ACIT, NEW DELHI vs. SH. SANDEEP BINDRA, NEW DELHI

The order of the Ld. CIT is against law and facts of the case.”

The revenue has raised the following grounds of appeal in for the Assessment Year 2005-06:- “1 (a) On the facts and under the circumstances of this case the Ld. CIT (A) has erred in deleting the addition of Rs.72,806/- on account of undisclosed investment in property without appreciating the fact that the assessee has failed to prove the source of investment in property. 1(b) On the facts and under the circumstances of this case the Ld. CIT (A) has erred in deleting the addition of Rs.22,87,936/-without appreciating the fact that the receipts of membership and subscription receipts from M/s Moet’s Retreat Club were worked out Page | 6 Sandeep Bindra Vs. ACIT, ITA No. 2647 to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) on the basis of seized documents and assessee has failed to furnish any supporting evidence in respect of expenses claimed by him. 1(c) On the facts and under the circumstances of this case the Ld. CIT (A) has erred in giving relief of Rs.58,78,764/- to the assessee out of total addition of Rs.66,89,707/- without appreciating the fact that the assessing officer was justified in arriving at reasonable estimate of sales for various concerns of the assessee and worked out G.P. on the basis of seized documents after rejecting the books of accounts of the assessee. 1(d) On the facts and under the circumstances of this case the Ld. CIT (A) has erred in giving the relief of Rs.94,287/- out of total addition of Rs.2,39,346/- without appreciating the fact that the assessing officer has already allowed to third of the expenses without any evidence.

The assessee has raised the following grounds of appeal in for the Assessment Year 2006-07:-

The ld Authorised Representative submitted his written arguments which are as under:- “Moets Retreat Club Issue: This issue is involved in Asst. Yr. 2002-03 to Asst. Yr. 2006-07. The Facts are common in all the years and only the figures vary year to year. 1.1 The appellant along with the LP Hospitality Pvt. Ltd owner of the premises at 12/7, Mathura Road, Faridabad entered into the agreements (PB 1 to 31 , Vol. 1) dated 1-4-98, 1-4-2000 and 15.3.2001 to form a restaurant and club in the name of M/s Moets Retreat Club by enrolling members. This agreement was for FIVE YEARS ONLY (later extended for 2 years i.e. in total 7 years). The broad understanding was to share the sale proceeds of 15% with the owners of the premises M/s LP Hospitality and all expenses for running and maintenance and creating of infrastructure is to be made by the appellant. 1.2 As per the above agreement , major expenses were to be borne by the appellant as mentioned in the relevant clause i.e. cooking expenses, staff expenses, excise fee payment to renew the license, building up of infrastructure like club facilities of gym, pool, sports equipments, etc. 1.3 An agreement was also made dated 02/04/2001 with M/s Enhancers Network for enrolling members for the club for which charges are fixed at Rs. 10,000 per member (non-refundable) and Rs. 1500 per annum as annual subscription fees . For the said services, they are paid 30% of the amount as commission per member. The agreement is placed at ( PB 34 to 36 Vol. 1).

The main thrust in the arguments of the Ld. AR was on application of real income theory as the assessee appellant earned no income and so no tax Page | 21 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) is leviable on him despite this assessee has declared additional income, which is much more than the income actually earned by him. The Ld. AR insisted that either the membership fee received after paying commission was spent on the infrastructure or development of the club or for running the club as is evident from the details of expenditure filed above. It was further argued that the period allotted was only 5 years which was not sufficient to fetch income and the owners were not spending any amount on the renovation and facilities required to be offered to the club members. These members were enrolled after lots of efforts but due to lack of facilities in the club new members were reduced year after year because of lack of facilities and dispute between the owners of the land and building due to which money on account of annual fees was not received by him.

The ld DR submitted that according to the provision of section 69C unexplained expenditure cannot be allowed to the assessee. He further submitted that the assessee has not produced any voucher of expenditure incurred and there are seized materials. With respect to the claim of the assessee for deduction of payment of commission, he submitted that assessee has not disclosed original return of income and also did not produce the party. In view of this no documentary evidences were produce before the assessee. Even otherwise he submitted that assessee has not deducted tax at source and therefore, even if it is an allowable expenditure because of the failure to deduct tax it should be disallowed. He further referred to page No. 15 of the order of the ld Assessing Officer and submitted that 1/3rd of the expenditure has been disallowed by the ld Assessing Officer and therefore, according to him the assessee has very reasonably computed the business income of the assessee. He further submitted that AO has computed the number of new members on the basis of annexure A-8 and A-9 seized during the course of search, which has been ignored by the ld CIT (A). He further submitted that the bank account in which the assessee has deposited membership receipt was not Page | 22 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) submitted by the assessee, which was called by the ld Assessing Officer u/s 133(6) of the Act. He further submitted that the assessee produced no receipts issued to the members and most of the payments have been received in cash that was not recorded in the books of accounts. With regard to the commission paid to M/s. Enhancer Network he submitted that assessee has furnished incomplete information and failed to produce any of the parties‘ representative and therefore, the AO is justified in allowing expenses only to the extent of amount debited in bank account of the assessee. With respect to the gross profit of the various units he submitted that statement of the various employees were recorded during the course of search wherein, it clearly emerged that assessee is making sales out of the books. He further referred to the provisions of section 132(4A) of the Act to state that validity of statement recorded during the course of search is very high. He referred to the various decisions of the court.

