DEPUTY COMMISSIONER OF INCOME TAX, HYDERABAD vs. M/S PRESTIGE AVENUES LIMITED, HYDERABAD

Succinctly stated, the assessee company which is engaged in the business of Real Estate was incorporated on 28/09/2004 with its Registered Office at 4th Floor, Tirumala Estates, Himayat Nagar, Hyderabad-500029, Andhra Pradesh.

Search and seizure proceedings U/s. 132 of the Act were conducted on the assessee company and its group entities on 30/11/2006. The assessee company filed its belated return of income for the subject year i.e. A.Y 2007-08 on 6/3/2008 declaring an income of Rs. 2,93,48,652/-. Subsequently, the assessee company filed a revised return of income on 15/11/2008 declaring an income of Rs. 6,07,69,080/-. The assessee company along with its revised return of income had enclosed a letter, wherein it was stated that Sri M. Venkateswara Rao, Managing Director of the assessee company in his statement recorded u/s 132(4) of the Act, dated 30.11.2006, had disclosed an additional income of Rs. 3.30 crores in the hands of the assessee company for the subject year i.e., A.Y 2007-08, which however was being offered for tax in two years viz., (i). A.Y: 2007-08 - income under the head “other sources”: Rs. 3,14,20,425/-; and (ii). A.Y 2006-07- unexplained investment in properties situated at Meerkhanpet and Kadthal/Maisigandi sites: Rs. 15,79,075/-. It was further stated in the letter that considering the aforesaid additional income that was being offered by the assessee company i.e., A.Y 2006- 07 (Rs. 15,79,075/-) and A.Y 2007-08 (Rs. 3,14,20,425/-), the declaration of the additional income of Rs. 3.30 crores that was made in the statement recorded U/s. 132(4) of the Act, dated 30/11/2006 was complied with.

During the course of the assessment proceedings, the A.O. observed, that in the course of the search proceedings conducted U/s. 132 of the Act at the premises of the assessee company, i.e., 4th Floor, Tirumala Towers, Himayat Nagar, Hyderabad on 30/11/2006, cash amounting to Rs. 3,00,46,700/- was found. It was further observed by him that an amount of Rs. 3 crores out of the aforesaid amount was seized by the Department during the search proceedings. Also, the A.O. observed that Sri M. Venkateswara Rao, Managing Director of the assessee company in his statement recorded U/s. 132(4) of the Act, dated 30/11/2006, had declared an additional income of Rs. 3.30 crores in the hands of the assessee company for the subject year i.e. A.Y 2007-08.

The A.O. after referring to the statement of Sri M. Venkateswara Rao (supra) recorded U/s. 132(4) of the Act, dated 30/11/2006, observed that he had come forth with an additional income of Rs. 3.30 crores (supra) after taking into consideration the multi-facet facts that had surfaced during the search proceedings, viz. (i). that all the receipts of the assessee company were not entered in its books of accounts; (ii). that certain miscellaneous expenditure was not routed through the books of accounts; and (iii). that certain other deficiencies had emerged. Apart from that, the A.O. observed that Sri M. Venkateswara Rao (supra) had thereafter in his two separate sworn statements recorded during the post-search proceedings i.e. on 05/12/2006 and 27/01/2007 confirmed the disclosure of additional income of Rs. 3.30 crore that was made by him in his statement recorded u/s 132(4) of the Act, dated 30.11.2006. The A.O. further observed that the assessee company had in its books of accounts suppressed the sale proceeds of lands situated at Maisigandi/Kadthal. The A.O. observed that as the assessee company had failed to offer the additional income of Rs. 3.30 crores (supra) that was admitted in the statement recorded U/s. 132(4) of the Act, dated 30/11/2006, which though was disclosed in its revised return of income filed on 15/12/2008, thus, in the backdrop of his deliberations recorded in the assessment order made an addition of Rs. 3.33 Crores in its hands.

Also, the A.O. observed that the assessee company had based on registered sale deeds purchased 53.27 Acres of land during the FY 2005-06 (relevant to the A.Y 2006-07) and 11.04 Acres of land at Kadthal/Maisigandi during the subject year i.e., A.Y 2007-08 @ Rs. 16,000/- per acre. However, the A.O. after considering certain incriminating documents that were seized during the course of the search proceedings, viz., (i) Pages 42 to 45 of Annexure PAL/MEL/4; (ii) PRK/New Folder/meeting/Maisigandi of Annexure A/PAL/MEL/PO/2; (iii) Sworn deposition dated 18/04/2007 of Sri P. Ravikumar; and (iv) Page 41A of Annexure A/PAL/MEL/4, adopted the purchase consideration of the subject lands at Rs. 3.5 lac to 4 lac per acre, and thus, held that the assessee company had made an unexplained investment of Rs. 42,62,400/- in the subject property U/s. 69A of the Act. Although the assessee company claimed that as per the recitals of the registered sale deeds it had purchased the lands ad measuring 11.04 acres out of Survey Nos. 260, 266, and 267 of Kadthal Village @ Rs. 16,000/- per acre, therefore, in the absence of any material proving to the contrary that it had parted with any “on- money” to the sellers no adverse inferences were liable to be drawn, but the same did not find favor with the A.O.

