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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
Appellant by : Shri S.N. Soparkar, Sr. Advocate With Ms. Urvashi Sodhan Shri N. R. Soni, CIT-D.R. Respondentby: 10.07.2019 Date of Hearing Date of Pronouncement 25.09.2019 O R D E R
PER Ms. MADHUMITA ROY - JM:
The instant appeal is directed against the order dated 24.08.2016 passed by the Commissioner of Income Tax (appeals) 9, Ahmedabad arising out of the order dated 13.03.2015 passed by the Deputy Commissioner of Income Tax, Circle-3(1)(1), Ahmedabad under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2010-11.
The brief facts leading to the case is this that the assessee company filed its return of income on 25.09.2010 declaring total income at Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 2 - Rs.99,38,140/- which was accepted by passing intimation under section 143(1) of the Act on 24.05.2011. Subsequently on 19.05.2011 a survey was conducted by the Investigation Wing, Ahmedabad at several premises of M/s Nishant Construction Private Ltd. Upon going through the survey report dated 27.07.2012 sent to the concerned office and upon analysing the impounded documents certain facts claimed to have been emerged before the revenue authorities for which ultimately additions on following 3 counts were made: A. Addition on account of alleged bogus premium to the tune of Rs.4 crores u/s 68 of the Act. B. Rs.18,05,87,658/- on account of on money payment/ unaccounted investment in purchase of land of the appellant’s project Ratnakar IV and C. on money receipts to the tune of Rs.17,85,79,435/- The addition, however, was confirmed by the First Appellate Authority, hence the assessee is before us.
At the time of hearing of the instant appeal, the Learned Sr. Counsel appearing for the assessee submitted before us that he does not want to proceed with the Ground No.1 being the maintainability of the proceeding. Hence, the first ground preferred by the assessee is dismissed as not pressed.
We now propose to deal with the grounds relating to the addition made on each count.
Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 3 - Ground No.2:Addition on account of alleged bogus premium to the tune of Rs 4 crore.
The brief facts leading to this addition is this that the assessee was alleged to have been in receipt of investment amounting to Rs. 4 crore from one M/s Ankush Finstock Ltd whereupon the director of the said company namely Shri Bharat M. Shah was summoned under section 131 of the Act and his statement was recorded on 27.06.2011. According to the statement of Shri Bharat M. Shah upon receiving the said amount of Rs.4 crore from the director of the assessee company namely Shri Upendra C. Shah during the year relevant to assessment year 2010-11 has introduced the same into his own company M/s Ankush Finstock Ltd and subsequently used the same to invest in assessee’s company through his own company.
6. It further revealed that the assessee company allotted 80,000, 40,000 and 40,000 number of shares to Shri Nishant U. shah, Shri Upendra C. Shah and Nilam U. Shah respectively. All the shares were ultimately purchased by Nilam U. Shah. It was further claimed to have been appeared from the documents submitted by Shri Bharat M. Shah and also from his statement that Ankush Finance Ltd purchased 160000 shares of Nishant Construction Private Ltd at the rate of Rs.250/- per share including share premium of Rs.240/- from the said Nilam U. Shah. While explaining the source of funds to invest on shares of the assessee’s company, the Learned Assessing Officer also narrated the details of Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 4 - transaction of receipts from various parties togetherwith the application of Rs. 4 crore in order to establish the co-relation between the two. It was further mentioned by the Learned AO that Upendra C. Shah and Nilam U. Shah both invested Rs. 1 crore each in the loan account of the assessee company in their books of accounts to invest in its shares. Out of the amount of Rs. 4 crore so received from Ankush Finance Ltd total an amount of Rs.1,79,96,000/- (Rs.1,19,96,000/- by Nilam U. Shah and Rs.60,00,000/- by Upendra C. Shah) invested in the shares to the assessee company thereby unaccounted income was introduced in the books of accounts of the assessee company by making such investment in its shares to the tune of Rs.1,79,96,000/-. Further that loan of an amount of Rs.1,65,50,000/- has also been said to be repaid to the debtors of the assessee company from whom the assessee took loans immediately preceding the month of investment i.e. December 2008. Thus the amount of Rs.1,65,50,000/- has been said to be brought to the books of assessee company being Nishant Construction Private Ltd. as observed by the Learned Assessing Officer. The entire pattern of transaction by rotation of money actually owned by Shri Uprendra C. Shah is nothing but a clever trick adopted by the assessee to introduce unaccounted income in the group company and individuals in a disguised manner and ultimately the assessment was finalised inter alia by making addition of Rs.4 crore under Section 68 of the Act on account of unexplained credits which was further confirmed by the First Appellate Authority. Hence the instant appeal before us.
Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 5 - 7. During the appellate proceeding the assessee submitted the following before the Learned First Appellate Authority:
“5.1 On this issue the appellant during the course of appellate proceedings submitted as under:- "(i) ADDITION ON ACCOUNT OF ALLEGED BOGUS PREMIUM Rs. 4,00.00,000/- The Ld. A.O. has erred in law and on facts in making huge addition of Rs. 400,00,000/- on account of alleged bogus share premium ignoring the fact that there was absolutely no evidence of such undisclosed income of the appellant nor any concern of the appellant with regard to the share transactions. The addition made merely on assumption and on the basis of the statement of Director of Ankush Finstock Ltd. whose cross examination was specifically asked is patently wrong and against the sanction of law. It be so held now and the huge addition of Rs.4,00,00,000/- made on this account be deleted.
(ii) The ld AO further erred in law and on facts that the appellant had furnished all the details and explanation with regard to Ankush Finstock Ltd in its letter dated 11.12.2014 along with documentary evidences which have been clearly ignored and not properly considered while making addition in the hands of the appellant.The addition made is unjustified, uncalled for and against the sanction of law. IT be so held now and addition be deleted. Your appellant submits that there is no justification at all nor any sanction of law for the addition of Rs. 4,00,00,000/- made by the ld AO in the hands of the appellant company. The addition is made on the basis of alleged statement of Mr. Bharat Shah of M/s Ankush Finstock Limited (whose cross examination is not allowed despite specific request) In this regard, your kind attention is invitedto appellant's submissions in letter dated 11.12.2014 attached with Appeal Memo as EXHIBIT-A at page 8 in which it is very clearly stated that there was no investment by M/s Ankush Finstock Limited in the appellant company. The said submissions are reiterated It is also established form the facts and evidences in the form of various documents attached with the said reply that the appellant company merely followed procedure of transfer of shares in the transactions between the share holders Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 6 - transferring their shares as per the provisions of the Companies Act. The assumption drawn by the Id AO is thus without consideration of factual position and hence even reopening based on these facts which are contrary to the view taken by AO is bad in law.
The appellant's explanation as regards the transactions of share transfer between the share holders (Transferor) and M/s Ankush Finstock Limited (Transferee) has not been rebutted by the AO and is otherwise established form the records furnished to him. The appellant reiterates the submissions made at para 1 of the letter dated 11.2.2014 (page 8 to 11 as enclosed with Appeal Memo).
