DCIT CENTRAL CIRCLE-8(4), MUMBAI vs. M/S ROHAN DEVELOPERS PVT LTD, MUMBAI

Per Rajesh Kumar, Accountant Member:

The above titled cross appeals by the assessee and Revenue have been preferred against the different orders of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2006-07, 2008-09, 2010-11, 2011-12, 2012-13, 2013-14 & 2014-15. Since these appeals are having common issues or belonging to the Rohan Group of Companies, therefore these are being disposed off by this common and consolidated order. We would first take up the revenue’s appeal for A.Y-2008-09 as under.

ITA No.4060/M/2019 A.Y. 2008-09 (Revenue’s appeal) 2. The grounds raised by the Revenue are reproduced as under: “1. The Ld. CIT(A) failed to appreciate that the transactions recorded in the seized documents have not been explained by the assessee at the time of assessment proceedings. 2. The Ld. CIT(A) failed to appreciate that statements recorded from the persons associated with the group, mainly Mr. Haresh Mohanlal Mehta, one of the director stated that the assessee company has been indulged in accepting the cash payment @3O% over & above the agreement value, which works out to be Rs.5,87,85,000/-. 3. The Ld. CIT(A) failed to appreciate that the statements recorded from the sales persons suggested receipt of cash by the assessee company over & above the agreement value. 4. The Ld. CIT(A) erred in allowing the sum of Rs.6,35,952/- on account of speed boat expenses as the assessee company failed to establish that the speed boat was utilized wholly & exclusively for the business of the assessee company. 5. The Ld. CIT(A) failed to appreciate that short rent to the extent of Rs.2,34,863/- was offered by the assessee company in its return of income filed u/s.153A. 6. The Ld. CIT(A) failed to appreciate that the fact that the assessee company failed to offer full rental income as reported in AIR statement; in its return of

4 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors income filed u/s. 153A cannot be denied even though the addition is not based on the incriminating documents found/seized during the search proceedings. 7. The Ld. CIT(A) erred in admitting the additional evidences furnished by the assessee during the appellate proceedings as assessee failed to demonstrate the reasons &/circumstances which prevented it to furnish these evidences before the AO. 8. The Ld. CIT(A) ignored the findings of the AO in his remand report regarding the creditworthiness of the loanee & genuineness of the loan transactions to the extent of Rs.35,00,000/-.”

5 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors search team seized page no 114 of annexure A-1 which found from 112-122, Hira Bhavan, Raja Ram Mohan Roy Road, Mumbai. During the course of search, the search team also recorded statements of Ms. Chaulla Joshi (Ex. Sales Executive), Shri Vijay Jasani (Office Assistant), Shri Paresh Panchlotiya (Office Assistant) and Shri Harresh Mehta (Director) wherein they admitted that part of the sales consideration of flats/office premises equal to 30% is being received by Rohan Group of companies in cash. The search team also recorded the statement of Late Shri Jitendra Mehta during search who denied and rebutted in the statement recorded u/s 132(4) on 22.07.2011 the allegation of receiving On-money on sale of flats/office premises. During the course of assessment proceeding, Shri Harresh Mehta , Ms. Chaulla Joshi, Shri Vijay Jasani and Shri Paresh Panchlotiya filed retraction affidavits before the AO. The AO however without re-examining the deponents namely Shri Harresh Mehta, Ms. Chaulla Joshi, Shri Vijay Jasani and Shri Paresh Panchlotiya heavily relying on their original statements recorded/ obtained u/s 132(4) and on the basis of Pg. No 114 of Annexure A-1, held that Rohan Group of companies including the assesse received/collected 30% on money on sale of flats/office premises and accordingly the AO has made addition in respect of alleged On-money @ 30% of reported sales. Finally, the AO, after rejecting the contentions of the assessee added a sum of Rs.5,87,85,000/- on account of on- money being 30% of the sale of flat declared by the assessee and added the same to the income of the assessee in the assessment framed under section 153A read with section 143(3) of the Act dated 13.03.2014.

6 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 5. In the appellate proceedings, the Ld. CIT(A) determined the on money received in the various years and confirmed the addition to the extent of 30% in respect of those years in which there was sale of flats of Mayuresh Apartment. Accordingly, the CIT(A) has confirmed/deleted the following additions:-

AY Addition deleted Addition confirmed @ 30% 2008-09 5,87,85,000 -- 2010-11 6,72,36,000 2,19,14,820 2011-12 11,52,03,750 70,24,980 2012-13 5,79,81,750 59,40,000 2013-14 -- 4,05,81,975 2014-15 -- 6,34,64,070

In respect of the additions confirmed by CIT(A) on the presumption that seized page no 114 related to On-money received on sale of flats of Mayuresh Apartment, it is stated that on perusal of page no 114 it is evident that there is no whisper about any On-money on the said page (placed at page number 9 of Paper Book). On this page, only the name of Mayuresh Apartment (Karim Mansion) is mentioned and ‘10% token’ on the extreme right hand side is written in hand. There is no whisper or noting/scribbling about On-money receipt for sale of flats of Mayuresh Apartment. Thus, the presumption of CIT(A) that seized page no 114 related to On-money received on sale of flats of Mayuresh Apartment is factually incorrect. Finally, in para 23.26, the Ld. CIT(A) stated that for the current year under consideration viz. AY 2008-09, there is no sale made in Mayuresh Apartment project and accordingly there is no occasion for making any addition w.r.t to On-money in the

7 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors appellant’s case for the AY 2008-09 and he deleted the addition for AY 2008-09.

The Ld. CIT(A) finding that the seized page no. 114 is related to On-money received on sale of flat of Mayuresh Apartment is incorrect as there is no mention about any on money received on sale of flats of Mayuresh Apartment on this seized paper. There is only mention about 10% token against Mayuresh Apartment. The token means that the upfront payment to be made by the prospective buyer at the time of booking of any flat and this is not On-money.

8 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors extent of 30%. However, Shri late Shri Jitendra Mehta in the statement recorded under section 132(4) of the Act dated 22.07.2014 retracted the allegation of receiving on-money on sale of office/flats. We also note that during the course of assessment proceedings all these individuals filed their retraction affidavits retracting their statements originally given. However, the AO relying on the said statement and on the basis of page No.114 of Annexure A-1 held that the respondent assessee has received 30% on-money on sale of flats/office premises and accordingly added the same to the income of the assessee on the basis of reported sale by the respondent assessee. The Ld. CIT(A) deleted the addition during the year on the ground that though there is a mention of Mayuresh Apartment in seized page No.114 of Annexure A-1 found from 112-122, Hira Bhavan, Raja Ram Mohan Roy Road, Mumbai. However, since there is no sale during the year under consideration of flats/office premises, therefore, the on-money can not be added in this year and thus deleted the addition in entirety. We find that Ld. CIT(A) while deleting the addition relied on a couple of decisions in the assessee’s group concerns in Goodwill Properties Pvt. Ltd passed by the predecessor Ld. CIT(A) in A.Y. 2008-09 & 2009-10 and also decision of the co- ordinate Bench in the appeals of the Revenue against the decisions of predecessor Ld. CIT(A) in A.Y. 2008-09 & 2009-10 in ITA No.4023 & 4026/M/2016 in the case of DCIT vs. Goodwill Properties Pvt. Ltd. order dated 01.03.2019 in which the co- ordinate Bench has upheld the decision of CIT(A) wherein the Ld .CIT(A) has deleted the addition @ 30% in respect of on-money on the basis of page No.114 of annexure A- and the statements

