on as per audited
accounts
2008-09 31.03.2008 45,62,297 PB 37
2009-10 31.03.2009 8,93,257 PB 64
2010-11 31.03.2010 11,59,956 PB 90
2011-12 31.03.2011 16,70,448 PB 165
2012-13 31.03.2012 5,10,000 PB 190
2013-14 31.03.2013 42,96,000 PB 233
2014-15 31.03.2014 17,83,000 PB 278
207
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He therefore submitted that assessee company used to maintain a sufficient cash balance. The cash in hand on the date of search was therefore acceptable.
190. We have considered the rival submissions and the orders of the Ld. Lower authorities. On a careful consideration of the facts, we find that the cash in hand, as on the date of search is duly explained. As per the cash chart submitted by the assessee for transactions between 01.01.2014 to 31.01.2014, the cash in hand on 31.01.2014 comes to Rs. 75,01,959. The cash receipts and payments between 01.01.2014 to 31.01.2014 have not been doubted by the department. Therefore cash found can be duly explained from the cash balance existing with the assessee. Further, assessee has submitted a chart showing month-wise cash balance, and also the cash balance in the reported Balance Sheets over different year. This shows that assessee was maintaining sufficient cash balance round the years, and there was no abnormality in the cash balance taken on 31.01.2014. We therefore do not find any infirmity in the order of Ld CIT(A). We therefore 208 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
dismiss the ground no. 1 of the Department's appeal for A.Y. 2014-
15.
191. Ground No. 5 of the Department's appeal for A.Y. 2014-15 amounting to Rs. 10,00,000 relate to addition in respect of unaccounted receipts covered in LPS A-2 page no. 25.
192. The facts relating to this ground of appeal are that during the course of search a loose computer generated document LPS A-2 page no. 25 was found. As per this document, against the sale of flat to Shri Anandjeet Singh, allegedly an amount of Rs. 10,00,000 was received in cash on 04.10.2011. Ld. AO therefore treated this Rs. 10,00,000 as unaccounted receipts of the assessee.
193. Against this addition, the assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) deleted that addition at page no. 97 to 106 of his order, holding as under (relevant extract):-
4.5.5 This is an undisputed fact that neither any incriminating material was found or seized during search proceedings nor the payer has ever admitted about payment of Rs. 10,00,000/- On the contrary the advance received by the appellant was either due to cancellation or the same is duly reflected in books of account. In absence of any corroborative evidence to 209 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
prove that there was any exchange of money by CASH, AO has no locus to assume that appellant has received Rs. 10,00,000/-. It is settled law that AO cannot make any addition merely on basis of suspicion, however strong it may be. The AO is not justified in presuming certain facts without having anything to corroborative. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex Court In the case of Dhiraj Lal Girdharilal v/s CIT (954) 26 ITR 736 (SC).
4.5.6 In view of the above discussion, material evidences on record and case laws cited, firstly, the AO ought to have done independent enquiries from whose as alleged the appellant has received such amounts. Secondly, the AO should have done independen enqury transaction. Thirdly, the loose paper or rather say it as dumb documents should be a speaking one having direct nexus with the assessee, which was not in the case of appellant. Thirdly, the AO did not reject books of account of the appellant. Fourthly, neither the customer nor any of the partner of appellant has ever stated that such transaction actually occurred. Last but not the least, the impunged loose papers were not found in possession of the appellant. My findings on the issue under consideration are based on the various conclusions drawn by me which have been discussed in the above paras. Therefore, the AO was not justifies in making addition of Rs. 10,00,000/- being on sheer assumption and presumption basis. Thus, the addition made by the AO amounting to Rs. 10,00,000/- is Deleted. Therefore appeal on this ground is Allowed.
210 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
194. Against this, the revenue is in appeal before us. Ld. Counsel for the revenue relied on the order of Ld. AO and contended that the addition made by the Ld. AO may kindly be restored.
195. On the contrary, Ld. Counsel for the assessee submitted that at the first instance, going by the receipt itself, it is clearly established that the amount was allegedly received on 04.10.2011 which related to A.Y. 2012-13, and therefore addition by the Ld AO in A.Y. 2014-15 was totally unjustified. Further, he contended that the booking of Shri Anandjeet Singh was cancelled subsequently and the amount received from him was refunded. He referred to PB 1852-1853 showing that the bookings was cancelled and the payment was made. Thus in any case, since the booking had been cancelled and the amount refunded, no income in fact arose to the assessee. He therefore relied on the order of Ld CIT(A).
