TaxTMI 
TaxTMI 
2019 (4) TMI 1908
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.... 23.01.2015 271AAA of the Act 402 & 411/Ahd/14 M/s. Savaliya Developers Pvt. Ltd. -Do- 28.11.2013 26.03.2013 143(3) of the Act 2. The grounds of appeal raised by the assessee (in case of M/s. Savaliya Buildcon) in ITA No. 401/Ahd/2014 read as under: I. ADDITION ON ACCOUNT OF ON-MONEY RECEIPT - Rs. 14,10,000/- 1. The Ld. CIT(A) has erred in law and on facts while confirming the addition of Rs. 14,10,000/- on the basis of statement of two members recorded behind the back of the appellant, copy of which was not provided to the appellant during the course of assessment proceedings as well as in absence of granting the opportunity of cross examination of these two members. 2. The Ld. CIT(A) has erred in law and on facts while considering the alternative ground of the appellant that the addition of Rs. 14,10,000/- as made by the Ld. A.O. on account of 'on-money' received from two members is required to be telescoped against the disclosure of Rs. 2 Crores made by the appellant firm for the financial year 2010-11 relevant to A.Y. 2011-12. 3. The Ld. CIT(A) has erred in law and on facts while failing to consider the fact that volun....
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....i K. Savaliya) of the group. The group disclosed an amount of Rs. 25 Crores in aggregate. A case was made out by the assessee before the AO that such disclosures made suo motu for F.Y. 2010-11 relevant to AY 2011-12 were voluntary. An amount of Rs. 2 Crore was disclosed by the group in relation to captioned assessee firm to cover up any deficiency. The assessee, at the time of filing the return of income subsequent to search, duly included the aforesaid disclosure of Rs. 2 Crore towards unaccounted booking receipts from its Krish Residency 1 & 2 project and paid the taxes thereon. In the course of the scrutiny proceedings as a consequence of search, the AO observed that in the course of post search inquiry statement of two members/purchasers (namely; Surekhaben M. Bhavsar & Shri Hasmukhbhai M. Solanki) of Krish Residency Housing Project were recorded on oath under s.131 of the Act. The AO noted that as per the statement so recorded of the two purchasers that one of the purchasers namely Smt. Surekhaben M. Bhavsar has admitted cash/onmoney payment of Rs. 9Lakhs towards purchase of residential flat in Krish Residency-1. Similarly, another purchaser Shri Hasmukhbhai M. Solanki also ad....
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....t was further pointed out that the assessee itself has declared a lump sum amount of Rs. 2 Crore to cover unaccounted cash component without there being any incriminating material found in this regard and the alleged cash component admitted by the two purchasers are far lower than the amount already declared. It was contended on behalf of the assessee before the CIT(A) that extrapolation theory adopted in the assessment order for making an addition of presumption basis is not permissible in law in the absence of any tangible material in corroboration. 4.3 The CIT(A) took note of the detailed submissions made on behalf of the assessee and found considerable merit therein. The CIT(A) accordingly observed that the AO was not justified in making extrapolation on basis of statement of two purchasers and estimation of probable on-money receipts from remaining other flat byers. The CIT(A) accordingly deleted the addition on account of on-money receipt of Rs. 3,28,13,355/- made by the AO. However, it sustained Rs. 14,10,000/- being aggregate of the confessional amount from two purchasers whose statements were actually recorded. In short, the CIT(A) sustained addition of Rs. 14,10,000/- ....
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....ination. (h) In the case of Jawaharbhai Atmaram Hathiwala [128 TTJ 36] addition on account of on money was made for purchase of flat. In this case, during the course of search documents were seized from developer firm which indicated that assessee has made payment of on money for purchase of a flat. It was held by Hon'ble ITAT, Ahmedabad 'C' Bench that no evidence was brought on record by revenue to show that appellant had actually paid the on money. It was further held that assessee's denial cannot be brushed aside without bringing any positive material on record. The addition was held not be justified in such a case. (i) A similar view was held in the case of Bharat A Mehta [86 TTJ 369] by Hon'ble ITAT, 'B' Bench. In this case addition u/s. 69 was made on account of on money paid on purchase of bungalow on the basis of admission made by builder during the search. However, no document was recovered during the search regarding on money paid by assessee. In. such a case, the addition was directed to be deleted by Hon'ble ITAT. (j) In the case of CIT vs. D Kanta [205 Taxman 115(Kar)], addition was made u/s. 69B r.w.s. 147 on ....