The ld AO has miserably failed to appreciate the true position and also failed to consider the supporting documentary evidences in the form of share applications, Board resolution allotting shares in the year 2008- 09, allotment of shares as well as Form No 2 filed with ROC, Share transfer Forms, Resolution sanctioning transfer of Shares from both the companies etc (Attached with letter dated 11.12.2014 ).
It is therefore abundantly clear that as far as the appellant company is concerned, the addition is made merely on the basis of assumption, presumption and suspicion on the basis of alleged uncross verified statement of Mr. Bharat Shah of Ankush Finstock Ltd. It is also clear from the analysis of the transactions noted by AO in para 4 of his order that the transactions of share purchases were pertaining to year 2008 and were all genuine transactions between the various persons. Merely because the shares earlier allotted (which were accepted as genuine transactions) were transferred by the share holders during later years, it cannot be presumed that the amount received by those shareholders through proper banking channels was to be added in the hands of the appellant company which has no role to play in those transactions It be so held now and addition of Rs. 4,00,00,0007- be deleted, and addition.
It is also further submitted that the Id AO has made half hearted erroneous addition-since in para 4.1.18, it is observed that alleged unaccounted income is to be added protectively in the hands of Shri Upendra Shah and Nilam U Shah.This shows that there is no "Reason to believe" as the AO himself has doubts with regard to the satisfaction which is envisaged in section 147.
Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 7 - It is further submitted without prejudice to the above that the alleged statement of Mr. Bharat Shah is relied upon for which no cross examination is given though specifically requested by the appellant. (Para 13 of letter dated 11.12.2014 Page 11 of the EXHIBIT-A attached with appeal Memo).
The Apex Court in the case of Kishinchanmd Chellaram vs CIT 125 ITR 713(SC) that addition based by relying on the statement of third party without permitting the assessee to cross examination is not valid. It is also submitted that as is very clear form the assessment order and the submissions of the appellant in its letter dated 11.12.2014 along with documentary evidences relating to share applications , Board resolutions etc , the appellant company had no concern with the transaction of shares between Bharat M Shah or Ankush Finstock Ltd and the shareholders and there being no cash credit in the books of the appellant so far as the said transactions are concerned, the addition in the hands of the appellant is not at all justified or permissible by any provision of the Act. It be so held now and addition be deleted. It is submitted that the observations of the AO in para 4 to 4.1.18 to conclude that that modus operandi of appellant was routing the alleged unaccounted money to directors bank account and advancing loan to company are incorrect and based on no cogent material or evidence except suspicion. The Id AO has miserably failed to relate the amount of Rs. 4,00,00,000/- as the receipt by the appellant as unexplained or unaccounted income. It be so held now and addition of Rs.4,00,00,000/- be deleted."
The learned CIT(A) while confirming the addition made by the Learned AO observed as follows: “5.2 I have carefully considered the rival contentions, observation of the A.O. as well as the case law relied upon by the appellant. It is observed that the A.O has made an addition of Rs. 4 crore on account of unexplained credits as per sec.68 of the Act. It is observed from para- 4.1.18 of the order of assessment that the A.O has also made protective addition of Rs. 4 crores in the hands of Shri Upendra C. Shah and Smt. Nilam U. Shah. The addition in the hands of the appellant has been made on substantive basis. The A.O at para-4.1 to 4.1.18 has dealt with the issue of share application money received by the appellant. The A.O has observed that the appellant had allotted 1,60,000 shares at the Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 8 - rate of Rs. 250 per share (Rs. 10 + premium of Rs. 240/-) to the directors/related individuals of the directors namely Nilam U. Shah, wife of Shri Upendra Shah, Shri Upendra Shah, M.D of the appellant company and Shri Nishant U. Shah, son of Shri Upendra Shah. 160000 shares of the appellant were allotted by theappellant on 31/3/2009. Later on Smt. Nilam U. Shah purchased the shares so allotted to Shri Upendra C. Shah and Shri Nishant U. Shah. In F.Y.2009-10,Smt. Nilam U. Shah sold 160000 shares at the rate of Rs.250/- per shares to Ankush finstock Pvt. Ltd. During the post search enquiries, enquiries were also made with regard to the investment made by Ankush Finstock in the shares of Nishant Construction Pvt. Ltd./appellant by way of purchasing 160000 shares from Nilam U. Shah. Shri Bharat Manubhai Shah, Director of Ankush Finstock on 27/6/2011 was asked about the source of funds for making investments in the shares of appellant. Shri Bharat M. Shah informed and admitted before the tax authorities that he was in the business of providing entries to various groups/companies/persons. According to Shri Bharat Shah, he received cash from the beneficiary party and provided the entry to them in the form of share capital/premium. He had developed the network of bank accounts in the name of his relatives/employees and different persons in which the cash so received by the beneficiary party was introduced. After layering the cash in various bank accounts, finally a cheque is issued in the name of the beneficiary party for making share application or introducing the capital. He admitted to the tax authorities that he had received Rs. 4 crore in cash from Shri Upendra C. Shahof the appellant company. He also issued a cheque from the account of Ankush Finstock favouring Nilam U. Shah for the purchase of shares of the appellant company. He admitted that till date he had not been given any share certificate of the appellant company and at the same time the appellant had also taken blank signed share transfer forms from him which are in the possession of the appellant company. On 4/7/2011 Shri Bharat Shah re-affirmed to the tax authorities that he had received Rs. 4 crores in cash in order to buy shares of appellant company. He explain to the tax authorities how the cash was routed through various bank accounts through its statements to the bank account of Ankush Finstock through bank statements. It was evident to the tax authorities that Rs. 4 crore given in cash by Shri Upendra C. Shah to Shri Bharat Shah finally came back to Upendra Shah in the form of investment in shares of Nishant Construction Pvt. Ltd. The A.O at para-4.1.4 to para- 4.1.17 has explained the modus operandi of how the appellant issued shares to Smt. Nilam U. Shah Shri Upendra C. Shah and Nishant U. Shah. It has been observed by the A.O that all the three individuals Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 9 - have passed journal entries in their individual books in the ledger account of the appellant for making share application money. All three of them have diverted funds from their loan account to make investments in the share of the appellant. The A.O has mentioned at para-4.1.6 how the funds came to these three individuals for making investments in the shares of the appellant company. The details of funds received by these three individuals are mentioned at para-4.1.6 to 4.1.14. It can be seen from these details that through various persons the money was being introduced into the accounts of these three individuals and routed for making investments by means of share application money of the appellant company. 160000 shares of the appellant company were thus concentrated in the hands of Nilam U. Shah and finally with the help of entry operator namely Bharat M. Shah the money was introduced through purchase of shares of the appellant company at a premium. Therefore, as the funds of Rs. 4 crore in cash given by Shri Upendra Shah to Shri Bharat Shah finally came back in the form of share application money to the appellant company, although Ankush Finstock Pvt. Ltd. (company of Shri Bharat Shah) had purchased the shares of the appellant company from Nilam U. Shah. During the appellate proceedings the appellant has reiterated the submission made before the A.O. It further submitted that the A.O has failed to appreciate the supporting documentary evidence in the form of share application, Board resolutions, share transfer forms, resolution sanctioning transfer of shares etc. Thus, according to appellant it has discharged its duties u/s.68 and the A.O has failed to prove beyond doubt that money belong to the appellant. According to appellant the share purchase and sales were genuine transactions. All the money it received was through proper banking channel and it cannot be said that Rs. 4 crore that were invested by Ankush FinstockPvt Ltd. belong to the appellant.
