Income Tax Appellate Tribunal - Mumbai
L/H Of Smt. Vimla Ratilal Mehta, Mumbai vs Department Of Income Tax on 9 December, 2015
आयकर अपीऱीय अधिकरण, मुंबई न्यायपीठ "एफ" मुंबई
IN THE INCOME TAX APPELLATE TRIBUNAL" F" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN, AM AND PAWAN SINGH, JM
आमकय अऩीर सं./I.T.A. No.3361/Mum/14
(ननधधायण वषा / Assessment Year: 2007-08)
Income Tax Officer-16 बनाम/ Shri ASHOK MEHTA,
(1)(3) Vs.
L/H of (L) Smt. Vimla Ratilal
Room No.220, 2nd floor, Mehta, 201, Jeevan Villa,
N Dhabholkar road,
Matru Mandir, Mumbai-400006
Tardeo Road,
Mumbai-400007
(अऩीरधथी /Appellant) .. (प्रत्मथी / Respondent)
स्थधमी रेखध सं ./जीआइआय सं ./PAN. :AACPM3745N
अऩीरधथी ओय से / Appellant by Shri A K Dhondial
प्रत्मथी की ओय से/Respondent Shri Sashi Tuulsian
by
सन
ु वधई की तधयीख / Date of Hearing : 19 .11.2015
घोषणध की तधयीख /Date of Pronouncement: 9.12.2015
आदे श / O R D E R
Per B R Baskaran, AM:
The appeal filed by the revenue is directed against the order dated 28.2.2014 passed by the ld. CIT(A)-27, Mumbai and it relates to assessment year 2007-08. The revenue is aggrieved by the decision of Ld CIT(A) in deleting the addition of Rs.6.84 crores relating to undisclosed investment made by the AO u/s 69 of the Act.
2. The facts relating to the issue cited above are stated in brief. The assessee is an individual and filed here return of income for the 2 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 year under consideration on 01-12-2009 declaring a total income of Rs.29,920/-. The assessing officer reopened the assessment consequent to certain information obtained during the course of search operations conducted in the case of Bharat Shah Group, which is engaged in real estate business. The said group had promoted a building project by name "Legend" through a company named M/s Layer Exports Pvt Ltd. During the course of search, certain loose papers were found which related to the sale transactions of flats. The page no.15 of the loose paper contained certain entries relating to sale of flats to Shri Ashok R Mehta and smt. Vimala R Mehta, who had jointly purchased flat. The assessing officer infered from the entries made in the loose papers that the assessee herein had paid cash of Rs.6.84 crores in connection with the purchase of flats from out of her undisclosed income and accordingly reopened the assessment of the assessment year under consideration. It is pertinent to note that the assessee herein had jointly purchased the flat along with two other persons, but the AO chose to take action in the hands of the assessee herein only.
3. When the loose papers were confronted with the assessee, one of the co-owners named Shri Ashok Mehta denied the payment of cash both in the sworn statement taken from him as well as in the affidavit filed by him subsequently. One of the directors of Bharat Shah group also denied receipt of any cash as infered by the assessing officer. However, the assessing officer came to the conclusion that the assessee had paid cash of Rs.6.84 crores out of her unaccounted income and accordingly assessed the same as undisclosed investment u/s 69 of the Act. In the appeal filed before 3 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 Ld CIT(A), the first appellate authority deleted the addition and hence the revenue has filed this appeal before us.
4. At the time of hearing, the Ld D.R strongly supported the order passed by the assessing officer by contending that the loose papers found during the course of search conducted in the hands of Bharat Shah Group clearly indicate payment of cash in connection with the purchase of flats. On the contrary, the Ld A.R strongly defended the order passed by Ld CIT(A) by submitting that the loose paper was only an illegible dumb document and it is an undated document; did not contain the name of the assessee; and the assessing officer has made his own interpretation to suit his convenience. He further submitted that the view taken by the assessing officer was not corroborated with any other record. He further submitted that both the buyer and seller of the flats have not accepted the interpretation of the assessing officer and both of them have categorically denied cash transactions.
5. We have heard the rival contentions and perused the record. We have gone through the order passed by Ld CIT(A) on this issue and notice that the first appellate authority has made detailed discussion on this issue and hence, for the sake of convenience, we extract the same below:-
"2.4.24 Ground No.1 and 3 to 8 are in respect of addition made by the AO u/s 69 of the IT Act towards alleged cash payments for purchase of a flat jointly with her son Shri Ashok Mehta. Ld. AO made the addition on the basis of the loose papers serially numbered as Annexure A-1/15 seized from the premises of Prime Down Town during the course of search u/s 132 of the IT Act on 15.3.2008. The loose paper in question was supposedly the record relating to actual sale transactions in Legend Project promoted by Layer Exports 4 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 Pvt. Ltd. As per the Ld.AO. the following facts emerge on the basis of analysis of the seized documents:-
"i. The assessee jointly with her son Shri Ashok R. Mehta had purchased five flats on 15th & 16th floor of 'Legend Project' i.e. flat numbers 1502-C, 1502-F, 1503- B, 1603F & 1603-0.
ii. As per the documents found & seized as discussed above, the assessee has made an amount of Rs.6,84,60,000/- by way of cash towards the purchase of the above flats, in addition to the cheque payments.
iii. As per the purchase agreement, assessee has paid purchase cost of Rs.3,85,67,640/- but stamp duty authorities have taken higher value. iv. The Stamp duty authorities have valued the property at Rs.6,42,37,636/- as against the purchase cost shown by the assessee at Rs.3,85,67,640/- which itself is a corroborated evidence to show that the actual prevailing rate at that time was much higher than the agreement value as shown by the assessee.
