AI Drafter 
TaxTMI 
TaxTMI 
2025 (2) TMI 405
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....1 (hereinafter referred to as „the Act‟) was conducted on 10.01.2019 in the case of the assessee. In response to notice u/s 153A(a) of the Act issued and served on 10.10.2019, the assessee filed its return of income on 24.10.2019 declaring total income at Nil. Statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the assessee filed the requisite details from time to time. 3. During the course of assessment proceedings, the Assessing Officer noted that the assessee LLP is a partnership firm (on conversion from Ganraj Homes Pvt. Ltd. w.e.f. 03.06.2016) wherein Smt. Kavita Goel, Pinky Garg, Sulochana Garg, Mahavir Agarwal and Agrim Goel are the partners. The assessee firm is engaged in construction of residential and commercial projects and has executed a development agreement dated 10.10.2013 with M/s. Kalyanee Fortune Constructions, a partnership firm having its registered office at 3 AA, Edena Building, 97 Mk Road, Marine Lines, Mumbai on principal to principal basis for development of a piece of land at S.No.41, village-Sus, Mulshi, Pune, on revenue sharing basis. The share of gross sales proceeds of the proj....
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...., in which any and every kind of details are noted down by them. These noting may represent anything like, communications with sales representatives of other projects, negotiations with the customer wherein rates for standing units and units with higher specifications are specified, negotiations with the customer, wherein discounts may have been discussed, etc. 3. Affirmation on the part of the sales manager regarding acceptance of cash is merely rough notings made by the sales representatives in their personal capacity. 4. The sales representatives do not understand the intricacies of the various taxation laws and hence the words written by them do not have the same meaning as may be inferred for taxation purpose." 6. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He noted that the notings on the diary are not just any random notings but a comprehensive break down/calculation of the consideration along with the name of customers and flat numbers. Further the method of calculation of cash could not be said as conversation with sales representative or with any other person. Therefore, the arguments of the assessee t....
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.... of search / survey. He noted that the evidences of on-money were found with respect to the following shops, the details of which are as under: Sr No Flat details Cash amount accepted including infrastructure charges Date of registry Consideration as per registered deed AY % of on money with resp. to registered deed (in Rs. in lakhs) 1 D-1603 17 15/10/2018 4918503 2019-20 34.56 2 D-803 18.64 20/11/2018 4710510 2019-20 39.57 3 D-802 4 14/12/2018 62,88,260 2019-20 6.36 4 E-601 0.75 04/01/2019 7438691 2019-20 1 5 D-1405 17.25 21/09/2018 5150459 2019-20 33.49 6 E-1501 25 02/02/2019 7819000 2019-20 31.97 7 E-601 27.25 04/01/2019 7438691 2019-20 36.63 8 D-202 20 03/01/2019 4606492 2019-20 43.41 9 E-1003 25 27/05/2019 Not submitted by Assessee 2019-20 NA 10 C-1103 31.25 27/04/2017 6805300 2019-20 45.92 11 B-602 40 01/11/2018 10468259 2019-20 38.21 12 A-502 37 26/11/20....
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....s the rate on which the flat is to be registered. The difference amount of Rs. 1200/- is the amount that will be charged on each square feet area of property sold for the consideration to be received as cash component. The same is reproduced hereunder for ready reference. ii) As per scanned copy of page no. 4 of bundle no. 1, the said page indicated that the appellant firm is involved in accepting on-money and the method to calculate cash component is mentioned with example. Rs. 5600 is the rate per square feet. 1046.93 Sq. feet is the area of the flat to be sold, infra are infrastructure charges. All of these constitute agreement value. Minus 20 lakhs is the cash component involved in sale of flat. It is pertinent to mention here that the cash component for each category of the flats is different which ranges from 20 lakh to 38 lakh, The same is reproduced for ready reference. iii) As per scanned copy of page no.9 of diary no.3, the said page indicated that the calculation of agreement value and cash component. The value 58,61,968 is the amount in Rupee at the rate of 5600 for the area of 1046.78 Square Feet and 7,50,000 is the infrastructure charges. 66,11,968 i....
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....A 11 Maulik Shah B-602 Paid 40 Ledger N/A 12 Imran Khan A-502 Paid 37 Ledger N/A 13 Shobhit Joshi B-501 Not paid 15 4,05,790/- 14 Venkat Charan D-902 4,25,000/- 10 1,00,000/- Total 279.64 Furthermore, the AO has mentioned that most of the flats mentioned in the said table are sold below the Quoting rates and in some cases "Other Charges" have also not been taken. On this basis, the AO has concluded that these are taken in cash but not shown in the books of account. The AO has attempted to corroborate the above noting from the noting found on the page no. 2 of Loose paper Bundle no.1 impounded from the same premises, wherein at sr. no. 2, there is mention of customer name as Venkat Charan A and in the column "involved" "10 lacs" is written and in column "received "it is written as "yes" The AO has held that that on verification from ledger extract of the Shri Venkat Charan it is found that the appellant has received a payment of Rs. 1 lakh only on 15/10/2018 and no payment is reflected in it till the date of Survey action i.e. 10/01/2019. Next payments shown....