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....ing the course of search which record or indicate receipt of on-money by appellant. Appellant firm made disclosure of Rs. 2 crore as unaccounted booking receipt from project Krish Residency-I & II. This amount was duly included in return of income as mentioned by AO in the assessment order. In view of all these facts, I hold that AO is not justified in making extrapolation on the basis of statement of Smt. Surekhaben Bhavsar and Shri Hasmukhbhai Solanki and estimating total on-money receipt in respect of 87 flats at Rs. 528,13,355/-. Merely on the basis of statement of two members, it cannot be presumed that appellant received similar amount from each and every client. It is a well established principle that suspicion; however, strong can never take the place of evidence. In this case, AO could have made addition of Rs. 900,000/- which was admitted by Smt. Surekhaben Bhavsar and Rs. 510,000/-which was admitted by Shri Hasmukhbhai Solanki. I, therefore hold that addition on account of on-money receipt is to be restricted to Rs. 14,10,000/- as against Rs. 3,28,13,355/- made by AO. The AO is therefore directed to restrict addition on this account to Rs. 14,10,000/-. Ground no. 1 of th....
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....partners of the firm. The Authorized Officer has not raised any dispute on such disclosure for the whole of the year. The learned AR contended that if the Revenue seeks to discard the statement given by the partner and go beyond the assertions made in the statement recorded under s.132(4) of the Act making disclosure for entire financial year then in that circumstances any addition can be made only on the basis of cogent material and evidences against the assessee and consequently no addition can possibly survive in the absence of any adverse material brought on record. The learned AR contended that the assessee has already disclosed a lump sum amount of Rs. 2 crores in respect of extra booking etc. from some of the members of the project which will naturally include any amount allegedly confessed by two of the purchasers which confession remains unverified and unilateral nevertheless. The learned AR submitted that the appellant firm had declared additional income of Rs. 2 Crore merely to buy peace, save time and costs and to avoid protracted litigation and also to co-operate with the department as a goodwill gesture without any substantive evidences in possession of the Revenue. I....
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....7. The learned DR for the Revenue, on the other hand, relied upon the order of the AO and submitted that where two of the purchasers have unequivocally confessed payments of cash money to the assessee in the posts search inquiry, a natural and logical inference would arise against the assessee in respect of remaining flats sold. The AO was accordingly justified in estimating the cash component in respect of all the flats. It was further submitted that the AO was quite fair in granting relief in respect of amount already declared in the confessional statement recorded under s.132(4) of the Act and only the balance amount in excess of what was declared has been added in the hands of the assessee firm. In the circumstances, it was contended that there was no justification for the CIT(A) to cancel the additions so made. 8. We have carefully considered the rival submissions. Both assessee as well as the Revenue are aggrieved by the order of the CIT(A). The addition on account of alleged on money receipt towards sale of residential flat by the assessee is subject matter of controversy. While it is the case of the assessee that in view of the voluntary declaration made by the assessee ....
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....money receipt for all the flats applying extrapolation theory, the assessee seeks to challenge the addition of Rs. 14.10Lakhs sustained by the CIT(A) on the basis of statements of two purchasers on the fact of generic declaration already made. 8.2 The statement of two purchasers is the bedrock for additions in controversy. It is an admitted position that the statements of two purchasers allegedly claiming to have paid cash money of Rs. 14.10 Lakhs in aggregate, were obtained behind the back of the assessee. The copy of the statement was not provided to the assessee at all. The cross examination of the purchasers were also not provided by the Revenue authorities despite several requests made by the assessee. Such overwhelming facts remain unrebutted on behalf of the Revenue. This being so, the action of the AO in placing reliance upon statement of third party to crucify the assessee is clearly in negation of overriding principles of natural justice which is supposed to be guiding factor in an adjudication process. Needless to say, the appropriate opportunity to an affected party is not a gift but an absolute and salutary right which cannot be simply bypassed. The infringement of ....
