THE ACIT, CENTRAL-2, INDORE vs. M/S. CHUGH REALTY, INDORE

PER MANISH BORAD: The above captioned appeals at the instance of Revenue are directed against the respective orders of Ld. Commissioner of Income Tax(Appeals)-III, (in short ‘CIT(A)’), Indore dated 29.09.2016, 16.12.2016 24.10.2016 & 30.11.2016. Grounds of appeal in IT(SS)ANo.267/Ind/2016, Shri Mohanlal Chugh 1. “On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition made by the AO of Rs.1,89,38,425/- on account of on-money received on sale of various units in ‘The View’ Project and Rs.32,70,000/- on account of on-money received on sale of various units in ‘Almas Elements’ Project without appreciating the facts and evidences brought into light by the AO during assessment proceedings.” Grounds of appeal in IT(SS)ANo.268/Ind/2016, Shri Mohanlal Chugh 1. “On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition made by the AO of Rs.27,30,000/- on account of on-money received on sale of various units in ‘The View’ Project and Rs.3,65,88,500/- on account of on-money received on sale of various units in ‘Almas Elements’ Project without appreciating the facts and evidences brought into light by the AO during assessment proceedings.”

Grounds of appeal in ITANo.239/Ind/2017, Shri Mohanlal Chugh 1. “On the facts and in the circumstances of the case the Ld. CIT(A) 3

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erred in deleting the addition made by the AO of Rs.1,40,74,000/- on account of on-money received on sale of various units in ‘Almas Element’ Project and Rs.1,75,00,000/- on account of unexplained investment in property and Rs.3,79,04,952/- on account of undisclosed investment for purchase of plots in ‘Pulak City’ project without appreciating the facts and evidences brought in to light by the AO during assessment proceedings.

Grounds of appeal in IT(SS)ANo.77/Ind/2017, Smt. Reena Devi Chugh 1. “On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition made by the AO of Rs.20,85,427/- on account of on-money received on sale of various units in ‘The View’ Project and Rs.1,89,38,425/- on account of on-money received on sale of various units in ‘The View” Project and Rs.2,49,482/- on account of unaccounted investment in house property without appreciating the facts and evidences brought into light by the AO during assessment proceedings.”

Grounds of appeal in IT(SS)ANo.22/Ind/2017, Shri Nitesh Chugh 1. “On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition Rs.2,08,00,000/- made by the AO on account of on-money received on sale of agricultural land without appreciating the facts and evidences brought into light by the AO during assessment proceedings.”

Grounds of appeal in ITANo.122/Ind/2017, Shri Nitesh Chugh 1. “On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition Rs.3,39,000/- made by the AO on account of cash loan given from unaccounted income and Rs.1,75,48,900/- on account of unexplained investment in purchase of plots without appreciating the facts and evidences brought into light by the AO during assessment proceedings.”

Grounds of appeal in ITANo.238/Ind/2017, M/s Chugh Reality 1.“On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition made by the AO of Rs.22,71,000/- on account of sale consideration from the sale of units of “The Mark Project and Rs.5,26,74,600/- on account of unexplained investment 4

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in ‘Pulak City’ project and Rs.3,81,11,476/- on account of undisclosed investment in ‘ Sun City’ project without appreciating the facts and evidences brought in to light by the AO during assessment proceedings.”

case of Mohanlal Chug for the assessment years 2011-12 to 2013-

person of one real estate group of Indore titled as ‘Chugh Group’.

Search and Seizure operations u/s. 132 of the Act were initiated in

the Chugh Group by the DDIT(Inv.)-II, Indore on 21-09-2012.

Subsequently, notices u/s 153A of the Act were issued to the

assessee and in response, the assessee furnished returns for

respective assessment years. Thereafter, the case of the assessee, for

all three assessment years was selected for scrutiny and necessary

notices u/s 143(2) and 142(1) of the Act served upon the assessee.

Finally, the Assessing Officer framed the assessments for A.Ys.

2011-12 and 2012-13 u/s 153A r.w.s. 143(3) of the Act and for A.Y.

2013-14 u/s 143(3) of the Act, by passing a common Order dated

30.03.2015.

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assessment years before the Ld. CIT(A) and the Ld. CIT(A) deleted

the additions made by the AO.

for all the three assessment years. As all three appeals relate to the

same assessee and the issues raised are common, they were heard

together and are being disposed off by this common order for sake of

convenience and brevity.

Ground No. 1 for A.Y. 2011-12:

5 . This ground of appeal of the Revenue pertains to additions of

Rs.1,89,38,425/- and Rs.32,70,000/- made by the Assessing Officer

on account of on-money received on sale of units in ‘The View’ and

‘Almas Elements’ projects respectively of the assessee. Briefly stated

facts as culled out from the records are that the assessee along with

his wife namely Smt. Reena Devi Chugh had constructed many

multi-storied housing units in the name of ‘The View’ near Laad

Colony, Indore during F.Ys. 2009-10, 2010-11 and 2011-12. The

Assessing Officer noted that on examination during the course of

search and seizure, the receipts of Rs.6,33,12,350/- as per

registered sale deeds from sale of units in ‘The View’ project were not 6

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found recorded in the regular books of account. The Assessing

Officer further noted that the taxable profit cannot be less than 30%

of the total sales consideration as per registered sale deeds. The

Assessing Officer also noted that in real estate business, normally

the actual sales considerations are at least twice of the amounts

shown in the registered sale deeds. The Assessing Officer further

noted that 19% profit shown to have been derived by the assessee

on sale of units in “The View Project” is contrary to the actual

scenario. The AO made a comparison of “The View” project with one

residential project of the assessee titled as “Almas Elements”. The

Assessing Officer further added that the cost of construction would

have been lower in commercial project as the quality of finishing

varies drastically in both the type. The Assessing Officer also noted

that the various members of the group were involved in receiving on-

money in land transactions. As per the Assessing Officer, some

incriminating documents were found by the Search Party in this

regard and Shri Nitesh Chugh had also confirmed the receipt of on-

money in his case. In another case, it was found that Shri Vivek

Chugh had received cash of Rs.35 lakhs and the same was not

accounted for in his books of account. Accordingly, the Assessing 7

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Officer estimated the net profit of the assessee and his wife Smt.

Reena Devi Chugh from ‘The View Project’ @ 30% and made an

addition in the assessee’s income on account of short-term capital

gain. The AO also noted that assessee and the co-owner might have

received on-money equivalent to the value stated in the registered

sale deeds, on sale of various units in “The View” Project and

therefore, he made additions equivalent to the amount stated in

registered sale deeds by dividing such amount between the assessee

and his wife equally in three assessment years viz. A.Ys. 2010-11 to

2012-13 in the same proportion in which the sale registries were

executed by the assessee [Rs.1,89,38,425/- for A.Y. 2011-12 and

Rs.27,30,000/- for A.Y. 2012-13]. In respect of one another project

of the assessee titled as ‘Almas Elements’, the Assessing Officer

noted that the assessee had sold many flats and duplexes in the

name of ‘Almas Elements’ near Saket Nagar, Indore during F.Y.

2011-12 and F.Y. 2012-13. Again, in respect of this project too, the

Assessing Officer noted that the amount of Rs.5,39,32,500/- as per

registered sale deeds from sale of flats in ‘Almas Elements’ was not

found recorded in the regular books of account of the assessee. The

Assessing Officer again noted that normally the actual sales 8

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considerations are at least twice the amount as per the registered

deeds. Accordingly, the Assessing Officer made an addition of

Rs.32,70,000/-, Rs.3,65,88,500/- and Rs.1,40,74,000/-,

respectively, for A.Ys. 2011-12, 2012-13 and 2013-14 on account of

on-money from sale of units in ‘Almas Elements’ project.

The Ld. CIT(A) observed that although the assessee has himself

claimed not to have maintained any regular books of account u/s

44AA of the Act, but the bills, vouchers and details in respect of the

projects were duly produced before the Assessing Officer. The Ld.

CIT(A) also noted that in the original returns u/s 139 as well as

returns furnished in compliance to notices u/s 153A, the assessee

has duly shown income from short-term capital gain from sale of

units in ‘The View’ project. The Ld. CIT(A) noted that the Assessing

Officer has added Rs.30 on account of profit and Rs.100/- as on-

money received i.e. Rs.130/- on sales of Rs.100/- which is highly

improbable and arbitrary in the line of this business. The Ld. CIT(A)

also observed that the incriminating documents found in the hands

of other members of the assessee’s family have no relation with the

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issue on hand. The Ld. CIT(A) further noted that the two projects

‘The View’ and ‘Almas Elements’ cannot be compared as the first one

is commercial and the second is residential, they are situated at

different locations and time period of construction is also different.

The Ld. CIT(A) further observed that the assessee had produced all

the bills and vouchers in support of cost of construction of the

project and no defect or discrepancy in such bills and vouchers was

found by the Assessing Officer. The Ld. CIT(A) noted that the

assessee and his wife have jointly shown short term capital gain of

Rs.1,20,21,991/- on deemed sales consideration of

Rs.6,55,18,000/- u/s 50C which works out to 18.34%. Further, the

assessee and co-owner have not claimed any other administrations

expenses, financial expenses or depreciation as the assessee carried

out the activities of development of project as an investor and not as

a builder. The Ld. CIT(A) also noted that without bringing any

corroborative evidence on record the profit of the project cannot be

estimated @30%. In respect of the other project ‘Almas Elements’,

the Ld. CIT(A) noted that the assessee has duly shown income from

business in respect of sale of units in ‘Almas Elements’ in his

original returns of income as well as returns furnished in response 10

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to notices u/s 153A. The Ld. CIT(A) further noted that the assessee

had shown income aggregating to Rs.3,21,08,829/- for A.Ys. 2011-

12, 2012-13 and 2013-14 which is more than 30% of sale

consideration of various units. The Ld. CIT(A) also found that the

assessee had furnished a list showing complete name, address, PAN

etc. of the buyers to whom the units in the ‘Almas Elements’ project

had been sold and the Assessing Officer was requested to verify the

actual amount of receipt of sale consideration from the buyers of

properties. However, the Assessing Officer simply by rejecting the

explanation and submissions of the assessee and disregarding all

the documentary evidences made an addition equivalent to the

amount of sales consideration which was getting reflected in the

registered sale deeds. The Assessing Officer also assumed that the

assessee had received the on-money component on the sale of flats

belonging to the share of the developer. The Ld. CIT(A) relied upon

the decision of Hon’ble Supreme Court in the case of K.P. Varghese

vs. ITO & Anr. (1981) 131 ITR 597 (SC) wherein it has been held that

the onus lies on the Revenue to establish that an assessee has

understated the consideration for transfer of an immovable property

and unless such onus is discharged by the Revenue, there cannot be 11

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any presumption as regard to the understatement. Accordingly, the

Ld. CIT(A) held that no effort has been made by the Assessing Officer

for making any investigation or enquiry to substantiate his theory of

receipt of on-money or estimation of net profit @30%. Finally, the

Ld. CIT(A) deleted the additions so made by the AO in the assessee’s

income in respect of both ‘The View’ and ‘Almas Elements’ Projects

of the assessee.

appeal before this Tribunal. The ld. CIT-DR relied upon the order of

the Assessing Officer. The ld. DR also filed a Paper Book which is

carefully perused and placed on record. Per contra Ld. counsel for

the assessee referred and relied on the findings of Ld. CIT(A).

records placed before us. We find that the Ld. CIT-DR, except

placing his reliance on the findings of the Assessing Officer, could

not bring any corroborative material on record to justify the

additions made by the Assessing Officer. We find that the assessee

had duly shown the short-term capital gain from sale of units in

‘The View’ project and business income from sale of units in ‘Almas 12

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Elements’ project in his original returns of income furnished u/s

139 of the Act. We further find that during the course of the

assessment proceedings, the assessee had duly furnished all the

necessary details, documents, bills, vouchers etc. in respect of both

the projects before the Assessing Officer. We also find that the

Assessing Officer has also not made any independent enquiry or

investigation from the buyers of the property as regard to actual

receipt of sale consideration despite specifically being insisted by the

assessee during the course of the assessment proceedings. Further,

the Assessing Officer has also not brought any incriminating

material or evidence on record which could substantiate that the

assessee has actually received any on-money from the sale of units

in ‘The View’ and ‘Almas Elements’ projects. We also found that the

assessee has duly shown the income by having regard to the

provisions of section 50C of the Act. Therefore, we are of the

considered view that the Assessing Officer has made the additions

purely on his guess work and surmises which do not have any basis

whatsoever. We do not find any reason to interfere with the findings

of the Ld. CIT(A). Accordingly, the action of the Ld. CIT(A) in deleting

the additions of Rs.1,89,38,425/- and Rs.32,70,000/- on account of 13

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‘The View’ and ‘Almas Elements’ projects respectively, is hereby

sustained. Thus, the only ground raised in the appeal of the

Revenue for the A.Y. 2011-12 is dismissed.

