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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The above titled appeals three by the assessee and three by the Revenue have been preferred against the common order dated 25.10.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)].
First we take up the appeal of the assessee in for A.Y. 2011-12 and the grounds raised
by the assessee are as under:
1. The Learned CIT(A) erred in determining the income at Rs. 4,34,10,958/- as against the income disclosed at Rs. 66,45,958/- by the assessee.
2. The Learned CIT(A) erred in directing to estimate the income at 9.50% of Rs,38.70 Crores, i.e. Rs. 3,67,65,000/- u/s. 68 of the I. T. Act, 1961 instead of deleting the whole amount of Rs.38.70 Crores as he considered the unsigned loose sheets are dumb documents.
The Assessing Officer erred in charging interest u/s. 23413, 234C & 234D of the Income tax Act, 1961.
It is prayed that the additions made may please be deleted or in the alternative, the assessment be set aside.
The appellant craves leave to adduce, add, amend, alter or delete any of the above grounds of appeal before or at the time of hearing this appeal.”
3. The issue raised by the assessee in the ground Nos.1 is of general nature and require no adjudication. The issue raised in ground no 3 is consequential in nature and is dismissed.
4. The only effective issue raised in ground No.2 is against the direction of Ld. CIT(A) to AO to estimate the income at 9.5% of Rs.38.70 Cr thereby sustaining the addition to the tune of Rs.3,67,65,000/- under section 68 of the Act instead of deleting the whole amount of Rs.38.70 crores as the same was based upon dumb documents.
The facts in brief are that the assessee filed e-return on 30.09.2011 declaring income of Rs.66,45,958/- which was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS and notices under section 142(1) and 143(2) of the Act were duly issued and served upon the assessee. A survey action was also conducted in the case of M/s. Kamala Group on 21.11.2012 during which various documents were found and seized. The assessee was a group concern of Kamla Group and out of the loose papers impounded from the premises of M/s. Kamala Group three pages namely page Nos.30, 56 and 57 were identified as belonging to the assessee firm M/s. Mathura Enterprises wherein the entries of cash transactions were recorded on various dates. Accordingly, the AO called upon the assessee to furnish the details in respect of such entries and reconcile the same with its books of accounts. The assessee filed some workings with respect to cash transactions but could not prove with the books of accounts. Thereafter, a show cause notice dated 12.03.14 was issued to the assessee which reads as under: "In connection with the assessment proceedings in your case for A Y 4 & Ors. M/s. Mathura Enterprises 2011-12, you had-submitted before the undersigned on 26.2.2014 that entries of cash receipts corresponding to the sales made during the year i.e. bookings made correlating with the impounded material A-1 and A-2 belonging to M/s. Kamla Group. From the entries, certain pages are identified to be belonging to M/s. Mathura Enterprises (page no.22,23 & 24) )You further argued that these are nothing but flat advances received from various buyers and the same should not be taxed by treating it as income and also argued that these business advances will accrue as income only at the time of handing over the flats to the customers. You were asked to justify the claim with valid documentary evidences like MOUs, agreements, confirmations letters etc, if the claim is to he accepted. The working submitted by you was observed to be not correct and again submitted the revised working of the receipts made by M/s. Mathura Enterprises during the F Y 2010-11 on 31/3/2014 which is as follows. As per the impounded material and as per the submissions made by you, following are cash receipts made by you during the F Y2010-11 relevant to A Y 2011- 12. Rs.30,74,99,000/- for Tower-‘A’ Rs. 5,65,68,000/- for Tower ‘B’ Rs.36,40,67,000/- TOTAL Further you were asked to explain page no. 30 of impounded material A- 1. You stated that these are cash paid by the brokers to your concern on receipt of the same from customers. But based, on this page total receipts during the year is Rs. 38:70, 00, 000/- (Rupees Thirty Eight Crores and Seventy Lakhs) and as per the submission dated 3.3.01, it is Rs.36,40,67,000/-.
Hence you were asked to explain why the difference amount , of Rs. 2,30,00,000/- should not be taxed as unexplained receipts in absence of any explanation.
Till today, the explanation called for regarding the cash receipts of Rs.36,40,67,000/- based on impounded material and excess cash receipt of Rs.2,30,00,0001- being the difference amount between the cash paid by the brokers to you and cash receipts reflected by you. You have claimed that these are nothing but flat advances received various buyers. But till today you have not justified your claim with valid documentary evidence like MOUs, agreements, confirmation letters, identity, ceditworthiness and genuineness of these transactions. In the absence of any evidence in your support, please show cause as to why these receipts should not be taxed as income during the assessment year relevant to financial year 2010-11 which is under consideration.”
The assessee filed written submission to the said show cause notice vide letter dated 19.03.14 which is extracted below:
5 & Ors. M/s. Mathura Enterprises “This project is a "Proposed redevelopment scheme of Municipal acquired property known as Bhoiwada Gaon under DCR 33(9)" wherein approximately 780 slum tenements have to be re-accommodated in the Rehab buildings; thereafter the construction of free sale building can be started.