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.... the residential flat sold. The action of the AO is a mere ipse dixit which is not objectively justifiable by some inculpatory evidence. It is only elementary to say that estimation of unaccounted money cannot be made only on the basis of contemplation. The order of the AO in making additions of Rs. 3.28 Crores is thus clearly arbitrary and unsustainable in law. It is well settled that the Revenue authorities cannot base its findings on suspicions, conjunctures or surmises nor should it act on no evidence at all or on vague considerations partly on evidence and partly on suspicion, conjunctures or surmises. The Revenue could not demonstrate any material except unsupported statements of two persons. Such unverified statements without any proof towards its assertions are not a good evidence and do not raise any estoppel against the assessee. Therefore, the addition made by the AO is in the realm of speculation without any basis whatsoever. Hence, we decline to interfere with the order of the CIT(A) in so far as appeal of the Revenue is concerned. 8.3 We shall now advert to the maintainability of addition of Rs. 14.10 Lakhs confirmed by the CIT(A) on the basis of statement of two p....
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....d on facts in confirming the penalty levied u/s. 271AAA of the Act of Rs. 1,41,000/- out of total penalty levied of Rs. 21,41,000/-. On the facts and circumstances of the case, the assessee has neither concealed the income nor has submitted any inaccurate particulars of income. In view of this, the Ld. CIT(A) ought to have deleted the entire penalty levied u/s. 271AAA of the Act of Rs. 21,41,000/-." 10.2 Apart from CO noted above, the assessee has also filed cross appeal reiterating the grievance raised as per CO. The grounds of appeal raised by the assessee (in case of M/s. Savaliya Buildcon) in ITA No. 3188/Ahd/2015 read as under: I. LEVY OF PENALTY U/S. 271AAA OF THE ACT 1. The Ld. CIT(A) has erred in law and on facts in confirming the penalty levied u/s. 271AAA of the Act of Rs. 1,41,000/- out of total penalty levied by the Ld. A.O. of Rs. 21,41,000/-. 2. The Ld. CIT(A) has erred in law and on facts while not considering the fact that no penalty can be levied on the addition of Rs. 14,10,000/- on account of 'on-money' received from two members as the same is required to be telescoped against the disclosure of Rs. 2 Crores made by the appellan....
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....the CIT(A), the AO invoked the provisions of Section 271AAA of the Act and imposed penalty @10% on Rs. 2,14,10,000/- sustained by CIT(A) in quantum being aggregate of Rs. 2 Crore disclosed by the assessee in the statement under s.132(4) of the Act and Rs. 14,10,000/- confirmed by the CIT(A). A penalty of Rs. 21,41,000/- was accordingly imposed on the assessee vide order dated 23.01.2015 passed under s.271AAA of the Act. 13.2 Aggrieved, the assessee preferred appeal before the CIT(A). 13.3 On reappraisal of facts and circumstances of the case, the CIT(A) deleted penalty to the extent of Rs. 20Lakhs levied @ 10% in respect of disclosure made of Rs. 2 Crores in the statement under s.132(4) of the Act and in the return of income. The CIT(A) however confirmed the penalty @ 10% as per the provisions of Section 271AAA of the Act on remaining addition of Rs. 14,10,000/- upheld in the quantum proceedings by the first appellate authority. In the result, the CIT(A) deleted the penalty of Rs. 20 Lakhs and confirmed the remaining penalty of Rs. 1,41,000/- out of total penalty of Rs. 21,41,000/- imposed by the AO under s.271AAA of the Act. The relevant operative portion of the CIT(A)'s ord....
