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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI R. K. PANDA & MS SUCHITRA KAMBLE
PER BENCH These appeals are filed by the three different assessees against the separate orders dated 28/01/2015 passed by CIT(A)-XXX, New Delhi for Assessment Year 2011-12 on the same issues.
The grounds raised by the Assessees in all the three appeals are as under:
ITA No. 3185/Del/2015 (A.Y. 2011-12) Pavitra Realcon Pvt. Ltd.
That on the facts and circumstances of the case, the order passed by the Assessing Officer and confirmed by the CIT(A), is bad in law and void ab-initio on account of unlawful/illegal assumption of jurisdiction by the Assessing Officer.
That on the facts and circumstances of the case, the orders passed by the Assessing Officer, and the CIT(A), are bad in law and void ab-initio on account of violation of principles of natural justice and denial of proper and adequate opportunity of being heard.
That on the facts and circumstances of the case, the assessment made is bad in law for the reason that material seized u/s 132 of the IT Act from third parties (i.e. Sh. S.K.Jain and Sh.V.K.Jain) has been utilized in the assessment of the assessee without complying with the mandatory provisions of law as engrafted under the IT Act.
That on the facts and circumstances of the case and in law the CIT(A) erred in confirming the addition of Rs.120,00,00,000/- as income u/s 68 of the IT Act, 1961.
That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition of Rs. 120,00,00,000/- relying on the material seized u/s 132 of the IT Act 1961 from third parties (i.e. Sh. S.K.Jain and Sh. V.K.Jain) and collected during post search investigations made, including statements recorded behind the back of the assessee and other details, forming part of Annexures 1 to 6 attached to the assessment order, running into 351 pages, without even furnishing the copies thereof (except few pages) in the
course of assessment proceedings, thereby violating the principles of natural justice and denying the right of cross examination, wherever necessary.
That on the facts and circumstances of the case and in law the CIT(A) erred in confirming the addition of Rs. 120,00,00,000/- u/s 68 of the IT Act, 1961 , despite the fact that the aforesaid sum, having undisputedly been received by way of advance for purchase of land, and through normal banking channel, could not be subjected to the provisions of section 68 of the IT Act.
That on the facts and circumstances of the case and in law, the CIT(A) erred in not accepting the genuineness and authenticity of the tripartite agreement/MOU dated 29.05.2010 effected amongst M/s Aquiss Pvt. Ltd, M/s Attractive Finlease Pvt. Ltd and M/s Aasheesh Capital Services Pvt. Ltd as first party and M/s Design Infracon Pvt. Ltd, M/s Delicate Realtors Pvt. Ltd and M/s Pavitra Realcon Pvt. Ltd as second party and Sh. Kabul Chawla as the confirming party, and the factum of the forfeiture of the amount as per the said agreement/ MOU.
That on the facts and circumstances of the case and in law the CIT(A) erred in holding that the sum of Rs. 120,00,00,000/- was surrendered as income in the hands of the assessee, without dealing with specific objections raised/taken before him against the alleged surrender.
That on the facts and circumstances of the case and in law the CIT(A) erred in concluding, to quote, “all the grounds of appeal are dismissed”, despite a finding given in the penultimate paragraph, to the effect, ‘that if the arbitration award is decided in favour of M/s Aasheesh Capital Service Pvt. Ltd., then the amount advanced by them would be taxable in the hands of M/s Aasheesh Capital Service Pvt. Ltd.’.
That on the facts and circumstances of the case and in law the CIT(A) erred in not deleting the interest charged u/s 234B of the IT Act.
The appellant craves permission to add, amend, alter or vary all or any grounds of appeal on or before the date of hearing of the appeal.
Additional Legal Ground Under Rule 11 1. That assessee has raised legal ground in appeal memo vide ground no.l, challenging the validity of the proceedings and assumption of jurisdiction. 2. That vide paper book filed on 08.06.2017, in remarks portion it is humbly submitted that on short legal issue of assessment being wrongly framed u/s 143(3) (confusing phrases are used in assessment order at different places), whereas assessment should have been framed u/s 153C, entire proceedings are vitiated by non application of mind. 3. That vide synopsis filed on 04.07.2017, it is narrated in length that not only grave prejudice is caused to appellant/ assessee by invalid jurisdiction being assumed, ultra vires to section 153C, & which deserves to be quashed. 4. In continuation of above to make our ground more explicit we humbly submit under mentioned ground vide Rule 11 of ITAT rules (reference can be made to Hon’ble Punjab & Haryana High Court decision in case of VMT Spinning Co. Ltd., order dated 16.09.2016 (ITA no.445/2015) (389 ITR 326), Hon’ble Delhi High Court decision in case of Fast Booking (I) Pvt. Ltd., order dated 02.09.2015 (ITA no. 334/2015) (378 ITR 693), Hon ’ble Delhi high Court decision in case of Silver Line, order dated 04.11.2015 (ITA no. 578/2015) (383 ITR 455) “That assessment framed u/s 143(3) for the period under consideration (AY 2011-12) which falls in Six years block prescribed u/s 153C, is invalid, void-ab-initio and lacks jurisdiction as it should have been framed u/s 153C, accordingly the orders passed by AO and First Appellate Authority deserves to be quashed. ” “That assessment framed u/s 143(3) for the period under consideration is ultra vires to section 153C, in as much as the documents referred in satisfaction note (copies placed on records), do not give rise to any undisclosed income and they are admittedly non -incriminating in nature as also none of the document is used in assessments while making the impugned additions. ” 5. That we reiterate our contentions and arguments raised in synopsis filed on last date, in support of aforesaid grounds where revenue has been heard and revenue has not factually controverted on facts assessee’s contentions.
That we further rely on Hon’ble Supreme Court ruling in case of NTPC (229 ITR 383) and old Delhi High Court ruling in 123 ITR 200. 7. That at the time of filing of appeal assessee was not having advantage of decision of jurisdiction High Court decision like Jasjit Singh which came to the knowledge of the assessee later on. This is the reasonable cause for not taking the this plea before lower authorities. (High Court order came on 11.08.2015 subsequent to the filing of appeal on 22.05.2015).
ITA No. 3253/Del/2015 (A.Y. 2011-12) Delicate Realtors Pvt. Ltd.
That on the facts and circumstances of the case, the order passed by the Assessing Officer and confirmed by the CIT(A), is bad in law and void ab-initio on account of unlawful/illegal assumption of jurisdiction by the Assessing Officer.
That on the facts and circumstances of the case, the orders passed by the Assessing Officer, and the CIT(A), are bad in law and void ab-initio on account of violation of principles of natural justice and denial of proper and adequate opportunity of being heard.
That on the facts and circumstances of the case, the assessment made is bad in law for the reason that material seized u/s 132 of the IT Act from third parties (i.e. Sh. S.K.Jain and Sh.V.K.Jain) has been utilized in the assessment of the assessee without complying with the mandatory provisions of law as engrafted under the IT Act.
That on the facts and circumstances of the case and in law the CIT(A) erred in confirming the addition of Rs.105,00,00,000/- as income u/s 68 of the IT Act, 1961.
That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition of Rs. 105,00,00,000/- relying on the material seized u/s 132 of the IT Act 1961 from third parties (i.e. Sh. S.K.Jain and Sh.
V.K.Jain) and collected during post search investigations made, including statements recorded behind the back of the assessee and other details, forming part of Annexures 1 to 6 attached to the assessment order, running into 351 pages, without even furnishing the copies thereof (except few pages) in the course of assessment proceedings, thereby violating the principles of natural justice and denying the right of cross examination, wherever necessary.
That on the facts and circumstances of the case and in law the CIT(A) erred in confirming the addition of Rs. 105,00,00,000/- u/s 68 of the IT Act, 1961 , despite the fact that the aforesaid sum, having undisputedly been received by way of advance for purchase of land, and through normal banking channel, could not be subjected to the provisions of section 68 of the IT Act.
That on the facts and circumstances of the case and in law, the CIT(A) erred in not accepting the genuineness and authenticity of the tripartite agreement/MOU dated 29.05.2010 effected amongst M/s Aquiss Pvt. Ltd, M/s Attractive Finlease Pvt. Ltd and M/s Aasheesh Capital Services Pvt. Ltd as first party and M/s Design Infracon Pvt. Ltd, M/s Delicate Realtors Pvt. Ltd and M/s Pavitra Realcon Pvt. Ltd as second party and Sh. Kabul Chawla as the confirming party, and the factum of the forfeiture of the amount as per the said agreement/ MOU.
That on the facts and circumstances of the case and in law theCIT(A) erred in holding that the sum of Rs. 105,00,00,000/- was surrendered as income in the hands of the assessee, without dealing with specific objections raised/taken before him against the alleged surrender.
That on the facts and circumstances of the case and in law the CIT(A) erred in concluding, to quote, “all the grounds of appeal are dismissed”, despite a finding given in the penultimate paragraph, to the effect, ‘that if the arbitration award is decided in favour of M/s Attractive Finlease Pvt Ltd, then the amount advanced by them would be taxable in the hands of M/s Attractive Finlease Pvt. Ltd’.
That on the facts and circumstances of the case and in law the CIT(A) erred in not deleting the interest charged u/s 234B of the IT Act.
The appellant craves permission to add, amend, alter or vary all or any grounds of appeal on or before the date of hearing of the appeal.
Additional Legal Ground Under Rule 11 1. That assessee has raised legal ground in appeal memo vide ground no.l, challenging the validity of the proceedings and assumption of jurisdiction. 2. That vide paper book filed on 08.06.2017, in remarks portion it is humbly submitted that on short legal issue of assessment being wrongly framed u/s 143(3) (confusing phrases are used in assessment order at different places), whereas assessment should have been framed u/s 153C, entire proceedings are vitiated by non application of mind. 3. That vide synopsis filed on 04.07.2017, it is narrated in length that not only grave prejudice is caused to appellant/ assessee by invalid jurisdiction being assumed, ultra vires to section 153C, & which deserves to be quashed. 4. In continuation of above to make our ground more explicit we humbly submit under mentioned ground vide Rule 11 of ITAT rules (reference can be made to Hon’ble Punjab & Haryana High Court decision in case of VMT Spinning Co. Ltd., order dated 16.09.2016 (ITA no.445/2015) (389 ITR 326), Hon’ble Delhi High Court decision in case of Fast Booking (I) Pvt. Ltd., order dated 02.09.2015 (ITA no. 334/2015) (378 ITR 693), Hon’ble Delhi high Court decision in case of Silver Line, order dated 04.11.2015 (ITA no. 578/2015) (383 ITR 455) “That assessment framed u/s 143(3) for the period under consideration (AY 2011-12) which falls in Six years block prescribed u/s 153C, is invalid, void-ab-initio and lacks jurisdiction as it should have been framed u/s 153C, accordingly the orders passed by AO and First Appellate Authority deserves to be quashed. ” “That assessment framed u/s 143(3) for the period under consideration is ultra vires to section 153C, in as much as the documents referred in satisfaction note (copies placed on records), do not give rise to any undisclosed income and they are admittedly non -incriminating in nature as also none of the document is used in assessments while making the impugned additions. ”
That we reiterate our contentions and arguments raised in synopsis filed on last date, in support of aforesaid grounds where revenue has been heard and revenue has not factually controverted on facts assessee’s contentions. 6. That we further rely on Hon’ble Supreme Court ruling in case of NTPC (229 ITR 383) and old Delhi High Court ruling in 123 ITR 200. 7. That at the time of filing of appeal assessee was not having advantage of decision of jurisdiction High Court decision like Jasjit Singh which came to the knowledge of the assessee later on. This is the reasonable cause for not taking the this plea before lower authorities. (High Court order came on 11.08.2015 subsequent to the filing of appeal on 22.05.2015).
ITA No. 3186/Del/2015 (A.Y. 2011-12) Design Infracon Pvt. Ltd.
That on the facts and circumstances of the case, the orders passed by the Assessing Officer, and the CIT(A), are bad in law and void ab-initio on account of violation of principles of natural justice and denial of proper and adequate opportunity of being heard.
That on the facts and circumstances of the case, the assessment made is bad in law for the reason that material seized u/s 132 of the IT Act from third parties (i.e. Sh. S.K.Jain and Sh.V.K.Jain) has been utilized in the assessment of the assessee without complying with the mandatory provisions of law as engrafted under the IT Act.
That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition of Rs. 1,16,00,00,000/- relying on the material seized u/s 132 of the IT Act 1961 from third parties (i.e. Sh. S.K.Jain and Sh. V.K.Jain) and collected during post search investigations made, including statements recorded behind the back of the assessee and other details, forming part of Annexures 1 to 6 attached to the assessment order, running into 351 pages, without even furnishing the copies thereof (except few pages) in the course of assessment proceedings, thereby violating the principles of natural justice and denying the right of cross examination, wherever necessary.
