DCIT, CC-I, CHANDIGARH vs. M/S MANOHAR INFRASTRUCTURE & CONSTRUCTION PVT. LTD., CHANDIGARH

The Ld. AR advanced arguments and referred to various documents to support the submissions. The Ld. CIT-DR also advanced arguments and supported the orders of lower authorities. Having heard rival submissions and upon perusal of case records including 3 documents as placed in the paper-book, our adjudication would be as under. Assessment Proceedings 3.1 The assessee group was subjected to search u/s 132(1) on 08-09- 2011 which has led to impugned assessment on the assessee. During the course of assessment proceedings, notice u/s 153A was issued to the assessee on 10-01-2013. In response, the assessee filed return of income declaring income of Rs.240.43 Lacs. 3.2 During search, a document was seized from the residence of director Shri Taraninder Singh which was marked as Annexure A-1. The Page No.3 of this document (extracted in the impugned order) inter-alia, tabulated name of the dealer, name of the seller, area, total value, registry value commission rate and commission payable. It transpired that the said document contained details of certain land purchased by the assessee group in Mullanpur area and in Village Dhanoram, Mastgarh etc. through a broker by the name Sekhon. As per this document, approx. 3859.46 Marla of land was acquired for Rs.33.48 Crores whereas the same was registered for Rs.27.77 Crores. Further, commission of Rs.48.43 Lacs was payable to Sekhon @1.5%. On these facts, Ld. AO concluded that there was difference in actual purchase value and registered value to the extent of Rs.5.70 Crores which was allegedly paid by the assessee group to various sellers during AYs 2011-12 and 2012-13. 3.3 The assessee denied having paid any such amount in cash and stated that the said document merely contained registry amount and 4 market value and the document was only an estimate given by Sekhon and company. The assessee denied having made commission payment of Rs.48.43 Lacs. The assessee also drew attention to aggregate disclosure made by it for Rs.6.50 Crores u/s 132(4) for AYs 2011-12 & 2012-13 to cover up the loose papers, cash, undisclosed income etc. 3.4 However, Ld. AO rejected assessee’s submissions on the ground that summons u/s 131 were issued to the sellers and their statement was recorded wherein eight sellers admitted to have received on-money over and above registered value. The Ld. AO also invoked the presumption of Sec.292C / 132(4) and proceeded to make the impugned addition in the hands of the assessee. 3.5 However, to negate the allegations of Ld. AO, the assessee submitted the affidavits of the sellers to support his submissions and pleaded that the said document was merely a dumb document which could not be relied upon to make any addition in the hands of the assessee. The Ld. AO still rejected the aforesaid submissions also. The cash component in land deals pertaining to this year was computed at Rs.243.93 Lacs which was added to the income of the assessee. The unaccounted commission was computed at Rs.17.04 Lacs which was also added to the income of the assessee. 3.6 The Ld. AO further alleged that such cash component as well as commission was paid on all the other regular transactions also as done by the assessee during this year. The percentage of money paid over and above registered value varied from 0% to 118%, average being 12.8%. The Ld. AO concluded that the books results were not reliable 5 and accordingly, the books were rejected. Finally, a value of 5% was applied to cover up unaccounted payments on other regular transactions which resulted into another addition of Rs.52.65 Lacs in the hands of the assessee. Similar, extrapolation was done for commission payment at the rate of 0.75% on all the other transactions which resulted into another addition of Rs.7.89 Lacs in the hands of the assessee. However, both these additions have already been deleted by Ld. CIT(A) and the same is not the subject matter of present appeal before us. 3.7 Another addition was made by Ld. AO for Rs.59.14 Lacs on account of alleged commission paid by the assessee on sale of plots. The same was on the basis of document Annexure A-5 Page Nos.17-19 found during search which contained details of bookings done by property dealer Shubh Real Estate of Manimajra. The document contained customer-wise details for booking done by them for Palm Spring Project from 31-01-2011 to 31-03-2011. The total commission payable to them was quantified at Rs.123.84 Lacs. 50% of commission being Rs.61.92 Lacs was to be released at the time of booking. As per this document, Rs.10 Lacs was paid in cash whereas Rs.26.35 Lacs was adjusted in the form of plots and the amount of Rs.25.57 Lacs was pending. The remaining commission was to be paid at the time of second installment. An enquiry u/s 131 was conducted from Shri Rakesh Kataria (prop. Shubh Real Estate) and his statement was recorded on 09-09-2011 which is extracted in the assessment order. He confirmed having received Rs.10 Lacs in cash. The assessee received 6 total advances from various customers during the year amounting to Rs.52.98 Crores. The assessee had been paying commission @1% to 5% of the value of plots booked. It was possible that some bookings were done directly by the assessee without paying any commission. Accordingly, Ld. AO estimated commission payment of 1.5% on advances of Rs.52.98 Crores which came to be Rs.79.47 Lacs. The assessee reflected commission of Rs.20.33 Lacs in regular books and accordingly, the balance amount of Rs.59.14 Lacs was added to the income of the assessee as alleged commission payment on such sale transactions. 3.8 The additions so made by Ld. AO aggregated to Rs.380.66 Lacs. The assessee had voluntarily surrendered amount of Rs.240.51 Lacs, the benefit of which was granted to the assessee against the impugned additions so made by Ld. AO. Aggrieved, the assessee assailed the action of Ld. AO in further appeal.

