TaxTMI 
TaxTMI 
2023 (7) TMI 669
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....nces of the case, the Id. CIT(A) erred in deleting the addition of Rs. 82,35,639/- made by the Assessing officer on account of overdraft interest. 4. On the facts and in the circumstances of the case, the Id. CIT(A) erred in deleting the addition of Rs. 3,53,80,000/-, Rs. 49,00,000/-, Rs. 18,50,000/-, Rs. 22,70,000/- made by the Assessing officer on account of on money payment against the land purchase. 3. Apropos ground no. 1 the learned CIT(DR) submitted that the AO was right in making addition in this regard because during the course of statement recorded u/s. 132(4) of the I.T Act 1961 on 22.10.2011 and 15.11.2011, the assessee Sanjeev Agrawal has offered total undisclosed to the tune of Rs. 17,25,00,000/- in the hands of himself, his family members and his business concerns. The learned CIT(DR) further submitted that subsequently again vide letter dated 23.04.2012 before the DDIT-(Inv.)-1, Bhopal the assessee again confirmed the said surrender of Rs. 17.25 crores. The learned CIT(DR) further submitted that in the case of ACIT vs. Hukum Chand Jain reported as (2010) 191 Taxmann.com 319 (Chhatisgarh), the Hon'ble Chhatisgarh High Court has held that the admission is ....
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....osed sources at Rs. 6.50 crores over and above of Rs. 3 crores disclosed in the return of income. 6. The learned counsel, supporting the first appellate order, vehemently pointed out that the AO has failed to bring on record any positive or adverse evidence having nexus with the assessee or business transaction carried out by the assessee or by pointing out assessee connection with the seized documents in name or otherwise. Therefore, it was rightly concluded by the Ld. CIT(A) that the addition made by the AO was not on the basis of any incriminating material found during the course of search but only on the basis of statement of assessee Shri Sanjeev Agrawal only. The learned counsel also pointed out that during the post search enquiries no irregularity or adverse material have been brought on record and only addition made was towards income declared in the statement recorded u/s. 132(4). The learned counsel also place reliance on the various decisions including as listed below:- 1. ACIT (1) vs. Sudeep Maheshwari ITA No. 524/Ind/2013 2. Kailasben Mangarlal Chokshi Vs. Commissioner of Income Tax-(2008) 14 DTR 257 (Guj.) 3. Shree Ganesh Trading Co. Vs. ....
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.... was picked up by the AO for making addition in the hands of assessee. 11. From careful perusal of the relevant part of the first appellate order, we further note that the learned first appellate authority after considering the stand of the AO, replying and explanation of the assessee concluded that the assessee has made the deduction of Rs. 6.5 crores by submitting that no such undisclosed income was earned and therefore no such income was required to be offered to tax. For the sake of completeness, we find appropriate to reproduced the relevant cooperative part of the first appellate order which read as follows:- 4.5.1 During the course of search at various premises of appellant various incriminating material/documents were found and seized. These documents were also confronted to appellant and the appellant in reply made voluntary surrender of Rs. 17.25 crores on various accounts. The brief details of additional income offered during the course of search are as under:- Particulars Amount Rs. in Crores Work in Progress at site "Sagar Premium Towers" 4.00 Advances given to parties 1.00 Cash kept at site "Sagar Premium Towers" 0.90 Cash kept a....
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.... person found to be in the possession and control of the books of premises. Relevant questions asked about the loose paper found were duly replied in the statement. Further, Id AR of the appellant has also contended that search in the case of appellant was started on 21.10.2011 and concluded on 22.10.2011. The statement of appellant was recorded on 24.10.2011 and cannot be utilized against assessee without having any corroborative evidence on record. 4.5.3 The AO on page 7 of the assessment order has given specific reference of loose paper mentioning details of payment of Rs. 6.75 crores which has been considered as incriminating documents by him based on which the addition has been made. I have gone through the said loose papers/observations and it has been observed that the said loose paper does not mention any amount more than Rs. 6.75 crores, however, appellant has already made voluntary disclosure of Rs. 10.75 crores in return filed by various concerns. All these facts have been accepted by the AO during the assessment proceedings and none of these facts have been disputed by the AO. Thus, the assessee has successfully explained that the seized paper and declared amou....
