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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI R. K. PANDA
O R D E R
PER R. K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 28.11.2016 of CIT(A)- 15, Delhi relating to assessment year 2007-08.
Facts of the case, in brief, are that the assessee is an individual and filed her return of income on 31.07.2007 declaring total income of Rs.1,98,951/- after claiming deduction under Chapter VIA of the I.T. Act, 1961. An information was received from Director of Income Tax (Inv.)-II, Mumbai vide letter No.DIT(Inv.)-II/Time Barring/2013-14 dated 27.03.2014 in respect of search operation conducted on the Hiranandani Group of Builders and Developers on 11.03.2014 that the assessee has purchased a flat bearing Flat No.1001 in Glendale Building and paid on money (cash) of Rs.10,95,000/- through Crescendo Associates, a concern of Hiranandani Group. Accordingly, the notice u/s 148 of the I.T. Act, 1961 was issued on 28.03.2014 with prior approval of the Joint Commissioner of Income Tax, Range-27, New Delhi vide her letter No.JCIT/Range-27/148/2013-14/609 dated 28.03.2014 which was duly served upon the assessee by Speed Post vide Ack.No. ED099387509IN for filing return of income for Asstt. Year 2007-08 within 30 days from the date of issue of the said notice in the prescribed form. In response to the said notice, no return was filed by the assessee. Subsequently, the Assessing Officer issued notice u/s 143(2) & 142(1) asking the assessee to explain the various details as stated therein. The assessee, in her submission, in response to query no.4 of the questionnaire, stated that the information of the cash paid of Rs.10,95,000/- is wrongly coated by the Department. The Assessing Officer, therefore, issued letter to the Director of Income Tax (Inv.)-II, Mumbai to provide copy of statement recorded on oath of the Director of Hiranandani Group and other persons and evidence found during the course of search against the persons/parties who had purchased flats from Hiranandani Group and paid on money especially in the case of Smt. Indu Jain (the assessee), wife of Ravinder Jain.
In response to the letter issued by the Assessing Officer, Dy. Director of Income Tax (Inv.), Unit-6(3) filed his reply vide his letter No.DDIT (Inv.)/unit- 6(3)/Hiranandani/2014-15 dated 11.03.2015. The relevant portion of the same which has been reproduced by the Assessing Officer reads as under :-
“During the course of search action in Hiranandani Group of cases, inter alia, a pen drive was seized wherein evidence of 'on money' payments by buyers/prospective buyers to the developer, in respect of properties bought by them in different projects of Hiranandani Group was found. The pen drive contained date- wise entries of the receipt of cash from various flat buyers mentioned against flat no./shop no. This information was correlated against the names of actual purchasers of the flats/shops. It is pertinent to mention here that name of buyers who have paid 'on money ' are not mentioned explicitly in the data contained in the pen drive. In order to correlate this data, name, PAN address of actual purchasers of the flat/shop nos. mentioned in pen drive were obtained from the Hiranandani Group and a consolidated excel sheet was prepared. The relevant part of the excel sheet has already been forwarded to you vide Annexure A-1 of letter No.DIT(Inv.)-II/Time barring/2013-14 dated 27-03-2014. As stated above, the incriminating evidence found in this case was a pen drive which contained a 'running cash ledger' of the cash receipt by the Hiranandani Group. All the fields and description of this ledger relevant to your assessee have already been forwarded to you vide letter No.DIT(Inv.)-II/Time Barring/2013-14/ dated 27-03-2014. This annexure A-1 of letter No. DIT (Inv.)-II/Time barring/2013-14 dated 27-03-2014 is therefore the incriminating evidence found in respect of your assessee. The fact of receipt of 'on money from buyers has been admitted by the employees and directors/partners of the concerns controlled by the group in their respective statements. These statements form part of the Appraisal Report of the Hiranandani Group. The fact that the group is accepting 'on money' cash from the flat purchasers was accepted by various levels of employees working in the group. However the final admission made by the promoters of the Hiranandani Group admitting the receipt of 'on money' is contained in the final statement of Shri Niranjan Hiranandani recorded u/s 132(4) of the Income Tax Act. 1961. The relevant portion of the statement dated 14-03-2014 is as under :- "Q.10: From the running statement of cash transaction pertaining to period from 1-04-2006 the ledger account of flat buyers has been extracted, and made part of-this statement as Annexure A-I, and it is being shown to you. As per this annexure the total ‘on money’ cash receipt (over and above the registered value of the flats) comes to Rs.475,60,19,990/- kindly go through it and confirm. Ans: I have gone through the statement and I confirm that the total ‘on money’ cash receipt (over and above the registered value of the flats) comes to Rs.475,60,19,900/-. This annexure A-1 referred to in the above question contains inter alia details of your assessee, as forwarded to you earlier in the form of excel sheet.”