Appellate Proceedings 4.1 The assessee assailed the impugned additions by way of elaborate written submissions which have already been extracted at para-4 of the impugned order. The assessee assailed the rejection of books of accounts and also pleaded that the persons whose statements were recorded by AO were not offered to be cross-examined. The impugned additions were made on the basis of dumb documents which merely contained estimate of calculation made by the broker Shri Sekhon. The assessee already made disclosure of Rs.240.51 Lacs in AY 2011-12 and disclosure of Rs.409.48 Lacs in AY 2012-13 to make- 7 up for the discrepancies. There were arithmetical errors and the difference was Rs.381.23 Lacs instead of Rs.570.97 Lacs as computed by Ld. AO. The assessee also pointed out discrepancies in statements recorded by Ld. AO without affording cross-examination. It was contended that the evidences collected by the department could not be used against the assessee without affording the opportunity of cross- examination. The suspicion however strong could not take place the required proof as per the decision of Hon’ble Apex Court in the case of Uma Charan Shaw & Bros. Co. vs. CIT (37 ITR 271) as well as the decision in Dhakeshwari Cotton Mills Ltd. (26 ITR 775) wherein it was held that AO is not entitled to make a pure guess and make any assessment without reference to any evidence / material. Further, corroborative evidence is essential to support the evidences. While making a disclosure of Rs.240.51 Lacs for this year, the assessee already took into consideration the contents of seized annexure. The assessee also assailed other additions made by Ld. AO in the assessment order. 4.2 The Ld. CIT(A), after due consideration of assessee’ submissions, upheld the rejection of books of accounts on the ground that seized document reflected different amount paid to acquire the land. The assessee also surrendered income on the basis of this document which was shown in the return of income filed u/s 153A. 4.3 On the issue of alleged unaccounted payments by the assessee, Ld. CIT(A) observed that the document was found from the residence of director of the assessee company and it contained details of land 8 purchased by the assessee-group. The claim that it was a dumb document was not acceptable. Accordingly, the addition of Rs.243.93 Lacs and commission payment of Rs.17.04 Lacs was confirmed. However, the addition of Rs.52.65 Lacs and Rs.7.89 Lacs as made by Ld. AO by extrapolation was deleted on the ground that there was no direct document / evidence to support the same. The addition was merely on presumption and suspicion. 4.4 The addition of Rs.59.14 Lacs allegedly paid to M/s Shubh Real Estate as commission payment was confirmed in view of the admission of Shri Rakesh Kataria. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 5. From the facts, it emerges that the assessee group was subjected to search u/s 132(1) on 08-09-2011 which has led to impugned assessment on the assessee. The first addition of Rs.243.93 Lacs is based on a document marked as Annexure A-1. Upon perusal of the same, it could be seen that it is a loose paper and a computer generated sheet. The same has been found from the premises of the director of the assessee-entity and not from the premises of the assessee-company which has a separate legal entity. The said loose paper is undated, unsigned and the author of the same is unknown. It donot mention any particular date or year and it is without signatures of any of the party. The same merely contain computations of commission payable to Sekhon. However, no independent enquiry is shown to have been made from Sekhon. As per assessee’s submission, the said paper 9 is merely projections and rough calculations of commission payable. There is no direct evidence to establish that there was actual cash flow of sale consideration between the assessee and the sellers of the land. No supporting document like agreement to sell, cash receipts, dates of payment has been found during search on assessee. The said document does not prove the fact of actual cash payment by the assessee to the sellers over and above the registered amount. Therefore, this document is liable to be held as mere dumb document having no evidentiary value without corroboration thereof.

It could be seen that the whole basis of addition is enquiry made by Ld. AO by issuing notices to various sellers u/s 133(6). From assessee’s reply, it is quite evident that against these notices, 29 sellers replied along with supporting documents like sale deeds, notarized affidavits and bank statements and none of them have admitted to receive any cash component over and above the registered value. All these papers have been kept by the assessee in the paper-book. These 29 parties include 3 parties whose names found mentioned in the seized loose papers and they have denied having received any cash component. Further, Ld. AO has recorded statement of 16 parties on oath and none of them have admitted to have received cash from the assessee. The assessee also furnished list of 60 purchase deeds which were executed during AYs 2011-12 and 2012-13 which duly matches with the transactions recorded in audited books of the assessee. All these facts further support the case of the assessee that the content of the loose paper substantially remained unsubstantiated.

Finally, considering the facts and circumstances of the case, we would hold that the addition of Rs.243.93 Lacs as confirmed by Ld. CIT(A) could not be sustained in law. The impugned addition stands deleted. Consequently, the impugned addition of alleged commission payment of Rs.17.04 Lacs which is based on same very documents also stands deleted. The assessee succeeds in its corresponding grounds of appeal

Facts being pari-materia the same as in AY 2011-12, our findings and adjudication for AY 2011-12 would mutatis-mutandis apply to this year also. Accordingly, the addition of Rs.137.29 Lacs & Rs.31.59 Lacs stand deleted. The consequential addition of Rs.451.57 Lacs & Rs.68.44 Lacs would not survive. The addition of Rs.153.82 Lacs would 13 not have any impact on returned income considering the fact that the surrender as made by the assessee far exceeds this amount. Even otherwise, the impugned addition is not supported by substantial evidence on record. In other words, Ld. AO is directed to accept the returned income of Rs.404.43 Lacs as filed by the assessee. The assessee’s appeal stands partly allowed. The revenue’s appeal stands dismissed. Conclusion 14.