THE A C I T CENTRAL-II, BHOPAL vs. S V INFRA DEVELOPERS, BHOPAL

आदेश / O R D E R

PER MANISH BORAD:

The above captioned appeals filed at the instance of the

revenue pertaining to different assessee(s) for Assessment Year

2014-15 are directed against the orders of Ld. Commissioner of

Income Tax(Appeals)-3 (in short ‘Ld. CIT], Bhopal dated 17.05.2019

and 05.03.2019 which are arising out of the order u/s. 143(3) of

the Income Tax Act 1961 (In short the ‘Act’) for A.Y. 2014-15 dated

28.03.2016 framed by ACIT (Central)-II, Bhopal.

arising out of similar facts these were heard together at the request

of both the parties and are being disposed off by way of this

consolidated order for sake of convenience and brevity.

assessee namely Shri Nitin Agrawal vide IT(SS)A No.182/Ind/2019

for Assessment Year 2014-15 :-

(1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 5,00,00,000/- made by Assessing Officer on account of admission of additional income u/s 132(4) of the Income Tax 2

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

Act,1961

(2) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 26,42,910/- made by Assessing Officer on account of unexplained cash of the Income Tax Act,1961

(3) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 24,88,216/- made by Assessing Officer on account of unexplained jewellery of the Income Tax Act, 1961

(4) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 50,00,000/- made by Assessing Officer on account of unexplained advances to Shri Lilwani of the Income Tax Act,1961

(5) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 10,00,000/- made by Assessing Officer on account of unexplained investment in watches of the Income Tax Act, I 96I

(6) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,00,000/- made by Assessing Officer on account of foreign travel expenses of the Income Tax Act, 196I

(7) The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal.

assessee namely M/s S.V. Infra Developers vide ITA No.657/

Ind/2019 for Assessment Year 2014-15 :-

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 (1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 5,00,00,000/- made by Assessing Officer on account of admission of additional income u/s 132(4) of the Income Tax Act,1961

(2) The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal.

that the issue raised in Ground No.1 of each of the appeal is

common through which the revenue has challenged the finding of

Ld. CIT(A) deleting the addition made by the Ld. A.O on the basis of

statement given u/s 132(4) of the Act wherein the assessee during

the course of search admitted additional income. The remaining

grounds pertains to the revenue’s appeal in the case of Shri Nitin

Agrawal. Since both the assessee(w) are from the same group and

were subjected to the search u/s 132 of the Act on 29.1.2014, we

will first take up this common issue raised in Ground No.1 of both

the appeals by Revenue. As agreed by both the parties we will take

the facts of Shri Nitin Agrawal for the purpose of adjudicating this

common issue raised before us.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 6. Brief facts of the case are that the appellant is an individual

and derives income from business, rental income and other

sources. Search and Seizure operation u/s 132 of the I.T. Act was

carried out at the residential and business premises of the

appellant as well as on the premises of other concerns/business

associates of Signature Group on 29.01.2014. Notice u/s 153A of

the Act were issued on 12.09.2014. In response to the said notice

assessee has filed return of income on 30.11.2014 declaring income

of Rs.1,84,65,660/-. During the course of assessment proceedings

Ld. A.O referred to the statement given by the assessee u/s 132(4)

of the Act admitting additional income on account of various

discrepancies noticed/incriminating material found during the

course of search. Detailed submission filed by the assessee were

considered. The statement given by the assessee u/s 132(4) of the

Act was composite in nature referring to various discrepancies

noticed during the course of search. Ld. A.O completed the

assessment assessing income at Rs.8,21,10,518/- after making

following additions:-

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 (i) Admission of additional income u/s 132(4) Rs.5,00,00,000/- (ii) Unexplained cash Rs. 26,42,910/- (iii)Unexplained jewellery Rs. 48,01,948/- (iv)Unexplained advance to Shri Lilwani Rs. 50,00,000/- (v) Unexplained investment in watches Rs. 10,00,000/- (vi)Foreign travel expenses Rs. 2,00,000/-

addition made by the Ld. A.O based on the statement given u/s

132(4) of the Act and subsequently deleted by the first appellate

authority, Ld. Departmental Representative vehemently argued

supporting the order of Ld. A.O and also submitted that the

statement given u/s 132(4) of the Act was on oath and no retraction

of said statement was made in reasonable time. Retraction of said

statement by way of not offering the income in the return of income

is not acceptable and Ld. A.O has rightly made the addition.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

of Ld. CIT(A) also made written submission which is reproduced

below:-

The assessee is an individual deriving income from development construction and sale of real estate. The assessee also derives income from various partnership firms. The assessee is filing the returns regularly. The books of accounts are audited and the TAR is filed. A search was conducted on the Signature Group and also at the premises of the assessee. During the course of the statement recorded u/s 132(4) the assessee declared an additional income of Rs.5,00,00,000/- for the A.Y. 2014-15.

In the statement Q.50 was asked as "during the course of search in your house substantial jewellery was found. On verification of the projects, it is seen that the work-in-progress in various firms do not match with the amounts disclosed in the books of accounts. Besides this in your house at 1, Mount Villa, Ch una Bhatti, Bhopal substantial investment has been made. All these questions have not been satisfactorily answered. You are again given an opportunity to explain this,

the assessee gave a reply as ----- during the course of the proceedings, considering the documents, papers and jewellery, etc. found, I have consulted the manager Abhishek Jain. During this, financial year, in the various projects of my firms, Premium Arcade, Orchid Square and Red Square, cash receipts which are not incorporated in the books are approx. to the tune of Rs. 10 crores. Out of this, I have invested 1 crore in jewellery, 1 crore in the furnishing of the house and approx. 8 crores in 7

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

Work-in-progres of various firms, the details of which are as under

Swadesh Developers and Colonisers 4 crores

S. V. Infra Developers 3.5 crores

Swadesh Developers 0.50crores

I offer the above amount as undisclosed income. This income is besides the income disclosed in the books of various firms for the F.Y. 2013-14. I will declare the income in the income tax return as under:

Swadesh Developers and Colonisers 5 crores

Ss. V. Infra Developers 5 crores

However, while filing the returns, the assessee retracted from the said surrender and filed the returns on the basis of the accounts which are duly audited.

1.In the course of the assessment proceedings all the information as required by the AO from time to time was furnished. The assessee is in the business of real estate, builders and developers. The assessee during the relevant period was developing a residential complex in the individual capacity and also in the firms in which he was a partner. The expense incurred on the purchase of land and construction expenses on the projects were the business expenses of the assessee. The assessee had maintained regular books of account in which all the expenses including the cost of construction were duly recorded. These books were presented before the AO during the course of assessment proceedings and were duly checked by him and no deficiency was found in the books of account or the

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

records maintained. No evidence was found during the course of search or after words during post search enquiry or pre assessment enquiries to suggest that the assessee has received any extra receipts or has incurred any unrecorded expense. Therefore, the assessee retracted from the declaration made for additional income u/s 132(4).

2.The Id. A.O. did not consider the submissions of the assessee and made various additions on the basis of the loose papers and also on the basis of the investments made besides, the cash found, the jewellery and the investments in the residential house. During the course of the assessment proceedings, the matter was referred to the DVO regarding the investment in the residential house. On the basis of this report the additions were made in various years. The Id. A.O. further made additions of Rs.26,42,910/- for alleged unexplained cash found, Rs.48,Ol,948/- for alleged unexplained investment in jewellery, Rs.IO,OO,OOO/- for alleged unexplained investments in watches. On the basis of the loose papers, the Id. A.O. made the addition of Rs.5O,OO,OOO/- for alleged unexplained advances to Mr. Lalwani and Rs.2,OO,OOOI- for foreign travel.

3.In appeal, it was submitted before the Ld. CIT(A) that the assessee has incurred expenses on the project which are duly recorded in the regular books of accounts and were supported by proper supporting evidences and formed part of the sales/WlP shown by the assessee. It was further submitted that the assessee has been maintaining regular books of accounts which were duly audited and the audit report along with audited financial statements were duly furnished before the AO during the course of assessment proceedings. No discrepancy was found in the books of account, nor any paper/proof was found that the assessee has received any extra payment on sale of flats. No undisclosed investment or assets

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

were found during the course of search. It was further submitted that the additions cannot be made without finding any incriminating material merely on the basis of the statement recorded u/s 132(4). The assessee relied on number of judgments of various High Courts and the judgments of the Indore Tribunal. 4.After considering the various objections raised by the assessee and analysing the different case laws, the Ld. CIT(A) allowed the assessee's appeal.

ARGUMENTS

It is submitted that no addition was warranted as the surrender has not been made with reference to any loose paper seized during the course of search and was accordingly not in accordance with the provisions of section 132(4). The AO has failed to bring on record any specific instance of the assessee having earned any undisclosed income or having made any unexplained investment which could justify the addition under reference. The sole basis for making the addition is the statement made by one of the partners. The Ld. A.O. has made various additions for the documents found. Thus, all the loose papers and the investments have been considered by the A.O. and accordingly he has made the additions under various heads. After making the additions on the basis of various papers there remains no scope for making any furher addition on the basis of declaration made in the statement.

It is humbly submitted that no incriminating material was found during the course of the search to show that the assessee has received any extra payment than mentioned in the books of accounts nor has incurred any extra expenditure on the construction of buildings, nor any paper/proof was found that the assessee has received any extra payment on sale of 10

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

flats. No undisclosed investment or assets were found during the course of search. The assessee has maintained regular books of accounts which are not found to be incomplete or unreliable. The books of accounts are not rejected.

It is further submitted that no addition can be made without finding any incriminating material merely on the basis of the declaration. In this connection the attention is drawn to the direct judgment of the Hon'ble Indore Tribunal in the case of Shri Sudip Maheshwari in ITA 524/IND/2013 pronounced on 13/0212019 and in the case of M/s Ultimate Builders in ITA 134/2019 pronounces on 09108/2019. The Hon'ble Tribunal has relied on the various judgments of the various High Courts specially the decision of the Hon. Jharkhand High Court in the case of Shri Ganesh Trading eo. vis. CIT and the decision of Hon. Gujrat High Court in the case of Kailashben Mangarlal Choksi v/s. ClT.

