TaxTMI 
TaxTMI 
2015 (5) TMI 723
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....at the order dated 09.12.2014 passed u/s 250 of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals) Rohtak is against law and facts on the file in as much as she was not justified to reject the application filed under Rule 46A of the Income-tax Rules, 1962 for submission of following documents as an additional evidence on the unjustified and arbitrary ground that the same are not covered under Rule 46A(1) of the Income-tax Rules, 1962 and that the same are mere after thoughts in order to obfuscate the issue and in any case, have no bearing on the transactional aspect of this case:- Ø Copy of Memorandum & Articles of Association of Mls Smriti Buildcon Pvt Ltd; Ø Copy of audited financial statement as on 31.03.2007 in the case of M/s Smriti Buildcon Pvt Ltd; Ø Copy of order of assessment dated 28.12.2010 in the case of M/s Smriti Buildcon Pvt. Ltd. for Assessment Year 2008-09; Ø Copy of order of assessment dated 31.12.2010 in the case of Smt Ritu Parwal for Assessment Year 2008-09; Ø Copy of submission in the case of Smt Ritu Parwal for Assessment Year 2008-09; Ø Copy of order of CIT(A) dated 23.10.2012 in the c....
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....y receipt on account of sale of shares of M/s Smriti Buildcon Pvt. Ltd. for a sum of Rs. 8.70 crores paid by one Group of companies called HBN. Consequent to this information, a survey operation under Section 133A of the Act was conducted by the Investigation Wing at the office premises of the appellant, based on the strength of this information furnished by the officials of HPN Group of Companies that on money was paid to the appellant and his spouse, namely, Mrs. Ritu Parwal. A notice under Section 148 of the Act was issued on 23rd August, 2011. In response to this notice, the appellant submitted on 21.09.2011 that the original return filed on 19.08.2008 should be treated as return filed incompliance of the notice under Section 148 of the Act. Against the said return of income, the assessment was completed at Rs. 8,93,13,680/- vide order dated 24th September, 2012 under Section 143(3) read with Section 147 of the Act. While doing so the learned Assessing Officer made the addition of Rs. 8,70,00,00/- on account of undisclosed short term capital gain from sale of shares in M/s Smriti Buildcon Pvt. Ltd. The factual matrix leading to the addition by the Assessing Officer is as follow....
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....ayments is mentioned in page No. 116 itself, which is reproduced as below: 'Details of payments' Payment Payable Paid Balance Total Payments 12.95 9.5 3.45 Cash 8.70 6.95 1.75 By Cheque 4.25 2.55 1.70 Details of cheque paid from HBN Dairies A/c Smriti Buildcon 2.15 Sanjay Parwal 0.20 Ritu Parwal 0.20 Total 2.55 Balance to be paid 1.70" Please acknowledge the same and also explain the sources of payment made in cash Ans: Yes, I acknowledge the same as also the fact that the property was purchased for Rs. 12.95 crore, which includes a cash payment of Rs. 8.70 crore. The property was purchased in the account of M/s Smriti Buildcon Pvt. Ltd. through transfer of shares. The sources of cash payment of Rs. 8.70 is known to promoters & Directors only. The above mentioned seized documents were also shown to Sh. Pankaj Tetarway, General Manager of HBN Group by the investigation wing. While recording his statement during search proceeding, he also admitted that a cash payment of Rs. 8.70 crores was made in this deal. Relevant portion of statement of Sh. Pankaj Tetarway, General Manager of HBN Group is reproduced hereunder:- R....
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.... at Rs. 12.95 crores conveyed by Sh. Nehra, in between another deal for the purchase of a shop for Rs. 50 lakhs was proposed by Sh. Nehra to partly make-up for the difference between the above two amounts. However, the proposal regarding the shop did not materialized and the deal for transfer of property through transfer of shares for Rs. 12.95 crores only. The difference was appropriated by Sh. Nehra as his commission. Que: 25 I am showing you page no. 105 to 108 of annexure No. A-I referred to above which purport to be the details of some work done on the property at B- 53, B-Block, community Centre, Janak Puri, New Delhi., Page No. 106 also contains a memorandum in your own handwriting(also bearing your signatures) regarding the payments of Rs. 80,00,000/- + Rs. 25,00,000/-. The memorandum in your handwriting is reproduced below: "Payment made till date: 80,00,000/- Payment made today : 25,00,000/-" Please explain the nature of transaction? Ans: I acknowledge the above documents. The documents contain the working regarding the working of expenditure made on B-53, B-Block, community Centre, Janak Puri, New Delhi. The figures printed in black represent the a....