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....admission is merely a hollow statement. We have given our thoughtful consideration to the rival contentions of the parties. It is undisputed fact that the statement recorded us 132(4) of the Act has a better evidentiary value but it is also a settled position of law that the addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the contents of the statement. In the case in hand, revenue could not point out as what was the material before the A.O., which supported the contents of the statement. In the absence of such material, coupled with the fact that it is recorded by the Ld. CIT(A) that the assessee himself had surrendered a sum of Rs.69,59,000/- and Rs. 75,00,000/- in A. Y. 2008-09 and 2009-10 respectively. The A.O. failed to co-relate the disclosures made in the statement with the incriminating material gathered during the search. Therefore, no inference is called for in the finding of the Ld. CIT(A) and is hereby affirmed. Ground raised by the revenue is dismissed. 4.5.4 Hon'ble Gujarat High Court in the case of Kailashben Mangarlal Chokshi vs. CIT - (2008) 14 DTR 257 (Guj.) has held that merely on the basi....
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....We are of the considered opinion that statement recorded under section 132(4) of the Income Tax Act, 1961 is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Drawing inference from the facts is a question of law. Here in this case, all the authorities below have merely reached to the conclusion of one conclusion merely on the basis of assumption resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) of the Income Tax Act and when there is incriminating admission against himself, then it is required to be examined with due care and caution. In the judgment of Kailashben Manharlal Chokshi (supra), the Division Bench of Gujarat High Court has considered the issue in the facts of that case and found the explanation given by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific reason has been given for rejection of the assessee's contention by which the assessee has retracted from his admission. None of the authorities gave any reason as to why Assessing Officer did ....
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.... basis, for arriving at any adverse decision against the assessee. If the authorities under the IT Act, 1961, have to be conferred with the power, to be exercised, solely on the basis of a statement, then it may lead to an arbitrary exercise of such power. An order of assessment entails civil consequences. Therefore, under Judicial review, courts have to exercise due care and caution that no man is condemned, due to erroneous or arbitrary exercise of authority conferred. " The court further held that "if the assessee makes a statement under s. 132(4) of the Act, and if there are any incriminating documents found in his possession, then the case is different. On the contra, if mere statement made under s. 132(4) of the Act, without any corroborative material, has to be given credence, than it would lead to disastrous results. Considering the nature of the order of assessment, in the instant case characterised as undisclosed and on the facts and circumstances of the case, we are of the view that mere statement without there being any corroborative evidence, should not be treated as conclusive evidence against the maker of the statement. " 4.5.8 Hon'ble Jurisdict....
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....uring the course of search and seizure operation on 22.10.2011 & 15.11.2011 and the letter dated 23.04.2012, could not show us any positive, adverse or cogent documentary evidence or incriminating material to show that the remaining amount of surrender of Rs. 6.5 crores, which was not included in the return of income, was in fact, earned by the assessee from undisclosed sources. The Assessing Officer proceeded to make impugned addition on the basis of statement of the assessee only along with his on whims, wrong assumptions and presumption by arising suspicion and doubt over the statements and explanations of the assessee. At this juncture, we take respectful cognizance of the judgment of Hon'ble Supreme Court in the case of Umacharan Shaw & Bros. Company vs CIT (supra) wherein it was held that the suspicion, however, strong cannot take a place of proof. In the subsequent judgment in the case of K.P Verghese vs. ITO (supra), the Hon'ble Supreme Court again held that the assessee must be shown to have received more than what is disclosed by him. 13. On careful consideration of stand of the AO and basis taken by the Ld. CIT(A) for deleting the addition first of all we may point ou....
