NAVEEN TYAGI,GHAZIABAD vs. DCIT, CENTRAL CIRCLE , GHAZIABAD

We have heard the rival submissions and perused the materials available on record. During the course of search, a sum of Rs 21,00,000/- was found in the form of cash in the following manner:- Cash found from residence – Rs 14,00,000/- Cash found from locker - Rs 7,00,000/- The assessee is an employee of M/s Vibhav Vaibhav Infra Home P Ltd working as Head of Finance. The assessee submitted that the said cash pertains to the said company and he was holding it as a custodian in the capacity of Head of Finance of the said company. Moreover, certain IOUs were there on the date of search which were not incorporated in the cash book prior to the search. The same were however entered in the cash book of the said company after the date of search. In any case, the company had owned up the cash of Rs 21,00,000/- and had also come forward to explain the source for the same to have drawn from the available cash balance as per its cash book. During the course of search, a statement u/s 132(4) of the Act was recorded from the assessee , wherein the assessee had categorically stated that the cash belongs to the company M/s Vibhav Vaibhav Infra Home P Ltd vide reply to Question No. 31 of the statement. The ld. AO however, did not heed to these contentions of the assessee and proceeded to treat the cash found during search as unexplained money u/s 69A of the Act in the hands of the assessee. This action of the ld AO was upheld by the ld CIT(A). Aggrieved, the assessee is in appeal before us.

The Ground No.2 raised by the assessee is challenging the chargeability of interest u/s 234A, 234B and 234C of the Act. In the instant case, the return was filed by the assessee belatedly. Hence interest u/s 234A of the Act is leviable as per the Act. The chargeability of interest u/s 234B of the Act is consequential in nature and does not require any specific adjudication. It is well settled that interest u/s 234C of the Act is to be made only on the returned income and not on the assessed income. The Ground No. 2 raised by the assessee is partly allowed.

In the result, the appeal of the assessee is partly allowed.

Ground Nos. 2 and 3 raised by the assessee are challenging the addition made in the sum of ₹39,07,928/- on account of alleged on-money paid by the assessee for purchase of flat. The assessee has raised additional grounds of appeal

We have heard the rival submissions and perused the material available on record. For AY 2016-17, the assessee originally filed his return of income on 30.01.2017 declaring total income of ₹17,09,970/-. A search was conducted u/s 132 of the Act at the business and residential premises Page | 11 of VVIP & SSG Group of cases/ directors and partners on 03.11.2016. Accordingly, a notice u/s 153A of the Act stood issued to the assessee. The assessee filed his return of income on 05.09.2018 in compliance to notice issued u/s 153A of the Act disclosing total income of Rs. 17,09,970/-. During the course of search, a document containing details of payment made by various persons for sale of units in VVIP project was found and seized from the residential premises of Shri Praveen Tyagi, Director of M/s Vaibhav Vibhor Infrahome Private Limited (VVIP Ltd). The documents contained details of payments received by the said concern i.e. VVIP in cheque and in cash. Shri Praveen Tyagi explained the documents during the course of search proceedings and offered an amount of ₹16.65 crores for taxation as undisclosed income of VVIP Ltd. Relevant seized documents in this regard is Annexure-A page 26 of the paper book. Shri Praveen Tyagi in his statement u/s 132(4) of the Act had stated that amounts reflected in the said seized documents were received by VVIP Limited against the booking of flats in financial year 2015-16 in the months of April and May 2015. Shri Praveen Tyagi is the Chief Managing Director of VVIP Limited and he came forward to offer the cash component reflected in the said seized document amounting to ₹16,65,60,788/- as undisclosed income of VVIP Ltd for Assessment Year 2016-17. The ld AO observed that the assessee had made booking of a flat bearing No. I–301(2) for total consideration of ₹1,62,88,282/- and has made payment of ₹1,59,59,893/- as reflected in the seized documents. The ld AO made an addition of ₹1,59,59,893/- as unexplained investment in flat made by assessee and brought to the same to tax u/s 69 of the Act. This was reduced to ₹39,07,928/- by the ld CIT(A) on the ground that only this sum was paid in cash by the assessee as on-money and the remaining sums to the tune of ₹1,20,51,965/- were paid by cheques on various dates commencing from 13.12.2011 to 31.03.2015. The ld CIT(A) also observed at page 26 of his order that service tax was also paid by the assessee on payment made in cheques. The ld CIT(A) also admitted to the fact that the payments in cheques were made by the assessee in earlier years, either out of own funds or out of loan from HDFC Bank Limited to the tune of ₹66,17,057/-. Aggrieved by the sustenance of the addition of ₹39,07,928/- by the ld CIT(A) on account of alleged on money payment made in cash for purchase of flat, the assessee is in appeal before us.

