AI Drafter 
TaxTMI 
TaxTMI 
2016 (5) TMI 1501
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....eged cash payment received from CCCPL of Rs. 1,48,42,565/- confirmed by the Ld. CIT(A) may kindly be deleted. 2. Disallowance of compensation paid to Frontline Financial Services Pvt Ltd of Rs. 27,28,000/- confirmed by the Ld. CIT(A) may kindly be deleted. 3. The brief facts of these cases are that the assesseecompanies were the co-owners of land bearing Plot No.67/1, in TP No.42, Village Sola, Thaltej, Ahmedabad. The land had been purchased by M/s. Care Cardiovascular Consultant Pvt. Ltd (herein after referred as 'CCCPL' for the sake of brevity) from the following 7 assessee-companies, including this assessee. i. Matang Properties Pvt Ltd, ii Martand Estate Pvt Ltd iii Maitrik Buildcon Pvt Ltd iv Medbhuti Complex Pvt Ltd v Madhumati Realty Pvt Ltd vi Madhuj Realty Pvt Ltd vii Tirth Developers Pvt Ltd 3.1 The land was sold by assessee-companies to CCCPL on 17.10.2007 for a consideration of Rs. 2.50 crore as per the documents registered. M/s. CCCPL is a company run by group of Heart Specialist Doctors, who are popularly known as "Heart Care Group' and this is headed by Dr. Keyur Parikh, who is a renowned Cardiol....
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....dition made by the AO 1 Matang Properties Pvt Ltd 1626 175,26,514 2 Martand Estate Pvt Ltd 1377 148,42,565 3 Maitrik Buildcon Pvt Ltd 1990 214,50,039 4 Medbhuti Complex Pvt Ltd 2197 236,81,275 5 Madhumati Realty Pvt Ltd 1998 215,36,270 6 Madhuj Realty Pvt Ltd 1997 215,25,492 7 Tirth Developers Pvt Ltd 2796 301,37,845 Against the above additions, all the seven companies have filed appeal before the CIT(A), wherein various contentions were raised by the assessee which are reproduced herein below:- "Addition on account of alleged cash payment received from CCCPL - Rs. 2,15,36,270/- In continuation of the Synopsis of Arguments dated 15.04.2011, the appellant company has to submit the bullet points arguments in a summarized manner as under:- i) There was no search proceedings in the case of the appellant company and other six co-owners appellant companies. ii) That the Notice u/s 153C dated 11.06.2009 was issued in the case of the appellant company and other five coowners appellant companies....
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....r Parikh, Nihir Shah and Arpit Patel. In short, it can be said that the Ld A.O has not referred and/or relied upon the any of the statements of the Directors of CCCPL and/or any other persons of the management of CCCPL for recording of The satisfaction note. From the aforesaid analysis of satisfaction note, one can say that in the seized material, there was no incriminating material where the name of the appellant company and other six co-owners appellant companies were appearing for the alleged cash transactions as well as in none of the given by the Directors of CCCPL and/ or any persons in the management of CCCPL the name of the appellant company or other six co-owners appellant companies referred to or found to be stated for alleged cash transaction. v) The appellant company has to submit that the first notice issued u/s. 153C of the Act has been admitted as invalid notice by the Ld A.O himself and even when the first notice was issued on 11.06.2009, the Ld. AO has not even recorded the satisfaction note for issuance of notice u/s. 153C of the Act. From the submissions made in earlier paras, it seems that the Ld. AO for the first time recorded the satisfaction note on ....
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....April, 2010 by the Ld. A.O in assessment order are not the statements on oath as the same seems to be not recorded by observing the procedure laid down for recording of the statement on oath as per the provisions of section 131 of the Act and from the questions raised to the six doctors, it is a stereo type questions raised by the Ld. A.O and the answers given by the six doctors are also stereo type and therefore, it can be interpreted that it is not a statement recorded on oath, but seems to be that the Ld. A.O issued the questionnaire to the Six Doctors and the Six Doctors in common consensus basis submitted the reply in writing as a self serving statement to buy peace and to avoid litigation with the department. Whatever, the income the offered in their return of income, they have not stated the source of income and the same has been stated to be from undisclosed sources. From the analysis of the statements of six doctors as no where the name of the appellant company and other six co-owners appellant companies have been mentioned or referred by the six doctors, therefore, the said statement cannot be used against the appellant company. For the sake of arguments, your Honour as L....
