SUBHASH SUSHILA LAKHOTIA TRUST,NEW DELHI vs. ITO(E), WARD- 2(2), NEW DELHI

This appeal filed by the Assessee is directed against the Order dated 03.05.2018 of the Ld. CIT(A), New Delhi relevant to assessment year 2006-07 on the following grounds: -

1. “That on facts and circumstances of the case, the order passed by the Ld.CIT(Appeals) is bad both in the eyes of law and on facts.

2. That the Ld.CIT(A) has erred in upholding the penalty of Rs. 8,12,701/-, imposed by the AO, invoking the provisions of sec. 271(1)(c) of I.T. Act, 1961.

3. That the Ld.CIT(A) has erred in upholding the penalty of Rs. 8,12,701/-, without looking into facts and circumstances of the case and by ignoring the relevant judicial pronouncements.

4. That the Ld. CIT(A) has erred in upholding the penalty order passed by the Ld. AO, in the absence of evidence of material evidence and on the basis of presumption only.

5. That the Ld.CIT(A) has erred in invoking the provisions of Explanation 5A to Sec. 271(1)(c) of the Act. 2 A.Y. 2006-07 Subhash Sushila Lakhotia Trust

6. That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.

7. That the Appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the Appeal.”

2. The brief facts of the case are that the assessee filed its return of income declaring NIL income on 09.09.2016. The case of the assessee was selected for scrutiny as search was conducted in the case of the assessee on 10.2.2012 and subsequently the assessment was completed u/s. 153A of the Income Tax Act, 1961 (in short “Act”) read with section 143(3) of the Act on 20.3.2014 at an income of Rs. 25,8,107/-. In the course of assessment proceedings, the AO noted that the assessee did not apply 85% of its receipts, therefore, balance receipt of Rs. 60,223/- was treated as income of the assessee. Further, a sum of Rs. 25,20,884/- was held income from undisclosed sources as during the course of search operation it was found that the assessee had invested a sum of Rs. 32,70,884/- for purchase of flat/space/land with M/s Indirapuram Habitat Centre (P) Ltd. and out of the above sum Rs. 7,50,000/- was paid through cheque (reflected in balance sheet) and balance amount of Rs. 25,20,884/- was paid in cash and the same was not reflected in the books of accounts. With reference to the assessment order dated 20.3.2014, the penalty proceedings u/s. 271(1)© of the Act was initiated in the course of assessment proceedings and accordingly show cause notice u/s. 271(1)© r.w.s. 274 of the Act dated 20.3.2014 was issued and served upon the assessee. Further notice dated 5.2.2016 was also issued to the assessee. In response, none attended 3 A.Y. 2006-07 Subhash Sushila Lakhotia Trust nor any reply was received in this regard. AO observed that it is evident that during the course of assessment proceedings the assessee has failed to demonstrate that it has not made cash payment of Rs. 25,20,884/- for purchase of flat/space/land to M/s Indirapuram Habitat Centre (P) Ltd. and the same was not earned by it from the undisclosed sources. Further, assessee failed to demonstrate that its intention was bona fide in claiming the exemption in respect of income of Rs. 60,223/- by which application of income short fell below 85% of gross receipts as required by provisions of section 11(1)(a) of the Act. Moreover, the Ld. CIT(A) has dismissed the appeal of the assessee and thereby accepted the viewpoint of the AO. AO further observed that as per Explanation 1, there is presumption that the amount added, or disallowed in computing the total income, shall be deemed to be the income in respect of which particulars have been concealed or inaccurate particulars have been filed. The onus is placed on the assessee to prove that there was no concealment or inaccurate filing of its particulars of income. He further observed that in this case the assessee has failed to discharge his burden of proof. Accordingly, the AO imposed the penalty of Rs. 8,12,701/- u/s. 271(1)© of the Act dated 31.3.2016 for furnishing inaccurate particulars of income and concealment of income.

3. Aggrieved with the penalty order, the assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order 03.5.2018 dismissed the Appeal of the Assessee.

4. At the time of hearing, Ld. Counsel of the Assessee, stated that the quantum addition on which the penalty has been imposed, has already been deleted by the ITAT in (AY 2006-07) vide Order dated 01.6.2018. In this behalf he filed the copy of the Tribunal’s Order dated ITA Nos. 4548/D/2018 4 A.Y. 2006-07 Subhash Sushila Lakhotia Trust 01.06.2018 in assessee’s own case and he requested that penalty in dispute may be deleted.

