TaxTMI 
TaxTMI 
2022 (1) TMI 1211
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....hat the promoter group of the company selling the said land had accepted receipt of unaccounted cash from the assessee towards the sale of land and had declared the same before the Settlement Commission. 1.1 The Ld. CIT(A) has grossly erred in law and on facts by not giving due cognizance to the provisions of 292C of the IT. Act (with respect to the impounded documents during the course of survey u/s. 133A), which mandates that the contents of such impounded documents are to be presumed to be true. 1.2 The Ld. CIT(A) has grossly erred in law and on facts by invoking and travelling to the provisions of section 34 of the Evidence Act (which is with respect to the entries in books of accounts) when the relevant section for the said impounded documents is section 292C of the I.T. Act. 1.3 The Ld. CIT(A) has grossly erred in relying on the decisions of the Hon'ble Supreme Court which were in respect of criminal or quasi-criminal proceedings, which are not based on "proof beyond doubt', whereas the IT. proceedings are based on the principle of preponderance of probability and human behavior and are in governed by the rule of evidence as provided for in ....
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....y the Revenue is that the Ld. CIT-A erred in deleting the addition made by the AO for Rs. 33.92 crores on account of investments not disclosed in the books of accounts as required under section 69B of the Act. 4. The stated facts are that the assessee in the present case is a private company and engaged in the business of development of land. There was a property located at Manek Chowk which was known as 'New Manek Mills/ New Manek Chowk Textile Mills. The impugned property was purchased by M/s Advance Lifestyle Ltd. through its 'Special Purpose Vehicle' namely M/s. Advance Life Space Private Ltd. in an E-auction dated 31st December 2010. The impugned property was sold by National style Textile Corporation to Advance Life Space Private Ltd. 5. Afterward, the assessee purchased the shares of Advance Life Space Private Ltd which were held by M/s Advance Lifestyle Ltd vide MOU dated 17th January 2012 for a total consideration of Rs. 143.55 crores. Effectively, the impugned property was transferred to the assessee by virtue of the transfer of shareholdings. 6. Subsequently, there was the survey operation under section 133A of the Act dated 12th December 2012 at the premises of....
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....tioned at Rs. 235.61 crores cash. As such there was the mismatch in the amount of total consideration for the sale/purchase of the shares/property. Likewise, the survey was conducted at the third party premises and there was no material found for any cash transaction. Thus such statement cannot be relied upon. 9. The assessee further submitted that there was no supporting material furnished before the settlement commission evidencing the involvement of any cash transaction in the impugned deal for the purchase of shares/property. Furthermore, the order of the settlement commission is not binding on the third party. 10. There was also a survey operation at the premise of the assessee under section 133A of the Act dated 17 October 2013 but there was not found any document of incriminating nature suggesting any undisclosed transaction of cash in the impugned property deal. 11. However, the AO disregarded the contention of the assessee by observing that the directors of M/s Phulchand Exports Pvt. Ltd and M/s Advance Lifestyle Ltd. have categorically admitted to have received the cash from the assessee in the statement furnished during survey operation. This fact was also prove....
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.... and that too of a third party. 17. For making any addition under the provisions of section 69B of the Act, there has to be some tangible materials indicating the investment made in cash which was not recorded in the books of accounts. In the absence of any tangible material, no addition under the provisions of section 69B can be made. Admittedly, in case of assesse no such material is available. 18. There were found certain loose papers/diaries containing the noting of certain amounts which cannot be equated as an evidence under the provision of section 34 of the Evidence Act, to draw an inference that there was unexplained investment made by the assessee. As such, these noting must be supported by corroborative materials. Even, Shri Pradeep Aggarwal in his statement recorded under section 131 of the Act failed to substantiate based on the documentary evidence that there was the cash payment made by the assessee. Even at the time of cross-examination, Shri Agarwal failed to substantiate to have received any money from the assessee except making statement. Thus such noting does not have any evidentiary value and statement of third party cannot be made basis for addition in th....