Ground No. 1 for A.Y. 2012-13:

pertains to additions of Rs.27,30,000/- and Rs.3,65,88,500/- made

by the Assessing Officer on account of on-money received on sale of

units in ‘The View’ and ‘Almas Elements’ projects respectively of the

assessee. This ground is identical with that raised for the A.Y. 2011-

2011-12 in the preceding paras, we have discussed in detail on the

additions made by the Assessing Officer in ‘The View’ and ‘Almas

Elements’ projects. Accordingly, following our own findings given in

the preceding paras, this Ground of appeal of the Revenue is

dismissed.

Ground No. 1 for A.Y. 2013-14:

2013-14 pertains to additions of Rs.1,40,74,000/- on account of on-

money received on sale of units in ‘Almas Elements’ project,

Mohanlal Chugh & others

Rs.1,75,00,000/- on account of unexplained investment in property

and Rs.3,79,04,952/- on account of undisclosed investment for

purchase of plots in ‘Pulak City’ project.

account of on-money received on sale of units in ‘Almas Elements’

project has already been dealt with by us while adjudicating the

Ground No. 1 for A.Y. 2011-12 in the preceding paras. Accordingly,

following our own findings given in the preceding paras, the action of

the Ld. CIT(A) in deleting the addition of Rs.1,40,74,000/- for A.Y.

2013-14 is confirmed.

account of unexplained investment in property, the briefly stated

facts as culled out from the records are that during the course of

search, an unexecuted, unsigned, undated sale agreement between

partners of M/s. Gold Terrace Apartment and Chugh family for sale

of 16.34 acres land at village Bhorasala for Rs.18,00,00,000/- was

found and seized vide Page No. 112 to 116 of LPS-6. During the

course of the assessment proceedings, the Assessing Officer required

the assessee to explain the sources of payments made in respect of 15

Mohanlal Chugh & others

such sale agreement and to show cause as to why an addition of

Rs.1,75,00,000/- be not made on account of undisclosed payment

from undisclosed sources. In response, the assessee stated that

such agreement was not executed and ultimately, the deal has got

cancelled. The assessee further stated that in respect of the said

land, only token money of Rs.50,00,000/- was paid through account

payee cheque dated 23-05-2012 and except making such payment,

no further payment was made. The Assessing Officer rejected the

explanation of the assessee and stated that if the agreement was

cancelled, the amount would have been refunded to the Chugh

family. However, the said amount of Rs.50,00,000/- was not found

returned by the seller to the assessee family. Thus, the Assessing

Officer noted that the installment of Rs.1,75,00,000/- which, as per

the agreement, was payable by the assessee on 01.09.2012, would

have also been paid by the Chugh family. The Assessing Officer

further noted that while examining the books of account of the

assessee family, this payment was not found recorded in the regular

books of account of any of the assessees of Chugh family. The

Assessing Officer issued summons and notices u/s 131 and 133(6)

to Shri Mahavir Jain, ex-partner of the firm M/s. Gold Terrace 16

Mohanlal Chugh & others

Apartment, but Shri Mahavir Jain had neither attended nor filed any

reply. Accordingly, the Assessing Officer made an addition of

Rs.1,75,00,000/- in the hands of the assessee on account of

unexplained investment made in house property.

11.1 Being aggrieved, the assessee filed an appeal before the

Ld. CIT(A). The Ld. CIT(A), at para (5.2) of the impugned order, noted

that the assessee claimed that the agreement was only at draft

stage, a fact which is brought out by the unsigned, undated

agreement. The assessee further submitted that the sellers failed to

provide the necessary documents establishing their clear title due to

which the agreement came to an end. The sum of Rs.50,00,000/-

which was paid by Shri Nitesh Chugh, the son of the assessee, to

the sellers was returned by them to Shri Nitesh Chugh vide RTGS on

29.04.2013. The assessee has also submitted before the Assessing

Officer a notarized affidavit of Shri Anil Sogani, one of the partners

of M/s. Gold Terrace Apartment, the purported seller, stating that

other than the initial token money of Rs.50,00,000/-, no other

payment was made towards the said agreement. It is also stated in

the affidavit that the advance of Rs.50,00,000/- was refunded on

Mohanlal Chugh & others

29.04.2013 through RTGS. The Ld. CIT(A) further found that the

affidavit remained uncontroverted. The Ld. CIT(A) also found that

the Assessing Officer has not brought any evidence on record to

show that the first installment of Rs.1,75,00,000/- was paid before

the date of the search. The Ld. CIT(A) further observed that the

agreement states the assessee and his two sons as the joint

purchasers and the advance of Rs.50,00,000/- was paid by one of

the sons, Shri Nitesh Chugh but the addition of Rs.1,75,00,000/-

towards the first installment has been made only in the case of the

assessee and not his two sons without any basis or justification. The

Ld. CIT(A) cited and relied upon various authorities wherein it has

been held that when the seized papers have not been corroborated

by any independent evidence, it cannot be considered as acceptable

piece of evidence. Finally, the Ld. CIT(A) made a finding that the

Assessing Officer has simply proceeded to make additions on the

basis of the documents in question without bringing any evidence on

record to show that Rs.1,75,00,000/- was paid by the assessee

towards the first installment as per the terms of the unsigned,

undated agreement seized during the course of search which is not

an acceptable, sustainable and justified approach. Accordingly, the 18

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Ld. CIT(A) deleted the addition of Rs.1,75,00,000/- made by the

Assessing Officer in the hands of the assessee.

11.2 Felt aggrieved, the Revenue is in appeal before this

Tribunal. The ld. CIT-DR vehemently argued supporting the order of

the Assessing Officer. The ld. DR also filed a Paper Book which is

carefully perused and placed on record. Per contra Ld. counsel for

the assessee referred and relied on the findings of Ld. CIT(A).

11.3 We have heard the rival contentions and carefully perused

the records placed before us. We find that the Ld. CIT-DR, except

placing his reliance on the findings of the Assessing Officer, could

not bring any corroborative material on record to justify the

additions made by the Assessing Officer. We find that during the

course of the assessment proceedings, the assessee has duly

furnished a notarized affidavit of Shri Anil Sogani, one of the

partners of M/s. Gold Terrace Apartment, stating that except a

payment of Rs.50,00,000/-, no other payment was made towards

the said agreement. However, the said Affidavit was not controverted

by the Assessing Officer. We also find that during the course of the

assessment proceedings only, the assessee has also demonstrated 19

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the refund of Rs.50,00,000/- to Shri Nitesh Chugh on 29.04.2013

through RTGS but, the Assessing Officer did not make any reference

thereof in his assessment order and instead, the AO made an

incorrect finding to the effect that the amount of Rs.50,00,000/- was

not found refunded by the seller to the assessee family. We also find

that the Assessing Officer, except placing his reliance on the

payment terms stated in the unsigned and undated agreement,

could not bring any corroborative evidence on record to establish

that the installment of Rs.1,75,00,000/- was actually paid before

the date of the search. We have also carefully perused the judicial

pronouncements cited and discussed by the Ld. CIT(A) in the

impugned order. The decisions relied upon by the Ld. CIT(A) are

directly applicable to the present issue to avoid repetition, the same

are not discussed here again. In view of the above facts,

circumstances and material available on record, we find no infirmity

in the order of the Ld. CIT(A) in deleting the addition of

Rs.1,75,00,000/- made by the Assessing Officer on this count.

Accordingly, this ground of appeal of the Revenue to this effect has

no merits.

Mohanlal Chugh & others

account of unexplained investment for purchase of plots in Pulak

City, the briefly stated facts as culled out from the records are that

the assessee has purchased 25 plots (total area 31,372 sq. ft.) in

Pulak City Colony located at Rau Pithampur Road. The assessee has

shown purchase of these plots in March 2013 at a total sale

consideration of Rs.1,25,48,800/- (excluding registry expenses).

However, it is seen from the registry documents that as per the

government guideline value for these plots was Rs.3,20,93,556/-.

According to the Assessing Officer, as against the guideline value of

Rs.1023/- per sq ft., the assessee has shown purchase of these plots

at Rs.400/- per sq. ft. only. The Assessing Officer further noted that

Shri Vivek Chugh (son of the assessee) has also purchased 27 plots

(total area 31,372 sq. ft.) in Pulak City for a total sale consideration

of Rs.1,23,40,800/- (excluding registry expenses) as against the

government guideline value of Rs.3,07,00,996/-. The Assessing

Officer also observed that in another search group namely ‘Jhaveri

Group of Indore’, evidences were found that in their project namely

Silicon City located in the vicinity of the Pulak City, prevailing rate of

plots in A.Y. 2012-13 was Rs.750/- per sq. ft. and in A.Y. 2013-14, 21

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it was Rs.1100/- per sq. ft. The AO further noted that during the

course of simultaneous assessment proceedings in the case of Shri

Vivek Chugh, an undertaking was filed by the assessee that if any

undisclosed income/ expenditure/ investment is found, the same

may be added to the total income of the assessee, being father of

Shri Vivek Chugh and main earning member of family. Therefore,

the AO noted that the undisclosed investment found in Pulak City in

the name of Shri Vivek Chugh will also be added to the total income

of the assessee for the A.Y. 2013-14. Accordingly, the Assessing

Officer held that the assessee has suppressed the purchase price of

plots in Pulak City, Indore and made an addition of

Rs.1,95,44,756/- [Rs.3,20,93,556 minus Rs.1,25,48,800] in the

hands of the assessee for the A.Y. 2013-14 on account of

undisclosed investment in purchase of plots in the name of assessee

in Pulak City. Furthermore, an addition of Rs.1,83,60,196/-

[Rs.3,07,00,996 minus Rs.1,23,40,800] has also been made in the

hands of the assessee on account of undisclosed investment made

by the assessee in purchase of plots in Pulak City in the name of

Shri Vivek Chugh. Accordingly, an aggregate addition of

Rs.3,79,04,952/- was made by the Assessing Officer in the 22

Mohanlal Chugh & others

assessee’s income for A.Y. 2013-14 on account of unexplained

investment in land.

