AI Drafter 
TaxTMI 
TaxTMI 
2022 (2) TMI 808
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.... company is part of the Lodha Group, and is a connected entity by a string of transactions. That during the search proceedings, it was found that Lodha Group was engaged in suppression of sale receipts on account of sale of car parking space outside the regular books of accounts. That simultaneously, instances of receipt of on money against sale of flat were also found which shows that the group had been indulging in receipt of on money on sale of flats over and above the disclosed receipts. That shri Abhinandan Lodha, director and a key person of Lodha Group was confronted with the evidences found during the search of Lodha Group of Companies and his statement was recorded on 12th January 2011 under section 132(4) of the Act wherein he made a declaration of Rs. 199.80 crore as undisclosed income in the hands of various companies of Lodha Group on various accounts. That in his statement he had made a voluntary disclosure in the hands of the assessee company also for various assessment years including the assessment year under consideration, i.e. AY 2010-11, where in an amount of Rs. 487 lakh was admitted on account of undisclosed cash receipt on sale of car parking space. That cons....
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....It was found that the assessee adopted the following modus operandi for sale of car parking stands as under :- The purchaser of car parking used to approach the developer of Lodha Group. If the terms of sale of car parking are accepted by the prospective buyer, the Lodha Group used to take a cheque from such buyer in the name of either of the following entities :- 1. Navkar Enterprises 2. Nakoda Enterprises 3. Raj Vijay 4. Arihant Enterprises 5. Dev Industries 6. Hirani Enterprises 7. Sh tv Sha kti Enterprises 8. V Raj Enterprises 9. Weaves Impex 10. Vijaylaksmi and Co. 11. Arya Enterprises The cheques issued by the buyer were given to the seller i.e. Lodha Group. The Lodha Group used to pass on these cheques to Shri Hirachand Jain or any other entity for discounting the same and the cash generated after discounting was collected by Shri Hirachand Jain, the person to whom the cheques were given for discounting and it was ultimately passed to Lodha Group of concerns wherefrom it has been routed. At times, the car parking receipts were also accepted in cash. The episode narrated above shows how the ca....
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....dings. The assessee has neither retracted the disclosure of additional income made during the search proceedings of Rs. 47.52 lacs nor offered any plausible explanation for not including the balance disclosure of 40.52 lacs in the return of income. In the backdrop of these facts, the additional income disclosed by the assessee of Rs. 40.52 lacs is brought to tax as additional income. As discussed in subsequent para the assessee has sold 24 flats during the previous year relevant to AY under consideration. Needless to mentioned that the sale of flats was coupled with car parking. However the consideration received on sale of car parking was not accounted in the books of accounts there by not offered for tax in the return of income. During the course of search proceedings as discussed earlier this issue cropped up and disclosure was made of Rs. 40.52 lakhs on this account. However the disclosure though not incorporated in the return was found totally inadequate and insufficient, taking into consideration the prevailing rate of car parking of Rs. 4,41,000/-. This rate exactly matches with rate at which car parking were sold by the lodha group of company M/S NSIL having projec....
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....9;15% c component to be adjusted' and 20% C in agreement to be adjusted' have been made. Kindly explain what according to you the alphabet 'c' denotes in the above remarks and also explain these entries. Ans. The alphabet 'c' in the above remarks stands for 'cash component and the remarks which is written in Column 'C and 'D' are made by the Sales Manager viz. Nayan Vora and Mukul Mehta to get the special deviation under SCUD as asked by the clients / customers for which no approval is given by the higher management. Q.11 lam showing you another computer print out taken from the computer in Cabin No.2 which gives the summary of deviations for approval, wherein Column 'D' there is a remarks 30% in C'. The remarks made by the committee on this request are 'the C-component is a facility provided, no discount would be provided. Please give your comments. Ans. As per the printout, comment is made by Sales Manager named as Jayant for the project 'Casa Ultima', as myself is confused for the remarks which is given by the Committee as in approved column it's dearly mentioned 'NO'. Statemen....
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....ding of ail the three statements clearly reveal that under the garb of SCUD meeting what was being done in the Lodha Group of companies was that the key person and top bosses of the company used to decide the element of cash money and to that extent the agreement price was brought down viz-a-viz market value. Even the flats which are sold almost in the same period had different rates as per agreement where there was no SCUD meeting the rates charged were higher viz-a-viz the rates fixed after SCUD meeting. Taking into consideration this factor, Mr. Abhinandan Lodha made a disclosure of Rs. 51 Crore accepting in principle that the Lodha Group of concerns were indulged in the acceptance of on money. After having accepted in principle that the Lodha Group of cases including assessee, the only question remains what is the quantum of on money received by the assessee company in the sale of flats. Therefore, the exercise was made to go thoroughly through the data collected at this end and then as a natural consequence it was decided that the highest rate at which any flat has been purchased or sold is the real marketable value and any flat which is sold at the rate lesser than t....
