DCIT ,CC- 8 (4), MUMBAI vs. SITARA BUILDERS PVT. LTD., MUMBAI

ORDER

PER S. RIFAUR RAHMAN, AM:

2. The "Rohan Group", headed by Mr. Harresh N. Mehta, is one of the leading builders of the South and Central Mumbai and mainly engaged in construction of residential buildings and redevelopment of old & dilapidated buildings. The group has re-developed over 50 buildings and constructed over 2.5 million sq. ft. residential space. Apart from M/s Rohan Developers Pvt. Ltd, other main concerns are M/s Goodwill Properties Pvt. Ltd., M/s. Silver Arch Builders & Promoters Pvt. Ltd. The main persons in this group are Mr. Harresh N. Mehta and Late Mr. Jitendra N. Mehta. Apart from these persons, Mr. Sameer Shah, Mr. Haresh M. Mehta, Mr. Riyush Vora, Mr. Kalpesh Mehta, Ms. Chaulla Joshi and Ms. Ananya Karnani are other key persons of the group who were handling financial, sales and other important functions of the business activities of "Rohan group".

Sr. No. Name of the Entity Particular of Income Assessment year Amount (Rs.) 1. Jitendra Mehta Undisclosed Income and peak 2006-07 23,44,692 negative cash 2007-08 10,62,72,672 2008-09 12,09,72,295 2009-10 2,22,47,743 2010-11 11,78,972 2011-12 1,94,877 2012-13 86,17,859 2. Jitendra Mehta Page 15, Ann. A-1 seized from 2007-08 65,000 Residence.

3. Jitendra Mehta Disputed demand for 2011-12 17,20,35,681 additional interest by lenders 4. Jitendra Meht Disputed demand for 2011-12 45,99,142 Additional interest by lenders of Shivalik A.Ys. 2012-13 & 2013-14 3 DCIT, CC-8(4) Vs. M/s Sitara Builders Pvt. Ltd.

5. The assessee filed the return of income on 30-09-2012 declaring total income at Rs. 26,99,750/-. Thereafter, notices u/s 143(2) dated 30-09-2013 and 142(1) dated 21-10-2013 along with detailed questionnaire were issued and duly served on the assessee. In response, A.R of the assessee filed the relevant information as called for by the A.O. Based on the findings in the search u/s 132 of the Act in the case of Rohan Group Concerns and their admission of additional income, AO made an addition of 30% of the Sales on account of on-money and also disallowed 25% of the conveyance charges and 30% of telephone charges added back in the hands of the assessee.

15.17 The matter travelled to the Hon'ble Appellate Tribunal, which had decided the same issue of on-money on sale of flats, vide it's order dated 01.03.2019. This was a Departmental Appeal against the order of CIT (A) and the CIT(A) had ruled in favour of the assessee by deleting the addition on account of on-money. It may be noted that the background on which addition was made was the same search operation dated 26.05.2011 conducted on the Rohan Group. Further, the additions were also based on the same statement given by Shri. Haresh M. Mehta, wherein Shri Mehta had acknowledged that 30% of on-money had been accepted over and above the registered value of the agreement. I have also noted that the AO had also relied on the same statement of Mrs. Chaula Joshi and Mr. Vijay Jasani. The contentions of the AO in that case were also the same as in the Appellant's present case. In that case also, reliance had been placed on the seized Page No. 114, confessional statement recorded u/s 132(4) of the Act, delay in filing of retraction of statements etc., 15.18. The Hon'ble Tribunal held that the statements of the employees, in Search and seizure cases, can only be used if they are supported by corroborative evidences. The department could not point out the evidence proving the receipt of alleged On-money. The Hon'ble ITAT in it's order in the case of Goodwill Properties Pvt. Ltd. had also relied in the case of DCIT Vs Silver Arch Builders and Promoters, which has been quoted extensively in the order. The relevant extract of the aforementioned case of M/s Goodwill Properties Private Limited is reproduced as under- "15. 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 analyzed the page number 114 that was seized by the authorized 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 A.Ys. 2012-13 & 2013-14 5 DCIT, CC-8(4) Vs. M/s Sitara Builders Pvt. Ltd. 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 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.

16. After having gone through the facts of the present case and also perusing the orders of the Coordinate Bench of ITAT in the case of group concern with regard to the same search, we are also of the view that the statements of the employees, in search and seizure cases, can be used only if they are supported by some kind of collaborative evidence. However, Ld. DR could not point out the evidence proving the receipt of alleged on money. As the assessment for the AY. 2008-09 was not pending, so, without some incriminating material, the AO should not have made the addition to the total income of the assessee. That the order of Ld. CIT(A) does not suffer from any legal or factual infirmity. Moreover, taking into consideration, the decision of the Coordinate Bench of ITAT in the case of group concern and also in order to maintain judicial consistency, we apply the same findings in the present case which are applicable mutatis mutandis. Resultantly this ground raised by the revenue stands dismissed." 15.19 I have also examined the orders passed by the various judicial authorities in the case of Silver Arch Builders & Promoters which is a group concern of the Appellant on this issue. The CIT(A) in its order in the case of Silver Arch Builders & Promoters for an earlier year had decided the issue of on money in her appellate order dated 29.02.2016. The issue dealt by her in that appeal is identical and based on the same evidence as in the case of the Appellant i.e., Page No. 114 of Annexure

