TaxTMI 
TaxTMI 
2018 (1) TMI 318
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "on money'' payment for buying plots of land. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 10,63,66,700/- (b) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the addition of Rs. 10,63,66,700/- which is merely based on statement of Shri Nirmal Kumar Jain and Shri Bimal Kumar Jain, opportunity of whose cross examination was never provided. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire addition of Rs. 10,63,66,700/- (c) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the AO in not referring the matter to the Department Valuation Officer (DVO). The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the addition as being without any basis. 2.1 During the course of hearing, the ld.AR of the assessee has not pressed the Ground No. 1 and 2(c) of the appeal. Henc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome for the year. Further, it is also facts that no evidence suggesting "on money payment" with regard to property at plot no. D-112 purchased from M/s. Rawat Construction Pvt. Ltd. has been found during the course of search operation conducted. Keeping in mind this fact, the AO observed that FMV ( Fair Market Value) of this plot should to be taken on the basis of two other plots purchased by the assessee, which are marked as plot no D-112A and D112B from Jain brothers namely Sh Nirmal Kr Jain & Sh Bimal Kr Jain. The area of those two plots is also 1000 sq. yds for which the purchase price has been adopted by the AO at Rs. 7 Crore, as against aggregate amount of Rs. 2 crores shown in the two sale deeds. The AO took the rate @ Rs. 70000/= per sq. yrds and on that basis, the AO has held that the land in this area should accordingly be computed at the same purchase price of adjacent plot measuring 1000 sq. yrds purchased from M/s Rawat Construction Pvt. Ltd. Finally, he estimated at Rs. 7,40,60,000/- and added the difference u/s 69B of the Act. For the sake of clarity, relevant extract of AO's finding in page 9 & 12 of the assessment order are reproduced inter alia here as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d on oath given by Sh Jain Brothers. It is also fact that no incriminating documents suggesting payment of on money with regard to transaction with M/s. Rawat Construction Pvt. Ltd. were found from the search premise. Further, AO has also not examined M/s Rawat Construction Pvt. Ltd. to arrive at such conclusion. It is seen that all the three plots D-112, D-112A and D-112B are part of a common plot( Refer Asst Order Pg 7) . In respect of Plot no D-112 A & D-112B, purchased from Sh Nirmal Kr Jain and Sh Bimal Kr Jain, both the sellers have accepted fact of receipt of "on money" to the extent of Rs. 5 Crores and offered the same in their respective returns. This "on money" payment by Nirmal Kr Jain is also supported by the documents seized in search. Once, the seller has accepted the fact of giving on money, the same has to be considered as paid by the buyer. Similarly, plot no D-112 is part of the plot D-112A & D-112B and therefore, the on money payment in respect of plot no D-112 cannot be denied in view of circumstantial evidences. In view of facts and circumstances of the case and duly considering the facts of the evidences found from the sellers' premises, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(SC) 175: (2006) 287 ITR 91 (SC) PB 117 4 CIT vs. S.C. Sethi (2007) 295 ITR 351 (Raj) PB 118 5 Sheth Akshay Pushpavadan vs. Dy. CIT (2010) 130 TTJ (Ahd)(UO) 42 PB 118 6 CIT vs. Ashwani Gupta (2010) 191 Taxman 51 (Del) PB 118 7 Unique Organisers & Developers (P) Ltd. Vs. Dy. CIT (2001) 70 TTJ (Ahd) 131 PB 118 SUBMISSIONS 1. Written Submissions, made before the ld. CIT(A), appearing at Paper Book Pages 9-107, 108-119 and 120-125 may please be considered. 2. Ld. CIT(A) has passed a very skeptical and non speaking order in a most summary manner. His findings are contained in merely 3 pages at para 3.1.2 (CIT(A) Order pg 23-26), out of which page 25 is only reproduction of the ld. AO finding. 3. Ld. CIT(A) has not considered the pleadings madebefore him. The factual and legal issues raised are not even dealt with by the ld.CIT(A). 