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Facts
The revenue filed an appeal against the CIT(A)'s order deleting an addition of Rs. 33.86 crores made by the AO. The addition was related to an investment in a Zirakpur project. The assessee had filed a settlement application where they offered additional income for AY 2014-15.
Held
The Tribunal held that the seized documents relied upon by the AO were estimates and not substantiated by any other material, and they were not seized from the assessee's premises nor related to the assessment year. Therefore, the addition of Rs. 33.86 crores was deleted. However, the assessee's disclosed additional income of Rs. 35 lakhs in the settlement application for AY 2014-15 was to be added to their total income.
Key Issues
Whether the addition made by the AO based on seized documents, which were not substantiated and not related to the assessee, is valid? Whether the additional income disclosed in a settlement application can be added to the total income of the assessee?
Sections Cited
143(3), 132, 245C(1), 245D(1), 245D(4), 153A, 153C, 245HA(3)
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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: The appeal in AY 2014-15, arises out of the ld. 1. Commissioner of Income Tax (Appeals)-28, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 379/19-20/1671 dated 17.03.2020 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 17.09.2018 by the Assessing Officer, ACIT, Circle-16, Delhi (hereinafter referred to as ‘ld. AO’).
At the outset, we find that there is a delay of 109 days in filing of appeal 2. by the revenue before us. Considering the reasons adduced in the condonation petition, in the interest of substantial justice, we are inclined to condone the delay and admit the appeal of the revenue for adjudication.
The revenue has raised the following grounds of appeal:- 3.
1 That the Id. CIT(A) has erred in law and on facts in deleting the addition of Rs.33,86,46,800/- made by A.O. on account of investment in Zirakpur Project of M/s SIPL? 2. That the Id. CIT(A) has erred in law and on facts in not considering the facts emulated out of the application u/s 245C(1) filed by the assessee before the ITSC? 3. That the Id. CIT(A) has erred in law and on facts in ignoring the retrieved documents which clearly show the land purchased at Rs.45.15 cr. Whereas it has been shown in the books at Rs. 11.28 cr. Only 4. (a) The Ld. Commissioner of Income Tax (Appeals) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.
We have heard the rival submissions and perused the materials available 4. on record. The assessee is engaged in the business of running a dal mill. The original return of income for the assessment year 14-15 was filed by the assessee company on 30-9-2014 declaring total income of Rs 21,060/-. This was duly processed under section 143(1) of the Act on 7-12-2014. A search and seizure action under section 132 of the Act was conducted on Bansal Diamonds Private Limited (BDPL) on 13-2-2014 under section 132 of the Act. During the search on BDPL, Annexure A-11, a hard disk having three pages were seized. The assessee company was named in the Panchanama. It is pertinent to note that no search was conducted on the assessee company though it is part of the Bansal Diamonds group.
Pursuant to the search action, the assessments of the assessee for the 5. block period of assessment years 2008-09 to 2014-15 were reopened. During the course of assessment proceedings, the assessee company along with five assessee’s of the Bansal Group filed an application under Section 245C(1) of the Act before the Hon’ble Income Tax Settlement Commission (ITSC) on 7-3-2016 for assessment years 2008-09 to 2014-15.The details of returned income and the additional income offered by the assessee before the Hon’ble ITSC are tabulated hereunder:-
AY Income as per Additional Income ROI offered in SOF 2008-09 (13,355) NIL 2009-10 (13,054) NIL 2010-11 - NIL 2011-12 (7,726) NIL 2012-13 (15,104) NIL 2013-14 14,844 NIL 2014-15 21,060 35,00,000/- The assessee in its application for assessment year 2014-15 had offered 6. additional income of Rs 35 lakhs and had paid due taxes with applicable interest thereon. The ITSC admitted all the applications vide combined order under Section 245D(1) of the Act dated 17-3-2016. However, during the proceedings under Section 245D(4) of the Act, the Settlement Commission rejected applications of all the six persons vide its order dated 18-9-2017 for the reason that the additional income offered to explain the shortage in stock of gold and diamonds does not match with the unexplained investment in share capital. Thereafter, the assessments of the assessee were carried out under Section 153 A or under Section 143(3) of the Act, as the case may be. The assessment for the assessment year 2014-15 was framed under Section 143(3) of the Act, being the year of search. During the course of assessment proceedings, the Learned AO on the basis of hard disk found and seized from 2502, Gurudwara Road, Karol Bagh, Delhi vide Seized Document Reference Annexure A-11 made an addition of Rs. 33.86 crores in the hands of the assessee company. The seized documents are reproduced in pages 3 to 5 of the assessment order.
