ITO,WARD-10(1), NEW DELHI vs. GOVINDAJEE BUILDTECH PVT. LTD., NEW DELHI

In the impugned order of CIT(A), as first appellate authority, the CIT(A) observes that in assessment order, at paras 6 and 6.1, the AO has noted that on verification it is seen that investigation wing, Delhi found credible evidences and details during the search & seizure operation carried out on Kartar Singh Group wherein certain documentary evidences were seized, which reflect the market price of various properties purchased by Shri Sumit Gupta and the companies controlled by him including the assessee. It is further stated that the 3 actual market rates for such properties have been derived by the Investigation Wing on the basis of price mentioned in the seized documents, and as per findings of the Investigation Wing, the average minimum price per sq. yd. for computation of actual investment in plot in Satbari area has been mentioned as Rs.1,35,000 per sq. yd by the Investigation Wing, Income Tax Department, Delhi after post search enquiry and due verification. It was further noted by the AO that the copy of findings of the Investigation wing has been provided to the assessee, but the assessee has not submitted any cogent and vital rebuttal regarding the fair market price, as mentioned in the findings of the Investigation Wing, of plot situated at Satbari area with any supporting document. It is further mentioned by the AO that during the course of search and seizure operation and post search investigation, Sh. Sumit Gupta, Director of assessee company, has mentioned in statement under oath that huge cash was paid for sale/purchase of the properties. Further not only this Mr. Sumit Gupta has also submitted the list of the properties and based on the documents, the Investigation Wing has derived the market rates of the properties. The AO has also noted that it is an open secret that the actual market rates are much higher than the circle rate of land specially of agriculture land in Delhi and that during the course of Search and Seizure operation an excel sheet was found from the premises of Sh. Kartar Singh and the same was containing the market price as well as the price as mentioned in the documents. In most of the transactions it is seen that the price recorded in the documents is just a small fraction of the actual market price of 4 the land. The circle rate in entire Delhi for agriculture land is only kept at a very low rate whereas most of the agriculture land is sold for farm houses and at a huge consideration which is paid in cash and only a small part of the consideration which is as per circle rate or slightly above the circle rate is paid in cheque which has happened in the case of assessee also. Thus, as per the AO, the assessee's contention is totally devoid of merits that it has purchased the land at above the circle rate because the circle rate is for agriculture land whereas the assessee is in the business of developing farm houses and the same land is never used for agriculture purposes. Not only this, Satbari area near Chattarpur is the most posh area of South Delhi and contains. residences/farmhouses of the richest in Delhi. Even in the nearby areas of Chattarpur Satbari is the most prized area and demands enormous consideration much above the circle rate. It's a common knowledge that price of 1 Acre of land for farm houses in the posh area like Satbari ranges from 20-30 crores per acre which is also found in the excel sheet at the premises of Mr. Kartar Singh. Thus the Investigation Wing after conducting detailed enquiries and on the basis of the seized documents have come up with the price as mentioned in the reasons for reopening u/s 148 by the assessing officer of the Central Charges and the AO was in full agreement with the findings of the Investigation Wing and Central Charges. It is further noted by the AO that the assessee has submitted that the said land was purchased at Rs.7,50,00,000/- which is above the Circle Rate and the District Valuation Officer (DVO), Income Tax 5 Department has accepted this price. On perusal of the valuation report submitted by the DVO with respect to the property purchased by the assessee, it is seen that the DVO has valued the land only based on I or 2 transactions which have occurred in the office of the sub-registrar and the conveyance deed as mentioned in the above para usually contains only the declared consideration which is paid in cheque. The allegation of the Department was that there are huge cash transactions in sale purchase of Farm houses and obviously when the department is talking of on money or cash transactions, the cash component will invariably not be mentioned in the conveyance deed. Further the departments formula for arriving at the price of the land is based on the documents seized during the course of search and seizure operation and the document contained prices of various farm houses located in and around the place near Satbari and has clear-cut basis which cannot be doubted. Thus, the AO concluded that the total value adopted by the DVO is not acceptable. Accordingly, the AO has not accepted the valuation of the impugned property made by him at Rs. 3,35,41,500/- by relying on the documents seized from the premises of Shri Kartar Singh as well as common knowledge that there is a huge element of unaccounted cash involved in the land transactions in Delhi.

