HARSHA ASHOK BHAMBHANI,MUMBAI vs. INCOME TAX OFFICER, MUMBAI

Is the Income Tax Officer correct in making addition u/s 69 for AY 2019- 20, when the date of registration of the property itself is registered on 18- 06-2019 i.e. in FY 2019-20 and AY 2020-21. The officer erred in making additions worth Rs.12,50,000 u/s 69 of the Income Tax Act, 1961. 2. Whether the department is correct in making addition u/s 69 when it is mentioned that the appellant is not mandated to maintain books of accounts u/s 44AA.

Whether the approach of the officer of making addition in the case of the appellant was appropriate when no addition or proceedings have been made in the hands of the co-owner of the property Mr. Dheeraj Ashok Bhambhani.

Whether the approach of the officer of making addition in the case of the appellant was appropriate when the department have accepted the transaction of another adjacent flat bearing flat no 1705 of which the appellant is the co-owner and the registration of both flats -1701 and 1705 have been made on same day and whereas flat no 1705 is of a higher value and there is no suspicion raised in that transaction.

Whether the addition made was correct considering the fact that there is no acknowledgement receipt bearing the name of appellant or bearing the signature of appellant.

That the Learned Assessing Officer erred in treating Rs.12,50,000 as unexplained investment under section 69 without any conclusive evidence and solely relying on third party statements without affording the opportunity of cross-examination.

That the Learned Assessing officer and Commissioner of Income tax (appeals) have conveniently ignored submissions made by the party and passed an order against the appellant without considering the same.

That the assessment order is bad in law as it violates principles of natural justice and fair play, in particular, the denial of opportunity to cross- examine the person whose statements were heavily relied upon.

That the Learned Assessing Officer failed to appreciate that mere mention of the assessees name in third-party documents without corroborative evidence does not constitute proof of income escaping assessment.

That the addition made is arbitrary, unjustified, and unsustainable in law, and the burden of proof has not been duly discharged by the department.

That the initiation of penalty proceedings under sections 270A and 271AAC is unjustified and without valid basis as the addition itself is not sustainable.

Whether the proceedings are as per procedures considering the fact that the approval taken from PCIT is not shared with the appellant.

Whether the assessee can be made to prove a negative..

All the ground from ground nos. 1 to 10 are interlinked and pertain to the only addition made by the AO. Accordingly, they are adjudicated together. Brief facts of the case are that the assessee filed the return of income declaring total income of Rs 6,71,090/-. The return was processed under section 143(1) of the Act. A notice under section 148 of the Act was issued based on information from the Insight Portal.As per the information available with the Department, during the year under consideration, the assessee, had been found to have made an unaccounted cash payment as on money of Rs. 12,50,000/- as part of the consideration for the purchase of Flat No.1701 in Omaxe Hazratganj Residency from the Omaxe Group. According to the assessment order, A P a g e | 4 A.Y. 2019-20 Harsha Ashok Bhambhani search action under section 132 of the Act was carried out in the case of Omaxe Group on 14.03.2022. which led to seizure of voluminous evidences examination and analysis of the data led to the identification of folders named „MAIN REPORT DATA‟ and „SHYAM NEERAV PANKAJ PANDEY‟ wherein comprehensive data of the unaccounted transactions (both receipts and payments) undertaken by the Omaxe group entities were found recorded in the MAIN REPORT excel files. The data in the excel files was substantiated with bank account statements of different entities of Omaxe group, oral evidence of its employees and statements recorded under oath of its customers. Further, it was ascertained/correlated that information contained in documents/digital data seized from different premises related with Omaxe group across different states was found included in the MAIN REPORT excel files under consideration. Importantly, substantiation of the information contained in the MAIN REPORT excel files with bank account statements, statements of employees and customers of Omaxe group and its correlation with the evidence seized from various other premises during the post search proceedings led to the consolidation of certain important findings. It lead to the identification of Annexure A35 which is a hard disk found and seized during the search proceedings at 14 Local Shopping Centre, Kalkaji, New Delhi (Office of Omaxe