“9. We have heard both the parties and perused all the records. It is pertinent to note that in present case on 17.08.2011, a search and seizure action has undertaken in the case of AEZ group during this search it is alleged that the assessee invested an amount of Rs 25,20,884/-via cash in M/s Indrapurarn Habitat Center Pvt Ltd. Thereafter, a search action was also undertaken in the case of assessee on 10.02.2012. However, no evidence supporting the case of revenue vis- a-vis investment in cash in Indrapurarn Habitate Center was found. AO issued notice to the assessee asking the source of alleged investment. During the course of assessment proceedings, the assessee explained that assessee had not invested anything in the alleged property. However, the Assessing 5 A.Y. 2006-07 Subhash Sushila Lakhotia Trust Officer relied upon the confession of some I.E. Soomar and made the addition in the hands of the assessee. The said confession and the said Group search is already taken into account in co-investor’s case by this Tribunal. The Tribunal has allowed the appeal of the co-investor which is mentioned in the proceedings of the present assessee (Subhash Khattar Vs. ACIT A.Y. 2006-07 ITA No. 902/Del/2015 order dated 30/06/2016). The Hon’ble Tribunal held in para 8 as under:

“8. Considering the above submissions, we find that the Learned CIT(Appeals) has upheld the addition in question mainly on the basis of (i) the details written on the hard disc found during the course of search from the premises Aerens Group, wherein payment through cheque and cash have been mentioned against the name of assesee at Sr. No. 32; Shri I. E. Soomar appearing at Sr. No. 39 of the said hard disc had admitted the cash investment of Rs.6.64 crores being made in the said project and had paid the taxes on the same; (iii) the said hard disc cannot be relied upon in part as the assessee has admitted the payment through cheque but denied the cash payment shown therein etc. In 6 A.Y. 2006-07 Subhash Sushila Lakhotia Trust our view, a hue addition of Rs.3,21,00,000/- cannot be made in a casual manner without having corroborative evidence in support. It is a prevailing practice in the dealings of immovable properties that cash amount, if any, out of the agreed consideration is paid during the course of execution/registration of the sale deed and admittedly in the present case no sale deed or other mode of transfer has been effected. Merely because name of the assessee is appearing in the said hard disc and amongst other investors are investor Shri I. E. Soomar appearing in the said hard disc has admitted payment of cash amount, cannot be a basis for arriving at a definite conclusion, in absence of corroborative evidence in support, that the assessee had also paid the amount of Rs.3,21,00,000/- in cash. The Hon’ble Jurisdictional High Court of Delhi in the case of CIT Vs. Prem Prakash Nagpal (Supra) wherein Assessing Officer had made certain additions u/s 69 of the Act on the basis of the documents found during search at a place of third party which indicated that assesseee had purchased a plot by paying consideration in cash, it was 7 A.Y. 2006-07 Subhash Sushila Lakhotia Trust held by the Hon’ble High Court that the Assessing Officer could not prove by evidence that said docuemtns belonged to the assessee and that any on money transaction had taken place. The documents at the best only showed tentative/projected purchase consideration held the Hon’ble High Cout. Again, in the case of CIT Vs. Alpha Impact Pvt. Ltd (Supra), the Hon’ble Bombay High Court has been pleased to hold that addition to assessee’s income in respect of additional sales consideration received in sale of land merely on the basis of Email recovered during the course of search action at the premises of another person and there being no independent material available supporting such addition, was not justified. Besides, we also find substance in the contention of the Learned AR that assessment u/s153A of the act in absence of incriminating material found during the course of search at the premises of the assessee and in absence o abatement of assessment on the date of search, cannot be made in the present case as per the above cited decisions including the decision of Hon’ble Jurisdictional 8 A.Y. 2006-07 Subhash Sushila Lakhotia Trust

Delhi High Court in the case of CIT vs Kabul Chawla (Supra). Under the circumstances, we are of the view that the Assessing Officer was not justified in assuming jurisdiction u/s 153A and authorities below ere also not justified in making and sustaining the addition in question merely on the basis of a hard disc found during the course of search at the premises of Aerens Group without any corroborative evidence in support. We thus hold that the assessee/appellant succeeds on both the above issues, i.e. on validity of assumption of jurisdiction u/s153A and the addition in question. The grounds involving the above issues are accordingly allowed.

The issue contested herein is confirmed by the Delhi High Court vide order dated 25.07.2017. Thus, the issue raised in the present appeal is already covered in co-investors’ case.

6.1 Keeping in view of the facts and circumstances of the case, I find that the addition on which the penalty in dispute was levied, has already been deleted by the ITAT vide order dated 01.6.2018 in (AY 2006-07) in assessee’s own case as aforesaid, hence, the penalty in dispute will not survive. Accordingly, I cancel the orders of the ITA Nos. 4548/D/2018 9 A.Y. 2006-07 Subhash Sushila Lakhotia Trust authorities below and delete the penalty in dispute and allow the Appeal filed by the Assessee.