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Income Tax Appellate Tribunal, JAIPUR BENCH-B, JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & DR. MITHA LAL MEENA, AM vk;dj vihy la-@ITA No. 1302 & 1303/JP/2019
PER SANDEEP GOSAIN, JM. These two appeals have been filed by the Revenue against the consolidated order dated 13.09.2019 passed by the ld. CIT (Appeals-4), Jaipur under section 153C read with section 153A of the Income Tax Act, 1961 for the assessment years 2016-17 and 17-18. The grounds raised
in both the appeals are exactly common except in figures, which are reproduced as under :-
1. Whether on the facts and in the circumstances of the case and in law, ld. CIT (A)-4, Jaipur is justified in ignoring the evidence of “On-money” found in cloud data and thereby deleting the addition of Rs. 3,97,44,689/- (AY 16-17), Rs. 1,02,46,441/- (AY 17-18) made by the AO.
2. Whether on the facts and in the circumstances of the case and in law, Ld. CIT (A)-4, Jaipur was justified in ignoring the fact that entries pertaining to ‘On-money’ were found in N Trading cloud data and thus addition of ‘on money’ was on the basis of incriminating seized data.
Whether on the facts and in the circumstances of the case and in law, Ld. CIT (A)-4, Jaipur is justified giving relief to the assessee on the ground that the Manglam Group had owned up the entire entries in the N Trading on cloud data before the Hon’ble ITSC. The order of Hon’ble ITSC has already been challenged in writ before the Hon’ble High Court.
Since the grounds raised are common in both the appeals, therefore, both these appeals are being decided by this combined order for the sake of convenience.
Briefly stated the facts of the case are that a search and seizure operation u/s 132(1) of the Act was carried out on 04.11.2016 at various premises of Manglam Group, Jaipur. In search certain data were found in the name of N. Trading Company which also contains data reflecting the name of assessee firm and therefore, notice u/s 153C was issued on 26.09.2018. The partners of assessee firm are Shri Sanjay Gupta, Shri Nitesh Agarwal, Shri Rahul Gupta & Shri M.L. Khairadi. In compliance to notice issued under section 153C, the assessee filed returns for both the Assessment Years at Nil income. Notice under section 143(2) of the Act was issued on 17.10.2018 which was duly served. Further notice under section 142(1) of the Act was issued on 17.10.2018 along with detailed questionnaire. The notices were duly complied with by the ld. A/R of the assessee and furnished the desired details, which were examined with reference to claims made in the return of income.
2.1. The assessee firm constructed a project in the name of Goverdhan Sky located at Khatipura Road, Jaipur where commercial space (shops/plots) has been developed. In Assessment Year 2016-17 it has sold 35 plots measuring 10627.15 sq. ft. for Rs.3,49,16,034/- and in Assessment Year 2017-18 it has shown total advance against booking at Rs.2,56,16,102/-. The AO observed that in the cash book found in cloud data in the name of N. Trading Company, several instances were found where cash payments have been received by the developer concern from its customers in the property transactions related to the project Goverdhan Sky. In these transactions substantial amounts in cash have been received which have not been accounted for in the regular books of the developer concern. The AO in assessment order has pointed out following instance of ‘on money’ found in search:-
Unit Nam of buyer Details of cash payment Remarks No. Date Amount (Rs.) 605 SushilaAgarwal 01.04.2013 15,50,000 Cash payment details found in cash Book (Annexure A-54 of Party No.3)
He further reproduced ledger account of S.D. Agarwal as under:-
N. TRADING COMPANY S.D. AGARWAL 605 SSD Ledger Account
1-Apr-2013 to 31-Mar- 2017 Date Particulars Vch Type Vch No. Debit (’00) Credit(’00) 01-04-2013 By Cash Receipt 22 15500.00 07-06-2013 To Cash Payment 532 3000.00 17-03-2015 To Cash Payment 3535 12500.00 15500.00 15500.00
On this basis he computed average rate of property for AY 2015-16 at Rs.6655.02/- per sq. ft. as under:-
Unit Area of Unit Sale amount Cash receipts Total Rate of No. (Shop/Office) shown in books found in N. Consideration property (per of accounts(in Trading Co. (in Rs.) sq. ft.) (in Rs.) (in Rs.) Rs.) 605 507.49 1827356 15,50,000 3377356 6655.02 Accordingly, by adopting the rate of property of AY 2015-16 as base rate at Rs.6655.02 per sq. ft., Cost Inflation Index (CII) of AY 2015-16 at 1024 and CII of AY 2016-17 at 1081, AO determined the average selling price of flats of AY 2016-17 at Rs.7025.47 per sq. ft. (6655.02*1081/1024).On the basis of average selling price, he determined the total amount received on sale of flats for AY 2016-17 at Rs.7,46,60,723/- (10627.15*7025.47) and after reducing the sale amount shown in books of accounts at Rs.3,49,16,034/-, worked out on money received by the assesseeat Rs.3,97,44,689/-. For AY 2017-18 AO held that total advance against booking disclosed by the assessee is Rs.2,56,16,102/-. By determining the average on money received by the assessee at 40%, he worked out on money received by the assessee at Rs.1,02,46,441/- (2,56,16,102*40%). The AO thereafter asked the assessee to show cause as to why the above on money be not added to his total income. In response to same, assesse filed the explanation which is reproduced at Page 6 of the assessment order. However, AO rejected the same by observing as under:-
(i) The sale price of per sq. ft. saleable area is derived on the basis of incriminating seized material found during the course of search proceedings and information collected during post search enquiries. Since the evidence of ‘on money’ is available for one F.Y., the same can be used to estimate the ‘on money’ received in other financial years as well.