Apart from that, the A.O. observed that the assessee company had during the subject year purchased 2.30 acres of land at Village: Karkha Pahad out of Survey Nos. 123 and 262. Although the assessee company had disclosed the purchase consideration of the subject land at Rs. 1.57 lacs, but, the A.O. based on “agreements to sell” relating to Survey No. 120 for a transaction executed between third parties viz. Shri. T. Chinna Yadabai & Others in favor of Shri. B. Jayaprakash & Others worked out the undisclosed investment of Rs. 45,79,111/- u/s 69A of the Act in the hands of the assessee company. The A.O. while concluding as hereinabove, had drawn support from certain documents seized during the search proceedings, viz., (i) seized document A/PAL/MEL/PO1/2; and (ii) seized document A/PAL/MEL/PO2/10, which were stated to be relating to the lands situated at Village: Karkalpahad, Amangal Mandal, District Mahaboobnagar. Although it was the claim of the assessee company that the documents that were being relied upon were not related to the subject transactions, but the same did not find favor with the A.O. Accordingly, the A.O. based on his aforesaid observations made an addition towards unexplained investment of Rs. 45,79,111/- U/s. 69A of the Act.

The A.O. based on his aforesaid deliberations vide his order passed U/s. 143(3) of the Act, dated 31/12/2008 determined the total income of the assessee company at Rs. 7,14,90,163/-.

Aggrieved, the assessee company carried the matter in appeal before the CIT(A). As is discernible from the record, the CIT(A) though did not find favor with the contentions advanced by the assessee that no addition of Rs. 3.33 Crores (supra) was called for in its case, but vacated the additions made by the A.O towards unexplained investments in purchase of 11.04 acres of land at Village: Kadthal (Rs. 42,62,400/-) and that made towards the purchase of 2.30 acres of land at Village: Karkhalpahad (Rs. 45,79,111/-). Accordingly, the CIT(A) partly allowed the appeal filed by the assessee company.

Both the assessee company and the Revenue being aggrieved with the order passed by the CIT(A) have carried the matter in appeal before us.

We have heard the Learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.

As multi-facet issues are involved in the present appeal, therefore, we shall deal with the same in chronological manner, as under:

As is discernible from the record, the assessee company had vide registered sale deeds purchased 11.04 acres of land at Kadthal/Maisigandi during the subject year @ Rs. 16,000/- per acre. However, the A.O. by drawing support from some certain seized documents had adopted the purchase consideration at Rs. 3.5 lac to Rs. 4 lac per acre and made a consequential addition towards unexplained investment of Rs. 42.62 lacs (supra) U/s. 69A of the Act.

Ostensibly, it was claimed by the assessee company that the purchase consideration that had exchanged hands for the aforesaid property was evidenced by the registered sale deeds wherein the sellers had admitted having received the complete sale consideration. Apart from that, the assessee company had claimed that the investment made towards purchasing the subject land was duly disclosed in its financial statements for the year under consideration. Accordingly, the assessee had based on the aforesaid facts claimed that in the absence of any material with the A.O. which would prove that any “on-money” i.e., any amount over and above the sale consideration disclosed in the sale deed was paid by the assessee company for purchasing the subject property, no adverse inferences qua the veracity of its claim of having purchased the same at the value disclosed in the registered purchase deeds could be drawn. Apart from that, the assessee company had in the proceedings before the CIT(A) tried to dispel the reliance that was drawn by the A.O from the seized documents/statements based on which he had doubted the veracity of the purchase transactions, as under:

Ostensibly, the CIT(A) after considering the aforesaid contentions of the assessee company, observed that as the seized documents that were relied upon by the A.O. viz., (i) PRK/New Folder/meeting/Maisigandi; and (ii) Annexure A/PAL/MEL/PO/2, as well as the copy of sworn deposition recorded on 18/04/2007 of Sri. P. Ravi Kumar did not contain the details such as date, month or year, therefore, it was difficult to conclude that the notings made therein related to the assessment year under consideration. Apart from that, the CIT(A) had observed that the A.O. had neither conducted any other investigation i.e., examining the concerned parties nor brought on record any other positive material that would substantiate his claim that any “on-money” was paid by the assessee company for purchasing the subject property. Rather, the CIT(A) observed that the A.O. had wrongly relied upon the statement recorded on 18/04/2007, as nothing was therein stated against the assessee company i.e., payment of any “on-money” for purchasing the subject property. Accordingly, the CIT(A) had based on his aforesaid observations vacated the addition of Rs. 42.62 lacs (supra) made by the A.O. U/s. 69A of the Act. For the sake of clarity, the observations of the CIT(A) are culled out as under:

We have thoughtfully considered the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the orders of the authorities below. On a careful perusal of the record, we concur with the CIT(A) that as the seized documents that have been pressed into service by the A.O. viz., (i) Annexure PAL/MEL/4/pages 42 to 45; and (ii) Excel spreadsheet document PRK/New Folder/Networth of Annexure A/PAL/MEL/PO/2 do not contain the details such as date, month or year, therefore, it is difficult to conclude that the notings made therein related to the subject year in question. Also, we concur with the view taken by the CIT(A) that as the A.O. had failed to conduct any other investigation such as examining the parties concerned or to bring any other positive material on record to substantiate his conclusion regarding the payment of any “on-money” by the assessee company, therefore, there was no justification for him to have summarily drawn adverse inferences regarding the veracity of the assessee’s claim of having purchased the subject property at the value disclosed in the registered sale deeds. Apart from that, we concur with the CIT(A) that a perusal of the statement recorded on 18.04.2007 (supra) nowhere evidence that the subject lands were purchased by the assessee company for a purchase consideration over and above that disclosed in the registered sale deeds. The Ld. D.R had failed to place on record any material which would dislodge the view taken by the CIT(A) and irrefutably evidence payment of “on-money” by the assessee company for purchasing the subject property. Our aforesaid view that the terms of a registered sale deed cannot be summarily dislodged is fortified by the judgment of the Hon'ble High Court of Punjab & Haryana in the case of Paramjit Singh Vs. Income Tax Officer, of 2009 dated 10.02.2010, wherein the Hon'ble High Court after drawing support from Section 91 & 92 of the Indian Evidence Act, 1872, had observed that when terms of a contract, grant or other disposition of property has been reduced to the form of a document then no evidence is permissible to be given in proof of any such terms of such grant or disposition of the property except the document itself or the secondary evidence thereof. It was further observed by the Hon'ble High Court that according to section 92 of the Indian Evidence Act, 1872 Act once the document is tendered in evidence and proved as per the requirements of section 91 then no evidence of any oral agreement or statement would be admissible as between the parties to any such instrument for the purposes of contradicting, varying, adding to or subtracting from its terms. It was further observed by the Hon'ble High Court that once ostensible sale consideration disclosed in the sale deed is accepted then, it cannot be contradicted by adducing any oral evidence. For the sake of clarity, the observations of the Hon'ble High Court are culled out as under:

Ostensibly, the assessee company had purchased 2.30 acres of land at Village: Karkalpahad for a consideration of Rs. 1.57 lacs. However, the A.O. by drawing support from certain documents seized during the search proceedings, viz. A/PAL/MEL/PO1/2; and (ii). A/PAL/MEL/PO2/10 relating to lands situated at Village: Karkalpahad, Amangal Mandal, District Mahaboobnagar, an “agreement to sell” entered into between Sri T. Chinnayadabai and others in favor of Sri G. Jayaprakash and others; and also a receipt of cash of Rs. 30 lacs, had concluded that the subject land was purchased by the assessee company involving “on-money” payment of Rs. 45,79,111/-.

On a perusal of the record, it transpires that the assessee company had claimed before the CIT(A) that the aforesaid “agreements to sell” and also the receipt relied upon by the A.O. were not related to it as it was not a party to both the documents. Rather, it was the claim of the assessee company that it had purchased the subject land from the different land owners and not from the parties mentioned in the “agreement to sell” as was referred by the A.O. Also, the assessee company had claimed that as the landowners/sellers had acknowledged the receipt of the sale consideration disclosed in the registered sale deed before the Sub-Registrar, therefore, there was no justification for the A.O. to have summarily assumed the payment of “on-money” by the assessee company for purchasing the subject lands. Apart from that, the assessee company had drawn support from the fact that the land mentioned in the seized document relating to a third party that was relied upon by the A.O. related to Survey No. 120, whereas the land purchased by the assessee company related to Survey Nos. 123 and 262. Elaborating further, the assessee company had claimed before the CIT(A) that the A.O. without carrying out any independent inquiry i.e examining the parties concerned (as was specifically requested by the assessee), or by placing on record any positive material proving to the contrary its claim for having purchased the subject property as per the value disclosed in the registered sale deeds, had most arbitrarily by relying upon the documents relating to third parties regarding lands situated in altogether different survey numbers drawn adverse inferences in its hands. It was, thus, the assessee’s claim before the CIT(A), that the very basis that was adopted by the A.O. for inferring the payment of “on-money” by the assessee-company for purchasing the subject land had its genesis in misconceived facts. We find that the CIT(A) found favor with the contentions of the assessee company and vacated the addition by observing as under:

We have thoughtfully considered the facts relating to the issue in hand in the backdrop of the contentions of the Ld. Authorized representatives of both parties and find substance in the observations of the CIT(A). At the threshold, we may herein observe that as the purchase consideration of the subject lands is supported by the recitals of the registered sale deeds vide which the assessee company had purchased the same, therefore, the A.O. could not have summarily dislodged the same without placing on record any material proving to the contrary. Once again, our aforesaid view that the terms of a registered sale deed cannot be summarily dislodged is fortified by the judgment of the Hon'ble High Court of Punjab & Haryana in the case of Paramjit Singh Vs. Income Tax Officer, of 2009 dated 10.02.2010. Also, we concur with the CIT(A) that as the lands referred in the seized documents/agreement to sell relied upon by the A.O. related to Survey No. 120, whereas those purchased by the assessee company during the year were related to Survey Nos. 123 and 262, therefore, no feasible comparison could have been made based on the aforesaid documents. Also, we concur with the CIT(A) that as the A.O. had not conducted any other investigations such as examining the parties concerned; or bringing any positive material on record to substantiate his conclusion, therefore, he had failed to bring his view to a logical end and without any basis assumed that the assessee had parted with “on-money” of Rs. 45,79,111/- for purchasing the subject property i.e., 2.30 acres of land (out of Survey Nos. 123 and 262) situated at Village: Karkhalpahad, Amangal Mandal, District Mahaboobnagar. We thus, find no infirmity in the view taken by the CIT(A), who by way of a reasoned order had vacated the addition of Rs. 45,79,111/- made by the A.O. U/s. 69 of the Act, uphold the same. The Ground of appeal No.3 raised by the Revenue is dismissed.

As is discernible from the record, during the course of the search and seizure proceedings conducted U/s. 132 of the Act at the business premises of the assessee company i.e., 4th Floor, Tirumala Towers, Himayat Nagar, Hyderabad on 30/11/2006 cash amounting to Rs. 3,00,46,700/- was found. Out of the aforesaid amount Rs. 3 Crores was seized by the Department. Also, as observed by us herein above, Sri M. Venkateswara Rao, Managing Director of the assessee company had in his statement recorded U/s. 132(4) of the Act, dated 30/11/2006, declared an additional income of Rs. 3.30 Crores in the hands of the assessee company for A.Y 2007-08.

On a perusal of the statement of Sri M. Venkateswara Rao (supra) recorded U/s. 132(4) of the Act, dated 30/11/2006, it transpires that he had disclosed the additional income of Rs. 3.30 Crores (supra) for the subject year i.e., A.Y 2007-08 for the reasons, viz., (i) that all the receipts of the assessee company were not entered in its books of accounts; (ii) that certain miscellaneous expenditure had not been incurred through the books of accounts; and (iii) to cover other deficiencies that had surfaced during the course of the search and seizure proceedings. Also, it is a matter of fact borne from the record that Sri M. Venkateswara Rao (supra), had thereafter, vide his two statements recorded on oath during the course of post-search investigation i.e., on 05/12/2006 and 27/01/2007, had confirmed/stood by the disclosure of additional income of Rs. 3.30 Crores that was made by him in his statement recorded U/s. 132(4) of the Act, dated 30/11/2006. For the sake of clarity, the confirmation of the disclosure of additional income of Rs. 3.30 crore (supra) by Sri M. Venkateswara Rao (supra) vide his statements recorded during the post-search proceedings on the aforesaid dates i.e., on 05/12/2006 and 27/01/2007 are culled out as under (relevant extract):

On a perusal of the assessment order, we find that the A.O. had after referring to the documents that were seized from the premises of the assessee company during the search proceedings conducted U/s. 132 of the Act, dated 30/11/2006, viz., (i) PAK/New Folder/Meeting/Messigandi sales; (ii) Annexure A/PAL/MEL/PO/2; and (iii) Page 127 of Annexure A/PAL/MEL/PO1/4, had observed, that though the assessee company had sold the lands at Messigandi, Kadthal in Amanngal Mandal, District Mahaboobnagar to the extent of 65 acres - 01 Guntas and had received a consideration of Rs. 3,48,85,660/-, but it had disclosed the same in its books of account only to the extent of Rs. 16,25,250/- and, thus, had derived undisclosed income of Rs. 3.33 Crores [Rs. 3,48,85,660/- (-) Rs. 16,25,250/-].