196. We have considered the rival submissions and order of the Ld. Lower authorities. We find that the assessee is correct in contending that the amount received, if any, from Shri Anandjeet Singh, was refunded as the booking was cancelled. Moreover, since the amount was received in F.Y. 2011-12, addition in the A.Y. 2014- 211 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
15 was unjustified. We therefore confirm the finding of the Ld. CIT(A) on this issue.In the result, this ground of the revenue is dismissed.
197. Now we take up Ground No. 7 of the Department's appeal for A.Y. 2014-15 amounting to Rs. 5,00,000 in respect of LPS A-13 relating to on-money in respect of 21 registries found from the office assessee-company and 6 registries found from the site office of Aakriti Aqua City. Ld. AO relied on the statements of the parties and contended that on-money was paid by the assessee on the purchase of land. He therefore added Rs. 5,00,000 in the hands of the assessee as on-money paid.
198. Against this addition, the assessee preferred an appeal before Ld. CIT(A). Ld. CIT(A) deleted the addition at page no. 144 to 146 of his order, holding as under (relevant extract):-
4.7.8 In view of the above, firstly, the AO ought to have given opportunity of cross examination to the appellant. Secondly, the AO should have brought evidence having direct nexus with the alleged on money payment of Rs.
5,00,000/- (correctly Rs. 36,00,000/-). Thirdly, the addition made by the AO are on assumption and presumption basis. Futher, the loose papers were found in possession of Shri Yashovrdhan Jain and not from appellant. Fifthly, statements were recorded by the then ADIT who was not 212 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
appropriate jurisdictional officer. Sixthly, all the sellers except Smt Binda Bai filed affidavits stating that all the payments made for purchase of land are duly recorded in books of account. Most importantly, Shri Chand Singh vide their affidavits which are on record has stated that the statement given before the Income Tax authorities was given under pressur. My findings are based on the findings given in above mentioned paras. Thus, keeping in view the above discussion and judiciously following the decision of Hon'ble Supreme court in the case of Kishanchand Chellaram (supra), the AO was not justified in making addition of Rs. Rs. 5,00,000/- ( (correctly Rs. 36,00,000/-). Thus, addition made by the AO amounting to Rs. 5,00,000/- is deleted being on the basis of statement recorded behind the back of appellant and no meaningful opportunity of cross examination was provided. Therefore, appeal on this ground is Allowed."
199. Against this, the department is in appeal. Ld. Counsel for the revenue submitted that the Ld. AO was justified in making the addition for on-money.
200. On the contrary, at the ouset, Ld. Counsel for the assessee relied on the finding of Ld.CIT(A)
201. We have considered the rival submissions, orders of the Ld. Lower Authorities and the evidences on record. We find that the very basis of the addition is some statements recorded of the sellers. However, insipte of being asked for, Ld. AO did not provide an opportunity to cross-examine the sellers. Thus, the statements of 213 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
the sellers cannot be relied on. Further, the statements are not corroborated by bringing any material on record. A mere statement of third person cannot bind the assessee, unless it is corroborated by any evidence on record. Further, Ld. AO relied on the bank statements of the sellers. However, bank statement of not even a single seller was ever brought on record to establish that cash was deposited in their bank accounts. Even in the Paper book filed by the Department, same has not been filed. Thus, no reliance can be placed on same. In respect of Shri Ram Singh, Shri Chandar Singh and others, Shri Chandar Singh later denied to have received on- money in affidavit. In respect of Shri Prahalad Singh, Shri Manohar Singh and Shri Hukum Singh, we find that out of the three sellers, two denied to have received on-money. The third seller, Shri Hukum Singh although stated that on-money was received and that same was deposited in his bank; but no such bank statement was ever produced. The receipt of on-money was not corroborated by any evidence. Thus, considering all the facts and circumstances of the cases, we do not find any infirmity in the order of Ld. CIT(A). In the 214 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
result, Ground No. 7 of the Department's appeal for A.Y. 2014-15 is dismissed.
202. Now we take up the appeals filed at the instance of the assessee.
203. Ground No. 1 of the assessee's appeal for A.Y. 2013-14 and A.Y. 2014-15 relate to the validity of assessment. Since no specific submissions were made by the Learned counsel of the assessee on this issue it seems that assessee is not interested to press this ground and further nothing was brought on record to show that the assessment so framed are invalid. These grounds of the assessee are therefore dismissed.
204. Now we take the common grounds, Ground No. 2 to 5 of the assessee's appeal for A.Y. 2013-14 (Rs. 4,34,08,100) and Ground No. 2 and 3 of the assessee's appeal for A.Y. 2014-15 (Rs. 28,00,00,000) relating to addition on account of retraction of the surrender made during the course of search u/s. 132.
