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Facts
During a search, loose papers indicating cash expenditure of INR 2,40,09,447/- on an Industrial Park Project were found. The AO also estimated commission of INR 2,70,525/- on sale deeds found at the assessee's residence, proposing additions. The CIT(A) deleted both additions.
Held
The Tribunal held that no evidence of commission payment was found, and the sale deeds alone did not prove brokerage. Regarding the cash expenditure, the Tribunal noted that the expenses were owned up by another individual, Shri Subhash Chaudhary, and that the Settlement Commission had also ruled no further addition was required in this regard. Therefore, the additions made by the AO were not sustainable.
Key Issues
Whether the AO was justified in making additions for cash expenditure and commission income on a protective/estimated basis, given subsequent evidence and settlement commission orders?
Sections Cited
132, 153A, 139(1), 250, 245D(3), 245D(4)
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Income Tax Appellate Tribunal, DELHI “B” BENCH: NEW DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
Year : 2017-18] DCIT vs Joginder Singh Room No.343, 3rd Nangal Jogiyan, Sikri, Floor, ARA Centre, Ballabgarh, Faridabad, Jhandewalan Extn. Haryana-121004 PAN-AAJCS1175L New Delhi-110055 APPELLANT RESPONDENT Revenue by Ms. Pooja Swaroop, CIT DR Assessee by Shri Charitra Kumar, CA & Shri Deepak Garg, CA Date of Hearing 22.01.2026 Date of Pronouncement 10.04.2026 ORDER
PER MANISH AGARWAL, AM :
The present appeal is filed by Revenue against the order dated 12.06.2023 by Ld. Commissioner of Income Tax (A)-25, New Delhi [“Ld. CIT(A)”] in Appeal No.10553/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 29.12.2019 passed u/s 153A of the Act pertaining to Assessment Year 2017-18.
Brief facts of the case are that the assessee has originally filed return of income u/s 139(1) of the Act on 31.03.2018 declaring total income at INR 8,82,110/-. A search and seizure action u/s 132 was conducted on 14.09.2017 at the business and residential premises of the assessee and during the course of search various loose papers were found and seized. Thereafter, proceedings u/s 153A were initiated in the case of assessee for the year under appeal. The AO observed that during the course of search carried out at the premises of Shri Rajesh Chaudhary and Shri Subhash Chaudhary, who were also covered u/s 132 of the Act, certain loose papers were found according to which cash expenditure to the tune of INR 2,40,09,447/- were incurred on the Industrial Park Project at Dhudhola. Since this project was promoted by assessee, the AO proposed to make the addition of the said cash expenses in the hands of the assessee as unexplained expenditure. The assessee submits that these expenses were incurred by Shri Subhash Chaudhary and also filed his affidavit and it was further submitted that in case of Shri Subhash Chaudhary, petition was filed before Settlement Commission wherein these expenses were owned up by him, therefore, no addition could be made in the hands of the assessee. After considering these fats, AO made the addition of INR 2,40,09,447/- in the hands of the assessee on protective basis. Besides this, AO made further addition of INR 2,70,525/- by estimating commission @ 1 % on three registered Sale Deeds found at the residence of the assessee, holding the assessee acted as “broker” in the said transactions. Accordingly, total income of the assessee was assessed at INR 2,51,62,082/-.
Against the said order, assessee preferred appeal before Ld. CIT(A) who vide impugned order dated 12.06.2023, deleted the additions made by the AO.
Aggrieved by the order of Ld.CIT(A), Revenue is in appeal before the Tribunal by raising various Grounds of appeal as per appeal memo.
Ground of appeal No.1 raised by the Revenue is general in 5. nature hence, not adjudicated.
Ground of appeal No.2 raised by the Revenue is with respect to the deletion of addition of INR 2,70,525/- made on account of unaccounted commission.
