MS KAMAKSHI INTERNATIONAL vs. THE DCIT CENTRAL CIRCLE-1 JAIPUR

Judgment 20/11/2018 (Per Hon’ble Mr. Justice Mohammad Rafiq) These two income tax appeals under Section 260A of the Income Tax Act, 1960 (for short ‘the Act’) have been filed by two different assessees. Since decision of one appeal would necessarily affect the another appeal, therefore, they were heard together and are being decided by this common judgment.

(2 of 8) [ITA-16/2018] Appeal No. 16/2018 was admitted to hearing by this Court vide order dated 20.02.2018 and Appeal No. 132/2018 was later admitted to hearing by this Court vide order dated 10.07.2018 on the identical substantial question of law which reads as under: “Whether under the facts and circumstances and in law, the Ld. ITAT is justified in sustaining the addition of Rs. 22,83,000/- as “ON MONEY” on sale of land by arbitrarily estimating the Fair Market Value @ Rs. 13500/- per sq. yards, without there being any evidence, as against Rs. 11342/- per square yards as declared by the Appellant well above the District Level Committee rates, in its Income Tax Return?” Appeal No. 16/2018 pertains to assessment year 2009- 2010 and has been field by the appellant-assessee M/s. Shree Om Builders & Colonizers challenging judgment dated 17.10.2017 passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short ‘the Tribunal’) whereby the appeal filed by the appellant- assessee was partly allowed. Facts of the case are that the appellant is a partnership firm engaged in the business of sale and purchase of the property. The appellant purchased a property at D-81, Ghiya Marg, Bani Park, Jaipur ad-measuring about 1058 sq. yards on 05.11.2007 for sale consideration of Rs. 1.06 crores. The appellant sold the aforesaid property on 25.02.2009 to M/s. Kamakshi International (Appellant in Appeal No. 132/2018) for a sum of Rs. 1.20 crores. Appellant filed its return of income tax under Section 139 of the Act on 28.09.2009 declaring total income of Rs. 23,80,840/-. M/s. Kamakshi International is a partnership firm belonging to Shri Mahaveer Sankhla and his family. A search was carried out at the business premises of Shri Mahaveer

(3 of 8) [ITA-16/2018] Sankhla and his family concerns on 23.07.2009. Simultaneously, a survey under Section 133A of the Act was also carried out at the business premises of the appellant on the same day. There were in fact two business concerns of Sankalp Group i.e. M/s. Kamakshi Hospitality Private Limited and M/s. Kamakshi International and both the concerns purchased immovable properties in Bani Park area. Case of the Revenue is that both the aforenamed concerns made substantial “on money” payment to the sellers. M/s. Kamakshi Hospitality Private Limited purchased a plot situated at D-112A, Power House Scheme, Station Road, Bani Park, Jaipur and made a payment of Rs. 5 crores as “on money” in addition to recorded payment of Rs. 2 crores which as per the revenue was accepted by the sellers of the plot, who were also searched. As per the Revenue, the recorded consideration in respect of the property sold by the appellant was highly understated. The Assessing Officer reopened its assessment and served notice dated 12.12.2011 under Section 148 of the Act on the appellant M/s. Shree Om Builders and Colonizers. The appellant filed S. B. Civil Writ Petition No. 858/2013 challenging the aforesaid notice, which was dismissed by the Single Bench of this Court vide order dated 28.02.2013. The Assessing Officer completed the assessment under Section 147/143(3) of the Act vide order dated 21.03.2013 at total income of Rs. 6,44,40,840/-. Aggrieved thereby, the appellant M/s. Shree Om Builders and Colonizers filed appeal before the Commissioner of Income Tax (Appeals), Central, Jaipur [for short ‘the CIT(A)], which relying upon the valuation report of DVO, vide order dated 10.01.2014 partly allowed the appeal and limited the addition of “on money”

