ACIT, CC,, VARANASI vs. M/S D.S. INFRAHEIGHTS PVT. LTD.,, VARANASI

The background facts relating to the cases are stated in brief. Both the assessees herein belong to the same group and both of them are engaged in real estate business. The Revenue carried out search and seizure operations under section 132 of the Act in the case of M/s. Tulsiani Construction and Developers Pvt. Limited, its sister concerns, residential premises of the directors and proprietors of the group on 16.11.2016. During the course of search, a loose document containing written entries in the name of “D S Infra” and “Vatika” was found and seized from the premises of Shri Anil Kumar Tulsiani. The said document was inventoried as page 8 of LP-1 in the seized documents. The written entries depicted some computation.

The details of above said document were inquired with Shri Anil Kumar Tulsiani, who was main person & director of M/s Tulsiani Construction and Developers Pvt. Ltd. He submitted that the transactions noted in the loose document were related to purchase of FSI from M/s. Ansal API by both the assessees herein, viz., M/s D S Infraheights Pvt. Ltd. and M/s Vatika Nirman Pvt. Limited. According to AO, Shri Anil Kumar Tulsiani admitted that those transactions are partly recorded and partly unrecorded. On the

During the course of assessment proceedings, the Assessing Officer examined the shareholding pattern of both the assessee companies herein. He found that the shareholders of both the companies were M/s. Tulsiani Construction and Developers Pvt. Ltd. and KBG Infrastructure Pvt. Ltd., each of them holding 50% of shares. The Assessing Officer further noticed that the shares in M/s KBG Infrastructure Pvt. Ltd were held by Shri Ashish Agarwal to the extent of 34% and by Shri Shashank Gupta & his father jointly to the extent of 66%. The Assessing Officer also noticed that Shri Ashish Agarwal and Shri Shashank Gupta are the directors in both the above said companies.

We shall now narrate the facts relating to the additions made in the hands of both the assessees herein. We noticed earlier that Shri Anil Kumar Tulsiani had stated that the entries found in the loose documents were related to purchase of FSI by the assessees herein from M/s Ansal API. The facts relating thereto are discussed in brief. A company named M/s. Ansal Properties and Infrastructure Ltd (APIL) had developed a township named M/s Ansal API. In the above said township two housing projects named “Urban Woods I” and “Urban Woods II” were proposed to be executed by the assessees herein, viz., M/s. D.S. Infraheights Pvt. Ltd. and M/s. Vatika Nirman Pvt. Ltd respectively. It is the submission of Shri Anil Kumar Tulsiani that the entries found in the impugned loose document were related to the transactions between APIL and the assessees herein with regard to purchase of rights of construction of housing projects. According to AO, Shri Anil Kumar Tulsiani has stated that part of the consideration was unrecorded. In the loose document, some entries were noted as “prm”. According to Shri Anil Kumar Tulsiani, it refers to “premium”.

On the basis of statement so given by Shri Anil Kumar Tulsiani, the AO asked the assessees herein to explain the nature of entries found in the loose documents. Both the assessees replied that they have entered into an agreement with APIL for construction and sale of houses named Urban Woods I and Urban Woods II. As per the agreement, APIL shall hand over the possession of the land to the assessees herein after payment of 20-30% of the agreed consideration. APIL will allow marketing of the flats after payment of 50% of the agreed consideration. It was submitted that both the assesees have entered into an agreement with APIL. Further, all the payments made to APIL have been duly recorded in the books of accounts. With regard to the entries found in the loose sheet, both the assessees submitted that they are only estimates prepared at the time of negotiation of the deal. It was submitted that, after agreeing with terms and conditions of the deal, a memorandum of understanding was entered between the parties on 26.6.2014 and final purchase deed was executed on 9.11.2017. Both the assessees submitted that they have made payment in accordance with the MOU and no payment was made outside the books of account.

We noticed earlier that the two persons mentioned earlier, viz., Shri Shashank Gupta and Shri Ashish Agarwal are directors of both the assessees herein. The Assessing Officer examined both of them and recorded a statement under section 131 of the Act from both of them. Shri Shashank Gupta admitted that the part of entries found in the loose paper could be of his handwriting. With regard to the payment mentioned therein, he submitted that all the transactions have been duly recorded in the books of account. With regard to the statement given by Shri Anil Kumar Tulsiani, he pleaded ignorance about the same. In the statement taken from Shri Ashish Agrwal also under section 131 of the Act, he maintained very same stand as that of Shri Shashank Gupta. However, the Assessing Officer took the view

In the above said loose document, certain payments were mentioned “Prm” and we noticed earlier that the same was decoded as “premium” by Shri Anil Kumar Agarwal. The AO noticed that the amount mentioned as “prm” was found not recorded in the books of account of the assessees herein. The ‘prm’ amount mentioned against M/s D S Infra Heightrs P Ltd was Rs. 5.66 crores and it was Rs. 2.36 crores in the case of Vatika Nirman Pvt. Limited. Based on the statement of Shri Anil Kumar Tulsiani and also based on the fact that part of entries are in the hand writing of Shri Shashank Gupta, the AO took the view that the assessees herein have paid the above said amounts outside the books of accounts. Accordingly, the Assessing Officer assessed the amount mentioned against each of the assessees above, as investment not fully disclosed in the books of account under section 69B of the Act.