The ld AR vehemently contested the argument of the ld DR and submitted that only the real profit can be charged to tax. He submitted that ld CIT (A) has correctly analyzed the Annexure A-8 and A-9 seized during the year for the purpose of membership income. He submitted that number of members enrolled is not doubted and therefore, the liability to pay the commission to M/s. Enhancer Network has arisen. Therefore, merely the amount of commission paid by cheque was allowed irrespective of the fact that the assessee collected the cash and also paid commission to the party out of the cash available. With respect to the expenditure incurred by the assessee he submitted that when the search took place there was a swimming pool on which the assessee has incurred expenditure. It is not the case of the revenue that swimming pool was not there. He further submitted that amount of expenditure incurred is further supported by the valuation report of the authorized valuer. With respect to the applicability of provisions of section 69C of the Act he submitted that the issue in the appeal is with respect to determination nof the correct profit Page | 23 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) and not allowability of any expenditure. He submitted that when the gross receipt is not accounted for the same couldn‘t be the income without granting deduction for the expenditure. The Ld. CIT DR has relied upon the orders of the assessing officer and argued that the annexure A-8 and A-9 clearly shows that members were made by the assessee and the amount might have been received by him from all the members for annual maintenance also but CIT(Appeals) did not appreciate these facts and granted the relief.

We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also called for respective annexure containing documents found and seized during the course of search. Ld AR filed the set of such annexure. Now we proceed to decide the each of the issues before us.

We first decide the profitability chargeable to tax for the each year in case of Moets Retreat Club. We have gone through the annexure A-8 and A-9 and found that in the initial year the members were enrolled and they have paid fees of Rs. 10,000/- for becoming members. List of members clearly depicts against membership no., name of members, date of membership, their dependant members, address, and telephone number, date of membership and the amount paid by each member. The list in annexure A-8 starts from S. No. 2 giving membership number ―2‖. However at S. No. 1 no names are mentioned against that but at S. No. 4 membership no. 3A is mentioned which makes up for Membership No. 1 because thereafter S. No. of membership continue up to 823. Likewise, Annexure A-9 is the list of members, which starts from S. No. 824 and membership no. also from 824 giving names, address, telephone nos., dependants name, date of membership and the amount. This list continues till membership No. 1969. Against each member the amount is clearly mentioned either Rs. 10,000/- or Rs. 11,500/-. The members who were initially made only paid Rs. 10,000/- up to 31-03-2002 in both the list but members made during the subsequent financial year i.e. AY Page | 24 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) 2003—04 have either paid R. 10,000/- or Rs. 11,500/- also. Since, names, addresses, telephone numbers, date of membership and amount is clearly mentioned in the seized document, We therefore hold that the ld CIT(Appeal) has rightly accepted the list of membership. The revenue has not pointed out that which amount of fees received for members as mentioned in seized material have not been considered by the ld CIT (A). ld AO also accepted the number of members enrolled for financial years 2001-02 to 2003-04. The list of members also shows that there were few names appeared in the list but the amount has not been mentioned and in some of the cases members were made much earlier but the amount was paid by them much after becoming the member such as at S.No.137 membership no. 136 of annex.A-8, Sh. Rajan Sharma became a member much earlier but the amount was paid in subsequent year. Likewise, member at S.no.998 Mr.S.Jain of Annex. A-9, has paid the amount on 20-08-2003 while at S.No.997, member Mr. Vikram Bhatia and at S.No.999 Mr. R.Taneja has not paid membership subscription. further while Mr. S. Sethi mentioned at S. No. 1000 paid the membership on 17-10-2001 i.e. much earlier than Mr. Jain. The above findings are apparent from the seized papers placed at pages 180 to 182 of the paper book. The ld AO has calculated figures of all the members whose names are appearing in the seized annexure and the annual charges of all the members. The list, which is a seized document, has to be relied upon totally and not partially, unless there is some other corroborating evidence supporting the view of the assessing officer are also found. The documents has to be read as a whole and not in part and it cannot be said that one part of the document to be correct and another as incorrect. The ld CIT (Appeal) has rightly accepted the list of members and the amount shown from seized annexure as the amount is clearly depicted against each member and rightly rejected the amount calculated/estimated by the AO. As the ld OA has not made any reference to any other evidences which shows the receipt of the Page | 25 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) membership fees higher than what is computed by the ld CIT (A) , we donot find any infirmity in the orders of the ld CIT (A) in computing the membership fees which is showing the numbers of the members as well as the fees received from them.