(ii) MBDL has owned up the transaction while filing the petition before Settlement Commission. Thus, where one party has accepted the transaction, the same is correct for other also.
(iii) The Manglam Group has failed to disclose all the transactions pertaining to its ‘on money’ receipts before the ITSC, it has disclosed only those transactions which are appearing in the cloud data. Thus it is important that in order to quantify the real ‘on money’ receipts of the assessee, quantification should be made for other financial years and units as well.
Accordingly, AO made addition of ‘On-money of Rs. 3,97,44,689/- in Assessment Year 2016-17 and Rs.1,02,46,441/- in Assessment Year 2017-18 under section 68 of the I.T. Act.
2.2. Being aggrieved by the order of AO, the assessee preferred appeal before the ld. CIT (A). The Ld. CIT(A) after giving the various reasons as reproduced at para 7, pages 17-19 of his order held that after considering the fact that no incriminating material was found for which various cases were relied on by the assessee and order of Hon’ble Settlement Commission, addition made by the AO by estimating on money is not justified. Accordingly, he deleted the addition made by the AO.
Now the revenue is in appeal before us.
3. Before us, the ld. D/R supported the order of the AO and submitted that the ld. CIT (A) was not justified in deleting the additions made by the AO on account of ‘On money’ received by the assessee. It was submitted that the ld. CIT (A) ignored the transactions found on Cloud Data and also ignored the facts that entries relating to unaccounted capital and advances were found in the N Trading Company cloud data and thus the addition of unexplained, unaccounted capital advance, interest and surplus profit earned were on the basis of incriminating seized data. The ld. D/R also submitted that the ld. CIT (A) was not justified in giving relief to the assessee on the ground that Manglam Group had owned up the entire in the “N Trading” on cloud data before the Hon’ble ITSC particularly when the order of the Hon’ble ITSC has already been challenged in Writ before the Hon’ble High Court. The ld. D/R placed on the judgment of Hon’ble Supreme Court in the case of ITO vs. Ch.
Atchaiah (1996) AIR 883 and judgment of Hon’ble Delhi High Court in Writ Petition (Civil) No. 4368 of 2010 dated 18th May, 2012.
On the other hand, the Counsel for the assessee reiterated the same arguments as were raised by him before the ld. CIT (A). The ld. A/R further pointed out that on the basis of documents found in case of searched person, additions can be made in the hands of other person only for those assessment years for which search documents were found. In the present case, the AO has pointed out that only one instance of ‘On money’ found in Assessment Year 2015-16. Therefore, in the absence of any incriminating material pertaining to assessment years 2016-17 and 2017-18, no addition can be made. He placed reliance on the following case laws :-
CIT Vs. Sinhgad Technical Education Society (2017) 156 DTR 161/ 250 Taxman 225 (SC) The relevant para 18 & 19 of the order is reproduced as under:- “18. The Tribunal permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the Tribunal that as per the provisions of s. 153C of the Act, incriminating material which was seized had to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co- relation, document-wise, with these four assessment years. Since this requirement under s. 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of s. 153C of the Act. Para 9 of the order of the Tribunal reveals that the Tribunal had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to asst. yr. 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of asst. yrs. 2000-01 and 2001-02 was even time- barred.
19. We, thus, find that the Tribunal rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the asst. yrs. 2000-01 and 2001-02 was time-barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy.”