9 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors of Shri Chaullee Joshi, ex-sale executive, Shri Vijay Jasani, office assistant, Shri Paresh Panchlotiya, office assistant and Shri Harsh Mehta. Thus we note that similar addition made on account of alleged On-money in the case of M/s Goodwill Properties Pvt. Ltd for the AY 2008-09 and 2009-10, which were deleted the Ld. CIT(A) on the ground that neither the assessee’s name nor the project developed by the assessee is appearing on page no. 114 of annexure A-1 on the basis of which the additions were made by the AO, was held to be rightly deleted by the ld CIT(A) by dismissing the departmental appeals. We also find that similarly the AO made the addition in the hands of M/s Silver Arch Builders and Promoters Pvt. Ltd. in respect of alleged on money on the basis of Pg. No 114 of Annexure A-1 and the statements of four persons as referred to above and the Ld. CIT(A) deleted the addition and the department filed appeal before the tribunal in ITA no 3162 and 3163/Mum/2016 were dismissed by the tribunal vide order dated 02.05.2017. We also note that similar addition in respect of on-money by the AO in the hands of M/s Mindset Estate Pvt. Ltd a sister concern for AY 2013-14 and 2014-15 were also deleted by ld CIT(A) and the revenue’s appeal before the tribunal in ITA no.5038/M/2016 was dismissed by the coordinate bench. We have also perused the decision of the tribunal in the case of Sitara Builders Pvt. Ltd in ITA nos. 4030-4032/M/2016, 6303-6304/M/2019 for the AY 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14 , and in case of M/s Peccadally Estate Pvt. Ltd for the AY 2011-12 in ITA nos. 4029/Mum/2016 wherein the order of the ld CIT(A) were affirmed wherein the ld CIT(A) deleted the similar additions. The

10 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors operative part of the decision in the case of DCIT vs. Goodwill Properties Pvt. Ltd.(supra) is reproduced as under:

“15. We have also perused the order of the Coordinate Bench of ITAT, wherein the identical ground has already been decided by the Coordinate Bench of ITAT in the case of group concern in ITA No. 3126 & 3163/Mum/16 in the case of DCIT Vrs. Silver Arch Builders & Promoters. The operative portion of the order of Hon’ble ITAT contained in para no. 2 to 5, which is reproduced below:-

2.The brief facts of the case are that Rohan group of entities along with directors, family members and related parties were subject to search and seizure operations u/s. 132 of the Act on 26/05/2011,that the assessees was also associated with the said group. Subsequent to the search a notice u/s. 153A was issued to the assessee on 11/01/2013.It filed a return on 04/03/2013, declaring income at Rs. 36.65 lakhs. During the assessment proceedings, the AO found that the assessee had undertaken the construction of a commercial project Rameswaram.During the search proceedings statements of Haresh Mohanlal Mehta(HMM), one of the directors of the Rohan group,were recorded,who admitted that that 30% on money was accepted over and above the receipt value of the agreement and the same was not recorded in the regular books of accounts.The AO also took note of the statements of sales and marketing executive, accountant of the group and of the liason officer for the proposition that on money was collected on sale transactions and accordingly asked the assessee to explain as to why such addition should not be made in its hand.

The assessee filed its reply stating that none of the individuals, whose the statements were relied upon by the AO, was in any way authorised to close sales transactions,that the copies of the said statement had not been provided to the assessee,that HMM was director in the one of the concerns of Rohan group, that he was not concerned with the sales, that he was not looking after day-to-day activities of the assessee, that no salesperson or other staff of the company was reporting to HMM, that he independently owned a construction company, that there was no nexus between the project of the assessee and the independent project carried out by HMM, that the declaration made by HMM u/s. 132 (4) could not be taken to relates the projects of the assessee.

After considering the submission of the assessee and taking note of the cash and jewellery found at the office premises, the AO made an addition of Rs. 36.71 lakhs under the head on money received during the year under consideration.

3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA).Before her, the assessee challenged the validity of the order passed u/s. 153A of the Act and relied upon certain case laws.After considering the elaborate submissions of the assessee,the FAA held that original return u/s. 139 of the Act on 2/7/2007, that search was

11 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors carried out in the case of Rohan group on 26/05/2011, that the time limit for issue of notice u/s. 143(2) for the year under consideration expired on 31/03/2008,that there was no proceedings pending in the case of the assessee,that it was not a case where assessment proceedings were pending and had abated.She referred to the case of All Cargo Global Logistics Ltd. of the special bench of the Tribunal and held that in cases where there had not been any abatement of assessment the assessment u/s. 153A of the Act would be made on the basis of incriminating material found in the course of search, that the order of the special bench of the Tribunal were challenged by the Department before the jurisdictional High Court, that the Hon’ble Bombay High Court had dismissed the appeal filed by the revenue and had upheld the order of the tribunal. She further observed that the case of the assessee for the year under consideration was not a pending or abated assessment, that in case of non-abated assessments addition had to based on incriminating material seized during the search, that the only document referred to in the impugned order was page 114 of annexure A-1 and the statements of HMM along with the statements of employees, that the perusal of the seized paper revealed that there was no mention of the assessee or the project undertaken by it on the said paper, that the above referred paper did not make any mention of the assessee, that the perusal of the statements of the employees reflected that no specific mention of receipt of on money, that the impugned assessment was not based on any incriminating material pertaining to the assessee seized during the search, that the addition made on account of on money was not emanating from the material found and seized during the search action. Finally, she deleted the addition made by the AO.

4.During the course of hearing before us, the Departmental Representative stated that the employees of the assessee had accepted the fact that on money at the rate of 30% of the registered value was accepted by the company.As stated earlier, none appeared on behalf of the assessee.

5.We have perused the available material. We find that the FAA has given a categorical finding of fact that no incriminating material was found during the search and seizure operation that could justify the addition made by the AO. She has analysed the page number 114 that was seized by the authorised party carrying out the search proceedings. It is very clear that neither the name of the assessee nor the name of the project is appearing in the paper. The assessee had objected before the AO that the statements of the employees were not given to it. We do not know as to whether same were made available to the assessee or not. The statements of the employees, in search and seizure cases, can be used if they are supported by some kind of collaborative evidence. On a specific query by the bench to the DR about supporting evidence proving the receipt of alleged on money,she could not refer to any material. As the assessment for the AY. 2007-08 was not pending, so, without some incriminating material the AO should not have made the addition to the total income of the assessee.The FAA had taken notice of the order of the special bench and dismissal of the Departmental appeal by the Hon’ble Bombay High Court and had decided

12 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors the issue.In our opinion, her order does not suffer from any legal or factual infirmity. So, confirming the same, we decide effective ground of appeal (GOA-1&2) against the AO.

13 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors statements of the employees, in search and seizure cases, can be used if they are supported by some kind of collaborative evidence. On a specific query by the bench to the DR about supporting evidence proving the receipt of alleged on money,she could not refer to any material. As the assessment for the AY. 2007-08 was not pending, so, without some incriminating material the AO should not have made the addition to the total income of the assessee.The FAA had taken notice of the order of the special bench and dismissal of the Departmental appeal by the Hon’ble Bombay High Court and had decided the issue.In our opinion, her order does not suffer from any legal or factual infirmity. So, confirming the same, we decide effective ground of appeal (GOA-1&2) against the AO.”

14 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors boat is also used for conferences and meetings with staff and thus the speed boat is used for multiple purposes/acts relating to the business of the assessee. However, the AO brushed aside the contentions of the assessee and disallowed 20% of the speed boat expenses on the ground that personal use can not be ruled out thereby adding a sum of Rs.6,35,952/-.

