TaxTMI 
TaxTMI 
2017 (1) TMI 1719
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....ention was invited to the observation made at page2 of the assessment order and reply of the assessee at page-3. It was asserted that there was no co-relation made in the prices and reminder was send at the rate which was cancelled. The ld. counsel invited our attention to the affidavit of the buyer (page17 of the paper book) and affidavit of director (page-12 of the paper book) along with page-4 (letter of cancelation) and pages 23 & 24 (bank statement showing the amount returned to earlier buyerMilind Bhingare). It was explained that the letter is merely a reminder and not a formal document like agreement. It was contended that there was no other material found for justifying the addition. The ld. counsel further contended that the explanation of the assessee is supported by bank account, books of accounts, registered sale deed, etc. It was explained that the price, which was quoted by the assessee to the new buyer is supported by valuation report of Subregistrar (page-63 of the paper book). The crux of the argument is that there was no evidence found against the assessee and no enquiry was carried out by the Assessing Officer, so the addition made on hypothetical basis is not ju....
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.... the necessary details, information and explanation called for by the Assessing Officer. A search action u/s 132 of the Act was carried out in the case of 'Gala Sharma Siddhi' group on 28/08/2008. Along with the search, one of the premises of the assessee was covered u/s 133A of the Act. As per the Revenue, one CD, comprising various correspondences, books of accounts and documents, was impounded and later on during the course of assessment, its contents were viewed. On perusal of the CD, as per the Revenue, amongst others, one letter in respect of sale transaction with Mr. Devendra Singh Tomar (Flat Purchaser) was found. According to the Assessing Officer, the letter dated 08/08/2008, return to Mr. Devendra Singh Tomar, by the assessee, showed that the sale price, payable by Mr. Devendra Singh Tomar is Rs. 57,73,000/- towards the purchase of flat, whereas, the agreement value with reference to the same was Rs. 49,18,000/- and thus the assessee was called to explain as to why:- (i) why the difference of Rs. 8,55,000/- in the sale price as project herein before in the case of Shri Devendra Singh Tomar should not be added to the total income of the assessee and (ii)....
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....of remaining buyers. During assessment proceedings, the assessee was asked to clarify/explain the differential amount mentioned in the said letter vis-a-vis mentioned in the agreement. The assessee explained the difference and also filed an affidavit of Shri Gautam Kabra. An affidavit was also filed from Shri Devendra Singh Tomar explaining the factual matrix. The relevant extract of the contents of the letter of Shri Gautam Kabra are reproduced hereunder:- "6. I had negotiated flat no. 101 in wing D-2 with one Mr. Milind Bhingare for a sum of Rs. 59,34,000/-. The said party paid token money of Rs. 1,00,000/- on or around 16.05.2008. However, he cancelled the booking on the ground that the price agreed was much higher than the rate prevailing in the surroundings. We repaid the sum of Rs. 1,00,000/- on or around 30.05.2008. 7. Mr. Devendra Singh Tomar approached us somewhere in July 2008 and inquired for three bed room hall kitchen (3 BHK) flat in our project at a reasonable value. He was not too inclined for higher floor and probably 1st floor suited his requirement. 8. He negotiated with us for some time and after several meetings the price for the flat ....
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....1,000/- as an instalment for completion of top slab and outstanding amount of Rs. 51,00, 000/- till date aggregating to Rs. 55,31, 000/-. I informed the company about our agreed price and was informed to ignore the letter as the figures appearing in the letter pertained to their erstwhile deal. 7. The agreement was signed and registered with Sub Registrar, Thane, I further state that, I have not paid any amount towards purchase consideration of my above mentioned flat over and above Rs. 49, 18, 0001- as agreed mutually by me with the company. 8. As agreed I paid the total consideration of the balance amount in three instalments vis-a-vis Rs. 1,18,000/- on or around 06.05.2009, Rs. 20,00,000/- on or around 07.05.2009 and Rs. 27,00,000/- on or around 10.05.2009 aggregating to Rs. 48,18,000/-." 2.8. The ld. Commissioner of Income Tax (Appeals) A) was of the view that mere filing of an affidavit is not enough; therefore, he sustained the addition. Shri Kabra explained the factual matrix by saying that he negotiated flat no.101 with Mr. Milind Bhingare for a sum of Rs. 59,34,000/- and the party paid token money of Rs. 1 lakh on or around 16/05/2008. The booking was ....