Aggrieved by the addition made by AO, the appellant had raised several contentions before the CIT(A) which have been summarized, in the impugned order of CIT(A), as under: i) That notice under section 148 of the Act has not been served and as 6 such, the instant reassessment proceedings in absence of valid service of notice is invalid and illegal. ii) The assessee company further submitted that the sole basis of addition so made by AO are the documents found from search of Sh. Kartar Singh on 27.07.2016 and also statement of Sh. Sumit Gupta recorded during survey on 23.08.2016, which information was already on record of assessing officer, when assessment under section 153C/143(3) was first framed against the assessee company on 13.12.2016, as such, no fresh material has surfaced after the aforesaid assessment. Accordingly, subsequent reopening of the case is based on change of opinion, which is not sustainable. Further, the said documents/material have never been confronted to assessee company for rebuttal, as such, the same needs to be excluded altogether. iii)A bare perusal of the reasons recorded would make it amply clear that the AO has not mentioned about any tangible material except the letter dated 29.03.2019 from ACIT, CC-30, which suggests that the learned AO had no material in his possession to initiate the instant reassessment proceedings, as it has been held by various courts that mere receipt of letter/information from another officer/ investigation wing does not constitute to be a tangible material and reopening on the basis of the same is not justified. iv) The assessee company submitted that the assessee has only purchased 6 bighas 17 biswas i.e. 1.42 acres of land, whereas, addition has been made on account of undisclosed investment for 16 bighas 9 biswas. Said fact is evident from the purchase deed dated 08.12.2011 which also shows that only 6 bighas 17 biswas have been purchased, which itself indicates that there was no application of mind by the AO while reopening the case. v) That AO had referred the matter to Department Valuation Officer to work out the fair market value at the time of purchase by assessee company and the DVO has given a report stating the fair market value of the property purchased is even less than the price at which the property has been purchased by the assessee company. The said DVO report is binding on the AO, as DVO is a technical expert with regards to valuation and not the AO.