5.3 I have gone through the submissions made by the appellant, the stand taken by the A.O as well as the case law relied upon by the appellant. The receipt of share application money by the appellant through Ankush Finstock Pvt. Ltd. cannot be said to be a genuine transaction of share application. In the instant case there was evidence and material available to show that the shareholder company i.e. Ankush Finstock Pvt. Ltd. was only a paper company and yet it had made substantial and huge investments in the form of share application money. The primary requirements for Sec. namely identification c creditors/shareholders, creditworthiness of the creditors/shareholders am genuineness of the transactions have to be decided not only Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 10 - superficial but ii depth having regard to the material available on record. The transfer of fund: through banking channels, share registration form, certificate of incorporation PAN are relevant as far as the issue of identity goes, but these details have their limitation when there is predominant evidence and material to show that the subscriber company was only a paper company and not a genuine investor.
5.4 Hon'ble Supreme Court in the case of CIT vs Durgaprasad More 82 ITF 540 has observed that "it is true that the apparent must be considered real until it is shown that there are reasons to believe that apparent is not the real.......... Little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find the reality of the recitals made in those documents." Hon'ble Supreme Court in the case of A. Govindarajulu Mudaliyar 34 ITR 807 has held that whether receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the instant case the statement of entry providers i.e. Bharat M. Shah explaining their modus operandi to help the appellant as well as Shri Upendra C. Shah, Smt. Nilam U. Shah and Nishant U. Shah to convert their unaccounted money into the accounted money by means of layering and laundering offers sufficient material on the basis of which the A.O can be said to have been fulfilled its duty. The statements of Shri Bharat M. Shah, refers to the practice of receiving cash and issuance of cheques in a systematic manner for subscription to share capital for a consideration i.e. the commission. The investigation wing has already recorded statement of such share applicant subscribing the shares of the appellant. This constitutes materials upon which one could reasonably come to the conclusion that the cash belonged to the appellant company and was introduced in the form of share capital by means of purchasing the shares of the appellant from Smt. Nilam U. Shah. Hon'ble High Court of Delhi in the case of Nova Promters and Finlease Pvt. Ltd. has held that "we are afraid that we cannot apply the ratio to a case such as the present one, (refers to dismissal of SLP against Divine Leasing case 299 ITR 268, Delhi) where the A.O is in possession of material that discredits and impeaches the particulars furnished by the assesses and also establishes the link between selfconfessed "accommodation entry providers," whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 11 - such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such "entry providers". The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre-meditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec. 68 to prove and establish e identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary."
5.5 In the instant case, even though the funds have been received from Ankush Finstock through banking channels but they do not reflect the actual genuine business activity of Ankush Finstock Pvt. Ltd. As mentioned by Shri Bharat Shah M/s. Ankush Finstock was only a front or a paper company which would enable him to provide entries to various beneficiaries which reflects that the share subscriber did not have its own profitmaking apparatus and was not involved in any genuine business activity.The front company was merely involved in rotation of money which was coming through the bank accounts but this does not reflect its creditworthiness or even genuineness of the transactions. As mentioned by Shri Bharat M. Shah, he did not have possession of the shares allotted to Ankush Finstock and had given the blank signed share transfer forms to the appellant and Shri Upendra C. Shah. It would be worth mentioning that Hon'ble Delhi High Court in the case of N.R. Portfolio Pvt. Ltd. 206 (2014) DLT 97 (Del) has held that mere production of incorporation details, PAN, the fact that 3rd person or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts protect a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive Companies, no doubt, are artificial or juristic persons but they are soulless and dependent upon the Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 12 - individuals behind them who run and manage the sail companies, it is the persons behind the company to take the decisions, control and manage them." On 16/1/2015 Hon'ble Supreme Court has dismissed the SLP in the case of by Navodaya Castle Pvt. Ltd. vs CIT 230 Taxman.com 268. The SLP was filed by Navodaya Castle Pvt. Ltd. against the ruling of Hon'ble High Court of Delhi that certificate of incorporation, PAN etc. are not sufficient for purpose of identification of subscriber company when there is material to show that subscriber was a paper company and not a genuine investor. Hon'ble Delhi High Court in the case of Navodaya Castle Pvt. Ltd. vs CIT in vide their order dated 25/8/2014 upheld the additions made by the A.O u/s.68 of the Act. Hon'ble Delhi High Court has deliberated in detail the issue of additions made u/s.68 of the Act with regard to share application money. Hon'ble High Court has dealt with various Supreme Court as well as High Court decisions with regard to additions u/s.68 and given the decision in favour of revenue especially when the share application money has been introduced into a company by means of accommodation entry. Hon'ble Delhi High Court has referred to judgments such as CIT vs Durga Prasad More 82 ITR 540 (SC), CIT vs Nova Promoters and Finlease P. Ltd., 342 ITR 169 (Delhi), CIT vs N R Portfolio P. Ltd. 206 DLT 97 (Del.), CIT vs MAP Academy P. Ltd. 206 DLT 277 (Del.) etc. Relying on the judgment of Hon'ble Supreme Court in the case of Navodaya Castle Pvt. Ltd. 230 Taxman.com 268 dated 16/1/2015 by which it has dismissed the SLP filed against the ruling of Hon'ble High Court of Delhi, I am of the considered opinion that in the instant case also the appellant has introduced share capital of Rs. 4 crore in the form of share application money through the entry provider i.e. M/s. Ankush Finstock Pvt. Ltd. The entry provider has purchased the shares of the appellant from Ms. Nilam U. Shah. But finally, the funds have come back to the appellant after systematic layering of funds. Thus, I hereby confirm the addition of Rs. 4 crore on substantive basis in the hands of the appellant. Thus, ground no.2, is hereby dismissed.”
The Learned Senior Counsel appearing for the assessee submitted before us that the authorities below had erred in law and on facts in making huge addition on account of alleged bogus share premium ignoring this particular fact that there was absolutely no supporting document and cogent evidence of such undisclosed income of the Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 13 - appellant. Such addition has been made on as assumption basis and on the basis of the statement of the director of Ankush Finstock Ltd who was not been allowed to be cross-examined by the assessee in spite of repeated request made to that effect. Apart from that the Learned Senior Counsel also argued on this particular point that though the assessee furnished all the details and explanation with regard to such share transaction to Ankush by and under its letter dated 11.12.2014 along with all the documentary evidences including the share applications, the same have been totally ignored by the authorities below while making addition which is nothing, but the colourable exercise of power, as also submitted by the learned AR. In this respect he has relied upon the said letter dated 11.12.2014 being Exhibit-A as appearing at page 45 of the paper book before us. More so the Learned Senior Counsel explained as regards transaction of share transferred between the shareholders and Ankush Finstock Ltd. has not been rebutted by the Learned Assessing Officer which was otherwise established from the records furnished to him.
