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Income Tax Appellate Tribunal, “SMC”BENCH, MUMBAI
Before: SHRI B.R. BASKARAN, AM & SHRI AMARJIT SINGH JM
M/s Strawberry बनाम / DCIT Constructions Private Ltd. Central Circle-4(2) Vs. The Plaza, 11th Floor, 55,Gamdevi, Mumbai-400007 �थायीलेखासं/.जीआइआरसं/.PAN/GIR No. :AABCS1396K (अपीलाथ� / Appellant) .. (��थ� / Respondent) Assessee by: Shri Sashi Tulsian Revenue by: Shri Chaitanya Anjaria Sr. DR सुनवाई की तारीख / Date of Hearing: 10.04.2019 घोषणा की तारीख /Date of Pronouncement: 12.04.2019 आदेश / O R D E R PER B. R. BASKARAN, AM:
The assessee has filed this appeal challenging the order dated 19/01/2017 passed by Ld CIT(A)-52, Mumbai and it relates to the assessment year 2007-08. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the addition of Rs.21 lakhs made by the AO u/s 69C of the Income Tax Act, 1961 (hereinafter ‘the Act’) as A.Y.2007-08 unexplained expenditure relating to alleged unaccounted brokerage payment made by the assessee.
The facts relating to above said issue are stated in brief.
The assessee company is a builder and developer. The assessment for the year under consideration was completed by the Assessing Officer originally y/s 143(3) of the Act on 17/11/2009. It is pertinent to note that the assessee did not start any construction activity during the year under consideration and hence, the Profit & Loss Account of the assessee did not reflect any purchases/sales during the year under consideration.
The Revenue carried out search and seizure operation u/s 132 of the Act on 03/03/2014 in the hands of the assessee and the certain documents including a Pen Drive was seized. Based on these documents, a statement was recorded u/s 132(4) of the Act from one of the employees of the assessee named Shri Daxesh Parmar. The statement of Daxesh Parmar was confirmed by Shri Nilesh Tank, Director of the assessee company in the statement taken from him u/s 131 of the Act. During the course of search, one paper was seized, which contained a noting to the effect that a sum of Rs.21 lakhs was paid as brokerage to a person named Pravin Bhai for land dealing. A.Y.2007-08 Though the date was mentioned as 25.3.1997 and the amount was mentioned as 21000.00, Shri Daxesh Parmar stated that the date has been recorded by deducting ten years from the original date and the amount should be understood by removing “.”. Accordingly, the date mentioned as 25/03/1997 was taken as 25/03/2007, which fell in the Assessment Year 2007-08 and the amount was taken as Rs.21.00 lakhs. Based on the above said information, the Assessing Office reopened the assessee of the year under consideration by issuing notice u/s 148 of the Act on 28/03/2014.
The assessee objected to the reopening of the assessment before the Assessing Officer and also objected to the proposal to assess the amount of Rs.21.00 lakhs as income of the assessee. It was submitted that the assessee did not carry on any construction activity nor did it purchase any land during the year under consideration and hence the question of paying any brokerage does not arise. With regard to the statement given by Shri Daxesh Parmar, the assessee submitted that Shri Daxesh Parmar is neither its employee nor its agent. It was submitted that he used to threat the assessee seeking money and hence the assessee has made several police complaints against him for threat and extortion. It was submitted that a police complaint dated A.Y.2007-08 12/02/2014 was filed with police department prior to the date of search dated 31/03/2014 and FIR was filed on 01/04/2014.
Accordingly, it was contended that the statement given by Shri Daxesh Parmar should not be relied upon. With regard to the statement given by Shir Nilesh Tank, the director of the assessee company, wherein he had endorsed the statement given by Shri Daxesh Parmar, it was submitted that Shri Nilesh Tank has retracted from his statement.
The AO did not accept the explanations of the assessee and accordingly took the view that the assessee could not furnish proper explanations with regard payment of Rs.21 lakhs as brokerage to Shri Prvain Bhai. Accordingly, the AO assessed the same as unexplained expenditure u/s 69C of the Act. The Ld. CIT(A) confirmed the additions with following observations.
