Income Tax Appellate Tribunal - Ahmedabad
Acit.,Cent.Circle-1(1),, Ahmedabad vs Bhagwanbhai Karmanbhai Aajra, ... on 12 April, 2017
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद यायपीठ 'सी' अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, AHMEDABAD
BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER
AND SHRI MANISH BORAD, ACCOUNTANT MEMBER
SN IT(SS)A/ITA No. AY Appellant Respondent
1 IT(SS)A No. 2009-10 ACIT, Shri Bhagwanbhai
194/Ahd/2013 Central Circle 1(1), Karmanbhai Ajara,
Ahmedabad 12, Gopalak Society, Nr. Kiran
Park, Nava Vadaj,
Ahmedabad-13
PAN : AGYPA 0845 K
2 IT(SS)A No. 2009-10 Shri Bhagwanbhai ACIT,
195/Ahd/2013 Karmanbhai Ajara, Central Circle 1(1),
PAN : AGYPA 0845 K Ahmedabad
3 ITA No. 2010-11 ACIT, Shri Bhagwanbhai
1373/Ahd/2013 Central Circle 1(1), Karmanbhai Ajara,
Ahmedabad PAN : AGYPA 0845 K
4 ITA No. 2010-11 Shri Bhagwanbhai ACIT,
1375/Ahd/2013 Karmanbhai Ajara, Central Circle 1(1),
PAN : AGYPA 0845 K Ahmedabad
5 IT(SS)A No. 2008-09 ACIT, Uma Shakti Corporation Kalol
440/Ahd/2012 Central Circle 1(1), Project, 2-Kunta Park Society,
Ahmedabad Opp. Ganesh School, Nava
Vadaj, Ahmedabad -13
PAN : AACFU 2673 H
6 IT(SS)A No. 2008-09 Uma Shakti Corporation ACIT,
436/Ahd/2012 Kalol Project, Central Circle 1(1),
PAN : AACFU 2673 H Ahmedabad
7 ITA No. 2010-11 ACIT, Uma Shakti Corporation Kalol
1370/Ahd/2013 Central Circle 1(1), Project, Ahmedabad -13
Ahmedabad PAN : AACFU 2673 H
8 ITA No. 2010-11 Uma Shakti Corporation ACIT,
1376/Ahd/2013 Kalol Project, Ahmedabad Central Circle 1(1),
PAN : AACFU 2673 H Ahmedabad
Revenue by : Shri Krishna Morari, CIT-DR
Assessee(s) by : Shri Tushar Hemani, AR
सुनवाई क तारीख/ Date of Hearing : 22/03/2017
घोषणा क तारीख / Date of Pronouncement: 12/04/2017
आदे श/O R D E R
PER MANISH BORAD, ACCOUNTANT MEMBER:
These are four cross appeals, out of which cross-appeals for AY 2008-09 & AY 2010-11 in the case of Uma Shakti Corporation Kalol Project in IT(SS)A IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project -2- Nos. 436 & 440/Ahd/2012 and ITA Nos. 1370 & 1376/Ahd/2013 are directed against CIT(A)-I, Ahmedabad order dated 18.07.2012 & 22.02.2013 arising out of order under Section 143(3) r.w.s. 153A of the Income-tax Act, 1961 (hereinafter referred to as "the Act") dated 30.12.2011 (AY 2008-09) & dated 22.02.2013 (AY 2010-11) framed by ACIT, Central Circle-1(1), Ahmedabad and remaining two cross appeals for AYs 2009-10 & 2010-11 in the case of Shri Bhagwanbhai Karmanbhai Ajara are directed against separate orders of CIT(A)-I, Ahmedabad even dated 22.02.2013, arising out of orders under Section 143(3) r.w.s. 153A of the Act dated 30.12.2011 framed by the ACIT, Central Circle-1(1), Ahmedabad. As the issues raised in these appeals are common and relating to the same group, these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
IT(SS)A Nos. 436 & 440/Ahd/2012-Assessee: Uma Shakti Corporation Kalol Project
2. First we take up IT(SS)A Nos. 436 & 440/Ahd/2012 in the case of Uma Shakti Corporation Kalol Project. The only issue raised relates to the addition made by the ld. Assessing Officer under Section 69 of the Act for unaccounted investment at Rs.5,27,50,000/- on the basis of document seized during the course of search. On appeal, Ld. CIT(A) has partly allowed this ground and deleted the addition of Rs.2,72,50,000/- out of total addition of Rs.5,27,50,000/- made by the Assessing Officer.
3. Facts in brief of this case are that search was conducted in the case of Umiya Group on 4.3.2010 and during search at the residence of partner of the appellant - Shri Vikas R. Patel - an unsigned Memorandum of Understanding (in short MOU) of November 2007 was seized for purchase of land of 15500 sq. yard at certain survey numbers of Kalol @ Rs. 4500 per sq. yard. This MOU was at page 66 to 72 of Annexure A/2 (seized from the residence of the partner). This MOU was between the appellant through partner -Shri Deepak G. Prajapati and the land owners. On the basis of this MOU price of land IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project -3- purchased by the appellant was worked out at Rs. 6,97,50,000. According to the AO the registered sale deed dated 13.3.2008 of this land showed price of only 1,70,00,000 and on the basis of MOU he concluded that unaccounted / on- money on purchase of land was paid to the tune of Rs.5,27,50,000 (Rs.6,97,50,000 - Rs. 1,70,00,000) and added the same u/s. 69. The Assessing Officer has also mentioned on page 2 of the order that during search in the statement dated 5.3.2010 recorded u/s. 132(4) Shri Vikas R. Patel (partner) admitted that Rs. 51,00,000 was paid as unaccounted payment by Uma Shakti Corporation Kalol Project for land transaction.
4. On the basis of these observations, ld. Assessing Officer was of the view that on the basis of impugned document, i.e., MOU, as discussed above, it is established that total payment of Rs.6,97,50,000/- was made for the acquisition of the land at Survey No. 1001/1B and 1000 at Kalol for the project of the assessee-firm and accordingly addition of Rs.5,27,50,000/- was made after deducting Rs.1,70,00,000/- being the value of land shown in regular books of accounts. Accordingly, income was assessed at Rs.5,23,40,065/-.
5. Aggrieved, assessee went in appeal before the ld. CIT(A) against the impugned addition under Section 69 of the Act on account of unexplained investment of Rs.5,27,50,000/- and partly succeeded as ld. CIT(A) sustained the addition to Rs.2,55,00,000/- by observing as follows:-
"7. After going through rival submissions it is seen that the MOU relied upon by the Assessing Officer is unsigned, undated, does not even specify the area of land.
The land in question was converted into non-agricultural land 1.2.2008. The first condition was that the payments would be made within 15 months from the date of NA order, (please refer to page 65 of Annexure A/2 enclosed here in Annexure-1), whereas the payments were made within 1½ months of the NA order.
No seized document has been found to confirm that on-money payments were actually made. In this background, the case laws relied upon by the appellant cited above viz. Shri Rajat Agrawal vs. DCIT 68 DTK 58 (JP Tribunal), CIT vs. Smt. K.C. Agnes 262 ITR 354 (Ker), CIT vs. S.M. Aggarwal 293 ITR 43(Del) IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project -4- all support the contention that the draft agreement found during search was not acted upon. Notwithstanding the arguments of the appellant this is also a fact of the case that the partner from whose residence the MOU", its terms and "conditions etc were seized admitted u/s. 132(4) having purchased the land at the rate of Rs. 4500 per sq. yard and paid Rs.51,00,000 in cash for the Kalol project land. English translation copy of the statement with Gujarati version furnished by the appellant is enclosed as Annexure-2 of this order. It was vehemently argued by the Id. AR that the partner was being asked questions with reference to the MOU and what he meant was the rate agreed upon in the MOU. It was argued that land could never have been purchased at this rate by Umiya Group when it had such small share ratio in the appellant firm. It was also pleaded during appellate proceedings that if the AO's version is upheld then the land was purchased at Rs.6,97,50,000, out of which Rs.1,70,00,000 was the registered deed price, which brings the cheque : cash ratio at 24:76 of Rs.1,70,00,000 being 24% of Rs.6,97,50,000 and the remaining Rs.5,27,50,000 becomes 76% of Rs.6,97,50,000. It was argued that real estate never works in such lopsided proportions of 24:76 of cheque:cash payments. However, this was not challenged by the Id. AR that huge on-money was earned (as discovered during search through seized document - A/3 (page 32 to 35) on the residential and commercial complex titled 'Umiya Tirth Ville' constructed by the appellant on the impugned Kalol land. In the facts of the case common sense says that such land would not have been purchased just on the value mentioned in the registered deed, when it is an open secret that purchase and sale of land and buildings do not happen without on-money or unaccounted cash payments, which never appear in the registered documents. No clues / proofs are left by those involved so actual price of such deals slips away uncaught / untaxed. This is also a fact that the partner admitted on 5.3.2009 during search that he paid cash of Rs.51,00,000 which is the same cash which is mentioned as last line in the terms and conditions on the seized paper (page 64 of A/2. The line states "(Aaj roj Rs.51,00,000/- Rupees Fifty One Lacs)" that Rs. 51,00,000 shall be paid as on the day of the MOU. And in the MOU (page 69 of A/2) (please refer to Annexure-1 of this order) the same payment of Rs.51,00,000 in cash is mentioned. The MOU cannot be dismissed to have not been implemented at all. In this background it would not be unreasonable to hold this ratio at 40:60 as per prevalent market practice in real estate transactions. It can therefore be said that 40% of the deal was paid in cheque and the remaining through on-money (cash). In this case the registered document is of Rs.1,70,00,000, and if the ratio was 40:60 then Rs.1,70,00,000 becomes 40% of Rs.4,25,00,000. And the balance Rs.2,55,00,000 (Rs. 4,25,00,000 - Rs. 1,70,00,000) paid as on-money. The AO is directed to delete the addition of Rs.2,72,50,000 (Rs.5,27,50,000 - Rs.2,55,00,000) and restrict the addition to Rs.2,55,00,000."