205. The facts relating to this ground of appeal are that during the course of search and seizure operations at the premises of the 215 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
assessee-company between 29th Jan. 2014 to 1st Feb. 2014, statement on oath u/s. 132(4) of the Act was recorded of the Chairman and Manging Director of the assessee company Mr.Hemant Soni on multiple occasions. On 1st Feb. 2014, he accepted surrender of income of Rs. 50 crores in the group. Further, on 4th Feb. 2014, he gave the break-up of this 50 crores; and in the assessee company he accepted a surrender of Rs. 30 crores; Rs. 2 crores in the A.Y. 2013-14 and Rs. 28 crores in the A.Y. 2014-15. Later on, certain corrospondances took place between the department and the assessee-company. Thereafter on 30.05.2014, statement of Shri Hemant Soni was again recorded, whereby he was asked about the surrender made during the search. He replied that voluminous documents were seized from the premises, and therefore it is taking time for analysing the same. Once the documents seized are verified from the books, he will provide the breakup of same. Subsequently, on 12.11.2014, return was filed for A.Y. 2013-14 and A.Y. 2014-15. In this return, the income surrendered earlier was not offered. Later, on during assessment, a retraction letter was also filed on 06.02.2016. Ld. 216 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
AO, however, disregarded the retraction, and treated Rs. 2 crores as income for A.Y. 2013-14 and treated Rs. 28 crores as income for A.Y. 2014-15. In the return of income for A.Y. 2013-14, assessee had offered income of Rs. 11,04,36,150/- in the return and the Ld. AO after making addition on various grounds, assessed the total income at Rs. 35,52,18,458/-. He therefore concluded that since the total addition made during assessment for A.Y. 2013-14 exceeded Rs. 2,00,00,000/- no separate addition needs to be made. He therefore did not make separate addition in A.Y. 2013-14. Similarly, in A.Y. 2014-15, against the total income offered by the assessee at Rs. 8,48,71,480/-, Ld. AO assessed the total income at Rs. 34,80,77,254/- after making various additions on difference grounds. He held that the total of additions made was Rs. 27,16,02,887/- and therefore he added Rs. 83,97,113/- separately on account surrender; thus making the total addition to Rs. 28,00,00,000/-. Thus, although the Ld. AO did not accept the retraction, the addition made by him towards income surrendered during the course of search in A.Y. 2013-14 was nil, and in A.Y. 2014-15 was Rs. 83,97,113/-.
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206. Against the addition by the Ld. AO, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) discussed the various grounds of appeal and deleted many additions. However, in respect of retraction of statement, he did not accept the retraction of surrender. As he had deleted other additions, therefore, he issued enhancement notice and enhanced the income on account of retraction from Rs. 83,97,113/- to Rs. 28 crores in A.Y. 2014-15. In the A.Y. 2013-14, he had enhanced the addition in respect of on- money received on the sale of Highland project. Ld. AO made addition of Rs. 2,05,66,065/- on account of on-money received in the Highland project. Ld. CIT(A) enhanced the on-money received in the highland project from Rs. 2,05,66,065/- to Rs. 4,34,08,100/-. He relied on the statement recorded during the course of search that on-money received on sale of plots at Highland project was 5- 10%. Since he enhanced the addition to Rs. 4,34,08,100/- i.e. more than Rs. 2 crores surrendered during search, he stated that making addition of Rs. 2 crores again would amount to double addition and therefore did not make separate addition for surrender. 218 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
207. Against this addition/ enhancement, the assessee is in appeal before us. In the A.Y. 2013-14, by various grounds of appeal, assessee is challenging the addition on account of on-money received on sale of plots of Highland project and further, the enhancement of Rs. 2.00 crores and adjusting the same against the increase in excess profits on the sale of plots at Highland project. In the A.Y. 2014-15, by various grounds, the assessee is challenging the enhancement of income and sustaining the addition of Rs. 28 crores on account of surrender during search. Since both these issues are interconnected, same are taken up together and adjudicated together.