Today, since acquiring, the construction has hardly taken place as the property is facing litigation. The said litigation has aroused due to differences between families of original owners (from whom we have acquired) viz. Late Mr. Sunil Mane (elder brother) and Mr. Santosh Mane. The dispute aroused after the elder brother, Sunil expired due to prolonged kidney ailment in 2012. Mr. Sunil Mane the legal heir of Sunil Mane. But consequently due to the legal dispute between the families, we have been deprived from physical possession of the site/project since then i.e., 2012.
The matter was referred to Company Law Board (CLB) by the Mane Family and further in High Court Appeal as the project came under litigation due to dispute in that family run business.
Currently, this project has delayed by almost 3 years; is still stalled till further clarity due to litigation and various other unavoidable circumstances.
Out of the total disclosure amount Rs.25,00,00,000 (Rupees Twenty Five Crores only) was disclosed in the name of M/s. Mathura Enterprises and the remaining Rs.25,00,00,000 (Rupees Twenty Five Crores only) in other group Companies. Even though our project not yet starts we have made voluntarily Disclosure to buy peace and to avoid litigation with department.
These amounts should not be taxed in A. Y. 2011— 12 as the same has already been disclosed in Assessment year 2013-14. If you make the addition in AY 2011 - 12, then it will be Double Taxation in the hands of Mathura Enterprises”
The AO was not satisfied with the explanation of the assessee as to the total receipt of Rs.38,70,00,000/- as per the page No.30 against which the assessee submitted that the total receipt was Rs.36,40,67,000/- and added the said amount as unexplained cash deposit under section 68 of the Act by assessing the income of Rs.38,46,45,958/- vide order 6 & Ors. M/s. Mathura Enterprises dated 29.03.14 passed under section 143(3) of the Income Tax Act by observing as under: (i) That the burden to prove the identity, capacity and genuineness has to be on the assessee (ii) If the cash credit is not satisfactorily explained the assessing officer is justified to treat it as income from “Undisclosed sources”, (iii) The firm has to establish that the amount was actually given by the customers in cash, (iv) If the explanation is not supported by any documentary or other evidence, then the deeming fiction credited by section 68 can be invoked.
Hence, an amount of Rs.38,70,00,000/- is treated as unexplained cash credits in the books of the assessee and added as taxable income of the assessee during the year under consideration. Penalty proceedings u/s.271(1)(c) r.w.s. 274 of the Income Tax Act is initiated separately for furnishing inaccurate particulars of income and concealment of income.
6. Aggrieved by the order of the AO, assessee preferred an appeal before the Ld. CIT(A) who, after considering the detailed submissions by the assessee which have been incorporated in the appellate order in paras 5.4 to 5.11, partly allowed the appeal of the assessee by holding that the documents impounded during survey which were stated to be related to the assessee were dumb documents and directing the AO to estimate the income on Rs. 38,70,00,000/- @ 9.50% based upon the GP of earlier years by observing and holding as under: “5.12 I have considered the submissions of the appellant and gone through the assessment order. The sum and substance of the appellant's arguments are that there is no material in the hands of the Assessing Officer to add an amount of Rs.38.70 Crores as income of the appellant. The A.O. has made addition on the basis of loose paper marked as 30 of A-1.These documents neither certified by the partner nor authorised person. Further, the said loose papers are not in the form of executed documents or books of accounts or certificates which can proved conclusively that appellant has earned undisclosed or unaccounted income. Further, since the impounded papers, have no acceptable narration and do not bear the certify the appellant or any authorised person, they are in the nature of dumb 7 & Ors. M/s. Mathura Enterprises documents having no evidentiary value and cannot by taken as a sole basis for determination of undisclosed income of the appellant. When dumb documents like the present loose sheets of papers are recovered and the assessing officer wants to make use of it, the onus rests on the assessing officer to collect cogent evidence to corroborate the noting therein. The assessing officer has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the impounded papers reveal the unaccounted on money receipts of the assessee. Further, no circumstantial evidence in the form of any unaccounted cash, jewellery or investments outside the books of account was found in course of search in the case of appellant. The AO brushed aside this explanation submitted by the appellant. The A.O. merely stated in the assessment order that the explanation of the appellant is not acceptable and made an addition of these loose papers. . The Section 68 of the Act is in relation to “Where any sum is found credited in the books of an assessee mainr3ineJ for any previous year, and the assessee offers no explanation about the nature and source thereof". The addition u/s 68 is to be made only in relation to transactions recorded in the books of the assessee. When the AO opines that transactions are not recorded in the books the same cannot be taxed u/s 68 of the Act.