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....d AR vehemently supported the order of the learned CIT-appeal. 23. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case on hand have already been elaborated in the preceding paragraph which are not in dispute. Therefore, for the sake of brevity and convenience, we are not inclined to repeat the same. From the preceding discussion, we note that the addition in entirety was based on the statement recorded in the course of survey operation under section 133A of the Act at the premises of the third party namely M/s Phulchand Export Pvt Ltd. The copy of the survey statement is placed on pages 82 to 101 of the paper book. On perusal of the same, it is deciphered that no material of incriminating nature has been referred therein indicating/suggesting that the assessee has made payment in cash for the acquisition of the shares of the company namely M/s Advance Life Space Pvt Ltd which were held by M/s Advance Life Style Ltd except a diary containing the date and amount. Moreover, we also note that there is a contradiction in the statement of Shri Pradeep Aggarwal recorded during the survey operation. At one place wh....
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....te that the CBDT in instruction no 286/2/2003-IT(Inv.II) has instructed the revenue authority to make addition in search or survey proceeding only on the basis of cogent material found instead of mere admission. The relevant extract of the instruction reads as under: Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adve....
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.... a third party cannot bind the assessee. In holding so we draw support and guidance from the judgment of Hon'ble Delhi High Court in the case of CIT vs. Vineeta Gupta reported in 46 taxmann.com 439 wherein it was held as under: The impugned order does not call for any interference. The fact that sellers had declared a sum of Rs. 16 crores as undisclosed income in respect of the said transaction cannot bind the assessee and her husband. They were not privy to the settlement application filed on behalf of sellers. In any event, what the Settlement Commission has said in the order in respect of sellers is that as per their calculations the premium amount came to Rs. 13.3 crores but since they had declared more than that, the disclosure needed no disturbance. 29. We have also analyzed the transaction from a different angle. For the sake of clarity but without admitting, assuming the assessee paid the amount in cash against the acquisition of the shares. In the present case, admittedly, the assessee acquired the shares of M/s Advance Life Space Pvt. Ltd from M/s Advance Lifestyle Ltd for certain value. If any consideration has been paid by the assessee outside the books of a....
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.... same cannot be the basis of making charges against the person whose name noted on sheet without corroborating the same. The relevant extract reads as under: From a plain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still, the statement made therein shall not alone be sufficient evidence, still, the statement made therein shall not along be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second park speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfil the requirements of the above section so as to be admissible in evidence and if this question is answer....
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....t has issued the receipt vouchers which contained the name of the member, shop / office allotted and cheque no., bank name and branch etc. in respect of the advances received from each of such members. These details were duly verifiable from the bank statement of the appellant in which such advances have been credited. Further oil the payments have been received through cheques. Therefore, there is no doubt about the genuineness of the advances received from the members as the same were through banking channels. The above were duly accounted for in the books of accounts of the appellant which were before the AO in the assessment proceedings. 4.7. The appellant has also submitted that it has maintained the ledger account copies of each of the parties in which the payments received from the member / sales effected to them and / or repayment of refund in case of cancellation has been accounted for. These ledger accounts are part of the books of accounts which have been produced before the AO in the assessment proceedings and the AO has not given any adverse finding over the same. Further, the appellant had also maintained the duly signed vouchers of the members whose shops / ....
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....ppearing in the books of accounts of the assessee which were treated as unexplained cash credit under the provisions of section 68 of the Act. Admittedly the onus lies upon the assessee under the provisions of section 68 of the Act to offer an explanation based on the documentary evidence about the nature and source of such cash credit entries. As such the assessee, has to justify the identity, creditworthiness of the parties and genuineness of the transactions. 42. It was contended by the assessee that the impugned credit entries were representing the advance booking received from the members. The assessee qua to such credit entries has also furnished name, addresses, booking of the shop, agreement date and the cancellation deed. This fact can be verified from the details placed on pages 217 to 237 of the paper book. Likewise, the assessee has also furnished the booking receipts and service tax paid on such booking advance which is evident from pages 235 to 245 of the paper book. It is also not out of place to mention that in majority of the cases the PAN of the sundry debtors representing the advance booking were available on record. As far as the details as discussed aforesai....
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....inciple of preponderance of probability and human behavior and are in governed by the rule of evidence as provided for in the I.T. Act, in this case section 292C. 1.4 The Ld. CIT(A) has failed to appreciate that the statement of Shri Pradeep Agarwal was recorded u/s. 131 of the I.T. Act which provide that the officers/I.T. Authority have the same powers as are vested in a court under the Code of Civil Procedure 1908; therefore, such statement could not be taken lightly or dismissed outrightly, as has been done by the Ld. CIT(A). 1.5 The Ld. CIT(A) has failed to appreciate that the figure of unaccounted money was not a figment of imagination by the AO, but it was what was found recorded in the impounded documents. 1.6 The Ld. CIT(A) has failed to appreciate that the seller company i.e. M/s. Advance Life Style Ltd., the holding company of the SPV, namely M/s. Advance Life Spaces Pvt. Ltd., and M/s. Phulchand Exports Pvt. Ltd. are all related concerns and are controlled by Agarwal family, of which Shri Pradeep Agarwal S/o Shri Phulchand Agarwal is a member. Thus, CIT(A) erred in facts and law in observing that Shri Pradeep Agarwal whose sta....