4. Ld. CIT(A) has rejected the appeal for the following reasons: Reason by ld. CIT(A) i. Incriminating documents suggesting on money payment with regard to property at Plot No. D-112-A and D-112-B were found and seized. Submissions Ld. CIT(A) has mentioned ab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....D-112 from M/s Rawat Constructions Pvt. Ltd. is concerned, ld. CIT(A) has himself admitted that no incriminating documents were found and even ld. AO has not examined the directors of the company. Therefore, confirming the addition is unjustified. Reason by ld. CIT(A) v. Ld. CIT(A) finally upheld the order of the ld. AO holding that once the seller accepted the fact of on money, the same has to be considered as paid by the buyer and in respect of Plot No. D-112 on money payment cannot be denied in view of circumstantial evidences. Submissions The final conclusion of the ld. CIT(A) is based on his misconception that once seller accepts the fact of on money receipt, the payment of the same by the buyer cannot be denied. Under the peculiar facts of the instant case, the buyers have admitted the on money receipt in their self interest and there is no corroborative evidence in this regard. Therefore, their acceptance has no evidentiary value against the appellant company. The request for cross examination was turned down which renders the statements of no evidentiary value. 5. Before the ld. CIT(A), following cases relied upon by the ld. AO were adequately distingui....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Aishwarya K. Rai v/s DCIT (2007) 104 ITD 166 (MUM) (TM ) 62-63 7 Dadamchand Mochi V/s ITO (2006) 36 Tax World 11 (Jd) 63 8 ITO V/s Bua Dass (2006) 155 Taxman (Magzine) 131 (Amritsar) 63-64 9 Govind Ram Chhugani v/s ACIT (2002) 77 TTJ 339 (Jp) 64 10 ITO V/s L.N. Mehta (HUF) (2002) 77 TTJ 63 (Jd) 64-65 11 Radhey Shyam Tanwar V/s ACIT (2002) 77 TTJ 509 (Jd) 65 12 Maheshwari Industries v/s ACIT (2003) 81 TTJ 914 (Jd) 65 13 Vimal Raj Singhvi V/s ACIT (2006) 104 TTJ 321 (Jd) 65-66 14 Zakir Hussain v/s CIT & Ors. (2006) 202 CTR 40 (Raj.) 66 15 Shree Chand Soni v/s DCIT (2006) 101 TTJ 1028 (Jd) 67 16 Ajay Sharma v/s ACIT (2006) 101 TTJ (Del) 1065 67-69 17 Smt. Sujata Graover v/s ACIT (2006) 99 TTJ (Del) 837 69 18 CIT v/s naveen gera (2010) 328 ITR 516 (Delhi) 69-70 19 CIT V/s Bajrang Lal Bansal (2011) 335 ITR 572 (Delhi) 70-71 20 ITO V/s Dua Auto Components (P) Ltd. (2011) 135 TTJ (Del) 621 71 8. Heavy burden is on the Department where unexplained investment u/s 69 is alleged. Following case laws were relied upon which have been totally ignored by the ld. CIT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....01 ITR 134 (MP) 84 4 CIT v/s Dharam Pal Prem Chand Ltd. (2007) 295 ITR 105 (Delhi) 85 5 CIT v/s SMC Share Brokers Ltd. (2007) 288 ITR 345 (Delhi) 85 6 CTO, Anit Evasion, Zone Jaipur v/s Haryana Dal Mill. (1993) 90 STC (Raj.) 519 85 7 Anil Kumar mahipal v/s ITO (2006) 35 Tax World 33 (JD) 86 8 Laxmanbhai S. Patel v/s CIT Oct. 15,2008 114 ITD (ITR No. 41 of 1997 dated 22.7.2008) (Guj.) 86-87 9 ITO v/s Permanand. (2007) 107 TTJ (JD) 395 87 10 Zakir Hussain v/s CIT (2006) 202 CTR (Raj.) 40 87-88 11 ITO v/s Dr. R.L. Narang (2008) 174 Taxman 96 (Mag.) (Chd.) 88-89 12 Eagle Seeds & Biotech Ltd. V/s ACIT (2006) 100 ITD 301 (Ind.) 89 13 CIT v. Gujarat Heavy chemicals Ltd. (2002) 256 ITR 795 (SC) 89-90 14 Shri J.R.C. Bhandari v. ACIT (2003) 79 TTJ (Jd) 90-91 15 Narayan Dass Singhi v/s Income Tax Officer (2004) 87 TTJ (JD) 615 91-92 16 Dr. Chetan Prakash Ranka v/s ITO (2005) 33 Tax World 72 (Jp.) 92-93 17 Unique Organisers & Developers (P) Ltd. v/s DCIT (2001) 70 TTJ (Ahd) 131 93 18 Kishanchand Sobhrajmal v/s Assistant Commissioner of Income Tax (1992) 41 ITD ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ddition so made does not pertain to the assessment year 2010-11 and, therefore, the addition deserves to be deleted on this account. It is the onus of the ld. AO to specifically pinpoint the dates for the purpose of deciding the relevant assessment year. The statements are very precise that the payments have been made during the period January 2009 to April 2009. This is without agreeing to the merit of the additions made by the ld. AO. This is an alternative argument and may not be treated as our agreeing to the addition. 14. The ld. AO has very conveniently ignored the following requests of the assessee company during the course of assessment proceedings: i. Cross examination of ShriBimal Kumar Jain and ShriNirmal Kumar Jain. ii. Examination and cross examination of persons who sold properties to ShriNirmal Kumar Jain and ShriBimal Kumar Jain in which ShriNirmal Kumar Jain and ShriBimal Kumar Jain admitted to have invested the on money received from the appellant. iii. Examination and cross examination of Directors of Rawat Constructions Pvt. Ltd. (In this case even the oral admission of any of the Directors not available to the Department.) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court ) 17-18 Doddamallappa v. Gangappa AIR 1962 Mysore 44 (Mysore High Court) Leelamma Ambikakumari and another Vs. Narayanan Ramakrishnan AIR 1992 Kerala 115 (Kerala High Court) Febril Gasosa vs. Labour Commissioner and others AIR 1997 (S.C.) 954 Paramjit Singh Vs. Income Tax Officer (2010) 323 ITR 0588 (P&H) Smt. K.Narasamma vs. ITO (1990) 32 ITD 494 (Hyd Trib) 3 Court should safeguard itself against the danger of basing its conclusions on suspicions, howsoever strong they may be. State v. Gulzari Lal Tandon AIR 1979 S.C. 1382 and J.A. Naidu v. State of Maharashtra AIR 1979 S.C. 1537. 19 It is equally well settled that the courts decision must rest not upon suspicion but upon legal grounds established by legal testimony. Mere suspicion, however strong, cannot take the place of proof. 4 Allegation, of on money, by the revenue must be backed by mode of receipt by the assessee, the manner of receipt by the assessee, the date of receipt by the assessee and the evidence for its receipt by the assessee. 20 5 Right of Cross Examination - Fundamental Right of Assessee Sahara India (Firm), Lucknow v. Commissioner of Income Tax, Centra....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Otherwise also, since assessment is not based on these documents, they are not relevant for deciding the appeal. 1.3 At the first page, at S.No. 6, following is mentioned:- "There is no such evidence in the assessment records." It is not clear what was sought from the ld. AO which was not in the assessment records. This requires clarification from the Department. 2. Departmental Paper Book - II made available on 19.10.2016 (covering letter dated 17.10.2016) 2.1 Letter of ACIT, Central Circle - 1, Jaipur, dated 13.10.2016 mentions the following: "In the question no. 13 of the statement of Shri Nirmal Kumar Jain, he was asked about the sale of plot no. D-112, in reply of which he has admitted a receipt of cash of Rs. 2.5 crore. However, no seized record has been referred to in the question or the reply by the assessee. In the question no. 20 only, the seized record Annexure-A (page no. 1 to 35) has been referred to, the copy of which is enclosed herewith." From the above, it is crystal clear that no specific seized document has ever been referred to. 2.2 Department has provided a Paper Book on 19.10.2016 which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate an din absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another." 4. Shri Bimal Kumar Jain 4.1 Statements dated 24.07.2009: In response to Q.10, Shri Bimal Kumar Jain answered that he was not in touch with the buyer nor he could recognize the buyer. Where such huge cash is alleged having changed hands, not recognizing each other is impossible. It confirms that no cash changed hands. Answer to Q.11 is contradictory in itself. Answer to Q.14 gives details of investments by Shri Bimal Kumar Jain which he has covered by showing it as onmoney. 4.2 Statements dated 23.07.2009: In Question 25, Shri Bimal Kumar Jain had replied that he was not remembering that, to whom and for what consideration, the said plot was sold. Just after five questions, while replying to Question 30 he could recollect everything. It proves that he developed a story in his own defence. 4.3 Acce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd Rs. 20 lacs was further incurred on construction as stated in the statements recorded during search. Thus the total cost of the house as on date comes to Rs. 1,62,84,560/-. 3. The long term capital gain on sale of property at D-112 and tax thereon works out as under:- Particulars Amount (in Rs.) Sale consideration of property 3,50,00,000 Less: Brokerage Paid 3,50,000 3,46,50,000 Less: Purchase cost of the 4,52,062 property Assessee's share 1/2 of the same 2,26,031 Indexed cost (2,26,031 * 632 /133) 10,74,072 Long term Capital Gain 3,35,75,928 Less: Deduction u/s 54F for purchase of residential flat Purchase cost (1,62,84,560 / 3,46,50,000 x 3,35,75,928) 1,57,79,775 Chargeable Long Term Capital Gain 1,77,96,153 Tax on above @ 20% 35,59,231 Add: Cess @ 3% 1,06,777 Total Tax 36,66,008 In addition to this, he also purchased a flat at Chitrakoot which was registered for Rs. 29.31 lacs but actual investment was Rs. 82,33,780 [DPB II - 10 and DPB II - 66]. The relevant portion of the AO order in case of Shri Nirmal Kumar Jain is reproduced below:- "12.