3 In view of the above, the AO concluded that it was established fact that the property details found during the search action in the excel sheet were exactly matched with the property details submitted by the assessee and Omaxe Ltd. Therefore, the statement under section 132(4) of the Act was an important piece of evidence. Further, the documents were seized as per process laid down under law. From these, it was evident that assessee had purchased the said flat with a consideration of Rs. 41,93,437/- out of that Rs. 29,43,437/-was mentioned as agreement value and balance amount of Rs. 12,50,000/- was paid as on money cash component in lieu of purchase of flat, which was not recorded in the books of accounts of the Omaxe Group and the same was over and above the agreement value. This cash component was also not reported by assessee.

4 In response to the queries in this regard, the Authorised representative submitted confirmation from OMAXE Limited, affidavit from the assessee, which had already been submitted during the assessment proceedings through e-filing portal. However, no other submissions have been made by him. The assessee had filed only part submissions, wherein he denied of payment of cash. However, assessee did not provide any evidence or cogent reasoning to refute the evidences of cash payment by him. The evidence found during the course of search proceedings clearly indicated that the on money had been paid by the assessee Harsha Ashok Bhambani and same was reflected in the excel sheet. This payment was an independent transaction concerning unaccounted money paid irrespective of share of the assessee. The share percentage in the property does not invalidate the cash payment evidence. The assessee was major owner of property and her minor son was namesake owner of the property. In this regard, reliance was placed in the decision of Hon‟ble Supreme Court in case of Sumati Dayal v. CIT (1995) 214 ITR 801 (SC), wherein the Hon‟ble Supreme Court held that the genuineness of a transaction must be determined on the basis of surrounding circumstances and the overall probability of the transaction. In this case, evidence from the excel sheet duly seized by the Income tax department, along-with statements of key persons of the P a g e | 9 A.Y. 2019-20 Harsha Ashok Bhambhani group indicates that the cash payment was indeed made by the assessee. The Excel sheet entries, along with the statements from Omaxe Group key persons, provide substantive evidence of unaccounted cash payments linked to the assessee. As perratio laid down by decision of Hon‟ble Supreme Court in case of Chuharmal v. CIT (1988) 172 ITR 250 (SC), even if third-party records are used as evidence, they are valid if they show a clear link to the assessee‟s undisclosed income. The Excel sheet found during the search was admissible as evidence, establishing the undisclosed cash payment as a credible and taxable event. In case of assessee, key employee of the Omaxe group had accepted receipt of such payments. The evidences (excel sheets) were found during the search proceedings and seized in presence of two independent witnesses. Further, the evidences had been seized strengthened from statement of Shri Manish Kumar, President of Omaxe Group (aka Manish Garg) and Shri Hemant Mittal, key employee of the group recorded on oath u/s 132(4) of the Act during search. Shri Manish Kumar, President of Omaxe Group (aka Manish Garg) admitted in his statement that he supervises, maintains and updates the accounts of unaccounted cash transactions of Omaxe group.

5 The statement under section 132(4) of the Act is an important piece of evidence. In this regard, reliance is placed on the P a g e | 10 A.Y. 2019-20 Harsha Ashok Bhambhani following: The Hon‟ble Supreme Court in the case of Pullangode Rubber CIT (Allahabad High Court) 248 ITR 782, where the hon‟ble Apex Court again confirmed its own decision in the case of Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala. The Honb‟le Apex Court, in the case of Union of India & Others Vs. Dewan Bhadur Seth Gopal Das Mohta (SC) 26 ITR 722, held that: “an admission is the best evidence that an opposing party can rely upon though not conclusive, is decisive of the matter, unless successfully withdrawn or proved erroneous.” Reliance was also placed on the case of Surjeet Singh Chhabra Vs. Union of India 1997 (89),Juggilal Kamlapat v. CIT [1969] 73 ITR 702.PNB Finance Ltd. v. Shri Shital Prasad Jain [1983] etc.