Both the assessees filed appeals before Ld CIT(A) challenging the above said addition made in their respective hands. It was contended that (a) the impugned addition has been made on the basis of a dumb document found at the place of a third party. (b) the AO has relied upon statement recorded from a person who is not connected with the activities of the assessee companies. (c) the AO did not offer cross examination of the said party also. (d) the AO did not conduct any enquiry with AIPL in order ascertain veracity of the document. Both the assessees also placed reliance on certain case laws in order to contend that the AO could not placed reliance on a dumb document without corroborating its contents with any independent evidence.

The Ld CIT(A) was convinced with the contentions of the assessees herein. Accordingly, he deleted the impugned addition made in the hands of the assessees herein. Hence the revenue has filed these appeals.

We heard the parties and perused the record. We noticed that impugned loose paper was found at the premises of Shri Anil Kumar Tulsiani. It is a fact that the above said person is neither a share holder nor a director in the assessee companies. However, he was a director in M/s Tulsiani Constructions and Developers P Ltd, which held 50% of share holdings in the capital of the assessees herein. Thus, as contended by the Ld A.R, Shri Anil Kumar Tulsiani is having indirect connection with the assessee company.

The AO has scanned the copy of loose sheet in the assessment order. Following noting made therein is in dispute:- D.S Infra - Prm 240 x 2,36,000 = 566 Vatika - Prm 100 x 2,36,000 = 236 The assessing officer has interpreted the above figures as Rs.5.66 crores and Rs.2.36 crores. We noticed earlier that the AO has placed reliance on the statement given by Shri Anil Kumar Tulsiani. The said reply is extracted by the AO in the assessment order and the same reads as under ( refer to Page 19 of the assessment order passed in the case of D S Infraheight P Ltd):- “This transaction though recorded by Mr Shashank Gupta relates to FSI purchase of 2,36,000 sq. ft. each in DS Infraheights P Ltd and Vatika Nirman P Ltd from Ansal Properties and Infrastructure Ltd. Terms of agreement for such purchase are submitted to your goodself. Amongst the handwritten note, premium amount written as ‘Prm’ is unrecorded and the status of the payment made can be ascertained from the books of the company. Further, 30% and 20% which is mentioned in the note against DS Infraheights Pvt Ltd and Vatika Nirman Pvt Ltd respectively may denote minimum amount of payment required by Ansal to provide possession of such FSI. The percentage may vary depending upon the understanding and business relation with the FSI seller. “UA” mentioned on the page denotes Urban Axis which belong to Shashank Gupta.”

The main contention of the assessees is that the AO could not have placed reliance on the above said statement. We shall examine this aspect. We have seen earlier that Shri Anil Kumar Tulsiani does not have direct connection with the assessee companies herein. Further, the impugned loose document was found at the residence of Shri Anil Kumar Tulsiani. We also noticed that both the directors of the assessee companies herein have stated that the noting made in the loose paper was only estimates. We also notice that the AO has not brought on record any other corroborative evidence to vindicate the noting made in the loose paper. Under these set of facts, in our view, the AO could not have placed reliance fully on the statement given by Shri Anil Kumar Tulsiani without corroborating the same with other independent materials.

The assessees herein have contended that the noting made in the loose paper were estimates noted down at the time of negotiation of the deal with AIPL. It was stated that, after finalization of the deal, a formal MOU has been entered between the parties and the payments have been made as per the terms and conditions of MOU. It is the case of the AO that the impugned payments have been made by the assessees herein to APIL. However, we notice that the AO did not make any enquiry with APIL in order to find the veracity of the entries made in the loose paper. It is also an admitted fact that the MOU does not contain any premium amount noted down in the loose paper. The AO has also examined two directors of the assessee company, but both of them have denied any payment outside the books of accounts. Thus, all the parties to the transaction have denied any payment outside the books. Under these set of facts, we are unable to understand as to how the AO could have placed reliance on the statement of Shri Anil Kumar Tulsiani, who is not directly connected with the affairs of the assessee companies herein.

We notice that the Ld CIT(A) has expressed following views on the impugned loose paper:- (a) In order to qualify as a document with evidentiary value, the information supplied by it should discern the transaction and the person to whom it is attributable for the liability to pay the tax arising out of it. (b) The document should be a speaking document and if it is not, then the AO needs to supplement it by other corroborative evidences. (c) The submission of the assessees that the noting are just estimates in nature and it is no way the final value of the transaction. No premium amount was paid. The document was seized from the residence of Shri Anil Kumar Tulsiani, which means that the assessees herein did not have control over the document. (d) The Ld CIT(A) has relied upon following case laws to support his view that the impugned loose paper was a dumb document:- (i) Atul Kumar Jain vs. DCIT (1999)(64 TTJ (Del) 786) (ii) Sri Radheshyam Poddar (1992)(41 ITD (Cal) 449) (iii) CBI vs. V C Shukla (1998)(3 SCC 410)(SC) (e) The AO has not examined the purported receiver of payment. No third party enquiry was made by the AO. (f) The unsigned papers does not have evidentiary value as held in S.P Gramophone Co vs. CIT (1986)(24 Taxman 507/158 ITR 313)(SC) (g) The inference drawn by the AO is based on suspicion and surmises. (h) Shri Anil Kumar Tulsiani has stated that the premium amount may be ascertained from the books of accounts. He never said that the above premium amount on purchase of FSI was actually paid in cash by the assessees herein.

We noticed that the AO has placed reliance solely on the statement given by Shri Anil Kumar Tulsiani. However, a careful perusal of his statement, which extracted above, would show that the same is not reliable on account of inherent contradictions, which are being highlighted below:-

In view of the foregoing discussions, we are of the view that the Ld CIT(A) was justified in deleting the impugned addition in the hands of both the assessees. Accordingly, we uphold his decision.

In the result, both the appeals of the revenue are dismissed.