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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI I.C.SUDHIR & SHRI PRASHANT MAHARISHI
Assessee by : Sh. V. S. Rastogi, AR Revenue by: Smt. Paramita M. Biswas, CIT DR Date of Hearing 05/05/2016 Date of pronouncement 04/07/2016 O R D E R PER PRASHANT MAHARISHI, A. M. These are the cross appeals filed by the assessee and the revenue against 1. the order of the ld CIT(A)-II, New Delhi dated 23.01.2009 for the Assessment Year 2006-07. The assessee has raised the following grounds of appeal:- 2. “1. On facts and in law, the order of Assessing Officer and the Ld. Commissioner of Income Tax (A)-II, New Delhi have been passed in utter violation of principles of natural justice without giving the appellant proper opportunity of being heard and in total disregard of the peculiar facts of the case.
2. On facts and circumstances of the case, the Ld. CIT(A)-II has erred in law & on facts in confirming the addition of Rs.26,12,500/- made by the Ld. A.O. being the alleged cash receipt over and above the amount received for booking of Unitech Mohali Protect.
3. On fact and circumstances of the case, the Ld. CIT(A)-II has erred in law and on facts in confirming the addition of Rs.10,62,500/- made by the Page 2 of 13 Id. A.O. as estimated amount of alleged brokerage/ commission on booking of 17 plots which is without any basis.
4. On facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the addition of Rs 1040000/- being 40% of Rs.26,00,000/- being alleged amount of commission on Unitech Agra Project on the basis of surmises and conjectures.
5. On facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs.96,000/- out of addition of Rs. 96000/- made by the Ld. Assessing Officer in respect of alleged sale proceeds received in respect of sale of plot of land at D-14, Sector- 122, Noida to alleged to have been executed between Shri Ravi and Sh. SP Sharma for Rs. 4800000/-.
6. On fact and circumstances of the case, the Ld. CIT(A)-II has erred in law and on facts in confirming the addition of Rs.15,00,000/- made by the Ld. Assessing Officer relying on the slip allegedly found at the time of search (Ann. A-2/ page 37 of Party C-2) on on the ground that figures of Rs.23,35,852 has-been allegedly mentioned on the slip that too without given proper opportunity of being heard.
7. On fact and circumstances of the case, the Ld. CIT(A)-II has erred in law and on facts in confirming the addition of Rs. 1,72,500/- out of addition of Rs.9,22,500/-made by the Ld. A.O. being alleged commission earned on the deal of sale of Plot No. B-191, Seqtor-46, Noida whereas alleged deal never materialized.
8. On fact and circumstances of the case, the Ld. CIT(A)-II has erred in law and on facts in not disposing of Ground No. 2 in which the validity of the proceedings initiated by the ld AO were challenged. He has failed to appreciate that neither the assumption of jurisdiction was valid nor the proceedings initiated were sustainable in law.
9. On fact and circumstances of the case, the Ld. CIT(A)-II has erred in law and on facts in not disposing of Ground No. 16 in which assumption of jurisdiction and validity of order was challenged.
10. That the learned CIT-II, New Delhi has erred in law in not deciding Ground No. 17 in which denial of proper opportunity of hearing, not providing opportunity of cross examination & without confronting the adverse material was taken.”
3. The brief facts of the case is that the assessee is an individual running a proprietary concern of M/s. Suraj Property and engaged in the business of proper dealing and earning income commission and service receipts. For the year AY 2006-07 he filed his return of income at Rs. 4888311/- on 05.03.2007. A search u/s 132 of the Income Tax Act was conducted on 23.02.2006 on the assessee at its business premises and the residence. After issue of notice under the statute assessment u/s 143(3) was framed on 31.12.2007 at Rs. 18559930/- making 10 additions for various reasons. Assessee preferred appeal before the ld CIT(A), who in turn deleted some of the addition and also sustained some of the additions and therefore, both the parties are in appeal before us.
