TaxTMI 
TaxTMI 
2013 (11) TMI 1242
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....d amount should be taxed in the hands of the company M/s. CCCPL." FACTS / ASSESSMENT ORDER : 3. Facts in brief as emerged from the assessment order passed u/s 153A r.w.s. 143(3), dated 28.12.2012 were that a search u/s 132 was carried out on the "Heart Care Group" on 21.8.2008. Thereupon, a notice u/s 153A was issued and in compliance a return was filed on 27.3.2009 declaring an income of Rs.2,04,96,280/-. The AO has noted the brief history of the case, according to which, a group of cardiologists and cardiac surgeons have formed a company namely M/s. Care Cardiovascular Consultants Pvt. Ltd. (in short CCCPL) to provide treatment pertaining to heart ailment. For that purpose a land was acquired admeasuring 13,981 sq. mt. located at plot no.67/1 village Sola, Thaltej, Ahmedabad. According to AO, the total cost of the project was about Rs. 50 crores to Rs. 52 crores. At the time of search, a document was seized (marked as Annexure A-2,), i.e., a registered deed for Rs.2.50 crore for purchase of land dated 15.10.2007 and the details of payments were as under: Rs. 29,28,756/- Cheque No.42007 dated 15.10.2007 Rs.24,79,891/- Cheque No.42008 dated 15.10.2007 Rs. 35,83,840/- Cheque....
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....the basis of the said document therefore that document was confronted to the assessee with a show cause notice as to why the cash component of the land should not be taxed in the hands of the assessee. The assessee's reply was reproduced by the AO, the contents were as under: "No where it is indicated that payment for the purchase of land by CCCPL is contributed by doctors in cash and cheques. The document is not signed by any person and no date of execution is mentioned. This is draft copy prepared before finalization of document date. However, if we read the document the project cost is Rs.45,00,00,000 and share capital of Rs.25,00,00,000 and if we co-relate the same Appendix-1 of page 83, the one can see that it is identical with the amount to be given in total column i.e. Rs.24.60 cr. Therefore while conceiving the project it was decided that equity base will be Rs.25,00,00,000/- and the same will be brought by the company in phased manner. Therefore, it was decided to bring 15% at the time of purchase of land and balance 85% in a phased manner." 4.4 The AO's rebuttal of the said reply was that the group of doctors have decided to start a hospital and the cost of....
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....e facts and affirmed that the documented price and the stamp duty was paid on 15th October, 2007. It was informed that in that manner the formalities of the registration of the land were completed. D. Document- The AO has referred page 46 of the file "Hospital" seized from the computer hard disk. The AO has recorded the synopsis of that page. The main feature of the said synopsis was that there was mention of "Rs.18 crores - invested in 2006-2007". In the said paper, there was detail of the expected investment from one Shri Kirti Patel of Rs.4 crores. There was a mention of expected investment from (Aalst Group - 4 crores). There was a mention of buying price of Rs.18 crore and thereupon it was commented that since the purchase price of the land was one and a half year old therefore the price had increased. It was thus said that the value of the land had doubled therefore the premium got absorbed within the escalated valuation of the land. The assessee's reply was as under: "Page no.46 and 47 is the working prepared for getting the finance from the proposed financiers. In those papers the land cost has been shown at Rs.18.50 crores. On page no.46 it is also mentioned....
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....eived by them was reproduced in the assessment order. On the basis of the tabulation so reproduced, the AO has concluded that the 15% figures have matched with the payment made by the doctors to CCCPL by cheque totaling Rs.2.5 crore. That amount was the sale consideration of the land. In reply the assessee has submitted that Dr. Parikh had categorically stated that entire contribution in the hospital project was through cheque. There was a projection of figures noted below the said tabular-table wherein the total land cost was noted as (150729000, 25000000, 175729000). The AO has placed strong reliance on that portion of the noting which were noted below the table. 4.11 There was some other discussion as also the reference of the statement of the said doctors in the assessment order. The statement of Dr. Anil Jain has also been reproduced by the AO. That statement was recorded by the A.O. It was asked that what was the total cost of the land and in compliance Dr. Jain has replied that the cost of land was split into two components, cash and cheque in the ratio of 85% as cash and 15% as cheque. He has stated that the cost of land was 17.5 crore out of which 2.5 crore was paid in ch....
