Principal Commissioner Of Income Tax vs. M/S Bhomiyaji Land And Finance Co.

ITA-129-2018 1 HIGH COURT OF MADHYA PRADESH: JABALPUR (Division Bench) ITA No. 129/2018 PRINCIPAL COMMISSIONER OF INCOME TAX ... APPELLANT Vs. M/S BHOMIYAJI LAND & FINANCE CO. ... RESPONDENT

-------------------------------------------------------------------------------------------- Coram: Hon’ble Mr. Justice Ajay Kumar Mittal, Chief Justice Hon’ble Mr. Justice Vijay Kumar Shukla, Judge -------------------------------------------------------------------------------------------- Appearance: Mr. Sanjay Lal, Advocate for himself and as Proxy Counsel for Ms. Veena Mandlik, Advocate for the Appellant. -------------------------------------------------------------------------------------------- JUDGMENT (Oral) (03.02.2020) Per: Ajay Kumar Mittal, Chief Justice: In view of the order of even date passed in R.P. No.25/2020 (Principal Commissioner of Income Tax vs. M/s Bhomiyaji Land and Finance Co.), the present appeal is taken up for fresh hearing. 2. The present appeal under Section 260A of the Income Tax Act, 1961 (for brevity “the Act”) has been preferred by the Revenue challenging the order dated 31.01.2018 passed by the Income Tax Appellate Tribunal, Bench Indore (in short “the Tribunal”) in ITA No.490/Ind/2013 (Assessee's appeal) and ITA No.412/Ind/2013 (Revenue's Appeal) for the Assessment Year 2007- 08 claiming the following substantial questions of law: ITA-129-2018 2 “(i) Whether the ITAT was justified in deleting the addition of Rs.23,02,500/- made on account of unexplained investment merely on the ground that the aforesaid unexplained investment which was voluntarily accepted by the assessee later got retracted by him? (ii) Whether the ITAT was justified in deleting the addition of Rs.28,97,500/- made on account of unexplained investment merely on the ground that the aforesaid unexplained investment which was voluntarily accepted by the assessee later got retracted by him? (iii) Whether the ITAT was justified in deleting the addition of Rs.3,72,79,410/- by taking net profit rate on unaccounted sales even when the assessee failed to provide any documentary evidence of the corresponding expenses?” 3. The facts of the case, in brief, are that the assessee filed its return of income on 15.11.2007 for the assessment year 2007-08 declaring total income of Rs.1,41,350/-. A survey action under Section 133A of the Act was carried out in the business premises of the assessee on 15.03.2007 wherein undisclosed income of Rs.60.00 Lac on account of underhand transactions in purchase of land as well as excess cash was found. Such statement of one of the partner of the assessee Firm, namely, Shri Prem Kumar Agrawal was recorded on oath. The assessment under Section 143(3) of the Act was completed by the Assessing Officer vide order dated 15.12.2009 on the total income of Rs.5,10,56,000/-, who added an amount of Rs.23,02,500/- on account of unexplained investment under Section 69 in purchase of land; Rs.28,97,500/- towards unexplained investment in the properties as per statement of the partner; Rs.8,03,142/- towards unexplained money u/s 69A; Rs.3,72,79,410/- towards suppressed sales; Rs.65,67,600/- on account of ITA-129-2018 3 unexplained cash credits and an amount of Rs.10,64,500/- was added on account of bogus credit entries in the books as well as excess unaccounted money charged from the customers. 4. Feeling aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), Ujjain [for short “the CIT(A)], who vide order dated 28.3.2013 partly allowed the same and deleted the aforesaid additions of Rs.23,02,500/- and Rs.28,97,500/- holding that certain additions were made only on the basis of statement whereas the Assessing Officer was obliged to corroborate the addition with any other material during the assessment proceedings. Similarly, the addition made by the Assessing Officer to the tune of Rs.3,72,79,410/- on account of suppressed sales was restricted to Rs.17,05,082/- after adjusting the net profit already shown by the appellant, on appreciation of various judicial pronouncements and detailed reasons assigned in the order that it was reasonable if net profit @ 8% was applied on estimated sales of Rs.2.5 Crores in place of 1.60% shown by the appellant in the return because net profit shown by the appellant was on lower side considering its line of business. Further, the addition made by the Assessing Officer to the tune of Rs.65,67,600/- towards unexplained cash credits was reduced to Rs.35,37,500/- as the appellant had furnished the copies of the sale deeds and proof of repayment of the remaining amount of Rs.30,30,100/-. As regards the addition of the amount of Rs.10,64,500/- for bogus credit entries, the said amount was also restricted by the CIT(A) to Rs.3,30,000/- on the basis of the material on record revealing that the remaining accounts amounting to Rs.7,34,500/- were substantiated by proof ITA-129-2018 4 of refund through banking channel, copies of registers, cash receipt vouchers and money receipt etc. which were also got verified along with the books of accounts. Thereafter, dissatisfied with that order dated 28.3.2013, the Revenue filed an appeal before the Tribunal, which was registered as ITA No.412/Ind/2013. The assessee also preferred an appeal being aggrieved by a part of the order of the CIT(A), which was numbered as ITA No.490/Ind/2013. The Tribunal vide common order dated 31.1.2018 dismissed both the appeals thereby upholding the findings of the CIT(A). Hence, the Department is in present appeal. 