15 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors the assessment has not abated on the date of search, the AO has jurisdiction to make the addition only on the basis of seized material and not otherwise. We find that the case of the assessee is squarely covered by the various decisions including the decision of jurisdictional High Court in the case of CIT vs. Continental Warehousing Corporation (supra) and Murali Agro Products Ltd. vs. CIT (supra). Therefore, we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground No.4.

16 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors incriminating material found and seized during the course of search and not otherwise.

17 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 21. In the appellate proceedings, the Ld. CIT(A) after admitting the additional evidences forwarded the same to the AO vide letter dated 15.03.2016 and called upon the AO to furnish a remand report on the same. The AO vide letter dated 04.08.2016 furnished the report before the Ld. CIT(A). Thereafter, the Ld. CIT(A) noted that AO has not carried out any investigation or enquiry by issuing summons under section 131 or called information under section 133(6) of the Act. The Ld. CIT(A) allowed the appeal on merit as well as the jurisdiction/legal issue. So far as the merit of the case is concerned, the Ld. CIT(A) noted that assessee has filed all the documents to prove identity, creditworthiness of the lenders and genuineness of the transactions whereas the AO has failed to carry out any meaningful enquiry or investigation, therefore, no addition can be made under section 68 of the Act. While allowing the appeal of the assessee on merit the ld CIT(A) referred to the decision of the Hon’ble apex court in the case of CIT vs Odisha Corporation Pvt. Ltd. (159 ITR 78), decision of Hon’ble Bombay High Court in the case of CIT vs Creative World Telefilm Limited (333 ITR 100). In para 39.20, the Ld. CIT(A) stated that the comments of the AO are superficial and general in nature. He also stated that there is no illustration of facts or figures in the remand report, which have led to such a conclusion. In para 39.21 the Ld. CIT(A) stated that it is now a settled proposition that when the assessee has submitted the details and documents to prove the identity, creditworthiness and genuineness of the lenders, no addition u/s 68 of the act can be made and for this preposition the Ld. CIT(A) has relied upon a series of decisions namely Murulidhar Lahorimal vs

18 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors CIT (280 ITR 512)(Guj),Labh Chand Bohra vs ITO reported in 219 CTR 571 (Raj), CIT vs Dwarkadish Investment Pvt. Ltd. reported in 330 ITR 298 (Del), Sarogi Credit Corporation vs CIT reported in 103 ITR 344 (Pat),DCIT vs Rohini Builders reported in 256 ITR 360,Aravali Trading Co. vs ITO reported in 220 CTR 622 (Raj) and Nemi Chand Kothari vs CIT reported in 264 ITR 254 (Gau).In para 39.28 the Ld. CIT(A) noted that in a large no of judicial pronouncements, it had been held the department is free to reopen the individual assessments of the parties in question in accordance with law, but it cannot be treated as undisclosed income of the respondent-assessee company, where documents to prove the identity, creditworthiness and genuineness of the lender are placed on record. For this preposition the Ld. CIT(A) has relied upon various decisions namely CIT vs Lovely Exports Pvt. Ltd 216 CTR 195 (SC), CIT vs Vacmet Packaging (India) Pvt. Ltd (2014-TIOL-297-HC-ALL- IT),CIT vs Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC),CIT vs Divine Leasing & Finance Ltd. 299 ITR 268 (Del),CIT vs Creative World Telefilm Ltd 333 ITR 100 (Bom), CIT vs Value Capital services Pvt. Ltd. 307 ITR 334 (Del), Netscape Software Ltd. in ITA no 3852/Mum/2009 dated 19.10.2011,CIT vs Daulat Ram Rawatmull 87 ITR 349, (SC).

19 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 23. After hearing both the parties and perusing the material on record, we find that the Ld. CIT(A) has passed a very reasoned and speaking order by deciding the issue both on merit as well as on jurisdictional issue. Even on the jurisdictional issue this being an unabated assessment year on the date of search, therefore, any addition could only be made based on the incriminating material seized during the course of search. We have already decided the issue in ground No.4, 5, 6. Hence, our finding in ground Nos.4, 5 & 6 would, mutatis mutandis, apply to the ground No.7 as well. Accordingly, we uphold the order of Ld. CIT(A) by dismissing the ground of the Revenue.

ITA No.4062/M/2019 (Revenue’s appeal) & ITA No.3801/M/2019 (assessee’s appeal)

20 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 27. In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee by sustaining addition only in respect of those years in which the sale of flats of Mayuresh apartment which found mentioned in page 114 of annexure A-1 seized during the course of search from respondent-assessee’s premises and accordingly during the year, addition was sustained to the extent of Rs.2,19,14,820/- being @ 30% of the amount of sales realized from Mayuresh apartment thereby allowing a relief of Rs.6,72,36,000/-. The Ld. CIT(A) while deciding the appeal of the assessee recorded a finding that the mention of project Mayuresh apartment in the seized document page 114 of annexure A-1 gave rise to the presumption that there was on-money being charged for sale of flats/commercial premises. Simultaneously, Ld. CIT(A) held that the said presumption can not be extended to other projects undertaken by the assessee which were not mentioned in the seized documents page 114 of annexure A-1 and therefore confined the addition to sale of flats/commercial premises with regard to Mayuresh apartment. The Revenue has come in appeal before us against the deletion of Rs.6,72,36,000/- whereas the assessee has challenged in the cross appeal Rs.2,19,14,820/-.

21 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors whether the name thereof is mentioned in the seized paper or not. The Ld. D.R. stated that once this is established that assessee has received on-money then general presumption is that whatever sale of flats/commercial premises the assessee might have received on-money. The Ld. D.R. submitted that AO has rightly calculated the on-money on the basis of total sale declared by the assessee irrespective of any project or commercial complex. Therefore, the Ld. D.R. prayed that the order of AO may be restored by setting aside the finding of Ld. CIT(A).

22 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors merely on the ground that on the seized paper there is a mention of Mayuresh apartment besides mentioning of 10% token which is apparently on the basis of conjunctures and surmises and deserved to be deleted.

23 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors all these flats @ 30% and accordingly sustained the addition equal to Rs.2,19,14,820/- being 30% of sales from Mayuresh Apartments project. We have examined the page 114 of annexure A-1 and also the statements recorded during the search including statement of late Shri Jitendra Mehta who denied to have received the on-money and are of the considered view that the addition of 30% of the total agreement value based on page 114 of annexure A-1 is not correct as there is no mention of on-money received qua the said project though admittedly there is a mention of Mayuresh apartment on page 114 of annexure A-1 with token @10%. Moreover, the authorities below have failed to bring any independent evidences corroborating that assessee has received on-money @ 30% in respect of Mayuresh apartment and other projects of the assessee. Accordingly, we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. Therefore, we are inclined to set aside the order of Ld. CIT(A) on the issue of on money and direct the AO to delete the addition. The ground No.1 to 3 of the Revenue’s appeal are dismissed and ground Nos.1 & 2 of assessee’s appeal are allowed.

24 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors establish whether the same were wholly and exclusively incurred for the purpose of business and accordingly came to the conclusion that there is a possibility that assessee might have incurred these expenses for the purpose of non business activities. Consequently , the AO made adhoc disallowance of 20% of the total expenses and added the same to the income of the assessee.

25 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors presumption, surmises and conjuncture which certainly can not be sustained. The case of the assessee finds support from the decision of the co-ordinate Bench of the Tribunal in the case of DCIT vs. Goodwill Properties Pvt. Ltd. in ITA No.4023 & 4026/M/2016 order dated 01.03.2019 and decision of the Hon’ble Gujarat High Court in the case of Sayaji Iron & Engineering Co. vs. CIT (supra). Accordingly, we do not find any infirmity in the order of Ld. CIT(A) and same is upheld by directing the AO to delete the disallowance. The ground no. 4 and 5 are dismissed.