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.... statement recorded during the course of survey. Addition retained without corroborative evidence ignoring the audited accounts is patently wrong. It be so held now and entire addition of work in progress be directed to be deleted. 2. The Ld. CIT (A) erred in law and on facts in ignoring the submission that estimated WIP working includes the land value and if land value from estimated WIP is removed then estimated working tallies as per the audited books of accounts. Ld. CIT (A) ought to have considered the submission and ought to have deleted the addition in toto. It be so held now. 3. Ld. CIT (A) erred in law and on facts in confirming addition of WIP of Rs. 41,60,76,489/- without rejecting the books of accounts of the appellant u/s 145(3) or without pointing out any defects in book results. Ld. CIT (A) ought to have considered the fact that books of account of appellant are audited under Companies Act as well as under income tax Act and there was no qualification under both audits and accordingly ought to have accepted book results. It be so held now. 4. Without prejudice to the above grounds the Ld. CIT (A) miserably failed to appreciate that even as ....
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....aring of the appeal." 49. The first issue raised by the assessee in ground Nos. 1 to 4 of its appeal is that the Ld. CIT-A erred in confirming the addition of Rs. 41,60,76,489/- out of the total addition made by the AO at Rs. 68,93,96,668/- instead of deleting the same in entirety. 50. There was a survey operation under section 133A of the Act dated 17th October 2013 at the premises of the assessee. In the course of survey operation, a diary marked as annexure AS-2 was found wherein the construction cost as on the date of survey was recorded at Rs. 90,63,11,765/- whereas the construction cost in the books of accounts was recorded at Rs. 49,02,35,276/- only. The director of the company namely Shri Bharatbhai Shah has admitted the difference in the construction cost recorded in the books viz a viz found in the impugned diary for a sum of Rs. 41,60,76,489/- as unaccounted income of the assessee. However, the assessee in the return of income disclosed an income of Rs. 15,88,86,558/- based on percentage completion method. 51. On question by the AO, the assessee submitted that it does not have the seized document being diary and the statement recorded during the survey operation....
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.... Thus, the addition has been made by the AO without any proper basis. 58. The assessee also admitted that in the statement, it was duly furnished that the project cost has been estimated at market value for the purpose of the bank loan. Accordingly, no credential could be given to the value recorded in the diary for the project construction cost as no any other corroborative material was found. The assessee also submitted that the statement obtained during the survey proceedings has no evidentiary value and therefore there cannot be any addition based on the same. 59. The assessee further submitted that estimated project revenue at Rs. 267,94,01,400/- includes the value of the land which does not belong to the assessee. If the value of land is reduced/ excluded from the estimated revenue the profit declared by the assessee will be in the line of estimated profit. On the basis of the above the assessee prayed that that the addition made by the AO is not sustainable. 60. However the Ld. CIT-A partly confirmed the order of the AO by observing as under: "3.5. I have considered submission of the appellant and all the judicial: pronouncements. In the appellant's cas....
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....facility. In any event, the mere statement of the assessee in that behalf could never be accepted. The Tribunal has considered all relevant materials in this behalf and its view is reasonable." 3.6 Appellant has further relied on the decision of CIT vs. Kaderkhan (supra) that statement recorded u/s. 133A does not have evidential value. The appellant's reliance is misplaced as the unaccounted WIP mentioned by AO in the assessment order is based on the impounded material which has been affirmed by Director of the company in his detailed statement recorded on oath u/s. 131 of the Income Tax Act, 1961. The reliance of appellant on other case laws are distinguishable on facts. In view of the above, it is held that appellant has unaccounted WIP of Rs. 41,60,76,489/-. Accordingly the addition made by the AO to the extent of Rs. 41,60,76,489/- on account of WIP is confirmed. Relief is granted for the balance amount. The ground of appeal is accordingly partly allowed." 61. Being aggrieved by the order of the Ld. CIT-A, both the assessee and the revenue are in appeal before us. The assessee is in appeal against confirmation of Rs. 41,60,76,489/- whereas the Revenue is in appeal f....
