TaxTMI 
TaxTMI 
2021 (1) TMI 84
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....l vide IT(SS)A.No.204/Ahd/2016. Thus, by way of this common order, we are going to dispose of 21 appeals i.e. eleven appeals and ten cross-appeals. 2. First we take appeals of the Revenue. Though Revenue has taken three grounds of appeal in each assessment year, which contained six sub-grounds in ground no.1, but a perusal of all these grounds would indicate that solitary grievance of the Revenue revolves around one issue that the ld.CIT(A) has erred in deleting additions made by the AO on account of unexplained investment by the assessee in these assessment years. These additions have been made by the AO with aid of section 69/69B of the Income Tax Act, 1961. 3. Brief facts of the case are that search under section 132 of the Income Tax Act, 1961 was carried out on 21.7.2011 at the premises of both the assessees, and certain other persons of the group. Notices under section 153A were issued upon both the assessee, and they have filed their returns of income. At the time of hearing, the parties have mainly made reference to the assessment year 2008-09 in the case of Galaxy Developers. Therefore, for facility of reference, we take up the facts from IT(SS)A.No.264/Ahd/2016 for ....
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....ort). In other words, in the Asstt.Year 2008-09 on the basis of pages no.88, 77, 76 of Annexure-A/2, the ld.AO has made addition of Rs. 2,35,00,000/- in the hands of Galaxy Developers and similarly he added this very amount in the hands of Uday Bhatt. Thus, there is a duplication of addition on substantive basis in the hands of both the assessees on the basis of a common paper. 7. The ld.CIT-DR while taking us through the assessment order submitted that during the course of search at the residential/office premises of "MRK" diary and loose papers were found and seized which were inventorised as Annexure-A/2 and A/89. These documents were written by "MRK" and it contained inflow/outflow of money both in cheque as well as cash. When these papers were confronted to him, he disclosed that he has taken on-money from Galaxy Developers for sale of land to them. Thus, on the strength of recovery of material exhibiting receipt of on-money in cash from the assessees coupled with statement of the author of the page, the AO has made addition in the hands of these assessees on account of unexplained investment in the purchase of land. 8. The ld.CIT-DR thereafter took us through order o....
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.... Supreme Court's decision in the case of CBI Vs. VC Shukla & Others, (1998) 3 SC Cases 410 and on the judgment of Hon'ble Bombay High Court in the case of ACIT Vs. Lata Mangeshkar, 97 ITR 696, she contended that the assessee cannot be burdened with the tax liability merely on the basis of noting and jotting recorded by a third person in his diary at his premises, and more so, when such person who made such entries gave conflicting statement at different stages. In other words, if a third-person authored document found at his premises gives conflicting statement, then there could not be any evidentiary value to such a statement as well as to the noting made by him. She also made reference to large number of other decisions for this proposition, but we need not to recite and recapitulate these decisions for the above proposition. 12. In her next fold of submissions, she contended that Shri "MRK" and Harilal Valjibhai Thakkar ("HVT" for short) have filed an application before the Settlement Commission for settlement of their tax disputes. Such application was filed on 11.3.2014. In this application with regard to the noting on Annexure A/2 and A/89, they took the stand that it is i....
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....ral land which is falling into the Vastral Gam (sim) for the year 2007 to 2009 in Exhibit - III to appellant firm's letter dated 9-1-2014 (Refer Page No. 406 to 428 of Paper Book) . From verification of the said comparative sales instances chart, it can be noticed that the non-agricultural land sales consideration rate as per the executed conveyance deed in the period 2007 to 2009 from the land revenue records works out to Rs. 100/- per sq. mtr to Rs. 200/- per sq. mtr and upto maximum of Rs. 800/- per sq. mtr. Whereas, non-agricultural land purchased by the appellant firm M/s. Galaxy Developers at Vastral gam (sim), the purchase cost by appellant firm M/s. Galaxy Developers is also a more price / rate per sq. mtr i.e. more than Rs. 2300/- per sq. mtr which is nearly more than 3 times than the highest rate in comparative sales instances rate attached has been provided .to the Ld. as per Exhibit - III to appellant firm's letter dated 9-1- 2014. 21. Similarly, in respect of various banakhat agreement entered by the appellant firm M/s. Galaxy Developers, in respect of various survey Numbers New Tenure (New Condition) Agriculture land at Vastral, wherein, Shri Maheshsi....