We have further examined the agreements made by the assessee with LP Hospitality Pvt. Ltd., Supplementary agreement and tripartite agreement with JS Hospitality Services Pvt. Ltd. who has finally taken over the liability. We find that assessee has to make payment of Rs. 5,20,000/- to LP Hospitality Pvt. Ltd. on account of settlement of outstanding dues. The building and land was owned by LP Hospitality and the infrastructure built thereon by the assessee out of the receipts of the club membership was ultimately taken over by LP Hospitality Pvt. Ltd. Even the running of the club was ultimately handed over to JS Hospitality Pvt. Ltd. The receipts of the members were spent for the expenditure incurred on the infrastructure and to run the club. Enhancers Network introduced the members of the club with whom a separate agreement was made for commission and they were entitled for a fixed amount of Rs. 3,000/- per member introduced by them. The partner of Enhancers Network has confirmed the receipt of the amount from the assessee. Thus, the amount paid for introducing member cannot be doubted. The ld AO has not brought any contrary material on record to show that assessee has not paid the above sum to the agent. Further ld CIT(A) has restricted the disallowance of commission to 50% out of cash payments made by the assessee because the assessee did not produce vouchers of payment of commission. Revenue has failed to appreciate the modus operandi of the Enhancer Network Limited. It used to receive the amount of subscription from members in cash and the commission of Rs 3000/- was deducted wherefrom. Therefore, the assessee was paid only the net subscription after deducting their commission. It is not the case of the revenue that Enhancer network has not received the commission, which it was entitled to receive. The members have been shown to have paid Rs. 10,000/- and Page | 26 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) out of which Rs. 3,000/- was required to be paid by the assessee to Enhancers Network. The recipient confirmed the receipt of the amount. The commission was mainly paid through cheques, which is admitted by the ld AO. Further, the amount of money has already been deducted by the Agent when the sum is received in cash from member and only net amount is received by the assessee. We therefore hold that commission claimed by the assessee in each year cannot be disallowed especially when the subscription fees is included in the gross receipt chargeable to tax. Further the above sum is payable according to the agreement on receipt of the membership fees by the assessee. When the membership fees has been fully charged to tax, the enhancer has confirmed the receipt of the full commission, there is no dispute about the non-payment of any commission to that party, there is no justification for restricting the allowance of the commission paid by the assessee partially. Therefore the Ld. assessing officer is directed to allow the commission to the assessee is an expenses paid to M/s Enhancer network as the full commission income has been charged to the tax by the Ld. assessing officer.

With respect to other expenditure incurred by the assessee and claimed by the assessee, a chart is placed at PB pg 43 , which shows the head of various expenditure incurred as well as the amount of such expenditures incurred by the assessee for AY 2002-03 to 2006-07. A separate income and expenditure statement of each year along with the ledger accounts of the parties to whom payment was made is also placed before us. The major expense incurred by the assessee is in ‗Moets Retreat‖ apart from other minor expenditure of Bank Charges, Courier Charger, License Fee, Auditor Fees etc. It is the claim of the assessee that expenses incurred as shown under various heads of ledger in Moets Retreat were paid through cheques. The ledger accounts are placed in the paper book. The ld AO partially allowed the 2/3rd of expenditure and disallowed one-third of the expenses in AY 2002-03. We do not find any sound reasoning for Page | 27 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) disallowing part of the expenditure. If the expenditures are incurred wholly and exclusively for the purposes of the business and they are paid by the cheques and no contrary material is found showing that expenditures has not been incurred by the assessee, we do not find any justification for restricting the allowances of the expenditure to only 2/3rd thereof. The CIT(A) restricted the disallowance of expenditure to Rs. 37,334/- by giving reasons of absence of certain vouchers of the specific ledger mentioned by him. We do not find any infirmity as far as this disallowance is concerned in this year as he disallowed one-third of expenses of Rs. 1,12,000/- for which no vouchers were produced. As regards disallowance in other years, the ld CIT(A) has not given any specific reasons but confirmed disallowance on adhoc basis to Rs. 1,50,000/- in AY 2003-04 and 2004-05 on the reasoning that in absence of all the vouchers the above disallowance is reasonable , while in AY 2005-06 whole of the expenditure was allowed by him. But in AY 2006-07 the CIT(A) stated that AO has not pointed out any vouchers of expenses which were not produced but still disallowance has been upheld to the extent of 40% on adhoc basis. We restrict the disallowance in all these years to Rs. 50000/-for each of the assessment year i.e. AY 2003-04, 2004-05 and 2006-07. Since no discrepancy was found in AY 2005-06 the disallowance made by the AO and allowed by the CIT(A) is upheld. Accordingly the Ld. assessing officer is directed to restrict the disallowance for all these years.

