DCIT- CC- 6(4), MUMBAI vs. JAILAXMI REALTY AND DEVELOPERS LTD., MUMBAI

2 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., O R D E R PER S. RIFAUR RAHMAN (AM)

3 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., the retraction affidavit filed by Shri Madan Kolambekar and Shri Hiren Oza has been upheld." (5) on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made u/s.69C aggregating to Rs. 17,67,72,393/- (5,40,00,000+ 12,23,72,393) even though it has been held in the impugned order that the transactions that documents seized from the premises of Shri Madan Kolambekar and impounded from the premises of M/s. Weldone Real Estate Limited can be used as evidence against the assessee." 6. "On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made u/s.69C aggregating to Rs. 17,67,72,393/- (5,40,00,000+ 12,23,72,393) even though plethora of evidences were found during the course of search, which corroborate the statements recorded on oath of various persons and substantiate the fact that the assessee company had made unaccounted/unexplained payments." (7) The Applicant craves to leave, to add, to amend and/or to alter any of the ground of appeal, if need be.

5 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., substantial agricultural land and 12.5% CIDCO plots through him Mr.LM Dhanda and Mr.Jeevan Anant Surve, the employees of "Jai Corp Group directly supervised the transactions through Mr. Madan Kolambekar. Further, Mr.Hiren Oza, another employee of group supervised the transactions of land done by the group through Mr.Madan Kolambekar. In their sworn statement, Mr Hiren Oza, Mr. Jeevan Anant Surve and Mr.L.M.Dhanda had accepted that they were visiting Mr.Madan Kolambekar's office three to four times a week. Mr. Mahendra Bhantia was also one of the land aggregators, through whom the group had purchased substantial agricultural land in and around New Panvel. The group had one of its office at Shiv Parvati Building, New Panvel, from which they supervised the land acquisition done through Mr.Mahendra Bhantia. Mr.Ganesh Atmaram Mokashe was another land aggregator of the group involved in the land acquisition in Ahirwade, Chikhalse and Naigaon villages of Pune District. From the group's office at Nakoda Center, Pune, Mr.Atul Pawar controlled and handled the group's operations in relation to purchase of land in and around Pune and Nashik.

12 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., documents, the team of Jai Corp Group had decided the transfer of funds and its utilization to M/s Deva Realtors in the absence of Mr Madan Kolambekar. This proved that Mr.Madan Kolambekar was acting as per the directions of Jai Corp Group.

13 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., 19. Further, page No.27 of Annexure A-1 impounded from Mr.Hiren Oza contained the details of sources and deployment of funds. The amount of ₹.4,30,00,000/- and ₹.1,14,00,000/- (totaling to ₹.5,44,00,000/-) on source side shown as 'development charges' was nothing but cash payment. This fact was admitted by Mr.Hiren Oza in his statement recorded during the search proceedings.

21. Thus, on the basis of material seized from the office of Mr. Madan Kolambekar, from the possession of Mr. Hiren Oza and from office of 14 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., M/s.Welldone Real Estate Pvt. Ltd., the Assessing Officer concluded that the total amount of ₹.30,67,72,393/- (13,00,00,000+ 12,23,72,393 + 5,40,00,000) was transferred from Jai Corp Group to Mr.Madan Kolambekar for purchase of agricultural land Out of this total amount of ₹.30.67,72,393/-, the amount of ₹.17,67,72,393/- (12,23,72,393+ 5.44,00.000) was not appearing in the books of account of Jai Corp Group entities. Finally, the Assessing Officer concluded that out of unaccounted payment of ₹.17,67,72,393/-, the amount of ₹.5,44,00,000/- was paid in cash and balance of ₹.12,23,72,393/- (out of which atleast ₹.2,40,00,000/- was cash payment) was undisclosed and unexplained expenditure by the Jai Corp Group.