208. During the course of hearing, Ld. Counsel for the assessee submitted that the search and seizure operation started on 29th Jan. 2014 and continued upto 4 days. Search action took place during these 4 days, day-and-night and at various premises of the assessee concern. During the search operations statement on oath were recorded on Shri Hemant Soni on multiple occasions. On 30.01.2014, his statement was recorded asking 33 questions. He replied to them and tried to explain each and every question asked 219 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
for. Similarly on 31.01.2014 statement was recorded on two occasions. Ld. Counsel tried to take us through the statements recorded on these dates palced at PB 1197-1216 and submitted that during his statement, Shri Soni tried to explain the transactions to the best of his knowledge. Thereafter, after 3 sleepless nights, on the fourth day, when the statement was recorded on 01.02.2014, and again more than 30 question were asked, Shri Hemant Soni in an ill state of mind, made the surrender of Rs. 50 crores in the group. He submitted that it can be seen from his statement that no specific incriminating document was pointed out or found which could show unaccounted income. Ld. Counsel for the assessee submitted that Shri Soni was totally tired, and in ill state of mind while making surrender. Ld. Counsel further took us to the assessment order, and submitted that the Ld. AO did not point out any incriminating material found during the course of search which was made the basis of surrender. Ld. Counsel submitted that during assessment, whatever addition were made on account of incriminating material, had been separately contested before the Ld. CIT(A) and before this Hon'ble Bench. There exists no 220 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
basis for making a separate addition on account of mere surrender of income. Ld. Counsel for the assessee specifically took us to page 20 of the assessment order, and submitted that the Ld. AO himself stated that it is not possible for the authorised officer u/s. 132 to put every minute detail of the discrepancies and documents in the statement recorded during the search proceedings. He further, referred the findings of Ld. CIT(A) and contended that in respect of surrender of income, Ld. CIT(A) could not also point any specific incriminating material He submitted that the Ld. CIT(A) infact himself deleted many additions made purportedly made by the Ld. AO on the basis of incriminating material.
209. During the course of hearing, ld. Counsel for the assessee relied on a plethora of judgments. The same are cited below:
1. Pullangode Rubber Held that (a) An In present case also the Produce Co. Ltd. admission is an extremely addition was on basis of 91 ITR 18 (SC) important piece of voluntary disclosure u/s evidence but it cannot be 132(4), which was later on said that it is conclusive. retracted by the assessee.
b). Retraction from
admission was
permissible in law and it
was open to the person
who made the admission
to show that it was
incorrect.
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2. CIT vs. Merely on basis of In present case also, the Chandrakumar admission that few addition was based on Jethmal Kochar benami concerns were admission which was later on [2015] being run by assessee, retracted. Dept could not taxmann.com 292 assessee could not be furnish any incriminating (Gujarat) subjected to addition document or otherwise to when assessee retracted support the admission. Hence, from such admission and addition is unjustified.
revenue could not furnish any corroborative evidence in support of such admission
3. CIT vs. Ramanbhai Held that admission of In the present case also, the B Patel (Gujarat undisclosed income by addition was not based on any high Court) assessee is not conclusive incriminating document and if no evidence is found to the retraction filed on support the admission. A 30.11.11 is valid.
retraction, though belated, is valid. 4. CIT vs. SunilHeld that a retracted In Present case, the retraction Aggarwal (2015) 64 statement u/s 132(4) was before the assessment, taxmann.com would require some and the addition was not 107(Delhi)/ (2016) corroborative material for corroborated by any evidence 237 the ld AO to make but was merely on the basis of Taxmann 512 addition on basis of such statement recorded during (Delh)/ (2015) 379 statement. search. ITR 367(Delhi) 5. CIT vs. O. Abdul Initial Burden to show Retraction itself proves that Razak 350 ITR 71 that confession was the confession was under (Ker) voluntary and not mental pressure and hence obtained by resorting to liable to be retracted. coercive means is on the department. 6. TDI Marketing P Held that since basis of Same facts as the addition Ltd. 28 SOT 215 addition was statement of was based on statement. (Del.) assessee rather than actual investment having been made, provisions of sec 69 were not attracted to such a situation. 7. M. Narayanan & It was held that when Retraction itself proves that Bros. v. ACIT, SIC, assessee had explained the confession was under Salem[2011] 13 his statement as not mental pressure and hence taxmann.com 49 correct in context of liable to be retracted. (Madras) materials produced, same 222
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could not be added to assessee's income.
8. CIT vs Dhingra Held that when assessee Present case also, the addition Metal Works 196 had been able to explain was solely based on admission Taxman 488 (Del.) discrepancy in stock and hence not sustainable.
found during course of
survey, then addition
solely on basis of
statement made by
partner on behalf of
assessee could not be
sustained.