Now we come to the expenditure, which are held to be of capital in nature by the revenue. The ld. CIT DR has submitted that the AO has rightly disallowed the expenditure incurred on fixed assets and ld CIT(A) has wrongly allowed depreciation @10% on the fixed assets as no depreciation was claimed by the assessee on this expenditure. On the contrary, Ld. AR argued that these assets were erected by the assessee in each year as per details placed on record in the balance sheets filed and the AO did not find any infirmity on the assets built by him. These Page | 28 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) assets were built on the property owned by LP Hospitality Pvt. Ltd. and after the tenure of five years the same were handed over to them thus, no enduring benefit was received by the assessee. The assets built in the first year were kitchen equipments of Rs. 50,000/- and construction of swimming pool to the tune of Rs. 9,37,000/- totaling Rs.9,87,000/- in AY 2002-03 and additions were also made in swimming pool, scooter, sports and gym equipments in AY 2003-04 of Rs.25,21,026/-, in AY 2004-05 also sports and gym equipments were purchased apart from renovation of the banquet hall provided to the club by the owners totaling to Rs. 21,35,000/-. Thus total expenditure amounting to Rs. 56,43,026/- is revenue expenditure being incurred on the property not owned by the assessee but during the period of operations of the club hence, whole of the expenditure is required to be allowed. We have examined the facts and circumstances of the present case. We find that Moets Retreat Club was made as per supplementary agreement with LP Hospitality who were the owners of the land and building. The infrastructure and the assets built thereon by the assessee have already become the property of the owners now. In fact, another company JS Hospitality is presently running the club who has taken over the liabilities assigned on the assessee. The expenditure incurred by the assessee relates to kitchen equipments, swimming pool, scooter, sports and gym equipments and banquet hall. The banquet hall was already built by the owners and only renovations by way of tiles, painting etc. were made which amounted to Rs. 6,00,000/- only in AY 2004-05 because club members were not satisfied about the conditions of the building of the banquet hall. This expenditure is only in the nature of renovation of the building and therefore is required to be allowed totally. The kitchen and sports equipments are also not in the nature of enduring benefits as all the aforesaid equipments are required to be replaced from time to time. However, expenditure incurred on swimming pool and scooter cannot be allowed as revenue expenditure. The depreciation on these two assets is rightly allowed by the ld. CIT(A). Page | 29 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) The other expenditure incurred by the assessee cannot be said to of capital expenditure in nature because they are of the routine nature such as utensils and sports equipments etc and no enduring benefit can be said to have been acquired by the assessee as these are the normal running expenditure in case of the nature of the business week by the assessee. The Ld. assessing officer also could not show that this expenditure has resulted into naming any enduring benefit to the assessee and to have any material useful life in the nature of the business being run by the assessee . Therefore the Ld. assessing officer is directed to grant deduction of the expenditure as directed above and to consider the balance expenditure as capital expenditure and be upheld of those assets allowability of depreciation by the Ld. CIT (A). Accordingly the Ld. assessing officer is directed to recompute the income of the club for all the years. Therefore the issue No. 1 in the above appeals has been decided accordingly and all the grounds of the appeal of the revenue and the assessee respectively are disposed of with above direction.