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....buyers. Rather, the situation is in favour of the assessee because in the cases of remaining buyers, the value/price mentioned in the registered documents has to be accepted in the case of one single buyer i.e. Mr. Devendra Singh Tomar, who negotiated with the assessee at the price, which was mentioned in the registered sale deed. The remaining buyers also made the payments as mentioned in the registered sale deeds. The earlier person, Mr. Milind Bhingare, who found the rate at the higher side, therefore, he cancelled the agreement. Thus, the onus cast upon the assessee was duly discharged. Rather, the onus cast upon the Assessing Officer was never discharged and he picked up one letter from 219 buyers and made proportionate addition in the hands of the assessee for the remaining buyers also. This type of approach cannot be said to be justified unless and until the same is substantiated with evidence. Our view finds support from the decision from Hon'ble Apex Court in COMMISSIONER OF INCOME TAX vs. DAULAT RAM RAWATMULL 87 ITR 349 (SC), wherein, it was held as under:- "Held : Findings on questions of pure fact arrived at by the Tribunal are not to be disturbed ....
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....he assessee. There is no flaw or infirmity in the above reasoning of the High Court. The question which arose for determination in this case was not whether the amount of Rs. 5,00,000 belonged to B but whether it belonged to the respondent-firm. The fact that B has not been able to give a satisfactory explanation regarding the source of Rs. 5,00,000 would not be decisive even of the matter as to whether B was or was not the owner of that amount. A person can still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money is found to be not correct. From the simple fact that the explanation regarding the source of money furnished by A, in whose name the money is lying in deposit, has been found to be false, it would be a remote and far-fetched conclusion to hold that the money belongs to B. There would be in such a case no direct nexus between the facts found and the conclusion drawn therefrom. There is also no cogent ground to take a view different from that of the High Court that the other circumstances, namely, the transfer of the amount of Rs. 5,00,000 from Calcutta to Jamnagar for fixed deposit in the name of B and....
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....., 1946. It would thus follow that both as regards the source as well as the destination of the amount, the material on the record gives no support to the claim of the Department. The AAC also took into account the fact that the office of the Central Bank, is in the same building in which there are the business premises of the respondent-firm. This was, a wholly extraneous and irrelevant circumstances for determining the ownership of Rs. 5,00,000 which had been deposited in fixed deposit in the name of B. There should, be some direct nexus between the conclusion of fact arrived at by the authority concerned and the primary facts upon which that conclusion is based. Conclusion : Merely because the surety's explanation regarding source of deposit held by him was found false, it cannot be held that the principal debtor (firm) which operated an overdraft account against the security of such deposit owned the money. 2.9. In another case, in COMMISSIONER OF INCOME TAX vs. U.M. SHAH, PROPRIETOR, SHRENIK TRADING CO. 90 ITR 396 (Bom.), the Hon'ble jurisdictional High Court held as under:- "Held : The Tribunal took the view that upon the material or....
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.... 2.10. Likewise, Hon'ble Apex Court in COMMISSIONER OF INCOME TAX vs. BEDI & CO. PVT. LTD. 230 ITR 580 (SC) observed as under:- Held : There cannot be any doubt that High Court will not address itself to recording findings of facts unless the subject-matter of the question referred to it by the Tribunal, either under sub-s. (1) or sub-s. (2) of s. 256, relates to the perversity of the findings arrived at by the Tribunal. That sort of question has to be distinguished from a mixed question of facts and law, which also requires consideration and discussion of facts but does not warrant returning findings of facts inconsistent with the findings recorded by the Tribunal while giving its opinion on the question referred to the High Court. In answering the question, in this case, the High Court had to deal with various facts on record to determine whether the amount in question was loan or income. If such discussion of facts has led to arriving at the conclusion that the amount was loan but not income, it cannot be urged that the High Court disturbed the finding of fact recorded by the Tribunal. Here the Tribunal did not find any material to record specific finding that the amo....
