PODAR MILLS LTD,MUMBAI vs. ASST CIT CEN CIR 34, MUMBAI

सपनवधई की तधरऩख /Date of Hearing : 22/02/2018 घोषणध की तधरऩख /Date of Pronouncement : 02/05/2018 अदेश / O R D E R

PER SHAMIM YAHYA, ACCOUNTANT MEMBER:

“1.The CIT (A) erred in law and on facts in upholding assessment made on the Appellant under section 153 C of the Act without appreciating that no money, valuable article, books of accounts, documents, etc. which belonged to the Appellant were seized from Raj Oil Mills. 2.The Ld. CIT (A) erred in law and on facts in upholding assessment made under section 153 C of the Income Tax Act, 1961 on the Appellant without appreciating that the Assessing Officer of Raj Oil Mills, the person searched had not recorded any satisfaction that the documents, etc. seized from Raj Oil Mills

M/s. Podar Mills Ltd. belonged to the Appellant, as satisfaction note has not been provided to the Appellant in spite of request made.” 2.2.1. Upon careful consideration and hearing both the Counsel we admit the additional Grounds on the touchstone of Hon’ble Apex Court decision in the case of National Thermal Power Co. Ltd. (229 ITR 383).

2.3. Brief facts of the case are as under :-

2.3.1. The assessee company is engaged in the business of running a small scale textile unit as well as real estate. A search and seizure action u/s.132 of the Act was carried out on 20.01.2011 at the premises of M/s.Raj Oil Mills Ltd. The assessee company, however, was not covered u/s.132 of the Act. The assessment of the assessee u/s. 153C of the Act was initiated on the basis of statement of Shri Mohammdi T. Singaporewala recorded u/s.132(4) of the Act on 21.01.2011 and the incriminating materials seized from his residence during the course of search proceedings. In the course of said statement; Shri Mohammdi T. Singaporewala, Legal Advisor and Director of M/s. Raj Oil Mills Ltd. had pointed out that he had advised M/s.Raj Oil Mills (the firm) on legal and technical matters and documentation concerning its purchase of Transfer of Development Rights (TDRs) from the assessee company and its Chairman, namely, Mr.Vinay Poddar. The total quantity of TDRs purchased was said to be 2,00,000 sq.ft, In his statement on oath, Shri Mohammdi T. Singaporewala disclosed that M/s. Raj Oil Mills & M/s.Newa Raj Developers on behalf of M/s. Raj Oil Mills had made huge payment in cheque and cash to the appellant. Further, as per the material seized from the premises of Shri Mohammdi T. Singaporewala, the assessee had received 30% of the entire sales consideration- On the basis of the seized materials, notice U/S.153C of the Act dated 01.02.2013 was issued and served on the assessee. In response to the said notice, the assessee filed return of income for the A.Y. under consideration declaring total income at Rs.'NIL' on 26.03.2013. Notices u/s.143(2) and 142(1) of the Act were issued and served upon the assessee. Assessment order u/s. 143(3) r.w.s. 153C of the Act was passed by the A.O. on 28.03.2013 determining the total income of the assessee at Rs.5,07,18,640/- after making certain additions.