12.1 Being aggrieved, the assessee preferred an appeal before

the Ld. CIT(A) and the Ld. CIT(A), at para (6.4) of the impugned

order, noted that the Assessing Officer made the addition by relying

on the observation that the assessee group is in continuous process

of earning undisclosed income and has made reference to some

evidences found during the search regarding other issues. As per the

Ld. CIT(A), the Assessing Officer further observed that in another

project Silicon City of the Jhaveri Group located in the vicinity of

Pulak City, the prevailing rate of plots was Rs.750/- per sq. ft. in

A.Y. 2012-13 and Rs.1100/- per sq. ft. in A.Y. 2013-14. During the

course of appellate proceedings before the Ld. CIT(A), additional

evidences were submitted under Rule 46A which were duly

forwarded to the Assessing Officer for comments. According to the

Ld. CIT(A), the Assessing Officer has neither objected to the

admissibility of additional evidences nor offered any comments. The

Ld. CIT(A) further noted that the colony Pulak City was being

developed by Shri Ritesh Ajmera and due to some encroachments,

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various cases were pending before the judicial forums in respect of

the said colony. Such fact is seen from the newspaper cuttings

which have been placed on record. The Ld. CIT(A) also noted that the

details of other parties who have purchased the plots in same colony

at Rs.400/- per sq. ft. have also been placed on record. The Ld.

CIT(A) further observed that during the course of search, no

incriminating document or material was found to show that the

assessee had made payment over and above the amount stated in

the purchase deeds for the plots in Pulak City. The Ld. CIT(A) also

observed that estimation of the additions on the basis of the

assumption that as the group members indulge in receiving on-

money in land transactions, there is undisclosed consideration paid

for purchase of plots in Pulak City is not an acceptable, sustainable

and justified approach. The Ld. CIT(A) relied upon the decision of

Hon’ble Supreme Court in the case of K.P. Varghese vs. ITO & Anr.

(1981) 131 ITR 597 (SC) wherein it has been held that the onus lies

on the Revenue to establish that an assessee has understated the

consideration for transfer of an immovable property and unless such

onus is discharged by the Revenue, there cannot be any

presumption as regard to the understatement. Thus, the Ld. CIT(A) 24

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held that the addition of Rs.3,79,04,952/- made on account of

undisclosed investment for purchase of plots in Pulak City on

account of purchase consideration paid being less than the guideline

value cannot be sustained. Accordingly, the Ld. CIT(A) deleted the

entire addition of Rs.3,79,04,952/- made by the Assessing Officer in

the assessee’s income.

12.2 Being aggrieved, the Revenue is in appeal before this

Tribunal. The Ld. CIT-DR vehemently argued supporting the order of

the Assessing Officer. The ld. DR also filed a Paper Book which is

carefully perused and placed on record. Per contra Ld. counsel for

the assessee referred and relied on the findings of Ld. CIT(A).

12.3 We have heard the rival contentions and carefully perused

the records placed before us. We find that the assessee has

furnished various documentary evidences including newspaper

cuttings in support of the disputed nature of the colony. We also

find that the assessee has also furnished the details of other parties

who have purchased the plots in same colony at the same rate of

Rs.400/- per sq. ft. at which the assessee and his son purchased.

However, the Assessing Officer could neither comment nor 25

Mohanlal Chugh & others

controvert any single document or evidence furnished by the

assessee. We also find that the Assessing Officer has also not

brought any corroborative evidence on record to establish that the

assessee has paid any consideration over and above that stated in

the registered sale deeds. Further, the Assessing Officer has also not

made any independent enquiry from the sellers or from the other

parties who have purchased the plots in the Pulak City. We find that

the Assessing Officer has also not brought any incriminating

document or material on record to establish that the assessee has

paid any amount over and above the purchase consideration stated

in the registered sale deeds. We noted that the Assessing Officer has

made a reference of some rates prevailing in Silicon City of Jhaveri

Group of Indore but, in our considered opinion, it cannot be a

parameter or yardstick for determining the purchase price of the

plots in another colony. Thus, in our view, the onus was lying on the

assessing officer to establish that the assessee had paid any on-

money over and above that stated in the registered sale deeds.

However, the Assessing Officer failed to discharge such onus and

made the addition merely on assumption and presumption. We

further find force in the contention of the assessee that the 26

Mohanlal Chugh & others

impugned transactions of purchases were carried out during the

financial year 2012-13 relevant to A.Y. 2013-14 and for such year,

the provisions of s.56(2)(vii) were not made applicable. It is worth to

note that the provisions of s.56(2)(vii) have been introduced in the

statute by the Finance Act, 2013 w.e.f. 1.4.2014 only and such

provisions are not retrospective in the nature. In such

circumstances, merely on the presumption basis, any difference in

the guideline value and apparent consideration paid by an assessee

for purchase of an immovable property cannot be deemed as income

of the assessee. Undisputedly, in the present case, no positive

evidence has been brought on record to establish that the assessee

has parted with any consideration over and above that shown in the

registered sale deeds. In such circumstances, we are of the

considered view that the Ld. CIT(A) has rightly deleted the addition

of Rs.3,79,04,952/- made by the Assessing Officer in the assessee’s

income on the allegation of payment of on-money by the assessee

and his son Shri Vivek Chugh. Accordingly, this ground of the

Revenue for the A.Y. 2013-14 is dismissed.

Mohanlal Chugh & others

2012-13 and 2013-14 are dismissed.

SMT. REENA DEVI CHUGH (A.Y. 2011-12)

this Tribunal raising the only ground of appeal challenging the deletion of addition of Rs.20,85,427/- made by the Assessing Officer on account of on-money received on sale of various units in ‘The View’ Project and Rs.1,89,38,425/- on account of on-money received on sale of various units in ‘The View” Project and Rs.2,49,482/- on account of unaccounted investment in house property. Briefly stated facts as culled out

from the records are that the assessee along with her husband

namely Shri Mohanlal Chugh had constructed many multi-storied

housing units in the name of ‘The View’ near Laad Colony, Indore

during F.Ys. 2009-10, 2010-11 and 2011-12. The Assessing Officer,

in the assessment order, noted that on examination during the

course of search and seizure, the receipts of Rs.6,33,12,350/- as per

registered sale deeds from sale of units in ‘The View’ project were not

found recorded in the regular books of account. The Assessing

Officer further stated that the taxable profit cannot be less than 30% 28

Mohanlal Chugh & others

of the total sales consideration as per registered sale deeds. The

Assessing Officer also noted that in real estate business, normally

the actual sales considerations are at least twice of the amounts

shown in the registered sale deeds. The Assessing Officer further

observed that 19% profit shown to have been derived by the

assessee on sale of units in “The View Project” is contrary to the

actual scenario. The AO made a comparison of “The View” project

with one residential project of the husband of the assessee titled as

“Almas Elements”. The Assessing Officer further added that the cost

of construction would have been lower in commercial project as the

quality of finishing varies drastically in both the type. The Assessing

Officer also noted that the various members of the group were

involved in receiving on-money in land transactions. As per the

Assessing Officer, some incriminating documents were found by the

Search Party in this regard and Shri Nitesh Chugh had also

confirmed the receipt of on-money in his case. In another case, it

was found that Shri Vivek Chugh had received cash of Rs.35 lakhs

and the same was not accounted for in his books of account.

Accordingly, the Assessing Officer estimated the net profit of the

assessee and her husband Shri Mohanlal Chugh from ‘The View 29

Mohanlal Chugh & others

Project’ @ 30% and made an addition in the assessee’s income on

account of short-term capital gain [Rs.20,85,427/- for A.Y. 2011-

12]. Besides, the Assessing Officer also noted that assessee and the

co-owner might have received on-money equivalent to the value

stated in the registered sale deeds, on sale of various units in “The

View” Project and therefore, he made additions equivalent to the

amount stated in registered sale deeds by dividing such amount

between the assessee and her husband equally in three assessment

years viz. A.Ys. 2010-11 to 2012-13 in the same proportion in which

the sale registries were executed by the assessee [Rs.1,89,38,425/-

for A.Y. 2011-12].

The Ld. CIT(A) observed that although the assessee has herself

claimed not to have maintained any regular books of account u/s

44AA of the Act, but the bills, vouchers and details in respect of the

projects were duly produced before the Assessing Officer. The Ld.

CIT(A) also noted that in the original return u/s 139 as well as

return furnished in compliance to notice u/s 153A, the assessee has

duly shown income from short-term capital gain from sale of units

Mohanlal Chugh & others

in ‘The View’ project. The Ld. CIT(A) noted that the Assessing Officer

has added Rs.30 on account of profit and Rs.100/- as on-money

received i.e. Rs.130/- on sales of Rs.100/- which is highly

improbable and arbitrary in the line of this business. The Ld. CIT(A)

also observed that the incriminating documents found in the hands

of other members of the assessee’s family have no relation with the

issue on hand. The Ld. CIT(A) further stated that the two projects

‘The View’ and ‘Almas Elements’ cannot be compared as the first one

is commercial and the second is residential, they are situated at

different locations and time period of construction is also different.

The Ld. CIT(A) observed that the assessee had produced all the bills

and vouchers in support of cost of construction of the project and no

defect or discrepancy in such bills and vouchers was found by the

AO. The Ld. CIT(A) noted that the assessee and her husband have

jointly shown short term capital gain of Rs.1,20,21,991/- on deemed

sales consideration of Rs.6,55,18,000/- u/s 50C which works out to

18.34%. Further, the assessee and co-owner have not claimed any

other administrations expenses, financial expenses or depreciation

as the assessee carried out the activities of development of project as

an investor and not as a builder. The Ld. CIT(A) further stated that 31

Mohanlal Chugh & others

without bringing any corroborative evidence on record the profit of

the project cannot be estimated @30%. The Ld. CIT(A) relied upon

the decision of Hon’ble Supreme Court in the case of K.P. Varghese

vs. ITO & Anr. (1981) 131 ITR 597 (SC) wherein it has been held that

the onus lies on the Revenue to establish that an assessee has

understated the consideration for transfer of an immovable property

and unless such onus is discharged by the Revenue, there cannot be

any presumption as regard to the understatement. Accordingly, the

Ld. CIT(A) held that no effort has been made by the Assessing Officer

for making any investigation or enquiry to substantiate his theory of

receipt of on-money or estimation of net profit @30%. Finally, the

Ld. CIT(A) deleted the additions of Rs.20,85,427/- and

Rs.1,89,38,425/- made by the Assessing Officer in the assessee’s

income in respect of ‘The View’ Project of the assessee.

appeal before this Tribunal. The Ld. CIT-DR relied upon the order of

the Assessing Officer. Per contra Ld. counsel for the assessee

referred and relied on the findings of Ld. CIT(A).