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....nd the same is required to be deleted. e) The Ld. A.O has not brought on record any comparative sales instance from the land revenue records in support of the alleged cash payments received by the appellant company and/or other six co-owners appellant companies for the alleged land deal transactions for which the addition is made in the assessment order and even the Ld. A.O has also not referred the matters to the DVO to ascertain the fair market value on the date of land deal transaction. The appellant company has to submit that the Ld. A.O has not discharged his burden that the sales consideration stated in the sale deed is understated. As and when the Assessing Authority makes an allegation that the sales consideration stated in the sale deed is understand, the burden is on the Assessing Authority to discharge the said burden which has not been discharged in the present case of the appellant company and other six coowners appellant companies while bringing on record any independent clinching material and/or evidence. viii) The appellant company relies upon the decision of Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO & Others (1981) 131 ITR 597....
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.... question is only a guess work not related as well as relevant to the 7 companies. Similarly, from verification of page No. 23, it does not mention any where the name of any of the 7 companies and also it does not refer to the particular of any land such as Survey No., Final Plot No. or Area. Allegation made in your question for the cash component of land price for an amount of Rs. 15.63 Crore is a false allegation. The 7 companies have executed conveyance deed for sale of land to Care Cardiovascular Consultants Private Limited and the sale consideration stated in the conveyance deed has only been received by the 7 companies as the Co-owners. The companies have not received any amount over and above the sales consideration stated in the conveyance deed. Q.23. I am now showing you a document recovered from the computer of CCCPL at its office premises from a file namely copy of Hosp.det.xls. The document clearly reveals that the CCCPL has purchased a piece of land for hospital construction. Cost of this land comprises of 85% amount to be paid in cash and 15% amount to be paid in cheque. The value of cheque amount is Rs. 2.5 crores while the value of cash component is Rs. 15.....
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....mount. I specifically deny the receipt of any alleged cash amount of Rs. 15.07 Crore by 7 companies". 3.5 To sum-up, Shri Shekarbhai Govindbhar Patel specifically denied the receipt of cash over and above the cheque amount. Further, the Assessing Officer gave a copy of the statement of the surgeon doctors to the assessees inter alia stated in their statement recorded on 13/4/2010 that they have paid cash over and above the cheque amount to Shri Keyur Parikh and his associates for the purchase of land. The assessee denied having received any cash amount and instead requested for the cross examination of the six Doctors namely (i) Dr. Anil Jain, (ii) Dr. Bharat R. Trivedi, (iii) Dr. Basrur Srinivas Mallya, (iv) Dr. Vishal M Gupta, (v) Dr. Chirag B. Mehta and (vi) Dr. Naman A Shastri. However, the Assessing Officer did not allow the opportunity of cross examination of the above mentioned 6 doctors to the assessees on the ground that it was not necessary that cross examination should be allowed to each and every person. According to the Assessing Officer, it is sufficient to give the copy of the statements recorded from the 6 doctors for the comments of the appellants. Further....
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.... land to CCCPL for documented price of Rs. 2.50 crores. These documents also indicated that beside the cheque amount of Rs. 2.50 crores, cash of Rs. 15.07 crores was also paid for the purpose of purchase of the land. Further, in their statement, the 6 doctors confirmed that they have paid cash beside the cheque amount for the purchase of the land. The land in question was the same land which has been sold by the assessees to the company CCCPL. The assessments of these doctors were also completed by the same Assessing Officer in the month of April, 2010, who made the addition cash component paid by them for the purchase of land. The same Assessing Officer has issued notice under section 153C on 7/9/2010. Further, in the case of other cardiologist doctors who have not accepted the payment of cash for purchase of land, the Assessing Officer has made addition in their hands of the cash component on the basis of the seized documents found from the possession of CCCPL and other doctors prior to issue of notice by the Assessing Officer. Therefore, there was enough material before the Assessing Officer to believe that the assessees have received cash of Rs. 15.07 crores over and above the ....
