ASST CIT 5(3)(2), MUMBAI vs. WORLD TRADE PARK LTD, JAIPUR

All the appeals are heard together and all the facts in these appeals are similar, for the sake of convenience, it is disposed off by this common order. To dispose off these appeals, we have taken facts from AY 2010-11 bearing ITA No. 1665/Mum/17. 3. The brief facts of the case are, the assessee filed its return of income for the assessment year 2010–11 on 15.10.2010 declaring total income at Rs. Nil. The original order under section 143(3) was passed on 13.03.2013 and the total income was assessed at Rs. 8,40,510/-. Subsequently, the assessment was reopened and notice under section 148 dated 14.03.2014 was issued and served on the assessee. In response AR of the assessee filed a letter dated 20.03.2014, to treat the original written filed by the assessee as a written filed in response to notice under section 148. Further, AR of the assessee, requested the AO to supply the reasons for the opening of assessment and the same was given to the assessee. For the sake of clarity, it is reproduced below:- "In the above mentioned case return of income has been e-filed on 15.10.2010 declaring total income at Rs. NIL-. Scrutiny assessment u/s 143(3) has been completed on 13.03.2013 at a total income of Rs. 8,40,510/-.

During reassessment proceeding, the AR of the assessee submitted cash flow statement is under: Amount (In Rs.) Opening cash balance as per cash 43,86,068 book Cash withdrawals from various 82,54,762 bank accounts as per bank statements Booking advance received from 1,84,50,000 parties Less:- utilization for daily expenses -30,05,525 Less:- Redeposit in various bank -2,80,75,000 accounts Cash Balance at the end of year 10,305

Further, he submitted a list of names and addresses of 34 persons who had booked the property in the company. Accordingly, AO issued notice under section 133(6) of the Act to the above said parties to confirm the above transactions. In most of the cases, notices were returned unserved by the postal authorities. Further, assessing officer observed that few of the parties denied about transactions and he has listed the parties who has denied i.e., Mr Damodar Goyal, Shankar Lal Agarwal and Vinod Kumar. Further, one of the party who had received the show cause notice had confirmed that he has settled the total purchase consideration by way of cheque only.

Subsequently, assessee filed a detailed submission opposing the reassessment proceedings as bad in law and further submitted that the cash deposit of Rs. 2,80,75,000/- includes opening cash in hand of Rs. 43,86,068/-, cash withdrawal of Rs. 82,54,762/- and booking advance of Rs. 1,84,50,000/- received during the year. Ld AR of the assessee by relying on the decision of Hon’ble Supreme Court in the case of Chug Mal Rajpal V. P Chaliha 79 ITR 603, wherein it was held that reassessment is not meant for enquiry and requested the reassessment proceedings be dropped.

After considering the submissions of the assessee and by relying in the case of Roshan D Hatti (107 ITR 938 (SC)), Kale Khan Mohammed Hanif (50 ITR 1 (SC)), dismissed the contention of the assessee and confirmed the addition to the extent of the cash not explained by the assessee i.e., to the extent of the booking amount received from the customers of the assessee under section 68 of the act.

Aggrieved with the above order, assessee preferred an appeal before Ld. CIT(A) and filed detailed submissions. After considering the submissions of the assessee, Ld CIT(A) allowed the appeal of the assessee with the following findings:

2 I have carefully considered the facts of the case and submissions of the Id.AR. I have also gone through the decisions relied on by the AO and the Id.AR. As seen from the facts of the case, there was a survey u/s 133A on 17/10/2013 in the office premises of the appellant company and Sri Anup Bartaria, the Managing Director of the appellant company has clearly admitted before the survey party in the statement recorded u/s 133A, that he could not explain cash deposits to the extent of 11.26 cr. out of total cash deposits of Rs.41.02 cr. deposited in the banks over a period of time starting from F.Y.2005-06 to F.Y.2013- 14 even though he has clearly mentioned in that statement that the some cash has been deposited out of cash received against booking of shops and offices and some of the cash deposits are also out of earlier cash withdrawals from different banks of the assessee company (refer to answer to question No. 13 of his statement dated 17/10/2013). The same fact has been re-confirmed in the subsequent statement recorded u/s 131 on 12/11/2013 from him. Even though, I do not agree with the Id.AR that the statement recorded u/s 133A has no evidentiary value since any incriminating material evidence gathered during the course of survey can be used against the assessee, it is seen from the records that the AO has not laid his hand on any such independent incriminating evidence except emphasizing on the statement given by the MD disclosing cash deposits to the extent of Rs.11.26 cr. as unexplained. Therefore, excessive reliance given only on the disclosure given in the statement by the MD is not proper without having any independent evidence in the possession of the AO, especially when the assessee could explain the cash deposits admitted during the same survey with material evidence during the course of assessment proceedings with confirmations, financial statements and reconciliation of cash deposit with the books.

No income escaping assessment can be made out on the reasons recorded for reopening the assessment. Hence the assessment is completed u/s 147 assessing the total income on the returned income of Rs. 83, 930......"

1 In view of the above discussion, I am convinced that if the appellant can explain the facts of his statement corroborating with the material evidence in the form of confirmation letters and entries in the books from the parties who have booked the flats and paid advances and also the evidence with regard to cash withdrawals from other banks as source for re- depositing in conformity with the statement given during the course of survey no further addition is called for. Since, no revised return of income was also filed by disclosing the so-called undisclosed income and no advance tax was paid no liability arises from the assessee. I therefore, delete the addition made for A.Y.2010-11, 2011-12 and 2012-13 amounting to Rs.11.26 cr. The ground is allowed.