26 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 38. The issue raised in ground Nos. 9 & 10 is against the deletion of addition of Rs.65,00,000/- as made by the AO on account of cash credit under section 68 of the Act in respect of loan transactions.

27 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors by the AO in the hands of the assessee on the ground that substantive addition made by the AO in the hands of Shri Jitendra Mehta in respect of cash interest paid by the respondent-assessee have now been confirmed by the Ld. CIT(A) without appreciating the fact that Shri Jitendra Mehta has challenged the decision of Ld. CIT(A) before the Tribunal.

During the course of search in the statement recorded under section 132(4) on 27.05.2011 late Shri Jitendra Mehta had offered undisclosed interest income as stated above Rs.17,20,35,681/- on account of cash interest, however, in the return filed under section 153A the late Shri Jitendra Mehta did not offer the said undisclosed income to tax. Consequently, on the basis of the said seized papers the AO held that the assessee

28 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors has paid interest in cash in respect of loans appearing in the books of account, over and above the interest already debited in the books of accounts. Thus, on the basis of these seized material, the AO made substantive addition in the case of Late Jitendra Mehta (Legal Heir, Rohan Mehta) of Rs.17,20,35,681/- and protective addition of various amounts as stated above aggregating to Rs.17,20,35,681/- in the hands of various parties which are also mentioned in the above table. The cash interest attributable to the respondent-assessee was Rs.122,236,512/- and protective addition was also made in the case of respondent- assessee accordingly.

29 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors accordingly treated the differential rate as unexplained expenditure under section 69C and accordingly added the same on protective basis in the hands of the respondent-assessee. We note that the Ld. CIT(A) deleted the addition on the ground that substantive addition made in the hands of Shri Jitendra Mehta (legal heir Rohan Mehta had already confirmed vide order dated 29.03.2019 and thus deleted the protective addition made in the hands of the respondent-assessee. After having perused the order of Ld. CIT(A) and also various decisions relied upon as discussed in para No.108.9 to 108.20 of the appellate order. Therefore, we are of the view that the protective addition has rightly been deleted by the Ld. CIT(A) and thus inclined to dismiss the ground No.4 raised by the Revenue by upholding the order of Ld. CIT(A).

30 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors mentioned above. Consequently, the grounds raised by the Revenue in respect of deletion of addition of speed boat expenses are dismissed.

31 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors page. According to the AO the said amount appeared to be interest component on the cash loan as Shri Sameer Shah in his statement admitted that these amounts were cash loans provided to M/s. Rohan Developers Pvt. Ltd. According to the AO there was an agreement between M/s. Rohan Developers Pvt. Ltd. and these parties and even late Shri Jitendra Mehta, director of the assessee respondent had owned up the cash loans. According to the AO, Shri Sameer Shah has given cash loans and naturally there would have been cash payments of interest also and accordingly Rs.3,47,81,569/- was added under section 69C as unexplained expenditure. The Ld. CIT(A) allowed the appeal of the assessee by deleting the addition in the hands of the assessee on the ground that this addition has been confirmed in the hands of late Shri Jitendra Mehta and therefore no addition can be made in the present case by observing and holding as under: “128.0 I have considered the facts of the case, submissions of the Appellant, the observations of the AO contained in the assessment order and the other materials on record on this issue.

128.1 I have noted that the AO had completely ignored and rejected the explanation provided by the Appellant and made addition merely on the basis of the disclosure made by Late Shri Jitendra N. Mehta in the statement recorded u/s 132(4) of the Act, without bringing on record any corroborative evidence. I have noted that Shri Samir Shah, in his reply to Question No. 39 of his statement recorded u/s 132(4) of the Act had categorically stated that the calculation of differential interest was tentative and made for discussion with the clients. The relevant portion of the said statement is extracted below:-

"Q,39.Kindly explain since when you have started collecting cash interest from the parties. Ans. The real estate sector was badly hit by slow down and it was facing numerous issues which are in the public knowledge, including severe liquidity crunch. As a result many small builders, who were not having financial strength for borrowing, started offering absurd interest rates. As result Lenders who had lent money to my clients started demanding higher interests on the money lent by them. Therefore there are numerous pages containing noting in respect of such higher demand of interest and

32 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors calculation of differential interest over and above the interest paid to them. These workings prepared by me were tentative workings for discussion with my clients who were resisting such payment of additional interest........"(Emphasis Supplied)"

128.2 The AO has only relied on answer to Question No. 7, whereas the answer to Question No. 7 should be read with the above answer to Question No. 39. It had been clearly stated that the seized paper on which this whole addition is based actually represented a tentative working for the differential interest demanded by the lenders in cash. The clients however refused to pay the differential amount. It was also submitted that the statement of Mr. Samir Shah corroborates the Statement of Mr. Jitendra Mheta in which he had stated that the differential interest was a matter of debate and was never paid.

128.3 I have noted that the Appellant had relied on the following case laws:-

"In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until some corroborative evidence is found in support of such admission. We are also of the view that the statement recorded at such odd hours cannot be considered to be voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making the addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has committed an error m ignoring the retraction made by the assessee." (Emphasis Supplied)

"The Tribunal considered all the relevant materials and facts and come to a correct conclusion that there is no material available for the Revenue to assess the same. Paragraph No.6 of the order of the Tribunal reads as follows: "6. Now, coming to I.T.A. Nos. 2270/Mds/2003 and 796/Mds/2004, these appeals relates to the vendors of the property. The addition was made only on the basis of the statement said to be made by Shri Bhuvanendran on March 19,1999. Admittedly, the said Shri Bhuvanendran retracted the statement. No other material was available to show that any on-money was paid. The Assessing Officer found that the property was located in a busy

33 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors commercial location and the market price is much more than the price quoted in the document. It is well-settled principles of law that market is nothing but the price agreed between a willing purchaser and a willing seller. Therefore, it is for the purchaser and the seller to determine the market price after taking into consideration of the locality of the property. The State Revenue authorities after considering the transaction accepted the market price disclosed in the sale deed. Therefore, the burden of proof is on the Revenue to show what is apparent is not real. In other words, the sale consideration disclosed in the sale deed cannot be rejected without any material to show that the sale consideration disclosed in the sale deed was- not correct. In this case admittedly no material was available to show that tire sale consideration disclosed in the sale deed was not correct. In those facts and circumstances in our opinion the Commissioner of Income-tax (Appeals) has rightly deleted the addition. Accordingly, we do not find any infirmity in tire order of the lower authority."

The reasoning of the Tribunal is based on valid 'materials and evidence. In the present cases, the Revenue failed to establish that there is actually on- money passed on to the seller and also there is no evidence to show that there is understatement of sale consideration in the document. If the Revenue is able to produce evidence to show that there is understatement of sale consideration in the document, the Revenue may be right in inferring that on-money has been passed on to the seller. It would be otherwise harsh and inequitable to tax the assessee on income which has neither arisen to him nor is received by him. It amounts to tax on notional or fictional income. Hence, we do not find any error or legal infirmity in the order of the Tribunal so as to warrant interference. Hence, no substantial questions of law arise for consideration of this court and accordingly, the tax cases are dismissed.

Under the circumstances, all the tax cases are dismissed." (Emphasis Supplied)

"The orders of the Commissioner (Appeals) and the Tribunal have correctly reached to the conclusion that there is no material on record to show that the sale consideration was understated or the respondent-assessee had received anything directly or indirectly over and above the declared value of the shares.............,the revenue is under an obligation to discharge that there is material to show that the sale consideration was understated or the assessee had received anything directly or indirectly over and above the declared value."