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....erefore, an amount of Rs.4,57,23,509/- was brought by the assessee to pay back the cardiac surgeons. It is not recorded in the books of assessee and it is unaccounted income of the assessee. The chart at page 38 shows the position of fund contributed by the doctors after exit of surgeon group. This chart shows the amount of Rs.9,97,90,000/- against the name of Dr. Keyur Parikh. In view of above facts, Rs.5,52,50,000/- paid in cash for the purchase of land and Rs.4,57,23,509/- paid to the surgeon group, totaling to Rs.10,09,73,510/- is unaccounted income of the assessee. The amount of Rs.10,09,73,510/- is added to the income of assessee in A.Y. 2008-09. The assessee concealed the particulars of income hence penalty proceedings u/s. 271AAA are initiated against the assessee." 4.12 The aforesaid addition was challenged before the first appellate authority. DECISION OF FIRST APPELLATE AUTHORITY :- 5. The first ground of the assessee before learned CIT(A) was that the AO had erred in relying upon the Dumb documents. The AO has erred in placing reliance on the Hard Disk found from the computer. It was also objected through a ground raised that the AO had erred in making an addition of....
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....5% represent the cost of the land and other assets respectively for establishing the hospital project. I have seen all the tables and projections as per the seized record of the appellant Dr. Keyur Parikh. In none of these papers the cost of the land comes to 15% of the total projected cost. In fact, the projected cost of the entire project is estimated at Rs.51 to 55 crores, out of which the land cost is shown at Rs.17.50 crores approximately. The cost of the land comes to approximately 33% to 35% of the whole project. If it is presumed that none of the doctors had contributed towards cash component and only cheque of Rs.2.50 crores was paid towards the cost of the land, in that event, the cost of the land comes to only 4 to 5% of the estimated cost of the whole project. During the course of appellate proceedings, the representative of the appellant Dr. Keyur Parikh, Shri S.N. Soparkar was specifically asked to point out from any of the seized material wherein the cost of the land comes to around 15% of the whole project. To this, it was stated by him that there is not a single seized paper which indicates that the cost of the land was around 15% of the total project cost. In view....
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.... the company CCCPL to explain the source of cash given by the company for the purchase of land. In other words, the onus is on the Doctor to explain the entry of cash in the seized material. If the doctor is able to explain the source of cash, in my opinion, no addition can be made in respect of that cash amount in the hands of the Doctor. However, if the doctor is unable to give any satisfactory explanation of cash, then, that cash amount has to be treated as unexplained, income of the Doctor. If it is proved by the doctors that they have paid the cheques to the company CCCPL in various names and the company confirms receipt of such cheques from the doctor, then to the extent of such amount no addition can be made in the hands of the doctors. But since as held by me in earlier para that cash has been paid by the company CCCPL to the owners of the land, the onus lies on the company CCCPL to explain the source of such cash payment. If the company is unable to explain the source of the cash, then the AO will treat that amount as unexplained investment by the company CCCPL." 5.4 Learned CIT(A) has also directed that the amount was paid by CCCPL on 15.3.2007 therefore the AO is direct....
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.... pleaded that a land which was otherwise costed at Rs. 18 crore should not have been costed for 2.5 crore. The cheque component was only 15% and the rest of the component of 85% was in cash. Therefore, the cheque payments have matched in the recorded transaction. Learned DR has referred pages 56, 57 and 58 of a compilation filed from the side of the Revenue. On these pages there are certain calculations about interest upto 31st March, 2008. He has also referred the details of payment as recorded in the books of account (page 58) wherein the 15% amount, which was stated to be paid in cheque, was duly recorded and admissible in the books of accounts. But the balance 85% was not appearing. Again DR has placed strong reliance on the statement of one of the doctor who has left the project. Dr. Anil Jain has not only surrendered the cash portion of the sale consideration of the said property but also affirmed that it was repaid in cash by Dr. Parikh. The paper book of the Revenue Department also contained the statements of the persons who have sold the property to the assessee company. There was one statement of Sri Shekhar Bhai Govind Bhai recorded u/s 131 on 04.11.2008. In this stateme....
