TaxTMI 
TaxTMI 
2015 (7) TMI 799
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.... Validity of proceeding initiated under section 153C of the Act. (ii) Disallowance of 50% out of the expenditure claimed on the commission income. (iii) Addition of Rs. 1,33,00,000 under section 69A of the Act. 2.1. While issue No.(i) and (ii) are common in all the appeals, issue No.(iii) is specific to A.Y. 2009-2010 only. 3. At the outset, we propose to deal with the merits of the additions made on account of disallowance of 50% of expenditure of commission income as well as addition under section 69A of the Act. As far as the first issue relating to disallowance of 50% expenditure of commission income is concerned, briefly the facts are the assessee an individual is a Director of M/s. Talwar Mobiles P. Ltd., and M/s. Talwar Auto Garages P. Ltd., That apart assessee also derives income from commission. A search and seizure operation under section 132 of the Act was conducted in case of Mr. Suresh Chand Agarwal and others in the group on 29.10.2010. During the search and seizure operation, certain documents were seized which revealed a transaction relating to sale of property named as "The Trails" at Plot No.6, Gated Community, Manikonda Jagir Village, Rajendra Nagar Mandal, R....
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....ut of the expenditure claimed, that too in an assessment under section 153C of the Act without referring to any incriminating material. 5. The learned D.R. on the other hand, justified the disallowances. 6. We have considered the submissions of the parties and also perused the orders of the revenue authorities as well as other materials on record. As can be seen, the A.O. made an adhoc disallowance of 50% of expenditure claimed to have been incurred in earning commission income, primarily for the reason that assessee has not been able to explain fully that the expenditure claimed was wholly and exclusively laid out for the purpose of business. However, from the observations of the A.O. in the assessment order, it is clear that during the assessment proceeding, the assessee has furnished the details of expenditure incurred by furnishing names of the persons to whom payments were made, cheque numbers and amount paid. In contrast, the A.O., as it appears, has not made any enquiry either with regard to the genuineness of such payment or whether such payments were required for the purpose of business or not before making adhoc disallowance of 50% of the expenditure. When the assessee ....
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....tion of Rs. 1,31,00,000. As a follow-up to the agreement of sale, an unsigned letter was also found and seized which stated that an amount of Rs. 2,66,00,000 has been paid by Mr. Suresh Chand Agarwal to the assessee and his wife and balance amount of Rs. 55,00,000 remains to be paid out of the total sale consideration. Certain receipts, allegedly executed by the assessee, were also seized which indicated that the assessee received an amount of Rs. 2,30,00,000 in cash on different dates on account of sale consideration of the property owned by him in addition to the amount of Rs. 36,00,000 received in cheque. The A.O. observed that in the course of post search proceeding when the assessee was confronted with the seized material, in statement dated 08.11.2011, the assessee admitted that signature on the receipts appears to be his, but, at the same time, he expressed that he had no knowledge of the contents of the receipts. The assessee however denied of receiving the cash of Rs. 2,30,00,000. Even in the course of assessment proceedings also, a statement was recorded from the assessee on 20.03.2013 and in the course of recording of such statement, the assessee again denied of having r....
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....completed. However, according to the Ld. CIT(A), when signed receipts of the assessee forming part of the seized document clearly indicate that the assessee has received cash of Rs. 2.30 crores along with cheque payment of Rs. 36 lakhs, the claim of the assessee that no such payments have been received cannot be accepted. Finally, the Ld. CIT(A) confirmed the addition on the following reasoning. (i) "There was a search at the premises of the intending purchaser of the property where the agreement of sale between the said person with the appellant has been found. (ii) As per the agreement of sale, there was a transaction for purchase of the property, "The Trail" at Plot No.6, Gated Community, Manikonda Jagir Village to which the appellant and his wife are parties along with the intending purchaser, i.e., Sri Sureshchand Agarwal. (iii) There were documents showing the total payments made both in cash and cheque and the appellant's claiming that only the cheque payments were the total consideration cannot be accepted because the document as a whole needs to be considered and cannot own part of it and disown the inconvenient one. (iv) The intending purchaser admitted to have pai....