“15. I have considered the facts of the case, submissions and contentions of the assessee as well as the order of the AO. 1 have also discussed this issue with the AO who made the assessment in this case as also with the AO who represented the department before the J-Hon'ble Settlement Commission in this case. Though, the assessee claims that Shri Daxesh Prmar is not an employee and was infact a blackmailer. However, the facts and documents recovered from his possession speak a different story. It is gathered that Shri Daxesh Parmar not only had details about various projects undertaken by the assessee at different places under the name Akshar Shanti and Pam Nagar developers in the Mira Road locality but he also had details about the personal investments in NSCs made by Shri Nilesh Tank and Shri Riran Tank, the Directors of the assessee company. The details of these investments have been discussed by the AO on page 9 & 10 of the A.Y.2007-08 assessment order. If Shri Daxesh Parrnar were just not connected with the assessee company in any way, then he were not expected to have the personal investment information of the assessee. The assessee, further claims that Shri Daxesh Parmar was a blackmailer and that a. police complaint was filed against him prior to the date of search. However, the enquiries conducted by the AO speak otherwise. It is gathered that the assessee has filed a FIR against Shri Daxesh P.rrnar only on 01/04/2014, much after the date of search on the premises of the assessee on 03/03/2014. Therefore, the claim of the assessee that such FIR was filed against Daxesh Parmar on 12/02/2014 and that statement was given by him before the police authorities on 17/02/2014 appears to be unsubstantiated. In fact, such facts have not been confirmed by the police authorities on specific enquiry by the AO. On the basis of the enquiries conducted by the AO, the police authorities have only confirmed about a FIR filed as on 01/04/2014. The assessee, in this regard, as relied upon para 9.1 and 9.2 of the Honble Settlement Commission order in case of the appellant company for other years wherein the issue of filing FIR prior to the date of search and statement of Shri Daxesh Parmar before the police authorities has been mentioned. With utmost respect to the Flon'ble Commission, it appears that this fact was apparently not been verified by the Hon'ble Settlement Commission. But the AO had caused independent enquiries with the police authorities during the course of assessment proceedings wherein the only fact confirmed has been the filing of an FIR as on 01/04/2014 which is after one month of the date of search and therefore, it can be a ploy at the end of the assessee to confuse the whole proceedings,
The assessee has further claimed that no sales or purchases had been carried out by it during the year under consideration and therefore there was no reason to pay any brokerage to anybody. However, the fact remains that brokerage has not been paid for sale of flats or apartments, but has apparently been paid for the purchase of land. It is an admitted fact that the assessee is engaged in the business of civil construction and without purchase of land it cannot carry out any construction activities. More importantly, it has been noticed during the course of search that they are in habit of making huge transactions outside the books of accounts and did not record the same in the books for reasons best known to them. Therefore, even if any activities were taking place in nature of construction or sales and purchases, the same may not have been recorded by the assessee in its books of accounts. Further, the commission could have been paid in respect of land deal once it has been finalized, even if the land may not have been registered in the name of the assessee. it is however, gathered that 5 A.Y.2007-08 WIP of the project of the assessee under construction as on 31/03/2008 was Rs. 93,64,92,018/- though the value as on 31/03/2007 was shown at NIL. Therefore, it can be said that the assessee's project was in pipeline and construction activities are in full swing during the immediately succeeding year and the payment of brokerage may be connected to such activities. In any case, such activities could not have been carried out without procurement of land of which the above brokerage may have been paid. in any case, the amount of Rs. 21,00,000/- paid during the year is not a huge amount and may have been only a part of overall deal made by the assessee with the help of Shri Pravin bhai. Further, these are the facts in special knowledge of the assessee and the assessee need to explain as to who Shri Pravin bhai is and what were its actual dealings with him. As the assessee has not furnished any explanation regarding the source of Rs. 21,00,000/- paid to Pravinbhai as per entries in the seized pendrive, the same is treated as unexplained and is liable to be added in the hands of the assessee u/s. 69C of the Act, Consequently, the addition of Rs. 21,00,000/- made by the AO is upheld.”
