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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI CHANDRA MOHAN GARG, & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the ld. CIT(A)-23, New Delhi dated 09.10.2015 pertaining to A.Y. 2009-10.
2. The grievances of the Revenue read as under:
“1. On fact and circumstances of the case the Ld.CIT(A) was correct in law in deleting the addition made by the Assessing Officer of Rs.9,11,45,950/- made on and account of statement given by the assessee u/s 132(4) of the I.T. Act during the search proceeding on the basis of the Red diary and some other loose paper found and seized from his personal cabin, which established that renovation work has done and cash payments were made and thus, invoking section 132(4A) also.’
2. On the facts and circumstances of the case the Ld.CIT(A) was correct in deleting the addition made by the AO of Rs.9,11,45,950/- in the hands of the assessee because the assessee had surrendered of Rs.9 crores in his another company M/s Global Reality Venture Ltd.
3. On fact and circumstances of the case, the CIT(A) has erred in making his findings in para 4.3.7 of its order where the CIT(A) held that the red diary is not reliable whereas the assessee himself admitted u/s 132(4) the unaccounted transactions noted in the diary and thus, gave finding contrary to express provisions of section 132(4) and 132(4A).
4. On the facts and circumstances of the case the Ld. C1T(A) has erred in not following the decision laid by the Higher Courts in the cases :
• Delhi Transport Corporation Vs. Shyam Lal, AIR 2004 SC 4271 ; • Sowar Vs. S L Prasad, AIR 1978 Kant 25;
• Rameshchandra and Co. Vs. CIT[1987] 168 1R 375; • Kumhambu (V.) and Sons Vs. CIT (1996) 219 ITR 235 • Mrs. Aanisa Batool Gilani Vs. ACIT (2008) 219 ITR 235; • Surjit Chhabra Vs. Union of India, AIR 1997 SC 2560;
• Dhakeshwari Cotton Mills Ltd. Vs. CIT (1954) 26 ITR 775 relied upon by the Assessing Officer in his retirement order;
5. On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 2,21,09.600/- made by the AO after taking into account the value of the property as per section 50C of the I.T. Act and not as per the share purchase agreement.
6. On the facts and circumstances of the case, the CIT(A) erred in not taking into consideration the findings of the AO that the assessee adopted the modus operandi to transfer of shares of a company having only asset of land to circumvent the provisions of section 50C of the I.T. Act and thus section 50C redundant.
7. On facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 17,43.460/- made by the AO on account of unexplained jewellery and cash for which no explanation or documentary evidences were filed by the assessee before the AO.
8. The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal.”
3. The representatives of both the sides were heard at length, the case records carefully perused and we have duly considered the relevant documentary evidences brought on record in light of Rule 18(6) of ITAT Rules.
The peculiar underlying facts in issues are that the entire additions have been made on the basis of statement recorded by the search party u/s 132(4) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] without there being any corroborative/ demonstrative evidence in support of the impugned additions.
5. The Hon'ble High Courts have, time and again, held that addition should not only be made on the basis of statement recorded at the time of search, but should be supported by corroborative evidences.
Even the Central Board of Direct Taxes has time and again issued instructions to its officers not to coerce or put undue influence on the searched persons to admit undisclosed income during searches/surveys conducted by the department.
6. Some of the instructions are as under:
SECTION 132, READ WITH SECTION 133A OF THE INCOME-TAX ACT, 1961 - SEARCH & SEIZURE - ADMISSIONS OF UNDISCLOSED INCOME UNDER COERCION/PRESSURE DURING SEARCH/SURVEY
LETTER [F.NO.286/98/2013-IT (INV.II)], DATED 18-12-2014
Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light.
I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence.
In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I T.Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely.
4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance.
I have been further directed to request you to closely observe/oversee the actions of the officers functioning under you in this regard.
This issues with approval of the Chairperson, CBDT.
XXXXX Confession of additional income during the course of search and seizure and survey operation
Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assesseeswhile filing returns of income. In these circumstances, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.
Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.
Instruction : F. No. 286/2/2003-IT (Inv. II), dated 10-3-2003.
7. The above instructions show that instances of coercion and pressure to extract confession of undisclosed income are frequent and, therefore, in light of these instructions, it cannot be said that all confessions u/s 132(4) of the Act are binding on the tax-payer.
The Board itself has stated in the aforementioned instructions that confession u/s 132(4) of the Act are of no use if corroborative evidences are not gathered by the Investigation Officers/Assessing Officer.