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....ew Delhi of Sh. Sanjay Parwal (the then director of M/s Smriti Buildcon Pvt Ltd) and the Director of M/s Vijay Shree Builders Pvt. Ltd. However, during the course of recording his statement on oath before the Investigation Wing, he did not accept the fact that any cash was received by him and/or his wife in respect of the sale of property in question. Further, during the course of search operation on HBN Group U/S 132 of the Income Tax Act, 1961 by the Investigation Wing, 14(fourteen) lockers related to HBN Group and family members of Sh H S Sran were restrained. During the course of operating the locker no. 409 in the name of Sh. H S Sran, located at Canara Bank, Vikas Puri, New Delhi on 15.01.2010 some documents including agreement to sale related to property no. B-53, B-Block, Community Centre, Janak Puri, New Delhi were seized. The aforesaid agreement to sell was made on 14.01.2008 between Mr Virendra Nehra S/o Sh. Partap Singh Nehra Rio A-1/84, Chankya Place, Opp. C-l, Janakpuri, New Delhi- 110059 and Sh. Harmender Singh Sran S/o Sh. Baldev Singh Sran R/o M-105, Guru Harkishan Nagar, Paschim Vihar, New Delhi 110067. This agreement to sell is related to property no. B-53, B-B....
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...., A-1I84 Chankya Place, Jankpuri, New Delhi also on 02.02.210. During the course of survey proceedings, statement of Sh. Virendra Nehra was recorded on oath by the Investigation Wing whereby he admitted that he acted on behalf of Sh. Sanjay Parwal / Smriti Buildcon Pvt Ltd in selling the property at B-53, B- Block, Community Centre, Janak Puri, New Delhi to Mls HBN Dairies & Allied Ltd. He confirmed the fact that the total consideration of the said property was fixed at Rs. 12.95 crores out of which Rs. 8.70 crores was given in cash to Sanjay Parwal / Ritu Parwal. Relevant portion of his statement is reproduced hereunder: Relevant portion of statement of Sh. Virendra Nehra recorded on 02.02.2010 by the Investigation Wine. Que: 23 What is your relationship with Mr. Sanjay Parwal? Ans: I do not know Sh. Sanjay Parwal much. However, I helped/acted on behalf of Sh. Sanjay Parwal in Selling his property at B-53, B-Block, Community Centre, Janak Puri, New Delhi to M/s HBN Dairies & Allied Ltd. Que: 24 Kindly give the details of the property in question and the deal as mentioned by you in your earlier answer. Ans: The property no. B-53, B-Block, Community Centre, Janak Puri, New Del....
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....t i.e. 25 Lakhs was handed over to Sh. Sanjay Parwal on the same day. The details in r/o page no. 56 to 58 shown to me have already been explained by me in responses to you earlier question. Further, to verify and confront the contents of agreement to sell in respect of property no. B-53, B-Block, community Centre, Janak Puri, New Delhi, all of the four witness namely Sh. N. S. Tyagi (witness no. 1), Sh. Pramod Singhal (witness no.2) Sh. Pankaj Tetarway( witness no. 3) and Sh. G S Chauhan (witness no. 4) were summoned by the Investigation Wing and their statements were recorded on oath. Among these witnesses Sh. Pankaj Tetarway (witness no. 3) and Sh. G.S. Chauhan (witness no. 4) are the employees of HBN Group and were looking after the affaires of this deal on behalf of HBN Group. During the proceedings of recording the statement, all of them were shown the agreement to sell of property in question and asked them to recognize their signatures on the said agreement to sell. All of the four witnesses admitted to have put their signatures on the said agreement to sell in respect of property no, B-53, B-1, Community Centre, Janakpuri, New Delhi on 14.01.2008. Relevant portions of the....