22. Further the Assessing Officer held that as per Annexure O-3 enclosed with the Assessment order, it was clear that the agricultural land was first purchased by Mr.Madan Kolambekar and other nominated farmers of M/s.Deva Realtors. Thereafter, those agricultural lands was transferred in the name of nominated farmers of Jailaxmi Realty & Developers Ltd, which was admitted by Jailaxmi Realty & Developers Ltd. As per land details submitted by Jailaxmi Realty & Developers Ltd. and on comparison of the Annexure O-8, it could be seen that the land firstly

15 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., purchased in the name of Mr. Madan Kolambekar and other nominated farmers of M/s Deva Realtors was subsequently transferred in the name of nominated farmers viz. Mr.Balaprasad Gupta, Mr.Hirasingh Rawat, Mr.Bijay Kumar Saraf, Mr.Manoj Dadhich and Mr.Ramswaroop Gupta of Jailaxmi Realty & Developers Ltd. The above facts further confirmed that all the agricultural transactions actually took place in the hands of Jailaxmi Realty & Developrs Ltd. (through the nominated farmers) after making the above-mentioned unaccounted/unexplained payments.

23. Accordingly, the unexplained payments/unaccounted cash payments of ₹.5,44,00,000/- was held by the Assessing Officer as unexplained expenditure in the hands of Jaylaxmi Realty & Developers Ltd. u/s.69C of the Act for AY 2008-09. Further, the unexplained payments (including unaccounted cash payments) of ₹.12,23,72,393/- was held as unexplained expenditure in the hands of the assessee u/s 69C of the Act for A.Y.2008-09.

24. Further, the Assessing Officer held that in the computation of total income, the unexplained expenditure of ₹.12,23,72,393/- and 16 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., ₹.5,44,00,000/- could not be allowed as a deduction as per proviso to section 69C under any head of income.

25. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) following the decision of the ITAT in the case of M/s. Krupa Land Ltd., and decision of the Hon'ble Jurisdictional High Court in the case of M/s. Lavanya Land Pvt. Ltd., & other entities of the group concern, deleted the additions made by the Assessing Officer.

26. Aggrieved revenue is in appeal before us. It is observed that this appeal was filed on 27.05.2022 after corona pandemic period. After considering the Hon'ble Supreme Court decision on extension of limitation period, the delayed period of filing the appeal is condoned.

27. At the time of hearing, Ld. DR brought to our notice Page No. 84 of the Assessment Order and submitted that during search incriminating material were found which are listed by the Assessing Officer in the case of M/s. Welldone Realty Pvt. Ltd., and discussed in detail in Para No. 13.14.1 of the Assessment Order and submitted that assessee is one of the group concerns who are involved in purchasing of the land and transferred huge funds from assessee to M/s. Deva Realtors which are appearing under the head “loans and advances” in the books of the assessee and he submitted that an amount of ₹.12,23,72,393/- which is the amount Assessing Officer made the addition which does not appear

17 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., in the books of Iconic realtors Ltd. Further, he submitted that the amount of ₹.5,44,00,000/- which was shown transferred as development charges is nowhere appearing in the books of account of these two companies i.e. Iconic Realtors Ltd., and Deva Realtors. Ld.DR supported the findings of the Assessing Officer and further, he submitted that Mr. Madan Kolambekar has accepted the transactions in the statement recorded and he submitted that it is also fact that the above statements were retracted by the other parties. He further brought to our notice Para No. 7.3.6.2 of the Ld.CIT(A) order and submitted that Ld.CIT(A) has deleted the addition without actually going through the document found during the search and he vehemently supported the findings of the Assessing Officer.

19 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., Jurisdictional High Court has deleted the addition, relevant ratio of the decision are reproduced below: - “20. The Tribunal noted the grounds of Appeal

. It also noted the facts pertaining to the search and seizure action under Section 132 and the statement of Dilip Dherai. The Tribunal noted the fact that the entire land acquisition was looked after by Central Leadership Team of which Mr. Dilip Dherai, Mr. Anand Jain, Mr. Sanjay Punkhia and Mr. Ajit Warthy are key members. The Tribunal also referred to the seized documents. The Tribunal then referred to the order passed by the Commissioner of Income Tax (Appeals). Then the Tribunal noted the arguments of both sides. These arguments were noted in great details. Then, the Tribunal, in paragraph 18 and 19, held as under:

18. Thus it is clear that before issuing notice u/s. 153C, the primary condition has to be fulfilled and which is that the money, bullion, documents etc., seized should belong to such other person. If this condition is not satisfied, no proceedings could be taken u/s. 153C of the Act. The seized documents marked as page 1 & 2 or our order do not belong to the assessee but were seized from the residential premises of Shri Dilip Dherai. It is not the case of the Revenue that the impugned documents are in the handwriting of the assessee. At this stage, it would be fair to the Revenue that it cannot be in the handwriting of the assessee since the assessee is a legal person, so to extend our observation, the seized documents are not even in the handwriting of any person related with the assessee because Shri Dilip Dherai is neither a Director nor a shareholder/member nor even an employee of the assessee company. We may mention at this stage that the provisions of the Indian Evidence Act are not strictly applicable to the proceedings under the Income Tax Act, but the broad principles of law of evidence do apply to such proceedings. Further an entry in the books of account maintained in the regular course of business is relevant for the purpose of considering the nature and impact of a transaction, but noting on slip of papers or loose sheet of papers are required to be supported/ corroborated by other evidence. There is also a distinction 20 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., between loose papers found from the possession of assessee and similar documents found from a third person. In the present case, impugned documents were not found from the possession of the assessee but was found from the possession of a third person i.e. Shri Dilip Dherai. Mere mention of the names of the villages where the companies may have purchased lands would not give any basis to assume/presume/surmise that the name of the companies are mentioned in the impugned documents. The very foundation of Sec. 153C has been shaken by not fulfilling the condition precedent for the issue of notice. It is the say of the Ld DR that in the present case there is no need for recording of the satisfaction. If this plea of the DR is accepted then the legislative intent of inserting sec. 153C in the Act would get defeated because the AO will get unstoppable powers to reopen assessments for 6 year in the case of the ' Other Person ' without recording any basis [ satisfaction ] for his action. Therefore this plea of the Ld DR cannot be accepted.

21. Thereafter, in paragraph 20, the Tribunal considered the merits and once again, at great length. The particular argument revolving around the statement of Dilip Dherai and his answer to question No. 24 was also considered in paragraph 21 of the impugned order. Then, in paragraph 22, the Tribunal refers to the additions made under Section 69C. After reproducing Section 69C and adverting to the fact that Dilip Dherai has retracted his statement, the Tribunal arrived at the conclusion that merely on the strength of the alleged admission in the statement of Dilip Dherai, the additions could not have been made. The concurrent findings of fact would demonstrate that the essential ingredients of Section 69C of the IT Act enabling the additions were not satisfied. This is not a case of 'no explanation'. Rather, the Tribunal concluded that the allegations made by the authorities are not supported by actual cash passing hands. The entire decision is based on the seized documents and no material has been referred which would conclusively show that huge amounts revealed from the seized documents are 21 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., transferred from one side to another. In that regard, the Tribunal found that the Revenue did not bring on record a single statement of the vendors of the land in different villages. None of the sellers has been examined to substantiate the claim of the Revenue that extra cash has actually changed hands. It is in these circumstances that the Tribunal found that on both counts, namely, the legal issue, as also merits, the additions cannot be sustained. Eventually, the Tribunal held in paragraph 25 (page 188) as under: “25. A perusal of the balance sheet of the assessee show that the authorized, issued and subscribed paid up capital is at Rs. One lakh and the assessee had not done any business during the year under consideration. With such a small corpus and no business activity, nor any has been brought on record by the Revenue, it is not acceptable that the company may have incurred such huge expenditure outside its books of account. Further in his entire assessment order, the AO himself has pointed out time and again different persons, who are alleged, to have made cash payments. Even on that count, the additions cannot be sustained in the hands of the assessee. In our considerate view, there being no evidence to support the Revenue's case that a huge figure, whatever be its quantum, over and above the figure booked in the records and accounts changed hands between the parties, no addition could therefore be made u/s. 69C of the Act to the income of the assessee. Considering the entire facts brought on record, we have no hesitation to hold that even on merits, no addition could be sustained.”