Mohanlal Chugh & others

17 We have heard the rival contentions and carefully perused the

records placed before us. We find that the Ld. CIT-DR, except

placing his reliance on the findings of the Assessing Officer, could

not bring any corroborative material on record to justify the

additions made by the Assessing Officer. We find that the assessee

had duly shown the short-term capital gain from sale of units in

‘The View’ project in his original return of income furnished u/s 139

of the Act. We further find that during the course of the assessment

proceedings, the assessee had duly furnished all the necessary

details, documents, bills, vouchers etc. in respect of the project

before the Assessing Officer. We also find that the Assessing Officer

has also not made any independent enquiry or investigation from

the buyers of the property as regard to actual receipt of sale

consideration despite specifically being insisted by the assessee

during the course of the assessment proceedings. Further, the

Assessing Officer has also not brought any incriminating material or

evidence on record which could substantiate that the assessee has

actually received any on-money from the sale of units in ‘The View’

project. We also found that the assessee has duly shown the income

by having regard to the provisions of section 50C of the Act. 33

Mohanlal Chugh & others

Therefore, we are of the considered opinion that the Assessing

Officer has made the additions purely on his guess work and

surmises which do not have any basis whatsoever. We find ourselves

in full agreement with the findings of the Ld. CIT(A). Accordingly, the

action of the Ld. CIT(A) in deleting the additions of Rs.20,85,427/-

and Rs.1,89,38,425/- on account of ‘The View’ project is hereby

confirmed.

Rs.2,49,482/- made on account of unaccounted investment in

house property, the briefly stated facts as culled out from the

records are that during the course of the search proceedings, it was

found that a palatial house in the name of the assessee is under

construction at 85, Pragati Vihar, Indore. As per the Assessing

Officer, investment in the construction of house was not found

disclosed in the books of account of the assessee. During the course

of the assessment proceedings, the assessee was required to explain

the total investment in construction of house made by her and

sources thereof. In response, the assessee filed her reply. Thereafter,

a reference u/s 142A of the Act was made by the Assessing Officer

Mohanlal Chugh & others

to the District Valuation Officer, Bhopal for estimation of value of

investment in construction of the said house. The DVO submitted

his valuation report estimating the value of investment at

Rs.4,03,15,000/- as against Rs.3,60,40,102/- shown by the

assessee. Finally, the Assessing Officer, by accepting the valuation

report of the DVO and rejecting the explanation of the assessee,

made additions of Rs.42,75,898/- in five assessment years viz. A.Ys.

2009-10 to 2013-14 [Rs.2,49,482/- in A.Y. 2011-12].

The Ld. CIT(A) observed that besides incurring an expenditure of

Rs.3,60,40,102/-, the assessee has also incurred a sum of

Rs.47,61,258/- during the F.Y. 2013-14 relevant to A.Y. 2014-15.

The Ld. CIT(A) stated that the assessee had given a reason for not

submitting the details of expenses incurred on construction of house

during F.Y. 2013-14. The Ld. CIT(A) admitted the additional

evidences under Rule 46A. As per the Ld. CIT(A), the Assessing

Officer in his report dated 29.11.2016 has neither objected to the

admissibility of additional evidences nor offered any comments. The

Ld. CIT(A) stated that the assessee submitted a copy of ledger

account of house construction for F.Y. 2013-14 wherein an 35

Mohanlal Chugh & others

expenditure of Rs.47,61,258/- has been incurred by the assessee

during F.Y. 2013-14. In support of the expenditure of

Rs.47,61,258/-, the assessee furnished a copy of relevant bank

statement along with copies of bills. The Ld. CIT(A) noted that after

including the said expenditure of Rs.47,61,258/-, the total

investment of the assessee towards the property amounts to

Rs.4,08,01,360/- which is more than the value of Rs.4,03,15,000/-

determined by the DVO. Accordingly, the Ld. CIT(A) deleted the

addition so made by the Assessing Officer on the basis of the DVO’s

report. Now, aggrieved with the order of Ld. CIT(A), the Revenue is in

appeal before this Tribunal against the additions deleted by the Ld.

CIT(A). The Ld. CIT-DR relied upon the order of the Assessing

Officer. Per contra Ld. counsel for the assessee referred and relied

on the findings of Ld. CIT(A).

records placed before us. We find that the construction of the House

at 85, Pragati Vihar, Indore, has been claimed to have been

commenced by the assessee during the F.Y. 2008-09 [A.Y. 2009-10]

and the same has been claimed to have been completed during the

F.Y. 2013-14 [A.Y. 2014-15]. In the said construction, the assessee 36

Mohanlal Chugh & others

has claimed to have incurred a sum of Rs. 4,08,01,360/- in various

years. During the course of the assessment proceedings, the

assessee also provided the break-up of the financial year wise

investment made in construction of the house. We also find that as

per the Report submitted by the DVO, there are two points of

variation between the DVO's valuation and the assessee's claim. The

first variation is as regard to the period of construction inasmuch

according to the DVO's estimation, the construction work was

carried out only during the period from the F.Y. 2008-09 to the F.Y.

2012-13 whereas according to the assessee's claim, the construction

work lasted till F.Y. 2013-14. We find that over and above the cost of

Rs.3,60,40,102/- incurred by the assessee uptill F.Y. 2012-13 [A.Y.

2013-14], the assessee had also incurred expenditure towards cost

of construction amounting to Rs. 47,61,258/- during the F.Y. 2013-

14 relevant to A.Y. 2014-15. We also noted that the assessee, in

support of the cost of construction of Rs.47,61,258/- during F.Y.

2013-14, the assessee has duly furnished copies of the bills and

bank statements evidencing payments which were forwarded by the

Ld. CIT(A) to the Assessing Officer. However, we find that the

Assessing Officer could not controvert any of the documentary 37

Mohanlal Chugh & others

evidences furnished by the assessee. We also find that the Assessing

Officer has also not brought any corroborative evidence or material

on record to establish that the construction of the house got

completed at any time earlier than that claimed by the assessee. We

further find that the assessee has also challenged the DVO’s report

by pointing out various defects and discrepancies prevailing in such

report. However, the Assessing Officer could neither by himself

controvert any of the points raised by the assessee nor he sought

any clarification from the DVO and merely, by rejecting the

submission of the assessee and accepting the DVO’s report, made

the addition in the assessee’s income. Thus, we find that if the

investment made by the assessee during the F.Y. 2013-14 at

Rs.47,61,258/- is also taken into consideration, the total cost of

construction shown by the assessee herself would work out to be at

Rs. 4,08,01,360/- which is much higher than the cost of

construction of Rs.4,03,15,000/- determined by the DVO. Thus, in

our considered opinion, the assessee has fully established the total

cost of construction of Rs.4,08,01,360/- with supporting evidences

which remained unrebutted by the Assessing Officer. In such

circumstances, we don’t find any infirmity in the action of the Ld. 38

Mohanlal Chugh & others

CIT(A) in deleting the addition so made by the Assessing Officer on

account of unaccounted investment in house property. Accordingly,

we hereby confirm the action of the Ld. CIT(A) in deleting the

addition of Rs.2,49,482/- made in the hands of the assessee.

Therefore, this ground of Appeal of the Revenue is dismissed.

dismissed.

SHRI NITESH CHUGH (A.Y. 2012-13 & A.Y. 2013-14)

Ground No. 1 for A.Y. 2012-13:

Rs.2,08,00,000/- made by the AO on account of on-money received

on sale of agricultural land of the assessee. Briefly stated facts as

culled out from the records are that during the course of the search

proceedings, various incriminating loose papers were found and

seized vide LPS-1 (page no. 82 & 83 to 86), LPS-4 (page no. 2 to 6),

LPS-6 (page no. 69 to 78, 96 to 90, 94 to 108) and LPS-7 (page no.

67 to 68) from the assessee’s premises situated at 503, Orbit Mall,

A.B. Road, Indore. The Assessing Officer, in the assessment order,

noted that agricultural land admeasuring 2.139 hectares situated at

Mohanlal Chugh & others

Survey No. 149/1, 150/2, 150/1/2, PH No. 26, Village Mundla

Nayta, Tehsil Indore was sold by the assessee to M/s. Avalanche

Realty Pvt. Ltd.. The Assessing Officer further stated that the total

consideration received during the period from 01-01-2011 to 21-10-

2011 was at Rs.260 lacs i.e. @Rs.50 lacs per acre but on record,

only payment of Rs.52 lacs was disclosed. The Assessing Officer

noted that Shri Mohanlal Chugh, father of the assessee, in his

statement recorded u/s. 132(4) of the Act, admitted an additional

income of on-money of Rs.2,08,00,000/- by his son, being the

assessee, against sale of the aforesaid agricultural land. The

Assessing Officer further observed that the assessee has admitted to

have received total sale consideration of Rs.2,60,00,000/- against

sale of agricultural land at Rs.52,00,000/-. The assessee also

admitted that out of total consideration of Rs.2,60,00,000/-, only

sales consideration of Rs.52,00,000/- was recorded in books and the

remaining consideration of Rs.2,08,00,000/- was received by him

from the purchaser as on-money. The Assessing Officer noted that

in the return of income filed under s.153A for A.Y. 2012-13, the

assessee has shown taxable long term capital gain from sale of land

to the extent of Rs.50,12,179/- only. The Assessing Officer further 40

Mohanlal Chugh & others

observed that out of the total sales consideration of

Rs.2,60,00,000/-, the assessee claimed indexed cost of acquisition

of land at Rs.76,06,453/- thereby showing capital gain of

Rs.1,83,93,547/-. However, against such gain of Rs.1,83,93,547/-,

the assessee has claimed a deduction u/s. 54F in respect of

investment of Rs.1,89,15,088/- in purchase of one residential house

situated at 18, Manishpuri, Indore. The assessee has claimed pro-

rata deduction of Rs.1,33,81,367/- thereby offering only a sum of

Rs.50,12,179/- as long-term capital gain. According to the Assessing

Officer, the on-money of Rs.2,08,00,000/- received by the assessee

is not a normal receipt on sale of capital asset and therefore, no

claim under any section of the Income Tax Act is allowable against

this receipt. According to the Assessing Officer, since the said

amount was admitted only after search action, the entire

undisclosed receipts are taxable under the head ‘Income from Other

Sources’ and no deduction under s.54F will be available against this

receipt. The Assessing Officer further stated that the claim of the

assessee u/s. 54F is also not admissible in view of the provisions of

s.115BBE. The AO also averted that although the section 115BBE is

applicable w.e.f. A.Y. 2013-14 but the same is applicable for earlier 41

Mohanlal Chugh & others

years also. Finally, the Assessing Officer made an addition of

Rs.2,08,00,000/- in the assessee’s income on account of on-money

received on sale of agricultural land for the A.Y. 2012-13.

22 Being aggrieved, the assessee filed appeal before the Ld. CIT(A).

The Ld. CIT(A) observed that the decision of the Coordinate Bench of

ITAT, Pune in the case of Shri Manish Madhav Malpani vs. ACIT,

Central Circle-1(1), Pune is applicable to the facts of the case of the

assessee. The ld. CIT(A) further noted that section 54F provides

options to the assessee to invest even within a period of one year

before the date on which transfer took place and there is no

precondition imposed by the provision to the effect that the property

is to be purchased out of the consideration received on account of

transfer of the capital asset. The ld. CIT(A) noted that undoubtedly,

the receipt of on-money is on account of sale of land which is a

capital asset and as the appellant has invested in a residential

house within a period of one year before the date on which the

transfer took place and is fulfilling the other condition u/s. 54F, the

claim for deduction u/s. 54F cannot be denied on the receipt of

unaccounted money disclosed and owned up by the appellant. The

Mohanlal Chugh & others

ld. CIT(A) relied upon the decision of the Hon’ble Bombay High Court

in the case of CIT vs. Sheth Developers (P) Ltd. (2012) 208/25

taxmann.com 173 wherein the Hon’ble Court has held that the

income disclosed in the search which was received in the course of

carrying out business activities as a builder. The ld. CIT(A) further

stated that the amount of on-money received by the assessee on

account of sale of land has to be taxed under the head ‘income from

capital gains’ and not under the head ‘income from other sources’.

