Loading judgment…
Facts
A search action on a land broker, Suresh Thakkar, revealed an earlier cancelled MOU for a land sale at Rs. 163 crores. The same land was later sold to the assessee, GSG Abode LLP, for Rs. 48 crores. The AO made additions under Section 69B for alleged on-money payments based on seized digital evidence (Whatsapp chats, loose papers) and a District Valuation Officer's (DVO) report, considering the difference between the actual sale price and the DVO's valuation as unexplained investment. The CIT(A) deleted these additions, leading to the present appeals by the Revenue and cross-objections by the assessee challenging the jurisdiction.
Held
The Tribunal upheld the CIT(A)'s decision, finding that the alleged incriminating material did not directly pertain to the assessee, nor did it establish any actual on-money payment by the assessee. The initial MOU was cancelled, and its terms were not binding on the subsequent transaction. The DVO's valuation was based on estimates made years later when the land had developed, and the difference with the actual sale price was within the acceptable variance (less than 15%). Consequently, the additions made by the AO under Section 69B were deemed unsustainable due to lack of corroborative evidence, and the initiation of proceedings under Section 153C was held invalid in the absence of incriminating material pertaining to the assessee.
Key Issues
1. Whether additions for unexplained investment (on-money) under Section 69B can be sustained based on third-party material and DVO's valuation when direct evidence is lacking and sale price variation is minor. 2. Whether assessment proceedings initiated under Section 153C are valid without incriminating material directly pertaining to the assessee.
Sections Cited
153C, 143(1), 132, 131, 69B, 143(3), 127, 153A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Shri Narendra Prasad Sinha
Per Sanjay Garg, Judicial Member:
The captioned appeals by the revenue are arising out of the separate orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’]. Cross Objection No.32/Ahd/2024 for AY 2019-20 has been filed by the assessee, GSG Abode LLP, Ahmedabad. Since common facts and issues involved in all the appeals are identical and all the appeals are outcome of the common search action carried out by the Department in the case of One Shri Suresh Thakkar, hence, the same were consolidated vide order dated 27/09/2024 of this Tribunal and were heard together and are being disposed of by this common order.
The issue involved in all these appeals pertains to the exchange of alleged on-money between the sellers and buyer over and above the sale consideration mentioned in the sale deed of the land. The IT(SS)A No. 21/Ahd/2024 for AY 2019-20 and for AY 2020-21 respectively have been filed by the revenue contesting the action of the CIT(A) in deleting the impugned additions made by the AO in the hands of the purchaser GSG Abode LLP; whereas the remaining appeals by the Revenue pertain to the additions made by the Assessing Officer (in short, “the AO) and deleted by the CIT(A) in the hands of the sellers. C.O. 32/Ahd/2024 for AY 2019-20 has been filed by the asssessee GSG Abode contesting the validity of assuming jurisdiction by the AO u/s 153C of the Act on the ground (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. that no incriminating material pertaining to the assessee was found during the course of search action in the case of third party namely Suresh Thakkar.
For the sake of ready reference, the grounds of appeal taken by the Revenue in the case of GSG Abode LLP in IT(SS)A No.21/Ahd/2024 for AY 2019-20 and Cross Objection by the assessee in CO No.32/Ahd/2024 for AY 2019-20 are reproduced as under:
IT(SS)A No.21/Ahd/2024 for AY 2019-20: “1) Whether, in the facts and on the circumstances of the case and in law, the Id.CIT(A) is correct in deleting the addition made on account of unexplained investment u/s.69B of the Act of Rs. 5,37,00,000/-, without considering the incriminating digital evidence suggested cash involvement in the transaction of immoveable property.?"
CO No.32/Ahd/2024 for AY 2019-20 – by Assessee: “1. In law and in the facts of the appellant's case, Ld. CIT(A) has erred in dismissing ground that the order passed u/s 153C of the Act is Bad in law and deserves to be quashed.
2. In law and in the facts of the appellant's case, Ld. CIT(A) has erred in dismissing ground that the impugned order passed under section 153C of the Act is bad as order u/s 127 of the Act was not issued to the appellant.”
3.1. The ground of appeal taken by the Revenue in the case of GSG Abode LLP in for AY 2020-21 is reproduced as under:
“Whether, in the facts and on the circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the addition made on account of unexplained investment u/s 69B of the Act of Rs. 19,63,00,000/-, without considering the incriminating digital evidence suggested cash involvement in the transaction of immovable property?”
(SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21.