9. DCIT v.Narendra It was held that where Present case also, the addition
Garg & Ashok Garg assessee retracted from is on bare suspicion and
[2016] 72 disclosure made in presumption, which the
taxmann.com 355 statement under section department could not support
(Gujarat) 132(4) which was not through corroborative
accepted by revenue, and evidence.
if no undisclosed income
was found during search,
revenue could not make
addition on bare
suspicion and
presumption
10 Basant Bansal v Held that neither any The addition in our case was
ACIT (2015) 63 worthwhile incriminating solely on the basis of
. taxmann.com 199 material, information, statement of surrender by
(Jaipur Trib.) and evidence was brother/ brother-in-law of the
discovered as a result of assessee and not a single
impugned multiple search reference for any
operations nor the incriminating document is
additions sustained are made.
based on any such
material. The sole basis of
additions is the
disclosure which we have
held to be involuntary.
Consequently the
additions do not conform
to the mandate of sec.
153A.
11 CIT v. Balaji Wire Statement made by any In our case, no chance of
(P) Ltd. third party after the date cross examination on the
. [2008] 304 ITR of search is of no basis of surrender was given.
393/[2007] 164 consequence; assessee The surrender was on the
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Taxman 559 has a right of its cross- back of the assessee.
(Delhi), examination. This having
not been done the
additions cannot be made
12 CIT v.Harjeev A statement recorded Same as above
Aggarwal [2016] 70 u/s. 132(4) can form
. taxmann.com 95 basis for a block
(Delhi) assessment only if such
statement relates to any
incriminating evidence of
undisclosed income
unearthed during search.
13 Vinod Solanki v. It is the burden of the In our case, the statement of
UOI [2009] ELT Department that material Shri Sudeep maheshwari
. 157(SC). brought on record disclosing additional income
including retracted was not supported with any
statement must be corrobative evidence, hence no
substantially addition can be made on the
corroborated by other basis of admission in the
independent and cogent statement u/s 132(4)
evidences.
14 Krishan v. Admission made in In our case, absence of any
Kurukshetra ignorance of supporting supporting record does not
. University AIR record and legal rights or bind the admission made on
1976 SC 376. under duress cannot bind our behalf by third party.
such statement or
disclosure.
15 CIT v. Vikas Whatever be the merits or In our case also, since the
Electronics demerits of statements of undisclosed income could not
. (International) (P.) 'assessee, unless they be connected to any
Ltd. [2007] 166 could be directly incriminating document, they
Taxman 137 (Delhi) connected with the cannot be the basis of
recovery of any addition.
incriminating material
during the search, they
could not be used against
the assessee.
16 CIT Vs. Bhanwar Department should bring Same as above
Lal Murwatiya on record sufficient
. 39 TW 214 evidence before making
addition u/s 69 of the
Income Tax Act, 1961 and
the retreated statement
cannot be made the sole
basis for making addition
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as it cannot be said to be conclusion.
17 Kalishaben Addition on the basis of In our case, the statement Manharlal Chokshi retracted statement u/s was duly retracted on . Vs. CIT (2008) 220 132(4) - statement 30.11.11, at the earliest CTR (Guj) 138 : retracted by assessee occasion, as assessee came to (2010) 328 ITR 411 after two months on the know about it and thus : (2008) 174 ground that it was cannot be the basis of TAXMAN 466 : recorded under coercion addition (2008) 14 DTR 257 and duress cannot be basis of addition.
18 Shree Ganesh Held that the statement In our case also, since the Trading Co. v. CIT recorded u/s. 132(4) undisclosed income could not . [2013] without corroborative be connected to any taxmann.com 170 evidence could not fasten incriminating document, they (Jharkhand) liability cannot be the basis of addition. 19 Smt. Ranjnaben Held that AO could not In present case also, the Mansukhlal Shah make addition only on addition was merely based on . v. basis of disclosure statement, hence addition is ACIT [2004] 2 881 statement without unjustified. (RAJKOT) corroboration and evidence in support of disclosure statement. 20 ACIT V. Jorawar Held that the surrender In present case also, the Singh M. Rathod was under pressure as no addition was based on . [2005] 148 Taxman such evidence or statement of brother/brother 35(Ahd.) (MAG.) asset/evidence were in law , and nothing found in movable or incriminating was found from immovable property from the search premises. the search premises, thus addition is unsustainable. 21 Naresh Kumar Held that addition in Present case also, there was Verma vs. ACIT, respect of job work no incriminating document . Central Circle, charges merely on basis hence addition is Patiala of statement was not unsustainable. [2013] 32 sustainable as no taxmann.com 280 evidence was found in (Chandigarh - possession of assessee to Trib.) support the admission. 22 DCIT, Circle 6(1), Held that when the Present case also, the Ahmedabad vs. assessee retracted the admission was retracted and . Pramukh Builders statement and no other no evidence was on record. [2008] 112 ITD 179 evidence was on record to (Ahm.) (TM) show the undisclosed 225
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income baring statement, addition is unsustainable.