After considering the submissions made by the assessee and the papers filed during the course of the appeal the Id. CIT(A) allowed the appeal.

In view of the above, it is humbly submitted that the order of the Id. CIT(A) is correct in deleting the said addition. Thus, the addition deleted by Id. ClT(A) is correct and may please be upheld.

that the alleged addition is purely based on the statement given u/s

132(4) of the Act and there is no corroboration with any

incriminating material found during the course of search. It is also

submitted that whatever discrepancies were noticed during the 11

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 course of search separate additions had already been made by the

Ld. A.O.

placed before us. The common issue raised by the revenue is with

regard to the additions made by Ld. A.O in the hands of assessee(s)

Shri Nitin Agrawal and M/s S.V. Infra Developers for Assessment

Year 2014-15 by the Ld. A.O on the basis of admission of additional

income in the statement given u/s 132(4) of the Act at Rs.5 crores

each in the hands of both the assessee(s) but wrongly deleted by Ld.

CIT(A) observing that the impugned additions are not corroborating

with any incriminating material found during the course of search.

the group concern/business associates of Signature Group on

29.1.2014. Mr. Nitin Agrawal is one of the key person controlling

the business of the group. Search was conducted at his residential

premises also. During the course of search unexplained jewellery,

unexplained cash, unexplained investment and advance were

noticed. Thereafter statement u/s 132(4) of the Act of Shri Nitin 12

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 Agrawal was taken wherein he accepted to offer additional income

in the name of various business concerns as well as his individual

name. In the instant appeal the impugned account of Rs.5 crores

each was surrendered by Nitin Agrawal in his own name as well as

M/s S.V. Infra Developers. Ld. A.O thereafter during the course of

assessment proceedings called for reply. Detailed submissions with

regard to the discrepancies found during the course of search were

filed. Ld. A.O concluded the assessment by making various

additions under different heads in unexplained cash, unexplained

jewellery, unexplained advance, unexplained investment and foreign

travel expenses. Ld. A.O separately made addition of Rs.5 crores for

additional income offered in statement u/s 132(4) of the Act but not

offered to tax in the return of income.

addition of Rs.5 crores made in the hands of Shri Nitin Agrawal

made by the Ld. A.O giving detailed finding on fact and placing

reliance on various decisions. Relevant extract is reproduced

below:-

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

4.2 Ground No. 3:- Through this ground of appeal, the appellant has challenged the addition of Rs. 5,00,00,000/- on account of admission of undisclosed income u/s 132(4). During the course of search no incriminating documents have been found from the office or from the project site of the appellant. There were other documents which were duly explained by the appellant. No undisclosed investment has been found. The accounts for the relevant years have also been examined by the Assessing Officer to reassess the income. The Assessing Officer did not find any irregularity of any sort so as to warrant any addition to the returned income. It is to be mentioned that there is no addition to the returned income in any of the years up to the A.Y. 2014-15. The AO made the addition in the A. Y. 2014-15 as a result of search is based on the Statement of Shri Nitin Agrawal recorded u/s 132(4). No documentary evidence has been brought in support of the addition.

4.2.1 The allegation that there is a huge difference in the work in progress found at site and that mentioned in the financial books of account is not supported by any document found during the course of search. During the course of search or post search enquiry or even during assessment proceedings, no particulars of what is the quantum of difference, how the difference has been arrived at, both in terms of quantity and value, was never worked out. During assessment proceedings the Assessing Officer did not refer the case to the DVO or made any efforts to arrive at the variation in the book figures and that is available at the project site. There is no basis whatsoever on account of which it can be stated that there is an excess investment in work in progress to justify the addition of Rs. 5 crores.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

4.2.2 The above fact can be confirmed from page-16 of the Statement dated 30-31/01/2014 recorded in respect of Shri Nitin Agrawal. It has been stated that the figures of 'work-in-progress' as noted at site do not match with the books of account. There is no reference to any quantity or value of stock, excess or short. How could the appellant be asked to explain the difference which is not quantified? It is also not mentioned as to whether the difference is on the positive side or negative side. Not having done so the mere statement made by the assessee, who was sick and under sedation, and without actual figures in hand to show that there was a difference, cannot be made the basis of making an addition to the returned income. Copy of the relevant pages of the Statement has been reproduced by the AO at Page no. 10 and 11 of the assessment order. The statement recorded does not speak about the quantity of the material found during the course of search. The inventory drawn during the course of search in respect to the material found is also not excessive. During the course of search no exercise has been done to arrive to the book stock value.

4.2.3 It is to be mentioned that Shri Nitin Agrawal had suffered a heart attack in the recent past. He was under medical observation and medication. His health deteriorated during the search operation which continued for three days. Doctor was called and as per Doctor's advice Shri Nitin Agrawal was kept under sedation. Medical certificate has been produced during the course of assessment proceedings. Therefore, such statement cannot be considered as a voluntary statement. A statement taken under such conditions cannot certainly be made the basis of addition in assessment; more so when there are no corroborating facts by way of incriminating documents found or proof of undisclosed income being discovered to support the statement. Neither during the course of search or post search enquiries nor during the course of assessment

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

proceedings have revealed any unexplained or undisclosed investments, income or other expenditure. Further, the volume of the material at site is so small that it cannot by any means justify an undisclosed income of Rs. 5.00 crores.

4.2.4 While going through the statement at Page No. 10-11 of the statement in question it is observed that an amount of Rs. 3.50 crores has been stated against M/s S V Infra Developers as undisclosed investment; also a sum of Rs. 50 lacs has been shown towards undisclosed income with M/s Swadesh Developers and Builders. However, later on the same has been summed up at Rs.5.00 crores in the case of SV Infra Developers and Nil in the case of Swadesh Deveoplers and builders. All it shows is that the discloser dose not reveals the true and correct picture of undisclosed income. Such a statement carries no weight in the eyes of law.

The A.O. has placed his reliance on the decision of the Hon'ble High Court of Punjab & Haryana in the case of CIT vs Rakesh Mahajan 214 CTR 218 (2007). I have carefully gone through the said decision, I am of the considered opinion that the facts in the instant case are clearly distinguishable from the facts in the said decision of the Hon'ble punjab and Haryana High Court in as much as in the instant case, no disproportionate asset has been brought on record."

I find that the case of the appellant finds support from the following decisions:

a)M. NARA YANAN & BROS. vs. ASSISTANT COMMISSIONER OF INCOME TAX (20 ll) 243 CTR (Mad) 588 : (2011) 339 fIR 192 : (2011) 60 DTR 233

Xxxxxx ..... xxxxx

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

b)INCOME TAX OFFICER vs. VIJAY KUMAR KESAR (2010) 231 CTR (Chattisgarh) 165: (2010) 327 ITR 497: (2010) 36 DTR 13

Xxxxxx ..... xxxxx

c)COMMISSIONER OF INCOME TAX vs. SHRl RAMDAS MOTOR TRANSPORT (2000) 163 CTR (AP) 403 : (1999) 238 ITR 177 (AP) : (1999) 102 T AXMAN 300 (AP)

Xxxxxx ..... xxxxx

d)KAILASHBEN MANHARLAL CHOKSHI vs. COMMISSIONER OF INCOME TAX (2008) 220 CTR (Guj) 138 : (2010) 328 ITR 411 : (2008) 174 TAXMAN466 : (2008) 14 DTR 257

Xxxxxx ..... xxxxx

It is the case of the assessee that during the course of search & seizure, no incriminating material or undisclosed income or investments were found. It is stated that the assessee was under mental pressure and tired. Therefore, to buy peace of mind, he accepted and declared Rs.5 crores during the course of search. It is also stated that the case laws as relied by the A.O. are not applicable on the facts of the present case. The Hon'ble Supreme Court rendered in the case of pullangode Rubber Produce Co. Ltd. 91 ITR 18 (SC), wherein the Hon'ble Court has held that admission cannot be said that it is conclusive. Retraction from admission was permissible in law and it was open to the person who made the admission to show that it was incorrect. However, reliance is placed on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT Vs. Chandra kumar Jethmal Kochar (2015) 55 Taxmann.com 292 (Gujarat), wherein it has been held that merely on the basis of admission that few benami concerns were being run by assessee, assessee could not be basis for making the assessee liable for tax and the assessee retracted from such admission and revenue could not furnish any corroborative evidence in support of such evidence. It was further urged by the assessee that admission should 17

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 be based upon certain corroborative evidences. In the absence of corroborative evidences, the admission is merely a hollow statement. A thoughtful consideration to the rival contentions of the appellant and AO. It is undisputed fact that the statement recorded U/S 132(4) of the Act has a better evidentiary value but it is also a settled position of law that the addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the contents of the statement. In the case in hand, revenue could not point out as what was the material before the A.O., which supported the contents of the statement. The A.O. failed to eo-relate the disclosures made in the statement with the incriminating material gathered during the search. The Hon'ble ITAT Indore in the case of ACIT 1(1)Bhopal vis Shri Sudeep Maheshwari vide ITA no. 524/Ind/2013 A.Y. 2010-11 date 13.02.2019 deleted the addition on the similar facts. Respectfully following the decision of the Hon'ble Tribunal the addition made by AO amounting to Rs. 5,00,00,000/- is Deleted. Therefore, the appeal on this ground is Allowed.

M/s S.V. Infra Developers wherein also similar type of addition of

Rs.5 crores was made for admitting additional income u/s 132(4) of

the Act, Ld. CIT(A) has given almost similar finding and deleted the

addition. In the case of M/s S.V. Infra Developers the surrender

was made on account of huge difference in the work in progress

found at work site and that mentioned in the financial book. But

during the course of assessment proceedings Ld. A.O did not refer 18

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 the case to the Departmental Valuation Officer nor made any efforts

to arrive on the variation in the book figures and value estimated at

the project site and resorted to make the addition purely on the

basis of statement. Ld. A.O also failed to take note of the fact that

in the case of M/s S.V. Infra Developers till the time of search there

was not a single bunglow that was completed for sale therefore no

sale or any possession of house is handed over to any customer.

