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Income Tax Appellate Tribunal, “B” BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकर अपीलीय अिधकरण “बी” �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI माननीय �ी महावीर िसंह, उपा ! एवं माननीय �ी मनोज कुमार अ&वाल ,लेखा सद) के सम!। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ (िनधा*रण वष* / Assessment Year: 2013-14) DCIT M/s. New Delta Gear Manufacturers Pvt.Ltd. बनाम/ Central Circle-2(3), 2, Palayakaran Street, Ekkattuthangal, Vs. Chennai. Chennai-600 097. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACN-3576-F (अपीलाथ�/Appellant) : (� थ� / Respondent) Assessee By : Shri T. N. Seetharaman (Advocate) -Ld.AR Revenue By : Shri S. Senthil Kumaran (CIT)- Ld. DR सुनवाईकीतारीख/Date of final Hearing : 01-12-2023 घोषणाकीतारीख /Date of Pronouncement : 19-12-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2013-14 arises out of the order of learned Commissioner of Income Tax (Appeals)-19, [CIT(A)] Chennai dated 23-08-2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s 153C of the Act on 31-12-2018. The grounds taken by the revenue read as under: 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2 The Ld.CIT(A) erred in deleting the addition of Rs.27,50,00,000/- made towards unexplained investment by the assessing officer based on the detailed queries made and after considering the explanation given by the assessee.
2.1 The Ld.CIT(A) erred in deleting the addition made towards unexplained investment without considering that though the transaction had not been materialized for the reason that the property was acquired by M/s. CMRL Ltd, the source for cash available for making payment of Rs.27.50 Crore was not properly explained by the assessee and the assessing officer has rightly assessed the same as undisclosed investment made. 2.2. The Learned CIT(A) failed to appreciate that the addition was made on the basis of the Sworn statement recorded us/132(4) from Shri V. Selvakumar and u/s.131 from Shri. Elamaran in which he had confirmed the transaction with M/s. True Value Home Pvt Ltd, including cash payments. 2.3 The Learned CIT(A) ought to have appreciated that Shri. V. Selvakumar and Shri. Elamaran had not retracted their statements at any stage during the assessment/appellate proceedings.
As is evident, the sole issue that arises for our consideration is addition of Rs.27.50 Crores as made by Ld. AO on the basis of search proceedings. The Ld. CIT(A) has deleted the impugned addition against which the revenue is in further appeal before us. 2. The Ld. CIT-DR advanced arguments supporting the grounds of appeal and pleaded for restoration of assessment order. The Ld. CIT-DR submitted that the additions are backed by statement made u/s 132(4) which would have evidentiary value. The Ld. CIT-DR submitted that the agreement as found during the course of search proceedings was acted upon and therefore, the impugned additions would be sustainable in law. The Ld. AR, on the other hand, supported the impugned order and submitted that the conclusions drawn in the assessment order were erroneous. The Ld. AR submitted that there was no evidence of cash payment. In fact, no such payment was mentioned in the sale agreement which is evident from findings rendered by Ld. CIT(A) in the impugned order. The Ld. AR submitted that the aforesaid finding is based on remand report of Ld. AO. The case was put for clarification which was duly responded to by both the sides. Having heard rival submissions and upon perusal of case records, our adjudication would be as follows.
3. Proceedings before Ld. AO 3.1 The assessee being resident corporate assessee is stated to be engaged in hotel business. A search was conducted by the department in the case of Shri S. Jagathrakshakan group of cases on 12.07.2016. This group include an entity M/s J. Hotels Private Limited (JHPL) which operates Accord Hotels and Resorts. Shri S. Jagathrakshakan and his family members are stated to be director in JHPL. During search in the premises of JHPL, certain documents and cash was found. Based on search proceedings, an assessment was framed on the assessee u/s 143(3) r.w.s. 153C of the Act. 3.2 During search, loose sheets marked as ANN/KSI/VS/LS/S were found which was sale agreement dated 31.05.2012 between M/s True Value Homes Private Ltd. (TVHPL) as seller and the assessee as purchaser with respect to purchase of a property by the assessee from that entity. This property was vacant Land and building bearing Plot No.51, North Phase of Guindy Industrial Estate admeasuring 40659.36 Sq. Ft. The sale agreement was for a consideration of Rs.43.89 Crores. On page No.4 of the agreement, it was seen that the assessee paid aggregate sum of Rs.35 Crores which include cash payment of Rs.27.50 Crores and payment of Rs.7.50 Crores through Cheque No.325656 dated 31.05.2012 drawn from South India Bank Ltd., T. Nagar Branch, Chennai. When this was confronted to one of the employees i.e., Shri V. Selvakumar, he stated that sale agreement belonged to his cousin Shri Elamaran and only he could explain the contents of the same.