On being queried during the course of the search proceedings, it was claimed by Sri M. Venkateswara Rao, Managing Director of the assessee company that as the company staff for the last week was busy in the filing of its return of income and also those of the group entities , therefore, for the said reason its books of accounts and those of its group entities viz., (i) M/s. 2 R Leisure P Ltd; and (ii) M/s. Manage Estates (I) Pvt Ltd could not be updated since 24/11/2006. For the sake of clarity, the relevant extracts of the statement of Sri M. Venkateswara Rao (supra) is culled out, as under:

On a perusal of the assessment order, it transpires that the assessee company had subsequently updated its “cash book” based on which the cash balance available with it on the date of search proceedings i.e on 30/11/2006 was re-worked out at Rs. 4,53,03,869/-. The A.O. while framing the assessment had not only considered the aforesaid aspect, but had categorically observed that the cash availability with the assessee company as per its books of account that were updated during the post-search proceedings was Rs. 4.53 Crore (approx.) on 30/11/2006, as against that found available with it on the date of the search proceedings i.e. Rs. 3,00,46,700/- (supra), which, thus revealed a deficit/shortfall of cash in hand of Rs. 1,52,57,169/- which it could not explain. Apart from that, the A.O. observed that a perusal of the “cash book” of the assessee company revealed certain cash credits/deposits from 25/11/2006 to 30/11/2006 for which it had failed to come forth with any proper explanation.

The A.O. taking cognizance of the aforesaid facts, had observed, that Sri M. Venkateswara Rao, Managing Director of the assessee company in his statement recorded U/s. 132(4) of the Act, dated 30/11/2006, had only after considering the aforesaid muti-facet discrepancies/infirmities declared an additional income of Rs. 3.30 Crores in the hands of the assessee company for the subject year ie., A.Y 2007-08. Also, the A.O. observed that the assessee company backed by the aforesaid facts had filed a “revised” return of income on 15/12/2008, wherein it had included in its revised income the voluntary disclosure that was made by Sri M. Venkateswara Rao (supra) in his statement recorded U/s. 132(4) of the Act on 30.11.2006. Accordingly, the A.O. based on his aforesaid deliberations made an addition of Rs. 3.33 Crores to the returned income of the assessee company.

Aggrieved, the assessee company assailed before the CIT(A) the aforesaid addition of Rs. 3.33 crores (supra) made by the A.O, but without success.

The assessee company being aggrieved with the order of the CIT(A) to the extent he had sustained the addition of Rs. 3.33 Crores (supra) made by the A.O, which, thereafter, had been upheld by the CIT(A) has assailed the same before us.

We have heard the Ld. Authorized Representatives for both parties on the aforesaid issue i.e., sustainability of addition of Rs. 3.33 crore (supra) by the CIT(A). Ostensibly, the addition of Rs. 3.30 Crores (supra) made by the A.O. is primarily based on three facts viz., (i) that a perusal of the seized material PRK/New Folder/Meeting/Maisigandi sales of Annexure A/PAL/MEL/PO/2 and Page 127 of Annexure A/PAL/MEL/PO1/4 (which was seized from the premises of the assessee company) revealed that though the assessee company had sold lands at Maisigandi/Kadthal in Amangal Mandal, District Mahaboobnagar to the extent of 65 acres – 01 Guntas for an actual sale consideration of Rs. 3,48,85,660/-, but in its books of accounts had disclosed the sale consideration of only Rs. 16,25,250/- which, thus, had resulted to an undisclosed income of Rs. 3.33 Crores; (ii) that Sri M. Venkateswara Rao, Managing Director of the assessee company in his statement recorded U/s. 132(4) of the Act, dated 30/11/2006, had after considering that cash of Rs. 3,00,46,700/- was found during the course of the search proceedings from the premises of the assessee company, and there were certain discrepancies in its books of accounts i.e., (a) certain receipts were not entered in the books of accounts of the assessee company; and (b) that certain miscellaneous expenditure incurred was not routed through the books of account, had offered an additional income of Rs. 3.30 Crores for the subject year ie., A.Y 2007-08; (iii) that the assessee company had filed a revised return of income on 15/12/2008 declaring an income of Rs. 6,07,69,080/-, wherein it had after considering the declaration of additional income by Sri M. Venkateswara Rao (supra) in his statement recorded U/s. 132(4) of the Act, dated 30/11/2006 included an additional income of Rs. 3,14,20,425/- under the head “income from other sources” for the subject year; AND (iv). that the assessee company along with its revised return of income had enclosed a letter wherein it was stated, viz., (i) that Sri M. Venkateswara Rao (supra) had in his statement recorded U/s. 132(4) of the Act, dated 30/11/2006 offered an additional income of Rs. 3.30 Crores for A.Y 2007-08; and (ii). that the assessee company to comply with/honor the declaration of the additional income of Rs. 3.30 Crores by Sri M. Venkateswara Rao (supra) had offered the additional income in two years i.e., (i) A.Y 2007-08 – income from other sources: Rs. 3,14,20,425/-; and (ii) A.Y 2006-07 - towards unexplained investment in Meerkhantpet property and Kadthal/Maisigandi sites: Rs. 15,79,075/-.