PCIT Vs. Meeta Gutgutia (2018) 257 Taxman 441 (SC)
Invocation of sec. 153A to reopen concluded assessments of AYs earlier to year of search was not justified in absence of incriminating material found during search qua each earlier assessment year. SLP filed against said decision dismissed.
The ld. A/R submitted that the Ld. CIT(A) has also allowed the relief to the assessee of this ground which is not challenged by the revenue. Hence, on this ground itself the appeal of revenue needs to be dismissed.
4.1. The ld. A/R further submitted that the AO in the order referred to one instance of ‘on money’ found in the cloud data of N. Trading Company and computed the ‘on money’ in respect of all transactions by presuming that the assessee has received ‘on money’ in all the cases. However, these books belong to MBDL and not to the assessee. It is a settled law that in search assessment u/s 153A / 153C, addition can be made only in respect of transactions for which incriminating evidences are found. The same can’t be interpolated to all the transactions. For this reliance is placed on the decision of Gujarat High Court in case of CIT Vs. Amar Corporation 2012 (7) TMI 983. In this case papers relating to receipt of ‘on money’ was found in respect of one flat and on that basis ‘on money’ was calculated for all the flats in that project. The ld. A/R submitted that the Hon’ble ITAT restricted the addition only in respect of that flat for which evidence of ‘on money’ receipt was found and deleted the addition made for other flats. The findings of the Tribunal was approved by the Hon’ble High Court by holding that on the basis of guess work and extrapolation, no addition can be sustained. He placed reliance on this proposition on the following cases:-
Ashoka Infrastructure Ltd. Vs. ACIT (2017) 189 TTJ 0749 (Pune) It was held that evidence found during the course of search indicating that full toll receipts were not recorded in the books of account for certain period can be utilised for extrapolation of income for the relevant financial year(s).However, the said material cannot be made the basis for working out the income for other years for which no incriminating documents or entries in any cash book or note books were found during the course of search.
Thakkar Popatlal Velji Sales Ltd. Vs. ACIT (Mum.) (Trib.) The Hon’ble ITAT at Para 6 of the order held as under:-
“Considering the above, we are of the opinion that it is a reasonably settled issue that no estimation can be made by the AO for which no incriminating material were discovered and no estimations were made based on the theories of extrapolation and multiplication. In the absence of any material of evidence found during the course of search to suggest that assessee was all along indulging in such unaccounted transactions, we are of the opinion that the decision of CIT(A) to all the issues raised in all the three appeals does not call for any interference. Accordingly, grounds raised by the Revenue in all the three appeals are dismissed.”
The ld. A/R submitted that without prejudice to above, we may point out that MBDL has owned up all the data found in cloud as belonging to them. On the basis of the same it filed settlement petition before Settlement Commission on 28.03.2018. As
per the petition filed by MBDL before the Hon’ble Settlement Commission, the following ‘on money’ receipts were considered for computing the income:-
Particulars Total Receipts of ‘On money’ Booking Receipts 6,90,12,13,000 Settled Booking 3,67,74,14,100 Receipts Total 10,57,86,27,100 From this on money, expenditure incurred were claimed and finally income of Rs.80.07 cr. (Rs.72.33 cr. + Rs.7.75 cr.) was offered which has been accepted by the Settlement Commission at Pg 57 of the order dated 16.05.2019 by giving following findings:-
Para 6.8 of Page 57 of the Settlement Commission order “The Commission finds merit in the argument of applicant on this issue. We are of the view that arbitrary extrapolations cannot be basis for arriving at true undisclosed income of the applicant. There must be some documentary basis for arriving at the true cash profit. The PCIT has not come out with any computation of undisclosed cash profit based on the data found during the course of search operations rather he has taken recourse to extrapolation of cash profit based on a few data to the entire turnover of the applicants. Accordingly, the contention of the applicants on the issue of cash profit is accepted.
Based on the above the total undisclosed income of the applicants of the Group is settled at Rs.80,07,69,990/- on the issue of cash profit. The amount of undisclosed income settled in respect of the applicants in the respective assessment years are given in the following table.”
The ld. A/R submitted that merely because a writ has been filed before the Hon’ble High Court against the order of Hon’ble ITSC (it is not known as to on which issue the writ is filed) cannot be a ground to tax the alleged on money in the hands of assessee.