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....e cash component was taken as our equity holding in the hospital. Although, the doctors have officially contributed 2.50 crore but the total equity was 17.5 crore. It was asked that what had happened when he had left the project. In compliance he has informed that money was returned in cash and through cheque by Dr. Kayur Parikh. Dr. Anil Jain was cross-examined and informed during cross-examination that he was working in Mayo Hospital Baroda. He has accepted that there were two MOUs with Dr. Parikh. It was asked whether other doctors were party of the said MOU but he expressed his ignorance. He has also answered that he did not remember the amount and the working of the amount as prepared in the computer sheets. There were certain questions in respect of his earning of retention fees and the fees earned from surgeries. A direct question no.19 was asked that whether the cash consideration was paid. In answer he has said that only cheque component was given by him to CCCPL, but in respect of cash component he was only informed. He has also said that he was not present when the purchase consideration was paid. It was asked that you have made a statement on 13th April, 2010 wherein it....
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....tion only contained the payments which were made through cheque. Even after taking the extreme step of search, there was no document to demonstrate that some specific cash amount was paid over and above the sale consideration. At the out-set at this juncture it is noteworthy that in the absence of any specific document in our considered opinion it is not justifiable to presume that the assessee had made payment in cash. The documents have established the sale consideration and the payment of stamp duty but there is no other evidence. On the basis of those documents, the assessee has passed connected entries in the books of accounts. There were several working of the project which were found from the computer, but there was no direct evidence in possession of the Revenue Department to conclusively establish that in fact there was a cash component. The Revenue Department had made inquiries from those persons who have sold the properties. Those persons have made the statement before the AO and affirmed that there was no cash component. The AO had made up his mind to thoroughly investigate the existence of the cash component, but then after the inquiry it was noticed that there was no ....
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....-operative society to private limited company. The CCCPL has volunteered to pay the stamp duty in respect of the transfer of the names. The additional payment of stamp duty was thereafter paid by the CCCPL. On the basis of these evidences the vehement contention of the assessee is that the correct fair market value as per the Registration Office was assessed on two occasions; hence, there was no question of raising any doubt. If one Government Authority has registered a document on an amount of consideration then that consideration should not be doubted unless and until there is concrete evidence against the sale value declared. 8.3 Next point. We have also examined the memorandum of understanding (MOU) arrived at between the CCCPL (hospital) and the group of doctors. This MOU was in possession of the Revenue Department, obtained during search operation. There was nothing incriminating in this MOU. The MOU has stated that the hospital project will cost Rs.45,00,00,000/-. The purchase of land was to be finalized before the end of 31st January, 2007. The share capital was fixed at Rs.25 crores. Through this MOU a Chairman, Vice Chairman, MD, etc., were selected. There is a clause of....
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....t 100% premium to give Rs.400,00,000 EXPECTED INVESTMENT FROM Aalst group: Rs.200,00,000 at 100% premium to give Rs.400,00,000 Approx. Euros 6,66,000.00 or Lesser. The land is 13,500 Square meters Buying Price-Rs.18,00,00,000+ Approx. 3 Millions Euros) * Interestingly the land value has doubted since the time we Paid/bought it 1.5 years ago! So the premium is already Absorbed by valuation of land so in reality you are getting the equity at the actual newer price of the land. * If your group does not come, then two outside investors (Non Doctors) are willing to come at 200% premium at Rs.6,00,00,000. * Our group has enough funds so we would rather have a value added partner like yours and Kirti Patel (who will develop Medical Tourism for Indian Patients residing in UK NHS system and bring them to India)" We have carefully examined the contents of this page. Indeed, it is mentioned that an amount of Rs.18 crore invested in 2006-07. But this page alone and the word "invested" alone did not lead to a definite conclusion that the sa....
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....e and not the statement made u/s.131 of IT Act. A statement recorded u/s. 132(4) is a statement on oath. Therefore, a statement recorded on oath can be used as an evidence. As against that a statement recorded u/s.131 is not a statement on oath, therefore, it cannot be used as an evidence hence, such a statement has no evidentiary value. Rather in this case it was made in the form of a questionnaire handed over to those out-going doctors, who have not answered the questions under oath. This is one of the reason that we are hesitant to uphold the revenue's reliance on a statement made before the AO. Moreover, Dr. Anil Jain has kept on changing his statement therefore as far as his statements are concerned, those are not said to be very dependable. In this connection, it is also worth to mention that a third party statement should not be made the basis of addition for income tax purpose. The Tax proceedings should be based upon certain direct evidence so that there must not be any miscarriage of justice. 8.6 Next point. The assessee has also tried to demonstrate that there was a dispute among the doctors and because of that dispute a group of the doctors have separated from the proj....
