SHAILENDRA SHANTARAM JONDHALE,RAIGRAH vs. I.T.O WARD 42(3)(3), MUMBAI, MUMBAI

PER SHRI ANIKESH BANERJEE, JUDICIAL MEMBER: The instant appeal of the assessee filed against the order of NFAC Delhi [for brevity ‘Ld. CIT(A)’], order passed u/sec. 250 of the Income Tax Act (for brevity ‘the Act’), for Assessment Year 2018-19, date of order 27.10.2025. The impugned order emanated from the order of the Assessment Unit Income Tax Department order passed u/sec. 147 r.w.s. 144B of the Act, date of order 09.03.2024 2. The brief facts of the case is that the assessee filed the return by declaring total income amount to Rs. 11,24,559/-. During the impugned financial year. The assessee purchased a residential flat from M/s. Patel Enterprises situated at flat number 304 “Bay Bills”, Navi Mumbai. The assessee entered into an agreement by executing the deed of regictration by total consideration of Rs. 62,00,000/- whereas the stamp duty valuation of the property was Rs.31,49,000/-. So the actual agreement value is significantly higher than the stamp duty valuation. A search and survey action was conducted in the case of M/s. Bhagwati Developers and its group concern dated 15.10.2018. During the course of search, the statement of Shri Kulin Shantilal Vora who supervised the “projects sales” for the group was recorded u/sec. 132(4) of the Act. He allegedly stated that the group was accepting ‘on money’ in cash for sale of flats/shops. Based on the statement the Ld. AO inferred that the assessee had allegedly paid unaccounted cash (On- money) amount to Rs. 22,00,000/- to M/s. Patel Enterprises related purchase of immovable property for F.Y. 2017-18. On basis of the statement the Ld. AO added back amount to Rs. 22,00,000/-u/sec. 69A of the Act. Being aggrieved the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) uphold the impugned assessment order. Being aggrieved the assessee filed an appeal before us. 3. The Ld. AR argued filed a paper book comprising pages 1 to 95 which has been placed on record. The Ld. AR submitted that the source of investment for purchase of immovable property and has duly explained and the details of payment before the revenue authorities. The relevant payments with source are duly produced as below which is annexed in APB page 65.

“5. The entire consideration was paid through proper banking channels, details of which were duly furnished before the assessing authority. Date of Purpose Bank Amount Source of Fund payment 15.09.2017 Purchase SBI Bank- 1,00,000.00/- Chetna & Shailendra consideration 8017 Jondhane- Joint A/c 09.10.2017 Stamp Duty Axis Bank 3,72,000.00/- Shailendra Jondhane 09.10.2017 Registration Axis Bank 30,000.00/- Shailendra Jondhane 22.11.2017 Maintenance SBI Bank- 1,41,746.00/- Chetna & Shailendra 8017 Jondhane- Joint A/c 22.11.2017 Purchase SBI Bank- 21,00,00.00/- Chetna & Shailendra Consideration 8017 Jondhane- Joint A/c 29.11.2017 Purchase Canara Bank - 40,00,000.00/- Loan Taken from Consideration 8799 Canara Bank 6. The Flat was purchased from the source Bank Loan from Canara Bank, PF withdrawal, Central Railway ECC SCTY Loan and some accumulated savings.  Source of funds Source of funds Amount 13,55,000/- PF Withdrawn 6,39,900/- Central Railway ECC SCTY Loan 2,05,100/- Accumulated Savings. 40,00,000/- Loan Taken from Canara Bank 62,00,000/- Total

