ITO 13 (2)(1), MUMBAI vs. M/S SAMRIDDHI FINVEST ADVISORY SERVICES PVT LTD, MUMBAI

आदेश / O R D E R PER AMARJIT SINGH, AM:

“1 On the facts and circumstances of the case and in law, the Ld.CI F(A) has erred in deleting the addition of Rs.1,60,02,000/- without appreciating the fact that the documentary evidence found during the search are sufficient evidence to draw a presumption regarding a transaction found entered in the seized document in terms of section 106 of the Evidence Act. 2 On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs.1,60,02,000/- without appreciating the fact that the Director of M/s. SDPL had admitted in his statement recorded u/s.132(4) of the Act, dated 01.12.2012 that the company has taken 'On Money' on account of sale of flats and such on money received has not been recorded in regular books of accounts of M/s. SDPL. 3 On the facts and circumstances of the case and in law, the LcI.CIT(A) has failed to appreciate the settled position of law that where direct evidences is not available or possible one has to fall back on the circumstantial evidence and apply the test of human probabilities. 4 On the facts and circumstances of the case and in law, the Ld.CIT(A) has failed to consider the provisions of the I.T. Act, 1961 that even under the Act, there is a presumption u/s.292C of the I.T. Act, 1961 that the contents of the books of account and other documents are true and such books of account/documents belongs to such person who is searched u/s,132 of the I.T. Act, 1961. 5 The appellant prays that the order of Ld.CTT(A)'s on the above ground be set aside and that of the Assessing Officer be restored.

C.O.60/Mum/2021 3 ITO-13(2)(1) Vs. M/s Samriddhi Finvest Advisory Services Pvt. Ltd.

C.O.60/Mum/2021 4 ITO-13(2)(1) Vs. M/s Samriddhi Finvest Advisory Services Pvt. Ltd.

12. Decision :- I have considered the facts of the case and submissions made by the appellant. According to the Assessing Officer, certain loose papers were found in the office of M/s Sheth Developers P Ltd during the search on 04.10.2012. On being confronted with the loose papers, Mr. Ashwin Sheth had admitted in his statement dated 01.12.2012 that these were on-money received from various clients in cash which was outside the books of accounts. On the basis of this evidence, the Assessing Officer made addition of Rs 1,60,02,0007- in the hands of the assessee. The appellant has booked two flats in the building 'Vasant Pearl' being no. 2302, 23rd Floor, Vasant Pearl and flat No. 2202, 22nd floor, Vasant Pearl, CIS No.- 104-A, Village- Dindoshi, A4-Plot, Malad (E), Mumbai. The appellant has submitted a copy of Allotment Letter dated 26.02.2010 for both the flats. A reference to the same would show that the assessee has booked such flat 2302 for Rs. 1,26,00,0007- (Rs. One Crore Twenty Six Lacs) and the assessee has booked fiat 2202 for Rs 1,26,00,000/- (Rs. One Crore Twenty Six Lacs). A perusal of the allotment letter shows that there is an earnest deposit of Rs 7,50,000/- required to be paid to the builder. The appellant has duly paid the amount of Rs 7,50,000/-. The payment was made by account payee cheque. The payment is reflected in the appellant's bank statement. The payment is reflected in the appellant's Balance Sheet. The remaining payments are to be made stage wise based on the completion of construction. According to the appellant, this allotment has been transferred by the assessee to (1) Divyam Saraf and (2) Krishnam Saraf during the year. Thus, effectively, no allotment was remained with the assessee during the year. The advance towards flat transferred in the name of Divyam Saraf and Krishnam Saraf were reflected in the Balance Sheet of the appellant as on 31.03.2010. The appellant submits that the statement of Mr. Ashwin Sheth dated 01.12.2012 was never provided to it during the Assessment Proceedings. The appellant requested for the statement in its submission dated 14.12.2017 and 21.12.2017. Hence, the evidence in the statement cannot be used against the appellant. Further, an opportunity of cross examination of Mr Ashwin Sheth requested vide letter dated 14.12.2017 and 21.12.2017 was not given. The Assessing Officer has not given copy of statement of Mr. Ashwin Sheth to the appellant. The Assessing Officer has not granted opportunity of cross examination of Mr. Ashwin Sheth to the appellant. Thus, the Id Assessing Officer has violated the principles of natural justice. Further, a reference to the Valuation Reports of the flats shows that they were worth around Rs.1 Cr as per stamp duty rates. However, the cost of C.O.60/Mum/2021 5 ITO-13(2)(1) Vs. M/s Samriddhi Finvest Advisory Services Pvt. Ltd.

