TaxTMI 
TaxTMI 
TaxTMI 
2013 (7) TMI 687
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.... which is engaged in the business of real estate developers and construction activity since 30th January 2003. The assessee has constructed two residential building, one - "Tulsi Gagan" a project, which was completed by the year ending on 31st March 2007 and the other "Tulsi Prerna" which was under progress and was completed by the year ending on 31st March 2009. A search and seizure operation under section 132(1) was carried out at the residential / business premises of the Metro group of cases on 5th June 2007. The assessee was also a part of the search and seizure operation under section 132((1). In pursuance of such a search and seizure action, the assessee firm declared a sum of Rs. 7.50 crores vide letter dated 31st July 2007 in the following manner:- "8. In action under section 132, the assessee firm has declared a sum of Rs. 7.50 crores vide letter dated 31.7.2007 as under:- "We are following "computed Project Method of Accounting" for construction project. We have completed project "Tulsi Gagan" in the year ended 31.3.2007 and "Tulsi Prerna" in the year ended 31.3.2008. The estimated income in project Tulsi Gagan is approximately Rs. 2,50,00,000 and the estimated income ....
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....flats as noted in the seized paper. The Assessing Officer did not find any discrepancy in the amount so declared and thereby accepted the disclosure made by the assessee vis-a-vis the 39 flats. Beyond this, the Assessing Officer has completely erred in law and on facts in making further addition of Rs. 2,24,32,000, on account of on-money, which was purely based on presumption and surmises without any material on record. It was submitted that while making an assessment under section 143(3), pure guess work based on surmises cannot be made basis for assessment without any reference to any material or evidence. Reliance was placed on a catena of cases which has been listed at Page-9 of the appellate order. Further reliance was also placed on the decision Allahabad Bench of the Tribunal in R.M.L. Mehrotra v/s JCIT, 68 ITD 288 (All.) and the judgment of Hon'ble Jurisdictional High Court in CIT v/s M.K.E. Menon, [2000] 112 Taxman 96 (Bom.). In both these judgments, it has been held that while computing the undisclosed income, estimation cannot be resorted to. Various other judgments were also relied upon which were mostly rendered in the context of block assessment proceedings. 5. Besid....
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....given to the Departmental officials to refrain from making attempts to obtain confession on undisclosed income without corroborative evidence and focus should be made on evidence / material gathered during the course of search. Thus, it was pleaded that without seized material, no adverse inference should be drawn. Thereafter, the assessee gave analysis of the rates of each and every flat on which the Assessing Officer has estimated the on-money on the flats which do not find any mention in the seized material and the reasons for justifying the sale rates. The said statement of flatwise details and the reasons have been given at Pages-20 to 27 of the appellate order which is not repeated here but has a huge relevance in this case. The sum and substance of the reasons given in respect of every flat were that - (i) these flats were sold at higher rate as compared to other flats on the same floor, therefore, there could not be any case of making any addition on account of alleged estimate of on-money. The actual sale rates were been provided; (ii) instances of sale of flats have been given wherein the sale has been made on the same rate; which has been accepted by the Assessing Office....
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....essments consequent to search should be based on evidences collected. In these circumstances, I am of the view that the addition made by the A.O. on estimate basis without any evidence cannot be sustained. I direct the A.O. to delete the addition of Rs.2,24,32,000/-." 13.3 Ground No.2 is allowed. 8. Regarding addition on account of inflated expenses, the same has been confirmed by the learned Commissioner (Appeals) for which the assessee has come into appeal, which shall be dealt with while discussing the assessee's appeal. 9. Before us, the learned Departmental Representative, Mr. S.D. Srivastava, on behalf of the Revenue, submitted that insofar as the facts are concerned, the same are not disputed as the estimate has been made by the Assessing Officer on the flats which were not found mentioned in the seized material. However, he submitted that once it has been found that on-money has been received in respect of some flats, then the presumption is that the same on-money permeates the entire transactions in relation to other flats also. Even if the seized material has not been found with respect to some of the flats, then also, the Assessing Officer can take the same as basis f....
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.... assessment under section 143(3), the Assessing Officer cannot resort to wild guess or presumption without any adverse material on record. For coming to a conclusion that the assessee has received on-money in respect of other flats also some kind of enquiry or material must be there on the record, otherwise there cannot be a presumption of receiving the on-money in respect of all the flats. The reasons for various rates of flats have been elaborately placed before the learned Commissioner (Appeals) which has been accepted by him and there is no rebuttal of these vital facts by the Department. She further submitted that the rate of the flat cannot be same for every flat as there are various factors on which sale is undertaken because it depends upon the mutual understanding and negotiation with the parties and factors like initial bookings, location of flats, vaastu of the flats and terms and conditions of the payments, etc. These factors have to be taken into consideration while determining the sale rate of the flats. She further submitted that if the comparison of the rates of flats, one mentioned in the seized material and others for which there is no seized material or incrimina....