On the basis of above information obtained from Investigation Wing of the Department, the Assessing Officer noted that the assessee has paid an amount of Rs.10,95,000/- as on money through Crescendo Associates, a concern of Hiranandani Group. The Assessing Officer again asked the assessee to explain the nature of such transaction to which the assessee repeated the same word that no cash of Rs.10,95,000/- has been paid by the assessee. However, the Assessing Officer did not accept the submission made by the assessee. He observed that the promoter and director of Hiranandani Group i.e. Shri Niranjan Hiranandani and Shri Surendra Hiranandani have also admitted in their statements recorded u/s 132(4) on oath in which they have stated that they will speak the truth and nothing but the truth and were aware of the fact that any false or untrue statement given by them shall make them liable to prosecution under the Indian Penal Code and under the Income Tax Act, 1961. They have also confirmed that the total ‘on money’ cash receipt (over and above the registered value of the flats) comes to Rs.475,60,19,000/- in which ‘on money’ paid by the assessee is also included. Rejecting the various explanations given by the assessee, the Assessing Officer made addition of Rs.10,95,000/- to the total income of the assessee as “unexplained income” u/s 68 of the I.T. Act.
Before the ld. CIT(A), the assessee made elaborate submission challenging the addition of Rs.10,95,000/- made by the Assessing Officer in the order passed u/s 147/148 on the basis of report of the Investigation Wing of the Department.
However, the ld. CIT(A) also upheld the addition made by the Assessing Officer by observing as under :-
“6. I have gone through the assessment order and also the submissions made during the course of appellate proceedings. It is an undisputed fact that the appellant booked the property in ‘Glendale’ Hiranandani Gardens, Powi in December 2007. Admittedly, the search was conducted as mentioned in the assessment order on 11.03.2014. The time gap in carrying out search operation according to me would not vitiate evidentiary value of the material unearthed during the course of search. As clarified by the Investigation Wing, a pen drive was seized during the course of search which contained the date wise information of on money received in cash against the properties booked by various investors/buyers. Even if no name was mentioned therein, the fact remains that the property mentioned therein, was as a matter of fact, booked by the appellant and the appellant has not disputed that. Considering that the incriminating evidence collected by the Investigation Wing in the form of pen drive clearly showed that on money of Rs.10,95,000/- was paid on 20.02.2007 and that the employees at various levels of Hiranandani Group, and also its promoter Sh. Niranjan Hiranandani admitted the receipt of cash from flat/shop buyers in respect of the properties booked in their statements recorded and the fact that the appellant did book the said property which was mentioned in the pen drive seized, the addition of Rs.10,95,000/- made by the A.O. is hereby confirmed.”
Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds :-
“1. That information of reassessment proceeding u/s 147-151 is void ab initio being contrary to the legal procedure prescribed by the Act.
2. That the addition made by the A.O. and confirmed by the CIT(A) is also illegal as no material whatsoever relied upon by the A.O. was ever confronted to the appellant and therefore the same cannot be treated as evidence against the appellant for making the impugned addition. The appellant craves to add, or amend the ground of appeals if required and necessary.”