3.2. The identical grounds have been taken by the Revenue in the cases of all the sellers. For the sake of ready reference, the grounds taken in the case of one of the sellers (Hitendrakumar Bhailalbhai Patel) in IT(SS)A No.19/Ahd/2024 for AY 2019-20 and in AY 2020- 21 are reproduced as under:
IT(SS)A No.19/Ahd/2024 for AY 2019-20: “ 1). Whether, in the facts and on the circumstances of the case and in law, the Id.CIT(A) is correct in deleting the addition of Rs. 1,62,47,274/ made by AO on account of LTCG on sale of immovable property, without considering the incriminating digital evidence suggested cash involvement in the transaction of immoveable property.?"
AY 2020-21: “Whether, in the facts and on the circumstances of the case and in law, the Ld.CIT(A) is correct in deleting the addition of Rs. 5,93,45,914/- made by AO on account of LTCG on sale of immovable property, without considering the incriminating digital evidence suggested cash involvement in the transaction of immovable property?.
IT(SS)A No.21/Ahd/2024 is taken as lead case for the purpose of narration of facts.
The brief facts of the case as extracted from the assessment order are that the assessee is a limited liability partnership-firm and is engaged in the business of real estate and rendering services. The assessee filed its original return of income on 24/09/2019 declaring total income of Rs.1,74,642/-, the same was processed u/s.143(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). Later on, a search and seizure action u/s.132 of the Act was carried out on 15/10/2019 in the case of one Shri Suresh Ranchodbhai Thakkar, who was involved in the land broking business.
(SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21.
During the course of search action, in the case of said Shri Suresh Thakkar, certain incriminating material/digital data was found and seized, which was related to the assessee herein, M/s. GSG Abode LLP. In the light of the said incriminating documents seized, satisfaction was drawn as per the provisions of section 153C of the Act by the Assessing Officer (AO) of the searched person and the assessment was carried out u/s 153C of the Act in the case of the assessee for AYs 2014-15 to 2020-21. The incriminating material included and unregistered and un-notarized M.O.U. dated 21/01/2018 which was found in digital from the I-phone of Shri Suresh Thakkar. Further, Whatsapp images were also noted as incriminating material. Further, a statement of said Shri Suresh Thakkar was recorded u/s.131 of the Act on different dates during the course of search and post search enquiries and he was asked to explain the contents of the aforesaid images/data recovered from his mobile phone. In his statement, Shri Suresh Thakkar stated that transactions mentioned in the aforesaid data were related to a memorandum of understanding (MOU) dated 20.01.2018 relating to sale of land situated at Sarkhej Vejalpur, Ahmedabad owned by Shri Hitendrabhai, Smt. Jankiben, Shri Sanjay Salvaliya and others, as per which the land was proposed to be sold by these persons to Shri Dhiren Rambhai Bharwad that for this purpose, the MOU was made and accordingly a sale consideration was worked out @ Rs.37,021/- per sq. metre for an area of 44160 sq. metres, thereby the total sale consideration would come at Rs.163 crores, out of which a token amount of Rs.5 crores advance was paid by Shri Dhiren Bharwad to the aforesaid owners of land. However, due to certain issue, the deal could not be materialized and the deal was cancelled on 30/01/2018 between the parties. That thereafter, the same land was sold by the aforesaid owners to the (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. assessee, GSG Abode LLP, on 30/10/2018 for a sale consideration of Rs.48 crores for facilitation which Shri Dhiren Bharwad (earlier proposed purchaser) had also consented. Due to huge difference in the value as stated in the MOU found during the course of search between the owners and the original purchaser Shri Dhiren Bharwad and the actual sale consideration on which the land was purchased by the assessee. The AO was of the view that the land was deliberately shown to have been sold at a lesser price and that out of books/on-money was passed on by the assessee to the land owners. Therefore, the assessment in the case of the assessee, GSG Abode LLP as well as in the case of land owners was re-opened for six assessment years u/s.153C of the Act.
5.1. During the assessment proceedings, for the year under consideration, the AO show-caused the assessee as to why the sale consideration of the land be not taken at Rs.163 crores and the difference be not added to the income of the assessee being the expenditure incurred from undisclosed sources. However, the assessee disputed the value of the land as proposed by the AO at Rs.163 crores and stressed that the value of the land even as per the market price was that at which the sale consideration was mentioned in the sale-deed i.e. at Rs.49 crores. It was also contended that if the AO had any doubt about the actual value of the land in question, he should refer the matter to the Departmental Valuer to avoid high-pitched and unrealistic addition in the hands of the assessee. The assessee in this also contended that if it was not so done by the AO, the assessee would make an application to the High Pitch Committee as circulated vide F. No. 225/101/2020-21-ITA-II dated 23.04.2022. Apart from that, the assessee also furnished before the AO a report (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. from the Registered Valuer in which the value of the land was determined at Rs. 48,74,54000/-.