Apropos the ld. AR’s contention that the statement of Sri M. Venkateswara Rao (supra) recorded U/s. 132(4) of the Act, wherein he had made a disclosure of additional income of Rs. 3.30 Crores for the subject year i.e., A.Y 2007-08 cannot on a standalone basis justify the addition in the hands of the assessee company, we principally concur with him. Admittedly, though the statement of an assessee recorded during the course of the search proceedings U/s. 132(4) of the Act carries evidentiary value, but the same on a standalone basis i.e., in the absence of any supporting material cannot be acted upon for making additions, specifically when, the same has been resiled by the assessee either by way of an explicit retraction or a retraction by implication i.e by not abiding with the same in his return of income. Our aforesaid conviction is fortified by the CBDT Circular No 286/98/2013-IT(Inv.II), dated 18.12.2014, wherein it has been emphasized by the Board that the officials of the department should refrain from exercising any undue pressure or coercion in the course of recording the statements during the course of search, survey or other proceedings, and should rather focus on gathering evidence. Apart from that, we may herein observe that though an admission made in a statement recorded u/s 132(4) is a good piece of evidence, but the same in itself is not conclusive of the correct state of affairs unless supported by any material. In fact, in a case where there is a retraction from a disclosure earlier made by an assessee in his statement recorded u/s. 132(4) of the Act, then, in such a case a very heavy onus is cast upon the department to prove that such retraction was not maintainable considering the incriminating material which proved to the contrary and was merely a brainchild of an afterthought to wriggle out of the correct disclosure that was made by the assessee about his real financial affairs in the course of the search proceedings. Our aforesaid conviction is fortified by the judgment of the Hon’ble High Court of Delhi in the case of Pr. CIT v. Anand Kumar Jain HUF (2021) 432 ITR 384 (Del). It was observed by the Hon’ble High Court that an assessment framed u/s.153A on the basis of a standalone statement recorded u/s.132(4) without reference to any incriminating material discovered during the course of the search and seizure operations is not sustainable in the eyes of law. Also, a similar view had been taken by the Hon’ble High Court of Gujarat in the case of Chetnaben J Shah (Legal heir of Jagdish Chandra) Vs. ITO (2016) 288 CTR 579 (Guj). It was held by the Hon’ble High Court that there must be some material substance either in the form of documents or alike to justify an addition made pursuant to search proceedings. It was further observed that a statement recorded u/s. 132(4), and that too retracted, could not on a standalone basis justify an addition in the hands of the assessee. Also, a similar view had been taken by the ITAT, Mumbai “C” Bench in the case of DCIT & Ors Vs. Sitara Builders Pvt. Ltd. & Ors (2019) 56 CCH 99 (Mum) and that in the case of ACIT Vs. Oriental Decorators (2018) 52 CCH 14 (Mum). It was observed by the tribunal that an admission or concession is not a conclusive piece of evidence and is only a piece of evidence relevancy of which is required to be judged based on the material evidence and the circumstances in which it was made. We thus, in terms of our aforesaid observations, though principally concur with the Ld. A.R. that a statement recorded U/s.132(4) of the Act cannot on a standalone basis justify an addition in the hands of an assessee, but the same does carry an evidentiary value and can be pressed into service to corroborate the incriminating evidence found in the course of the search proceedings.

Apropos the “revised” return of income filed by the assessee company for the subject year i.e., AY 2007-08 on 15/12/2008 declaring an income of Rs. 6.07 Crores (supra), which included an amount of Rs. 3.14 Crores under the head “Other sources” for giving effect to/complying with the offer of additional income that was made by Sri M. Venkateswara Rao (supra) in his statement recorded U/s. 132(4) of the Act, we concur with the ld.AR that as the assessee had delayed the filing of its original return of income that was filed on 06/03/2008 i.e. was a belated return of income filed u/s 139(4) of the Act, therefore, the same could not have been revised by him. To sum up, the “revised” return of income filed by the assessee company on 15/12/2008 wherein it had offered an additional income of Rs. 3.14 Crores (supra) was an invalid and a non-est return of income that had no existence in the eyes of law. Rather, we find that the A.O. had also while framing the assessment vide his order passed under Section 143(3), dated 30/12/2008 not considered the aforesaid “revised” return of income filed by the assessee company.

