TaxTMI 
TaxTMI 
2019 (7) TMI 930
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.... Revenue 2912/del/2011 U/s 143(3) rws 153C dated 30-12- 2008 CIT (A)-III, New Delhi Appeal No 481/08-09 dated 7/3/2011 2006-07 Assessee Co 198/Del/2011 2006-07 Revenue 4665/Del/2011 u/s 153A rws 14393) of the Act dated 30/12/2010 CIT (A)-III dated 5/8/2011 in Appeal No 681/10-11 2009-10 Revenue 5863/del/2011 Passed u/s 153A read with section 143 (3) of the income tax act dated 30/12/2010 Passed by the Commissioner of income tax (A) -III dated 14/10/2011 in appeal number 684/10 - 11 2. First , we address the appeals of assessment year 2005 - 06 wherein both the parties have filed the cross appeals against the order of The Commissioner Of Income Tax (Appeals) -III, New Delhi [ The ld CIT (A)] dated 25/3/2010. 3. The assessee has raised the following grounds of appeal in ITA No. 2494/Del/2010 for the Assessment Year 2005-06:- "1. On the facts and in the circumstances of the case, the Ld CIT (A) was not correct in holding date assessment proceedings are validly initiated and further holding that assessment order was not illegal and invalid 2. Without prejudice to above, that ld CIT(A) has erred ....
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.... Crores made by the AO on account of receipt of cash payments? 2. Whether on the facts and in the circumstances of the case, the CIT (A) has erred in law and on facts by not appreciating the fact that the addition made in the case of M/s Vipul Ltd. stands confirmed by the CIT (A) himself on the same issue as well as on the basis of same evidences'." 3. Whether on the facts and in the circumstances of the case, the CIT (A) has erred in law and on facts in ignoring the fact that the assessee company is a co partner of M/s Vipul Ltd in various projects and was in receipt of equal amount of cash component as received by M/s Vipul Ltd.? 4. The order of the CIT(A) is perverse and not tenable in law and on facts." 5. The brief fact shows that assessee is a company engaged in the business of construction of residential flats in Gurgaon. Search and seizure action u/s 132 of The Income Tax Act [the Act] was carried out in Vipul group of cases on 1/6/2006 and survey at the business premises of the assessee u/s 133A of The Act. During the course of search, certain documents allegedly belonging to the assessee were seized and therefore after recording the satis....
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....nts to the assessee to rebut the above findings. The opportunity of cross-examination was also given. During the course of hearing, assessee stated that those documents have neither been prepared by the assessee not seized from the possession of the assessee and they are not in the handwriting of any employees of the assessee company. He further stated that the statement of Mr. Masand has no reference about the assessee company and in the seized documents; the name of the assessee is not appearing. It was further stated that Mr. Masand has accepted that he has never collected any and has not indicated any definite source of the documents on the figure mentioned therein. Assessee also stated that that Mr. Masand has never handled financial part of M/s Vipul Ltd and was only associated with the execution of the projects as an engineer. Assessee stated that the documents seized from that person are dumb documents and there is no authentic source of the said documents and figures written therein. It was further stated that projects were being developed and marketed by M/s Vipul Ltd and during the course of search, afterward in any confessional statement it has not been admitted that th....
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.... sale agreements" are normally prepared which is also proof of the property having exchanged the hands. Therefore, he made the addition of INR 1500000/- being half of the share of INR 3,000,000 as undisclosed income of the assessee. However he did not make any separate addition with respect to the above sum because of the addition made by the assessing officer of undisclosed cash receipt of INR 40.58 crore has been made, which subsumes it. Accordingly, assessment order u/s 143 (3) read with section 153C of the income tax act was passed on 30/12/2008 determining the total income of the assessee at Rs. 447401350/- against the returned income of INR 9 801350/- wherein an addition of Rs. 43.76 crores have been made as undisclosed income of the assessee. 7. The assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT - A- III, New Delhi. He passed on detailed order on 25/3/2010. As per para number 4.3 onwards of his order he deleted the above addition of Rs. 43.76 crore . However, he sustained the addition of INR 1,500,000 as per para number 5.2 of his order. Therefore the revenue is in appeal before us contesting the deletion of t....
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....ssessee is impugning addition of Rs. 48.76 crores. The brief facts of the case that search and seizure operation was carried out at the business premises of the assessee on 1st of June 2006 under sec. 132 of the Income-tax Act, 1961 along with the residential premises of its directors. It emerges out from the assessment order that Vipul Group is controlled by Shri Puneet Beriwala and Orchid Group is controlled by Shri Rajiv Gupta. They have constructed severai projects in joint venture. With effect from 1st of October 2005, both these groups have separated and transferred all the assets and liabilities available as on 3 of September 2005. According to the Assessing Officer, as a result, the various projects were taken over by Orchid Group and the details have been noticed on page 4 of the assessment under:- Vipul Ltd., Plaza Agora Belmonte Greens Villanova (Residential) Garden Ludhiana (Punjab) Orchid Infrastructure Developers Centre Petals Sohna Road (Orchid Business park) Villanova (Residential) Zirakpur Project (Punjab) Aurobindo Marg, New Delhi 18. In the assessee"s company, there was a director, namely, Shri Moti S. Masand, who a....
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....on page 60 of the impugned order. The finding of the Learned CIT(Appeals) read as under: "4.6 I have carefully considered the facts of the case, submissions of the appellant, remand report of the AO dated 06,112009 and the rejoinder filed by the appellant on the last day of the proceedings. It is observed from-the factual matrix of the ease that search m/s 132 of the Act was conducted on 01.0612006 at the business premises of the company as well as residential premises of its directors. The search at the residential premises of Sh. Moti S. Masand led to seizure of various incriminating documents namely 4. To 47, 80, 51, 53, 54 in Annexure A/1. These documents are daily collection reports, MIS collection sheets of different projects of M/s Vipul Ltd. The document no. 50 & 51 reflect the progressive collection as on 31.3.2005 and 30.9.2005 respectively. The scanned version of document no. 52 in annexure A/1 is reproduced below:- This documents contains 13 columns. Sh. Masand explained the various columns in his statement recorded u/s 132(4) of the Act on 01.06.2006 which is reproduced below:- "Q. During the course of search and seizure operation cash amount....
