TaxTMI 
TaxTMI 
TaxTMI 
2016 (2) TMI 835
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....come Tax] and that appeal was dismissed by the Division Bench of this Court on 6th April 2015. Search and Seizure operation 3. The background facts are that the Respondent-Assessee is engaged in the business of real estate development and was incorporated on 2nd July 1998 under the Companies Act, 1956. 4. A search and seizure operation under Section 132 of the Act was carried out at the business premises of the Assessee and residential premises of its Directors on 8th May 2003. For quite some time thereafter no further proceedings took place. 5. During the search and seizure operation, the Revenue seized various materials including inter alia the documents stored in the computer of one Mr. Sunil Awasthi, an employee of Vatika Group to which the Assessee belongs. These documents contained the working of the anticipated sale revenue on account of sale of space in the Vatika Triangle ('VT') and Vatika World ('VW') commercial complexes. The construction of these commercial complexes commenced in the financial year ('FY') 2001-02 (relevant to the Assessment Year 2002-03). VT comprised of eight floors (ground plus seven floors) having an aggregate area of 1,30,428 sq.....
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.... pointed out that Mr. Awasthi had been working as a Junior Executive under Mr. Pankaj Pal, Vice President (Marketing Division) of Vatika Group. The Assessee volunteered that "it is evident from the plain reading of the paper that these are mere projections and do not represent any completed materialized transaction." It was submitted that the said paper did not reflect that those were the actual sale rates. Attention of the AO was drawn to the footnote on the third page of the print out of the computerized file of Mr. Awasthi which read as under: "(i) It is presumed that the building will be completed and fully let out in the month of November 2002. (ii) Sale of building will took place over a period of nine month. (iii) Advance rent is adjustable in equal instalments over a period of 36 months (iv) Sale value calculated after adjustment for the security deposits and unadjusted advance Rent Deposit. (v) No Tax deducted at sources is considered on the rental revenues." 9. The Assessee in its reply pointed out that the projections "do not refer to any materialized transactions." It was further pointed out that although print out was titled 'Cash in flow detail for the reve....
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....Rs. 17,93,217. According to the Assessee, the hand writings at the bottom of the page and adjoining sheets of A1/60 were dumb workings and mere figures. 12. As regards documents Annexure A-1 and Annexure A-9 seized from the residence of Mr. Anupam Nagalia, Director of the Assessee, it was submitted that they were mere projection sheets prepared by Mr. Anupam Nagalia who would be the best person to explain them. A request was made to summon Mr. Nagalia since the seized documents did not pertain to the Assessee. It was pointed out that the documents seized were not in the handwriting of the Assessee. As far as Annexure A-1 was concerned, it was submitted that it was an estimated working of assumed payments and receipts with the interest thereon. 13. As regards Annexure A-13 seized from the office of Vatika Group at First India Place, Gurgaon, inter alia stated to be in handwriting of Mr. Mrinal Nag whose statement was recorded by Deputy Director of Investigation ('DDI'), the Assessee explained that the said papers had nothing to do with the Assessee. They had not been found in the control and possession of the Assessee. It was reiterated that the Assessee "enters into transactions ....
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....s: (i) The plots in VT were surrendered by Mr. Rajesh Bhatia and Ms. Poonam Bhatia at the rate ranging from Rs. 4,682 to Rs. 4,800 per sq.ft. in the month of February 2003 which shows that the plots in VT were sold at a rate ranging from Rs. 4600 to Rs. 4800 per sq.ft. in the month of February 2003. The entries mentioned on the reverse of page No. 26 of Annexure A-9 seized from the residence of Mr. Nagalia further strengthened this fact and revealed that Rajesh Bhatia and Poonam Bhatia had purchased their plots in VT at Rs. 4350 per sq.ft. in August 2002 and had further sold their respective plots in VT at Rs. 4682 per sq.ft. in February 2003. (ii) From the sale register (Annexure A-18), it was revealed that Mr. K.L. Verma and his family members had made a total investment of Rs. 4,11,43,300, out of which an amount of Rs. 1,65,44,740 was paid through cheques and the balance of Rs. 2,45,98,500 was paid in cash. These very flats were repurchased by the Assessee and sold to other persons at much higher rate. This was corroborated by the figure mentioned in the documents seized from the computer operated by Mr. Sunil Awasthi in which the sale rate was mentioned at Rs. 4,000 per sq.....
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....e made basis for making any addition in the hands of the Assessee unless a logical conclusion could be drawn from them. (ii) No adverse view was possible on the basis of entries recorded in Annexure A-13. The author of that document, Mr. Mrinal Nag, clarified that the entries therein were made by him for the purposes of a job at Unitech. (iii) As far as the print out of the file recovered from the computer of Mr. Sunil Awasthi was concerned, it established that the rate at which the flats on the second and third floor were sold was Rs. 3,250 per sq.ft. This was in excess of the sale consideration to the extent of Rs. 5,60,73,380. (iv) Annexure A-1/16 seized from the office of Vatika Group at First India Place, from the computer of Mr. Anupam Nagalia, did not indicate the consideration for the purchase of flats held by the Bhatias in VT. Therefore, no adverse view could be drawn from the said documents. (v) As regards the sale of flats to Mr. K.L. Verma and family and the group Company M/s. Sunflame at VT, no documents were seized on the basis of which it could be said that some part of the consideration was paid in cash. (vi) Page 14 of Annexure A-13 maintained by Mr. Mri....