4.2. The ld. A/R further submitted that similar issue has been decided by Hon’ble ITAT in case of Shri Jugal Kishore Garg (Derawala) where also AO on the basis of cloud data of N. Trading Co. seized during the course of search carried out in case of M/s Manglam Group, Jaipur made various additions. The Ld. CIT(A) deleted the addition made by AO. Against the order of Ld. CIT(A), department filed an appeal before Hon’ble ITAT, Jaipur Bench. The Hon’ble ITAT vide order dt. 14.09.2020 in Shri N.K. Gupta, main person of M/s Manglam Builder & Developer Ltd. (MBDL) had already owned up all the data found in cloud as belonging to them. On the basis of same, MBDL filed the settlement petition before Settlement Commission which was accepted. Accordingly, Hon’ble ITAT held that since the amount had already been subjected to tax in the hands of MBDL and related entities, therefore, Ld. CIT(A) has rightly deleted the addition.
4.3. The ld. A/R supported the order of the ld. CIT (A) and submitted that in view of the facts narrated above, order of Ld. CIT(A) be upheld by dismissing the ground of department.
We have heard the ld. Counsels for both the parties, perused the materials placed on record, deliberated upon the judgments cited by both the parties as well as the orders passed by the Revenue authorities. From the facts of the case, we note that the AO on the basis of one transaction of receipt of on money in respect of Unit No.605 found in the cloud data of N. Trading Company computed the average rate of flat for assessment year 2015-16 at Rs.6655 per sq. ft. and applying cost inflation index worked out average selling price of flat for assessment year 2016-17 at Rs.7025.47 sq. ft. and on that basis determined the on money receipt at Rs.3,97,44,689/-. However, for the assessment year 2017-18, the AO held that advance against booking disclosed by assessee is Rs.2,56,16,102/- but by estimating average on money receipt at 40% he made addition on account of on money receipt at Rs.1,02,46,441/-. Thus, we find that no evidence/ material is brought on record of any on money receipt pertaining to assessment years 2016-17 & 2017-18. The Hon’ble Supreme Court in case of CIT Vs. Sinhgad Technical Education Society (2017) 156 DTR 161/ 250 Taxman 225 has held that addition under section 153C can be made only when the incriminating material seized pertain to the assessment year in question. The relevant Para 18 & 19 of the order is reproduced as under:-
“18. The Tribunal permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the Tribunal that as per the provisions of s. 153C of the Act, incriminating material which was seized had to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. Since this requirement under s. 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of s. 153C of the Act. Para 9 of the order of the Tribunal reveals that the Tribunal had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to asst. yr. 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of asst. yrs. 2000-01 and 2001-02 was even time-barred.
We, thus, find that the Tribunal rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the asst. yrs. 2000-01 and 2001-02 was time-barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy.”
In the present case also, the Ld. D/R has not brought out any material on record to show that in the years under consideration any on money has been received by the assessee. Therefore, in the absence of any such material on record, no addition for on money can be made on estimation basis. We further note that Manglam Build Developers Ltd. has owned up all the data found in the cloud as belonging to them and on that basis offered an income of Rs.80.07 cr. which has been accepted by the Settlement Commission at Page 57 of its order dated 16.05.2019. The Coordinate Bench of the Tribunal in case of DCIT Vs. Sh. Jugal Kishore Garg in to 37/JP/2020 dated 14.09.2020 and in case of DCIT Vs. Late Smt. Pushpa Goyal in ITA No. 1299 to 1301/JP/2019 dated 03.01.2022 wherein the facts are pari materia arising out of the same search action on Manglam Group and same set of data in form of ‘N. Trading Company’ found in the cloud data which has formed the basis of addition in the aforesaid case and the matter has already been examined by the Coordinate Bench of the Jaipur Tribunal basis the filings and acceptance of MBDL petitions before the Settlement Commission, the addition has been deleted.
Therefore, there is no reason to deviate from the findings already given by the Coordinate Bench. The revenue has taken a ground that the order of Settlement Commission has been challenged by the revenue by way of Writ before the Hon’ble Rajasthan High Court but the same cannot be the basis for not following the decisions so passed by the Coordinate Benches in the aforesaid cases as nothing has been brought on record in terms of the specific ground basis which the findings in the aforesaid order has been challenged by way of writ petition and secondly whether the order of Settlement Commission and that of the Coordinate Benches has been stayed by the Hon’ble Rajasthan High Court or not. In these circumstances
13 & 1303/JO/2019 Shiv Shakti Developers, Jaipur. the addition made in the hands of assessee is rightly deleted by Ld. CIT(A) and we hereby affirm his findings in this regard and the grounds of appeal so taken by the revenue are thus dismissed.
6. In the result, appeals filed by the revenue are dismissed. Order pronounced in the open Court on 30/11/2022.