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....corded u/s 131 of the act by the A.O. on 27.08.20Q8. The relevant questions and answers are reproduced below: Q. - Page No. 52 of Annexure A-l ccntain detail of total receipts made in collaboration with M/s Orchid and other land owners. As the products were marketed by M/s. Vipul has the share of amount received in cash was being transferred to M/s. Orchid M/s Vipul is marketing agent and selling share of orchid also. This page contains detail of shim of Vipul as far as my knowledge as I was entitled to received incentive on sale proceed of share of Vipul. How the cash component and other amount was shared between Orchid and Vipul is best know to management of Vipul and Orchid. Q. Do you have anything specific to state how the amount of share of cash was being shared between Vipul and Orchid ? Ans. I am a Director have knowledge of the marketing the entire project including the shares of Orchid Group has been done by Vipul Ltd. However, I don"t know about the sharing the proceeds between Orchid and Vipul. This was further confirmed by Sh. Masand by filing the affidavit dated 03.09.2008. It is observed from the document no. 52 in annexure....
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....ument number 52 in annexure A-l reveals the following: 1. It is written by the Technical Director in his own handwriting and Sh. Masand was holding a very important position in the company. He was authorized to sign bank books etc. 2. These notings have been made during ordinary course of business 3. The entries recorded in the document are incriminating and related to the business conducted by the appellant. 4. The document is not dumb as claimed by the appellant. 5. St is self speaking. St contains the financial transactions of the projects executed by the appellant. The other documents seized are MIS sheets arid circulated among the directors of the company on regular basis. 6. The transactions made through cheques noted therein are cross verifiable. 7. The receipt of cash is mentioned against the each project undertaken by the appellant and there are other documents seized during the search which indicate that cash transactions are integral part of the business conducted by the appellant. 8. Sh. Moti S. Masand admitted having earned the undisclosed income which is not recorded in the books of accounts and p....
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....proceedings. The learned counsel for the assessee submitted that this man came from Unitech and went back to Unitech. He worked with the assessee company from 1st of July 2001 to December 2006. He was taken on-the Board of Directors by the group in the capacity of a technical person. This confirm by Shri. Moti S. Masand, while, giving reply to. question No, 3. The learned, counsel for the assessee took/us through the statement of Shii Moti S. Masand. According to the learned counsel for the assessee, he was a disgruntled employee and, therefore, the papers found from the premises of a director cannot be considered for working additions in the hands of the assessee. For buttressing his contentions, he relied upon the order of the ITAT, Mumbai in the case of ACIT Vs. Shalesh S. Shah reported in 63 TTD 15. He further submitted that it is for the revenue to establish that loose papers constitute income of the assessee. In order to buttress this proposition, he relied upon the order of the ITAT, Chennai in the case of ITO vs. M.A. Chhidambram reported in 63 ITD 203. The learned counsel for the' assessee further submitted that if reply; of-the assessee dated 2d2.2008andl2JO.2009 are ....
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.... additional income from incentives. He has included Rs. 26 lakhs in his income in A.Y 06- 07 being part of Rs. 2. cr. and the remaining in the Assessment Year 2007-08. The said amount of surrender of the incentive received / receivable by Mm cannot be made the basis of addition in the hands of assessee company because there may be hundred reasons for any person, to surrender but to make additions in the hands of assessee company, it has to be proved beyond doubt that the assessee co has income on that account. It is deemed expedient to refer certain important depositions made by him which are as under:- Statement of Moti S . Masand dated 27/08/2008 In the answer to the Question number 2, he has deposed that he is presently working with Unitech Reality Investors (India) Pvt Ltd. as the M.D. and CEO from December 2006. Prior to that, he was working as a director with Vipul Ltd from Ist July 2001 to December 2006. In reply to Question number 3, he further deposed that in Vipul Group, he was looking after the engineering section and the planning and execution etc. of various projects. In the answer forming part of paragraph I on page 4 of the statement He fur....
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.... Returns to customers have been assumed to be 8 crore, which, even the accounting people may not be able to calculate over a period of 3 years out of the customers* accounts as to what the figures of returns to customers can be. It is a voluminous exercise to calculate tins kind of information, out of the thousands of customers for various projects as the bookings keep happening and keep getting cancelled as a routine every day and it is a Herculean task to calculate the cumulative refunds to various customers over a period of 3 years. How Mr. Mati Masand could juggle such figures out of the maze of accounts is anybody"s guess. What this figure of returned amounts means is not understood and whatever refunds have been made are a part of the audited books of accounts. ; Mr. Masand, then,, calculates his assumptive 0.5% incentive on the net collection of 236 crore making a /total incentive of Rs. 1)8,00,000/- to himself. Mr. Masand has then gone on to..... incentive allegedly received by him from the assessee. In the; said calculation on Page 52 he has shown to1 have received Rs. 26,38,500/ which does not give any details of the dates and the mode. Further, he has ....
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....Argumentatively, in case the amounts advanced were incentives as I alleged by Mr. Masand, due tax would have been deducted from the amount paid as is applicable and the net amount should have been paid. Mr. Masand, himself, was a (Calcutta) Private Limited and ismotmt received from this company was in the form of adjustment for incentive payable by Mis Vipul Ltd. as far as I understand. " As per our earlier submissions and the calculations made on Page 52, it is clear that alleged Rs. 1.18 crafe was received and / or adjusted / credited to Mr. Masand's account as per his own submissions and records. He also mentions in his reply to Question No.- 8 on-Page 6 of his statement that: 1his 1.18 crore is partly by cheque" which means these cheques would have been received before 01/02/2006, by the time, this entire amount of 1.18 crare was adjusted as per his statement. However, as per the show-cause issued by your goodself, on Page 2, it is detailed that the various' cheques received by Mr. 'Masand but adjusted against incentive were only received in the months of August, September and October 2006, which means that the alleged receipts against Rs. 1.18 cro....