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....of Rs. 12.95 crores was made to Sh. Virendra Nehra or Sanjay Parwall Ritu Parwal? Ans: Besides, the payment of Rs, 25,00,0001- which was given to Mr. Virendra Nehra in Cash on 14.0 l.2008, rest of the total consideration i.e. Rs. 12.70 crores was paid to Mr. Sanjay Parwal and Riitu Parwal partly by cheques and partly by cash on different occasions. Relevant portion of statement of Sh. G.S.Chauhan (witness no. 4) recorded on oath on 03.02.2012 by the Investigation Wing: Que:3 Do you know Mr. Virendra Nehra S/o Sh. P.S. Nehra r/o Rajouri Garden. New Delhi? Ans: Yes, I know him in relation of a property deal for B-53, B-Block, Community Centre, Janakpuri, New Delhi. He was representing Mr. Sanjay Parwal / Ritu Parwal who owned the said property which was purchased by HBN group. During the course of this deal for the said property, I used to meet him i.e. Sh. Virendra Nehra. Que:4 Kindly explain in details of this deal related to the property no. B-53, BBlock, community Centre, Janakpuri, New Delhi. Ans: The property in question was registered in the name of M/s Smiriti Buildcon Pvt. Ltd.which was owned by Sanjay Parwal & Ritu Parwal. Sh. Virendra Nehra approached the HBN group f....
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....Group of Companies. According to the Assessing Officer the appellant refused to cross examine them. Therefore, the learned Assessing Officer held that the appellant received money of Rs. 8.70 crores from the HPN Group of Companies and thus he brought the said amount to tax. Being aggrieved by this assessment order, an appeal was filed before the learned CIT(A), Rohtak. Before the learned CIT(A), the appellant filed an application under Rule 46A of the Income-tax Rules, 1962 for admission of the following additional evidence: Ø Copy of Memorandum & Articles of Association of Mls Smriti Buildcon Pvt Ltd; Ø Copy of audited financial statement as on 31.03.2007 in the case of M/s Smriti Buildcon Pvt Ltd; Ø Copy of order of assessment dated 28.12.2010 in the case of M/s Smriti Buildcon Pvt. Ltd. for Assessment Year 2008-09; Ø Copy of order of assessment dated 31.12.2010 in the case of Smt Ritu Parwal for Assessment Year 2008-09; Ø Copy of submission in the case of Smt Ritu Parwal for Assessment Year 2008-09; Ø Copy of order of CIT(A) dated 23.10.2012 in the case of Smt Ritu Parwal for Assessment Year 2008-09; Ø Copy of memo of appea....
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....DIT(Inv.), 257 ITR 123 (Del.) iv. Hirday Narain Vs. ITO, 78 ITR 26 (SC) v. Anupam Sushil Garg Vs. CIT, 265 ITR 474 (All.) 6. It was further contended before the learned CIT(A) that the reasons recorded under Section 148 of the Act do not confer valid jurisdiction, inasmuch as, the Assessing Officer merely acted upon the information received from Investigation Wing without applying his mind independently. He further contended before the learned CIT(A) that the reasons recorded under Section 148 of the Act were based on the assumptions, presumptions and factually incorrect information. In this regard, he relied upon the following decisions: i. Shipra Srivastava Vs. ACIT, 319 ITR 221 ii. Lakshya Exim (P) Ltd. Vs. ITO, 12 ITR (Trib.) 303 (Del.) iii. ITO Vs. Bidbhanjan Investment & Trading & Co. (P) Ltd., 132 ITD 51 (Mum.) ITO. iv. CIT Vs. Smt. Paramjit Kaur, 311 ITR 38 (P&H) v. DCIT Vs. Mrs. Rainee Singh, 125 TTJ 816 (Del), upheld by Delhi High Court in the case of CIT Vs. Rainee Singh, reported in 330 ITR 417, vi. CIT Vs. Atul Jain, 199 ITR 383 (Del.) vii. Jaswinder Kaur Vs. ITO, ITA No. 1511/D/2011, A.Y. 2002-03, dated 07.10.2011 viii. Sarthak Securities Co. P. Ltd. Vs. ITO....
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....the addition, learned CIT(A) after considering the seized material as well as the agreement to sell had come to the conclusion that the appellant had received on money of Rs. 8.7 crores. He further held that the submissions made by the appellant are contrary to the evidence on record. Therefore, he upheld the action of the Assessing Officer. He further held that the shares held by M/s Elecom Exports Pvt. Ltd. and M/s SJ Securities Pvt. Ltd. have not been proved and therefore he had not attributed any consideration out of Rs. 12.95 crores. In respect of shares held by the appellant he confirmed the addition @ Rs. 439.43 per share held by the appellant and thereby confirmed the addition to Rs. 8,33,59,871/-. Aggrieved, the appellant come up with the present appeal. 11. The learned Authorized Representative argued on the preliminary ground that the reassessment proceedings initiated are bad in law, inasmuch as, the approval of CIT, Rohtak, was obtained, which was not necessary under the provisions of Section 151 of the Act and he further raised objection that the reassessment proceedings were merely initiated on the directions of Investigation Wing of the Department, New Delhi, withou....