6 With regard to assessee‟s request for cross examination, it was stated that there was sufficient material on record against the assessee which had been gathered after detailed investigation, the evidences are further strengthened from statement of Shri Pankaj Mandavia recorded on oath u/s 132(4) of the Act during search. The evidences on record were sufficient to prove that the assessee had made unaccounted transactions. As such, the request for cross examination in the case was not warranted for. Further, the right of cross-examination is not an absolute right as held in Nath International Sales Vs. UOI, AIR

7 Accordingly, it was held that from the relevant extracts of the statements of the key persons involved, the excel sheet that the assessee had purchased the said flat for a consideration of Rs. 41,93,437/- out of that Rs. 29,43,437/- was mentioned as agreement value and balance amount of Rs. 12,50,000/- was paid as on money which was not recorded in the books of accounts of the Omaxe Group and the same was over and above the agreement value. The assessee

Aggrieved, the assessee filed appeal before the ld.CIT(A) contesting the impugned addition. After hearing the assessee, the appellate authority observed that the primary contention of the assessee was that the reassessment proceedings were initiated merely on the basis of third-party information emanating from a search conducted in the case of Omaxe Group and that no independent inquiry was carried out by the Assessing Officer. It is also argued that the assessee had purchased the property through registered documents and made all payments through banking channels and, therefore, no addition could be made merely on the basis of seized Excel sheets and statements of third parties. On careful consideration of the assessment order, material available on record, and submissions of the assessee, these contentions were found to be devoid of merit. During the search, voluminous digital evidence in the form of Excel sheets titled “MAIN REPORT” was seized, which categorically recorded unaccounted cash receipts from flat buyers.

1 The appellant‟s reliance on the fact that the registered agreement reflected only cheque payments did not negate the existence of unaccounted cash payment. It is a well-settled principle that registered documents do not conclusively prove that no on-money was paid. The Hon‟ble Supreme Court in CIT v. Durga Prasad More(1971) 82 ITR 540 (SC) and Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) has held that taxing authorities are entitled to look into the surrounding circumstances and apply the test of human probabilities to determine the real nature of transactions. The assessee had also objected to the addition on the ground that no opportunity of cross-examination of the P a g e | 14 A.Y. 2019-20 Harsha Ashok Bhambhani persons whose statements were relied upon was granted. This argument was also not acceptable. The addition in the present case was not based solely on statements but on corroborated documentary evidence in the form of seized digital records, which were independently verified with details obtained from Omaxe Ltd. under section 133(6) of the Act. When documentary evidence conclusively establishes a fact, denial of cross- examination does not vitiate the assessment. Reliance in this regard wasplaced on the judgment of the Hon‟ble Supreme Court in CIT v. P. Mohankala (2007) 291 ITR 278 (SC), wherein it was held that once the explanation of the assessee is found to be unsatisfactory, the addition is justified. The assessee placed reliance on certain judicial precedents to argue that additions could not be made merely on the basis of third- party material. However, thosedecisions were clearly distinguishable on facts. In the present case, the seized material specifically named the assessee and quantified the unaccounted cash payment, which had been corroborated by statements and third-party confirmations. On the contrary, the facts of the case are squarely covered by the decision of the Hon‟ble Delhi High Court in CIT v. NDR Promoters Pvt. Ltd. (2019) 410 ITR 379 (Del), wherein it was held that additions based on search material and statements revealing accommodation entries and unaccounted transactions are fully justified. The assessee had also P a g e | 15 A.Y. 2019-20 Harsha Ashok Bhambhani challenged the addition under section 69 of the Act. It is noted that she failed to explain the source of cash payment of Rs. 12,50,000/- despite being confronted with specific evidence. The explanation furnished merely reiterated that no cash payment was made, which stands contradicted by seized material and corroborative evidence. Therefore, the AO was fully justified in treating the said amount as unexplained investment under section 69 of the Act. The Hon‟ble Supreme Court in CIT v. Chuharmal (1988) 172 ITR 250 (SC) has held that unexplained investments can be taxed when the assessee fails to discharge the burden of proof. In view of the above facts, the reassessment proceedings initiated under section 147 are found to be valid in law, the addition of Rs. 12,50,000/- under section 69 was upheld. Accordingly, the assessment order was confirmed.