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not be restored back for giving another inning to the Department to improve its case." Veto Electropowers [2012] 20 taxmann.com 279 (Jaipur) Reliance is placed on the decision in the said case in which request of the Department to set aside the case was rejected and law in this regards was discussed by the Hon'ble ITAT in the following paras:- "19. The first decision relied upon by the assessee is in the case of Raja Vikramaditya Singh (Decd.) v. CIT [1988] 169 ITR 55 , the Hon'ble Indore Bench of the Madhya Pradesh High Court has held (headnote) "that the power of the Appellate Tribunal to remand a matter in an appropriate case to investigate fresh facts cannot be disputed, but that power must be exercised with proper discretion and it should not be exercised if all the basic facts required for disposal of the matter are already on record. It would not be a sound exercise of discretion by an appellate authority to remit a case to the subordinate authority for writing such order as would, in the opinion of the appellate authority be a proper and better order." 20. The second case law on which reliance has been placed is in the case o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to Assessing Officer instead of dismissing appeal - Held, yes" Harikishan Jethalal Patel [1987] 33 Taxman 217 (GUJ.) "In the present case, the ITO never doubted the genuineness of the firm or the genuineness of the transaction in question throughout the proceedings. Had he doubted, there would have been no occasion for him to vary the income of the assessee by adding the amount of capital gains. It was obvious from the demand made before the Tribunal that the revenue desired to examine the genuineness of the firm and the transaction, on fresh facts, not the existing facts, for the existing facts did not even remotely created any doubt regarding the genuineness of the firm and/or the transaction. If the demand was conceded, it would mean that all cases concluded by the decision of the Supreme Court in Sunil Siddharthbhai's case (supra) would be reopened in the mere hope that the revenue might be able to fish out material casting a doubt on the genuineness of the firm and/or the transaction. Hundreds of cases which stood finally settled by the above decision of the Supreme Court and in which no foundational facts exist for doubting the genuineness of the firm an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stored at the request of the parties so as to give second inning to the parties to establish their cases." " Siksha "O" Anusandhan [2012] 20 taxmann.com 798 (Orissa) "The Allahabad High Court in A.D. Sons v. Commissioner of Sales Tax [1989] 29 STL 37, held that on the facts of the case and in view of the finding recorded in the said impugned order, the Tribunal was in error in remanding the case to the assessing authority for giving second innings to the Department, and it was not open to the Tribunal under the law to do so." Sheikhar Chand & Sons [1990] 186 ITR 269 (ALL.) "However, learned standing counsel for the Revenue brings to our notice a particular observation made by the Incometax Tribunal in para 11 of his judgment to the following effect: "Therefore, when there is a registered valuer's report, the Valuation Officer's job is not merely to report the value as assessed by him but also to clarify where the registered valuer has erred. We have already stated that in this case the registered valuer's report had been made available to the Valuation Officer and yet he chose not to comment on its accuracy. We, therefore, fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tory and the AO having failed to follow the provisions of the Act, he should not be given one more chance to refer the matter to the DVO. Recently, the Hon'ble Supreme Court in the case of Manish Mahaeswari Vs. ACIT and another, and Indore Construction P. Ltd. Vs. CIT, [2007] 289 ITR 341 (SC) vis-à-vis the provisions of section 153C of the Act, observed that if the AO has not recorded his satisfaction for issue of notice u/s 153C of the Act, the proceedings deserve to be quashed rather than giving the AO another chance to record proper reasons. The same ITA No. 1130/H/15 Smt. Lalita Karan principle holds good even in this case; when the AO has not followed the procedure prescribed in law, the addition made deserved to be deleted." Smt. Sudhadevi Modi [2003] 84 ITD 604 (MUM.) "That apart, it is not legally permissible to allow the Assessing Officer innings after innings to make good the omissions and to improve the assessment order. He had a clear-cut mandate from the Commissioner (Appeals) which he chose not to give effect to. It would not be unreasonable to draw the inference that he had no material or evidence to discredit the appellants' version. If ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ona fide transaction where the full value of the