TaxTMI 
TaxTMI 
2013 (11) TMI 1242
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.... for the purchase of land by holding that the said 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/-....
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....res from Dr. Ashit Jain and Rs.1 crore from friends. Since the AO had proposed the addition on 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 rebutt....
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.... noted that subsequently the agricultural land was converted into non agricultural land. The assessee has not disputed those 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 fr....
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....ayment details of hospital project- 4.10 It was a list of the doctors and the amounts already given by them and the balance amount to be received 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 a....
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....30000 3,00,000 17,00,100 4. Dr. Joyal Shah 6000 60,000 3,40,020 5. Dr. Mihir Tanna 6000 60,000 3,40,020 Total.... 893838 89,38,380 5,06,53,799 Therefore, 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 tha....
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....000/-, which was, according to his statement, represented unaccounted investment in land. His finding was as under: "I do not agree with the contention of the appellant Dr. Keyur Parikh that the entry is shown under the head of 15% and 85% 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....
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....s received in cash from a particular Doctor, then, it is to be presumed that that particular Doctor has paid the cash to the company CCCPL; If, on the other hand, the cheque has been shown as received by CCCPL from the concerned doctor, then, the onus is on 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....
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....lable as he was also one of the investor. His statement cannot be ruled out because that statement was made by that person who had been a witness to the transaction. In his statement, he has confessed that the cheque amount and the cash amount were returned by Dr. Parikh to him, pointed out by Ld.DR. He has also 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 sa....
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....tal money was the only payment. Further, he has also informed that the share capital was refunded. There was another statement recorded on 13.04.2010 u/s 131 of IT Act. In that statement made before the AO as per question no.15 he has informed that the land payment was in two parts, 15% by cheque and 85% by cash. The 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 ....
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....Further, a sum of Rs.4,57,23,509/- was paid to the surgeons on their exit from the project. These figures were noted from certain calculation sheets taken out from the computer. Those computer sheets are naturally not signed by any person. Factually, the document which was recovered by the Revenue Department on search operation 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 Depa....
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....in the impugned sale deed. In this connection, our attention has also been drawn on a letter addressed to Superintendent of Stamps dated 5th March, 2007 wherein the assessee company has expressed the desire to pay the stamp duty which was legally required to be paid when the agricultural land was converted / transferred from co-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. T....
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....00,00,000(Approx.) 1st Round: Founder Doctors: At Par Rs.18,00,00,000 Invested in 2006-07 2nd Round: Founder partners Rs.400,00,000 at 100% premium to give Rs.800,00,000 EXPECTED INVESTMENT FROM Kirti Patel M Pharm- (Angel Investor from UK): Rs.200,00,000 at 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 partn....
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....e amount he has invested was refunded as his share application money. Later on an another statement was recorded by the ITO and in that statement Dr. Anil Jain had taken a turtle-turn and alleged the cash component. If we compare a statement u/s.132(4) with the statement made u/s.131 of IT Act then the law is very clear that a statement u/s132(4) has evidentiary value 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 stateme....
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....partial. 8.7 Next point. We have also pondered upon an argument which was raised by learned AR that what was the material evidence in possession of the Revenue Department on the basis of which it was alleged that onmoney was paid for purchase of the land. What was the incriminating evidence in possession of the Revenue Department in support of the said allegation. We are 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 observa....
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.... accounts of the CCCPL and the assessee were examined by the Revenue Department. There was no such evidence unearthed even when the extreme step of search operation was taken against the assessee. The Revenue Department has not found that the professional fees was not fully recorded by the assessee. If there was no element of earning of unaccounted income then it was wrong on the 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 ....
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....tal Factory (I) (P.) Ltd., 124 ITD 14 (Chennai). In this judgment, a search was on the assessee and on the managing director. On appeal CIT(A) had held that the addition made in the block assessment did not emanate from the evidence found at the time of search hence the addition was not sustained. However, learned CIT(A) has directed to issue notice u/s 148 to bring to tax the bogus advances. 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 ....