5.13 Further, certain facts compel to me that the appellant is a builder and developer and in such business, receipt of on money or receipt on undisclosed sales cannot be denied. However, at the time or survey it was accepted by Kamala Group that there was undisclosed Sales. Further, during the assessment proceeding, appellant have voluntarily disclosed Rs.50,00,00,000/-. Out of total disposal, amount of Rs.25,00,000/- was disclosed in the name of Mathura Enterprises. Hence estimating the income from Undisclosed Sales cannot be considered as wrong. Considering the nature of business of the appellant i.e. being a builder and developer, the on-money received by the appellant is embedded with the profit element and therefore only profit should be estimated on the unaccounted receipt. The amount of sales by itself cannot represent the income of the assesse who has not disclosed the sales. The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realization of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold made by the appellant and that has also not been disclosed, the question, whether entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year. The answers byitsell in the negative. The record goes to show that there is not finding nor any material has been referred to about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales. Therefore, in my considered opinion the total sales as such cannot be added. Because the amount of Sales by itself cannot represent the income of the assessee who has not disclosed Sales. The sales only represent the price received by the Seller of the goods for acquisition of which it has already incurred the cost. It is the realization of excess over the costs incurred that only forms part of the profit included in the consideration of Sales as held by the Hon'ble Gujarat High Court in the case of C.I.T. v. President Industries (2002) 124 Taxman 654 (Guj). Further, The Mumbai Tribunal in the case of Mehroo N. Irani v. A.C.I.T. (75 Taxman 123) held that "an estimated addition to the total income based on ground realities would be a 8 & Ors. M/s. Mathura Enterprises better way out. In this case, the Hon'ble ITAT held that even in the case of on- money it is only the net addition of 5% gross receipt would made the end of the justice. The relevant part of decision are as under:
In the instant case, from a perusal of the seized material, it could be said that no conclusive inference could be drawn from these papers that the assessee in fact had received Rs.50 per sq. Ft. on sale of flats. The papers did indicate that 'on money' would have exchanged hands on such sole. But what mode out a case for additions were the seized papers which go to show that the assessee could have incurred cash expenditure for purchase of scarce material like cement and steel. The contention of the assessee that merely because unrecorded expenditure might have been incurred by the assessee, an inference that there could be receipt of 'on money' had to be rejected, had merely to be stated to be rejected. The assessee had embarked on a business venture, i.e., construction of multi-storeyed building and such action on the port of the assessee could not have been motivated by altruism or philanthropy. The papers which indicated that the assessee could have incurred unaccounted expenditure were seized at the premises of the assessee. It would be idle to speculate that papers did not represent any real expenditure. No staff member would be expected to make a jotting of this nature and keep it in the file of the office. There, therefore, had to be some truth in the whole thing. The totality of the facts, if considered in a dispassionate manner, could lead to a conclusion that the assessee in fact had received 'on money' and had also incurred expenditure out of the same. An estimated addition to the total income based on the ground realities would be a better way out. In doing so, one should take into consideration the net profit disclosed by the assessee and also the net profit that would be reflected after the additions finally sustained were taken into consideration. In the instant case, having regard to the totality of the facts and circumstances of the case, a net addition of 5 per cent of the gross receipts exclusive of receipts on account of garages and installation of generator would meet the ends of justice. Moreover, no separate addition of 'on money' would be necessary in regard to sale of garages which were nothing but parking spaces. 5.14 The Hon'ble Gujarat High Court in the case of CIT vs Gurubachhan Singh Juneja (2008) 302 ITR 0063 (Guj.)(HC) has discussed identical issue that in absence of any material on record to show that there was any unexplained investment made by the assessee which was reflected by the unaccounted sales, the finding of the Tribunal that only the GP on the said amount can be brought to tax. Further, the Hon'ble ITAT Mumbai in the case of Platinum Property vs DCIT Central Circle has decided similar issue. The relevant part of decision are as under: A perusal of these unaccounted entries shows that the assessee was making entries of the on-money received by it during the course of its business. U/s. 153, the AO has power to assess or reassess the total income in respect of each assessment year falling within such 9 & Ors. M/s. Mathura Enterprises assessment year in case of person where a search is initiated u/s. 132 of the Act. Thus, the AO has the power to assess or reassess the total income of the assessee. What can be taxed is the undisclosed income and not the undisclosed receipts, this means that only a reasonable amount of profit which the assessee could hove corned con be added. Seized paper indicates assessee was receiving on-money in the ordinary course of its business. Even the unaccounted expenditures are also reflected in the seized papers. Considering the facts in totality, in or considered opinion, a reasonable profit should be taxed which is embedded in the total unaccounted gross receipts and therefore 8% should meet the end of justice. We, accordingly, direct the AO to recomputed the undisclosed income by taking 8% as net profit ratio on total unaccounted receipts. Since we have directed to estimate the profit at 8%, all the expenditures are deemed to be allowed.