1. The Ld. CIT(A) 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 could be made on the basis of incriminating material found during the course of search. The perusal of the statements of the employees reflected that there was 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 ITA Nos. 6303-6304/Mum/2019 A.Ys. 2012-13 & 2013-14 6 DCIT, CC-8(4) Vs. M/s Sitara Builders Pvt. Ltd. action. Accordingly, the addition made by the AO on the issue of on-money was deleted by the Ld. CIT(A). 15.20 Upholding the decision of CIT(A), the Hon'ble ITAT has decided this issue in favour of the Appellant. The relevant extract of the order of the Hon'ble ITAT in the appellant's own case, and 3163/MUM/16 is reproduced below:- 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. 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 authorized party carrying out the search proceedings. It is very clear 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 A.Y. 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. lTA/3163/Mum/2016, AY. 2008-09: All the facts for the year under consideration are identical to the facts of earlier A.Y., except for the amount of addition. Following our order for the AY.2007-08, we decide, effective ground of appeal against the AO. As a result, appeals filed by the AO for the both AY.s stand dismissed. 15.21 I have noted that the above decisions of Hon'ble ITAT in the case of M/s Goodwill Properties Private Limited and Silver Arch Builders & Promoters, both are identical to the facts of the present case at hand. In these case also, there was no mention in the seized Page No. 114 of Annexure 1 of on-money w.r.t. the projects, -6304/Mum/2019 A.Ys. 2012-13 & 2013-14

7. DCIT, CC-8(4) Vs. M/s Sitara Builders Pvt. Ltd. which were developed by M/s Goodwill Properties Pvt. Ltd. or Silver Arch Builders & Promoters. 15.22 I have noted that the above decisions in the case of Goodwill Properties Private Limited and Silver Arch Builders & Promoters, both are identical to the facts of the present case at hand. In these case also, there was no mention in the seized Page No. 114 of Annexure 1 of on-money w.r.t. the projects, which were developed by M/s Goodwill Properties Pvt. Ltd. or Silver Arch Builders & promoters. 15.23 In view of these facts and circumstances, the decisions of M/s Goodwill properties Pvt. Ltd and Silver Arch Builders & Promoters will therefore apply and in all aspects to the facts of the present case. It is therefore held that the addition in respect of on- money received in sales made needs to be deleted. Since the presumption of charging on-money can't be extended to the projects, which don't find mention in the seized document. Hence, the addition on account of on-money added by the AO for projects in the Appellant's case needs to be deleted. 15.24 The assessment year-wise sales made in the case of appellant, alongwith other relevant details is tabulated, as under:-

Assessment Year Names of Project Total Sales Moksha Plaza 2012-13 71,650,000 71,650,000 15.25 It may be noted from the above tabular data that in the case of Appellant Company, for the current year under consideration viz. A.Y. 2012-13, the sales made are not with respect to any projects which find mention on Page No. 114 of Annexure 1 of seized document. Accordingly, there is no occasion for making any addition with regard to on money in the Appellant's case for A.Y. 2012-13 and hence, the addition made by the AO on this account is hereby, deleted.

8. DCIT, CC-8(4) Vs. M/s Sitara Builders Pvt. Ltd.

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 @ 30% over & above the agreement value, which works out to be Rs.1,68,03,518/-.

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 deleting the addition made on account of disallowance @ 10% of depreciation, Speed Boat Charges & speed Boat fuel Charges as the assessee company failed to establish that the above expenses were utilized wholly & exclusively for the business of the assessee company.”’ 9. Ld. DR brought to our notice findings of the assessing officer in detail. Further he submitted that the policy of the group applied to all the group uniformly. He submitted that the findings of the A.O is proper as per facts. On the other hand ld. A.R brought to our notice coordinate bench decision in assessee’s own case in for assessment year 2009-10 which is placed on record in the paper book. He submitted that this issue is covered in favour of the assessee. 10. Considered the rival submission and material placed on record. We notice that the similar issue under consideration is already considered by the coordinate bench in the assessee’s own case for A.Y. 2009-10, the relevant extract of the decision is reproduced below:

“14. We have heard both the parties, perused materials available on record and gone through the orders of authorities below, along with case laws cited by the Ld.AR for the assessee. The solitary issue that needs to be resolved in this bunch of appeal is addition made by the AO towards on-money in cash on sale of flats. The AO has estimated 30% on total sales declared by the assessee for the relevant financial year towards receipt of on-money in cash over and above normal sales declared in the books of account on the basis of statement recorded from Shri Haresh M Mehta, director of M/s Rohan Developers Pvt Ltd. at the time of search u/s 132(4) of the Act. The AO had also taken support from statement of certain key employees, who looked after day today affairs of the assessee group. According to the AO, the contention of the assessee cannot be accepted that there is no evidence to establish that on-money is received in respect of its projects, because the statement of director and other employees threw light on the modus operandi of the assessee group, as per which, the group was indulging in receipt of on-money on sales which is 30% over and above the normal sales price declared in the registered document. The AO, further, observed that this fact is further strengthened by enormous material found during the course of search, including cash seized from premises of the group and other assets. The assessee had also admitted Rs.100 crore undisclosed income in various group companies name on the basis of incriminating material found as a result of search and also to cover up any errors / omissions / discrepancies, etc. There are certain specified seized materials, which clearly indicated undisclosed income. Therefore, he came to the conclusion that there is no merit in the arguments of the assessee that there is no A.Ys. 2012-13 & 2013-14 9 DCIT, CC-8(4) Vs. M/s Sitara Builders Pvt. Ltd. evidence to establish receipt of on-money. The AO further observed that when the material gathered during the course of search coupled with statement of directors clearly established the fact of receipt of on-money, it is very essential to infer that the group as a whole was indulging in this kind of modus operandi and accordingly he estimated 30% on total sales declared for the year towards on-money receipt and made addition to the total income.

questions to statement recorded during the course of search. All along the director as well as the employees made a general statement about receipt of on-money with reference to a question posed by the Investigation wing without any reference to particular seized material found as a result of search. Similarly, the AO has taken circumstantial evidence of cash and unexplained jewellery found during the course of search to argue that the assessee is in the habit of suppression of sales by showing under valuation which was used in its business, but on perusal of cash and other assets found during the course of search it was very clear that the cash was found from 112-122, Hira Bhavan, Rajaram Mohan Roy Road, Prarthana Samaj, Mumbai, which was common premises for four entities of the assessee group and that the total cash found from various premises was almost equivalent to cash balance maintained in the books of account. Although, there is a difference of cash balance of Rs.25,86,687, the same has been offered to tax in the hands of directors and also M/s Rohan Developers Pvt Ltd. Neither the Panchanama drawn during the course of search nor the statement recorded during search indicated that cash and other unaccounted assets found during the course of search belonged to the assessee. The Ld.AO has even failed to establish nexus between incriminating materials found during the course of search to the business of the assessee. Unless there is a direct nexus between incriminating material found during the course of search coupled with statement recorded from the director and employees of the group, merely on the basis of admission of certain parties, that too, after retraction of such statements by the parties, addition cannot be made towards receipt of on-money on adhoc basis taking a clue from statement of those persons. No doubt, estimation is possible in assessment proceedings provided the AO is having sufficient information with him regarding suppression of sales or receipt of on-money. In a case, where the department is in possession of material regarding suppression of sales or receipt of on-money for part of a period, then for the remaining period, the AO may go for estimation by taking into account various parameters including certain degree of estimation. But, then this cannot be extended or enlarged to the extent of extrapolation of information to another assessee, though the same belongs to one group, unless there is specific material in the possession of the AO with regard to suppression of sales or receipt of on-money. Further, statement recorded during the course of search including confession may be a best piece of evidence, but that by itself would not be conclusive evidence unless such statement is further supported by evidence in the form of incriminating material found during the course of search. The AO before estimating income has to bring on record some cogent materials to justify his action. In this case, on perusal of facts available on record, it is abundantly clear that nowhere the AO linked the seized material found during the course of search to the income estimated towards on-money received from sale of flats. While it is true that retraction by itself does not provide an impenetrable sheild to the concerned person, but it is also equally true that a statement per se by itself is not conclusive evidence. This legal proposition is fortified by the decision of Hon'ble Supreme Court in the case of CIT vs S Kader Khan Sons (2013) 352 ITR 480(SC) where it was categorically held that admission is a best piece of evidence, but that by itself is not a conclusive evidence unless it is supported by further evidence in the form of incriminating materials. This legal proposition is further fortified by the decision of ITAT, Amritsar Bench in the case of ACIT vs Janakraj Chauhan (supra) where it was held that admission at the time of search is important, but not conclusive. The Tribunal further held that addition should be considered on -6304/Mum/2019 A.Ys. 2012-13 & 2013-14 11 DCIT, CC-8(4) Vs. M/s Sitara Builders Pvt. Ltd. merits, rather than on the basis of sworn statement made by the assessee. The Hon'ble Bombay High Court in the case of CIT vs Uttamchand Jain (supra) had considered the admission and subsequent retraction of the assessee and held that a retracted confession can be relied upon only if there is independent and cogent evidence to corroborate the statement. In this case, the AO has failed to bring any corroborative evidence to support the statement of directors as well as employees in order to support his action of estimation of on-money on sales declared by the assessee for the relevant financial years. Therefore, we are of the considered view that the AO was erred in estimating adhoc on-money received from sale of flats on the basis of statement of some employees even after such statement has been retracted and also nothing on record to indicate that the assessee is in receipt of on-money. 17….

Order pronounced in the open court 31.05.2021.