Let us now consider the following additions made by the Assessing Officer :
a) Restoration/beautification work at the residence at G-17, Maharani Bagh - Rs. 4,74,98,350/- b) Expenses towards Narsi House, Dampier Nagar, Mathura – Rs. 1,16,06,600/- c) Renovation of 11, Ring Road, Lajpat Nagar-IV, New Delhi - Rs. 95,00,000/- d) Cash advance paid to brokers for purchase of land at Jaipur. - Rs. 2,25,41,000/-
The afore-mentioned additions have been made by the Assessing Officer solely on the basis of statement recorded u/s 132(4) of the Act and on the strong belief that the assessee has not honoured the disclosure made in the said statement.
In his statement, the assessee had surrendered Rs. 9,11,45,950/- which was bifurcated as under:
a) Rs. 9 crores towards construction of hotel project M/s Global Heritage Ventures Ltd.; b) Rs. 5 lakhs shown as cash in hand; and c) Rs. 6,45,950/- shown as amount receivable by the assessee.
The above bifurcation of surrendered amount, according to the Assessing Officer, does not match with the statement given u/s 132(4) of the Act wherein Rs. 6,86,04,950/- was surrendered on account of renovation and cost of construction of properties at G-17, Maharani Bagh, New Delhi and Narsi House, Mathura. Rs. 2,25,41,000/- was on account of cash advance paid to brokers for purchase of land at Jaipur.
The Assessing Officer further observed that in the return filed by the assessee in pursuance to notice u/s 142(1) of the Act on 03.09.2010, the assessee had not shown undisclosed income of Rs. 9,11,45,950/- but has shown only Rs. 11,45,950/- as undisclosed income.
The above observations of the Assessing Officer are factually incorrect and clearly show non-application of mind by the Assessing Officer. In the computation of total income, exhibited at page 57 of the paper book, under the head “Income from other sources”, undisclosed income as per declaration made u/s 132(4) has been mentioned as Rs. 9,11,45,950/- and total returned income is Rs. 9,39,00,720/-. So, now the entire quarrel boil downs to the fact that the disclosure made in the statement u/s 132(4) and bifurcation given to the Assessing Officer do not match.
Coming back to the additions made by the Assessing Officer, the details have already been mentioned elsewhere. First addition relates to restoration/ beautification work at the residence at G-17, Maharani Bagh.
At the very outset, it has to be factually understood that the assessee is not the owner of the said property for which alleged unexplained investment has been assessed in his hands. The matter was referred to the Departmental Valuation Officer whose report is placed at page 162 of the paper book. In his report, the DVO has categorically stated that no construction/renovation whatsoever has been carried out after 15.12.2004.
It has to be understood that reference has been made to the DVO for estimating the value of investment made by the assessee and his relatives from 01.04.2002 to 31.03.2009 in two properties, namely, G- 15 and G-17, Maharani Bagh, New Delhi. On the basis of such commission, the DVO has mentioned that no investment has been made after 15.12.2004, though the report of the DVO is binding upon the Assessing Officer but yet the Assessing Officer chose to go with the alleged statement made by the assessee u/s 132(4) of the Act and the notings in the red diary found at the time of search.
As mentioned earlier, property at G-17, Maharani Bagh, New Delhi is not owned by the assessee but was purchased by group entity, namely M/s Vasu Properties (P) Ltd. Thereafter, the said property was purchased by Smt. Amita Garg from M/s Vasu Properties (P) Ltd during the F.Y. 2004-05 with several assets installed for a consideration of Rs. 4,61,76,883/-.
Construction of building with assets is fully accounted for in the books of account of M/s Vasu Properties (P) Ltd and we have the benefit of the assessment order passed by the very same Assessing Officer who has assessed the assessee and in the assessment of M/s Vasu Properties (P) Ltd, no construction/renovation of the said property has been reported neither by the DVO nor by the Assessing Officer in the assessment order of M/s Vasu Properties (P) Ltd.
As mentioned elsewhere, the entire addition has been made on the basis of entries in the red diary without there being any corroborative evidence and, in fact, the only evidence brought by the Assessing Officer is the valuation report of the DVO which is, in fact, in favour of the assessee.
In light of the DVO’s report, we do not find any merit in the addition of Rs. 4,74,98,350/-. The ld. CIT(A) has rightly deleted the same and no interference is called for.
Next addition is of Rs. 95 lakhs in respect of property at 11, Ring Road, Lajpat Nagar, New Delhi.