The ld. counsel for the assessee, at the outset, challenged the validity of the reassessment proceedings. Referring to the following decisions, he submitted that the reassessment on the basis of information received from Investigation Wing of the Department and recording of reasons without independent application of mind by the Assessing Officer and without tangible material is invalid :-
(i) PCIT vs. RMG Polyvinyl (I) Ltd., 396 ITR 5. (ii) PCIT vs. Meenakshi Overseas (P.) Ltd., 395 ITR 677. (iii) Signature Hotels (P.) Ltd. vs. ITO, 338 ITR 51. (iv) CIT vs. Sfil Stock Broking Ltd., 325 ITR 285. (v) India Terminal Connector Systems Ltd. vs. DCIT, 52 SOT 13.
The ld. counsel for the assessee further submitted that the Joint Commissioner of Income Tax in a mechanical manner has given approval for issue of notice u/s 151(2) and there is no independent application of mind.
Therefore, such reassessment is invalid. For the above proposition, he relied on the following decisions :-
(i) United Electrical Co. (P.) Ltd. vs. CIT, 258 ITR 317. (ii) ITO vs. M/s Observer Investment Finance Pvt. Ltd., & 1186/Del/2009, order dated 24.02.2016. (iii) ITO vs. M/s Direct Sales (P) Ltd., ITA No.3545/Del/2010, order dated 25.02.2015.
He submitted that during the course of assessment proceedings, the assessee was not allowed to cross-examine the witnesses although the statements of those witnesses are the basis of the impugned addition. Thus, the principle of natural justice has been violated. Relying on the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CCE reported in 62 taxmann.com 3, he submitted that not allowing the assessee to cross-examine the witness by adjudicating authority though the statement of those witnesses were made on the basis of impugned addition, the serious flaw which makes order nullity inasmuch as it amounts to violation of principles of natural justice. Referring to various other decisions he submitted that no addition u/s 69 can be made in the case of the assessee on the basis of documents being found from the premises of third party where neither the name of the assessee was mentioned nor any document was found evidencing fact that the assessee had paid any cash as on money to the said party for purchase of any property/flat. Referring to the report of the Investigation Wing of the Department, which has been reproduced by the Assessing Officer in the body of the assessment order, ld. counsel for the assessee submitted that the name of the assessee nowhere appears in the said list.
So far as merit of the case is concerned, ld. counsel for the assessee referring to the decision of the Mumbai Bench of the Tribunal in the case of Anil Jaggi vs. ACIT reported in 89 taxmann.com 266 submitted that under identical circumstances the Tribunal has deleted the addition made by the Assessing Officer and upheld by the ld. CIT(A) on the basis of the same pen drive. He also referred to the following decisions where under identical circumstances such addition has been deleted by the Tribunal :-
(i) Shri Sachinkumar Surya vs. ITO, dated 25.07.2017. (ii) ITO vs. Shri Nikhil Vinod Aggarwal, ITA No.2574/Mum/2017 dated 13.10.2017.
He accordingly submitted that both legally as well as factually the addition made by the Assessing Officer and sustained by the ld. CIT(A) is not in accordance with law.
The ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the ld. CIT(A). He submitted that the promoters of Hiranandani Group i.e. Shri Niranjan Hiranandani and Shri Surendra Hirandani have admitted in their statements recorded u/s 132(4) that they have received on money on account of flats. The assessee has purchased the flat in Glendale Building and has paid an amount of Rs.10,95,000/- through Cresenco Associates, a concern of Hiranandani group. Therefore, addition made by the Assessing Officer and sustained by the ld. CIT(A) should be upheld.