"There was sufficient time with the Investigation wing to carry on the investigation and to collect the evidence against the retraction.

34 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors However, records show that nothing has been done in this regard. In such a situation, the retraction of the assessee cannot be said to be invalid in absence of any incriminating documents. In view of these facts, we uphold the order of the CIT(A).

In the result, the appeal of the revenue stands dismissed."

128.4 It may be noted the addition made by the AO on account of cash interest amounting to Rs. 3,47,81,569/- is emanating from the seized Page No. 206 of Annexure A-l found from the possession of Shri Samir Shah, the finance broker of the Rohan Group. Shri Samir Shah had given a complete and comprehensive list of all the loans raised by Rohan Group of entities through him relevant to the A.Y. 2011-12, along-with the working of unaccounted cash interest paid on such loans. I have noted that the details of the loan mentioned on the seized Page No. 206 of Annexure A-l are covered by the said comprehensive list submitted by the Appellant at the time of operation of the PO, during the course of search.

128.5 It is also pertinent to bring on record that the addition on account of cash interest paid out of books by the Rohan Group of concerns amounting to Rs. 17,66,34,8237- relevant to A.Y. 2011-12 had been confirmed in the hands of Late Shri Jitendra N. Mehta in Appeal No. CIT(A)-47/74/2014-15 for A.Y. 2011-12. Hence, no further addition on account of cash interest is required to be made again in the hands of the Appellant for the A.Y. 2011-12, as the same will result in double addition.

128.6 To sum up, this issue had been dealt with by me in the appellate order of Shri Samir Shah & Late Shri Jitenra N. Mehta for the A.Y. 2011-12, wherein after detailed factual and legal discussion, the addition on account of cash interest amounting to Rs. 17,66,34,8237- on all the loans of the Rohan Group of concerns worked out by Shri Samir Shah relevant to A.Y. 2011-12 had been confirmed in the hands of Late Shri Jitendra N. Mehta in A.Y. 2011-12. Hence, no further addition of the same income is required to be made on account of cash interest in the hands of the Appellant Company. In view of the above, the Ground No. 12 of the present appeal is allowed.”

35 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors A.Y. 2011-12 by Ld. CIT(A) and no further addition is required to be made in the hands of assessee as same would result in double addition of the same income which is not permissible under the Act. In view of these facts, we do not find any infirmity in the order Ld. CIT(A) and accordingly, we are inclined to uphold the same by dismissing ground No.10 of the Revenue’s appeal.

36 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 11.06.2013, a document was recovered and seized which is marked as annexure A-3, page No.183 & 184. These pages contained two original promissory notes of Rs.10 crores each given to Rakesh Kothari by M/s. Rohan Developers Pvt. Ltd. A perusal of the promissory notes seized as page No.183 & 184 showed that Rs.20 crores were advanced to Shri Harresh Mehta of M/s. Rohan Developers Pvt. Ltd. for which corresponding entry was found in “Udhar” Account written in diary Annexure-8 on page No.58 which is written against the name of Shri Harresh Mehta as 2000 with date 1.10.2011 which showed that amounts were written in lakhs. According to the AO, these promissory notes were issued by M/s. Rohan Developers Pvt. Ltd. to Shri Rakesh Kothari in lieu of money received in cash. The AO observed that respondent assessee had received Rs.20 crores from Shri Rakesh Kothari in cash against security of promissory notes given by director of M/s. Rohan Developers Pvt. Ltd. and further noted that this is a common practice in the business of real estate developers. According to the AO from the diaries seized, it is apparent that under the head ‘Udhar’ that these loans were advanced @ 2% per month to the director of the respondent assessee. These cash loans were started to be advanced sometime in 2010-11 and reached Rs.20 crore on 1.10.2011 @ 2% interest and the said loan was outstanding on 01.04.2013. Accordingly, the assessee was issued a show cause notice dated 02.03.2016 as to why an addition of cash interest paid @ 2% per month on Rs.20 crore, which worked out to Rs.4,80,00,000/-, should not be made under section 69C to the income of the assessee which was replied by the assessee vide letter dated 21.03.2016. The AO rejected the reply of the

37 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors assessee and added Rs.4,80,00,000/- under section 69C of the Act.

38 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors effect that any cash transaction took place. The AO has not brought any evidence on record to show that the cash transaction took place between the parties. Further, in para 24.7 to 24.17, The Ld. CIT(A) has stated that M/s Riddhi Siddhi Bullions Ltd. had filed Settlement Application after the search & seizure action carried out at their premises before the Hon’ble Settlement Commission and the Settlement Commission has accepted the fact that there was no cash transaction between the parties and consequently made no addition in the hands of the applicants in the order passed u/s 245D(4). Since no cash transaction had taken place, no unaccounted income was offered in this regard. The settlement application has been accepted by the Hon’ble Settlement Commission without any addition on account of the promissory notes. Thus, the Hon’ble Settlement Commission was fully satisfied with the explanation of M/s Riddhi Siddhi Bullions Ltd. that no unaccounted income is emanating from such seized pages. The Ld. CIT(A) has relied upon the order of the Hon’ble ITSC on the ground that the order passed by the superior authority is binding on him. It may be noted that a detailed enquiry u/s 245D(3) was conducted in the case of RSBL Group. In para 24.18, the Ld. CIT(A) has also noted that the AO of RSBL group had conducted detailed enquiry u/s 245D(3) of the Act and furnished a report to the Hon’ble ITSC which is reproduced below :- “2.12…..during the course of enquiry proceedings statement of the appellant was taken u/s. 131 of the ACT on 02.02.2017 wherein the reply to Q. No 46, he drew my attention to the back side of the promissory note which revealed that the promissory note was given only as a guarantee subject to the clearance of Gorai Property which is in dispute since long and hence, no cash loan was given to the said property. The same is found to be correct……….”

39 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors Thus the Ld. CIT(A) deleted the addition by following the order of Hon’ble Income Tax Settlement Commission on merits.

40 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors page No.183 and he also stated that the said promissory note was given subject to sale of Gorai property by the respondent company which never materialized and happened. We also note that Ld. CIT(A) has also recorded a finding that the observations of the AO that Shri Harresh Mehta has received Rs.20 crore in cash and issued promissory notes to the intended buyer is nothing but presumptions and assumptions without any proof or evidence. The Ld. CIT(A) noted that AO has failed to bring on record to show the cash transactions between the two parties. Further we find that the Ld. CIT(A) has also noted the fact that the Income Tax Settlement Commission has accepted that there was no cash transaction between the parties and made no addition in the hands of applicants in the order passed under section 245D(4) of the Act. Thus the Income Tax Settlement Commission accepted the settlement application by M/s. Riddhi Siddhi Bullion Ltd. without any addition on account of promissory notes upon being fully satisfied with the explanation of M/s. Riddhi Siddhi Bullion Ltd. that no unaccounted income has arisen from such seized pages. In view of these facts, we do not find any infirmity in the order of Ld. CIT(A) and uphold the findings of first appellate authority on this issue that addition made by the AO is based upon presumptions, assumptions and surmises. Accordingly, ground No.6 is dismissed. In the result, appeals of the assessee are allowed and appeals of the revenue are dismissed. ITA No.6754/M/2019 (Revenue’s appeal) 57. At the outset, it is brought to the notice of the Bench by the Ld A.R. that the CBDT recently has amended the Circular No. 3/2018 dated 11.07.2018 vide Circular No. 17/2019, F.No.279/Misc.142/2007-ITJ(Pt.) dated 08.08.2019 increasing the limit for filing of appeal before Income Tax Appellate Tribunal

41 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors to Rs.50 lacs in each appeal. We note that earlier Circular No. 3 of 2018 was made applicable to pending appeals also and this clause of the circular remains unchanged even after the amendment. Admittedly, in this case tax effect is below the prescribed limit of Rs. 50 Lacs for filing the appeal before the Tribunal by the Revenue.