The assessee had submitted that during the financial years 2012-13 to 7. 2014-15, it had advanced Rs 16,18,00,000/- (including Rs 71 lakhs by Mr. S K Bansal, a director of the assessee company) to Sunrise Infratec Private Limited, a company executing a housing project in Zirakpur. In the balance sheet of the assessee as at 31-3-2013, advances made to Sunrise Infratec Private Ltd was shown as ‘Investment’ and in the balance sheet as at 31-3-2014, it was shown as ‘unsecured loan’.
Now let us examine the contents of the seized document Annexure A-11. 8. From first page of Annexure A-11 enclosed in page 3 of the assessment order with the heading ‘payment schedule of Zirakpur project’, it emerges that:
Total cost of Zirakpur project, for 7 acres land was decided at Rs 44.94 crores i.e. calculated at Rs 6.42 crores per acre, out of which approximately Rs 16 crores had already been received from the allottees. The balance of Rs 28.94 crores(44.94-16) was to be distributed between the two groups of shareholders. Share of Bansal group (60%) was Rs 17.36 crores. Against the same, Rs 13.65 crores had already been paid. The balance due was adjusted by Rs 6.42 crores being the amount for 7th acre of land. Thus, a sum of Rs 2.82 crores was due from Bansal group to Sunrise Infratec Private Ltd. From second page of Annexure A-11 reproduced in page 4 of the 9. assessment order, we find that it has two parts with many headings.
By the opening part, total estimated cost of Zirakpur project was determined at Rs 133.35 crores, which comprised of Rs 45.15 crores and Rs 88.20 crores i.e. land cost and cost of construction. Having estimated cost as above, total estimated realizations from sales was worked out at Rs 173.28 crores, resulting in estimated surplus of Rs 39.93 crores.
Later part of the seized document relates to distribution of cost amongst Bansal group and local group under the heading ‘our funds requirements’.
Agreed upon cost of land was taken at Rs 45.15. This was reduced by Rs 7 crores and Rs 15.70 crores on account of bank loan and collections from the allottees, to arrive at Rs 22.45 crores, which was given the heading ‘balance to be financed’. Distributing Rs 22.45 crores between Bansal group and local group in the ratio of 60:40, the share of Bansal group came at Rs 13.47 crores and in consideration, Bansal group was to get 43.40% shares of Sunrise Infratec Private Ltd. The 40% share of local group was computed at Rs 8.98 crores and to acquire the same, it was to bring in Rs 2.14 crores.
The third page of Annexure A-11 of seized document enclosed in page 5 of 10. the assessment order is a tabular chart of the amounts received from the allottees. The Learned AR submitted that ultimately the Zirakpur project did not materialize at all as the said project was not approved by the Punjab Government. We find that this fact is also mentioned in page 7 of the assessment order and hence taken as correct. It was submitted that as on 2-9- 2019, the Zirakpur project had not even started. The Halka Patwari had certified that the land was lying vacant for the last 15 years and the huge weed grass had grown in the land. The evidence in this regard is enclosed in pages 61 to 62 of the paper book . The Learned AR pointed out that there was no date that was mentioned on the documents of hard disk i.e. Annexure A-11. He argued that the details set out in the seized documents are not substantiated by any other material or document found during the course of search and that these were merely rough estimates worked out. In post search enquiries, the directors of Sunrise Infratec Private Ltd had affirmed that the cost of land as on 31-3-2014 was Rs 11.28 crores and the cost of construction was Rs 4.19 crores. The assessee had invested Rs 16.18 crores in Sunrise Infratech Private Ltd as at 31- 3-2014 which fact is also mentioned in page 7 of the assessment order.
The Learned AO noted that the cost of land purchased as reflected in the 11. seized document was Rs 45.15 crores, whereas the directors of the company had shown the cost at Rs 11.28 crores and hence the remaining amount of Rs 33.86 crores had been paid in cash and the source of the same remain unexplained in the hands of Sunrise Infratec Private Ltd. With regard to advance received from allottees, the seized document gave complete list of customers showing the amount of Rs 14.92 crores including the cash component. Since the Sunrise Infratech Private Ltd had not been doing any business, the source of funding had been only from the major shareholders and the shareholders had failed to explain the source of its investment in this project. In the Settlement Application, the assessee had declared an outflow of funds in Annexure D amounting to Rs 29,67,05,160/- for purchase of 60% shares in Sunrise Infratec Private Ltd. The ld AO noted that assessee is 60% shareholder in Sunrise Infratec Private Ltd and it had failed to explain the source of investment. Hence investment in Zirakpur project of Sunrise Infratec Private Ltd at Rs 33,86,46,800/- was sought to be added to the total income of the assessee as unexplained investment.
The Learned CITA observed that as on 31-03-2014, Sunrise Infratec Pvt.