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....crores approx on account of other discrepancies 7. Referring to the above, ld.CIT(A) held that it is abundantly clear that cash found and seized at various placed was in respect of the on money received on account of car parking and sale of flats a part of which belonged to assessees company, which the director of the assessees company, Shri Abhinandan Lodha declared as undisclosed income u/s. 132(4) fo the Act . Hence, he held that it clearly shows that unaccounted cash receipts of car parking and on money was resorted by the assessee. He further referred to the search action at the premises of Shri Somnathan Nair said to be the key employer of the Lodha Group and custodian of the unaccounted money. He observed that various documents were seized from the residence of Somnath Nair and these were considered by Shri Abhinandnan Lodha while making his statement. Hence, he observed that large number of incriminating documents were found during the search of the searched person. 8. Ld.CIT(A) observed that he finds enough indications of the evidence of incriminating material particularly unaccounted cash discovered during the course of search belonged to the appellant. That as per ....
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....ns and round trping." 7.5 Enquiries were carried out u/s.245D(3) which revealed that the applicant group continues to receive unaccounted car parking amounts after 16/09/2010 to the date of search. On the issue of car parking charges after the date of search, CIT mentioned in 245D(3) report that post search, no significant increase in rates of flats sold was noticeable. This would imply that the applicants continues to take car parking amounts outside the books even after search. 7.6 It is further observed by the Hon'ble Settlement commission that the Lodha group of Companies, the appellant being one of the entities of such huge group, in this Statemnt of Facts (SOF) admitted the important basic fact of quantum directly reflected in the incriminating documents:s a) Cash received as part of sale proceeds (on money) 24 instances totaling to Rs. 1,05,84,000/- b)From Shri Hiralal Jain, Finance Broker, discounting of cheques through 11 sham concerns was found in the statement of bank accounts of these sham concerns. 10. Thereafter, ld.CIT(A) referred to the modus operandi as noted by the AO. He referred to the statement of employees of Lodha group ....
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....not seem plausible and has not been substantiated by the appellant. In the present case, the appellant company has not offered any amount on account of car parking in its original return of income as well as in a revised return filed u/s. 153C of the Act. In view of the above facts it may be concluded that the assessee was indeed involved in selling parking slots and considerations was received in cash which was unaccounted. Accordingly additions of Rs. 1,05,84(000/- made by the AO in this regard is upheld 11. As regards the issue of addition of Rs. 2,07,21,096, for on-money on sale of flats, the learned CIT(A) noted the following submissions of the assessee:- 8.1 Appellant's Submission: The appellant is part of Lodha Group of Companies. A search u/s 132 was conducted on Lodha Group on 10.1.2011. During the search, the statement of certain individuals were recorded, including Mr. Abhinandan Lodha, who was the director of Lodha Developers Pvt. Ltd. It may be clarified that Mr. Abhinandan Lodha was neither employee nor director of the appellant company. In the statement recorded for certain disclosure was made by Mr. Abhinandan Lodha in respect of on money an....
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....gal. A copy of the order of the Mumbai is attached as Annexure 3. As per the information available with the appellant, the department has accepted the decision of Mumbai Tribunal in the case of NSIL and has not preferred any appeal before the Bombay High Court. On Merits: SI. No. Issue Amount (Rs.) Assesse's Contention 1 Unaccounted sale of car parking 10,84,00,000 Both these additions were made merely on the basis of the statement of Mr. Abhinandan Lodha recorded for AY 2011-12 during the search action. No incriminating material is found or seized in respect of the appellant during the search process on Lodha Group. The AO has relied on pages 107 and 108 of Annexure A4 seized during the search action which represents the chart showing the projects of the appellant, sales consideration etc. At no place there is mention of project 'Casa Ultima' developed by the Appellant which proves that the appellant has not received any on money from the project. 2 Unaccounted on money on sale of flats 16,78,31,372 12. Thereafter, ld.CIT(A) referred to search in Lodha group and retrieval of a deleted file from computer. That the same contained on m....