Aggrieved by the order passed by Ld CIT(A), the assessee has filed this appeal before the Tribunal.
The Ld. AR submitted that the Assessing Officer has reopened the assessment after expiry of four years from the end of the present Assessment Year and the basis for reopening of assessment is the letter received from DDIT(Inv.) alleging payment of brokerage. The Ld. AR for the assessee submitted that the Assessing Officer did not apply his mind on the letter so received by him from DDIT to examine its veracity and simply reopened the assessment. In the above said A.Y.2007-08 letter, DDIT has referred to the following noting found in a seized document:-
“25.03,97 Pravin Bhai (land brokerage)-21,000.00”
The Ld. AR submitted that above said information does not give rise any reason to believe that there was escapement of income in the hands of the assessee. He submitted that the AO, without applying his mind on the above said information, has simply reopened the assessment and hence the assessment is bad in law.
The Ld. AR further submitted that assessee has filed settlement application before the Settlement Commission for Assessment Year 2010-11 to 2012-13. The Hon’ble Settlement Commission has examined veracity of seized documents and given a finding that these documents did not yield any foolproof, cogent, direct and clinching evidence to establish the department’s contention of non-disclosure of true and full income in the settlement application by the assessee company. The Ld. AR further submitted that Hon’ble Settlement Commission has given its finding on the reliability of the seized documents and the said order is binding on the Revenue, since the order passed by the Settlement Commission has been accepted by the Revenue. Accordingly, the Ld. AR submitted that the Assessing Officer 7 A.Y.2007-08 could not have placed his reliance on the very same document to reopen the assessment under consideration.
The Ld. AR also placed reliance on the decision rendered by Hon’ble Bombay High Court in the case of Vinod M. Chitalia vs Union of India (FERA Appeal No.8 of 2012) dated 28/03/2012. The Ld. AR further submitted that the Hon’ble Bombay High Court, in the above said case, has held that the order of settlement commission is considered to be conclusive of the matters stated therein and cannot be challenged in any other proceedings under any other law including FEMA. The Ld. AR further submitted that the findings given by the Hon’ble Settlement Commission on the reliability of evidences is conclusive and hence, the AO was not right in reopening the assessment by relying on the very same material. Accordingly the Ld A.R pleaded that the reopening of assessment should be quashed.
On merits, the Ld. AR submitted that the assessee had filed police complaints prior to the date of search in the name of Shri Daxesh Parmar, as he was threatening for extorting money from the assessee. The police has registered FIR on 01/04/2014 ie. subsequent to the date of search. Hence, the Ld. CIT(A) was not justified in holding that filing of FIR was a ploy at end of the assessee to confuse A.Y.2007-08 the proceedings. The Ld. AR further submitted that the assessee did not carry on any construction activity during the year under consideration and did not purchase any land also during the year. The question of paying brokerage shall arise only if any land transaction has been finalized during the year. Hence there was no reason for the assessee to make the alleged payment of brokerage of Rs.21.00 lakhs.
The Ld. AR further submitted that the AO did not make any independent enquiry to find out whether the seized document is reliable or not. The AO also did not find Mr. Pravin Bhai and did not make any enquiries from him which would have brought out the veracity of the seized documents. The Ld. AR further submitted that the assessee has, in fact, purchased a land in the succeeding year. The ld. CIT(A) has taken a view that the amount of Rs.21 lakhs might have been paid by the assessee to PravinBhai as advance in connection with the land purchased in the succeeding year.
The Ld. AR further submitted that the view so entertained by the Ld. CIT(A) is not based on any material and is purely based on surmises under conjectures. The Ld. AR submitted that the Ld CIT(A) did not cause any enquiry nor did he bring any material on record any credible material to show that the assessee has incurred unexplained A.Y.2007-08 expenditure of Rs.21 lakhs towards payment of brokerage to a person named Shri PravinBhai. Accordingly, the Ld. AR submitted that the Ld. CIT(A) was not justified in confirming additions of Rs.21 lakhs in the hands of the assessee merely on the basis of surmises and conjectures.