5. Before this Court, the appellant has restricted the challenge to the impugned order passed by the Tribunal to the extent of deletion of the amount of Rs.23,02,500/- and Rs.28,97,500/- made on account of unexplained investments and further deletion of Rs.3,72,79,410/- by taking net profit rate on unaccounted sales. The submission of the learned counsel for the appellant with regard to the Substantial Question of Law Nos.(i) and (ii) is that the Tribunal should not have deleted the said additions because they were arrived at keeping in view the difference between the consideration mentioned in the sale deed and the fair market value declared by the Stamp Valuation Authority. As regards the Substantial Question of Law No.(iii) it is urged that the CIT(A) while reversing the findings of the Assessing Officer for addition of amount of Rs.3,72,79,410/- towards suppressed sales, estimated the sales at Rs.2.5 Crores and applied the net profit at 8% thereby sustaining only the addition of Rs.17,05,082/- as against the sum of Rs.3,72,79,410/- whereas the said suppressed sales was worked out by the Assessing Officer on the basis of the two registers which were ITA-129-2018 5 impounded by him during the course of survey conducted on 15.03.2007. It was found that the actual sale consideration of the plots was much more than the registered value shown by the assessee in his books. The assessee used to record the names of the purchasers by ink/ball pen and would record the amount received from them by pencil leading to an inference that the unaccounted receipts were routed in the books of accounts of the assessee under the guise of unsecured loans or bogus creditors. The Assessing Officer also observed that the amount of sale consideration recorded in the books was found to be between 25% to 46% of the actual sale and the remaining 67% was outside the books of account, therefore, by applying the said ratio, the Assessing Officer had rightly worked out the unaccounted sale consideration of Rs.3,72,79,410/-. On these premises, learned counsel for the appellant submits that the impugned order be set aside and the appeal be allowed. 6. We have heard learned counsel for the appellant and perused the material placed on record. 7. Firstly, taking up the addition of Rs.23,02,500/- made by the Assessing Officer on account of unexplained investment under Section 69 of the Act in purchase of land, arising in question No.1, the Tribunal had concluded that the Assessing Officer had made the additions on the basis of the statement of the partner, namely, Shri Prem Kumar Agrawal. However, the said statement was retracted on the very next day of completion of survey proceedings by way of duly signed affidavit, signed by all the partners. Further, except for the retracted statement of the partner, there was no other material with the Assessing Officer to make such an addition. The ITA-129-2018 6 addition was made on the basis that the sale consideration which was shown in the two sale deeds dated 28.09.2006 and 09.10.2006 was Rs.31,01,000/- and Rs.31,10,000/- whereas the Stamp Valuation Authority had determined the market price of this land at Rs.42,69,500/- and Rs.42,44,000/- respectively, resulting in the difference of Rs.23,02,500/-. Applying the provisions of Section 50C of the Act, the addition was sought to be made. However, the provisions of Section 50C of the Act were not available to the Revenue as the assessee was the purchaser of the land. With regard to the substantial question of law No.(i) raised by the appellant, the learned Tribunal while considering the cross-appeals for the Assessment Year 2007- 08 came to hold as under:- “22. Apropos Ground No.1 of Revenue's appeal challenged the Ld. CIT(A) finding deleting the addition of Rs.23,02,500/- unexplained investment. 