The volume of the material at site was also too small which cannot

justify the undisclosed income of Rs.5 crores. Ld. CIT(A) after

appreciating the above stated facts concluded that the addition

made was purely on the basis of the statement given u/s 132(4) of

the Act and deserves to be deleted.

facts narrated/discussed in the preceding paras following two

aspects needs to be considered.

(1) In the case of Shri Nitin Agrawal surrender of income was

made looking to various discrepancies noticed by the search

team but at the time of completing the assessment Ld. A.O

had made separate additions for all such discrepancies 19

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 noticed/incriminating material found and addition was further

made for the surrender of Rs.5 crores. So whether such

addition not corroborating with any incriminating material

found during search and made purely on the basis of

statement given u/s 132(4) of the Act was justified.

(2) In the case of M/s S.V. Infra Developers also surrender was

made for the alleged mistmatch in work in progress at project

site vis-à-vis the figures available in financial books.

Surrender of Rs.5 lakhs was made. During the course of

assessment proceedings Ld. A.O has not referred the matter to

Departmental Valuation Officer and he also could not

controvert the fact that the concern M/s S.V. Infra Developers

was new and there was no sale since the bunglows were under

construction and in short Ld. A.O failed to corroborate the

addition of Rs.5 crores with the excess work in progress

alleged to be found during the course of search. In the body of

the assessment order also reference is only made to the

statement given u/s 132(4) of the Act.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 17. With regard to the above two aspects Ld. DR was also

confronted to place any evidence to show that the alleged addition

of Rs.5 crores each made in the case of both the assessee(s) namely

Shri Nitin Agrawal and M/s S.V. Infra Developers is having any

nexus with any incriminating material or corroborative evidence

found during the course of search. But Ld. Departmental

Representative failed to bring any such evidence. Therefore the

undisputed facts remains is that both the impugned additions were

purely made only on the basis of statement given during the course

of search and have no nexus whatsoever with any incriminating

material found during the course of search.

has come up before us in another group case M/s. Signature Group

in IT(SS) A No.184 to 186/Ind/2018 order dated 8.1.2021 which is

the same group as that of the assessee mentioned in the instant

appeal and this Tribunal after considering the settled judicial

precedents deleted the additions which were made by the Ld. A.O

purely on the basis of statement given u/s 132(4) of the Act

observing as follows:- 21

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

regard to the addition of Rs.25,00,000/- and Rs.3,00,00,000/- made for the Assessment Years 2013-14 and 2014-15 the same is purely based on the statement given on oath u/s 132(4) of the Act by the authorised representative on behalf of the assessee which was collectively surrendered as additional income on behalf of various group concerns. But without the support of any incriminating material on which the revenue authorities were able to lay their hands, this addition totalling to Rs.3.25 crores (Rs.25,00,000/- + Rs.3,00,00,000/-) is based only on the statement given u/s 132(4) of the Act. 28. Now the moot question remains that “whether the Ld. A.O was justified in making the addition purely on the basis of statement given u/s 132(4) of the Act without proving on record any corroborative evidence or incriminating material found during the course of search which could have direct nexus with the alleged addition of Rs.3.25 crores”. 29. We observe that similar issue came up before this Tribunal in another group concern M/s Ultimate Builders V/s ACIT ITA No.134/Ind/2019 order dated 09.08.2019. M/s Ultimate Builders was also subjected to search u/s 132 of the Act on 29.1.2014 being part of the same Signature group. From perusal of the impugned order of Ld. CIT(A) in the case of M/s Signature Builders observed at page 64 & 65, Ld. CIT(A) has given the brief details of the additional income admitted by the authorised person of M/s Signature group which is as follows; S.No Concern/F.Y 2012- 2013- Total 13 14 1 Signature Infrastructure 50 300 350 2 Signature Builders 25 300 325 3 Signature Builders and 25 300 325 Colonisers 4 Signature Developers 100 100 Total 1100

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

5 Om Builders 275 275 6 Om Construction 50 750 800 7 Sainath Infrastructure P 25 25 Ltd Total 1100 8 Ultimate Builders 225 225 9 Virasha Infrastructure 225 225 Total 450 10 M/s Sainath Colonizers 110 110 Pvt. Ltd 11 Shri Anil Kered Khilwani 40 40 Total 150 30. From the above we find that in the case of M/s Ultimate Builders also additional income was surrendered in the statement given u/s 132(4) of the Act for which the addition was made by the Ld. A.O without corroborating it with any incriminating material and the addition was confirmed by Ld. CIT(A). When the matter travelled before this Tribunal the addition of Rs.2.25 crores was deleted by this Tribunal observing as follows:- “9. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments referred to and relied by both the parties. The sole grievance of the assessee raised in Ground No.1 of the instant appeal is against the order of Ld. CIT(A) confirming the addition of Rs.2,25,00,000/- made by the Ld. A.O on account of undisclosed income surrendered during the course of search by the partner of the assessee firm. 10. At the cost of repetition we would like to recite and recapitulate the facts once more. The assessee is a partnership firm engaged in real estate business. It is the part of Signature Group. Search action was initiated in the Signature Group and its associates on 29.1.2014. The assessee’s 24

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association with the Signature group is on account of the common partners in various concerns. Assessee is separately assessed to tax. Search u/s 132(4) of the Act was initiated in the case of the assessee on 29.1.2014 and was concluded on 31.1.2014. This fact is proved on the basis of “panchanama” prepared by the officer of the search team which is placed at page 62-64. No surrender was made in the statements taken by the search team during the course of search from 29.1.2014 to 31.1.2014. There is no mention of any incriminating material referred by the Ld. A.O on the basis of which additions have been made. 11. The search action in the case of Signature Group continued ever after 31.1.2014. On 02.02.2014, Mr. Vipin Chouhan who is the partner of the assessee firm gave a statement before the search team wherein he made surrender of Rs.2,25,00,000/- on behalf of the appellant firm and agreed to offer it to tax. In the very same statement he also made surrender on behalf of another firm M/s. Virasha Infrastructure in the capacity of a partner. In the very same statement he also made surrender on behalf of other companies of Signature Group. Ld. A.O during the course of assessment proceedings observed that the assessee has not offered surrendered income of Rs.2,25,00,000/- for tax and confronted the assessee. During the assessment proceedings u/s 143(3) of the Act, assessee made the retraction by submitting that no such undisclosed income was earned and therefore no such income was required to be offered to tax. However, Ld. A.O giving reference to the statement of Mr. Vipin Chouhan, partner of Ultimate Builders and also giving reference to the seized documents found during the search at Signature Group made addition for undisclosed income. When the matter came up before Ld. CIT(A) addition was confirmed. However the basis of addition was accepted to have been made only on the basis of the statement of Mr. Vipin Chouhan. No reference was made to any incriminating material having its 25

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bearing on the surrendered income. During the course of hearing before us Ld. Counsel for the assessee contended that during the course of search i.e. between 29.1.14 to 31.1.2014 no cash or unrecorded assets was found, no incriminating material was found and no income was offered to tax in the statement recorded u/s 132(4) of the Act of the person found to be in the possession and control of the books of premises. Relevant questions asked about the loose paper found were duly replied in the statement. 12. Ld. Counsel for the assessee further contended that since the search in the case of assessee was concluded on 31.1.2014 the alleged statement of the partner Mr. Vipin Chouhan taken on 02.02.2014 cannot be construed as a statement given during the course of search u/s 132(4) of the Act so far as relating to the assessee since the search in its case already concluded on 31.1.2014. He further submitted that no incriminating material was found during the course of search and as held by Hon’ble Tribunal in the latest decision in the case of ACIT(1) vs. Sudeep Maheshwari (supra) that “no addition was called for which has been made merely on the basis of the statement without correlating the disclosure made in the statement with the incriminating material gathered during the course of search”. 13. So the contention of the Ld. Counsel for the assessee can be summarised that the addition cannot be made merely on the basis of statement which too was taken after conclusion of the search and no correlation has been made with the incriminating material found during the course of search. 14. On the other hand Departmental Representative gave reference to various judgements referred above. She mainly placed emphasis on the judgment of Hon’ble High Court of Madras in the case of Kishore Kumar V/s DCIT (supra) holding that “when there was a clear admission of 26

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undisclosed income in the statement sworn in u/s 132(4) of the Act there is no necessity to scrutinise the documents”. 15. Now so far as the first contention of the assessee that the statement relied on by the revenue authorities cannot be construed as a statement given u/s 132(4) of the Act, we will like to first reproduce the provisions of Section 132(4) of the Act; “(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is fond to be in possession or control of any books of account, documents, money, bullion, jewellery to other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act. Explanation.- For the removal of doubts, it is hereby declared that the examination of any person under this sub- section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act.”

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the Panchanama framed by the search team. The statement of Mr. Vipin Chouhan was taken on 02.02.2014 by another authorised officer and this date is after the conclusion of the search in the case of the assessee on 30.01.2014. 18. There may have been some force in the contention of the revenue authorities if the statement u/s 132(4) of the Act was taken during the course of search at the assessee’s premises or during the continuation of search, the statement may have been recorded on other places but the fact is that so far as the assessee M/s. Ultimate Builders is concerned the search concluded on 31.01.2014 and before the conclusion of the search no surrender of undisclosed income was made in the statement recorded u/s 132(4) of the Act by the persons available at the assessee’s business premises.