24. As a result of the above discussion, and when it is conceded that all these Appeals involve identical issue and challenge, we proceed to dismiss them but without any orders as costs.”

23 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., of the matter in the said year. However, the Coordinate Bench in the appeal for the A.Y. 2009-10 adjudicated the issue on the merits and concluded that the provisions of section 69C are not applicable on the facts of the present case as the statement of Mr. Dilip Dheria has been withdrawn by him. Further, the Coordinate Bench has held that addition made by the Assessing Officer is merely on the basis of the loose paper found during search, however the same is not supported by any material showing cash passing hands. Further, the revenue authorities have not brought a single statement on record of the vendors to substantiate the claim of the Revenue that extra cash has actually change hands. The Coordinate Bench has held as under in the case of Krupa Land Limited (supra) on merits: - “20. Now coming on to the merits of the case, which is without prejudice to our findings hereinabove, the submissions of the Ld. Sr. Counsel have been incorporated hereinabove to which the Ld. DR in addition to his oral arguments filed a written submission. The Ld. DR has mainly relied upon the findings of the AO. So far as payments outside the regular books of accounts are concerned, in his written submission, the Ld. DR has explained the modus operandi of the assessee relying upon various documents seized from the premises of Shri Dilip Dherai and M/s. Jai Corp group. The Ld. DR strongly contended that the retraction of Shri Dilip Dherai is only self serving and has to be rejected as an afterthought. For this preposition the Ld DR relied upon several judgements. It is the say of the Ld. DR that the statement of Shri Dilip Dherai was recorded u/s. 132(4) of the Act on 5.3.2009 whereas Shri Dilip Dherai has filed an affidavit on 14.5.2009 retracting from his admission on 5.3.2009. The Ld. DR pointed out that after 5.3.2009 Shri Dilip Dherai appeared before the 24 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., DDIT on 6.4.2009, 8.4.2009, 20.4.2009, 22.4.2009 & 8.5.2009 and none of these appearances Shri Dilip Dherai never stated that his statement on oath recorded on 5.3.2009 was done under threat, force, coercion. Therefore, the affidavit filed by Shri Dilip Dherai is only an afterthought. In his written submission, the Ld. DR has pointed out that Shri Dilip Dherai in order to escape the consequences of law, has filed the affidavit as an afterthought which deserves to be ignored especially when the affidavit has been controverted and repelled by the Authorised Officer Shri Manoj Kumar. Thereafter in his written submission, the Ld. DR went on to explain how the cash transactions have taken place as mentioned in the seized documents. It is the say of the Ld. DR that on perusal of these seized documents, there is clear mention of cash required at the bottom of these pages. Further in all these documents, total cost of land has been arrived by multiplying area of land with rate per acre. Referring to page-22 and 23 of Annexure-A1, which are at page 1 & 2 of our order, the Ld. DR submitted that since 5 columns of the chart are entered into the books of account, then it cannot be accepted that the 6th & 7th column do not belong to the assessee company. This view has been accepted by the Ld. CIT(A). The Ld. DR finally concluded that in view of all the surrounding facts and circumstances, it is very clear that cash payments have been made and an addition has to be made on this account. To substantiate his claim, the Ld. DR has also referred to seized materials 101 to 108. According to the Ld. DR, these seized materials described the modus operandi of the group. The Ld. DR in his written submission has tried to explain the nature of transaction recorded in the seized documents 101 to 108.

