TaxTMI 
TaxTMI 
2020 (1) TMI 855
X X X X Extracts X X X X
X X X X Extracts X X X X
.... seized from his premise are cash and cheque payments receipts in respect of Anupam Square project. Moreover, there is no evidence of expenses incurred to support the claim of expenditure. The Ld.CIT(A) further erred in holding that amount depicted in diary is true net income despite the fact that there were no evidence of expenses. [2] On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer. [3] It is, therefore, prayed that the order of the CIT(A) may be set aside and that of Assessing Officer may be restored to the above extent." 3. Brief facts of the case are that the assessee a partnership firm is engaged in the construction business. A search action u/s.132 of the Act was carried out in the case of partners of Anupam Group. The assessee's business office premises and site office were also covered under survey action u/s.133A of the I.T.Act, therefore, assessment u/s.143(3) was completed by the AO in this case, thereby determining the total income at Rs. 9,02,77,106/- after making addition of Rs. 6,02,77,106/- on account of business income receipt of 'on money'. 4. Being aggrieved by the o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tel and cash and cheques were received deposits in the office of Anupam Organiser. The ld.DR further submitted that calculations in respect of sale of shops/show rooms was also done in coded formats on the seized papers. In this regard, the coded writing on the seized papers, the said broker Shri Jayantilal Mulchand Patel in his statement has stated that coding of numerical is done by removing certain signs which have been details in his statement and assessee himself has admitted the total amount found during the survey was Rs. 3 crores in the diary as 'on money' from sale of shops at Anupam Square and without deduction. 6. On the other hand, the ld.AR relied upon by the orders passed by the ld.CIT(A) and reiterated the same arguments as was raised by him before the ld.CIT(A). The ld.AR also relied upon the written submissions filed before ld.CIT(A) which are contained in para no.6 of its order and the same is reproduced below: "6. During the appellate proceedings, the assessee submitted the following written submission and facts of the case according to it: "1. Brief facts of the case:: The appellant is a partnership firm has carried out project for Anupatn S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m recorded during survey u/s 133A of the Act. A statement was recorded on 29.12.2012 at 3.00p.m. Survey was conducted by a team of investigation wing of IT Department, Surat. A search, at residential premises of Jayati Mulchand Patel was completed on 28.12.2012 i.e. prior to start survey at appellant's business premises. Not a single question was asked or any evidence shown to the partners of the firm in survey proceedings. Ld. ACIT has also not recorded his satisfaction w.r.t. evidences found from Shri Jayanti Mulchand Patel. A disclosure made in survey was shown by the appellant firm in it's Return of Income-for A.Y.2013-14. The same is also accepted by the ACIT after making deep scrutiny of the case. He stated, in para 1 of assessment order that a notice u/s 143(2) was issued on 05.09.2013. In the said para he has also stated that ROI was filed on 13.09.2013. There is no notice u/s 143(2), after filing of return by the appellant. If is a departmental practice based on CBDT circular No. 06/2014 dated 02.09.2014 that when disclosure is fully shown in the return and payment of taxes are made, such cases should not be taken for scrutiny assessment. Considering all these fact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....: Let me go through the assessment order where in the AO has entirely decided the issue on the basis of statement and evidences pertains to the case of Jayanti Mulchand Patel. Pg- No. Para Contents 7 1 to 3 General facts regarding the case 2 to 7 4 to 4.3 Fact regarding survey at residence of Jayanti Mulchand Patel on 28.12.2012, his statement u/s 132(4), ann. BS- 12, BS-1, BS-6, code No. in dairy found from him etc. were made basis for addition in appellant's case without offering cross examination. 7 & 8 5 Affidavit of J.M. Patel is self serving cannot be relied upon without offering adequate opportunity. The appellant has rebutted contention of J.M. Patel through reply dated 16.02.2015 to the ACIT in assessment proceedings. Shri J.M. Patel himself-has retracted his version made in affidavit. 8 6 A small dairy impounded in survey from business premises of appellant. Total amount, as per dairy is offered in return for A.Y.2013-14 and ACIT has accepted the same. 9 to 11 7(a) to (e) These are the details of sales submitted by the appellant along-with Name, address, PAN, and Copy of sale deed. The AO has also issued summons to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ge no. -73- and -74- of Annexure BS-12 seized from the residence of Jayanti Mulchand Patel. He stated that these pages are related to the appellant. He has reproduced scan copy of these loose papers on page -3- of assessment order. In fact, the said documents cannot relied due to following reasons- (i) It has neither found from the business premises of the appellant firm in survey nor found from the residential premises of the partners of the appellant's firm during search. (ii) There is no indication of name, address, receipts, payment etc. on the said loose papers. (iii) It has not been prepared by the appellant firm or any of his partners. It has not been written by the partners of the firm or his employee. (iv) Shri Jayanti Mulchand Patel is not a broker for the appellant firm, but, only one of the customers who purchased show room No. 6 on 4th floor of Anupam Square building. The appellant has not paid any brokerage to him. Lr. ACIT has not assessed any income u/s. 69C in respect of brokerage expenses paid to the said Jr-MtsSotel 4n Assessment for A.Y. 2013-14, which- was completed u/s. 143(3). Meaning thereby, Shri Jayanti Mulchand