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.... paper containing various financial transactions should be matched with the books of accounts of the assessee at least to some extent. If part of the transactions recorded in a loose paper are matching with the books of accounts of the assessee then the remaining transactions can be assumed that these are actual transactions. Similarly, noting in loose paper should corroborate with some other documents or material suggesting the genuineness of the noting found in the survey proceeding then it can be assumed as actual transaction. There can be a situation that the assessee for any purpose has made noting of certain figures but the same cannot be characterized as income of the assessee until and unless some supporting documents are found qua to such loose papers. 66.1 Likewise, there can be loose papers having financial transactions, part of which are matching with the bank account of the assessee. Then, such loose paper can be termed as incriminating document having bearing on the income of the assessee. To our understanding, finding of loose papers in the course of survey containing certain financial transactions cannot ipso facto represent income of the assessee. 67. It shal....
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....nue should collect necessary evidence to prove that the figures represent incomes earned by the assessee. 69. In view of the above and after considering the facts in totality, we are of the view that there cannot be any addition merely on the basis of loose papers found during the survey operation until and unless there were some corroborating evidences found. 70. At this juncture, it is also pertinent to note that the revenue is authorized record the statement under section 133A(3)(iii) of the Act during the survey operation. There is no provision for recording the statement under section 131(1) in survey operation except the circumstances provided under subsection 6 to the section 133A of the Act. In other words the revenue can resort to the provisions of section 131 of the Act if the assessee doesn't co-operate during the survey proceedings or tries to evade the relevant formations. However in the case on hand, we note that there is no such allegation that the assessee was not cooperating during the assessment proceedings. Thus we hold that the revenue has acted beyond the jurisdiction by recording the statement under section 131 of the Act. Accordingly, no reference can b....
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....n. 75. However, the AO found that the assessee was to construct 8,20,589 sq. ft. area for its project. Out of such total construction area, the assessee has already made sale/received booking advance for 6,78,475 sq. ft. area. The AO also found that the assessee has estimated the total profit for its project at Rs.27,37,58,452/- crores which is applicable to the total construction area of 8,20,589 sq. ft. Thus the AO worked out the profit attributable to the area i.e. 678475 sq. ft. sold by the assessee in the year under consideration amounting to Rs. 22,63,47,496/- and compared the same with the amount of profit declared by the assessee at Rs. 15,87,80,951/-. Thus it was also found out by the AO that the assessee has declared less profit by Rs. 6,75,66,545/- (Rs. 22,63,47,496/ - Rs. 15,87,80,951/-). However, the AO has not made any addition for such amount of profit in the total income of the assessee on the reasoning that there has already been made an addition of Rs. 68,93,96,668/- to the total income of the assessee on account of unexplained expenditure. 76. Aggrieved assessee preferred an appeal to the Ld. CIT-A. 77. The assessee before the Ld. CIT-A contended that it....
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....mputed the profit at Rs. 22,63,47,496/ on the basis of the sales of the constructed area made by the assessee leading to a difference of Rs. 6,75,66,545/ only. Under percentage completion method, the profits is determined in the manner as detailed below: Revenue = cost incurred to date / estimated total cost x contract price - revenue already recognized 84. Based on the above method, there is no reference to be made to the value of the sales. In other words, under percentage completion method, income of the assessee is computed based on cost incurred to date in proportionate with total estimated cost and total estimated revenue. This method of recognizing the profit is very well accepted by the industries engaged in the business of construction of the projects. There was no defect pointed out by the AO in the method adopted by the assessee. 85. It is also pertinent to note that the assessee has shown revenue in the financial statements based on percentage completion method despite the fact that there was no actual sales made by the assessee in the year under consideration. The question of making the sale arises when the project/the property is handed over to the prospectiv....