6. Aggrieved, both assessee and Revenue are in cross appeal before the Tribunal.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project -5-
7. Ld. Counsel submitted that the impugned addition made by ld. Assessing Officer under Section 69 of the Act was merely based on unsigned, undated and rough draft MOU and kaccha chitthi, which was found during the course of search under Section 132 of the Act. This unsigned and undated MOU does not fall under the category of valid contract and have no legal sanctity. Further, ld. Assessing Officer has merely presumed that contents of such seized material are correct and assessee has actually paid such on-money without appreciating the fact that such seized material is nothing but merely a dumb document and ld. Assessing Officer completely failed to bring on record any corroborative material to prove that any such sum has been actually paid by the assessee. Further, no enquiry was made with the alleged recipient of such sum. Ld. Counsel further added that ld. Assessing Officer has also made reference to statement of Shri Vikas Patel, wherein he has admitted the factum of payment of Rs.51,00,000/- in cash by the assessee-firm. However, ld. Assessing Officer failed to appreciate that Shri Vikas Patel did not give any explanation for the amount of Rs.51,00,000/-. Further, ld. Assessing Officer did not appreciate the assessee's submissions that the land deal was actually carried out through Shri Bhagwanbhai Ajara.
8. Ld. Counsel also submitted the facts pertaining to acquisition of land in question that, initially, the concerned MOU was prepared by Dipak G. Prajapati (partner of assessee-firm) in November 2007 for purchase of land in question. Such MOU was shown by Dipak Prajapati to Vikas R. Patel to figure out as to whether Vikas Patel is interested in purchasing such land. Thereafter, Vikas Patel inquired with Brijesh Patel about land prices prevailing in Kalol to which Brijesh Patel replied as follows:
• Land in question was agricultural land and there were problems in conversion of such land in NA land (Non-agricultural land); • Prices quoted were very high.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project -6- In view of the above, Vikas Patel discarded the proposal of Dipak Prajapati. Somewhere in January 2008, Vikas Patel was approached by his friend Bhagwanbhai Ajara with a partnership proposal for a flat scheme at Kalol since he had acquired some piece of land at Kalol, had paid Rs.40 lac as token by cheque to original land owners as is evident from his bank statement and was to pay balance sum of Rs. 130 lac. He also stated that there were some problems in conversion of such land but he assured that he will get such issues sorted out based on his experience in land matters. Co-incidentally, such proposal was w.r.t. the land in question itself in respect of which proposal by Dipak Prajapati was rejected by Vikas Patel. Vikas Patel accepted such offer of Bhagwanbhai Ajara and it was agreed upon that such project shall be looked after by Bhagwanbhai Ajara. Thereafter, land in question came to be converted into non-agricultural land on 01.02.08. Partnership deed for the firm was executed on 08.02.2008 and the date of partnership was kept w.e.f. 20.01.2008 i.e. the date on which all the persons joined hands together. Assessee-firm's bank account was opened with Axis bank on 19.02.08. Finally, the sale deed w.r.t. the land in question for a consideration of Rs.1,70,00,000/- came to be executed on 13.03.08. Almost two years later, a search action was carried out on 04.03.10 during the course of which the concerned MOU and kaccha chitthi were seized based on which the impugned addition came to be made by AO without appreciating the factual as well as settled legal position. In light of the above, impugned addition in respect of alleged unaccounted investment in unwarranted. The same be held so now.
9. Ld. Counsel further summarizing his contentions submitted that no addition should have been made under Section 69 of the Act for unexplained investment merely on the basis of unsigned, undated and rough draft of MOU and kaccha chitthi as actual transaction was entered separately through Shri bhagwanbhai Ajara, partner of the assessee-firm. In support of his contention IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project -7- that no addition can be made on the basis of dumb document, he placed reliance on following decisions:-
i) ACIT vs. Manav Infrastructure P. Ltd in IT(SS)A No. 572/Ahd/2011
ii) ACIT vs. Dharmendrasinh R. Waghela, Prop. M/s. Narendra Roadlines in Tax Appeal No.1539 of 2011 (Guj).
10. On the other land, ld. Departmental Representative supported the order of ld. Assessing Officer and added that the alleged document, i.e., MOU contains all the necessary information including the name of the purchaser, seller, description of the properties, rate per sq. yards and total area of land along with conditions of payment and the installments to be paid for and most importantly, sum of Rs.51,00,000/- was paid as part consideration. All these facts clearly show that there was a transaction of purchase by the assessee-firm and the cost shown in books of accounts was much less than the actual purchase consideration paid and there was an element of on-money of Rs.5,27,50,000/- paid by the assessee over and above the cost shown in the books at Rs.1,70,00,000/-.
11. We have heard the rival contentions and perused the record placed before us. The issue raised by both the parties relates to a Memorandum of Understanding (MoU) which was pertaining to a purchase of land of 15,500 sq. yards at Kalol @ Rs.4,500/- per sq. yard. This alleged document was seized in the course of search conducted in the case of Umiya Group on 04.03.2010. This document, in which matter was typed in the form of Memorandum of Understanding (MoU) between assessee-firm through its partner Dipak Prajapati and the land owner for the purchase of land bearing Survey No. 1001/1B and 1000 at Kalol admeasuring 15,500 sq. yards agreeing to purchase at Rs.4,500/- per sq. yard. Ld. Assessing Officer, during the course of assessment proceedings, observed that there is a purchase of alleged land admeasuring 15,500 sq. yards at the cost of Rs.1,70,00,000/- in the regular books of accounts. Ld. Assessing Officer was convinced that the alleged purchase of IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project -8- land was actually purchased at Rs. 6,97,50,000/- which he calculated by applying the rate of Rs.4,500/- per sq. yard as appearing in the seized MOU. He accordingly made an addition of Rs.5,27,50,000/- and completed the assessment.
12. When the issue came up before the ld. CIT(A), he took a view that, in general parlance, in the business of real estate, there is an element of on-money which is normally to be carried out in cash. Ld. CIT(A) adopted a ratio of 40:60, wherein 40% of the deal amount is normally paid by cheque and remaining 60% being the on-money is paid by cash. Ld. CIT(A) accordingly taking the base of cost price appearing in assessee's books of accounts at Rs.1,70,00,000/- calculated the total consideration value at Rs.4,25,00,000/- and thereafter calculated the 60% on-money value at Rs.2,55,00,000/- and sustained the addition to this extent.
13. During the course of proceedings before us, ld. Counsel has mainly contended that the alleged document, i.e., MOU and kaccha chitthi, are unsigned, undated and mere draft and is a dumb document which ld. Assessing Authority should not have taken. We notice that the alleged document MOU is filed at page No.15-21 of the paper-book and kaccha chitthi at Page Nos. 22-23 and observe that the Memorandum of Understanding is prepared on a stamp paper dated 31.10.2007 between Uma Shakti Corporation Kalol Project, being the purchaser and the selling parties and this MOU is undated and only the stamp is of November 2007. There appears no signature of either of the parties on any of the pages. Even kaccha chitthi is also unsigned which speaks about a rough draft showing a partnership firm to be incorporated and there are other notings about installments and an amount of Rs.51,00,000/- is written on the last page of the kaccha chitthi. Ld. Assessing Officer has made the impugned addition on the basis of these documents. Now, the question arises before us is whether this unsigned, undated MOU and IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project -9- kachha chitthi can be taken as corroborative evidence against the assessee in order to make an addition.