It would be pertinent to reproduce the relevant seized documents i.e. Annexure-A at page 26 of the paper book as under:-

From the above table, it could be seen that there is absolutely no mention of any date of receipt of money, be it in cheque or in cash. As far as the payment is concerned, ld CIT(A) in page 25 para 6.16 of his order had categorically stated that cheque payments were made from 13.12.2011 to 31.03.2015. Hence, it is very clear that no cheque payments Page | 13 were made by the assessee in Assessment year 2016-17. The assessee had categorically denied having not made any cash payment in the sum of ₹39,07,928/- towards purchase of flat. In this regard, the reliance placed by the ld AR on the decision of the Hon’ble Bombay High Court in the case of Sumathi Janardhana Kurup Vs. ITO in Writ Petition No. 1746 of 2020 dated 12.02.2024 is very well founded. The facts of that case together with the adjudication by the Hon’ble Bombay High Court are reproduced herein:- “1. Ms. Agarwal states a physical copy of reply has been handed over to her this morning and she may have to file a rejoinder.

Having considered the petition, we do not think there is any need to file a rejoinder. Petition can be disposed at this stage because we are not at all satisfied with the order passed by Respondent. In our view, it is an unacceptable order.

Petitioner is a senior citizen aged 75 years. During the year under consideration, i.e., Assessment Year 2015-2016, for which Petitioner has not filed return of income since there was no taxable income, Petitioner paid a sum of Rs. 10,00,000/- in two tranches, i.e., Rs. 5,00,000/- on 28th February 2015 and another Rs. 5,00,000/- on Gitalaxmi 2/6 406-aswp- 1746-2024.doc 2nd March 2015 to one M/s. Lucina Land Development Limited ("Lucina") against allotment of a flat being Flat No. 5C-2061, Rose in the joint name of Petitioner and her grand-daughter Divya.

Petitioner had initially received a notice dated 11 th June 2021 under Section 148 of the Income Tax Act, 1961 ("the Act"). The notice was not proceeded with. Subsequently, after the Apex Court's judgment in the matter of Union of India v. Ashish Agarwal 1, a fresh notice dated 26th May 2022 under Section 148A(b) of the Act was served upon Petitioner. It is alleged in the notice that the department had carried out a search and seizure action under Section 132 of the Act in the case of M/s. India Bulls and its group concerns on 13 th July 2016. During the search operation, there was some material they found regarding unaccounted income, which included on-money (cash) receipts on sale of certain flats/units by different entities for the group which inter-alia included an entity M/s. Lucina Land Development Limited and Lucina has admitted having received cash from different customers, which included Petitioner. It is also alleged that Lucina has admitted having received a sum of Rs. 20,91,200/- from Petitioner. Based on this information, the notice under Section 148A(b) of the Act has been issued.

Petitioner replied vide a letter dated 13th June 2022, which has been relied upon in the affidavit-in-reply. It is stated in the reply that only Rs. 28,04,337/- has been paid to Lucina of which Rs. 10,00,000/- were only paid during the relevant assessment year and the balance was still payable and Petitioner is not filing return of income as her income was below taxable limits. It is also stated in the reply that the source of payment for the flat is from redemption of Fixed Deposits, Loans from the daughter and son-in-law. The total payments made for the flat also is tabulated in the reply. Further, there is a categorical denial that any amount has been paid in cash to the builder in addition to the basic price of the flat. A final defence also has been taken that the case also does not qualify within the ambit of Section 149 of the Act, as there is no income chargeable to tax represented in the form of an 'asset', which has escaped assessment amounting to Rs. 50,00,000/- or more and therefore, the notice issued under Section 148 of the Act was not valid.