acquisition is much higher around Rs 1.26 Cr. This shows that both the flats were purchased at a rate higher than the stamp duty value. Hence, there is no question of the assessee giving any on-money to the builder. The assessee has purchased both the flats at market rates by account payee cheque and there appears to be no additional amount paid to the builder in view of the facts available on record. The Assessing Officer has at para 8, page 6 of the Assessment Order mentioned the fact that there is no denial of cash being received by M/s Sheth Developers Pvt. Ltd in its reply to the notice u/s 133(6) of the Act dated 06.12.2017. M/s Sheth Developers Pvt Ltd in their letter to the Assessing Officer dated 15.12.2017 have categorically stated that they have received Rs 7.5 lakhs towards flat No 2202 and Rs 7.5 lakhs towards fiat no 2302. They have enclosed their bank statement highlighting the receipt of Rs 7.5 lakhs. The same tallies with the appellant's bank statement showing payment of Rs 7.5 lakhs. In the reply to notice u/s 133(6) of the Act, M/s Sheth Developers Pvt Ltd have nowhere admitted that they have received cash from the appellant. Further, coming to factual analysis of the issue, as per common practice followed in the market a nominal amount will be paid at the time of allotment and installments will be paid based on the progress of the work. Here, as per the Assessing Officer the appellant in addition to Rs. 7.5 lacs at also made huge payment which is almost equivalent to 75% of the total cost of the flat but, it has been submitted that no construction work was commenced at all, leave alone 75% of the work, which should have been completed to match the 75% of the amount which the appellant may have paid. Presuming that there was on many payments were involved, it would be in proportion to the payment. In the appellant's case as per A.O. the letter of allotment dated 26.02.2010 mentions that the installments shall be paid as per the schedule. It appears that the construction was not commenced, only the extent of amount alleged to have been give i.e. around 75% of the total agreement amount from the above finding also that is no justification from the amount that was paid. The appellant also produced copy of the valuation report and wherein it has been mentioned that the project got delayed and it was likely to be completed in 2022 only. Thus, the finding of the Id Assessing Officer that M/s Sheth Developers have not denied that cash was received from the appellant company is baseless. On legality of the issue the appellant submitted that the entire case was reopened based on certain loose papers found during the search of M/s Sheth Developers Pvt. Ltd on 04.10.2012. Various Courts have held that the evidentiary value of loose papers is less. In the case of Common Cause & others v Union of India (WP 505 of 2015) dated 11.01.2017, it was alleged that based on certain loose papers found in Sahara and Birla searches, that amounts in cash were paid to various politicians. The Supreme Court observed that in decision of the Apex Court in C.B.I, versus V.C. Shukla (1998 (3) SCC 410), it was submitted that it is open to any unscrupulous person to make any entry any time against anybody's name unilaterally on any sheet of paper or computer excel sheet. Such entries have been held to be prima facie not even admissible. The Court has considered the entries in Jain Hawala diaries, note books and file containing loose sheets of C.O.60/Mum/2021 6 ITO-13(2)(1) Vs. M/s Samriddhi Finvest Advisory Services Pvt. Ltd. papers not in the form of "Books of Accounts" and has held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible. The Court has further laid down in V.C. Shukla (Supra) that meaning of account book would be spiral note book/pad but not loose sheets. The Supreme Court observed that in Beni v. Bisan Dayal it was observed that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. Following the above rulings, the Supreme Court held that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. Considering the aforesaid principles which have been laid down, the Court was of the opinion that the materials in question are not good enough to constitute offences to direct the registration of F.I.R. and investigation therein. The AR also submitted that, the case of ACIT v Ms. Katrina Rosemary Turcotte [2017] 87 taxmann.com 116 (Mumbai - Trib.), is applicable to the facts of the appellant's case the brief facts are, in the course of assessment proceedings, the Assessing Officer on the basis of material seized from a third party i.e., from the computer and mobile back up of Ms. Sandhya Ramchandran, was of the view that the assessee charges one and half times in cash over and above her remuneration in cheque. It was found that as per the evaluation sheet found from the computer of Ms. Sandhya Ramchandra, assessee is earning 28% of the reported income in cash. Accordingly, he made addition of Rs. 32,65,574. The CIT(A) deleted the addition. On Revenue's appeal, the assessee's Counsel argued that:  The said document was not found from the assessee.  The author of the document was not examined.  Ms. Sandhya Ramchandra, in the statement recorded from her expressed her unawareness with regard to the facts mentioned in the said documents as she was not an employee of Matrix at the relevant time.  Even an affidavit has been filed on behalf of Matrix denying any cash payment to the assessee  Therefore, the learned Authorised Representative submitted, without any evidence brought on record, the addition cannot be made on loose sheet / dumb documents, that too on the basis of estimation / extrapolation. The Hon'ble ITAT held that the Assessing Officer has not brought on record any clinching evidence on the basis of any enquiry made by him to demonstrate that the assessee has actually received any cash as per the evaluation sheet from Matrix. Therefore, in the absence of any direct evidence demonstrating that the assessee had received cash payment from Matrix, as shown in the evaluation sheet, no addition can be made merely on presumption and surmises and on estimate basis.