14. Before analyzing the facts, we find it necessary to go through the decision of the Co-ordinate Bench in the case of ACIT vs. Manav Infrastructure P. Ltd. (supra), wherein Co-ordinate Bench has dealt with similar issue relating to addition made by the Assessing Officer on the basis of seized documents and whether an addition can be sustained if the alleged seized papers are rough work and there is no clear indication as to how they will lead as a basis for the alleged addition. The Co-ordinate Bench in the case of Manav Infrastructure P. Ltd (supra) has observed as follows:-
"7. We have duly considered rival contentions and gone through the record carefully. Section 132(4A) contemplates that where any books of accounts, other documents, money, bullion, jewellery or other valuable article or thing is found in the possession or control of any person in course of a search, it can be assumed that such books of accounts other documents etc. belongs to such person, contents in the books of accounts or documents are true. No doubt such an evidence is an admissible evidence, but not a conclusive one. Presumption of belonging and its genuineness are rebuttable one. Hon'ble High Court in the case of Dharmendrasingh R. Waghela (supra) has also propounded that though section 132(4A) of the Act uses expression "may presume", meaning thereby that such presumption is rebuttable one. In the present appeal, we have been called upon to construe and interprets these pages and arrive at a conclusion whether any transaction having nexus with the business transaction of the assessee can be inferred. The assessee has placed on record details in tabular form exhibiting total shops available in Balaji Mall and how these shops have been sold in F.Y.007-08, 2008-09 and 2009-10. The assessee has also compiled these details floor-wise i.e. availability of shops on ground floor, second floor, third floor and fourth floor. It has placed on record date of sales, area and the amount for which these shops have been sold. Thus, complete picture of the shops, their area, their geographical location, date of sale and the amount for which they have been sold, have been placed by the assessee on page no.43 to 49 of the paper book. During the course of hearing, we have confronted the ld.CIT-DR to demonstrate nexus between narrations available on page no.7 to 10 of the paper book i.e. seized material vis-à-vis alleged book results by the assessee. However, the ld.CIT-DR could point out that on page no.7 i.e. 2nd page of the seized paper, name of Ashish J. Shah was mentioned. It contemplates business of Balaji Mall. On an analytical examination of these details, we find that some narrations here and there, are having a slight connection with the shops, but it is difficult to arrive at logical conclusion. The stand of the assessee before the AO was that IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 10 -
these papers can be divided in three parts viz. (a) typed documents, hand written documents in Gujarati pertaining to Shree Balaji Mall and other hand written documents written in English with certain numbers mentioned in it. According to the assessee these hand-written documents in English is neither of Balaji Mall nor of the company. These papers have neither been drawn by the directors or their family members. This aspect was not only explained during the course of assessment proceedings, but even during the course of search itself. Against this stand of the assessee, the department did not take any step to investigate the issue further. The AO has also not tried to supplement his reasoning by inductive method i.e. he has not made reference to any other connected material exhibiting nexus between these papers with that of the assessee's transaction. He simply observed that explanation of the assessee is not acceptable. The assessee has made a disclosure of Rs.3 crores in reply to question no.10 recorded under section 132(4) of the Act. Out of this Rs.3n crores, Rs.2 crores has been offered for taxation in this year. We have been informed that rest of Rs.1 crore were offered in individual hands. We have tried our best to persuade both the ld.representatives to show some nexus or reasonable conclusion from all the figures mentioned in these papers. By any scientific means they did not goad adjudicating authority to arrive at a conclusion that unaccounted profits have noticed in these papers. The ld.CIT(A) has appreciated these papers and arrived at a conclusion that these are rough work without any clear indication as to what the said numbers really lead to or relates to. On an analysis of complete material including statement of director recorded under section 132(4) and the explanation of the assessee extracted (supra) during the course of assessment proceedings, we are of the view that the ld.CIT(A) has appreciated the facts in right perspective way, and department is unable to goad us to arrive at any other logical conclusion. Therefore, we do not find any merit in this appeal of the Revenue. It is dismissed.
15. We further observe that Hon'ble jurisdictional High Court in the case of Dharmendrasinh R Waghela Prop M/S. Narendra Roadlines (supra) has also observed as under:-
"2. The issue arises in following factual background. During the course of search operations carried out at the residential and business premises of the respondent
- assessee, certain documents were seized. On the basis of such documents, the Assessing Officer desired to make addition. The assessee, however, during the course of the assessment, contended that such documents do not belong to him. The assessee's business was of transportation. The documents contained entries regarding the oil business. In short, the assessee totally disowned such documents.
3. The Assessing Officer, principally placing reliance upon section 132(4A) of the Income Tax Act, 1961 ("the Act" for short), however, discarded such objections and ruled that the presumption against the assessee would arise. On such basis, he made addition of Rs.30,27,987/-.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 11 -
4. The assessee carried the matter in appeal before the Commissioner. The Commissioner confirmed the view of the Assessing Officer, once again placing heavy reliance upon section 132(4A) of the Act. The assessee carried the matter in further appeal. The Tribunal reversed the view of the revenue authorities and allowed the appeal of the assessee, making following observations :
"17. We have heard both the sides. We have perused the material placed before us. As per the document placed on page No.179 of the compilation, it had reflected some business transaction in respect of oil and kerosene oil. As per this typed document, there was a mention of parties from whom a business activity was performed. The figures have mentioned the rates applied for the said commodity and the details of the amount received. This document in fact appears to be in respect of some "oilbusiness" but there is no denial of this admitted fact that the assessee is in the business of Transport. Hence, a vehement contention is that by the very nature of document, it did not relate to the business activity of the assessee. However, there was no finding or even an allegation of the Revenue that there was such type of business at all run by the assessee. It was not the case of the revenue that an undisclosed business was unearthed which was not found recorded in the books of account. Barring this paper, there is no material in possession of the Revenue to corroborate that the said paper had any connection with the accounted or unaccounted business activity of the assessee. From the side of the Revenue even no such attempt was ever made to make an enquiry from those parties whose names were printed on the said paper. Because of these reasons, ld. AR Mr. Mukund Bakshi has emphasized that the said document was nothing but a bald document. For this legal proposition, case laws cited are:- 1 ACIT vs. Satyapal Vasan 295 ITR (AT) 352 [ITAT Jabalpur] 2 CIT vs. Girish Chaudhary (2008) 296 ITR 619 (Mad.) 3 CIT vs. S.M. Aggarwal (2007) 293 ITR 43 (Del.) 4 Jaya S. Shetty vs. ACIT (1999) 69 ITD 336 (Mum) 5 Bansal Strips P. Ltd. vs. ACIT (2006) 99 ITD 177 (Del.) "18. From these decisions, it transpires that if an addition is to be made on the basis of a seized document, then it must be supported by some identification having any nexus with the unaccounted business activity of the assessee. The nature of transaction should reflect some direct or indirect connection with the accounted or unaccounted activity of the assessee. If a document is silent or the ingredients could not be linked, then the said document was considered as "a dumb document". Placing reliance on these decisions, inter-alia we are of the view that the Revenue Department had not made sufficient enquiry so as to establish that in fact the said document had unearthed a concealed business activity of the assessee. In the absence of any such evidence, the addition so made by the AO remained un-corroborated, hence, we hereby reverse the findings and allow this ground."
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 12 -
5. Counsel for the revenue vehemently contended that the Tribunal committed an error in interfering with the concurrent findings of the revenue authorities. He submitted that the assessee's explanation that the documents seized were not found satisfactory. That presumption under section 132(4A) of the Act would apply.
6. We are of the opinion that the entire issue is based on appreciation of the material on record. Section 132(4A) of the Act uses the words "may presume", meaning thereby that such presumption is rebuttable. In the present case, documents found pertain to entries related to oil business. The assessee's business at least accounted was of transportation. Revenue could not bring on record any material to suggest that the assessee was also involved in the business of dealing in oil. Additionally, the Tribunal has correctly recorded that the documents were dump documents. Revenue did not make any attempt to inquire into the matter further from the persons whose names were reflected in such entries.
7. In short, it cannot be stated that the conclusions arrived at by the Tribunal are perverse. No error is committed by the Tribunal. Tax Appeal is dismissed."
16. Going through the views expressed in the judgment of Hon'ble jurisdictional High court and decision of Co-ordinate Bench which gives fair view that if from the seized material no nexus or reasonable conclusion can be arrived, then even if the documents are seized during the course of search, they cannot be used against the assessee. Examining the facts of the case before us, we observe that assessee-company was incorporated on 28.01.2008 and its first bank transaction was entered on 19.02.2008. Assessee-firm is having six partners namely S/Shri Vikas R. Patel, Brijesh S. Patel, Dipak G. Prajapati, Kamalbhai J. Patel, Bhagvanbhai K. Aajra and Arvindbhai N. Prajapati; and the major capital has come from Shri Bhagvanbhai K. Aajra. On viewing the alleged document, we find that the unsigned MOU is dated 31.10.2007 which is almost 4 months before the incorporation of the assessee-firm. The alleged MOU also do not fulfill the basic requirement of the valid contract which needs to a written or expressed agreement between two parties to provide a product or service and for a valid contract there has to be an intention to create legal relation, offer, acceptance, consideration and capacity to fulfill the contract.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 13 -
However, the alleged MOU, which is unsigned and undated, do not stand for as a valid contract and the same is not enforceable by law.
17. It seems that ld. Assessing Officer has stretched a link emanating from the seized material and has formed up a complete story along with taking a basis of impugned land which was purchased in the later part of the year and applying the conditions embedded in the alleged MOU on to the impugned land purchase transactions thereby calculating the purchase consideration of the land in question at Rs.6,97,50,000/- as against Rs.1,70,00, 000/- shown in the books. We notice that ld. Assessing Officer has completely disregarded relevant facts which includes the date of incorporation of the assessee-firm, actual date of registration of the land purchase document dated 12.03.2008 and the date of conversion of land in question, i.e., 01.02.2008; coupled with that ld. Assessing Officer also has not enquired from the alleged sellers about the value of transactions entered into for the sale of land. More so, ld. Assessing Officer has also ignored the glaring fact that proposal for purchasing the impugned land was brought by Shri Bhagvanbhai Aajra, who is also the partner of the assessee-firm.
18. We would further like to refer the provisions of Section 132(4A) of the Act which reads as follows:-
"132(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed--
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true ;
and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested."
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 14 -
From going through the above provision, we find that it uses the word "it may be presumed", which as rightly held by the Hon'ble jurisdictional High Court in the case of CIT vs. Dharmendrasinh Waghela that the word "may presume" that such presumption is rebuttable in a situation if Revenue could not bring on record any material to prove that the seized material is corroborative for the addition. We are, therefore, respectfully following the judgement of the Hon'ble jurisdictional High Court and decision of Co-ordinate Bench discussed above in preceding paragraph, are of the considered view that ld. Assessing Officer erred in making the addition of Rs.5,27,50,000/- and ld. CIT(A) in restricting the addition at Rs.2,55,00,000/- as it was based on undated, unsigned Memorandum of Understanding which, in our view, cannot be correlated with the assessee-firm as it was incorporated in the latter period to that of MoU stamp date nor can it be taken as corroborative evidence to make addition and also in the light of the fact that Revenue could not point out any error in the actual registered document dated 12.03.2008 entered into by the assessee-firm for the impugned land at Kalol.