Facts on record show that this property was purchased in F.Y.
1998-99 by the wife of the assessee alongwith sister in law, which was subsequently sold in F.Y. 2011-12 and capital gains have been duly returned. No expenditure has been added by the Assessing Officer nor claimed while computing the capital gains. No enquiry has been carried out by the Assessing Officer to justify the addition and, in fact, there is not even a whisper of name of the person to whom alleged payment of Rs. 95 lakhs has been made. On such facts, the ld. CIT(A) has rightly deleted the said addition.
Next part of the addition of Rs. 1,16,06,600/- in respect of property at Narsi House, Mathura, which is in the name of the father of the assessee and was purchased in the year 1975-76.
Another property there was purchased in F.Y. 2006-07. Once again, addition has been made without there being any enquiry nor any material evidence has been brought on record and the ld. CIT(A) has rightly deleted the said addition which calls for no interference.
Another part of the entire addition is addition of Rs. 2,25,41,000/- regarding land advance at Jaipur which is as per the notings in the red diary and a per the notings, the Assessing Officer formed a belief that the assessee has advanced the sum for land at Jaipur in cash.
We have the benefit of assessment orders in the case of group companies, namely, Arpan Buildwell (P) Ltd, Vardhan Buildwell (P) Ltd, Pacific Buildwell (P) Ltd and Pink City Infrastructure (P) Ltd. Incidentally, all the group companies were assessed by the same Assessing Officer and in none of the assessment orders, the Assessing Officer has made allegation of purchase/advances outside the books of account. In fact, the balance sheet of M/s Pink City Infrastructure (P)
Ltd which is there in the paper book, had cash in hand of Rs. 3.21 crores which would be sufficient to cover the alleged payment of Rs. 2,25,41,000/-.
This also shows that in spite of having such huge cash balance, the assessee had made surrender u/s 132(4) of the Act statement. As mentioned elsewhere, the entire addition has been made on the basis of statement made u/s 132(4) of the Act and notings found in the red diary seized from the premises. No further enquiry has been made by the Assessing Officer from outside nor any material evidence has been brought on record to support the views taken by the Assessing Officer.
As mentioned elsewhere, even the DVO report also supports the contention of the assessee that no unexplained investment has been made toward cost of purchase/renovation/construction of the properties. Considering the facts in totality, the first appellate authority has rightly deleted the additions and we do not find any reason to interfere with the findings of the ld. CIT(A).
Total addition of income surrendered amounting to Rs. 9,11,45,950/- is deleted. For the sake of repetition, this amount has been duly offered for taxation in the return of income by the assessee as mentioned elsewhere, and as can be found from the computation of income and return of income.
Next addition is Rs. 2,21,09,600/- being long term capital gain u/s 50C of the Act.
During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has transferred shares of M/s Raj Refuelers and Fire Safety Equipment (P) Ltd alongwith his brother Shri Santhosh Kumar Garg who was 50% owner of the shares.
The Assessing Officer treated the transfer of shares equivalent to the transfer of property and, accordingly, applied provisions of section 50C of the Act on the assumed transfer of land on the basis of assumed circle rate.
We have the benefit of the order of this Tribunal in in the case of Shri Santosh Kumar Garg who was 50% owner of shares. The relevant findings of the co-ordinate bench read as under:
“6.1 On perusing the above, it is observed that this the section is applicable for transfer of land or building which is registered with the registering authority by paying stamp duty. Section 50C could be invoked only if the sale consideration received is less than the value adopted by Stamp Valuation Authority of the State Government for the purpose of payment of stamp duty. However, there is no evidence that any stamp duty has been paid towards transfer of the plot of land as held by the AO and that the Stamp Valuation Authority adopted any particular value as sale consideration for payment of stamp duty in the present transaction. In fact, in this case there is a mere transfer of shares of a company and no stamp duty appears to be payable towards plot of land. In the assessment order also it is nowhere stated that any state government authority has adopted a particular value at the time of payment of stamp duty by the parties to the said share purchase agreement. We further find that Section 50C has undergone amendment with effect from 01/10/2009. The word 'assessed or assessable' has been inserted in place of 'assessed' appearing before that date. If the transaction were to have taken place after 01/10/2009, it would have been possible to take the value which could have been assessable by the stamp valuation authority even in cases where such value has not be assessed or adopted. Since the transaction has taken place on 06/11/2008, the said amendment is not applicable for the current assessment year and therefore the AO cannot adopt on his own the circle rates. The procedure adopted by the AO in determining the capital gain from the said transaction is not tenable under the law as it stood applicable for the current assessment year. We are of the view that section 2(47)(vi) is applicable in the cases where the asset in question is like a group of houses owned by a company and each shareholder is allotted a house for his personal enjoyment similar to what is prevalent in housing cooperative societies. However, there is no necessity to adjudicate on this issue as even if t is assumed that transfer of shares of the said company amounted to transfer of plot of land, in the absence of any evidence of extra amount having been exchanged, no addition can be made invoking section 50C as noted in the previous paragraph. Therefore, addition made by the AO was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) and reject the ground raised by the Revenue.