It was further argued that it is clear from the analysis of the transaction noted by the Learned AO in paragraph 4 of his order that the transaction of share purchases were pertaining to the year 2008 and were all genuine transactions between the various persons. Merely because the shares earlier allotted that too was accepted as genuine transactions were transferred by the shareholders during later years, it cannot be presumed that the amount received by those shareholders through proper banking channels was to be added in the hands of the appellant company which has no role to play in those transactions. Finally, it was the argument of Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 14 - the Ld. Senior Counsel that the alleged modus operandi of appellant in routing the alleged unaccounted money to director’s bank account and advancing loan to company are absolutely incorrect and based on no cogent material and / or evidence on record except on suspicion, conjecture and surmises. Therefore, the authorities below miserably failed to relate the amount of Rs.4 crores as the receipt by the appellant as unexplained or unaccounted income and thus, addition on that basis is liable to be deleted.
At the time of hearing of the instant appeal the Ld. Departmental Representative (DR) submitted before us that the appellant company is one of such entities which indulged in introducing its own unaccounted money in the form of subscribed shares from the paper entities which was specifically brought into existence in a systematic manner. According to him the director of the Ankush Finstock Ltd namely Shri Bharat Shah admitted before the revenue authorities that he was in the business of providing entries to various groups/companies/persons. Shri Shah further admitted that he received cash from the beneficiary party and provided the entry to them in the form of share capital/premium. The main contention of the Ld DR is this that the receipt of share application money by the appellant through Ankush Finstock Ltd. cannot be said to be a genuine transaction of share application. The evidences/materials available with the authorities below clearly show that the shareholder company i.e. Ankush Finstock Ltd was only a paper company and yet it had made substantial and huge investments in the form of share application money. According to him the primary requirements for Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 15 - section 68 namely identification of creditors/shareholders, creditworthiness of the creditors/shareholders and genuineness of the transaction have to be decided not only superficially but in-depth having regard to the materials available on record. He further proclaims that transfer of funds through banking channels, share registration form, certificate of incorporation, PAN become irrelevant so far as the issue of identity is concerned when there is pre-dominant evidence and material to show that the subscriber company was only a paper company and not a genuine investor. He further relied upon the statement made by the director of the Ankush Finstock Ltd that he did not have possession of the shares allotted to his company and had given the blank signed shares transfer forms to the appellant and Shri Upendra C. Shah. According to the Ld DR though the funds have been received by the assessee from Ankush Finstock Ltd through banking channels, they do not reflect the actual, genuine business activity of the said company; being a paper company the entire transaction is ingenuine and thus he relied upon the conclusion made by the authorities below to this extent that the appellant has introduced the share capital of Rs. 4 crore in the form of share application money through the entry provider and hence addition has been rightly made. The Learned DR relied upon the judgement passed by the Coordinate Bench in the case of Ayaana Comtrade (P) Ltd -versus- Income Tax Officer, Ward-(1(1)(4), Ahmedabad, reported in (2019) 104 taxman.com 66 whereby and whereunder the addition in respect of unexplained share application money made by the Ld AO under Section 68 of the Act has been confirmed.
Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 16 - 12. Heard the parties, perused the relevant material available on records. We have further carefully considered the order passed by both the authorities below. We have already discussed the fact narrated by the Ld AO, confirmed by the First Appellate Authority and the case made out by the assessee before authorities below and before us as well.
We would like to formulate the point in a very short campus as to whether the addition made by the authorities below has been done in due process of law in the present fact and circumstance of the case.
While answering the issue would like to point out the basic lacuna reflecting from the orders impugned before us. It is evident on record that the authorities below primarily on the basis of the statement given by the director of Ankush Finstock Ltd namely Bharat Shah, who admittedly not been allowed to be cross-examined by the assessee despite repeated request made to that effect including the representation to that effect dated 11.12.2014 available at page 55 of the paper book before us which certainly questions the admissibility of the addition made by the authorities below. It is a settled principle of law that relying upon the deposition made by a person against the assessee, addition cannot be made without allowing the assessee to cross examine such statement recorded by the authorities under section under section 132(4)/131/133A of the Income Tax Act, 1961. Thus, the same has no evidentiary value.
Apart from that the assessee time and again furnished the relevant documents before the authorities below in the form of the share applications of Upendra C shah, Nilam U shah and Nishant Shah dated Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 17 - 15.12.2008, the Board Resolution of the assessee company dated 10.02.2009 for determination of share price, statement showing details of payment made by Ankush Finstock Ltd and share transfer form along with necessary application for such transfer, the resolution dated 10.07.2009 passed by the Board of Directors of the said Ankush Finstock Ltd in order to show that the said Ankush Finstock Ltd has not made any direct investment in the shares of the assessee company but has purchased shares worth Rs. 4 crores from Mrs Nilam U Shah. However, with utter surprise we find though those were placed before the authorities below the same were not taken into consideration either by the Ld AO or by the First Appellate Authority for the reason best known to them. Thus, the authority hasadmittedly acted in a closed and biased mind only on the basis of the statement of Bharat C shah recorded on oath under section 133of the Act and addition made thereon. The defense of the assessee has not been taken into consideration in its proper perspective either by way of examining the document placed before it as made known to the authorities by and under the representation dated 11.12.2014 or by affording opportunity to cross examine the said Bharat C Shah. It is a settled principle of law that assessment order in which addition is made on the basis of any such statement is a "nullity" as also held by Apex Court in the case of Andaman Timber Mart v. Commissioner of Central Excise, Kolkata [2015]62 taxmann.com 3 (C) where the Apex Court has observed that : " According to us, not allowing the assesses to cross examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 18 - principles of natural justice because of which the assessee was adversely affected."
The addition is therefore, howsoever bigger, admittedly made on surmises and conjectures on the basis of statement made by Bharat Shah which has no evidentiary value without any supporting cogent and / or valid document, whatsoever.
