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Before: SHRI SHAMIM YAHYA & SHRI AMARJIT SINGHDr. B.A. Road, Parel,
PER SHAMIM YAHYA, ACCOUNTANT MEMBER; 1. This is an appeal by the revenue and Cross Objection by the assessee arising out of the order dated 16.01.2019 of learned Commissioner of Income Tax (Appeals)-14, Mumbai [for short ‘the ld. CIT(A)] and pertains to Assessment Year 2014-15. The revenue has raised the following grounds of appeal:
M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar.
1. Whether on the facts and in the circumstances of the case and in law, Hon’ble CIT(A) is justified in concluding that the cash transactions in the seized documents during a search operation do not belong to the assessee? 2. Whether on the facts and in the circumstances of the case and in law, Hon’ble CIT(A) is justified in deleting the addition made on grounds of undisclosed investments u/s. 69B of the Income Tax Act, 1961? 2. The assessee has filed Cross Objection raising the following grounds of appeal:
The assessee prefers a cross objection against the order passed by Ld. Commissioner of Income Tax (A) 14, Mumbai vide order dated 29/01/2019 on following amongst other grounds each of which are without prejudice to any other :- 1.0 On facts and circumstances of the case and in law, Ld. CIT(A) ought to have deleted the addition u/s.69B of alleged undisclosed investments of Rs.5,50,00,000/- since the disputed flat, whose booking has been cancelled prior to search of the builder, belonged to the wife of the assessee; 2.0 The Ld. CIT(A) ought to have deleted the addition since the documents/material found at premise of 3rd party cannot be used against the assessee in particularly when the copies of such material and retracted statements is not provided to the assessee for confrontation and opportunity of cross examination has not been provided to the assessee.
Brief facts of the case are that the in this case information has been received from the office of the Dy. Director of Income Tax (inv.)-Unit 8(3) Mumbai i.e. from investigation wing of the Income Tax that search and seizure operation was conducted in the case of M/s Nish developers Pvt. Ltd. M/s Nish developers Pvt. Ltd has been developing premium residential project in the name of “One Avigna Park” at curry road Mumbai. The main promoter of M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar. the company is Kailash Agarwal and his son Nishant Agarwal. During the course of search proceedings, a pen drive and loose papers was seized from the residence of Sh. Pravin Mishra, one of the trusted employee of Sh.
Kailash Agrarwal which contains the details of cash transactions pertaining to M/s Nish developers Pvt. Ltd. The pen drive contains transactions amounting to Rs.181,66,44,000/- contains date wise details of cash receipts were found. On the basis of these evidences, statement of employees and persons working as cash handlers of M/s Nish developers Pvt. Ltd has been recorded wherein they have accepted the issue of on-money. The evidences found during the search proceedings were confronted to Sh Kailash Agarwal in which he has accepted that an amount of Rs.181.64/- crores as unaccounted receipts generated by M/s Nish developers Pvt. Ltd on of the name in this pen drive is Sanjay Parmar and he has paid total cash of Rs.5.50/- crores in F.Y.2013-14. In view of the above information notice u/s142(1) along with details questionnaire dtd.03.10.2016 was issued and served upon the assessee wherein he has been requested to provide the details of payment made towards booking/ purchase of flat at “one Avigna Park”, copy of ledger account along with copy of bank statement.