Page 3 of 13 4. We first take up 10 effective grounds of appeal are raised. At the beginning itself ld AR of the assessee submitted that he does not intend to press ground Nos. 1, 8, 9 and 10 of the appeal. Further, ground No. 11 is general in nature and therefore same is dismissed. Ground No. 1 and 8 to 11 are dismissed.
5. Ground No. 2 of the appeal is against the addition of Rs. 2612500/- made by the ld Assessing Officer on account of alleged cash receipts over and above the amount receipts for booking of Mohali Project of Unitech Ltd. ld Assessing Officer made this addition on the ceased paper C-2, Annexure A-1 wherein certain amounts were under the column cash as per the ceased documents. In that particular paper 5 names are mentioned and sum of Rs. 2612500/- is the total this amount. Ld Assessing Officer was of the view that the ceased documents shows that the assessee has booked 70 plots directly and the cash and cheque payments were received for such projects. Further the documents shows that the part from the receipt of cheque in the name of the assessee cash payment is further received of Rs. 2612500/- and therefore same is added as income of the assessee. The assessee carried the matter before the ld CIT(A), who confirmed these additions.
6. The ld AR submitted before us that the assessee has not built any books and therefore no additions can be made in the hands of the assessee on the basis of the loose paper found in the course of search. He further submitted that it is a rough documentation and there is no corroborative material. He further stated four out of five statements confirmed in the statement that no cash was paid for booking the plots. Further, as the assessee is broker no addition can be made in his hands. He relied on the several case laws to support his contention.
7. The ld DR relied on the order of the lower authorities.
8. We have carefully considered the rival contentions. The ld CIT(A) has confirmed this addition for the reason that during the appellate proceedings the ld AR was asked to provide the details of payment of the amount received on booking of the plots to Unitech to prove that transactions has been carried on behalf the principal, however, nothing was furnished as the ceased documents have been from the assessee as there is mention of cash amount received by the assessee, the arguments of the assessee that no books of accounts are maintained and it is merely a rough documents Page 4 of 13 cannot be accepted. The documents at Sl. No. 50 and 51 of the Paper Book clearly show that booking price was in the range of Rs. 625000/- to Rs. 650000/- and the total consideration was divided into payment by cash and by cheque in past. There is no evidence submitted before us that the assessee is merely acting as a sub-broker, therefore, ld CIT(A) has rightly held that there may be possibility that the assessee is cornering some of the plots at lower rates and resale them in market at higher prices. The statement given by the parties subsequently, that they have not paid any cash cannot be accepted. Unless, assessee fully explains the preponderance of the probability of the sale of plots to these parties. Further, when the fact of the receipt of the cheque by the assessee is not denied which shows that assessee himself is accepting part of the documents as correct and part of the documents as incorrect. We cannot subscribe to the argument of the ld AR that this addition has been made in the hands of the assessee erroneously. In view of this we confirm the order of the ld CIT(A) in confirming the addition of Rs. 2612500/- in the hands of the assessee on account of the ceased documents. In the result ground No. 2 of the appeal of the assessee is dismissed.
9. Ground No. 3 of the appeal is against the addition of Rs. 1062500/- on account of commission income.
10. The brief fact of this ground is that the assessee has booked 17 plots meaning 500 sq yard each through M/s. Manohar Singh And Co and confirmed by letter dated 28.11.2007 that a sum of Rs. 12037500/- has been received from the assessee in March 2006. Therefore, ld Assessing Officer worked out the brokerage of Rs. 62500/- per plot and made the addition of Rs. 1062500/-. The ld CIT(A) confirmed this addition.
11. Ld AR submitted that the ld CIT(A) has not considered the submission of the assessee which is at Pages 113 to 135 of the Paper Book. He further stated that the issue has been decided on mere suspicion.
The ld DR relied on the orders of the lower authorities.
