SHRI MANOJ KUMAR KUMAWAT,JAIPUR vs. ACIT, CENTRAL CIRCLE-3, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR MkWa- ,e- ,y- ehuk] ys[kk lnL; ,oa MkWa- ,l- lhrky{eh] U;kf;d lnL; ds le{k BEFORE: DR. M.L. MEENA, AM & DR. S. SEETHALAKSHMI, JM vk;dj vihy la-@ITA. No. 68/JP/2021 fu/kZkj.k o"kZ@Assessment Years : 2018-19 cuke Sh. Manoj Kumar Kumawat ACIT, AB-351, Nirman Nagar, Vs. Central Circle-3, Ajmer Road, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ASTPK 2052 M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (C.A.) jktLo dh vksj ls@ Revenue by : Shri Manoj Mehar (CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 25/05/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 01/08/2022 vkns'k@ ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-4, Jaipur [hereinafter referred to as (CIT(A)] dated 29.06.2021 for the AY 2018-19.

2. The assessee has raised the following grounds:- “1.The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs. 14 lacs on account of alleged on money paid in respect of plot at 37A, Mahahinlaj Nagar, Jaipur u/s 69 of the Act by drawing incorrect inference from the papers/documents found in search even when the same nowhere reflect payment of any on money.

2. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs. 13,55,790/- on account of alleged construction expenses incurred by the assessee ignoring the fact that these expenses pertain to M/s ABM Infra LLP duly recorded in its books of account.

3. The appellant craves to alter, amend & modify any ground of appeal

4. Necessary cost be awarded to the assessee.”

(v) As regards the contention of the appellant that this joint venture did not materialize and therefore the appellant started construction on the said plot of his own for which total expenditure of Rs. 36,88,036/- was incurred, it is observed that the appellant has not been able to furnish any documentary evidence to justify his stand that the joint venture did not materialize whereas on the contrary there has been incriminating documents suggesting otherwise and moreso subsequently the construction on the aforesaid plot did take place which was sold by the appellant and capital gains was also declared thereupon. Further the claim of the appellant that the same was sold on 04.12.2018 for Rs. 41,00,000/- and the resultant short term capital gain of Rs. 4,11,964/- was declared in his return for AY 2019-20 , it is stated that since the legal ownership of the above plot was in the name of the appellant, therefore declaring of capital gains in his hands was as per requirement of the IT Act and therefore this does not prove that the joint venture did not materialize. Therefore this plea of the appellant is not found to be acceptable. (vi) The appellant has further claimed that in case any addition is sustained, same has to be allowed as cost against the sale of flat constructed on this plot and therefore, instead of STCG of Rs.4,11,964/- offered in AY 2019-20, there would be a short term capital loss of Rs.9,88,036/- (14,00,000-4,11,964) in that year. Since the capital contribution of Rs.14,00,000/- by the appellant and Rs.28,00,000/- by Shri.Banwari Kumawat have been made out of books of accounts, therefore in such circumstances the same cannot be allowed as cost against the sale of flat constructed on this plot and therefore this contention of the appellant is not accepted. (vii) As regards the contention of the appellant that even if it is assumed that Rs. 14,00,000/- is the amount of on money paid, the same cannot be added in the year under consideration in as much as the plot was purchased on 21.04.2016 which falls in AY 2017-18 and not in AY 2018- 19, it is observed that the seized Pg. 3 of Exhibit 1 clearly indicates that the capital contributed by the appellant and his partner Sh. Banwari Kumawat is on 06.09.2017. It is further observed that though the addition of Rs.14,00,000/- was made in the case of the appellant, however, it seems that no such addition was made in the hands of Shri Banwari Kumawat, whereas per page 1 & 3 of the seized exhibit 1, shir banwari Kumawat has made a capital construction of Rs. 28,00,000/- in the above plot. Therefore the AO may take necessary action in the hands of Sh. Banwari Kumawat, as deemed fit, as per the provisions of the Act, after verifying from the records. (viii) Further the contention of the appellant that in view of the statement of Sh. Pannalal Kumawat recorded u/s 132(4) of the Act during the course of search on 28.09.2017, it has been admitted that whatever unaccounted investment is recorded in Exhibit 1 may be considered that of M/s Bhivaram Pannalal Kumawat, the source of which is out of inflated labour expenses of the firm. However, this contention of the appellant is not acceptable in view of the fact that Sh. Pannalal Kumawat has subsequently retracted from this statement. Further the firms M/s ABM Infra LLP in which the appellant and Sh. Banwari Kumawat are partners and M/s Bhivaram Pannalal Kumawat wherein Sh. Bhivaram Kumawat and Sh. Pannalal Kumawat are partners are two separate entities with different composition and no evidence has been submitted by the appellant in favour of his contention that the source of investment made by the appellant is from the firm M/s Bhivaram Pannalal and therefore set off the same cannot be allowed against the addition made in the hands of the appellant. (ix) The appellant does not succeed on this ground and the addition of Rs. 14,00,000/- made by the AO in the hands of Sh. Manoj Kumawat being his share of payment/contribution in the above plot, is accordingly confirmed. The Ground of appeal no. 1 8s 1.1 is treated as dismissed.”

