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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DELHI
ORDER PER K.N.CHARY, JUDICIAL MEMBER Challenging the order dated 29.09.2011 in Appeal No.376/2008-09 passing by the Commissioner of Income Tax (Appeal) [in short “CIT(A)”]-III, Delhi for 2005-06 Assessment Year, the Revenue filed this appeal on the following ground:- “
Whether on the facts and on the circumstances of the cases, the Ld.CIT(A) erred in deleting the addition of Rs.2,35,00,000/- on account of receipts of “on money” received through sale of space in Villa Nova project by relying on the issue of preponderance of probability being not substantiated and ignoring the fact that there is evidence in the shape of seized documents referring to cash received in Villa Nova projects and that assessee company is one of joint collaborators of the project villa Nova.”
2. Briefly stated facts are that the assessee is a company incorporated on 10.09.1993, derives income from the business of builder and real estate. They have entered into a joint venture with M/s Vipul Infrastructure Developers Ltd. (Now known as M/s Vipul Ltd.) and M/s Bhudeep Builders & Exporters Pvt.
Ltd. with 37.5%, 37.5% and 25% of shares respectively. Assessee filed its return for the AY 2005-06 on 19.01.2007 declaring total loss of Rs.22,050/-.
There was a search in the group concern of M/s Vipul Ltd. and the residence of Mr. Moti S. Masand on 01.06.2006, wherein certain incriminating papers were seized from the premises of Mr. Masand. Statements of Mr. Masand were recorded on 01.06.2006 & 27.08.2008 and basing on the contents of document No.52 of the seized material, AO concluded that the amount of Rs.2.35 crores reflected in such documents was received in cash by M/s Vipul Ltd. When called for by way of notice, the plea that subsequent to the Joint Venture Agreement with M/s Vipul Infrastructure Developers Ltd. and others, the assessee had nothing to do with the planning, execution and development of the project and also marketing which was the responsibility of M/s Vipul Group and it was the Vipul Group that obtained the sale proceeds from the intending buyers. Assessee further pleaded that they have no knowledge about the aggrieved and received sale consideration as mentioned in the statement as recovered from Mr. Masand. However, AO held that it is not believable that the assessee is not aware of the cash exchange in respect of sale of space in Villanova and added a sum of Rs.2.35 crores in the hands of the assessee.
Aggrieved by the addition of Rs.2.35 crores, the assessee carried the matter in appeal to the Ld.CIT(A) taking the very same plea as was pleaded before the AO. Ld.CIT(A) by way of impugned order held that the questioned document No.52 recovered from Mr. Masand cannot be said to be belonging to the assessee and since the condition precedent for fastening the liability on the assessee is that the document or the asset found seized during the search should belong to the assessee, as such following the decisions reported in pg. 2 P.Srinivasa Naik vs ACIT, Central Circle-1(2), Banglore 114 TTJ 856 and Vijaybhai N.Chandrani 2331 CTR 474 Gujarat High Court. Ld.CIT(A) held that no liability could be fastened on the assessee basing on the document which does not belong to him. Ld.CIT(A) found that the alleged document No.52 relates only to the details of transactions of M/s Vipul Ltd. and the details of the commission and by Mr. Masand. Further as a matter of fact, Ld.CIT(A) found that as per the Joint Venture Agreement between M/s Vipul Ltd. & M/s Orchid, it was M/s Vipul Ltd. that is authorized to obtain all relevant approvals and sanctions for the development of Villanova project and authorized for the sale and marketing of the saleable area in the projects by applying its marketing skills to fetch the best market price and also to do all publicity, advertising, printing of brochures etc., as such the assessee was in no way in a position to interact in financial terms with the customers of the Joint Venture.
In these circumstances, by holding that the addition to income made in the assessee’s case is based on presumption of facts that when unaccounted receipt was being received by M/s Vipul Ltd. with whom the assessee is a joint venture partner in the project, the assessee also must have received his share of unaccounted receipts. Consequently, Ld.CIT(A) allowed the appeal and deleted the addition. Hence this Revenue’s appeal before us.
It is the arguments of the Ld.AR that the alleged document No.52 does not belong to the assessee and it only contains the details of the projects of M/s Vipul Ltd. and the commission earned by Mr. Masand. Further, he brought to our notice that Mr. Masand is one of the Directors of M/s Vipul Ltd. and when the addition was made in respect of the amounts reflected in this document No 52, in the hands of M/s Vipul Ltd., a Co-ordinate Bench of this pg. 3 Tribunal in & 5999/Del/2010 vide order dated 24.05.2013 held that the disclosure made by Mr. Masand would only bind him and it does not bind the third parties like M/s Vipul Ltd. and anyone else. It was further held that the calculations made by Mr. Masand at page No.52 do not reflect the true business affairs of M/s Vipul Ltd. and such details were complied only for the calculation of his growth as he has worked as independent consultant instead of an employee. Basing on these observations, the Tribunal deleted the entire addition made in the hands of the M/s Vipul Ltd., as such, no addition could survive basing on the alleged page No.52 of the seized material. He produced a copy of the said order. Ld.DR vehemently relied on the orders of the AO.
We have carefully gone through the record in the light of the contentions raised in the assessment order and by the Ld.AR. The alleged document No.52 is produced before us by way of page No.6 of the Paper Book and vide Row No.8, Nova and vide Column No.5, an amount of Rs.2.35 Crores are shown.
Except this, nothing could be deciphered from this document. Revenue could not substantiate before us that this document belongs to the assessee. Unless and until it is shown that this document No.52 belongs to the assessee, no addition could be made. In that sense, the Revenue failed to substantiate before us, how the observations of the Ld.CIT(A) on this aspect are erroneous or perverse. Further, the finding of a Co-ordinate Bench of this Tribunal vide order dated 24.05.2013 passed in & 5999/Del/2010 held that the details mentioned in the alleged document No.52 do not bind or relate to anyone else than Mr. Masand himself and as a matter of fact that this document is not a record of the business affairs of M/s Vipul Ltd. but it is only a calculation relating to the commission earned by Mr. Masand as an pg. 4 independent consultant. In these circumstances, we find that Ld.CIT(A) is perfectly justified in holding that the very basis of the presumption raised by the AO basing on document No.52 is failed to link up any business dealings of Mr. Masand with the assessee in this case. We, therefore, find it difficult to sustain the addition made basing on an unconnected and irrelevant document.
We find that nothing irregularity and illegality in the order of the Ld.CIT(A), hence we do not find any reasons to interfere with the same. We, therefore, do not find any merits in this appeal as such the same is liable to be dismissed.
In the result, the departmental appeal is dismissed.
The order is pronounced in the open court on 09th November, 2017.