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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI L.P. SAHU
ORDER PER SHRI BHAVNESH SAINI, J.M.
This appeal by assessee has been directed against the order of Ld. CIT(Appeals)-XXXI, New Delhi dated 09.05.2014 for AY 2010-11.
Briefly the facts of the case are that search and seizure operation u/s 132(1) of the I.T. Act was conducted at residential premises as well as business premises of Sh. Rajesh Kumar Kanodia and his group concerns/companies/family members on 28.03.2011. Notice u/s 153C was issued to the assessee. The assessee filed return of income declaring income of Rs. 7,35,920/-.
During the course of survey operation u/s 133A of the I.T. Act at the business premises no. 10174, Gurudwara Road, Karol Bagh, New Delhi documents marked as annexure A-3 was found/impounded. On page no. 6 of annexure A-3, it is seen that Rs. 33 lakhs rent security received in cash during the year. The assessee was asked to furnish details of rent security amounting to Rs. 33 lakhs received in cash during the year. The assessee filed the reply, wherein it was submitted that the said document does not pertain to the undersigned rather it pertains to M/s Chak De Hospitality Private Limited which was the tenant in the said place. The details of rental income along with copy of the rent agreement in favour of the assessee prop. of Hotel Tripti has already been placed on record. All the transactions of Hotel Tripti with M/s Chak De Hospitality Private Limited have been duly shown in the regular books of account maintained by the assessee and duly offered to tax in the respective year. It was submitted that it is important to mention that the said captioned page was signed by Mr. Ravinder Singh who is the Director of M/s Chak De Hospitality Private Limited. Therefore, independent inquiry may be made directly from him. The AO, however, noted that explanation of the assessee is not convincing. As per document, it was seen that total rental amount per month is Rs. 5,25,000/-.
As per copy of the balance sheet of Tripti Hotel available as on 31.03.2010 on hard disc impounded no such security rent was reflected. Moreover, rent of Rs. 30 lakhs only was found to have been shown in the P&L Account for the entire financial year under appeal. This is indicative of the fact that rent decided was Rs. 5,25,000/- per month which comes to Rs. 63 lakhs for 12 months.
Out of this Rs. 63 lakhs, Rs. 30 lakhs for 12 months was received through cheque and the balance of Rs. 33 lakhs was received in cash as advance rent, which was not offered for taxation. The AO, accordingly, written a letter to M/s Chak De Hospitality Private Limited for verification. Statement of Sh. Ravinder Singh, who was looking after administrative work was recorded on 26.03.2013, wherein he has confirmed that he had taken premises from Tripti Hotel on rent during August 2008 to March 2011. As regarding rent security, he has stated that he had also paid a rent security of Rs. 21 lakhs and advance payment of Rs. 16,08,716/- to the assessee related to tenancy of this Hotel premises, which had not been returned back to them from Sh. Rajesh Kumar Kanodia. As regards page no. 6 of annexure A-3 impounded, he has stated that presently he was not able to explain this and will explain it later on. He was not involved in the financial matter, though his signature appeared on the document. The AO, accordingly, noted that M/s Chak De Hospitality Private Limited was tenant of the assessee and had paid rent as well as rent security in cash amounting to Rs. 33 lakhs which has not been disclosed by the assessee. On page no. 6, four months security rent shown at Rs. 21 lakhs from which it is clear that rent for 1 month was Rs. 5,25,000/- and not Rs. 2,50,000/- shown by the assessee. On the same page it has been mentioned that cash rent security shown at Rs. 33 lakhs. This clearly shows that the rent decided was Rs. 5,25,000/- per month which comes to Rs. 63 lakhs for 12 months. Out of this Rs. 63 lakhs, Rs. 30 lakhs for 12 months was received through cheque and the balance of Rs. 33 lakhs was received in cash as advance rent which was not offered for taxation. The AO, accordingly, noted assessee received Rs. 33 lakhs in cash as rent security and treated the same as undisclosed rental income of the assessee from the above property. The AO, accordingly, passed the assessment order u/s 153C of the Act dated 28.03.2013.
The assessee reiterated the submissions before Ld. CIT(A) and it was submitted that Sh. Ravinder Singh, Director of the tenant company did not deny that the document in question did not belong to him. Therefore, action of the AO in taking rent at Rs. 5.25 lacs per month instead of Rs. 2.5 lacs per month was without any basis. The assessee alternatively contended that 30% rebate u/s 24(a) of the Act may be allowed. The Ld.CIT(A) noted that the document was found in possession of the assessee and same has many hand written notings along with computer printout of the rent details of Hotel Tripti clearly indicate that the document belonged to the assessee. In the document the details of rent are noted which indicate that the document belonged to the assessee and not to the tenant. Since, assessee did not explain the same document, therefore, rent of Rs. 5.25 lacs was taken and the addition in principle was confirmed but deduction u/s 24(a) @ 30% was allowed thus, addition to the extent of Rs. 23,10,000/- was confirmed as against addition of Rs. 33 lakhs.