After considering the aforesaid facts in the backdrop of the settled position of law, we are of the view, that as the assessee company had failed to file its original return of income within the prescribed period provided in sub-section (1) of Section 139 of the Act, therefore, the impugned “revised” return of income filed by it was non- est and invalid. Athough the “revised” return of income filed by the assessee company could not have been acted upon, but, the same would carry an evidentiary value. We say so, for the reason, that the assessee company along with its “revised” return (supra), had filed a letter, wherein it was stated that considering the statement of Sri M. Venkateswara Rao (supra) recorded U/s. 132(4) of the Act, dated 30/11/2006, wherein he had disclosed an additional income of Rs. 3.30 Crores (supra) in the hands of the asseessee company for A.Y 2007-08, the same was being offered in two years i.e., (i) A.Y 2007-08 - income from other sources: Rs. 3,14,20,425/-; and (ii) A.Y 2006-07 - towards unexplained investment in properties: Rs. 15,79,075/-. We thus, are of the firm conviction that though the “revised return” of income filed by the assessee company was technically non-est and invalid, but the letter that was filed along with the same carries substantial evidentiary value, as the same prima facie reveals that the disclosure of Rs. 3.30 Crores made by Sri M. Venkateswara Rao (supra) in his statement recorded U/s. 132(4) of the Act, dated 30/11/2006 was not in thin air but based on certain material facts.

Apropos the unexplained cash of Rs. 3 Crores (supra) that was during the search proceedings seized from the business premises of the assessee company, we are of the view that the said aspect would also have weighed in the mind of Sri M. Venkateswara Rao (supra) while disclosing an additional income of Rs. 3.30 Crores (supra) in his statement recorded U/s. 132(4) of the Act on 30.11.2006. As observed hereinabove, the assessee company had during the course of post- search proceedings updated its “cash book”, as per which it had claimed to have cash of Rs. 4,53,03,863/- available with it on 30/11/2006 i.e. on the date of search. On a perusal of the assessment order, we find that the A.O. had observed that as per the cash available with the assessee company on 30/11/2006 i.e, as per its updated “cash book”, there was a short/deficit cash of Rs. 1,52,57,169/- [Rs. 4,53,03,869 (–) Rs. 3,00,46,700/-] for which it had failed to give any explanation. Also, the A.O. had observed that though the updated cash book produced by the assessee company revealed certain cash receipts/deposits from 25/11/2006 to 30/11/2006, but it had failed to provide any proper explanation regarding the said transactions.

We have thoughtfully considered the aforesaid issue i.e., the cash balance on 30/11/2006 of Rs. 4.53 Crores (supra.) that was claimed by the assessee company to be available with it as per its updated “cash book”. Although, the A.O. had observed that the assessee company had failed to give any explanation regarding the cash receipts/deposits reflected in its updated cash book for the period 25/11/2006 to 30/11/2006, but interestingly he had not rejected its “books of accounts”. On the contrary, we find that the A.O. had adopted the “Net profit” of Rs. 2,93,48,652/- that was disclosed by the assessee company based on its audited updated books of account. Considering the aforesaid fact, we are unable to comprehend that on the one hand the A.O had doubted the authenticity of the cash receipts/deposits that were disclosed by the assessee company in its updated books of account for the period 25/11/2006 to 30/11/2006, which had resulted to a cash balance of Rs. 4.53 Crores (supra) on 30/11/2006, but at the same time, he had not only failed to reject its books of account but on the contrary adopted the book results i.e., the “Net profit” disclosed as per the audited updated books of accounts of the assessee company for framing the assessment vide his order passed U/s. 143(3) of the Act, dated 31/12/2008.

On a perusal of our record, we find that the assessee company during the course of hearing of the appeal had in compliance to the directions of the Tribunal vide its order sheet entry dated 16/01/2023, had placed on record the copy of the updated “cash book” for the period 01/04/2006 to 31/03/2007. On a close scrutiny of the updated “cash book”, it transpires that the assessee company had claimed that as on 30/11/2006 cash available with it after seizure of an amount of Rs. 3 Crores by the Income Tax Department on the said date worked out at Rs. 1,53,08,779.50 (Pages 8 and 9 of the assessee’s letter dated 16/01/2023). Accordingly, it was the claim of the assessee company that it had cash balance of Rs. 4,53,03,869/- (prior to the seizure of Rs. 3 Crore by the department) available with it on the date of the search proceedings i.e., on 30/11/2006.