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....s been paid to the assessee or not, the Assessing Officer discussed in details the various seized documents which proved that cash amount of Approx. Rs. 15.07 crores was paid towards the purchase of land. This issue has been discussed by the Assessing Officer at paragraph 3 and 4 of the assessment order. On the examination of the seized documents and the statements recorded of various persons, the CIT(A) held in the case of Dr. Keyur Parikh and other doctors for AY 2008-09 that the assessees have received total cash of Rs. 15.07 crores over and above the cheque of Rs. 2.50 crores and finally concluded as under:- "7.3 I have considered the submissions of the appellant Dr. Keyur Parikh. As can be seen from the questions and answers recorded during the course of examination and cross-examination of the six surgeon doctors, all of them have admitted that they have paid cash over and above the cheque amount for the purchase of land and that at the time of their separation from CCCPL, they received back the cheque as well as the cash amount paid by them." Thus, CIT(A) gave clear cut finding in the appellate order dated 23.09.2011 of Dr.Keyur Parikh and others that besides the....
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....w.s. 143(3) of the Act, the additions were made consequent to the additions made in the order u/s. 153A r.w.s. 143(3) of the Act in the cases of searched assessees case namely Dr. Keyur Parikh & Others. The cases of Dr. Keyur Parikh & Others came up before the ITAT in appeal IT(SS)A No. 604/Ahd/2011 for A.Y. 2008-09 and others in whose cases the ITAT "B" Bench has rendered the order wherein the additions made in searched assessees case u/s. 153A r.w.s. 143(3) Act has been deleted. The ITAT, "B" Bench, Ahmedabad, has rendered a decision in the case of Dr. Keyur Parik & Others vide No. IT(SS)A No. 604/Ahd/2011 1810-2013. In this background, it is submitted that in the case of assessee-company the addition has made consequent to the addition made in the searched assessees case Dr. Keyur Parikh & Others , wherein the addition has been made in the order u/s. 153A r.w.s 143(3) of the Act and consequently in assesseecompany's case, the order was rendered u/s. 153C r.w.s. 143(3) of the Act, once the Tribunal has deleted the addition made in searched assessees case in respect of addition made in the assessment order u/s.153A r.w.s 143(3) of the Act, assessee company's case became a ....
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....ed that there was no such money which was delivered at the time of the execution of the sale deed. Following are few points which were pondered upon by us so as to decide the substance in the allegation of cash on-money paid by the assessee. 8.1 Fact of the case have revealed that the registered sale deed dated 17.10.2007 was not executed between two individuals but it was purchased on behalf of a company, namely, CCCPL, on one hand, from other corporate entities, seven in number, on the other hand. Therefore, the transaction carried out was a well publisized transaction. Rather facts of the case have further revealed that earlier the land in question belonged to certain co-operative societies. Such a sale deed thus cannot be treated as a "close-door-deal". Before us it has been vehemently argued that it was wrong on the part of the Revenue Department to allege that the purchaser and seller have connived with each other and therefore settled a secret deal which was out of the record. The argument before us is that such a possibility is only if a deal is between two individuals but not possible when two corporate entities are dealing with each other. Rather the sale deed in....
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....n, MD, etc., were selected. There is a clause of separation and the either groups were authorized to leave the project. There were certain restrictions for leaving the project and to safeguard the project, a lock-in-period has also been fixed. On the basis of this MOU learned AR has contested that the total cost of the project and the contribution of share capital were as per the legal norms, which were also duly recorded in the books of accounts. It is argued that the group of doctors who have left the project have become hostile with the project of the hospital and therefore made certain harmful statements. One of the clause was that the doctors leaving the project shall not be allowed to practice within 100 kms. of the hospital. Because of this clause the doctors were not at ease with the assessee company and hence made statement to take the revenge. We are not deciding the personal issues cropped up among the group of doctors, but we are concerned about the allegation of the unrecorded investment made by the assessee. The possibility is that the doctors who have left the project might be having some grudge against the doctors subsequently running the hospital and due to that re....
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....s Rs. 18 crores could have been noted by escalating the price to influence the other participants so that the maximum capital contribution could be made by them. The impugned invested amount could have been escalated so as to give an impression that an investment in the land had already been made, hence a proportionate equity was to be contributed by the doctors/investors desirous to join the project. This presumption has a basis because in the notes underneath the chart there was a reference "premium" on the valuation of the land which was required to be contributed by the group of doctors. By mentioning the word "premium' the learned AR has pleaded that in fact no premium amount towards land was paid but it was merely a projected figure to attract the higher figure of investment. He has drawn our attention on number of such pages which were extracted from the computer disk to demonstrate that there were several projections of the total value of the project. The projected value had changed on number of occasion considering the interest shown by the investors. So the argument is that since the projections have not disclosed a static or a constant figure therefore such figures shoul....
