TaxTMI 
TaxTMI 
2015 (12) TMI 1650
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....said group had promoted a building project by name "Legend" through a company named M/s Layer Exports Pvt Ltd. During the course of search, certain loose papers were found which related to the sale transactions of flats. The page no.15 of the loose paper contained certain entries relating to sale of flats to Shri Ashok R Mehta and smt. Vimala R Mehta, who had jointly purchased flat. The assessing officer infered from the entries made in the loose papers that the assessee herein had paid cash of Rs. 6.84 crores in connection with the purchase of flats from out of her undisclosed income and accordingly reopened the assessment of the assessment year under consideration. It is pertinent to note that the assessee herein had jointly purchased the flat along with two other persons, but the AO chose to take action in the hands of the assessee herein only. 3. When the loose papers were confronted with the assessee, one of the co-owners named Shri Ashok Mehta denied the payment of cash both in the sworn statement taken from him as well as in the affidavit filed by him subsequently. One of the directors of Bharat Shah group also denied receipt of any cash as infered by the assessing office....
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....uments found & seized as discussed above, the assessee has made an amount of Rs. 6,84,60,000/- by way of cash towards the purchase of the above flats, in addition to the cheque payments. iii. As per the purchase agreement, assessee has paid purchase cost of Rs. 3,85,67,640/- but stamp duty authorities have taken higher value. iv. The Stamp duty authorities have valued the property at Rs. 6,42,37,636/- as against the purchase cost shown by the assessee at Rs. 3,85,67,640/- which itself is a corroborated evidence to show that the actual prevailing rate at that time was much higher than the agreement value as shown by the assessee. v. In the building Legend, other family members of the assessee has also bought flats and made cash payments which is unearthed during the course of search action by the investigation wing, as can be seen from the statement recorded of Shri Ashok Mehta, vi. The above discussed 'loose paper sheet' page No. 15 forms part of this order as Annexure "A'," 2.4.25 While making the addition, Ld. AO has based his decision on the basis of scribbling done on a loose sheet of paper serially numbered as Annexure A-1/15 wher....
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.... 3.85 crores which was corroborative piece of evidence to show the actual prevailing rate. In this regard, it has been stated that the first payment for the purchase of the flat was made in the year 2004. However, the appellant has submitted that if the alleged cash of Rs. 6.85 crores is added to the cheque amount of Rs. 2.85 crores appearing at Page No. 15 of the seized document, the alleged value would be Rs. 9.69 crores and ostensibly the appellant would not have paid Rs. 9.69 crores for an asset which had market value of Rs. 6.42 crores only. iii) The appellant has stated that the seized document, Page No. 15 on the basis of which the assessment has been framed, is a dumb loose sheet of paper seized from the premises of a third party, namely, M/s. Bharat Shah Pvt. Ltd., whereas the builder firm constructing the building in question was M/s. Layer Exports Pvt. Ltd. iv) The appellant has also challenged the reopening of the assessment by stating that you have relied upon the communication received from the Assessing Officer in the case of M/s. Layer Exports Pvt. Ltd., without applying your own independent mind about conclusion of escapement of income as nowhe....
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....t Mr. Ashok R. Mehta have bought 15th and 16th floor in Legend Project and cheque received of Rs. 2,85,00,000/- has been received. This also tallies with the details submitted by the assessee that the total of first three cheques received by the assessee vide cheque No.910755, No.910760, & No.633881 being Rs. 35,OO,OOO, Rs. 2,OO,OO,OOO and Rs. 50,OO,OOO totalling to Rs. 2,85,OO,OOO/-. Instead of full spelling of cash and cheque, it is written as SH for cash and Q for cheque, it can be clearly inferred that total Rs. 6,84,60,000/- has been received in cash for flats on 15th and 16th floor and Rs. 2,85,00,000/- has been received by cheque. The purchase cost shown by the assessee at Rs. 3,85,67,640/-whereas the Stamp duty authorities have valued the property at Rs. 6,42,37,636/-. During the course of assessment proceedings the assessee has sufficient time to explain his case but he did not prove that cheque payment was Rs. 3,85,67,640/- instead of Rs. 2,85,00,000/- on the basis of loose paper and investigation report received in this office and after relying the facts the assessing officer has rightly taken the amount of Rs. 2.85 crores. (ii) As per para no. 9(iv) of the asse....
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....ary that papers belonging to a particular company should be kept at the said Company's premises only. It can be kept at any premises owned by the same Director, either his residence or in any of his own company's premises as long as he is the owner/director of the companies. The Assessing officer has briefly discussed this issue in her order at para no.4 page 11 to 13 and also at para 1 & 3 at page no 17. iv) Assessee stated that the 'Case was reopened only on a communication received from the Assessing officer in the case of M/s Layer Export Pvt.Ltd. without applying independent mind about conclusion of escapement of income as nowhere on the loose sheet of paper (page no. 15) the name of the appellant, late Mrs.Vimla Mehta is mentioned. The assessee has challenged the reopening of assessment during the assessment proceedings and now before your honour also. During the assessment proceedings the assessee has quoted various court decisions challenging the reopening of the assessment. The fact is that the assessment was reopened not only on the basis of the information received from the ACIT CC 24 & 25, Mumbai, but also on the huge difference in the s....
