Income Tax Appellate Tribunal - Mumbai
Rakeshkumar Wadhwan, Mumbai vs Department Of Income Tax on 8 October, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" Bench, Mumbai
Before Shri D. Manmohan, Vice President
and Shri B.R. Baskaran, Accountant Member
ITA No. 5040/Mum/2009
(Assessment Year: 2003-04)
ACIT, Central Circle 37 Shri Rakeshkumar Wadhwan
Aayakar Bhavan, M.K. Road Dewan Tower, Navghar Station
Vs.
Mumbai 400020 Road, Vasai Road (W)
Thane 401202
PAN - ADIPB2373C
Appellant Respondent
Appellant by: Shri Santosh Kumar
Respondent by: Shri Ajay R. Singh
Date of Hearing: 08.10.2014
Date of Pronouncement: 08.10.2014
ORDER
Per D. Manmohan, V.P. This appeal by the Revenue is directed against the order passed by CIT(A), Central VIII, Mumbai and it pertains to A.Y. 2003-04.
2. The following grounds were urged before us: -
"1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) was not justified in deleting the addition of "on-money"
received by the assessee outside the books of accounts without appreciating the statement on oath of Shri K.K. Goel recorded u/s 132(4) of the IT Act, supported by the documents seized in course of search and action.
2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) was not justified in deleting the addition of "on-money"
received by the recipient assessee from Goel Group and MIs Rochem Separation Systems (I) Pvt. Ltd ignoring the fact that the same has been added in the hands of the purchaser of flat as unexplained cash by their respective Assessing Officer.
3. On the facts and in the circumstances of the case and in law, the Id.
CIT(A) was not justified in deleting the addition of "on-money' received in cash outside the books of the recipient assessee ignoring the fact that undisclosed investment by M/s Rochem Separation Systems (I) Pvt. Ltd and M/s K.K. Goel (HUF) in immovable properties 2 ITA No. 5040/Mum/2009 Shri Rakeshkumar Wadhwan has already been added as their undisclosed income u/s 153A on the basis of the statement given by Shri K.K. Goel u/s 132(4).
4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) was not justified in deleting the addition of "on-money" thereby accepting the contention of the assessee that the sums paid and recorded in the seized documents were payment made to contractors despite the fact that the said contractors were never produced before the Assessing Officer despite several reminders by the latter.
5. On the facts and in the circumstances of the case and in law, the Id.
CIT(A) was not justified in deleting the addition relying on the judgement of the Hon'ble Tribunal in the case of Shri Jag Mohan Singh Arora (101 TTJ 682) wherein the assessee Shri Arora despite being given opportunity to cross examine third party refused to do so and later retracted from the statement which was an afterthought. The facts and circumstances of the case being distinguishable from the present case of the assessee.
6. On the facts and in the circumstances of the case and in law, the Id. CIT(A) was not justified in deleting the addition of "on-money" relying on the decision in the case of Jag Mohan Arora (101 TTJ 682) ignoring the fact that the assessee was given ample opportunity to study and examine the seized documents and materials and ignoring the fact that the subsequent retraction of statement on oath was not made by Shri K.K. Goel himself but his Authorised Representative after his demise which has no legal authenticity."
3. Facts necessary for disposal of the appeal are stated in brief. Assessee is a builder and developer. Proceedings under section 132 were initiated in the case of the assessee on 18.01.2007 at his residential premises. Consequent to the search, notice under section 153A was issued. It deserves to be noticed that the ACIT, Central 10, Mumbai seized certain documents on 04.09.2007 which shows that the assessee sold a residential flat in the building known "Dheeraj Dhan" to Shri K.K. Goel and others for a consideration of `72,00,000/- vide sale agreement dated 24.07.2002 whereas search and seizure action carried out by the Revenue in the case of Shri K.K. Goel and M/s. Rochem Separation System (I) Pvt. Ltd. and consequent statement of Shri K.K. Goel shows that on purchase of the aforementioned flat Shri K.K. Goel has paid cash of `46,00,000/- as on- money to the assessee. In the opinion of the AO the 'on-money' receipt deserves to be added as undisclosed income of the assessee.
3 ITA No. 5040/Mum/2009Shri Rakeshkumar Wadhwan
4. On the other hand, the case of the assessee is that the statement made by the said purchaser, during the course of search proceedings, is not supplied to the assessee till date. Even otherwise no corroborative material was found during the course of search whereby it can be conclusively proved that the assessee received 'on-money' from the said purchaser. It was also submitted that neither the DDI who has conducted the search nor the AO of the said purchaser has ever communicated to the assessee seeking any explanation with regard to the so called 'on-money'. The AO, however, proceeded to treat the sum of `46,00,000/- as undisclosed income.