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....so disclosed an unaccounted income as if it was the cash component returned to them by the company. The assessee has argued that those were hostile to the assessee. The argument is that a third party's (specially a hostile party) confession cannot be used against any person unless that confession is independently supported by a cogent evidence. A serious question has been raised that how much credibility can be given to such intimidating witnesses. Naturally, a witness if proved to be antagonistic cannot be wholly relied upon. His statement or his action has to be weighed in the light of the surrounding circumstances. We therefore, make an observation that few statements or the filing of return of those doctors who have parted-ways from the assessee cannot be made the sole basis for the impugned addition. This legal issue can also be judged from an another angel. The credibility of a witness in the eyes of law has certain definite norms and standards. A common law is that it is unsafe to rely upon an 'interested witness'. It is possible that an 'interested witness' might be having revenge in his mind to the extent to implicate falsely, therefore, keen in seeing th....
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.... by the efforts of the assessee/CCCPL. Naturally, non- agricultural land fetch higher price in the market. When the land in question was transacted then its nature was "agricultural land". An Another adverse factor was that the land in question was under dispute among the owners. Earlier the land was owned by few individual persons. Then the co-operative society was formed and subsequently certain companies were formed. The assessee had entered into the negotiations with those persons and thereafter completed the purchase transactions. In that situation, it was difficult to presume that the assessee had paid on-money over and above the sale price as determined by the Registrar for stamp duty purpose. It has been argued that the sale price was escalated by the stamp duty authority time and again to match with the fair market price of the land of that area. Due to this reason, the sale price as determined by the stamp duty officer was at par with the prevailing market price of the land. This argument of the assessee has substantial force especially when the Revenue Department has not placed any comparable instance of prevailing market price. There is no evidence on record through whi....
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....pletion of the project. The assessee has also explained the 15% of the total project was in fact allocated towards the land which was required to be arranged by the doctors at the time of the joining of the project and rest 85% was allocated towards the cost of the project. There were several sheets showing various permutation and combination about the investments made by the doctors but all that which was recorded in the computer have also been systematically recorded in the respective books of accounts. Rather, the bank accounts in support of the investment have also been placed during assessment proceedings. On those bank transactions and the transactions recorded in the books the Revenue Department has not casted any doubt. Those were found to be true and correct as there was no fallacy in the transaction happened to be made through bank. 8.11 Learned AR has raised an argument that no corresponding legal action so far was taken against the sellers of the property. According to him, Revenue Department should have charged the capital gain on the alleged cash component from those companies who have sold the property. By not taking any action the Revenue Department had wea....
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....O is not entitled to make a pure guess, however, required to make an assessment without reference to any evidence. There must be something more than bare suspicion. In the present appeal a fundamental question is that whether there was sufficient clinching evidence unearthed by the Revenue Department consequent upon the search to make a firm belief that in fact there was the existence of unaccounted investment in the purchase of land. Side by side a second question therefore arises that whether the impugned addition was in the nature of suspicion only. We have carefully examined both these questions and then on critical analysis of the evidences and under the totality of the circumstances, we hereby hold that those were not even the incriminating material but simply computer generated projectionsheets, therefore, hard to say, synonymous to clinching material evidence depicting cash transaction, hence erroneously suspected by the Revenue Department. We hereby hold that there was no evidence in possession of the Revenue Department to hold that the assessee had in fact made an unaccounted investment towards the purchase of the property." 5.4 In this background, we find that the add....
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....s under:- "In the Profit & Loss Account submitted with return of income of A.Y. 2008-09, the assessee has declared profit of Rs. 3,95,2961- on the sale of this land. In'the computation of income, the assessee declared the profit on sale of land as long term capital gain amounting to Rs. 4,45,672/- as under: Gross sates consideration on the basis of Stamp duty value 4528079 Less: Compensation paid to Frontline Financial Services Ltd in connection with the transfer of land 3956800 Net sales consideration on sale 573279 Less: Indexed cost of acquisition of land 125607 Long term capital gain on sale 445672 5.2 In the above mentioned computation, the assesses reduced the amount paid to M/s. Frontline Financial Services Ltd amounting to Rs. 39,56,800/-, from the gross sale consideration. The assessee was asked to justify the same. In response to this, the assessee submits that a development agreement was executed in respect of land plot no.67/2 in T.P. Scheme No.42 at Sola, Thaltej with Frontline Financial Service Ltd on 27.03.2007. An agreement in this regard was submitted, As per the agreement, M/s. Frontline Financial Se....