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....statement of sale consideration. 3. The CIT(A) has erred in deleting the addition of Rs. 1,04,39,000 on account of addition made for a accommodation entry by the assessee as the additions were made by the Assessing Officer on the basis of discussion and derived from the seized documents during search operation. Order of the ITAT 26. By the impugned common order dated 8th March 2103, the ITAT dismissed the Revenue's appeal while partly allowing the Assessee's appeal. With regard to issue of the alleged undisclosed receipt on sale of flats/space in VT, the ITAT deleted the additions made by the AO as sustained by the CIT (A) of Rs. 5,60,73,380. It however upheld the additions of Rs. 1,35,00,000/- and Rs. 49,64,904/- aggregating to Rs. 1,84,64,904/- out of Rs. 2,00,14,904/- sustained by the CIT (A) in respect of the alleged undisclosed receipt on sale of flats/space in VW. The ITAT also deleted the implied confirmation of the addition of Rs. 20 lakhs made by the CIT(A). The ITAT held as under: (i) Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. As the statutory provisions go to show, it is not intend....
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.....e. Rs. 11,34,05,096 plus Rs. 15,50,000) out of the total addition of Rs. 13,84,20,000 made by the AO on account of undisclosed income not declared by the Assessee in its books of account? 3. Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in law in deleting the addition of Rs. 1,04,39,000 made by the AO on account of accommodation entries taken by the Assessee? 4. Whether on the facts and circumstances of the case, the order of the ITAT is not perverse as it has failed to consider that in this case, the AO made the addition on the basis of the relevant searched material gathered from the Assessee during the course of the search proceedings?" 29. However, by an order dated 20th May 2015 the only question that was framed for consideration by the ITAT was as under: "Did the ITAT fall into error in holding that the addition of Rs. 5,60,73,380 was unsustainable in law in the circumstances of the case?" 30. Consequently, as far as the present appeal by the Revenue was concerned, its scope is confined to the question framed viz., the sustainability of the deletion by the ITAT of the additions made by the AO as sustained by the CIT....
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.... accepting only one part of document which was otherwise characterized as projections. Merely because the portion that was accepted indicated that flats on the second and third floor had already been sold, it did not mean that the flats were sold at the rates mentioned therein. 35. Mr. Agarwal further submitted that once the sheet is held to be a projection statement, it is to be treated as such for all purposes. He also pointed out that the area stated in the document for the third floor was 17,004 sq.ft whereas the actual area was 16,121 sq.ft. Further up to AY 2003-04, the fourth floor had also been sold but it was not indicated so in this document. The constructed area recorded in the Sheet No. 10 was 1,30,425 sq.ft. whereas the total area sold was 94,671.09 sq.ft. The other figures noted in Sheet No. 3 (corresponding to Sheet No. 10) were only projections. Mr. Agarwal also pointed out the foot note on Sheet No. 3 indicated that "it is presumed that the building will be completed and fully let out in the month of November 2002." In the note it was observed that on the basis of Sheet No. 4 that "anticipated sale proceeds of seven floors has been worked out at Rs. 47 crores." Al....
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....ation in respect of the flats in VT. Lastly, it was submitted that the ITAT had based its conclusion on an interpretation of the documents in question and the said finding was essentially a finding of fact. Reliance was placed on the decisions in Commissioner of Income Tax v. Kantilal Prabhudas Patel (2008) 296 ITR 568 (MP) and Commissioner of Income Tax v. Manish Buildwell (P) Ltd. (2011) 245 CTR 397 (Del) to underscore the point that the additions cannot be made on guess work or estimates. Discussion and Reasons 38. At the outset the Court would like to recapitulate the scope of search proceedings under Section 158BC under Chapter XIV B of the Act. In Commissioner of Income Tax v. Ravi Kant Jain (supra) the Court explained: "The special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. As the statutory provisions go to show, it is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be d....
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....nvocation of sections 158BB and 158BC." 40. Turning to the case on hand, the document recovered from the file in the computer of Mr. Awasthi, forms the basis of the addition made by the AO, which was further reduced by the CIT (A). This was in the form of a computer print out of three sheets which were unsigned and undated. The first sheet was titled 'Cash-in-flow detail for the revenue', the next was titled 'Revenue details' and the third was titled 'Vatika Triangle, Guargaon.' The notes to the documents are indicative of their being projections. Noting (i) states that "it is presumed that the building will be completed and fully let out in the month of November 2002." Another note states "Further, the sale of the building will took place over a period of nine months." Admittedly, as on the date of the search the construction was still in progress. Flats up to the fourth floor had been sold. The view taken by the ITAT that mere fact that the print out states that the flats on second and third floor have been sold, does not necessarily mean that they were sold at the rates indicated therein is definitely a plausible view to take. 41. Considering that the document was recovered fr....
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.... Seventh floor 4,000 3,360 44. The above projection statement mentions rates for seven floors whereas the construction was still in progress and the seven floors had not been completed. There is another anomaly inasmuch as in para 8.28 of the order of the CIT (A), it is observed that the said document cannot form the basis of determining the actual rate of sales for the remaining floors, and yet, as rightly pointed out by the ITAT, those rates have been relied upon by the CIT (A) to determine the amount that should be added in respect of the sales of the flats on the second and third floors of VT. 45. As pointed out in Commissioner of Income Tax v. S.M. Aggarwal (supra) the said document can at best be termed as a 'dumb' document which in the absence of independent corroboration could not possibly have been relied upon as a substantive piece of evidence to determine the actual rates at which the flats were sold. Further as pointed out in Commissioner of Income Tax v. D.K. Gupta (supra) merely because there are notings of offers on slips of paper, it did not mean that those transactions actually took place. Likewise in Commissioner of Income Tax v. Girish Chaudhary (supr....