(a) The assessee submitted that the transactions recorded on Exhibit 1 relates to the assessee and some other person wherein share in respect of plot has been mentioned but same didn’t materialize in due course of time but no evidence to substantiate the same has been submitted by the assessee.

(b) If the transaction didn’t materialize then why would specifically a date of payment, i.e. 06.09.2017 is mentioned on the seized document.

(c) Page No.1 of Exhibit 1 contains detail related to ‘on money’ payment which is a common practice in real estate business. The plot situated at 37A, Mahahinlaj Nagar was actually registered for Rs.5 lacs vide sale deed dt. 21.04.2016, however, cash payment of Rs.14 lacs was made by the assessee and Rs.28 lacs was paid by Sh. Banwari ji who is the partner in firm ABM Infra LLP. The bifurcation of this amount is same as that in the partnership firm.

(d) During the course of search proceedings Sh. Pannalal Kumawat, father of assessee in reply to Q.No.2 stated that these transactions are related to unaccounted cash investment of Sh. Manoj Kumawat.

3. The Ld. CIT(A) at Para 4.3, Pg 4-8 of the order confirmed the addition made by the AO by not properly appreciating the various contentions of the assessee by holding as under:-

(a) It was observed that as per the assessee’s own submission the value of plot as on 06.09.2017 was Rs.42 lacs and not Rs.5 lacs declared in books of accounts for which no evidence is furnished to corroborate his stand of escalation of cost of plot from Rs.5 lacs on 21.04.2016 to Rs.42 lacs on 06.09.2017. She further observed that payment of on money is prevalent practice in real estate transaction.

(b) The seized paper shows that assessee and Sh. Banwari Lal Kumawat have contributed the plot of land and thus, cost of plot as on 06.09.2017 was Rs.42 lacs. The contention of assessee that the joint venture did not materialize is not supported by any documentary evidence whereas on the contrary there is incriminating documents suggesting otherwise and more so subsequently the construction on the aforesaid plot did take place.

(c) The claim of assessee that in case any addition is sustained, then in AY 2019-20 instead of short term capital gain of Rs.4,11,964/- declared by the assessee there would be short term capital loss of Rs.9,88,036/- cannot be accepted as when capital contribution is made out of books, the same cannot be allowed as cost against the sale of flat constructed on the said plot.

(d) The another contention of assessee that since the plot was purchased on 21.04.2016 which falls in AY 2017-18 and not in AY 2018-19, the addition cannot be made in the year under consideration is not acceptable since the seized paper clearly indicate that the capital contribution was made on 06.09.2017 which falls in the year under consideration.