ITA No.4067/M/19 A.Y. 2011-12 (Revenue’s appeal) 60. The sole ground raised by the revenue is reproduced as under: “In the facts and circumstances of the case and in law, the Id.CIT(A) erred in deleting the addition made by the AO of Rs.3,47,81,569/- on account of alleged cash interest received, the fact that substantive addition made by the AO in

42 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors hands of Shri Jitendra Mehta For A.Y 2011-12 has now been confirmed by the CIT(A) without appreciating the fact that Shri Jitendra Mehta has challenged the decision of CIT(A) before Hon'ble ITAT.”

43 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors Rs.3,47,81,569/- as undisclosed cash interest in the hands of the assessee. However, a set off was allowed to the extent of Rs.2,81,17,128/- being expenditure incurred by the assessee and offered to tax in the return filed under section 153A and the balance remaining of Rs.66,64,441/- was added as undisclosed cash income after allowing set off as claimed by the assessee in the without prejudice argument.

44 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors page No.206 annexure-1 by offering the explanation which was found to be correct that these were just noting and rough workings of proposed interest which may or may not be payable to his clients who had invested through him. The Ld. CIT(A), after taking into account the remand report of the AO, deleted the addition made on account of cash interest received. The Ld. CIT(A) also noted that the amount of so called cash loan of Rs.20,24,50,000/-, which has been added to the income of the assessee were found to be genuine and duly recorded in the books of accounts and certainly they are not cash loans and thus directed the AO to delete the addition. The Ld. CIT(A) recorded a finding that these loans were recorded in the books of accounts in the Rohan group concerns and once the allegation of cash loan imputed in the assessment order has been found to be incorrect in the remand proceedings then the allegation of cash interest can not be justified as both the loans and interest amounts are noted on the same seized paper. Thereafter, the Ld. CIT(A) relied on a several judicial pronouncements and finally directed the AO to delete the addition.

45 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors received and paid the cash interest in their respective sworn in statements recorded under section 132(4) of the Act. We find that the Ld. CIT(A), after taking into account the remand report filed by the AO, deleted the addition by observing that the AO has given report in favour of the assessee. We also note that the page No.206 of annexure-A1 on the basis of which addition was made in respect of cash loans of Rs.20,24,50,000/- was deleted by ld. CIT(A) by recording a findings in para 18.5 of the appellate order that the loans as mentioned at page No.206 of annexure A-1 have duly been recorded by the Rohan group concerns in their books of accounts and were in in fact not cash loans as observed by the AO in the assessment order. Considering all hese facts , the ld CIT(A) deleted the addition by treating the as genuine. This we are in agreement with the conclusion of the ld. CIT(A) that once the loans are treated as genuine then the allegation of cash interest on the basis of same page No.206 Annexure-A1 can not be held to be justified. Considering these facts we do not find any infirmity in the order of Ld. CIT(A) and therefore we are inclined to uphold the same by dismissing the appeal of the Revenue.

ITA No.4068/M/19 A.Y. 2011-12 (Revenue’s appeal) 65. The only ground taken by the revenue is reproduced as under: “1. On the facts and circumstances of the case and in law, the Id.CIT(A) erred in deleting the addition made by the AO of Rs.2,10,23,428/- on account of alleged cash interest received, the fact that substantive addition made by the AO in hands of Shri Jitendra Mehta For A.Y 2011-12 has now been confirmed by the CIT(A) without appreciating the fact that Shri Jitendra Mehta has challenged the decision of CIT(A) before Hon'ble ITAT.”

46 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 66. The facts of this case are similar to one as involved in ground No.4 in ITA No.4063/M/2019 which has been discussed and decided by us in para Nos.42 to 45 (supra) with the variation in the amount of cash interest paid in the present case the respondent-assessee was alleged to have paid interest in cash of Rs.2,10,23,428/- on account of differential rate of interest on the borrowed money. Accordingly, our decision on ground No.4 in ITA No.4063/M/2019 A.Y. 2011-12 would, mutatis mutandis, apply to this appeal as well. Accordingly, the Revenue’s appeal is dismissed.

ITA No.4069/M/19 A.Y. 2012-13 (Revenue’s appeal) 67. The grounds taken by the Revenue are reproduced as under: “1. On the facts and circumstances of the case and in law, the Id.CIT(A) erred in deleting the addition of Rs.6,10,00,000/- on account of Unexplained cash payment without appreciating the fact that the seized document cannot be treated only as rough noting and the onus to prove that the transactions reported on the seized documents have not been carried out, lies with the assessee. 2. "On the facts and circumstances of the case and in law, the Id.CIT(A) failed to appreciate that no evidence to the contrary has been furnished to support the claim of the assessee and according to the provisions of sections 132(4A) of the Income Tax Act, 1961, any document found to be in possession or control of any person in the course of search, it may be presumed that the contents of such documents are true.” 68. The facts in brief are that during the course of search on the premises of M/s. Rohan Developers Pvt. Ltd. a document ( page No.21 of annexure-8) was seized vide panchnama dated 27.05.2011 which contained the details of various payments such as Rs.2.00 crores paid to Paras Porwal, Rs.1.60 crores paid in cash by the assesse and Rs.2.50 crores paid to some landlord. The said seized document clearly stated that the amounts pertained to property between the respondent assessee and

47 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors other mentioned parties with full details as to schedule of property, location plan, description of tenant, amenities etc. Accordingly, the AO issued a show cause notice as to why the same should not be added to the income of the assessee which aggregated to Rs.6.10 crores (2.00+1.60+2.50) as undisclosed payment. However, the assessee denied the said payments by submitting that the same is not corroborated and supported by any evidence. Finally, the AO, on the basis of these documents found during the course of search, added a sum of Rs.6,10,00,000/- to the income of the assesse as unexplained cash payments.

40.1 For analyzing the addition made by the AO, it is extremely important to examine the said seized paper, which is reproduced hereunder for ready reference:-

48 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 40.2 I have noted that the AO had made addition on basis of the above reproduced loose paper, which according to him represent a transaction for purchase/sale of a property. At the top of the seized page, the format of an agreement has been drawn up showing the item that should be included such as Schedule of Property, location, description of tenant, etc. Below this part, there are noting showing amounts towards cheque and cash, which are not related to the contents at the top. The name of Oasis Infratech is also mentioned on the said seized page, which is not a group company of the Appellant. If the payments had been made by way of cheque, as is mentioned in the said seized page, the AO had failed to enquire as to how and to whom it had been paid.

40.3 Thus, there is no proof / evidence on record to show that any property actually had been purchased / sold. The AO had failed to bring on record, the details of the property underlying the alleged transaction. There is nothing on record that the amounts written on the said seized pages have actually been paid. No dates are written on the said seized page relating to the transaction alleged by the AO. The AO had also examined Shri Paras Porwal, whose name is written on the said seized page and he has denied any such transaction.

40.4 In short, the noting on this piece of paper could not be corroborated by the AO by bring on record any cogent material. Without corroboration, the rough noting on the loose paper is not sufficient to make addition to the income of the Appellant.