The Assessing Officer (AO) noted that the assessee has failed to furnish documentary evidence to substantiate the claim. Thereafter, the AO noted the M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar. statement of cash handlers M/s Nish Developers Pvt. Ltd. He referred to the statement of the employee Shri Pravin Mishra. Referring to the above, he observed that pen drive as well as the statement of Shri Mishra provides that on money was received for flat in the project “one Avigna Park”. The AO concluded as under:
5.8 In view of the above facts and the statement of Sh. Pravin Mishra and Sh. Kailash Agarwal, it is evident that assessee i.e. Sh. Sanjay Parmar has given cash of Rs.5.50/- crores towards booking/purchase of flat at “One Avigna Park” developed by M/s Nish developers Pvt. Ltd. The source of the same has not been explained by the assessee during the course of assessment proceedings. As per provision u/s 69B of the Act “Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the [Assessing] Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the “[Assessing] Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year”. 5.9 In this case, assessee has made investment of Rs.5.50/- crores towards booking/purchase of flat at “One Avigna Park” however the same has not been reflected in his books of account and source of such investment has not been explained by the assessce. In this case clear cut evidences has been brought on record through the search & seizure operation in the case of M/s Nish developers Pvt. Ltd. that assessee has paid Rs.5.50/- crores in cash M/s Nish developers Pvt. Ltd. As per provision of Section 69B of the Act, the burden of proof is on assessee, however assessee fails to discharge his onus to provide the source of cash payment made towards booking/purchase of the flat. As assessee fails to substantiate the source of the cash payment of Rs.5.50/- crores towards booking/ purchase of flat at “One Avigna Park” developed by M/s Nish developers Pvt. Ltd, therefore Rs.5.50/- crores has been added total income of the assessee u/s M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar.
69B of the Act. Penalty proceedings u/s. 271(1)(c) are initiated separately for furnishing inaccurate particulars of income thereby concealment of income chargeable to tax. 5. Against the above order, the assessee has filed the appeal before the ld.
CIT(A). The ld. CIT(A) referred to the assessee’s submission, He also referred to the remand report obtained from the AO and the rejoinder from the assessee. Thereafter, the ld. CIT(A) opined that the addition was not sustainable inasmuch as wife of the assessee Smt. Varsha Parmar had made the booking by making cheque payment of Rs. 51,00,000/-. Later she got the booking cancelled and the advance money was refunded back to her. He gave a finding that refund has been credited in the bank account of Smt. Varsha Parmar on 25.02.2014 whereas the search and seizure action took place in the premises of M/s Nish Developers on 04.04.2014 which was much after date of cancellation of booking by Mrs. Varsha Parmar. He noted that AO has not made any adverse comment in respect of the evidence submitted by the assessee regarding booking and cancellation by Smt. Varsha Parmar. He also found it absurd that even after cancellation of the booking, cash payment was noted in the said pen drive. The ld. CIT(A) opined that there is no plausible explanation as to why a person who has cancelled the booking would continue to make cash payment to the builder. Referring to the other noting and the facts operating in the case, he was of the opinion that the addition was not sustainable. The order of ld. CIT(A) in this regard is as under: 5 M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar.
4. I have considered the submission made by the appellant and the reasons recorded by the AO. From the material on record it is clear that the AO has no material in its possession from which it can be concluded that the person Sanjay Parmar mentioned in the data contained in the pen drive seized during the course of search in the case of M/s Nish Developers Pvt Ltd on 04/04/2014 was the appellant only. Though, the wife of the appellant Smt. Varsha Parmar had made a booking in the project “One Avighna Park” on 11/07/2013 by making cheque payment of Rs. 51 lakhs, the booking was cancelled by her and the advance payment was refunded back to her. The refund has been credited in the bank account of Smt. Varsha Parmar on 25/02/2014 whereas search and seizure action took place in the premises of M/s Nish Developers Pvt. Ltd on 04/04/2014, which was much after the date of cancellation of the booking by Mrs Varsha Parmar. The AO has not made any adverse comment in respect of the evidence submitted by the appellant regarding cancellation of booking by Smt. Varsha Parmar. It can also be seen from the data contained in the pen drive, which is reproduced by the AO in the assessment order that cash payment by Sanjay Parmar, the person mentioned in the pen drive continued to be made even after 25/02/2014. Following payments have been made by that person after 25/02/2014 Rs. 10,90,000/- on 25/02/2014 Rs. 25,10,000/- on 05/03/2014 Rs. 35,00,000/- on 18/03/2014 Rs. 25,00,000/- on 27/03/2014 Rs. 20,00,000/- on 31/03/2014 There is no plausible explanation as to why a person who has cancelled booking would continue to make cash payments to the builder. Only possible explanation would be that the person making cash payments and the person cancelling the booking are two different persons. Since the AO has failed to bring any material on record to show that the person making cash payment is the appellant only and the appellant has not been identified in the statements recorded during the course of search, I'm of the opinion that the cash transactions recorded in the pen drive cannot be taxed in the hands of the appellant because there is no plausible reason for the appellant to continue to make cash payments even after cancellation of booking. Moreover, in the description against the cash payment entry is as under:- “Recd from Sanjay Parmar, he is having his office in Kalbadevi. The cash is received against the sale of flat”
M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar.