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....of the view that a clinching incriminating material can be used against a tax payer if unearthed at the time of search. The documents which were referred by the Revenue Department cannot be said to be falling under this category of documents. Those were computer generated document which were neither signed by any person nor properly dated. Be that as it was, but whether those documents can be said to be an authentic document to be used against the assessee to allege that on-money was transacted for purchase of land. We are of the view that in the context of the prevailing facts it shall not be fair and reasonable to take an adverse view against the assessee merely on certain suppositions. Though we are aware that in the present era a computer generated record is important and trustworthy, hence the above observation is not to be used universally as we are conscious not to make a sweeping generalization in respect of the computer related evidences, for that reason, to be adjudged on the basis of the surrounding facts of each case. 8.8 Next point. We have also pondered upon an another point about the fair market value of the land in question. It was noted that the agricultural land ....
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....e part of the Revenue Department to presume that unaccounted income was used for purchase of land. Where was the element of unaccounted cash availability, is the question remained unanswered?. When there was no evidence of generation of unaccounted cash by the assessee then the allegation of cash payment remained unsubstantiated. There was no proof found even after the search to establish that the assessee had generated unaccounted income from medical profession. Even it is difficult to believe in the case of the CCCPL, which was in the nascent stage, that there was a possibility of availability of such huge unaccounted cash. We are not therefore convinced about the direction of Ld. CIT(A) to examine this issue in the hands of CCCPL. 8.10 The Revenue Department has held that the 15% payment was in cheque and 85% payment was in cash which were mentioned on number of occasion as per the data sheets of the computer. Prima facie, those sheets have demonstrated that the contribution of the doctors was to be made in the said proportion. The explanation of the assessee in general is that percentage of contribution was fixed in the light of the progress of the construction, keeping in min....
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....ances. It was held that the learned CIT(A) has failed to record a categorical finding justifying the direction given to the AO when the AO had not chosen for reopening of the assessment then the direction given by learned CIT(A) were to be set aside. In the light of these decisions, learned AR has vehemently pleaded that the direction made by learned CIT(A) to assess the cash component in the hands of the company was beyond his jurisdiction therefore required to be over ruled. Considering the circumstances under which such directions were given, it is hereby held, not valid in the eyes of law. 8.13 Next point. It is a universal law that the 'Suspicion howsoever strong cannot take the place of evidence'. At best, it can only lead to investigation. No person can be punished merely on the basis of a doubt, but side by side, must not be spared on the basis of unfavorable evidence. So the procedure is that a mistrust leads to investigation and an investigation leads to collection of evidence. There are several decisions in the past pronounced by the Hon'ble Apex Court wherein a general rule is framed that although the ITO is not fettered by the technical rule of evidence, but ITO is no....
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....otal income of the assessee. When the matter was carried before the First Appellate Authority, learned CIT(A) has recorded those facts in the following manner:- "The next ground of appeal is against the addition of Rs.457,23,509 paid by the appellant Dr. Keyur Parikh to the outgoing surgeon group. This issue has been discussed by the AO in para number 4.5 and 4.6 of the assessment order. As stated earlier, due to the differences between surgeon group and the cardiologist group, the surgeon group separated from the cardiologist group. In order to pay off the surgeon group, Dr. Keyur Parikh had put in further funds and some more doctors were also introduced. These doctors were also to be allotted shares as on 31.3.2008. As a result of this, shares were allotted to Dr. Asit Jain and Kirti Patel as on 31.3.2008. To them shares were allotted at premium. According to the AO after the exit of surgeon group, 806,838 shares were additionally allotted by the company CCCPL to the appellant Dr. Keyur Parikh. Since the surgeon group was to be paid off both cheque and cash components, cash of Rs.56.67 and cheque of Rs.10 per share was contributed by the appellant Dr. Keyur Parikh i....