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....n 31st March, 2008. Case records have revealed that shares were allotted at some premium. Out of which 8,06,838 shares were additionally allotted by CCCPL to Dr. Parikh. The allegation of the AO was that there was a cash component of Rs.56.67, which was in respect of additional shares of Rs.8,06,838/- and therefore, the amount of Rs.4,57,23,509/- was held as 85% balance which was taxed in the total 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 ....
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....igure. It is only on the basis of statement of the six surgeon doctors, the AO held that Dr Keyur Parikh paid the cash to the outgoing six doctors from his unaccounted sources. As can be seen from the above table, 806,838 shares were allotted to Dr Keyur Parikh on 31/3/2008 by the company CCCPL out of the share application money received from him. The outgoing six doctors did not sell the shares of the 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 ....
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....on he has directed to assess the same in the hands of the company CCCPL. Skepticism must not lead to inflict punishment. Rather in a situation when CIT(A) had the uncertainty then judicious approach would be that he should have justifiably deleted the addition on his own, instead of directing the AO to examine the facts and tax in the hands of the company CCCPL. It is worth to mention that as on date nothing 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....
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....e taxed partly in the year 2007-08 and partly in the year 2008-09. Learned AR has raised the legal issue that the learned CIT(A) was not empowered to direct the AO to assess the amount in the case of a person who has so far not been assessed by the AO. Moreover, the appeal of the said other person i.e., CCCPL was not pending before the learned CIT(A). According to learned AR, learned CIT(A) has given direction beyond his jurisdiction. 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 ....
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....d amount of Rs.31.75 lacs was paid in cash towards purchase of land. In the absence of any direct cogent evidence we have taken a view that merely on presumption it was wrong on the part of the Revenue Department to hold that there was cash involvement in the purchase of the land. Resultantly, the impugned addition is hereby deleted and the ground of the assessee is allowed. 25. In the result, the appeal of the assessee is allowed. E. IT(ss)A No. 603/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 we....
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....e side of the respondent-assessee, learned AR has pleaded that the view taken in the lead case of Dr. Keyur Parikh is to be followed in this case as well. Further, he has placed reliance on a decision of DCIT V/s. Mahendra Ambalal Patel, 40 DTR 243 (Guj), wherein the addition was made on the basis of the statement of a third party. The Hon'ble Court has opined that the Tribunal was right in deleting the addition by holding that the basis for making the addition in the hands of the assessee was merely on a bald statement 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 Learn....
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....ering the details and submissions made by the Respondent has rightly held that "there is no evidence in the form of seized documents, statements recorded during or after the date of search or during the assessment proceedings which proves that these four doctors have also paid cash over the above cheque amounts. In absence of any evidence regarding the cash paid by the appellant 4 doctors, the AO is directed to delete the addition of unaccounted investments in shares of CCCPL made in their cases." 38. The CO has been filed in support 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 inve....
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....rce. Hence dismissed. 43. In the result, appeal of the Revenue is dismissed. J. IT(ss)A No. 640/Ahd/2011, A.Y. 2008-09 (Assessee- Dr. Urmil G. Shah's Appeal) 44. At the outset, learned AR has informed that ground nos.1 and 2 are general in nature, hence not pressed. Learned AR has informed that only ground nos. 3, 4 & 5 are required to be decided, reproduced below: "3. Without prejudice, on the facts and in the circumstances of the case, the CIT(A) erred in holding that the assessee had made an undisclosed investment of Rs.46,75,000 in connection with the hospital project 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 asses....
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.... received by CCCPL in cash from the appellant that represented unaccounted income of the appellant. This action is in clear breach of Principles of Natural Justice and therefore deserves to be quashed." 50. In the light of the above view, as a consequence, these grounds are allowed. 51. In the result, assessee's appeal is partly allowed. M. IT(ss)A No. 611/Ahd/2011, A.Y. 2008-09 (Revenue's Appeal)(Dr. Gunvant Tulsibhai Patel) 52. This is an appeal filed by the Revenue arising from an order of learned CIT(A) dated 13.09.2011 and the only ground of the Revenue is reproduced below: "The Ld. CIT(A) has erred in 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 ....