That on the facts and circumstances of the case and in law the CIT(A) erred in confirming the addition of Rs. 1,16,00,00,000/- as income u/s 68 of the IT Act, 1961. 5. That on the facts and circumstances of the case and in law the CIT(A) erred in confirming the addition of Rs. 1,16,00,00,000/- u/s 68 of the IT Act, 1961 , despite the fact that the aforesaid sum, having undisputedly been received by way of advance for purchase of land, and through normal banking channel, could not be subjected to the provisions of section 68 of the IT Act. 6. That on the facts and circumstances of the case and in law, the CIT(A) erred in not accepting the genuineness and authenticity of the tripartite agreement/MOU dated 29.05.2010 effected amongst M/s Aquiss Pvt. Ltd, M/s Attractive Finlease Pvt. Ltd and M/s Aasheesh Capital Services Pvt. Ltd as first party and M/s Design Infracon Pvt. Ltd, M/s Delicate Realtors Pvt. Ltd and M/s Pavitra Realcon Pvt. Ltd as second party and Sh. Kabul Chawla as the confirming party, and the factum of the forfeiture of the amount as per the said agreement/ MOU. 7. That on the facts and circumstances of the case and in law the CIT(A) erred in holding that the sum of Rs. 1,16,00,00,000/- was surrendered as income in the hands of the assessee, without dealing with specific objections raised/taken before him against the alleged surrender. 8. That on the facts and circumstances of the case and in law the CIT(A) erred in concluding, to quote, “all the grounds of appeal are dismissed”, despite a finding given in the penultimate paragraph, to the effect, ‘that if the arbitration award is decided in favour of M/s Aquiss Pvt Ltd, then the amount advanced by them would be taxable in the hands of M/s Aquiss Pvt. Ltd’.
That on the facts and circumstances of the case and in law the CIT(A) erred in not deleting the interest charged u/s 234B of the IT Act.
The appellant craves permission to add, amend, alter or vary all or any grounds of appeal on or before the date of hearing of the appeal.
2.1 Since the above grounds are purely legal in nature, these grounds are admitted for adjudication after hearing both the side.
For the sake of convenience, the facts of ITA No. 3185/Del/2015 are narrated hereunder:-
A search and seizure operation u/s 132 in the case of M/s BPTP Ltd. (earlier known as M/s Business Park and Town Planners Ltd.) group of Companies was carried out at 7/12/2010 and finally concluded on 5/2/2011. Notice u/s 143 (2) of the Income Tax Act, 1961 was issued to the assessee on 13/9/2012. The assessee had filed its return of income on 30/09/2011 declaring total income at Nil. The detailed questionnaire dated 10/10/2012 was issued. In response to the said notices, the assessee’s representative appeared and submitted the details and clarifications which were placed on record. The Assessing Officer observed that BPTP Group is headed by Shri Kabul Chawla, son of Shri Satish Chawla. Ownership Company of the group, M/s BPTP Ltd. was incorporated in 2003 and is a leading real estate developer in NCR region. The group is one of the major players in development of integrated town ship, residential projects, IT Parks, Sez, Hospitality Sectors etc. in NCR region comprising of Delhi, Noida, Gurgaon and Faridabad. The group had also acquired a huge track of land from APIIC at Hyderabad for development of the project. The group is having massive land bank at Faridabad known as BPTP Park land. During the course of search action it was seen that three companies of the group viz. M/s Designing Infracon Pvt. Ltd., M/s Delicate Realtors Pvt. Ltd and M/s Pavitra Realcon Pvt Ltd. have shown a total amount of Rs.325.23 crores as “advance against property”, from three companies namely M/s Attractive Finelease Pvt. Ltd, M/s Ashish Capital Pvt. Ltd, M/s Aquiss Pvt. Ltd. On the basis of the information in the possession of the department, Directors of these three companies were confronted with the fact that the above three companies were accommodation entry providing companies and have given the above amount by converting unaccounted cash after routing them through a series of transactions. Directors of the three companies M/s Designing Infracon Pvt. Ltd, M/s Delicate Realtors Pvt. Ltd & M/s Pavitra Realcon Pvt Ltd., namely Shri Sanjiv Kumar, Sh. N. K. Jain and
Sandeep Sehgal respectively in the statements recorded on oath u/s 132 (4) accepted that they were not in a position to explain the receipts of above amount and hence came out with a voluntary disclosure of Rs. 325.23 to be their unaccounted income for the Financial Year 2010-11 (Assessment Year 2011-12). As per the statement dated 08.04.2010 of Shri Sanjiv Kumar, who was a Director in all the above three companies, he accepted that the above income was received by cheques from the above three companies for collaboration of future projects. Since, they were not able to explain and support the receipts with evidences, they accepted the same to be their income earned during the year which was not entered in the books of accounts in the current Financial Year. Therefore, to avoid any penalty, litigation and prosecution and to buy peace of mind they accepted this income. Thus, total amount declared was as under:-
(1) M/s Delicate Realtors Pvt. Ltd= Rs. 98 Crores (2) M/s Pavitra Realcon Pvt Ltd.= 118.65 crores (3) M/s Design Infracon Pvt. Ltd.= 106.60 crores Total Rs. = 325.23 crores. Shri Sanjeev Kumar, submitted that the taxes on the above disclosed amount including interest would be paid in due course. During the assessment proceedings, the notice u/s 143(2) was issued on 13/9/2012. The details of disclosure made by these three companies are as under:-
S. No. Name of the company making Amount of Details of taxes disclosure disclosure made paid thereon 1 M/s Design Infracon Pvt. Ltd Rs. 106.60 crores Rs.6,67,33,333/- 2 M/sDelicate Realtors Pvt. Ltd Rs.99.98 Crores Rs.6,65,33,333/- 3 M/s Pavitra Realcon Pvt. Ltd Rs. 118.65 Crores Rs.6,67,33,334/- Total Rs. 20 Crores
3.1 Since in the return of income the assessee company did not declare the above said disclosed income, show cause notice in respect of credit of Rs.116 crores into the account of the assessee company was issued on 23/7/2012 and again on 29/1/2013. In response to the show cause notices, on 22/2/2013, the assessee made a written submission. The Assessing Officer observed that during the various searches conducted and evidence collected, it was found that these are entry providing Companies used as conduits for channeling of unaccounted money. No evidence of any of the Directors of the above three companies were found from their addresses. The Assessing Officer repeated once again that these companies are used for the sole purpose of providing accommodation entries to the various other concerns/companies which require them to convert their unaccounted income into accounted one without paying any tax. In addition to the statements given by the Directors of M/s Design Infracon Pvt. Ltd, M/s Delicate Realtors Pvt. Ltd and M/s Pavitra Realcon Pvt Ltd., the perusal of the documents seized from the residential premises of Jain Brothers revealed that Shri Surendra Kumar Jain and Shri Virendra Jain had provided accommodation entries amounting to Rs.341 crores to M/s Design Infracon Pvt., M/s Delicate Realtors Pvt. and M/s Pavitra Realcon Pvt Ltd. for Financial Year 2010-11 from following Jain Group of Companies, during the period mentioned as under:-
From To Total Amount Period Aasheesh Capital M/s Pavitra Rs. 120 Crores 07/07/2010 to Services Pvt. Ltd. Realcon Pvt Ltd. 03/08/2010 Attractive M/s Delicate Rs. 105 Crores 18/06/2010 to Finlease Pvt. Ltd. Realtors Pvt. 07/07/2010 Aquiss Pvt. Ltd. M/s Design Rs. 116 Crores 29/05/2010 to Infracon Pvt., 05/08/2010
3.2 Rejecting the various explanations given by the assessee, the Assessing Officer made an addition of Rs. 120,00,00,000/- u/s 68 of the Income Tax Act, 1961. Similar addition of Rs.105 crore has been made u/s 68 of the I.T. Act, 1961 in the case of M/s Delicate Realtors Pvt. Ltd. and amount of Rs.1,16,00,00,000/- in the case of M/s Design Infracon (P) Ltd..
3.3 Before the CIT(A), the assessee made elaborate submission which the ld. CIT(A) summarized at page 67 and 68 of his order and which reads as under :-
“B) Arguments of Ld. AR Main arguments of Ld. AR are Summarized as under :- i) Proper opportunities were not given while framing the assessment:- a) The appellant has filed two replies is response to show cause letter issued by the assessing officer. Further opportunity was not allowed by the assessing officer before making addition. b) The assessing officer did not call upon the assessee to produce any person. c) The assessing officer has not given any opportunity to cross-examine the persons whose statement has been relied on by the assessing officer that the bank account of those persons were used by Jain Brothers for accommodation entries & Neither their statement was given to the assessee during the assessment proceedings. d) Annexure A-10 Seized from the premise of Jain Brothers was only shown to the Directors of the appellant’s director copy of annexure A-10 was not given to the assessee. e) Copy of statement of Jain Brothers i.e. S.K. Jain & Sh. Virendra Kumar Jain was not given to the assessee. f) The assessing officer has not brought any corroboration evidence while relying on the statement u/s 132(4) before making the addition. g) The evidences that Jain Brothers are operating bogus companies were never confronted to the appellant. h) The evidences/enquires that the Jain group of companies are introducing unaccounted cash through bogus Sales were never confronted to the assessee during the assessment proceedings. i) The assessing officer has concluded that tripartite agreement is an afterthought, though, the arbitration has been filed before Retired judge of Sh. S. K. Mahajan by these companies namely M/s. Aquiss Pvt. Ltd., M/s Aashish Capital Services Ltd. & M/s. Attractiion Finlease Ltd. There companies are very much in existence & later acquired by Gurinderjeet Singh Group of companies. ii) On merits Ld. AR argued that the core issue is that Section 68 is not applicable as the amount received from M/s Aashish Capital Services Pvt. Ltd. is not a credit in the nature of share capital, unsecured loan, but the sum is advance in nature & the same has been forfeited due to non compliance of the terms of MOU, but the same was not accepted by M/s Aashish Capital Services Pvt. Ltd. & filed arbitration petition before retired High Court Judge Sh. S.K. Mahajan. As the matter is before arbitration, the said
forfeited amount has not been declared as income. Under these Circumstances, Section 68 does not apply. Ld AR argued that MOU document filed cannot be brushed aside as the said MOU is before arbitration proceedings, headed by retired Judge of High court. Further Ld. AR argued that the assessing office cannot ignore the evidentiary value of the document supporting the Judgment of hon’ble Supreme Court unless the assessing officer proves that such device is conterable is nature & is illegal/illegitimate. iii) On the evidentiary value of statement recorded u/s 132(4), main arguments of Ld. AR is that the person who makes the statement u/s 132(4) has right to retract the same if he proves his bonafide. In present case, the statement recorded u/s 132(4) disclosing such huge income is in four lines without specifying the manner in which such income is earned. None of the persons namely Sh. N.K. Jain, Sh. Sandeep Sehgal and Sh. Sanjeev Kumar has accepted the cash payment by Sh. Ramprasad as per seized material A-10 found from the premise of Jain Brothers. Further, Ld. AR argument that Sh. N.K. Jain was not director's of M/s Delicate Realtors Pvt. Ltd. & M/s. Pavitra Realcon Pvt. Ltd. though his statement has been relied on by the assessing officer while framing the assessment.” 4. However, the ld. CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the action of the Assessing Officer by observing as under :-
“I have considered the entire evidences relied by the assessing officer & the arguments of Ld.AR.
First I would deal with the statement of the directors recorded during the search u/s 132(4) of l.T. Act, during the search & post Search proceeding at appellant's premise. Statements of following there persons were recorded. 1. Shri Nirbhay kumar Jain 132(4) section vide which statements recorded 2. Shri Sandeep Sehgal 131 3. Shri Sanjeev Kumar. 132(4)
Both person Sh. N.K. Jain & Sh. Sanjeev Kumar whose statement were recorded u/s 132(4) were shown cash book seized from the premise of Sh. S.K. Jain and Sh. Virendra Jain as annexure A-10 which shows the cash was received by sh. S.K. Jain & Sh. Virendra Jain from one Shri Ramprasad. When these facts were brought to the notice of these persons they declared income in the hands of three companies of BPTP group the details are as under:- S. No. Name of the company Disclosure Made. A.Y. 1. M/s. Delicate Realtors Pvt. Ltd. Rs. 99.98 Crore 2011-12 2. M/s. Pavita Realcon Pvt. Ltd. Rs. 118.65 Crore 2011-12 3. M/s. Design Infracon Pvt. ltd. Rs. 106.60 Crore 2011-12 Total Rs. 325.23 Crore
Through earlier the relevant portion of statement has been reproduced. It is necessary to reproduce the same for drawing inference as to how disclosure was made. The relevant portion of statement is as under:-
i) Statement of Sh. Sanjeev Kumar (u/s 132(4»
"Q2. Please slate, the names of the companies is which you are a director or shareholders. Please also specify the address of their registered office? Ans. I am a director or shareholder in following companies: 1. Pavitra Realcon (P) Ltd, address: 5H/89, NIT. Faridabad 2. Delicate Realtors (P) Ltd., address: as above 3. Design Infracon (P) Ltd., address: 51h Floor, DCM Building, Barakhamba Road, Delhi I am one of the Director of all the above three companies and 50% shareholder it, 1st and 2nd company. Other directors in first and second companies is Sh. Sandeep Sehgal and in third company Sh. N. K. Jain.