v. In the building Legend, other family members of the assessee has also bought flats and made cash payments which is unearthed during the course of search action by the investigation wing, as can be seen from the statement recorded of Shri Ashok Mehta, vi. The above discussed 'loose paper sheet' page No. 15 forms part of this order as Annexure „A‟,"
2.4.25 While making the addition, Ld. AO has based his decision on the basis of scribbling done on a loose sheet of paper serially numbered as Annexure A-1/15 where the following is noted:-
"Page No.15 Ashok M R Mehta
15th and 16th 5 x 5 = 25
SH recd 639.60 + 45L
Q Recd 285.00
5 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4
According to the Ld. AO., 639.60 and 45 written on top of the page was nothing but cash given by the appellant to the builder for purchase of a flat. For coming to the above conclusion, apparently, the Ld. AO. has not given any basis. However, she has found a corroborative evidence by way of comparing the same with the stamp duty rate which was Rs. 6,42,37,636/- against the price of Rs. 3,85,67,6401- shown by the appellant in the agreement. However, it is important to note that while dealing with the appellant's objection against the initiation of reassessment proceedings at page 19 of the order, the Ld. AO has herself stated that, in case of the appellant, provisions of section 50C was not invoked in the assessment proceedings as the appellant was a purchaser of the flats and not seller. Thus, there appears to be a disagreement in the grounds taken by the Ld. AO for making the addition vide para 9 at page 21 of the order and the findings given at page NO.19 of the order as referred to above.
2.4.26 Per contra, during the course of the appellate proceedings, Ld AR has filed voluminous paper book along with written submissions. As there appeared certain anomaly in the argument advanced by the Ld. AR and those by the Ld. AO., remand report was called for in the following terms vide letter dated 17.01.2014.
"2. In respect of the addition made, the appellant has made exhaustive submissions and there are certain clarifications which are required at this end i.e
i) The amount of cheque payment allegedly made by the appellant as per the seized document at Page No. 15 of the Annexure was Rs.2.85 crores whereas the appellant has submitted that the actual cheque payment as per the agreement was Rs.3,85,67,640/-. Also, the first payment for acquisition of property was made on 28-09-2004 amounting to Rs.1.18 crores and all balance payment was made in the year 2010 and 2011 whereas the documents in question were seized from Bharat Shah Group on 15-03-2008 allegedly showing cheque payment of Rs.2.85 crores.
ii) As per Para 9 (iv) of the assessment order, it has been mentioned that the stamp duty authorities had valued the property at Rs.6.42 crores as against the purchase cost shown by the appellant at Rs.3.85 crores which was corroborative piece of evidence to show the actual prevailing rate.
6 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 In this regard, it has been stated that the first payment for the purchase of the flat was made in the year 2004. However, the appellant has submitted that if the alleged cash of Rs.6.85 crores is added to the cheque amount of Rs.2.85 crores appearing at Page No. 15 of the seized document, the alleged value would be Rs.9.69 crores and ostensibly the appellant would not have paid Rs.9.69 crores for an asset which had market value of Rs.6.42 crores only.
iii) The appellant has stated that the seized document, Page No. 15 on the basis of which the assessment has been framed, is a dumb loose sheet of paper seized from the premises of a third party, namely, M/s. Bharat Shah Pvt. Ltd., whereas the builder firm constructing the building in question was M/s. Layer Exports Pvt. Ltd.
iv) The appellant has also challenged the reopening of the assessment by stating that you have relied upon the communication received from the Assessing Officer in the case of M/s. Layer Exports Pvt. Ltd., without applying your own independent mind about conclusion of escapement of income as nowhere on the loose sheet of paper (Page No. 15), the name of the appellant, Late Mrs. Vimla Mehta is mentioned.
3. You are, therefore, requested to go through the seized documents, statements recorded and give your comments on the issues raised by the appellant which may have a bearing on the outcome of the appeal.
4. Your report in the matter may please be furnished by 5.2.2014 and in case the report is not furnished in time, you may please attend and explain the details in person along with the seized documents etc, on that date"
2.4.27 Pursuant to the same, Ld. AO submitted her remand report dated 14.02.2014 which reads as under:-
" Kindly refer to the above.
2. In the aforesaid appeal, on the basis of exhaustive submission made by the assessee in respect of additions made, a letter was sent to this office with a direction to submit a report as per the provisions of Rule 46A of I. T Rules.
3. I have gone through the assessee's written submissions submitted before your honour and a copy of which was sent to this office. The submission made by the assessee is not acceptable and do not justify for the following reasons:-
7 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4
i) A search & seizure action u/s. 132 of the Act 1961 was carried out on the premises of Bharat Shah Group, in which loose papers numbering 1 to 19, contained in Annexure A-1, were seized from the premises of 55, Gamdevi, 2nd Floor, Panchshil Plaza, Mumbai on 15.03.2008. These loose papers are systematic records relating to actual sales transactions in Legend Project, promoted by Layer Exports Pvt.Ltd, situated in Walkeshwar, Malabar Hill, Mumbai, wherein Shri Bharat Shah is the Director. Most of the said loose papers contain details of flat numbers, flat size (total area), rate per sq.ti., total consideration bifurcated in cash and cheques, cash to be paid, cheques to be paid, details of re-negotiation, details of actual cash payment, details of actual cheques payment etc. In this regard, on page No. 15, there is recording of transaction related to sales of flats by Layer Exports Pvt. Ltd.