3.3 During assessment proceedings, requisite details were called form the assessee in this regard vide questionnaire dated 03.10.2018. Further enquiries were also carried out from the office of TVHPL vide letter dated 03.10.2018. Shri Sankalpa Dehury, AGM, Finance and Accounts, TVHPL appeared for hearing on 05.10.2018 and confirmed the sale transaction. However, it was stated by him that on account of this transaction, TVHPL received advance of Rs.7.50 Crores from M/s JHPL (group companies of assessee). It was also confirmed that the agreement was cancelled since the said property was acquired by Chennai Metro Rail Corporation (CMRL) against TDR. Since the sale agreement was cancelled, the advance received from JHPL was adjusted against flats booked by them in TVH Quadrant Project. The requisite details, as called for by Ld. AO, in this regard, was also furnished. On the basis of these facts, Ld. AO concluded that it was proved beyond doubt that the payment of Rs.7.50 Crores was made through cheque which was finally adjusted against booking of flat in TVH Quadrant Project. 3.4 The assessee’s representative Shri S. Ramasamy, Accounts Officer, during the course of hearing on 22.11.2018, denied the sale agreement as well as payment stated to be made therein. It was submitted that the group had planned to buy the said property and had negotiated the price. The agreement of sale was drafted by TVHPL and for the purpose of getting assessee’s consent, the sale agreement was duly signed and sent to assessee’s office for getting their signatures and payment. The agreement was signed by the assessee. However, before handing over cash and cheque, it was found that the encumbrance on the property was not cleared. Therefore, the entire dealing was cancelled and original sale agreement was destroyed, copies of which may be left over in the file which was found in the premises of Shri V. Selvakumar. The agreement never materialized and no payment flowed as mentioned in the agreement. The statement of Shri Elamaran, director of assessee- company was also recorded on 30.11.2018. In reply to question no.25, it was stated that agreement was draft proposal and it was not accounted for in the books of accounts. The statement made by Shri S. Ramasamy, Accounts Officer of the assessee and confirmation of TVHPL was also confronted to him. It was also confirmed by him that the original agreement was destroyed. Further, the payment stated to be made in cheque was, in fact, given by JHPL. 3.5 In the light of above facts, Ld. AO concluded that the transaction for purchase of vacant land was carried out vide sale agreement dated 31.05.2012. The payment as stated therein were made. The fact that the agreement was destroyed stood controverted by the confirmation given by TVHPL from where it was evident that the transaction was existing and was in the continuous process and not closed as stated by the assessee. Therefore, this could not be accepted. The Cheque payment of Rs.7.50 Crores was adjusted against subsequent flat booking in TVH Quadrant Project. The bank confirmed the clearance of cheque from the account of JHPL. Though the transaction was very much executed, original document was destroyed to suppress the actual transaction. Finally, Ld. AO made addition of Rs.27.50 Crores as unaccounted investment in the hands of the assessee.