Heard the contentions of both the parties at length and perused the material available on record. It is observed from the order of AO that three registered Sale Deeds were found from the possession of assessee for which it as explained that assessee was “Sarpanch” and the owners of these properties approached the assessee for getting their revenue records corrected/resolved the disputes between the parties. No paper whatsoever, was found indicating payment of any commission to the assessee or indicating that assessee solicited the deals of such properties as broker. Therefore, Ld.CIT(A) by placing reliance on the judgement of Hon’ble Delhi High Corut in the case of Kabul Chawla reported in 380 ITR 573 (Del. HC) deleted the additions. The relevant observations of Ld.CIT(A) as contained in para 11.5.3 to 11.5.4 are reproduced as under:- 11.5.3. “From the above details it is seen that the said documents were found from the premises of the appellant. Since the appellant was admittedly Sarpanch earlier and a prominent person in the area, the finding of photocopies of property documents in itself cannot lead to an inference that the appellant has earned commission income in respect of such sale deeds, unless there is any material to suggest that such property has been sold through the appellant/property agent on which commission income has been received. As submitted by the appellant and seen from record, no enquiries were made by the AO from the parties mentioned in the sale deeds to rebut the claim of the appellant. The appellant has stated that he and Shri Manish Goyal were both directors in SRC group of companies and known to each other. 11.5.4. In this case no enquiries are seen to have been carried out by the AO before making the addition. This is not seen to be a case wherein any document showing the receipt of commission was found; rather, only sale deeds/agreements in respect of certain properties were found. As such, in the absence of any material brought on record evidencing the conclusion of sale through the appellant and/or any material showing the receipt of commission, the addition made by the AO is not sustainable in law and accordingly, such addition made is deleted and ground number 6 of the grounds of appeal raised is allowed.”
From the perusal of the observations, it is observed that Ld.CIT(A) has categorically held that no documents showing the receipt of commission was found as a result of search and only Sale Deed in respect of certain properties were found thus, in absence of any incriminating material, no addition could be made on assumptions and presumptions in the order passed u/s 153A of the Act. Such observations of the Ld.CIT(A) has not been controverted by the Revenue before us, therefore, the order of Ld.CIT(A) to this extent, is hereby, upheld. The ground of appeal No.2 of the revenue is thus, dismissed.
Grounds of appeal Nos. 3 to 5 are regarding deletion of 9. addition of INR 2,40,09,447/- towards cash expenditure made on protective basis.
10. Heard the contentions of both the parties at length and perused the material available on record. The AO made the addition on protective basis by observing that the petition filed by Shri Subhash Gupta before the Settlement Commission was pending from whose possession the documents were found and seized. It is further observed that Shri Subhash Chaudhary in terms of the affidavit filed admitted that the transactions found noted in the seized papers pertained to him. It is further observed that before Ld.CIT(A), copy of the order of Interim Board of Settlement Commission dated 30.06.2023 was filed according to which it is held that no addition should be made on the issues including the documents under reference which were reported by Ld. PCIT in its report filed u/s 245D(3) of the Act dated 07.01.2021 before Hon’ble IBS. Once this report stood considered by the Hon’ble IBS and has categorically held that no further addition is called for on the basis of such documents and further looking to the facts that Shri Subhash Chaudhary has owned such documents as belonged to him and filed an affidavit before the AO in this regard, no addition could be made in the hands of the assessee by holding the transactions noted therein as unexplained investment of the assessee even on protective basis. These facts were duly appreciated by the Ld.CIT(A) while deleting the additions made. The relevant observations of Ld.CIT(A) as contained in para 11.4 to 11.4.3 are as under:- 11.4. “In grounds No. 5, 7 and 8 of appeal, the appellant has contested the addition made of Rs. 2,40,09,447/- in para 3 of the impugned assessment order on account of unexplained cash expenses found recorded in seized document Annexure A- 6 found and seized from the residence of Mr Rajesh Choudhry and seized document Annexure A-29 found and seized from the residence of Mr Subhash Choudhry. The appellant has claimed that the AO ignored his submission that the said expenses pertained to and had been owned up by Mr Subhash Choudhry and hence did not pertain to the appellant. He also submitted that Mr Subhash Choudhry had already given an affidavit with regard to his categorical admission regarding ownership of such documents and hence the contents of the documents in the said Annexures ought not to have been used against him for making the addition. It was also informed that Mr Subhash Choudhry had already filed an application before the Hon'ble Income Tax Settlement Commission (ITSC) on 23.12.2019 which had been admitted and final order had also been passed thereon on 30.06.2023. 