23 Arun Kumar Held that the ld AO Present case also, the addition Bhansali V. DCIT should take cognizance of merely on basis of admission . [2006] 10 SOT 46 such correct income as by brother in law and no (Bang.) (URO) depicted in books of evidence is unsustainable.
accounts as well as seized
material and should not
adopt figures merely as
per admission of
assessee.
24 Shree Chand Soni Held that where the Similar case, where addition
V. DCIT [2006] 101 addition was based on was merely on statement
TTJ 1028 (Jodh.) statement alone and no recorded u/s 132(4) and that
such income was too, without any incriminating
disclosed in return filed document. The assessee has
for the block period but fully and truly disclosed all
admitted and no the foreign as well as Indian
incriminating document income in the return filed.
was found to support the
impugned addition, the
addition was to be
deleted.
25 Rajesh Jain V. Confessional statement Similarly, the confession was
DCIT [2006] 100 should be corroborated not corroborated with any
. TTJ 929 (Delhi) with some material evidence, hence addition is
evidence to show that unjustified.
assessment was just and
fair.
26 Jyotichand It was held that no Same as above
Bhaichand Saraf & addition can be made
. Sons P. Ltd. V. merely on the basis of
DCIT [2013] 86 statement recorded u/s
DTR (Pune) 289 132(4) in absence of
corroborative evidence.
27 CIT vs S. Ajit Where no material was In present case also, there
Kumar 300 ITR found during search in was no incriminating material
. 152 (Mad.) respect of amount or document was found from
allegedly paid by assessee search premises.
to a builder, material
found in course of survey
in premises of builder
could not be used in
block assessment of
assessee to make addition
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28 Abdul Quyme v CIT An admission or an Similarly, in present case the (1990) 184 ITR 404 acquiescence cannot be a admission cannot be binding . (All) foundation for an without findings by the assessment. A finding in authority. this regard is a condition precedent and where no such finding is recorded, the action of the authority concerned cannot be upheld. 29 CIT vs Radhe Held that the addition by In present case also, the Associates (2013) assessee construction statement was retracted and . 37 taxmann.com firm, only on basis of hence addition is 336 (Guj.) partner's statement which unsustianble. was later retracted, was not sustainable 30 CIT vs M.P. Scrap Held that except Same as above. Traders (2015) 60 statement, there was no . taxmann.com 205 other material or (Guj.) corroborative material with Assessing Officer to justify said addition - hence addition is unjustified
210. Ld. Counsel for the assessee further referred to CBDT Circular dated 10.03.2003 and contended that vide this Circular, a clear mandate was put on the officers of the department that instead of recording confessional statements, efforts shall be made on collecting evidences. Anything contrary to this direction would be taken adversely. This direction of the CBDT was repeated subsequently again on 18.12.2014. He therefore contended that a mere confession cannot be a basis for addition. In so far as the 227 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
material found during the course of search, same have been impugned under various grounds of appeal. Thus, this addition, which is purely on surrender cannot be made.
211. In respect of acceptance of on-money in respect of sale of land Highland project, Ld. Counsel for the assessee contended that there was no evidence except the statement of Mr. Hemant Soni. No material has been brought on record. He further submitted that during the course of search, when asked about on-money receipt in any project, Mr. Hemant Soni stated in reply to Question 30 on 01.02.2014 that on the sale of plots in the Highland Project, we have received on-money of 5-10% above the recorded sale consideration. There was no evidence or inquiry from any customer to hold that such on-money was received. Ld. Counsel for the assessee therefore submitted that no such addition of on-money receipts, which was purely based on mere statement of Mr.Hemant Soni was called for. He alternatively submitted that in any case, if the on-money receipts are assessed, then those entire receipts cannot be taxed and a reasonable profit rate be applied on same. He 228 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
relied on the judgment of CIT vs Balchandra Ajit Kumar 186 CTR 419 (M.P.).
