I.T.O. - 3(1)(3), MUMBAI vs. COSMOS REALTORS PVT. LTD., MUMBAI

O R D E R Per G Manjunatha, AM : This appeal filed by the revenue is directed against order of the CIT(A)-8, Mumbai dated 26-09-2017 and it pertains to AY 2006-07. The revenue has raised the following grounds of appeal:-

“1. Whether on the facts and in the circumstances of the case and in law, Ld, CIT(A) is right in deleting the addition of Rs.5,59,30,000/- made by the AO u/s69B of the Income Tax Act, without appreciating the fact that the addition is based on the specific information received from the DR1, Mumbai unit regarding cash payment out of undisclosed source by the assessee for the purpose of purchasing land and the assessee had failed to counter this findings during the assessment & remand proceedings, which makes it evident that the assessee had made payment from undisclosed income.

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2. Whether on the facts and in the circumstances of the case and in law, Ld, CIT(A) is right in holding that the additions were made on the basis of presumption & without material evidence, without appreciating the fact that the addition is based on documentary evidence in the form of print outs of soft copy of information extracted from the computer of Ms. Zaver Cyrus Dadina, Deputy Manager (Accounts) of NITCO before the Panchas & panchnama of said proceedings is provided by the DRI authorities.”

“8) The assessee company is incorporated on 18.04.2005. On perusal of the Balance Sheet as on 31.03.2006 it is seen that the assessee has purchased agricultural land during the year under consideration. As per the balance sheet the cost of the land is shown at Rs 3,06,72,954/-. On perusal of the details filed by the assessee company during the course of original assessment proceedings, it is seen that the assessee has purchased land from 3 parties as under: S Particulars Date of Amount r agreement N to sell o 1 Land A/c (XII) (14112 10,06.2005 Rs2,79,65,400/- Sq.Yds) Dulichand S/O Shri Bhagwana 2 Land A/c (XIII) (226.66 23.06.2005 Rs 13.20.000/- Sq.Yds) Pradeep Kalra & Family 3 Land A/c (XIV) (5846.40 2-12.2005 Rs 10.98.500/- Sq.Yds) Jage Ram, Shanti Devi & Bijender Singh 9) Subsequently information has been received from investigation wing, New Delhi vide letter No. F. No. ITO(INV)/Unit-IV(2)/2012-13/16 dated 15.03.2013 of the ITO(lnv.), Unit-IV(2), New Delhi. As per the said information, DRI, Mumbai conducted a search on 28.08.2009 at the residential premises of one Ms Zaver Cyrus Dadina, NITCO's Deputy Manager (Accounts) during which a hard disk and a pen drive was seized. A file found in this hard disk contained details of purchase of and payments made for 36(27+9) landed properties in Maidan Garhi (popularly known as sainik Farms) area of South Delhi, during F Y 2005-06. A copy of the said file in excel format, listing the said 36 properties and details of sellers/buyers and payments both in demand draft and "B" (cash mode) was enclosed. During the course of discrete enquiry by investigating officer at Mumbai, it was gathered that the entire land deal apparently was organized by the NITCO group through its sister concerns and individuals known to tie Directors/key persons in the group who acted as purchasers. The objective of /he transactions was consolidation of various holdings and change of its land use for development purpose. Out of the names of buyers/sellers, one of the names is/ that of the assessee company i.e M/s Cosmos Realtors Pvt Ltd. This finding corroborates with the fact that Shri Vivek Tawar who is' the Director of M/s Cosmos Realtors Pvt Ltd is also the Managing Director of M/s NITCO Ltd. The details of cash component culled from the excel sheet furnished by the DRI, Mumbai is reproduced he/eunder:

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Name Details of Amount of on-money of the property paid(Rs.) seller

Duli Khasa 4,57,68,000/- Chan No.50/17/24(4- d 16), 50/17/2(0-4), 52/4(4-16), 52/7(5-15), village Devli, Tehsil Hauz Khas (Mehrauli), New Delhi Jage 638, Maidan 1, 01,62, 000/- Ram Garhi, Tehsil & Hauz Khas Famil (Mehrauli), New y Delhi