to Shri Ashok R.Mehta (PAN AADPM5946J) and Smt. Vimla R. Mehta (AACPM3745N), jointly purchased this flat. On the page 15 it is clearly mentioned the name of the person as Ashok R Mehta, floors are mentioned as 15th and 16th. and "SH recd 639.60" + 45.00L and 'Q recd 285.00" written. From this notings, it can be inferred that Mr. Ashok R. Mehta have bought 15th and 16th floor in Legend Project and cheque received of Rs.2,85,00,000/- has been received. This also tallies with the details submitted by the assessee that the total of first three cheques received by the assessee vide cheque No.910755, No.910760, & No.633881 being Rs.35,OO,OOO, Rs.2,OO,OO,OOO and Rs.50,OO,OOO totalling to Rs.2,85,OO,OOO/-. Instead of full spelling of cash and cheque, it is written as SH for cash and Q for cheque, it can be clearly inferred that total Rs.6,84,60,000/- has been received in cash for flats on 15th and 16th floor and Rs.2,85,00,000/- has been received by cheque. The purchase cost shown by the assessee at Rs. 3,85,67,640/-whereas the Stamp duty authorities have valued the property at Rs.6,42,37,636/-. During the course of assessment proceedings the assessee has sufficient time to explain his case but he did not prove that cheque payment was Rs.3,85,67,640/- instead of Rs.2,85,00,000/- on the basis of loose paper and investigation report received in this office and after relying the facts the assessing officer has rightly taken the amount of Rs.2.85 crores.
8 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4
(ii) As per para no. 9(iv) of the assessment order it has been mentioned that the Stamp duty authorities have valued the property atRS.6,42,37,636/- as against the purchase cost shown by the assessee at Rs. 3,85,67,640/-, which was corroborative piece of evidence to show the actual prevailing rate.
The assessee has submitted that if the alleged cash of Rs.6.85 crores is added to the cheque amount of Rs. 2.85 crores appearing at page no. 15 of the seized document, the alleged value would be Rs.9.69 crores and ostensibly the assessee would not have paid RS.9.69 crores for an asset of which had market value of Rs. 6.42 crores only.
The contention of the assessee is not acceptable since it is a general practice in city like Mumbai where properties were sold at much higher the value adopted as per stamp duty authorities but agreement were registered at below the value decide by the stamp authorities or at the market value. Sometimes it is seen that it was registered at the market value even the actual cost of flat would be more than the market value. So the question does not any meaning that assessee would not have pay Rs.9.69 crores for an asset which had market value of Rs.6.42 crores. Further Assessee could not object this issue during the assessment proceedings having sufficient time of explained his case. So it is requested that the new issues may not be admitted on this level.
(iii) The assessee's contention that the seized document, page no.15 on the basis of which the assessment has been framed is a dumb loose sheet of paper seized from the premises of a third party, namely, M/s Bharat Shah Pvt. Ltd, whereas the builder firm constructing the building in question was M/s Layer Exports Pvt Ltd is not correct. The search was conducted in the premises of Bharat Shah & Group concerns in which loose papers numbering 1 to 19, contained in Annexure A-1, were seized from the premises. These loose papers are systematic records relating to actual sales transactions in Legend Project promoted by Layer Exports Pvt.Ltd, wherein Shri Bharat Shah is the Director. Most of the said loose papers contain details of flat numbers, flat size (total area), rate per sq. ft.total consideration bifurcated in cash and cheques, cash to be paid, cheques to be paid, details of re-negotiation, 9 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 details of actual cash payment, details of actual cheques payment etc. It is not necessary that papers belonging to a particular company should be kept at the said Company's premises only. It can be kept at any premises owned by the same Director, either his residence or in any of his own company's premises as long as he is the owner/director of the companies.
The Assessing officer has briefly discussed this issue in her order at para no.4 page 11 to 13 and also at para 1 & 3 at page no 17.
iv) Assessee stated that the 'Case was reopened only on a communication received from the Assessing officer in the case of M/s Layer Export Pvt.Ltd. without applying independent mind about conclusion of escapement of income as nowhere on the loose sheet of paper (page no. 15) the name of the appellant, late Mrs.Vimla Mehta is mentioned. The assessee has challenged the reopening of assessment during the assessment proceedings and now before your honour also.
During the assessment proceedings the assessee has quoted various court decisions challenging the reopening of the assessment. The fact is that the assessment was reopened not only on the basis of the information received from the ACIT CC 24 & 25, Mumbai, but also on the huge difference in the stamp duty valuation done by the stamp authorities of the said flats i.e Rs.6.42 crores and the purchase price shown by the assessee in the agreement i.e Rs.3.85 crores.
The loose papers were recovered from the premises of M/s Prime Down Town Estate Pvt Ltd. It is also necessary to mention here that on the loose paper sheet found during the search action in the premises of Bharat Shah Group concerns are systematic records relating to actual sales transactions in Legand project promoted by Layer Exports Pvt Ltd, wherein Shri Bharat Shah is the Director in all the above companies. In this regard it may be noted that the search and seizure action was conducted on the entire Group concerns of Shri. Bharat Shah Most of the said loose papers contain details of flat numbers, 10 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 flat size(total area), rate per sq. ft. total consideration bifurcated in cash and cheques, cash to be paid, cheques to be paid, details of re-negotiation, details of actual cash payment, details of actual cheque payments etc. In this regard, on page No. 15, there is recording of transaction related to sales of flats by Layer Exports Pvt. Ltd to Shri Ashok R. Mehta, PAN:AADPM5946J and Smt. Vimla R. Mehta PAN:AACPM3745N, jointly purchased this flat. As per the said record Smt. Vimal R.Mehta has paid cash money of Rs. 6,84,60,000/-. This is nothing but income earned from source not disclosed to the department in her return of income.
She has failed to disclose her true and complete particulars of her income and its sources. Thus it is established that the income for A.Y 2007-08 has escaped assessment and accordingly case was reopened to safe guard the Revenue.