40.5 I have noted that the complete details of the transaction, the parties involved, the date of transaction, location of the property etc. are not noted on the said seized page and hence, the document is not a speaking one. Reference may be made to the following decisions, wherein the Hon'ble Courts have held that no addition can be made on the basis of dumb documents:-

• No decoding is permissible on suspicion, surmise, conjecture and imagination. Amar Natwarlal Shah v. Assn. CIT [1997] 60ITD 560, 564- 565(Ahd.). • In the absence of any evidence about the nature of figures noted on loose paper seized, date, name of party etc., no addition can be made merely upon suspicion. Asstt. CITv. Shailesh S.Shah [1997] 63 ITD 153 (Bom.). Brijlal Rupchand vs. ITO [1991] 40 TTJ 668 (Indore). • Vague noting on loose paper found during the course of search proceedings of sister concern and there being no material on record to suggest that the assessee has in fact received the amounts written on the loose paper, apart from and in addition to the amount received by the assessee per account payee cheques and entered in its account books, addition was deleted. Malabar Oil Marketing Co. V. Asstt. CIT [2004] 91 TTJ 348 (Mum.) • Loose papers containing jotting of certain figures even if seized from the possession of assessee would not come within the compass of the word 'document' and cannot be the basis for treating certain income as undisclosed income of the assessee. D.D. Malijan V. Dy. CIT [2004] 91 TTJ947(Del.)

49 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors Addition could not be made on the basis of an unnamed loose paper found at the business premises of the husband of the assessee by treating part of the items noted in the said paper as transactions relating to assessee. Smt. Bommana Swarna Rekha v. Asstt.CIT [2005] 147 Taxman 59 (Visakha.) (Mag.) • Dumb documents or documents with no certainty have no evidentiary value for purpose of resorting to deeming provisions of sections 68, 69, 69A to 69D. In the absence of adequate material as to nature and ownership of transaction, undisclosed income cannot be assessed in hands of assessee merely by arithmetically totalling various figures jotted down p loose documents found during search. Bansal Strips (P) Ltd. vs. Asstt. CIT [2006] 99 ITD 177 (Del)

• Addition on the basis of loose paper which cannot be treated as books of account cannot be made under section 68. Asstt. CIT v. Satyapal Wassan [2007] 295ITR (AT) 352 (Jabalpur) [2008] 5 DTK (Jab.) (Trib.)202. • Additions made by the Assessing Officer, inter-alia, on the basis of loose papers found during search by making certain presumptions which are found to be inconsistent or contrary to other evidence on record cannot be upheld, especially when no significant asset outside the books or no evidence of ostensible expenditure outside the books is found. Ninnal Fashions (P) Ltd. V. Dy. CIT [2009] 23 DTK 386 (Kol.)(Trib.). • Assessee's undisclosed income could not be taken as Rs. 48 lakhs on the basis of seizure of a dumb document which showed certain unexplained entries totally '48' in the absence of any material on record to come to the conclusion that the figure '48' is to be read as Rs. 48 lacs. The Tribunal having rightly deleted the addition of Rs.48 lakhs, the order of the Tribunal does not give rise to a question of law, much less a substantial question of law. CIT v. Girish Choudhary [2008] 6 ITR 619 (Del). • Loose papers found at assessee's premises indicating money lending transactions without mentioning assessee's name have no evidentiary value and cannot by itself form the basis of addition. Chander Mohan Mehta V. Asstt. CIT [1999] 71 ITD 245 (Pune). 40.6 I am also constrained to note that the AO had in the assessment order failed to corroborate the notings made in the seized paper by bringing any other material evidence on record.

40.7 In this regard, it is important to refer to the judgment of Hon'ble Delhi High Court in the case of CIT vs. Anil Bhalla (2010) 38 DTK 0113: (2010) 322 ITR 0191, wherein the Hon'ble Delhi High Court has upheld, the following observations of the CIT(A):-

4.2 I have considered in detail the material on record. From the notings on p.47 of Annex. A2, it cannot be said that any actual expenditure is represented by such notings which is not recorded in the books of account. To support the addition on account of unexplained expenditure on the basis of jottings on a loose sheet of paper, it is necessary to establish that the notings represent unaccounted transaction, with the help of independent corroborative evidence. In this case apart from the notings on the said

50 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors paper, no other independent material or evidence has been brought on record. Moreover, the explanation submitted by the appellant is supported by relevant entries in the books of account of VTPL. Accordingly, the allegation of unexplained expenditure outside the books of account has not been established in the assessment order. The addition of Rs. 35 lacs is, therefore, deleted." 40.8 Reliance is also placed on the following judicial decisions in support of the on the rationale that for making additions on the basis of seized rough notings, the same needs to be corroborated with some material evidence. • The search party discovered some notings and jottings in the diaries and documents seized. Additions were made raising presumption under section 132(4A) about the notings. Additions were deleted by CIT(A) and ITAT. Held that, Tribunal had recorded a finding that, there was no corroborative or direct evidence to presume that notings and jottings had materialised into transactions diving rise to income not disclosed in the books. There was no perversity in Tribunal's findings. CIT V. D.K.Gupta [2009] 308ITR 2(DeL). • In the absence of any corroborative evidence, addition of undisclosed income could not be made simply on the basis of entries on loose papers recovered from the residence of a third party and certain general statements of said party. T.S.Venkatesan V. Asstt. CIT [2000] 74TD 98 (Cal.) • Additions based on jottings on paper found during the course of search could not be sustained in the absence of any corroborative material or evidence on record for rejecting the assessee's contention that jotting was an estimate and not actually expended amount. Addl CIT v. Prasant walia {2005 J 464 (Ctk.) 40.9 In view of the above detailed factual and legal discussion, the addition made by the AO on the rough noting is deleted. Accordingly, the Ground No.5 of the present appeal is allowed.”

51 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors property has been purchased or sold by the assessee and therefore we are of the view that the addition as made by the AO based upon presumptions and surmises can not survive. We also note that Mr. Paras Porwal to whom Rs.2.50 crore has been paid has also denied the allegation of having received any money from Rohan group. In our opinion, this is nothing but a dump document. Ld. CIT(A) has passed a very detailed and reasoned order while allowing the appeal of the assessee on this issue by relying on various decisions as discussed in para 14.5, 14.7 & 14.8. Therefore, we are inclined to uphold the order of Ld. CIT(A) on this issue by dismissing the appeal of the Revenue.

ITA No.6752/M/2019 A.Y. 2013-14 (Revenue’s appeal) 71. The issue raised in ground No.1 is against the order of Ld. CIT(A) deleting the addition of Rs.2,28,86,365/- as made by the AO on account of unexplained interest expenditure paid by the assessee due to differential rate of interest paid on unsecured loan. The facts of the issue raised in this ground are similar to one as involved in ground No.4 in ITA No.4063/M/2019 which has been discussed and decided by us in para Nos.42 to 45 (supra) with the variation in the amount of cash interest paid in the present case the respondent-assessee was alleged to have paid interest in cash of Rs.2,28,86,365/- on account of differential rate of interest on the borrowed money. Accordingly, our decision on ground No.4 in ITA No.4063/M/2019 A.Y. 2011- 12 would, mutatis mutandis, apply to this appeal as well. Accordingly, the Revenue’s appeal is dismissed.

52 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 72. The issue raised in ground No.2 is against the deletion of addition of Rs.11,20,417/- as made by the AO on account of deemed rental income.