M/s. Podar Mills Ltd. 2.3.2. Upon assessee’s appeal the ld. CIT(A) elaborately considered the issue and conformed the action of the Assessing Officer by holding as under :- “I have considered the submissions of the appellant and perused the materials available on record including statement of Shri Singaporewala recorded on oath u/s.132(4) of the Act on 21.01.2011 and materials seized/impounded from his premises in the course of search/survey on 20.01.2011. The sole point for determination is whether the addition of Rs.5,07,18,640/- made by the A.O. towards unaccounted income earned by the appellant on sale of TDRs is in order keeping in view the factual matrix of the case. At the outset, I am unable to accept the plea of the appellant that the aforesaid addition has been made without any basis or without placing any evidence on record, because, as brought out above, the said addition of Rs.5,07,18,640/- made by the A.O. on account of unaccounted income realized by the appellant on sale of TDRs is based not only on incriminating documents seized/impounded in the course of search/survey but also on the statement of Shri Singaporewala recorded u/s.132(4) of the Act. It deserves to be noted that Shri Singaporewala is not "a third party" unconnected with the transaction of sale of TDRs but legal advisor and Director of M/s.Raj Oil Mills Ltd. who had provided legal and technical advice to M/s.Raj Oil Mills in the matter of purchase of T'DRs and was also admittedly "involved" in the "deliberations" among the three concerned parties, namely, M/s.Raj Oil Mills, M/s.Soleri Land Developers Ltd. and the appellant "in the capacity of assistant to the solicitor of M/s.Raj Oil Mills". A perusal of his deposition recorded u/s.132(4) on 20.01.2011 reveals that as representative of M/s.Raj Oil Mills, he had knowledge about the initial negotiations as well as the renegotiated settlement arrived at among the parties concerned with regard to sale of TDRs by the appellant to M/s.Raj Oil Mills including the agreed terms of payment. It is seen from the record that the agreement dated 24.04.2007 between the appellant and M/s.Raj Oil Mills appointing the latter as representative of the former "in the matter of availing any benefit by way of FSI/TDR" has been duly witnessed by Shri Singaporewala and executed in his presence. Thus, the testimony of Shri Singaporewala cannot be dismissed lightly or brushed aside as irrelevant or inadmissible material. Rather, on the contrary, his statement recorded u/s.132(4) of the Act on 20.01.2011 has its own evidentiary value in the matter. There is also no merit in the contention raised on behalf of the appellant that it was not provided with copies of statement of Shri Singaporewala and of seized documents relied upon by the A.O. in making the impugned addition. It is observed from the record that the appellant vide, letter dated 20.03.2013 requested the A.O. "to provide us the photo copies of seized material" on which the A.O. had relied in the assessment proceedings. It is also observed that the A.O. vide letter dated 21.03.2013 provided xerox copies of the seized/impounded materials recovered from the premises of Shri Singaporewala at the time of search/survey in the case of M/s.Raj Oil Mills Ltd. The A.O. has very clearly mentioned in para 6 of the impugned order that copies of the seized materials were "handed over" to the appellant on 21.03.2013. Thus, it cannot be said that the A.O. had not complied with the principles of natural justice and reliance of the appellant on the ratio in the cases of M.O. Thomakurty and Mangaldas N. Verma (supra) is found to be misplaced and misconceived. It is noted that the evidence seized/ impounded during the course of search/ survey at the premises of Shri Singaporewala was used against the appellant only after complying with the principles of natural justice and affording due opportunity to the appellant to furnish its explanation in rebuttal thereto. In its written submissions filed vide letter dated 09.06.2014 in the course of appellate proceedings, it is categorically stated that "after going through the seized papers, the return of income was submitted on 26.03.2013." In other words, the appellant never sought copy of statement of Shri Singaporewala recorded u/s. 132(4) on 20.01.2011 at the time of its assessment. It was only during the course of appellate proceedings that the appellant raised the issue of having not been supplied copy of aforesaid statement of Shri Singaporewala when it was called upon to furnish copy of the same vide order sheet noting dated 09.06.2014. Accordingly, the 3

M/s. Podar Mills Ltd. A.O. was directed to provide copy of the said statement to the appellant which was done on 21.10.2014. However, strangely enough, the appellant once again vide letter dated 10.11.2014 raised the plea that "... we have asked the concerned assessing officer to give us the copies of the material he has relied on ... but were unable to get the material mentioned in the assessment order ....." Nevertheless, the appellant was against provided copies of relevant seized/ impounded documents by the undersigned vide order sheet nothing dated 29.12.2014 and asked to furnish its explanation in this regard on 14.01.2015. However, since then, there has been no response from the appellant in the matter till the date of this order. The inevitable conclusion is that the appellant has nothing to say in its defence in view of the incriminating evidences seized/impounded from the premises of Shri Singaporewala showing undisclosed income pocketed by the appellant on sale of TDRs. Under these circumstances, it can by no means be said that no evidence has been brought on record by the A.O. while making the impugned addition. Rather, on the contrary, the appellant has not come out with any credible explanation or despite having been afforded adequate opportunity in this regard. The plea taken by the appellant that the A.O. ignored the submissions made before him is also devoid of substance and deserves to be rejected outright. It deserves to be noted that it is clearly stated in Para 7 of the impugned order that "in response to the show cause notice dated 26.03.2013, the assessee has not submitted any details." When no details/submissions were made before the A.O., it cannot at all be said that the A.O. ignored such submissions. Even during the course of appellate proceedings, the appellant has not placed on record any submissions made by it before the A.O. which are now claimed to have been overlooked by the latter. Even at the appellate stage, the appellant has not made any specific submissions with regard to the incriminating documents seized/impounded during the course of search/survey at the premises of Shri Singaporewala. The written submissions furnished by the appellant are found to be general and legal in nature rather than specific and factual. The appellant has not furnished details of transaction of sale of TDRs along with supporting evidence. Nor has it placed on record copy of its audited accounts for F.Y.2006-07, income-tax return, computation of income etc. relevant to the A.Y. under consideration. What it has furnished instead is copy of its Annual Report for F.Y.2007-08. A perusal of its Manufacturing, Trading and P & L Account for the previous year ended 31.03.2007 reveals credit of Rs.2,20,00,000/- towards "sale of Real Estate". In this connection, the appellant has placed on record copy of Conveyance Deed dated 30.03.2007 evidencing sale of a residential plot along with buildings constructed thereon having total area of 4486.51 sq.metres to M/s.City Buildtech Pvt. Ltd. Jaipur for a consideration of Rs.2.20 crores. It is observed that the Conveyance Deed has been executed on non-judicial stamped paper of Rs.100/- and does not bear either details of market value of the properly as per the stamp duty authorities or proof of payment of requisite stamp duty thereon. The execution of the Conveyance Deed of the said property worth Rs.2.20 crore on a non-judicial stamped paper of only Rs.100/- raises serious doubt about the genuineness of the said Conveyance Deed. It is equally strange to note that while the entire consideration of Rs.2.20 crores was paid by the transferee company to the appellant between 17.06.2006 and 05.07.2006, the Conveyance Deed was executed on 30.03.2007. Moreover, during the course of appellate proceedings, the appellant was provided with copy of its ledger account in the books of M/s.Newa Raj Developers (partner of M/s.Raj Oil Mills) which also showed payment of Rs.5 lacs and Rs.1.15 crore made to the appellant on 01.06.2006 and 20.10.2006 (during F.Y.2006-07). These payments were also borne out from the bank statement of M/s.Ncwa Raj Developers. The appellant was asked to reconcile payments received from Raj Oil Mills and Newa Raj Developers and make submissions as to why excess amounts received in cash as well as by cheque should not be issued in the hands of the appellant. However, the appellant has neither reconciled the said payments nor furnished any submissions/explanation in the matter. Under these circumstances, it can safely be inferred that the appellant has nothing to say in this regard. This also belied the appellant's claim that the amounts as per the seized/impounded papers were not paid during the relevant period but were yet to be paid. 4