It is submitted that the assessee was given more than sufficient opportunity during the course of assessment proceedings to submit all relevant documentary evidences in support of its stand, as can be seen from the assessment proceedings that stretched from 29/03/2012, being the date on which notice u/s 148 was issued and remained live till 20/03/2013, being the date on which the assessment order was passed. It means, more than a year's time was made available to the assessee to submit the requisite details. Even if the date of notice u/s. 142(1) is reckoned as the starting point, it was issued as late as 18/09/2012. Hence, assessee was given adequate opportunity to submit the requisite details. Therefore, admission of such additional issues raised before your honour is against the spirit of Rule-46A.
As such, it is requested that the same may not be admitted and the issues involved in the appeal may kindly be decided on merits."
2.4.28 The same was forwarded to the appellant for her rejoinder, if any, Appellant‟s AR vide letter dated 22.01.2014 filed the rejoinder which reads as under:-
"2. In furtherance to the submission dated 07.01.2014 & 21.02.2014 already filed in your Honour's office and in 11 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 response to the remand report of the AO which was forwarded along with your letter No CIT(A)-27/Remand Report/2013-14 dated 18-02-2014 we have submit as under:
3. On the first point raised in para 3(i) of the remand report we have to submit that the appellant very clearly and emphatically stated before the A O. that the loose sheet on which the whole assessment order is founded does not relate to the transaction done by the appellant as the notings in the relevant loose sheet contain vital particulars which do not match with the specifications of our transaction. The first and foremost point made was that the appellant's name is no where mentioned in the sheet. In a search material of the kind relied upon the addition cannot be fastened when it has no direct relation with the transactions of the appellant. The sheet is supposed to contain particulars relating to purchase cost, the cheque segment of which is of value of Rs. 2.85 crores. The report in para 3(i) mentions that the details of total payment of 3 cheques coming to Rs. 2.85 crores comprised of cheques nos 910755, 910760 & 633881 for Rs 35,00,000, Rs.2,00,00,000/- & Rs. 50,00,000/- respectively was submitted by the appellant. The appellant submits that no such details were furnished to the AO. Further the A O. has stated in the report in point 3(i) that the appellant was given sufficient time to explain that the cheque payment was Rs.3,85,67,640/- as against Rs 2.85 crores but he did not prove the same. In this connection the appellant had explained during assessment proceedings that the cheque payment towards purchase of property is of Rs.3,85,67,460/-and not Rs. 2.85 crores as contained in the loose sheet(Page 5 para 7 & 8 of assessment order). Further it was explained that these two amounts are not at all similar. The AO is not correct in stating that the appellant failed to prove that cheque amount was Rs.3,85,67,640/-. The purchase agreement itself is sufficient to substantiate the cheque payment of Rs.3,85,67,6401-(Page No of 01 - 85 of Paper Book dated 07.01.2014).
4. Further at point no 3(ii) of the remand report the AO has stated that the appellant has contended that if 12 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 alleged cash of Rs. 6.85 crores is added to the cheque component of Rs. 2.85 crores appearing in seized papers the total value of the property will be Rs. 9.69 crores which will be more than the stamp duty value of Rs. 6.42 crores. The A O. has stated that the same contention was not taken before him and therefore any new issues may not be admitted. The appellant has to submit that it is not prohibited for taking any arguments before the appellate authority so long as the same is borne out from the evidences filed before the A O. Since the contentions of the appellant are based on the material already available with the AO the appellant was within its right to put forth contention for consideration of the Appellate Authority.
5. Further at point 3(iii) of the remand report the AO has stated that the appellant has contended that the seized paper was a dumb document seized from the premises of third party. The AO has stated that it is not necessary that papers belonging to a particular company should be kept at the premises of the said company. It can be kept at any premises owned by same director. The A. 0. is not legally correct to make this argument in view of provisions of section 292C which raises a presumption of belonging in favour of the individual or entity from whose control or custody the documents are recovered and seized. Further if the AO is claiming that the document belonging to 1 person was found from the premises of other person the onus is on him to lead evidence to prove that it actually belong to that person which onus has not been satisfactorily discharged. Further it has to be kept in view that the seized paper is dumb document and therefore, it is not easy to establish its connection with any person other than from whose custody it has been seized.
6. Further at point no 3 (iv) of the report the A. O. has contended that the assessment was re-opened not only on the basis of the information received from ACIT CC 24 & 25, Mumbai but also on account of the huge difference in stamp duty valuation and purchase price shown by the assessee. This comment is factually incorrect because the reasons recorded for re-opening the assessment do not 13 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 include any such observation. As far as the stamp duty valuation is concerned the appellant has to submit section 50C provides for substitution of stamp duty valuation in place of sale consideration for computation of capital gains. This is a deeming provision for a limited purpose of computation of capital gains. It however does not raise a legal presumption that the sale transaction has actually taken place at the amount computed on the basis of stamp duty valuation. As far as the appellant is concerned this provision has no relevance because the appellant is a purchaser and the provisions of section 50C apply in the case of the seller. Further where the appellant disputed the correctness of stamp valuation, section 50C(2) provide for reference to valuation authorities for determination of the value. In the circumstances mere difference between the purchase consideration and stamp duty valuation do not provide a legal basis for re-opening the assessment. "
2.4.29 Having weighed the evidence brought before me as also the remand report submitted by the Ld. AO., I am of the considered opinion that the only way in which it can be said that the notings at page NO.A-1/15 were in relation to the actual transaction for purchase of flat would be if the amount of cheque purportedly written in the said loose sheet of paper tallied with the actual cheque payments made by the appellant. As per the agreement, it is seen that whereas as per the loose sheet of paper, the alleged cheque payment was Rs.2.85 crore, as per the actual payment made by the appellant to the builder, the same was Rs. 3,85,67,640/- The first payment for acquisition of property was made on 28.09.2004 amounting to Rs.1.18 crore and the balance payments were made in the year 2010 or 2011 whereas the documents in question were seized from Bharat Shah Group on 15.03.2008. Therefore, it could not be said that as on the date of seizure, the figures purportedly for cheque payment of Rs.2.85 crore matched with the actual cheque payment of only Rs.1.18 crore. Had the cheque amounts matched, perhaps it could be said that there was some truth in the notings in the documents.