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....he company to Dr. Keyur Parikh. It may be mentioned-that in the cross-examination the outgoing six surgeon doctors admitted that Dr Keyur Parikh had not paid any cash to them directly or they have not paid any cash to him directly. In the cross examination they have mentioned the name of Mr Nihir Shah, an employee of CCCPL (manager) to whom they have paid cash or received cash. In the cross examination all the six doctors categorically stated that-they have not directly transacted with Dr Keyur Parikh. Therefore, even if it presumed that the cash was paid back to the outgoing surgeon doctors, the same was paid by the company CCCPL as it was the company who had allotted the shares to Dr Keyur Parikh. I would have accepted the finding of.the AO that Dr. Keyur Parikh himself had paid cash to the outgoing doctors, if the outgoing doctors had sold their shares to Dr. Keyur Parikh. In this case, shares were not allotted to the six outgoing doctors but the share application money contributed by them was refunded back to them by the company on 15/2/2008. On 3/2/2008 shares have been shown as allotted to the cardiologist group, on the other hand, no shares are shown as allotted to the surge....
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....othing is on record to see whether any consequential action was taken in the case of CCCPL. In a situation when we have already taken a view that there was no element of on money in the purchase of the property in question then in consequence thereof, there was no element of payment of cash to the outgoing doctors. We, therefore, affirm the findings of the learned CIT(A) to the extent that the amount in question is not to be taxed in the hands of doctor Keyur Parikh. This ground of the Revenue is, therefore, dismissed. In the result, the appeal of the Revenue is hereby dismissed. B. IT(ss)A No. 604/Ahd/2011, A.Y. 2008-09 (Assessee Dr. Keyur Parikh's Appeal) 13. Ground Nos.1 and 2 of the Assessee is reproduced below: "1. The learned Commissioner (Appeal) failed to understand the facts and circumstances of the case and the provisions of law. 2. The learned Commissiioner (Appeal) erred in fact and in law in not accepting the contention of the appellant that the assessing officer has relied upon dumb documents and computer hard disk found from the office premises of the company namely CCCPL and residence of the doctors during the search." 14. Learned AR h....
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....sdiction. At the moment, we are not answering the question of the jurisdiction of learned CIT(A) because, otherwise, on merits we have taken a view that land was purchased on the amount as per the registered sale deed and there was no payment over and above the amount so declared. Once, this view has been taken, therefore, the direction given by learned CIT(A), as challenged in these grounds, are hereby reversed. On merits these grounds are hereby allowed. 17. In the result, assessee's appeal is partly allowed. C. IT(ss)A No. 601/Ahd/2011, A.Y. 2008-09 (Revenue's Appeal) (Dr. Anish Chandarana) 18. This appeal is arising from the common order of learned CIT(A)- III, dated 27.09.2011 and the Revenue has raised the following grounds: "The Ld. CIT(A) has erred in law and on facts and circumstances of the cae by providing relief of Rs.15,00,000/- to the assessee on the issue of unexplained investment for the purchase of land." 19. In respect of the above amount, the explanation of the assessee was that in the books of account of Dr. Anish Chandarana, the impugned amount of Rs.15 lacs was shown as purchase of equity shares of a company, namely, Shaligram Buildcon Pvt. L....
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....3/Ahd/2011, A.Y. 2008-09 (Revenue's Appeal) (Dr. Milan Chinubhai Chag) 26. The ground of the Revenue is reproduced below: "The ld. CIT(A) has erred in law and on facts and circumstances of the case by providing relief of Rs.75,00,000/- to the assessee on this issue of unexplained investment for the purchase of land." 27. The explanation of the assessee in respect of the payment made to CCCPL was as under: Dr. Milan Chag 1/3/2007 25,00,000 Laljibhai Savla 4/11/2007 75,00,000 Shaligram buildcon P L 12/28/2007 12,50,000 Aakash Ceramics P.L. Sub Total 1,12,50,000 28. The finding was given that the cheques of Rs.25 lacs and Rs.75 lacs were found recorded as per the seized material. There was another fact that the appellant had shown share application money of Aakash Ceramic Pvt. Ltd. of Rs.13 lacs dated 11.12.2007. Therefore, the assessee has tried to explain the source of the deposit. Learned CIT(A) has examined those facts and thereupon arrived at the conclusion as under: "Further, since the amount of Rs.25 lakh has been shown as paid on 3.1.2007, therefore, this amount has to be considered in the hands of CCCP....