Q7. Do you know one Sh. Ram Prasad? Do your companies have got any financial dealings with sh. Ram Prasad? Ans: I know one Mr. Ram Prasad, who is an employee of M/s. BPTP Ltd.. none of our above three companies have got any financial dealings with Sh. Ram Prasad.
Q8. I am showing you Xerox copies of annexure, A-10, seized from the premises of Sh. S.K. Jain which reflects a set of documents in the shape of cash book, written in the hand writing of sh. SiK. Jain and his brothers Sh. Virendra Jain himself, reflect that one Sh. Ram Prasad in this regard? Ans: We deny to have any cash transactions as above stated by you. We accept the above incoming of money by cheque from the above three companies for collaboration of future projects. Since we are not able to explain and support the receipts, we accept the same to be our income, earned during the year, on our own not yet provided for in the books of A/c in the current financial year. We are accepting theses income to avoid any penalty, litigation and prosecution and to buy peace of mind. Thus the total disclosed amount 'works out as under: 1. Delicate Realtors (P) Ltd. Rs.99,98 crores 2. M/s. Pavitra Realcon (P) Ltd. Rs.118.65 crores 3. M/s. Design Infracon (P) Ltd. Rs.106.60 crores Total Rs.325.23 crores. The taxes on the above disclosed amount including interest will be paid in due course. ii) Statement of Sh. N.K. Jain (u/s 132(4) "Q. 34 I am showing you zerox copies of Annexure A-10 seized from the premises of Sh. S. K. Jain, which reflects that a set of documents in the shape of cash book. written in the hand writing of shri S. K. Jain and his brothers Shri
Virender Jain reflect that one Shri Ram Parsad, who incidentally happens to be one of the employee of BPTP Group of companies and yourself who happened to be company secretary of M/s. BPTP Ltd., have given cash to Shri S. K. Jain on different dates. You are hereby shown Annexure sheet depicting receipts of cheques from the companies M/s. Aquiss Pvt. Ltd. to Mis. Design Infracon Pvt. Ltd. on deferent dates. Your attention is hereby drawn to the fact that enquiries conducted by the Investigation Wing of the department has established the fact that the company M/s. Aquiss Pvt. Ltd. have been found to be actually managed and controlled by Sh. S. K. Jain himself You are further hereby shown the statement of Shri Sanjeev Kumar recorded on oath u/s. 132(4) of the 1. T Act. 1961, who is the other Director in M/s. Design Infracon Pvt. LId. Please furnish your comments on this?
Ans. 34 1 have gone through the documents shown by you as well as the statements furnished by Shri Sanjeev Kumar in this regard. 1 agree with the discloser of Rs. 106.60 Crores in my company Mrs. Design lnfracon Pvt. Ltd. for the current financial year based on the facts mentioned at answer no 8 of the statement of Shri Sanjeev kumar. "
iii) Statement of Sh. Sandeep Sehgal (u/s 131) 03. I am showing you the statement of Sh. Sanjeev Kuamr Sio Sh. Salish Chand r/o 7, Barakhamba Road, New Delhi recorded on oath on BI1212010. Sh. Sanjeev Kumar has offered the following income for taxation in the following companies. 1. M/s. Delicate Realtors (P) Ltd. Rs.99.98 crores 2. M/s. Pavitra Realcon (P) Ltd. Rs.118.65 crores 3. M/s. Design Infracon (P) Ltd. Rs.106.60 crores You please go through the statement of Sh. Sanjeev kumar and kindly comment on the same. Ans. I am director in M/s. Pvritra Rea/con Pvt. Ltd. and Mis. Delicate Realtors Pvt. Ltd. am not director in Mis. Design lnfracon Pvt. Ltd. 1 hereby affirm the statement of Sh. Sanjeev kuamr in M/s. Pavitra Rea/con Pvt. Ltd. and Mis. Delicate Realtor Pvt. Ltd. and stand by the statement given him in respect of above said 11'1'0 companies where I am a director with him. As I do not hand any position in M/s. Design lnfracon Pvt. Ltd. I am unable to offer any comment.
A perusal of these statement reveals that the disclosure in the name of these companies of BPTP group namely M/s. Design Infracon Pvt. Ltd. M/s. Delicate Realtors Pvt. Ltd. & M/s Pavitra Realcon Pvt. Ltd. was made when the Seized document in form of Cash book Seized from Jain Brothers were shown to them, though cash transaction were denied. It means that the disclosures of income in the hands of these three companies are related to cash book shown. Details of the findings on the content of annexure A-10 & its relevance would be given subsequently. Therefore, I do not agree this argument of Ld. AR that disclosed of income is four liners & not based on evidence. Second arguments of Ld. AR that the people who are not directors of a particular company, their statement have also been relied by the assessing office. It may be mentioned that all there persons namely Sh. N.K, Jain, Sh. Sandeep Sehghal & Sh. Sanjeev Kumar are employee of flagship company M/s BPTP Ltd. and are directors in different companies of BPTP
group. Either of three person are directors in all the three companies. During the appellant proceedings, details of directors as on date of search of different companies were obtained from Ld. AR. The same areas under:- S. No. Name of the Name of the Directors as Name of the directors as company on date of search i.e. on date 07.12.2010 l. M/s Design Infracon Sh. N.K. Jain & Sh. Sh. N. K. Jain & Sh. Pure Ltd. Digvijay Yadav Sanjeev Kumar 2. M/s Delicate Sh. Sandeep Sehgal & Sh. Sh. Sandeep Sehgal & Sh. Realtors Pvt. Ltd. Sanjeev Kumar Sanjeev Kumar 3. M/s Pavitra Realcon Sh. Sandeep Sehgal & Sh. Sh. Sandeep Sehgal & Sh. Sanjeev Kumar Pvt. Ltd. Sanjeev Kumar i I A perusal of the above reveals that Sh. Sandeep Sehgal & Sh. Sanjeev Kumar were directors of M/s Delicate Realtors Pvt. Ltd. and Pavitra Realcon Pvt. Ltd. & Sh. N.K. Jain was directors of M/s Design Infracon Pvt. Ltd. therefore it is sure that atleast one of the directors of all 3 companies have accepted undisclosed income u/s 132(4) 1131 of IT Act. Mention of acceptance of other persons as a disclosure of a particular company in no way negate the case of revenue as all these 3 persons are employee with BPTP Ltd. and directors in various group companies of BPTP group.
Another argument of Ld. AR is that though statement U/S 132(4) has an important piece of evidence but the person making such statement is authorized to retract the same and has relied on various judicial pronouncements. I have perused the facts of the case. Statements of the 2 directors namely Sh. Nirbhay Kumar Jain and Sh. Sanjeev Kumar were recorded U/S 132(4) on 07112/2010. Statement of Sh. Sandeep Sehgal was recorded on 1310 1/20 11 after lapse of more than a month confirming the disclosure. Till filing of return ofIncome U/S 139(1) on 30109/2011, when these companies have not shown these undisclosed income in return of income, there is no correspondence specifically mentioning that there are retraction from statement of disclosure of income.
During the assessment proceedings, the appellant has relied on the reply filed before investigation on 06/06/2011 stating that the said money received by these companies was advance by way of collaboration/agreement/MOU dt29.05.2010 & the amount was received from the banking channels and the source is explainable. Therefore, the statement u/s 132(4) should be read with the reply filed before the investigation Director. I do not agree with this argument as retraction has to be filed by the person making such statement. Further, an discussed earlier the disclosure of undisclosed income was made apparently pursuant in subsequent question of cash transaction shown in seized annexure A- I0 found from the premises of Jain Brothers. Under these circumstances, I do not agree that retraction of statement was made by the person who has made such statement explaining the circumstances in which such statement was made. In fact, in the statement of Sh. Sanjeev Kumar has stated that we are not able to explain and support the receipt, we accept the same to be income earned during the year, which has not been provided yet in the books of current Financial Year. The alleged advance as contended by Ld. AR must have been entered in the
books of account at the time of receipt of the same. It is not a new fact after recording of statement. A closed security of this statement reveals that such income which is the source of alleged cheque payment is not explainable. The said Statement was not retracted is further strengthened by the fact that these companies have made part payment of taxes on such undisclosed income. In view of the above facts, I do not agree that it is a case of retraction of statement. All case laws relied by the Ld AR this issue are not applicable.
Last argument of Ld. AR against the disclosure made U/S 132(4) is that the authorized officer while recording the statement has not asked the manner of earning of income & cited various judicial pronouncements. I have perused the above cited judicial pronouncements. These judicial pronouncements are applicable for levy of penalty u/s 271 AAA & not on the evidential value of statement u/s 132(4) for quantum addition. The restriction contained in section 271 AAA cannot be brought for determining income by using the statement. Considering the entire facts, the arguments against statement u/s 132(4) are not acceptable. I hold that there existed valid statement u/s 132(4) & not retracted by the persons who made such statement. b) Now I will examine the evidences gathered during the search at the premises of Jain brothers as well as at the premises of the appellant & BPTP group of cases relating to these additions. As discussed in earlier para graph seized annexure A- 10 & A-II contained date wise receipt of cash by Jain Brothers from one Sh. Ram Prasad. Total of cash receipt as per the cash book comes Rs. 345.19 Crores for the period from 27/05/2010 to 30109/2010. Ld. AR has totaled up all these transaction and argued that total date wise such of all cash received comes to Rs. 256.13 Crores instead of Rs. 345.19 Crores. The instances quoted by the assessing officer are from 27/05/20 I 0 to 29/06/2014. The assessing officer has mentioned this date upto 30109/210 (last date of receipt of money) by these 3 companies of BPTP group. Therefore, the seized documents found from the premises of Jain Brothers where cash is received from Sh. Ram Prasad, explain the source of cheques given to three companies of BPTP group, as apparently the date of receipt of cash from Ram Prasad tallies with the cheque given by the three companies of Jain brother namely M/s Aquiss Pvt. Ltd., M/s Aashish Capital Pvt. Ltd. & M/s. Attractive Finlease Pvt. Ltd to 3 corresponding companies of BPTP groups after rotating through various layers of bank transactions.
The assessing officer has correlated Sh. Ramprasad mentioned in seized material as an employee of BPTP Ltd. on the basis of two evidences. First evidence is a seized document found from the premise of BPTP group inform of a letter issued by BPTP stating that Sh. Ramprasad is an employee of Mis. BPTP Ltd. and has been given accommodation at 7, Barakhamba Road. Secondly, mobile no. of Sh. Ramprasad was obtained during the search at the premise of BPTP as '9871262713' and call details were obtained in respect of mobile no. 98917-09895 belonging to Sh. Surendra Kumar Jain which shows that there is frequent conversation between Sh. Surendra Kumar Jain and Sh. Ramprasad on the date of receipt of cash from Sh. Ramprasad. The very fact that Surendra Kumar Jain was calling Sh. Ramprasad, employee of BPTP Ltd. and on the same date cash is received by Sh. Surendra Kumar Jain as per the seized document
proves that 'Ramprasad ' mentioned in the seized document of Jain Brothers is employee of BPTP Ltd. Further name of Sh. N.K. Jain, another employeelcompany secretary of BPTP Ltd. is also appearing in seized material in Annexure A-II where he is shown as mediator for the transaction which proves that the cash payment and obtaining cheque from Jain Brothers was arranged by Sh. Ramprasad and Sh. N.K. Jain ofBPTP group.
In view of these evidences brought on record, I do not think there is any confusion that Sh. Ramprasad I N.K. Jain working with BPTP Ltd. is the same person whose name is recorded in the seized document' Annexure A-I 01 A-II found from the premise of Jain Brothers as giver of cash.