Total 5,59,30,000/-

10) Since the properties are reflected as fixed assets in the books of the assessee as on 31.03.2006, it is evident that the assessee has taken possession of the properties and has paid the on-money of Rs. 5,59,30,000/- out of his undisclosed sources of income. Accordingly during the course of assessment proceedings, notice u/s 142(1) along with extract of excel sheet was issued to the assessee and he was asked to furnish submissions in this regard. The assessee neither attended the scrutiny proceedings nor furnished any reply. It is therefore evident that the assessee has no explanation to offer in this regard. Further it is observed that the amount of D/D mentioned in excel sheet furnished by the DRI roughly matches with purchase value of land disclosed by the assessee in the balance sheet but the cash component "B" mentioned in the excel sheet is not disclosed by the assessee. This corroborates with the facts intimated by the DRI that the cash portion is not declared in the sale agreement. Since the assessee has not furnished any submissions on this issue, it is presumed that the assessee has no explanation to offer. 11) To reiterate, in this case Department had received specific information from DRI, Mumbai that the assessee had paid money in cash for purchase of land over .and above the agreement value. When the assessee was confronted with these facts, the assessee offered no explanation for the same despite several opportunities ;given to him to furnish his submissions. The silence of the assessee indicates that the information received from DRI is correct and since the assessee was fully aware ''of these dealings and money was paid out of his undisclosed sources of income he has no plausible explanation to offer. The silence of the assessee is in other words his admission of guilt of non disclosure of true and correct facts of his dealings. 12) Since in F Y 2005-06 the assessee has made investments and it is found that the amount expended on making such investment exceeds the amount recorded in this behalf in the books of accounts maintained by the assessee

5 ITA 7150/Mum/2017 for any source of income and the assessee has offered no explanation about such excess amount of money, this excess amount is deemed to be the income of the assessee for the F Y 2005-06. The assessee has paid on- money of Rs. 5,59,30,000/- out of his undisclosed sources of income for purchase of land over and above the amount disclosed in the balance sheet. Accordingly as per the provisions of section 69B of the I T Act this excess amount of Rs. 5,59,30,0007- is deemed to be the income of the assessee for the F Y 2005-06 relevant to A Y 2006-07 and added back. Penalty proceedings u/s 271{1)(c) of the I T Act is initiated separately on this issue for furnishing inaccurate particulars of income. 13) As per the computation of total income filed by the assessee company it is seen that the assessee company has stated that business activity is not carried out during the year and hence the loss of Rs 54.404/- is not allowed to be carried forward and to be adjusted against business profit of subsequent year. Thus the business loss is not allowed to be carried forward. Even otherwise this loss cannot be set off against income determined u/s 69B, as discussed in para above.”

The assessee further contended that when documents produced before the AO are clearly indicative of payment of consideration for purchase of land, no adverse inference can be drawn on the basis of some outside materials to come to the conclusion that the on-money payment has been made for purchase of land.

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“5.3.1 This ground of appeal relates to addition of Rs. 5,59,30,000/- to the returned income under section 69B of the Income Tax Act 1961. The assessing officer has dealt with this issue from para 8 to 13 of his order. A perusal of the material available on record shows that the company was incorporated on 18/04/2005. During the year, the appellant had acquired agricultural land. As per the balance sheet the cost of land was Rs. 3,06,72,954/-. The appellant had purchased land from four parties as have been mentioned as para 8 of the assessment order. The agreement dated 10/06/2005 for Rs. 2,79,65,400/-, agreement dated 23/06/2005 for Rs. 13,20,000/-, and agreement dated 02/12/2005 for Rs. 10,98,5007-. 5.3.2 The assessing officer has observed that as per information received, DRI, Mumbai conducted search on 28/08/2009 at the residential premises of Ms. Zaver Cyrus Dadina, NITCO's Deputy Manager (accounts) from where a hard disk & pen drive were recovered and these electronic media contained details of purchases and payments made for 36 properties in Maidan Garni area of South Delhi, during FY 2005-06. Copy of that Excel file was received by the Tax Department. The assessing officer has further observed, "During the course of discrete enquiry by investigating officer at Mumbai, it was gathered that the entire land deal apparently was organised by the NITCO group through its sister concerns