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....xplain. Answer:' These contain details of total cost' of projects I properties and details of amount paid which are duty reflected m regular return of income. The details are as under.- (i) Dell Commercial tentative total cost is 254 lacs, out of which, 25 lacs has been paid. (ii) Commercial Sana tentative cost is s. 53 lacs, out of which 25 lacs have been paid." Against the second property, the tentative cost against commercial flat on Sona Road is Rs. 53 lac, out of which, Rs. 25 Lac has been paid. In case the alleged adjustment against incentive on Page 52 is considered correct, argumentatively, then, an amount of Rs. 32,15,000/ - should have been stated to his credit as paid in addition to Rs. 3,00,000/- paid by him by cheque. But, Mr. Moti S. Masand claims to have paid only Rs. i25 lac against the said property. Further, as per the records of the assessee, Mr. Masand had surrendered this flat to the company on 1 st February, 2006 and a refund cheque for this amount was paid by the. company by cheque, was refunded back to him. As per prudent norms, in case he had surrendered the said commercial fiat, the alleged cash incentives adjust....
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.... offered an incentive of 0.5%, instead of his salary, then, how much benefit can accrue to him in those circumstances. The figures on these various Pages are concoctions of the various collection figures of the assessee coming. to him as MIS and assumptions of the cash, receipts which might have been there to arrive at presumptive conclusions to decide on his own future course of relationship who and half truthful submission. On another page of the seized material he has specifically Answer:- These contain details of total cost- of projects / properties and details of amount paid which are duly reflected in regular return of income. The details are as under:- (i) Dell Commercial tentative: total cost is 254 lacs, oat of which, 25 lacs has been paid. (ii) Commercial Sona tentative cost is s. 53 lacs, out of which 25 lacs have been paid. Against the second property, the tentative cost against Commercial flat on Sona Road is Rs. 53 lac, Out of which, Rs. 25 Lac has been paid. In case the alleged adjustment against incentive on Page 52 is considered correct, argumentatively, then, an amount of Rs. 32,15,000/- should have been stated to his credit as ....
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....age? Answer:- These are the calculations made for various projects. The figures were calculated to ascertain that in case of salaried employee, if I would have worked as a consultant, how money would have been calculated as incentive. " On the perusal of the second answer, Mr. Masand has categorically admitted that these were assumptive figures calculated only for his own purpose that was to ascertain that in Ills case, he switched to a consultant mode and is offered an incentive of 0.5%, instead of his salary, then, how much benefit can accrue to him in those circumstances. The figures on these various Pages are concoctions of the various collection figures of the assessee coming. to him as MIS and assumptions of the cash, receipts which might have been there to arrive at presumptive conclusions to decide on his own future course of relationship with the assessee company. None of these figures have nay relevance to that facts on record except Mr. Masand"s half hearted and half truthful submission. On another page of the seized material, he has specifically Answer:- These contain details of total cost- of projects I properties and details of amount paid w....
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....ac was received by him in cash in F.Y. 2006-07 relevant to the A.Y. 2007-08. This could have only been possible if Mr. Masand had surrendered this Dell Commercial "property to the assessee company and the company, in turn, would have refunded the entire amount to the credit of Mr. Masand by cheque or in cash. However, interestingly, Mr. Masand continues to own this property till date, enjoying the rental income from this property: It seems like a benevolent thought that the company would have paid Rs. 50 lac of the alleged incentive to Mr. Masand in-F.Y. 2006-07 relevant to the A.Y. 2007-0S without getting Mr. Masand 1a surrender the said property. Since the same has not happened, where Mr. Masand received solid cash incentive is purely a matter of speculation. Further, on page-52 of the seized material, it would be noticed by your goodself that In column 12, the cash received, till 30/09/2005 from Plaza project was written as Rs. 5 crore, whereas, as per the backside of Page 52, the total cash received till April 2006 from Plaza project was 3 crore . Identically, the alleged cash receipt from Agora project as per Page 55. was Rs. 2 crore till April 2006,....
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....e cash receipts are corroborated or detailed, except in the mind of Mr. Masand is anybody's guess. In regard to the above it is stated that the cash mentioned therein do not contain any detail except the rourid figures from the different projects. There is no detail of where it was received from, when was It received and the details thereof. There is no authenticity of this page as it is not signed contains no date, year or any ether detail regarding the receipt of cash would not be justified to infer anything without any further corroboration with any other material either on record is seized from the assessee. There is no document either on record or seized from. the premises of the 'assessee which support that the cash was actually received. Neither there is any material to substantiate the application , of these alleged cash receipts not any actual cash has been found during the course of search or survey proceedings except the cash accounted for in the books of accounts and surrendered during the course of proceedings, on the complete basis of all the seized records during the search & survey. The assessee's stand is vindicated by the fact & further established in ....
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....TR 36 was relied upon. The learned counsel for the assessee further submitted that statement of Shri Moti S. Masand cannot be relied upon because it was recorded from the back of the assessee. He pointed out that one statement was recorded during the course of search, the other statement was recorded during the assessment proceedings of Shri Moti S. Masand and no statement was recorded in assessment proceedings of the assessee. Learned Assessing Officer had taken an affidavit from Shri Masand but the copy of the affidavit was not supplied to the assessee during the course of assessment proceedings. It was only supplied during the appellate proceedings but assessee was not granted opportunity to cross-examine. In order to support his contention that material collected from the back of assessee should not be relied upon, unless an opportunity to rebut or cross examine the witness was given, he relied upon the judgement of Hon"ble Punjab & Haryana High Court in the case of Chranji Lal Steel Rolling Mil vs. CIT reported in 84 ITU-222. 22. In the next fold of his submissions, learned counsel for the assessee contended that complete details have been submitted before th....
