AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2019 (5) TMI 1924
X X X X Extracts X X X X
X X X X Extracts X X X X
...., in confirming the action of the AO in making addition of Rs. 1,75,00,000/- in the appellant's income, by invoking provisions of s. 69B of the Act in respect of alleged cash payment for purchase of Land at Village Sejwaya, Tehsil & Dist. Dhar, in the name of one company namely, M/s. Natural Gadia Real Estate Pvt. Ltd., merely on the basis of a statement given by the sellers, by disregarding ample of documentary evidences furnished by the appellant in his support. 2b.That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in making addition of Rs. 1,75,00,000/- in the appellant's income, merely on the farfetched assumptions, by erroneously correlating the making of cash deposits by the sellers in their bank accounts with the alleged cash payments by the appellant, without considering and appreciating the material fact that the sellers were having their independent sources of income and from such sources of income only, the cash deposits in bank accounts were made by them. That, the appellant further craves leave to add, alter or amend the foregoing ground of appeal as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the sellers of the land and accordingly, statement of one of the sellers, namely of Shri Rajendra Prasad Jhala, was duly recorded by him on 14-122016. During the course of recording the statement, the appellant and his Authorized Representative were also present. The learned AO afforded the opportunity to the appellant to cross-examine Shri Rajendra prasad Jhala. Subsequently, a final Show-Cause Notice was issued by the learned AO to the appellant on 20-12-2016 and in response to the same, the appellant filed a detailed written submission on 26-12-2016, inter alia, commenting upon the various statements given by the sellers of the land. Finally, the learned A 0 framed the Assessment, under S.l43(3)/147, on 27-122016 by determining the total income of the appellant at Rs.l,76,58,290/- as against the returned income of Rs.l,58,290/- thereby making an addition of Rs.l,75,00,000/- in the appellant's income on the allegation of appellant having made cash payment in respect of purchase of Land at Village Sejwaya, District Dhar, by invoking provisions of section 69B of the Act. 4. Aggrieved assessee preferred appeal before CIT(A) but could not succeed as Ld. CIT(A) confirmed the ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any evidence in support of its contention. Moreover, sellers were not having any other source of income except agriculture income which was not liable to tax. The appellant has not brought anything on record which may prove that then. sellers have sold any other land except the land which was sold to appellant. Further it would not be a coincidence that cash deposited in the bank account of the sellers on the same date on which appellant has made payment to the sellers. Thus; all the evidences are against the appellant and it proves* that appellant has made payment over and above the registered amount for the purchase of the land. The contention .of the appellant* that no addition can be made in its case u/s 69B is not correct as appellant has to explain the source of investment in the purchases and if it failed to explain the source of investment, deeming provision of sec.69B would come into effect. In the case of the appellant it has not recorded amount of investment in its books of account and is not .n:Ild)t to accept the truth inspite of having .all the evidences against it. It is also the known fact that in real estate businesses properties are being purchased....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e AO is justified in making addition of Rs. 1,75,00,000/- in the taxable income of the appellant on account of unexplained investment u/s 69B of the IT Act and it is hereby confirmed. Therefore, the appeal on this ground is dismissed." 5. Now the assessee is in appeal before the Tribunal. 6. Ld. Counsel for the assessee argued at length referring to following submissions:- "Your Honours, after receipt of the statement of the reasons, the appellant through his counsel's letter dated 16.08.2016 (kindly refer PB Page No.44 to 49), objected the very issuance of the notice under s. 148 and as also the reopening of the assessment proceedings. The appellant also requested the AO to provide him the copy of the affidavit of Shri Vishnu Jhala which was relied upon by the AO while recording the reasons. In response to the objections raised by the appellant, the learned AO passed an order dated 19.10.2016 rejecting the objections of the appellant against issuance of the notice under s. 148 (kindly refer PB Page No.50 to 56). However, the AO, instead of providing the copy of any affidavit, provided a copy of the statements of Shri Vishnu Jhala, as recorded under s.131 of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thout having any cogent and adverse material on record. 