Submission:- 1. It is submitted that Pg 1 of Exhibit 1 (PB 11) contain details of Plot No.37A, Mahahinlaj Nagar-B, Gandhi Path West, Vaishali Nagar, Jaipur where the size of plot is mentioned at 130 yard and its value Rs.42 lacs with a narration of share of 33.33% of assessee at Rs.14 lacs and share of 66.66% of assessee’s uncle Banwari Lal at Rs.28 lacs. The paper further indicate that assessee and Banwari Lal ji intended to enter into a joint venture for construction of flat on this land (G+2) with Sh. Jeevanji having equal ratio whereby the expenditure on construction would be incurred by Jeevanji and the value of plot contributed by assessee and Banwariji would be considered at Rs.42 lacs. Thus, the amount of Rs.14 lacs noted against the name of assessee is not the on money paid by him for the purchase of plot rather it is the value of plot estimated for entering into joint venture with Jeevanji. The amount of Rs.28 lacs in the name of Banwariji and Rs.14 lacs in the name of Manojji is also reflected at Pg 3 of Exhibit 1 (PB 12) with the date 06.09.2017. This date indicate the date on which the joint venture was entered into and not the date of alleged payment of on money in as much as the assessee purchased the said plot vide sale deed dt. 21.04.2016(PB 13-19) for Rs.5 lacs situated in a scheme developed by Sh. LaxmiGrahNirmanSahakariSamiti Ltd. Thereafter the assessee obtained JDA patta on 18.05.2016 because of which the value of plot increased(PB 20-24).On registration and obtaining JDA patta, expenditure of Rs.1,62,765/- (46,110+1,16,655) was incurred. Thus, the total cost of plot is Rs.6,62,765/-(PB 25). Therefore, the assumption of lower authorities that amount of Rs.14 lacs is on money payment on purchase of the said plot is without basis and not borne out from the seized record. In fact the Ld. CIT(A) has incorrectly assumed that amount of Rs.42 lacs noted on this paper is cost of plot whereas this is the value of plot estimated on 06.09.2017 in as much as the date of purchase of plot is 20.04.2016 (PB 14-24) and not 06.09.2017.

2. It may be noted that immediately after entering into the joint venture there was search on the assessee’s premises on 28.09.2017 and therefore, this joint venture did not materialize. The Ld. CIT(A) has not accepted this contention by simply stating that no documentary evidence to justify this stand is filed ignoring that neither any material is found in search nor brought on record by the lower authorities that construction on the said plot has been carried out in joint venture. The fact thatthe joint venture did not materialize is verifiable from the subsequent event whereby assessee started construction on the said plot of his own for which expenditure of Rs.7,78,330/- was incurred during FY 2017-18 (PB 26-27) and Rs.22,46,941/- in FY 2018-19(PB 28). Thus, the total cost of land and construction was Rs.36,88,036/- (6,62,765+7,78,330+22,46,941) which was sold on 04.12.2018 for Rs.41 lacs(PB 29) and the resultant short term capital gain of Rs.4,11,964/- was declared in the return for AY 2019-20 (PB 30-34). Therefore, in case any addition is sustained, same has to be allowed as cost against the sale of flat constructed on this plot and therefore, instead of STCG of Rs.4,11,964/- offered in AY 2019-20, there would be a short term capital loss of Rs.9,88,036/- (14,00,000-4,11,964) in that year. The Ld. CIT(A) has incorrectly not accepted this contention by simply stating that when Rs.14 lacs is paid out of books, it cannot be allowed against the sale of property ignoring that there is no such provision under the Act. Thus, it is evident from records that joint venture did not materialized.

3. In the statement u/s 131dt. 28.09.2017 the assessee in reply to Q. No.8 (PB 4-5) has stated that Pg 1-3 of Exhibit 1 relates to the size of plot of 37-A, Gandhi Path, amount of partners relating to construction and its purchase. Nowhere he has stated that the amount of Rs.14 lacs represents the on money payment in relation to the purchase of said plot. Sh. Pannalal Kumawat in his statement u/s 132(4) in reply to Q.No.2 (reproduced at Pg 6 of the assessment order) after considering the statement of assessee has stated that Exhibit 1 containing 37 pages relates to plot no.37-A, Gandhi Path and construction thereon with reference to his son and Sh. Banwariji for which the expenditure is incurred by M/s Bhivaram Pannalal Kumawat. Therefore, the statement of Pannalal Kumawat which is subsequently retracted has no relevance for the addition made by the AO. Otherwise also, if the statement of Pannalal Kumawat is considered to be sacrosanct, then also the addition, if any, can be made only in M/s Bhivaram Pannalal Kumawat and not in the hands of assessee.