19. In the result, appeal of the assessee is allowed and that of the Revenue is dismissed.
ITA Nos. 1370 & 1376/Ahd/2013- Cross appeals by Revenue and Assessee respectively for AY 2010-11-Assessee: Uma Shakti Corporation Kalol Project
20. Now, we take up cross appeals for AY 2010-11 in the case of Uma Shakti Corporation Kalol Project vide ITA Nos. 1370 & 1376/Ahd/2013. In the Revenue's appeal, two issues have been raised against the order of ld. CIT(A); firstly, regarding the deletion of addition of Rs.22,18,250/- made on account of unaccounted interest payment and secondly, relating to the deletion of addition of Rs.3,81,07,860/- out of total addition of Rs.4,35,39,800/-.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 15 -
21. As regards deletion of addition of Rs.25,18,250/- on account of unaccounted interest payment, brief facts are that during the course of search in the group cases, search was also conducted at the premises of one of the partners Mr. Bhagwanbhai K. Ajara, wherein two diaries were seized which were marked as Annexure A/1 and Annexure A/2. It contained details of unaccounted interest income of Rs.3,92,750/- and Rs.25,18,250/- from the assessee's firm in AY 2009-10 and 2010-11 respectively. However, cash flow of unaccounted transactions furnished by the assessee-firm did not contain entries with respect to unaccounted interest payment. Ld. Assessing Officer while framing the assessment order made the impugned addition of Rs.25,18,250/- treating it as unaccounted interest payment.
22. In the appeal before the ld. CIT(A), the addition of Rs.25,18,250/- was deleted by observing that the partner Mr. Bhagwanbhai K. Ajara was receiving on-money from the project of the assessee-firm and was recording it properly in the diary and was putting names of fictitious persons to show that he had borrowed money from elsewhere. Ld. CIT(A) further observed that Mr. Bhagwanbhai K. Ajara has already offered a notional income of Rs.23 lacs in his return of income for AY 2010-11 and therefore this disclosure covers the entire interest paid by the appellant and not recorded in the books of accounts.
23. Aggrieved, the Revenue is now in appeal before the Tribunal.
24. Ld. Counsel for the assessee submitted that ld. Assessing Officer failed to appreciate that Mr. Bhagwanbhai K. Ajara was the main person looking after the flats/shops of the Kalol project and he used to note the details of funds received from various members of Kalol project. Such notings were made in the name of fictitious persons just to hide the actual details of on-money received. As the seized diary contained details of the on-money received from assessee-firm project, there was actually no interest payment because the IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 16 -
transactions in the diary were of on-money received on behalf of assessee-firm and the same fund used to be diverted back to the firm for project expenses and therefore, there cannot be any reason to charge interest on its own funds. Hence, the question of making the impugned addition does not arise at all. On the other hand, ld. Departmental Representative supported the order of the ld. Assessing Officer.
25. We have heard the rival contentions and perused the record placed before us. The issue raised by the Revenue in this ground relates to deletion of addition of Rs.25,18,250/- relating to unaccounted interest payment. We notice that in the search conducted in Umiya Group of cases on 04.03.2010 under Section 132 of the Act, various documents were seized. It also included two diaries seized from the premises of partner Mr. Bhagwanbhai K. Ajara, marked as Annexure-A/1 and Annexure A/2. It contained details of various transactions of funds received and paid from assessee-firm. It is not disputed by Revenue that Mr. Bhagwanbhai K. Ajara was entering the details of on- money transactions received from members of the Kalol Project. However, Mr. Bhagwanbhai K. Ajara was entering the names of fictitious persons just to create a picture in the diary that funds have been borrowed from outside parties and are being given to the assessee-firm for project expenditure. The alleged interest amount of Rs.25,18,250/- only finds it place in diaries, but there is no actual payment on record. We further observe that assessee-firm had made a total disclosure of Rs.163 lacs towards unaccounted income which, inter alia, includes Rs.23 lacs shown in the return of income of Mr. Bhagwanbhai K. Ajara which is contended to have covered the alleged notional income also. We are, therefore, of the view that ld. CIT(A) was justified in deleting the impugned addition by observing that the diary contained the transactions of on-money of the project and the amount advanced to the assessee-firm was actually its own money and there cannot be any reason to charge interest on its own funds. More so ever, Mr. Bhagwanbhai K. Ajara had already offered a IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 17 -
sum of Rs.23 lacs for AY 2010-11, which will cover up the entire interest paid, if any, by the appellant and not recorded in the books of accounts. We, therefore, find no reason to interfere with the order of the ld. CIT(A). In the result, this ground of the Revenue is dismissed.
26. Next common ground relates to addition of Rs.4,35,39,800/- made on account of unaccounted collection/receipts by the Assessing Officer on the basis of seized material which was not accounted for in the regular books of accounts.
27. Brief facts related to this ground are that during the course of search, certain documents containing receipts of sale proceeds were seized and further, when explanation was called for by the Assessing Officer, the assessee worked out unaccounted turnover of Rs.5,44,39,800/- and offered income of Rs.109 lacs by calculating the embedded net profit @ 20% of the unaccounted turnover. However, ld. Assessing Officer made an addition of Rs.4,35,39,800/-, after giving set off of Rs.109 lacs offered by assessee against the unaccounted turnover of Rs.5,44,39,800/-.
28. When the issue came up before the ld. CIT(A), he was of the view that only profit element embedded in the unaccounted turnover can be added in the hands of the assessee; however, the ld. CIT(A) adopted net profit rate of 30% as against 20% shown by the assessee and sustained the remaining addition.
29. Now, aggrieved, both assessee and Revenue are in appeal before the Tribunal.
30. Ld. Counsel for the assessee submitted that the unaccounted turnover of Rs.5,44,39,800/- has not at all been disputed by the Assessing Officer. There are plenty of judgments which have been relied on by the ld. CIT(A) also, wherein IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 18 -
it has been consistently held that unaccounted turnover cannot be added to the income but only the profit element embedded therein can be subject to tax. However, ld. CIT(A) has applied the net profit rate of 30% completely ignoring the fact that assessee's average gross profit rate is just 10.97% and net profit rate is also around 9.66%; whereas, income offered of Rs.109 lacs has been calculated by applying 20% net profit rate on unaccounted turnover. Ld. Counsel further submitted that ld. CIT(A) has merely made a guess work of applying 30% by just relying on the finding of the Income-Tax Settlement Commission, Mumbai Bench in the case of M/s. Silver Springs & M/s. Rushabh Vatika. The ld. Counsel further requested that as the alleged unaccounted turnover is not disputed, the income offered by the assessee at the rate of 20% should be accepted and no further addition should be made In support of his contention, ld. Counsel placed reliance on the following judgments:-
i) CIT vs. Resident Industries, 258 ITR 654 (Guj.), ii) CIT vs. Balchand Ajit Kumar, (2003) 263 ITR 610 (MP), iii) Man Mohan Sadani vs. CIT, (2008) 304 ITR 52 (MP), iv) Kishor Mohanlal Telwala vs. ACIT, (1999) 64 TTR 543 (Ahd)
31. We have heard the rival contentions and perused the material placed before us. The issue raised in these grounds are relating to the income determined on the unaccounted collection/receipts. We notice that assessee worked out unaccounted turnover from the seized documents containing receipts and sale proceeds at Rs.5,44,39,800/-. The Revenue has also accepted the figure of unaccounted turnover at Rs.5,44,39,800/- as worked out by assessee. Assessee offered the profit element embedded in the unaccounted turnover by applying net profit rate of 20% and offered Rs.109 lacs as income. Ld. Assessing Officer, however, did not accept the contentions and after giving set off of Rs.109 lacs against the unaccounted turnover of Rs.544 lacs, made the impugned addition of Rs.435 lacs. However, ld. CIT(A), IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 19 -
after following various decisions, especially the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. President Industries (supra), wherein it has been held that "entire undisclosed sales could not be added as income of assessee but addition could be made only to the extent of estimated profits embedded in sales for which net profit rate was adopted." The ld. CIT(A), following these judgments, observed that only the profit element should be taxed and not the total turnover. However, he applied the rate of 30% by following the rate adopted by Income-Tax Settlement Commission, Mumbai Bench in the case of M/s. Silver Springs and M/s. Rushabh Vatika. We further observe that during the course of appellate proceedings before the ld. CIT(A), assessee has given five comparable cases wherein judgments of Hon'ble jurisdictional High Court, Co-ordinate Bench of Ahmedabad were taken the basis which related to similar type of business activities carried on by the assessee and the percentage of the net profit rate were ranging between 1.31% to 20%. A summary of profit estimated on on-money in these cases is reproduced below:-
"2.5 A summary of profits estimated on on-money in the various cases is as under:
No. Detail of the case %of Net Remarks
Profit
1. Naresh B. Aganval (HUF) 15% Construction of commercial
Magatulal Harlalka (HUF) - complex. Reference by the
Gujarat High Court order dated Department against the
3/5/00 order of ITAT rejected.
2. CIT v. Abhishek 1.31% NP % is not comparable as
Corporation (2000) 158 CTR The assessee was doing
(Guj) 374 - Gujarat High Court supervision of construction
rejected the reference of the work.
Department and upheld the
decision of ITAT, Ahmedabad.
3. M/s. R. K. Corporation v. ACIT 20% The disclosure made by the
(ITA No. 4940/Ahd/1996) Order assessee worked out to 20%
08/02/99 of 'on money ' receipt.