After the receipt of cash, Jain brothers, have rotated this cash through various proprietorship firm and through various companies in different layer before giving the cheques to 3 companies of BPTP Ltd. namely, Design, Delicate and Pavitra (name in short of) of BPTP group from 3 last layer companies of Jain Group namely, Aashish, Aquiss & Attractive. The assessing officer after verifying the bank transaction has given pictographically fund flow which is reproduced for sake of clarify. Stage - Stage -1 Stage - 2 Stage - 3 Stage - 4 5 Around Main concerns viz. Jai Shree Attractive Delicate 30-35 proprietorship i) Chhaganlal Financial Finlease Pvt. Ltd. Realtors Pvt. Capita concerns Mukesh Kumar Services Pvt. Aashish Ltd, / ii) Shiv Shankar Ltd. Pvt. Ltd. and Pavitra Rea/con Trading Co. Acquiss Pvt. Ltd Pvt. Ltd and iii) JM Clothing Design Infracon Pvt. Ltd , Transferred Transferr Cash deposit in Transferred Transferred to ed to non- three to three stage -1 --- to the concerns -- -- numbering corporate company companies companie around 35 concerns managed managed by ofBPTP Shri S.K. entities managed by by Shri group Jain Shri S.K. S.K. Jain companie -, It may be mentioned here that as a result of search and seizure operation at the premise of Jain Brothers and Post search enquiry, it was found that Jain Brothers are engaged in providing accommodation entry to various beneficiaries by receiving cash and giving them cheques, after rotating the fund through various layers of bank transaction. Main evidences in support of such finding are as under:- • Jain brothers were found to operate over 200 concern/companies whose bank accounts were utilized for this purpose. These concerns were identified & list of such concerns are mentioned in the
assessment order of Sh. S.K. Jain & Sh. Virendra Jain. The name of three concerns namely Aquiss, Aashish & Attractive which have paid the sum to three companies of BPTP including the appellant are appearing in the list. • Books of accounts of these companies were found in the computer maintained at the premise of Jain Brothers. • In the annexure A-158, found from the premise of Jain Brothers, there are letters addressed to the bank for depositing huge cash and RTGS clearing of huge fund. • Cash books were found and seized from the premise of Jain Brothers contained date wise cash received from the mediator running in thousands of Crores and ultimately the cheque is given to beneficiary with the name of mediator (Annexure A-10, A-II, A-12, A-158) • Addresses of all concerns/paper companies are belonging/owned by Jain Brothers and are small places with no infrastructure accept receiving tapale. • Directors/proprietors of these concerns were employees of Jain Brother or getting commission for such entries in their bank accounts. • Telephone numbers of Sh. S.K. Jain and Sh. Virendra Jain was given for e- transaction in the bank accounts of these dummy concerns. • Letter of authority in respect of all these concerns are in favour of Sh. Surendra Kumar Jain to be appear before Income Tax Authority & found in the computer of Jain Brothers. Considering the entire facts and circumstances of the case Sh. Surendra Kumar Jain and Sh. Virendra Jain was assessed U/S 153A1143(3) as entry operators where commission income was assessed for seven assessment year from 2005- 06 to 2011-12. I have decided the appeal in both the cases U/S 250(6) in appeal no. 222-228/13-14/1373- 1379 and appeal no. 229-235/13-14/1380-1386 in the case of Sh. Virendra Jain and Sh. Surendra Kumar Jain where I have held that these two Jain Brothers are receiving cash from the beneficiaries and by utilizing its bogus/paper concern/company by rotating the fund through various layers gives cheques to beneficiaries after charging commission. I have confirmed the addition on account total cash received as per the seized document u/s 68 as these persons have not explained the source and not given the name of beneficiary to whom such cash belongs inspite of numerous opportunities. I have given clear finding that the cash received in the cash books of Jain Brothers belongs and earned by e beneficiaries. After dealing with these evidences, I would deal with various issues raised such as not providing proper opportunity by Ld. AR against the assessment order as under:- i) Copy of Annexure A-I 0 containing transaction of cash received by Sh. Jain Brothers from Sh. Ramprasad was not given to various directors while recording the statement. Firstly the copy of such document was not sought during the
statement. Further, entire copy of such cash book is part of the assessment order which clearly shows that cash was received from one Sh. Ramprasad. Once, the Director accepted the income a undisclosed, I do not think by not giving copy of these seized document in any way reduces its evidential value. ii) The assessing officer has not called the appellant to produce any person. The assessing officer has utilized documentary seized evidence primarily found as a result of search and seizure operation after giving show cause, I do not think, the assessing officer was compulsorily required to give an opportunity to the appellant to produce any person. iii) Copies of the statement of Jain Brothers were not given to the appellant. Statement of Jain Brothers have not been relied by the assessin2 officer. I have decided the appeal in the case of Jain Brothers. Neither Sh. Surendra Kumar Jain nor Sh. Virendra Jain explained the transaction in seized documents inspite of numerous opportunities given during the recording of statement or during the assessment proceedings. Therefore, unambitious evidences gathered during the search have to be interpreted and to be utilized for assessment of income. iv) The assessing officer has not brought any corroborative evidence while relying on statement u/s 132(4) for making addition. I do not agree with this argument of Ld. AR. The assessing officer has relied on various evidences gathered during search and post search, proceedings to establish the addition that the cheques/pay orders received from three companies of Jain group are nothing but by way of giving cash. It may be mentioned that the evidences gathered during search/post search enquiry has to be utilized by the assessing officer. Once the evidences gathered during search & Post search proceeding as so conclusive, the assessing officer need not conduct further enquiry. v) The assessing officer has not examined Sh. Ramprasad and no cross- examination was offered to the appellant. In my view where documentary evidences in support of cash received from Sh. Ram Prakash was seized and corroborative evidence was found that Sh. Ram Prakash is an employee of BPTP group and BPTP group has received cheque/P.O. of equivalent amount from Jain Brothers, examination of sh. Ram Prakash was not required as enough evidences are there to prove the facts. vi) The evidences that Jain Brothers are operating bogus companies to provide accommodation entries were never confronted to the appellant during the assessment proceedings. In this regard, I have perused the show cause letter issued by the assessing officer dt.29.01.2013 which is part of the paper book page 79-83. In the said show cause entire flow of fund leading to issuance of payment made to Delicate, Design & Pavitra (three companies of BPTP name in short) are mentioned. In the said show cause, it is clearly mentioned that cash book seized from the premise of Jain Brothers shows that they are charging commission for converting cash into cheques. Therefore, basic contention/evidences were informed to the appellant. In any case, all such evidences have been made part of the assessment order. I have' perused those evidences and during the appellant proceedings the decision is taken after considering the contents of these evidences and written submission of Ld. AR. Finally, I would like to reiterate the settled position to law that strict technicality of law of Indian Evidence Act, does not apply to Income Tax proceedings. Therefore, examination / cross-examination etc of witness strictly do not apply to Income Tax proceedings. Inferences have to be drawn on totality of facts and circumstances of the case. Therefore, reliance of various evidences by the assessing officer in the
assessment order appears to be proper after giving reasonable opportunity to the appellant. Considering the entire evidences and enquiries, I am convinced that three companies of BPTP namely, Design, Delicate & Pavitra got cheques /P.O. from, Attractive. Aquiss and Aashish of Jain Brothers by paying cash to Jain Brothers through Ramprasad and N.K. Jain. I rely on the decision of hon'ble Supreme Court in the case of Sumati Dayal v. CIT [1995J 214 ITR 801, that human probability has to be considered while deciding the case, during the income tax proceedings as the evidence of cash received in the cash book seized from the premise of Jain brother and the cheques are issued by dummy / paper company of Sh. S.K. Jain group namely Aquiss, Aashish & Attractive. c) The facts that these three companies of BPTP including appellant namely Design, Delicate, & Pavitra has got the cheques form Aquiss, Aashish & Attractive (three companies of S.K. Jain & Virendra Jain) in lieu of cash is further strengthened by the enquiry during post search enquiry in BPTP group of cases in form of fund flow from cash deposit in fictitious concerns, statement of the alleged proprietor of such fictitious concern that the respective bank accounts were opened & operated at the instance of Sh. S.K. Jain & Virendra Jain, enquiry on the registered address of these three companies namely Aquiss, Aashish & Attractive as these address as were owned & possessed by Jain brothers, convergence of all fund at the bank account of M/s Jai Shree Financial Services Pvt. Ltd from fictitious concern & then transferring the fund from M/s Jai Shree Financial Services Pvt. Ltd to Mis Aquiss, Aashish & Attractive. These enquiries have been dealt in details in earlier parts of the order. d) Now, I would discuss the claim of MOU dt.21.5.2010 that the amount receive by 3 companies of BPTP group, namely, Design, Delicate & Pavitra (name in short) from three companies of Jain Brothers namely, Ashish, Aquiss & Attractive was on account of execution of said MOU signed by these six companies with confirming party as Kabul Chawla for the transfer of land at Hyderabad. All the money received by these three companies of BPTP group namely, Design, Delicate and Pavitra has been forfeited on the ground of non compliance of terms by the alleged purchase of land through MOU namely, Aquiss, Aashish & Attractive. The said forfeited amount was not declared by M/s. Design, Delicate & Pavitra on the ground that other parties namely, Aashish, Aquiss and Attractive have filed arbitration suit against the forfeiture of the sum before a retired High Court judge namely, Sh. S.K. Mahajan. The arbitration process is continuing and yet to be finalized. Therefore, the said sum was not declared as income during the year. The Ld. AR has relied on various judicial pronouncements on this issue. Ld. AR argued that the directors had made disclosure U/S 132(4) of this income in view of forfeiture of advance. Ld. AR argued that under these circumstances, section 68 is not applicable as the advance was in the nature of trade receipt. The assessing officer has examined these claim and held that on various grounds such as during the disclosure by Directors u/s 132(4), they have never stated the claim of MOU and forfeiture of advance, such MOU was not found during the search, the MOU has been signed on a stamp paper purchased prior to incorporation of two companies namely, Pavitra & Delicate, the land in question at Hyderabad was not owned by three companies of BPTP group namely Design, Delicate and Pavitra and Jain Brothers company, namely,
Aashish, Aquiss & Attractive do not have the experience on any real estate business to enter such a high value transaction, single MOU has been signed without mentioning percentage of share of each BPTP company namely, Design, Delicate & Pavitra and each Jain group of companies, namely, Aquiss, Aashish and Attractive though payment made to each BPTP group companies are different. During the appellate proceedings, Ld. AR has relied mainly on the stand taken before the assessing officer. I have considered the facts and arguments of Ld. AR on these issues. I have perused the statement of the Directors of Design, Delicate & Pavitra. Nowhere in the statement have they discussed the issue of MOU. In the statement u/s 132(4), in the disclosure was made as if these Incomes were not provided in the books of accounts and the receipts could not be explained. If the disclosure was relatable to forfeiture of advances, then they could not have said that receipts are not explainable. Further, it is the fact that the land in question was not owned by Design, Delicate & Pavitra. Without owning the land, how a sum of more than Rs. 300 Crores could be given. I have perused even the statement of Sh. Kabul Chawla u/s 133A on 30.05.2011, after almost Six months from the date of search. Even Sh. Kabul Chawla has not stated exactly entering of MOU. Considering all the facts and circumstances of the case. Therefore, I am convinced that the fund received by M/s. Design, Delicate & Pavitra from Aquiss, Aashish & Attractive is on account of cash paid to Jain brothers and not by virtue of the alleged MOU signed. This cash paid to Jain Brothers are the income of BPTP group and has to be taxed at the first layer of BPTP group of companies as income in form of cash which can reasonably be assumed belonging to these companies. In present case, first layer of companies of BPTP group are Mis. Design, Delicate and Pavitra who have received money from Jain group of companies which are fictitious/paper and used only to provide entries. It may be mentioned here that once, the amount received from M/s. Aquiss, Aashish & Attractive is held to be on account of cash payment to Jain Brothers, the source of amount through bank account remained unexplained. Therefore, section 68 applies on account of non genuineness of the transaction/creditworthiness of these paper companies. Even otherwise the cash receipts by Jain Brothers from BPTP group are nothing but income of BPTP group which have to be taxed. The most suitable answer is the first recipient of BPTP group in whose hand such receipt is taxable which was disclosed u/s 132(4)/131 of the Act by the directors of the company. Accordingly, additions in the hands of M/s. Design Infracon Pvt. Ltd, Mis Delicate Realtors Pvt. Ltd and M/s. Pavitra Realcon Pvt. Ltd to the extent of following additions are confirmed. S. No Name of the company Amount of addition 1. M/s. Design lnfracon Pvt. Ltd. Rs. 116 Crores 2. M/s. Delicate Realcon Pvt. Ltd. Rs. 105 Crores 3. M/s. Pavitra Realcon Pvt. Ltd. Rs. 120 Crores Total Rs. 341 Crores In my view on the entirety of facts & circumstances, the decision of hon 'ble apex court in the case of Me Dowell cited supra is applicable as the alleged MOU is a colorable device which has been proved so in view of numerous evidences gathered during search & seizure operation. Ld. AR's reliance on the decision of Vodafone cited supra does not help the appellant as the MOU is proved to be
colorable device on the basis of evidences gathered. The arguments of Ld. AR that if arbitration filed against forfeiture of money filed by Aashish, Aquiss & Attractive against the forfeiture of the amount gets approved and final award to return such advance is given to Design, Delicate, and Pavitra and the same is accepted by M/s. Design, Delicate and Pavitra by making repayment either in cash or kind, which means that the money belongs to M/s. Aashish, Aquiss and Attractive. Ld. AR has argued that these companies namely, Aquiss, Aashish & Attractive are effectively taken over by Gurinderjit Singh Group. Companies namely MIs Attractive & MIs Aquiss were taken over by Gurinderjit Singh group by change of share holding before transfer of alleged cash. Third company namely Aashish Capital Pvt. Ltd. is also under their control as common lawyer is appearing for arbitration & consolidated application is filed for arbitration. Therefore, even if the source of cheques are by way of cash payment to Jain brothers, these cash belongs to Gurjinder Singh Group and these companies now belong to separate group and is no longer paper companies. I have considered these arguments. M/s Aquiss, Attractive & Aashish are the companies which were operated undisputedly by Jain brothers namely Sh. S.K. Jain & Virendra Jain. Point of arbitration is on account of forfeiture of money as per the terms of memorandum & not on the nature money involved. In any case, arbitration process is subsequent phenomenon which will not change the character of transaction. Therefore, this argument does not change my finding based on evidences discussed earlier. The argument of Ld. AR that the mere filing of arbitration by M/s Aquiss, Aashish & Attractive proves that the fund belongs to them. I have examined this argument. If it is proved that these three companies namely Aashish, Aquiss & Attractive are controlled effectively by Gurinderjit Singh Group and the award becomes final that M/s Design, Delicate & Pavitra have to return the money received & the award is finally implemented. In that case it would be taxable in the hands of M/s Aquiss, Aashish & Attractive. Lastly. in the statement of facts filed alongwith appeal form no. 35. it is claimed that the order & approval of Addl. CIT as mentioned in the assessment order is undated. I have verified the assessment records, the order date is 28.03.2013 & approval of Addl. CIT is also dt.28.03.2013. This fact is further proved by the date mentioned in demand notice u/s 156 dt.28.03.2013 which has been enclosed alongwith form no.35. Therefore, there is no confusion over date of order & approval by Addl. CIT. Accordingly, all the grounds of appeal are dismissed. 5. 7th ground of appeal is against charging of interest u/s 234B of LT. Act. This ground is consequential in nature. Assessing Officer is directed to charge interest as per provision of I. T. Act on Total Income after giving effect to this order. 6. Eighth ground of appeal is against not giving proper credit. This issue can be rectified u/s 154. The appellant may apply for rectification u/s 154 who will verify the facts & settle the grievance of the appellant. 7. As a result, the appeal is dismissed.”