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....fore, dismissed. 6.10 Since the quantum addition has been upheld in respect of ground no. 1 of the appeal, grounds No. 2 to 5 raised do not require separate adjudication." 12. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: 1. On facts and circumstances prevailing in the case and as provisions and scheme of the Act it be held that the First Appellate Authority erred in upholding the addition Rs. 2,42,12,902/- made by the Learned Assessing Officer ('Ld. AO') as on-money received by the Appellant. The addition sustained is unwarranted, unjustified, and contrary to the provisions and scheme of the Act. The addition so made be deleted. The Appellant be granted just and proper relief in this respect. 2. Without prejudice to Ground No. 1 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that if any addition needs to be sustained then that should only be restricted to the incriminating material found during the course of search proceedings. The addition made over and above such incriminating material, being merely on....
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....pect. 3. Without prejudice to Ground No. 1 and 2 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that in case additions are sustained on estimation basis, then the addition should be restricted only to the Gross Profit that might have been earned by the Appellant on such on-money. The addition made by the First Appellate Authority be reduced. The Appellant be granted just and proper relief in this respect. 4. Without prejudice to Ground No. 1, 2 and 3 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that the addition made by the Ld. AO and sustained by the First Appellate Authority is on a very high side. The same should be substantially reduced. The Appellant be granted just and proper relief in this respect. 5. The Appellant craves leave to alter, delete, modify, add or amend any ground of appeal. ITA No.874/PUN/2024 (A.Y. 2019-20) 1. On facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that, the First Appellate Authority erred in upholding the addition of Rs. 10,....
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....f the Bench to the same and submitted that the Ld. CIT(A) has deleted the addition made on account of on-money received on sale of flats / units in their project Ganga Acropolis. He submitted that not a single question was asked to Mr. Subhash Goel about the statement of any of the employees which were recorded u/s 131. So far as the incriminating documents are concerned, he submitted that it relates to one penth house which has not been sold. Further, the employee whose statement was recorded joined the service in 2018 and no statement of any old employee has been recorded. He submitted that when the employee was not employed during the period under consideration, it is not understood as to how the additions can be made for earlier years prior to his joining the service when he was not aware of the affairs of the assessee firm at the time of sale. Further, none of the old employees whose handwritings in the diary were found was questioned / examined / called. 15. Referring to the details as per Annexure-4 placed in the paper book, Ld. Counsel for the assessee drew the attention of the Bench to the same and submitted that most of the flats were actually sold to the persons other....
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.... 1,00,000 1,00,000 25-02-2019 04-01-2019 18-01-2019 17 D 606 Neelam Shrivastava Neelam Shrivastava 1,00,000 1,00,000 20-01-2019 01-01-2019 01-02-2019 (emphasis supplied) 16. He submitted that a perusal of the same shows that most of the sales have not been made to those persons whose names are appearing in the seized documents. The Assessing Officer has not called a single buyer to find the truth by recording his statement. He submitted that none of the buyers are related to the assessee and the entire addition made by the Assessing Officer is on the basis of surmises and guesswork. 17. Referring to the following decisions, he submitted that the statement recorded u/s 133A of the Act has no evidentiary value: i) CIT vs. Khader Khan Son (2008) 300 ITR 157 (Mad) ii) Paul Mathews & Sons vs. CIT (2003) 129 Taxman 416 (Ker) iii) CIT vs. P. Balasubramaniam (2013) 33 taxmann.com 130 (Mad) 18. Referring to the following decisions, he submitted that no arbitrary addition to the income can be made based on dumb documents, loose papers containing scribbling, rough / vague notings: i) PCIT vs. Umesh Israni....
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....ons related to the said Whats App messages and no extrapolation could be made with respect to other transactions having no relation to the said Whats App messages whatsoever. 23. Referring to the following decisions, he submitted that the addition on the alleged on-money being accepted by the assessee should be restricted to the profit element embedded in the alleged on-money received by the assessee. i) CIT vs. President Industries (2002) 124 TAXMAN 654 (Guj) ii) CIT vs. Gurubachhan Singh J. Juneja (2008) 171 Taxman 406 (Guj) iii) Jyotichand Bhaichand Saraf & Sons (P.) Ltd. vs. DCIT (2012) 26 taxmann.com 239 (Pune) iv) Kush Corporation vs. ACIT vide ITA No.357/Srt/2022 v) CIT vs. Balchand Ajit Kumar (2004) 135 Taxman 180 (MP) vi) Madanlal Narendrakumar (HUF) vs. ACIT (2003) 131 TAXMAN 41 (Indore)(Mag.) 24. He accordingly submitted that no addition should be made in the hands of the assessee on account of on-money received by the assessee. 25. In his alternate argument, the Ld. Counsel for the assessee submitted that in case it is held that some addition needs to be sustained, then the addition should be restricted to t....