The assessee time and again discharged its duty to prove the nature and source of the amount credited in his books of accounts by placing those documents thereby shifted the onus upon the Department to bring on record relevant materials to show that why in spite of those documents being submitted by the assessee the addition is still to be made in the hands of the assessee. It is, therefore, evident on record that the authorities have not discharged their duties either by scanning those documents relied upon by the assessee in support of his case to prove the creditworthiness of the person concerned and the genuineness of the transaction or to bring any cogent document which could justify the case against the assessee to make addition; inaction apparent on their part cannot be allowed by a court of law in the present fact and circumstances of the case. With utter surprise we find that the learned CITA has observed that when they have come to a conclusion that the Ankush Finstock Ltd is not a genuine company but an entry provider or a paper company, inspite of fulfilling the condition prescribed under the law towards the creditworthiness of that person or the genuineness of the transaction by the assessee. In this regard we find that the revenue relied upon the judgment passed by the Hon’ble Apex Court in the matter of Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 19 - Navodaya Castles Pvt. Ltd.-vs-CIT reported in 230 taxman.com 268. We have carefully considered the said judgment passed by the Hon’ble Apex Court the fact whereof is entirely different from that of the fact available before us in the case in hand. In that particular case, the assessee was unable to produce directors or principle officers of the sixth share holder companies pleading that they were not shareholders now and seven years had passed since the transactions took place. We do not hesitate to conclude that such an attempt by the authorities below in relying upon a judgment passed by the Hon’ble Apex Court on a different set of facts is nothing but misleading in order to make addition against the assessee by hook or crook by the revenue.In this regard we further would like to rely upon the order passed by the Hon’bleJurisdictional High Court in the matter of PCIT-vs-Chartered Speed Private Ltd in Tax Appeal No. 126 of 2015 and Tax Appeal No. 127 of 2015. While dealing with this particular aspect of the matter the Hon’ble High Court observed as follows: “In the appeal before the Commissioner (Appeals), the order of the AO was confirmed. In the further appeal before the Tribunal, at paras 17 and 18, it was observed thus – "17. We find that in the instant case, the addition is made u/s. 68 of the Act on the ground of unexplained cash credit. As per the provisions of section 68, the initial onus lies upon the assessee to prove the nature and source of amount credited in his books of account. We find that this initial onus was discharged in the instant case by the assessee by furnishing documents like MOA, AOA, share application & board resolution, Certificate of Incorporation, Certificate of Commencement, acknowledgements of ITRs, audited accounts etc. of concerned companies. Thereafter, in our view, the onus shifted upon the Department and it was for the Department to bring on record relevant material to show that why inspite of the above stated documents, the addition is still to be made in the hands of the assessee. In the instant case, the Department has endeavoured Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 20 - to discharge its burden on the basis of statements recorded by it of the persons mentioned above.
18. We find that the assessee requested for cross-objection of the maker of the statement. Further, we find that Assessing Officer also made an attempt re allow the assessee opportunity to cross-examine the makers of the statement by issuing summons to them. However, the cross- examination could not take place because of failure on the part of the makers of the statements to appear on the appointed date. But strangely, thereafter, the Assessing Officer did not take any step to allow effective opportunity to the assessee to cross-examine the makers of the statements. The Assessing did not pursue the matter further. Thus, we find that the assessee was not allowed any real opportunity to cross-examine the persons whomade the statement at the back of the assessee. In our considered view, in the circumstances, the statement of those persons cannot be read against the assessee. Our above view finds support from the decision of the Hon'ble Jurisdictional High Court in the case of (i) Heirs and Legal Representatives of Late Laxmanbhai S. Patel Vs. Commissioner of Income Tax (supra)
(ii) CIT Vs. Indrajit Singh Suri (supra)
(iii) DCIT Vs. Mahendra Ambalal Patel (iv) CIT Vs. KantibhaiRevidas Patel (supra) In view of the above settled position of law, we find force in the argument of the assessee that the statements of the persons mentioned above are not admissible evidence against the assessee. In absence of these statements, we find that no other material has been brought on record by the Revenue to show that why still the amount in question should be treated as income of the assessee when the assessee furnished all the documents which were available with it to discharge the onus which was upon it u/s. 68 of the Act. In the above circumstances, in our considered view, the addition was made solely based on the inadmissible and unreliable material and therefore addition so made cannot be sustained. We, therefore, delete the addition of Rs.2,00,00,000/- made in the case of M/s Charted Motors Pvt. Ltd. as well as addition of Rs.70,00,000/- made in the case of M/s. Chartered Speed Private Limited."
Under the circumstances, the present Tax Appeals before this Court.
Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 21 - 4. Mr.Bhatt, learned counsel appearing for the Revenue contended that three aspects were required to be proved. One was the identity of the person concerned from whom the source of money is disclosed. The another was the creditworthiness of the person concerned and the third was the genuineness of the transaction. He submitted that in the present case, the Tribunal has committed error in not considering that the creditworthiness as well as genuineness of the transaction were not proved and therefore, irrespective of the fact that the persons who had given statements were not made available for cross-examination, the Tribunal has committed error in accepting the explanation as sufficient and thereby deleting the amount as income of the assessee concerned. He also relied upon the decision of this Court in the case of Umesh Krishnani Vs. ITO in Tax Appeal No.800/12 decided on 15.12.2013 and he contended that as the preliminary burden was not discharged by the assessee, the Tribunal has not considered the said aspect and hence, the matter deserves consideration on the question raised.
5. As recorded by the Tribunal, the Tribunal found that the initial burden was discharged by the assessee. In our view, once the Tribunal upon the appreciation of the material found and recorded the finding of the fact that the assessee had discharged initial burden, such a finding of fact would be outside the judicial scrutiny in the appeal before this Court unless the finding of fact is perverse to the record. It is an undisputed position that the statement of the persons concerned which were recorded by the department, those persons were not made available for cross-examination, may be for one reason or another inspite of the attempts made by the department. Therefore the Tribunal has rightly found that the statement of those persons cannot be read against the assessee.
The attempt made to contend that the burden is upon the assessee to prove the identity of the person, creditworthiness of the person and the genuineness of the transaction are to be examined in context to the existence of the person concerned, the factum of actual money in possession of the person and having paid to the assessee and the mode of payment. Thereafter, if the person concerned is in existence and has actually paid the amount from his account by cheque, it can be said that the initial burden is discharged so far as explanation to be considered under section 68 of the Act. Thereafter, the burden would be upon the revenue to show that either the person was bogus or there was no financial capacity to make the payment and the arrangement of money was artificial or that the money has not passed over and it was only by way of an eye wash. Such could be proved by the Revenue in the present case through the statement Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 22 - of those persons, but unfortunately, they were not made available for cross- examination andtherefore, the statements could be used as an evidence against the assessee. No otherevidence was available with the Revenue.
Under these circumstances, if the Tribunal hasfound that the explanation under section 68 of the Act was acceptable in absence of non- discharge of the burden upon the Revenue, such a finding of fact would not call for interference when the appeal before this Court is limited to the substantial questions of law. The decision upon which the reliance has been placed by Mr.Bhatt in Tax Appeal No.800/12 (supra) is of no help to the Revenue because the facts and circumstances of the present case cannot be equated with the facts of the said caseconsidered by this Court. It is hardly required to be stated that whether the explanation is sufficient or not would essentially depend upon the facts and circumstances of each case. But the principle remains that once the initial burden is discharged by the assessee, it would be for the Revenue to show that the transaction was bogus leading to conclusion for discarding of the explanation. In the present case, as observed by us hereinabove, the burden was not discharged and therefore the Tribunal has held in favour of the assessee. We do not find that any substantial question of law would arise for consideration in the present appeals, as canvassed. 8. Hence, the appeals are meritless and therefore, dismissed.”
Thus, it appears that in that case the assessee has to prove the nature and source of the amount credited in his books of accounts.