The ld. CIT(A) also placed reliance on the decision of the Coordinate

Bench of ITAT, Pune in the case of Malpani Estates vs. ACIT

reported in 64 SOT 105 (Pune) wherein it is held that the character

of income does not change because of the search. The ld. CIT(A)

further noted that the provisions of section 115BBE are not

applicable in the case of the assessee for the assessment year under

consideration. Finally, the Ld. CIT(A) deleted the addition of

Rs.2,08,00,000/- so made by the Assessing Officer on account of

on-money received on sale of agricultural land for the A.Y. 2012-13.

Now, aggrieved with the Order of Ld. CIT(A), the Revenue is in appeal

before this Tribunal. The Ld. CIT-DR relied upon the order of the

Assessing Officer. The ld. DR also filed a Paper Book which is 43

Mohanlal Chugh & others

carefully perused and placed on record. Per contra Ld. counsel for

the assessee referred and relied on the findings of Ld. CIT(A).

23 We have heard the rival contentions and carefully perused the

records placed before us. We find that the Ld. DR, except placing his

reliance on the findings of the Assessing Officer, could not bring any

further material on record to justify the addition made by the

Assessing Officer. We find that there is no dispute as regard to the

receipt of sale consideration of Rs.2,60,00,000/- from sale of a

capital asset (agricultural land) by the assessee. It is also not

disputed that against sale of the aforesaid land, the assessee has

purchased one residential house situated at 18, Manishpuri, Indore

for a total consideration of Rs.1,89,15,088/-. We find that the

Assessing Officer has also not disputed the claim of deduction u/s.

54F made by the assessee in respect of the investment in purchase

of residential house. The only point of dispute raised by the

Assessing Officer is that the on-money of Rs.2,08,00,000/- admitted

during the course of search u/s. 132(1) by the assessee to have

received from sale of agricultural land is to be declared in the return

of income under the head ‘income from other sources’ and no

Mohanlal Chugh & others

deduction u/s. 54F is allowable to the assessee against the receipt

of on-money of Rs.2,08,00,000/-. We also find that as per the

provisions of section 14 of the Act, for the purpose of charge of

income-tax and computation of total income, an income has to be

divided into five heads. We also find that the fifth head of income i.e.

‘Income from Other Sources’ is a residual head and an income shall

be chargeable under this head only if it does not fall under any other

four heads of income. We are of the considered view that the on-

money received by the assessee against sale of capital asset is

nothing but un-recorded part of the sale consideration actually

received by the assessee and therefore, any gain arising from

transfer of such capital asset has to be charged only under the

provisions of s.45 of the Act. We find merit in the argument of the

AR that under provisions of clause (b) of section 153A, the Assessing

Officer is required to assess or reassess the total income of an

assessee. We also find that the expression ‘total income’ has been

defined under clause (45) of section 2 of the Act and according to

which, the expression ‘total income’ means the total amount of

income referred to in section 5, computed in the manner laid down

in the Act. Thus, in our considered opinion, even in the assessment 45

Mohanlal Chugh & others

proceedings u/s. 153A, the total income has to be computed in the

same manner in which it is computable under the normal

assessments under the provisions of s.143(3) of the Act and no

discriminatory treatment can be given for computation of total

income in pursuance of the assessment made u/s. 153A of the Act.

We also find that the position of law for giving a different treatment

has got changed only by way of insertion of a new section 115BBE in

the statute by way of the Finance Act, 2012 w.e.f. 1-4-2013, which

is not applicable for the assessment year under consideration. Thus,

we are of the considered view that the assessee is eligible for claim of

deduction u/s. 54F of the Act in respect of the on-money of

Rs.2,08,00,000/- received from sale of subject capital asset. This

view is supported by the decision of the Coordinate Bench of ITAT,

Pune in the case of Shri Manish Madhav Malpani vs. ACIT, as also

relied upon by the ld. CIT(A). We find that in that case too, the

assessee had made fresh claim of deduction u/s. 54F at

Rs.31,20,000/- against the long term capital gains declared during

the course of assessment u/s. 153A of the Act which was not so

declared in the return of income filed u/s. 139. The Coordinate

Bench was pleased to hold that the character of the income remains 46

Mohanlal Chugh & others

‘long term capital gain’ and since the assessee fulfills the conditions

laid down in provisions of s.54F of the Act, the assessee is entitled to

claim deduction u/s. 54F to the Act. Further, the decision of the

Hon’ble Bombay High Court in the case of CIT vs. Sheth Developers

(P) Ltd. (2012) 208/25 taxmann.com 173, as also relied upon by the

assessee and the ld. CIT(A), is also applicable to the case of the

assessee. The Hon’ble Court, at para (11), was pleased to hold as

under:

“11. The further case of the appellant-revenue that in view of

section 69A of the said Act the benefit of deduction under

Chapter VIA of the said Act would not be available to the

respondent-assessee is not well founded. In the present facts it

is not the case of the revenue that the money found in

possession of the respondent assessee could not be explained

and/or its source could not be explained to the satisfaction of the

Assessing Officer. In the present case undisclosed income found

in the form of cash was explained as having been acquired while

carrying on business as a builder and this explanation was

accepted by the Assessing officer by having assessed the

undisclosed income for the block period as income from profits 47

Mohanlal Chugh & others

and gains of business or profession. Therefore, the reliance by

the revenue upon the decision of the Gujrat High Court in the

matter of Fakir Mohmed Haji Hasan (supra) is not correct as the

facts of that case are completely distinguishable from the

present facts. In the present case, no question of application of

section 68,69 and 69A, 69B and 69C of the said Act arises as

the same has not been invoked by the Department. It is an

admitted position between the parties as reflected even in the

order the Assessing officer that undisclosed income was in fact

received by the respondent in the course of carrying out its

business activities as a builder. The same was returned by the

respondent as income arising from profits and gains of business

or profession and the same was accepted by the department

unlike in the matter of Fakir Mohmad Haji Hasan (supra)”

We also find that the Coordinate Bench of ITAT, Pune in the case of

Malpani Estates vs. ACIT (2014) 39 CCH 0413 (Pune Trib), by

following the decision of the Hon’ble Bombay High Court in the case

of Sheth Developers supra, has also held that the assessee was

eligible for deduction u/s. 80IB(10) in relation to additional income

Mohanlal Chugh & others

offered in statement u/s. 132(4) in the course of search and

subsequently declared in return filed in response to notice u/s.

153A. We find that the Coordinate Bench of ITAT, Ahmedabad in the

case of Shree Bhagwanbhai Revabhai Prajapati vs. ACIT (IT(SS)A No.

377/Ahd/2014, Order dated 24.06.2015) has also held that the

assessee is fully entitled to the benefit of exemption u/s. 54B of the

Act in respect of the on-money.

decisions relied upon by the assessee and the ld. CIT(A) and also

could not bring on record any contrary decision to support the claim

of the Revenue that the on-money received by the assessee from the

sale of capital asset would be taxed separately and no deduction

u/s. 54F of the Act would be available to the assessee against such

receipt of on-money. Therefore, we are of the considered opinion that

the Assessing Officer has made the impugned addition without any

basis whatsoever. We do not find any reason to interfere with the

findings of the Ld. CIT(A). Accordingly, the action of the Ld. CIT(A) in

deleting the addition of Rs.2,08,00,000/- on account of receipt of

on-money from sale of agricultural land, is confirmed. Therefore,

Mohanlal Chugh & others

this ground of Appeal of the Revenue for the A.Y. 2012-13 is

dismissed.

Ground No. 1 for A.Y. 2013-14:

to addition of Rs.3,39,000/- made by the Assessing Officer on

account of cash loan given from unaccounted income and

Rs.1,75,48,900/- on account of unexplained investment in purchase

of plots by the assessee.

as culled out from the records are that during the course of search

proceedings, various incriminating loose papers were found and

seized vide LPS-7 (page no. 63 & 64), LPS-2 (page no. 24) and LPS-7

(page no. 56, 57 & 59) from the assessee’s premises. As per the

Assessing Officer, these papers show that the assessee had given

loans in cash and against these loans, he had obtained undated

cheques from the borrowers. As per these loose papers, the assessee

had given cash loans aggregating to Rs.8,39,000/- during A.Y. 2013-

was required to make his explanation. The assessee, in his reply, 50

Mohanlal Chugh & others

admitted to have made cash loans aggregating to Rs.1,89,000/- i.e.

Rs.50,000/- (page no. 56), Rs.39,000/- (page no. 57), Rs.50,000/-

(page no. 63), Rs.50,000/- (page no. 64) out of his undisclosed

income for A.Y. 2013-14. Further, in respect of the remaining

amount, the assessee claimed that the page no. 24 of LPS-2 did not

pertain to him but it pertains to his younger brother Shri Vivek

Chugh, who has given cash loan of Rs.5,00,000/- to some Mr. Amit

Chawla against one undated cheque. The assessee submitted that

Shri Vivek Chugh has already owned such loose paper bearing no.

24 of LPS-2 and has also made a disclosure of Rs.5,00,000/- on this

count in his return filed u/s. 153A for A.Y. 2013-14. However,

according to the Assessing Officer, in respect of the remaining cash

loans of Rs.1,50,000/- i.e. (Rs.8,39,000 – Rs.1,89,000 –

Rs.5,00,000), the assessee could not furnish any satisfactory

explanation. Thus, according to the Assessing Officer, the assessee

has given cash loan of Rs.3,39,000/- (Rs.1,89,000 + Rs.1,50,000)

out of his undisclosed income for A.Y. 2013-14. Accordingly, the

Assessing Officer made an addition of Rs.3,39,000/- in the

assessee’s income for A.Y. 2013-14 on account of cash loans given

but not found recorded in books. 51

Mohanlal Chugh & others

The Ld. CIT(A) observed that out of the cash loans aggregating to

Rs.3,39,000/-, the assessee has already offered a sum of

Rs.1,89,000/- in his return for A.Y. 2013-14 filed post-search and

therefore, the ld. CIT(A) deleted the addition to the tune of

Rs.1,89,000/- made on this count. Further, as regard the remaining

addition of Rs.1,50,000/-, the ld. CIT(A) noted that such addition is

made on the basis of LPS-7/59 which is a promissory note dated

25.03.2007 given by Shri Sanjay Wadhwani in favour of Shri Vivek

Chugh. The assessee submitted before the ld. CIT(A) that the said

loose paper is not pertaining to him or any other family member and

further, the date on the promissory note is 25.03.2007 and the

income on the basis of such loose paper cannot be made in A.Y.

2013-14. The ld. CIT(A) noted that the assessee is neither the lender

nor the borrower in such loose paper and therefore, there is no

justification for making the addition in the hands of the assessee.

The ld. CIT(A) further relied upon decisions of the various judicial

authorities. Finally, the Ld. CIT(A) deleted the addition of

Rs.3,39,000/- so made by the Assessing Officer on account of cash 52

Mohanlal Chugh & others

loans for the A.Y. 2013-14. Now, aggrieved with the order of Ld.