Before partying, the Ld. CIT(A) as well as the Ld. Departmental Representative has strongly relied upon the decision of the Hon'ble Supreme Court in the case of Dewanbohadur Seth Dos Mohta (supra). In the present case, we find that the assessee has declared the entire gross receipts during the course of the search proceedings thereafter realize that only the profit element should have been offered for taxation which it rightly did in the return of income. Any offer mode on the wrong assumption of fact/low cannot be mode a ground for taking the benefit by the Revenue authorities. Therefore, the retraction of the assessee is not on the undisclosed gross receipts but on the wrong assumption of fact that the entire undisclosed gross are its income. The assessee has offered o presumptive rat of income on the total unaccounted gross receipts which we have directed to be taken at the rate of 8% of the total gross receipts. Therefore, in our considered opinion, the decision relied upon by the Ld. DR is misplaced. On the estimation of the profit, all the expenses are deemed to be allowed, therefore, the assessee will not get any other deduction.
5.15 In view of above decision of court, it is found that in such situation profit should be taken for undisclosed sales or receipt. The assessee has disclosed the NP ratio between 6.20% to 9.43% in the four years. Therefore, I am of the view that estimation of profit at 9.50% would meet the ends of justice on undisclosed Sales or receipt. The A.O. is directed to estimate 9.50% of the Undisclosed Sales as assessed by him, as the income of the appellant over and above the income disclosed by the appellant. However, the A.O. has computed an income of Rs. 37.80 Crores instead of Rs.38.70 Crores, as mentioned in the body of the order. The Assessing Officer is directed to make an addition of Rs.3,67,65,000/- (9.50% of 38.70 Crores) instead of Rs. 38.70 Crores. The assessee gets a relief of Rs.35,02,35,000/-. This ground is partly allowed.”
7. The Ld. A.R. vehemently argued before the Bench that the addition as sustained by the first appellate authority @ 9.5% of the total amount as appearing in page 30 found and seized during the course of survey action on M/s. Kamala Group on 21.11.12 was totally wrong factually as well as legally as the ld CIT(A) himself held these documents as dumb documents but directed the AO to estimate the income @ 9.50% of the so called cash transactions as recorded on page no 30 amounting to Rs. 38.70 Cr. The Ld. A.R. submitted that the survey was conducted at the premises of M/s. Kamala Group and the documents seized and impounded was not belonging the assessee i.e M/s. Mathura Enterprises. It was stated that the statement recorded of Mr. Ketan A. Shah who was neither a partner nor connected with the assessee firm. The Ld. A.R. also submitted that the addition was wholly based upon the page No.30 which contained the details of cash transactions of Rs.38.70 crores and title of the said page was “PAREL BHOIWADA KAMALA A/C” which showed that the paper did not belong to the assessee as there was no such project undertaken by the assessee at any point of time including the during the year under consideration. It was also submitted that there was no MOU or development agreement or any other agreement whatsoever between the assessee firma and the M/s. Kamala Group. The assessee did not have any right, title or interest in Bhoiwada project and the presumption of 11 & Ors. M/s. Mathura Enterprises the AO that assessee received cash for such project was totally baseless and without any evidence and thus were mere conjectures and presumptions of the AO. The AO relied on a piece of paper which was uncertified and unauthenticated loose sheet and therefore cannot come within the compass of document to be used as evidence and same cannot form the basis for assessing the undisclosed income of the assessee. The Ld. A.R. in defense of his arguments relied on the decision of Tribunal in the case of Atul Kumar Jain vs. DCIT (1999) 64 TTJ (Del) 786. The Ld. A.R. also submitted that no addition can be made on the basis of unsigned piece of paper which is a dumb document by relying on the decision of Tribunal in the case of ACIT vs. Radheshyam Poddar (1992) 41 ITD 449. The Ld. A.R. further contended that addition under section 68 of the Act can only be made in relation to those transactions which are recorded in the books of the accounts of the assessee and not otherwise. In the present case, the AO noted that these transactions of cash were not recorded in the books of accounts but despite that the addition was made under section 68 of the Act. The Ld. A.R. submitted that the first appellate authority clearly recorded the findings that the document found and seized from the premises of M/s. Kamala Group which showed the cash transactions of amount of Rs.38.70 Cr from various parties in connection with Parel Bhoiwada Kamala A/c was a dumb document whereas despite that the first appellate authority directed the AO to estimate the income on the basis of said dumb documents. The ld counsel contended that the estimation of income @ 9.5% of 12 ITA Nos.7096/M/2017 & Ors. M/s. Mathura Enterprises Rs.38.70 Cr was bad in law and deserved to be deleted. The Ld. A.R. in defense of his arguments placed reliance on the decision of the Tribunal in the case of Jaya S. Shetty vs. ACIT 69 ITD 336 (Bom.). The Ld. A.R. also stated that the additions were made on the statement given by Mr. Ketan A. Shah which have no evidentiary value as there was no corroboration by the AO either with reference to the books of accounts or other evidences gathered either during survey or during the assessment proceedings as has been held in a series of decisions namely; 1. Paul Mathews and Sons vs. CIT (2003) 263 ITR 101 (Ker.) 2. CIT Vs. S. Khader Khan Son (2008) 300 ITR 157 (Mad.) 3. CIT vs. S. Khader Khan Son (2013) 352 ITR 480 (SC)
The Ld. A.R. submitted that there was complete lack of enquiry on the part of AO as the assessee furnished all the required information/material as desired by the AO during the course of assessments proceedings and secondly addition under section 68 of the Act is bad in law as has been held by the Hon’ble Delhi High Court in the case of CIT vs. Gangeshwari Metal Pvt. Ltd. (2013) 96 DTR (Del) 299 in which it has been held that in case of lack of enquiry on the part of the AO where assessee has furnished all the details, no addition can be made. The Ld. A.R. stated that in the assessee’s case there was neither any cash receipt physically nor excess cash found by the survey team and thus the paper i.e. page No.30 which was stated to have contained the details of various entries without any signatures and certification are 13 & Ors. M/s. Mathura Enterprises nothing less than dumb document as has been held by the Hon’ble Gauhati High Court in the case of CIT Vs. Smt. Sanghamitra Bharali (2014) 361 ITR 481 (Gau) at p.