After the order dated 23rd July 2022 under Section 148A(d) of the Act was passed, an assessment order has been passed and Petitioner admits having filed an appeal. But the concern is, Petitioner will be directed to deposit 20% of the tax amount and Petitioner is not in a position to pay the same.

Ms. Agarwal stated that when on the face of order under Section 148A(d) of the Act it could not have been passed, Petitioner who is 75 years old and looking after her 88 years old husband suffering from Parkinson, should not be made to go through the misery of waiting for the appeal itself to be heard and also having to deposit 20% of the demand. Ms. Agarwal also submitted that penalty proceedings will also be issued and Petitioner will have to endure that also.

In view of the peculiar facts and circumstances of the case, we decided to entertain this petition under Article 226 of the Constitution of India.

Even in the assessment order, it is stated "therefore, during the assessment proceedings, the source of payments alongwith on-money payment towards the purchase of flat have been asked to assessee. However, assessee has failed to provide the justified reply in regard to the complete source of payments, which have been made during the Assessment Year under consideration for purchase of flat." During the assessment year, only a payment of Rs. 10,00,000/- has been paid and there is nothing that the AO has produced to show that any amount in excess of Rs. 50,00,000/- has been paid during the assessment year. The entire basis is the letter received from Lucina. In our view, that alone is not enough, particularly when assessee has Gitalaxmi 6/6 406-aswp-1746- 2024.doc denied having paid any cash to Lucina. The onus is on the Revenue to show evidence that assessee has in fact paid cash and purchased immovable property of Rs. 64,94,200/-. Simply relying on a letter allegedly from Lucina is not enough. In our view, there is no tangible matter to issue notice under Section 148A or Section 148 of the Act.

In the circumstances, in our view, the impugned order dated 23rd July 2022 passed under Section 148A(d) of the Act has to be quashed and set aside. Ordered accordingly. Consequently, the notice issued under Section 148 of the Act and the assessment order also are quashed and set aside.

In view of the above, Ms. Agarwal states they shall immediately take steps to withdraw the appeal filed. Statement accepted.

Though ultimately the Hon’ble Bombay High Court had quashed the reassessment notice, the observationsmade in paras 6,10, and 11 above would be very much relevant and equally applicable to the facts of the instant case before us and no addition could be made in the hands of the assessee herein based on the statement of Praveen Tyagi, which was recorded during the course of his search in the capacity of Chief Managing Director of VVIP Ltd.

Even assuming that assessee had made had made the cash payment, there is absolutely no evidence from the seized documents, indicating that the said cash payment of ₹39,07,928/- was made in Assessment year 2016-17. The basis for the revenue to consider those alleged cash payment of ₹39,07,928/- to have been made in Assessment year 2016-17 is from the statement of Shri Praveen Tyagi u/s 132(4) of the Act in response to Question No. 22 thereon. That statement is merely a statement and not supported with any other corroborative evidence found during the course of search. Hence, it is very clear that there is no such material indicating the date of payment of alleged on-money by the assessee to VVIP Ltd or to any other person in the sum of ₹39,07,928/-. There is absolutely no basis for making an addition of ₹39,07,928/- in Assessment year 2016-17 by invoking the provisions of Section 69 of the Act. Further, in any event, even if there is any cash payment that is required to be made for purchase of flat, the said cash payment would be made by the person at the time of booking of flat or at the time of making the first phase of payment by cheque which, in the instant case as considered by the ld CIT(A) is 13.12.2011. Hence, the alleged cash payment could be considered only in Assessment year 2012-13 and not in Assessment year 2016-17. This is in view of the fact that no builder or no seller of the flat would afford to take huge risk of not receiving the cash component involved in a particular property transaction as seller/ builder would always try to secure their position and remain in safe zone by receiving the cash component first and then do the documentation for the cheque portion. Hence, the theory of preponderance of probability which is heavily relied upon by the revenue actually goes in favour of the assessee herein. In the instant case, the booking of flat has been made by the assessee on 4.12.2011, as evident from the allotment letter given by the VVIP Ltd.