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....9. The Ld. Counsel for the assessee in his rejoinder submitted that in the case of Harish Textile Engrs. Ltd. vs. DCIT (supra) it was accepted by the assessee that it has received on-money, whereas in the instant case the director / partner of the assessee firm has completely denied the receipt of any on-money. He submitted that when the statements of the senior sales managers were recorded u/s 131 of the Act and they have made certain statements, the same were not corroborated with any evidence or any further enquiry from the buyers. Since nothing has been done, therefore, the said decision is not applicable. 30. So far as the decision of the Hon'ble Supreme Court in the case of Pooran Mal vs. Director of Inspection (supra) is concerned, he submitted that there is no dispute to the fact that the evidences can be used but the same has to be corroborated. When the assessee has stated that the negotiations were going on and the final price is as per the form signed by the director and the brokerage has also been given on the final price, the lower authorities could not have brushed aside all these submissions and made the addition of on-money as well as extrapolation of the sa....
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....y on the basis of the statements recorded u/s 131 of the senior sales managers. We further find none of the persons to whom the flats have been sold have ever been examined either by the search party during the course of search or post-search enquiries or by the Assessing Officer during the course of assessment proceedings. Further, a perusal of the details furnished by the assessee shows that most of the flats were sold to the persons other than the persons whose names are appearing in the seized documents. It is also an admitted fact that nothing is brought on record to show that any of the buyer to whom the flats have been sold are related to the assessee and the entire addition, in our opinion, has been made on certain guesswork on the basis of statements of the sales managers and some rough notings. Even the incriminating documents which relate to the penth house has not been sold. We, therefore, are of the considered opinion that the entire addition made by the Assessing Officer and sustained by the Ld. CIT(A) being on guesswork and surmises cannot be upheld. 33. We further find the Ld. CIT(A) in the case of the other partner of the joint venture M/s. Kalyanee Fortune Cons....
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.... have already been decided in favour of appellant. The relevant portion of the order is reproduced hereunder: "I find that the view taken by Hon'ble Apex Court in the case of Common Cause (A Registered Society) v. UOI 245 taxman 214 (SC) that the entries in loose papers and electronic data from the premise of a third party which were not regularly kept during the course of business has no evidentiary value is also affirmed by the Hon'ble Karnataka High Court in the case of DC IT v. Sunil Kumar Sharma - [2024] 159 taxmann.com 179 (Karnataka). I find merit in the contention that on the basis of decision of the Hon'ble Apex Court (supra), entries in loose papers recovered at premise of third party have no evidentiary value. The alleged transactions mentioned in the rough notings of a third party were not recorded by the appellant. The alleged transaction vi/as not corroborated from the material found at survey in the appellant own case. It is well settled in law that the loose papers and documents cannot possibly be construed as books of account regularly kept in the course of business. Therefore, the AO would not be justified in resting its case on the loose pape....
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....e Hon'ble Apex Court has, in plethora of cases, advised against the use of suspicion however strong, for the purpose of making addition as under: * Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC) Whether though ITO is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence on account of law, but in making assessment under section 23(3) of 1922 Act he is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all - Held, yes. * Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) In this case, Hon'ble Supreme Court observed that both ITO and ITAT arriving in their conclusions had indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained or finding was perverse which could not be sustained and therefore Supreme Court was entitled to interfere with such finding and the addition made was liable to be deleted. * Umacharan Shaw & Bros. v. CIT [1959] 37 ITR 271 (SC) "Taking into consideration the ....
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....f it is supported by the relevant material to substantiate the same. 38. We find the Mumbai Bench of the Tribunal in the case of Smt. Madhu Gupta vs. DCIT (2006) 8 SOT 691 (Mum), has held that the statements which are not confronted to any of the partners of the assessee should not be considered as the basis for making addition. 39. So far as various decisions relied on by the Assessing Officer as well as the Ld. CIT(A) are concerned, the same, in our opinion, are not applicable to the facts of the present case. In the case of Surendra M. Khandhar (supra), the Hon'ble Bombay High Court has held that where Xerox copy of document seized from the assessee was not denied the same showed advancement of certain sums to one 'C' and two signatories of said document were also not denied by the assessee and as the document was seized from assessee's control, presumption under section 132(4A) and 292C was clearly applicable. However, in the present case, the managing partner of the assessee firm has denied to have received any such on-money and no further questions were asked either to the managing partner or to any of the customers to whom the flats / shops have been so....
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....was put to Mr. Subhash Goel about the statements of the employees and the incriminating documents which relate to the sale of penth house has actually not been sold, most of the flats were sold to the persons other than the persons whose names were appearing in the loose sheets towards sale of the said very flats and the buyers are unrelated parties and since the Ld. CIT(A) in the case of other partner of the joint venture has already deleted the addition on account of such on-money received on sale of flats in the project Ganga Acropolis, we are of the considered opinion that no addition is called for in the hands of the assessee. Accordingly, the addition of Rs. 2,42,12,902/- made by the Assessing Officer for assessment year 2017-18 being share of the assessee on account of extrapolation is deleted. The grounds raised by the assessee are accordingly allowed. 43. Since the grounds raised by the assessee in the other two years are identical to grounds of appeal in assessment year 2017-18, therefore, following similar reasonings, we hold that neither any addition on account of any on-money received nor on account of extrapolation can be added. The grounds raised by the assessee a....