It was also contended that the AO has not expressed any dissatisfaction with regard to the evidences filed by the assessee nor any type of enquiries were made by the AO. The Ld. A.R. submitted that receiving information from a survey party is only a starting point for enquiry to be conducted and not the final conclusion. In the present case, the AO has only made addition on the basis of certain dumb document found in the M/s. Kamala Group and treating it as income of the assessee. The ld AR also referring to the decision of the Hon’ble Rajastan High Court in the case of CIT Vs. A. Lalpuria Construction P. Ltd. (2013) 215 Taxman Taxman 12 (Mag) (Raj) in which it has been held that no addition can be made on the basis of statement in case of accommodation entries where no cross examination was allowed to the assessee. The Ld. A.R. submitted that even in the case of accommodation entries without giving an opportunity of cross examination no addition can be made under section 68 of the Act merely on the basis of statement. Finally, the Ld. A.R. contended that once the Ld. CIT(A) has found the paper (page No.30) impounded from the premises of M/s. Kamala Group as dumb document, the Ld. CIT(A) should have deleted the entire addition rather than resorting to estimation of income on the amount of Rs.38.70 Cr as appearing in the said dumb document which is wrong and should be deleted. The Ld. A.R. submitted that unauthenticated and dumb paper was not 14 ITA Nos.7096/M/2017 & Ors. M/s. Mathura Enterprises entered in the books of accounts and hence no addition could have been made under section 68 of the Act. Finally, the Ld. A.R. prayed that in view of the fact that the documents found and seized were in the nature of dumb documents, no addition could be made on the basis of such documents and same deserved to be deleted.
The Ld. D.R., on the other hand, heavily relied on the order of AO and submitted that the Ld. CIT(A) has grossly erred in part sustaining the addition at 9.5% of Rs.38.70 Cr only. The DR contended that during survey the documents found and impounded were not dumb documents but contained the details of all the cash transactions which was further corroborated by the statement of Mr. Ketan A Shah. The Ld. D.R. submitted that there appeared a complete details of the cash transactions in chronology. The Ld. D.R. argued that the said documents as recovered and impounded during the course of survey on M/s. Kamala Group to which assessee belonged and was found to be related to the assessee. It is only on the basis of said document the addition was made by the AO. The Ld. D.R. submitted that the revenue has also challenged the part deletion of addition by the Ld. CIT(A) by filing of cross appeal in the current year l wherein the Revenue has challenged the part deletion of addition to the tune of Rs. 35.02 Cr by the Ld. CIT(A) by describing these documents are dumb documents whereas as a matter of fact these were not dumb document but a valid evidences recovered during the course of survey from the premises of M/s. Kamala Group. The contention of the assessee that the 15 & Ors. M/s. Mathura Enterprises assessee is nowhere related to the M/s. Kamala Group or any of the partner cannot be accepted specially when Mr. Ketan A. Shah in his statement recorded under section 131 of the Act during the course of survey has specifically admitted the fact that the document is related to the assessee only and the cash receipts in the said documents are over and above what has been accounted for in the books of accounts. The Ld. D.R. also took us through page No.48 and 50 of the paper book especially question No.8 & 12 of the statement recorded of Mr Ketan A Shah during survey and answers thereto. The Ld. D.R. mainly harped on the admission of the assessee itself during the course of assessment proceedings and thus there is no question of dumb document. So far as the findings of Ld. CIT(A) are concerned the Ld. D.R. contended that Ld. CIT(A) himself was not sure whether the documents found during the course of survey relating to the assessee were dumb documents or not as he made addition on the basis of the said document bringing to tax only part of the total amount of cash as has been mentioned in the said seized paper. Finally, the Ld. D.R. submitted that the AO has rightly made the addition and the order of AO deserved to be upheld by setting aside the order of the Ld. CIT(A) by dismissing the appeal of the assessee.