We have carefully considered the rival contentions. The ld CIT(A) has rightly held that when the assessee is engaged in the business of broker it is not possible that despite booking of 17 plots he does not earn any commission. Further, the rate of commission adopted by the revenue is not challenged but it is submitted that brokerage is not received. Before ld CIT(A) it was Page 5 of 13 submitted that the confirmation has been obtained from M/s. Manohar Singh that no commission has been paid and it is going to accrue only when approval from the State Govt. would be received and which is received on 07.01.2008. It was further stated that out of the booked plots three plots were surrendered and the amount was refunded. The contention of the assessee was that he is following the cash system of accounting and nothing has been received and therefore nothing is taxable during the year. We do not agree with the argument of the ld AR for the reason that no conclusive evidences have been raised before us that when the brokerage of this payment this plots were received by the assessee and when they are offered for taxation. In absence of any such evidence merely obtaining the confirmation of the principle broker and mentioning the rate of commission there does not make the order of ld Assessing Officer incorrect when in that certificate in para NO. 6 it is stated that till date no commission has been received from Unitech. In view of this we confirm the finding of the lower authorities with regard to the addition of Rs. 1062500/- on account of commission income. In the result ground No. 3 of the appeal is dismissed.
Ground No. 4 of the appeal is against the addition of Rs. 1040000/- on account of commission. The assessee has booked 45 plots at rate of Rs. 270/ sq yard and the commissions becomes due to the assessee on payment of 40% of the amount by the buyer. The total payment consideration was of Rs. 1.21 crores and therefore, ld Assessing Officer has estimated a commission of Rs. 26 lakhs on this accounts and has only 40% of the amount is required to be paid by the buyer, he added 40% of the total commission income of Rs. 26 lakhs i.e. Rs. 1040000/- as brokerage. Ld CIT(A) sustained these additions.
The ld AR submitted that the ld CIT(A) has confirmed these additions despite the fact that commission is only due on sale of specified no of yards and assessee is following cash system of accounting which will make the commission income chargeable to tax only on receipt of the money. He further stated that as assessee could not achieve the target noting is receivable. He referred to letter dated 25.12.2007, wherein this argument was raised before the ld CIT(A). he submitted that the same was not considered.
Ld DR relied upon the orders of the lower authorities.
Page 6 of 13 17. We have carefully considered the rival contentions. The ld CIT(A) has sustained this addition holding that the assessee has sold 45 plots and therefore he is entitled to the commission. The commission has been estimated on the basis of sale consideration paid by the buyer. The contention of the assessee that the minimum condition of booking 100 plots was mandatory before any commission and further the project was delayed therefore Unitech did not agree for payment of commission. As the assessee has already booked 45 plots and further the payment itself limited to 40% of the initial amount the contentions of the assessee that there was a condition for minimum booking of area for earning of the commission and delay in the project of Unitech and further refusal of the payment of commission by Unitech are merely the submission without any confirmation from the party or revised agreement for lesser payment of commission. It also could not be established that in which year and when the amount of commission of these 45 plots have been booked by the assessee as income. In view of this we do not find any infirmity in the order of the lower authorities in making an addition of Rs. 1040000/- on account of commission on these 45 plots. In view of this ground No. 4 of the appeal of the assessee is dismissed.
Ground No. 5 of the appeal is against the confirmation of Rs. 96000/- on account of sale proceeds of Noida property.
The fact for the ground is that a property of Rs. 48 lakhs was found to have been sold between two parties. The amount of addition is on account of brokerage of 1% from the buyer and seller was confirmed by the ld CIT(A), however, the Assessing Officer made an addition of Rs. 48 lakhs.
The ld AR submitted before us that the deal did not materialize and therefore the commission is not payable.
The ld DR relied on the orders of the lower authorities.