5.2. The AO, thereafter, considering that since the initial MOU made on 20/01/2018 between Shri Dhiren Bharwad and land owners contained various conditions mentioned therein which was subsequently cancelled on 30/01/2018 due to certain reasons and further that the land was finally sold by the land owners to the assessee and since the assessee had strongly contested about the valuation of land, hence, to ascertain the genuine value of the land and in the interests of justice, referred the matter to the District Valuation Officer (DVO) for valuation of the land.
5.3. The DVO vide letter dated 21/11/2022 submitted its valuation report in which the value of the aforesaid land as on 30/10/2018 was determined at 54.37crores. The assessee filed its objections against the said valuation report of the DVO and submitted that the valuation of the land was carried out by the DVO in the year 2022, whereas, the sale of the land was effected on 30/10/2018. That, at that time, the land was barren land and its value was very less, whereas, by the time the land was transformed into a real estate project in the name and style of ‘Orchid Sky’. That at the time of valuation, there were constructed Units of a real estate project which was under development. That, therefore, the valuation done in the year 2022 is influenced by the present condition and nature of the land and, therefore, was on higher side. It was also submitted that the valuation report of the DVO was having various discrepancies and was based on many assumptions and presumptions. That the DVO in his report has valued the land along with (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. constructions thereupon and thereafter reduced the construction cost to arrive at the value of the land, which method adopted by the DVO was not correct method. That even there were discrepancies in working out the cost of construction in the DVO’s report. That the DVO had failed to consider certain material facts affecting the valuation. That even the report of the DVO was based on just an estimation and that there was marginal variation of 10% only between the DVO’s value and actual consideration paid by the assessee and that such a marginal various was liable to be ignored, especially when the such valuation done by the DVO after four years from the date of the actual transaction and during the period the condition of the land had considerably improved and thus the DVO had arrived at a higher value than the actual sale value. It was also submitted that the assessee was a not a party to the earlier MOU entered into by the owners with Shri Dhiren Bharwad and hence the said MOU cannot be made a base to make addition in the hands of the assessee. That even the said MOU was cancelled between the parties within 10 days between the parties. That there was no evidence at all that the assessee had made any payment over and above the sale consideration as mentioned in sale-deed. That even otherwise there were various conditions mentioned in the MOU which the party could not fulfil, hence the said MOU was cancelled and, therefore, the said MOU cannot be relied upon to estimate the sale consideration paid by the assessee. It was further submitted that once the assessee had executed registered sale-deed on 30/10/2018, there could not be any reason for any on-money payment subsequent to registration of the sale-deed. That even the alleged loose-paper No.145 was found during the course of search at the premise of Shri Suresh Thakkar on 15/10/2019, however, it contained various dates of payment for calculation (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. of interest which were subsequent to such date of search, therefore, it was evident that the notings on such loose-paper were neither reliable and nor could have been acted upon.
5.4. The AO, however, to drive clarity on the valuation of the land made further enquiries by issuing summons to sellers and purchasers and recorded statement of many persons including sellers and also the key-persons of the assessee – purchaser. However, all the sellers in their statement categorically denied the receipt of sale consideration as mentioned in the earlier MOU and further also affirmed that the said MOU was cancelled after the 10 days of its signing and further that the land was finally purchased by the assessee and that no on-money was exchanged between the sellers and the assessee. The assessee had also submitted that the sale-deed of the land was effected at the actual value of the land at that time at Rs.49 crores.
5.5. The AO after considering the reply and submissions of the assessee as well as of the sellers observed that from the valuation report, it was evident that the valuation of the land was not Rs.49 crores, but Rs.54.37 crores. He further observed that even the digital evidence extracted from the mobile phone of said Shri Suresh Thakkar showed that there was involvement of on-money payment in the aforesaid deal of land. That even Shri Suresh Thakkar in his statement had admitted that the working of interest was calculated by Shri Dhiren Bharwad and was sent to Shri Chiragbhai Kheradiya for recovery of dues paid initially for purchase of land, however, he stated that he did not know whether the repayment was made by the sellers to Shri Dhiren Bharwad or not and further he was facilitating the deal (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21.
11 and that Shri Chiragbhai from the office of the Dhiren Bharwad had sent the working of the amount on his Whatsapp which was to be recovered from the assessee GSG Abode LLP. The AO, thereafter, arrived at the following conclusions:
There was a land deal between Shri Dhiren Bharwad and the sellers for which total money in cash amounting to Rs.25 crores was paid. The deal was later on cancelled. A new deal was executed with GSG Abode LLP by the seller. The money paid by Shri Dhren Bharwad was not repaid by the seller. The seller negotiated with the GSG Abode LLP to repay the same to Shri Dhiren Bharwad together with the amount of interest on Rs.25 crores.