We have heard the rival submissions of both the parties and perused the material placed before us including the impugned order and case laws cited by the representatives. The undisputed facts are that the assessee is a partnership firm which is one of the group concern of M/s. Kamala Group 16 & Ors. M/s. Mathura Enterprises which was subjected to survey on 21.11.2012. During the course of survey, a statement of Mr. Ketan A. Shah was recorded who is nowhere connected with the assessee firm. During the course of survey on the M/s. Kamala Group, certain papers were seized out of which page No.30, 56 & 57 were stated to be belonging to the assessee which contain the details of cash receipts during the various years. However, the said documents were not certified or authenticated by any of the partners of the firm or its employee. The said page 30 was titled “ PAREL BHOIWADA KAMLA A/C” and other two pages no 56 and 57 were without any headings. The additions were made in the year 2011-12 and 2012-13 on the basis of page no 30 whereas the additions in AY 2013-14 were based upon page 56 and 57. The AO on the basis of page no 30 made the addition to the income of the assessee after confronting the same to the assessee during the assessment proceedings to the extent of Rs.38.70 Cr under section 68 of the Act by observing that the assessee has failed to prove and explain the cash transactions and treated them as unexplained cash credits making the additions u/s 68 of the Act whereas in the appellate proceedings the Ld. CIT(A) partly deleted the addition by holding the document found and impounded during the course of survey especially the page No.30,56 & 57 which contained the details of the cash on various dates as dumb documents. However ld CIT(A) directed the AO to estimate the income @ 9.5% of the total cash transactions of Rs.38.70 crores in AY 2011-12 in order to assess the profit to tax on the basis that assessee has shown 17 & Ors. M/s. Mathura Enterprises the net profit of 6.20% to 9.48% in the four years thereby partly sustaining the addition to the extent of Rs.3,67,65,000/-. The assessee has challenged the part sustenance of addition @ 9.5% of the total amount of Rs.38.70 Cr on the ground that once the Ld. CIT(A) has held the papers impounded from the premises of M/s Kamala Group as not certified and unauthenticated by any of the partners of the firm or any of the employees of the firm and thus treated the same as dumb documents. Any addition as per the assessee based on the said dumb documents is bad in law. The ld Counsel contended that the addition @ 9.5% on the said amount of cash transactions of Rs. 38.70 Cr was totally bad in law and deserved to be deleted. Whereas, on the other hand, Revenue has challenged the order of Ld. CIT(A) against the deletion of addition of Rs.38.70 Cr which was based upon the evidences/documents as found during the course of survey on the M/s. Kamala Group and related to the assessee as the assessee is as group concern of the M/s Kamala Group by treating the same as dumb documents and directing the AO only to assessee 9.50% of the said amount. In the current year, the addition is based upon the page No.30 which is titled as “Parel Bhoiwada Kamala A/c”. For the sake of better understanding, the same is extracted below:
A perusal of the said paper reveals that there were entries from 08.07.2010 to 26.4.11 which was unsigned, unauthenticated and uncertified by either any of the partners or employees of the assessee firm. The AO added the total cash up to 30.03.11 aggregating to Rs.38.70 Cr in the current year as unexplained cash credit under section 68 of the Act. During the course of survey, the statement recorded of Mr. Ketan A. Shah wherein he admitted that the said cash was over and above has been accounted for in the books of accounts and also submitted that the said cash was received 19 & Ors. M/s. Mathura Enterprises in order to incur expenses which could not be accounted for in the books of accounts. We have gone through the statement of Mr. Ketan A. Shah recorded during the course of survey under section 131 of the Act at the premises of M/s Kamala Group who stated that he is connected with various group concerns and deriving income by way of salary, share of profit, interest on capital and remuneration from the firm, but nowhere his activity with the firm is established and nowhere it is stated that the said pages belonged to Mathura Enterprises. There is no authentication or certification or signature on the said page No.30 by any of the partners of the assessee firm. Keeping in view of the said facts and the ratio as laid down by various judicial forums, we are in agreement with the finding of the Ld. CIT(A) that this document is nothing but a dumb document. Once the first appellate authority has reached a conclusion that document is a dumb any further addition on the basis of said document is also not correct under law and has to be struck down and deleted. In our opinion, the AO should have done the further enquires on the basis of these documents and the addition, if at all, were required to be made that has to be with the corroborative evidences and not on the basis of these documents alone. In the case of Atul Kumar Jain vs. DCIT (supra), the co-ordinate bench of the Tribunal has held that AO was not justified in deciphering the figures on the paper at his whims and wishes based on unfounded presumptions and conjectures without bringing any corroborative material evidence in support thereof and same cannot form the basis for assessing the 20 & Ors. M/s. Mathura