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.... Kailasben Mangarlal Choksh vs. CIT(supra) the Hon'ble Gujarat High Court also rendered a proposition that merely on the basis of admission, the assessee could not be subjected to addition unless and until some collaborative evidence is found in support of such addition. 16. On in view of foregoing discussion we reached to a logical conclusion that the assessee during statement and subsequent surrender letter dated 23.04.2012 made head wise surrender of Rs. 6.75 crore but remaining amount of Rs. 10.50 crore was kept open to be declared as miscellaneous surrender which was to be confirmed after study all the papers. The assessee filed return of income u/s. 153A of the Act, subsequently and also included Rs. 4 crore on his account and his wife account leaving the amount of Rs. 6.50 crore. 17. Therefore, we are in agreement with the contention of the learned counsel of the assessee, which has been accepted by the Ld. CIT(A), that the assessee right from search and seizure operation till filing of return could not find any substantive material or investment which could be considered for supporting the surrender of reaming amount Rs. 6.5 crore and the AO has made addition in hands....
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...., the Ld. CIT(A) rightly deleted the addition. 20. On careful consideration of rival submissions, at the outset we note that the Ld. CIT(A) has granted the relief to the assessee with following observations and findings:- The AO has made allegation against the assessee that cash payment has been received by appellant. In absence of any admission, by any of person or either by appellant, addition cannot be made on basis of sheer imagination and guess work. It is settled legal position that onus of proof is on the person who makes any allegation and not on the person who has to defend. As per legal maxim "affairmanti non neganti incumbit probation" means burden of proof lies upon him who affirms and not upon him who denies. Similarly as per doctrine of common law "incumbit probation qui digit non qui negat" i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. Further, it is most important to mention that nowhere in the said impunged diary name of the appellant is mentioned and suggesting any such unaccounted payment/receipt. The AO has failed to discharge his onus of proof especially when addition has been made under "deeming fiction"....
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....the case of Dhira Lal Girdharilal v/s CIT (1954) 26 ITR 736 (SC). 4.7.5 In view of the above discussion, material evidences on record and case laws cited, firstly, the loose papers or rather say it as dumb document should be a speaking one having direct nexus with the assessee, which was not in the case of appellant. Secondly, the AO ought to have explained by which formula or methodology the amounts were treated as amounts in lakhs. Thirdly, the impunged transactions does not have even basis details of transactions such as whether the amount represents receipt/payment/balance amount, date of payment, mode of payment, details of payer/beneficiary, purpose of transaction etc. My findings on the issue under consideration are based on the various conclusions drawn by me which have been discussed in the above paras. Therefore, the A was not justified in making additions simply of guess work and solely on the basis of some dumb loose paper. Thus, the addition made by the AO amounting to Rs. 6,25,000/- is Deleted. Therefore, appeal on this ground is Allowed. 21. On careful consideration of basis taken by the AO and reason for deletion of addition recorded by the Ld. CIT(A), f....
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....ed counsel further submitted that the AO dismiss the explanation of the assessee that the name of the assessee also appeared at the page 38 of phone diary of the Sudheer Sharma inventories as A1/6 seized during the course of search at the same premises. The learned counsel further explained that merely because the name of a person has been recorded in the phone diary along with mobile number does not create any relation with the assessee for making addition in the hands of assessee u/s. 69C of the Act. 24. Furthermore, supporting the first appellate order the learned counsel submitted that the search operation on the assessee and group was conducted on 21.10.2011 and there was no material or document was found and seized from assessee pertaining to this transaction. He further explained that subsequently another search and seizure operation was conducted on third party Shri Sudheer Sharma Group on 20.06.2012 wherein alleged diary was seized which cannot be used against the assessee. The learned counsel lastly submitted that in such factual position the presumption available for the AO u/s. 292C of the Act cannot be validly drawn against the assessee for making baseless addition.....