5. Aggrieved, assessee contended before the CIT(A) that the statement recorded under section 132(4) and 131 of the Act, copies of the seized material, etc. were not supplied initially. Based on the information furnished subsequently, assessee claimed that the addition was mainly based upon pages 61 to 63 of the seized documents and on a close analysis of page 63 it can be seen that a sum of `75,00,000/- was paid by cheque and `46,00,000/- was stated to have been paid by cash on various dates but it did not mention any specific item for which such payment was made. The payment receipts by cheques on various dates do not match with the seized documents. Based on the factual discrepancies it was contended that the assessee has not received any extra consideration other than those specified in the agreement for sale. It was also submitted that the whole reassessment proceedings took place simply on account of search action and the statement of Mr. K.K. Goel in the capacity of Karta of the HUF whereas the said loose papers as well as the statement of Shri K.K. Goel have not been corroborated by any other documentary evidence or third party confirmation. There was no enquiry from DDI or the AO of such purchaser and after a span of more than 25 months assessee was served with a notice under section 153A r.w.s. 153C requiring the assessee to file returns of income, for the past six years, and only at that stage assessee was allowed to cross examine the party but before exercising such opportunity of cross examination, the concerned person, i.e. Shri K.K. Goel expired (in May, 2008). Hence the assessee was prevented by circumstances beyond its 4 ITA No. 5040/Mum/2009 Shri Rakeshkumar Wadhwan control to prove its case before the assessing authorities by showing that it has never received any 'on-money' from the said purchaser. However, the Authorised Representative of the purchaser - appeared in response to the summons under section 131 to the purchaser - submitted that the purchaser has never paid any 'on-money' to the assessee and the said sum of `46,00,000/- was spent by M/s. Rochem Separations (I) Pvt. Ltd., a group company, towards interior work in the said flat as per the resolution of the Board of Directors of the company. A photocopy of the said resolution was also enclosed. It was, thus, strongly submitted that the alleged payment of on-money by K.K. Goel, HUF is not proved by the Revenue.
6. The learned CIT(A) considered the issue exhaustively and extracted the reply, given by M/s. Vinodkumar Bindal & Co., Chartered Accountants in response to the summons issued to the purchaser, to notice that the group company incurred a sum of `46,00,000/- towards interior work in the said flat and there is no other evidence to prove to the contrary. In this regard the learned CIT(A) observed as under: -
"3.9 Perusal of the above reply, shows that it is categorically stated that the total consideration was paid of Rs.72,00,000/- for which an agreement between the assessee and builder was made on 24.07.2002. The said consideration was paid to the assessee through the bank account which however stated in relation to total consideration of Rs.72,00,000/-. M/s. Rochem Separation System (I) Pvt. Ltd. a group company incurred a sum of `46,00,000/- towards the interior work in the said flat as per the Resolution of the Board of Directors of the company. This amount of Rs.46,00,000/- was paid to various persons in cash on different date for interior work done in the flat. It is further stated on behalf of Shri K.K. Goel that it has never paid any cash to the said builder for purchase of flat. It is also pointed out that in the statement of Shri K.K. Goel, it is nowhere stated that Rs.46,00,000/- was paid to the builder i.e. the appellant. Since the purchaser and its associate company has denied payment of on money to the appellant in clear terms and has stated that the payment has been made for interiors and decorators for finishing job therefore the payment of on money to the appellant is not established. The Assessing Officer has stated that there is no proof of making payment of Rs.46,00,000/- to interior decorators and the contention is after thought. However, the burden of not furnishing evidence of payment of Rs.46,00,000/- to the interior and decorators directly for finishing work is not on the appellant and no adverse inference can be drawn against the appellant on this account.5 ITA No. 5040/Mum/2009
Shri Rakeshkumar Wadhwan 3.10 Perusal of the loose paper Annexure A1 page-63 shows that there is no date mentioned regarding payment of 'on money' and there is no signature or any acceptance given by the appellant company on the said paper. Therefore, the appellant has stated that any third party document or averment cannot be relied upon unless proved otherwise by corroborative evidence. This is unilateral statement without having any corroborative third party evidence, hence it cannot be inferred that the said purchaser company has paid the said amount to the appellant."
7. Having regard to the circumstances of the case the learned CIT(A) deleted the addition made by the AO by observing as under: -
"3.15 The appellant has further submitted that in the similar circumstances, the Hon'ble ITAT Mumbai Bench in the case of Jagmohan Singh Arora & Ors. V. Dy.CIT & Anr. 101 TTJ 682 has deleted the addition. In this case, the Hon'ble ITAT held that in search and seizure certain incriminating documents were seized. The Assessing Officer made addition on allegedly having taken 'on money' in construction project and unaccounted investment in purchase of land simply on the basis of statement of a third party and forced statement of head of the assessee group. The revenue had no evidence to establish the concealment of income except the papers seized from a third party, his statement (which was subsequently retracted) the forced statement of which was also retracted. Therefore addition cannot be upheld."