In the result, the appeal filed by the Department stands dismissed.”
Respectfully following the decision of the co-ordinate bench [supra], we decline to interfere with the findings of the ld. CIT(A).
This ground is accordingly, dismissed.
Last addition is in respect of alleged unexplained cash and jewellery of Rs. 17,43,460/-.
During the course of search operation, total cash amounting to Rs. 4,71,200 and jewellery of Rs. 41,80,901/- was found out of which cash of Rs. 4 lakhs and jewellery of Rs. 17.43 lakhs was seized. The assessee was asked to explain the source of the availability of cash and source of investment in jewelry.
It was explained that the cash belongs to his wife Smt. Amita Garg and the jewellery belonged to the assessee, his wife, his HUF, father and sons HUF. On receiving no documentary evidence, the Assessing Officer made addition of Rs. 17,43,460/-.
Before the ld. CIT(A), the assessee furnished details as per the Wealth Tax Returns which is as under:
NAME OF ASSESSEE DESCRIPTIONS QUANTI1 rY (gms.) 31.03.200 31.03.200 7 8 Shri Rakesh Kumar Gold Jewellery 553.77 553.77 Garg Smt. Amita Garg Gold Jewellery 472.7 472.7
Devi Das & Sons Gold Jewellery 1208.9 1208.9 HUF (Ornaments) Gold Ginni (335 Nos. @8 Gram Per Pcs) 2680 2680 Silver Ornaments 1.05 1.05 Silver Pure 124.7 124.7 Silver Utensils 25 25
Rakesh Kumar Garg Gold Jewellery 297.04 297.04 HUF (Ornaments) Gold Ginni (617 Nos. 4936 4936 @8 Gram Per Pcs) Silver Coins (3100 Nos. ) Silver Utensils 26 26
Total Quantity Gold Jewellery 10148.41 (Ornaments) Silver Ornaments 176.75 Copy of the WT returns have been filed with the paper book, according to which the facts are as under:
Name A.Y. D/o Item Quantit Amount y filing (Rs.) Rakesh Kr. Gold 07-08 31.03.07 533.77 4,16,214/- Garg Jewellery Diamond etc. 116.36 35,00,000/- Amita garg 07-08 31.03.07 Gold 472.70 3,55,282/- Others 3,65,893/- Diamond 85,12,765/- Rakesh Kr. 07-08 31.03.07 Gold 371.30 2,79,069/- Garg HUF Jewellery Gold Ginnis 617 45,65,800/- Silver 26 Kg 5,07,520/- Devi Dass & 07-08 31.03.07 Gold 11,35,752/- Sons HUF Jewellery Gold Ginnis 335 24,79,000/- 151 Silver 45Kg 29,42,640/-
The Wealth Tax returns were examined by the ld. CIT(A) who was convinced with the possession of the gold jewellery and on perusal of the balance sheet of Smt Amita Garg, the ld. CIT(A) found that she had cash in hand and on these facts, deleted the impugned addition.
Before us, the ld. DR could not point out any factual inaccuracy in the findings of the ld. CIT(A).
Considering the Wealth Tax Returns as mentioned above and the factual findings of the ld. CIT(A) in respect of possession of cash in hand by Smt Amita Garg, we do not find any reason to interfere with the findings of the ld. CIT(A). This ground also stands deleted.
To sum up, the alleged addition of Rs. 9,11,45,950/- which was bifurcated into four parts being addition in respect of residence at Maharani Bagh, New Delhi, expenses towards house at Narsi House, Mathura, renovation of property at Lajpat Nagar and cash advance paid to brokers for purchase of land at Jaipur stand deleted and other additions have also been deleted.
In the result, the appeal of the Revenue in is dismissed.
The order is pronounced in the open court on 19.01.2023.