I have considered the rival arguments made by both the sides and perused the orders of the authorities below. I have considered the various decisions cited before me. I find on the basis of report of the Investigation Wing of the Department that assessee has paid on money of Rs.10,95,000/- towards purchase of flat bearing Flat No.1001 in Glendale Building through Cresenco Associates, a concern of Hiranandani group, the Assessing Officer reopened the assessment u/s 148 and thereafter made addition of the said amount to the total income of the assessee which has been upheld by the ld. CIT(A). The basis of addition made by the Assessing Officer is the contents of a pen drive which contained date-wise entry of receiving cash on various flats mentioning flats/shop-wise number. Neither the name of the buyers nor the amount of cash over and above the registered value of the flats paid by individual buyers are mentioned in the data contained in the pen drive. I find identical issue had come up before the Mumbai Bench of the Tribunal in the case of Anil Jaggi (supra) where the Tribunal under identical circumstances has deleted the addition made by the Assessing Officer and sustained by the ld. CIT(A) by observing as under :-
“15. We shall now take up the case of the assessee on merits and deliberate on the validity of the addition of Rs. 2.23 crore made by the A.O on the ground that the assessee had made a payment of "on money" for purchase of flats from M/s Lakeview developers. We have perused the facts of the case and the material available on record on the basis of which the addition of Rs. 2.23 crore had been made in the hands of the assessee. We have further deliberated on the material placed on record and the contentions of the ld. A.R to drive home his contention that no payment of any "on money" was made by the assessee for purchase of flats from M/s Lakeview Developers. We find that the genesis of the conclusion of the A.O that the assessee had paid "on money" of Rs. 2.23 crore for purchase of property under consideration is based on the contents of the pen drive which was seized from the residence of an ex-employee of Hiranandani group. We have perused the print out of the pen drive (Page 42 of APB) and find ourselves to be in agreement with the view of the ld A.R that though against the heading "Amount of on money paid" the name, address and PAN No. of the assessee is mentioned alongwith the details of the property purchased by him, viz. Flat no.2501 in "Somerset" building from Lakeview Developers (a Hiranandani group concern), however, the same would not conclusively prove suppression of investment and payment of "on money" by the assessee for purchase of the property under consideration. We find that the information as emerges from the print out of the pen drive falls short of certain material facts, viz. date and mode of receipt of „on money‟, who had paid the money, to whom the money was paid, date of agreement and who had prepared the details, as a result whereof the adverse inferences as regards payment of "on money" by the assessee for purchase of the property under consideration remain uncorroborated. We further find that what was the source from where the information was received in the pen drive also remains a mystery till date. We find that Sh. Niranjan Hiranandani in the course of his cross- examination had clearly stated that neither he was aware of the person who had made the entry in the pen drive, nor had with him any evidence that the assessee had paid any cash towards purchase of flat. We have deliberated on the fact that Sh. Niranjan Hiranandani in his statement recorded on oath in the course of the Search & seizure proceedings had confirmed that the amounts aggregating to Rs. 475.60 crore recorded in the pen drive were the on-money received on sale of flats, which was offered as additional income under Sec. 132(4) and thereafter offered as such for tax in the petition filed before the Settlement commission. We are of the considered view that there is substantial force in the contention of the ld. A.R that mere admission of the amounts recorded in the pen drive as the additional income by Sh. Niranjan Hiranandani, falling short of any such material which would inextricably evidence payment of "on money" by the assessee would not lead to drawing of adverse inferences as regards the investment made by the assessee for purchase of the property under consideration. We rather hold a strong conviction that the very fact that the consideration paid by the assessee for purchase of the property under consideration when pitted against the „market value‟ fixed by the stamp valuation authority is found to be substantially high, further fortifies the veracity of the claim of the assessee that his investment made towards purchase of the property under consideration was well in order. We are of the considered view that though the material acted upon by the department for drawing of adverse inferences as regards payment of "on money" by the assessee formed a strong basis for doubting the investment made by the assessee for purchase of the property under consideration, but the same falling short of clinching material which would have irrefutably evidenced the said fact, thus, does not inspire much of confidence as regards the way they have been construed by the lower authorities for drawing of adverse inferences in the hands of the assessee. We thus are of a strong conviction that as the material relied upon by the lower authorities does not corroborate the adverse inferences drawn as regards the investment made by the assessee, therefore, the same cannot conclusively form a basis for concluding that the assessee had made payment of "on money" for purchase of the property under consideration. We thus in the backdrop of our aforesaid observations are of the considered view that the adverse inferences drawn by the A.O as regards payment of "on money" of Rs. 2.23 crore by the assessee for purchase of Flat No. 2501 from M/s Lakeview Developers are based on of premature observations of the A.O, which in the absence of any clinching evidence cannot be sustained. We thus are unable to subscribe to the view of the lower authorities and set aside the order of the CIT(A) sustaining the addition of Rs. 2.23 crores in the hands of the assessee.”