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....in this year. Similarly, he pointed out that Vipul Floors Projects was completed 82.66% in Financial year 2003-04. Vipul Project was completed in financial year 2004-05 at 88.51%. Taking us through all 13 projects, learned counsel for the assessee raised an alternative argument that in case it was found that the Assessing Officer has proved about the receipt of on money, then, at the most sum of Rs. 12.13 crores can be alleged to have been received in cash, because out of 10 projects against whom cash receipts have been estimated on sale of space only in four projects sales are booked in this year. Thus, Assessing Officer has failed to look into all these aspects. Learned counsel raised one more alternative contention that in the, assessment order, learned Assessing Officer has discussed /about an addition of Rs. 15 lacs. Though, this amount was not added separately on the ground that addition of Rs. 48.76 crores would take care of this unexplained expenditure. 24. Learned DR on the other hand submitted that first proposition raised by the learned counsel for the assessee is that Shri Moti S.. Masand is a disgruntled employee who came from Unitecli and went back to Unitech....
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.... took an objection that Vopul Sqbare is not mentioned, it is only square. He pointed out that while considering page No. 52 at page 60 of the Learned CIT(Appeals)?s order, square is mentioned at Sr. No.l. Learned Assessing Officer has also estimated five crores rupees as received by project square. There Is no basis for the assessee to say that it is not Vipul Square. The documents considered by the Assessing Officer duly disclosed receipt of on money, they are not dumb documents, page 52. is in the handwriting of Mr. Masand who is highly qualified technical He would not write the details without disclosing any meaning. The transfer to Sona Road, 13.2 is a clinching evidence on page 52. Learned DR submitted 'that conclusions are to be arrived at by weight the setting of ail the material available on the record as 'a whole including the statement of Shri Punit Beriwal. The importance not to be attached to a single page in isolation. If that approach is adopted then it would reveal that assessee was indulged in accepting on money which was not recorded in the books. 25. During the course of hearing, we put a query to the Learned DR thatfrom these documents, it was st....
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.... It contains four columns. In the first column, the names of the projects are noted, in the second column, collection for the day against each project are noted, in the third column, collections for the month against each project are noted and in the last column, collection up to 25.3.2006 against each project are noticed; At the end, copy of these details are forwarded to MD/Mr. Raj. The details mentioned on this page dully tallied with the books of the assessee. The copy of this page has been forwarded to managing director Shir Punil Beriwal and financial manager Shri Raj Kaushik. This document does not through light of any discrepancy. It is just referred by the leanred Assessing Officer in the assessment order. No inferences are drawn nor it is used for corroboration purposes. Thus, this document is neither here nor there for the purpose of the controversy. 29. Next page is page No. 441 ft is available on page 171 of the paper book. It contains daily collection of Vipul Garden. It is also for the month of March 06. Name of two customers Dalbir Singh and Amar Mahajan who booked Unit 6A, 8B in Tower GH-6 are noticed. They have paid Rs. 47,329 and Rs. 1,75,000 respectivel....
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....f salaried employee, if I would have worked as a consultant, how much money would have been calculated as incentive." 32. No questions are put to Shri Masand about this page at the time of search. We will discuss the impact of this page while we will be discussing Page No. 52 because these two pages are the material pages which led the Assessing Officer to make Assessing Officer to make the addition. Before commenting on, these pages we would like to take note the details of other pages i.e. page Nos, 50 and 51. On page - 50, details of daily collection report dated 31.3.2005 are written. It contains-again-four columns, namely, name of the project, collection for the day, collection for the month and collection till date. Similar are the details available on page 51 but they are: for the month of September 2005. Copies of both these pages are forwarded to Shri Punit Beriwal, Shri Masand and Shri Dliurva. Next is the page No, 52 Which Contains details in tabular form in the handwriting of Shri Masand. This page has thirteen columns. This page has been annexed by the Assessing Officer with the assessment order along with other pages. Learned CIT (Appeals) has placed the scan....
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....ished before the expiry of time specified in section 139 and he offered such income for tax and pays the tax with interest and also disclosed the manner in which such income has been derived then he will be absolve from the penalty. The important aspect is that assessee has to disclose the manner which such income was derived. Thus, in order to save his own skin, Mr. Moti S. Masand was found to disclose the manner of earning Rs. 2 crores. This situation put him in the category of an interested witness, hence, took him out from the duty of an independent director. While dealing with the taxability of the assessee"s income, this aspect has to be kept in mind while evaluation his statement. 35. In reply to question No.7 in the statement records, under sec, 132 of the Income tax Act, 1961, Shri Moti S Masand has disclosed his duties, Question No. 7 and reply reads as under:- Question No. 7; Please state your qualifications and what do you have look after in the above mentioned company? Ans: I am a bachelor of Engineering (C), only major and main duty is to look after construction and engineering work of the concerned company. Question No5: In the sta....
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....following explanation again:- Calculation of incentive as made, by Mr. Moti Masand on 'Page- 52 of the seized material: On the perusal the above alleged calculations made on seized documents on page 52, it can be inferred from the figures .that 242.752 derived from Column-6 on - f*age 52, 'which depicts probably the net turnover as on 31/03/05 and the figure of 47.4 is derived from. Column-S which again is as on 31/03/05, thereby, giving a total of 290.152 .We assume that this is the turnover of the organization being 'depicted by Mr. Masand. The next tine reduces 46 out of the total figure which is assumed to be the turnover till 31/03/03. On analysis of these figures and on perusal of document at Serial no. - 50, which is a daily collection report dated 31.03.2005, it is deduced that the figures in Column 2 have been taken from Coumn 3 of page 50. In Column-4, Mr. Masand has made some assumptive percentage shares against these turnovers attributed to Vipul and calculated his share in Columm. On perusal of the audited balance sheet from 2002-2003; Up to 31/03/05, the revenue recognized by Vipul Ltd .was as follows:- Financial year....