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.... Vastral works out more than Rs. 4000/- per sq. mts and which is substantially higher than old tenure Agriculture Land and/or N.A Land sold in Vastral in the same year and /or period of 2007 to 2009. on verification of the comparative sales instances chart, wherein all the agricultural lands which were Old Tenure Agriculture (Old Condition) Land not subject to premium payable to Government of Gujarat and not subject to granting the permission of Government of Gujarat, the sales consideration which took place between the purchaser and seller in respect of all comparative sales instances at Vastral Gam (sim) are in the range of Rs. 50/- to Rs. 100/- per sq. mtr. 22. That the Ld. A.O has not brought on record any -comparative sales instances of the adjacent and vicinity area of the Non-agricultural land, Old Tenure (Old Condition) agricultural land and New Tenure (New Condition) agricultural land at Village Vastral to substantiate the allegations made by Shri Maheshsingh R, Khushwah in his oral statement and the allegation made by the Ld. A.O. The Ld. A.O has also not referred the matter to the DVO for the valuation of the said Non-agricultural land purchased by appellant fir....
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....es lucidly in the impugned order. Therefore, we deem it appropriate to take note of relevant finding of the ld.CIT(A) from voluminous order running into 107 pages. These findings are as under: "13. I have carefully considered the assessment order, the detailed written submissions made in this regard, along with Paper Book No. A to D (identical paper books filed in respect of Sh Uday Bhat). I have also considered the statements & letter dated 05-03-2014 before AO, the copies of seized material placed in the paper book and various legal citations made in this regard. My observations with respect to the decision taken by the taken by the A.O. are as under. 13.1 At the outset, I am view the AO is not justified in making and substantive addition on the basis of identical seized material in case of 2 assessee, i.e in the hand so appellant and Uday Bhat. It can be seen that ground 1 in both appellants are exactly identical and additions are also based on the same seized material. This can also be seen from the table below (compiled from respective assessment orders) Assessment Year Additions by the A.O. Reference to Seized Material Uday D.....
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.... of Rs. 35 crores even though the seized material written by him indicates receipt of about of Rs. 28.02 crores. 15. During the course of assessment proceedings, the appellant requested the cross examination, which was carried out on 10/03/2014. The relevant portion of the cross examination have already been reproduced above on page No. 18 and 19. During the course of cross examination, a series of questions were asked from Question No. 1 to Question No. 11, wherein the appellant or it's A.R. repeatedly asked for proof or evidence to substantiate the receipt of cash from the appellant and Shri Uday Bhatt. In Answers to all the Questions, MRK had stated that he did not have any proof/evidence to substantiate that he has received cash of different amounts from the appellant - Shri Uday Bhatt. Further, It would be worthwhile to repeat Question/Answer No. 11 recorded during the course of cross examination, which is as under:- "Q.11 I am showing you Annexure A/2 & A/89. Please go through Page Nos. 88,82,81,80, 76, 75,66 of Annexure A/2 and all other pages of Annexure A/2 & A/89. Mostly on all pages on credit side and debit side, some name has been written ....
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....nce can be placed on statements of the witness which are conflicting in nature. In the present case Sh MRK has given conflicting statements on various occasions, on 22-07-2011 date of search, on 27-07-2011, letter before the AO dated 05-03-2014, retraction affidavit before settlement Commission dated 07-03-2014, with respect to the cash entries in the seized documents A2 and A89. Some of the important judgements which can be cited are *** *** *** *** *** *** *** *** *** *** *** *** Accordingly, the courts, including the apex court are of the view that if the witness gives conflicting statement then its evidentiary value is of great doubt. In the present case also, disclosure and retraction affidavit are conflicting in nature. It is also noticeable from the judgment that the AO has to' conduct independent inquiry draw a direct nexus or link between cash transactions with the appellants. It may be further be pointed that before the settlement commission Sh MRK & HBT has finally owned up all the money in seized document as their own and paid taxes. Final order of settlement commission is also passed to this effect as is discussed in subsequent paras. PRO....
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....seized material of. Mr. Maheshsingn Rajendrasinh Khushwah and Mr. Haribhai V. Thakkar and the Assessing Officer through Director of Investigation, Settlement Commission submitted the report to the Hon'ble Settlement Commission and the peak working submitted by both the aforesaid persons Mr.Maheshsingh Rajendrasingh Khushwah and Mr.Haribhai V.Thakkar were found to be in order except only one mistake of Rs. 12.12 1acs, for which the Director of Investigation, Settlement Commission recommended to the Hon'ble Settlement Commission, Additional Bench, Mumbai to make an addition in the case of Mr. Maheshsingh Rajendrasingh Khushwah and Mr. Haribhai V. Thakkar at the time of disposing of their applications by rendering the order u/s.245D(4) of the Act dated 24.08.2015. 18. Even though AO is party to entire settlement commission proceeding (refer para 4.11.11.1 of assmt order), as the final order of settlement commission was received after the finalisation of assessment orders it was sent to the AO for comments vide this office officer letter dated 13-05-2016. The AO has sent his comments vide letter dated 27-05-2016. The comments offered are: "2. In this connectio....