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....e under mistaken belief or was obtained by fraud or misrepresentation. Mere allegation will not suffice. Second situation is where the person seeking to retract proves, by leading cogent and reliable evidence, the erroneous or incorrect nature of the facts stated or confessed at the earliest possible opportunity. In the case before us, it has been held above that the assessee has squarely failed to satisfactorily discharge the burden that the confessional statement made by him Under Section 132(4) was involuntarily made or made under coercion or undue influence or was made under mistaken belief or obtained by fraud or misrepresentation. Rather, the evidence available on record shows that it was voluntarily made by the appellant with due care and caution and after necessary consultations with all concerned. Besides, there has been inordinate delay, which has not been substantiated to retract from the confessional statement. Retraction is also not supported by any independent or reliable evidence to prove the incorrect nature of the facts confessed in the statement. The confessional statement of the appellant is also corroborated by other evidence. For these reasons also, the AO was,....
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....enging the above. 16. We have heard both the parties and perused the records. We note that the first issue dealt with by the learned CIT(A) is the assessee's challenge that provisions of section 153C are not satisfied and hence, the jurisdiction of assessment in this case is defective and liable to be quashed. Before proceeding further, it will be gainful to refer to the necessary provisions of the Act. Section 153A provides the procedure of assessment in the case of search cases, where incriminating material pertaining to the assessee is found. Section 153C provides for the procedure in case of the person relating to whom materials are found in case of search of the other person to whom section 153A is applicable. Section 153A in the explanation at the end provides that the procedure mentioned in this section shall also be applicable to cases covered under section 153C. The necessary provisions read as under:- Assessment in case of search or requisition:- 153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books ....
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....hich reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.-For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.-For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) If any proceeding initiated or any order of a....
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....uch other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such oth....
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.... seized do not establish any correlation, document wise with the concerned assessment years, the assessment for that year suffers from jurisdictional defect. 19. Now, we refer to the finding of the authorities below regarding incriminating material found and seized and referring to the assessee in this case. It is noted that the search was not conducted at the premises of the assessee. The assessee is a limited company. Being an artificial judicial person, it has its separate identity form that of that its shareholders. It can sue and be sued in its own name. For tax purposes also, it has separate status and identity. 20. Now, it is undisputed that in the findings referred by the authorities below, there is no mention to any specific material corresponding to the assessment year under reference, which was found in search, which belong to the assessee in this case. The entire finding of the authorities below is based upon the search and material found in the case of Lodha Group. There is no mention of any specific material much less incriminating material relating to the assessee found in the search. The authorities below are also referring to statements given by the employees....
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....are also not based upon reference to any specific materials relating to the assessees company. The additions are said to be based upon materials belonging to the Lodha group and statement of employees of Lodha group and statement of Shri Abhinandan Lodha, which has been retracted afterwards. 24. As found out by us above, the assessee is a separate legal entity. There is no mention whatsoever regarding the nature of particular material belonging to the assessee company, which gives rise to the inference of on money receipt. This is based upon statement of other employees of Lodha group and that of Shri Abhianndan Lodha. As pointed out by us above, assessee has already disputed that assessee is a distinct legal entity and the term Lodha group cannot be used to incriminate the assessee and that Shri Abhinandan Lodha is not at all related to the assessee company. Hence, the material referred are not germane and hence, the addition on merits is also not sustainable. In this regard, we also note that the ld.CIT(A) has given the elaborate reference to case laws regarding the evidence Act and evidentiary value of statements obtained. 25. In this regard, we note that none of the state....
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....lation to matters of fact under inquiry; such statements are called oral evidence; (2) all documents including electronic records produced for the inspection of the Court; such documents are called documentary evidence." The Evidence Act also declares that the expressions "Certifying Authority", "electronic signature", "Electronic Signature Certificate", "electronic form", "electronic records", "information", "secure electronic record", "secure digital signature" and "subscriber" shall have the meanings respectively assigned to them in the Information Technology Act. 14. Section 22-A of the Evidence Act, which deals with the relevance of oral admissions as to contents of electronic records, reads as follows: "22A. When oral admission as to contents of electronic records are relevant. -- Oral admissions as to the contents of electronic records are not relevant, unless the genuineness of the electronic record produced is in question." 15. Section 45A of the Evidence Act, on the opinion of the Examiner of Electronic Evidence, then states: "45A. Opinion of Examiner of Electronic Evidence.-- When in a proceeding, th....
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.... contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities. (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether- (a) by a combination of computers operating over that period; or (b) by different computers operating in succession over that period; or (c) by different combinations of computers operating in succession over that period; or (d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly. (4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the followin....