212. On the contrary, Ld. Departmental Representative strongly relied on the order of the Ld. Lower authorities. Further, at the residence of Shri Yashovardhan Jain, who was the General Manager (Finance) of the assessee company, various documents, ledger and other records were found. Shri Jain and Shri Hemant Soni were unable to explain these documents. Shri Hemant Soni was the head of the company; and since he was unable to explain the transactions, he made a declaration, suo-moto regarding the undisclosed income of the company. The contention of duress is baseless. Decalaration of Shri Hemant Soni was binding on the assessee-company. Ld. Counsel for the revenue further contended that the surrender was made on 01.02.2014 and lateron, the declaration was reitereated on 04.02.2014 and thereafter on 05.03.2014. Even on 30.05.2014, statement of Shri Hemant Soni was recorded and he did not specify about his retraction. Retraction letter was filed only on 06.02.2016 after two years form the date of search. In the retraction letter, it was stated that Shri Hemant Soni 229 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
could not withstand the strain, and hence he made the surrender. Such retraction was highly belated, and further no explaination was given regarding the discrepencies found during the course of search. He also submitted that a retraction could have been acceptable only if assessee explains the discrepencies found during the course of search.
213. Ld. Departmental Representative relied on the judgment of Rakesh Mahajan vs CIT 214 CTR 218 (P & H) and contended that an admission constitutes best piece of evidence. Such admission is binding on the maker of the statement, unless it is shown by bringing positive evidence on record that the admission was made mistakenly. He therefore contended that no such positive material was brought on record to show that the admission was made under a mistake.
214. In respect of on-money receipt on Highland project, Ld. Counsel for the revenue contended that Mr. Hemant Soni himself came forward on behalf of the assessee company and voluntarily stated that the 5-10% on-money was received on the sale of plots in 230 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
Highland project. The said declaration is therefore binding on the assessee.
215. We have considered the rival submissions, the facts on records and the case laws quoted by both the sides. Through Ground No. 2 to 5 for Assessment Year 2013-14 and Ground No.2 & 3 for Assessment Year 2014-15 the assessee has raised a common issue challenging the finding of Ld. CIT(A) confirming the addition made on the basis of the surrender of the income made by the assessee during the course of search conducted u/s 132 of the Act.
216. Before moving further to examine the facts we would like to go through the judicial precedents with regard to the issue that where in case no corroborative material is found during the course of search having its nexus with the income surrendered during the course of search whether the addition can be made merely on the basis of statement recorded during the courseof search. Though Ld. Counsel for the assessee has referred and relied on plethora of judgments, we find that this Tribunal has dealt with this issue. In the case of ACIT vs Shri Sudeep Maheshwari, ITA 524/ Ind/ 2013, vide order dated 13.02.2019, this Tribunal observed as under:- 231
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"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 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 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."
217. Recently, in Ajit Singh Melhotra vs ACIT, IT(SS)A 63/ Ind/ 2019 vide order dated 22.10.2020, this Tribunal after considering various judgments including thoseof Hon'ble Gujarat High Court as well as Hon'ble Apex Court and also following its own decision in 232 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
the case of ACIT vs Shri Sudeep Maheshwari (supra) observed as under:-
"6. We have heard rival submissions and perused the material available on record and gone through the orders of the authorities below. We find that the addition was made on the basis of admission of assessee's son during the course of search. It was contended before us, that all these documents were properly recorded in the regular books of accounts of the persons to which these documents actually pertained. However, we find that the assessing officer did not establish the fact that any of the documents as found and seized was not recorded in the books of accounts of the persons to which these documents actually pertained. Therefore, we find force in the contention of the assesee that without referring to any of the documents was not binding on the assessee and the same cannot be used against the assessee as an evidence and that too in search assessment proceedings. Our view is supported by ratio laid down in the following judicial pronouncement:
1. M/s. Ultimate Builders vs ACIT (ITA No. 134/Ind/2019 dated 09.08.2019)(Indore Tribunal).
2. ACIT vs Sudeep Maheshwari (ITA No. 524/Ind/2013 dated 13.02.2019)(Indore Tribunal).
3. Kailashben Manharlal Chokshi vs CIT (2010) 328 ITR 0411 (Guj)
4. Pullangode Rubber Produce Co. Ltd. vs. State of Kerala (1973) 91 ITR 18 (SC)
7. On consideration of above facts/submissions in the light of judicial pronouncements (Supra) and the fact that no adverse material was filed by the revenue to controvert the factual 233 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
submission advanced before us, we direct the assessing officer to delete the addition of Rs. 10,00,00/-."
218. On going through the above judgments it is judicially settled that an addition made on the basis of mere surrender of income during the course of serach without referring to any of the incriminating documents is not binding on the assessee and the same cannot be used against the assessee as an evidence.