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.... & 6) Conclusion : Amount in question received by the assessee from a foreign creditor was loan and not commission or business income; facts that loan was advanced without any security, it was not repaid and no interest was paid, cannot without any further material, lead to inference that the amount was not loan but business income. Reference-Finding of facts-Interference by Court-High Court will not address itself to recording findings of facts unless the subject-matter of the question referred to it by the Tribunal relates to the perversity of the findings arrived at by the Tribunal-That sort of question has to be distinguished from a mixed question of facts and law, which also requires consideration and discussion of facts but does not warrant returning findings of facts inconsistent with the findings recorded by the Tribunal while giving its opinion on the question referred to the High Court-In the present case, High Court rightly held that the circumstances taken singly or cumulative did not justify the conclusion that the amount was not received as loan as it purported to be but was anything in the nature of commission or any receipt of business- High Court could ....
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.... war in 1991 also adversely affected his income. On facts the Tribunal found that the assessee's income under the above block period increased from November, 1993 onwards and, therefore, the AO was not right in applying the peak income of post-November, 1993 period to the entire period of the block assessment commencing from 1st April, 1986 to 11th Dec., 1996. We agree with the finding of the fact recorded by the Tribunal. While estimating the undisclosed income under Chapter XIV-B, the AO cannot apply a rule of thumb. The AO cannot estimate the undisclosed income on an arbitrary basis. We cannot loose sight of the fact that the assessee is a professional. It is highly improbable that his professional income remained constant from 1983-84 (when he was put on the panel) right upto 1996. It is highly improbable that the fees which he was charging in 1993 were the same also during the period 1984 upto November, 1993. We agree with the contention advanced on behalf of the Department that in matters under Chapter XIV-B the AO is required to estimate the undisclosed income. We agree with the contention of the Department that this estimation involves guess work. However, the AO under Chap....
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....und also could not have remained static for the entire period of ten years. The assessee further pointed out that during the Gulf war the number of persons who went to the Gulf countries stood substantially reduced. These facts should have been considered by the Department. On the other hand, in the present matter, the Department has applied the peak income rate of post-1993 period to the entire block period commencing from 1st April, 1986 up to 11th Dec., 1996. Hence, the Tribunal was right in coming to the conclusion that an arbitrary method has been adopted by the AO in estimating the income of the assessee under Chapter XIV-B." 2.12. It is noticed that while coming to a particular conclusion, the Hon'ble jurisdictional High Court distinguished the decision from Hon'ble Apex Court in CST vs H.M. Esufali H.M. Abdulali (1973) 90 ITR 271 (SC) and the Tribunal was held to be right in coming to conclusion that an arbitrary method has been adopted by the Assessing Officer in estimating the income of the assessee. Identical is the situation in the present appeal before us, as mentioned earlier, the ld. Assessing Officer made addition arbitrarily on presumptive basis that too....
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....o cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances, it was not open to the Revenue to challenge the correctness of the cash entries or the statements made by those deponents in their affidavits." 2.13. In another case, Hon'ble Delhi High Court in CIT vs Aero Club (2011) 336 ITR 400 (Del.) held as under:- "21. Thus, even assuming for the sake of argument that the assessee's P&L a/c was rightly discarded by the AO, it is for this Court to examine whether a rational basis was adopted by the AO. The answer is our opinion must be an emphatic no. In our opinion, the CIT(A) and the Tribunal rightly set aside the "best judgment" assessment of the AO on the ground that the AO had "not brought on record any comparable case wherein the net profit declared by a taxpayer in the similar business was higher than the one declared by the assessee." We also concur with the findings of the Tribunal that the profit margins of a taxpayer as declared by him, could be varied and disturbed only if the profit margins in the case of other assessees engaged in similar business are higher. In the instant case, the assessee has brou....