7 ITA 7150/Mum/2017 and individuals known to the Directors/key persons in the group who acted as purchasers. The objective of the transactions was consolidation of various holdings and change of its land use for development purposes. Out of the names of buyers/tellers, one of the names is that of the assessee company i.e. M/s Cosmos Realtors Pvt Ltd. This finding corroborates with the fact that Shri Vivek Tawar who is the Director of M/s Cosmos Realtors Pvt Ltd. is also the Managing Director of M/s NITCO Ltd." 5.3.3 The details of cash component extracted from the excel sheet furnished by the DRI Mumbai are given at para 9 & 10 of the order. For the impugned transactions, the total amount of Rs. 5,59,30,0007- "on-money" was paid out of "undisclosed sources of income". The assessing officer has observed that the value of agricultural land reflected in the balance sheet of the appellant "roughly matches" with the DD amount as per the information received from the DRI. He has, therefore, concluded at para 12, "Since in FY 2005-05 the assessee has made investments and it is found that the amount expended on making such investment exceeds the amount recorded in this behalf in the books of accounts maintained by the assessee for any source of income and the assessee has offered no explanation about the excess amount of money, this excess amount is deemed to be the income of the assessee for the FY 2005-06. The assessee has paid on-money f Rs. 5,59,30,0007- out of his undisclosed source of income.....-". With these observations, the Assessing Officer has added the impugned amount u/s 69B. original return be treated as filed in compliance to the said notice. Thereafter, notices under section 143(2} and 142(1) were duly issued and served on the appellant. 5.2.3 It is seen that there was specific information received by the Assessing Officer from the Investigation Wing/DRI with firm reason to believe that the appellant had paid 'on money' for the purchases. The Assessing Officer has recorded detail "reasons to believe" that the income of the appellant had escaped assessment and, therefore, was fully justified in reopening of the assessment. 5.2.4 I have given due consideration to decisions cited by the appellant's including CIT v Kelvinator India Ltd (2010) 1 Taxmann 27. I do not find that the appellant gets support from the decisions cited by a number of decisions of the Apex Court as well as High Courts. In the case of the appellant, it is relevant to ascertain as to whether the assessing officer has reopened the assessment on basis of "reason to believe" or near "change of opinion". It is noted that the issue of purchase of immovable property had not been considered earlier during the scrutiny assessment under section 143(3) completed on 04/12/2008 when the Assessing Officer has merely observed that the appellant was engaged in the business of real estate development. The assessing officer had received fresh material information from Investigation Wing/DRI about payment of money. This matter was not part of the original scrutiny assessment. Therefore, the reopening is valid. 5.2.5 In the case of Calcutta Discount Co. Ltd. v. ITO 41 ITR 191 fSC), it was observed that it is the duty of the assessee to disclose all the primary facts which have a bearing on the liability of the income earned by the assessee being subjected to tax. It is for the Assessing Officer to draw inferences from the facts and apply the law determining the liability of the assessee. 5.2.6 Discovery of new and important matters or knowledge of fresh facts which were not present at the time of original assessment would constitute a 'reason to believe that income had escaped assessment' within the meaning of section 147. Similar view has been taken by the apex court in the following cases :— (/) Phool Chand Bajrang Lal v. ITO 203 ITR 456, 477; (//) ALA Firm v. CIT 189 ITR 285, 298; (Hi) Indian and Eastern Newspaper Society v. C/7119 ITR 996, 1004; and (/V) ITO v. Lakhmani Mewal Das 103 ITR 437. 445. 5.2.7 In view of the above unambiguous view of judicial authorities with regard to discovery of new material facts, I do not find any merit in the contention of the appellant for this ground of appeal. Therefore, reopening of assessment is sustained and this ground of appeal is dismissed. 5.3.4 The above facts have been considered by me. It is noted that besides a copy of Excel file provided by DRI there was absolutely no information available with the 8 ITA 7150/Mum/2017 assessing officer regarding the transaction in respect of agricultural land purchased by the appellant. It is also a fact that Ms. Zaver Cyrus Dadina, NITCO's Deputy Manager (accounts) is Deputy Manager of NITCO group and in no way connected with the appellant company. Furthermore, apart from the file received from DRI, the assessing officer has gathered no other evidence that the appellant had paid any on-money. He has not even made any independent enquiries to ascertain the market rate of land in that locality during assessment proceedings. 5.3.5 During these appellate proceedings, the appellant had made written submissions filed on 16/02/2015 which included P&L account, balance sheet and copies of agreement for purchase of agricultural land on stamp paper. My predecessor had called for report under section 250(4) of the Income Tax Act, 1961 vide his letter dated 29/04/2015 asking the assessing officer to submit the remand report after making further enquiry. The assessing officer submitted his remand report vide letter dated 24/05/2016 wherein he stated that all the documents forwarded to him have already been considered by the assessing officer while passing thejassessment under Section 144 r.w.s. 147 of the Act. Thus, it is seen that even at the remand stage the assessing officer did not make any further enquiries or produce any substantive or material evidence to establish payment of on-money by the appellant. In their response, the appellant filed a rebuttal to the remand report on 24/06/2016 reiterating their submissions as extracted above. They emphasised the point that it was the 1st year of operation and business had not commenced and strongly contended that the addition made by the assessing officer was purely hypothetical and without any evidence. It is also noteworthy that the appellant had never been given any of facilities to cross examine Ms, Zaver Cyrus Dadina. NITCO's Deputy Manaqer__(accounts) from whom information was seized by DRI. 5.3.6 I have considered the various judgements relied upon by the appellant as reproduced above in the contentions and find that the ratios of the various decisions applies squarely in the facts and circumstances of this case. There must be some material on record as evidence for addition. Addition made on the basis of presumption cannot be sustained in law. This position is strongly supported by the following decisions of the Apex Court: a) CIT V Roman & Co (1968) 67 ITR 11 (SC) b) CIT v Calcutta Discount Co Ltd (1973) 91 ITR 8 (SC) c) Omar Salay Mohamed Sait vs CIT 1959 37 ITR 151 (SC) d) Dhirajlal Girdharilal v CIT (26 ITR 734)(SC) 5.3,7 In view of the above, I find that there is no justification for presuming that on money of Rs. 5,59,30,0007- was made by the appellant. This ground of appeal is allowed.”