23. We have heard the rival contention and perused material on record before us. We find that the Ld. AO taking the basis of the statement of one of the partner Shri Prem Kumar Agrawal in which he accepted that the investment made in the business are more than the price of the property and accordingly offered Rs.52,00,000/- as unexplained investment. However, the statement was retracted on the very next day of completion of survey proceedings by way of filing of affidavit signed by all the partners. This fact has not been disputed by the Revenue that Ld. AO failed to bring anything on record which could prove that the assessee made unexplained investment in purchase of profits except the admission of one of the partner. It is also observed that the alleged addition of Rs.23,02,500/- was made on account of difference in stamp valuation of the land purchased on 28.09.2006 and 09.10.2006 at Rs.31,01,000/- and Rs.31,10,000/- from Mr. Amritpal Singh Khanuja. The market price of this land as per the stamp valuation authority was Rs.42,69,500/- & Rs.42,44,000/- respectively. The difference of the market price and purchase cost of these two lands comes to Rs.23,02,500/-. However, we do not find any basis in the finding of the Ld. AO applying provisions of ITA-129-2018 7 section 50C of the Act, because provisions of section 50C of the Act applies on the seller of the property and not on the purchaser. The Ld. CIT(A) has rightly adopted this view holding that provisions of section 50C were not applicable on the assessee being the purchaser of the property and also during the survey proceedings no documentary evidence was found which may prove that the assessee has made payment over and above the registered valuation of the property. In lack of any incriminating material, no addition was called for by the AO as rightly held by the I.T.A.T. Indore Bench in the case of ACIT vs. Raj Homes P. Ltd. Bhopal 9 ITJ 286 (2007) and further Hon'ble High Court of Delhi in the case of CIT vs. Dheengar Metal Works (2010) 328 ITR 384 also held that, “in any event it is settled law that though the admission is extremely important piece of evidence it cannot be said to be conclusive and it is open to the person, who has made the admission, to show that it is incorrect.” 24. We, therefore, respectfully following the decision and judgments discussed above and in the given facts and circumstances of the case find no inconsistency in the finding of Ld. CIT(A) deleting the addition of Rs.23,02,500/- made by the Ld. AO u/s 69 of the Act. In the result Revenue's ground no.1 is dismissed.” 8. Nothing was shown that the aforementioned finding recorded by the learned Tribunal was erroneous or perverse in any manner. 9. Adverting to the addition of Rs.28,97,500/-, in respect of which the Revenue has claimed that substantial question of law No.(ii) arises in the appeal, the learned Tribunal observed that the Assessing Officer after making addition of Rs.23,02,500/- on the basis of the provision under Section 50C of the Act being the difference of market value and purchase cost of the plots purchased, as discussed hereinabove, made the remaining addition at Rs.28,97,500/- as unexplained investment in the properties. This was done on the basis of the surrender made by the partner at Rs.52 Lac. The said amount of Rs.23,02,500/- was subtracted from the surrender made by the partner to the tune of Rs.52 Lac to arrive at the remaining addition of ITA-129-2018 8 Rs.28,97,500/-. The view taken by the learned Tribunal that the Assessing Officer had erred in making the addition of Rs.28,97,500/- finds support from the finding arrived at while deciding the ground No.1 of the Revenue's appeal relating to unexplained investment under Section 69 in purchase of land, that the addition could not have been made without bringing any evidence on record and merely on the basis of the statement given during the course of survey which was not on oath and was retracted by all the partners by submitting an affidavit on the very next day of the survey. The relevant extract of the findings recorded by the learned Tribunal reads, thus:- “25. Apropos Ground No.2 of Revenue's appeal for A.Y. 2007-08 related to deleting of addition of Rs.28,97,500/- made on account of unexplained investment, we have heard the rival contention and perused material on record placed before us. 26. We find that this issue relates to ground No.1 of Revenue's appeal adjudicated above, wherein we have discussed about surrender made by the partner at Rs.52 lacs and thereafter retracted on the very next day. The Ld. AO made addition of Rs.23,02,500/- u/s 69 of the Act taking the basis of provisions of section 50C of the Act, being the difference of market value and purchase cost of the plots purchase. Ld. AO made the remaining addition (Rs. 52 lacs – 23,02,500/-) at Rs.28,97,500/- as unexplained investment in the properties. We have already discussed the issue in detail while adjudicating ground no.1 above that addition cannot be made merely on the basis of statement given during the course of survey which is not on oath and if there is no incriminating material with the AO to make such addition. We, therefore, are of the view, Ld. AO erred in making the addition of Rs.28,97,500/- without bringing any evidence on record. We, therefore, upheld the view taken by the Ld. CIT(A) deleting addition of Rs.28,97,500/-. Thus, ground no.2 of the Revenue's appeal for A.Y. 2007- 08.” 10. We have already observed that the appellant failed to point out any illegality or perversity in the findings recorded by the learned Tribunal with ITA-129-2018 9 regard to substantial question of law No.