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....ditional issues raised before your honour is against the spirit of Rule-46A. As such, it is requested that the same may not be admitted and the issues involved in the appeal may kindly be decided on merits." 2.4.28 The same was forwarded to the appellant for her rejoinder, if any, Appellant's AR vide letter dated 22.01.2014 filed the rejoinder which reads as under:- "2. In furtherance to the submission dated 07.01.2014 & 21.02.2014 already filed in your Honour's office and in response to the remand report of the AO which was forwarded along with your letter No CIT(A)-27/Remand Report/2013-14 dated 18-02-2014 we have submit as under: 3. On the first point raised in para 3(i) of the remand report we have to submit that the appellant very clearly and emphatically stated before the A O. that the loose sheet on which the whole assessment order is founded does not relate to the transaction done by the appellant as the notings in the relevant loose sheet contain vital particulars which do not match with the specifications of our transaction. The first and foremost point made was that the appellant's name is no where mentioned in the sheet. In a search material of the k....
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....party. The AO has stated that it is not necessary that papers belonging to a particular company should be kept at the premises of the said company. It can be kept at any premises owned by same director. The A. 0. is not legally correct to make this argument in view of provisions of section 292C which raises a presumption of belonging in favour of the individual or entity from whose control or custody the documents are recovered and seized. Further if the AO is claiming that the document belonging to 1 person was found from the premises of other person the onus is on him to lead evidence to prove that it actually belong to that person which onus has not been satisfactorily discharged. Further it has to be kept in view that the seized paper is dumb document and therefore, it is not easy to establish its connection with any person other than from whose custody it has been seized. 6. Further at point no 3 (iv) of the report the A. O. has contended that the assessment was re-opened not only on the basis of the information received from ACIT CC 24 & 25, Mumbai but also on account of the huge difference in stamp duty valuation and purchase price shown by the assessee. This comment is f....
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....d on loose sheet of papers bearing No.A-1 /15 is part of 19 loose sheets which were seized from the same premises and some of the other assesses, in whose case the additions were made and who had gone before the appellate authorities, have received favourable decision in the first appeal. In the case of one such appeal, Ld. CIT(A)-11 in Appeal No.CIT(A)-11/IT/Rg.2(1)/11-12/522 vide his order dated 2501.2012 has, inter alia, held as under:- "4.10 As per the details of payment furnished vide page 1 of the Paper Book and reproduced in para 4.1 above, total cheque payment in FY 2003-04 is Rs. 1,53,00,000/-, 77,00,000/- paid by the assessee and Rs. 76,00,000/- paid by Smt.Lalita Siroya (wife of the assessee). Date of search in this case is 15.03.2008 and from the details of payment in the said chart, the entire cheque payment of Rs. 2,37,52,200/- has been made by 18.02.2008. As per the seized document, cheque payment received, as seen, is Rs. 1 crore only. Therefore, even the details of cheque payment till the date of search do not match with the noting in the sheet. 4.11 On a careful examination of the copy of seized document as provided together with the facts as adm....
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....tten which can be clearly inferred as that total 5 car parking for a consideration of Rs. 25 Lakhs has been purchased. This details also tallies with your previous answers that 5 car parking were purchased? Ans. I have not given any cash and the garages were including with the purchase of each flats as explained above i.e 3 and 2 with all flats. Regarding cheque payment total payment paid by my family is Rs. 3,35,00,000/- and Rs. 1,18,00,000/- by me and my mother respectively. 2.4.32 Similarly, the statement of Shri Bharat Shah, director of M/s. Layer Exports Pvt. Ltd. was also recorded u/s.132(4) on 08.05.2008 where he emphatically denied mention of cash in any of the papers seized. Relevant part of his statement is as under:- Q.4. The pages in Annexure A-1 (1 to 19) mentioned above in Q. No. 3 have been found and seized from your office. Accordingly, the same are presumed to be belonging to you/ your business and you are supposed to know the contents of the same. Kindly avail another opportunity to explain the same. Ans. In our office at 3rd Floor, Gamdevi, old papers since 1985 are lying. This office is a site office for construction project and so many persons/ cust....