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....eping the spirit of settlement hi view, the applicants have offered further unaccounted investment for the Assessment Years 2008-09 to 2012-13 revising their earlier offer of Rs. 24.28 Crores to Rs. 32 Crores. Average purchase rate for working out the unaccounted investment hi land transactions has been enhanced keeping hi view the discrepancies pointed out during the course of the proceedings. In the process further additional income of Rs. 7,72,19,950/-has been offered raising the earlier offer to Rs. 32,00,66,150/- which, we feel, meets the ends of justice. Further offer of Rs. 7,72,19,950/- has been voluntarily made to settle the issue hi a peaceful manner without further litigation. This act of the applicants, hi our view, does not attract any adverse inference. The total offer of Rs. 32 Crores of additional income is, therefore, treated as true and full and the issue is settled. 21 I have perused the final order of Hon'ble Settlement Commission the comments offered by the A.O. vide letter dated 27/05/2016 and the rebuttal comments offered by the appellant. The findings of Hon'ble Settlement Commission are very clear in this regard vide para-14 and 14....
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.... A2P75 2500000.00 364 09/04/2008 09/04/2008 A2P75 5000000.00 364 10/04/2008 10/04/2008 A2P75 2500000.00 364 11/08/2008 11/08/2008 A2P6 5000000.00 371 18/08/2008 18/08/2008 A2P6 2500000.00 371 20/08/2008 20/08/2008 A2P6 1000000.00 371 23/08/2008 23/08/2008 A2P6 2500000.00 371 26/08/2008 26/08/2008 A2P6 2500000.00 371 30/08/2008 30/08/2008 A2P7 2500000.00 372 01/09/2008 01/09/2008 DA99 2500000.00 372 02/09/2008 02/09/2008 DA99 2500000.00 372 03/09/2008 03/09/2008 DA99 2500000.00 372 05/09/2008 05/09/2008 DA99 2500000.00 372 06/09/2008 06/09/2008 DA99 2500000.00 372 07/09/2008 07/09/2008 DA99 2500000.00 372 09/09/2008 09/09/2008 DA99 2500000.00 372 10/09/2008 10/09/2008 DA99 2500000.00 372 12/09/2008 12/09/2008 A2P10 2500000.00 372 16/09/2008 16/09/2008 A2P9 2500000.00 373 18/09/2008 18/09/2008 A2P80 2500000.00 373 20/09/2008 20/09/2008 A2P80 2500000.00 373 23/09/2008 23/09/200....
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....000000.00 409 10/01/2011 10/01/2011 A2P22 2000000.00 409 23/01/2011 23/01/2011 A2P21 1000000.00 409 06/02/2011 06/02/2011 A2P20 5000000.00 410 11/02/2011 11/02/2011 A2P20 5000000.00 411 TOTAL 67444070.00 It can thus be seen that factually all the cash entries considered by AO for making additions u/s 69/69B for Galaxy Developers and Shri Uday D. Bhatt were a part of the peak working and was offered for taxation by the applicant as their own money. I am also in agreement with the contention of the A.R. that nowhere the order of Hon'ble Settlement Commission gives a finding that real investment have Galaxy Developers _ and Shri Uday D. Bhatt. In fact, the Hon'ble Settlement Commission has, after verifying the peak working, has enhanced the income of the applicants on the basis of Assets Application Theory. The detailed working of application of assets is available on page no.418 of paper-book 'B', wherein the grand total of investments assets is indicated, at Rs. 20, 27,46,500/-. The Hon'ble Settlement Commi....
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....evidence or an independent inquiry, which may link cash transactions in Annexurie-A-2 and A-89 to be belonging to the appellant, I am of the view that such cash transactions in the said Annexures cannot be added in the hands of the appellant. Also it is seen from the order of Hon'ble Settlement Commission that all the cash transactions in Annexure-A-2 and Annexure-A-89, including other seized material also, have been offered for taxation and taxes paid thereon as per the terms and- conditions set by the Hon'ble Settlement Commission. The AR also pointed out that the final order of the Settlement commission was also not challenged before the High court. I am, thus, of the view that the additions made by the A.O. in the case of both the appellants are not sustainable. The additions made u/s. 69/69B for A.Y. 2008-09 to 2012-13 deserves to be deleted in the case of M/s. Galaxy Developers & Sh Uday Bhat. The AO is directed to do the same. Ground 1 for both the appellants is allowed for Galaxy Developer and Uday Bhat." 15. An analysis of complete record would show that the AO has basically possessed two pieces of evidence. The first piece of evidence is loose....
