NRS DEVELOPERS,MUMBAI vs. DCIT CC 6(4), MUMBAI

We have heard both the counsel and perused the records. Upon careful consideration, we find that section 153C mandates that upon search conducted upon a person, if certain incriminating material relating to third person is found, the Assessing Officer of the third person is entitled to issue notice to him u/s. 153C upon receipt of information and satisfaction that incriminating material relating to assessee has been found in that search. Now materials found in that search are statement u/s. 132(4) by Mr. Vishal Doshi, VP (Sales and Marketing) head of the group that he has received on money regarding project named “92-Bellleveue”, which was assessee’s project. Furthermore, lose sheets pertaining to cash transaction of the assessee with assessee group was found. We find that although no mention is there regarding nature of lose sheets pertaining to cash transaction, statement of Shr Vishal Doshi does constitute material for issue of notice to the assessee. Hence in our considered opinion learned CIT(A) is correct in upholding that jurisdiction of the Assessing Officer to issue notice u/s. 153C. Accordingly,

One common issue raised in these appeals pertain to merits of confirmation of learned CIT(A) of the amounts as unaccounted business income.

As referred in the search mentioned in above ground, Shri Vishal Doshi, VP (Marketing and Sales) of M/s. Rajesh Lifespaces Group admitted flat wise details of receipt of on money for flats being developed by the assessee in the project named “92 Bellevue”. Cumulative amount of on money is said to be received is Rs. 15,35,00,000/- out of which Rs. 12,95,00,000/- was claimed to be received during A.Y. 2015-16 and Rs. 2,40,00,000/- were received during A.Y. 2016-17. This statement of Vishal Doshi was confronted to Mr. Rajesh Patel, Group Head of M/s. Rajesh Lifespaces Group and he confirmed the same. Further during the course of search at the residence of Mr. Amit Sheth, CFO of the group, certain lose papers were found and seized which had entries of cash transaction of the assessee with other entities of M/s. Rajesh Lifespaces Group amounting to Rs. 1,00,02,500/-. The Assessing Officer had issued show-cause notice in both aspects. The Assessing Officer in the assessment had finally made addition for the on money receipt for sum of Rs. 12,95,00,000/- and Rs. 2,40,00,000/- for A.Y. 2016-17. The Assessing Officer had rejected the retraction of the statement of these persons on the ground that retractions are not supported by any material evidence. The assessee’s statement that no entry of on money in the books was noted was also rejected. The assessee has also given affidavits from flat buyers who have stated that they have not paid any on money. These were also rejected.

We have heard both the counsel and perused the records. Learned counsel of the assessee submitted that statement of Vishal Doshi which is the basis of addition of on money is totally unreliable. He submitted that Shri Vishal Doshi is not an employee of the assessee. Furthermore, he submitted that Shri Vishal Doshi has duly retracted his admission. Learned counsel submitted that the authorities below have dismissed the retraction on the ground that there is no supporting for retraction. In this regard, learned counsel submitted that statement given by Shri Vishal Doshi also has no supporting whatsoever. He submitted that when the statement given by Shri Vishal Doshi had no basis or evidence, no adverse inference can be taken against retraction on the ground that it is not based upon any evidence. Learned Counsel of the assessee submitted that addition cannot be made simply on the basis of statement of Shri Vishal Doshi, who was not an employee of the assessee and which has also been duly retracted. Learned Counsel further submitted that assessee has duly given affidavit from several of the flat buyers for the proposition that no on money has been paid. He submitted that without any reason whatsoever these affidavits by the flat buyers have been rejected. Learned Counsel further referred that price on which flats have been sold are well above the stamp duty rate hence inference of on-money receipt is not justified. Learned counsel submitted that settlement application made by RLS group cannot be a reason to take adverse inference

Per contra, learned Departmental Representative submitted that addition has been made based upon cogent material obtained. He submitted that though Shri Vishal Doshi was not an employee of the assessee firm, he was Vice President (Marketing and Sales) of RLS group, which had 1/3rd shares in the partnership firm of the assessee. He further submitted that retraction is without any supporting. He further submitted that affidavits of the flat buyers are self serving statement. Learned Departmental Representative further supported the order of learned CIT(A) and case law relied upon by him

We have carefully considered the submissions and perused the record. We find that addition of on money receipt is based upon the statement given by Shri Vishal Doshi, Vice President (Marketing and Sales) of RLS group, who have 1/3rd shares in assessee’s firm. There is no other material whatsoever relating to on money receipt. Shri Vishal Doshi has retracted his statement. This retraction has been rejected by authorities below on the ground that it is not based upon any supporting document. In this regard, we find that statement obtained from Shri Vishal Doshi is also not based upon any supporting material. If this view is accepted, then learned counsel of the assessee is correct that the Revenue cannot reject retraction on the ground that it is not based upon any cogent material. In our considered opinion Revenue cannot apply shifting stand. It is accepting statement without any supporting material but rejecting retraction on the ground that it is not based upon any supporting material.

Assessee further submitted affidavit from flat buyers who have given statement that they have not paid any on money. The reason due to which 6 NRS Developers affidavits are rejected has not been specified by authorities below. It is not the case that any inquiry has been conducted with regard to the flat buyers and it has been found that there is defect in the affidavit submitted by them. Hence rejection of the flat buyer’s affidavit by the Revenue without any enquiry is not sustainable. Another point which has been canvassed by the assessee is that all the sales have been affected above stamp value and hence there cannot be any adverse inference of on money received. We find that this statement of the assessee has also cogency. It is only when sale consideration reflected in the agreement is below that permissible for the stamp value registration, there is presumption u/s. 50C regarding the value reflected in the agreement is lower. This fact also supports the case of the assessee. Furthermore, authorities below have drawn adverse inference for the settlement commission application made by RLS group. We find that this ipso facto cannot be a reason to draw adverse inference against the assessee as addition on this issue is to be based upon material found in assessee’s case.

Another plea of the assessee before learned CIT(A) was that no unaccounted money or asset of the assessee has been found. This has been rejected by learned CIT(A) on the ground that no search has been conducted on the assessee, hence there is no question of such finding. In this regard we fail to understand as to what stopped the Revenue from making search or to make further inquiry with regard to any unaccounted asset generated by the assessee. If search has not been conducted by the Department upon the assessee, it cannot be presumed that there are unaccounted asset in the hands of the assessee. In fact, such presumption is quite preposterous. As held by Hon'ble Apex Court in the case of K.P. Verghese (131 ITR 597), when these allegation of on money receipt, the burden is upon the Revenue to prove the same. In the present case we find that Revenue has failed to discharge the burden

In this regard we also place reliance on Hon'ble Apex Court decision in the case of P.V. Kalyansundaram (Civil Appeal No. 4262 of 2007 vide order

In the background of the aforesaid discussion and precedent, we set aside the orders of the authorities below and delete the addition on merits.

In the result, assessee’s appeal No. 5910/Mum/2018 is partly allowed and is allowed.