I further find in the instant case the Assessing Officer has not given any opportunity to the assessee to cross-examine the witnesses on the basis of whose statements addition has been made. I find under identical circumstances the Mumbai Bench of the Tribunal in the case of Shri Nikhil Vinod Aggarwal (supra) has deleted the addition wherein on the basis of the same pen drive the addition was made by the Assessing Officer which was deleted by the ld. CIT(A) and on appeal by the Revenue, the Tribunal dismissed the ground raised by the Revenue by observing as under :-
“11. Even otherwise also, the assessee has a strong case on merit as well. As evident from the facts on record, the Assessing Officer has made the addition on account of alleged on-money paid by the assessee towards purchase of flat relying upon the information obtained from the search operation carried out in the case of Hiranandani Group. Further, he has relied upon the statements recorded from the directors and promoters of Hiranandani Group in course of search. However, though, the assessee in the course of assessment proceedings, has repeatedly requested the Assessing Officer to provide the information / adverse material in his possession, neither such adverse material was provided to the assessee nor confronted to him. Further, the statement recorded from third parties which were relied upon by the Assessing Officer for making the addition were neither confronted to the assessee nor the assessee was Shri Nikhil Vinod Aggarwal permitted to cross-examine the concerned persons. Neither in the assessment order the Assessing Officer has discussed in detail the nature of information / material available with him directly implicating the assessee for paying on-money for purchase of flat nor the learned Departmental Representative has brought on record any such material as may be available with the Assessing Officer. It is evident from the assessment order, the Assessing Officer without disclosing adverse material / information available with him to the assessee during the assessment proceedings, has simply called upon the assessee to furnish the name of persons who according to the Assessing Officer negotiated for purchase of flat between the assessee and the builder. Unless, the assessee is confronted with the adverse material in possession of the Assessing Officer, he cannot be expected to rebut them considering the fact that the from very beginning the assessee has consistently stated that he has not paid any on-money over and above the declared sale consideration. The learned Commissioner (Appeals) while deciding the issue has clearly brought out the aforesaid factual aspect in his order. We agree with the learned Commissioner (Appeals) that once the assessee has furnished the details of transactions relating to purchase of flat and has stated that he has not paid on-money over and above the declared sale consideration, burden shifts to the Assessing Officer to falsify Shri Nikhil Vinod Aggarwal assessee's claim by bringing cogent evidence on record. Merely, referring to certain adverse material and statement of third parties, but, without confronting them to the assessee the Assessing Officer cannot make the addition. In view of the aforesaid, we do not find any infirmity in the order of the learned Commissioner (Appeals) in deleting the addition. Accordingly, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground raised by the Revenue.”
The various other decisions relied on by the ld. counsel for the assessee in the Paper Book also supports the case of the assessee. In view of the above discussion, I hold that the ld. CIT(A) is not justified in sustaining the addition made by the Assessing Officer. I, therefore, set-aside the order of the ld. CIT(A) and direct to the Assessing Officer to delete the addition. The grounds raised by the assessee are accordingly allowed.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on this 17th September, 2018.