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....acts, the claim of compensation paid to Frontline Financial Services Ltd out of the sale proceeds is rejected. The assessee furnished inaccurate particulars of income and concealed particulars of income, therefore, penalty proceedings u/s. 271(1 )(c) of the Act is initiated separately. The computation of capital gain in the case of assessee is worked out as under : Sale consideration as declared by assessee Rs. 45,28,0791/- Add: Sale consideration received in cash Rs. 2,15,25,492/- Rs. 2,60,53,571/- Less: Indexed cost of acquisition Rs. 1,25,607/- Long Term Capital Gain Rs. 2,59,27,964/-" 6.1 Matter was carried before the First Appellate Authority wherein various contentions were raised by the assessee which are reproduced herein as under: "1. The appellant company would like to submit that it along with other 6 co-owners Companies have entered into-a Development Agreement in respect of land with party namely Frontline Financial-Services Ltd. (hereinafter referred to as FFSL for the sake of convenience). The copy of Development Agreement was provided 'to the Ld. A.O. (Refer Page No.129 to 135 of Paper Book No.1). As per the said ....
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....d during the financial year 2007-08 has been deducted in computation of capital gain as expenditure incurred wholly and exclusively in connection with such transfer of land and is allowable u/s. 48(1) of the Act. 4. Further, it may be noted that the appellant company has paid the compensation to FFSL for termination of development agreement by account payee cheques only. 5. Since the compensation for termination of the development agreement is payable to FFSL in terms of duly executed Development Agreement and Termination Agreement, the same is required to be allowed as deduction from the gross sales consideration while computing the capital gain on sale of the said land. Accordingly, the disallowance made by the Ld. A.O deserves to be deleted." 6.2 Having considered the same, the CIT(A) observed that a letter dated 05.03.2007 was written by CCCPL to Superintendent of Stamps and Inspector General of Registration, Gandhinagar. From the contents of aforesaid letter, the CIT(A) observed that the company CCCPL has already negotiated the purchase of the land bearing plot number 67 of TPS 42 situated at Sola, district Ahmedabad admeasuring 17,190 m2 and therefore the....
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....or any other concern or individual of Ganesh Housing Corporation or withdrawn the amounts in cash. It was further stated that the payment of Rs. 2.75 crores was made to FFSL after two and half years in December 2009 even though as per the cancellation agreement dated 18th August 2007, the payment was to be made within 15 months of the termination agreement. According to Shri Shekhar Patel, the delay was due to the ill health of Shri Govind bhai Patel who ultimately expired in October 2009 and that Shri Tushar Shah of FFSL never demanded the money from him. Subsequently, a letter was filed by the Authorized Representative for the assessee, inter alia, requested for cross examination of Shri Tushar S Shah, director of FFSL which was denied by CIT(A). He observed that case, the assessee did not have any right of cross examination of his own witness. Therefore, the question of allowing the cross examination of Shri Tushar Shah to the assessee did not arise. In other words, the assessee has no right whatsoever to ask for the cross examination of his own witness Shri Tushar Shah. Accordingly, the CIT(A) has written a letter dated 17/11/2011 to the assessee companies as under: "T....
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.... the principle of natural justice, I am ready to allow you an opportunity of cross examination if you can produce Shri Tushar S Shah before me during any working day from 18th November, 2011 to 30th November, 2011 (except for 28th and 29th of November, 2011) between 11.00 A.M. to 6.00 P.M." 6.4 According to CIT(A) the assessee companies have not discharged the onus of proving the credit amount of Rs. 2.75 crores under the guise of compensation to Frontline Financial Services Ltd. Same was found bogus by him. The authorized representative insisted for cross examination of Tushar Shah who is alleged to have stated that above agreement was terminated and termination was bogus. Cross examination of Tushar Shah should not be relied and the disallowance in question be set aside. On the other hand, ld. DR supported the action of CIT(A) on the issue. 6.5 After going through the rival submissions and material on record we find that assessee companies claimed to have paid Rs. 2,75 crores to M/s Front Line Financial Services. Assesseewise break up of the same is as under :- i) M/s Martand Estate Pvt. Ltd. Rs. 32,22,400/- ii) M/s Matang Properties Pvt. Ltd. Rs. 27,28,00....