Manager (Accounts) of NITCO before the panchas and panchanamas of said proceedings were provided by DRI authorities.

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7. We have heard both the parties and perused the material available on record. The sole basis for addition towards on-money payment u/s 69B of the Act, is report of Directorate of Revenue Intelligence, Mumbai Unit where it was stated that as per the contents of seized document during the course of search in the case of NITCO, the assessee has paid on-money for purchase of lands at Delhi. Except this, no other evidence has been brought on record by the AO to justify his action. The AO has even failed to conduct any enquiry to ascertain correct market rate of the property as on that date. Unless, the AO has conducted further enquiries in the light of report of DRI to ascertain correct rate of land, no adverse inference could be drawn only on the basis of report of DRI without confronting those informations / statements to the assessee for its rebuttal. Further, an identical issue has been considered by the ITAT, Mumbai Bench “G” in the case of M/s Rhythm Real Estates Pvt Ltd vs ITO in where under identical set of facts and also on the basis of similar DRI report, the Tribunal came to the conclusion that the AO was erred in making addition towards on-money payment u/s 69B without there being any further evidences to indicate payment of on-money for purchase of land. The relevant findings of the Tribunal are as under:-

section 147 of the Act. It is also evident, the report of the DRI, Mumbai, is on the basis of recovery of a hard disk and a pen drive during a search conducted in the residential premises of Ms. Zaver Cyrus Dadina, no 28th August 2009, who is stated to be the Dy. Manager (Accounts) of NITCO. As per the information available from the hard disc contained in Excel format the assessee purportedly paid on–money in cash towards purchase of landed property at Sainik Farms, New Delhi. As observed by the learned Commissioner (Appeals), apart from the information received from DRI, along with attached Excel Sheet, the Assessing Officer had no other corroborative evidence indicating cash payment of on–money by the assessee. As could be seen, the learned Commissioner (Appeals) after verifying the materials on record, has found that the assessee in the relevant previous year acquired agricultural land and as per the Balance Sheet advance against the land was shown at ` 2,42,21,801. He further noticed that the assessee had entered into agreements with four parties for purchase of land. He found that the entire basis for addition on account of on–money is on the basis of information found from the Hard Disk recovered from Ms. Zaver Cyrus Dadina, who is in no way connected with the assessee. The learned Commissioner (Appeals) observed, apart from this information in the form of an Excel Sheet received from DRI, Mumbai, the Assessing Officer has no other evidence in his possession to indicate payment of on–money by the assessee. He also took note of the fact that the Assessing Officer even has not made any independent enquiry with the sellers of the landed property or made any enquiry to ascertain the market rate of the land in that locality. He observed, even though the assessee has furnished the sale agreements of the property before the Assessing Officer in the course of assessment proceedings, the Assessing Officer has not taken note of them during the assessment proceedings. The learned Commissioner (Appeals) observed, even though, in course of proceedings before him the Assessing Officer was directed to examine the submissions made by the assessee and conduct necessary enquiry, however, the Assessing Officer without conducting any enquiry has submitted his remand report on 18th August 2015, by simply stating that the documents forwarded to him have already been considered by the Assessing Officer while completing the assessment under section 143(3) r/w section 147 of the Act. Thus, in view of the aforesaid factual position, the learned Commissioner (Appeals) concluded that in the absence of any evidence brought on record to prove the payment of on– money by the assessee the addition made under section 69B of the Act cannot be sustained. The aforesaid factual finding of the learned Commissioner (Appeals) remains uncontroverted even before us. Moreover, while dealing with identical issue arising in the Revenue’s appeal in case of M/s. Saturn Advisory Services Pvt. Ltd. (supra), wherein, addition of on–money under section 69B was made on the basis of the similar report of the DRI containing information found during search on Ms. Zaver Cyrus Dadina, the Co– ordinate Bench has upheld the decision of the learned Commissioner (Appeals) observing as under:– “2.9. Totality of facts, if kept in juxtaposition, with the facts and the ratio laid down in the aforesaid cases are analyzed, the Ld. Assessing Officer is asking the assessee to prove the negative which is not permitted and the whole assessee of the Department is based upon the presumption that the assessee could not explain that no cash was transacted in the sale consideration. It is also noted that the Ld. Commissioner of Income Tax (Appeal) has duly analyzed the statement of Shri Atul Sud, Ms. Zaver Cyrus Dadina, Dy. Manager (Accounts) of NITCO, from whose premises the hard disc was found and seized and Shri Atul Sud admitted to have purchase the land from the concerned two parties on a consideration of `39 to 40 lakhs and payments was made by demand draft he has nowhere admitted /