Section 292C of the Act provides that where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are found in the course of a search u/s.132 or survey u/s. 133A, it may, in any proceeding under the Act, be presumed that such books of account and other documents etc. belong to such person and that the contents of such books of account and other documents are true. The presumption u/s.292C is obviously a rebuttable presumption and it is for the assessee to rebut the same with cogent evidence or materials. There is no merit in the appellant's contention that the impugned assessment is based on ïrrerelevant and inadmissible materials”, because the materials seized from the residential premises of Shri Singaporewala in the course of search bring out details of actual payments (including 'on-money') made by M/s. Raj Oil Mills to the appellant towards transfer of TDRs and as such these documents are very much relevant as well as material to the assessment of the appellant's income. It is undisputed that loose papers impounded in the course of survey have evidentiary value and can be used for the purpose of assessment under the Act(CIT v. Sonal Constructions 359 ITR 532 (Del). Drawing support from the ratio of aforesaid decision, it can be safely asserted that it is not an inviolable rule applicable to all situations and to all cases that every seized or impounded document should be corroborated before any additions can be made based on it. It has been held that if calculations and computations have been made in the seized documents in such a manner that its probative value and genuineness cannot be doubted, nothing prevents the Assessing Officer from making additions on the basis of such documents despite the absence of any corroboration. It has also been held that when documents which are not meant for the eyes of the Revenue are unearthed after undertaking an exercise which involves an intrusion into the privacy of the assessee, it is not permissible to discount the veracity, genuineness and truthfulness of the contents thereof for the flimsiest of reasons. It has been further held that while examining the evidence, the appellate authority is not expected to put on 'blinkers; wherever necessary, it should scratch the surface, probe deeper and draw appropriate inferences which accord with the normal course of human conduct and probabilities. In this connection, it deserves to be noted that the area of 22404.54 sq. meters written on,.Page 6 of Annexure A-1 is found to be matching with that mentioned in clause (vii) on Page 3 of the Agreement dated 24.04.2007 furnished by the appellant in respect of which additional FSI/ TDRs were to be sought from the municipal authorities. Therefore, the probative value and genuineness of the document cannot be doubted and the contents of the said document including cash as well as cheque payments to the appellant towards sale of TDRs have rightly been treated by the A.O. as true and correct forming the basis of the impugned addition of Us.5,07.18.640/-. The appellant has failed to rebut the findings of the A.O. in this regard with any cogent evidence or materials. In view of this, reliance placed by the appellant on judicial decisions in the cases of Dhirajlal Girdharilal, Dhakesbwari Cotton Mills, Lalchand Bhagat Awbika Ram, Umacharan Shaw & Bros., P.R. Metrani and Omar Salay Mohamed Sait cited above will not help to advance its case. In view of the above discussion, I do not find any error or infirmity in the action of the A.O. in making addition of Rs.5.07,18,640/- in the hands of the appellant towards on sale of TDRs and, therefore, the said addition made by the A.O. is confirmed.” Against the above order the assessee is in appeal before us.

2.4. As noted above the assessee has also raised legal points as additional Grounds . We note that these legal grounds were never raised before the Ld. Commissioner of Income tax(Appeals) or the Assessing Officer . Furthermore, adjudication of the same also needs reference to the assessment and search records. Hence, in our considered opinion interest of justice will be served if the additional 5

M/s. Podar Mills Ltd. Grounds raised are remitted back to the file of the ld. CIT(A). Ld. Commissioner of Income tax(Appeals) is directed to consider the additional Grounds raised as above and decide as per law. Needless to add, assessee should be granted adequate opportunity of being heard.

2.4.1. We make it clear that we have not adjudicated upon merits of the case in any manner whatsoever. In this regard we note that Hon'ble Madras High Court has expounded in CIT vs. Ramdas Pharmacy (77 ITR 276) that all issues in an appeal should be decided and piecemeal adjudication will lead to multiplication of proceedings at different levels and forums, which is not desirable.

2.4.2. After the order of ld. Commissioner of Income tax(Appeals) is complete, after the adjudication of the additional grounds as remitted above, it will be open to both the parties to raise the necessary Grounds in appeal as and if necessary.