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....rsons working of peak was also verified. The Settlement Commission thereafter accepted the stand of the author of these pages. If that be so, then how a different inference can be drawn in the cases of the present assessees. The ld.CIT(A) has gone through both these circumstances, and thereafter arrived at a conclusion that the department is not possessing clinching evidence to show that assessees have paid on-money. Apart from the above, respondents in order to rebut belief of the AO that these assessees have given on-money over and above consideration stated in the agreement to sale, they have submitted that two types of transactions at the most could be alleged as done by these assessees viz. (a) purchase of non-agriculture land/agriculture land, (b) purchase of old tenure land/new tenure land. Respondents have compiled details in tabular form. They have put the rates on which they have entered into agreement for purchase viz. banakhat. Thereafter they have appraised the AO circle rate/jantri available for similarly situated land in these years. The assessees thereafter compiled details of other sale deeds which has taken place in these years during that very period, and demonst....
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....ed the expenses at the rate of 1% for arranging this accommodation entry. We find that in the Asstt.Year 2010-11, Shri Uday Bhatt has challenged these two additions in his appeal. We have dismissed all the COs. except for Asstt.Year 2010-11 in the case of Shri Uday Bhatt as withdrawn and proceed to decide the appeal of Shri Uday Bhat for the Asstt.Year 2010-11 along with its CO filed in the appeal of the Revenue for the Asstt.Year 2010-11. 18. Brief facts of the case are that a sum of Rs. 3,40,20,000/- was noticed by the AO as received from M/s.Sarang Chemicals Ltd. He further found that M/s.Sarang Chemicals Ltd. was maintaining a bank account bearing no.0009-0-140-082068 with Bhuj Mercantile Co-op Bank. This concern has received a cash deposit of Rs. 5.02 crores on 26th and 27th June, 2009. According to the AO a sum of Rs. 3,40,20,000/- was transferred by this concern to the account of the assessee through account payee. During the course of assessment proceedings, the ld.AO has down-loaded bank statement, balance sheet & audited accounts of M/s.Sarang Chemicals Ltd from the site of Registrar of Companies. He called for the director of company, Shri Lalit Kantilal Rathod and....
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....cision submitted that statement of Shri Lalit Kantilal Rathod deserves to be excluded from relying upon on this issue. 20. On the other hand, the ld.DR relied upon orders of the Revenue authorities. He submitted that the AO has called for director of the creditor company and he deposed before him that it was an accommodation entry. In this situation, the ld.CIT(A) has rightly confirmed the addition. 21. We have duly considered rival submissions and gone through the record carefully. Section 68 of the Income Tax Act contemplates that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the AO satisfactory, then the sum so credited in the accounts may be treated as income of the assessee of that previous year.The assessee has submitted bank statement, copy of PAN, balane sheet, copy of confirmation from M/s.Sarang Chemicals Ltd. Only evidence possessed by the AO to doubt this transaction is alleged disclosure made by the director of M/s.Sarang Chemicals Ltd. The ld.AO under serial no.(d) of his ....
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.... is adjourned to be resumed at 5.00 PM on 21.03.2014 to state that I have stated these facts before also in my statement taken during the course of search in case of M/s.Sarang Chemicals Ltd in 2012. The above stamen is given in sound state of health and mind, without any threat, fear, coercion, inducement or promise." 22. A perusal of the above statement would indicate that director, Shri Lalit Kantilal Rathod has nowhere taken name of the assessee. He took time of 2-3 hours to peruse the record, but thereafter, the ld.AO neither asked any question nor conducted further inquiry. We have extracted the above portion from page nos.37 & 38 of the assessment order. There is an abrupt end to the recording of the statement. This is one factor to disbelieve the version of the AO. The other fact is that the assessee has been emphasizing for providing an opportunity to cross-examine the alleged director Shri Lalit Kantilal Rathod, but the AO did not allow cross-examination of this person. Therefore, before appreciating reliability and veracity of this piece of evidence, i.e. statement of Shri Lalit K. Rathod, we would like to make reference to the decision of Hon'ble Supreme Cou....