11.01 Your Honour, during the course of the assessment proceedings, the appellant had established that the statements given by the sellers of the land are self-serving evidences which are patently far from truth. Many of the points, which were raised by the appellant before the AO, remained unaddressed/un-countered/uncontroverted by the AO. The vital points raised by the appellant before the AO are summarized as under: It is the Company who is the registered owner of the subject lands and not the appellant. The learned AO failed to appreciate that the Company has made subject investment in the land and not the appellant. The appellant was only holding 30 shares in the above said company and the remaining 70 shares were held by other persons who were not related to the appellant. It is submitted that since it is only the company and not the appellant who is the registered as well as the absolute beneficial owner of the subject property, any addition on the basis of allegation of unexplained investment could have been made only in the hands of the company and in any situation, such addition could not have....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Further, on the third occasion, while executing and registering the sale deeds, before a Government Authority, the sellers have stated and admitted the total sales consideration of the subject land at Rs. 95,00,000/-. Thus, in nutshell, as many as on three occasions, the sellers, by way of affidavits/ putting signature on duly executed and registered documents, in an unequivocal term, had admitted the sales consideration of the subject land at Rs. 95,00,000/- only and therefore, their subsequent oral statements without having any corroborative evidence have no legs to stand and deserves to be discarded at the threshold itself [kindly refer PB Page No. 147 to 162]. vii) The Guideline Value of the subject property was only of Rs. 95 lakhs and at such guideline value only, the actual sale transaction had taken place. If for the sake of argument, the theory of cash payment of Rs. 1,75,00,000/- is taken to be correct, then the actual market value of such property would result into a sum of Rs. 2,70,00,000/- which is almost 3 times of the guideline value. It is submitted that by any theory of imagination, such a vast difference in the actual market price and Stamp Guideline Val....
X X X X Extracts X X X X
X X X X Extracts X X X X
....im that neither he himself nor his company ever made any payment over and above that of Rs. 95,00,000/- stated in the registered sale deeds. iii) In the Affidavit filed by Shri Rajendra Prasad Jhala along with his brother Shri Vishnu Prasad Jhala, this vital fact was concealed that Shri Rajendra Prasad Jhala is an Advocate by profession since 1990. Shri Rajendra Prasad Jhala evaded such fact even before his Assessing Officer who framed the assessment in his case for A.Y. 2010-11. The AO ought to have confronted Mr. Jhala for having any other income from carrying out practice as an Advocate. iv) Despite being specifically required by the AO, Shri Rajendra Prasad Jhala failed to produce many documents such as copy of his pay-in slips, counter foil of cheques, copies of purchase deeds of the various lands purchased by him for claiming any deduction under Sec. 54B of the Act. This vital fact was completely ignored by the AO. Shri Rajendra Prasad lhala changed his stand frequently and he stated that the alleged agreement for Rs. 2,70,00,000/- was taken back by the appellant upon execution of registered agreements for Rs. 95,00,000/-. Earlier, it was stated by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....said decision of Hon'ble High Court of Madras has also been affirmed by the Hon'ble Supreme Court in Civil Appeal No.4262 of 2007 (2007) 294 ITR 0049 (SC) (iv) ITAT Bangalore Bench in the case of ACIT vs. Ashad Valmark (2014) 40 CCH 0076 (Bang Trib) (v) CIT Vs. Daulatram Rawatmull (1964) 53 ITR 0574 (SC) (vi) Umachandran Shaw & Bros vs. CIUT (1959) 37 ITR 0271 (SC) (vii) CIT Vs. Kapil Nagpal (2016) 381 ITR 0351 (Del) (viii) CIT vs. Anupam Kapoor (2008) 299 ITR 0179 (P&H) (ix) Sheo Narain Dulichand vs. CIT (1969) 72 ITR 0766 (AO) (x) CIT vs. Suresh Kumar Goyal (2004) 270 ITR0050 (Raj.) (xi) K.P. Verghese vs. ITO (1981) 131 ITR 597 (SC) (xii) Brijmoni Devi & Ors. Vs. CIT (1983) 142 ITR 427 (Cal. HC) (xiii) CIT Vs. Balram Prasad (1984) 150 ITR 687 (All HC) (xiv) Prem Narayan & Co. Vs. CIT (2006) 287 ITR 0056 (P&H) (xv) CMS Computers (P) Ltd & Anr. Vs. Appropriate Authority & Ors. (2008) 76 CCH 685 (MUmHC) (xvi) Indian Dyestuff Industries Ltd vs. Inspecting Assistant Commissioner & Anr. (1994) 206 ITR 0485 (GUJHC) (xvii) C.B. Gautam vs. Union of India & Ors. (19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the issuance of notice u/s 148 of