2.4.30 It has also been brought to my notice by Ld. AR vide his letter dated 21.02.2014 that the addition which has been made in this case, based on loose sheet of papers bearing No.A-1 /15 is part of 19 loose sheets which were seized from the same
14 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 premises and some of the other assesses, in whose case the additions were made and who had gone before the appellate authorities, have received favourable decision in the first appeal. In the case of one such appeal, Ld. CIT(A)-11 in Appeal No.CIT(A)-11/IT/Rg.2(1)/11-12/522 vide his order dated 2501.2012 has, inter alia, held as under:-
"4.10 As per the details of payment furnished vide page 1 of the Paper Book and reproduced in para 4.1 above, total cheque payment in FY 2003-04 is Rs.1,53,00,000/-, 77,00,000/- paid by the assessee and Rs.76,00,000/- paid by Smt.Lalita Siroya (wife of the assessee). Date of search in this case is 15.03.2008 and from the details of payment in the said chart, the entire cheque payment of Rs.2,37,52,200/- has been made by 18.02.2008. As per the seized document, cheque payment received, as seen, is Rs.1 crore only. Therefore, even the details of cheque payment till the date of search do not match with the noting in the sheet.
4.11 On a careful examination of the copy of seized document as provided together with the facts as admitted, and in light of the glaring mismatches as above, and absence of any independent, reliable, corroborative evidence, it cannot be' said that the said document, in any manner, can be held as genuine and reliable to hold that the assessee has paid unaccounted cash for the purchase of property as held by AO.
4.12 In view of submissions of Ld. AR and the case laws relied upon and the mismatch in the area of flat and the amounts of cheque payments, in absence of any other corroborative evidence to establish a direct nexus, it cannot be said that the notings in the said paper are genuine and, therefore, constitute sufficient evidence to hold that undisclosed cash payment of Rs.1,60,90,191/- has been made by the appellant with his wife. More so in view of the fact that in the seized paper, part of cash amount is shown receivable.
4.13 It is hereby held that addition made by the AO regarding payment of unaccounted cash for purchase of property is without any sound basis and hence is hereby
15 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 deleted, Hence grounds 3, 4 (partly) and 5 are allowed."
2.4.31 I find that in the appellant's case, during the course of the assessment proceedings of the builder M/s. Layer Exports Pvt. Ltd., appellant's legal heir was called to testify as regards the purchase consideration for the flat and in the said statement Shri Ashok Mehta, legal heir, emphatically denied any on money in the purchase of the flat.
"Q.8. I am showing you page No 16 from loose paper file 1 to 19 seized from Mr Bharat Shah's premises in which your name Mr Ashok R Mehta are written along with this 15th and 16th is written and" Sh recd 659.60 and "Q recd 285100" written. From this notings, it can be inferred that Mr. Ashok R Mehta have bought 15th and 16 floor in Legend project and cheque of Rs. 2,85,00,000/- has been received. This also tallies with the details submitted by the assessee that the total of first three cheques received by the assessee vide cheque No 910755, 910760,633881 being Rs 35,00,000, 2,00,00,000, and 50,00,000 total upto Rs.2,85,00,000/-. Accordingly, as it is the practice followed by Layer Exports Pvt Ltd to write Q for cheque and Sh for cash, it can be clearly inferred that total Rs 6,59,60,000/- has been received in cash for flats on 15th and 16th floor and Rs.2,85,00,000/- has been received by cheque. Further, on this page "5X5=25" is written which can be clearly inferred as that total 5 car parking for a consideration of Rs 25 Lakhs has been purchased. This details also tallies with your previous answers that 5 car parking were purchased?
Ans. I have not given any cash and the garages were including with the purchase of each flats as explained above i.e 3 and 2 with all flats. Regarding cheque payment total payment paid by my family is Rs 3,35,00,000/- and Rs 1,18,00,000/- by me and my mother respectively.
2.4.32 Similarly, the statement of Shri Bharat Shah, director of M/s. Layer Exports Pvt. Ltd. was also recorded u/s.132(4) on 08.05.2008 where he emphatically denied mention of cash in any of the papers seized. Relevant part of his statement is as under:-
16 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 Q.4. The pages in Annexure A-1 (1 to 19) mentioned above in Q. No. 3 have been found and seized from your office. Accordingly, the same are presumed to be belonging to you/ your business and you are supposed to know the contents of the same. Kindly avail another opportunity to explain the same.
Ans. In our office at 3rd Floor, Gamdevi, old papers since 1985 are lying. This office is a site office for construction project and so many persons/ customers visit who make different rough workings for prospective transactions. We are not regularly visiting that office and only our staff is handling that premise.
Q.5 On going through these pages mentioned above, it is seen that details of flats at different floors along with details of area of flat, and part cheque consideration and part cash consideration have been mentioned. You are requested to explain which project these workings belong to and why it should not be construed that part consideration in respect of these flats has been received in cash outside the books of account?
Ans. Since 1985 our many projects have been on- going/ completed. Before the project and during the construction phase, we make plans for different size flats and also furnished flats i.e. special house and unfurnished flats without amenities. The plans get altered as per the customers' requirement and BMC FSI. Further cash is nowhere mentioned in the above mentioned papers."
2.4.33 Ld AR has also stated that in the appellant‟s case, neither the flat number nor the rate per sq. Ft were mentioned, Further, according to him, there is no mention of any payment or renegotiation. It has also been stated that the name of Late Smt.Vimla R Mehta is nowhere appearing in the said loose sheet of paper and only the name of Shri Ashok Mehta is written.
