TaxTMI 
TaxTMI 
2026 (3) TMI 1107
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....eard together and being disposed off by this common order. First we take up the appeal of revenue in ITA No.1002/Del/2024 for AY 2020-21 and corresponding CO.No. 62/Del/2024. 3. Brief facts of the case are, the assessee company i.e. 'Khemka Group' negotiated for the purchase of property situated at A-32, Westend Colony, Delhi, in the first quarter of 2018 and finally purchased the property and registered the sale deed on 16.05.2019 and the property was purchased for Rs. 76 crores; and the share of the co-owners is as under: Sr. No. Name of Entity Share (%) Amount Paid not in dispute Amount in dispute as alleged by learned Assessing officer on the basis of whatsapp chat i) PMK Impex (P) Ltd. 75 57 crores 17.25 crores ii) Rama Shanker Khemka 12 9.12 crores 2.76 crores iii) Payal Khemka 8 6.08 crores 1.84 crores iv) Rajesh Rani Khemka 5 3.80 crores 1.15 crores Total 100 76 crores 23 crores 4. Further, a search and seizure action u/s 132 of the Act was carried out in "Khemka Group of cases" on 14.01.2021. The search proceeding on locker No. 874 dated 08.03.2021 and is evident ....
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....ty situated at A-32, Westend, New Delhi owned by M/s Wealth Estate Pvt. Ltd. We liked the proposal after our visit as the location and area of the said property matched our expectations. However, existing structure did not match our requirement. Thereafter, we were persuaded by the broker that the refurbishment of the above said property would be undertaken by the seller at his own cost and fully furnished property as per our agreed specifications would be available to us at a total price of Rs. 100 crores. The details of such refurbishment to the extent of Rs. 24 crores were got prepared and exchanged between the parties. Thereafter, negotiations and deliberations occurred several times for over a period of more than one year. We communicated to the seller that sale price of the property should not be more than Rs. 95 crores since it was tax neutral whether the same is sold through transfer of company or through registration. Eventually, the negotiations for refurbished property failed and deal was hibernated for a considerable period of time. Again, an offer was received for sale of the above property on as is where is basis without any refurbishment fo....
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.... beneficial owner. Mr. Aditya Gupta is the real estate broker who facilitated introduction of the parties concerted and acted as an intermediary in consummation of the deal. Mr. Tony Gupta is another non-resident who happened to be merely a common acquaintance between me and Mr. Nirmal Sethia. To trace background of the impugned transaction, it is pertinent to mention that we were envisaging to acquire a residential property in Central/ South Delhi area. In this context, various properties were shown to us by the real estate broker, Mr. Aditya Gupta. Eventually, the property at Westend was shown to us for which we expressed our willingness to acquire. However, we were not satisfied with the then existing condition, interior and infrastructure of the said property since the same was quite old and appeared to exist in a dilapidated condition. We expressed our willingness to acquire the same provided the impugned property is refurbished or renovated as per our suitability and taste by the sellers. However, the broker stated that the sellers were only willing to sell the property in its existing condition but agreed to discuss and revert regarding refurbishme....
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...., it was highlighted by us that the price of the property which is tax neutral to both the parties should be Rs. 95 crores. It was clarified that in case the property is old through sale of the shares of the company which enshrines the same, the tax outgo in the hands of shareholders would be Rs. 4.5 crores and the net amount received by the sellers in that case would be Rs. 95.5 crores. On the other hand, in case the property itself is transferred and registered in our favour, we shall have to incur a cost of Rs. 5.5 crores approximately on account of stamp duty without any tax incidence on the seller. Thus, the price of the property was requested by us to be considered and reduced to Rs. 95 crores. However, the 'said offer was summarily rejected by Mr. Sethia that the sale of the refurnished/renovated property will not be made by them at such price. During such process it came to our knowledge that Mr. Tony Gupta, another non-resident, who happened to be our family friend had good relationship with Mr. Sethia too. I requested him to intervene and persuade Mr. Sethia to agree to our desired terms. After a few interventions, Mr. Tony Gupta reclused as nothing significa....
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....d and deposited. The evidences as found and seized during the course of search corroborate the veracity of our version in this regard. The contents of the impugned conversations/chats may be analysed in the light of the above said version which will clarify the entire gamut of facts and circumstances pursuant to which the same would have occurred between the parties concerned. It is therefore requested that no negative inference may be derived against our group on this issue. However, in case any other clarification or explanation is desired, the same may kindly be communicated to us. 8. Further it was submitted vide reply dated 24.2.2022 (pages 208-225 of Paper Book) that Khemka group had agreed to purchase property situated at A-32, Westend Colony, New Delhi with the help of property broker Mr. Aditya Gupta. However, since the property was in a dilapidated condition, Khemka group asked the seller company to undertake the refurbishment of the property for which additional consideration of Rs. 23 crores were agreed which was over and above the sale price of property i.e. Rs. 76 crores. It was further stated that due to some reasons, the refurbishment was not undertaken by the se....