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....the case of Trilok Chand Chaudhary(supra). Therefore, we are inclined to hold that there is no ambiguity and perversity or any valid reason to interfere with the findings arrived and recorded by the Ld. CIT(A) and thus the we uphold the same. Accordingly both the limbs of ground no 2 of Revenue are dismissed. 27. Apropos ground no. 3 of Revenue the learned CIT(DR) strenuously contended that in para 27.4 the AO rightly made addition in the hands of the assessee by observing that the assessee has claimed expenditure of Rs. 1,22,86,668/- including an amount of Rs. 82,35,639/-pertaining to present A.Y. 2012-13 and the said over draft interest claimed by the assessee was not allowable as business expenditure. Therefore the impugned amount debited by the assessee as over draft interest for A.Y. 2012-13 was rightly disallowed u/s. 14A of the Act by the AO. 28. Replying to the above the learned counsel of the assessee, drawing our attention towards relevant part of the assessment order while adjudicating ground no. 12 of assessee, submitted that in para 4.8 the Ld. CIT(A) has considered entire facts and circumstances of the issue and thereafter deleted the addition by following the o....
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....Patil vs DCIT 2 SOT 678 (ITAT Mum) has held as under:- Under the new scheme of taxation of the firm and its partners effective from the assessment year 1993-94, the Legislature has provided two different segments, one for the purpose of share of profit from a firm, as mentioned in section 10(A), and the other segment in respect of salary, remuneration, etc., as provided in section 28(v). Both these claims, thus, function in two different directions. The firm itself is taxed at the rates prescribed and the partners are taxed only in respect of remuneration, commission, etc., but not in respect of their share of profit from the firm which is exempt under section 10(2A). A combined reading of sections 14A and 10(A) leads to the conclusion that the share of profit from a firm being exempt under section 10(A), the expenditure incurred in relation to this income is not subject to any deduction. Moreover, the profits of a firm are nothing but the profits of the partners who work for and on behalf of the firm. The profits, so earned, are firstly taxed in the hands of the firm and thereafter divided among the partners according to their profit sharing ratio. Due to this reason, the....
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..... [Paras 6 to 87] In view of the foregoing legal interpretation, a conclusion could be drawn that an assessee is entitled to the deduction of the interest paid on moneys borrowed for investment in the firm in which he has become a partner against the amount received by him from the firm as remuneration/salary and assessed under the head Profits and gains of business or profession'. With the result, in view of the clear provisions of section 28(v), the salary income has to be considered as profit and gains from business or profession and, hence, interest paid on the money borrowed for the purpose of making capital contribution to the partnership firm has to be fully allowed in the hands of assessee/partner. Resultantly, the ground raised by the assessee was to be allowed Similar view was taken by Hon'ble ITAT Mumbai in the case of AH Baldota vs ACIT (2016) 103 TTJ 517 wherein it has has been held that:- Interest on borrowed capital - Assessment years 1994-95 to 1997-98 - Whether if a partner gets any bonus, commission, remuneration and interest from firm which is allowed as a deduction in hands of firm, then partner has a source of income under hea....
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....ervice first part of said ground no. 4 of Revenue, the Ld. CIT(DR) submitted that the AO made addition on protective basis in the hands of assessee. The Ld. CIT(DR) also submitted that During the course of the search a registered purchase deed ( page 55 of PB) was found for land of 1.459 Hectares located at Gram Katra Tec. Huzur purchased by M/s Agrawal Buildcon from Pankaj Makhija, Pradeep Sharma and Pradeep Hirani being the power of attorney holder of Smt. Rekha Bai, Shri Lalaram and Shri Devi Singh for a consideration of Rs. 1,76,50,000/-.During the course of post search enquiry, summons under 131 were issued to the sellers Rekha Bai and others and their statements were recorded jointly. During the statement these persons produced an agreement dated 27/11/2010 for the sale of 3.69 Acres of land between Shri Lakhmichand Hirani and Shri Pradeep Sharma on one side and Shri Lalaram, Shri Devi Singh and Smt. Rekha Bai on other side for a consideration of Rs. 5,03,68,500/-. The sale agreement is reproduced at page 33 of the assessment order. The joint statement of the sellers were recorded by the DDI (In.) who stated that they have received 5,03,68,5001- from Pradeep Sharma and Lakhmi....