2.4.34 My attention has been invited to the following decisions:
17 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4
i) The Hon'ble ITAT Jabalpur Bench in the case of ACIT V/s Satyapal Wassan reported in 295 ITR 352 held as under:
Held, (i) that the document was bereft of necessary details about the year of transaction, ownership, nature of transaction, necessary code for deciphering the figures. The Assessing Officer presumed that the transaction belonged to the financial year 1988-99 relevant to the assessment year 1989-90, that the figures mentioned in the document were advances made by the assessee, that the transaction belonged to the assessee, and that the transaction were in a code of Lakhs and that the unit was the rupee. The Assessing Officer did not carry out any enquiry either during the course of search or during the course of assessment proceedings to find out the nature of transactions and the period in which those transaction were carried out : he had simply presumed that the figures were advances without there being any material on record to support such presumption. If the assessee had by affidavit denied the ownership of the document and the wife of the assessee's brother admitted that it belonged to her husband, it could not be inferred without rebutting this evidences that the document and transaction recorded therein, in fact, belonged to the assessee. The affidavits, even if regarded as self-serving did not lose their evidentiary value as there was no material contrary to the averments made in the affidavit. Nothing was shown by the Assessing Officer that there was other material correlated with the document clearly showing that it belonged to the assessee. Under these circumstances, the assessee has successfully shifted the onus on to the Assessing Officer by filing the affidavits. Once the onus shifted to the Assessing Officer, he was duty bound to collect evidence so as to belie the contents of the affidavit and hold that the document and transaction recorded therein, in fact, belonged to the assessee. The Assessing Officer had drawn inferences, made presumptions, relied on surmises and thus made unsustainable additions.
(ii) That document NO.7 was only a piece of paper and could not be called a "book" within the meaning of section 68. No 18 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 addition under section68 of the Act could be made on the basis of the loose sheet being document No. 7 found during the search.
ii) The Hon'ble ITAT Delhi Bench in the case of Steel Home vs. Assistant Commissioner of Income-Tax reported in 69 ITD 240 held as under :
"Since the document found in the form of Annexure-P could not be related to the assessee, no addition could be made on the basis of the aforesaid documents. Even though there are specific assets mentioned in the aforesaid documents, Before any addition could be made for low withdrawals, purchase of plots as well the stock as mentioned in the documents, it was necessary to have proved that the same related to the assessee. Since this exercise was not done the documents could not be considered for both the assessment years much less being made the basis for estimating income in the hands of the assessee.
(iii) The Hon'ble ITAT Nagpur Bench in the case of Elite Developers vs. Assistant Commissioner of Income-Tax reported in 73 ITD 379 held as under .:
"It is noticed that seized papers as mentioned in Para 5 are not speaking documents, as they do not contain any narration or description about the different figures noted therein. No document documents contain any narration of on money. The department has also not examined these purchases and has not collected any material or evidence to corroborate the allegation regarding on-money and to give a reasonable and acceptable meaning to various entries and figures. Since the Assessing Officer has failed to produce any other evidence the provisions of section 132(4A) do not permit him to presume the receipt of on-money. In view of this, in our opinion, the assessment of undisclosed income on the basis of these seized materials is not justified".
iv) The Hon'ble Supreme Court in the case of CBI vs. V. C. Shukla (1998) 3 SCC 410 wherein the Apex Court held that loose sheets of paper could not be considered as "book" and hence entries therein were inadmissible evidence and could not be relied upon. The Court held that only a book was admissible evidence within 19 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 the meaning of section 34 of the Evidence Act, but not loose sheets of paper.
v) The Hon'ble ITAT Delhi Bench in the case of Ashwani Kumar Vs. ITO (1992) 42 TTJ (Del) 644 wherein it was held as under:
"Then for presuming that the contents of the books of account or document are true the document must be a speaking one. In this case the slip, said to have been recovered by the revenue, does not contain any narration in respect of the various figures noted therein.The slip does not indicate whether the figures referred to quantities of money or to quantities of goods and whether one side, and if so, which side represents receipts and which side represents outgoings. This is. thus a dumb document and as the orders of the authorities below would show they have merely added the total of the right side of the slip without supplying the figures any language to indicate their meaning. In the case of such a dumb document, the provisions of Section 132(4A) do not permit anyone to presume that the total of the figures of right side of the slip represents the assessee's income. The presumption at the most is attracted to the figures and a further presumption that they represent the income of the assessee is not permissible under Section 132(4A). When a dumb document, like the present slip, is recovered and the revenue wants to make use of it, it is the duty of the revenue to collect necessary evidence which may provide an acceptable narration to the various entries. The evidence collected should be such that any reasonable man would accept, the hypothesis advanced by the revenue that the figures written on the right side of the slip represent incomes earned by the assessee. It was conceded by the learned Departmental Representative that no such evidence has been brought on record Therefore the additions cannot be sustained and they are hereby deleted. "
vi) Hon'ble Bombay High Court in the case of ACIT vs. Lata Mangeshkar reported in 97 ITR 696 wherein it was held that entries in the accounts of third party regarding payment to the assessee was not sufficient as there was no proof that the same was genuine. The Hon'ble High Court observed as under:
"The income-tax authorities sought to assess certain income as income from undisclosed sources received by the assessee.
20 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 The evidence on which the income-tax authorities relied were statements by two persons that they had paid money in "black" to the assessee and entries in books belonging to them regarding alleged payments to the assessee. The Tribunal examined the statements made by the two persons and found that the evidence tendered by them suffered from serious infirmities. It held that mere entries in the accounts regarding payments to the assessee were not sufficient as there was no guarantee that the entries were genuine. The Tribunal, therefore, held that there was no proof that the amounts in question represented income from undisclosed sources. belonging to the assessee. The department sought a reference to the High Court.