5.6. The AO on the basis of his above points of conclusions held that it was established that there was involvement of on-money payment to the extent of Rs.25 crores as depicted in page No.145 of Annexure A/2 by the purchasers to the sellers. That even the DVO’s report also suggested that the valuation of the land was not Rs.49 crores were Rs.54.37 crores. The AO thereafter observed that since the amount of on-money of Rs.25 crores was more than the difference of value in sale-deed and the DVO’s valuation report which was of Rs.5.37 crores, therefore, the said difference of Rs.5.37 crores was subsumed in the total on-money payment of Rs.25 crores. He further observed that the sale-deed was done on 30/10/2 018 at Rs.49 crores and the valuation report gave the valuation at Rs.54.37 crores as on 30/10/2018. He, therefore, made the addition of Rs.5.37crores in the assessment year under consideration, i.e. AY 2019-20. He assumed that the remaining amount of Rs.19.63 crores was paid in the subsequent assessment year AY 2020-21 by (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. assessee GSG Abode to Dhiren Bharwad as the dates mentioned in the Whatsapp message in respect of calculation of interest etc. on the amount of Rs. 25 crores found in the phone of searched person Suresh Thakkar were of subsequent period/year to the date of execution of the sale deed. He, accordingly, made the addition of the said amount in the assessment carried out for AY 2020-21. The AO also made proportionate addition in to the income of the sellers out of alleged on money received of Rs. 5.37 Crores in the AY 2019-20 and further proportionate additions in the AY 2020-21 in respect of the remaining amount of 19.63 crores out of total alleged on-money of Rs. 25 crores allegedly received by the sellers from Shri Dhiren Bharward.
Being aggrieved by the said assessment order, the assessee GSG Abode preferred appeal before the Ld. CIT(A).
Before the Ld. CIT(A), the assessee apart from contesting the validity of the additions made by the AO on merits, also raised legal ground relating to validity of the assessment order on the ground that the assessment order passed by the AO u/s.153C of the Act was bad in law because no notice of transfer of the case from Central Circle-2(3) to Central Circle-1(2) Ahmedabad was issued to the assessee. The Ld. CIT(A), however, rejected the aforesaid contentions of the assessee observing that the case was transferred u/s.127 of the Act and the assessee was given due opportunity of hearing and the assessee duly participated in the assessment proceedings.
7.1. The Ld. CIT(A), however, on merits decided the issue in favour of the assessee observing that the loose-paper page No.145 of Annexure-A/2 found (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. during the course of search action in case of Shri Suresh Thakar and relied upon by the AO pertained to AY 2020-21 being subsequent assessment year and considered by the AO in such assessment year, hence, such loose-paper since was separately dealt with for such assessment year, hence, no cognizance of such loose-paper could be made in the assessment year under consideration. The Ld. CIT(A) further observed that no cash trail was found during the course of search action which represents any alleged on-money payment by buyer to seller or to any other party. He observed that the AO, during the assessment proceedings, had recorded the statements of various parties involved in the land deal, wherein all the parties have stated that no on-money payment was made over and above the consideration mentioned in the registered sale-deed. The Ld. CIT (A) further observed that the entire addition made in the year under consideration was based upon the DVO’s report, however, on perusal of DVO’s report, it revealed that the DVO had arrived at fair market value of the land after making certain presumptions as well estimates. He also took note of the fact that the DVO had valued the land in the year 2022, whereas, the sale transaction was made on 30/10/2018 and at that time the land was barren. That by the time, the DVO valued the land, the real estate project was already executed and significant improvements in land had already taken place. Therefore, there were chances of higher valuation of the land by the DVO influenced by the aforesaid circumstances. The Ld. CIT(A) also observed that the assessee had also provided similar market value instances in same TP area, wherein, it had purchased land in similar period to prove that the value of the land as mentioned in the registered sale-deed was reflecting fair market value of the land. He further observed that the variation in the fair market value of land as per DVO and (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. as per registered sale-deed was only 5.37crores, which was 9.88% lower than the value determined by the DVO. He observed that since DVO in arriving at fair market value of the land had made certain estimates and hence, there cannot be any one-to-one direct nexus between land deal executed by the assessee and the evidences referred to by the DVO as size of land, circumstances in which the land was purchased, payment terms, condition of the land at the time of purchase, etc. differ in each comparable evidences. The Ld. CIT(A) considering the overall facts and circumstances of the case that the variation in the sale consideration mentioned in the deal as compared to the fair market value of the DVO was minor and below the acceptable variance under law, hence, the AO was not justified in making addition u/s.69B of the Act solely on relying upon the DVO’s report which was made on estimation basis only. The Ld. CIT(A), in this respect, relied upon the various case laws and observed that since the variation between the sale price and the DVO’s report was less than 15%, the same should be ignored. He, accordingly, deleted the addition so made by the AO. He in the separate appeals filed by the sellers, also deleted the corresponding additions made by the AO.