The next issue is with respect to Ground No 2 of AY 2006-07 is with respect to disclosure of Rs 2 Crores made by the ld AO confirmed by the revenue. The Ld. AO has dealt with this issue at para No. 5 of his order. The brief facts are that during the course of search 6/12/2005 in reply to question No. 12, question No. 13 and question No. 14 of the assessee has made disclosure under section 132 (4) of the act to stop the assessee disclosed Rs. 4 crores during the course of the statement. Out of the above of the question No. 10 the assessee was shown a loose paper found from his bedroom are as Annexure A –4/1 on which it was written that given in gurugaon during the year April 2005 30/11/2005 of approximately 200 lakhs, the assessee was asked to explain the above paper wherein he replied that the paper contains the details of loans he has given to different persons during the period April 2000 05/02/1930 of November 2005 in gurgaon. The assessee did not disclose the above amount in his return of income. Therefore 26/9/2007 the assessee was Page | 30 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) asked as to why the above what should not be included in the total income of the assessee. To this the assessee submitted reply on 15/12/2007 stating that the assessee has been forced to give the above statement about the loan of Rs. 2 cross without pointing out any evidences. He submitted that assessee has not given any such loan to anybody. He submitted that there is no name the persons the loans have been given with respective name or the terms and condition of such loans but the above amount has been disclosed by the assessee to make the total figure of Rs. 4 crore is without any basis as pressurized by the search party. He further submitted that there is no specific material to support the advancing of the loan to the specified person and the amount of loan. He further stated that about disclosure of Rs. 2 crores cannot be related with the amount of suppression of the sales, which can be taxed, separately on estimate basis. The Ld. assessing officer takes the above amount of Rs. 2 crores on account of loan by the assessee holding that that the seized paper is specific with respect to the nature of transaction, the amount and the period of transaction. He further stated that that the above paper was confronted to the assessee at the time of search and the assessee has made disclosure voluntarily in his statement. In short he rejected the contention of the assessee that the assessee has retracted the above statement timely. The Ld. AO further stated that the revenue is not required to corroborate the about decrement. The assessee challenged the above addition before the Ld. CIT (A) who upheld the above addition. Therefore assessee is in appeal before us.

The grievance of the assessee/appellant was that the CIT(A) did not appreciate that the search party put extensive pressure on the appellant to surrender Rs. 10 crores which was later on reduced to 4 crores and forced the assessee to write on piece of paper provided by them shown as recovered from the bedroom as annexure A-4(1) placed before us at page 797 stating therein as under:

The CIT(A) did not appreciate that appellant filed objection to the DI investigation immediately after the search on 3.03.2006 and in view of that petition, DI- investigation relaxed the payment of tax on the income surrendered during search. The retraction was also made by way of an affidavit during the assessment and the assessee did not declare any such income in the return filed u/s 153A.

The grievance of the Ld. CIT DR was that assessee cannot retract later once income was surrendered during search that too on the basis of document found during search and subsequent denial has no meaning.

The arguments of the Ld.AR filed submission as under :-

The Ld. CIT DR filed written statement, in which various decisions were relied upon by him which are as under:

Kishore Kumar Vs CIT (62 taxmann.com 215, 234 Taxman 771) (Copy Enclosed) Where Hon’ble Supreme Court dismissed SLP against High Court’s order where it was held that since assessee himself stated in sworn statement during search and seizure about the undisclosed income, tax was to be levied on basis of admission without scrutinizing documents.

Bhagirath Aggarwal Vs CIT (31 taxmann.com 274, 215 Taxman 229, 351 ITR 143) (Copy Enclosed) Where Hon’ble Delhi High Court held that an addition in assessee’s income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect.

Raj Hans Towers (P.) Ltd. Vs CIT (56 taxmann.com 67, 230 Taxman 567, 373 ITR 9) (Copy Enclosed) Where Hon’ble Delhi High Court held that where assessee had not offered any satisfactory explanation regarding surrendered amount being not nona fide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified.

In rejoinder, Ld. AR argued that the contents of the document prepared during the course of search have to be read carefully. The assessee put word ―approx..‖ i.e. not specific. The period mentioned Apr 05 to 30 Nov ‘05 clearly shows that this document was forcefully prepared by them as the search took place on 06 Dec 2005 and period for the search year starts from April 2005 and ends at March 2006 therefore assessee was asked to write Nov 2005 to cover the whole period of the year in concern. The Ld. AR argued that neither name of any party was mentioned nor the Page | 36 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) amount mentioned pertaining to any of the party or address of any person mentioned in the paper. The paper was prepared and the assessee had no option but to sign because the statement started at 8 am in the morning and whole night continued, the assessee appellant had no option to run around at late night but to sign on such paper by taking reasonable precautions to avoid any further argument. No tax was deposited which was required to be paid in the normal circumstances when surrender is made. The cheques taken over by the search team by them were never encashed. The assessee immediately retracted and contacted the DI Investigation due to which no pressure was subsequently made by the investigation wing. Neither the investigating officer nor the assessing officer could find any evidence in support of such loan. The assessee has already taken huge loans shown in the balance sheet; there is no reason of giving loans to anybody specifically to the extent of Rs. 2 crores mentioned by the searched team in the piece of paper, which was signed after pressure. The Ld. AR relied upon the following decisions in which additions made on account of income surrendered in the statement recorded at mid night which was retracted after two months held to be not justified [Kailashben Manharlal Chokshi vs. CIT 328 ITR 411 (guj)]. The Ld. AR also relied upon CBDT instructions No. 286/02/2003-IT(Inv.) dated 10-03-2003 and 286/98/2013- IT(Inv.II) dated 18-12-2014.