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hands of the assessee in our view cannot be construed as the statement u/s 132(4) of the Act. 21. Coming to the issue of addition made by the Ld. A.O on the basis of the statement but no reference been given to the incriminating material, we find that in the assessment order Ld. A.O has referred to various seized documents but none of them is directly related to the assessee. These seized documents are of the Signature Group and Ld. A.O has only mentioned the details of the seized document without uttering a word about their nexus with the business transaction carried out by the assessee or by pointing out assessee’s connection with the seized document in name or otherwise. Thus it can be safely concluded that the addition made by the Ld. A.O was not on the basis on the incriminating material found during the course of search but only on the basis of statement of Mr. Vipin Chouhan given on 02.02.2014. 22. Recently the Co-ordinate Bench in the case of ACIT(1) VS. Sudeep Maheshwari (supra) in which the undersigned was also a co-author while adjudicating the issue that “whether addition can be made merely on the basis of statement given during the course of search without correlating the statement with incriminating material”, we have decided the issue observing as follows:- “6. It is the case of the assessee that during the course of search & seizure, no incriminating material or undisclosed income or investments were found. It is stated that the assessee was under mental pressure and tired. Therefore, to buy peace of mind, he accepted and declared Rs.3 crores in personal name. It is also stated that the case laws as relied by the A.O. are not applicable on the facts of the present case. The assessee has relied on the decision of the Hon'ble Supreme Court rendered in the case of Pullangode Rubber Produce Co. Ltd. 91 ITR 18 (SC), wherein the Hon'ble Court has held that admission cannot be said that it is conclusive. 29

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Retraction from admission was permissible in law and it was open to the person who made the admission to show that it was incorrect. However, reliance is placed on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT Vs. Chandrakumar Jethmal Kochar (2015) 55 Taxmann.com 292 (Gujarat), wherein it has been held that merely on the basis of admission that few benami concerns were being run by assessee, assessee could not be basis for making the assessee liable for tax and the assessee retracted from such admission and revenue could not furnish any corroborative evidence in support of such evidence. It was further urged by the assessee that admission should be based upon certain corroborative evidences. In the absence of corroborative evidences, the admission is merely a hollow statement. We have given our thoughtful consideration to the rival contentions of the parties. It is undisputed fact that the statement recorded u/s 132(4) of the Act has a better evidentiary value but it is also a settled position of law that the addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the contents of the statement. In the case in hand, revenue could not point out as what was the material before the A.O., which supported the contents of the statement. In the absence of such material, coupled with the fact that it is recorded by the Ld. CIT(A) that the assessee himself had surrendered a sum of Rs.69,59,000/- and Rs.75,00,000/- in A.Y. 2008-09 and 2009-10 respectively. The A.O. failed to co-relate the disclosures made in the statement with the incriminating material gathered during the search. Therefore, no inference is called for in the finding of the Ld. CIT(A) and is hereby affirmed. Ground raised by the revenue is dismissed.”

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of admission, the assessee could not have been subject to additions, unless and until some corroborative evidence is found in support of such admission. 24. Hon'ble Jharkhand High Court Shree Ganesh Trading Co. V/s Commissioner of Income-tax, Tax Case No.8 of 1999 order dated 03.01.2013 held as under; “4. We considered the submissions of the learned counsel for the parties and perused the reasons given in the impugned orders as well as reasons given in the case of Kailashben Manharlal Chokshi (supra). 5. It appears from the statement of facts that there was a search in the business premises of the petitioner’s firm as well as in the residential premises of its partner, Shri Sheo Kumar Kejriwal, on 24th September, 1987. During the course of search, the statement of Shri Sheo Kumar Kejriwal had been recorded under section 132(4) of the Income Tax Act and in the statement, he stated that he was partner in the Ganesh Trading Company, i.e. the present assessee-firm in his individual status and that he surrendered Rs. 20 lacs for the assessment year 1988-89 as income, on which tax would be paid. He further stated that other partners would agree to the same; otherwise it would be his personal liability. However, in the returns filed after search, the income of Rs. 20 lacs surrendered by Shri Sheo Kumar Kejriwal was not declared by the assessee-firm. On being asked to explain the reason for not showing the surrendered amount in the returns, it was submitted by the assessee that declaration made by the partner was misconceived and divorced from real facts. It was contended that the declaration was made after persuasion, which, according to the learned counsel for the assessee, Shri Binod Poddar, in fact, was because of coercion exerted by the search officers. In explanation, it was submitted that the firm or the individual had no undisclosed income. The assessee’s said retraction was not accepted by 31

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any of the authorities below on the ground that the statement given by the assessee appears to be voluntarily given statement disclosing undisclosed income of Rs. 20 lacs. According to the learned counsel for the assessee, Shri Binod Poddar, the Assessing Officer had full jurisdiction to proceed for further enquiry and could have collected evidence in support of alleged admission of undisclosed income of the assessee. 6. We are of the considered opinion that statement recorded under section 132(4) of the Income Tax Act, 1961 is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Drawing inference from the facts is a question of law. Here in this case, all the authorities below have merely reached to the conclusion of one conclusion merely on the basis of assumption resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) of the Income Tax Act and when there is incriminating admission against himself, then it is required to be examined with due care and caution. In the judgment of Kailashben Manharlal Chokshi (supra), the Division Bench of Gujarat High Court has considered the issue in the facts of that case and found the explanation given by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific reason has been given for rejection of the assessee’s contention by which the assessee has retracted from his admission. None of the authorities gave any reason as to why Assessing Officer did not proceed further to enquire into the undisclosed income as admitted by the assessee in his statement under section 134(2) in fact situation where during the course of search, there was no recovery of assets or cash by the Department. This fact also has not been taken care of and considered by any of the authorities that in a case where there was search operation, no assets or cash was recovered from the assessee, in that situation what had prompted the assessee to 32

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make declaration of undisclosed income of Rs. 20 lacs. Mere reading of statement of assessee is not the assessment of evidentiary value of the evidence when such statement is self-incriminating. Therefore, we are of the considered opinion that in the present case, a wrong inference had been drawn by the authorities below in holding that there was undisclosed income to the tune of Rs. 20 lacs. 7. In view of the above reasons, without answering the question about retrospective operation of the proviso to section 134(4), we are holding that the authorities below have committed error of law in drawing inference from the materials placed on record, i.e. admission of the assessee coupled with its retraction by the assessee. The Revenue may now proceed accordingly”.

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of assessee was concluded on 31.1.2014 by the Authorised Officer. Secondly as regards to other business concerns referred by Mr. Vipin Chouhan in his statement given on 02.02.2014 and in case of such business concern wherein search action u/s 132 of the Act was continuing the said statement dated 02.02.2014 will be considered as the statement u/s 132(4) of the Act. Thirdly, no reference has been given by the Revenue Authorities to any incriminating material found during the course of search at the business premises of the assessee, which could be correlated to the alleged surrendered income earned by the assessee from undisclosed sources. 27. We therefore are of the considered view that the finding of Ld. CIT(A) needs to be set aside and the addition of Rs.2,25,00,000/- deserves to be deleted since it has been made on the basis of a statement not given u/s 132(4) of the Act and without referring to any incriminating material found during the course of search. Addition for undisclosed income of Rs.2,25,00,000/- is deleted. Accordingly Ground No.1 raised in the appeal by the assessee is allowed.”

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 of both the lower authorities and accordingly allow Ground No.3 raised in assessee’s appeal for Assessment Years 2013-14 and 2014-15 raised in ITA No.185-186/Ind/2018. 19. We therefore respectfully following the judgments referred

herein above and the consistent view taken by this Tribunal under

similar set of facts are of the considered view that since the

impugned addition of Rs.5 crore each is purely made on the basis of

statement u/s 132(4) of the Act without establishing any nexus

with incriminating material found during the course of search, the

finding of Ld. CIT(A) deleting the addition of Rs.5 crores each in the

case of Shri Nitin Agrawal and M/s S.V. Infra Developers needs no

interference and the same is confirmed. In the result common

Ground No.1 raised by Revenue in the case of Shri Nitin Agrawal

and M/s S.V. Infra Developers vide IT(SS)A No.182/Ind/2019 and

ITA No.657/Ind/2019 respectively stands dismissed.

Appeal No. IT(SS)A No.182/Ind/2019 in the case of Shri Nitin

Agrawal. With regard to Ground No.2 top 6 revenue has challenged

the following additions deleted by Ld. CIT(A).

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 Ground Particulars Amount No. 2 Unexplained cash Rs.26,42,910/- 3 Unexplained jewellery Rs.24,88,216/- 4 Unexplained advance to Shri Rs.50,00,000/- Lilwani 5 Unexplained investment in Rs.10,00,000/-. watches 6 Unexplained foreign travel Rs.1,00,000/- expenses

Representative vehemently argued supporting the order of Ld. A.O

and prayed for confirming the additions made by Ld. A.O.

of Ld. CIT(A) and also argued refrring to following written

submissions :-

Ground No 2: Deletion of addition of Rs.26,42,910/- on account of alleged unexplained cash

During the course of the search, the cash was found at the business premises at Rs.26,42,910/-. It was submitted that the cash balances as per the books of accounts of various firms was Rs. 87,82,341/-. Out of this

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

cash a sum of Rs.26,42,910/- was kept with the partner. The balance of the cash was explained as cash in office at Rs.3,16,630/- ; Rs.50,00,000/- as pending cash entry being advance to Smt. Big Saree Mall and balance of Rs.8,22,801/- being expenses incurred for pending vouchers at site. The Id. A.O. did not accept the contention of the assessee and made the addition. The Id. CIT(A) has deleted the same on the ground that the cash balance as per the seized books of accounts is Rs.87,82,341/- which takes care of the cash found at the residence and as such no addition is called for.

ARGUMENTS

It is humbly submitted that as per cash book which was seized during the course of the search there was a substantial cash balance. Thus, the CIT(A) was right in deleting the said addition.

Ground No.3 Deletion of addition of Rs.24,88,216/- on account of alleged unexplained jewellery

On the basis of the jewellery found at the residence and in the locker during the course of the search and after considering the statement the Id. A.O. made the addition ofRs.48,01,948 as undisclosed income.

In appeal, the CIT(A) allowed the deduction of Rs.24,88,216/- as per the Board's circular and the wealth tax returns filed earlier. The Id. CIT(A) maintained the balance addition ofRs.23,13,739/-.

The Id. CIT(A) was justified in considering the Board's circular and the wealth tax returns and deleting the addition of Rs.24,88,216/-. The order of the Id. CIT(A) may please be maintained.