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....t such presumption. If the assessee had by affidavit denied the ownership of the document and the wife of the assessee's brother admitted that it belonged to her husband, it could not be inferred without rebutting this evidences that the document and transaction recorded therein, in fact, belonged to the assessee. The affidavits, even if regarded as self-serving did not lose their evidentiary value as there was no material contrary to the averments made in the affidavit. Nothing was shown by the Assessing Officer that there was other material correlated with the document clearly showing that it belonged to the assessee. Under these circumstances, the assessee has successfully shifted the onus on to the Assessing Officer by filing the affidavits. Once the onus shifted to the Assessing Officer, he was duty bound to collect evidence so as to belie the contents of the affidavit and hold that the document and transaction recorded therein, in fact, belonged to the assessee. The Assessing Officer had drawn inferences, made presumptions, relied on surmises and thus made unsustainable additions. (ii) That document NO.7 was only a piece of paper and could not be called a "book" ....
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....or presuming that the contents of the books of account or document are true the document must be a speaking one. In this case the slip, said to have been recovered by the revenue, does not contain any narration in respect of the various figures noted therein. The slip does not indicate whether the figures referred to quantities of money or to quantities of goods and whether one side, and if so, which side represents receipts and which side represents outgoings. This is. thus a dumb document and as the orders of the authorities below would show they have merely added the total of the right side of the slip without supplying the figures any language to indicate their meaning. In the case of such a dumb document, the provisions of Section 132(4A) do not permit anyone to presume that the total of the figures of right side of the slip represents the assessee's income. The presumption at the most is attracted to the figures and a further presumption that they represent the income of the assessee is not permissible under Section 132(4A). When a dumb document, like the present slip, is recovered and the revenue wants to make use of it, it is the duty of the revenue to collect necessary....
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.... even though in book-keeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account." 2:4.36 The above passage was cited with approval in Morvi Industries Ltd. v. Commissioner of Income-Tax (Central), [1971] 82 ITR 835 (SC) in which Supreme Court also considered the dictionary meaning of the word "accrue" and held that income can be said to accrue when it becomes due. It was then observed that: "........ the date of payment ..... does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be immediately." It further held, more importantly, that income accrues when there "arises a corresponding liability of the other party from whom the inc....
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....e factors together but once the accrual takes place, on the conduct of the parties subsequent to the year of closing an income which has accrued cannot be made "no income". 26. This Court then considered the facts of the case and came to the conclusion (in Godhra Electricity) that no real income had accrued to the assessee in respect of the enhanced charges for a variety of reasons. One of the reasons so considered was a letter addressed by the Under Secretary to the Government of Gujarat, to the assessee whereby the assessee was "advised" to maintain status quo in respect of enhanced charges for at least six months. This Court took the view that though the letter had no legal binding effect but "one has to look at things from a practical point of view." (See R.B. Jodha Mal Kuthiala v. Commissioner of Income Tax,[1971] 82 ITR 570 (SC). This Court took the view that the probability or improbability of realisation has to be considered in a realistic manner and it was held that there was no real accrual of income to the assessee in respect of the disputed enhanced charges for supply of electricity. The decision of the High Court was, accordingly, set aside. 27. Applying the t....
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.... occasion to examine the issue of assessment based on conjectures and surmises in the case of Commissioner of Income tax-21, Mumbai vs. Uttamchand Jain (2009) 182 Taxman 243 (Bom) where it was held as under: "There is nothing on record to suggest that the assessee had given cash to Mr. Sanjay Saxena. The assessing officer has not chosen to examine Mr. Sanjay Saxena to establish that cash was given by the assessee to Mr. Trivedi through Mr. Sanjay Saxena. Perusal of the reassessment order shows that the Assessing Officer has not made any efforts to link the cash received and deposited by Mr. Trivedi in his bank account was in fact paid by the assessee. In other words, the decision of the Assessing Officer in discarding the sale and holding that the amount received by the assessee is based on conjectures and surmises and is not based on any independent evidence gathered prior to or during the course of reassessment proceedings. In these circumstances, in the absence of any cogent evidence brought on record, the decision of the Tribunal in holding that the Assessing Officer has failed to establish the nexus between the cash amount deposited in the bank account of Mr. Trivedi ....
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....e instant case and also appreciated the various judicial pronouncements on the impugned issue and accordingly taken the decision by applying the case law on the facts of the instant case. We have noticed that the basis for making the impugned addition is the loose sheet found during the course of search conducted in the Bharat Shah Group. A very important point is that the said loose paper does not contain the name of the assessee, it was an undated document and does not bear signature of anyone. Another important point is that both the purchaser as well as seller has denied the contents of the said document. We notice that the assessing officer has tried to decipher the information found in the said document by interpreting that "Sh" represents Cash payment and "Q" represents cheque payment. We notice that the assessing officer has not brought any material on record to corroborate his interpretation. A perusal of the document would show that the letter written after 45 looks like "C" and hence it is capable to different interpretation also as against the interpretation given by the AO as "Lakhs". The assessing officer has only tried to corroborate his interpretation by comparing t....