Pate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble. If if is a brokerage figure than version of Jayanti Mulchand Patel that he is getting I % brokerage is false. g) In the given table at item no. 3, as per AO amount receivable is 45,118=98 and amount received is 75460=00, which is not possible because no buyer would make more payment than what is fixed to pay and i.e. also towards cash. h) In the given table, at item no. 4, details of show room no. 6,7 & 8 is appearing. If AO's finding are considered than cost of it should be 54,56,000, 54,87,800 & 25,41,600 respectively. The same is nowhere matched with the numeric figures mentioned in the table. Further, total amount receivable and received are also mismatched. j) In the given table, at item no. 5th, two numeric figures 7000=00 and 18000=00 are mentioned. And alphabetic words OK is also appearing. As per AO, the sale consideration of the said show room should be 25,00,000/- including On-money. k) In calculation of 2nd-8, 25,41,600/- and 2,04,900/- are not found in the table. There are also more facts coming out from these papers, but, only few are mentioned hereinabove. 4.4 Lr. ACIT has further tried to establish nexus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e appellant firm has not received any cash or chaque payment from Mr. Jayanti Mulchand Patel.; The partners of the appellant firm are well experienced in the line of business and had sold all units in their project of Anupam Square to the respective buyers. The ACIT himself has given list of such buyers, list no. 7, Page 9,10& 11 of his assessment order. None of the buyer has admitted the fact that they purchased their shop or office or show room through shri Jayanti Mulchand Patel. 4.7 (i)As stated by AO Mr. Jayanti Mulchand Patel was summonsed u/s. 131 of the I.T Act during the course of assessment proceedings. It is not stated that in whose case, he has been summonsed. I am filing herewith a copy of AC's show cause notice dated 06.02.2015. In para 3, page 6, he has stated that Mr. Jayanti Mulchand Patel was directed to give details regarding (a) his role in transaction with party,, (b) details of owner and sales value, (c) receipt of cash by Anupam Organizer i.e. name and address of the person from whom cash is received and to whom it was paid, and (d) details of commission income earned by him for the sale of show room at Anupam Square Project. (ii) On goi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 153A of the I.T Act. Therefore, arithmetic calculation made by him is not binding upon the appellant firm. There is no corroborative evidence record that the appellant firm and/or its partner have received Rs. 3,44,19,004/- including cash payment of Rs. 1,98,03,894/-. Secondly, in the given table it appears that the AO has presumed rate per sq. ft. at Rs. 3,932/- and 4,124/- on 2nd floor and Rs. 4,401/- on 4th floor. Likewise on 3rd floor, he took different rates of 3,328 and 3,708/-, which is not and never possible. In actual practice also the rates on higher floors are lower than the rates on lower floor. On the basis of numeric figures, he has tried, to work out cash and chaque portion in para 6 on Page 12 of his assessment order. He himself has presumed chaque and cash portion in the ration of 20:80 for ground floor shops for which there is no evidence on record. Likewise, for 1st floor, he presumed chaque and cash proportion in 35:65 ratio for which also there is no evidence with him. Likewise, on other floor, he has calculated such ratio which has no nexus with the actual business of the appellant firm. In light of above factual aspects there is no merits on imagi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing part of the ceased diary, the same could not be held to be the unexplained investment or income earned by the assessee firm or its partners or the concern in which they held interest. Thus, invocation of Section: 69A is arbitrary and illegal. 6. Addition made by the AO for Rs. 6,02,77,106/- is also not justifiable due to following reasons :: In para 8 & 9, from page no. 17 to 20, the AO has discussed the fact of survey at the business premises of the appellant firm in which the firm has declared On-Money profit, in order to co-operate with the department. Though the AO was not agreement in such disclosure on film-icy ground, but ultimately, he has accepted the same, that can be seen from para 11 of his assessment order. In this para, he has given computation of income under the head Business. While computing such income, he has deducted Rs. 3 crores being net profit earned on receipt of On-Money declared in survey. Thus, the stand of the AO'is contradictory. On one hand, he is disputing and doubting disclosure made by the appellant firm and on other hand, he is accepting such disclosure, while finalizing assessment u/s. 143(3). The search party has recorded a state....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any advance tax on these receipts as on date why the same should not be considered as your unaccounted profit on the above mentioned projects, please clarify? Ans. As J already agreed in my answer to questing no. 17, these amounts were not entered in my books of accounts nor I paid any tax on these amounts. Hence, I voluntarily offer the amounts totaling to Rs. 12 crores (twelve crores rupees only) along with my partners in respective firms as our unaccounted net income and on the same I and my partners would not claim any expenses thereof and we agree to pay the due taxes to the government in the financial year 2012-13 relevant to A.Y. 2013-14. In confirmation to this myself and my partners will abide this statement and they will confirm the same through their respective signature in this statement." 