C.O.60/Mum/2021 7 ITO-13(2)(1) Vs. M/s Samriddhi Finvest Advisory Services Pvt. Ltd.

The appellant also brought to my notice, the jurisdictional decision in the case of Anil Jaggi vs. ACIT 89 taxmann. Com 266 Mumbai ITAT dated 20.12.2017. The relevant portion of the decision is as under:- 14. We shall now take up the case of the assessee on merits and deliberate on the validity of the addition of Rs. 2.23 crore made by the A.O. on the ground that the assessee had made a payment of "on money" for purchase of flats from M/s. Lakeview developers. We have perused the facts of the case and the material available on record on the ji basis of which the addition of Rs. 2.23 crore had been made in the hand of the assessee. We have further deliberated on the material place don record and the contentions of the Id. A.R. to drive home his contention that no payment of any "on money" was made by the assessee for purchase of flats from M/s. Lakeview Developers. We find that the genesis of the conclusion of the A.O that the assessee had paid "on money" of Rs. 2.23 crore for purchse of property under consideration is based on the contents of the pen drive which was seized from the residence of an expenses- employee of Hiranandani group. WE have perused the print out of the pen drive (Paga 42 of APB) and find ourselves to be in agreement with the view of the Id A.R that though against the heading "Amount of on money paid" the name, address and PAN No. of the assessee is mentioned alongwith the details of the property purchased by him, viz. Flat no. 2501 in "Somerset" building from Lakeview Developers (a Hiranandani group concern), however, the same would not conclusively prove suppression of investment and payment of "on money" by the assessee for purchase of the property under consideration. We find that the information as emerges from the print out of the pen drive falls short of certain material facts, viz. date and mode of receipts of 'on money1, who had paid the money, to whom the money was paid, date of agreement and who had prepared the details, as a result whereof the adverse inferences as regards payment of "on money" by the assessee for purchase of the property under consideration remain uncorroborated. We further find that what was the source from where the information was received in the pen drive also remains a mystery till date. We find that Sh. Niranjan Hiranandani in the course of his cross-examination had clearly stated that neither he was aware of the person who had made the entry in the pen drive, nor had with him any evidence that the assessee had paid any cash towards purchase of flat. We have deliberated on the fact that Sh. Niranjan Hiranandani in his statement recorded on oath in the course of the Search & Seizure proceedings had confirmed that the amounts aggregating to Rs. 475.60 crore recorded in the pen drive were the on-money received on sale of fiats, which was offered as additional income under Sec. 132(4) and thereafter offered as such for tax in the petition filed before the settlement commission. We are of the considered view that there is substantial force in the contention of the Id. A.R that mere admission of the amounts recorded in the pen drive as the additional income by Sh. Niranjan Hiranandani, falling short of any such material which would inextricably evidence payment of "on money" by the assessee would not lead to drawing of adverse inferences as regards the investment made by the C.O.60/Mum/2021 8 ITO-13(2)(1) Vs. M/s Samriddhi Finvest Advisory Services Pvt. Ltd. assessee for purchase of the property under consideration. We rather hold a strong conviction that the very fact that the consideration paid by the assessee for purchase of the property under consideration when pitted against the 'market value1 fixed by the stamp valuation authority is found to be substantially high, further fortifies the veracity of the claim of the assessee that his investment made towards purchase of the property under consideration was well in order. We are of the considered view that though the material acted upon by the department for drawing of adverse inferences as regards payment of "on money" by the assessee formed a strong basis for doubting the investment made by the assessee for purchase of the property under consideration, but the same falling short of clinching material which would have irrefutably evidenced the said fact, thus, does not inspire much of confidence as regards the way they have been construed by the lower authorities for drawing of adverse inferences in the hand of the assessee. we thus are of a strong conviction that as the material relied upon by the lower authorities does not corroborate the adverse inferences drawn as regards the investment made by the assessee, therefore, the same cannot conclusively form a basis for concluding that the assessee had made payment of "on money" for purchase of the property under consideration. We thus in the backdrop of our aforesaid observations are of the considered view that the adverse inferences drawn by the A.O. as regards payment of "on money" of Rs. 2.23 crores by the assessee for purchase of Flat No. 2501 from M/s. Lakeview Developers are based on of premature observations of the A.O, which in the absence of any clinching evidence cannot be sustained, we thus are unable to subscribe to the view of the lower authorities and set aside the order of the CIT(A) sustaining the addition of Rs. 2.23 crores in the hands of the assessee.