Being aggrieved by the said order of the Ld. CIT(A), the Revenue has come with the captioned appeals before us.
We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record.
(SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21.
9.1. The Ld. DR has relied upon the findings of the AO and has further submitted that in this case incriminating documents were found and seized during the course of search action in the premises of Sh. Suresh Thakkar which showed that the consideration over and above the sale consideration was passed on to the sellers by the buyer GSG Abode. That the seized documents show that the advance money of Rs. 25 crores and not Rs. 5 crores was paid by the original potential buyer Sh. Dhiren Bharwad to the sellers/land owners. That as explained by Sh. Suresh Thakkar, the chat was pertaining to the demand of Rs. 25 Crores along with interest by Sh. Dhiren Bharwad. Therefore, it was apparent that the said amount of Rs. 25 Crores was refunded by the GSG Abode to Dhiren Bharwad on behalf of the land owners/sellers. The Ld. DR has also relied upon the valuation report of the DVO to contend that it was proved that the value of the land was higher than that was mentioned in the sale deed, which further proves that on-money has exchanged hands in respect of the above noted land sale transaction.
9.2. On the other hand, Sh. Biren Shah, the Ld. AR of the Assesse GSG Abode has reiterated the submissions as were made before the Ld. CIT(A). He has contended that the name of the assessee GSG Abode did not appear in any of the seized documents; That the alleged Whatsapp chat was between third parties and the assessee GSG Adobe has no concern with that at all. That even there was no mention in the chat that the assessee GSG Adobe has paid any on-money either to the land owners/sellers or to Sh. Dhiren Bharwad. He has also disputed the additions made by the AO on the basis of valuation report and stated that the assessee had duly explained the reasons for the variation in the value done by the DVO as compared to the sale deed, which (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. has been accepted by the Ld. CIT(A). He has also relied upon the findings of the Ld. CIT(A) that since the variation was less than 15%, therefore even otherwise, the additions on the basis of such valuation report could not have been made.
9.3. Shri Dhiren Shah, the Ld. AR for assesses-sellers further adding to the above submissions made by Sh. Biren Shah, has contended that the MOU dated 20/01/2018 was cancelled on 30/01/2018, wherein, in clause (5) of the said cancellation deed, it was categorically mentioned that Shri Dhiren Bharwad, in fact, had not paid Rs. 5 crores as token money as was mentioned in MOU dated 20/01/2018. He, therefore, has submitted that no token money of Rs.5 crores was ever received by the assessees-sellers. The Ld. AR has submitted that even the AO has not disputed the cancellation deed. That once the cancellation deed was not disputed, therefore the mention that even Rs.5 crores as token money was not received by the sellers has become relevant and to be admitted as correct as the said cancellation deed/document is to be read in full. He has contended that it would not be justified to deem one part of the document as correct and the other part as incorrect.
9.4. He has further submitted that there was no mention in the aforesaid seized material i.e. Whatsapp message/Excel-sheet about any payment of on- money to any of the sellers. That neither the name of any of the seller nor the details of land was mentioned in the alleged WhatsApp chat. He has further submitted that even none of the parties, whose statement was recorded during search action or the post search action, ever stated that the transaction (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. mentioned in the seized data belonged to the sellers. That the alleged communication between third parties was relating to calculation of some interest on the amount of Rs.25 crores, with which the assessee sellers had nothing to do.
9.5. He has further submitted that the transactions mentioned in the alleged Excel-sheet found in the phone of Shri Suresh Thakkar were for the period from 01/04/2019 to 29/02/2020, which was after the date of execution of the MOU on 20/01/2018 and even after the execution of the sale-deed in favour of GSG Abode LLP on 30/10/2018. He in this respect has contended that the sellers had received full consideration at the time of execution of the deed and, therefore, there was no question of receiving any amount on or after the date of execution of the sale-deed which was otherwise highly improbable.
9.6. He has further submitted that even because there was some variation between the sale-deed price and the DVO’s report that itself does not prove that any on-money was received by the sellers.