6.1 In light of above submission, arithmetical working made by the AO in para 10 on page 20 and 21 of assessment order is not acceptable and it is strongly objected. If is very humbly stated that On-Money receipt of Rs. 9,02,77,106/- is based on a statement and loose paper found from Jayanti Mulchand Patel. The same could not be binding upon the appellant firm being ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amination at the end of the assessee is called for. Very recent judgments of Hon'ble Ahmedabad ITAT (full judgment) is attached for your perusal and reference. Considering above submission and settled legal position, your judicial honor is : prayed to allow appellant's appeal and oblige." 7. We have heard Counsels of both the parties and we have perused the material placed on record as well as the judgment cited by respective parties. Before we decide the merits of this ground, it is necessary to evaluate the order passed by the ld.CIT(A). The ld.CIT(A) has dealt with this ground in para no.5 to 8. The operative portion is contained in para no.8.3 to 8.3.1 and the same is reproduced below: "8.3 Before, I venture into deciding the issue; I would like to discuss some background of the case. A survey action u/s. 133A of the IT Act was carried out in the main office premise of Anupam Sub-group at U-12, 13, 14, 15, - Navmangalam Complex, City Light Road, Surat. During the course of it, 7 (seven) small pocket diaries were recovered from the premise, from the cabin ~of~SPirr Ashok kumar Sadanand Rai. These were confronted to him in statement taken u/s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... clinching corroborative evidence of the transactions as depicted in the documents seized from third person being true, is required. c) It is noteworthy that the department has failed to prove that Shri Jayantilal Mulchand Patel acted as a broker from independent sources, failed to recover any document depicting the transactions as such, despite of search and survey proceedings in appellant's case. The statement and affidavit of Shri Jayantilal Mulchand Patel has been used without affording opportunity of cross examination. On the side of the department's case, there is admitted proof that the appellant was indulging in taking 'on- money' outside books of account and also sort of circumstantial evidence in the form of cheque payments as per-documents seized from Jayanatilal matching exactly Shop/Office number wise with the payments appearing In the books of account of the assessed However, without deciding the evidentiary value of the documents seized from Jayanatilal and his statement/affidavit; in light of the observations above; I have mined the case from a different angle. Clearly, the assessee and the department have accepted that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....depicted in diary BI-6. The AO has taken 100% of the purported 'on-money' receipts as income, whereas the higher judicial authorities including the Hon'ble Gujarat High Court have held in many cases that the estimation of net income from total 'on-money' receipts is justified. The gist of the judgment of the Hon'ble Gujarat High Court in the case of Panna Corporation 74 DTR 0089 is as follows: "Whether entire receipt on account of on-money could be taxed in the hands of the assessee or only the income embedded in such receipt-Assessee, partnership firm received 'on money' of Rs. 62 lakhs during the block period for sale of the flats, which the Assessing Officer brought to tax-Tribunal did not permit the revenue to collect the tax on the entire receipt believing it was only the income embedded in such receipt which can be subjected to tax-Held, consistently, this Court and some other Courts have been following the principle that even upon detection of 'on money' receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves-If that be the legal position, what should be es....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of income (net profit of over 30%) from such total receipts. Therefore, I hold that in the totality of all facts and circumstances, the amount depicted in the diary Bl- 6 is the true net amount of income from 'on-money' receipts, earned out of books of account. No further addition is justified and the addition of Rs. 6,02,77,106/- as made by the AO is directed to be deleted." 8. After having heard the Counsels at length and perusal of the facts placed on record, we find the ld.AO while making the additions had basically relied upon the some loose documents seized during the survey at the residence of Shri Jayantilal Mulchand Patel, statement recorded u/s.132(4) of the Act and affidavit dated 04.02.2015 for coming to the conclusion that said person acted as broker for assessee and entries represented in the said seized documents are actual transactions. Apart from above, the AO also relied upon small diary impounded at the office of the assessee and noting therein, wherein acceptance of income of Rs. 3 crore over and above declared in the books of accounts to hold that assessee had accepted taking 'on money' on sales. The ld.AO treated the cash portion mentioned....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e transactions in the property as true for determining his total income. Even the presumption of correctness is attached with the statement so recorded u/s.132(1)(a) of the I.T.Act which has not been rebutted or uprooted by the assessee. 11. At the same time, the Revenue/Department has also failed to prove that the said Shri Jayantilal Mulchand Patel acted as a broker by leading any independent evidence, and failed to recover any documents depicting the transactions as such. The statement and affidavit on Shri Jayantilal Mulchand Patel has been used by the Revenue without affording an opportunity of cross-examination to the assessee. 12. While considering the entirety of the facts, the ld.CIT(A) had rightly concluded that without deciding the evidentry value of the documents seized from the said Shri Jayantilal Mulchand Patel and statement or affidavit for examining the case from a different angle. The ld.CIT(A) rightly relied upon the judgments as mentioned in his order which has already been reproduced above and held that even if the ratio were applied, even then the AO's working of total 'on money', the net income of Rs. 3 crore as disclosed by the assessee during the cour....