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....ment which was not corroborated by any documentary evidence found during the search. The Hon'ble Court has concluded that the Tribunal having based its conclusion on findings of facts recorded by it after appreciation of the evidence on record, its conclusion cannot be held to be suffering from legal infirmity. An another decision of Hon'ble Gujarat High Court pronounced in the case of DCIT V/s. Prathna Construction (Tax Appeal No.79 of 2000), dated 25.3.2011 is cited, wherein the presumption as prescribed u/s.132(4A) was discussed but held that the same would not be applicable to a third party from whose possession documents have been found by the Revenue. 34.1 Learned CIT(A) has given the verdict as follows: "In the case of Dr. Gunvant T Patel the share application money of Rs.4,50,000 was received on 24th to 27th March, 2008 and Rs.3,00,000 from D.P.S. Iyenger on 24.3.2008. There is no document found from any premises which indicate that these four doctors have paid cash over and above the share application money of Rs, 10 per share. In the case of other doctors whose names are appearing at page 84 of file 2-l-08.kpc, I have held that they have paid amounts in the....
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....pport of the view taken by learned CIT(A) which has already been approved by us upto the extent as discussed hereinabove, therefore, this CO has become redundant; hence dismissed. 39. In the result, Co of the assessee is dismissed. I. IT(ss)A No. 602/Ahd/2011, A.Y. 2008-09 (Revenue's Appeal) (Dr. Urmil G. Shah) 40. This appeal of the Revenue is arising from the consolidated order of learned CIT(A)-III, Ahmedabad, dated 27.09.2011 and the only ground raised is as follows: "The Ld. CIT(A) has erred in law and on facts and circumstances of the case by providing relief of Rs.35,00,000/- to the assessee on the issue of unexplained investment for the purchase of land by holding that the said amount should be taxed in the hands of the company M/s. CCCPL." 41. In this case, the total amount stated to be invested in CCCPL was as under: Dr. Urmil Shah 4/24/2007 30,00,000 5/2/2007 5,00,000 10/14/2007 5,00,000 10/15/2007 2,50,000 1/23/2008 2,50,000 11/1/2007 1,75,000 Sub Total 46,75,000 41.1 During the proceedings, the assessee has explained the source in respect of the major investment of Rs.30 lacs and also in ....
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.... over and above the corresponding sums shown in the account books of the assessee. 4. On the facts and in the circumstances of the case, the learned CIT(A) erred in not deleting Rs.35 lacs in regard to the cheque payments by the assessee and further erred in partly setting aside the assessment order in respect of further verification by the Assessing Officer. 5. Without prejudice, on the facts and in the circumstances of the case. The CIT(A) erred in holding that the assessee was liable to be taxed on Rs.11,75,000 for cash payments allegedly made by the assessee to CCCPL in connection with the hospital project and he further erred in holding that the assessee can escape taxation on Rs.35 lacs only which is shown by the assessee as payment by cheques to CCCPL and that too subject to verification by the Assessing Officer." 44.1 These grounds of the assessee are covered by the discussion as made hereinabove; hence, the assessee shall be entitled for the corresponding relief. As a result, these grounds are allowed. 45. In the result, appeal of the assessee is partly allowed. K. IT(ss)A No. 634/Ahd/2011, A.Y. 2008-09 (Revenue's Appeal) (Dr. Dhiren S. Shah)....
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....n law and on facts and circumstances of the case by deleting addition of Rs.25,50,000/- on account of unaccounted cash payment for purchase of shares of the company M/s. CCCPL." 53. We have noted that at page 15 of the order of learned CIT(A) a clear cut finding was given by appreciating the fact that, quote "In the case of Dr. Gunvant T Patel the share application money of Rs.4,50,000 was received on 24th to 27th March, 2008 and Rs.3,00,000 from D.P.S. Iyenger on 24.3.2008. There is no document found from any premises which indicate that these four doctors have paid cash over and above the share application money of Rs, 10 per share. In the case of other doctors whose names are appearing at page 84 of file 2-1-08.kpc, I have held that they have paid amounts in the ratio of 85% over and above 15% amount paid by them for the purchase of land. However, there is no such evidence either in the seized documents or in the statements recorded during the course of search or subsequent to the search which indicates that the appellant 4 doctors have also paid cash towards the purchase of shares of CCCPL. In fact, on 31/3/2008 they were allotted shares by CCCPL. Till 31/3/2008 the amounts re....