Ltd. owned 6 acres of land. In the books, it had disclosed the cost of land at Rs. 11.28 crores. Taking the value of per acre land at Rs. 6.45 to 7 crores, the amount of Rs. 45.15 crores (market value) was arrived. The Learned CITA noted that since the advance was shown at Rs. 11 lakhs as against receipt of Rs. 15.75 crores, therefore adverse inference, if any, can be drawn only against Sunrise Infratec Private Ltd and not against assessee company, particularly because when Sunrise Infratec Pvt. Ltd had acquired the land and the assessee was nowhere involved in the picture. The Learned CITA noted that there was absolutely no document that was found or seized to prove that any cash payment was made by assessee to Sunrise Infratec Pvt. Ltd. The Learned CITA further noted that the figures appearing in the seized document were only a notional estimated value to determine the contribution to be made by the shareholders (which includes assessee). The Learned CITA noted that merely because Sunrise Infratech Pvt. Ltd. had shown the cost of land at Rs. 11.28 crores in its books, that cannot be a ground to make addition in the assessee’s hands because the actual owner of the land was Sunrise Infratec Pvt. Ltd. and not the assessee. The Learned CITA further observed that an application filed before the Settlement Commission cannot be the basis to make any addition for it does not show utilization of money. No corroborative evidence was brought on record to make any addition of Rs. 33.86 crores. With these observations, the Learned CITA deleted the addition made in the sum of Rs 33,86,46,800/-.
The revenue contended before us that in the settlement application an outflow of funds to the tune of Rs 29,67,05,160/- was mentioned. The total information disclosed by the assessee in the settlement application along with other applicants cannot be ignored and the same can be used by the assessing officer while framing the addition. He relied on the provisions of section 245 HA(3) of the Act in this regard. Per Contra, the Learned AR contended that provisions of section 245HA(3) of the Act could be used by the learned AO only in the case of abatement. He relied on the decision of the Coordinated Bench of Mumbai Tribunal in the case of Late Shri Savarmal Hisaria through legal heir Shri Sandeep Hisariya vs DCIT in for Assessment year 2013- 14 dated 5-4-2022. We find lot of force in the argument advanced by the Learned DR in the instant case with regard to the utilization of the amounts disclosed in the settlement application by the assessee. We also find that the case law relied upon by the Learned AR on the Mumbai Tribunal was a case where the settlement commission had rejected the application at the initial stage under section 245D(1) of the Act itself. Whereas in the instant case before us, the settlement application preferred by the assessee along with others had been duly admitted by the settlement commission under section 245D(1) of the Act and later only in the final proceedings under section 245D(4) of the Act, the application was rejected as the additional income offered to explain the shortage in stock of gold and diamonds does not match with the unexplained investment in the share capital. It is pertinent to note that the proceedings under section 245D(1) of the Act at the time of admission of the application is an in- house camera proceedings wherein there would be no presence from the side of the revenue. The settlement commission on prima facie perusal of the application and on satisfaction of the requisite conditions, come to a conclusion to admit the settlement application preferred by the assessee. Thereafter the said application is duly forwarded by the settlement commission to the income tax department and Rule 9 report would be sought from the Learned Principal Commissioner of Income Tax(PCIT) having jurisdiction over the assessee. The learned PCIT had indeed furnished the Rule 9 report in the instant case of the assessee and others before the settlement commission. Hence whatever is being disclosed by the assessee in the in-house camera proceedings in the settlement application before the Hon’ble Settlement Commission, the same is already made known to the Income Tax Department and in that scenario, the income tax department would be entitled to use the incomes or the additional incomes disclosed by the assessee in the settlement application before the settlement commission, while framing the assessment. Hence we hold that the decision relied upon by the Learned AR on the Co- ordinate Bench of Mumbai Tribunal dated 5-4-2022 referred supra is factually distinguishable. But it is pertinent to note that the assessee had disclosed merely a sum of Rs 35 lakhs in Assessment Year 2014-15 as additional income before the Hon’ble Settlement Commission. The remaining disclosures made and observations made by the Settlement Commission are fully relevant only for other applicants and absolutely those are not at all relevant for the assesee herein. Hence the argument advanced by the Learned AR that assessee joined the Settlement Application by offering additional income of Rs 35 lakhs in Assessment Year 2014-15 in order to fulfil the requirement of payment of tax on additional income of Rs 10 lakhs or more, is accepted. The reason for rejection of settlement application adduced by the Settlement Commission is absolutely not relevant to the assessee herein as it is applicable only for other applicants.
The outflow of funds mentioned in the Settlement Commission’s order is also not relevant to the assessee herein.