4.1 Aggrieved with such order of ld. CIT(A), the assessee is in appeal
before the Tribunal.
On legal issue involved in Delicate Realtors Pvt. Ltd. & Pavitra Realcon Pvt. Ltd., the Ld. AR submits that the present assessment is framed in utter violation of various mandatory jurisdictional conditions stipulated under the Act, since no search was conducted under Section 132 of the Income Tax Act, 1961 in the above two cases. The present period under consideration would fall u/s 153C, as per the Jurisdictional High Court decisions in case of SSP Aviation Ltd. 346 ITR 177, Jasjit Singh, order dated 11.08.2015 (ITA no.337/2015), RRJ Securities 380 ITR 612, ARN Infrastructure Ltd., order dated 25.04.2017 (WP(C)2768/2016), RL Allied Industries, order dated 28.01.2016(ITA 370/2015). The Ld. AR further submitted that it is an undisputed fact that no notice u/s 153C of the Act was issued for the period under consideration, there was no mention of relevant period referred to in the satisfaction note recorded u/s 153C of the Act. Only notice u/s 143(2) was issued for the relevant period. On basis of consistent stand of this Tribunal, framing of assessment u/s 143(3) instead of section 153C caused grave prejudice to the assessee. For this reliance is placed on the decision of the Hon’ble Allahabad High Court in case of Sri Raj Kumar Jaiswal, order dated 28.02.2017 (ITA no. 25/2010) (relevant Para 16). The Ld. AR further submits that there is huge difference in framing assessment u/s 153C of the Act and framing assessment u/s 143(3) of the Act, because jurisdictional conditions for both the provisions are altogether different. It has been held by Jurisdictional High Court in various rulings that invocation of section 153C of the Act requires not only recording of satisfaction note but same must be based
on incriminating material giving rise to undisclosed income for the period under consideration. The Ld. AR further submits that in present case, it is undisputed fact that no addition whatsoever was made on basis of material referred to in satisfaction note. In other words, once satisfaction note itself does not give rise to any incriminating material containing any undisclosed income, invocation of section 153C for the period under consideration could not have been made. The Ld. AR further submits that once it is accepted fact that no assessment was carried out for any of the period referred to in satisfaction note, the assessment u/s 143(3) also fails because same is in consequence to reopening u/s 153C. Thus, the Ld. AR submitted that it is well settled law that jurisdiction u/s 153C comes from satisfaction note which cannot be allowed to be improved, modified or altered, i.e. any infirmity in satisfaction note would be non curable.
In respect of the Merits of the case, the Ld. AR submits for all the three appeals that arbitration proceedings were going on. Since the factum of arbitration is not in doubt, therefore applying the theory of accrual of income as highlighted in recent Hon’ble Supreme Court decision in case of P. G. & Sawoo (385 ITR 60), no income can be said to have accrued during the pendency of arbitration proceeding, in the period under consideration. Only in the period when arbitration proceedings are settled and assessee gets ownership of the money, then only in that period accrual of income can take place. Since payer of the sum has claimed refund of the money given in arbitration proceedings going before retired Hon’ble High Court Judge, genuineness of the transaction cannot be called in question. Till date no enquiry has been
made by the AO, from payer of the money or from the arbitrator or from ROC or from the parties on balance sheets filed by the payer. Without following Principles of Natural Justice various materials are used without confronting the same to the assessee, which needs to be expunged as highlighted by Hon’ble Supreme Court decision in case of Kishanchand Chellaram vs. CIT (125 ITR 713). Only show cause notice and assesses reply thereto should be considered, without considering any other extraneous material. The material seized from third party premises, cannot be directly considered u/s 153A of the Act, without following the procedure prescribed u/s 153C of the Act. The Ld. AR further drew the attention of the Bench to the following Jurisdictional High Court decisions where issue of admissibility of legal plea is considered at length. The Ld. AR relied upon the Hon’ble Delhi high Court decision in case of Fast Booking (I) Pvt. Ltd., order dated 02.09.2015 (ITA no. 334/2015) (378 ITR 693), Silver Line, order dated 04.11.2015 (ITA no. 578/2015) (383 ITR 455) and also Hon’ble Punjab and Haryana High Court decision in case of M/s VMT Spinning Co. Ltd., order dated 16.09.2016 (ITA no. 445/2015) (389 ITR 326). Thus, the Ld. AR submits that all the three appeals be allowed and order of the CIT(A) be set aside.
The Ld. AR submits that statement given by Mr. Sanjeev Kumar cannot be relied upon in case of Design Infracon Pvt. Ltd. as he was not director in case of Design Infracon Pvt. Ltd. There was no statement of Mr. Digvijay Yadav who was another director. There was no statement of Mr. Sandeep Sehgal u/s 132(4) of the Act. His statement was recorded u/s 131(1) which cannot be construed with statement given u/s 132(4).
Show cause notice given by AO was duly replied on 7.2.2013 and 22.2.2013 to AO. The Ld. AR further submits that the Assessee, during the course of survey on 30.5.2011 duly explained the reasons to DDIT who conducted search also about disclosure of income during search and latest position of disclosure. The Ld. AR further submitted that the receipt of amount against proposed transaction of sale cannot be taxed u/s 68 of Income Tax Act. The Ld. AR further submitted that provisions of Section 68 of Income Tax Act are not applicable in the present case as identity of entity (Aquiss) who paid the money to assessee was beyond doubt since the entity was assessed to tax with same Assessing Officer. Entity (Aquiss) who paid money to assessee was assessed to tax was traceable, was complying with provisions of law and was regularly appearing before the same AO with whom assessee is assessed to tax. Aquiss is regularly filing Tax returns and ROC returns as the data is available on MCA portal. As regards the genuineness of transaction of the assessee with the Aquiss, the existing assessee (Aquiss) assessed to Tax with same AO with whom assessee is assessed to tax. The assessee filed confirmed copy of account of Aquiss before Assessing Officer. Further, the amount paid by Aquiss were duly shown in the Audited financial statement of Aquiss which were matching with books of appellant and are duly verifiable. All amounts were paid through normal banking channels. The Amounts were paid by Aquiss pursuant to MOU / agreement. The Amounts paid by Aquiss were held to be genuine as appeal of Aquiss was allowed by CIT-Appeals. As regards the creditworthiness of the transaction of the assessee with Aquiss is concerned, the Ld. AR submitted that the amount paid by Aquiss were reflected in their Audited financial statement and duly matches with
amounts shown to have been received by assessee from them. Financial statement of Aquiss shows that their creditworthiness was accepted by the department as they were regularly assessed to tax and assessment was also completed u/s 143(3) for AY 2011-12 and earlier years u/s 153-C of the Act. Amounts paid by Aquiss were claimed by them before Arbitration which is pending and the same clearly shows that amounts are payable by assessee to them. The Ld. AR submits that had the money belong to assessee then why they would have filed arbitration proceedings. Thus, the source of source was also explained by the assessee. The Ld. AR submits that the finding of AO that Aquiss Pvt. Ltd. who paid money to assessee is S.K. Jain and Virender Jain controlled companies is contrary to the facts on record. Submissions and documents were filed before AO as well as CIT-Appeal that Aquiss Pvt. Ltd. on the date of signing of MOU / agreement and prior to receipt of money by assessee from Aquiss, shareholding of Aquiss was changed on 29.5.2010 and whole of shareholding was acquired by Jaguar Buildcon Pvt. Ltd, a company owned by an NRI in hospitality business. The said finding of CIT-Appeal is mentioned in the order of CIT(A) at page no. 75. The copies of Annual Returns of Aquiss duly supported the fact that ownership of Aquiss was acquired by Gurinderjeet Singh group prior to transaction with assessee. There was no adverse statement given against the assessee by any party whether S.K. Jain, Virender Jain, Ram Prashad, N.K. Jain or any other party. No opportunity of any cross examination was provided to assessee. The Ld. AR relied upon the decision of Supreme Court in case of Andaman Timber Inds. The Ld. AR further submits that there was no corroboration of seized records found during the course of search which was used against the assessee. The
Ld. AR relied upon certain decisions. The Ld. AR further submits that the seized records if any found during the course of search on S.K. Jain and Virender Jain cannot be used against the assessee as no procedure as explained u/s 153-C was followed by the AO. The Ld. AR relied on the decision of Hon'ble Jurisdictional Delhi High court in case of Pepsi Foods, Pepsico Holding and Hon’ble Allahabad High court decision in case of Gopi Apartments. The Ld. AR further submitted that there was no accrual of income to assessee. As against forfeiture of amount received by assessee from Aquiss, claim is pending before Arbitration, the amount forfeited does not give rise to accrual of income in the hands of assessee. Reliance is placed on the decision of Supreme court in case of CIT vs. Excel Inds. Ltd. reported in 38 taxmann.com 100 (SC)(2013) and Godhra Electricity Ltd. in 225 ITR 746. Relying on various decisions, the ld. AR submitted that the order of the ld. CIT(A) be set- aside and the grounds raised by the assessee be allowed.
The Ld. DR submitted that the satisfaction notes entitled as ‘M/s
Delicate Realtors Pvt. Ltd. and as ‘M/s Pavitra Realcon Pvt. Ltd. were dated
27.07.2012, therefore, the contentions of the AR that assessment orders for
A.Y. 2011-12 ought to have been passed u/s 143(3)/153C are not proper. In
fact, the assessment orders mention the same thing i.e. these assessment
orders were passed u/s 143(3)/153C. Presumption is in favour of the revenue
by virtue of Illustration (e) of Section 114 of Evidence Act, 1872. However, the
Ld. AR contends that it was made u/s 143(3) only. The Ld. AR submitted that
what is apparent is not real. Therefore, the onus is upon the assessee to prove
it with the help of cogent material. The reliance is placed upon the ratio of
decision by the Hon’ble Supreme Court in case of CIT Vs DAULAT RAM
RAWATMALL 2002-TIOL-1540-SC- IT. The Ld. DR submitted that the
contention of the Ld. AR that there is no mention of issuing of notice u/s 153A
r.w.s. 153C of the Act is not valid. Firstly, this argument is based upon a
(wrong) assumption that what is not written in the assessment has to be
presumed in favour of the assessee. There is no compulsion or guideline as to
what should or what should not be written in the assessment order. Any
prudent person would not hesitate to say that mentioning of something in
assessment order indicates about existence of some fact but non-mentioning
(of any thing) is neutral. It is not the case of the AR that he has obtained any
certificate from AO to that effect. In fact, the AR does not even claim to have
inspected the records. Secondly, the assessee, is having comfort of professional
advice. More particularly, being the search assessment, in normal course, the
assesee would raise objection at the time of issuing notice u/s 143(2) i.e. on
13.09.2012. The Ld. DR further submitted that the AR tried to draw support
from the above stated satisfaction notes (dated 27.07.2012) by pointing out
that AY 2011-12 is not mentioned therein. Here again, the AR is making a
(wrong) assumption. The satisfaction note has to be of the AO of the searched
person for conclusion that the material seized belongs to the other person and
then he (the AO of searched person) is supposed to hand over the ‘seized
material belonging to the other person’ to the AO of such other person. It has
been held by numerous court pronouncements that after receiving such
material issuing of the Notice u/s 153A rws 153C is automatic and no
satisfaction is required for the same). The reliance is placed on the ratio of
judgment of Hon’ble jurisdictional High Court in case of CIT Vs Anil Kumar
Bhatia [2012 24 taxmann.com 98 (Delhi). The ld. DR drew the attention of the Bench to the relevant portion of the judgment which reads as under-
“A perusal of Section 153A shows that it starts with a non obstante clause relating to normal assessment procedure which is covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31.5.2003. These Sections, the applicability of which has been excluded, relate to returns, assessment and reassessment provisions. Prior to, the introduction of these three Sections, there was Chapter XIV-B of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as 'block assessment' because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also included in what was known as 'block period'. Though a single assessment order was to be passed, the undisclosed income was to be assessed in the different assessment years to which it related. But all this had to be made in a single assessment order. The block assessment so made was independent of and in addition to the normal assessment proceedings as clarified by the Explanation below Section 158BA(2). After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place.”