Held that the conclusion of the Tribunal. has been reached by it on proper appreciation of the evidence. This was finding of fact by the Tribunal and no question of law arose and no reference would lie from the decision of the Tribunal."
2.4.35 It is now well settled that income tax cannot be levied on hypothetical income. In Commissioner of Income Tax v. Shoorji Vallabhdas and Co., [1962] 46 ITR 144 (SC) it was held as follows:-
"Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account."
2:4.36 The above passage was cited with approval in Morvi Industries Ltd. v.Commissioner of Income-Tax (Central), [1971] 82 ITR 835 (SC) in which Supreme Court also 21 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 considered the dictionary meaning of the word "accrue" and held that income can be said to accrue when it becomes due. It was then observed that: "........ the date of payment ..... does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be immediately." It further held, more importantly, that income accrues when there "arises a corresponding liability of the other party from whom the income becomes due to pay that amount. "
2.4.37 It follows from these decisions that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. Similarly, in Commissioner of Income Tax Vs. M/s. Excel Industries Ltd. [Civil Appeal No.125 of 2013] it has. been held as under by the Apex Court:
" in Godhra Electricity Co. Ltd. v. Commissioner of Income Tax, [1997]225 ITR.746 (SC) this Court reiterated the view taken in Shoorji Vallabhdas and Morvi Industries.
23. Godhra Electricity is rather instructive. In that case, it was noted that the High Court held that the assessee would be obliged to pay tax when the profit became actually due and that income could not be said to have accrued when it is based on a mere claim not backed by any legal or contractual right to receive the amount at a subsequent date. The High Court however held on the facts of the case that the assessee had a legal right to recover the consumption charge in dispute at the enhanced rate from the consumers.
24. This Court did not accept the view taken by the High Court on facts. Reference was made in this context to Commissioner of Income Tax v. Birla Gwalior (P.) Ltd., [1973] 89 ITR 266 (SC) wherein it was held, after referring to Morvi Industries that real accrual of income and not a hypothetical accrual of income ought to be taken into consideration. For a similar conclusion, reference was made to Poona Electric Supply Co. Ltd. v. Commissioner of Income
22 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 Tax, [1965] 57 ITR 521 (SC) wherein it was held that income tax is a tax on real income.
25. Finally a reference was made to State Bank of Travancore v. Commissioner of Income Tax, [1986]158 ITR 102 (SC) wherein the majority view was that accrual of income must be real, taking into account the actuality of the situation; whether the accrual had taken place or not must, in appropriate cases, be judged on the principles of real income' theory. The majority opinion went on to say:
"What has really accrued to the assessee has to be found out and what has accrued must be considered from the point of view of real income taking the probability or improbability of realisation in a realistic manner and dovetailing of these factors together but once the accrual takes place, on the conduct of the parties subsequent to the year of closing an income which has accrued cannot be made "no income".
26. This Court then considered the facts of the case and came to the conclusion (in Godhra Electricity) that no real income had accrued to the assessee in respect of the enhanced charges for a variety of reasons. One of the reasons so considered was a letter addressed by the Under Secretary to the Government of Gujarat, to the assessee whereby the assessee was "advised" to maintain status quo in respect of enhanced charges for at least six months. This Court took the view that though the letter had no legal binding effect but "one has to look at things from a practical point of view." (See R.B. Jodha Mal Kuthiala v. Commissioner of Income Tax,[1971] 82 ITR 570 (SC). This Court took the view that the probability or improbability of realisation has to be considered in a realistic manner and it was held that there was no real accrual of income to the assessee in respect of the disputed enhanced charges for supply of electricity. The decision of the High Court was, accordingly, set aside.
27. Applying the three tests laid down by various decisions of this Court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or 23 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. Essentially, the Assessing Offficer is required to be pragmatic and not pedantic."
2.4.38 It is also a trite law that no assessment can be framed merely on the basis of conjectures and surmises. In Smt. Sushila Suresh Malge v. Assistant Commissioner of Income tax (2012) 26 taxmann.com 53 (mum) it was held as under:-
"There is already evidence on record that assessee‟s wife has been filing the returns much before the searrch and there were scrutiny assessments in her case as well. Just because her affairs are being looked after by her husband, it does not mean that she is benami. In case the Assessing Officer has to hold that she is benami, it should be based on evidence and burden is on the revenue. Unless there is evidence, no addition should be made in the hands of her husband on mere conjectures, surmises and presumptions. These aspects should be examined by the Assessing Officer and only when there is clear evidence/findings addition of income of wife can be made in the hands of the assessee, otherwise they should be examined separately/independently without getting prejudiced by earlier orders of the Assessing Officer, i.e., the Assessing Officer should determine the undisclosed income separately in respective hands."
2.4.39 Similarly, while dealing with powers of CIT u/s 263, Hon‟ble Mumbai bench of ITAT in Indexco International v. Deputy Commissioner of Income tax (2004) 88 ITD 293 (Mum), held as under:-
"In the garb of exercising powers under section 263, the Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in the matters or orders which are already concluded......
24 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 2.4.40 Hon‟ble Bombay High Court also had an occasion to examine the issue of assessment based on conjectures and surmises in the case of Commissioner of Income tax-21, Mumbai vs. Uttamchand Jain (2009) 182 Taxman 243 (Bom) where it was held as under:
"There is nothing on record to suggest that the assessee had given cash to Mr. Sanjay Saxena. The assessing officer has not chosen to examine Mr. Sanjay Saxena to establish that cash was given by the assessee to Mr. Trivedi through Mr. Sanjay Saxena. Perusal of the reassessment order shows that the Assessing Officer has not made any efforts to link the cash received and deposited by Mr. Trivedi in his bank account was in fact paid by the assessee. In other words, the decision of the Assessing Officer in discarding the sale and holding that the amount received by the assessee is based on conjectures and surmises and is not based on any independent evidence gathered prior to or during the course of reassessment proceedings. In these circumstances, in the absence of any cogent evidence brought on record, the decision of the Tribunal in holding that the Assessing Officer has failed to establish the nexus between the cash amount deposited in the bank account of Mr. Trivedi is attributable to the cheque issued by Mr. Trivedi in favour of the assessee cannot be faulted. Consequently, the decision of the Tribunal in deleting the addition of Rs.10,35,562/- cannot be faulted."