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....n, transferred to Commercial (Dell Commercial flat) on 01/02/06, thereby, assuming to have writing off an amount of Rs. 46,500, which was balance and as per this document, . Mr. Masand bad adjusted all of Ms calculated alleged incentive of Rs. 1.18 crores as on 01.02.2006. We have analyzed all the adjustments of this statement in the prism of of his statements at the time of search and another made on 27/08/08 as well as his return of his income filed u/s 153A and the show cause notice issued on 10.10.2008 and our observation are as under: On the perusal of the above details, it is evident that whatever alleged incentive Mr. Masand has detailed for himself, it was received by him as on 01/02/06, which means that his return of income for F. Y, 2005-06 relevant for the Assessment 2006-07 should have depicted the total incentive received from the assessee at Rs. 1.18 crore, whereas, Mr. Masand has declared an incentive of only 26 lac in his return of income for the said assessment year. 37. The above explanation of the assesses is self-explanatory. This, explanation has neither been dealt by the learned Assessing Officer nor by the leanred CIT(Appeals) in an....
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....ther there is a nexus between the outcome of the result on the basis of these pages and calculations made by Mr Masand. The assessee has demonstrated that total collections as per the audited books of account as oh 313.2005 was at Rs. 271.32 crores. The calculations of Mr. Masand are short by 29 crores. If the money was accepted in cash" then total collection would have been worked out at a higher figure then not on a lesser figure. 38. The assessee has further demonstrated as to how the theory of receipt of of incentive by Mr. Masand does not go parallel with his return of income, It is duly discernible in the reply of the assessee, extracted supra. Shri Masand has worked out incentive of Rs. 1.18 crores as on 1st of February 2006 whereas in his return for assessment year 2006-07, he has declared incentive of only 26 lacs. His calculations and disclosures are not in coherence with each other. 39. The disclosure made by any person would always be against his interest. His disclosures can never bind a third concern. The addition in die hands of third concern has to be made on the basis of merits of the evidence and not on the basis of any concession given by any pe....
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....ting the addition of Rs. 43.61 Crores out of INR 437,600,000 made by the learned assessing officer on account of receipt of cash payment. Accordingly, ground numbers 1 - 3 of the appeal of the learned assessing officer are dismissed. 12. Ground number 4 and 5 of the appeal of the learned AO are general in nature and therefore there dismissed. 13. Accordingly, appeal of the learned assessing officer is dismissed. 14. Now we come to the appeal of the assessee in ITA no 2494/Del/2011 for AY 2005-06. As per ground number 1 - 7 of the appeal are raised on the issue of assumption of jurisdiction u/s 153C of the income tax act. 15. Ground number 1 of the appeal of the assessee is general in nature. No specific arguments were advanced by both the parties. In view of this, we dismiss ground number 1 of the appeal. 16. Ground number 2 of the appeal relates to proceedings u/s 153C of the income tax act stating that the learned Commissioner of income tax (A) has erred on facts and in law in not holding that the present assessment is without jurisdiction and void ab initio , insofar as, no documents and material seized during the various searches could be said to be "belonging to....
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....om the employee or director of the appellant company and also the person from whom it is seized has not named the appellant. In view of this, it was stated that the documents seized from Mr Moti M Masand does not belong to the assessee and therefore the assumption of jurisdiction u/s 153C of the income tax act by the learned assessing officer is devoid of any merit. 18. With respect to the material seized from Mr Aman Sharma and Vipan Sharma, the satisfaction note refers to page number 49 of annexure A - 1 which is a receipt of payment made by Mr Raj Singh, Dharmveeringh and SUrinder Singh. It was further stated that the above document content name of the Vipul infrastructure Ltd as well as the other person and that does not contain name of the assessee. It was further stated that the above document was seized from the possession and control of Mr Aman Sharma and Vipin Sharma during search on them. He further stated that there is no name of the appellant mentioned in the seized material and therefore same cannot be treated as "belonging to" the appellant. He further submitted that in the satisfaction note the learned assessing officer has not shown any reason why he is of the op....
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....43 to 47, 48, 49, 50, 51, 52 in annexure A - 1 seized from the residence of Sri Masand does not show at all any transaction conducted by the appellant. However the document number 43 in annexure A - 1 seized during the search from the premises of Mr Aman Sharma and Mr Vipin Sharma the notes that cash of INR 3,000,000 has been paid on 08/05/2004 in pursuance to agreement dated 15/03/2004 by the appellant. The judicial precedents discussed in the earlier paragraphs make it clear that the term " belonging to" implied something more than the idea of casual association. It involves the notion of continuity and indicates one more on less intimate connection with the person over a period of time. The expression belonging to the assessee connotes both the complete ownership and limited ownership of interest. The term belonging to is capable of, connoting interest, which is less then the absolute perfect legal title. However there should be some limited ownership of interest, if it is to be permitted that the assets belong to the assessee. Applying these principle to the facts of the instant case, it can be safely concluded that the subject documents seized from the residence of Sri Moti S ....
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....Singh. The claim of the assessee is that assessee does not own any such land as mentioned in the receipt and further, nothing has been mentioned about the assessee. On perusal of para number 40 of the order of the coordinate bench in case of M/s Vipul Ltd in ITA number 2403 and 5999/del/2010 for assessment year 2005 - 06 and 2006 - 07, it has been held that Messer Bhudeep builders and exporters private limited belongs to the orchid group. However, on careful consideration of the above document it is apparent that the above receipt did not mention the name of the assessee and therefore even that document does not belong to the assessee. Even if it is presumed that M/s orchid group is involved in the transaction then there is a specific name of Messer Bhudeep builders and exporters private limited, and not the appellant. The company that is namely Bhudeep Builders and Exporters Pvt Ltd is separately assessed to income tax and is an altogether different entity and therefore even if any recourse is required to be taken it has to be taken in the hands of that company. Even otherwise, In the order of the coordinate bench in Vipul Ltd also, it did not discuss whether the above document be....
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....mber 8 is with relation to addition of INR 1,500,000 confirmed by the learned CIT - A. 31. The learned authorised representative submitted that as the impugned document based on which the addition has been made by the learned assessing officer does not belong to the assessee, assumption of jurisdiction u/s 153C of the income tax act is itself bad in law. Even otherwise, he submitted that there is no such payment received by the assessee as assessee did not own any such property. 32. The learned departmental representative vehemently supported the order of the lower authorities and submitted that identical issue in the case of Vipul Ltd has been considered by the coordinate bench where in para number 40 - 41 the coordinate bench set aside the whole issue in the case of Vipul Ltd back to the file of the learned assessing officer. He extensively referred to para number 41 of the order of the coordinate bench. 33. We have carefully considered the rival contention and perused the orders of the lower authorities. In the present case, as we have already held that the receipt found from the residence of Mr Aman Sharma and Vipin Sharma does not belong to the assessee and therefore ....