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....ental Representative submitted that the assessment was made based on the concrete information and the appellant had not availed the opportunity to cross examine the witnesses therefore, he cannot complain at this stage about the violation of principles of natural justice. He strongly placed reliance on the orders of the lower authorities. Hence, he prayed for the dismissal of the appeal. 14. We have heard the rival submissions of the parties and perused the material on record. At first instance, we shall deal will the preliminary ground raised by the appellant regarding the challenging of reassessment proceedings. It was the contention of the appellant that the reassessment proceedings are invalid for the reasons that the approval of CIT, Rohtak, was obtained, which was not necessary, in our opinion, this shall not vitiate the reassessment proceedings, inasmuch as, the reassessment proceedings were launched by the Assessing Officer that is the Assistant Commissioner of Income Tax, who is competent to do so as per the provisions of Section 147 of the Act. Since the period of four years had not expired from the end of the relevant assessment year and the original assessment wa....
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....well as Mr. Virendera Nehra who had given statement that on money was paid on behalf of the HBN Group of companies to the appellant on 24th February, 2010 on which date, the appellant was asked to cross examine them. The appellant had not availed the opportunity of cross examination that apart the appellant is very much aware of the adverse information against him as the same was confronted to him during the course of the statement recorded from him by the Investigation Wing. Hon'ble Supreme Court in a case of Sh. Vasantlala and Co. Vs. CIT, (1962) 45 ITR 206 (SC) has held that direct cross examination may not be necessary, if the facts of the case show that the assessee was in knowledge of the facts and the evidence is against him. Therefore, this ratio is squarely applicable to the facts of the case since the appellant was confronted to the adverse information given against him by the said four witnesses. Moreover, the appellant had not availed the offer of cross examination which amounts to waiver of right to cross examine the witness as held by the CIT Vs. Chandravilas, [1987] 164 ITR 102 (Guj.). In In Roger Enterprises P. Ltd. v. DCIT [2004] 88 ITD 95 (Delhi), the assessee cla....
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....refore in the light of the above decision, the arguments advanced by the learned Authorized Representative that the assessment was made in utter disregard of the principles of natural justice cannot be accepted. Accordingly, ground no. 4 is disposed of. 18. Now, we shall deal with ground no. 1 which assails the very addition of Rs. 8.70 crores in the hands of the appellant. The arguments of the learned Authorized Representative that the appellant had not sold the property cannot be accepted since it is judicially well known that in the case of a company the entire property held in the name of Company can be transferred through the mode of transfer of shares. This is approved by the Hon'ble Karnataka High Court in the case of Bhoruka Engineers Vs. DCIT, 356 ITR 25. Moreover, we noticed that M/s Smriti Buildcon Pvt. Ltd. owns only the property in question. Therefore, the underlying object of transfer of shares is only the transfer of property in question. It is well known settled principle of law that the substance of a transaction should be considered rather than the form of the transaction. This principle is reiterated by the Hon'ble Jurisdictional High Court in CIT Vs. EKL Applia....
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....rawn by the Assessing Officer that the on money was paid to the appellant remains unrebutted, therefore, the Photostat copy of agreement to sell can very well form the basis for the addition. Therefore, the reliance placed by the learned Authorized Representative on the decision of Hon'ble Punjab and Haryana High Court in the case of CIT Vs. Sidhu Rice & Gen. Mills, (2005), 142 Taxman 335 (P&H) is misplaced. 21. Moreover, knowing fully well about the incriminating information against him, the appellant had not chosen to rebut the same either before the Assessing Officer or Investigation Wing of the Department and he had not even availed the opportunity of cross examination, therefore, the information that the appellant had been paid on money of Rs. 8.7 crores in connection with the transfer of shares held by him in the M/s Smriti Buildcon Pvt. Ltd. remains uncontroverted. Moreover, it is undisputed facts that the appellant has transferred his shares and controlling interest in M/s Smriti Buildcon Pvt. Ltd. to HBN group of companies with the sole object of transferring the property held by the M/s Smriti Buildcon Pvt. Ltd. This conclusively proves that the agreement to sell entered....