Before us, the ld.AR has submitted that assessee is the co- owner of the property and had purchased flat no 1701 which was in the name of the assessee and Dheeraj Ashok Bhambhani. She also purchased flat no 1705. The co-owners of the flat were appellant i.e. Harsha Ashok Bhambhani and Harsh Ashok Bhambhani. Both the flats were purchased for similar values, infact the value for flat no 1705 was more compared to flat no 1701 and yet the same is being questioned. Further, for co-owner Dheeraj Ashok Bhambhani, the value of flat was P a g e | 16 A.Y. 2019-20 Harsha Ashok Bhambhani accepted and there was no reassessment proceedings in his case. Even for flat no 1705, there was no reassessment proceedings giving a clear hint of cherry picking. The registration of both the properties had happened on 18/06/2019. It is to be noted that the assesse was not engaged into any business or profession that mandates maintenance of books of accounts as per section 44AA of the Act.

1 It was further contended that the assessee denied the allegation of cash transaction with Omaxe Ltd. and requested cross- examination of the person whose statement was relied upon. However, the AO did not provide cross examination opportunity, stating it was not an absolute right. The CIT(A) has also supported the order of AO and had not considered the valid arguments The AO and CIT(A) has disregarded plethora of decisions of various benches of ITAT pertaining to the same builder and same issues. Despite submissions, the AO added Rs.12,50,000/- as unexplained investment under section 69 of the Act.

We have carefully considered all aspects of the case. It is undisputed fact that certainincriminating materials relied upon by the AO were seized from the builder from which the assessee had purchased the said flat. The said seized materials which have also been reproduced in the assessment order, clearly revealed the cash payment which the P a g e | 17 A.Y. 2019-20 Harsha Ashok Bhambhani assessee denied to have made. In such a situation, there can be a reasonable inference that the said materials rightly relied by the AO for making the impugned addition. Moreover, one of the key employees of Omaxe group as also the President Sri Manish Garg in their statements u/s 132(4) of the Act had also admitted such unaccounted payments. During search operation. Therefore, the addition made is not a figment of imagination but based on seized materials from the premises of the seller and the evidentiary value thereof cannot be discounted and simple denial by the assessee cannot be accepted in its face value. The statement of the persons u/s 132(4) of the Act during search operation cannot be brushed aside lightly.

1 In respect of the issue relating to cross examination, we find that the lower authorities have rightly rejected the same as discussed in details and duly supported by various court decsions. We find that the addition has been made basically on the basis of incriminatingmaterials unearthed during search operations in the case of the seller i.e. Omaxe Ltd. and not on the basis of the statement alone. Therefore, the emphasis on lack of cross examination is insignificant in the light of such clinching evidences clearly proving the unaccounted transaction. Moreover, such evidences were duly intimated to the assessee in clear terms and therefore, the AO has not used such materials behind her