First Appellate Proceedings 4.1 During appellate proceedings, the assessee vehemently assailed the conclusions drawn by Ld. AO and submitted that it was confirmed beyond doubt that the agreement dated 31.05.2012 had not materialized and the land was ultimately acquired by CMRL. It would not be correct to state that impugned payment of Rs.27.50 Crores was made before entering into a sale agreement and no prudent buyer will make such huge payment without taking any receipt for such payment. Even the draft agreement was destroyed. The impugned addition was without any corroborative evidences. 4.2 The Ld. CIT(A) thought it fit to call a remand report by making pertinent observation that Ld. AO referred to Page No.4 of the sale agreement to note the details of cash paid and details of amount paid by cheque. However, the details as discussed by Ld. AO were completely absent in the agreement and there was complete inconsistency between the observation made by Ld. AO and the seized material. 4.3 The Ld. AO furnished remand report on 10.05.2022 and inter-alia, submitted that transaction along with amount of cash paid to the extent of Rs.27.50 Crores was confirmed by Shri Selvakumar and Shri N. Elamaran. These statements have evidentiary value and therefore, this amount was rightly brought to tax. 4.4 The assessee, in its rejoinder to remand report, submitted that Ld. AO has merely relied on the sworn statements. These statements and remand report do not indicate by any means that the assessee has made payment for on-money for purchase of property. None of the persons have confirmed the payment of on-money in their sworn statement. They have merely acknowledged the presence of draft agreement unearthed during the course of search proceedings. Therefore, the presumption of on-money was contradictory since in none of the statements, the payment of on-money was admitted. Without prejudice, the agreement was mere draft proposal wherein there was no specific mention about payment of alleged on-money. Since it was draft paper, it had not been recorded in the books of accounts. The assessee relied in CBDT Circular No.286/2/2003-IT (Inv. II) dated 10.03.2002 discouraging general confession of additional income during the course of search operations. The aforesaid circular emphasized collection of evidences rather that relying upon admission statements. Reliance was placed on the decision of Hon’ble Apex Court, inter-alia, rendered in the case of Omar Salay Mohamed Sait (37 ITR 151) to support the submission that additions could not have been made merely on the basis of suspicion, conjectures or surmises. Reliance was also placed on the decision of Hon’bles High Court of Madras in the case of M. Narayanan & Bros. (339 ITR 192) which held that statement could not be the sole material to frame the assessment. In this decision, it was held that while statement rendered by assessee at time of search u/s 132(4) may be used in evidence in any proceeding, yet that, by itself, does not become sole material to rest assessment, more so when assessee seeks to withdraw same by producing material in support of such retraction. The assessee also averred that no buyer would part with more than 60% of sale consideration before entering into sale consideration. Further, Ld. AO was not in possession of any evidence to claim that the assessee paid impugned cash payment to TVHPL. Therefore, the assessee vehemently pressed for deletion of impugned addition. 4.5 Considering assessee’s reply, AO was specifically asked to furnish certified copy of the seized material in the form of loose sheets vide exhibit ANN/KSI/VSI/LS/S containing the impugned sale agreement dated 31.05.2012. The AO, vide letter dated 06.07.2022, furnished the certified copies which were confronted to the assessee, The assessee reiterated that Ld. AO merely acted upon sworn statements. The assessee also pointed out there was no mention of any cash payment on Page No.4 of the agreement and therefore, reliance on this document was arbitrary and without any basis. Further, in none of the statement, there was admission of any on-money by any person. The assessee referred to specific questions asked, in this regard, from Shri V. Selvakumar and Shri Elamaran to support the submissions. 4.6 In the light of all these facts, Ld. CIT(A) concurred with assessee’s submissions / explanations and deleted the impugned additions by observing as under: - 9.1 I have carefully examined the assessment order, the written submissions of the Appellant, the remand report of the AO, the rejoinder of the assessee to the remand report and material available on record. It can be seen from the assessment order that the AO has made the addition of Rs. 27,00,00,000/- towards unexplained investment. The said addition was made on the basis of the copy of sale deed dated 31.05.2012 found and seized during the course of search in the case of Shri S. Jagathrakshakan, which was entered into between the Appellant company and M/s True Value Homes India Pvt. Ltd. (hereinafter referred to as TVH). 9.2 According to the A.O. on the basis of the copy of the seized sale agreement, that the Appellant paid consideration to the extent of Rs. 27,50,00,000/- (two payments of Rs. 25,00,00,000/- and Rs. 2,50,00,000/-) in cash to TVH apart from payment by cheque of Rs. 7,50,00,000/- and that the amount paid in cash of Rs.27,50,00,000/- has not been accounted in the books of account of the Appellant. The AO relied on the statements of Shri V. Selvakumar, employee of the Appellant company and a relative of a Director u/s 132(4) and statement of Shri Elamaran, Director of the Appellant company u/s 131 in arriving at this conclusion.