8.1 Therefore, the arguments made by the AR are, at the most, a remote probability which does not help the cause of the assessee. Normal assessment proceedings u/s 143(3) are perfectly in order. The search was conducted in the case of M/s BPTP on 07.12.2011 and concluded on 05.02.2011.Handing over of books/documents as per the interpretation of the AR was on 27.07.2012. The Returns of Income were filed on 30.09.2011. Therefore, none of the condition stipulated in section 153C(2) are met and hence there cannot be assessment u/s 153C for AY 2011-12 and hence normal assessment proceedings {u/s 143(3)} by issuing notice u/s 142(2) are perfectly in order. The Assessee’s stand is shifting and contradictory. The stand of the assessee earlier was that the basic requirement of 153C was not fulfilled. In that case, how can normal assessment be objected to. The stand of the assesee is different (rather contrary) than the one taken at appellate stage. Therefore, such (new) ground cannot be allowed to be raised but for asking for exercise of discretion of the ITAT. However, there is no such request/application. Even if such request/application was made, the same is liable to be rejected as i) there is no good reason for the delay, and ii) the law on this point has been settled by Hon’ble SC that if the relevant facts are not before the Appellate Authority, the law point cannot be raised. In this case relevant facts would come out only after detailed scrutiny of Assessment/search records. The reliance in placed upon ratio of judgment of Hon’ble SC in case of National Thermal Power Company Limited Vs CIT 2002-TIOL-279-SC- IT-LB as explained while delivering the judgment in case of Goetze India Ltd Vs. CIT 2006-TIOL-198-SC- IT. During the appellate proceedings, the appellate authority is also required to do justice to the revenue which represent interest of society at large. It is
therefore, necessary that conduct of assessee has to be honest. Therefore, assessee ought to have pointed out/taken objection to technical defects at the earliest opportunity. The Assessee did not raise objection at appropriate time as per law and interest of the revenue has been prejudiced. In fact, while delivering judgment in case of GKN Driveshaft (India) Ltd. Vs. Income-tax Officer [2002] 125 TAXMAN 963 (SC), the Hon’ble Supreme Court held that objection to assumption of jurisdiction are to be taken and disposed off at that point of time.
8.2 The Ld. DR submitted that by not raising this point at the stage of issue of notice u/s 153A of the Act, a prejudice has been cast against the revenue (e.g. revenue could have initiated proceedings u/s 147, independently).It may be pointed out that addition which are subject matter of impugned Assessment Year was confirmed by the CIT(A). Therefore, the AO had enough material to start proceedings u/s 147 of the Act. If the assesse would have raised such objection at the time of initiation of the proceedings, the AO would have met such objections. Legitimate tax liability cannot be allowed to be escaped just for non-observation of minor technicalities of procedure. It is not the case of the assessee that there is no material to make the additions under question. It is also not the case of the assessee that this very assessment year is not barred by time limitation prescribed by provisions u/s 153A. It is also not the case of the assessee that the AO was incompetent to assess the income u/s 153C. The AR has also not been able to point out any defect with the satisfaction recorded for initiating proceedings u/s 153C. Various judicial pronouncement have held that after receiving material u/s 153C, issuance of notice u/s 153A r.w.s.
153C is automatic. 8.3 The Ld. DR submitted that during the appellate proceedings, the appellate authority is required to do justice to the revenue which represents interest of society at large. Therefore, procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice. Therefore, where there is a matter of mere technicalities, the revenue cannot be put to disadvantage and prejudice. Reliance is placed on the ratio of judgment delivered on 20.11.2008 by the Hon'ble Supreme Court in case of Sambhaji and Ors. Vs. Gangabai and Ors. [Civil appeal no. 6731 of 2008 (arising out of SLP (C) No. 14562 of 2006]. The Hon’ble SC has laid down that such defects are capable of cure by setting aside the orders for re-doing it.
As regards the merit of the case is concerned, the Ld. DR submits that during search and post search enquiries, in case of BPTP group, there was no warrant u/s 132 against these companies, these were companies running from addresses belonging to BPTP group and employees of BPTP group are directors. The Ld. DR further submits that in case of BPTP, overwhelming incriminating material was seized/gathered which indicated unaccounted cash transactions. In various assesees belonging to the BPTP group, various additions have been confirmed upto ITAT stage. Special mention is to the modus operandi of issuing of post dated cheques (PDCs) against purchase of Land and extension of validity of these PDCs payment of unaccounted cash. Specific Case of ACIT, Central Circle-23, New Delhi Vs. IAG Promoters & Developers Pvt. Ltd. dated 31.10,2014 {ITA No. 1674/Del/2011 AY 2008-09}. Employees of the BPTP group( Shri Ram Prasad and N K Jain. Shri N K Jain is Director in M/s Design
Infracon Pvt. Ltd.) were paying cash to obtain cheques from accommodation entry providers (Surendra Jain/Virendra Jain who are known for running racket of money laundering and have been arrested by Enforcement Directorate for such activities). There are cases decided by Settlement Commission ( a quasi-judicial authority like ITAT) where Shri Surendra Jain / Virendra Jain have been adjudicated to be accommodation entry provider. Ld. DR submitted that specific instances would be submitted later. (However, no such instances were submitted). There is specific materials (discussed in Assessment Order and CIT(A)’s Order) evidencing that the sum which is subject matter of addition under consideration was obtained by way of accommodation entries and given colour of genuine transactions. Directors of these companies could not explain these transactions and logically admitted this to be undisclosed income by way of statements under oath including statement u/s 132(4). These statements were taken at different places, by different officers and at different time (there was a gap of more than a month) and later( after time gap of about 4 months from last of these statements) found corroborated with Balance Sheets as on 31.12.2010 and Profit & Loss account (from 01.04.2010 to 31,12. 2010) signed by Directors and submitted before the revenue. These statements were never retracted or proved to be wrong.
The Ld. DR further submits that Pavitra Realcon Pvt. Ltd., and Delicate Realtors Pvt. Ltd were newly promoted companies in May, 2010 and had no credentials, had no business and directors were petty salaried employees and therefore someone has invested astronomical amount on so called projects which were nowhere in reality does not found logic. The Case of Design
Infracon Pvt. Ltd. is also the same except date of incorporation being in March 2008. In bank accounts of all these investor companies Shri Virendra Jain (accommodation entry provider) was authorised signatory. All these companies defaulted together in making payment. None of the directors (of the assessee companies) whose statements were recorded at different places and at different time, could make a reference to so called agreement, default in payment, forfeiture of amount and arbitration in-spite of fact that this being activity of astronomical figures (and only significant activity in the histories of these companies) and also there was no significant time gap between these events and date of recording of the statements of the Directors.
As relates to legal issues, the Ld. DR submits that in view of the over whelming evidences showing that there was no genuine activities carried out by these assessee companies and colour has been provided by creating evidences on paper in form of recording of accounting entries there is very heavy onus upon assesee to show identity and capacity of the persons providing this money and genuineness of these transactions. The Ld. DR relied upon the judgment of the Hon’ble Supreme Court in case of CIT Vs. Durga Prasad More [19711 82 ITR 540 (SC). The Ld. DR also relied upon the order of the Hon’ble Delhi HC in case of CIT Vs. Nova Promoters & Finlease (P) Ltd. [2012] 18 taxmann.com 217 (Delhi). The Ld. DR submits that Directors of these companies could not explain these transactions and logically admitted this to be undisclosed income by way of statements under oath including statement u/s 132(4). These statements were taken at different places ,by different officers and at different time (there was a gap of more than a month). These statements were never retracted or proved to be wrong. These were ignored in RsOI. The retraction made by the Assessee two years after the declaration was not bonafide. There was no satisfactory explanation for not including the said amount in the return of income. Reversed ITAT Order and the ratio of decision
in CIT v. Khader Khan Son [2008] 300 ITR 157 (Mad.) cannot be applied. In Principal Commissioner of Income-tax (C)-2, New Delhi Vs. Avinash Kumar Setia [2017] 81 taxmann.com 476 (Delhi) it was held that retraction to be effective has to be made at the earliest opportunity when the pressure or coercion or undue influence on the person making confession ceases to be operative. Whenever there is delay in retracting from the concessional statement, the onus lies upon the person retracting to show the circumstances that existed for him not to retract earlier as held in case of Gurdev Agro Engineers, Bhawanigarh Vs Commissioner Of Income Tax, Patiala 2016-TIOL- 2689-HC-P&H-IT. The additions made by the Assessing Officer was on the basis of clear admission made by the assessee in the statement recorded under section 132(4). The Tribunal has wrongly proceeded to deal with the issues on the premise that no evidentiary value can be attributed to the statement under section 132(4) especially in the context of there being a retraction and that for making additions, the Assessing Officer should necessarily unearth materials during the search as held in case of Commissioner of Income-tax, Kozhikode Vs. O. Abdul Razak [2012] 20 taxmann.com 48 (Ker.)
The ld. DR submitted that in case of Design Infracon Pvt Ltd, the AR has pleaded that it is a case of search u/s 132. Therefore, AY 11-12 is a search year and assessment is to be made as 143(3) which has been done. It is plea of the AR that ‘Block’ cannot be broken by way of operation of 153C(2). It may be seen that section 153A/153C talks about assessing or reassessing the ‘total income’ of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted . It also talks about issuing of individual notices in individual assessment years. Nowhere it talks of any ‘Block’, in fact, as per earlier scheme in relation to 158BC where there was concept of ‘undisclosed income’ and ‘Block period’. Under new scheme (u/s 153A/153C) these concepts have been done away with. In relation to 158BC, there were concepts of ‘undisclosed income’ and ‘Block period’.
Under new scheme (u/s 153A/153C) these concepts have been done away with. Under new scheme, there is concept of ‘single assessment’. That is why Hon’ble Delhi High Court in case of Ashok Chadha Vs ITO 2011-TIOL-HC- DEL-IT ruled that Issuance of notice u/s 143(2) is not required under new scheme. So many judgments are in relation to 158BC. These judgments are not applicable simply because new and old schemes are way apart in concept. For example, the judgment of the Hon’ble Delhi HC in case of Harjeev Aggrawal. In any case this judgment is in peculiar facts of that case where issue was whether the statement in that particular case there were other contradictory evidences) would triggers Block assessment. After Hon’ble Delhi HC confirming additions u/s 153A based upon statement in case of Smt. Dyawanti Vs CIT [2016] 75 taxmann.com 308 (Delhi), the order dated 31.05.2016 of ITAT in case of Best Infrastructure Pvt. Ltd. Vs. ACIT ITA No. 1698-1701/Del/2014 cannot help the case of the assessee. Since, there is no bar to the AO when to issue notice u/s 143(2) before date of limitation which in this case was in Sept, 2012. Imagine a situation, if notice u/s 143(2) was issued before date of handing over of the material (say in June, 2012). If we go by the proposition of AR, in that case there would have been abetment of normal proceedings and 153C proceedings would start which will have no limitation. It will not impose any limitation on the powers of the AO to make addition. Obvious answer is ‘no’. If we put another question- whether assessee is entitled to privilege just because the notice u/s 143(2) is issued on any particular day (as long as it is before 30.09.2012-the limitation date)?. Again obvious answer is ‘no’. The contention of the AR was that material collected during the search of Sh. Surendra Kumar Jain was made known to the assessee by way of show cause notice dated 03.07.2012, for the first time. This is not correct. Attention is invited to the statements of Directors of the assessee companies (during search in case of BPTP/post search) (which is part of assessment order) whereby the material from the search of Surendra Kumar Jain/Virendra Kumar Jain was confronted to the Directors and nature of the sum which is subject matter of addition under consideration, was asked.
Because the Directors were unable to explain, they made the surrender. By raising arguments like AO should have asked the version of the payees as well as Surendra Kumar Jain/Virendra Kumar Jain etc., the AR is trying to suggest as to how the investigating officer should have conducted the investigation. It is duty and prerogative of investigating officer as to how he investigates and collects material favourable to the revenue in a particular case. Can there be any straight jacket formula for investigation? Certainly not. If assessee wanted anybody to act as its witness, it could have very well produces him/her during assessment proceedings. If it itself chose not to do so, how assessee can take such plea now or at CIT(A) Stage? Plea regarding not giving opportunity of cross-examination is without any substance because as per settled law, statement of a third party witness is used against the assessee, assessee is entitled to his/her cross-examination. However, AR is not pointing out any specific request for any such cross-examination before AO or CIT(A), Reliance is placed on the order on 7 March, 1992 passed by Hon’ble Customs, Excise and Gold Tribunal - Tamil Nadu in case of G. Sridhar And Ors. Vs Collector Of Customs {1992 (43) ECR 95 Tri Chennai }which has held as under
“………. The Courts have observed that whether in a particular case a particular party should have the right of cross-examination or not depends upon the facts and circumstances of each, case and it very largely depends upon the adjudicating authority who is not guided by the rules of evidence as such.