(4 of 8) [ITA-16/2018] to Rs. 75,36,325/-. Being aggrieved, the appellant as also the Revenue filed appeals before the Tribunal. The Tribunal vide judgment dated 17.10.2017 dismissed the appeal of the Revenue and partly allowed the appeal of the appellant and reduced the amount of “on money” received on sale of plot of land from Rs. 75,36,325/- to 22,83,000/-. Facts of Appeal No. 132/2018 filed by the appellant M/s. Kamakshi International are that since M/s. Kamakshi International was the buyer of the aforesaid property from M/s. Shree Om Builders and Colonizers, the Assessing Officer made corresponding alteration of Rs. 6,11,16,770/- in his hands vide assessment order dated 30.12.2011. The appellant filed appeal before the CIT(A) which relying on its earlier judgment passed in the case of M/s. Shree Om Builders and Colonizers reduced the addition of Rs. 75,36,325/- on account of undisclosed investments under Section 69 of the Act and partly allowed the appeal of the appellant. Aggrieved thereby, the appellant as also the Revenue both filed appeals before the Tribunal which vide judgment dated 01.12.2017 dismissed the appeal of the Revenue and partly allowed the appeal of the appellant-assessee. Hence, both these appeals. Mr. Gunjan Pathak, learned counsel appearing on behalf of the appellant M/s. Shree Om Builders and Colonizers argued that the Tribunal has erred in sustaining the addition of Rs. 22,83,000/- as “on money” received by the appellant on sale of plot of land by arbitrarily estimating the fair market value @ Rs. 13500/- per sq. yards as against Rs. 11,342/- per sq. yards despite there being no evidence to substantiate the same and the (5 of 8) [ITA-16/2018] appellant providing all the documentary evidence in support of sale price received and declared in the income tax return. The judgment of the Tribunal is based on surmises and conjectures and it has merely estimated fair market value by observing that on the date of sale it must be around 13,500/- per sq. yards. There was noting on record to suggest that the appellant received any “on money” on sale of the property. It is argued that law on the question of burden of proof is well settled that burden to prove the same lies on the Revenue. Learned counsel in support of his argument relied on the judgments of the Supreme Court in K.P. Varghese Vs. Income Tax Officer & Another, (1981) 131 ITR 0597; Lal Chand Bhagat Ambica Ram Vs. Commissioner Vs. Bedi & Co. Pvt. Ltd. (230 ITR 0580); Kishinchand 0713); Commissioner of Income Tax Vs. Appasamy Real Estate, (9 DTR 0285); Commissioner of Income Tax Vs. Rikadas Dhuraji & Another, (103 ITR 0111); O. Thomas & Others Vs. Commissioner of Income Tax, (103 CTR 0232); behalf of the appellant M/s. Kamakshi International in Appeal No. 132/2018 adopted the arguments advanced by learned counsel for the appellant M/s. Shree Om Builders and Colonizers and also (6 of 8) [ITA-16/2018] additionally submitted that the Tribunal has committed grave illegality in not appreciating the fact that the addition under Section 69 of the Act is admissible in law only when the investment is found unrecorded in the books of the accounts and the explanation offered by the assessee in respect of the investment is not found to be satisfactory. Addition cannot be made merely on the basis of statement recorded under Section 132(4) of the Act. In the present case, neither the seller of the disputed property namely M/s. Shree Om Builders and Colonizers, nor the buyer of the disputed property i.e. M/s. Kamakshi International ever admitted the receipt/payment of “on money”. The said addition has been made only on the basis of statement of third party, which is not warranted by law. It is therefore argued that the appeals be allowed by answering the aforementioned question of law in favour of the assessees. Mr. Aditya Vijay, learned counsel appearing on behalf of Mr. Anuroop Singhi, learned counsel for the respondent-Revenue (Karnataka); judgment of Delhi High Court in Commissioner of (Delhi); Commissioner of Income Tax Vs. Abhinav Kumar Mittal, (2013) 30 Taxman.com 357 (Delhi); judgment of this of Income Tax (D.B. Income Tax Appeal No. 277/2005

(7 of 8) [ITA-16/2018] decided on 14.02.2017; judgment of Madras High Court in Taxman 233 (Madras); We have given our anxious consideration to rival submissions and carefully perused the material on record. The Assessing Officer has made addition of Rs. 6,20,60,000/- on account of undisclosed “on money” received. The CIT(A) has accepted fair market value of the land valued by DVO and confirmed the addition only to the extent to Rs. 75,36,325/-. The Tribunal noted that the valuation done by the DVO is one of the good methods to arrive at fair market value. The Tribunal has also noted the sale instance of a property located near to the disputed plot. The size of that plot was 409.94 sq. yards, value of which was declared at Rs. 15,185/- per sq. yards. This sale was carried out almost one year after the sale in the case of the appellants-assessees herein. The Tribunal therefore observed that comparing this sale instance with adjustment of time period, cost index inflation, size and other peculiar facts, fair market value of the disputed property on the date of sale must be around Rs. 13,500/- per sq. yards. The Tribunal thus substantially reduced the addition and brought it down to only Rs. 22/-. There can be no quarrel with the proposition of law laid down in the judgments cited by learned counsel for the appellants that such addition cannot be made only on the basis of surmises and conjectures without there being any material on record. But, in the facts of the case, we are not inclined to countenance the argument that the findings recorded by the Tribunal in the present

(8 of 8) [ITA-16/2018] case were based only on surmises and conjectures and there was total absence of material to prove the said findings. In view of above, we accordingly answer the substantial questions of law framed in both the appeals in favour of the Revenue and against the appellants-assessees. The appeal are accordingly dismissed. Office is directed to place a copy of this judgment on record of connected appeal. (GOVERDHAN BARDHAR),J (MOHAMMAD RAFIQ),J Manoj.