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Ground No.4 Deletion of addition of Rs.50,OO,OOO/- on account of alleged unexplained advances to Lalwani Family

During the course of the search, copies of two cheques dated 15/12/2013 of Rs.25,00,000/- each Smt. Big Saree Mall were found at the premises of Shri P. Raju, the partner of the assessee in the firm M/s. S.V. Infra Developers. In the statement of Shri Raju, he admitted that he has advanced a loan of Rs.50,00,000/- to Lalwani Group. He further stated that Shri Nitin Agrawal has also advanced the similar loan. The statement of the assessee was recorded. In the statement recorded on 10/01/2014, the assessee admitted that he has advanced cash to Shri Dinesh Lalwani for purchase of floor adjacent to the office of the assessee. Subsequently, this transaction was cancelled. It was further stated that on cancellation of the agreement two cheques were given by the party for repayment of the advance. On the request of the party two cheques were given by them. The party however, stopped the payment of these cheques which were found during the course of search.

During the course of the post search enquiry, a statement of Shri Dinesh Lalwani was recorded on 27/05/2014 and 22/07/2014. In the statement Shri Dinesh Lalwani stated that they had purchased 6 duplex flats in the building of the assessee for a consideration of 6 crores which were registered on 31/03/2013. He further stated that 1 crore is required to be paid. He stated that post dated cheques were issued for renovation of the six duplex flats. Since the renovation was not completed within the time, they stopped the payment.

It was submitted before the Id. A.O. that the assessee had entered into an agreement for purchase of a floor in the building of Shri Lalwani and made the payment in cash. There is a substantial cash balance as on 38

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31/03/2013 out of which the payment of Rs.50,00,000/-- was made (pg.20 of asst. order). However, the transaction was cancelled by the Lalwani group and a cancellation agreement was entered on 07/11/2014 which was notarised (pg. 137 of PB). Lalwani group gave two cheques for the return of the advance for which the payment was stopped. These cheques were substituted by the subsequent cheques.

The Id. A.O. did not accept the contention of the assessee and on the ground that the cash was paid is not acceptable and in the absence of satisfactory explanation the addition of Rs.50,00,000/- is made as unexplained investment.

Before the Id. CIT(A), the arguments. were put forward that the cash advances were given for the purchase of the property which was cancelled and on cancellation the cheques were received from the party. It was further submitted that the assessee has filed a complaint for the offence u/s 138 r.w.s. 420 of IPC. It was further submitted that the statement of Shri Lalwani cannot be considered without providing the sufficient opportunity of cross examination. Various decisions were cited before the Id. CIT(A).

The Id. CIT(A) considered the submissions of the assessee and the following circumstantial evidences.

a.In the statement, the assessee has stated on oath that the advance was given in cash for purchase of a space adjacent to the assessee which did not materialise.

b.The cheques given by Dinesh Lalwani were replaced by two cheques which were dishonoured with the reason of stop payment by the drawer.

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The memo of stop payment has been seized during the course of the search.

c.The cancellation agreement has been entered. d.The appellant filed a complaint for the offence u/s 138 r.w.s. 420 of IPC which is pending in the Court.

e.No opportunity of cross examination is given. f.The A.O. overlooked the statement recorded of the assessee and his partner.

The Id. CIT(A) after considering the submissions and the evidences allowed the assessee's appeal and deleted the additions.

ARGUMENTS

It is humbly submitted that the evidences filed by the assessee conclusively prove that the advances were given for the purchase of the property in cash. There was a sufficient cash balance available with the assessee. The statement of Shri Dinesh Lalwani is totally unreliable and no evidence has been put up to corroborate the evidence. The duplex flats were registered in January 2013 and the possession was handed over. There is no evidence to show that the assessee was asked to renovate the house. No person will give any post dated cheque for the renovation of the newly constructed house. The cancellation agreement of the premises duly signed by the party and the cheques given by them which are mentioned in the agreement clearly prove that the cheques were issued for the repayment of the advance given. The fact is further strengthened that subsequent cheques were issued replacing the earlier cheques. The assessee's version is further proved that the complaint was filed in the

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Magistrate's Court for dishonouring the cheque which is pending.

In view of the above, it is humbly submitted that the Id. CIT(A) was justified in deleting the addition. The order of the Id. CIT(A) may upheld.

Ground No.5 Deletion of addition of Rs.I0,OO,OOO/- on account of alleged unexplained investment in watches

The Id. A.O. has made addition of Rs.I0,00,000/- for the watches found during the course of the search. It was submitted that these are duplicate Chinese watches and would not exceed more than Rs. 25,000/- in value. The Id. A.O. did not accept the contention of the assessee on the ground that the details of purchase and the bills have not been produced. On the basis of internet prices he has made the addition of Rs.10,00,000/-.

The Id. CIT(A) deleted the addition that the same has been made solely on estimate, presumption and assumption the additions cannot be made on guesswork without any evidence.

It is humbly submitted that these watches are Chinese duplicate watches and have no value. The assessee has visited Hong Kong and China number of times (pg. 36 of the asst. order). The additions cannot be made on pure guesswork without any evidence. The Id. CIT(A) was right in deleting the additions.

Ground No.6 Deletion of addition of Rs.l,OO,OOO/- on foreign travel

The ld. A.O. has made the addition of Rs.2,00,000/- on foreign travel on estimated basis. The ld. CIT(A) has upheld the addition of Rs.l,OO,OOO/- allowing a relief of Rs. l ,00,000/-.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 23. We have heard rival contentions and perused the records

placed before us. Revenue has raised following grounds challenging

the finding of Ld. CIT(A) deleting the addition on account of the

following:-

Ground Particulars Amount No. 2 Unexplained cash Rs.26,42,910/- 3 Unexplained jewellery Rs.24,88,216/- 4 Unexplained advance to Shri Rs.50,00,000/- Lilwani 5 Unexplained investment in Rs.10,00,000/-. watches 6 Unexplained foreign travel Rs.1,00,000/- expenses

as per the panchnama cash of Rs.26,42,910/- was found from the

residence of the assessee and Rs.3,16,630/- was found from the

office premises. During the assessment proceedings reconciliation

statement of physical cash balance found during the search as

against the cash recorded in the books of accounts was furnished

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

but the same was not accepted by Ld. A.O When the matter came

up before Ld. CIT(A) the addition for unexplained cash was deleted

observing as follows:-

4.3 Ground No. 4 :- Through this ground of appeal, the appellant has challenged the addition of Rs. 26,42,910/- on account of unexplained cash. During the course of search cash amounting to Rs. 26,42,910/- was found out of which Rs. 25,00,000/- was seized. The AO during the course of assessment proceedings required the assessee to explain the acquisition of the cash found during the course of search. The assessee in reply submitted that the cash found physically is completely matched with books of accounts.

4.3.1 The appellant during the course of appellate proceedings submitted that cash amounting to Rs. 26,42,910/- was found from residential premises and sum of Rs. 3,16,630/- was found from official premises. The appellant has been maintaining combined cash balance for all the units run by him and submitted reconciliation of cash found during the course of search.

4.3.2 I have considered the factual matrix of the case, plea raised by the appellant and findings of the AO. The appellant before the AO as well as before me has filed reconciliation statement of cash found during the curse of search and in support has filed copies of cash books. The relevant extract of reconciliation statement is as under:-

Cash balance as per books of accounts as on 28.01.2014

Swadesh Developers and Colonizers Rs. 7,32,575/- 43

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Swadesh Developers and Builders Rs. 94,657/-

SV Infra Developers Rs.79,55,109/-

Total Rs. 87,82,341/-

Cash found physically/accounts pending

Cash found at residence Rs.26,42,910/-

Cash at office Rs. 3,16,630/-

Cash entry pending

• Shreemati Big Saree Mall Rs. 50,00,000/- Other pending vouchers at site • Rs. 8,22,801/- and

office Total Rs. 87,82,341/-

Further, on perusal of copies of cash book it was observed that cash balance as on 28.01.2014 in the firm M/ SV Infra Developers was Rs. 79,55,109/-, Rs. 7,32,575 in M/s Swadesh Developers and Colonisers and Rs. 94,657/- in M/s Swadesh Developers and Builders. The AO has alleged that these firms are different entity and books of accounts are maintained separately, therefore, maintenance of cash balance of all these concerns is not correct as per standard practice of accounting. On the contrary, the appellant has strongly contended that there is no principle of law which bounds any firm/individual to keep its cash in separate cash box. The AO further stated that the cash entry of Rs. 50 lakhs in the name 44

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 of Shreemati Big Saree Mall was not fully explained by the appellant, in my considered opinion if the appellant has provided details of the cash payment to the said firm/company, it was on the part of the AO to confirm from the said party whether any such payment was received from appellant, which the AO failed to do so.

The appellant has fully explained each and every detail of cash found during the course of search, when he was asked only to explain source of cash amounting to Rs. 26,42,910/-. Thus, in view of the above, the AO was not justified in considering the facts and evidences before him and thus, the addition made by the AO amounting to Rs. 26,42,910/- is Deleted. Therefore, appeal on this ground is Allowed.

us, we find that Shri Nitin Agrawal is one of the key person

controlling the various business. The department has taken the

basis of statement of Shri Nitin Agrawal for making various

additions which interalia included surrender on behalf of various

business concerns so this is an undisputed fact that though there

are different entities running under the business group but they

all are inter connected and controlled by some common persons of

which one is Shri Nitin Agrawal. In the reconciliation statement

cash balance as per the books is stated at Rs.87,82,341/-.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 Revenue has not confronted this fact. The assessee has stated that

the cash in hand found during the course of search from his

residence was part of the cash in hand of the group. There is no

contrary finding by Ld. A.O to the figures narrated in the

reconciliation statement about the cash balance in books of

business concern named therein. Under these given facts where the

cash in hand available in books is much more than the cash found

during the course of search and the same has been rightly

explained in the reconciliation statement, we find no justification in

the addition made by Ld. A.O for unexplained cash and Ld. CIT(A)

has rightly deleted the addition and the finding is thus confirmed.