In this judgment the Supreme Court while dealing with the rights and obligations of both the parties under Article 298 of the Constitution of India held that the decision of the State or its instrumentality, engaged in commercial transactions is an administrative' decision and can be impeached on the ground that the decision is arbitrary or violative of Article 14 of the Constitution of India on any of the grounds available in public law field. However, on the question as to how far the State or its instrumentality has to got to comply with the requirements of natural justice., the Court held as under :-- "THEREFORE it is necessary to reiterate that even in the field of public law, the relevant persons concerned are to be affected, should be taken into confidence. Whether and in what circumstances that confidence should be taken into consideration cannot be laid down on an" strait racket basis. It depends on the nature of the right involved and nature of the power sought to he exercised in a particular situation. It is true that there is discrimination between power and right but whether the State on the instrumentality of a State has the right to function in public field or private field is a matter which, in our opinion, depends upon the facts and circumstances of the situation, but such exercise of power cannot be dealt with by the State or the instrumentality of the State without informing and taking into confidence, the party whose rights and powers arc affected or sought to be affected, into confidence." (21) The Court further observed that in cases where the instrumentality of the State enters the contractual field, it should. be governed by the incidence of P a g e | 19 A.Y. 2019-20 Harsha Ashok Bhambhani the contract and held that in the field of this nature, it may not be necessary to give reasons, but fairness must be to the parties concerned. (22) Applying the principles laid down in Mahabir's case (supra) we are of the considered opinion that in the present case the petitioner had been duly taken into confidence before the impugned action had been taken against them. From the material which has come on record, we are satisfied that the firm knew all about the evidence which was proposed to be used against it. As noted above, it has been stated in the additional affidavit that all the incriminating documents, including the statements recorded by Dri officials, had either been shown or copies thereof had been given to the representatives of the firm. It has been further stated that all the material documents, namely (i) TRW's lest certificate as handed over by the firm to DLW's Inspector at the time of inspection on 26 May 1989, (ii) original covering letter dated 8 June, 1980, alleged to have been sent to Dlw Along with accompanying Airway bill etc., (iii) original telex message received from Trw etc. were shown to firm's representative on 14 June. 1991 in compliance with this Court's directive on 31 May, 1991 in Cwp No. 1365191. We have no reason to disbelieve the same. In fact, there is no denial of this fact but what is alleged to be wanting is the inspection of some more original documents and supply of authenticated copies thereof. We are satisfied from the contents of DLW's letter dated 26 June, 1991, (Annexure Z-1), addressed to the firm, that all the original documents, available on the records of the respondents, have been shown to the representative of the firm. In our view, on the facts and the circumstances of the case firm's further insistence on inspection of some more original documents or supply of authenticated copies thereof is only an empty formality. The firm is fully aware of the contents of all the documents which have been relied upon against it. Therefore, we do not read any violation of the principles of natural justice in this case. (23) Furthermore, we find from the record that the firm has also received fair treatment when it has been given personal hearing by Mr. H. S. Suri, Executive Director, Railway Stores at Rail Bhavan, New Delhi. Firm's request for personal hearing with Member (Mechanical) Railway Board was also acceded to. In our opinion, therefore; requirements of natural justice have been fully met in the present case. Mr. Jaitley's reliance on S. L. Kapur's case (supra), in our view, is misplaced inasmuch as in the instant case the firm was fully put to notice the elements on which action against it was sought to be taken and we feel on the fact, and circumstances of the case, nothing more was to be done. (24) Lastly, it is urged by Mr. Jaitley that the principles of natural justice demand that an opportunity should be given to the petitioners to cross- examine Mr. S. A. Khan, DLW's Inspector, to elicit the truth as to which of the two inspection reports is genuine. We do not feel persuaded to do so. As is observed by the Supreme Court in State of J&K and others v. Bakshi Gulam Mohammad &anr., , a right of hearing does not include a right to cross- examine and the right to cross-examine must depend upon the circumstances

4 It is also submitted that the assesses income is taxed u/s 44AD of the Act. As such, no such addition could be made in her hands. The contentions lacks any merits as irrespective of the fact she was not P a g e | 21 A.Y. 2019-20 Harsha Ashok Bhambhani expected to maintain books of account, it was for her to prove the sources of the impugned sum which she failed to explain. Further, the reference to the date of registration of the property in the subsequent assessment years is of no relevance as the impugned transactions has been held to have been made in the year under consideration and therefore, provisions of the Act were rightly applied during the year. The contentions regarding third party information is also baseless as in the instant case, the search and seizure operations in the Omaxe Group from whom the assessee purchased the said flat directly revealed on money transactions involving inter alia the assessee also. Such a finding could not be considered as a third party information by any stretch of imagination.

5 Considering the entirety of the facts and the circumstances of the case, we find no infirmity in the addition made by the AO based on cogent materials and duly endorsed by the ld.CIT(A) which is, therefore, upheld.

The ground no.11 relating to initiation of penalty proceedings is premature and does not require any adjudication at this stage.

The ground no.12 relating to non supply of approval of the PCIT has not been argued before us. Moreover, no such ground appears

In the result, the appeal of the assessee stands dismissed.