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....e the declared price of Rs. 76 crores for the purchase of the property situated at A-32, Westend Colony, New Delhi in cash. The assessee has failed to furnish any explanation of the source of payment of Rs. 23 crores in cash for purchase of said property. In view of the above discussion Rs. 17,25,00,000/- (being 75% share of the assessee in payment of Rs. 23 crores) is treated as unexplained investment of the assessee u/s 69 r.w.s. 115BBE of the Act for A.Y. 2020-21 relevant to the F.Y. 2019-20." 10. Aggrieved by the order, assessee filed appeal before learned Commissioner of Income Tax (A) on 26.04.2022. During the appellate proceeding's assessee submitted that the sole reliance for the making the addition of the Assessing officer is the WhatsApp chats found and statement recorded during the course of search proceedings. The assessee submitted its explanation of chats and also placed documentary evidences on record to prove that there are no cash transaction involved in the purchase of property. A tabular chart was filed before Ld CIT(A), which is placed at pages 75-84 of CIT (A) order, wherein complete submission made by the assessee regarding WhatsApp chat are filed. Afte....
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.... is presumed that any books of account or documents found from premises of the assessee belong to him and that the contents of such books of account and other documents are true. Further, as per Section 292C of Income Tax Act, 1961, there is a valid presumption that the books of account, other documents found in possession of any person in the course of search u/s 132 of the Income Tax Act then it may be presumed that the content of such books of account and other documents are true. The above whatsapp chats and documents were found and seized during the course of search proceedings and therefore the same shall be presumed to be true. Therefore, it can be concluded that all the whatsapp chats and the seized documents are true and represent the correct details of the transaction pertaining to the purchase of said property. Therefore, all the seized records have to be examined together and in totality to understand the correct nature of transaction pertaining to the property." (Page 89 of CIT(A) order) 4.1.22 As per the statement of Sh. Aditya Gupta, the property dealer the discussion and negotiations of this property were initiated some time in first quarter of 2018 and the....
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....e following seized material is required to be highlighted: S. No. Particulars Page no. of Paper Book AO's Comment 1 Pages No. 75 and 76 of Annexure A-2 found and seized during the course of the search on 08/03/2021 179 to 180 It is a copy of an Agreement to Sell (ATS) with respect to property no. A-32, Westend Colony, New Delhi, which was found and seized during the course of the search on 08/03/2021. The said ATS is unsigned and was prepared in the month of November 2018 according to which the cost of the land was Rs. 76 crores and the estimated cost of refurbishment was Rs. 23 crores. 2 Page No. 85 of "Annexure A-2" found and seized during the course of the search on 08/03/2021. 181 It is a copy of an estimate sheet found and seized during the course of the search on 08/03/2021. This page contains an estimate for renovation work at A- 32, Westend Colony, New Delhi the value of which is Rs. 24 crores. It's a single page on which an estimated cost of Rs. 24 crores for some renovation work for property at A-32 is appearing. 3 Page No. 86 of Annexure A-2 found and seized during the course of the search on 08/03/2021. 182 It is a....
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....19. 6. It is hereby clarified that neither the seller nor we incurred any cost for refurbishment before acquiring the above said property. The refurbishment entailing outlay was neither contributed nor incurred by either party. Necessary documents/details evidencing the above said version are enclosed and marked as Annexure 15." Thus, it is noteworthy that the assessee raised the same arguments (as were raised subsequently during the assessment and appellate proceedings) regarding the property transactions before the Investigation Wing immediately (almost within a week) after the initiation of search and also filed copies of documents supporting its claim. Moreover, the Assessing Officer did not offer any adverse comments to the above submission of the assessee filed before the investigation wing. 4.1.36 The Assessing Officer submitted during the appellate proceedings that his comments may be considered and appeal filed by the assessee may be decided on merits of case. It is noteworthy to mention that the Assessing Officer did not make any adverse remarks on the seized documents and/or on the submissions of the assessee on the seized documents, which was not menti....