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....in the business premises of the assessee. The document number 43 - 47, 48, 49, 5, 52 in annexure A - 1 was seized from the possession of that gentleman. His statement was recorded u/s 132 (4) of the act. In the statement, he admitted that the documents contain the details of commission earned by him on the sales made by M/s Vipul Ltd. The document number 52 in different columns contain the details of the project, realization made in cheque and cash on different dates and the working of the commission earned by the gentleman. He admitted that para number 5 contain the details of cash receipt from the respective projects. Therefore, the notice u/s 153C of the Act was issued to the assessee and the copy of the satisfaction note was also given. The assessee filed its return of income declaring income of Rs. 21000442/- on 02/6/2008. The original return under section 139 of the act was also filed on 13/12/2006 at the same income. Consequent to that the learned assessing officer made an addition of INR 8 crores in the hands of the assessee as undisclosed income being the undisclosed income received by the assessee in the joint project with M/s Vipul Ltd in case of project plaza of INR 5 c....
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....8125/-. Accordingly the assessment u/s 153C read with section 143 (3) of the act was passed on 30/12/2008 at INR 101000442/- against the returned income of Rs. 21000442/-. 40. The assessee being aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT - A, who relying on the order of the learned CIT - A for assessment year 2005 - 06 , in case of assessee, deleted the addition of INR 8 crores on account of undisclosed cash received. With respect to the 2nd addition of Rs. 11858125/-, he held that that the adverse inferences has been drawn by the learned assessing officer on the basis of the document seized from the premises of 3rd party and the request of the assessee to examine the 3rd party or to cross-examine him was negated. It was further held that the learned assessing officer also did not get any valuation done by the learned departmental valuation officer to determine the fair market value of the land purchased by the assessee and Ao has also not examined the sellers of the land. He further recorded the statement of Shri Vipin, at the back of the assessee and neither confronted the same to the assessee nor allowed any opportunit....
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....rsons searched u/s 153A as mandated by Income Tax Act, 1961. As such assessment be annulled. 4. Without prejudice to above, that the ld CIT(A) has erred on facts and in law in not holding that the present assessment is without jurisdiction in so far as there is no record of handing over and taking over of record from file of persons searched to that of assessee as mandated by Income Tax Act, 1961. 5. Without prejudice to above, the ld CIT(A) has erred on facts and in law in holding that jurisdiction u/s 153A r/w 153C of Income Tax Act, 1961 is validly initiated in so far there is absence of two separate AO"s i.e. one having jurisdiction over assessee searched and other having jurisdiction over assessee in whose case jurisdiction u/s 153C initiated as such assessment be annulled." 43. We 1st address the appeal of the learned assessing officer wherein the learned AO has made an addition of INR 80,000,000 in the hands of the assessee which is deleted by the learned CIT appeal and therefore contested by the learned assessing officer as per ground number 1 of this appeal. 44. The learned departmental representative relied upon the order of the learned assessing o....
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....ving 50% share in the joint venture and therefore the addition to that extent has been made by the learned assessing officer. 49. Learned authorised representative submitted that the material is impounded during survey under section 133A of the act on SVS Pro Mart Private limited. It was not seized from the premises of the appellant company and not from its employees are directors. The document has not been authored by any of the person related to the assessee and it does not contain name of the author, appellant or any of its employees are directors. It does not contain the purpose for which the same was prepared. In view of this, it was stated that the seized document does not pertain to the assessee. It was further stated that the land mentioned in the seized document is located at Zirakur whereas the land owned by the assessee is located at RajPura. Hence, he submitted that there is no connection between the document found in the transaction of the land owned by the assessee. He further stated that as per the marking of the seized documents it is stated that it is related to assessment year 2005 - 06 where the addition has been made in assessment year 2006- 07. He further st....
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....ble evidence. Therefore, the addition was deleted. The learned departmental representative could not show us any reason that a. when there is a locational difference between the situs of the land as per the document and the actual ownership of the land by the appellant, b. without confronting the assessee the statement of Mr Vipin, c. Without giving an opportunity of cross-examination to the assessee the addition can be made. In view of this we do not find any infirmity in the order of the learned CIT - A in deleting the addition of INR 1 1858125/- on account of undisclosed investment under section 69B of the act for the purpose of purchase of land at the Zirakpur along with Vipul Limited. Accordingly, ground number 4 of the appeal of the learned assessing officer is dismissed. 51. In the result ITA number 2912/Del/2011 filed by the learned assistant Commissioner of income tax, central circle - 2, New Delhi for assessment year 2006 - 07 is dismissed. 52. Now we come to the cross objection filed by the assessee in the above appeal. As per ground number 1 and 2 of the appeal the assessee has challenged that no documents and material so seized are belo....
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....ew of our decision in the appeal filed by the learned assessing officer as well as dealing with ground number 2 of the cross objection by the assessee has merely become academic and therefore they are dismissed. 58. In view of this the cross objection number 198/del/2011 filed by the assessee is partly allowed. 59. Accordingly, for assessment year 2006 - 07 the appeal of the learned assessing officer in ITA number 2912/del/2011 is dismissed and cross objection filed by the assessee in CO number 198/del/2011 filed by the assessee is partly allowed. ITA No 4665/del/2011 AY 2006-07 ( By AO) U/s 153 A 60. Now we come to ITA No 4665/Del/2011 For AY 2006-07 filed by the learned Assistant Commissioner Of Income Tax, Central Circle - 2, New Delhi (the assessing officer) against the order of the learned Commissioner Of Income Tax (Appeals) -III, New Delhi dated 5/8/2011 wherein additions made by the learned AO are deleted. 61. The brief facts for assessment year 2006 - 07 shows that pursuant to search and seizure action u/s 132 of the income tax act carried out in Sri Ram Hari Ram group of cases of 26/02/2009 in the case of the assessee was also covered under search. Co....