9.3 During the course of the Appellate proceedings, it was contended by the Appellant that there is no specific mention about the payment of cash consideration of Rs.27,50,00,000/- which has been alleged to be payment of on money. It was also contended that if any cash payment had been made, a prudent buyer will always insist for the receipt of the cash payment on the reverse of the sale agreement or for a separate cash receipt towards proof of payment and that no such acknowledgment of cash receipt on the reverse of the sale agreement or separate cash receipt were found during the search. It was also contended that no prudent buyer will make huge payment of around 60% of the total sale consideration in cash and that too prior to execution of sale agreement. 9.4 Having regard to the contentions of the Appellant, a copy of the relevant sale agreement dated 31.05.2005 which was seized wide Annexure ANN/KSI/VS/LS/S was obtained from the AO for examination. The relevant page of the seized document is appended herewith. The VENDOR had offered to sell the SCHEDULE PROPERTY for consideration of Rs. 6,500/- (Rupees Six Thousand and Five Hundred only) per sq. ft aggregating to a Sum of Rs.27,06,81,840/- (Rupees Twenty Seven Crores Six Lakhs Eighty One Thousand Eight Hundred and Forty only) and the PURCHASER has accepted the above offer of the VENDOR and thereby both the parties herein have agreed to enter into this agreement on the following terms and conditions. NOW THIS SALE AGREEMENT WINNESSTH AS FOLLOWS:
1. 1. That the price agreed for the sale of the SCHEDULE PROPERTY is Rs.6,500/- (Rupees Six Thousand and Five Hundred only) per sq. ft., aggregating to a sum of Rs.27,06,81,840/- (Rupees Twenty Seven Crores Six Lakhs Eighty One Thousand Eight Hundred and Forty only) and shall be conveyed free of all encumbrances.
2. That the PURCHASER has on this day pays to the VENDOR a sum of Rs.7,50,00,000/- (Rupees Seven Crores and Fifty lakhs only) by way of cheque dated 31.05.2012, bearing Nos. 325656, drawn from The South India Bank Limited, T. Nagar branch Chennai the receipt of which sum the VENDOR do hereby admit and acknowledge and the balance sale consideration of Rs.19,56,81,840/- (Rupees Nineteen Crores Fifty Six Lakhs eighty One Thousand Eight hundred and Forty only) shall be paid by purchaser to the vendors on mutually agreed date.
3. The VENDORS have provided copies of all the documents pertaining to the schedule mentioned properties to the PURCHASER in order to enable for legal scrutiny of the same and this agreement has been executed upon satisfaction of the PURCHASER about the clear and marketable title of the VENDOR on the schedule mentioned property.
4. That the deed of sale shall be executed immediately upon payment of the balance sale consideration or on a day as may be decided by the PURCHASER.
5. The charges towards drafting, execution & registration of the sale deed shall be borne by the PURCHASER. 9.5 While going through the above it can be seen that there is no mention of the payment of consideration in cash to the extent of Rs.27,50,00,000/- in the said agreement, though it was mentioned by the AO in the assessment order that the said recital regarding cash payments is found at Page No. 4 of the sale agreement.