4. Otherwise also, even if it is assumed, though not admitting, that Rs.14 lacs is the amount of on money paid, the same cannot be added in the year under consideration in as much as the plot was purchased on 21.04.2016 which falls in AY 2017-18 and not in AY 2018-19. The Ld. CIT(A) has not accepted this contention simply by stating that the seized Pg No.3 of Exhibit 1 (PB 12) clearly indicate the capital contribution by the assessee on 06.09.2017. However, he ignored that it is simply the estimated fair value of plot on 06.09.2017 and not the cost of the plot. If it is considered as cost of plot which is contributed as capital contribution in the joint venture, then also the addition can be made only in AY 2017-18 and not in AY 2018-19. In view of above, addition made by the AO and confirmed by CIT(A) is unjustified and on surmises & conjectures. Hence, the same be directed to be deleted by allowing the ground of assessee.”

“(i) The fact remains that Exhibit 2 seized from the residential premises of the appellant relates to the unaccounted expenditure incurred on the construction of hostel building near Manipal University, carried out by the firm M/s ABM Infra LLP, in which the appellant and Sh. Banwari Kumawat are partners. As per Pg 2 86 3 of this annexure, the expenditure claimed to be incurred by the assessee is Rs. 31,98,702/-out of which Rs. 18,47,912/- has been made by cheque whereas as per Pg 4 86 5 of the annexure, the expenditure claimed to be incurred by Sh. Banwari Kumawat is Rs. 32,66,142/- out of which payment of Rs. 11,10,000/- has been made by cheque. Therefore an addition of Rs. 13,55,790/- (Rs.31,98,702/- minus Rs. 18,47,912/-) u/s 69C of the Act was made by the AO in the hands of Sh. Manoj Kumawat, the appellant, being payment made in cash by him. (ii) During the course of appellate proceedings, the appellant has submitted that due to certain differences amongst the partners, both of them have given inflated amount of expenditure incurred by them on construction of the hostel building carried out by them which is recorded in this diary seized as Exhibit-2. It has been further contended that the total payment recorded in the seized annexure is Rs. 64,64,844/- (Rs.31,98,702 + Rs.32,66,142) whereas in the books of ABM Infra LLP, the total cost is recorded at Rs. 62,33,822/- and that the difference is only Rs. 2,31,022/-. However, the fact remains that as per the appellants own submissions and on perusal of the ledger account of expenditure incurred, as furnished by the appellant, it is observed that the expenditure of Rs. 62,33,822/ pertains to Plot No. 76, Tejaswi Greens whereas as per Exhibit 2 seized during the search, the expenditure of Rs. 64,64,844/-is in respect of Plot No. 77 and 80. There is no reference of Plot no. 76, Tejaswi Greens in the seized exhibit. Therefore the expenditure incurred/value noted in the ledger account and seized exhibit cannot be equated. Further, it is observed that the expenditure of Rs. 62,33,822/- (Rs.7,65,000 + Rs.42,89,177 + Rs.11,85,700) incurred in respect of Plot No. 76, Tejaswi Greens pertains to three F.Yrs i.e. 2016-17, 2017-18 and 2018-19 respectively whereas the expenditure noted in Exhibit 2 amounting to Rs. 64,64,844/- (Rs.31,98,702 + Rs.32,66,142) pertains to only one F.Y. i.e. F.Y.2017-18. In view of the above facts, the contention of the appellant is far from truth and hence is not found acceptable. (iii) The fact remains that Sh. Manoj Kumawat, the appellant has made unaccounted expenditure at Rs. 13,55,790/- on the construction of the aforesaid hostel building and therefore the plea taken by the appellant is rejected and the AO is found justified in making the addition of Rs. 13,55,790/-. Infact similar addition was required to be made in the hands of Sh. Banwari Kumawat, the other partner in the firm M/s ABM Infra LLP on account of expenditure of Rs. 21,56,142/- incurred by him, in cash, in the construction of the above hostel. It appears that no such action has been taken in the hands of Sh. Banwari Kumawat. Therefore the AO may take necessary action in the hands of Sh. Banwari

