TaxTMI 
TaxTMI 
2019 (6) TMI 290
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.... "1) "On the facts and in the circumstances of the case and in law, the Id CIT(A) erred in deleting the addition of on-money of Rs. 3,90,53,280/- received on sale of flats relying on the observation and decision in the case of ACIT vs. Janak Raj Chauhan (102 TTJ 316) (Amritsar) and Maheshwari Industries vs. ACIT (148 Taxman 74(Jodh.) (Mag)) without appreciating the facts that the addition was made on the basis of the statement of the Director Shri Haresh Mohanalal Mehta and three key employees of the assesses group namely Ms. Chaula Joshi (Sales and Marketing Executive of Rohan Group) and Mr. Vijay Jasani (Accountant of the Rohan Group) and also of Mr. Paresh Panchlotiya (Office Assistant/Liaison Officer) during the course of search. The CIT(A) further failed to appreciate that the Rohan Group had been searched earlier too on 10.08.2006 and even during the course of that search, the same Ms. Chaula Joshi had admitted to the fact that the group executed sales deed by accepting on money in cash which was over and above the agreement price." 3. The brief facts of the case extracted from ITA No.4031/Mum/2016 are that Rohan group of entities, along with directors, family member....
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....ani, accountant of the group was recorded on 26-05-2011 where he had admitted that on-money has been collected from a buyer which is over and above the value mentioned in the sale deeds and the same is outside books of account. Likewise, statement of Shri Paresh Panchlotiya, liaisoning officer / office assistant was also recorded u/s 132(4) of the Act, on 26-05-2011 wherein he admitted that the group was indulging in collection of on-money from sales over and above the value mentioned in registered documents. 5. During assessment proceedings, the AO, on the basis of statements of director and employees of the group, called upon the assessee to explain as to why income towards collection of on-money from sale of properties shall not be estimated @30% on total sales declared for the year under consideration. In response to show cause notice, the assessee, through its authorised representative, vide letter dated 13-01-2014 submitted that during the course of search, no incriminating material / evidence was found which indicated receipt of on-money from sales over and above registered value mentioned in documents in case of the assessee. Therefore, based on the statement of certa....
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....he assessee that nothing on record to indicate receipt of on-money from sales. Accordingly, he rejected the arguments of the assessee and estimated 30% of total sales declared for the year towards on-money and made addition to the returned income. The relevant findings of the AO are as under:- "7.38 The assessee has submitted that the seized material pertains to only few flats/ projects. The assessee has submitted that no evidence is found in the course of search with respect to sales in the other projects. After careful consideration of the facts of the case and the submissions of the assessee it is seen that the contention of the assessee that the income should not be extrapolated to the other projects and the other group companies is nothing but an eye wash. It is observed that the assessee is only harping upon its argument that there is no evidence to establish that on money is received in of its other projects. 7.39 The contentions of the assessee cannot be accepted as there is no reason as to why the assessee would charge on money in one project and not in the other. More so, in the statement given by Mr, Haresh Mohanlal Mehta, director of Rohan Developers P....
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....shes with cogent materials that the assessee is indulging in receipt of on-money. The assessee further submitted that the documents relied upon by the AO is nothing but dumb documents where nothing has been recorded except the rates pertaining to sale of flats. Further, the contents of seized material mentioned on page 114 neither related to the assessee nor anything written about receipt of on-money. Although, the AO has relied upon statements of Shri Haresh M Mehta, director and other employees of the group, but fact remains that nowhere in the statement, they have indicated the name of the assessee and collection of on-money from sale of flats. Further, the persons, who gave the statement have retracted their statements by filing affidavit and also explained the circumstances under which they gave admission in the statement recorded u/s 132(4). The assessee has also explained the seized materials found n the possession of Shri Haresh M Mehta, as per which, none of the seized material pertained to business of the assessee or receipt of on-money, rather, all seized papers related to personal affairs of Shri Haresh M Mehta. Therefore, in absence of any material found as a result....