CIT(A), the Revenue is in appeal before this Tribunal. The Ld. CIT-

DRrelied upon the order of the Assessing Officer. The ld. DR also

filed a Paper Book which is carefully perused and placed on record.

Per contra Ld. counsel for the assessee referred and relied on the

findings of Ld. CIT(A).

records placed before us. We find that the Ld. CIT-DR, except

placing his reliance on the findings of the Assessing Officer, could

not bring any further material on record to justify the addition made

by the Assessing Officer. We find that the assessee himself had

offered a sum of Rs.1,89,000/- as additional income on account of

cash loans in his return of income filed post-search for the A.Y.

2013-14. Thus, the Assessing Officer was not justified in re-making

the addition to the tune of Rs.1,89,000/- in the assessee’s income

for the relevant assessment year. Even, as regard the addition of

Rs.1,50,000/- made by the AO on the basis of page no. 59 of LPS-7,

we find that the said loose paper is in the form of a promissory note

dated 25.03.2007 given by Shri Sanjay Wadhwani in favour of Shri

Mohanlal Chugh & others

Vivek Chugh. We are in full agreement with the finding of the ld.

CIT(A) that the said promissory note neither contains the name of

the assessee nor it pertains to the assessment year under

consideration and in such circumstances, no addition could be

made in the assessee’s income on this count for the relevant

assessment year. Accordingly, the action of the ld. CIT(A) in deleting

the entire addition of Rs.3,39,000/- (Rs.1,89,000 + Rs.1,50,000) is

confirmed. .

29 Now, as regard the addition of Rs.1,75,48,900/- on account of

unexplained investment for purchase of plots in Pulak City, the

briefly stated facts as culled out from the records are that the

assessee has purchased 25 plots (total area 27,534 sq. ft.) in Pulak

City Colony located at Rau Pithampur Road. The assessee has

shown purchase of these plots in March 2013 at a total sale

consideration of Rs.1,10,13,600/- (excluding registry expenses).

However, it is seen from the registry documents that as per the

government guideline value for these plots was Rs.2,85,62,500/-.

According to the Assessing Officer, as against the guideline value of

Rs.1037/- per sq ft., the assessee has shown purchase of these plots

Mohanlal Chugh & others

at Rs.400/- per sq. ft. only. The Assessing Officer also observed that

in another search group namely ‘Jhaveri Group of Indore’, evidences

were found that in their project namely Silicon City located in the

vicinity of the Pulak City, prevailing rate of plots in A.Y. 2012-13

was Rs.750/- per sq. ft. and in A.Y. 2013-14, it was Rs.1100/- per

sq. ft. Accordingly, the Assessing Officer held that the assessee has

suppressed the purchase price of plots in Pulak City, Indore and

made an addition of Rs.1,75,48,900/- [Rs.2,85,62,500 minus

Rs.1,10,13,600] in the hands of the assessee for the A.Y. 2013-14 on

account of undisclosed investment in purchase of plots in Pulak

City. Being aggrieved, the assessee preferred an appeal before the

Ld. CIT(A). The Ld. CIT(A), at para (7.2) of the order, noted that the

Assessing Officer made the addition by relying on the observation

that the assessee group is in continuous process of earning

undisclosed income and has made reference to some evidences

found during the search regarding other issues. As per the Ld.

CIT(A), the Assessing Officer further observed that in another project

Silicon City of the Jhaveri Group located in the vicinity of Pulak City,

the prevailing rate of plots was Rs.750/- per sq. ft. in A.Y. 2012-13

and Rs.1100/- per sq. ft. in A.Y. 2013-14. During the course of 55

Mohanlal Chugh & others

appellate proceedings before the Ld. CIT(A), additional evidences

were submitted under Rule 46A which were duly forwarded to the

Assessing Officer for comments. According to the Ld. CIT(A), the

Assessing Officer has neither objected to the admissibility of

additional evidences nor offered any comments. The Ld. CIT(A)

further noted that the colony Pulak City was being developed by Shri

Ritesh Ajmera and due to some encroachments, various cases were

pending before the judicial forums in respect of the said colony.

Such fact is seen from the newspaper cuttings which have been

placed on record. The Ld. CIT(A) also noted that the details of other

parties who have purchased the plots in same colony at Rs.400/-

per sq. ft. have also been placed on record. The Ld. CIT(A) further

observed that during the course of search, no incriminating

document or material was found to show that the assessee had

made payment over and above the amount stated in the purchase

deeds for the plots in Pulak City. The Ld. CIT(A) also observed that

estimation of the additions on the basis of the assumption that as

the group members indulge in receiving on-money in land

transactions, there is undisclosed consideration paid for purchase of

plots in Pulak City is not an acceptable, sustainable and justified 56

Mohanlal Chugh & others

approach. The Ld. CIT(A) relied upon the decision of Hon’ble

Supreme Court in the case of K.P. Varghese vs. ITO & Anr. (1981)

131 ITR 597 (SC) wherein it has been held that the onus lies on the

Revenue to establish that an assessee has understated the

consideration for transfer of an immovable property and unless such

onus is discharged by the Revenue, there cannot be any

presumption as regard to the understatement. Finally, the Ld. CIT(A)

held that the addition of Rs.1,75,48,900/- made on account of

undisclosed investment for purchase of plots in Pulak City on

account of purchase consideration paid being less than the guideline

value cannot be sustained. Accordingly, the Ld. CIT(A) deleted the

entire addition of Rs.1,75,48,900/- made by the Assessing Officer in

the assessee’s income. Aggrieved with the order of Ld. CIT(A), the

Revenue is in appeal before the Tribunal against the addition deleted

by the Ld. CIT(A). The Ld. CIT-DR vehemently argued supporting the

order of the Assessing Officer. The ld. DR also filed a Paper Book

which is carefully perused and placed on record. Per contra Ld.

counsel for the assessee referred and relied on the findings of Ld.

CIT(A).

Mohanlal Chugh & others

records placed before us. We find that the assessee has furnished

various documentary evidences including newspaper cuttings in

support of the disputed nature of the colony. We also find that the

assessee has also furnished the details of other parties who have

purchased the plots in same colony at the same rate of Rs.400/- per

sq. ft. at which the assessee purchased. However, the Assessing

Officer could neither comment nor controvert any single document

or evidence furnished by the assessee. We also find that the

Assessing Officer has also not brought any corroborative evidence on

record to establish that the assessee has paid any consideration over

and above that stated in the registered sale deeds. Further, the

Assessing Officer has also not made any independent enquiry from

the sellers or from the other parties who have purchased the plots in

the Pulak City. We find that the Assessing Officer has also not

brought any incriminating document or material on record to

establish that the assessee has paid any amount over and above the

purchase consideration stated in the registered sale deeds. We noted

that the Assessing Officer has made a reference of some rates

prevailing in Silicon City of Jhaveri Group of Indore but, in our 58

Mohanlal Chugh & others

considered opinion, it cannot be a parameter or yardstick for

determining the purchase price of the plots in another colony. Thus,

in our view, the onus was lying on the assessing officer to establish

that the assessee had paid any on-money over and above that stated

in the registered sale deeds. However, the Assessing Officer failed to

discharge such onus and made the addition merely on presumption

and assumption. We further find force in the contention of the

assessee that the impugned transactions of purchases were carried

out during the financial year 2012-13 relevant to A.Y. 2013-14 and

for such year, the provisions of s.56(2)(vii) were not made applicable.

It is worth notable that the provisions of s.56(2)(vii) have been

introduced in the statute by the Finance Act, 2013 w.e.f. 1.4.2014

only and such provisions are not retrospective in the nature. In such

circumstances, merely on the presumption basis, any difference in

the guideline value and apparent consideration paid by an assessee

for purchase of an immovable property cannot be deemed as income

of the assessee. Undisputedly, in the present case, no positive

evidence has been brought on record to establish that the assessee

has parted with any consideration over and above that shown in the

registered sale deeds. In such circumstances, we are of the 59

Mohanlal Chugh & others

considered view that the Ld. CIT(A) has rightly deleted the addition

of Rs.1,75,48,900/- made by the Assessing Officer in the assessee’s

income on the allegation of payment of on-money by the assessee.

Accordingly, the ground No. 1 of the Revenue for the A.Y. 2013-14 is

dismissed.

and 2013-14 are dismissed.

M/s. CHUGH REALITY (A.Y. 2013-14)

Ground No. 1:

Rs.22,71,000/- made by the Assessing Officer on account of sale

consideration from sale of units of ‘The Mark’ project, addition of

Rs.5,26,74,600/- on account of undisclosed investment in purchase

of plots in ‘Pulak City’ project and addition of Rs.3,81,11,476/- on

account of unexplained expenditure in ‘Sun City’ project by the

assessee.

facts as culled out from the records are that during the course of

Mohanlal Chugh & others

search and post-search proceedings, it was noticed that the assessee

firm had purchased an old house situated at Plot No. 24A, Old

Palasia, Indore, admeasuring 25,464 sq. ft. for a total consideration

of Rs.8,21,00,000/- under a registered sale deed dated 06-10-2008.

It is stated by the Assessing Officer that after purchasing the above

old house, the assessee firm got the old house demolished and

constructed a multi-storeyed building thereon, titled as ‘The Mark’.

As per the Assessing Officer, during the course of search

proceedings, it was seen that the sales consideration from the units

of ‘The Mark’ project have been shown by the assessee firm at a

lower side despite the fact that the project is commercial in nature

and located at business centre of Indore. It has also been observed

that the sales consideration has been shown even below the

guideline value fixed by the Registrar of Properties. It was noticed by

the Assessing Officer that during F.Y. 2010-11 to F.Y. 2012-13, the

assessee firm has sold 69570.70 sq. ft. floor area in six floors of ‘The

Mark’ project and as per guideline, the sales ought to have been

shown by the assessee atleast for a sum of Rs.16,21,48,315/-.

However, upto 31.03.2013, the assessee had shown sales

consideration in its books at Rs.14,47,46,500/- only which, as per 61

Mohanlal Chugh & others

the Assessing Officer, makes it clear that the assessee had

understated its sales in its books by a sum of Rs.1,74,01,815/-.

During the course of the assessment proceedings, the Assessing

Officer required the assessee to show cause as to why the difference

of Rs.1,74,01,815/- be not added as undisclosed estimated sales

consideration in A.Y. 2011-12 to A.Y. 2013-14. In reply, the assessee

firm stated that it had recorded sales consideration aggregating to a

sum of Rs.17,49,93,500/- in its books of account in respect of ‘The

Mark’ Project, upto 31-03-2013, whereas the sales value adopted by

the Stamp Valuation Authority for the purpose of stamp duty was to

the extent of Rs.18,08,30,500/- thereby giving a difference of

Rs.58,37,000/-. The assessee further submitted that it had

furnished the entire details as regard to unit no., area of unit, name,

address, PAN of the buyer, sale consideration as per books,

valuation as per Stamp Valuation Authority and also furnished all

the copies of sale deeds and therefore, no addition in respect of

difference of Rs.58,37,000/- can be made. The assessee firm further

claimed that since it was holding the units in ‘The Mark’ project in

the form of stock-in-trade and not as capital assets, the provisions

of s.50C were not applicable to it. The assessee also claimed that the 62

Mohanlal Chugh & others

provisions of s.43CA which are applicable only from the A.Y. 2014-

15, cannot be made applicable to its case for the A.Y. 2013-14.