2.4.41 In the case of Pooja Bhatt V. ACIT 79 ITD 205 the Hon‟ble Mumbai ITAT deleted the addition made on account of alleged on money paid for purchase of flat. The ITAT held as under:-
"There may be a strong suspicion of payment of on- money in respect of the property deals but no addition can be made on mere suspicion. It is established principle of law that howsoever strong it may be it does not take the place of proof."
2.4.42 In view of the factual and legal analysis, there is an overwhelming evidence in favour of the appellant rather than against her as neither her name was appearing in the loose sheet of paper nor was any mention of the total area or rate of the flat. Both, the builder shri Bharat Shah, and the alleged payer of on money Shri Ashok Mehta being the legal heir of 25 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 the appellant had stated that they were neither receiving or paying any cash for the purchase of the said flat and most importantly, even the figures of alleged cheque payments do not match with the actual cheque payments made as brought out earlier. In that view of the matter, it cannot be said that the appellant had paid any „on money‟ for the purchase of the flat of an amount of Rs.6.84 crore which has been made out by the Ld A.O on the basis of a document which does not even seem to pertain to her. It is not known as to why this piece of document was used against the appellant even though her name was not appearing on the said sheet. In coming to the above view, I am also guided by the decision of Ld CIT(A)-11 as cited above, wherein in the same set of facts, relief was granted as the documents did not match with the actual figures as per the purchase agreement. In this regard, the decision of Hon‟ble Bombay High Court in the case of Lata Mangeskar (supra) is apt that mere entries in the accounts regarding payments to the assessee were not sufficient as there was no proof that the amounts in question represented her income from undisclosed sources. Accordingly, respectfully following the above said decisions, the grounds of appeal Nos. 1 & 3 to 8 are allowed."
6. We notice that the Ld CIT(A) has made comprehensive analysis of the facts prevailing in the instant case and also appreciated the various judicial pronouncements on the impugned issue and accordingly taken the decision by applying the case law on the facts of the instant case. We have noticed that the basis for making the impugned addition is the loose sheet found during the course of search conducted in the Bharat Shah Group. A very important point is that the said loose paper does not contain the name of the assessee, it was an undated document and does not bear signature of anyone. Another important point is that both the purchaser as well as seller has denied the contents of the said document. We notice that the assessing officer has tried to decipher the information found in the said document by interpreting 26 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 that "Sh" represents Cash payment and "Q" represents cheque payment. We notice that the assessing officer has not brought any material on record to corroborate his interpretation. A perusal of the document would show that the letter written after 45 looks like "C" and hence it is capable to different interpretation also as against the interpretation given by the AO as "Lakhs". The assessing officer has only tried to corroborate his interpretation by comparing the aggregate amount noted in the loose sheet with the stamp duty valuation. However, as pointed out by the assessee, the alleged cash payment together with the purchase value declared by the assessee far exceeds the stamp duty valuation and hence such kind of corroboration is not acceptable. Even otherwise, the stamp duty valuation stated to be adopted by sec 50C is only a legal fiction applicable to a seller of property and it does not automatically support the conclusion that the difference between the stamp duty valuation and the actual sale consideration as passed hands. Though the AO has interpreted that the cheque payment made by the assessee was Rs.2.85 crores, the said interpretation has been proved to be wrong by the co-owners, since they have actually paid a sum of Rs.3.85 crores by way of cheque. Further, the assessee has stated that the payments have been made in 2004, 2010 and 2011, which fact also does not support the interpretation given by the assessing officer. Under these set of facts, we are of the view that the Ld CIT(A) was justified in observing that the assessing officer has made the impugned addition on surmises and conjectures. The decision rendered by Hon‟ble jurisdictional High Court in the case of Lata Mangeshkar (97 ITR 696) supports the case of the assessee. Accordingly, we are of the view that the Ld 27 I T A N o . 3 3 6 1 / Mu m / 2 0 1 4 CIT(A) has passed a reasoned order based on various judicial pronouncements and the same does not call for any interference.
7. The revenue has also raised a ground relating to violation of Rule 46A of the Income tax Rules. However, a careful perusal of the order of Ld CIT(A) would show that the Ld CIT(A) has not admitted any additional evidences. The assessee has raised many contentions and they have been put to the AO by calling for a remand report. Hence, we do not find any merit in the said ground.
8. In the result, the appeal filed by the revenue is dismissed.
Pronounced accordingly on 9th December, 2015.
घोषणध खर ु े न्मधमधरम भें ददनधंकः 9th Dec, 2015 को की गई ।
Sd sd
(PAWAN SINGH) ( B.R. BASKARAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
भुंफई Mumbai: 9th Dec, 2015.
व.नन.स./ SRL , Sr. PS
आदे श की प्रतिलऱपप अग्रेपिि/Copy of the Order forwarded to :
1. अऩीरधथी / The Appellant
2. प्रत्मथी / The Respondent.
3. आमकय आमुक्त(अऩीर) / The CIT(A)- concerned
4. आमकय आमुक्त / CIT concerned
5. ववबधगीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai concerned
6. गधर्ा पधईर / Guard file.
आदे शधनुसधय/ BY ORDER, True copy सहधमक ऩंजीकधय (Asstt. Registrar) आमकय अऩीरीम अधधकयण, भंफ ु ई /ITAT, Mumbai