It appears from the aforesaid judgement that when the assessee has admittedly discharged its initial burden it would be for the revenue to show that the transaction was bogus leading to conclusion for discharging of the explanation.Since the same was not discharged by the authorities below the addition made on that premise has been deleted by the Learned Tribunal. In the instant case before us we find that time and again the assessee placed the documents as discussed above in order to defend his case to show the genuineness of the transaction but the same Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 23 - were not considered by the authorities below. Neither the assessee was allowed to cross examine the deponent namely Bharat C shah despite repeated request made by the assessee. Neither any evidence is forthcoming from the revenue to prove the transaction is bogus beyond doubt. Needless to mention that the ratio laid down by the Hon’ble High Court is applicable to the instant case.
We have carefully gone through the written notes of submissions filed by the Ld. CIT, Departmental Representative, as well as the rejoinder filed by the assessee. We place it at the cost of repetition, that when there was evidence in the form of share application forms, copy of bank statements of the share subscribers from where such share application amount was paid, the certification of incorporation with the copy of memorandum/resolution of the company produced by the assessee to prove the identity of the shareholders, genuineness of transactions, no room was left for doubt and suspicion unless otherwise is proved by the revenue with cogent document thereof. On careful reading of the written notes of submissions filed by the learned CIT DR we find that revenue has prayed for setting aside the issue with the directions for affording opportunity of cross examination at this stage since repeated request was not made by the assessee before the authorities below which is not correct as it appears from page 55 of the paper book being part of the representation made to the Learned DCIT,Circle-3(1)(1) as well as the submission made by the assessee before the FirstAppellate Authority appearing at page 14, paragraph 5 of the order passed by the Learned CIT(A) as impugned before us. Those clearly show that this particular Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 24 - aspect was further pointed out to the CIT(A). Thus,in the event we accede to such prayer made by the revenue, at this stage, it will be nothing but adding premium to the inaction/overaction made by the authorities below particularly when we do not find any such receipt of the appellant during the year under consideration as added under section 68 of the Act, neither we encourage multiple innings to revenue authorities as the ratio laid down in the judgement passed by the Hon’ble Jurisdictional High Court in the case of Rajesh Babubhai Damania-vs- CIT, reported in 122 Taxman 614(Guj) which was subsequently followed by the Hon’ble ITAT Bench, at Delhi in the case of COIM India private Ltd versus ACIT reported in 96 taxman.com 511.
It is relevant to mention that the judgement relied upon by the Ld. DR has no manner of application to the instant case since the basic fact is completely different from that of the judgement relied upon before us.Particularly in the said judgment the assessee failed to produce a shareapplications before the Assessing Officer which is admittedly different from the case before us. Thus, the entire action of the authorities below speaks total non-application of mind, lack of inquiry and colourable exercise of power, excessive highhandedness as also close mindedness resulting into addition merely on the basis of the statement made by the director of Ankush Finstock Ltd which was neither allowed to be cross examined; such addition, thereforeis"nullity", totally unjust, unfair and without due process of law having no legal basis and thus liable to be deleted. Hence with the above observations we delete the Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 25 - impugned addition to the tune of Rs.4 crores made on the ground of bogus premium. This ground of appeal, is thus, allowed in favour of the assessee.
Ground No. 3:Addition of Rs.18,05,87,658/- towards alleged unaccounted investment in purchase of land of the project Ratnakar -IV of the assessee company.
It further revealed from the survey enquiry that the assessee had purchased land from three individuals for the construction of its residential project as “Ratnakar IV”. The case of the revenue is this that apart from payment of Rs. 5,25,00,000/- through cheque, being the amount as reflected in the deed of sale, an amount of Rs.18,05,87,658/- was paid by the assessee by cash since the actual total value was Rs. 23,30,87,658/- as reflected on the noting on the loose paper inventoriesed at Page No. 160 of Annexure “A-2” impounded from the employee of the assessee company namely Shri Virendra N Thakkar at premises No. 801, 802, Regency Plaza, Satellite Road, Ahmedabad, who deals with matters relating to purchase of land as alleged. The said cash component is unaccounted investment of the assessee as observed by the Learned Assessing Officer and the said sum of Rs.18,05,87,658/- was added to the total income of the assessee which was, in turn, confirmed by the Ld CIT(A). Hence, the instant appeal.
Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 26 - 15. Heard the respective parties, perused the records. We find from the assessment order that the Director of the assessee company namely Shri Upendra C shah by and under his statement dated 20.05.2011 had accepted the discrepancies in his books of accounts and made a disclosure of Rs.15 crore on behalf of the group. Ultimately, the Learned AO added Rs.18,05,87,658/- which has been alleged to have been paid by cash by the assessee in regard to purchase of the said land in question.It is relevant to mention that the assessee subsequently retracted from his statement by filing an affidavit on 25.05 2011 which was made known to the authorities being the Assistant Director of Income Tax, Aykar Bhawana, Ahmedabad, by and under an intimation dated 20.06.2011 as it appears at page 118 of the paper book before us. Admittedly the authorities below while coming to the conclusion that the assessee had paid Rs.18,05,87,658/- by cash relied upon that particular document which has been narrated by the Learned Assessing Officer in the following manner:
4.2.1. During the course of survey proceedings at the premises of Nishant Construction Pvt. Ltd. at 801-802, Regency Plaza, Satellite Road, Ahmedabad a loose paper inventoried as page no.160 of Annexure A-2 was found and impounded. There are certain rough notings on this page. A figure (Rs.23,30,87,658/-)is written at the top of this page with remarks 'total'. Below that, in the second line a figure of Rs.14,26,00,000/- is written with remarks 'cash paid'. A figure of Rs.9,04,87,658/- is written as the balance figure in the third line. A figureof Rs.5,25,00,000/- is written at the four line. Further, a figure of Rs.3,79,87,658/ is written at the fifth line with remarks 'cash'. To understand and interpret this paper properly it is necessary, to have a look at pages 112 to 128 ofAnnexure A-impounded from the premises of Nishant Construction Pvt. Ltd. at 801-802 Regency Plaza, Satellite Road, Ahmedabad. Page no. 112 to 128 ofAnnexure A-is the deed of registration for purchase of land by Nishant Construction Pvt. Ltd for land bearing final Plot No.43 from DashrathbhaiPunjabhai, Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 27 - MahendrabhaiDashrathbhai, and RajendrabhaiDashrathbhai. The said land was purchased by Nishant Construction Pvt. Ltd. in FY 2009-10 for its residential project known at Ratnakar-IV. 4.2.2. If the loose paper at page no. 160 of Annexure A-2 is seen in conjunction with page no. 112 to 128 ofAnnexure A-l, it can be clearly seen that the noting on page no. 160 ofAnnexure A-2 are nothing but the details of payments made for the purchase of land ofRatnakar IV. The notings reflected or page no. 160 consist of both cash and cheque payments made for the purchase of said land. The agreed price for tile land reflected in the conveyance deed dated 03/02/2010 is Rs. 5,25,00,000. This is the figure reflected at fourth line of page no. 160 of Annexure A-2. This is nothing but the cheque component of the agreed price of the land at Rs.23,30,87,658/-(the figure reflected at the top of page no. 160 of Annexure A-2). It is evident from page no. 160 of Annexure A-2 that out of the total salt consideration of Rs.23,30,87,658/- an amount of Rs.5,25,00,000/- which is reflected in the deed of conveyance was paid by cheque and the balance amount of Rs.18,05,87,658/- was paid in cash The said payment in cash was made by Nishant Construction Pvt. Ltd. out of its unaccounted income. The source for the said payment ofRs. 78,05,87,658/- is not reflected in the books of accounts of Nishant Construction Pvt. Ltd.