4. Kishore Mohan Telwala v.ACIT 8% Residential project taken over
(1999) 63 TTJ (Ahd.) 651 - from Naresh Agarwal who
Order dated 2/9/98 took up the work of
organizing and building
activity of Hare Krishna Apt.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013
& ITA Nos.1370, 1373,1375& 1376 of 2013
Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 20 -
5 DCIT v. S.P. Enterprises (IT(SS) 17% The assessee's declaration A NO.58/Ahd/2003) order dated worked out equal to 17% of 24.11,2005 'on money ' received.
32. From going through the table, we notice that net profit rates offered is between 1.31% to 20%; whereas assessee has offered 20% net profit rate. On the other hand, ld. CIT(A) has also followed the decision of the Income-Tax Settlement Commission but has not pointed out any error in the income estimation by the assessee. Even before the ld. Assessing Officer also no such material was found to show that assessee has given a wrong calculation. It seems that the ld. CIT(A) has just made guess work of estimating 30% net profit rate. We are, therefore, of the view that even in the given facts and circumstances of the case and in view of the fact that the net profit rate offered by the assessee is much more than its normal gross profit and net profit rate consistently offered in its return of income and also in the given fact when the unaccounted turnover is not disputed by the Revenue Authorities, we are of the view that income offered by the assessee at 20% should have been accepted by the Assessing Authorities and no further addition was called for. We accordingly allow the ground of the assessee and dismissed that of the Revenue.
33. Now, we take up cross-appeals by assessee and Revenue for AYs 2009-10 and 2010-11 in the case of Shri Bhagwanbhai Karmanbhai Ajara in IT(SS)A Nos. 194 & 195/Ahd/2013 for 2009-10 and ITA Nos. 1373 & 1375/Ahd/2013 for 2010-11 respectively. Grounds of appeal raised in all these four appeals read as under:-
IT(SS)A No.194/Ahd/2013 : AY-2009-10 : Revenue's appeal
1. The Ld.CIT(A) has erred in law .and on facts in deleting the addition of Rs.3,92,750/- out of total addition of Rs.5,87,250/- made on account of unaccounted interest income.
2. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.46,91,750/- out of total addition of Rs.66,36,750/- made by working out IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 21 -
peak of the entries appearing the diaries seized from the residence of the assessee.
3. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.15,00,000/- being amount received during the year from Nicol land transaction recorded in the diaries seized from the residence of the assessee.
4. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O. IT(SS)A No.195/Ahd/2013 : AY-2009-10 : Assessee's appeal
1. The ld. Commissioner of Income Tax (Appeals) has erred in law and on fact in confirming addition of Rs. 1,94,500/- on alleged ground of earning of interest income, which is offered by the firm in the overall disclosure of Rs. 163 lac, more precisely, as part of Rs. 23 lac. Such addition amounts to double addition in the hands of firm as well as partner. It is therefore prayed that addition so made may kindly be deleted.
2. The ld. Commissioner of Income Tax (Appeals) has erred in law and on fact in confirming the addition of Rs. 19,45,000/- on alleged ground of unexplained investment to earn interest income of Rs. 1,94,500/-, whereas, the funds are sourced from extra collection from members of Uma Shakti Corporation Kalol Project i.e. firm. Such addition amounts to double addition in the hands of firm as well as partner. It is therefore prayed that addition so made may kindly be deleted.
3. Your appellant craves liberty to add, to alter, to modify, to amend or to withdraw / delete any of the grounds of appeal at any time, on or before the hearing of appeal.
ITA No.1373/Ahd/2013 : AY-2010-11 : Revenue's appeal1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.9,00,000/- made u/s 69 of the I.T. Act.
2. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,42,59,250/- out of total addition of Rs. 1,68,34,250/- made by working out peak of the entries appearing the diaries seized from the residence of the assessee.
3. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.26,20,000/- being amount received during the year from Nicol land transaction recorded in the diaries seized from the residence of the assessee.
4. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O. IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 22 -
ITA No.1375/Ahd/2013 : AY-2010-11 : Assessee's appeal1. The ld. Commissioner of Income Tax (Appeals) has erred in law and on fact confirming addition of Rs. 25,75,000/- as profits from Ognaj Land as unexplained investment, whereas such amounts are duly considered in the income offered in IT Return of Rs. 38 lac. Such addition amounts to double addition. It is therefore prayed that addition so made may kindly be deleted.
2. The ld. Commissioner of Income Tax (Appeals) has erred in law and on fact confirming addition of Rs. 25,75,000/- as profits from Ognaj Land as unexplained investment, whereas the appellant has made payments for Dalali of Rs. 75,000/- and reduced Bana amount of Rs. 150,000/-, thus, there is net profit of Rs. 22.75 lac, which is offered in the income offered in IT Return of Rs. 38 lac. It is therefore prayed that addition so made may kindly be deleted.
3. Your appellant craves liberty to add, to alter, to modify, to amend or to withdraw / delete any of the grounds of appeal at any time, on or before the hearing of appeal.
34. In appeals for AY 2009-10, first common issue relates to addition of Rs.5,87,250/- for unaccounted interest made by the Assessing Officer out of which ld. CIT(A) deleted addition of Rs.3,92,750/-. Now, assessee is in appeal against the sustained addition of Rs. 1,94,500/- and Revenue against deletion of addition of Rs.3,92,780/-.
35. Brief facts related to this ground are that a search was conducted on 04.03.2010 at Umiya Group, including assessee's premises, during which, two diaries marked as Annexure-A/1 and Annexure A/2 were seized. As per which, it was alleged that assessee has earned unaccounted interest income of Rs.5,87,250/- which included interest from M/s. Uma Shakti Corporation Kalol Project (in short "USCKP") at Rs.3,92,750/- and interest from others at Rs.1,94,500/-.
36. While adjudicating this issue, ld. CIT(A) partly allowed assessee's appeal by deleting the addition of Rs.3,92,780/- by observing as follows:-
"6. I have gone through the assessment order and submission of the A.R. of the appellant carefully. It is seen that the Assessing Officer is correct in saying that the interest income of Rs.5,87,250/- if it pertains to A.Y.2009-10 has to be taxed in A.Y.2010-11. However, the Assessing Officer has not considered the IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 23 -
submissions of the appellant that the entire source of money advanced was from the project carried out by this group. The fact that most of the on-money collected at Kalol was with the appellant has been accepted by the Assessing Officer also in the assessment of the appellant as well as in the case of the other entities of this group. It is seen, however, that the Assessing Officer has not accepted the contention of the appellant that the notings in diaries represented on-money collection of the various projects. In fact CIT(A) in the case of Umashakti Corporation Kalol Project in A.Y.2009-10 in appeal No.CIT(A)- I/CC. 1(1)7308/2011-12 vide order dated 18.07.2012 has held that the sum of Rs.3,92,750/- added by the Assessing Officer on account of undisclosed interest payment by the firm Umashakti Corporation Kalol Project to the appellant was not correct. The contention that the on-money collection from the projects of the firm Umashakti Corporation Kalol Project itself had been utilized by the appellant to advance money to the firm Umashakti Corporation Kalol Project to earn interest had been accepted. It was held that since the money belonged to the firm Umashakti Corporation Kalol Project itself hence there was no question of paying interest to Bhagwanbhai K Ajara.
6.1 In view of the fact that the CIT(A) has deleted addition of Rs.3,92,750/- made, in the case of Umashakti Corporation Kalol Project indicates that the principal amount on which this interest had been worked out belonged to the firm Umashakti Corporation Kalol Project. However, the Assessing Officer has observed that the entries made in the diaries do not match with the sale of flats recorded by the entities of this group hence the Assessing Officer has not accepted the contention of the funds recorded in the diary were on-money receipt of projects. This contention of the Assessing Officer has been rejected by the CIT(A) in the case of Umashakti Corporation Kalol Project in A.Y.2009-10. It is seen that the appellant had shown interest income to the extent of Rs.5,87,250/- out of which Rs.3,92,750/- was from the firm where the appellant was a partner. The CIT(A) has held that in A.Y.2009-10 the amount of Rs.3,92,750/- was not unrecorded expenses of the firm Umashakti Corporation Kalol Project because the firm's own on-money had been utilised in granting loans to the firm itself by the appellant.
6.2 In light of the above, it is clear that out of the interest income of Rs.5,87,250/- as computed by the Assessing Officer a sum of Rs.3,92,780/- was not chargeable as interest income of the appellant. In view of the above, the addition made by the Assessing Officer is reduced from Rs.5,87,250/-to Rs.1,94,500/-."
37. Aggrieved, both Revenue and assessee are in appeal before us.
38. Ld. Counsel for the assessee submitted that ld. CIT(A) has rightly deleted the addition of Rs.3,92,780/- by taking the basis of ld. CIT(A)'s order in the case of Uma Shakti Corporation Kalol Project (USCKP), wherein it was held that ld.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 24 -
Assessing Officer has wrongly added a sum of Rs.3,92,750/- as undisclosed interest payment and once the interest payment has been held to be incorrect, there cannot be a corresponding income to the assessee. As far as balance interest of rs.1,94,500/- is concerned, ld. Counsel submitted that USCKP Group has made a disclosure of Rs.163 lacs under Section 132(4) of the Act, of which income from notings in assessee's diary book was worked out at Rs.23 lacs, which certainly will take care of alleged interest income of Rs.1,94,500/- and therefore, no separate addition is called for. Ld. Departmental Representative, on the other hand, vehemently argued supporting the order of Assessing Officer.