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....ate of search, because the proceeding u/s 143(3) has been concluded much before the date of search and also there was no proceeding of whatsoever is pending for the year under consideration. Thus, the case of the assessee cannot be said to be one where assessment proceedings had been abated. Once the assessment proceedings have been unabated, in absence of any incriminating material found as a result of search or satisfaction qua incriminating material, no addition could be made in the assessment framed u/s 153C of the Act. Therefore, by following the decision of ITAT, Special Bench in the case of All Cargo Global Logistics Ltd vs DCIT (supra) and also the decision of Hon'ble Bombay High Court where the appeal filed by the department has been dismissed by the Court, held that the AO has made addition towards estimation of on-money without there being any incriminating material found as a result of search; consequently, the addition made by the AO cannot be sustained. He, accordingly, deleted addition made by the AO towards estimation of on-money. The relevant findings of the Ld.CIT(A) are as under:- "5.1 In Grounds No.l and2 the appellant has challenged the validity of the....
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....ection (1) of section 153A1" (Emphasis Supplied) 10. On plan reading of the above, it may please be noted that as per the provisions of section 153C of the Act, proceedings can be initiated on the other person, only upon satisfaction of the following pre-requisites: The AO must be satisfied- a. That money, bullion, jewellery or other valuable article or thing found in the course of search belongs to a person other than the person searched, or b. That the Books of accounts or documents seized or acquisitioned belongs to a person other than the person referred in section 153A (i.e., person searched) and c. That the above consists of undisclosed income of the other person. It may please be noted that before proceeding with initiating proceedings u/s. 153C of the Act, the AO has to be thoroughly satisfied that the seized material indicating escaped income pertains to the other person (i.e. other than the searched party). 11. In this regard, at the outset, it is submitted that no incriminating material whatsoever (in the form of money, bullion, jewellery, books of account document seized, etc.) has been found, to suggest any conceale....
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.... seized paper at Page 114, Annexure A-l, found and seized from 112-122, Hira Bhawan, Raja Ram Mohan Roy Road, Prarthana Samaj (referred by the AO on page 12 of the impugned order), perusal of the same shows that there is no mention of the appellant company or the project undertaken by it on the said page. During the year under consideration, as observed by the AO in the impugned order, the appellant company has executed the project named Moksh Plaza which name does not find mention on page 114, Annexure-Al. Perusal of the said document at page 114 reveals that the projects listed on it are namely Siddhesh Darshan; Mayuresh Apartments; Lifescapes Kshitij; Siddhesh Jyoti. In the submissions made in appeal, it is stated that these projects are undertaken by the following entities: Name of Project Entity of Rohan Group Siddhesh Darshan Meridian Construction Private Limited Mayuresh Apartment Rohan Developers Private Limited Lifescapes Kshitij Roxina Real Estate Private Limited Siddhesh Jyoti Manav Builders Private Limited Thus, it cannot be concluded that the seized paper makes any mention of the appellant company or the project undertaken by it d....
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.... the income that had already been assessed, the assessment u/s 153A subsequent to search would be made on the basis of incriminating material, which in the context of relevant provisions means books of account and other documents found in the course of the search but not produced in the course of original assessment as well as undisclosed income or property disclosed in the course of the search. The decision of the Special Bench was challenged by the Department before the Jurisdictional High Court and vide order ITA No.523 of 2013 dated 21.04.2015, the Hon'ble Court upheld the view taken by the Special Bench. The principle enunciated regarding the scope of assessment u/s 153A extends to assessments completed u/s 153C also, inasmuch as the link to incriminating material is necessary for addition to be made in a non-abated assessment. 5.1.6 As discussed earlier, in the instant case, the impugned order does not show that any document, money, bullion, etc. was seized or requisitioned in the case of the appellant. Neither is there any indication of the satisfaction of the AO that any such item seized or requisitioned specifically belonged to the appellant company. The only ....