the LT. Act. The notice u/s 148 was issued to the appellant on 10.02.2016. The notice u/s 148 has been issued after recording the reasons. The appellant has been provided the reasons recorded u/s 148 of the LT. Act. As far as the adequacies of reasons are concerned in my opinion, they are adequate and based QP relevant facts and material. The need to issuing notice arose due to noticing of vast amount of cash payment made by the appellant to the sellers of land. The appellant filed the objection for issuing notice u/s. 148 on 22.08.2016. The objection filed has been discharge by the AO. The appellant has filed the letter dated 19.02.2016 in response to notice u/s 148 stating that original return tiled on 17-03-2011 may be treated as return in compliance to notice u/s. 148. Subsequently notice u/s 143(2) and 142(1) has been issued and appellant have complied the above notices. The AO has followed the proper procedure before issuing the notice U/S 148. Therefore, the appeal on these grounds is Dismissed". 10. From going through the above findings of Ld. CIT(A) and in the light of the fact stated above, we observe that explanation 2(b) of Section....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... deal between the sellers namely Mr. Rajendra Prasad Jhala and Mr. Vishnu Prasad Jhala and the buyer Natural Gadia Real Estate Pvt. Ltd (through its Director Mr. Lokesh Gadia, the assessee). Land is situated at Village Sejwaya, Tehsil & Dist. Dhar measuring 2.091 hectre (1.046 hec + 1.45 hec) and in bighas the area is 10 bighas) was jointly owned by Mr. Rajendra Prasad Jhala and Mr. Vishnu Prasad Jhala. Agreement for sale was entered on 24.12.2009 between the two parties ( seller & buyer) agreeing for a total sale consideration of Rs. 95,00,000/-. An advance of Rs. 5,00,000/- was given vide Cheque No.284340 & 284343 dated 23.12.2009 of SBI, Indore. As the land in question is situated in District Dhar which is declared as a tribal District therefore written permission from District Collector is needed prior to the sale of land. Mr. Rajendra Prasad Jhala and Mr. Vishnu Prasad Jhala made two separate applications on 24.12.2009 and District Collector accorded the permission on 13.1.2010. Subsequently the sellers executed two separate sale deeds in favour of purchaser company namely Natural Gadia Real Estate Pvt. Ltd (through its Director Mr. Lokesh Gadia, the assessee) for a considerat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ok place through registered sale deed duly signed by both the sellers as well as the companies authorised representative. Before this transaction actually took place agreement to sale was duly executed agreeing for consideration of Rs. 95,00,000/-, the prior permission was also taken from the Collector showing the sale consideration of Rs. 95,00,000/-. The sale consideration was not less than the guideline value of the property. Ld. Counsel for the assessee further stated that both the sellers have given affidavits before the SDM Collector, Dhar confirming the sale consideration of Rs. 95,00,000/-. Public notices were issued for the said land. Note sheet evidencing proceedings carried out before the office of the District Collector regarding sale of land. Necessary approval was given by Collector Office for carrying out the sale transaction on 18.3.2010 stating the sale consideration of Rs. 95,00,000/- out of which Rs. 5,00,000/- was given in advance and the remaining amount to be given at the time of registering the sale deed. So there is sufficient material placed on record by the Ld. Counsel for the assessee in support of its contention that the transaction of sale of alleged la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y such material, it cannot be assumed that the statement of Somabhai Prajapati was sacrosanct and not a self serving statement more so, when the alleged amount which he claimed to have received was claimed by him as nontaxable receipt being exempt under section 54B of the Act. Upon appreciation of the entire material on record, the Tribunal has come to the conclusion that the revenue had failed to bring on record any reliable material to prove that the assessee had made actual investment of Rs. 3,25,51,0001-, Rs. 6,51,00,0001-and Rs. 3,25,50, 0001- in the previous years relevant to assessment years 2005-06, 2006-07 and 2007-08 respectively. However, to the extent of Rs. 11, 00, 0001-, the Tribunal was of the view that the agreement was material to conclude payment of such amount and that the assessee had failed to show that the amount of Rs. 11, 00, 0001- was paid by him to Shri Somabhai Prajapati by cheque and not by cash and accordingly confirmed the addition to that extent for assessment year 2005-06. 8. For the reasons stated hereinabove, this court is in complete agreement with the findings recorded by the Tribunal upon appreciation of the evidence on record and finds....