On the contrary, the Ld. DR has strongly supported the order passed by the Ld. CIT(A).
We heard the parties and perused the record. We noticed that the Assessing Officer has made the additions on the basis of noting made in a seized material, which was deciphered as the payment of Rs.21 lakhs was made to a person named Shri PravinBhai as brokerage for land deal. Though the contents of payment and the amount was mentioned in different way, as stated earlier, the same was deciphered as having been paid on 25/03/2007 and the amount was Rs.21 lakhs. In the statement taken from Shri Daxesh Parmar u/s 132(4) of the Act, he has admitted that the same represents brokerage paid by way of cash. The Director of assessee company, Shri Nilesh Tank has endorsed the statement so given by the Shri Daxesh Parmar subsequently. A.Y.2007-08 14. It is the contention of the assessee that Shri Nilesh Tank has given statement under pressure and accordingly, he has retracted the statement subsequently. It was also pointed out that Shri Daxesh Parmar was not employee of the assessee and he has been creating trouble to the assessee by issuing threats for the purpose of extorting money from the assessee. We notice that the AO has rejected the above said contentions of the assessee without examining Shri Daxesh Parmar. On the contrary, the assessee has furnished evidences in the form of complaints lodged with Police personnel and FIR filed by the Police against Daxesh Parmar to substantiate its contentions that the statement given by him is not reliable. We also notice that the AO has not identified the Shri Pravin Bhai to whom the above said amount of Rs.21 laksh was alleged to have been paid. When the assessee has disowned the entries made in the seized paper and also pleaded ignorance above Pravin Bhai, in our view, the responsibility to prove the view taken by the AO lies upon the assessing officer, more particularly, when the assessee has contended that the statement given by Shri Daxesh Parmar is not reliable. As noticed earlier, the AO has also not conducted further enquiries with Shri Daxes Parmar.
Under the set of facts, in our view, the Assessing Officer could not A.Y.2007-08 have placed his reliance on the seized material without bringing any other corroborative material to support his view.
Though, the Ld. CIT(A) has taken the view that FIR filed by the assessee against Shri Daxesh Parmar subsequent to the date of search was a ploy to confuse the assessment proceedings, yet we notice from the assessment order that the Assessing Officer has accepted the fact that the assessee has filed a police complaint with police authorities prior to the date of search and finally a FIR was lodged subsequent to the date of search. Hence, in our view, the Ld CIT(A) was not justified in taking a different view on this matter. In any case, no material was brought on record by Ld CIT(A) to show that the assessee did not file such a letter before the police authorities prior to the date of search.
Under the set of facts, there is merit in the contention of the assessee that the Ld. CIT(A) was not justified in presuming that lodging of FIR was a ply to confuse the assessment proceedings.
16. It is in the common knowledge of everyone that brokerage is usually paid on conclusion of the relevant transaction. It is also an admitted and accepted fact that the assessee did not carry out any construction activity and did not purchase any land or property during the year under consideration. Hence, there is merit in the in contention A.Y.2007-08 of the assessee that the question of paying any brokerage during the year under consideration does not arise. The Ld. CIT(A) has taken the view that the assessee has purchased a land in succeeding year and hence the amount of Rs.21 lakhs might have been paid during the year under consideration as advance towards brokerage in connection with said land dealing entered in the succeeding year. As rightly pointed out by the Ld. AR that that this observation of the Ld. CIT(A) is based on surmises and conjectures only, since the Ld. CIT(A) has not brought out any material to support his views. Accordingly we are of the view that there is no justification for making addition of Rs.21 lakhs in the hands of the assessee as unexplained expenditure incurred towards payment of brokerage. Accordingly, we set-aside the order passed by the Ld. CIT(A) on this issue and direct the Assessing Officer to delete the impugned additions.
The Ld. AR also vehemently argued on the validity of reopening of the assessment as well as binding nature of the order passed by the Hon’ble Settlement Commission. Since, we have granted relief to the assessee on merits, we don’t find it necessary to adjudicate these legal grounds, as the same would be academic in nature.
ITA. NO.2838/M12017 A.Y.2007-08
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 12/04/2019