Apart from that the authorities below relied upon the statement made by Shri Upendra C Shah who disclosed income of Rs.15 crore on behalf of the group and also admitted discrepancy in the books of accounts as the case made out by the revenue. It is relevant to mention that the said loose paper available at page 113 of the paper book filed by the assessee before us was impounded during the survey proceedings from the premises of the company at 801-802, Regency Plaza, Satellite Road, Ahmedabad and particularly was recovered from one Virendra N Thakkar, an employee of the assessee company who happens to be the liaison officer for the company for last 23 years. However, according to the authorities below the said Shri Thakkar deals with the matters related Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 28 - to land. We have also gone through the deed of conveyance dated 03.02.2010 available at page 175 to 193 of the paper book filed before us by the assessee where the total consideration of the said sale proceed was of Rs. 5,25,00,000 as reflected at page 185 of the said paper book.
The case of the assessee is this that the said loose paper as aforesaid is a “dumb document” having no title, date or details which can lead to the conclusion that it was pertaining to the appellant and related to the alleged payment made by the appellant to DasharathbhaiPunjabhai, MahentabhaiDashrathbhai and RajendrabhaiDashrathbhai for purchase of land for the residential project of Ratnakar VI of the assessee company. It is only pure guess, without any supporting evidence to rebut the explanation of the appellant and given without any independent enquiry from the vendors regarding any such alleged cash payment being made to them as the submission made by the Learned Senior Counsel appearing for the assessee before us. The Learned Counsel further argued that the consideration amount was not disputed by the Registrar at the time of registration of the Deed of Conveyance, hence the formation of the opinion without making enquiry is nothing but absolutely on surmise and conjectures and thus the addition on that basis is liable to be deleted. The Learned Senior Counsel further argued that both the authorities below miserably failed to make proper enquiry into the matter before making addition. Merely on the basis of the figure noted on the “dumb document” seized and impounded particularly when the contents were not corroborated by any material evidence and when other figures cannot Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 29 - be presumed to be corroborated evidence in the absence of any enquiry, the addition is not sustainable. In this regard the Learned Senior Counsel appearing for the assessee relied upon the judgement passed by the Hon’bleApex Court in the matter of V. C. Shukla reported in 1998(3) SCC 410, the judgement passed by Hon’bleApex Court in the matter of Dhakeshwari Cotton Mills reported in 26 ITR 77. So far as the retraction of the statement given by the assessee is concerned it was the case of the assessee that under pressure and coercion the assessee accepted the discrepancy in the books of accounts and disclosed Rs. 15 crore as it appears at page 118 to 121 of the paper book filed by the assessee before us. It was argued by the Learned Senior Counsel for the assessee that different judicial forum pleased to hold that the statement during survey has no evidentiary value. In this aspect he also took us to the judgement passed by the Hon’ble Madras High Court in the case of CIT-vs.-S. Kader Khan, reported in 352 ITR 480. The Judgement passed by the Jurisdictional High Court in the case of CIT-vs-SardabenK.Modi, reported in 217 taxman 89 was also relied upon in order to rely upon the CBDT circular dated 10.03.2003 whereby and whereunder the Board has clarified that the Revenue Authorities are not permitted to obtain confessional statement of disclosure.
On the other hand, the crux of the argument made by the Learned CIT-DR is this that the amount of Rs. 5.5 crore is mentioned in the deed of conveyance and also in the loose sheet found, seized and impounded from the employee of the appellant company and, therefore, it was to be Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 30 - concluded that it is that amount which is reflected in the sale deed. Further that the other figures of various amounts mentioned in the said loose paper either paid or to be paid in cash has rightly been considered by the authorities below. It was further contended that in the event the aforesaid argument is not accepted by us the matter be set aside to the file of the authorities below to cross examine the Vendors of the land.
Thus, it appears that the moot point to be considered by us is as to whether the revenue can rely upon the piece of paper in question as part and parcel of the transaction pertaining to the land which has been alleged to be a dumb document by the assessee in the present facts and circumstances of the case and as to whether the statement given by Upendra C Shah at all been taken into consideration while making addition of the amount of Rs. 18,05,87,658/- as payment of cash towards the purchase of land under section 69C of the Act.
Firstly, we would like to deal with that piece of paper seized and impounded from the employee of the assessee company namely Shri Virendra N Thakkar at premises No. 801, 802, Regency Plaza, Satellite Road, Ahmedabad during survey proceeding. Admittedly, the said document as is having no title or date or broad details to draw an inference that it was particularly relating to payment made by the appellant to DasharathbhaiPunjabhai, MahendtabhaiDashrathbhai and RajendrabhaiDashrathbhai for purchase of land for the residential project of Ratnakar VI of the assessee company. In this regard, we find that no independent enquiry has been conducted by the Revenue by cross Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 31 - verification from the vendors of the land in question; the revenue has only cooked up a story on the basis of the figures appeared on such loose papers on surmises and conjectures.Purely on assumption basis the Revenue has drawn an inference that the same is nothing but relating to the property deal in question which remains an inherent defect while making addition against the assessee. If that be so, then the document can only be titled as “dumb document”and nothing else. It is also a fact as the deed of conveyance registered with the registration authorities at the prevailing Jantri rate upon payment of appropriate stamp duty charges; such stamp duty charges has been calculated on the basis of the Jantri rate not by the appellant company but by the office of the Registrar and thus the amount declared in the Deed of Registration cannot, at all be said to be incorrect and / questioned provided there is an independent enquiry made by the authorities below to that effect. In this respect, we would like to discuss the judgment passed by the Hon’ble Delhi High Court in the matter of CIT, C-1-vs-Vatika Landbase Pvt. Ltd. In that matter, the Assessing Officer did not make any enquiry from the employee or from buyers of flats in respect of actual price paid by them. In that circumstances of the case the impugned addition made merely on the basis of and unsigned and undated seized document has been held to be unsustainable in the eye of law. Thus, the proposition made by the revenue towards making addition on the basis of the figures mentioned on the said loose dumb document, thus, cannot be considered to be valid evidence in the absence of any enquiry made by the authorities which ought to have done in the manner as already dealt with us hereinabove. No authority acting judicially would have acted on the basis of a loose Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 32 - paper having no evidentiary value had there been minimum application of mind. In this regard we have considered the judgement relied upon by the Learned AR passed in the matter of V. C.Shukla, reported in 1998(3) SCC 410 wherein, it was held that the loose sheet cannot be said to be the book or entries therein is not an admissible evidence. In the case before us the such loose paper was found from one of the employees of the assessee company namely Mr. Virender N. Thakkar. Shri Thakkar did not depose that this particular loose paper belongs to the appellant company or it relates to the payment made for land in cash by the appellant company. Relying on the figure mentioned in that particular loose paper and assuming that relates to the payment made by the appellant in cash towards land dealing is ultimately is of no value if the very basis of such conclusion is not having any true force in the eye of law. We have further considered the judgement passed in the matter of CIT, Delhi-VI-vs-Girish Choudhary, reported in (2007) 163 Taxmann 608 (Delhi) where in similar circumstances a document containing entry ‘48’ was seized from the premises of the company in which the assessee was a Director. As assessee failed to explain the said entry, the Assessing Officer treated Rs.48 Lakh as assessee’s undisclosed income and made addition.The Hon’bleCourt held that since there was no material on record to show as to on what basis the Assessing Officer has reached at the conclusion that figure “48” was to be read as 48 lakhs and thus document recovered was a “dumb document”, addition therefore was unjustified and upheld the order passed by the Learned Tribunal in deleting such addition. In another matter the Hon’ble ITAT, Chennai Bench in the case of M.M.Fisheries Private Ltd.-vs.-DCIT, reported in 17 Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 33 - SOT 5 observed as follows “…the duty the Assessing Officer is not only to assess the income but also to investigate into the details of such income. The Assessing Officer had not established Nexus between the loose slips and the seized material. There was no date or signature in the loose slips. No narrations or descriptions were written on thoseslips. Since those were unsigned an undated, the contents therein were insufficient to fasten the liability on the assessee. The Learned Tribunal further held that the Assessing Officer failed to establish the payment of Rs. 2.40 crores as purchase consideration for the acquisition of 22 of land and he had failed to prove the payment; hence there was no other alternative but to rely on the books of accounts made by the assessee according to which the purchase consideration was Rs.91 lakh and this had properly tallied with the shown statement of the assessee”.