9.7. He has further submitted that even the Ld. CIT(A) has given the finding that the difference between the DVO’s report and sale-deed price was minor and, therefore, the same has to be ignored 9.8. The Ld. AR relying upon the decision of Hon’ble Supreme Court in the case of Ambalal Sarabhai Enterprises Ltd. vs. KS Infraspace LLP [Civil Appeal No.9346 of 2019] has submitted that the Hon’ble Supreme Court has clarified that Whatsapp chats are virtual verbal communications, which must (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. be scrutinized through examination-in-chief and cross-examination to assess their probative value. He, in this respect, has also relied on the decision of Co-ordinate Mumbai Bench of the Tribunal in the case of Rucha Consultancy LLP vs. DCIT [(2005) 174 taxamnn.com 221]. He has further submitted that, in the case in hand despite so demanded by the assessees, the Ld. AO has not given any opportunity to the assessees/sellers to cross-examine Shri Suresh Thakkar and Shri Dhiren Bharwad. Therefore, no adverse inference can be drawn on the basis of oral statement of Shri Suresh Thakkar which was resiled later on.
9.9. The Ld. AR, further referring to the observations of the Ld. CIT(A) given at page 21 para (iv) of the impugned order given in the case of Hitendrakumar Bhailalbhai Patel ( ITA 664/Ahd/2024) has contended that a search action was also carried out u/s.132 of the Act in the case of Shri Dhiren Bharwad on the same date, i.e. 15/10/2019 on which the premise of Shri Suresh Thakkar was searched. He has further submitted that the AO while passing the assessment order has not brought any incriminating evidence on record found from the premises of Shri Dhiren Bharward which could also prove that he had paid Rs. 25 crores towards land deal or that such amount was received back by him along with interest from the sellers or the GSG Abode LLP. The Ld. AR has further submitted that even the AO has not referred to any statement recorded during the course of search in case of Sh. Dhiren Bharwad, wherein, Shri Dhiren Bharwad had ever admitted similar fact of payment of Rs.25 crores to land owners.
(SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21.
9.10. The Ld. AR has further submitted that Shri Suresh Thakkar had never stated that at the time of execution of MOU or thereafter, Rs.25 crores were paid by Shri Dhiren Bharwad to the land sellers. He has also never stated that the GSG Abode LLP has ever paid Rs.25 crores along with interest to Shri Dhiren Bharwad. He has submitted that even Shri Suresh Thakkar had filed an Affidavit before the AO, wherein, it was stated that the aforesaid digital image had no connection with the GSG Abode LLP.
9.11. He, therefore, has submitted that the Ld. CIT(A) has rightly deleted the impugned additions made by the AO.
We have considered the rival contentions of the Ld. Representatives of the parties and gone through the record. Though, the above contentions made by both the Ld. Representatives are concentrated in defending the cases of their respective clients, however findings given in case of one assessee - purchaser will also have bearing in the case of sellers, however, subject to just exceptions.
10.1. Firstly, we proceed to discuss and adjudicate the appeals relating to GSG Abode LLP.
10.2. The AO, in this case, after appreciation of all the evidence viz. the seized material, the statement recorded of searched person Shri Suresh Ranchodbhai Thakkar as well as of the sellers and purchasers, could derive the conclusion to the extent that there was a land deal between Shri Dhiren Bharwad and the sellers vide MOU dated 20.01.2018 for which a token money (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. of Rs. 5 crores was paid and the said land deal was later on cancelled on 30.01.2018. Further, that a new deal was executed with the assessee by the sellers on 30.10.2018. From the seized Whatsapp chat and statement of Sh. Suresh Thakkar, he derived the conclusion that in fact the total advance received by the sellers from Dhiren Bharwad was of Rs.25 crores. He further presumed that the said money paid by Shri Dhren Bharwad was not refunded by the sellers to him and that the assessee-GSG Adobe LLP had paid the said amount of Rs. 25 crores to Sh. Dhiren Bharwad, however, without any reliable or corroborative evidence on the file in this respect.
10.3. However, the peculiar facts on the file are that in this case the alleged incriminating material was allegedly recovered from the mobile of Sh. Suresh Thakkar, who admittedly was not a party to any of the transactions in question. More particularly, the alleged Whatsapp chat relied upon by the AO was not between the parties to the transaction, rather the same was between the original potential buyer Sh. Dhiren Bharwad and Sh. Suresh Thakkar. Though, a copy of the MOU dated 20.01.2018 entered between the sellers and potential buyer Sh. Dhiren Bharwad was recovered from the phone of the searched person Sh. Suresh Thakkar, however, the said MOU did not pertain at all to the assessee GSG Abode. Even in the alleged Whatsapp chat, the assessee GSG was not a party. Even the said WhatsApp image or the so-called "loose paper" did not contain any name, land description or any indication connecting the said document to any of the assessees. Even in his statement, Sh. Suresh Thakkar, himself, had denied about any on-money payments made by the assessee either to the sellers or to Dhiren Bharwad.
(SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21.
10.4. So far as the presumption of the AO that an advance of Rs. 25 Crores was paid by Shri Dhiren Bharwad and not of Rs. 5 Crores to the land owners, is concerned, in our view, if there had been any cash payment of Rs.25 crores, then the said fact might have been mentioned in the said MOU itself. The said MOU was not a public document, rather it was allegedly a private document, wherein, as per the AO the actual sale price was mentioned. If that was so, then under the circumstances, there was no reason as to why the factum of cash payment of Rs.25 crores would not be mentioned in the said document. Moreover, when the said document was cancelled within 10 days of its execution, it was obvious that all the issues relating to the pending dues/payments between the parties would have been settled. It would not be perceivable even to a layman as to why at the time of cancellation of the MOU, the proposed purchaser Shri Dhiren Bharwad would not demand for the refund of any amount paid by him as token money. Moreover, the subsequent sale-deed was executed on 30/10/2018. Even at the time of execution of subsequent sale-deed, the payment due towards any of the parties would have been squared off. There is no answer to the question as to why Shri Dhiren Bharwad would not demand for the refund of the amount paid by him as advance money to the sellers, either at the time of cancellation of earlier MOU or at the time when the transfer/sale of the land was effected in the name of GSG Abode LLP. It is highly improbable that the alleged amount of Rs.25 crores was outstanding of Shri Dhiren Bharwad towards GSG Abode LLP, which was allegedly paid by him to the sellers at the time of execution of MOU dated 20/01/2018.
(SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21.
10.5. It has been mentioned in the cancellation deed that, in fact, the said sum of Rs.5 crores was not paid by Shri Dhiren Bharwad at the time of execution of the agreement. Admittedly, the Ld. AO has not disputed the cancellation deed. Hence, once the cancellation deed was not disputed, therefore the mention that even Rs.5 crores as token money was not received by the sellers has become relevant and to be admitted as correct as the said cancellation deed/document is to be read in full. The AO cannot discard the part of the documents which supports the contentions of the assessee and demolish the case of the revenue.
10.6. Even the alleged loose-paper No.145 found during the course of search at the premise of Shri Suresh Thakkar on 15/10/2019, contained various dates of payment for calculation of interest which, however, were subsequent to such date of search, which means no payment had exchanged hands as on the date of search and as discussed above. It is highly improbable that any payment would have been made by GSG Abode to Dhiren Bharwad or to the sellers subsequent to the execution of the sale deed.
10.7. The Ld. AO has relied upon the said MOU on 20/01/2018 to presume that the subsequent land deal was with GSG Abode LLP was also settled at the same price as mentioned in the said MOU. However, after getting the valuation report of the land, the AO himself, disregarded the said MOU viz. a viz. the subsequent sale deed with GSG Abode LLP in respect of the sale consideration. Therefore, any further presumption by the AO on the basis of said MOU, under the circumstances, is misplaced.
(SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21.
10.8. Even as per the alleged seized data, coupled with the alleged statement of Shri Suresh Thakkar, the notings in the data pertained to some calculation of interest on an amount of Rs.25 crores which, as per the AO, Shri Dhiren Bharwad wanted to recover from Shri GSG Abode LLP. Under the circumstances, even the said story does not state that the purchaser GSG Abode has already paid any on-money/cash amount to the sellers.
10.9. The AO had summoned all the sellers and examined them on oath however each person categorically denied receipt of any on-money for the land transaction in question. Under the circumstances, the alleged loose sheets or digital notes without clear linkage of the same to the assessee or the transaction in question, and without any cash flow traced, could not constitute credible or reliable evidence in law or making the impugned additions.
10.10. Even the Ld. CIT(A) relying on various case laws has observed that a variation between the estimated fair value by DVO and the recorded sale consideration was minor and has to be considered within the acceptable margin and even that in itself did not give rise to presumption of underreporting or on-money payment. The assessee, in this case has explained before both the lower authorities that the DVO had arrived at fair market value of the land after making certain presumptions and estimates. The DVO had valued the land in the year 2022 whereas, the sale transaction was made on 30/10/2018 and at that time the land was barren. Though, the DVO had estimated the fair market value of the land as on 30.10.2018, however, at the time of valuation in the year 2022, the real estate project was (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. already executed and significant improvements in land had already taken place. Therefore, the CIT(A) in our view was right in observing that the chances of higher valuation of the land by the DVO influenced by the aforesaid circumstances, cannot be ruled out. The Ld. CIT(A) has also observed that the assessee had also provided similar market value instances in same TP area, wherein, it had purchased land in similar period to prove that the value of the land as mentioned in the registered sale-deed was reflecting fair market value of the land.