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....red in law and on facts in deleting the disallowance of Rs. 1,15,548/- on account of interest paid on the bank overdraft utilized for non-business purpose. 6. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts In holding that no disallowance / addition can be made in an assessment u/s 153A which is not based on any incriminating document seized during search. 7 The order of the Id. CIT(A) is erroneous and is not tenable on facts and in law." 63. The ground number 1 of the appeal is with respect to deletion of the addition of INR 80,000,000 made by the assessing officer because of receipt of cash payments. Both the parties submitted that this is identical to ground number 1 -3 in the appeal of the learned assessing officer for assessment year 2006 - 07 in ITA number 2912. The learned authorised representative also submitted that the learned assessing officer has already made this addition in the order passed u/s 153C of the income tax act for the same assessment year and as this is the order u/s 153A of the income tax act pursuant to different search and therefore the learned assessing officer has repeated the same additi....
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....ct to the above addition. Accordingly, ground number 4 of the appeal is dismissed. 67. Now we come to ground number 5 of the appeal of the learned assessing officer wherein the learned assessing officer is aggrieved with the order of the learned CIT - A in deleting the disallowance of Rs. 115548/- on account of interest paid on the bank overdraft utilized for non business purposes. The brief facts of the case shows that vide para number 4 of the assessment order, the learned AO found that assessee has claimed interest paid of Rs. 115548/- in the profit and loss account. He found that loans and advances given by assessee were for non business purposes. Therefore the learned assessing officer was of the view that the assessee has taken the loan and used for giving interest free advances to other parties therefore he disallowed the sum of Rs. 115548/- holding that it is not for the business purposes . The assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT - A contesting the above disallowance. The learned CIT deleted the above disallowance for the reason that company had interest free funds of more than 280.87 Crores becaus....
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....essee did not submit any explanation of additional income until the end of the assessment proceedings and has not identified any seized material related to the additional income disclosed. 74. Further during the course of search at the residential premises of Sri Balkishan Saraf , an accountant, main person of the assessee on 26/2/2009 certain loose papers and notebook et cetera were found and seized as per inventory Annexure A of the panchnama. The learned assessing officer analyzed annexure A - 2, page number 48 of the seized documents and found that it is one kind of fund flow statement. The contents of the seized documents are reproduced at page number 3 and 4 of the assessment order. Based on the above document the learned assessing officer found that there is clear details of inflow and outflow of the funds mentioned on those papers. The learned AO further referred that there are a reference of RTGS in those documents and therefore these are actual receipts and payments of funds therefore the assessee was directed to explain the above document. The assessee submitted that these are the dumb document and Sri Balkishan stated that they related to the past period and ar....
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.... 250 170 RTGS JG holding bhop 25 280 Tinnulala bhop 50 100 AK 100 BK 800 325 475 tommarrow RTGS 50 bahetiji 125 Paharimata 83 73.5 BK Bank Bal. 16.5 Cash bal. 274 548.5 548.5 Bal 0 Note Captive shares pur 20L Auto impex shares pur 5.4 On perusal of the details and pattern mentioned in this paper it is clear that the details of inflow and outflow of the funds have been mentioned on this paper. This fact is further cemented by the amount of 170 mentioning "RTGS JG holding", it means 170 is the amount which has ....
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....cial planning. Shri BalKishan Saraf has simply mentioned that this is meant for financial planning but failed to prove that which type of planning made by him and what was the necessity of such planning. This cannot be a planning because these transactions include a transaction of 170 RTGS JG holding" in left side (inflow of funds) and also in right hand side (outflow of funds) "tomorrow RTGS 50", therefore, RTGS was executed by some bank for 170 and for 50 might to be executed tomorrow. RTGS is the system by which the funds are transferred from one bank account to another bank account electronically and this type of physical transaction if form part of a calculation on that sheet cannot be claimed by the assessee a future planning. Moreover, in the table word "tomorrow" is mentioned it means the assessee has mentioned the transactions of a day and next day only. On this calculation sheet the closing balance of the transactions is brought down for next day and out of the balance he has shown outflow of fund. In the planning the balance and tomorrow is not considered. In the planning simply the details of estimate of incoming fund and outgoing fund are mentioned. But the word tomorr....
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....e has to prove that this is only a dumb/useless paper whatever amounts have been mentioned on the paper specially when it is prepared in the nature of account and accounting term such as in a tabular form left side (inflow of funds) and right hand side (outflow of funds) and closing and opening balance has been mentioned, total of both sides tallies, RTGS, Cash Bal has been specifically mentioned on the paper, for which he has failed. Therefore, on the basis of narrations mentioned in this papers and terms used for preparation of this paper, it clearly indicates the nature of the paper as inflow and outflow of funds for some transaction which has neither been recorded by the assessee company nor explained during assessment proceedings. 5.7 As per the facts mentioned above it is proved that this paper is prepared for monitoring the funds and without proper explanation this is unaccounted funds for receipt and payment. Moreover, as discussed hereunder the modus operandie of Shri BalKishan Saraf related to the assessee company as he used to mention the money in lacs of rupee. Such as if 5 is written represents the amount of Rs. 5,00,000/-. Further Shri BalKishan Saraf is clos....
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....ompany as can be found from the statement of Shri Bal Kishan Saraf. Penalty proceedings u/s 271 (1) ( c) of the Act is being initiated separately, as the assessee has filed inaccurate particulars of income and concealed his income. 5.9 Page No.46 of Annexure A/2: (Annexed as annexure B with this order) This page was found from the residential premises of Shri BalKishan Saraf which prepared on 08/01/2009 The heading of this page is "To do list on:-08/01/2009. This summary is in a tabular form and a print out obtained from the computer. Below this summary/table of To do list, certain amounts has been mentioned. 5.10 On this paper amount, cash, Cr. and amounts before that has been mentioned, it proves that these are the recording of some financial and accounting transactions. These may be accounted for or unaccounted transactions in the books of the assessee company. 5.11 In reply Shri BalKishan Saraf has mentioned that "this is an estimate/projection document as it is clear from the head note at the top of the paper as "To do list as on 08.01.2009"". In this regard we also wish to draw-your attention to statement of Balkishan Sara....