We have considered the rival contentions and also perused the orders of the lower authorities . The brief facts of the issue involved are that during the course of search on 6/12/2005 the assessee disclosed the sum of Rs. 2 crores in the statement under section 132 (4) of the act on account of giving loans for a specified period. The total disclosure was made on a single line written on a seized paper from the bedroom of the assessee. The main contention of the assessee is that the surrender was retracted before the director of investigation stating that there is coercion Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) for the purpose of disclosure by the search party and overall there are no evidences available with respect to the amount of loan given to various parties. It was also not known to the loans have been given, then the loan amount was given, when the amount was required to be them and the rate of interest. It was further the claim of the assessee that when the assessee has retracted the statement it is for the revenue to show corroborative evidence with respect to the above disclosure made by the assessee. The Ld. CIT (A) has confirmed the addition only on the basis that the search was conducted in the presence of the witness and therefore now it cannot be challenged. Here the issue is not challenged to the search, here the issues involved days whether the addition can be made on the basis of the seized paper found during the course of search from the bedroom of the assessee where there is a mention of the single line that the assessee has given loan to various parties in Gurgaon amounting to Rs. 2 crores. It is apparent that the search was conducted on 12/2005 and the assessee submitted a petition on 3/3/2006 before the director of income tax (investigation). Even the cheque taken by the search party of Rs. 1.2 crore from the bank account of the wife of the assessee has not been deposited by the Ld. AO. During the course of the search the single paper stating the above assertion was found. There is no other material found during the course of the search that assessee has given loan to various parties. There is no diary or the dates of payment of the loan or any cheques from the borrowers or demand promissory note of the borrower were found. If the paper seized in the course of the search is look into which is placed at page No. 797 of the paper book it is apparent that paper is bald and does not disclose anything. It shows that it is merely for making the disclosure of Rs. 2 crores. This paper is also required to be looked into with the statement recorded of the assessee. It is dealt with at question No. 10 of his statement. The assessing officer asked the assessee a question that during the search they have formed a piece of paper from his bedroom Almeida on which it is written that Page | 38 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) ―loans given in Gurgaon during the year upgrade 2005 30/11/2005 approx 200 lakhs rupees‖. The assessee was asked to explain this paper and he replied that this paper contains the details of loans he has given different persons during the period mentioned therein. After that revenue did not raise any question that who are those parties to whom the loans have been given and on which date those loans are given, what are the terms and conditions on which the loans have been given, whether the loans are based on any security provided by the borrower, whether the loans are backed by a cheque issued by the borrower and are they also supported by a demand promissory note. The revenue did not bring on record in his statement all these facts with respect to the loans. We have examined the document placed in the paper book at page 797, an affidavit at page 798-805, the statement at PB 790-796 and the submissions made before the CIT (A) also. The document does not state any specific amount relating to any specific person to whom loan was given as Appr. Rs.200 lakhs is a very vague term when name of the party is not mentioned. The CBDT in their instructions time and again asked the investigation officers to bring supporting evidence on record at the time of recording the statement when income is surrendered. The addition made by AO without corroborative evidence brought on record specifically when the assessee appellant has retracted by way of an affidavit in which he has alleged The cheque issued of Rs.1.2 crores was also from the chequebook of assessee‘s wife Smt. Tanuja Bindra. The revenues relied upon very heavily on the decision of the Kishore Kumar Vs CIT (62 taxmann.com 215, 234 Taxman 771). The facts in that particular decision reported in B. Kishore Kumar v. Dy. CIT [2014] 52 taxmann.com 449/[2015] 229 Taxman 614 (Mad.) Were as under:- “2.1. The brief facts of the case are as under: On 29.8.2006, a search was conducted at the premises of the appellant's father, wherein loose sheets and notings on telephone diaries pertaining to the assessee were found by the department.

The main grievance of the assessee is that the Tribunal has not considered his plea that the Assessing Officer has not scrutinized the materials submitted before him and made additions based on a priori considerations.