10.11. Therefore, the assessee, having explained the minor variation in the valuation of the DVO as compared to the sale consideration and there being no corroborative evidence available to the AO showing any extra consideration passing between buyer and seller, the AO was not justified in assuming unexplained investment and making addition u/s 69B of the Act. We, therefore, do not find any infirmity of the order of the CIT(A) in this respect, holding that the impugned additions, solely on the basis of DVO’s report were not justified.
10.12. Even otherwise, the AO on the one hand has relied upon the DVO’s report and on the other hand has presumed the payment of on-money of Rs. 25 Crore which is almost 5 times more of the variation in the sale price and DVO’s report which has neither been proved from any direct documentary evidence not from the circumstantial evidence in the shape of valuation report etc. Hence, the AO, thus, has been blowing hot and cold in the same stream. Once the AO had got the valuation of land done from the DVO, the AO having relied on such valuation, was not supposed to presume further (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. that the assessee might have paid the amount over and above than the fair market value of the land assessed by the DVO.
10.13. Shri Biren Shah, the Ld. AR of the Assessee GSG Abode, has further contended that even the impugned addition was not legally sustainable as the very initiation of proceedings under Section 153C of the Act was bad in law, as there was no incriminating material found relating to the assessee during the search action in the case of third party. No doubt, it has been held time and again that in respect of completed/non abated assessment years, no addition u/s 153A/153C can be made in the absence of any incriminating material found during the course of search action. However, in this case, the assessment for the assessment year under consideration was not completed, hence, the AO could have carried out the assessment u/s 143(3) of the Act by issuing notice u/s 143(2) of the Act. However, we note that the case of the assessee was not selected for scrutiny assessment u/s 143(3) of the Act. The assessment in this case was initiated u/s 153C of the Act, allegedly on the basis of incriminating material found during the course of search action in case of third party. However, admittedly, none of the seized material/data pertained or belonged to the assessee. The AO on the basis of seized documents/data pertaining to the deal between the sellers and Dhiren Bharwad has presumed that the assessee might have paid the on-money in subsequent deal. Even the alleged WhatsApp message exchanged between third parties, which otherwise has no evidentiary value, did not mention either the name assessee GSG Abode nor of any of the sellers and even there was no mention of any details of land or sale deed. Thus, the initiation of (SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21. assessment u/s 153C, in this case was not based on any incriminating material pertaining or belonging to the assessee, hence was bad in law.
10.14. We also find force in the additional contentions of Shri Dhiren Shah, Ld.AR for the assessees–sellers to the effect that even if , for the sake of arguments, it is presumed that the sellers had received token money of Rs. 25 Crores from Dhiren Bharwad at the time of execution of the MOU dated 20.01.2018, still, no addition can be made of the said amount in the hands of the sellers for the year under consideration. As per the version of the AO, the said amount was allegedly received by the sellers from Shri Dhiren Bharwad on 20/01/2018 either at the time of execution of MOU or between the period from 20/01/2018 to 30/01/2018. i.e. the period from the date of signing of the MOU till the cancellation of MOU, which means in the Financial Year (FY) 2017-18 relevant to Assessment Year (AY) 2018-19 and, hence, even otherwise, the addition relating to said receipt cannot be made in AY 2019-20 and AY 2020-21.
10.15. In view of the above detailed discussion, it comes out that the entire story by the AO relating to alleged transaction is based upon assumptions and presumptions only. Therefore, in the absence of any reliable evidence that any cash had exchanged hands over and above the sale consideration mentioned in the deed, such an addition made by the AO in our view, is not sustainable either in the hands of purchaser GSG Adobe LLP or in the hands of the land owners/sellers.
(SS)A No.21/Ahd/2024 & 8 Others DCIT vs. GSG Abode LLP & Others Asst. Years : 2019-20 & 2020-21.
No other issue or ground pressed by any of the Ld. Representatives of the parties.
In view of our findings given above, all the captioned appeals filed by the Revenue are hereby dismissed, whereas, the C.O.No.32/Ahd/2024 for AY 2019-20 of the assessee stands allowed.
Order pronounced in the Open Court on 18 /09 /2025.