In this respect, we would further like to consider the Judgment passed by the Hon’ble Apex Court in the matter of Dhakeshwari Cotton Mills reported in 26 ITR 775, wherein it was held “even thoughIncome Tax authorities including the Assessing Officer has unfettered discretion and not strictly bound by rules and pleading as well as materials on record and is legitimately entitled to Act on the material which may not be accepted as evidences, nevertheless such discretion does not entitled them to make a pure guess and base an assessment entirely upon it without reference to any material or evidence at all”. If the ratio of this particular judgment is made to be applied in the instant case then the Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 34 - addition made on the basis of the loose paper impounded from the office premises of the appellant company is of no value at all.
Secondly, we find that time and again the authorities below has relied upon the statement made by Shri Upendra C. Shah recorded during the survey on 20.05.2011 accepting discrepancy in the books and disclosing Rs.15 crore but the affidavit dated 25.05.2011 shown by the assessee with a specific statement that such statement so recorded during survey was under pressure and coercion has not been taken into consideration in its proper perspective. The judgment passed by the Hon’ble Madras High Court in the matter of CIT-vs-S. Kadarkhan, reported in 352 ITR 480 holding that statement during survey has no evidentiary value has been upheld by the Hon’ble Apex Court. The ratio has also been followed by the Jurisdictional High Court in the case of CIT-vs-Sardaben K. Modi, reported in 217 Taxman 89. In the said judgment the Hon’ble Court was pleased to refer the CBDT Circular dated 10.03.2003 whereby and whereunder the Board has instructed that no attempt should be made to obtain confessional statement of disclosure and evidence should be collected.
We further find from the submissions made by the revenue that they have prayed for setting aside the issue to the learned AOfor re- examination of the matter which, according to us is not permissible at this stage. If the prayer is granted by us, then this will be nothing but a premium on the inaction made by the authorities below on this aspect Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 35 - when they failed to avail the chances to do so at the relevant time. Both the Learned AO or by the Learned CIT(A) failed to do it. Opportunity of cross verification from the vendors, in our considered view should not be given in the hands of the Revenue once again which will be opening a further avenue for multiple innings which has been deprecated by the Hon’ble Jurisdictional High Court in the matter of Rajesh Babubhai Damania-vs-CIT, reported in 251 ITR 54 particularly when the alleged unaccounted investment made by the assessee in respect of the property in question has not been established by the Revenue before us. Thus, taking into consideration the entire aspect of the matter, the addition made on the basis of the “dumb document” is unjustified, unwarranted and bad in law which is liable to be set aside. Hence, with the aforesaid observation, we delete the addition of Rs.18,05,87,658/- towards alleged unaccounted investment in purchase of land of the project Ratnakar -IV of the assessee company. Thus, this ground of appeal preferred by the assessee is allowed.
Ground No.4 : Addition on account of on money to the tune of Rs.17,85,79,435/-.
The 3rd addition was made in respect of the dispute relating to the 20. sell price of the flat of Ratnakar II project, sold to customers which was shown as Rs.1,780/- per square feet in the sale deed instead of Rs. 4,300/- per square feet, as disclosed at page 130 of annexure BF17 recovered/impounded /inventorised from the survey premises as the case made out by the revenue.According to the revenue it is implied that the Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 36 - assessee had received only the amount as per circle rate by way of cheque payments and all the remaining amount had been received by way of cash payments i.e. on money. Which has worked out at Rs.17,85,79,435/- and added to the total income of the assessee which was further confirmed by the Learned CIT(A).Hence, the instant appeal before us.
The revenue has conceded this ground in view of this particular fact that the issue has already been examined by the Hon’ble ITAT in the relevant portion of the written notes of submission filed by the revenue is as follows:
Ld. CIT(A) erred in law and on facts in confirming addition made by AO of Rs.17,85,79,435/- on account of alleged on money receipt from Ranker-III/IV scheme developed by the Appellant. Ld CIT(A) ought to have deleted addition made in absence of iota of evidence regarding price charged or received over and above documented rates approved by stamp valuation authority. It has been contended that this issue has already been examined by this bench of Hon’ble ITAT in decided in pursuant to the specific direction of the Hon’ble High Court in Tax Appeal No.898/2017 and the matter has attained finality by dismissal of the SLP filed by the Revenue against the orders of the Hon’ble High Court in Tax Appeal Nos.809 and 898/2017 arising out of the orders of the Hon’ble Tribunals in ITA No.378/Ahd/2016 for A.Y. 2012-13 and ITA No.1502/Ahd/2017 for A.Y. 2011-12. Therefore, the issue of addition of Rs.17,85,79,735/- may be decided accordingly.
Nishant Construction Pvt. Ltd. vs. DCIT Assessment Year 2010-11 - 37 - Taking into consideration the Judgment passed by the Hon’ble Tribunal, we find that the issue has already been settled in favour of the assessee hence, respectfully relying upon the same we allow this ground of appeal preferred by the assessee by deleting the addition of Rs.17,85,79,435/- on account of on money.
In the result, assessee’s appeal is partly allowed.