In this background therefore, it cannot be said at this stage and on prima facie considerations that the lower authority's order is bad prima facie for the reason of denial of cross-examination. Detailed arguments will have to be heard in this context whether in the facts of this case denial of cross- examination was called for taking into consideration the totality of the evidence on record...."
Principle of natural justice is a flexible concept. The idea is that assessee to be confronted with adverse material. Ref. is invited to para 6.4 of the order dated 31.12.2010 passed by ITAT in case of Hersh W, Chadha Vs DyCIT [2011] 43 SOT 544(Delhi)- relevant portion is reproduced as under:
“....All that is required is that if they want to use any material collected by them which is adverse to the assessee, then the assessee must be given a chance to make his submissions thereon. The principles of natural justice are violated if an adverse order is made on an assessee on the basis of the material not brought to his notice...” The reading of the assessment order shows that there is no withholding the material. Therefore principles of natural justice have been followed.
The Ld. DR submitted that the Revenue's case is that the subject sum is certainly credited in books of accounts of the assessee and it is not shown as income. Therefore, provisions of section 68 are applicable. As per settled law the initial onus is upon assessee to prove identity and capacity of the creditor and genuineness of the transaction. This is also settled law that the burden to discharge the onus becomes much heavier in view of confessional statements of their directors coupled with corroborative material. The assesee has not discharged this onus. Even identity is not proved because, it is not the case of the AR that assesee provided material to show that the companies were doing business in reality. In fact, there is material to show that these are paper companies of Surendra Jain/Virendra Jain working as conduit to further activity of providing accommodation entries. Ld. DR drew the attention of the Bench to para 18 of judgment delivered in case of CIT Vs. N.R. Portfolio (P.) Ltd. [2014] 42 taxmann.com 339 (Delhi) which reads as under: “The word "identity" as defined, it was observed meant the condition or fact of a person or thing being that specified unique person or thing. The identification of the person would include the place of work, the staff, the fact that it was actually carrying on business and recognition of the said company in the eyes of public. Merely producing PAN number or assessment particulars
did not establish the identity of the person. The actual and true identity of the person or a company was the business undertaken by them."
13.1 According to the Ld. DR, it is the plea of AR that in case of Navodaya Castle, the Hon’ble Delhi HC has spoken about AO sitting with folded hands, thus the AR is trying to pick and choose. The Hon’ble HC was concerned with investigation by the revenue as a whole (and not by AO in particular). In present cases there is over whelming material with the revenue. The reliance of AR on the definition of ‘undisclosed Income’ prescribed by way of explanation to section 271 AAA is misplaced. The Ratio of Raza Textiles Ltd. Vs. Income- Tax [1973] 87 ITR 539 (SC) is not relevant to the present case because it that case issue was whether decision of ITO to decide that payee is not non-resident was open to writ jurisdiction or not. AR made reference to Article 365 of constitution. There is no quarrel that tax would be levied by authority of tax. The stand of revenue is that what AO did was under authority of Law, only. It is correct law position that if provisions of normal scrutiny are otherwise applicable, these would be disabled only in cases of abatement of these proceedings as provided under section 153A/153C. The case of assesee is not of abatement. In any case if the proceedings are abated, scope of 153A/153C would be unrestricted (and wider than in case of applicability of normal provisions). In other words because of search or passing of seized material belonging to the AO of ‘other person’, the scope of scrutiny under normal provisions can only be widened, it cannot be restricted or curtailed. The judgment of Hon’ble SC in case of P.G. & W. Sawoo Pvt. Ltd. & Anr. Vs ACIT 385 ITR 60(SC) does not help the cause of assesee. The court held that right to receive arose only in the year 1994 and not from any earlier date. There are so much circumstantial evidences indicating that there are preponderance of probabilities that it is an after-thought including the land being under legal dispute before Hon’ble Supreme Court and none of the assessee companies being owner of the land. According to the assesee, it has right to forfeit and that right has not been exercised and money is already with the assesee.
Relying upon E.D. Sassoon & Company Ltd, And Others vs. Commissioner of Income-Tax, (1954) 26 ITR 27 which has been quoted in P.O. & W. Sawoo Pvt. Ltd. & Anr. Vs ACIT (supra) the accrual or right to receive is before receipt. Here receipt has already been taken. Alternatively, the receipt is revenue in character because it was received in connection with the business because none of the assessee company was ever owner of the so called land. The accounting entries are not conclusive of actual nature of transactions and their tax treatment, especially, when there is so much material to indicate to the contrary. Reliance is placed on ratio of Hon’ble SC in case of Kedarnath Jute Mfg. Co. Ltd. Vs. CIT [1971] 62 ITR 363 (Hon'ble Supreme Court). The ld. Dr accordingly submitted that the order of ld. CIT(A) be upheld and the grounds raised by the assessee be dismissed.
The Ld. AR refuted the contentions of the Ld. DR and reiterated the submissions made earlier. He submitted that all decisions relied on by ld. DR are distinguishable and not applicable to facts of the present case.
We have heard the rival arguments made by both the sides and perused the material available on record. We have also considered the judicial precedents cited by both the sides. From a perusal of the orders of the authorities below as well as arguments advanced by both the sides, we find that no search u/s 132 of the I.T. Act, 1961 was conducted in the case of Pavitra Realcon Pvt. Ltd. and Delicate Realtors Pvt. Ltd.. However, a search u/s 132 was conducted in the case of Design Infracon Pvt. Ltd. We further find the Assessing Officer has recorded satisfaction u/s 153C in the case of Delicate Realtors Pvt. Ltd. and Pavitra Realcon Pvt. Ltd. on 27th July, 2012.
15.1 We find the Assessing Officer has recorded the following satisfaction note in the case of M/s Delicate Realtors Pvt. Ltd. :-
condition to initiate proceedings u/s 153C of the Income Tax Act, 1961, is fulfilled. Therefore, I am satisfied that case of M/s Delicate Realtors Pvt. Ltd. is a fit case for initiation of proceedings u/s 153C of the Income Tax Act, 1961. Accordingly, notices u/s 153C r/w 153A of the Income Tax Act, 1961 are issued for AY 2005-06 to 2010- 11, in the case of M/s Delicate Realtors Pvt. Ltd. i.e. the assessee company.
Sd/- (Dr. Anjula Jain) 27.07.2012 Dy. Commissioner of Income Tax
Central Circle-23, New Delhi.
15.2 Similarly, we find in the case of Pavitra Realcon Pvt. Ltd. the Assessing Officer has recorded the following satisfaction note :-
In view of above, it is established beyond doubt that many books of accounts or documents seized during the course of search and seizure action on BBTP group of cases belong to M/s Pavitra Realcon Pvt. Ltd. i.e. the assessee company and hence prerequisite condition to initiate proceedings u/s 153C of the Income Tax Act, 1961, is fulfilled. Therefore, I am satisfied that case of M/s Pavitra Realcon Pvt. Ltd. is a fit case for initiation of proceedings u/s 153C of the Income Tax Act, 1961. Accordingly, notices u/s 153C r/w 153A of the Income Tax Act, 1961 are issued for AY 2005-06 to 2010-11, in the case of M/s Pavitra Realcon Pvt. Ltd. i.e. the assessee company. Sd/- (Dr. Anjula Jain) 27.07.2012 Dy. Commissioner of Income Tax Central Circle-23, New Delhi.
15.3 Since the satisfaction was recorded on 27th July, 2012, therefore, deemed date of search in the case of other person for computing the period of six years is 27th July, 2012 and the six assessment years immediately preceding the assessment year relevant to previous year in which such search is conducted is assessment years 2006-07 to 2012-13. However, it is an admitted fact that no such notice u/s 153C was issued by the Assessing Officer in the above two cases for the impugned assessment years and the ld. DR also fairly admitted the same. It is a fact that the Assessing Officer mentioned in the body of the assessment order that the same has been passed u/s 153C/143(3). However, the Assessing Officer has not assumed jurisdiction u/s 153C as per the copies of order sheet entries filed during the course of hearing and the ld. DR also confirmed that no notice u/s 153C has been issued by the Assessing Officer in the above two cases. As per the requirement of the proceedings under Income Tax Act, the assessment proceedings has to be done as per Section 153C of the Act in case of the searched party. But the Assessing Officer choose to follow procedure u/s. 143(3) of the Act, yet while conducting the proceedings under the said Section chooses to use the material which was found during search with the third party without confronting the same to the present assessees. This is not permissible as per the provisions of the Income Tax Act, 1961. The contention of the Ld. DR that Principle of natural justice is
a flexible concept is not permissible. The statute has to be strictly followed and the Revenue cannot ignore the procedure given under Section 143(2) or Section 153A/153C of the Act. If we admit the submissions made by the Ld. DR that the Assessing Officer has rightly issued notice u/s 143(2) dated 13/9/2012 then how the Assessing Officer has used the material which was found during the search in this particular Assessment Year 2011-12. Section 143(2) and Section 153C are not only governing the procedure to be followed by the Assessing Officer but there is an obligation upon the Assessing Officer to properly fulfill the provisions of the Income-tax Act. Section 143(2) notice is given when the returns are furnished u/s 139 or in response to notice under Sub Section 1 of Section 142 when the assessee has not stated the income properly. Section 153C begins with non obstante clause that notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 & Section 153, the Assessing Officer will issue notice as per provisions of 153A. The intention of the parliament for separate Sections for issuing notice u/s 143(2) and Section 153A is specifically different and falls in particular circumstances mentioned in those particular Sections. It cannot be interlocated or inter related. Clearly, here the Assessing Officer was prima facie of the opinion that there was a search in the premises of BPTP Group. But instead of the searched material whether belong to the assessee or not which is in doubt cannot be simply taken in proceedings u/s 143(2) by the Assessing Officer. The Assessing Officer cannot take the benefit of both the Sections. It has to be specifically mentioned in the assessment order why he is invoking that particular Section because each Section has its own procedure and if there is a procedure which has to be followed the same cannot be ignored by the Assessing Officer . All the Sections to Income tax Act has given its own formats and whenever necessary they have given specific Sections in that particular Section and why the other Section has to be taken in cognizance while interpreting that particular Section. Thus, the legal ground of the assessee that Assessing Officer as well as the CIT(A) has not carried out proper proceedings against the assessee by invoking Section 143(2) in case of
Pavitra and Dedicate sustains to the test of legal scrutiny. The Ld. DR relied upon the various Hon'ble Supreme Court and Hon'ble High Court judgments. The legal principle in all these judgments does not give the right to the Revenue to over look the Sections or misinterpret the Section as per the convenience of the Department. In-fact, all the Hon'ble Supreme Court as well as the Hon'ble High Court judgments have rather reiterated each and every factual aspect of each case and after that have come to the conclusion whether that particular Section in the particular case has been properly followed or not. The decision is not only based on the legal principle but how the legal principle has to be applied to the factual aspect of each case has been taken care of by the Apex Court and the Hon'ble High Court.
We find the year for which the impugned assessment order has been passed u/s 143(3) is for assessment year 2011-12. This year falls within the period of six years when counted from the date of recording of satisfaction note u/s 153/153C of the I.T. Act which is deemed date of search. The Act has been amended recently by the Finance Act, 2017 with prospective effect i.e. from assessment year 2018-19. Thus, the period is same now only for the searched parties as well as the other person as per the amended provisions of the said section. In view of the above, we hold that the assessment completed u/s 143(3) is invalid.
So far as the argument of the ld. DR that although no notice u/s 153C has been issued but the assessment has been completed u/s 153C/143(3) and therefore, the error is curable u/s 292B is concerned, the same in our opinion cannot be read to confer the jurisdiction on the Assessing Officer where none exists. The said section, in our opinion, only protects return of income, assessment, notice, summons or other proceedings from any mistake in such return of income, assessment notices, summons or other proceedings provided the same are in-substance and in-effect are in conformity with the intent or
purposes of the Act i.e. 292B cannot save an order not passed in accordance with the provisions of the Act. We have also gone through the order-sheet entries, copies of which were filed during the course of hearing and find that no notice u/s 153C has been issued for the period under consideration. Since the assessment order has not been passed in conformity with the provisions of the law, the same is liable to be quashed since such assessment is palpably and patently illegal.
Now coming to the nature of addition is concerned, we find that in the case of M/s Delicate Real Estate Pvt. Ltd. and M/s Pavitra Realcon Pvt. Ltd., no addition has been made on the basis of any incriminating material found/seized during the course of search. We find the Hon’ble Delhi High Court in the case of CIT vs. RRJ Securities Ltd. reported in 380 ITR 612 has held as under :-
“35. The AO of the person other than the one searched also, is not, at the stage of issuing notice under Section 153C/153A of the Act, required to conclude that the assets/documents handed over to him by the AO of the searched person represent or indicate any undisclosed income of the Assessee under his jurisdiction. As explained in SSP Aviation (supra), Section 153C only enables the AO of a person other than the one searched, to investigate into the documents seized and/or the assets seized and ascertain that the same do not reflect any undisclosed income of the Assessee (i.e a person other than the one searched) for the relevant assessment years. If the seized money, bullion, jewellery or other valuable article or thing seized as handed over to the AO of the Assessee, are duly disclosed and reflected in the returns filed by the Assessee, no further interference would be called for. Similarly, if the books of accounts/documents seized do not reflect any undisclosed income, the assessments already made cannot be interfered with. Merely because valuable articles and/or documents belonging to the Assessee have been seized and handed over to the AO of the Assessee would not necessarily require the AO to reopen the concluded assessments and reassess the income of the Assessee.