We have perused the copy of the updated “cash book” of the assessee company (as available on our record) for the aforesaid period i.e., 25/11/2006 to 30/11/2006. Although the assessee company had disclosed certain cash receipts/deposits in the aforesaid period, but we find that against the same there is a mention of the narrations/details of persons from whom the respective amounts were so received. For the sake of clarity, the extract of the updated “cash book” for the period 25/11/2006 to 30/11/2006 is being culled out as under:

Be that as it may, we are of the firm conviction that in the totality of the facts involved in the case before us, viz. (i). the disclosure of the additional income of Rs. 3.30 Crores by Sri M. Venkateswara Rao (supra) in his statement recorded U/s. 132(4) of the Act during the course of the search proceedings; (ii). confirmation by him of the aforesaid disclosure of additional income of Rs. 3.30 Crores (supra) during the post-search proceedings i.e., on 05/12/2006 and 27/01/2007; and (iii). disclosure of the undisclosed income of Rs. 3.14 Crores (supra) for the subject year by the assessee company in its “revised” return of income filed on 15/12/2008, along with the letter wherein it was specifically stated that the said additional income was being offered to comply/honor the declaration of additional income made in the statement recorded U/s. 132(4) of the Act, we are of the firm conviction that the explanation/narrations provided by the assessee company in its updated cash book for the period 25/11/2006 to 30/11/2006 cannot be summarily accepted on the very face of it and would require a thorough verification by the A.O. At this stage, we may herein observe, that there is substance in the Ld. DR’s contention, that as the loose receipts/bills and vouchers that were found from the assessee’s premises during the course of the search proceedings were kept under the prohibitory orders, then, how the assessee company had updated its books of account without relying upon and referring to the said separate bills/vouchers and thereafter got the same audited. We, thus, are of the considered view that though the explanation of the assessee company regarding the cash receipts/deposits disclosed in its updated cash book for the period 25/11/2006 to 30/11/2006 could not have been summarily rejected, but based on our aforesaid deliberations the same in the totality of the facts involved in the case would require a thorough verification by the A.O.

On a perusal of the assessment order, we find that the A.O. had observed that as per the seized material, viz., PRK/New folder/Meeting/Masigandi Sales of Annexure A/PAL/MEL/PO/2; and Page 127 of Annexure A/PAL/MEL/PO1/4 (which was seized from the premises of the assessee company), the assessee company had though sold lands at Maisigandi/Kadthal in Amangal Mandal, District:

We had, for verifying the factual position referred to the aforesaid seized documents that have been relied upon by the A.O. for concluding, that the assessee company had suppressed the sale receipts of its 65 Acres – 01 Guntas of lands situated at Maisigandi/Kadthal in Amangal Mandal, District: Mahaboobnagar by an amount of Rs. 3.33 Crores. On a perusal of the copies of the aforesaid documents that have been filed by the assessee company before us, viz., (i) Page 127 of Annexure A/PAL/MEL/PO1/4; and (ii) Annexure A/PAL /MEL/PO/2, we are unable to fathom that as to on what basis the A.O. from the contents of the said documents had observed that the assessee company had suppressed the sale proceeds by an amount of Rs. 3.33 Crores. For the sake of clarity, the aforesaid seized documents are being culled out as under:

Before parting, we may herein observe, that though we are conscious of the fact that it is an old appeal for A.Y 2007-08 wherein assessment was framed by the A.O. u/s 143(3) of the Act, dated 31/12/2008 i.e., 16 ½ years back, but to ensure that neither the department is divested of its dues nor the assessee be saddled with tax dehors the authority of law, the verification of the facts as observed by us hereinabove qua the addition of Rs. 3.33 crore (supra) cannot be summarily dispensed with. We thus, in the backdrop of our aforesaid deliberations direct the A.O. to re-adjudicate the issue of the addition of Rs. 3.33 crore (supra) made by his predecessor and record clear observations both regarding, viz. (i). the explanation of the assessee company regarding the cash deposits/receipts in its updated cash book for the period 25/11/2006 to 30/11/2006, based on which the cash availability on 30.11.2006 was re-worked out by the assessee company a Rs. 4.53 Crores (supra); and (ii). the suppression by the assessee company of the amount of the sale proceeds of 65 Acres- 01 Guntas of the subject lands situated at Maisigandi/Kadthal in Amangal Mandal of District: Mahboob Nagar amounting to Rs. 3,32,60,410/- [Rs. 3,48,85,660/- (minus) Rs. 16,25,250/-] based on the seized material as referred by the A.O. in the assessment order. Needless to say, the A.O. shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee company. The Grounds of appeal Nos. 2 & 3 filed by the assessee company along with Ground of appeal No.1 of the Revenue’s Appeal are disposed of in terms of our aforesaid observations.

Resultantly, the appeal filed by the assessee company is partly allowed for statistical purposes, while for that filed by the Revenue is dismissed.