(i) raised. Since the question No.(ii) has been found to be inter-related with the question No.(i), therefore, equally for the same reason, we have nothing to differ from the view taken by the learned Tribunal in relation to the deletion of addition of Rs.28,97,500/-. 11. We do not find any force in the submission put forth by the learned counsel for the appellants with regard to question of law No.(i) and (ii) that since the said unexplained investments were voluntarily accepted by the assessee and later on the assessee got them retracted, therefore, the CIT(A) erred in deleting the said additions and so was the Tribunal not justified in affirming such findings. The law with regard to an admission or confession is well settled. An admission may be a strong piece of evidence but it is not conclusive evidence. The veracity of such evidence can be judged vis-a-vis the material evidence and the obtaining circumstances of the case in which it was made because it can always be explained by the person who has made such confession or admission. In the present case, a perusal of the findings recorded by the Tribunal shows that the aforesaid two additions of Rs.23,02,500/- and Rs.28,97,500/- towards unexplained investments were made by the Assessing Officer merely on the basis of the statements given during the course of survey and that there is no incriminating material or documentary evidence available with the Assessing Officer to substantiate the said additions for the assessment year 2007-08. That apart, the retraction was immediately made on the very next day by filing an affidavit signed by all the partners. Therefore, in the given facts and circumstances of the case, the retraction cannot be said to be for extraneous reason. Thus, in our ITA-129-2018 10 considered opinion, the substantial question of law No.(i) and (ii) raised, do not arise in the present appeal. 12. As regards the substantial question of law No.(iii) claimed by the appellant-Revenue, it is gathered that examining the correctness of the findings of the CIT(A) sustaining only the addition of Rs.17,05,082/- as against the addition of amount of Rs.3,72,79,410/- made by the Assessing Officer towards suppressed sales, the Tribunal has specifically found that the same issue had arisen during the adjudication of appeal for the earlier assessment year and since there was no dispute with regard to the similarity of the facts and circumstances of the case in hand vis-a-vis the appeal decided for the earlier assessment year, the Tribunal affirmed the order of the CIT(A) sustaining the addition of Rs.17,05,082/- and deleting the remaining addition of Rs.3,55,74,328/-. A relevant extract of the findings of the learned Tribunal in this behalf, reads as under:- “13. First common issue relates to addition of suppressed sales of Rs.3,72,79,410/-. The Ld. CIT(A) estimated the sales at 2.5 crores and estimated net profit @8% thereby sustaining addition at Rs.17,05,082/- and deleted the remaining addition of Rs.3,55,74,328/-. We further find that very same issue came up before us during the adjudication of appeal for A.Y. 2007-08. As all the facts and circumstances remains the same which have not been disputed by both the parties, we are inclined to apply same view as taken while deciding the issue for A.Y. 2007-08 and confirm the view taken by Ld. CIT(A) sustaining addition of Rs.17,05,082/- and deleting remaining addition of Rs.3,55,74,328/-. As a result ground No.3 of Revenue's appeal and Ground Nos. 2 & 3 of assessee's appeal are dismissed.” 13. Learned counsel for the Revenue was unable to demonstrate that the case of the assessee for the assessment year 2007-08 for which addition was sustained only to the extent of Rs.17,05,082/-, was different from the earlier ITA-129-2018 11 decision of the Tribunal or that the earlier decision of the Tribunal was set aside or reversed by the High Court or the Supreme Court. 14. Apart from the aforesaid, the findings recorded by the CIT(A) and upheld by the Tribunal on the issues raised in the present appeal are based on appreciation of evidence on record. The learned counsel for the Revenue has failed to point out as to how and in what manner such findings of fact are illegal or perverse. The findings arrived at by the CIT(A) and affirmed by the Tribunal are just and reasonable. The only endeavour of the learned counsel for the appellant was to re-appreciate the evidence so as to persuade this Court to take a different view, which is not permissible under Section 260A of the Act. 15. In view of the said fact, the substantial questions of law claimed by the appellant-Revenue, do not arise for consideration in the present appeal. Thus, the appeal being devoid of any merit, stands dismissed. (AJAY KUMAR MITTAL) (VIJAY KUMAR SHUKLA) CHIEF JUSTICE JUDGE s/ Digitally signed by SACHIN CHAUDHARY Date: 2020.02.05 11:17:10 +05'30'