It is pertinent to note that the ld CIT(A) in page 20 para 6.9 of his order had categorically stated that Annexure-A page 26 seized document has been found in the residential premises of Shri Praveen Tyagi and accordingly presumption u/s 132(4A) read with Section 292C of the Act would go in favour of the Shri Praveen Tyagi. In other words, as per these 2 sections, the law presumes that whatever is found in the course of search on the premises of the searched person belongs to the searched person, though this presumption is rebuttable with cogent supporting evidences. Hence, in the instant case, when Shri Praveen Tyagi was confronted by the search team with the seized documents Annexure –A, page 26, he admitted the fact that the transaction reflected therein pertaining to cheque and cash transaction received by VVIP Ltd from various flat owners. He never denied that this transaction does not belong / pertain/ relate to VVIP Ltd. It is also relevant to note that the statement of Shri Praveen Tyagi was recorded by the search team of Chief Managing Director in the capacity of Chief Managing Director of VVIP Ltd. If part of a transaction reflected in such seized documents is being used against the third-party, like the assessee herein, then the logical recourse provided in the statue to the revenue is to record a satisfaction note in the hands of searched person that part of document pertains/ relates/ belongs to 3rd party like the assessee herein and hand over such seized documents to the ld AO of the 3rd party like the assessee herein to take any further action known to law. Thereafter, it is the duty of the ld AO of the 3rd party like the assessee herein, after due examination/ enquiries of the transaction of the assessee qua the returns filed and evidences available on record, to record a satisfaction note in terms of Section 153C of the Act that the said seized documents received from the ld AO of the searched persons belongs/ relates/ pertains to the assessee herein and it has a bearing on determination of total income of the assessee. This is clear mandate provided in Section 153C of the Act and has been approved by various Hon’ble High Courts and Hon’ble Supreme Court. In the instant case, no such satisfaction note was ever recorded and no proceedings u/s 153C of the Act were initiated on the assessee herein. The ld AR also placed on record a copy of panchanama drawn on 05.11.2016 in the case of Shri Praveen Tyagi in the premises R-9/242, Rajnagar, Ghaziabad. On perusal of the said Panchnama, we find that the name of Shri Naveen Tyagi i.e. assessee herein, does not figure at all. Hence whatever is being found and seized in the aforesaid residential premises of Shri Praveen Tyagi, if they are sought to be used against the assessee, then the department should have proceeded on the assessee u/s 153C of the Act. It is not in dispute that the assessee was independently covered in the search u/s 132 of the act and proceedings were initiated u/s 153A of the Act in his hands for the year under consideration. But that does not mean that evidence found in the search of a third-party premises could be used in the search assessment proceedings of the assessee u/s 153A of the Act. The legislature in its wisdom permits two search assessments to be framed for the same assessment year – one u/s 153A of the Act and other u/s 153C of the Act. In the search assessment u/s 153A of the Act, the assessment is to be framed based on the materials found during the course of search of that assessee plus the declared income. In the search assessment u/s 153C of the Act, materials found in the premises of third- party could be used on the assessee provided search material has a bearing on determination of total income of the assessee after recording due satisfaction note as mandated in Section 153C of the Act. This is the clear mandate of law in Section 153A and 153C of the Act. This mandate cannot be changed merely because Shri Naveen Tyagi (assessee herein) is also part of VVIP Limited. Reliance has been rightly placed by the ld AR on the coordinate bench decision of Kolkata Tribunal in the case of Krishna Kumar Singhania V. DCIT reported in 168 ITD 271 (Kolkata Tribunal). Relevant operative portion of the said order is reproduced here in below:- “10. We have heard the rival submissions. We find that it is not in dispute that there were no documents that were seized from the premises of the assessee except loose sheets vide seized document reference KKS /1 comprising of 8 pages, for which satisfactory explanation has been given by the assessee and no addition was made by the Id AO on this seized document. The seized document used by the ld AO for making the addition in section 153A assessment is CG/1 to 11 and CG/HD/1 which were seized only from the office premises of Cygnus group of companies in which assessee is a director. In this regard, it would be pertinent to note that as per section 292C of the Act, there is a presumption that the documents, assets, books of accounts etc found at the time of search in the premises of a person is always presumed to be belonging to him/them unless proved otherwise. This goes to prove that the presumption derived is a rebuttable presumption. Then in such a scenario, the person on whom presumption is drawn, has got every right to state that the said documents does not belong to him / them. The ld AO if he is satisfied with such explanation, has got recourse to proceed on such other person (i.e the person to whom the said documents actually belong to) in terms of section 153C of the Act by recording satisfaction to that effect by way of transfer of those materials to the AO assessing the such other person. This is the mandate provided in section 153C of the Act. In the instant case, if at all, the seized documents referred to in CG/1 to 11 and CG/HD/1 is stated to be belonging to assessee herein, then the only legal recourse available to the department is to proceed on the assessee herein in terms of section 153C of the Act. In this regard, we would like to place reliance on the recent decision of the Hon'ble Delhi High Court in the case of CIT v.