Ground No.2 of Revenue’s appeal No. IT(SS) No. 182/Ind/2019

stands dismissed.

jewellery at Rs.24,88,216/-, following jewellery was found/ seized

at the residence and locker of the assessee as per the panchnama

drawn during the course of search action.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 S.No. Address of the premises Jewellery covered u/s 132 of I.T. Act 1961 Found (In Rs.) Seized (In Rs.) 1 Nitin Agrawal R/o H No.1, Rs.90,58,305/- Rs.67,82,036 Mount View Villas, Chuna Rs.56,365/- Bhatti, Bhopal Found-(Gold net weight 2371.070 gm) Seized-(Gold net weight 1475.42 gm) Found (Silver net weight 1927.00 gm) 2 Jewellery from Locker Rs.56,87,278/- Rs.43,85,570/- No.64 State Bank of India, P.B.B Shahpura, Bhopal (In the name of Shri Nitin Agrawal & Smt. Mamta Agrawal) Found-(Gold net weight 1835.02 gms) Seized (Gold net weight 1467 gms)

by the assessee that he has been a high tax payer since past more

than 20 years and enjoys a sound financial status in the society.

The wife of the assessee is also from a high status family. They got

married in the year 1990 and has received considerable amount of

gold jewellery from the family and in-laws. His wife have been filing

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 return of wealth and gold jewellery has been declared. The copy of

the wealth tax return was also filed. However Ld. A.O did not

consider these submissions and also did not gave any credit to the

CBDT Instruction 1916 dated11.5.1994 and was of the view that

total value of gold jewellery found during the course of search at

Rs.1,48,01,948/- as unexplained and after considering the

surrender of Rs.5 crores made by the assessee for the best reason

known to the Ld. A.O he made addition of Rs.48,01,948/- observing

that remaining amount of unexplained jewellery of Rs.1 crore is to

be covered in the addition of Rs. 5 crores. When the matter came

up before Ld. CIT(A) addition for unexplained jewellery was partly

deleted at Rs.24,88,216/- observing as follows:-

4.4. Ground No.5: Through this ground of appeal, the appellant has challenged the addition of Rs.48,01,948/- on account of unexplained jewellery. During the course of search, gold weighing 2371.070 gms was found from residence and 1835.02 gms was found from bank locker and silver weighing 1927 gms was also found from residence of the assessee. The AO during the course of assessment proceedings required the assesse to explain the source of acquisition of such jewellery along with documentary evidences. The assessee in reply before the AO submitted that the wife of assessee has been filing wealth tax return and has duly

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

shown 735 grms of gold jewellery and item wise details will be submitted later on. The AO after considering reply of the assessee did not find the same acceptable for the following reasons:-

1.The assessee has not submitted any item wise details of the above jewellery found from residence and locker even though he has stated in reply that the list of jewellery explaining the source of each purchase or gift received shall be provided shortly. Till date the assessee has not furnished any such details.

II. The assessee has also not submitted any confirmation of other family members and relatives of the assessee to prove that the jewellery has been gifted by them to the assessee and his wife. Even, till date the assessee has failed to furnish such details like name and address of the person who has gifted the jewellery, date of receipt of such gift etc.

IlI. The assessee has also not submitted any evidence which could substantiate the assessee's claim that the jwellery belongs to gift received at the time of his marriage and thereafter.

IV As regards the claim of the assessee of filing of wealth tax return, the assessee has submitted only the computation of wealth and challan of Rs 330/- of wealth tax payment for A.Y 1991-92 and no copy of return of wealth has been submitted by the assessee. In the computation of wealth for A. Y 1991-92 the net weight of gold ornaments are shown at 625 grams.

VII The CBDT Instruction No. 1916 dated 11/05/1994 is meant to be an administrative instruction for the guidance of the Authorized Officer at the time of search and seizure action regarding non-seizure of jewellery upto 500 gms for married woman and 100 gms for male member etc., given their sentimental attachment to it. However, non- seizure of jewellery does not imply that the jewellery is to be treated as explained in the assessment proceedings by the A. 0.

4.4.1 The appellant during the course of appellate proceedings submitted that the entire jewellery has been found from residence and joint bank locker in the name of appellant and his wife. Smt Mamta Agarwal wife of appellant has claimed that the entire jewellery belongs to her and was

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

given by her parents and in laws at her marriage and other occasions. The jewellery was also acquired out of her own funds and funds provided by her husband. Further, Smt Mamta Agarwal has filed Wealth Tax Return for year 1991-92 and 1992-93 declaring total gold of 735 gms.

4.4.2 I have considered the facts of the case, the written submissions of the learned AR and various decision cited and also perused the assessment order. The appellant stated that the total gold jewellery 2371.07 gms was found from residence at Ho. No 1, Mount view villas, Chunna bhatti, Bhopal and 1835.02 gms from bank locker with State Bank of India, Shahpura, Bhopal, during the course of the search. Reliance is placed on instruction no. 1916 of CBDT:

"Instruction No. 1916 (F.No. 286/63/93-IT{lNV.II), dated 11-5-1994, issued by the Central Board of Direct Taxes ('CBDT') directs the income tax authorities, conducting a search, to not seize jewellery and ornaments found during the course of search of varying quantities specified in the instructions, depending upon the marital status and the gender of a person searched. The guidelines are issued to address the instances of seizure of jewellery of small quantity in the course of search operations u/s. 132 that have been noticed by the CBDT. A common approach is suggested in situations where search parties come across items of jewellery for strict compliance by the authorities. The CBDT directed that in the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms. per married lady, 250 gms. per unmarried lady and 100 gms. per male member of the family, need not be seized.

Besides, this the above jewellery includes stri-dhan of the assessee's wife and jewellery of assessee.

4.4.3 The law with respect to quantity of jewellery and ornaments which would generally be held by the family members of an assessee has gone through huge litigations. Boards' instruction no 1916 dated 11th may 1994 which lays down guidelines for seizure of jewellery and ornaments has also been interpreted by various courts and tribunals.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

• In the case Commissioner of Income Tax vs Ratanlal Vyaparilal Jain

{(2010) 235 CTR 0568: (2010) 45 DTR 0290; ( 2011) 339 JTR 0351J it has been that:

"Instruction no. 1916, dt 11th may 1994 which lays down guidelines for seizure of jewellery in the course of search takes into account the quantity of jwellery which would generally be held by the family members of an assesse and, therefore unless anything contrary is shown, it can be safely presumed that the source to the extent of the jewellery stated in the circular stands explained" .

•In the case Commissioner of Income Tax vs M.S Agrawal (HUF) {(2008) 76 CCH 0802 MPHC: (2008) 11 DTR 0169 (MP)] it has been held that:

"In the absence of any material found during search having nexus with undisclosed income, no addition could be made in block assessment under chapter XIV-B; further Tribunal was justified in deleting addition on account of jewellery having regard to CBDT Instruction No. 1916 dt. 11 may 1994”. •In the case Ashok Chaddhavs ITO (2011) 202 Taxman 395 it has been held that:

"Section 69A of the Income-tax Act, 1961 - Unexplained moneys - Assessment year 2006- 07 _ During a search at assessee's residential premises, 906.900 gms jewellery was found from assessee _ Assessee explained that he was married 25 years back and jewellery was received by his wife in form of 'streedhan' or on other occasions such as birth of a child, ete. _ Assessing Officer accepted only 400 gms of jewellery as explained and treated 506.900 gms of jewellery as unexplained and, accordingly, made addition under section 69A - Whether collecting jewellery of 906.900 gms by a woman in a married life of 25 years in form of streedhan or on other occasions is abnormal - Held, no - Whether therefore, Assessing Officer was unjustified in treating only 400 gms as 'reasonable' and treating remaining jewellery as 'unexplained' - Held, yes - Whether, therefore, addition made was to be deleted - Held, yes {In favour of assessee)".

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 •In the case SmtPati Devi vs Income Tax Officer and others Reported in 240 ITR -727 (Karnataka High Court) it has been held that:

"by referring to instruction no 1916 it was held that it is not the value which is considered but it is the weight which is considered reasonable looking to the social circumstances prevailing in the country”. 4.4.4 Considering the aforesaid facts and circumstances of the case and the various decisions cited above the findings on this issue are as below:

i). The appellant assessee is married for about 30 years and the search took place in January 2014. For an individual and for married lady, collecting jewellery in the form of stri-dhan or buying jewellery on other important occasions is very normal and common in Hindu families. This depends to a large extent on the status and income of the family. In this case the appellant's status is reflected from the regular returns of income filed.

ii). The A.O's findings has no merit that the appellant has not submitted any material evidence to substantiate her claim regarding jewellery received as gift at the time of marriage. At the time of marriage jewellery is given as gift by close relatives and friends and a person giving a gift of jewellery does not attach the bill of purchase.

iii). During the last 10 to 15 years the prices of gold have gone up many folds. The valuation of jewellery was done at the time of search. It would be proper to consider the weight of the jewellery rather than the valuation on the date of search. The jewellery which is part of stri-dhan and also acquired at an earlier date would have been acquired at a price much lower than the value arrived at tbe time of search on account of valuation.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

iv). The A.O has not mentioned any specific material found during the

course of search which would show that the investment in jewellery found in the locker on account of undisclosed sources. The A.O has not been able to connect acquisition of jewellery with any undisclosed income. The A.O has proceeded with the onus being on the assessee to prove the genuineness of the source of acquisition of jewellery. But, the A.O has not been able to establish any nexus with any document or evidence collected during the search.

v). Appellant has also filed copies of Wealth Tax Returns m year 1991- 92 and 1992-93 showing jewellery of735 gms. Merely, if an affidavit! Evidences or bills is not filled regarding receiving of jewellery at the time of marriage, it cannot be presumed that it has been acquired out of undisclosed sources.