The CIT(A) has taken all the aspects into consideration and concluded as follows’ “8.1 I have carefully considered the facts, the assessment order, remand report, rejoinder to remand report and material available on record. It 7 would be appropriate to consider the merits of the case before dealing with the technical and procedural aspects involved in reopening the case. Since the appellant has contested the fact that the documents and statements on the basis of which the impugned addition has been made were never confronted to it, the AO was requested vide letter dated 09.02.2023, to clarify as to whether such material was supplied to the assessee and was also requested to provide proof of such supply. The AO was also requested to provide the copies of such relied upon documents/materials. The AO's Remand Report dated 06.03.2023 is silent of the aspect of confronting the documents/materials to the assessee during assessment proceedings. It is seen that the assessee had repeatedly requested for copy of material relied on by the AO. However, from reply dated 09.12.2019 of AO, to one request letter dated 09.12.2019 of the assessee, it is seen that the AO has supplied reasons for reopening, but has stated that documents relied upon shall be provided, if deemed fit, during the assessment proceedings. It therefore appears that adverse material was not confronted. The AO has however stated in the Remand Report that the case was reopened based on detailed investigation report, a copy of which has been enclosed with the remand report. In the rejoinder to the remand report, the appellant has submitted that the said addition under section 69 has been made by AO on the basis of an excel sheet found from search of Sh. Kartar Singh (Pg 4, para 6 of AO's order) and statement of Sh. Sumit Gupta recorded during post search proceedings (Pg 4, para 6 of AO's order) and that both the above documents were never made part of discussion by AO during the course of assessment proceedings neither the same were confronted and as a consequence no opportunity for cross examination was ever provided to the assessee. It was further submitted by the appellant that the AO has also not provided any material or letter to establish as to whether the said documents were ever confronted to the assessee during the course of impugned reassessment proceedings. It is, therefore, contended by the appellant that since the aforesaid documents were never provided to the assessee during the course of impugned reassessment proceedings, the same need to be excluded altogether for consideration and the addition so made on the basis of the same deserves to be deleted, as such. It was further submitted by the appellant that instead of providing the documents so relied in the impugned order of reassessment, the AO in the remand report has submitted a so called alleged "detailed investigation report", which also nowhere mentions about the land being purchased by the assessee appellant neither does it mention about any statement of Sh. Sumit Gupta. The said alleged investigation report contains general information with regard to transactions in certain other properties at a value lower than circle rate and nowhere, mentions about the concerned land being purchased by the assessee at Village Satbari. The appellant has further pointed out that the finding of the assessing officer in paragraph 6 of the impugned order that, Shri Sumit Gupta in a statement under oath has mentioned that huge cash was paid for sale/purchase of the properties is perverse and totally against material available on record i.e. no such adverse statement of Sumit Gupta recorded during the course of survey, has been confronted for rebuttal by the AO (even in the remand report). It is submitted that it is a trite law that any statement or any material gathered at the back of the appellant cannot be used against the appellant and has to be excluded altogether, if such statement/material is not confronted to the appellant for rebuttal. It is further submitted that in addition to the above, the allegation levelled by the AO in the impugned order, that findings of the Investigation Wing have been provided to assessee and assessee is unable to controvert the same is completely flawed and contrary to material available on record. Also, the officer is under an erroneous impression and has recorded perverse findings in the order when stating that, Sh. Sumit Gupta in a statement under oath has mentioned of payment of cash for sale purchase of properties, which findings are contrary to facts. It is further submitted that, AO is groping in dark and has proceeded to give a finding which is contrary to material on record which is totally baseless and not backed by any material, even in the remand report. 8.2 I have considered the remand report and submissions of the appellant as well as material on record. The impugned addition is based on evidences found during the search carried out on Kartar Singh Group, wherein certain documentary evidences were stated to have been found indicating the actual market price of various properties purchased by Shri Sumit Gupta, director of the assessee company and companies controlled by him. This evidence is stated to be contained in the report of the Investigation Wing which has been forwarded by the AO through the remand report and is reproduce earlier in this order. From this Investigation report, it is observed that as per the excel sheet recovered from the office of Shri Kartar Singh the actual market price of lands in various area of Delhi were much higher than the government rates. Accordingly, the Investigation Wing has listed out the average market prices of land in various areas in Delhi, in which the average market price for land in Satbari area is mentioned as Rs. 1,35,000/- per sq. yard. Though the relevant year is not mentioned in the Investigation report, it is seen from various transactions noted therein that the market rates have been noted for the year 2015 to which most of the noted transactions relate. The mention of Shri Sumit Gupta is only at one para of the report and this relates to a company called M/s Cruise Properties Pvt. Ltd. (CPPL) which owned an agricultural land in Najafgarh area of Delhi and Shri Sumit Gupta was one of the Directors in the said company, who sold his shares to one Shri Dhruva Goel and his family members in 2015. In this connection the statement of Shri Dhruva Goel u/s 132(4) has been mentioned, wherein he had accepted that cash totalling Rs.6.25 crores was paid to Shri Sumit Gupta and another Director of CPPL, Shri Devender Kumar. Other than this, there is no mention of Shri Sumit Gupta in the said investigation report, particularly relating to the impugned transaction which pertains to the appellant carried out during F.Y. 2011-12. Further, no such incriminating statement of Shri Sumit Gupta has been brought on record by the AO in the assessment order and even in the remand report despite being specifically asked to do so. Therefore, the AO’s finding that Shri Sumit Gupta mentioned in his statement that huge cash was paid for sale/purchase of properties and the allegation that he also submitted a list of such properties, is not founded on facts. In fact, from the appellate order dated 30.05.2022 in appeal no. 11461/2015-16 passed by CIT(Appeal)-30, New Delhi, while dealing with the very same transaction of shares of CPPL with Shri Dhruva Goel as mentioned in the investigation report, the addition on account of 50% of the amount of Rs.6.25 crores as per the statement of Shri Dhruva Goel was held to be untenable in the hands of the appellant, Shri Sumit Gupta, holding as follows: “8.8 Considering the judicial pronouncements which enunciate that the statement recorded during the course of search on standalone basis, which were subsequently retracted without reference to any other material discovered during the search and seizure operation would not empower the Assessing Officer to make the addition merely because any admission was made by the appellant during the search operation. The AO has alleged that Mr. Dhruva Goel has made payment of Rs.3,12,50,000/- in the form of cash to acquire the shares of the appellant in the said company. In this connection, it is seen that the allegation is factually incorrect and not supported by any documents or material. During the course of search, no document, agreement, paper, receipts or any other evidence with regard to alleged cash payment of Rs.6.25 crores were found or gathered. Neither any money trail nor any other document containing the detail of alleged payment made of Rs.6.25 crores for this property were found. Thus, it is seen that there was no incriminating material in possesssion of the AO to substantiate that an amount of Rs.3,12,50,000/- was received by the appellant Mr. Devender Kumar in the form of cash for acquiring the shares of the appellant in the company M/s Cruise Property Pvt. Ltd. 8.9 Further it is to be noted that there is no mention of statement recorded of the appellant during the course of search proceedings or post search in the case of Dhruva Goel to corroborate that the appellant had accepted to have received the impugned amount.

Then if we examine the satisfaction note dated 15.01.2016 available at page no.25 of the paper book, it comes up that the issue of recording satisfaction for the purpose of section 153C had in its background the investment made by way of a sale deed with the consideration of Rs.7.5 crores executed by Shri Anil Kumar Virmani in favour of Govindajee Buildtech Pvt. Ltd. for the land measuring 16 bighas 9 biswas in Village Satvari, Hauz Khas, New Delhi.

We find substance in the contentions of learned Senior Counsel that whatever alleged incriminating material is found from the search of Shri Kartar Singh and whatever statement Shri Sumit Gupta had made during survey if examined again will make the reopening based on change of opinion.

Then, relying on the statement of Shri Sumit Gupta exclusively for forming an opinion that as the buyers of other