The decision in SSP Aviation (supra) cannot be understood to mean that the AO has the jurisdiction to make a reassement in every case, where seized assets or documents are handed over to the AO. The question whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the AO after examining the seizedassets/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any undisclosed income of the Assessee for
the relevant assessment years, that further enquiry would be warranted in respect of those years. Whilst, it is not necessary for the AO to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an Assessee before commencing an enquiry under Section 153C of the Act, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the income of the Assessee for the relevant assessment years.
As expressly indicated under Section 153C of the Act the assessment or reassessment of income of a person other than a searched person would proceed in accordance with the provisions of Section 153A of the Act. The concluded assessments cannot be interfered with under Section 153A of the Act unless the incriminating material belonging to the Assessee has been seized.
We find the Hon’ble Allahabad High Court in the case of CIT vs. Shri Raj Kumar Jaiswal vide Income Tax Appeal No.25 of 2010 order dated 28.02.2017 and has observed as under :-
“16. However the above proposition has no application for the reason, when a power is exercised under a particular provision and in the manner,it is so contemplated in such substantive provision, then this defence is not open that it may be treated as a mere mistake of wrong provision of the statute. Notice was specifically served under Section 153A. Assessment order clearly says that it is being passed under Section 153A. Moreover, jurisdiction for making assessment under Section 153A read with Section 153C apparently is quite different than requirement of notice under Section 143(2) of Act, 1961 and assessment made under Section 143(3). 17. We find that this aspect has also been discussed by Tribunal and it has observed as under: "16................The provisions of section 153A read with section 153C empower the AO to proceed with the assessment in search cases mentioned therein meaning thereby that the AO gets jurisdiction to proceed for making assessment in search cases covered by these provisions, whereas provisions of section 143(2) subject to limitation provided under proviso to the sub-section require the AO to give the assessee an opportunity to support its return, before making of assessment under section 143(3)/144 as the case may be. In other words jurisdiction to make assessment under section 143(3) is gathered by the AO just after furnishing the return of income by the assessee under section 139 or on issuance and service of notice under section 142(1) requiring the assessee to furnish the return of income or on notice issued under section 148 of the Act, meaning thereby that provisions of section 143(2) of the Act did not give jurisdiction to make an assessment under section 143(3) but make it obligatory to comply with these provisions before making assessment under section 143(3) or section 144 as the case may be. In view of this difference between the purpose and the result of taking recourse to provisions of section 153A read with section 153C on one hand and
issuance of notice under section 143(2) of the Act on the other hand, we are unable to accept the plea advanced by the Ld. D.R. 17. Coming to the merits of the case, we, after having considered the provisions of section 153A, 153B and 153C, are of the opinion that though the provisions 153B(1) (b) provide the limitation for completing the assessment for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A of the Act, but there being no provision as to under which provision of law, the assessee can be called upon to furnish its return for that assessment year only under the provisions of section 139 and it is only in case of failure of the assessee to furnish the return under section 139 that the AO can call for return of income for the previous year either under section 142(1) or under section 147 of the Act, as the case may be, and if it is so, then the assessment for assessment year relevant to that previous year can be made only under section 143(1) or 143(3) or 144 or 147 of the Act but cannot be made under section 153A of the Act. 18. In view of the above discussion and the reasons stated by the CIT(A), we are of the opinion that the CIT(A) was quite justified in holding that for the assessment year under consideration, the AO had no jurisdiction to pass an order under section 153A of the Act. The order of the CIT (A) is, therefore, upheld." 18. We find ourselves in agreement with the view taken by Tribunal on this aspect, in absence of any otherwise sustainable argument advanced on behalf of appellant or binding authority taking otherwise view.
The Hon’ble Delhi High Court in a series of decisions relied on by ld. counsel for the assessee has held that additions cannot be made in proceedings u/s 153C in absence of any incriminating material. Reference may be made to the decision in the case of Pr.CIT vs. Meeta Gutgutia reported in 295 ITR 496.
Further, while writing the order it has come to our notice that the Hon’ble Apex Court in the case of Sinhagad Technical Education Society has held that section 153C can be invoked only when incriminating materials assessment year-wise are recorded in satisfaction note which is missing here. Therefore, the proceedings drawn u/s 143(3) as against 153C are invalid for want of any incriminating material found for the impugned assessment year.
In view of the above, the additional grounds raised by the assessee in the case of M/s Pavitra Realcon Pvt. Ltd. and M/s Delicate Real Estate Pvt. Ltd. are
accepted. Since the assessee succeeds on this legal ground, we refrain ourselves from adjudicating the issue on merit as far as these two cases are concerned.
Now, coming to Design Infracon (P) Ltd., we find from the material available on record that there is brazen violation of principles of natural justice inasmuch as neither the statement of Mr. Jain recorded at the time of search nor his cross-examination was provided to the assessee by both the lower authorities despite specific and repeated requests made by the assessee in this regard. The Hon’ble Supreme Court in the case of M/s Andaman Timber Industries vs. CCE reported in 281 CTR 241 has held that not giving opportunity of cross-examination makes the entire proceedings invalid and nullity. The Co-ordinate Bench of the Tribunal in the case of Best City Infrastructure Ltd. (supra) has also held that not providing opportunity of cross-examination makes the addition invalid. It has come to our notice that the Hon’ble Delhi High Court recently has upheld the said decision as reported in 397 ITR 82.
We further find from the records that the assessee has received advance from sale of land which has duly been recorded in the audited financial account of the assessee as well as the Payee Company. Further, we find the said advance has been claimed as refund by the Payee Company since arbitration proceedings between the assessee and the Payee Company are going on which has not been disputed by the Revenue. Although the Payee Company was assessed to tax under the same Assessing Officer, however, we find no enquiry worth name has been carried out by the Assessing Officer. Further the said amount has been received through banking channel and all entries in this regard are filed by the assessee. A perusal of the record shows that the assessee has filed the evidences such as confirmed copy of accounts, copy of income-tax return, details of PAN and complete set of audited accounts. Further, the case of the Revenue rests upon finding of the search action in the case of Mr. S.K. Jain where some alleged incriminating material was found
doubting the assessee’s transactions coupled with the recording of satisfaction of Directors of the assessee company u/s 132(4). However, so far as the seized materials are concerned, we find the same were not found during the assessee’s own search action and were found from Mr. S.K. Jain’s independent search. The procedure prescribed u/s 153C has not been followed in the present case. We find from a perusal of the record that on such search documents found from the premises of Mr. S.K. Jain neither the statement of Mr. Jain was brought on record nor the said documents are independently corroborated. This is more so when assessee’s extensive search operation has not yielded any incriminating material. The provisions of section 292C creates presumption only to the person from whose possession the said documents are found and therefore, the same will not be applicable qua the assessee.
As far as the statements u/s 132(4) are concerned, which are heavily relied on by the ld. DR, we find the same are bereft of any admission of any undisclosed income on the basis of any incriminating material found from the assessee’s own search. There is no corroboration of the statement recorded u/s 132(4) by any independent corroborative material. The above view of ours find support from the decision of the Co-ordinate Bench of the Tribunal in the case of Best City Infrastructure Ltd. (supra). The relevant observations of the Tribunal at para 11-12 read as under :-
In the case of Harjeeg Aggarwal (supra), Hon’ble Jurisdictional High Court considered the evidentiary value of the statement recorded during the course of search. The relevant portion is paragraph 19, 20 & 24, which are reproduced below for ready reference :- 19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words “evidence found as a result of search” would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly
be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation of Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. 24. If the Revenue’s contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is 12 others necessary to ensure that such statements, which are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee.” 12. Thus, Hon’ble Jurisdictional High Court has held “The words” evidence found as a result of search” would not take within its sweep statements recorded during search and seizure operations”. There Lordships further observed “However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation”. In paragraph 24, their Lordships have mentioned about the prevailing practice of extracting statement by exerting undue influence or coercion by the search party. Though the above decision in the case of Harjeev Aggarwal is with reference to the meaning of undisclosed income u/s 158BB of the Income-tax Act, However, in our opinion, the above observation of Hon’ble Jurisdictional High Court would be squarely applicable while considering the evidentiary value of the statement while making the assessment u/s 153A.” 26. As mentioned earlier the above decision of the Co-ordinate Bench of the Tribunal has been upheld by the Hon’ble Delhi High Court in 397 ITR 82.
Further, we are of the opinion that since arbitration proceedings are still going on therefore, there is no accrual of income pending litigation so as to bring the amount to tax. We find the Hon’ble Supreme Court in the case of P. G. And W. Sawoo Pvt. Ltd. and Another vs. ACIT reported in 385 ITR 60 has observed as under (short notes) :-
“Premises belonging to the assessee were let to the Government of India. The rent for the premises was enhanced from Rs.4 to 8.11 per sq.ft. per month effective from September 1, 1987 by a letter dated March 29, 1994 of the Estate Manager of the Government of India making it clear that the enhancement was subject to conditions including execution of a fresh lease agreement and communication of acceptance of the conditions incorporated therein. Such acceptance was communicated by the assessee by letter dated March 30, 1994. Notice was issued under section 148 of the Income-tax Act, 1961 seeking to reopen the concluded assessment of the assessee for the assessment year 1989- 90. On a writ petition, the High Court upheld the validity of the notice. On appeal to the Supreme Court : Held, allowing the appeal, that the income to be chargeable to tax must accrue or arise at any point of time during the previous year. Income can be said to have accrued or arisen only when a right to receive the amount in question is vested in the assessee. No such right to receive the rent accrued to the assessee at any point of time during the assessment year in question, inasmuch as such enhancement though with retrospective effect, was made only in the year 1994. The retrospective was with regard to the right to receive rent with effect from an anterior date. The right, however, came to be vested only in the year 1994. The notice seeking to reopen the assessment for the assessment year 1989-1990 was without jurisdiction or authority of law.”
Similarly, the Hon’ble Supreme Court in the case of CIT vs. Excel Industries Ltd. reported in 358 ITR 295 has observed as under :-
“Applying the three tests laid down by various decision of this court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability of improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. Essentially, the Assessing Officer is required to be pragmatic and not pedantic.”
We find the Hon’ble Supreme Court in the case of Dhirajlal Girdharilal vs. CIT reported in 26 ITR 736 has observed as under :-
“The question whether a Hindu undivided family is doing business in shares is a question of fact : but if the court of fact whose decision on a question of fact is final, arrives at the decision by considering material which is irrelevant
to the inquiry, or by considering material which is partly relevant and partly irrelevant, or bases its decision partly on conjectures, surmises and suspicions, and partly on evidence, then in such a situation clearly an issue of law arises.
When a court of fact acts on material, partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arises.”
Similarly, the Apex Court in the case of CIT vs. Daulat Ram Rawatmull reported in 87 ITR 349 has observed as under :-
“The onus to prove that the apparent is not the real is on the party who claims it to be so. As it was the department which claimed that the amount of fixed deposit receipt belonged to the respondent firm even though the receipt had been issued in the name of Biswanath, the burden lay on the department to prove that the respondent was the owner of the amount despite the fact that the receipt was in the name of Biswanath. A simple way of discharging the onus and resolving the controversy was to trace the source and origin of the amount and find out its ultimate destination. So far as the source is concerned, there is no material on the record to show that the amount came from the coffers of the respondent firm or that it was tendered in Burrabazar Calcutta branch of the Central Bank, on November 15, 1944, on behalf of the respondent. As regards the destination of the amount, it has already been mentioned that there is nothing to show that it went to the coffers of the respondent. On the contrary, there is positive evidence that the amount was received by Biswanath on January 22, 1946. It would thus follow that both as regards the source as well as the destination of the amount, the material on the record gives no support to the claim of the department.”
We find in the present case both the Assessing Officer and the CIT(A) are looking for proof beyond doubt which is not possible and they are basing their decision on an element of suspicion. It has been held in various decisions that presumptions and surmises, however strong may be, cannot be the basis for any addition. In view of our above discussion, we are of the considered opinion the ld. CIT(A) was not justified in confirming the addition made by the Assessing Officer. Therefore, the order of the CIT(A) is set-aside and the
Assessing Officer is directed to delete the addition made in the hands of Design Infrcon Pvt. Ltd. The grounds raised by the assessee are accordingly allowed.
In the result, all the three appeals filed by the respective assessees are allowed.
Order pronounced in the Open Court on 04th October, 2017.
Sd/- Sd/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 04/10/2017 R. Naheed */Sujeet Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT
//True Copy// ASSISTANT REGISTRAR ITAT NEW DELHI