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....ayank Khemka and Sh. Tony Gupta. On the basis of these whatsapp chats the Assessing Officer concluded that an amount of cash of Rs. 23,00,00,000/- was paid by the buyers of the property to the owner of the said property namely M/s Wealth Estates Private Limited. In my considered opinion, while concluding that an amount of cash was paid by the buyers to the sellers, which was not disclosed for taxation purposes, the seized material and the statements should be considered in entirety. This is a case of search and several pieces of evidences were gathered during the course of search and the statements of several persons were recorded during the courses of search as well as during the post search investigation. While coming to any conclusion regarding any issue, the entire seized material as well as the statements recorded during the course of search and subsequently during the post search investigations are required to be considered and a holistic approach is required to be taken. Apart from the whatsapp chats discussed above, there are statements of Sh. Mayank Khemka, Rama Shankar Khemka u/s 132(4) of Income Tax Act and of Sh. Aditya Gupta and Sh. Chhatar Singh Jain u/s 131(1A) of In....
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....fficer in his order and subsequent during appellate proceedings has neither addressed this issue of refurbishment nor provided any adverse findings. Since, the seized material has to be considered in entirety, therefore the contention of the assessee is apparently valid. There is evidence in the seized material itself that there was an agreement to sell and there was a cost estimate specifically mentioning the details of refurbishment to be carried out by the seller. There is no evidence to prove that the conditions prescribed in whatsapp messages were executed and fulfilled during the course of purchase of property. Even if it is presumed that there was a cash component proposed to be paid by the buyers to the sellers, there is no evidence to prove that such a consideration was actually paid by the assessee. Moreover, in the absence of any details of alleged cash payments made by the assessee, if any, the year/s of taxability of the alleged amount/s is not ascertainable. The evidence in possession of the Assessing Officer supports the contention of the assessee that the amount of Rs. 23,00,00,000/- was the cost of refurbishment which was earlier to be borne by the seller ....
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....ome Tax Act as unexplained investment is not sustainable. Therefore, the addition of Rs. 17,25,00,000/- made by the Assessing Officer as unexplained investment of the assessee u/s 69 r.w.s 115BBE of Income Tax Act is deleted. 12. Aggrieved with the above order revenue is in appeal before us raising following grounds of appeal in ITA no.1000/Del/2024 :- 1 Ground (a) The Ld. CIT(A) has erred in deleting the addition of Rs. 1,84,00,000/- made by the Assessing Officer in the order passed u/s 153A r.w.s. 143(3) of the Act. 2 (b) The Ld. CIT(A) has erred in not considering the evidence found during the course of search proceedings relied upon which the addition has been made. 3 (c) The Ld. CIT(A) has erred in considering the estimation made by the assessee in terms of plan of refurbishment cost without acknowledging the fact that no documentary proof has been furnished by the assessee. 4 (d) The Ld. CIT(A) has erred in not analyzing the fact that the estimation for refurbishment has been made but no refurbishment work has been done. 5 (e) The assessee cravesleave to add, amend, alter or withdraw any or all grounds of appeal at any time befo....
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....80000 5600000 6600000 Wardrobes 3000000 60000 4200000 7200000 Lighting 12500000 160000 11200000 23700000 Fire Place+Pool table 300000 12000 840000 1140000 Civil Works 2500000 2500000 MEP Works 35000000 35000000 landscape 3500000 3500000 Fabrication 2500000 2500000 Zinc 4200000 4200000 External paint 1000000 1000000 Wall Cladding 1250000 1250000 Glass Works 4000000 4000000 Main Door 100000 1000000 External Lighting 6000000 6000000 External window 7500000 7500000 Miscellaneous 4500000 4500000 Furniture 4000000 700000 49000000 53000000 Grand Total 124750000 1647000 115290000 240040000 Itemwise summary of material was also seized and; placed in paper book is as under: Sr. No. Nature of item Pages of Paper Book i) Flooring 50 ii Ceil....
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....proceedings October 31, 2018 and November 1, 2018 Discussions and negotiations happened between the seller and the Appellant company through Mr. Aditya Gupta. Terms of the entire transaction was discussed and the split of "76/23" was mentioned. WhatsApp chat between Mr. Mayank Khemka and Mr. Aditya Gupta Seized during the course of search proceedings November 2018 Draft Agreement to Sell was prepared between the seller and the purchaser mentioning the consideration for the property as Rs. 99 crores which also mentions that the cost of refurbishment was Rs. 23 crores out of the entire consideration. Copy of Draft Agreement to sell enclosed at pages 47-48 of Paper Bok Seized during the course of search proceedings March 2019 The transaction was again discussed along with terms and conditions, however, this time without any refurbishment cost - - April 10, 2019 Board resolution resolving that the said property would be purchased at a total consideration of Rs. 76 crores without refurbishment cost of Rs. 23 Crores was passed by the Appellant Company Copy of the Board resolution is enclosed at page 72 of Paper Book. Seized during the cours....