The appellant does not have any office in Kalbadevi rather his office is in Masjid Bunder. In view of these facts and in view of absence of any incriminating material being seized during the course of search, it is concluded that cash transactions recorded in the pen drive do not belong to the appellant. Accordingly, the addition of Rs. 5.5 crore made by the AO in the hands of the appellant is directed to be deleted and grounds of appeal raised by the appellant in this regard are allowed.
6. Against the above order, the revenue has filed appeal and assessee has filed the Cross Objection.
We have heard both the parties and perused the records. The learned Counsel for the assessee at the outset stated that on the basis of the same search at M/s Nish Developers, additions made in the hand of some of the parties has been deleted by the ITAT. Hence, he submitted that the issue stands covered in favour of the assessee.
The ld. counsel of the assessee has made elaborate written submissions which reads as under:
The Ld. CIT(A) has correctly deleted the addition u/s.69B of Rs. 5,50,00,000/of alleged on-money paid to M/s. Nish Developers Pvt Ltd for purchase of flat at “One Avigna Park” and in this respect, the assessee humbly submits as under :- a) There is absolutely no material on record to prove that the assessee had made any on-money to M/s Nish Developers Pvt Ltd. There was no sale deed, MOU, letter of allotment, etc found during search of M/s Nish developers Pvt Ltd which could prove that the assessee had made any booking of flat at “One Avigna Park”. No enquiry has been conducted against the assessee. The Ld. AO, in assessment order and in remand report, had not proved that the assessee had made any booking of flat at “One Avigna Park” and that too on making the payment of alleged on-money; b) The assessee’s wife Smt Varsha Parmar has provisionally booked a flat on making a token cheque amount of Rs.51,00,000/- on 11/07/2013 and such 7 M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar. booking had been cancelled and refund of such deposit had been credited in her bank account on 25/02/2014 which is before the search conducted at premise of M/s. Nish Developers Pvt Ltd on 04/04/2014; c) The cash payments disclosed in pen drive seized during search of M/s Nish Developers Pvt Ltd discloses the dates from 25/02/2014 to 31/03/2014, whereas Smt Varsha Parmar had cancelled the booking much prior to such dates; d) The Ld. AO made the addition under mistaken identity. The pen drive containing the description that “Recd from Sanjay Parmar, he is having his office at Kalbadevi. The cash is received against the sale of flat’ does not belong to the assessee since the assessee is not having any office at Kalbadevi, rather his office is situated at Masjid Bunder; e) The assessee had filed the Affidavit sworn on oath, Confirmation of M/s. Nish Developers Pvt Ltd and bank statements of Smt Varsha Parmar disclosing the cheque payment of booking deposit and refund received thereon. The assessee also filed copies of his own bank statements which does not disclose any payments made to M/s Nish Developers Pvt Ltd. The Ld. AO had not doubted the correctness of documents filed on record; f) The Ld. AO had not conducted any enquiry/investigation to verify the facts and had not issued any notice u/s 133(6)/131 to the developer. The Ld. AO did not provide the copies of statements of 3rd parties to the assessee for rebuttal and did not allow an opportunity of cross examination. In any case, the statements of the employee and director of M/s Nish Developers Pvt Ltd had been retracted; g) The documents found during search of 3rd parties cannot be used against the assessee. The presumption of Sec 292C and 132(4A) applies only to searched person and would not apply to the assessee; h) Without prejudice and without accepting any allegations, the addition cannot be made in hands of the assessee since the flat was booked and cancelled in name of Smt Varsha Parmar Judicial decisions relied upon: Addition made in identical case (relates to M/s Nish Developers Pvt. Ltd.) deleted by Hon'ble ITAT, Mumbai M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar. a) Jayesh kewalchand dated 31/7/2019 (copy enclosed) b) DCIT v. Manoj and Desai I.T No. (6301/MUM/2018) dated 07/12/2020 (copy enclosed) Documents found at premise of