Enterprises undisclosed income by way of sale proceeds of property. In the case of ACIT vs. Radheshyam Poddar (supra), the co- ordinate bench of the Tribunal has held that the presumption under section 132(4A) was rebuttable and assessee having filed ample evidences to revert the presumption, no addition can be made on the basis of unsigned memorandum of understanding between the assessee and his employer. In the case of Jaya S. Shetty vs. ACIT (supra) it has been held that additions based on conjectures, surmises and presumption not supported by any evidences/documents etc. found in search have to be deleted. It has been held that undisclosed income has to be treated on the basis of evidences, documents, material and information found during the search and it has to be authentic, reliable and verifiable information. Moreover, the statement of Mr. Ketan A. Shah who is associated with M/s. Kamala Group is not relevant in the case of the assessee as the assessee has not developed any project or entered into any MOU under the name Parel Bhoiwada Kamala A/c and therefore, the said statement of Mr. Ketan A. Shah does not have any evidentiary value. The case of the assessee is supported by a series of decisions namely Paul Mathews and Sons vs. CIT (supra) and CIT Vs. S. Khader Khan Son (supra), the latter one has also been affirmed by the Hon’ble Supreme Court wherein the ratio is that the statement during survey has no evidentiary value where there is no corroborative materials/evidences. In the present case there is no basis for the addition as the statement recorded during survey is not corroborated with any evidence. Whatever documents were 21 & Ors. M/s. Mathura Enterprises impounded are dumb documents. In this case there is complete lack of enquiry on the part of AO as he has not further carried out any investigation to establish the veracity of amounts mentioned in page No.30 which was impounded during the course of survey stated to be relating to the assessee. The case of the assessee is supported by the decision of Hon’ble Delhi High Court in the case of CIT vs. Gangeshwari Metal Pvt. Ltd. (supra) wherein the Hon’ble High Court has held that in case of lack of enquiry on the part of AO once the assessee has furnished all the materials, no addition could be made under section 68 of the Act. In this case, we find that AO has simply relied on the dumb document not bearing any signature or certification or authentication, which according to the AO is cash received by the assessee but AO has not rebutted the explanation of the assessee offered during the course of assessment proceedings. The case law relied upon by the revenue in the case of Kale Khan Mohammad Hanif Vs CIT 1963 50 ITR 1 is not applicable and is distinguishable on facts. Considering the above facts in totality and the ratio laid down by the Apex Court, High Courts and other judicial forums, we are of the considered view that the addition on the basis of dumb document is wrong and accordingly we set aside the order of the Ld. CIT(A) and direct the AO to delete the addition. The ground no. 2 raised by the assessee is allowed. (Revenue’s appeal) 11. The grounds raised
by the Revenue are as under:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)
22 & Ors. M/s. Mathura Enterprises has erred in deleting the addition of Rs. 35,02,35,000/- made by the A.O on account of unexplained cash credit under section 68 of the Income-tax Act.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that there is no evidence adduced by the assessee from any other source showing the position of the alleged entries and the financial ability of the parties involved.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show that the receipt was not income."
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the firm had taken shelter in the name of prospective customers in the form of "Flat Advances" in order to introduce the concealed income. If there is an entry in the books of the firm and if the firm is not in a position to establish the genuineness of the credit entry then it can be added as income from "undisclosed sources" in the hands of the firm. In this case the assessee has not advanced any evidence other than repeatedly stating that these were advances received from prospective buyers.
5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the onus is on the assessee to establish that the customers had actually deposited the advances in cash and that the entries were not fictitious.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the burden to prove the identity, capacity and genuineness has to be on the assessee. As the explanation offered by the assessee is not supported by any documentary or other evidence, then the deeming fiction credited by section 68 can be invoked.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that cash credits which are not satisfactorily explained may be assessed as income. It would be seen that where any sum is found credited in the books of an assessee, the assessee is required to offer an explanation about the nature and source thereof with valid documentary evidences. If the explanation so offered is not considered as satisfactory, the sum so credited can be treated as the assessee's income from undisclosed sources. Inference can be drawn from the decision of the Supreme Court in Kale Khan Mohammad Hanif v. C.l.T [1963] 50 ITR 1, where it has been laid down that the onus is on the assessee to explain the nature and source of cash credits, whether they stand in the assessee's account or in the account of a third party."