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....ccount and other documents are true. The learned Assessing Officer therefore without any material could not validly reject the contention of the assessee supported by seized documents that Rs. 23 crores was not paid by the assessee company which was proposed to expended by vendor towards refurbishment of property but was never paid or incurred by the assessee company. Reliance is placed on the decision in the case of ACIT v. M/s Vatika Greenfield (P) Ltd. reported in 315 ITR 113 (AT) wherein it has been held as under: 21. A conjoint reading of the above decisions suggests that taxing statutes have to be interpreted strictly. In the deeming provision what is prescribed is to be deemed and deeming provision cannot be extended beyond the legislative scope. The presumption as envisaged in s. 2920 is limited to the correctness of the documents found at the time of search or survey, but that presumption has not been extended by the statute to be presumed to be the income of the assessee. If it is so, then unless some evidence/material is brought on record by the Revenue to say that what is stated in the seized document is not correct, state of affairs, the state of affairs state....
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....? Ans. 15.5.2019. Q.73 Who was the seller of that property? Ans. Wealth Estate Pvt. Ltd. Its office is at Connaught Place. Q.74 Who is the main person in that company with whom you negotiated the deal? Ans. Mr. Chattar Singh Jain was the person from the company side. Mr. Aditya Gupta was the broker from company side. Q.75 Did you pay any commission to Aditya Gupta? Ans. No. Q.76 In reference to above property transaction, I am showing you screenshots of whatsapp chat between you and Aditya Gupta. Ans. 1st screenshot-there might be some property which Aditya would have offered us for sale. Q.77 You stated earlier that Aditya was the broker from Wealth Estate Ltd. for sale of a property located at Westend Colony and you got to know about him at that time only. In this context you are requested to explain the contents of the above mentioned screenshot-1, when you have stated in Q.70 that he did no work for you on the deal for A32 Westend Colony, Delhi. Ans. He showed me many properties in Vasant Vihar, Jor Bagh and other areas. This could be one of that property. Probably I knew Aditya 1....
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....p chat between you and Tony Gupta Delhi Ans. Tony is a friend of Mr. Sethia and he was negotiating on his behalf for the property at A 32 Westend, New Delhi. Q.89 In whatsapp chart with Tony Gupta Delhi dated 21st August to 13th September 2018 you mentioned "Mr. Sethia, 100 crores, cash portion, Exchange Rate etc". What do those words mean? Ans. The property price was pegged to the dollar and Sethia was changing the price according to the dollar fluctuations but the same was inacceptable to us. This was conveyed by us to Mr. Tony." Statement recorded on 17.6.2021 u/s 133(1A) of the Act (pages 130-161 at pages 131-132 of Paper Book) "Q.4 I am showing you your statement u/s 132(4), administered and recorded on 15.01.2021, during which vide Q.No. 76 to 94 you were confronted with the whatsapp chats with a property broker Mr. Aditya Gupta, Mr. Nirmal Sethia Jian and Mr Tony Gupta with regard to property namely 'A-32 Westend'. Please explain the nature of transaction mentioning "price is 99 Cr split of 76/23 all payable in Delhi". Ans. In May 2019, we have bought an immovable property situated at A-32 Westend from M/s Wealth ....
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..... I met again Mr. Mayank Khemka and sought his interest in buying the property in as and wherein basis. Then I again approached Mr. CS Jain if they would be keen in selling the property. Mr. Jain showed his keenness to sell the property on as and wherein basis at a cost of Rs. 80 Crores. Finally, the deal was materialised at around Rs. 76 Crores on as and wherein basis in around Apr-May 2019. Q30 Please explain the figures mentioned in the whatsapp messages, i.e. 75/24 & 76/23 written in your message and reply of Mr. Mayank Khemka. Ans It was 75 Crores for plot and building price and 24 Crores for renovation cost and in the reply of Mr. Khemka 76 was 76 Crores for plot and building price and 23 Crores for renovation cost. Q.34 As per the information available with the Income Tax Department, and the evidences of whatsapp chats undertaken between you and Mr. Mayank Khemka, as referred in question No. 27, it is evident that the property was sold for Rs. 99 Crores, which was split into 76 Cr paid in cheque and 23 Crores paid in cash and the 23 Crores were paid in cash prior to date of sale deed. The same condition was also mentioned by you with respect to 24/23 in you....