searched person cannot be used against other persons c) Pr. CIT v. Phenix Datatech Services Pvt Ltd 77 taxmann.com 294 (Del-HC) d) CIT v. Anil Khandelwal 93 CCH 42 (Del-HC) e) CIT v. Ramkumar 75 CCH 78 (P & H) f) Pradeep Amrutlal Runwal v. ITO {47 taxmann.com 293 (Pune)} Presumption u/s 292C and132 (4A) applies only to the Searched person. a) Bimal Kumar Damani v. CIT 261 ITR 635 (Cal-HC) Heavy burden is on revenue to prove that seized documents found at premise of searched person belong to other person a) Krishna Textiles v CIT {310 ITR 227 (Guj-HC) b) Kishinchand Chellaram v. CIT (125 ITR 713 (SC) 9. Per contra, the ld. Departmental Representative (DR) for the revenue relied upon the orders of the AO and the findings in the search and seizure at Nish Developers, the pen drive found and the statement of employees of Nish Developers.
Referring to the above, the DR for the revenue submitted that the above findings in the search and the pen drive and the statement make it absolutely clear that assessee has engaged into unaccounted on money transaction, hence, he pleaded that the order of the AO should be sustained. M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar.
Upon careful consideration we find that addition in the hands of the assessee is based upon search & seizure operation at the premises of Nish Developers Private Limited. The source is a pen drive entry recovered from an employee of the said developer.
The said pen drive purported to have an entry that cash against sale of flat was received from the assessee who is having's office at Kalbadevi. After detailed submission ld. CIT(A) has found that actually the wife of the assessee had booked a flat in the property of the said developer. That the said booking was done by making cheque payments. That the booking was cancelled and the amount of booking was duly refunded by the developer to the wife of the assessee. Ld. CIT(A) has found that this shows that the entry, that on money was paid for sale of flat to the assessee is not at all correct and is a result of a mistaken identity. He found that the said entries for on money cash payments are all dated after the cancellation of booking by the wife of the assessee and refund of money to her by the developer. Hence, he was of the opinion that there is no reason why after the cancellation of booking anybody would pay on money cash amounts. Learned CIT(A) has also noted that AO has not disputed the details about the booking of flat by the wife of the assessee, the cancellation thereof and the refund of booking amount to her M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar. by the developer. Learned CIT(A) also noted that the assessee's address is also not the same as mentioned in the said pen drive.
We find that the above reasoning of the ld. CIT(A) in deleting the addition in the hands of the assessee are cogent. When no material has been found that assessee has made any booking for the flat, a mere entry in a pen drive of a third party cannot ipso facto fasten the liability of on money transaction upon the assessee without further corroborative material brought on record. As a matter of fact as noted by the learned CIT(A) the other materials further support the view that the addition in the hands of the assessee is not sustainable in as much as there was a booking of flat by the assessee’s wife with the same developer which was duly cancelled and booking was refunded prior to the entry of on money cash transaction. Further the case laws relied upon by the learned counsel of the assessee as referred above are germane and support the case of the assessee
The ITAT in following case on addition, based upon same search on similar material has found the addition unsustainable.
Jayesh kewalchand dated 31/7/2019.
DCIT v. Manoj and Desai I.T No. (6301/MUM/2018) dated 07/12/2020.
M 19 & C.O. No. 61 M 2020-M/s Sanjay V. Parmar.
Accordingly in the background of aforesaid discussion and predents, we do not find any infirmity in the order of ld. CIT(A) and hence we upheld the same.
In the result revenues appeal stands dismissed.
In the Cross objection the assessee is supporting the order of learned CIT(A), hence, cross objection is treated as infructuous.
In the result, revenues appeal is dismissed and assessee’s CO is treated as infructuous.
Order pronounced in open court on 30th March 2021.