However, the Assessing Officer rejected the explanation of the

assessee and stated that the amendment by way of s.43CA is

clarificatory in nature. The Assessing Officer then made a reference

of certain incriminating documents found and seized during the

course of search in the cases of group assessees. Finally, the

Assessing Officer noted that the assessee firm has suppressed its

sales and accordingly, made an addition of Rs.49,000/- in A.Y.

2011-12, Rs.35,17,000/- in A.Y. 2012-13 and Rs.22,71,000/- in

A.Y. 2013-14. Being aggrieved, the assessee filed appeal before the

Ld. CIT(A). The Ld. CIT(A) observed that the incriminating

documents, as referred to by the Assessing Officer as found and

seized in the case of group members of the assessee firm, were not

having any bearing on the project ‘The Mark’ of the assessee. The ld.

CIT(A) noted that estimations of the additions on the basis of

assumption that as the group members were indulged in receiving

on-money in land transactions, there is an understatement of sales

in the project of the assessee also is not an acceptable, sustainable

and justifiable approach. The Ld. CIT(A) relied upon the decision of 63

Mohanlal Chugh & others

Hon’ble Supreme Court in the case of K.P. Varghese vs. ITO & Anr.

(1981) 131 ITR 597 (SC) wherein it has been held that the onus lies

on the Revenue to establish that an assessee has understated the

consideration for transfer of an immovable property and unless such

onus is discharged by the Revenue, there cannot be any

presumption as regard to the understatement. The ld. CIT(A) further

relied upon the decisions of the Hon’ble Gujarat High Court in the

case of CIT vs. Mukesh & Kishor Barot Co-owners (2013) 215

Taxman 151, Hon’ble Allahabad High Court in the case of CIT vs.

Kan Construction and Colonizers (P) Ltd. (2012) 208 Taxman 478,

the ITAT, Indore Bench in the case of ACIT vs. Danish Housing

Cooperative Society Ltd. (2013) 22 ITJ 447 wherein it has been held

that provisions of s.50C would have no application where the

transfer of immovable property is on account of sale of stock-in-

trade. The ld. CIT(A) also observed that the provisions of s.43CA can

also not be invoked in this case as the same have been inserted by

the Finance Act, 2013 w.e.f. 1-4-2014. Thus, the ld. CIT(A) deleted

the addition of Rs.22,71,000/- made by the Assessing Officer on

account of alleged understatement of sales by the assessee in its

‘The Mark’ project for the A.Y. 2013-14. Now, aggrieved with the 64

Mohanlal Chugh & others

order of Ld. CIT(A), the Revenue is in appeal before this Tribunal

against the addition deleted by the Ld. CIT(A). The Ld. CIT-DR relied

upon the order of the Assessing Officer. The ld. CIT-DR also filed a

Paper Book which is carefully perused and placed on record. Per

contra Ld. counsel for the assessee referred and relied on the

findings of Ld. CIT(A).

records placed before us. We find that the Ld. CIT-DR, except

placing his reliance on the findings of the Assessing Officer, could

not bring any further material on record to justify the addition made

by the Assessing Officer. We find that even the Assessing Officer,

while making the impugned addition, has not brought on record any

corroborative material or evidence on record to substantiate any

understatement of sales by the assessee. We also noted that the

assessee had duly furnished the entire details in respect of the sales

made by it in respect of the project ‘The Mark’ before the Assessing

Officer. If the Assessing Officer was not convinced with the sale

consideration claimed to have received by the assessee and stated in

the registered sale deeds, the Assessing Officer could have made the

Mohanlal Chugh & others

necessary enquiries from the buyers of the units in the project.

However, the Assessing Officer did not make any independent

enquiry or investigation to disprove the claim of the assessee. In

such circumstances, the Assessing Officer cannot be allowed to

proceed on presumptions and assumptions. We derive support from

the ratio laid down in the decision of the Hon’ble Supreme Court in

the case of K.P. Varghese vs. ITO & Anr. (1981) 131 ITR 597 (SC)

wherein it has been held that the onus lies on the Revenue to

establish that an assessee has understated the consideration for

transfer of an immovable property and unless such onus is

discharged by the Revenue, there cannot be any presumption as

regard to the understatement. We also find that the assessee firm is

a partnership firm engaged in the business of real estate

development which has not been doubted or disputed by the

Assessing Officer. We find that the units in the said project were

held by the assessee firm as its stock-in-trade and not as capital

assets and therefore, the provisions of s.50C which apply only in the

case of capital assets, cannot be made applicable to the case of the

assessee. We find that this Bench earlier in the case of ACIT vs.

Danish Housing Coopertative Society Ltd. (2013) 22 ITJ 447 (ITAT 66

Mohanlal Chugh & others

Indore) has already held that where the assessee has held an

immovable property as a trading asset, the income of the assessee is

taxable as business income and the provisions of s.50C have no

application in such a case. We are of the considered opinion that the

provisions of section 43CA which have been inserted in the Statute

by the Finance Act, 2013 w.e.f. 1-4-2014, were not applicable in the

case of the assessee firm for the assessment year under

consideration. Therefore, we do not find any reason for making

addition by the Assessing Officer in the assessee’s income on this

count. Accordingly, the action of the ld. CIT(A) in deleting the entire

addition of Rs.22,71,000/- for the A.Y. 2013-14 is confirmed.

unexplained investment for purchase of plots in Pulak City, the

briefly stated facts as culled out from the records are that the

assessee purchased 46 plots (total area 79,721 sq. ft.) in Pulak City

Colony located at Rau Pithampur Road. The assessee has shown

purchase of these plots in March 2013 at a total sale consideration

of Rs.3,19,78,400/- (excluding registry expenses). However, it was

seen from the registry documents that as per the government

Mohanlal Chugh & others

guideline value for these plots was Rs.8,46,53,000/-. According to

the Assessing Officer, as against the guideline value of Rs.1062/-

per sq ft., the assessee has shown purchase of these plots at

Rs.401/- per sq. ft. only. The Assessing Officer also observed that in

another search group namely ‘Jhaveri Group of Indore’, evidences

were found that in their project namely Silicon City located in the

vicinity of the Pulak City, prevailing rate of plots in A.Y. 2012-13

was Rs.750/- per sq. ft. and in A.Y. 2013-14, it was Rs.1100/- per

sq. ft. Accordingly, the Assessing Officer held that the assessee has

suppressed the purchase price of plots in Pulak City, Indore and

made an addition of Rs.5,26,74,600/- [Rs.8,46,53,000/- minus

Rs.3,19,78,400/-] in the hands of the assessee for the A.Y. 2013-14

on account of undisclosed investment in purchase of plots in Pulak

City. Being aggrieved, the assessee preferred an appeal before the

Ld. CIT(A). The Ld. CIT(A), at para (5.4) of the order, noted that the

Assessing Officer made the addition by relying on the observation

that the assessee group is in continuous process of earning

undisclosed income and has made reference to some evidences

found during the search regarding other issues. As per the Ld.

CIT(A), the Assessing Officer further observed that in another project 68

Mohanlal Chugh & others

Silicon City of the Jhaveri Group located in the vicinity of Pulak City,

the prevailing rate of plots was Rs.750/- per sq. ft. in A.Y. 2012-13

and Rs.1100/- per sq. ft. in A.Y. 2013-14. During the course of

appellate proceedings before the Ld. CIT(A), additional evidences

were submitted under Rule 46A which were duly forwarded to the

Assessing Officer for comments. According to the Ld. CIT(A), the

Assessing Officer had neither objected to the admissibility of

additional evidences nor offered any comments. The Ld. CIT(A)

further noted that the colony Pulak City was being developed by Shri

Ritesh Ajmera and due to some encroachments, various cases were

pending before the judicial forums in respect of the said colony.

Such fact is seen from the newspaper cuttings which have been

placed on record. The Ld. CIT(A) also noted that the details of other

parties who have purchased the plots in same colony at Rs.400/-

per sq. ft. have also been placed on record. The Ld. CIT(A) further

observed that during the course of search, no incriminating

document or material was found to show that the assessee had

made payment over and above the amount stated in the purchase

deeds for the plots in Pulak City. The Ld. CIT(A) also observed that

estimation of the additions on the basis of the assumption that as 69

Mohanlal Chugh & others

the group members indulge in receiving on-money in land

transactions, there is undisclosed consideration paid for purchase of

plots in Pulak City is not an acceptable, sustainable and justified

approach. The Ld. CIT(A) relied upon the decision of Hon’ble

Supreme Court in the case of K.P. Varghese vs. ITO & Anr. (1981)

131 ITR 597 (SC) wherein it has been held that the onus lies on the

Revenue to establish that an assessee has understated the

consideration for transfer of an immovable property and unless such

onus is discharged by the Revenue, there cannot be any

presumption as regard to the understatement. Finally, the Ld. CIT(A)

held that the addition of Rs.5,26,74,600/- made on account of

undisclosed investment for purchase of plots in Pulak City on

account of purchase consideration paid being less than the guideline

value cannot be sustained. Accordingly, the Ld. CIT(A) deleted the

entire addition of Rs.5,26,74,600/- made by the Assessing Officer in

the assessee’s income. Being aggrieved with the order of Ld. CIT(A),

the Revenue is in appeal before this Tribunal against the addition

deleted by the Ld. CIT(A). The ld. CIT-DR vehemently argued

supporting the order of the Assessing Officer. The ld. CIT-DR also

filed a Paper Book which is carefully perused and placed on record. 70

Mohanlal Chugh & others

Per contra Ld. counsel for the assessee referred and relied on the

findings of Ld. CIT(A).

36 We have heard the rival contentions and carefully perused the

records placed before us. We find that the assessee has furnished

various documentary evidences including newspaper cuttings in

support of the disputed nature of the colony. We also find that the

assessee has also furnished the details of other parties who have

purchased the plots in same colony at the same rate of Rs.400/- per

sq. ft. at which the assessee purchased. However, the Assessing

Officer could neither comment nor controvert any single document

or evidence furnished by the assessee. We also find that the

Assessing Officer has also not brought any corroborative evidence on

record to establish that the assessee has paid any consideration over

and above that stated in the registered sale deeds. Further, the

Assessing Officer has also not made any independent enquiry from

the sellers or from the other parties who have purchased the plots in

the Pulak City. We find that the Assessing Officer has also not

brought any incriminating document or material on record to

establish that the assessee has paid any amount over and above the

Mohanlal Chugh & others

purchase consideration stated in the registered sale deeds. We noted

that the Assessing Officer has made a reference of some rates

prevailing in Silicon City of Jhaveri Group of Indore but, in our

considered opinion, it cannot be a parameter or yardstick for

determining the purchase price of the plots in another colony. Thus,

in our view, the onus was lying on the assessing officer to establish

that the assessee had paid any on-money over and above that stated

in the registered sale deeds. However, the Assessing Officer failed to

discharge such onus and made the addition merely on presumption

and assumption. We further find sufficient merit in the contention of

the assessee that the impugned transactions of purchases were

carried out during the financial year 2012-13 relevant to A.Y. 2013-

14 and for such year, the provisions of s.56(2)(vii) were not made

applicable. It is worth notable that the provisions of s.56(2)(vii) have

been introduced in the statute by the Finance Act, 2013 w.e.f.