The revenue has raised several grounds which are argumentative and there is only one effective issue 23 & Ors. M/s. Mathura Enterprises coming out of all the grounds qua deletion of addition of Rs. 35,02,35,000. Since we have already decided the assessee’s appeal in ITA No.7096/M/2017 for A.Y. 2011- 12 in favour of the assessee by holding that the document impounded during the survey were mere dumb documents and deleted the addition as sustained by the CIT(A), the cross appeal filed by the Revenue against the order of the Ld. CIT(A) challenging the deletion of addition of Rs.35,02,35,000/- by Ld. CIT(A) is dismissed.
ITA No.7098/M/2017 A.Y.2012-13,ITA No.7097/M/2017 for A.Y. 2013-14(Assessee’s appeals) ,ITA No.64/M/2018 A.Y. 2012-13 & for A.Y. 2013-14(Revenue’s appeals)
The issues raised in appeal No.7098/M/2017 and ground No.1,2 and 5 in both assessee’s appeal are identical to one as decided by us in ITA No.7096/M/2017 and issue raised by the revenue in ITA No. 64/M/2018 and ITA 240/M/2018 is identical to one as decided by us in ITA No. 239/M/2018 (supra). Since the issues involved in the present appeals are identical, therefore, our decision in the above appeals would ,mutatis mutandis, apply to these appeals as well.
The issue raised in ground No.3 in the assessee’s appeal in is against the confirmation of unsecured loan of Rs.1,76,00,000/- by Ld. CIT(A) as made by the AO under section 68 of the Act as unexplained cash credit.
24 & Ors. M/s. Mathura Enterprises 15. The facts in brief are that during the course of assessment proceedings the AO noticed that assessee has taken secured loans from two parties aggregating to Rs.1,76,00,000/-. In the case of first party Metallic Industries Ltd the PAN quoted was invalid whereas in the case of second lender Sunil Kumar L. Manchanda the PAN was not mentioned at all. The AO added the aggregate of these two unsecured loans Rs. 1,76,00,000/-to the income of the assessee under section 68 of the Act by observing that the assessee has not proved creditworthiness and genuineness of these loans. In the appellate proceedings, the Ld. CIT(A) confirmed the addition by holding that the assessee failed to file the necessary evidences before the AO though the same were filed before the Ld. CIT(A). The Ld. CIT(A) observed that the assessee could not prove as to what prevented it from filing these papers before the AO and thus did not consider the said documents comprising copies of loan confirmations, bank statements and PAN cards etc filed by the assessee.
Having heard the rival contentions and perusing the relevant materials as placed before us, we find that in this case the assessee could not prove its case before the AO by filing the necessary evidences which were filed before the Ld. CIT(A) but Ld. CIT(A) did not consider the same and dismissed the issue simply on the ground that the assessee could not explain the reason for non filing before the AO. In our opinion, the action of the Ld. CIT(A) in not considering the evidences filed by the assessee is incorrect as he should have considered these evidences before deciding the appeal after 25 & Ors. M/s. Mathura Enterprises following due process of law. Under these circumstances, we earnestly feel that the documents filed by the assessee before the Ld. CIT(A) which were not submitted before the AO need to be examined and verified. We, therefore, restore the issue to the file of AO in the interest of justice with the direction to decide the same denovo after providing a reasonable opportunity to the assessee. The ground raised by the assessee is allowed for statistical purposes.
The issue raised in ground No.4 in is against the confirmation of addition of Rs.29 lakhs by Ld. CIT(A) even though all the necessary evidences were filed before the Ld. CIT(A).
The facts in brief are that in the assessment proceedings, the AO observed that assessee has charged a sum of Rs.29 lakhs in the profit & loss account on account of compensation paid. Thereafter, the AO issued show cause notice dated 04.09.15 asking the assessee to furnish the justification for claim of these expenses. However, the assessee did not file necessary evidences before the AO such as name and PAN number of the payee and ultimately the AO added the same to the income of the assessee.
In the appellate proceedings, the assessee filed before the Ld. CIT(A) the necessary evidences in the form of IT return of the payee, computation of income, confirmation of accounts and also details of persons to whom the compensation was paid. However, the Ld. CIT(A) did not 26 & Ors. M/s. Mathura Enterprises consider the same and dismissed the appeal solely on the ground that these papers were not submitted before the AO and the assessee could not give reasonable explanation for non submission of these papers.
Having heard and perused the record, we find that the action of the Ld. CIT(A) in not considering the documents as filed by the assessee is not appreciated as this is against the basic principles of natural justice. In view of the said facts, we are of the view that these documents need to be verified and examined at the level of the AO to meet the ends of justice. Accordingly, we restore this issue back to the file of the AO with a direction that a reasonable opportunity of hearing may be afforded to the assessee to file all these documents and the case may be decided denovo as per law and facts on record. The ground is allowed for statistical purposes.
In the result the appeals by the assessee in No. 7096/M/1017 and 7098/M/2017 are partly allowed and ITA No.7097/M/2017 is partly allowed for statistical purposes whereas all the three appeals of the Revenue are dismissed.
Order pronounced in the open court on 28.03.2018.