X X X X Extracts X X X X
X X X X Extracts X X X X
....statement or concealment is on the Revenue. This burden may be discharged by the Revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is an understatement or concealment of the consideration in respect of the transfer. Sub- s. (2) has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, and there is no concealment or suppression of the consideration. We find that in the present case, it was not the contention of the Revenue that the property was sold by the assessee to his daughter-in-law and five of his children for a consideration which was more than the sum of Rs. 16,500 shown to be the consideration for the property in the instrument of transfer and there was an understatement or concealment of the consideration in respect of the transfer. It was common ground between the parties and that was a finding of fact reached by the IT authorities that the transfer of the property by the assessee was a perfectly honest and bona fide tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orate the same with the statement of the seller for the purpose of determination of actual sale value, would the lower authority be justified in interfering with the same? C) When consistent sworn statements were taken into consideration along with evidences found at the time of search, would all be liable to be rejected on the basis of one statement in between contradicting the earlier ones which was also explained away as a result of intimidation?" 2. The facts leading to the above questions of law are as under: i) The assessment was made under Section 158BC of the Income Tax Act. The relevant Block Period was 01.04.1988 to 08.12.1998. The assessee had purchased land at Brindavan Road, Fairlands, Salem on 26 .10.1 998. The land was registered for Rs. 4.10 lakhs. During the course of search in the office premises of Polimer Net Work, certain notings were found in the seized material RK/S/B&D/25. In the statement recorded on 08.12.98, the assessee stated that he did not remember for what purpose he had made notings, which was confirmed by the assessee in a subsequent statement recorded on 11.12.1998. The land was purchased from one Shri Rajarathinam. His statement....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lue was Rs. 400/- per sq.ft. and hence the order of the Tribunal was perverse, wrong and without basis. 3. We heard the counsel. The seller had initially given conflicting statement about the sale consideration he received. When confronted by the Revenue on 11.12.1998, the seller admitted that he had deposited Rs. 4.10 lakhs received through draft in the bank and the rest amount was held by him in cash. The Revenue authorities could well have seized the cash invoking Section 132 of the Act, but for obvious reasons this was not done. Had the cash been seized from the seller, the matter would have been concluded in favour of the Revenue. In a subsequent submission, the seller claimed on 20.11.2000 that he had paid Rs. 15 lakhs out of the sale proceeds to settle old family debts, Rs. 4 .80 lakhs for construction of house in Pullkasi Village and the balance was advanced to parties for keeping Rs. 2 lakhs and Rs. 3 lakhs in the house for family expenses and educational expenses of his daughter, respectively. It was also noted that the revised return was filed by the seller wherein he had shown approximately Rs. 2.5 lakhs being available with him in cash. Even after giving the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld that the burden of proving actual consideration in these transaction was on the revenue and as the revenue has failed to discharge its duties, such additions are made merely on surmises and conjectures. This judgment of Hon'ble High Court of Madras has also been affirmed by the Hon'ble Supreme Court of India in Civil Appeal No.4262 of 2007 294 ITR 0049. 24. Now summarising the facts of the instant appeal and in light of above judgments we find that on one hand revenue authorities have relied only on the statement of sellers of land which was brought on record due to deposit of cash in their bank accounts. The source of deposit of alleged cash ofRs. 1,75,00,000/- in the joint bank account of sellers may be either from their own undisclosed sources of income of two sellers or "on money" receipt from sale of land. On the other hand there is long list of documentary evidences corroborating the transactions of sale of land for Rs. 95,00,000/- which are duly signed by the sellers namely Mr. Rajendra Prasad Jhala and Mr. Vishnu Prasad Jhala on multiple occasions. These documents includes agreement to sale dated 24.12.2009 executed between the purchasing company and the sellers for s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ement of law, or by the contract of the parties, to be the repositories and memorials of truth, any other evidence is excluded from being used either as a substitute for such instruments, or to contradict or alter them. This is a matter both of principle and policy. It is of principle because such instruments are in their own nature and origin, entitled to a much higher degree of credit than parol evidence. It is of policy because it would be attended with great mischief if those instruments, upon which men's rights depended, were liable to be impeached by loose collateral evidence. (See Starkie on Evidence p. 648" (Emphasis applied). We therefore on the basis of the facts and documentary evidences placed before us are inclined to hold that the sale consideration for sale of land in question was only Rs. 95,00,000/- and revenue authorities failed to bring any credible material on record to prove that the sale consideration was Rs. 2,70,00,000/- and not Rs. 95,00,000/-. 27. Even otherwise the addition of Rs. 1,75,00,000/- made by the Ld. A.O u/s 69B of the Act will not stand for under the provisions of Section 69B of the Act, firstly because the alleged land is not purchased ....