39. We have heard the rival contentions and perused the record placed before us. The issue raised in this ground relates to the alleged unexplained interest income of Rs.5,87,250/- taken up by ld. Assessing Officer from the seized diaries marked as Annexure A/1 and Annexure A/2 found in the course of search at Umiya Group. As per these diaries, unaccounted interested income of Rs.5,87,250/- and Rs.21,54,000/- were added to the assessee's income for AYs 2009-10 and 2010-11 respectively. Presently, in this appeal, we are dealing with AY 2009-10 and we notice that Rs.5,87,250/- includes interest from USCKP and interest from others. As far as interest from USCKP at Rs.3,92,750/- is concerned, we observe that ld. CIT(A) has rightly deleted the impugned addition following the order of ld. CIT(A)'s order in the case of USCKP, wherein it has been held that ld. Assessing Officer has wrongly made an addition of unaccounted interest payment. As the impugned disallowance has been deleted in the hands of payer, there cannot be any addition in the hands of payee, i.e., assessee. As regard the balance amount of interest from others at Rs.1,94,500/- is concerned, we accept the contentions of ld. Counsel that the impugned amount of Rs.1,94,500/- forms part of total disclosure of Rs.163 lacs made by USCKP which, inter alia, includes income from notings in assessee's diaries at Rs.23 lacs. Therefore, no separate addition is called for in respect of IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 25 -
such interest. In the result, ground No.1 of the Revenue's appeal for AY 2009- 10 is dismissed and that of assessee's is allowed.
40. Revenue's next common issue raised in Ground No.2 for AY 2009-10 and AY 20010-11 is against the deletion of addition of Rs.46,91,750/- and Rs.1,42,59,250/- out of total addition of Rs.66,36,750/- and Rs.1,68,34,250/- respectively made by ld. Assessing Officer by working out peak entries appearing in the seized diaries. Assessee is also in appeal raising Ground No.2 for AY 2009-10 and Ground Nos. 1 & 2 in AY 2010-11 challenging ld. CIT(A)'s order confirming addition of Rs.19,45,000 and Rs.25,75,000/- respectively.
41. During the course of assessment proceedings, ld. Assessing Officer found from Annexure A/1 and Annexure A/2 seized during the search that there was inflow and outflow of funds in the name of various persons which appeared to have been recorded by the assessee in his personal capacity with respect to business of financing and these transactions could not be correlated with extra collection from the members of USCKP as submitted by the assessee. Ld. Assessing Officer accordingly worked out the peak of seized diaries at Rs.66,36,750/- for AY 2009-10 and Rs.1,68,34,250/- for AY 2010-11. In appeal before the ld.CIT(A), assessee partly succeeded as ld. CIT(A) held that the entire peak cannot be added since substantial money of such peak belongs to USCKP, however, partly confirmed the addition at Rs. 19,45,000/- for AY 2009- 10 by calculating it as principal amount on which assessee had earned interest of Rs. 1,94,500/- @ 10%, and as regards to AY 2010-11, ld. CIT(A) confirmed addition of Rs. 25,75,000/- for unaccounted investment in Ognaj Land by observing as follows:-
AY 2009-10 "8. I have gone through the assessment order and submission of the A.R. of the appellant carefully. It is seen that the Assessing Officer has not accepted the contention of the appellant that the notings in diaries represented on-money collection of the various projects. In fact CIT(A) in the case of Umashakti Corporation Kalol Project in A.Y.2009-10 in appeal No.CIT(A)-
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 26 -
I/CC.1(1)/308/2011-12 vide order dated 18.07.2012 has held that the sum of Rs.3,92,750/- added by the Assessing Officer on account of undisclosed interest payment by the firm Umashakti Corporation Kalol Project to the appellant was not correct. The contention that the on-money collection from the projects of the firm Umashakti Corporation Kalol Project itself had been utilized by the appellant to advance money to the firm Umashakti Corporation Kalol Project to earn interest had been accepted. It was held that since the money belonged to the firm Umashakti Corporation Kalol project itself hence there was no question of paying interest to Bhagwanbhai K Ajara.
8.1 In view of the fact that the CIT(A) has deleted addition of Rs.3,92,750/- made, in the case of Umashakti Corporation Kalol Project indicates that the principal amount on which this interest had been worked out belonged to the firm Umashakti Corporation Kalol project. However, the Assessing Officer has observed that the entries made in the diaries do not match with the sale of flats recorded by the entities of this group hence the Assessing Officer has not accepted the contention of the funds recorded in the diary were on-money receipt of projects. This contention of the Assessing Officer has been rejected by the CIT(A) in the case of Umashakti Corporation Kalol Project in A.Y.2009-10. It is seen that the appellant had shown interest income to the extent of Rs.5,87,250/- out of which Rs.3,92,750/- was from the firm where the appellant was a partner. The CIT(A) has held that in A.Y.2009-10 the amount of Rs.3,92,750/- was not unrecorded expenses of the firm Umashakti Corporation Kalol Project because the firm's own on-money had been utilised in granting loans to the firm itself by the appellant.
8.2 In view of the above, it becomes clear that the appellant was receiving on- money from the project of the firm Umashakti Corporation Kalol Project and was not recording it properly in the diary as received on account of on-money of the project. The appellant was putting names of fictitious person to show that he had borrowed money from elsewhere and then would advance the same to the firm and charge interest on the same. This is the reason why the notings in the diary do not tally with the details of persons to whom flats have been sold. In view of the above, it is clear that substantial part of the noting in diary would relate to the on-money collected on behalf of the firm Umashakti Corporation Kalol Project from sale of flats of the project. However, it also cannot be denied that the appellant had obtained other unexplained cash credits also because the interest income of the appellant during the A.Y.2009-10 was Rs.5,87,250/- which has been recorded in the diary seized. Out of this amount only Rs.3,92,750/- pertains to interest charged from the firm Umashakti Corporation Kalol Project. Thus, an amount of Rs.1,94,500/- is interest charged from others. For earning this amount of interest the appellant would requires to invest 10 times this amount because the rate of interest is generally 10% to 12% and also sometime is invariably lost between collecting on debt and advancing the money so received to another person.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 27 -
8.3. In view of the fact that in the earlier paragraph it has been noted that peak working cannot be resorted to in this case because substantial money belongs to the firm Umashakti Corporation Kalol Project. In view of the above on the basis of the unaccounted entries it is held that the Principal amount on which interest of Rs.1,94,5000/- has been earned (10 x 1,94,500 = Rs.19,45,000/-) should be added to the income of the appellant.
Thus, the addition made by the Assessing Officer on account of peak working is reduced from Rs.66,36,750/- to Rs.19,45,000/-.
AY 2010-11 "9. I have gone through the assessment order and submission of the A.R. of the appellant carefully. It is seen that the Assessing Officer has not accepted the contention of the appellant that the notings in diaries represented on-money collection of the various projects. In fact CIT(A) in the case of Umashakti Corporation Kalol Project in A.Y.2009-10 in appeal No.CIT(A)- I/CC.1(1)/308/2011-12 vide order dated 18.07.2012 has held that the sum of Rs.3,92,750/- added by the Assessing Officer on account of undisclosed interest payment by the firm Umashakti Corporation Kalol Project to the appellant was not correct. The contention that the on-money collection from the projects of the firm Umashakti Corporation Kalol Project itself had been utilized by the appellant to advance money to the firm Umashakti Corporation Kalol Project to earn interest had been accepted. It was held that since the money belonged to the firm Umashakti Corporation Kalol project itself hence there was no question of paying interest to Bhagwanbhai K Ajara.
9.1 In view of the fact that the CIT(A) has deleted addition of Rs.3,92,750/- made, in the case of Umashakti Corporation Kalol Project indicates that the principal amount on which this had been worked out belonged to the firm Umashakti Corporation Kalol Project. However, the Assessing Officer has observed that the entries made in the diaries do not match with the sale of flats recorded by the entities of this group hence the Assessing Officer has not accepted the contention of the funds recorded in the diary were on-money receipt of projects. This contention of the Assessing Officer has been rejected by the CIT(A) in the case of Umashakti Corporation Kalol Project in A.Y.2009-10. It is seen that the appellant had shown interest income to the extent of Rs.5,87,250/- out of which Rs.3,92,750/- was from the firm where the appellant was a partner. The CIT(A) has held that in A.Y.2009-10 the amount of Rs.3,92,750/- was not unrecorded expenses of the firm Umashakti Corporation Kalol Project because the firm's own on-money had been utilised in granting loans to the firm itself by the appellant.
9.2 In view of the above, it becomes clear that the appellant was receiving on- money from the project of the firm Umashakti Corporation Kalol Project and was not recording it properly in the diary as received on account of on-money of the project. The appellant was putting names of fictitious person to show that he had borrowed money from elsewhere and then would advance the same to the firm IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 28 -
and charge interest on the same. This is the reason why the notings in the diary do not tally with the details of persons to whom fiats have been sold. In view of the above, it is clear that substantial part of the noting in diary would relate to the on-money collected on behalf of the firm Umashakti Corporation Kalol Project from sale of flats of the project. However, it also cannot be denied that the appellant had obtained other unexplained cash credits also because the interest income of the appellant during the A.Y.2009-10 was Rs.5,87,250/- which has been recorded in the diary seized. Out of this amount only Rs.3,92,750/- pertains to interest charged from the firm Umashakti Corporation Kalol Project. Thus, an amount of Rs. 1,94,500/- is interest charged from others. For earning this amount of interest the appellant would requires to invest 10 times this amount because the rate of interest is generally 10% to 12% and also some time is invariably lost between collecting the debt and advancing the money so received to another person.
9.3 In view of the fact that in the earlier paragraph it has been noted that peak working cannot be resorted to in this case because substantial money belongs to the firm Umashakti Corporation Kalol Project.