53 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 17.1 The AO has relied on the case of Dr. Balbir Singh, and Chem Mech (supra) for calculating the deemed rental income by adopting 8.5% of the total value as the ALP of the Appellant's bungalow. 17.2 The Appellant argued that section 22 would apply only when the essential condition that the assessee is the owner of the property is satisfied. Once this condition is satisfies, ALP of the property can be determined u/s 23 based on 3 parameters cited by the AO. As per the Appellant, the essential conditions of ownership is not satisfied in his case. The charging section is section 22 for house property income. The Appellant has shown that the entire amount of consideration for the purchase of property had not been paid. In this regard, evidence is on record that the developer has made demands of substantial sums on account of MVAT to be paid to the Government, pending land and villa instalments, etc. 17.2 There is also evidence by way of a letter filed by the Appellant that the developer had been threatening to terminate the sale agreement in the event of the Appellant not making payment of pending instalments towards the building and the land and other outstanding dues. In the letter dated 20.2.2014, the Developer had stated that an amount of Rs. 1,61,15,766/- shall be deducted from the payments made by the Appellant and the balance amount of Rs. 27,14,795/- shall be returned to the Appellant. The' termination is mentioned to be effective from 20.02.2014. There has been a number of letters exchanged between the developer and the appellant, subsequently on the subject. It appears from the letter dated 20.02.14 that the villa booked by the Appellant was yet to be constructed. Needless to say that the villa has not been constructed owing to the reluctance of the Appellant to pay the outstanding demands. Thus, the villa was under construction for the period relevant to the A.Y. 2013-14, which is under consideration.

17.3 It is clear from the above that the Appellant cannot be regarded as the owner of the land and building for which he had entered into an agreement of sale and be in a position to exercise the rights of ownership. In these circumstances, the condition of ownership therefore is not met. Charge of house property income therefore, does not apply in the Appellant's case.

17.4 It is also important to note that the word 'property' is used in the context of buildings or lands appurtenant thereto. Although the word used is ‘or’, the interpretation has always been that income from mere land is not treated as income from house property. The title of Chapter C reads 'Income from House Porperty'. The word 'or' therefore used in the section should be understood as 'and'. The land mentioned in the section is only the land appurtenant to the house to make it eligible to be taxed under this head of income. In the case of the Appellant, where there is no house constructed, there cannot be any charge of income from house property. There is no need to delve into the mechanism of assessing the income in section 23 of the Act in the present case at hand. The property, which is under construction is neither a property nor land. No notional income under this chapter could be attributed to such property.

17.5 The Supreme Court had held in Municipal Corporation of Greater Bombay Vs Polychem Limited AIR 1974 SC 1779 that for the purposes of levying municipal tax, an incomplete building would not justify evaluation because it can be treated as a

54 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors building only when it is actually and legally capable of occupation, as house tax is levied on the basis of Letting Value of the property.

17.6 In the case of City Vs Palace fund, 196 ITR .705 (Ker), it was held as under-

"The pre-requisite of charging income under the head 'Income from house property' is ownership of the building, which had not been established in the instant case. Therefore, the Tribunal was justified in holding that the notional income from the properties occupied by the members of the assessee could not be assessed in its hands. Further income in question could not also be assessed in hands of assessee-fund either as HUF or individual by invoking section 27(11). Accordingly, no referable question of law arose from the Tribunal's order."

17.7 In view of the above facts and circumstances, the addition made by the AO on account of deemed rental income is deleted. Accordingly, the Ground No. 3 of the present appeal is allowed.”

55 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 23 of the Act can be assessed from a house which has not been constructed. The Ld. CIT(A) relied on the decision of Hon’ble Supreme Court in the case of Municipal Corporation of Greater Mumbai vs. Polychem Ltd. AIR 1974 SC 1779 and also on CIT vs. Palace Fund 196 ITR 505 Kerala as stated above while allowing the appeal of the assessee. The first appellate authority has passed a very reasoned order giving a detailed finding as to how the deemed rent of the property in Sahara Valley can not be considered as deemed rent under section 23 as the property has not been constructed and assessee is not in a position to exercise the rights of the ownership. In view of these facts, we are inclined uphold the order of Ld. CIT(A) by dismissing the ground raised by the Revenue.

ITA No. 6753/M/19 (AY 2013-14)(Revenue’s Appeal): 76. The ground raised by the Revenue are as under: “1. The Ld. CIT(A) has erred in deleting the penalty levied u/s 271D of the Act and failed to appreciate that the seized promissory notes marked as page no.183 & 184 are dated 01.07.2012 which pertains to F.Y. 2012-13 relevant to A.Y. 2013- 14.

56 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors 78. The facts in brief are that during the course of search on M/s. Riddhi Siddhi Bullion Ltd. and its group concerns on 11.06.2013, a document was recovered and seized which is marked as annexure A-3, page No.183 & 184. These pages contained two original promissory notes of Rs.10 crore each given to Rakesh Kothari by M/s. Rohan Developers Pvt. Ltd. A perusal of the promissory notes seized as page No.183 & 184 showed that Rs.20 crores were advanced to Shri Harresh Mehta of M/s. Rohan Developers Pvt. Ltd. for which corresponding entry was found in “Udhar” Account written in diary Annexure-8 on page No.58 which is written against the name of Shri Harresh Mehta as 2000 with date 1.10.2011 which showed that amounts were written in lakhs. According to the AO, these promissory notes were issued by M/s. Rohan Developers Pvt. Ltd. to Shri Rakesh Kothari in lieu of money received in cash. The AO observed that respondent assessee had received Rs.20 crores from Shri Rakesh Kothari in cash against security of promissory notes given by director of M/s. Rohan Developers Pvt. Ltd. and further noted that this is a common practice in the business of real estate developers. These cash loans were started to be advanced sometime in 2010-11 and reached Rs.20 crores on 1.10.2011 @ 2% interest and the said loan was outstanding on 01.04.2013. Accordingly, the AO issued a show cause notice under section 271D vide letter dated 08.08.2016 as to why the penalty should not be invoked for contravention of section 2SS of the Act which was applied by the assessee vide letter dated 14.09.2016 and finally a penalty was imposed of Rs.20 crore vide order dated 27.09.2016. In the appellate proceedings Ld. CIT(A) allowed the appeal of the assessee by deleting the

57 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors addition made of Rs.20 crore in the quantum assessment which was not challenged by the department before the Tribunal. The Ld. CIT(A) while deleting the penalty recorded a finding that the addition made in respect of interest of Rs.4,80,000/- on cash loan of Rs.20 crore has been deleted by Ld. CIT(A) vide order dated 23.07.2019 A.Y. 2013-14 in assessee’s own case. Ld. CIT(A) also noted that the AO has given finding in the penalty order that cash loan reached the amount of Rs.20 crore as on 01.10.2011 as discussed in para 9.13 of the appellate order which implied that the alleged cash loan was received in F.Y. 2011-12 and also in F.Y. 2010-11 relevant to A.Y. 2012-13 and 2011-12 whereas AO has imposed penalty in 2013-14 which is not sustainable under the Act. But in any case we have already decided the issue of interest on cash loan in favour of the assessee in assessee’s own case in ITA No.6307/M/2019 A.Y. 2013-14 giving detailed finding that assessee has never taken any cash loan of Rs.20 crore through two promissory notes and upheld the finding of Ld. CIT(A) that these promissory notes were given as guarantee towards some property deal which never materialized and thus the present penalty is consequential to the ground No.6 decided in the above appeal.

58 ITA No.4060/M/2019 & ors M/s. Rohan Developers Pvt. Ltd. & ors

Order pronounced in the open court on 13.10.2021.

Sd/- Sd/- (Ravish Sood) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated: 13.10.2021. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ By Order

Dy/Asstt. Registrar, ITAT, Mumbai.