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....actions. It is obvious that apparently, this paper also relates to the assessee company as it is flagship company of Sh. Rajiv Gupta and for the reason also that Sh. Bal Kishan Saraf takes care of accounting and tax filing of group companies belonging to Sh. Rajiv Gupta. In the circumstances and keeping in view the figures and names written in the above seized document, it is held that the assessee has strike through the figures of 5,10,1 etc. it means he has collected or arranged the fund of Rs. 1.25 crore and given to some Shri Meeku bhai. As such it is proved that whenever, the assessee has not mentioned the amount in figure than the amount represents the figures in lacs as the strike through figure are in lacs and the total of the figure strike through figure is worked out as 1.25 crore as mention in front of the name of Shei Meeku Bhai. This logic also proves that these are the financial transactions noted on this paper which are not planning/estimation and as such this is not a dumb document as stated by Sh. Bal Kishan Saraf. The assessee has also not submitted any satisfactory reply in respect of the seized material and Shri BalKishan Saraf also has totally failed to co rela....
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....ent/income on the basis of the documents found from the premises of Sri Saraf. 76. Assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT - A who deleted the above addition as per paragraph number 5 of his order as under:- "5. Finding on Ground of Appeal Nos. 1 to 13:- On a consideration of the findings of the A.O. and the submissions made by the appellant as well as upon going through the seized documents, the scanned copy of which is forming part of this appellate order as above, the undisputed position on record is that both these papers have been found from the residential premises of Sh. Bal Kishan Saraf and have not been found / seized from either the premises or possession of the assessee company and is not authored by any of if s Directors. Even Sh. Bal Kishan Saraf in his statement on the date of search on 26.02.09 has admitted that these papers have been authored by him. The same position has been reiterated through letter dated 01.12.10 written by Sh. Bal Kishan Saraf to the AO in his assessment proceedings u/s 153A, the copy of which is placed on pages 93-97 of the paper book. Now when ....
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....the assets belongs to the assessee. In the instant case, the documents found and seized during the search cannot be termed to indicate any limited interest of ownership of the appellant in such documents. While there are reference to the words oidpl & SG, which have been admitted by Shri Saraf in his statement as signifying " Orchid Infrastructure development P. Ltd. & Sangeeta Gupta the wife of Shri Rajiv Gupta, but apart from this the other names written in code have not been identified /linked with the assessee, by the AO and therefore on this ground itself for lack of independent corroborative evidence, there is no case for making addition in case of the appellant. The AO has in his order has made references to the fact that the assessee as well as Sh. Bal Kishan Saraf have not come out with full and true explanation relating to the narration in these seized documents. While there is a legal responsibility on part of Sh. Bal Kishan Saraf to come out with valid explanation relating to these documents in view of the presumption applicable u/s 292C of the Act, but in view of the fact that the same are held as "not belonging to the assessee" therefore there can be no burde....
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....the already disclosed income for Rs. 31.50 Crores on part of the appellant therefore in my considered view a set off for this amount of Rs. 11,21,42,000/- can reasonably be granted to the appellant. In view of the above discussion in totality the addition made for Rs. 11,21,42,000/- is directed to be deleted. Thus Grounds of Appeal No. 1 to 12 are disposed off as all these grounds are essentially on the same issue and have been argued from different perspective. So far as Ground No. 13 is concerned the contention of the appellant is that the AO has passed his order u/s 153A /143(3) of the Act. That since the date of search is 26.02.2009 therefore section 153A is not applicable for this year and the assessment could have been completed only u/s 143(3) and not under section 153A r.w.s. 143(3). It has therefore been prayed that the assessment order be held as void- abinitio and should be deleted on this account itself. This plea of the assessee is not found acceptable as there is nothing on record which shows that notice u/s 153A was issued in appellant"s case. Moreover mention of S. 153A on the first page of the order is at best an inadvertent mistake which does not make the....
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.... u/s 143(3) of the income tax act. He therefore stated that above income has already been taxed in the hands of Balkishan Saraf and therefore now it cannot be taxed in the hands of the assessee once again. He further referred to the submission made by Mr Saraf during assessment proceedings, which is placed at page number 92 - 108 of the paper book. He further referred to the assessment order passed in case of Mr Saraf u/s 143 (3) of the act which is placed at page number 12 5 - 144 of the paper book wherein the above addition has been made. He further referred to the order of the learned CIT - A at page number 35 - 36 wherein the learned CIT - A has given the detailed reason for deleting the above addition. In view of this, he stated that there is no infirmity in the order of the learned CIT - A in deleting the above addition which has been made by the learned assessing officer on protective basis in the hands of the assessee. 80. We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly, based on the seized material found in the possession of Mr. Saraf the addition has been made in the hands of the assessee. Admittedly, in the....
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....parently as recorded by the learned CIT - A, Mr Saraf could not give the meaning of several terms mentioned in those documents. The document seized from Mr. Saraf placed at page number 41 - 42 of the paper book does not have any reference of the appellant company, the name of the assessee company was not at all mentioned on those documents. Therefore, the learned CIT - A has also held that these documents do not belong to the assessee company. Further, with respect to RTGS mentioned, no correlation or corroboration was made to show that it belongs to the assessee company. The learned departmental representative could not show us that how the seized documents belongs to the assessee. On reading the assessment order itself, the learned assessing officer has also not stated that how these documents belong to the assessee. The learned departmental representative also could not controvert the infirmity in the order of the learned CIT - A. In view of above facts, we confirm the order of the learned CIT - A , for the reason that, a. the disclosure of INR 31.50 crores subsumed the above addition of INR 11.21 crore , b. to the extent of INR 9.33 crore set off to Mr. Saraf ....