9.4 Further, it is seen that the appellant had made unaccounted investment in land by way of Banakhat dated 6.11.2009 in purchase of land at survey No.1195 Ognaj. The amount of cash paid at the time of banakhat wasRs.25,00,000/-. No separate addition has been made by the Assessing Officer because this amount has been included in the peak working of Rs. 1,68,34,250/-. In view of the fact that in the earlier paragraph it has been noted that peak working cannot be resorted to in this case because substantial money belongs to the firm Umashakti Corporation Kalol Project. However the investment made by the appellant are not assets of the firm Umashakti Corporation Kalol Project hence no benefit for Rs.25,00,000/- can be granted to the appellant. The contention that the amount of Rs. 1,50,000/- was recorded in the books of accounts was recorded in the diary seized during search is questionable because the Assessing Officer has given a categorical finding that the transaction was not recorded in the books of accounts and all thorough the assessment proceedings the appellant denied any ownership of lands based on the said banakhat.
9.5 As far as the payment of commission of Rs.75,000/- recorded in the diary is concerned, the A.R. of the appellant has filed a photocopy of the seized diary in support of the same. However, this payment is also unaccounted payment made by the appellant and the same has to be added to the banakhat amount. 9.6 In view of the above on the basis of the unaccounted entries noted in the diary belonging to the appellant, the appellant had made Unaccounted investment in land at Survey No. 1195 Ognaj of Rs.25,75,000/-.
9.7 Thus, the addition made by the Assessing Officer on account of peak working is reduced from Rs. 1,68,34,250/- to Rs.25,75,000/-."
42. Aggrieved, both Revenue and assessee are in appeal before the Tribunal.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 29 -
43. Ld. Counsel, at the outset, submitted that the impugned peak is part of "unaccounted turnover" of Rs.5,44,39,800/- declared by USCKP and profit element embedded therein has already been offered to tax by USCKP; therefore, no separate addition is warranted for as the same shall result into double taxation of the said sum which is not permissible under the law. As regards the addition confirmed by ld. CIT(A) at Rs.19,45,000/- is concerned, he submitted that it was mere guess work by hypothetically applying 10% rate on the interest income of Rs.1,94,500/-.
44. As regards the addition sustained at Rs 25,75,000/- by ld. CIT(A) for AY 2010-11 is concerned, it was submitted that Rs. 25 lacs received on Ognaj Land is profit of assessee as a middlemen on cancellation of banakhat. Such sum is received on 06.11.2009 against which assessee has paid dalali of Rs.75,000/-. As against such profit, assessee had declared interest income from USCKP at Rs.21,57,250/- and interest income from others at Rs.5,84,000, aggregating to Rs.27,41,250/- and against this amount, only Rs.3,89,500/- has been actually received and balance amount of Rs.23,51,750/- is notional income, which is, otherwise, not liable to be taxed in assessee's hands. In light of these submissions, assessee's personal profit of Rs.22.50 lacs need not be added separately since requisite disclosure has already been made by the assessee in the form of notional interest income.
45. On the other hand, ld. Departmental Representative supported the order of the ld. Assessing Officer.
46. We have heard the rival contentions and perused the records placed before us. The common issue raised by both the Revenue and assessee emanates out of the addition made by the ld. Assessing Officer by calculating peak balance from the transactions appearing in the seized diaries at Annexure A/1 and Annexure A/2 which contains entries with respect to inflow and outflow of funds. Peak addition of Rs.66,36,750/- and Rs.1,68,34,250/- was IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 30 -
made by ld. Assessing Officer. We observe that ld. CIT(A) has held that the entire peak cannot be added in the hands of assessee since the substantial money of such peak belongs to USCKP, wherein assessee is a partner and profit elements embedded therein has already been offered to income tax by USCKP in its income-tax returns. However, ld. CIT(A) confirmed the addition of Rs.19,45,000/- for AY 2009-10 by calculating the principal amount of the alleged interest addition sustained at Rs.1,94,500/- and calculated the amount at Rs.19,45,000/- by assuming the interest rate of 10%. For AY 2010-11, the CIT(A) confirmed the addition of Rs.25,75,000/- by observing that there is an unaccounted investment of the assessee in the Ognaj land as he is entered into a banakhat dated 06.11.2009 for project of land at Survey No.1195, Ognaj.
47. So far as the Assessment Year 2009-10 is concerned, we have already deleted the impugned addition of Rs.1,94,500/- alleged to be an interest income of the assessee by observing that it was part of the total disclosure of Rs.23,00,000/- made by the assessee on the basis of his diaries. As we have already deleted the alleged interest of Rs.1,94,500/-, there remains no reason to sustain the addition of Rs.19,45,000/- made by ld. CIT(A) by taking a deemed interest rate of 10%. So far as the remaining amount of peak addition is concerned, we agree with the view taken by the ld CIT(A) that in the seized diaries the transactions entered into were related to on-money received from various members who have invested in the USCKP project. We also agree with the view of the ld. CIT(A) that as substantial part of the noting in the diaries relates to on-money calculated on behalf of USCKP project for sale of flat and the undisclosed income involved in this unaccounted transactions have already been offered to tax by USCKP project in its disclosure of Rs.1.63 crores which includes Rs.23 lacs calculated from the transactions of seized diaries held by the assessee. We are, therefore, of the view that for AY 2009-10, ld. Assessing Officer erred in making an addition of Rs.66,35,750/- by working out together all entries appearing in diaries seized for the very reason that such peak was IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 31 -
part of the unaccounted turnover of Rs.5.44 crores declared by USCKP in the profit elements on this turnover has already been offered to tax during the course of search.
48. In the result Ground No.2 for AY 2009-10 raised by the Revenue is dismissed and Ground No.2 of assessee's appeal for AY 2009-10 is allowed.
49. As far as AY 2010-11 is concerned, wherein the peak addition of Rs.1,68,34,250/- was made by ld. Assessing Officer, ld. CIT(A) has already deleted the addition of Rs.1,42,59,250/- on the basis of his views which has upheld by us also as discussed in the preceding paragraph that the alleged peak is the part of total turnover of USCKP project and income on this turnover has been offered to tax. However, we have also observed that ld. CIT(A) has confirmed an addition of Rs.25,75,000/- as profits from Ognaj land as unexplained investment on the basis of banakhat dated 07.01.2009 entered into by assessee for projects of land at Survey No.1195 at Ognaj and a cash sum of Rs.25 lac was paid alongwith brokerage of Rs.75,000/-, totaling to Rs.25,75,000/-. In the record placed before us, we find that there was no proof found during the course of search to show that assessee is owner of the Survey No.1195, Ognaj and there was merely a banakhat showing the cash payment of Rs.25 lacs paid towards project of land. Ld. Counsel has contended that Rs.25 lacs was actually received as profit from cancellation of banakhat of Ognaj land by the assessee in the capacity of middleman. In fact, such sum was actually received on 06.11.2009 against which assessee has paid the dalali/commission of Rs.75,000/- which is evident from page 129 of the seized records at Annexure A/1 and further assessee has also accounted for Rs.1,50,000/- in books of accounts against the banakhat account given in FY 2007-08. It was further contended that as against such profits assessee has declared interest income of Rs.21,57,250/- for USCKP and Rs.5,84,000/- from others aggregating to Rs.27,41,250/- out of which only Rs.3,89,500/- has been actually received and balance sum of Rs.23,51,750/- is notional income not liable to be taxed in IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 32 -
assessee's hands. We find force in the arguments of ld. Counsel which is well supported by the seized material and we accept the contentions that the alleged sum of Rs.25 lacs was received as a profit on cancellation of banakhat by the assessee in the capacity of a middleman. We also notice that assessee had already made disclosure of Rs.23 lacs for both the years on account of transactions appearing in the seized diaries and the profit from the transactions of the Ognaj land forms part of the total disclosure of Rs.23 lacs and we find no reason for a separate addition of Rs.25,75,000/- sustained by the ld. CIT(A). We accordingly dismiss ground No.2 of Revenue's appeal for AY 2010-11 and allow Ground Nos. 1 & 2 of assessee's appeal for AY 2010-11.
50. Now we take up Ground No.3 of Revenue's appeal for AY 2009-10 and Ground No.3 for AY 2010-11 challenging the CIT(A)'s order deleting the addition of Rs.15,00,000/- and Rs.26,20,000/- in AY 2009-10 and 2010-11 being the amount received during the year from Nicol land transactions recorded in the diaries seized from the residence of the assessee.
51. Ld. Authorized Representative supported the order of the ld. CIT(A) and ld. Departmental Representative supported the order of Assessing Officer.