of the revenue stand dismissed.

6. The appeal of the revenue is dismissed.

C.O.60/Mum/2021 11 ITO-13(2)(1) Vs. M/s Samriddhi Finvest Advisory Services Pvt. Ltd. C.O. No.60/Mum/2021 “1. Reopening is bad in law:

1. 1. The Learned Assessing officer failed to appreciate that, the provisions of the section 147 read with section 148 is not applicable when the assessment is to be reopened on the basis of search proceedings initiated in the case of search initiated on third party, due to specific provision u/s.153C of the Act which starts with notwithstanding anything contained in section 139, 147, 148 etc hence the reassessment is bad in law and liable to be quashed.

2. Without prejudice to above, the Learned Assessing Officer erred in issuing the notice under section 148 for reopening of assessment on Divyam Financial Consultancy Pvt. Ltd. (Old name) instead of Samriddhi Finvest Advisory Services Pvt. Ltd., further notice was issued on wrong address. As the service of notice was not proper consequently the reassessment order is bad in law and liable to be quashed.

3. Without prejudice to above, the statement recorded u/s.132(4) of Shri Aswhin Sheth was not provided and without giving an opportunity for cross examination in the course of assessment proceedings as well as appellate proceedings, as the respondent vide letter dt.14/12/2012 and 21/12/2012 requested for the same. Hence, without giving an opportunity of cross examination, reassessment is bad in law and liable to be quashed.

4. The responded craves leave to add, amend, alter or delete any or all the above grounds of appeal. Ground No. 1:

C.O.60/Mum/2021 14 ITO-13(2)(1) Vs. M/s Samriddhi Finvest Advisory Services Pvt. Ltd. In the case of the assessee the A. O could not substantiate with supporting evidences that notice issued u/s 148 of the act was served on the assessee, in spite of the fact that necessary address changes has already been effected in PAN, ROC and assessment records as discussed above in this order. Therefore, we allow this ground of cross objection of the assessee that in absence of service of notice, reopening of assessment was invalid.