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....opers, M/s Goodwill Properties and M/s Silver Arch. During the appeal proceedings, the appellant submitted that total cash found from the various premises of group concerns/directors etc. was Rs. 1,35,00,000/- and that from this sum, an amount of Rs. 1,09,13,313/- was reconciled with the books of accounts of the constituent companies, directors etc. of the Group (refer letter dated 24.10.2013 submitted during the course of assessment of M/s Rohan Developers Private Limited.). The balance amount of Rs. 25,86,687/- is stated to have been offered as undisclosed income in the hands of M/s Rohan Developers Private Limited for A.Y. 2012-13. This reconciliation has not been rejected or contradicted by the AO. 5.2.10 With reference to carrying out of proceedings against concerned persons, the materiality, relevance, admissibility or weight of retracted statements has been examined by various courts. While it is true that retraction itself does not provide an impenetrable shield to the concerned person, it is also equally true that a statement per se, by itself is not conclusive evidence. In this regard, in the decision rendered in the case of ACIT vs Janak Raj Chauhan 102....
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.... a retracted confession can be relied upon only if there is independent and cogent evidence to corroborate the statement. 9.2.13 Therefore, in light of the detailed discussion in the preceding paragraphs, the statements relied upon by the A.O. cannot be said to have provided sufficient evidence of on-money transactions with regard to the appellant company. As discussed earlier, the single sheet of paper on which the AO has placed reliance also does not reflect the name of the appellant or its project. Thus on the facts of the instant case and after due consideration of the judicial pronouncements cited above, the addition of on money of Rs. 3,90,53,280/- is deleted and the grounds raised by the appellant are allowed." 10. Aggrieved by the order of Ld.CIT(A), the revenue is in appeal before us. 11. The Ld.DR submitted that the Ld.CIT(A) was erred in deleting the addition of on-money received on sale of flats by relying on the decision of ITAT, Amritsar Bench in the case of ACIT vs Janakraj Chauhan and the decision of Jodhpur Bench in the case of Maheshwari Industries vs ACIT 148 Taxman 74 without appreciating the facts that the addition was made on the basis of statem....
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....t was carried out on 26-05-2011 and by that time the assessment for AY 2009-10 had been completed u/s 143(3) on 31-12-2009. Insofar as assessment years 2010-11 and 2011-12, both the assessments are unabated, because the assessments have been framed u/s 153C on the basis of notice issued u/s 153C dated 28-03-2013. As per the proviso to section 153C, in case of such other person, the reference to the date of initiation of the search u/s 132 or making of requisition u/s 132A in the Second Proviso to sub section (1) of section 153A shall be construed as reference to the date of receiving the books of account or other documents or assets seized or requisitioned by the AO having jurisdiction over such other person. In this case, on the basis of notice issued by the AO having jurisdiction over the assessee u/s 153C on 28-03-2013 does not specify anything about receipt of documents. Therefore, in absence of any specific date on which the AO received the documents, the only conclusion that can be drawn is that the AO of such other person, other than the searched person has taken over the possession of the seized document on the date on which notice u/s 153C had been issued, i.e. on 28-03....
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....find as a result of search. Further, the assessee has filed retraction statement filed by them alongwith their affidavits, where they have categorically denied of having received on-money by the assessee and also explained under what circumstance they were compelled to give admission of receipt of on-money. Therefore, in absence of any material found as a result of search, making estimation towards receipt of on-money, more particularly on adhoc basis by extrapolation of documents found in some other cases, is arbitrary and incorrect. The Ld.CIT(A), after considering relevant facts has rightly deleted addition made by the AO towards estimation of on-money and his order should be upheld. 14. We have heard both the parties, perused materials available on record and gone through the orders of authorities below, along with case laws cited by the Ld.AR for the assessee. The solitary issue that needs to be resolved in this bunch of appeal is addition made by the AO towards on-money in cash on sale of flats. The AO has estimated 30% on total sales declared by the assessee for the relevant financial year towards receipt of on-money in cash over and above normal sales declared in the ....
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....exure A- 1, to argue that there are seized materials, which indicated collection of onmoney from sale of flats, but the assessee has rebutted the allegation of the AO with necessary evidence and also proved that seized material page 114 of Annexure A-1 is nothing to do with business activity of the assessee and its project undertaken during the year. Insofar as seizure of cash during the course of search at No.112 - 122, Hira Bhavan, Rajaram Mohan Roy Road, Prarthana Samaj, Mumbai, the assessee made it clear that said amount has been seized from the residence of Shri Jitendra Mehta, director and this fact has been reflected in the Panchanama drawn during the course of search and also the same has been disclosed to tax in his individual capacity. As regards statement of director, Shri Haresh M Mehta and other employees of the group, the assessee has filed retraction statements alongwith affidavits filed by them before the AO and also explained under what circumstance they have given admission in the statement recorded u/s 132(4) of the Act. The assessee also made it clear that neither Shri Haresh M Mehta, director, nor the employees from whom statements were recorded u/s 132(4) were....