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....e Tribunal it is submitted by learned counsel of assessee that the order of the Ld. CIT(A) was correct and accordingly be upheld. 33. At the outset, from the first appellate order, we note that the Ld. CIT(A) has granted relief to the assessee with following observations and findings:- Ground No 6:-Through this ground of appeal, the appellant has challenged addition of Rs. 3,53,80,000/- on account of on-money payment for purchase of land on protective basis. On perusal of assessment order it is seen that the additions have been made on protective basis in the hands of appellant and substantive basis in the hands of M/s Agrawal Buildcon. The substantive additions have been discussed and decided in depth vide appellate order passed in the case of M/s Agrawal Buildcon vide appeal No CIT(A)-3/BPL/IT-11392/2015-16 for AY 2012-13 dated 17.07.2020. In view of the facts that substantive addition has already been adjudicated in depth in the case of M/s Agrawal Buildcon, the addition made by the AO of the equal amount on protective basis in the case of appellant is directed to be Deleted.In case the demand in the hands of Ms Agrawal Buildcon are directed by the higher judicial au....
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....of ground no. 4 of Revenue is dismissed. Ground No. 4 of Revenue (Second Part) 36. Apropos this limb of ground no. 4 of Revenue, the Ld. CIT(DR) submitted that the assessee is a partner in the firm M/s Shiva Reality and the said firm purchased property from Shri Dayaram Chokse. During assessment proceedings the AO recorded statement of Shri Chokse by calling him u/s. 131 of the Act, wherein the stated to have received Rs. 1,03,00,000/- cash against sale of land. 37. The Ld. CIT(DR) further submitted that the assessee was provided due opportunity to cross examination Shri Bhagwan Ram Chokse son of Dayaram Chokse (seller of the land) on 10.12.2013 wherein he reiterated that he has received cash amount of Rs. 54 lakh on 24.12.2010 and Rs. 49 lakhs on 03.05.2011 which was deposited to the banks account of his family members immediately after receipt of cash from assessee Shri Sanjeev Agrawal. During statement recorded on 29.11.2013 the seller of land submitted copies of bank passbook of all family members wherein deposits have been made on 24.12.2010 and 04.05.2011 simultaneously to bank accounts of six family members of seller of land to the assessee. However this appeal is p....
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.... vs. CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, assessment cannot be made on the basis of imagination and guess work. 39. The learned counsel submitted that no incriminating material was found during the course of search suggesting exchange or payment of "on money" by the assessee to the sellers and the land. He further submitted that the land was not purchased by the assessee and in fact, the same was purchased by M/s. Shiva Reality partnership firm which is an independent assessee and filing return of income. The learned counsel also pointed out that the sellers failed to explain where the said cash received was utilised and date of receipt of cash. Therefore the Ld. CIT(A) was right in grating relief to the assessee. The learned counsel submitted that the AO was not justified in making addition on account of owned money paid to sellers u/s. 69A of the Act in absence of any collaborative evidence and simply relying on the basis of statement of third party. Therefore addition made by the AO amounting to Rs. 49 lakh may kindly be deleted. The learned counsel submitted that the facts and circumstances of ....
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....er submitted that the Ld. CIT(A) has granted relief to the assessee on the basis of correct appreciation of facts by rightly observing that the fiction created u/s. 50C of the Act, regarding full value of consideration received or accrue to seller, cannot be extended to the provision of section 69 or 69B of the Act in the case of purchaser i.e., present assessee. The learned counsel submitted that such statuary legal fiction cannot be extended to make addition in the case of purchasers, therefore the AO was not justified in making additions on account of owned money paid to seller's u/s. 69 of the Act, in absence of any collaborative evidence merely on the basis of difference between consideration shown in the registered sale deed and valuation taken by the Stamp Valuation Authority. The learned counsel submitted that even otherwise provision of section u/s. 56(2)(vii)(b) of the Act is applicable with effect from A.Y. 2014-15 and not the present A.Y. 2012-13 therefore in view of order of ITAT Chandigarh Bench in the case ITO vs. Ms. Inderjeet Kaur (2012) 50 SOT 377 (Chd.) the addition could not have been made in the hands of assessee under any provision of the Act, applicable at th....