Kumawat, as deemed fit, as per the provisions of the Act, after verifying from the records. (iv) Further the contention of the appellant that in view of the statement of Shri. Pannalal Kumawat recorded u/s132(4)of the IT Act during the course of Search on 28.09.2017, it has been admitted that whatever unaccounted investment is recorded in Exhibit 2 may be considered that of M/s Bhivaram Pannalal Kumawat, the source of which is out of inflated labour expenses of the firm. However, this contention of the appellant is not acceptable in view of the fact that Sh. Pannalal Kumawat has subsequently retracted from this statement. Further the firms M/s ABM Infra LLP in which the appellant and Sh. Banwari Kumawat are partners and M/s Bhivaram Pannalal Kumawat wherein Sh. Bhivaram Kumawat and Sh. Pannalal Kumawat are partners are two separate entities with different composition and no evidence has been submitted by the appellant in favour of his contention that the source of investment made by the appellant is from the firm M/s Bhivaram Pannalal and therefore set off the same cannot be allowed against the addition made in the hands of the appellant. (v) The appellant does not succeed on this ground and the addition of Rs. 13,55,790/- made by the Assessing Officer in the hands of Sh. Manoj Kumawat u/s 69C of the Act being payment made in cash by him, is accordingly confirmed. The Ground of appeal no. 2 & 2.1 is treated as dismissed.”

(a) The assessee has stated that the details mentioned in Exhibit 2 relates to construction related expenses in ABM Infra LLP of both the partners but these were written due to some dispute and need not be considered. The same is not acceptable as the assessee in a generic manner has given explanation related to the seized documents on which specific details related to cash payment and specific dates are mentioned.

(b) It is hard to believe that why would the assessee maintain such elaborate record of transaction related to unexplained expenses if the same never took place. These are the details related to cash expenditure borne by each partner which are not recorded in the books of accounts of the firm.

(c) During the course of search proceedings Sh. Pannalal Kumawat, father of assessee in reply to Q.No.3 stated that these transactions are related to unaccounted cash investment of M/s Bhivaram Pannalal Kumawat.

2. The Ld. CIT(A) at Para 5.3, Pg 10-12 of the order held that as per the seized paper assessee has made unaccounted expenditure of Rs.13,55,790/- on construction of the hostel building at Plot No.77 & 80 whereas in the books of M/s ABM Infra LLP the expenditure recorded is with reference to Plot No.76 and therefore, the total cost of Rs.62,33,822/- recorded in books during FY 2017-18 & 2018-19 is not linked to expenditure of Rs.64,64,844/- recorded in the seized paper in FY 2017-18. Accordingly, addition made by the AO is confirmed.

Submission:-

39-40). Out of it certain payment is reflected as paid by cheque which is verifiable from the books of accounts of ABM Infra LLP and certain amount is reflected as paid in cash as per the following details:- Name of Partner Total Payment Cheque Payment Cash Payment Manoj Kumar Kumawat 31,98,702 18,47,912 13,50,790 BanwariLalKumawat 32,66,142 11,10,000 21,56,142

3. In the statement u/s 131dt. 28.09.2017 the assessee in reply to Q. No.8 (PB 4-5) has stated that Pg2-4 of Exhibit 2 relates to the amount given by him and Banwari Kumawat to ABM Infra LLP in relation to the construction of building. Sh. Pannalal Kumawat in his statement u/s 132(4) in reply to Q.No.3 (reproduced at Pg 6 of the assessment order) after considering the statement of assessee has stated that Exhibit 2 containing 53 pages relates to construction of hostel project near Manipal University and whatever unaccounted investment is recoded there it is of M/s Bhivaram Pannalal Kumawat and therefore the source

of such investment is this firm out of inflated labour expenses. However, Sh. Pannalal Kumawat has subsequently retracted this statement. Therefore, in case any addition is sustained in case of M/s Bhivaram Pannalal Kumawat on account of alleged inflated labour expenses, set off the same should be allowed against the addition made in the hands of assessee. Otherwise also, if the statement of Pannalal Kumawat is considered to be sacrosanct, then also the addition, if any, can be made only in M/s Bhivaram Pannalal Kumawat and not in the hands of assessee.

In view of above, addition made by AO and confirmed by Ld. CIT(A) is unjustified and the same be directed to be deleted.”

In the result, the appeal of the assessee is allowed.