Hence, the objections raised by the ld DR in her written submissions that the premises of Shri Naveen Tyagi was also searched as part of VVIP group along with premises of Shri Praveen Tyagi and the premises of VVIP Ltd, has no substance. We have also found that the ld DR has relied on the decision of the Hon'ble Supreme Court in the case of CIT Vs. S Ajit Kumar reported in 404 ITR 526 (SC) wherein, it was held that any material or evidence found/ collected in a survey which has been simultaneously made at premises of connected person can be utilized while making block assessment in respect of an assessee u/s 158BB read with section 158BH of the Act as it would fall under words “and such other materials or information as are available with Assessing Officer and relatable to such evidence’ occurring in section 158BB of the Act. It has to be understood that this decision was rendered in the context of erstwhile provisions of Chapter XIVB of the Act for computation of undisclosed income for the block period wherein in Section 158BB of the Act, there was a specific inclusion of the following words “and such other material or information as are available with Assessing Officer relevant to such evidence.” It is pertinent to note that this expression is conspicuously absent in section 153A of the Act. Hence, the decision relied upon by the ld DR in the case of S. Ajit Kumar (supra) does not advance the case of the revenue. Further, we find that the Hon’ble Jurisdictional High Court in the case of PCIT vs Anand Kumar Jain HUF in dated 12.02.2021 had an occasion to address the very same legal issue. The relevant question Page | 21 raised before the Hon’ble Jurisdictional High Court High Court was as under:- “a. Whether the ITAT is justified in deleting the additions made on account of bogus long term capital gain on the ground that the evidences found during search at the premises of entry provider cannot be the basis for making additions in assessment completed u/S. 153A in the case of beneficiary ignoring the vital fact that there was a common search u/s 132 conducted on the same day in both the cases of the entry provider and the beneficiary.”

In view of the aforesaid detailed observations and respectfully following the various precedents relied upon hereinabove, we hold that the Additional Ground No. 2 raised by the assessee deserves to be allowed. Accordingly, the adjudication of Additional Ground No. 1 raised by the assessee becomes academic in nature, and accordingly not adjudicated. Hence, the alleged on-money payment of ₹39,07,928/- cannot be considered in the search assessment framed in the hands of the assessee u/s 153A of the Act. Even on merits of the addition, we have already held that these additions cannot be made in Assessment year 2016-17. Accordingly, Original Ground Nos. 2 and 3 raised by the assessee hereby allowed.

The Original Ground No. 5 raised by the assessee is challenging the chargeability of interest u/s 234A, 234B, 234C of the Act.

We have heard the rival submissions . If there is any delay in filing of return in response to notice u/s 153A of the Act by the assessee, then interest u/s 234A of the Act is chargeable. The ld AO is directed accordingly.