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....lant firm in pursuance of the statement of the partner's statement u/s. 132(4) of the Act submitted a letter to the ITO (Inv.) Unit-1, Ahmedabad vide letter dated 06-04-2011 confirming the disclosure statements given by the partner for and on behalf of the appellant firm for an amount of undisclosed income of Rs. 2,00,00,000/- in respect of unaccounted booking receipts/extra receipts from some (few) members of the scheme known as "Krish Residency" in its letter dated 06-04-2011 for which no records have been maintained and in the search proceedings, no incriminating material/records have been found. 3.4 It is further seen that on the basis of the statement of partner recorded u/s.132(4) of the Act, the appellant firm has offered the income of Rs. 2,00,00,000/- in the return of income of the current financial year 2010-11 relevant to A.Y. 2011-12 in its return of income filed on 30-092011 u/s.139 and even paid the tax thereon along with interest In the present case of appellant firm, the search took place on 06/07-01-2011 and therefore, for F.Y.2010-11 relevant to A.Y. 2011-12, date of filing the return of income was due on the date subsequent to the date of search. Hen....
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....f the voluntarily disclosed additional income amongst different assessees of his family and business concern, the manner of earning the additional income disclosed and its assets identification will be submitted subsequently as a part and parcel of his statement recorded u/s.132(4) of the Act. and further he filed a letter with ITO (Inv.) Unit-1. Ahmedabad wherein dated 21.01.2011, wherein he has stated the breakup of the disclosure of Rs. 25,00,00,000/- wherein he has bifurcated the disclosure made of. Rs. 2,00.00,000/- in respect of income earned by the appellant firm being accounted booking receipts/extra receipts from some (few) members of the scheme known as "Krish Residency", for which no incriminating material was found during the course of search proceedings. 3.6.1 Clause (ii) lays down the second condition that assessee should have substantiated the manner in which undisclosed income has been derived. In the present case of the appellant firm, after the partner of the appellant firm made the disclosure in his statement u/s. 132(4) of the Act for and on behalf of the appellant firm for an amount of Rs. 2,00,00,000/- for the F.Y.2010-11 relevant to A.Y.2011-12 being....
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....sion was introduced as to attract the penalty provisions to those cases as well. But an exception is provided in cl. (2) of Expln. 5 where the deeming provision will not apply if during the course of search the assessee makes the statement under sub-s. (4) of s. 132 that the money, bullion, jewellery, etc., found in his possession has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in s. 139 and also specifies in the statement the manner in which such income has been derived and pays the tax together with interest, if any, in respect of such income. The exception appears to be to provide an opportunity to the assessee to make a clean and fair confession and to surrender his income and also to deposit the tax and interest thereon which may result in an agreed assessment. The paramount intention appears to be that in the case of fair and clean confession and surrender of his income, during the course of search further litigation may be avoided and the Revenue may get the tax and interest, etc., at an earliest and the assessee may be saved from further litigation. Under s. 132(4), it is the....
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.... down the principles that the authorized officer has to explain the provisions to the assessee and ask the relevant questions on the manner in which the undisclosed income was earned. In the present case and as per section 271AAA, the statement of the partner recorded u/s. 132 (4) in the search proceedings, the authorized officer was satisfied with the manner in which the income was earned by the assessee and was satisfied about the substantiating the manner in which undisclosed income was earned. Clause (iii) lays down the third condition regarding the payment of tax alongwith interest on undisclosed income admitted in the course of search. It is an undisputed fact that the tax and interest has been paid by the appellant firm on the undisclosed income admitted in the course of search proceedings by disclosing in the return of income. 3.9 On the basis of the principles and ratio laid down by the Honorable jurisdictional High Court and by the Allahabad High Court cited supra and other courts have also given similar verdicts in cases such as (i) decision of Honorable ITAT in the case of DCIT vs. Smt. Sulochanadevi A. Agarwal, ITA No.1052/Ahd/2012, A.Y.2009-10, dated....