In the case of Commissioner of Income Tax vs Ratanlal Vyaparilal Jain [(2010) 235 CTR 0568: (2010) 45 DTR 0290 : ( 2011) 339 1TR 0351J. where it has been held;

"The Tribunal found that the jewellery held by the assessee and his family members was well within the limit laid down under the CBDT circular and accordingly, deleted the whole addition on the ground that the jewellery held by each of the family members was below the limits specified in the said circular. Though it is true that the CBDT Instruction No. 1916, dt. 11 th May, 1994 lays down guidelines for seizure of jewellery and ornaments in the course of search, the same takes into account the quantity of jewellery which would generally be held by family members of an assessee belonging to an ordinary Hindu household. The approach adopted by the Tribunal in following the said circular and giving benefit to the assessee, even for explaining the source in respect of the jewellery being held by the family is in consonance with the general practice in Hindu families whereby jewellery is gifted by the relatives and friends at the time of social functions, viz., marriages, birthdays, marriage anniversary and other festivals. These gifts are customary and customs 53

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prevailing in a society cannot be ignored. Thus although the circular had been issued for the purpose of non- seizure of jewellery during the course of search, the basis for the same recognizes customs prevailing in Hindu society. In the circumstances, unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained. Thus, the approach adopted by the Tribunal in considering the extent of jewellery specified under the said circular to be a reasonable quantity, cannot be faulted with. In the circumstances, it is not possible to state that the Tribunal has committed any legal error so as to give rise to a question of law. "

In the case Commissioner of Income Tax vs M.S Agrawal (HUF) [(2008) 76 CCH 0802 MPHC: (2008) 11 DTR 0169 (MP)] where it has been held;

"In the case at hand, the AO has not connected any undisclosed income with anything that has come in search and seizure. The AO has himself recorded with regarded with regard to the NRI gifts that the assessee had denied of having made any compensatory payments. He has also found that the statements recorded of the donor were not clear and he has not specifically mentioned anything about the gifts made to the assessee. The AO has proceeded with regard to the onus on the assessee to prove the genuineness of the transaction and on that basis, he has held it to be non- genuine. But the fact remains that no nexus has been established with any document or evidence collected during search and seizure with regard to the gifts made. There is no finding as to how the gifts are not genuine except stating about the onus. Be that as it may, in the absence of any document during search or seizure, it is difficult to accept the submission of the counsel for the Revenue that the conclusion arrived at by the Tribunal to the effect that the proceedings could not have been initiated under Chapter XIV-B is erroneous or perverse. The CBOT instruction which relate to guidelines for seizure of jewellery and ornaments in the course of search provides that in the case of a wealth-tax-assessee, gold jewellery and ornaments found in excess of the gross weight declared in the WT returns only need be seized, the officer having regard to the status of the family and the custom and practices of the community to which the family belongs and other circumstances of the case."

In the case Ashok kumar Jain vs DCIT- ITA No. 21/Ind/2003 reported in (2004) 32 ITC 527 (Ind) where it has been held;

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

" .... the CBDT instruction be taken as yard stick to arrive at reasonableness of holding of gold ornaments in a middle class Hindu family, prevailing customs also to give gifts to minor children IS on festive occasions".

4.4.5 The appellant's wife Smt Mamta Agarwal has filed Wealth Tax Return in year 1991-92 and 1992-93 shown gold jewelley of 735 grams. Thus, looking into the income and status of the appellant assessee and in view of the decisions cited above, the gold jewellery in possession of the appellant along with his wife Smt. Mamta Agarwal to the extent of 835 (735 + 100) grams is reasonable. Keeping in view Board's circular 1916, the breakup of gold jewellery to the extent of 835 grams taken as reasonable is given as under;

In grams

Nitin Agarwal (Appellant Assessee) 100

Mamta Agarwal (Appellant Assessee's wife) 735

(As per Wealth Tax Retum filed in year 1991-92 and 1992-93)

Total 835

It is, therefore, held that out of the total gold jewellery found in possession, as claimed by the appellant's wife and appellant only 835 grams amounting to Rs. 24,88,216/- ( 835 gms X Rs. 2979.90) is reasonable. Addition on account of 835 grams of gold jewellery amounting to Rs. 24,88,216/- out of the total gold jewellery in possession and claimed by the appellant and his wife Smt. Mamta Agarwal is hereby, deleted and balance addition of Rs. 23,13,732/- is Confirmed. Therefore, appeal on this ground is Partly Allowed.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019 28. From perusal of the above finding of Ld. CIT(A) we observe that

he has rightly considered the wealth tax return submitted by the

assessee during year 1991-92 and 1992-93 and also considered the

Instruction No.1916 of CBDT dated 11.5.1994 and after referring to

settled judicial precedents has confirmed the addition of

Rs.23,13,732/- out of the total addition of Rs.48,01,948/- made by

the Ld. A.O. Since the revenue authorities has failed to bring any

other material contrary to the finding given by Ld. CIT(A) and

considering the fact that the assessee has filed wealth tax and

assessed as well as considering the limit of jewellery of 500 grms for

female and 100 grams for male member provided in CBDT

Instruction No.1916 dated 11.5.1994, we find no reason to interfere

in the finding of Ld. CIT(A) duly supported by judicial precedence

deleting the addition of Rs.24,88,216/-. Thus Ground No.3 of the

Revenue’s appeal vide IT(SS)A No.182/Ind/2019 is dismissed.

on account of alleged unexplained advance to Shri Lilwani family

there was some transaction between the assessee and Shri Dinesh

Lilwani partner of Shrimati Big Saree Mall. Assessee contended 56

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

that Rs.50 lakhs was given in cash to Shri Dinesh Lilwani as an

advance for acquiring of office space whereas Shri Dinesh LLilwani

has submitted that the cheques found in the possession of Shri

Nitin Agrawal were with regard to the remaining amount of

consideration to be paid for completion of flats purchased from real

estate group run by the assessee but stopped for payment as work

was not completed. However the Ld. A.O came to the conclusion

that assessee had given unaccounted cash of Rs.50 lakhs to M/s

Shrimati Big Saree Mall owned by Shri Dinesh Lilwani. The

relevant finding of Ld. A.O is extracted below:-

The submission of the assessee is considered carefully. It is an admitted fact that the assessee has paid Rs. 50 lakhs in cash to Shri Dinesh Lilwani, partner of Shrimati Big Saree Mall. This cash transaction of Rs. 50 lakh are not found to be recorded in the books of accounts of the assessee and his concerns at the time of search action. The assessee’s contention that due to repeated promise of repayment of the advance in cash, the said amount was not entered in his books of account is not acceptable as the amount has been paid almost before six months. Further, the amount is quite big amount which should have been recorded in the books of accounts at the time of payment itself. Therefore, the assessee’s contention in this regard is not acceptable.

As earlier discussed in this order, the books of account of the assessee and his concerns cannot be relied upon, the assessee’s this contention that the

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

source of cash paid to M/s Shrimati Big Saree Mall is out of cash in hand available is not acceptable. Further, the explanation offered by the assessee in this regard is not acceptable. In absence of satisfactory explanation, an addition of Rs.50,00,000/- is made to the total income of the assessee on account of unexplained investment u/s 69 of the I.T. Act for A.Y 2014-15. Penalty proceedings u/s 271AAB of the I.T. Act are initiated for A.Y. 2014-15.

lakhs was deleted considering the cash reconciliation statement

filed by the assessee showing that there was sufficient cash balance

in the books of group concerns to cover up the alleged cash advance

given to Shri Dinesh Lilwani. The finding of Ld. CIT(A) is

reproduced below:-

4.6 Ground No. 8:- Through this ground of appeal, the appellant has challenged the addition of Rs. 50,00,000/- in A.Y. 2014-15 on account of unexplained advance to Shri Lilwani. During the course of search it was found that Shri P. Raju has advanced sum of Rs. 50 lakhs to Shri Dinesh Lilwani partner of "Shrimati Big Saree Mall" and two cheques dated 15.12.2013 of Rs. 25 lakhs each were found and seized in the name of P. Raju which were issued by M/s Shrimati Big Saree Mall. When confronted to Shri P Raju he stated that cheques were issued against loan given in cash to Shri Dinesh Lilwani partner of M/s Shrimati Big Saree Mall and similarly another loan of Rs. 50 lakhs has been given by Shri Nitin

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019& ITA No.657/Ind/2019

Agarwal to Shri Dinesh Lilwani. Statement of Shri Dinesh Lilwani was recorded on oath on 27.05.2014 and 22.07.2014, wherein he stated that 6 duplexs were purchased at project Palace Orchad, Kolar road, Bhopal and registries ere done on 31.03.20\3, however, the duplexes are still under construction. The six duplexes were purchased for Rs. 6 crores and payment of Rs. 5 crores has been made through cheques, however, payment of Rs. 1 crores is still to be paid. He further stated that the Post Dated Cheques were given for renovation work of six duplexes. Since the renovation work was not completed in time therefore, payment of these cheques were stopped.

During the post search enquiries, when Shri P Raju was again confronted with this issue he stated that the amount was against the deal for purchase of property from firm Shrimati Big Saree Mall and in support he filed a copy of agreement dated 07.11.2013, wherein Shri Lilwani agreed for repayment of Rs. 1 crores in lieu of cancellation of an earlier proposal. Therefore, the AO required the assessee to show cause as to why an amount of Rs. 1.50 crores should not be added to his income. The assessee in reply submitted as under:-

Transactions with Mr Dinesh Lalwani: The copy of the statements relied upon by your good self in the matter may please be provided to the assessee and in case reliance is placed solely on the said statements, purportedly recorded u/s 131 of the Income Tax Act, 1961, an opportunity to cross examine the said persons may also be afforded to the assessee. Without prejudice to the foregoing, the assessee encloses herewith copies of the documents relating to the housing transactions entered into with the Lalwani Family which are self explanatory. There is yet one more transaction relating to the purchase of floor area belonging to the Lilwani family adjacent to the assessee's office at E5116, Arera Colony. The documents relating to which have been found at the time of search. The assessee reiterates that all the transactions have been duly recorded in the audited books of account of the assessee and there is no transaction pending as at the date which have carried out of the books of the 59

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assessee. It may also be pertinent to point out that there is a civil 1 criminal suit against the Lalwani family for dishonor of the cheques in violation of the agreement to sell office premises. The cash receipts of Rs 1 Crore are duly recorded in the books of account of the assessee in the year prior to the year of search when the sale took place. A perusal of the books of account would have obviated the need of this observation, please.