Aggrieved with the above order, revenue is in appeal before us raising following grounds of appeal:

Before us, Ld DR submitted that there was a survey conducted on 17.10.2013 and subsequent to findings in the survey operations, the assessment for assessment years 2010-11, 2011-12 and 2012-13 were reopened. He brought to notice findings of assessing officer and Ld CIT(A). He submitted that contrary to the findings of the Ld CIT(A), he submitted that there was no response from the persons to whom assessing officer issued show cause notice under section 133. Further he brought to our notice the findings of assessing officer in the assessment year 2011-12, 2012-13 in particular para 4(e) in which assessing officer has clearly brought on record that assessee has no evidence in support of such huge cash deposit. He submitted that Ld CIT(A) erred in deleting the addition made on account of unexplained cash deposits as the assessee failed to discharge the onus of providing the source of money found to have received by it.

On the other hand, Ld AR submitted before us that the survey was conducted on 17.10.2013 and the assessing officer reopened the assessment for six years however based on the admission by one of the director that he could not substantiate certain amount of cash deposits, however the director had clearly indicated that the source of such cash deposits at the time of the survey itself. He further submitted that assessing officer has accepted the cash deposits made in other years but made addition only in the three assessment years i.e., assessment years 2010-11, 2011-12 and 2012-13 by solely relying on statement given by the director without proper evidence on record. The base year being assessment year 2011-12, with regard to findings of assessing officer in his order, he submitted that the statement under section 133(1) taken from the director is not legal and he brought to our notice that assessee has taken information by seeking information under RTI Act and he brought to our notice pages 631 to 636 of the paper book and submitted that there was no statement taken on 24.10.2013, but in fact statement was recorded on 12.11.2013, for which there is no statutory summons issued. He brought to our notice page 640 of the paper book in which both was administered in reference to the survey action under section 133A(1) of the Act on 17.10.2013. Further he brought to our notice para 2.1 of the assessment order in which the assessing officer quoted with reference to the statement recorded on 02.11.2013 in the office of the assessing officer under section 131 of the Act, however he submitted that no such enquiry was conducted by the Department.

Further, he brought to our notice, assessee has submitted all the confirmation letters before the assessing officer and in the identical reasons and situation, assessing officer has not made any adjustment in assessment year 2007-08 to AY 2009-10. He submitted that in the above assessment years, assessments were reopened with similar reasons and all the assessments were accepted without any adverse remarks, by a reference to the same statement of the directors. Therefore, the assessing officer cannot restrict the additions only relating to this assessment year.

Further, he brought to our notice CBDT circulars to submit that the board has given clear instruction that assessing officer cannot merely obtain statements and additions can be based only on evidence collected. He brought to our notice instruction no. 286/98/2013 and instruction no. 286/2/2003. He submitted that the assessing officer has made addition solely on the basis of statement and therefore it is not sustainable in this regard, he relied on the following case law:

Further he submitted that before making addition none of the books are rejected and in this regard, he relied on the decision of Hon’ble Supreme Court in the case of Sargam Cinema Vrs. CIT (2010) 328 ITR 513(SC).

With regard to assessment year 2012-13, he submitted that the addition was made similar to the facts in the assessment year 2011-12. 16. With regard to AY 2010-11, he requested the bench to remit this issue back to CIT(A) to adjudicate afresh, since assessee has given relevant information and submission before CIT(A) that additions were not made merely relying on the admission/statement of the Director but based on the information found during Survey. He submitted that the relevant information was filed before CIT(A) on this aspect and relevant information was already submitted before him.

Considering the rival submissions and material placed on record, we notice that the AO has made the addition based on the statement of the Director. Further, we notice that AO has completed the assessment for AY 2007-08 to AY 2009-10 after verification and found that the deposits were properly explained even though similar deposits were made by assessee and the reasons for reopening the assessment in the assessment years under consideration are same. AO cannot follow two yard sticks.

Even before us, Ld. DR has not brought on record to substantiate the difference between the deposits made in AY 2007-08 to 2009-10 are different to the deposits made in AY 2010-11 & 2011-12. The AO merely relies on the fact that the depositors has not responded to the notices issued by him. If no depositors responded, then how the AO deletes the addition in the earlier AY’s.

The Ld. AR submitted certain issues on statement taken by AO and certain rules were not adhered to. On careful consideration of CIT(A)’s order, we find that Ld. CIT(A) has considered the all aspects and gave reasonable findings and he found that AO has only relied on the statement of the director and has not brought any cogent material to make addition. This is against the procedure for making addition given by the CBDT. Therefore, we are in agreement with the findings of Ld. CIT(A) and accordingly, the ground raised by the revenue is dismissed.

The fact in AY 2011-12 are similar to the AY 2010-11 and findings in above plea are applicable and accordingly, grounds raised by revenue in AY 2011-12 is dismissed.

With regard to AY 2012-13, as submitted by Ld. AR that the facts in this AY are different and Ld. CIT(A) has not adjudicated the issue in that perspective, accordingly this issue is remitted back to the file of Ld. CIT(A) to consider the submission of assessee and material placed on record and adjudicate the issue afresh. Accordingly, grounds raised in AY 2012-13 are allowed for statistical purposes.

In the net result, the appeals filed by the revenue for AY 2010-11 and 2011-12 are dismissed and appeal for AY 2012-13 is allowed for statistical purposes.