6.1. We find that, at best, such a statement can raise a doubt or suspicion against the conduct of the assessee to trigger further enquiry or investigation for finding out and bringing on record relevant fact and material, so, as to conclusively prove the payment of on money by the assessee over and above the declared sales consideration. In the given set of facts as emerging from the orders of the authorities below and the replies furnished by the assessee, apparently ld. Assessing Officer has failed to bring any such evidence or material on record to prove the payment of on money by the assessee, more so, when assessee has from the very beginning denied payment of any such on money in cash. Addition made is on account of on money based on the information found during the search and seizure operation of the builder and the statement recorded u/s.132(4) of the Act. The material so found is not from the possession of the assessee, but in the course of search and seizure operation conducted in case of a third party that is the builder. There is no further corroborative evidence to establish that the contents of the seized material and the statement relied upon, are correct and authentic to the extent that assessee paid on money in cash. Further, not providing the opportunity to cross examine the person on whose statement reliance is placed, results into breach of principles of natural justice. In this regard, we place our reliance on the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE [2015] 281 CTR 241 (SC), wherein it has been held that failure to give the assessee the opportunity to cross examine witness, whose statements are relied upon, results in breach of principles of natural justice. It is a serious flaw, which renders the order a nullity. 6.2. We also place our reliance on the decision in the case of CIT vs. ODEON Builders (P) Limited 418 ITR 315, wherein it is held that addition/disallowance made solely on third party information without subjecting it to further scrutiny and denying the opportunity of cross examination of the third party, renders the addition/disallowance bad in law.

6.3. Hon'ble Supreme Court in the case of KP Varghese vs. ITO [1981] 131 ITR 597 (SC) observed in Para 4 that it is a well settled rule of law that the onus of establishing the conditions of taxability are fulfilled, is always on the revenue. To throw the burden of showing that there is no understatement of consideration on the assessee would be to cast an almost impossible burden upon him to establish the negative, namely that he did not receive any consideration beyond that declared by him. Thus, Hon'ble Supreme Court laid the burden on the revenue to establish the conditions for bringing to charge any income in the hands of the assessee. 7. Accordingly, in the given set of facts as narrated above, we are of considered view that assessee cannot be made to prove the negative stance for which he has been taking, right from the very first hearing by bringing on record all the corroborative documentary evidence in respect of actual and real purchase made by him. Therefore, in the given set of factual and legal position, no addition is warranted in the hands of the assessee. Addition so made by ld. Assessing Officer u/s. 69B is deleted. Ground nos. 4 and 5 raised by the assessee in this regard are allowed.” 5. The Ld. DR supported the orders passed by the revenue authorities and relied upon the findings recorded therein. The Ld. DR also placed on record a report duly received from the Ld. AO. The relevant observations contained in the said report are reproduced as under:

“A search and survey action was conducted in the case of M/s. Bhagwati Developers and its group concerns on October15, 2018. The main concerns of the group are M/s. Bhagwati Developers, M/s Shree Bhagwati Enterprises, M/s. Shanti Enterprises, M/s Patel Developers, M/s. Patel Enterprises, M/s Bhagwati Infra, M/s. Shree Hari Enterprises and key persons are Manji Karman Patel, Bhogilal M. Vora, KulinShantilalVora, MurjiRanchod Gajora, Pankaj Patel, Narayan HirabhaiDubariya and Dharmendra Manji Patel.M/s. Bhagwati Developers is a builder and developer firm that focuses on projects mainly in Navi Mumbai. The projects of Bhagwati Group are both in commercial and residential segments. The Group is known for its series of luxury apartments developed at several prime spots in Navi Mumbai. 2. During the search action, it was proved that the group were engaged in receiving on- money in various residential and commercial projects. The on-money was being accepted on sale of flats and commercial units in both ongoing as well as in completed projects. Generally the cash component was taken in full before registration of the agreement or issuing the allotment letter. After receipt of full cash component, agreements with the customers were made close to the prevailing circle rate/ stamp duty value or little higher 5 than that. However, it was noticed that the actual transaction/ sales considerations was much higher than the circle rate, part of which was not being accounted in the regular books of accounts. 3. There are certain key persons who are actively involved and have knowledge of the on- money being taken by M/s. Bhagwati Developers and its group entities as sale proceeds of flats and shops. The statements of such persons were recorded and the relevant portion of the same is reproduced hereunder. 3.1 Sh.Kulin Shantilal Vora, looks after the sales of all the projects of M/s. Bhagwati Developers and its group concerns. Shri Kulin Vora admitted in his statement recorded on oath that the group was accepting On money in the form of cash amount for sale of various projects of M/s. Bhagwati Developers and its group concerns. 3.2 Sh.Manji K Patel, who looks after the purchase of land for development of the projects of M/s. Bhagwati Developers and its group concerns admitted in his statement recorded on oath that whatever had been stated by Shri Kulin Vora in his statement u/s. 132(4) dated 19.10.2018 with respect to documents/ papers annexed as A1 to A20, A22 toA57,A59 to A63 & A65 to A67 was true and correct. 4. The statement of Sh. KulinShantilal Vora was recorded u/s 132 (4) during the search action wherein he admitted that Bhagwati group was receiving On money for sale of flats and shops. The relevant part of his statement is reproduced below: Ans. Annexure Al is the sales register of Bhagwati Eleganza, Ghansoli. The entries in the said annexure consists of the Sale Value and the cash amount received per sale. Further, the page wise details of Annexure Al will be explained in the due course of time. Q.24 I am showing you the seized documents marked as annexure A2. Please go through the contents of the annexure and offer your comments about the contents of the same. Ans. Annexure A2 is the sales register of Bhagwati Eleganza, Ghansoli. The entries in the said annexure consists of the Sale Value and the cash amount received per sale. Further, the page wise details of Annexure A2 will be explained in the due course of time. Q.25 I am showing you the seized documents marked as annexure A3. Please go through the contents of the annexure and offer your comments about the contents of the same. Ans. Annexure A3 is the sales register of Bay Bliss, Ulwe. The entries in the said annexure consists of the Sale Value and the cash amount received per sale. Further, the page wise details of Annexure A3 will be explained in the due course of time. Q.26 I am showing you the seized documents marked as annexure A4. Please go through the contents of the annexure and offer your comments about the contents of the same.

Ans. Annexure A4 is the sales register of Sky Oasis, Ulwe. The entries in the said annexure consists of the Sale Value and the cash amount received per sale. Further, the page wise details of Annexure A4 will be explained in the due course of time. Q.27 I am showing you the seized documents marked as annexure A5. Please go through the contents of the annexure and offer your comments about the contents of the same. Ans. Annexure A5 is the sales register of Shanti Darshan, Ulwe. The entries in the said annexure consists of the Sale Value and the cash amount received per sale. Further, the page wise details of Annexure A5 will be explained in the due course of time. Q.28 I am showing you the seized documents marked as annexure A6. Please go through the contents of the annexure and offer your comments about the contents of the same. Ans. Annexure Ab represents the miscellaneous cash receipts and expenditure details with respect to project Bhagwati Heritage. Further, the page wise details of Annexure A6 will be explained in the due course of time. 5. During the post search proceedings, the assessee group has submitted the unit wise and flat wise details of on-money received by them for all the eleven projects undertaken by the Group. The details of the assessee, PAN of the assessee, Flat/shop purchased, Project name, On money paid and Date of registration are mentioned in the data uploaded.” 6. We have heard the rival submissions and perused the material available on record. The dispute relates to the addition of Rs.22,00,000/-, alleged to have been paid by the assessee as “on-money” in connection with the purchase of a residential flat from M/s. Patel Enterprises. The registered agreement records the purchase consideration at Rs.62,00,000/-, whereas the stamp-duty valuation was Rs.31,49,000/-. The addition has principally arisen from material gathered during the search conducted in the case of M/s. Bhagwati Developers and its group concerns and the statement of Shri Kulin Shantilal Vora recorded under section 132(4) of the Act. On perusal of the assessee's documentary evidence, we find that the assessee has explained the source of the recorded purchase consideration of Rs.62,00,000/-. The material placed on record indicates that the consideration was stated to have been discharged through banking channels, comprising, inter alia, withdrawal from provident fund, loan from Central Railway ECC Society, accumulated savings and a bank loan of Rs.40,00,000/- from Canara Bank.