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Income Tax Appellate Tribunal, HYDERABAD BENCH ‘B, HYDERABAD
Before: SHRI SATBEER SINGH GODARA & SHRI LAXMI PRASAD SAHU
O R D E R
PER L.P. SAHU, AM:
This appeal filed by the assessee for AY 2006-07 is directed against the CIT(A) - iii, Hyderabad’s order, dated 12/07/2013 involving proceedings u/s 143(3) of the Income Tax Act, 1961 ; in short “the Act”.
In this appeal, the assessee has raised 6 grounds i.e. a to f. As per the written submissions filed on 08/04/2021 itself forming part of record, the assessee has not pressed ground 2 to 5, i.e. b to f, therefore, the same are dismissed as not pressed. . Therefore, we have to decide only ground No. 1 i.e. “a” relating to the Charminar Bottling Company Pvt. Ltd., Hyd. addition of Rs. 1,37,69,626/- u/s 69 of the Act, treating the same as ‘income from other sources’.
The brief facts relating to this ground are that assessee is a company engaged in the business of manufacturing and trading of aerated water i.e. different flavours. During the course of survey certain papers/documents found at the business premises of the assessee were impounded. A scrutiny of the impounded material revealed that the assessee had purchased about 9 acres of land at Maheswaram Village in Ranga Reddy Dist. for a consideration of Rs. 9,02,33,471/- as per the registered agreement of sale dt. 01/12/2005 in the name of M/s SMV Agencies Pvt. Ltd. The AO observed that the first part deals with the schedule of payments by way of DD for Rs. 9,02,33,471/- and the second part is with schedule of cash payments of Rs. 1,17,30,350/- apart from brokerage of Rs. 20,39,276/-. The AO treated the cash payments amounting to Rs. 1,17,30,350/- and brokerage of Rs. 20,39,276/- as income from other sources u/s 69 of the Act, rejecting the submissions of the assessee that the land deal in question was not by it and in fact pertained to M/s SMV Agencies Pvt. Ltd. .
Charminar Bottling Company Pvt. Ltd., Hyd.
Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A) and stated that the land deal in question was not done by it and in fact pertained to M/s SMV agencies Pvt. Ltd. It was further stated that since the said company also belonged to the same group as the assessee, it is their transaction and only facilitated by the assessee. The written submissions filed by the assessee before the CIT(A) were extracted by CIT(A) in his order at pages 7 to 10.
After considering the submissions of the assessee, the CIT(A) confirmed the addition made by the AO by holding that the evidence is compelling that the land deal was actually done by the assessee and the on money was also paid by the assssessee and only the name of M/s SMV agencies was placed.
Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT.
8. Before us, the ld. AR of the assessee reiterated the submissions made before the lower authorities and filed written submissions, which are as under: “1. The authorities below have erred in arriving at conclusion that the land purchase was done by the appellant as per the impounded document i.e. the Registered Agreement for Sale without possession. (@ paper book pg 124-142)
Charminar Bottling Company Pvt. Ltd., Hyd.
It is submitted that the records of the case reveal to the contrary, in that it is manifest from the impounded document which is a duly registered document that the deal has been done by Mis SMV Agencies Private Ltd and no involvement of the appellant can be found in it, save and except payment of certain initial advance amount which were duly returned to it by Mis SMV Agencies Private Ltd.
2. The authorities below have erred in stating that Sri Sanjay Kaul CEO and Sri Y. Bhaskara Rao GM(F) clearly admitted to the cash payments mentioned on the loose sheets. On the contrary, the knowledge and existence of any such payment was denied by Sri Sanjay Kaul and Y. Bhaskara Rao in their recorded statements (@ paper book pg. 163, Q5, pg. 164, Q7, pg. 165 Q 10, pg. 166 Q19, pg. 167 Q16 & Q17, pg. 168 Q19, pg. 173 Q2 and pg. 175 Q8). The only admission was in respect of certain handwriting which was explained by Mr. Y. Bhaskara Rao (@ paper book pg. 173 Q2). Legal Submissions 1. The AO and Ld. CIT(A) erred in considering loose sheets of paper as conclusive evidence and making additions on their basis. It is trite law that no addition based on the dumb documents, absent any corroborative evidence, is sustainable. Refer a. CBI v. V.C Shukla and Ors. (1998) SCC 410 (@ judgment compendium pg. 52 para15 and pg. 59 para 36-37)
Charminar Bottling Company Pvt. Ltd., Hyd. b. Karan R. Shah v. Income Tax Officer, Mumbai 2018 SCC ONLINE ITAT 23348 (@ judgment compendium pg. 22 para 38 and pg. 23 ) c. CIT v. Sunita Dhadda and ors. SLP(SC) 9432 OF 2018 (@ judgment compendium pg 70-71 para 5 pt.7, pg 75 pt. 22 and pg 153 para 3.1) 2. The AO failed to discharge its duties by making the addition without undertaking any independent enquiry. The Ld. AO in the present case neither undertook any independent enquiry or any statement from the beneficiaries of the alleged deal regarding the alleged payment of cash or even any statement from Mis SMV Agencies Pvt. Ltd to confirm that they were the actual purchasers of the land. Refer: a. Commissioner of Income Tax, Salem vs. P. V. Kalyansundaram (2006) 282 ITR 259 (refer to judgment compendium page 3 para 6-7) 3. The entire addition is based on presumption and conjectures and the same is unsustainable in law. Refer: a. Lalchand Bhagat Ambica Ram v. CIT, Bihar and Orissa (1959) 371TR 288 (refer to judgment compendium page 162-163 para 25-27) b. Omar Salay Mohommed v. CIT, Madras (1959) 37 ITR 151 (refer to judgment compendium page 180 para 33) c. CIT v. Ved Prakash Choudhary (2008)305 ITR 245 (refer to judgment compendium page 182 para 4, page183-184 para 11) 4. The addition is based