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....as the duty of the vendor to incur such expenses. Therefore, it was proposed by the AO that the assessee has not incurred such expenses in the course of the business. 90. Nevertheless, the assessee on the question by the AO, submitted that the MOU was cancelled and thereafter development agreement was entered with the owner of the impugned property. As such, the assessee being a developer, was under the obligation to complete the project on time hence incurred such expenses to get the property vacated. As per the assessee, such expenses were incurred in the course of the business. 91. However, the AO disregarded the contention of the assessee by observing that there is no document evidencing that the MOU was cancelled. Therefore, as per the AO the MOU entered dated 17-01-2012 is a valid piece of evidence which cast a duty upon the vendor to incur such expenses. As per the MOU, there was included the sum of Rs. 5 crores in the cost of the land purchased by the assessee towards getting the property vacated from the occupants. Accordingly, the AO disallowed the sum of Rs. 1,36,25,000/- and added to the total income of the assessee. 92. Aggrieved assessee preferred an appeal t....
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....he same is eligible for deduction. 95.2 On the other hand, the ld. DR before us vehemently supported the order of the authorities below. 96. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the authorities below has made the disallowance on the reasoning that the assessee was not under the obligation to incur such expenses as provided in the MOU with the M/s Advance Lifestyle Ltd. First of all we note that the genuineness of the expenses have nowhere in doubted by the authorities below. It is also an admitted fact on records that the assessee was constructing its project on the land held by M/s Advance Life Space Pvt. Ltd under the development agreement in the name of City Centre. The assessee to carry out its project needed the vacated land for smooth running of its construction business, therefore it has incurred an expense of Rs. 1,36,25,000/- by way of making the payment to the encroachments. 97. From the above discussion, it also appears that the assessee was not under the obligation to incur such expenses. As such it was the duty of the other party to handover the land t....
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....f the parties. But the assessee failed to produce such parties. Therefore the AO treated the same as unexplained cash credit under section 68 of the Act and added to the total income of the assessee. 102. Aggrieved assessee preferred an appeal to the Ld. CIT-A 103. The assessee before the Ld. CIT-A contended that it has furnished the primary documentary evidence in support of such loan parties. These primary documents include the copy of the PAN, bank statement and the income tax returns. Therefore, the assessee has discharged its onus imposed under section 68 of the Act. Therefore, the addition required to be deleted. 104. The Ld. CIT-A after considering the submission of the assessee confirmed the order of the AO by observing as under: "6.3. I have carefully considered the facts of the case, assessment order and submission of the appellant. The AO has made the addition of unsecured loan of Rs. 14,42,90,465/- under section 68 of the I. T. Act, 1961 in respect of following persons on the ground that appellant failed to produce above persons, and therefore, identity, genuineness and creditworthiness have not been proved. Hannah Enterprises Pvt. Ltd. Rs. 14,14,29....
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.... The appellant has shown unsecured loan of Rs. 3,36,84,947/-from the above company. The company is incorporated on 24/02/2012 and the income shown A. Y. 2014-15 is Rs. 2,04,603/-. In view of the above, capacity of lender is not proved. 6.9. As regard Sawaca Business Machines Ltd., appellant has submitted copy acknowledgement of I. T. return and copy of annual account without notes before the AO. The appellant has shown unsecured loan of Rs. 5,39,59,358/- from the above company. The income of the company for A. Y. 2014-15 is Rs,20,31,501/-. In view of the above, capacity of lender-is not proved. 6.10. It is seen that M/s. Biraj Manimpex Pvt. Ltd., Boaston Tradelinks M Ltd., and Vansh Glass Industries Pvt. Ltd., have the same common address of New York Tower, Ahmedabad. Appellant has failed to produce the lender before the AO. 6.10. Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In the land mark cases like Kale Khan Mohammad Hanif Vs. CIT [1963] 50 ITR I (SC), and Roshan Di Hafti Vs. CIT 11977] 107 ITR (SC), it has been held that the low is well settled that the onus of proving the so....
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.... to be presumed that the transactions were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the assessee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque was not sacrosanct nor could it make a non-genuine transaction genuine." 108. In the given case, the assessee has discharged its onus by furnishing the necessary details such as a copy of PAN, bank details, and ITR etc. in support of identity of the parties, genuineness of transaction and creditworthiness of the parties. Admittedly the learned CIT-A has not doubted on the identity and genuineness of transaction but doubted the credit worthiness of the all parties. Hence the learned CIT(A) sustained the addition made by the AO by holding that the assessee has not discharged the primary onus cast under section 68 of the Act. 109. Now coming to the third condition, i.e. creditworthiness of the parties, regarding this we note that the assessee has submitted that the fund was received through the through banking channel from all the parties. In support, the assessee has submitted their bank accounts, copy of retunred and annual a....