8. Aggrieved, Revenue is in appeal before us. The learned D.R. strongly relied upon the order passed by the AO and submitted that the purchaser admitted to have paid on-money and the assessee did not bring any material to prove to the contrary.
9. On the other hand, the learned counsel for the assessee submitted that Shri K.K. Goel, HUF purchased another piece of property from M/s. Housing Development & Infrastructure Ltd. and on behalf of the HUF he gave a similar statement i.e., he paid on-money to the seller, but when the matter came up before the Appellate Tribunal, the ITAT "H" Bench, Mumbai (ITA No. 4979/Mum/2009 dated 24.07.2013) set aside the addition on the ground that the addition was made in violation of the principles of natural justice. Following observations are relevant in this context : -
"8. We have considered the rival submissions, perused the orders of the lower authorities and the material evidences brought on record. The undisputed facts emerging out of the assessment record show that 6 ITA No. 5040/Mum/2009 Shri Rakeshkumar Wadhwan the search and seizure operation were conducted at MIs. Rochem Separation System and Shri K.K. Goel. It is also not in dispute that the payment of 'on money' was accepted by Shri K.K. Goel in his statement recorded u/s. 132(4) of the Act. However, it is also not in dispute that no opportunity was given to the assessee to cross examine the said statement of Shri K.K. Goel. It is also an undisputed fact that subsequently during the assessment proceedings of MIs. Rochem Separation System, it was explained that no such payment was made directly to the assessee but the payment was made to certain contractors for furnishing and interior decoration work. In our humble opinion, no addition can be made to the income of the assessee on the basis of documents seized from third party without any corroborative evidence and without allowing opportunity to cross examine the person concerned who were alleged the payment of 'on money'.
9. The Hon'ble Jurisdictional High Court in the case of Miss Lata Mangeshkar (supra) has held that mere entries in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine. The Hon'ble High Court confirmed the findings of the Tribunal as they were based on findings of the facts. The facts of the case of the assessee shows that the entries upon which the department is relying upon was found on a loose paper therefore such evidence is more vulnerable than the entries found recorded in the books of accounts as in the case of Miss Lata Mangeshkar. Moreover such entries found on the loose sheet have not been corroborated by the Revenue by any cogent material evidence on record. The only evidence, if at all, it can be considered as evidence, is the statement of Shri K.K. Goel but even that cannot be accepted because it has been admitted by the AU in gross violation of the principles of natural justice. It is also a fact that the consideration specified in the instrument of transfer is much higher than the market value and further the assessee has sold office premises to many other persons therefore, the sale price is very much comparable with similar kinds of sale affected in the same building."
The learned counsel also referred to the order of the ITAT in the case of Shri K.K. Goel - HUF (ITA No. 4390/Mum/2008 dated 14.09.2009) to submit that the HUF claimed in its return that a sum of `46,00,000/- was incurred on interior and other works in the said flat and this aspect was accepted by the Tribunal. Similarly, the addition made in the case of M/s. Rochem Separation System (I) Pvt. Ltd. was also accepted by the Tribunal. It was thus submitted that the learned CIT(A) was justified in deleting the addition in the facts and circumstances of the case.
10. We have heard the rival submissions and carefully perused the record. The assessment in this case was made on 13.06.2008 whereas Shri K.K. 7 ITA No. 5040/Mum/2009 Shri Rakeshkumar Wadhwan Goel expired in May, 2008 and thus the assessee could not get opportunity to cross examine the person concerned. At any rate, representative of Shri K.K. Goel, i.e. M/s. Vinodkumar Bindal & Co., Chartered Accountants, in response to the summons issued by AO, appeared and stated that the purchaser never paid any on-money to the assessee and the same was spent towards interior work in the said flat as per the resolution of the Board of Directors of the company. This aspect was also considered by the ITAT in the case of M/s. Rochem Separation System (I) Pvt. Ltd. as well as Shri K.K. Goel, HUF. In fact, under identical circumstances the ITAT "H" Bench, Mumbai in the case of M/s. Housing Development & Infrastructure Ltd. observed that an addition made on mere statement of the purchaser, i.e. K.K. Goel, HUF, cannot stand. Facts being identical in the instant case also, for the detailed reasons given by the CIT(A), we are of the view that the order passed by the CIT(A) does not call for any interference. We, therefore, affirm the order passed by the CIT(A).
11. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 8th October, 2014.
Sd/- Sd/-
(B.R. Baskaran) (D. Manmohan)
Accountant Member Vice President
Mumbai, Dated: 8th October, 2014
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) - Central VIII, Mumbai
4. The CIT- Central III, Mumbai City
5. The DR, "D" Bench, ITAT, Mumbai
By Order
//True Copy//
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
n.p.