11.4.1. I have considered the contentions of the appellant and the facts on record. The AO vide impugned order dated 29.12.2019 has stated in the last part of para 3 that: The submission of the assessee that all these documents/annexure belong to Mr. Subhash Chaudhary who has undertaken to explain the contents of such documents/data in his own hands is considered but with a view to protect the interest of Revenue, till the order of ITSC is finalized the amount of Rs.2,40,09,447/- should be assessed in the hands of the assessee. Therefore addition of Rs.2,40,09,477/-is being made in the hands of the assessee as his income from unaccounted/undisclosed sources for the year under consideration. (Emphasis supplied) 11.4.2. It is thus imperative to examine the order passed by the Hon'ble IBS in the matter. In the remand report dated 02.11.2024 furnished by the AO (supra) in response to this Page | 6 office letter, whereby a copy of the order dated 23.06.2024 of the Hon'ble IBS has been enclosed, it has been informed that: "The issue of unexplained expenditure on which major addition has been made in the impugned assessment order was duly incorporated in Para 4 of the report dated 07.01.2021 of the then Ld. Pr. CIT u/s 245D(3) of Income Tax Act (copy enclosed). It was explicitly mentioned in the report that some incriminating documents related to Sh. Subhash Chaudhary were seized from premises other than his premises, wherein details of cash expenses & receipts were mentioned. Further, Hon'ble IBS has ordered that no further addition is called for on other issues. Relevant extract of order of the Hon'ble IBS is reproduced hereunder: ……….. In respect of other issues discussed in the preceding paras of this order, we have considered the contentions of the applicant and the Department during the hearings and the various written submissions/reports submitted in this regard. We are of the view that no further addition is called for on other issues.' 11.4.3. As pointed out by the appellant too in his rejoinder, it is seen that on page 17 of the Hon'ble IBS order, in para 18.1 which contains the additional facts for consideration suggested by the PCIT, it is mentioned in the first column with regard to documents bearing page numbers 106-111 in Annexure A-6 seized from the residence of Shri Rajesh Choudhry, the amount of transaction, i.e., Rs. 2,44,06,463/-pertaining to the impugned AY 2017-18, were in the nature of cash expenses incurred by Mr Subhash Choudhry. Thus, the expenses were not stated to have been incurred by the appellant Mr Joginder Singh. In any case, as seen from the report dated 22.11.2024 of the AO in respect of the order of the Hon'ble IBS, the said amount of Rs. 2,44,06,463/- (erroneously taken as Rs. 2,40,09,447/- by the AO in the impugned assessment order as admitted by the AO vide his report dated 14.11.2023) was incorporated in para 4 of the report dated 07.01.2021 of the then PCIT u/s 245D(3) of the Act submitted to the Hon'ble IBS, which were thus taken into consideration by the Hon'ble IBS in its order dated 23.06.2024 in the matter. In view of the same, the addition made in the hands of the appellant by the AO in the impugned assessment order to protect the interest of revenue till the final order of the Hon'ble ITSC/IBS was passed, cannot be sustained, when the same had been owned up by Mr Page | 7
Subhash Choudhry as pertaining to him and in respect of which final order u/s 245D(4) of the Act has been passed by the Hon'ble Interim Board for Settlement VII, Chennai on an application made by Mr Subhash Choudhry. Accordingly, respectfully following the order of the Hon'ble IBS, the addition of Rs. 2,40,09,447/- made in the impugned assessment order in the case of the appellant is deleted and these grounds of appeal allowed.”
11. After careful consideration of the order of Ld.CIT(A) and overall discussion made herein above, we find that Ld.CIT(A) has deleted the additions after appreciating the order passed by Hon’ble IBS and also the admission by Shri Subhash Chaudhary accepting the ownership of the documents therefore, we find no error in the order of Ld.CIT(A) which is hereby, upheld. The Ground of appeal Nos. 3 to 5 are thus, dismissed.
In the result, appeal of the Revenue is dismissed. Order pronounced in the open Court on 10.04.2026. Sd/- Sd/-