In the result, appeal of the assessee is partly allowed. - Sarika Tyagi-AY 2016-17 31. Identical original and additional grounds are raised by this assessee as were raised in case of Shri Naveen Tyagi except the fact that no ground was raised on the addition made towards cash deposit of by Ms. Sarika Tyagi. Hence the decision rendered by us hereinabove for Shri Naveen Tyagi shall apply mutatis mutandis for Ms. Sarika Tyagi also except with variance in figures.

In the result, the appeal of the assessee in case of Ms. Sarika Tyagi case in is allowed.

Ground No. 2 raised by the revenue is challenging the addition u/s 68 of the Act on account of unsecured loan of ₹7,53,250/- 36. We have heard the rival submissions and perused the material available on record. During the assessment proceedings, since no representation was made by the assessee, ld AO directly proceeded to add the unsecured loan of ₹7,53,250/- as unexplained cash credit in the hands of the assessee. But before ld CIT(A), it was explained that loans were received from the following parties: – Sarika Tyagi (wife of assessee) Rs. 2,50,000/- HPS Greens Infrastructure Private Limited Rs. 5,03,250/- Total Rs. 7,53,250/- 35. It was submitted that loan from Ms. Sarika Tyagi was received in earlier year and was brought forward as opening balance and accordingly deleted the addition towards loan amount received from Sarika Tyagi as the amount was not received during the year and provisions of Section 68 of the Act cannot be made.

With regard to loan from HPS Green Infra Structure (P) Ltd, the ld CIT(A) verified the ledger account and found that assessee had received ₹56.03 lakhs and had paid back ₹51 lakhs thereby leaving a closing balance of ₹5.03 lakhs. The ld CIT(A) observed that all the receipts and payments were made through regular banking channels and the bank statements of the lender as well as assessee were examined to find out availability of sufficient funds in the bank account before making the said payment by the either party and also examined the return of income of the lender and from the audited financial statements found that it has own fund of ₹2.27 crore. Hence, ld CIT(A) concluded that the lender is having sufficient creditworthiness to advance loan to the assessee. Since all the 3 ingredients of Section 68 were duly fulfilled, the ld CIT(A) deleted the addition. None of the aforesaid factual findings of the ld CIT(A) were controverted by the revenue before us. Hence, we do not find any infirmity in the order of the ld CIT(A) in granting relief to the assessee. Accordingly, Ground No. 2 raised by the revenue is dismissed.

Ground No. 3 raised by the revenue is challenging the deletion of addition made on account of investment in shares of Rs. 10,00,000/-.

We have heard the rival submissions and perused the material available on record. On verification of the seized documents Annexure LP- 1 page 26, it was found that the assessee had acquired 10,000 shares of Rs. 10 each of Ms/ Frystal Polymers on transfer from Central Himalayan Farms (P) Ltd on 19.10.2010. This transaction valued at ₹10 lakhs was sought to be treated as unexplained investment for purchase of shares in the assessment as there was no representation from the side of the assessee. From the order of the ld CIT(A), it was duly clarified that the investment is only Rs. 1 lakh (10,000 X 10) and not Rs. 10 lakhs. Accordingly, the ld CIT(A) confirmed the addition only to the extent of Rs. 1 lakh and deleted the remaining arithmetic error of Rs. 9 lakhs. We do not find any infirmity in the order of the ld CIT(A) as what is sought to be corrected is only an arithmetic error committed by the ld AO. Accordingly, ground No. 3 raised by the revenue is dismissed.

Ground No. 4 is general in nature and does not require any specific adjudication.

To sum up, Sr AY Result No. 1 1386/Del/2022 Sushil Tyagi 2011-12 Dismissed 2. 1412/Del/2022 Naveen Tyagi 2016-17 Partly allowed 3. 1414/Del/2022 Sarika Tyagi 2016-17 Allowed 4. 1413/Del/2022 Yogender 2017-18 Partly Singh allowed 5. 1387/Del/2022 Yogender 2017-18 Dismissed Singh