12 ITA 7150/Mum/2017 tendered that any cash payments was made. Likewise, Ms. Zaver Cyrus Dadina has specifically tendered that she had no role to play either to issue cheque or cash. In reply to question no.12, whether any cash payment was made, she specifically denied of any transaction. A commission u/s 131(1)(d) of the Act was issued and the assessee was not able to provide any details/information/confirmation in this regard. Totality of facts clearly indicates that the Ld. Assessing Officer could not collect any evidence to substantiate that in fact any cash was transacted for purchase of property. The case of the assessee is further fortified by the facts that the demand drafts issued for purchase of property were reflected in the documents, no statement was recorded by DRI either of Ms. Zaver Cyrus Dadina or of any other person during the course of search in respect of the details contained in the hard disc. Even, the information received from the investigation wing was never corroborated with any evidence, statement that any cash changed hands for the transaction. When the Ld. Assessing Officer recorded the statement of Shri Atul Sud, Director of the assessee company, though he admitted the transaction to be made through demand draft but he never tendered that any cash was transacted. Ms. Zaver Cyrus Dadina completely expressed or ignorance with regard to details of land dealings as has been alleged. The efforts of Assessing Officer to record the statement of Miss Damini Vadhwa, and Miss Reeta Bhatia also could not provide any information leading to the addition. The seized material/print out was not in the handwriting of the assessee and even there is no material to suggest that the seized material was maintained either by the assessee or it’s of or employees. Even the statement of Rajaratanam was discarded by the Ld. Commissioner of Income Tax (Appeal) as the floor price, fixed by the authorities, for such property was found much lower than the value. Considering the factual matrix and the judicial pronouncements, discussed hereinabove, we find no infirmity in the conclusion of the Ld. First Appellate Authority. Our view is further fortified by the fact that the concerned data was even not found from the premises of the assessee and further the assessee has not started any substantial business activity and for acquisition of the land to inter corporate loan of ` 40 lakh from Strategic Capital Corporation. Thus, the presumption of the Ld. Assessing Officer for making the addition on presumptive basis was rightly deleted by the Ld. Commissioner of Income Tax (Appeal). Thus, addition cannot be made on the basis of presumption, which cannot be sustained in law. Even otherwise, presumption cannot take the shape of the evidence however strong it may be unless and until such presumption or statement, if any, is corroborated with material evidence. The ratio laid down in Dr. Anita Sahai vs DIT 266 ITR 597 (All.), Dheerajlal Girdharilal vs DCIT 26 ITR 734 (SC), CIT vs Calcutta Discount Co. Ltd. 91 ITR 8(SC), CIT vs Raman & Co. 67 ITR 11 (SC), Modi Creations Pvt. Ltd. vs Income Tax Officer (2011) 13 taxman.com 114(Del.), CIT vs Shree Rama Multitech Ltd. (2013) 34 taxman.com 32 (Guj.) and CIT vs Devine Leasing and Finance Ltd. 158 taxman 440 (Del.) supports our view. Thus, we affirm the stand of the First Appellate Authority, resulting into dismissal of the impugned grounds, raised by the Revenue.”

8. Facts involved in the present appeal being materially identical, respectfully following the aforesaid decision of the Co–ordinate Bench, we uphold the decision of the learned Commissioner (Appeals) on the issue. Ground raised is dismissed.”

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8. In this view of the matter and consistent with view taken by the co- ordinate bench, we are of the considered view that there is no error in the findings of Ld.CIT(A) while deleting addition towards on-money payments for purchase of land u/s 69B of the Income-tax Act, 1961; hence, we are inclined to uphold the order of the Ld.CIT(A) and dismiss appeal filed by the revenue.

Order pronounced in the open court on 12 -04-2019.