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.... (Civil) No(s) 23194 of 2019 Ambalal Sarabhai Enterprise Ltd. v. KS Infraspace LLP Ltd. has held that whatsapp chat has no evidentiary value ii) ITA Nos. 2199 and 2200/Mum/2019 dated 24.5.2021 DCIT v. M/s Ekta World (P) Ltd. (extracted at pages 301-303 of Paper Book) iii) ITA No. 87/Viz/2020 dated 23.9.2020 ACIT v. Shri Manhukonda Shyam iv) ITA No. 3028/Chny/2019 dated 13.5.2022 A.John Kumar v. DCIT (extracted at pages 299-301 of Paper Book) v) 42 CCH 20 (Bang) Nandini Deluce v. ACIT 36 THAT THE UNAUTHORIZED ELECTRONIC DATA EVIDENCE EITHER IN THE SHAPE OF WHATSAPP CHAT RECOVERED FROM MOBILE PHONE IN ABSENCE OF COMPLIANCE OF SECTION 65B OF THE EVIDENCE ACT, IS INADMISSIBLE IN THE EYE OF LAW i) Civil Appeal No .. 9346 OF 2019 (arising out of SLP (Civil) No(s) 23194 of 2019 Ambalal Sarabhai Enterprise Ltd. v. KS Infraspace LLP Ltd. ii) (2014) 10 SCC 473 Anvar P.V. Vs P. K. Basheer iii) 2008 (1) ARBLR 317 (Bom) Ark Shipping Co. Ltd vs Grt Shipmanagement Pvt. Ltd. iv) W. P. 18013 (W) of 2012 (Kol) Abdul Rahman Kunji vs. The State OF West Bengal v) Civil Appeal Nos 20828-20826 of 2017 dated 14.7.202....
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....g any oral evidence. Therefore, the order of the Tribunal does not suffer from any legal infirmity in reaching to the conclusion that the amount shown in the registered sale deed was received by the vendors and deserves to be added to the gross income of the assessee-assessee." 39. It is submitted that section 92 of Indian Evidence Act, 1872 talks about the exclusion of evidence of oral agreement. Reliance is also placed on judgment in the case of Akashdeep vs. Manpreet Estate LLP, Mum reported in 105 taxmann.com 187 (PBPTA-AT) wherein it has been held as under: "27. The authority has also concurred with the submission of R-1 that the 10 has miserably failed to discharge such burden of proof. Section 92 of Indian Evidence Act, 1872 talks about the exclusion of evidence of oral agreement. Once the primary evidence is proved by way of written document which is not challenged, no evidence of an oral agreement or statement shall be admitted, the burden shall be shifted to the party who pleaded oral agreement. After the amendment in the Benami Act, if apply as it is, the burden of proof was shifted upon the assessee. In the present case, the IO has failed to discharge ....
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.... OF THE ACT. SUCH BURDEN HAS NOT BEEN DISCHARGED ON THE FACTS OF THE ASSESSEE 42 Section 69 of the Act reads as under: "69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year." 43 It is also submitted that burden is on revenue to show unexplained investment under section 69 of the Act, such burden has not been discharged on the facts of the assessee. Reliance is also placed on the following judicial pronouncements: i) 22 SOT 174 (Mum) Rupee Finance & Management (P.) Ltd. v ACIT (extracted at page 313 of Paper Book) ii) 81 taxmann.com 257 (Bom) CIT v. Devesh Agarwal (extracted at pages 313-314 of Paper Book) iii) 64 taxmann.com 332 (Del) ACIT v. Rakesh Narang (extracted at pages 314 of Paper Book) ....
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....after several negotiations finally purchased the property and got it registered on 16.05.2019 for total consideration of Rs. 76 crores along with the other related parties. The basis of dispute under consideration are, during Search and Seizure operation u/s 132 of the Act at the premises of the group entities, a copy of draft agreement of sale relating to the above property was found along with the estimation cost of renovation of the said property and board resolution were found and seized. During search proceedings, certain WhatsApp chats were also recovered between the director of the assessee company, Aditya Gupta and Tony Gupta. It was mentioned in the Chat that the total consideration would be split of Rs. 99 crores as "76/23" and AO observed that the assessee had actually paid and completed the registration of the property at Rs. 76 Crores, the AO came to conclusion that the other portion is the settlement of sales consideration out of cash, outside the books of account. Accordingly, he proceeded to make the additions in the hands of the assessee and other related parties as per the respective shares. 16. We have also observed from the detailed findings of the Ld CIT(A) ....