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....u/s.271AAA of the IT Act, 1961." 14. Aggrieved by the modification made by the CIT(A) in the quantum of penalty imposed under s.271AAA of the Act, the Revenue has preferred appeal before the Tribunal as per ITA No. 3544/Ahd/2015 (supra). The assessee has filed cross objection in the Revenue's appeal in CO No. 14/Ahd/2016 (supra). The assessee has also filed separate cross appeal in ITA No. 3188/Ahd/2015 whereby it seeks to challenge the action of the CIT(A) in confirming the remaining penalty of Rs. 1,41,000/- on additions made and sustained by the CIT(A) on the basis of statement of two purchasers in the housing project of the assessee builder. The cross objection has also been filed on the same footing. 14.1 The learned AR for the assessee relied upon the order of the CIT(A) to the extent of relief granted by the first appellate authority and submitted in reiteration that in the search action under s.132 of the Act carried out in the premises of the assessee on 06.01.2011, no unaccounted money/asset/investment etc. were recovered. No reference in this regard has been made in the assessment order either. Likewise, no document or any inculpatory evidence has been referred in ....
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....ent of third parties i.e. two purchasers in the project. It was contended that such third parties' statements are fragile and have no evidentiary value in the absence of cross examination and in the absence of any credible material in corroboration. The learned AR reiterated that the quantum addition itself is not justified having regard to the total absence of any credibility of the statements and therefore penalty under s.271AAA of the Act cannot be resorted for such additions. The learned AR accordingly submitted that the remaining penalty of Rs. 1,41,000/- or additions made solely based on unvouched statement requires to be deleted and consequently, appeal as well as cross objection of the assessee deserves to be allowed. 14.3 The learned DR for the Revenue, on the other hand, relied upon the order of the AO and submitted in furtherance that where the assessee himself has admitted existence of certain undisclosed income in the course of search and included the same as part of return, the consequences of penalty under s.271AAA of the Act cannot be escaped as wrongly adjudicated by CIT(A). It was further submitted that the AO has also rightly imposed penalty of Rs. 1,41,000/- ....
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.... search has been initiated.-(1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i ) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii ) substantiates the manner in which the undisclosed income was derived; and (iii ) pays the tax, together with interest, if any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty refe....
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.... does not tantamount to 'undisclosed income' per se. The applicability of section 271AAA is dependent upon the income falling within the sweet of clear and express definition of expression "undisclosed income". An ad-hoc and lumsum declaration as a consequent of search without any reference made by A.O towards any money, bullion, jewellery or other valuable articles or thing or any entry in the books of account etc. cannot be deemed to be automatically an undisclosed income for the purposes of imposition of penalty under section 271AAA of the Act. The onus is on A.O to bring on record material which points to 'undisclosed income' as defined under section 271AAA of the Act. As noted, no reference to underlying material is found in the orders of lower authorities. A simple disclosure made in the course of search under section 132(4) in itself cannot be deemed to be 'undisclosed income' in view of the limitations placed in the definition thereof. 9. Therefore we are of the considered view that in the absence of any incriminating material referred for the purposes of assessing alleged undisclosed income, the imposition of penalty under section 271AAA is without any legal found....
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.... deletion of penalty by CIT(A) on income offered by way of oral evidence under s.132(4) of the Act is bereft of any merit on variety of reasons noted above. 18. The appeal of the Revenue in ITA No.3544/Ahd/2015 is therefore dismissed. 19. We now advert to the grievance of the assessee for remaining penalty of Rs. 1,41,000/- sustained by the CIT(A). The penalty so sustained arises out of quantum additions of Rs. 14,10,000/- sustained by the first appellate authority in quantum on the ground that two purchasers have given statement on oath in the proceedings under s.131 of the Act against the assessee and confessed that they have given on-money of Rs. 14,10,000/- in aggregate to the assessee for purchase of residential flat in the housing project. 19.1 The penalty so imposed and confirmed by the CIT(A) is not sustainable under s.271AAA of the Act for two reasons; (i) the quantum addition of Rs. 14,10,000/- itself has been deleted by us in the preceding para no. 9 with reference to ITA No.401/Ahd/2014 (supra) and (ii) the additions were made on the basis of post search inquiries and do not relate to 'undisclosed income' as defined under s.271AAA of the Act. The quantum additi....