9.6 In view of the said discrepancy between the seized document and observation made by the AO in the assessment order, a remand report was sought from the AO wide letter dated 04.04.2022 on the said discrepancy. ln the remand report dated 10.05.2022, the AO did not make any comment regarding the absence of details of cash payments made in the seized sale agreement. However, the AO stated that the payment of cash to the extent of Rs.27.50 crore was confirmed by Shri Selvakumar as well as Shri Elamaran in their sworn statements recorded under section 132(4) and section 131 respectively. The AO stated that Shri Elamaran confirmed the said cash payments in his statement u/s 131 which was recorded on 30.11.2018 after a lapse of 27 months from the date of search. The AO contented that since the said statements u/s 132(4) and 131 have evidentiary value, the transaction of payment of cash to the extent of Rs. 27.50 crore has to be considered as genuine and as having been established by way of supporting evidence. 9.7 In the rejoinder to the remand report furnished on 20.06.2022, the Appellant reiterated its contention that there is no specific mention about the payment of alleged on-money of Rs. 27.50 crore by cash in the seized sale agreement. The Appellant therefore made a specific request for providing a copy of the seized sale agreement, based on which the AO alleged that the Appellant paid Rs.27.50 crore in cash to TVH. Further, the Appellant referred to the extracts of the relevant portions of the statements recorded from Shri Selva Kumar and Shri Elamaran furnished by the AO in the remand report and pointed out that none of the said two persons have confirmed the payment of on-money in their sworn statements. The Appellant stated that they have merely acknowledged the presence of a draft agreement unearthed during the course of search proceedings. 9.8 Considering the specific request made by the Appellant in the rejoinder to the remand report, the AO was once again requested to submit certified copy of the relevant seized material in the form of loose sheets vide exhibit ANN/KSI/VS/LS/S containing the sale agreement dated 31.05.2012 entered into between the Appellant and TVH, which formed the basis for the addition of Rs.27.50 crore made in the assessment order. In response to it, the AO furnished certified copy of the seized sale agreement vide letter dated 06.07.2022. A copy of the same was provided to the Appellant. 9.9 In the rejoinder furnished, the Appellant stated that the copy of the seized sale agreement does not contain any reference to the alleged payment of cash consideration to the extent of Rs. 27.50 crore by the Appellant to TVH, as already contended by it earlier. The Appellant accordingly contended that the addition of Rs.27.50 crore made in the assessment order towards unexplained investments is not sustainable in the facts of the case. 9.10 On careful consideration, I am of the view that the contentions of the Appellant are tenable and acceptable. The primary basis for the addition of unexplained investment of Rs.27.50 core made in the assessment order was the contents of the sale agreement dated 31.05.2012 between the Appellant and TVH, which was seized during the course of search vide exhibit ANN/KSI/VS/LS/S. It is the case of the AO that Page No. 4 of the said agreement has revealed that the total sale consideration amounted to Rs.43,89,90,420/- and that the Appellant (purchaser) has already paid Rs.35.00 crore consisting of cash payment of Rs.25.00 crore, cash payment of Rs.2.50 crore and cheque payment of Rs. 7.50 crore. As the said cash payments aggregating to Rs.27.50 crore have not been accounted in the books of the Appellant, the AO treated the same as unexplained investment in the assessment order. 9.11 However, as rightly contended by the Appellant, it is noticed that there is no mention at all anywhere in the seized sale agreement, a certified copy of which was furnished by the AO during the course of Appellate proceedings about the cash consideration paid by the Appellant. It is observed that the AO has also remained silent in the. remand report on the issue of whether the seized sale agreement contains the details of the cash payments to the extent of Rs.27.50 crore, as asserted by him in the assessment order. It is clearly and undeniably evident from the certified copy of the seized sale agreement that there is no recital therein regarding making of any cash payment by the Appellant to TVH. Thus, it is seen that the primary basis for making the addition of unexplained investment of Rs.27.50 crore in the assessment order does not have any factual foundation. The addition so made without any basis or supporting documentary evidence is not sustainable. 9.12 Apart from the contents of the seized sale agreement, the AO has also relied on the statements recorded from Shri Selvakumar and Shri Elamaran u/s 132(4) and u/s. 131 respectively, in order to draw the conclusion that the cash payments to the extent of Rs. 27.50 crore were made by the Appellant to TVH. The relevant portions of the statements of the said persons have also been incorporated by the AO in his remand report in support of the addition made in the assessment order. However, as rightly contended by the Appellant, the relevant portions of the said statements as extracted by the AO in the remand report do not bring out the acceptance/admission of the said persons regarding making cash payments of Rs.27.50 crore. 