52. We have heard the rival contentions and perused the records placed before us. Through these grounds, Revenue is aggrieved with the deletion of addition of Rs.15,00,000/- and Rs.26,20,000/- received from Nicol land transactions. During the course of assessment proceedings, ld. Assessing Officer found that assessee has received a sum aggregating to Rs.11,60,000/- (Rs.10,00,000/- + Rs.60,000/-) from Jayesh Patel on sale of land at Nicol. Further on page 13 of Annexure A/1 of the seized diary, there was noting of the word "Nicol" and "dalali" and certain entries aggregating to Rs.52,20,000/- were found against specific dates spread over the assessment year 2009-10 and 2010-11 and a sum of Rs.11,60,000/- was found part of the same. On the basis of these details, ld. Assessing Officer concluded that such sum represented money IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 33 -
received by the assessee on sale of Nicol land and made addition of Rs.15,00,000/- and Rs.26,20,000/- for AY 2009-10 and AY 2010-11, totaling to Rs.45,25,000/- after excluding Rs.11,60,000/- from the sum of Rs.52,20,000/-. We further observe that it is not the case of the Revenue that assessee is owner of the land at Nicol which is also evident from the fact that during the course of extensive search, no purchase deed with respect to purchase of land at Nicol by assessee was found and there cannot be a question of selling the impugned land and receiving the sale consideration if there was no purcahse. We also observe that in the alleged seized material the word 'dalali' is appearing which is a Hindi version of the English word 'commission/brokerage' and which means that assessee was also earning brokerage from various land dealings. The alleged transactions of value of land are only the basis for calculating brokerage income. It is also not disputed that assessee has shown a brokerage income of Rs.5,44,656/- out of such deal of sale of land at Nicol and this income has been offered to tax for AY 2010-11. We further observe that ld. CIT(A) has deleted the impugned addition by giving common observation for AYs 2009-10 and 2010-11 which reads as follows:-
"10. I have gone through the orders of the AO and submissions of the AR of the appellant carefully. It is seen that the AO has relied on the entries in the diary alone to make the entire addition. The transaction in Nicol land spreads over 2 assessment years ie A.Y. 2009-10 and A.Y.2010-11. Part of the consideration is received in A.Y. 2009-10 and part of the consideration is received in A.Y.2010-
11. The AO has not appreciated the fact that the diary does not only contain the details of money received by him but also has fictitious entries-and also has the details of on-money collected from sale of flats of Uma Shakti Kalol Project. The AO also has not found any sale deed or purchase deed to establish the fact that the entire money received by the appellant in respect of Nicol land belonged to the appellant. The AO has also not attached any importance to the word "Dalali" which means brokerage mentioned against these entries. The appellant if he is a broker would receive the consideration on behalf of the sellers and then pass on the consideration to them and earn a commission. The AO has not even found that the appellant was owner of the land. If the appellant was not the owner of the land then he could never keep the sale proceeds with himself. He would only be entitled to brokerage. He would then retain a part of the sale proceeds by way of brokerage and pass on the balance to the owners. The finding by the AO that the words Dalai are mentioned in the diary are not insignificant.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 34 -
The words mean brokerage and clearly indicate that the appellant was a party to transaction as a broker only. It is also seen that the appellant has already shown income on the said transaction at Rs.5.45 lakhs in AY 2010-11."
53. We are, therefore, of the view that in lack of any findings of ownership of land, we agree to the contentions of the assessee that he earned the brokerage income from the transactions of purchase/sale of land and in view of the fact that the impugned addition has been made merely on the basis of entries in seized material without brining on record any corroborative evidence which is not tenable in the eyes of law as held by the Hon'ble jurisdictional High Court in the case of CIT vs. Maulikkumar K.Shah, 304 ITR 137 (Guj). We are, therefore, of the view that the impugned addition from sale of land at Nicol at Rs.15,00,000/- and Rs.26,20,000/- for AYs 2009-10 and 2010-11 respectively has been rightly deleted by ld. CIT(A). We, therefore, find no reason to interfere with the order of the ld. CIT(A) on this ground which is upheld. In the result, Ground No.3 of Revenue's appeal for AYs 2009-10 and 2010-11 are dismissed.
54. Now, we take up Ground No.1 raised by the Revenue for AY 2010-11 challenging the order of ld. CIT(A) deleting the addition of Rs.9,00,000/-made under Section 69 of the Act toward unaccounted investments in the Samarpan Scheme.
55. We have heard the rival contentions and perused the record placed before us. We notice that during the assessment proceedings, ld. Assessing Officer found that Mr. Vikas R. Patel, partner of USCKP made in his statement dated 05.03.2010 recorded under Section 132(4) of the Act that five persons mentioned therein including the assessee were supposed to contribute Rs.1.50 crores in the Samarpan Scheme; however, till the date of search only Rs.45,00,000/- was contributed. Further from page No.145 of Annexure-A/1, ld. Assessing Officer found that there was a noting of contribution of Rs.9,00,000/- in the Samarpan Scheme and merely on the basis of this noting, he made the impugned addition. We further observe that assessee has IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 35 -
contended before the lower authorities that the investment was made out of funds received from members of USCKP and not by the assessee. In fact, profit of Rs.31,00,000/- on account of land deal in the Samarpan Scheme has also been declared in the hands of USCKP in AY 2010-11 which has been accepted by Revenue Authorities. Certainly, when profit on such land deal has been taxed in USCKP's hands, then the Assessing Officer should have believed the fact that investment in such land was made by USCKP and not by assessee. We further find force in the contention of the assessee that the theory of equal contribution by each of the five persons mentioned by Shri Vikas Patel is also not acceptable since the profit on the said land deal has been offered in USCKP, wherein there are six partners. It is not possible to believe that five persons would invest in a land in the individual capacity but the profit on such land deal would be shared by six persons. We are, therefore, of the view that in the given facts and circumstances of the case and on the basis of seized records, investment in "Samarpan Scheme" was made by USCKP from the funds received from its members and therefore, the impugned addition is uncalled for in the assessee's hands. In the result, no interference is called for in the order of ld. CIT(A) who has rightly deleted the impugned addition by observing as follows:-
"7. I have gone through the assessment order and submission of the A.R. of the appellant carefully. It is seen that the Assessing Officer has not accepted the contention of the appellant that the cash amounting to Rs.9,00,000/- represented on money collections of the firm from Kalol Project. He has held that the investment noted in the diary written by Shri Bhagwan K. Ajara seized at Annexure-A-1 represented unexplained cash deposited by the appellant. This contention of the Assessing Officer does not appear to be sound. In view of the fact that the investment for purchase of the land named Samarpan Project amounted to Rs.45,00,000/- after it. was sold to M/s. Shree Krishna Corporation. The profit from the transactions had been declared in the hands of M/s. Uma Shakti Corporation which has been accepted by the Assessing Officer during the assessment proceedings of M/s. Uma Shakti Corporation. It is also seen that the total funds contributed in cash amounted to Rs.45,00,000/- was by five partners who contributed Rs.9,00,000/- each whereas the firm M/s. Uma Shakti Corporation has the following partners :
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 36 -
Sr.No. Name Share
1. Shri Vikas Ramchandra Patel 10%
2. Shir Bhagwan Karamanbhai Ajara 35%
3. Shri Brijesh Sukhdevbhai Patel 10%
4. Shri Deepak Govindbhai Prajapati 15%
5. Shri Arvind Natvarlal Prajapati 10%
6. Shri Kamalbhai Jayantibhai Patel 20%
TOTAL 100%
If it was a fact that the amount of Rs.45,00,000/- have been contributed by five partners @ Rs.9,00,000/- each from their own sources then there would have been no occasion to offer the profit in the hands of the firm where there were six partners. This is to say that if five persons had contributed towards cost of lands then there would have been no reason for them to share the profit from the transactions with the sixth person i.e. Shri Kamalbhai Jayantibhai Patel who had not contributed any capital. It is also to be noted that the profit sharing ratio of all the partners in the firm is not equal. If the five persons had contributed Rs.9,00,000/- each then there would be no occasion to not share the profits from the transaction equally. Thus, it is clear that only the funds of the firm M/s. Uma Shakti Corporation were utilised for the purchase of land titled as Samarpan Project which was later sold to Shri Krishna Corporation. The reason to share the profit between all the six partners of the firm would only arise if the funds have been contributed from the unaccounted collection of M/s. Uma Shakti Corporation, Kalol i.e. the firm where there are six partners. It is a fact that the firm M/s. Uma Shakti Corporation had collected on money from the Kalol Project which was kept with Shri Bhagwanbhai K. Ajara and only Shri Bhagwanbhai K. Ajara was keeping track of the cash collections. 7.1 The fact that unaccounted cash collection from the Kalol Project was utilised was the only reason only the five partners viz.
Sr.No. Name
1. Vikas R Patel
2. Bhagwan K Ajara
3. Brijesh S Patel
4. Deepak G Prajapati
5. Arvind N Prajapati
would agree to share the profit with the sixth person Shri Kamalbhai Jayantibhai Patel. If the money would have been collected from the five individual partners out of their own resources then the profit arising from the sale would have to be taxed in their individual hands in not in the hands of the firm. It is a fact that the Assessing Officer has assessed the income on sale of the land in the hands of the firm where the partners are not sharing the profits equally.
IT(SS)A Nos. 436 & 440 of 2012 & 194,195 of2013 & ITA Nos.1370, 1373,1375& 1376 of 2013 Assessee : Bhagwanbhai K. Ajara & Uma Shakti Corpn Kalol Project
- 37 -
7.2 Thus, it becomes clear that the funds were invested in the Samparpan Project out of the unaccounted funds collected from the Kalol Project. 7.3 In view of the above, the addition made by the Assessing Officer has not on sound footing. The same is hence deleted."
56. In the result, this ground No.1 of the Revenue's appeal for AY 2010-11 is dismissed.
57. Other grounds are general in nature which needs no separate adjudication.
58. In the combined result, all appeals of Revenue are dismissed and that of assessee are allowed.
Order pronounced in the Court on 12th April 2017 at Ahmedabad.
Sd/- Sd/-
(S.S. GODARA) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated, 12/04/2017
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आय!
ु त / Concerned CIT
4. आयकर आय!
ु त (अपील)/ The CIT(A)-
5. वभागीय त न ध,आयकर अपील(य अ धकरण ,राजोकट/DR,ITAT, Ahmedabad,
6. गाड. फाईल /Guard file.
आदे शानस
ु ार/ BY ORDER,
TRUE COPY
सहायक पंजीकार (Asstt.Registrar)
आयकर अपील(य अ धकरण
ITAT, Ahmedabad