The sole basis of addition made by the Learned AO is the declaration made 14. by the Bansal Group before the Settlement Commission in Annexure D thereon, wherein in the cash flow statement, it has been shown that the group company i.e. Bansal Diamonds Pvt. Ltd. had made payment of Rs. 29.67 crores for purchasing 60% shares of Zirakpur project from original promoters. Here, the name of the assessee had not figured. There is no other collaborative material brought on record by the Learned AO to prove that this sum of Rs. 29.67 crores was paid by the assessee and that it was paid by the assessee for acquiring its 60% shares in Zirakpur project. In any case, these figures are reflected based on estimated future projections of Zirakpur project which never materialized and the project never took off. What is relevant qua the assessee is the mere disclosure of additional income of Rs 35 lakhs for Assessment Year 2014-15, which alone need to be considered in the hands of the assessee while framing the assessment.
The Learned DR contended that the list of allottees mentioned in the 15. seized document reproduced in Page 5 of the assessment order match with the real allottees and hence half of the seized document cannot be real and half cannot be unreal. He however accepted the fact that the hard disk seized was not from the place of the assessee but from different person at a different address i.e. 2502, Gurudwara Road, Karol Bagh, Delhi. We find lot of force in the argument advanced by the learned AR that the seized documents found in the form of excel sheet is merely a proposal to determine the contribution required to be made by the outside partner for building residential flats and selling them. The page number 3 of the assessment order reproducing the Page | 10 seized document having the heading ‘payment schedule of Zirakpur project’ is containing only estimated calculations for bringing the contribution of the existing and the new partner in case the project took off. For this purpose, the total cost / market value of 7 acres of land, out of which 6 acres were already acquired by the existing members in their company Sunrise Infratec Private Ltd and the 7th acre of land which was still to be acquired, was estimated at Rs. 44.94 crores calculated at Rs. 6.42 crores per acre for entering a new partner. Out of the total cost of 7 acres of land estimated at Rs. 44.94 crores, Rs. 16 crores approximately was already received by the existing members from the allottees. The balance of Rs. 28.94 crores was worked out to be distributed between two group of shareholders out of which, share of Bansal group was 60% which was agreed at Rs. 17.36 crores and out of which, Rs 13.65 crores was already paid and balance due was required to be paid at the time of acquisition of 7th acre of land in Zirakpur project. Further the seized document reproduced on page 4 of the assessment order is also estimated cost calculation of Zirakpur project after considering the cost of 7 acres of land at Rs. 45.15 crores worked out at Rs. 6.45 crores per acre, estimated cost of construction, estimated realization, estimated surplus etc, balance to be financed by the existing group and Bansal group etc. We find that page number 5 of the assessment order reproducing the seized document of Annexure A-11, merely contains a tabulation of amounts received from the allottees by the existing group. We find a lot of force in the argument of the learned AR that the figures mentioned on pages 3 and 4 reproduced in the assessment order are estimates for entering a new partner i.e. assessee company in the project for 60 percent share which could not be materialized. It is not in dispute that the Zirakpur project did not materialize and the project was not approved by Punjab Government. The assessee company had made the total payment of Rs. 15.76 crores which is duly accounted for in the books of the assessee company. Thereafter the project never took off and the 7th acre of land was never acquired. All the remaining 6 acres of the land are vacant and the Halka Patwari had certified that the land was lying vacant for the last 15 years and huge weed grass had grown in the said land. This fact is not controverted by the revenue before us by bringing cogent evidences on record. Hence, it could be safely concluded that there is no basis for making the addition of Rs. 33.86 crores in the assessment order by the Learned AO in the hands of the assessee company herein and the same is hereby directed to be deleted. It is a fact that no search under section 132 of the Act was carried out at the premises of the assessee company even though Panchanama dated 13-2-2014 contained the name of the assessee along with others. No incriminating material or any document was found or seized from the premises of the assessee. Undisputably the seized documents relied upon by the Learned AO were not seized from the premises of the assessee and they cannot be said to be belonging to the assessee. Either way, no proceedings or no satisfaction note has been recorded by the assessing officer of the searched person or by the assessing officer of the third person in terms of section 153C of the Act in the instant case. Hence, the seized documents Annexure A-11 cannot be used against the assessee either in section 153A proceedings or in section 153C proceedings of the Act. Moreover, there is absolutely no evidence that the said documents relate to Assessment year 2014-15 as there was no date mentioned in the said seized documents. Hence, the seized documents are to be rejected as not belonging / pertaining/ to the assessee herein qua the Assessment year 2014-15.
However, we hold that the assessee had indeed made disclosure of 16. additional income of Rs 35 lakhs for Assessment Year 2014-15 before the Hon’ble Settlement Commission, which figure need to be added to the total income of the assessee company for the Assessment Year 2014-15. The taxes already paid for the said additional income of Rs 35 lakhs need to be given credit for the assessee by the Learned AO. With these observations, the grounds raised by the revenue are partly allowed.
In the result, the appeal of the revenue is partly allowed. 17.
Order pronounced in the open court on 06/08/2025.