consideration for the transfer is correctly declared by the assessee." Case 7: Raza Sugar Co. Ltd. Vs. CIT 130 ITR 421 This case is related to trading transaction and therefore has no relevance in the present case. Case 8: C.B. Gautam vs. Union of India 199 ITR 530 This decision was delivered under a different law of section 269UD. Hence is not relevant. Case 9:- M/s Hamamp Property P. Ltd. vs. ACIT 3811/DEL/2005 The present case is distinguishable because the purchase by the appellant company of land was at a rate higher than DLC value. Case 10:- Pranav Construction Co. vs. ACIT 61 TTJ 145 In this case from para 8, it is clear that partner of the assessee firm admitted on money receipt under section 132(4). Whereas in our case there is no such admission. Case 11:- Digvijay Chemicals Ltd. vs. ACIT 248 ITR 381 In this case addition was based on undisclosed advance detected from seized documents whereas no such document is seized from assessee's possession in the present case. Case 12:- Narayan Bhagwantrao.. vs. Gopal and others 1960 AIR 100 In th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... K.P. Verhese vs ITO , 131 ITR 597 (SC) 10. Raza Sugar Co. Ltd vs CIT, 130 ITR 421 (Del.) 11. C.B. Gautam vs Union of India, 199 ITR 530(SC) 12. M/s. Hamamp Property P.Ltd vs ACIT ,3811/Del/2005 13. Pranav Construction Co. vs ACIT, 61 TTJ 145 (Bom.) 14. Digvijay Chemicals Ltd. vs ACIT , 248 ITR 381 (All.) 15. Narayan Bhggwantrao vs Gopal and others 1960AIR 100 (SC) 16. H.M. Sarif & Sons vs CIT 8 of 1991 (High Court of Allahabad 17. DXN Herbal Mfg.India P Ltd vs ITO 110 ITD 99 (CHH) 18. GTC Industries vs ACIT 65 ITD 380 (Bom.) 3.4 We have heard the rival contentions and perused the materials available on record. Brief facts of the case are the assessee company was incorporated on 13-02-2009 wherein Smt. Aruna Sankhla an Shri Hemant Raj Sankhla are promoter Directors. The assessee company came into existence on 13-02-2009. During the period 13-02-2009to 31-03-2009, corresponding to A.Y. 2009-10, no business activity was carried out by the assessee company. Therefore, the year consideration is the first year of its operation. On perusal of the balance sheet of the assessee company, the AO noted that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd Shri Nirmal Kumar Jain show that the property was registered on an undervalued amount and on-money was paid to the sellers viz. Shri Bimal Kumar Jain and Shri Nimal Kumar Jain but no such document is mentioned or elaborated in his order. It is also noted by the AO that during the course of search both the persons admitted that each of them had received on-money amounting to Rs. 2.50 crores (total Rs. 5.00 crores) in addition to the registered sale consideration against the sale of above property at D-112, Power House Road, Bani Park, Jaipur but no opportunity to cross-examination was provided to the assessee even when it was asked for. The AO further noted that the transaction of on-money is not reflecting in the sale deed of the above property but no supporting documents specified. The AO further noted that both the above persons Shri Bimal Kumar Jain and Shri Nirmal Kumar Jain admitted the fact of receiving on-money amounting to Rs. 5.00 crores in their statements recorded during the course of search conducted on 23-07-2009 and accordingly surrendered the above amount for taxation treating the same as their undisclosed transaction. Further in response to notices u/s 153A of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2009 Bimal Kumar Jain Plot No. D-112-B, Power House Road, Bani Park, Jaipur 500 sq. yards 10,000,000 3 28.05.2009 Rawat Constructions Pvt Ltd. Plot No. D-112, Power House Road, Bani Park, Jaipur 1000 sq. yards 11,400,000 As per respective registered agreement dated 17-04-2009, the assessee had purchased the Plots D-112-A and D-112B at Power House Road, Bani Park, Jaipur measuring 500 sq. yards each (i.e. 1,000 sq. yards) from Shri Nirmal Kmar Jain and Shri Bimal Kumar Jain for a consideration of Rs. 1.00 crores each i.e. totaling to Rs. 2.00 crores. In the statements recorded during the course of search in their premises, they have disclosed certain on money received which have further been invested in acquisition of properties and for such investment incriminating documents were found from their premises. Both of them have also S. No. Date of Agreement Name of Seller Address Area Purchase Consideration 1 17.04.2009 Nirmal Kumar Jain Plot No. D-112-A, Power House Road, Bani Park, Jaipur 500 sq. yards 10,000,000 2 17.04.2009 Bimal Kumar Jain Plot No. D-112-B, Power House Road, Bani Park, Jaipur 500 sq. ....