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.... that during the search proceedings found that the assessee has purchased land in the name of firm M/s. Shiva Reality from Shri Amit Kumar Patani on 07.09.2011 where the consideration in the registered sale deed has been shown at Rs. 35 lakh whereas the fair market value was Rs 57,70,000/- and thus the AO rightly concluded that the whole deal was supervise and managed by Shri Sanjeev Agrawal being a key person of the firm therefore he made substantive addition in the hands of assessee and protective addition in the hands of M/s. Shiva Reality treating the same as unexplained investment u/s. 69B of the Act. Therefore the order of the AO is quite correct which requires no interference. The Ld. CIT(DR) vehemently pointed out that the Ld. CIT(A) has granted relief to the assessee without any reasonable and justified basis. Therefore first appellate order may kindly be set aside by restoring that of the AO. 46. On careful consideration of above submission first of all, we take up the issue of payment of own money of Rs. 49 lakh to Shri Dayaram Chokse and Rs. 18,50,000/- to Shri Kanhiyalal Pal on account of purchase of land i.e. second & third part og ground no. 4 of revenue. From the....
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....in para 4.3.4 it is we also note that the Ld. CIT(A) observed that the impugned sellers failed to explain where the said cash received was utilised and date of receipt of cash which is quite contrary to the factual findings recorded by the AO in the relevant paras of assessment order wherein date of payment and its used has been mentioned. The Ld. CIT(A) was mislead the facts and thus its findings arrive on the issue of own money of Rs. 49 lakh does not survive and requires re-adjudication by the Ld. CIT(A) after taking comments of the AO regarding explanation and allegation of the assessee. 48. The similar position is also discernable on the issue of own money of Rs. 18,50,000/- from Shri Kanhiya lal Pal and this third limb of ground no. 4 of revenue also require to be re-adjudicated by the Ld. CIT(A) after calling comment/remand report from the AO on the explanation, submissions and documentary evidences, if any, filed by the assessee. Therefore, in view of foregoing the second and third limb of ground no. 4 of revenue are restored to the file of Ld. CIT(A)for a fresh denovo adjudication, without being influenced from the earlier first appellate order and after allowing due op....
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....D 177(Del) it has been held that :- "If an income not admitted by assessee is to be assessed in the hands of the assessee, the burden to establish the such income is chargeable to tax is on the AO. In the absence of adequate material as to nature and ownership of the transactions, undisclosed income cannot be assessed in the hands of the assessee merely by arithmetically totally various figures jotted down on loosed document" Hon'ble MP High Court in the case of Krishna Kumar Rawat vs UOI & others (1994) 214 ITR 610 has held that the market rates for the purpose of registration of an immovable property as notified by the sub registrar can also have no application for determining the market value under Chapter XXC of the Act. It is limited only for payment of the stamp duty. The AO has simply presumed that village samardha kaliysot is a prime area of tehsil Huzur, Bhopal and the rates of land are very high. It is settled legal pronouncement that presumption how strong may cannot take place of evidence. Hon'ble ITAT Ahmedabad in the case of Vallabhbhai Purshottambhai Surani 54 SOT 556 (ITAT Ahmedabad) has held as under:- "Section 69B is deeming fict....
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....2)(vii)(b) is applicable to purchasers of immovable property viz. individual/ HUF and not to other assessees. In order to plug this loophole, scope of said provision was expanded by inserting a new section 56(2)(x) by Finance Act 2017 w.e.f 01.04.2017 thereby including all categories of assessees so that the assets received without or inadequate consideration may be brought to tax. The said provision is not even applicable in instant case and even otherwise provision of section 56(2)(vii)(b) is applicable w.e.f. A.Y. 2014-15 only. Hon'ble ITAT, Chandigarh Bench in the case of ITO v/s Mrs. Inderjit Kour (2012) 50 SOT 377 (Chd) has held that deeming fiction created u/s 50C regarding full value of consideration received or accrued to seller, cannot be extended to the provisions of section 69, in the case of purchasers. Such statutory legal fiction cannot be extended, to make in the purchasers liable to tax, in the context of undisclosed investment us 69 of the Act. It has been held that legal fictions created for a definite purpose should be limited for that purpose and cannot be extended beyond their legislative needs. It is well-settled that deeming provision creating legal fict....