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...., computer software or communication facilities which are connected or related to the computer in a computer system or computer network;" "(l) "computer network" means the inter-connection of one or more computers or computer systems or communication device through- (i) the use of satellite, microwave, terrestrial line, wire, wireless or other communication media; and (ii) terminals or a complex consisting of two or more interconnected computers or communication device whether or not the inter-connection is continuously maintained;" "(l) "computer system" means a device or collection of devices, including input and output support devices and excluding calculators which are not programmable and capable of being used in conjunction with external files, which contain computer programmes, electronic instructions, input data and output data, that performs logic, arithmetic, data storage and retrieval, communication control and other functions;" "(o) "data" means a representation of information, knowledge, facts, concepts or instructions which are being prepared or have been prepared in a formalised manner, and is intended to be processed, is being processed or....
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....laid down in this provision. The marginal note to Section 65B then refers to "admissibility of electronic records". 21. Section 65B(1) opens with a non-obstante clause, and makes it clear that any information that is contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document, and shall be admissible in any proceedings without further proof of production of the original, as evidence of the contents of the original or of any facts stated therein of which direct evidence would be admissible. The deeming fiction is for the reason that "document" as defined by Section 3 of the Evidence Act does not include electronic records. 22. Section 65B(2) then refers to the conditions that must be satisfied in respect of a computer output, and states that the test for being included in conditions 65B(2(a)) to 65(2(d)) is that the computer be regularly used to store or process information for purposes of activities regularly carried on in the period in question. The conditions mentioned in sub-sections 2(a) to 2(d) must be satisfied cumulatively. 23. Under S....
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.... the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub-section (2) are satisfied, company owning the mine is liable to prosecution. No question of violation of Article 14 therefore arises." 2 "70. Perusal of the opinion of the Full Bench in B.R. Gupta-I [Balak Ram Gupta v. Union of India, AIR 1987 Del 239] would clearly indicate with regard to interpretation of the word "any" in Explanation 1 to the first proviso to Section 6 of the Act which expands the scope of stay order granted in one case of landowners to be automatically extended to all those landowners, whose lands are covered under the notifications issued under Section 4 of the Act, irrespective of the fact whether there was any separate order of stay or not as regards their lands. The logic assigned by the Full Bench, the relevant portions whereof have been reproduced hereinabove, appear to be reasonable, apt, legal and proper." (emphasis added) without further proof or production of the original. The very adm....
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....n evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. 17. Only if the electronic record is duly produced in terms of Section 65-B of the Evidence Act, would the question arise as to the genuineness thereof and in that situation, resort can be made to Section 45-A-opinion of Examiner of Electronic Evidence. 18. The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65-B of the Evidence Act are not complied with, as the law now stands in India. xxx xxx xxx 20. Proof of electronic record is a special provision introduced by the IT Act amending various provisions under the Evidence Act. The very caption of Section 65-A of the Evidence Act, read with Sections 59 and 65-B is sufficient to hold that the special provision....
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....he compliance with the requirements of Section 65-B, which is a special provision dealing with admissibility of the electronic record, there is no bar in adducing secondary evidence, under Sections 63 and 65, of an electronic record." 22. The evidence relating to electronic record, as noted hereinbefore, being a special provision, the general law on secondary evidence under Section 63 read with Section 65 of the Evidence Act shall yield to the same. Generalia specialibus non derogant, special law will always prevail over the general law. It appears, the court omitted to take note of Sections 59 and 65-A dealing with the admissibility of electronic record. Sections 63 and 65 have no application in the case of secondary evidence by way of electronic record; the same is wholly governed by Sections 65-A and 65-B. To that extent, the statement of law on admissibility of secondary evidence pertaining to electronic record, as stated by this Court in Navjot Sandhu case, does not lay down the correct legal position. It requires to be overruled and we do so. An electronic record by way of secondary evidence shall not be admitted in evidence unless the requirements under Section 65-B....
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.... therefore overruled. (b) The clarification referred to above is that the required certificate under Section 65B(4) is unnecessary if the original document itself is produced. This can be done by the owner of a laptop computer, computer tablet or even a mobile phone, by stepping into the witness box and proving that the concerned device, on which the original information is first stored, is owned and/or operated by him. In cases where the "computer" happens to be a part of a "computer system" or "computer network" and it becomes impossible to physically bring such system or network to the Court, then the only means of providing information contained in such electronic record can be in accordance with Section 65B(1), together with the requisite certificate under Section 65B(4). The last sentence in Anvar P.V. (supra) which reads as "...if an electronic record as such is used as primary evidence under Section 62 of the Evidence Act..." is thus clarified; it is to be read without the words "under Section 62 of the Evidence Act,..." With this clarification, the law stated in paragraph 24 of Anvar P.V. (supra) does not need to be revisited. (c) The general directions i....