on the assumption that since the contents of the loose sheet coincide with Charminar Bottling Company Pvt. Ltd., Hyd. the Registered Agreement for Sale without possession dated 01.12.2005 in respect of cheques payment, then necessarily cash payment written on those loose sheets would also have been paid. However, the said Agreement for sale without possession was never acted upon. Subsequent registered sale deed dated 21.01.2006 (@ paper book pg. 143-158) manifests that a different land for a different consideration was actually purchased. Thus no point arises by linking I coinciding loose sheets with a document which was never acted upon. Refer: a. CIT v. Smt. K. C. Agnes (2003) 262 ITR 354 (refer to judgment compendium page 38 para 5) b. ACIT, Delhi v. Kundan Singh 2019 SCC ONLINE 9558 (refer to judgment compendium page 27 para 5.4) 5. The AO and the Ld. CIT(A) have sought to challenge the validity of a duly registered document by saying that the name of purchaser on it was wrong. The same is not sustainable as the remedy to challenge a registered document is provided in law and the same cannot be achieved by supplying mere assumptions. Refer: a. Prem Singh & Ors. v. Birbal & Ors. (2006) 5 SCC 353 (refer to judgment compendium page 192 para 27) “
8.1 Referring to the above submissions, the ld. AR of the assessee submitted that the addition may be deleted.
Charminar Bottling Company Pvt. Ltd., Hyd.
The ld. DR on the other hand besides relying on the orders of revenue authorities submitted that the initial payment for the land deal was made directly out of the bank account of the assessee and the papers were found from the premises of the assessee and, therefore, it is very clear that the land deal in question was made by the assessee and referred to the statements recorded & documents impounded mentioned in the AO’s order. . He, therefore, prayed for the confirmation of the addition made by the authorities below.
We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. A survey u/s 133A was conducted on the business premises of the appellant's on 08.02.2006. During survey certain documents were found and impounded. These documents revealed that the appellant had purchased around 09 acres of land in Ranga Reddy district for a consideration of Rs. 9,02,33,471/- as per the registered agreement of sale dated 01.12.2005 in the name of M/s SMV Agencies Pvt. Ltd. Along with the impounded registered agreement there were also two typed statements where details of payments made by cheques, through cash as well as details of cash received by the appellant were meticulously written. These annexures are marked as page 19 and page 20 of annexure 2/CBC of the impounded material. The assessing officer found
Charminar Bottling Company Pvt. Ltd., Hyd. that the notings on these pages correlated very well with the registered agreement of sale. Statements of Sri Sanjay Kaul CEO and Sri Y. Bhaskara Rao, GM(F) were also recorded and it was further confirmed that the documents contained the actual transaction i.e., both the cheque part as well as the cash part. Accordingly, the assessing officer held that the payments were made out of undisclosed sources and made the addition and confirmed by the CIT(A).
10.1 Before us, the contention of the ld. AR of the assessee is that no addition can be made based on dumb documents, absence of any corroborative evidence. For this proposition, he relied on the case law quoted supra.
10.2 In the case of CIT Vs. Sunita Dhadda and Ors. (supra) decided by the Hon’ble Rajasthan and Jaipur High Court in others, vide judgment dated 31/07/2017, on which reliance placed by the ld. AR of the assessee, wherein the Hon’ble High Court after considering various judgments decided the issue in favour of the assessee. The Hon’ble Supreme Court has dismissed the SLP of the revenue vide SLP No. 9432/2018, dated 28/03/2018.
10.3 In the above judgment, a land mark judgment has been referred by the High Court, which is as under:
Charminar Bottling Company Pvt. Ltd., Hyd. “3. Common Cause (A Registered Society) and Ors. vs. Union of India (UOI) and Ors. [2017] 394 ITR 220. “22. In case of Sahara, in addition we have the adjudication by the Income Tax Settlement Commission. The order has been placed on record along with I.A. No.
4. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, non-genuine was proved. It held as well that the PCIT/DR have not been able to show and substantiate the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also observed that Department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents.” 10.3 In the case under consideration, the AO has relied on only dumb documents, which are not having any evidentiary value as per the ratio laid down in the said judgment. The registered sale deed pertaining to the land purchase is not in the name of the assessee, but, the AO alleged that the name on the sale deed is wrongly
Charminar Bottling Company Pvt. Ltd., Hyd. mentioned as M/s SMV Agencies Pvt. Ltd., The observations of the Assessing Officer are not believable/ acceptable as there is no material brought on record to establish the same by the AO. We observe that the AO failed to discharge his duty by making the addition without undertaking any independent enquiry as to whether the property belonged to assessee or M/s SMV Agencies, he could have made an enquiry to establish that who is the owner of the land. He could have further enquired with the vendors regarding sale consideration. He failed to do so. Respectfully following the said judgment, we set aside the order of the CIT(A) and direct the AO to delete the addition made on this count. Accordingly, the ground raised by the assessee on this issue is allowed.
In the result, appeal of the assessee is partly allowed in above terms.
Pronounced in the open court on 20th May, 2021.