4.6.1 The appellant during the course of appellate proceedings submitted that the AO has relied upon the statement of Shri Dinesh Lilwani against the appellant and no opportunity of cross examination was provided. The appellant further submitted that a suit in respect of the said sum of Rs. 50 lakhs is still pending in the Bhopal Court and in support has filed necessary evidences.

4.6.2 I have considered the facts of the case, evidences on record and findings of the AO. This is an undisputed fact that Shri P Raju in his statement recorded on oath has stated that he and the appellant has given loan of Rs. 50 lakhs each to Shri Dinesh Lilwani, partner of Mls Shrimati Big Saree Mall without interest. Shri P Raju further submitted that the said loan has not been received back by the appellant. Thereafter, statement of appellant was also recorded on oath on 30.01.2014 wherein, it was explained that an advance of Rs. 50 lakhs in cash was given to Shri Dinesh Lilwani for purchase of floor adjacent to head office, however, the transaction did not materialized and Shri Dinesh Lilwani gave two cheques ofRs. 25lakhs each dated 15.12.2013 in the name ofShri P Raju which were also seized as page no 85 & 87 of LPS-1. Shri P Raju deposited the cheques in his bank and which were dishonored with reason "payment stopped by drawer". The return memo was also seized during the course of search vide page no 86 of LPS-1. The appellant, thereafter, moved to court against Mls Shrimati The Big Saree Mall and fild complaint u/s 200 ofCRPC offence u/s 138 of NI Act 1881 r.w.s 420 of IPC 1860. 60

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019,ITA No.657/Ind/2019 The case of the appellant was fixed in court on 22.08.2017 vide notice no MCRC/10603/2017 dated 27.07.2017 and the same is pending in Court.

Similar facts were narrated by Shri P Raju in his statement recorded on oath during the course of post search enquiries. Shri P Raju has also submitted a copy of agreement dated 07.11.2013, wherein Shri Lilwani has agreed for repayment of loan of Rs. 1 crores in lieu of cancellation of property deal under consideration. The AO in order to ascertain true and correct facts of the case issued summons to Shri Dinesh Lilwani and statement of Shri Dinesh Lilwani was recorded on oath on 27.05.2014 and 22.07.2014, wherein he stated that he along with his family has purchased 6 duplexes from firm of the appellant for Rs. 6 crores and payment of Rs. 1 crore is still pending to be paid. Shri Dinesh Lilwani has also stated that the two cheques were issued for renovation work of two duplexes and when the work was not completed in time the same were stopped for payment.

4.6.3 The appellant by taking an alternate plea stated that the AO has used statement of Shri Dinesh Lilwani against him without providing sufficient opportunity of cross examination. After considering the entire facts in totality I have reached to final conclusion that the AO ought to have provided opportunity of cross examination before making any addition on the basis of third party statement. Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise Kolkata in Civil Appeal No.248 of 2006 has held that in absence of cross-examination of parties, the assessment proceedings to be quashed. Further, the Hon'ble Gujarat High Court in the case of Praful Chunilal Patel Vs. M.J. Makwana [236 ITR 832 (Guj)] and JCIT & Ors. Vs. George Willimson (Assam) Ltd. [258 ITR 126 (Guj)] has held that statement of third party cannot be relied upon without having any corroborative evidence. 61

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019,ITA No.657/Ind/2019 Similarly, Hon'ble Supreme Court in the case of Kishanchand Chellaram V/So CIT 125 ITR 713 (SC) has held that adverse inference cannot be drawn against the assessee from the statement of third parties. Similarly, Ld. AR of the assessee has relied upon the decision of Hon'ble High Court in the case of CIT VIs. Indrajit Singh Suri (2013) 33 Taxmann 281 (Guj.) that where additions were made on the basis of statements of persons who were not allowed to be cross examined by the appellant, additions were not sustainable. It is a serious flaw on principles of natural justice which renders the order a nullity. It is also very important to notice that the AO has overlooked statement of two persons i.e. Shri P Raju and Shri Nitin Agarwal and has relied upon statement of Shri Dinesh Lilwani. Further, the AO ought to have considered the fact that the case of the appellant for advancing loan to Shri Dinesh Lilwani is still pending in court and the matter can only be decided in best when the order of the court is pronounced.

4.6.4 In view of the above discussion, the AO was not justified in making addition of Rs. 50,00,000/- on account of loan to Shri Dinesh Lilwani and therefore, addition made by the AO amounting to Rs. 50,00,000/- is Deleted. Therefore, appeal on this ground is Allowed.

facts arising out of the present issue are that firstly there was

sufficient cash in hand with the assessee and its group concerns,

secondly Ld. A.O has not provided opportunity of cross examination

of the assessee with Shri Dinesh Lilwani before relying on the

statement of Shri Dinesh Lilwani, thirdly Ld. A.O over looked the

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019,ITA No.657/Ind/2019 statements of Shri P. Raju and Shri Nitin Agrawal and gave only

credit to the statement of Shri Dinesh Lilwani and fourthly the

Ld.A.O failed to consider the fact that the case of the appellant for

advance of loan to Shri Dinesh Lilwani is still pending in the court.

Under these given facts, in our considered view Ld. A.O was not

justified in making addition for unexplained advances at Rs.50

lakhs. Thus no interference is called for in the finding of Ld. CIT(A)

thus Ground No.4 of the Revenue’s Appeal IT(SS)A

No.182/Ind/2019 is dismissed.

lakhs by Ld. CIT(A) we observe that during the course of search 17

watches were seized from the assessee’s residence. No purchase

bills of these watches were found. Ld. A.O claimed them to be

branded watches valued at Rs.10 lakhs. Before the Ld. A.O assessee

submitted that these watches are duplicate Chinese made watches.

Ld. A.O was not satisfied and he made addition for Rs.10 lakhs .

When the matter came before Ld. CIT(A) the addition were deleted

since there was no evidence to support the valuation of Rs.10 lakhs

brought by the Ld. A.O. Ld. CIT(A) deleted the addition of Rs.10 63

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019,ITA No.657/Ind/2019 lakhs for unexplained investment in watches observing as follows:-

4.7 Ground No. 9:- Through this ground of appeal, the appellant has challenged the addition of Rs.10,00,000/- in A.Y. 2014-15 on account of unexplained investment in watches. During the course of search, 17 watches were found from residence of appellant. Therefore, the AO during the course of assessment proceedings required the assessee to furnish source of investment in these watches. The assessee in reply submitted that the watches purchased by the appellant are all duplicate Chinese make watches, The AO after considering reply of the assessee submitted that the watches are branded watches and estimated the price of these watches at Rs. 10,00,000/-.

4.7.1 The appellant during the course of appellate proceedings submitted that the AO has erred in not referring the matter to an expert who would clearly ascertain the correct value of these duplicate Chinese watches. Further, there is no documentary evidence by way noting on passport for carrying valuable watches or a customs clearance because the watches were all duplicate and of no significant value.

4.7.2 I have considered the facts of the case, submissions filed and findings of the AO. The AO during the course of assessment proceedings observed that the assessee has purchased watches worth Rs. 10,00,000/- without referring the matter to a valuer/expert who could have ascertained the correct value of the watches. The addition made by the AO is solely on estimate, assumption and presumption basis. The AO has grossly erred in making addition simply on the basis of guess work, assumption and presumption. It is well settled that no addition can be made as a leap in the dark. The AO is not entitled to make a guess without evidence. The assessment of any particular year cannot be based on mere suspicion or 64

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019,ITA No.657/Ind/2019 bare guess, but on a legitimate material from which a reasonable inference of any unexplained cash credit can be made. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of Evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros co. v/s CIT 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex court in the case of Dhiraj Lal Girdharilal v/s CIT (1954) 26 ITR 736 (SC).

4.7.3 In view of the above judicial pronouncement, the AO was not justified in making addition on estimate basis and also when no corroborative evidence was found suggesting unaccounted investment in purchase of watches. Thus" the addition made by the AO amounting to Rs. 10,00,000/- is Deleted. Therefore, appeal on this ground is Allowed.

and the uncontroverted fact that Ld. A.O has not taken any step to

bring on record the valuation of the watches found during the

course of search which thus makes the addition merely on the

estimated basis and same therefore have been rightly deleted by Ld.

CIT(A) relying on settled judicial precedents. Ground No.5 of the

Revenue’s appeal in IT(SS)A No.182/Ind/2019 stands dismissed.

on account of foreign travel expenses at Rs.1 lakh. Brief facts 65

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019,ITA No.657/Ind/2019 relating to this issue are that during the search proceedings

various documents were found about the foreign travel carried out

by the assessee and his wife. The assessee claimed them to be duly

recorded in the books. However Ld. A.O made addition for Rs.2

lakhs for Assessment Year2014-15. Subsequently when the matter

travelled before Ld. CIT(A) he sustained it at Rs.1 lakh considering

the addition of Rs.2 lakh on a little higher side. We in the given

facts and circumstances of the case find that the assessee who is

into the business of construction has conducted various foreign

visits and expenses of the same were also debited in the books of

accounts. Ld. A.O estimated the undisclosed expenditure at Rs.2

lakh. We are however of the view that Ld. CIT(A) being fair to both

the parties has rightly considered the issue and partly deleted the

addition at Rs.1 lakh which thus do not call for any interference.

Accordingly Ground No.6 of the Revenue’s appeal in IT(SS)A

No.182/Ind/2019 is dismissed.

adjudication.

Shri Nitin Agrawal & S.V. Infra Developers IT(SS)A No.182/Ind/2019,ITA No.657/Ind/2019 36. Accordingly all the grounds of revenue in the case of Shri Nitin

Agrawal in IT(SS)A No.182/Ind/2019 and that of M/s S.V. Infra

Developers vide ITA No.657/Ind/2019 are dismissed. In the result

both the appeals of the Revenue are dismissed.

Order was pronounced in the open court on 25.03.2021.

Sd/- Sd/-

(KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore; �दनांक Dated : 25th March, 2021 /Dev Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Assistant Registrar, Indore