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....ana Samaj, Mumbai, which was common premises for four entities of the assessee group and that the total cash found from various premises was almost equivalent to cash balance maintained in the books of account. Although, there is a difference of cash balance of Rs. 25,86,687, the same has been offered to tax in the hands of directors and also M/s Rohan Developers Pvt Ltd. Neither the Panchanama drawn during the course of search nor the statement recorded during search indicated that cash and other unaccounted assets found during the course of search belonged to the assessee. The Ld.AO has even failed to establish nexus between incriminating materials found during the course of search to the business of the assessee. Unless there is a direct nexus between incriminating material found during the course of search coupled with statement recorded from the director and employees of the group, merely on the basis of admission of certain parties, that too, after retraction of such statements by the parties, addition cannot be made towards receipt of on-money on adhoc basis taking a clue from statement of those persons. No doubt, estimation is possible in assessment proceedings provided the....
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....pendent and cogent evidence to corroborate the statement. In this case, the AO has failed to bring any corroborative evidence to support the statement of directors as well as employees in order to support his action of estimation of on-money on sales declared by the assessee for the relevant financial years. Therefore, we are of the considered view that the AO was erred in estimating adhoc on-money received from sale of flats on the basis of statement of some employees even after such statement has been retracted and also nothing on record to indicate that the assessee is in receipt of on-money. 17. Coming to the legal argument taken by the assessee in the light of certain judicial precedent, including the decision of Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nava Sheva) vs CIT (supra). No doubt, if we consider the date of search, i.e. on 26-05-2011, the assessment for AY 2009-10 is unabated, because the assessment for the impugned assessment is completed u/s 143(3) on 31-12-2009 and further, no proceedings of whatsoever was pending as on the date of search. This fact has been categorically accepted by the lower authorities. Therefore, once an....
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....ed u/s 153C or the date on which notice u/s 153C has been served on the assessee. We find that if the date of search is considered, then assessment for AY 2010-11 and 2011-12 are abated, because the due date for issue of notice u/s 143(2) is expires on 30-09-2012 which after the date of search. If you consider date of issue of notice u/s 153C, i.e. 28-3-2013, then assessment for AY 2010-11 and 2011-12 are unabated, because the due date of issue of notice u/s 153C was expired on 30-09-2012 which before the date of search. But, in this case, there is no clarity with regard to date of receipt of receiving the books of account or documents or asset seized by the AO having jurisdiction over such other person. In absence of such date, no presumption as to date of issue of notice u/s 153C cannot be considered as date of receipt of assets and books by the AO having jurisdiction over person other than the person searched, even though the coordinate bench of ITAT, Delhi has resorted to deeming conclusion. But, fact remains that, assuming for a moment, the assessment for AY 2010-11 and 2011-12 are abated, still the primary precondition for initiation of proceedings u/s 153C remains applicable....
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.... a jurisdictional issue and non satisfaction thereof would make the entire proceedings taken thereunder null and void. Further, the Hon'ble Supreme Court in the case of CIT vs Singhad Technical Education Society 397 ITR 344 (SC) has considered an identical issue and held that where incriminating material was found in the course of search, but was not related to the concerned years and hence, addition for those years could not be made in the assessment order passed u/s 153A of the Act. 18. In this case, it is abundantly clear that there is nothing on record to indicate that there is a reference to seized material found during the course of search vis-a-vis addition made by the AO towards estimation of 30% on-money on total sales declared for the year. The Ld.CIT(A), after considering all these aspects, has rightly come to the conclusion that the addition made by the AO cannot be sustained either on jurisdictional issue or on merits. Hence, we are of the considered view that there is no reason to interfere with the findings of the Ld.CIT(A) insofar as deletion of addition made by the AO towards estimation of on-money @30% on sales declared by the assessee for the relevant assessme....