9.13 As clearly evident from the relevant portions of the statements extracted in the remand report, Shri Selvakumar merely stated that the seized sale agreement belongs to his cousin Shri Elamaran and that only Shri Elamaran can explain the contents of the same, in response to question no. 19 of the statement wherein he was requested to explain the sources for the payments stated to have been made in the seized sale agreement. Similarly, it is noticed that Shri Elamaran has merely stated that he has gone through the statement of Shri Selvakumar in his statement u/s 131. He did not admit therein that any cash payments were made. In view of this, it is clear that there is no admission whatsoever by the said persons in their statements regarding payments of on-money by cash. This being the position, the assertion of the AO that the said statements having evidentiary value have proven that cash payments of Rs. 27.50 crore have been made is devoid of any merit. 9.14 In view of the detailed discussion made in the preceding paragraphs, it is held that the addition of Rs. 27.50 crore made in the assessment order towards unexplained investment is not supported by any seized material including the relevant sale agreement dated 31.05.2012. It is also held that the statements of Shri Selvakumar and Shri Elamaran recorded u/s 132(4) and 131 respectively do not serve as supporting evidence for the inference drawn by the AO that cash payments of Rs.27.50 crore were made to TVH. In view of lack of any documentary evidence to support the finding of the AO, it is held that the addition of Rs.27.50 crore towards unexplained investment is not sustainable on facts of the case. 9.1.5 In addition to the above, the contention of the A.O. is that a sum of Rs.27,00,00,000/- was invested in purchase of property and the sources for the same is from unaccounted/unexplained. It may be appreciated from the facts as per the seized document the transaction relates to the purchase of property at Guindy Industrial Estate, Chennai. As per the information, the property was already acquired by the M/s. Chennai Metro Rail Limited (CMRL). The sale as per the sale agreement seized, was never materialized. Apparently, there was no sale for the purchase of the property by the appellant's company. In the absence of any purchase on the part of the appellant, the question of unexplained investment as contemplated by the A.O. will never arise. 9.16 In view of the above, the grounds raised by the appellant upon the issue of unexplained investment amounting Rs.27,00,00,000/- are hereby allowed. The addition of Rs.27.50 crore (which has been erroneously adopted as Rs 27.00 crore while computing the total income at Page 32 of the assessment order), is hereby deleted.
10. In the result the appeal is treated as allowed. Aggrieved as aforesaid, the revenue is in further appeal before us. Our findings and Adjudication
5. From the fact, it emerges that the whole basis of impugned additions is sworn statement of Shri V. Selvakumar and Shri Elamaran. However, none of these persons have admitted payment of on-money by the assessee to TVHPL. In fact, the cheque payment of Rs.7.50 Crores has been made by group entity JHPL and the amount has been cleared from their bank account. It could also be noted that the agreement did not materialize in view of the fact that the land was acquired by CMRL and the transaction could not be completed. Against the payment so made by JHPL, certain flats were allotted by TVHPL in TVH Quadrant Project. The allegation of Ld. AO is that the agreement was acted upon between the parties and therefore, the payment as mentioned therein on page no.4 has flown between the parties. However, in the remand report, the copy of seized document has been furnished by Ld. AO. Upon perusal of page no.4, a finding has been rendered by Ld. CIT(A) that there is no mention of alleged cash payment of Rs.27.50 Crores stated to be paid by the assessee. There is no receipt for cash payment in the sale agreement and / or no separate cash receipt has been found during the search. The relevant extract of sale agreement has been reproduced in the impugned order which remain uncontroverted before us. Another pertinent finding is that in none of the recorded statements of Shri Selvakumar and Shri Elamaran, the fact of payment of on-money has been admitted by any of them. They have merely acknowledged the presence of a draft agreement unearthed during the course of search proceedings. This being so, the whole case of Ld. AO would fall flat to the ground. The impugned additions are not based on any primary or corroborative material on record. Therefore, the same has rightly been deleted by Ld. CIT(A). We order so.
In the result, the appeal stands dismissed. Order pronounced on 19th December,2023