Loading judgment…

DCIT vs Jailaxmi Realty and Developers… | ITAT Mumbai 2023 | BharatTax

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

ITA 1425/MUM/2022Status: DisposedITAT Mumbai22 February 2023AY 2008-0929 pages

No AI summary yet for this case.

Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

Malik Bros (P) Ltd. v. CIT
162 Taxmann 43
10 citing

Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI

Before: SHRI KULDIP SINGH, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE

For Respondent: Shri Nimesh Yadav

Hearing: 30.11.2022Pronounced: 22.02.2023

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)

1.

This appeal and cross objection are filed by the Revenue and assessee respectively against the order of the Learned Commissioner of Income Tax (Appeals) – 54, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 07.01.2022 for the A.Y. 2008-09.

2.

Revenue has raised following grounds in its appeal: - (1) "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 Shri Madan Kolambekar, in his statement recorded on oath u/s. 132(4) of the Act, during the search action had admitted to have received unaccounted receipts from and made unaccounted cash expenditure on behalf of the Jai Corp Group, for purchase of land in lieu of commission/brokerage." (2) "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 agricultural land transactions actually took place in the hands of the assessee company (through nominated farmers), after making the said unaccounted/unexplained payment." (3) "On the facts and in the circumstances of the case and in law, the 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 of the assessee company with Shri Madan Kolambekar were not on 'principal to principal' basis." (4) "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 vide the impugned order, the action of the AO to reject

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.”

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.