1.4.2014 only and such provisions are not retrospective in the

nature and furthermore, these provisions are applicable only to the

individual and HUF and not to a partnership firm. In such

circumstances, merely on the presumption basis, any difference in

the guideline value and apparent consideration paid by an assessee 72

Mohanlal Chugh & others

for purchase of an immovable property cannot be deemed as income

of the assessee. Undisputedly, in the present case, no positive

evidence has been brought on record to establish that the assessee

has parted with any consideration over and above that shown in the

registered sale deeds. In such circumstances, we are of the

considered view that the Ld. CIT(A) has rightly deleted the addition

of Rs.5,26,74,600/- made by the Assessing Officer in the assessee’s

income on the allegation of payment of on-money by the assessee.

Accordingly, the action of the ld. CIT(A) in deleting the aforesaid

addition of Rs.5,26,74,600/- is confirmed.

account of unexplained expenditure in ‘Sun City’ project, the briefly

stated facts as culled out from the records are that during the

course of search proceedings, at the residential premises of the

partners of the assessee firm, certain documents pertaining to

development of ‘Sun City’ project at Rau, Indore, mentioned as page

no. 11 to 21 of LPS-2 were found and seized. During the course of

search as well as the assessment proceedings, the assessee was

asked to explain the transactions mentioned in these papers.

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However, the assessee replied that these papers do not belong to the

assessee. According to the Assessing Officer, the assessee firm

stated that this project has been developed and executed by M/s.

Medicaps I.T. Park Pvt. Ltd. and all the details regarding the same

should be called from the same only. According to the Assessing

Officer, the assessee firm was in fact, developer of the Sun City

project. The same can be seen from the fact that it had given an

advance of Rs.4Cr. to M/s. Medicaps I.T. Park Pvt. Ltd. in the A.Y.

2012-13 as project advance. The Assessing Officer noted that this

means, the assessee was handed over the land by the land owner

i.e. M/s. Medicaps I.T. Park Pvt. Ltd. and as a caution money

towards project development, the amount of Rs.4 Cr. was advanced

to the said company. As per the Assessing Officer, it has been

extracted from the internet and facebook page of the assessee firm

that the assessee is in fact the developer of the Sun City project. The

Assessing Officer stated that the assessee firm was engaged in

development of the Sun City project at Rau and had also incurred

the total cost of Rs.3,81,11,476/- on the project development as

evident from page nos. 12 to 23 of LPS-2 found and seized from the

residential premises of the partners of assessee firm. The Assessing 74

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Officer noted that from the verification of books and bank

statements of the assessee firm as well as its partners, the

expenditure to the tune of Rs.3,81,11,476/- as mentioned in the

three RA Bills (LPS-2) is not found recorded. The Assessing Officer

further stated that the veracity of the bills cannot be doubted as the

same are duly acknowledged. The Assessing Officer treated the

amount of Rs.3,81,11,476/- as unexplained expenditure incurred by

the assessee in Sun City Project. The Assessing Officer further

stated that as the time period of the same is not clearly available

and the assessee is also not forthcoming with full facts, it is

presumed that the assessee would have incurred these expenses

after payment of project advance to the land owner of the project.

Since the said advance was made in A.Y. 2012-13, the Assessing

Officer presumed that the expenditure might have been incurred in

A.Y. 2013-14. Finally, the Assessing Officer made an addition of

Rs.3,81,11,476/- in the assessee’s income for the A.Y. 2013-14 on

account of unexplained expenditure in respect of Sun City project at

Rau. Being aggrieved, the assessee preferred an appeal before the

Ld. CIT(A). The Ld. CIT(A), at para (6.3) of the order, noted that the

addition of Rs.3,81,11,476/- has been made by adding 75

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Rs.2,75,39,046/- mentioned at loose page no. 16 and the amount of

Rs.1,05,72,430/- mentioned at page no. 21. The Ld. CIT(A) observed

that the page no. 21 is an abstract sheet of the proposed estimate.

The Ld. CIT(A) stated that the Assessing Officer has given no basis

for adding the proposed estimate in the development expenditure.

The Ld. CIT(A) further noted that the entries at page no. 16 include

previous bill amount of Rs.1,94,12,306.50/- (also mentioned at page

no. 22) and amount of running bill no. 2 at Rs.81,26,739.57/-

totaling to Rs.2,75,39,046.07/-. The Ld. CIT(A), at para (6.4) of her

Order, further stated that any development agreement, being

binding on both the parties requires registration with the Sub-

Registrar of Properties. The Ld. CIT(A) stated that the Assessing

Officer could have gathered the information either from M/s.

Medicaps I.T. Park Pvt. Ltd. or the sub-registrar of the properties but

has not brought any evidence on record to show that the assessee

firm was a developer or Sun City, Rau. The Ld. CIT(A), at para (6.5)

noted that the perusal of the seized documents shows that they are

undated, page no. 16 & 17 only are signed by one Shri Ashish

Pachori. However, as per the ld. CIT(A), the Assessing Officer has not

brought anything on record to show the relationship/ connection of 76

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Shri Ashish Pachori with the assessee firm. The Ld. CIT(A) further

stated that the said addition of Rs.3,81,11,476/- has only been

made on presumptions without bringing any corroborative evidence

on record to support the stand taken that the said expenses have

been incurred by the assessee firm. The Ld. CIT(A) relied upon

certain decisions of the judicial authorities on the ratio that the

seized papers having not corroborated by any independent evidence

are dumb documents which cannot be considered as a reliable

document or acceptable piece of evidence. Finally, the Ld. CIT(A)

made a conclusion that the Assessing Officer has simply proceeded

to make additions on the basis of the documents seized without

bringing any evidence on record to show that Rs.3,81,11,476/- was

incurred by the assessee towards development of Sun City, Rau

which is not an acceptable, sustainable and justified approach.

Accordingly, the Ld. CIT(A) deleted the entire addition of

Rs.3,81,11,476/- made by the Assessing Officer in the assessee’s

income. Being aggrieved with the order of Ld. CIT(A), the Revenue is

in appeal before this Tribunal against the addition deleted by the Ld.

CIT(A).

Mohanlal Chugh & others

Assessing Officer. The ld. DR also filed a Paper Book which is

carefully perused and placed on record. Per contra Ld. counsel for

the assessee referred and relied on the findings of Ld. CIT(A).

records placed before us. We have also carefully perused the various

loose papers seized from the residential premises of the partners of

the assessee firm which have been relied upon by the Assessing

Officer for making the impugned addition. We find that such loose

papers are in respect of one project site titled as 'Sun City', Rau.

However, at the same time, we appreciate that these loose papers do

not anywhere contain name of the assessee firm or any of its

partners. It has been claimed by the assessee firm that such loose

papers have not been prepared by, or on the instructions of, the

assessee firm. We also find that on these loose papers, no date or

period has been mentioned. We further find that some of the loose

papers merely contain some measurement notings without any

reference of any amount. We find that the loose paper page no. 21

contains the caption ‘estimate’ for some work to be done for an

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estimated cost of Rs.1,05,72,430/-. We also find that at

computerized sheets inventorized as page No.22 to 23, some cost of

work at Rs.1,94,12,306.50p has been stated. Further, at page No.16

and 17 cost of work has been mentioned at Rs.81,26,739.57p. At

page No.16, the sum total of these two costs have been mentioned at

Rs.2,75,39,046.07p. On a careful and conjoint reading of all the

subject loose papers, we find that the subject loose papers do not

convey any meaning and these loose papers, having no signature, no

date and no periodicity, can at the best be regarded as dumb

documents and the same cannot be used as an evidence against the

assessee. We find that the Assessing Officer, except relying upon the

subject loose papers, have not brought any single corroborative

material or evidence on record to establish that the assessee firm

has actually incurred any such development expenditure in respect

of Sun City project at Rau. It is an undisputed fact that the 'Sun

City' project at Rau does not belong to the assessee firm. We find

that such project is situated at land owned by one different company

namely, M/s. Medicaps IT Park Pvt. Ltd. having its registered office

at 20/1, Pushparatan Paradise, 9/5, Palasia, Indore. Thus, the

ownership of the entire project is that of the above named company 79

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only and the assessee is not having any ownership rights in such

project. Before us, the assessee firm claimed that the above named

company had approached the assessee firm for marketing its

proposed 'Sun City' project and for such purpose, the company had

appointed the assessee as one of the agents. It has been further

claimed that in such project the assessee had made bulk booking by

giving an advance of Rs.4,00,00,000/- through account payee

cheque during the financial year 2011-12 which has duly been

entered into the regular books of account of the assessee firm. The

assessee firm further stated that a copy of the resolution to this

effect passed in the Meeting of the Board of Directors of M/s.

Medicaps IT Park Pvt. Ltd., on 01-09-2011, which was also

furnished before the ld. CIT(A). The assessee firm further claimed

that the entire expenditure relating to the development of the said

'Sun City' project had been incurred by the above named company

only and the assessee has not incurred any single penny in

connection with such project. As regard the abstracts of the websites

reproduced by the Assessing Officer in the assessment order, the

assessee firm submitted that it was making its efforts to market the

project along with Medicaps I.T. Park Pvt. Ltd. only. The assessee 80

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firm further claimed that it was not having any vested interest in the

said project either as owner or developer and during the course of

entire search proceedings, not a single agreement or title deed or

any other evidence to this effect was found by the search party.

proceedings, the Assessing Officer was having full details of the

owner of the project, i.e. Medicaps IT Park Pvt. Ltd. but, despite

having the information, the Assessing Officer did not make any

independent enquiry from the company to unearth the real truth

and merely relied upon the uncorroborated loose sheets recovered

during the course of search from the premises of the assessee firm.

We also find that the Assessing Officer has not brought on record

any cogent material or evidence that the assessee had incurred any

unexplained expenditure during the previous year relevant to A.Y.

2013-14 only. We noted that the Assessing Officer himself, at para

(15.9) of his Order, has stated that the period of the payment is not

clearly available and therefore, merely on presumption the AO

formed an opinion that the expenditure might have been incurred

during the previous year relevant to the assessment year under

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consideration and made the impugned addition. We find support

from the ratio laid down by the Hon’ble Supreme Court in the case

of Dhakeshwari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC) that

any suspicion howsoever strong it may be, cannot become a basis of

any addition. We are of the considered opinion that no addition can

be made in the total income of an assessee merely on the basis of

uncorroborated, undated, unsigned seized loose papers, in absence

of any other material or evidence to substantiate the contents of

such loose papers. In our opinion, these documents are merely

dumb documents which cannot be allowed as a piece of evidence

against the assessee. We are in agreement with the findings of the

Ld. CIT(A) and the decisions of the various authorities relied upon.

Thus, we uphold the action of the ld. CIT(A) in deleting the entire

addition of Rs.3,81,11,476/- made by the Assessing Officer in the

assessee’s income merely on guess work without bringing any

cogent and corroborative material or evidence on record.

Accordingly, the ground No. 1 of the Revenue for the A.Y. 2013-14 is

dismissed.

41 In the result, the appeal of the Revenue for the A.Y. 2013-14 is

dismissed. 82

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Order was pronounced as per Rule 34 of I.T.A.T., Rules 1963 on 23 .08.2021.

Sd/- Sd/- (RAJPAL YADAV) (MANISH BORAD) VICE-PRESIDENT ACCOUNTANT MEMBER

Indore; �दनांक Dated : 23/08/2021 !vyas! Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Assistant Registrar, Indore