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....stated that the signature in the receipts appears to be his that itself will not be enough to prove that he has signed those receipts or has received amounts mentioned in those receipts. The learned A.R. submitted that for making addition under section 69A of the Act, money, bullion and jewellery has to be found in possession of the assessee whereas in the present case, no money was found with the assessee to attract the provisions of section 69A. He therefore submitted that the addition made in violation of the statutory provision and also not based on any evidence has to be deleted. 11. Learned D.R. on the other hand submitted before us that the seized documents having clearly established the fact that assessee has received an amount of Rs. 2.30 crores in cash and Rs. 36 lakhs in cheque from Mr. Suresh Chand Agarwal towards sale of the property during the relevant previous year, the addition made in is justified. Learned D.R. submitted that there is nothing contained under section 69A to suggest that the addition can be made only in case of actual money having been found in the possession of the assessee. Alternatively, it was submitted that even if the addition cannot be made u....
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.... been made at the hands of the assessee and his wife. Therefore, the preliminary issue to be decided is, whether on the basis of the unsigned letter dated 19th November, 2009 and certain receipts purportedly signed by assessee, addition can be made under section 69A of the Act. 12.1. It needs to be mentioned, assessee from the very initial stage of the proceeding has denied of receiving any cash amount from Mr. Suresh Chand Agarwal towards the sale of property. It is also evident that apart from the receipts and the unsigned document, there is no other evidence in the possession of the department to conclusively prove that the assessee has actually received the amount of Rs. 2.66 crores from Mr. Suresh Chand Agarwal. On a plain reading of Section 69A, it is very much evident that the said section can be invoked only in a case where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery, article, which is not recorded in the books of accounts and further assessee offers no explanation with regard to such money, bullion, jewellery or explanation offered, is not found satisfactory by the A.O. In the present ....
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....ssessed under the Head "Capital Gains". For this purpose, it will be relevant to look into some other documents which also form part of the seized material. Amongst them is a letter dated 22.01.2010 (probably date is wrong) which speaks of returning the amount of Rs. 2,61,00,000 to Mr. Suresh Chand Agarwal by assessee and his wife. Of course, this document is again an unsigned one. There is an undertaking by the assessee and his wife for returning the amount of Rs. 1,90,00,000 to Mr. Suresh Chand Agarwal. There is also a cancellation deed executed between the assessee and his wife with Mr. Suresh Chand Agarwal cancelling the agreement of sale for sale of the property. Sale consideration mentioned in the aforesaid cancellation deed is Rs. 1,31,00,000. It also appears that the cancellation deed has been signed by all the parties. As per the said cancellation deed, one of the reason for cancelling the agreement of sale is, the market value of the property in the meanwhile has gone-up to Rs. 3,21,00,000. One of the clause in cancellation deed also specifies that if the property is sold for less than the market value of Rs. 3,21,00,000, the vendors will adjust a maximum amount of Rs. 15....
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....d his wife to return back the money to Mr. Suresh Chand Agarwal, receipt executed by Mr.Suresh Chand Agarwal, which were also part of the seized material. Keeping aside for the moment assessee's claim that he never received the amount of Rs. 2.66 crores and also assuming that the contents of the unsigned letter dated 19.09.2010 and receipts are correct, however, on consideration of the entire seized material as a whole, the situation which emerges is, though the assessee might have received an amount of Rs. 2.66 crores from Mr. Suresh Chand Agarwal towards part sale consideration of the property but he was supposed to return back the money to Mr. Suresh Chand Agarwal once the transaction did not materialize and agreement of sale was cancelled. Therefore, the amount of Rs. 2.66 crores being a debt due to Mr. Suresh Chand Agrwal cannot be treated as income of assessee and his wife. Moreover, it is neither expected nor believable that inspite of the fact that the transaction fell through and property was ultimately sold to a third party, Mr. Suresh Chand Agarwal would have given up his right over such a substantial amount of money and kept quite without recovering it from the assessee....