219. Now we proceed to examine the facts of the instant case in the light of above stated principle. In the instant case during the course of search various documents and other material were found and seized. Assessee accepted to surrender Rs.2 crores for Assessment Year 2013-14 and Rs.28 crores for Assessment Year 2014-15 on behalf of the various group concerns and the individuals connected there to. During the course of assessment proceedings Ld. A.O made various additions based on the incriminating material seized during the course of search. Along with these additions Ld. A.O also made addition for the income surrendered during the course of search. It is not in dispute that various incriminating material found during the course of search were duly considered by the Ld. A.O and necessary additions were 234 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
made based on them which were challenged before Ld. CIT(A) and before us. We have adjudicated and decided the issues raised before us connected to the additions made on the basis of incriminating material. As regards the addition made by the Ld. A.O made on the basis of statement recorded during the course of search there was no reference to any other incriminating material other than those considered above for making the other additions.
220. Even before us Ld. Departmental Representative failed to bring any incriminating material found during the course of search having its nexus with the impugned addition and which was not been considered by the Ld. A.O while making the other additions. So there remains no dispute to the fact that there is no material to show that how the addition for Rs. 30 crores was made by Ld. A.O for undisclosed income without corroborating with any incriminating material found during search. What is the working of this Rs. 30 crores, and how it was divided in two years is baseless except the confession of Shri Hemant Soni. Ld. AO himself pointed in the assessment order that it is not possible for the authorised officer u/s. 132 to put every minute detail of the discrepancies and 235 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
documents in the statement recorded during the search proceedings. It is clear from the findings of the Ld. AO that this addition is purely based on a mere declaration and nothing else. We see that after 4 days of search, on 01.02.2014, in question no. 30, Shri Soni made a declaration that on-money of 5 to 10% was received on sale of land in Highland project. Further in the subsequent question, question no. 31, he made the surrender. So far as the surrender of Rs. 30 crores in the assessee company and the confession of receipt on Highland project are concerned, there was no basis for making this surrender. In our view only surrender of income would not bind the assessee company.
221. We therefore in the light of settled judicial precedents and respectfully following the decision of this Tribunal in the case of ACIT vs Shri Sudeep Maheshwari (supra) and Ajit Singh Melhotra V/s ACIT (supra) which were decided after considering the settled judicial precedence by the Hon'ble courts are of the considered view that Ld. AO was not justified in making the additions merely on the basis of statement given during the course of search without referring to any incriminating material in the case of assessee- 236 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
company, and further Ld. CIT(A) was not justified in enhancing this addition. We therefore delete the addition of Rs. 4,34,08,100/- in A.Y. 2013-14 and Rs. 28,00,00,000/- in A.Y. 2014-15. Thus, these grounds of the assessee are allowed.
222. Now we take up the penalty appeals filed at the instance of assessee.
223. Assessee's appeal ITA 922/Ind/2019 is the penalty appeal u/s. 271(1)(c) for A.Y. 2013-14 (Rs. 8,52,700/-) and assessee's appeal ITA 923/ Ind/ 2019 is the penalty appeal u/s. 271AAB(1)(c) for A.Y. 2014-15 (Rs. 16,80,00,000). The penalty has been levied by the Ld. CIT(A) in respect of the enhancement done by the Ld. CIT(A) in relation to the amount surrendered during the course of search.
224. We find that since the very basis of levying the penalty u/s. 271(1)(c) of the Act and 271AAB(1)(c) of the Act i.e. the addition already stands deleted by us as held by us in preceeding paras, there remains no legs for the impugned penalties to stand for and the same are therefore deleted. Accordingly Assessee's appeal ITA 922/Ind/2019 relating to the penalty leived u/s. 271(1)(c) for A.Y. 237 IT(SS)A No.83,84,86,87,90,91,109,110 & ITA, No.922 &923/Ind/2019 AG8 Ventures Ltd.
2013-14 and assessee's appeal ITA 923/ Ind/ 2019 for the penalty levied u/s. 271AAB(1)(c) for A.Y. 2014-15 are allowed.
225. In the result appeals of the Revenue bearing No.IT(SS)A No.83,84,86,109 & 100/Ind/2019 for Assessment Years 2008-09, 2009-10, 2011-12, 2013-14 & 2014-15 respectively are partly allowed, Revenue Appeal bearing No.IT(SS)A No.87/Ind/2019 for Assessment Year 2012-13 is partly allowed for statistical purposes, Assessee's Appeal No.IT(SS)A No.90&91/Ind/2019 for Assessment Year 2013-14 & 2014-15 are partly allowed, Assessee's Appeal bearing No.IT(SS)A No.83,84,86,109&110/Ind/2019&ITA No.922 & 923/Ind/2019 for Assessment Year 2013-14& 2014-15 are allowed.
The order pronounced in the open Court on 16.02.2021.
Sd/- Sd/-
(KUL BHARAT) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 16 February, 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
238