The assessee in the present appeal has challenged the initiation of the proceedings u/s 153C of the Act and claimed that same are not valid and bad in law, liable to be quashed. The assessee also challenged the addition of Rs. 23,10,000/- on account of undisclosed rent.
We have heard Ld. Representatives of both the parties and perused the material on record. Ld. Counsel for the assessee reiterated the submissions made before authorities below as well as referred to impound documents and statement of Sh. Ravinder Singh recorded by the AO and submitted that no evidence was found that assessee received Rs. 33 lakhs in cash as advance security rent. On the other hand, Ld. DR relied upon the orders of the authorities below.
It is not in dispute that no search was conducted in the case of the assessee. No document was found during the course of search to connect the assessee with the above addition. During survey operation u/s 133A of the Act at Karol Bagh, New Delhi the document A-3 was impounded which contained that Rs. 33 lakhs rent security received in cash during the year. Copy of the seized documents are filed at pages 24, 25 and 26 of the PB. On page 24 there is no indication of any alleged advance security rent. It is not relevant. On page 25 the details of months security rent and security rent have been mentioned along with rent and service tax for the period from 01.04.2009 to 31.03.2010 and 01.04.2010 to 28.02.2011. On page 26 the rent details of Hotel Tripti are mentioned for the period from 07.10.2010 to 7.12.2011. This document is not relevant as it was beyond the purview of the assessment year under appeal. Therefore, the only document left is the details of security rent filed at page 25 of the PB. The assessee explained that the said document did not belong to her rather it pertains to M/s Chak De Hospitality Private Limited which was the tenant at the said place. It is not clarified by the AO in the assessment order as to from whose exclusive possession the said document was found during the course of survey. The assessee filed details of rental income along with copy of the rent agreement and explained that the impounded paper is signed by Sh. Ravinder Singh who is the Director of M/s Chak De Hospitality Private Limited and independent inquiry could be made from him directly. The AO recorded statement of Shri Ravinder Singh on 26.03.2013. Copy of which is filed at page 55 of the PB in which he has admitted that he was looking after administrative work of M/s Chak De Hospitality Private Limited and good time hotels. He has explained that rent for the premises have been given at Rs. 2,50,000/- per month and also paid rent security of Rs. 21 lakhs and advance payment Rs. 16,08,716/- which is not returned to them. He has admitted that the seized papers belong to their company and signed by him, containing the transactions upto 20.03.2011. As regards the payment of cash security of Rs. 33 lakhs, he has explained that presently he was not able to explain it and will explain later on but subsequently no other statement was recorded. On the face of this statement, it is clear that Sh. Ravinder Singh, Director of the tenant company has admitted in his statement that impounded document belong to the tenant company. As regards the rent security mentioned in the impounded document, he has explained that presently he was not able to explain the same. On the face of the document on record in the light of the statement of Sh. Ravinder Singh, it is clear that the impounded document did not belong to the assessee and that rent paid per month by the tenant company was Rs. 2,50,000/- only. The impounded document did not contain signature and hand writing of the assessee. Sh. Ravinder Singh admitted that the impounded document belong to the tenant company, and bore his signature, therefore, onus was upon the tenant company to explain the impounded document. Ld. CIT(A) was not justified to hold impounded documents belong to the assessee. Sh. Ravinder Singh did not confirm if the tenant company has paid cash of Rs. 33 lakhs to the assessee as rent security or advance rent. The AO, even as per the impounded document mentioned in the assessment order that the impounded document shows Rs. 33 lakhs rent security received in cash during the year but the AO did not affirm that the alleged amount of Rs. 33 lakhs in cash have been received by the assessee. Even the tenant has not confirmed to have paid any cash of Rs. 33 lakhs to the assessee. Therefore, no credence could be given to the seized/impounded paper because it did not contain any specific thing against the assessee.
The seized document is not reliable as it was not supported by Sh.
Ravinder Singh in his statement, if any, cash of Rs. 33 lakhs have been paid to the assessee. Thus, there is no basis or material available on record to justify the addition of Rs. 33 lakhs in the hands of the assessee. The authorities below thus, were unjustified in making addition of Rs. 33 lakhs in the hands of the assessee as unexplained rental income received for the above property. We, accordingly, set aside the orders of the authorities below and delete the entire addition.
Ld. Counsel for the assessee also argued that initiation of the proceedings u/s 153C of the Act are illegal and bad in law because no incriminating material was found during the course of search.
However, no satisfaction note u/s 153C of the Act have been produced on record, therefore, such contention of the assessee cannot be examined in detail. We may also note that since additions on merit have already been deleted, therefore, this issue is left with academic discussion only. We, therefore, do not propose to adjudicate upon the same.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court.