We have perused the orders passed by the Tribunal and the authorities below. Though the assessee was at pains to make out an issue that he has made certain submissions and those submissions were not considered by the Assessing Officer and therefore, the Assessing Officer has misdirected himself in determining the tax liability, on going through the order of the Tribunal, we find that the case of the assessee was decided on the basis of Page | 40 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) his own sworn statements dated 29.8.2006 and 10.10.2006 and admitted documents. We extract that portion of the order as has been recorded by the Assessing Officer in paragraph (11), which clinches the whole issue: "11. Therefore, reliance is placed on the admission of the assessee at the time of search, which is reproduced as under: Sworn statement of Shri Kishore Kumar dt. 29.8.2006: 'Qn.11: I am showing you the three print-out of amounts totaling to Rs.52,73,920 (Rs.3,31,336 + Rs.15,05,158 + Rs.34,37,427). Please explain this? Ans: These are the details of loans given by me to various parties as mentioned in the printouts. This is a separate business carried out by me which was not included in the income-tax returns filed by me. Qn.12: Please explain the source for the total outstanding amounts which are given by you? Ans: The loans totaling to Rs.52,73,920 given to various parties as per the list were from my undisclosed income. I agree to pay the relevant income- tax dues for the above declared undisclosed income.' Sworn statement of Shri Kishore Kumar dt. 10.10.2006 (in Tamil): 'Qn.1: I am showing you Ann/BL/B&D/S-3 and sl.No.5, which are telephone index books wherein amounts given in cash to various persons were found recorded. Whom do they belong to? In whose handwriting it is write? What do these amounts represent? Ans: They belong to me. Signature is mine and the notings relate to loans given by me on various dates. This constitutes my separate finance business. There are no regular books for this. According to the documents shown, as on date outstanding loans to be recovered is in the range of Rs.25 Lakhs to 30 Lakhs. The rate of interest is 18% (i.e. Rs.1.50 per 100 per month). The interest income is also not shown in the accounts. The borrowers have committed defaults in repaying the loans and more than 50% of the outstandings are to be treated as bad debts. All the advances were not disclosed in the returns filed.'" This has been relied upon by the Tribunal in full force.

With regard to the undisclosed income of Rs.52,73,920/- supported by printouts, in the sworn statement dated 29.8.2006, the assessee says that he had separate business income which was not included in his income tax returns. Therefore, admission of undisclosed income of Rs.52,73,920/- is categoric and undisputed. The assessee in the sworn statement made on 10.10.2006, stated that outstanding loans to the tune of Rs.25 Lakhs to 30 Lakhs are to be recovered with interest at the rate of 18%. This is a clear admission. This amount has also been calculated and added as undisclosed income. When there is a clear and categoric admission of the undisclosed Page | 41 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) income by the assessee himself, in our considered opinion, there is no necessity to scrutinize the documents. The document can be of some relevance, if the undisclosed income is determined higher than what is now determined by the department. Moreover, it is not the case of the assessee that the admission made by him was incorrect or there is mistake. In fact, when there is a clear admission, voluntarily made, by the assessee, that would constitute a good piece of evidence for the Revenue.

The learned counsel for the assessee relied upon a decision of the Delhi High Court in CIT v. Girish Chaudhary, [2008] 296 ITR 619/163 Taxman 608 to plead that loose sheets of papers should not be taken as a basis for determining undisclosed income. However, in the case on hand, loose sheets found during the search are not the sole basis for determining the tax liability. It is a piece of evidence to prove undisclosed income. The printout statements of undisclosed income is not disputed by the assessee and in his sworn statements it is accepted. In fact, he admitted that outstanding loans to be recovered are in the range of Rs.25 Lakhs to 30 Lakhs. We find no error in the procedure followed by the Assessing Officer on admitted facts. The entire exercise by the department to bring to tax undisclosed income, we find has been generous and simple. There appears to be no confusion in the quantification of the tax liability and we uphold the order of the Tribunal.

We have carefully produced the facts of that case with the case of the assessee. In the case relied upon by the revenue there were two statements of the assessee in which the facts of disclosure on account of the loan was confirmed. Furthermore, the assessee did not challenge his admission made by him during the course of the search. Has also disclosed that he is carrying on the finance business and he is also earning interest thereon at the rate of 18% on the amount financed. Therefore on this basis the Hon‘ble high court confirmed the addition based on the statement. In fact in that particular case the assessee wanted an adjustment of the total disclosure only and not retraction the wall amount disclosed. In the present case as the facts already discussed above the assessee retracted the statement of filing letter before the director of investigation (investigation) and also filing an affidavit before the Ld. assessing officer. During the course of search there were no evidences found except the release of the paper where there are no details of the loans given by the assessee as well as the amount of interest are. It is also interesting to note that the balance sheet of the Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) assessee assessee has borrowed from various parties therefore also it is unusual that assessee for also from other parties and also gives loan to other parties. It is also interesting to note that there is no interest element involved in these loans which is been added by the assessing officer. Therefore the decision relied upon by the revenue does not apply on the facts of the case before us. 2nd decision relied upon by the revenue is Hon‘ble Delhi High Court in 37. case of Shri Bhagirath Agarwal (supra) however in that particular case it was not an issue of the retraction. Therefore that decision to does not apply on the facts of the case.