23. A perusal of the aforementioned section shows that the requirement of the section is that an expenditure has been found to have been incurred by an assessee in any financial year. Consequently, the assessee fails to indicate satisfactorily the source of such expenditure or any part thereof. Then section 69C is attracted in such circumstances. The emphasis is on the fact that ―an assessee has incurred any expenditure‖. This itself show that the assessee must have been found to have incurred any expenditure to invoke the provisions of Sec. 69C of the Act. Even if 26 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., for the sake of arguments, the retraction of Shri Dilip Dherai is ignored, in his reply to question No. 24 on the date of search, Shri Dilip Dherai has categorically mentioned that cash payment from Makers is at Rs. 28.01 crores and cash payment from Jai Towers is at Rs. 10.43 crores, total of these amounts works out at Rs. 38.45 crores which was provided to Shri Dilip Dherai by one Shri Sanjay Punkhia CEO of SEZ Project. Shri Dilip Dherai is not even remotely related to the assessee company. It is also not the case of the Revenue that Dilip Dherai was acting as agent of the assessee company. Merely on the strength of this admission, it cannot be said that the assessee has incurred certain expenditure over and above what has been recorded in its books of account. We find that the ultimate conclusions drawn by the AO and the Ld. CIT(A) have been reached merely on the entries found on loose sheet of papers for which Shri Dilip Dherai has stated that they are only estimates / budgetary figures. However, the allegations made by the lower authorities are not supported by actual cash passing hands. The entire additions are based on the seized documents and no other material has been adverted to and which could conclusively show that the huge amount of the magnitude mentioned in the seized documents travelled from, one side to the other. The Revenue authorities have not brought a single statement on record of the vendors of land in different villages. None of the seller has been examined to substantiate the claim of the Revenue that extra cash has actually changed hands.

24. Our view is fortified by the decision of the Delhi High Court in the case of Malik Brothers Pvt. Ltd. Vs CIT 162 Taxmann 43 which is relied upon by the Ld. DR. In that case, the assessee purchased the property allegedly for Rs. 6 lakhs. The vendor in her statement confirmed that the sale consideration of said property was Rs. 45 lakhs and paid tax thereon. In view of vendor‘s statement, the AO made an addition of Rs. 39 lakhs to the income of the assessee towards unexplained investment. The action of the AO was justified and the additions were confirmed. Thus in view of the aforesaid decision, in the present case, none of the sellers have been examined by the AO to strengthen his views that cash has been paid over and above the registered amount. There is not even a single document/evidence of parties involved in the sale of land at different villages brought on record to show that an amount other than the 27 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., payment of consideration has exchanged hands. No confession from the sellers have been brought on record. The entire additions have been made merely on the strength of loose papers found during the course of the search not supported by any independent authority. Considering the entire addition, in the light of the provisions of Sec. 69C, as per A.O‘s own interpretation, investments in purchase of land have been fully financed by some other persons, therefore, the addition in the hands of the assessee cannot be justified as the assessee has not incurred any expenditure. There may be one more possibility that the persons who were doing land purchase might have inflated the sale price in these loose sheets just to extract monies from their higher authorities in the guise of On-Money to be paid to the vendors. May be because of his possibility no documents were found to show that the money actually changed hands.

28 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., 31. We observe from the above decision that the fact in the present case is similar to the case of Krupa Land Ltd. (supra) as the present proceedings also arise from the same search. Instead of the statement of Mr. Dilip Dheria, the Revenue is relying on the statement of Mr. Madan Kolambekar in the present proceedings. However, in the present case also, Mr. Madan Kolambekar has withdrawn his statement and other than loose papers, no further material has been brought on record by the Revenue to justify the addition in the hands of the assessee. The Revenue has not supported the allegation by any material showing cash passing hands. Further, the Revenue authorities have not enquired with the vendors or brought any statement on record of the vendors to substantiate the claim of the Revenue that extra cash has actually change hands. In view of the above facts, we are inclined to accept the findings of the Ld.CIT(A), who was justified in relying on the decision of the coordinate bench of the Tribunal in the case of Krupa Land Ltd. (supra).

29 ITA.NO.1425/MUM/2022 (A.Y: 2008-09) C.O. NO.105/MUM/2022 Jailaxmi Realty and Developers Ltd., with the findings of the Ld.CIT(A) by deleting the additions proposed by the Assessing Officer u/s. 69C of the Act. Accordingly, various grounds raised by the revenue are dismissed. Since we have decided the main appeal against the revenue the relevant cross objection filed by the assessee is also dismissed.

Order pronounced in the open court on 22nd February, 2023