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....e with the Assessing Officer which could be related to the evidence or material found during the course of search especially where assessment are not final and are abated. This, however, does not mean that the assessment under section 153A can be arbitrary and without giving credence to the seized material. Triggering point of the assessment in such cases has to be made on the basis of seized material only and based on evidence found, the Assessing Officer can carry out further enquiry or gather such other information for making the assessment for which some material has been found during the course of search and seizure operation. In the case of assessment under section 143(3), which are made for the year of search, the same principle will apply and the Assessing Officer has to have material or information for making any kind of addition. The seized material can certainly constitute a basis or starting point of enquiry, whether assessee has been taking on-money in respect of sale of other flats also. If the Assessing Officer on further probe or enquiry is able to unearth some information or material that is on sale of the other flats also assessee has been taking on-money then adv....
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....a trite law that the estimate has to be based on cogent material on record and not on the basis of suspicion, however, strong it may be. The resorting of estimate in the assessment has to have a live link nexus with the material and evidence on record and the assessee is unable to controvert such evidence or material found in its case in relation to which estimate of his income is being made. Pure guess work and a wild estimate divorced from the evidence or material on record cannot be resorted to. Thus, on these facts and circumstances of the case and in view of the detailed explanation given by the assessee before the learned Commissioner (Appeals) which has been elaborately dealt with in the appellate order, we do not find any reason to deviate from the conclusion drawn by the learned Commissioner (Appeals) and, accordingly, the same are confirmed. 15. Now, coming to the various case laws relied upon by the learned Departmental Representative. First of all, all these decisions are based on the peculiar facts which is evident from the analysis given herein below:- i) Diamond Investment & Ors. v/s Department of Income Tax, in ITA no.5537/Mum./2009, order dated 29th July 2010 Th....
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....recorded by the Tribunal held that no substantial question arises in this case. Further, the High Court after analyzing the provisions of section 153A, 153C, observed that the principle laid down by the Hon'ble Supreme Court in CST v/s Esufali, H.M. Abdulali, [1973] 90 ITR 271, will also apply in case of section 153 and 153C and if there is adequate material before the Assessing Officer with regard to the receipt of on-money, the Assessing Officer can draw an adverse inference. In the present case, the facts are entirely different as the assessee on the basis of sized material wherein the receipt of on-money on some flats was mentioned has disclosed the same in the return of income. With regard to the other flats, detail reasoning and explanation was given and it was also proved that these flats were sold at a much higher rate. This fact has not been controverted by the Assessing Officer or before us. Thus, without any further evidence to corroborate the receipt of on-money, it cannot be held that the same on-money permeated through in respect of each and every flat sold by the assessee. Thus, the judgment of Hon'ble High Court cannot be applied on the facts of the present case as ....
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.... as dismissed. 17. In the result, Revenue's appeal is treated as dismissed. We now take up assessee's appeal in ITA no.4811/Mum./2010. 18. The assessee is aggrieved by the confirmation of the addition on account of alleged inflation of expenses. The Assessing Officer, on the basis of some seized papers numbered "A-1 / Page-71" noted that the assessee has inflated following expenses:- Bharat Bhai Extra Bill Rs. 8,08,480 Fulji (Adjustment Bill) Rs. 23,85,708 Yogesh Sir Extra Bill Amount Rs. 2,22,452 Rs. 34,16,60 19. Before the learned Commissioner (Appeals), the assessee contended that before the Assessing Officer, vide letter dated 10th September 2009, it has been explained at great length why no addition can be made merely on the basis of rough notings without any corroborative evidence and these papers had no evidentiary value. It was also submitted that the said paper was a dumb document and does not relate to the assessee, therefore, no adverse inference can be drawn. Reliance was also placed on several decisions which have been incorporated by the learned Commissioner (Appeals) from Pages-29 to 33 of his order. The learned Commissioner (Appeals), however, con....
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....en pointed out by her before us to show that there is no co-relation between the debit and credit side entries and, hence, it cannot be said that these entries suggest any kind of inflated expenses. Thus, no addition can be made, firstly, on the ground that it was not found from the possession of the assessee and does not form part of the panchanama at the time of search in the assessee's case and, secondly, the entries in the said documents does not, in any manner, relate to the assessee as it mentions the name of Mr. S.C. Jain and Mr. Bharatbhai, without specifying the details of project for which any kind of alleged transaction has taken place. 21. On the other hand, the learned Departmental Representative heavily relying on the findings of the learned Commissioner (Appeals), submitted that the name of Mr. S.C. Jain, is not unfamiliar as he is one of the partners of the assessee firm and the onus was on the assessee to show that the entries in the said document does not pertain to the assessee. Otherwise, he submitted that the matter can go back to the file of the Assessing Officer to verify the contentions of the assessee. 22. We have carefully considered the rival contention....