In view of the aforesaid facts and circumstances, we hold that addition of Rs. 2 crores is not based on any evidence and therefore is deleted. In view of this issue No. 2 is decided in favour of the assessee. We now come to the 3rd issue of the estimation of the gross profits with 39. respect to several restaurants business carried on by the assessee. The brief facts of the case show that assessee individual earning income from business being proprietor different entities, which are carrying on restaurant business. The Ld. assessing officer due to incomplete supporting evidences in absence of justification of the GP rate declared by the appellant at the rate of 13.26% applied the GP rate of 30% considering the sales of Rs. 1139 8723/–. Therefore, it the addition was made to the total income of the assessee for assessment year 2007 – 08. With respect to the assessment year 2002 – 03 to 2006 – 07 the Ld. assessing officer rejected the books of accounts of the assessee holding that the sales are not fully recorded and no books of accounts are found at the premises of the assessee at the time of the search. The Ld. assessing officer was further impressed by the fact that the statement given by the employees showing the improper maintenance of records by the appellant stop he rejected the books of accounts and declared the net profit and gross profit shown by the assessee as there are unrecorded sales as per the seized paper. Therefore, the Ld. assessing officer and Page | 43 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) adopting the GP rate in the case of the assessee at the rate of 30% Moets catering and Moets Kabab. The 10% of the gross profit ratio was estimated in case of retreat. The assessee declared gross profit of 6.06 percentages in Moets Catering, 27.82% in Moets Kabab and 5.35% in retreat. The Ld. CIT appeal estimated 15%, 27.82% and 8.9% following the order of the coordinate bench in case of concerns . Therefore both the parties are in appeal before us on this issue. The grievance of the assessee appellant is that CIT(A) has estimated the GP arbitrarily without examining the facts of the case in each year. The grievance of the revenue was that GP Rate was rightly adopted by the AO and the ld CIT (A) has reduced the same without any basis. The parties argued on the similar line are before the Ld. CIT appeal and in the order of the Ld. assessing officer.

During the course of hearing summary of GP Rate was separately filed and it was argued that in AY 2002-03 the assessee was mostly engaged in settling the club due to which GP Rate of Moets Catering Services has come down while CIT(A) has adopted 15% GP Rate in all the years except AY 2003-04 against GP Rate declared by the assessee @11% to 17% in AYs 2003-04 to 2006-07. In AY 2003-04 the assessee already disclosed GP rate of 17.16% and CIT(A) even then enhanced to 20.53%. The LD. AR insisted that GP Rate exorbitantly enhanced in AY 2002-03 and 2003-04 be reduced and GP Rate declared by the assessee in all other years be also adopted as rightly declared by the assessee.

The Ld. departmental representative vehemently stated that the Ld. assessing officer has given a reason how the gross profit ratio of each of the business has been determined and therefore the Ld. CIT (A) has not given the justifiable reasons for reducing the gross profit rate.

We have carefully considered the rival contention and also the orders of the lower authorities. The estimation of the profit is arising because of the rejection of the books of accounts. The grievance of the assessee is that books of accounts were rejected merely on the basis of statement of Page | 44 Sandeep Bindra Vs. ACIT, to 2651 /Del/2011 ITA No. 2782 to 2786 and 1286/Del/2011 (Assessment Year: 2002-03 to 2006-07) employees in which one of the employees was accountant while other was not involved with the accounts. The ld AO did not appreciate that the accountant never said that books of account were not maintained but only stated that small pieces of paper were torn after recording the same in the computer in which books of accounts were maintained. After perusing the facts and circumstances of the case we find that the assessee has filed return u/s 153A and thereafter revised the same twice in most of the years declaring undisclosed income. This shows that the books of account are not fully correct. The CIT(A) is therefore correct in upholding the action of the assessing officer in rejecting the books of accounts. Further with respect to the estimation of the gross profit, We have examined this issue and find that CIT(A) has given very detailed order and come to the conclusion by adopting 15% GP Rate in most of these years except AY 2003-04 so far as business of Moets Catering Services is concerned, but it is true that in the year AY 2002-03 the assessee was engaged in the new business of developing a club at the same premises and so GP Rate adopted @15% in that year as against 6.06% declared by the assessee is not justified, and therefore same needs to be scaled down. In the interest of the justice, the Ld. assessing officer is directed to adopt at 8%. With respect to the other years the Ld. authorized representative could not show was any reason to deviate from the finding of the Ld. CIT (A). The Ld. departmental representative also could not show that how the decision of the Ld. CIT (A) is not justify where he has followed the order of the coordinate bench in case of a group concern. Therefore In AY 2003-04 assessee himself declared GP Rate of 17.16% which was more than 15% adopted in other years, thus the adoption of 20.53% in this year is also not justified the GP Rate in this year is rightly declared and the same be adopted. However, in other years the GP Rate of 15% adopted by the CIT(A) seems to be justified and is therefore upheld. In other businesses, also, the GP Rate adopted by the CIT (A) seems to be justified and no interference is called for. In Page | 45