We have carefully considered the rival contentions. The addition has been made based on ceased documents where there is a signed agreement for sale and purchase executed on 24.01.2006 between one employee of the assessee and Sh. SP Sharma for Rs. 48 lakhs. In the statement recorded before the Assessing Officer both of them admitted that transactions are on behalf of the assessee, some money was also paid on account of this. Therefore, it is not possible to believe that the deal did not materialize. At page 116 and 117 of the paper book the assessee has contended that the Page 7 of 13 transfer memorandum etc. assessee himself has stated that his employee and Sh. SP Sharma might have created a post document the influence the potential buyer. Ultimately, the transactions are happened between one Sh. Chaddha and Sh. Gupta. The assessee has submitted these documents, however, the statement of Sh. Ravi and Sh. SP Sharma were recorded and who confirmed that they acted on behalf of the assessee and ultimately there is a transaction between the parties may not be the same parties but the assessee could not explain that how these papers were found at his premises when he is not at all concern. In view of this we cannot subscribe to the argument of the ld AR that nothing has been received by the assessee has commission when the transaction of this property for purchase of sale is made. We do not find any infirmity in the order of the ld CIT(A) in confirming the addition of Rs. 96000/- as 2 % brokerage in the hands of the assessee on account of the sale of this property. Therefore, ground No. 5 of the appeal is dismissed.
Ground No. 6 of the appeal is against the addition of Rs. 15 lakhs based on the notings on a ceased paper from the assessee’s passion during search. The assessee could not recollect exact details however, based on that paper he surrendered undisclosed income. The lower authorities concurrently held an amount of Rs. 15 lakhs reduced on account of Mr. Yadav as income of the assessee.
The ld AR submitted that it is dumb documents and no addition can be made in the hands of the assessee he relied on the plethora of decision on this issue.
The ld DR relied on the orders of the lower authorities.
We have carefully considered the rival contentions. We have also seen the page 101 of the paper book which is copy of annexure A-2, page 37 of C2. The ld CIT(A) has confirmed this addition stating that the paper is written by the assessee himself and is recover from the assessee. Further, the assessee has partly accepted undisclosed income of Rs. 835852/- based on the same paper. We have also looked at the seized document which is showing total transactions of Rs. 2335852/- out of which Rs. 15 Lacs reduced there from and therefore net balance of Rs. 835852/- is offered by the assessee. The amount of 15 lakhs is mentioned in their against name Mr. Yadav is also mentioned than there is an arrow showing cheque and 3 Page 8 of 13 amounts are also mentioned of this check it is totaling to Rs. 15 lakhs. That means an amount of Rs. 15 lakhs out of the 23.35 lakhs is a check transaction and not cash transactions. In view of this we reverse the finding of the Ld. CIT (A) in confirming the addition of Rs. 15 lakhs in the hands of the assessee. In the result ground No. 6 of the appeal is allowed.
Ground No. 7 of the appeal is against an addition of Rs172500/-on account of plot number B – 191 sector 46 Noida. Ld. assessing officer has made an addition of Rs 922500/- on account of some loose papers found during the course of search which are relating to the property mentioned above which shows about the dealing of approximately purchase and sale of 82.5 lakhs and Rs. 90 lakhs between 2 parties and the paper is written in the hands of the assessee. That paper also contended that the commission at the rate of 1% from the buyer and the seller is required to be paid in view of this the Ld. assessing officer made an addition of Rs. 9 22,500/- in the hands of the assessee on account of profit on the sale of that property however the Ld. CIT appeal is restricted 2 % percent commission of that property.
Ld AR has repeated the same argument which was therein clearly on grounds that the deal did not materialize therefore there is no question of receiving any commission and in absence of any evidence that any commission is actually received by the assessee addition cannot be made in the hands of the assessee.
The Ld. departmental representative relied on the orders of lower authorities with respect to the addition on account of the commission of Rs. 1 72500/-.
We have carefully considered the rival contentions of Ld. CIT appeal have confirmed the addition of bees 172500 in the hands of the assessee instead of Rs. 922500/-. The Ld. CIT appeal has confirmed this addition on account of the seized paper found during the course of search which was returning the hands of the assessee and it also contended that the commission at the rate of 1 percentage from the buyer and seller is to be received by the assessee. In view of this we do not find any infirmity in the order of the Ld. CIT appeal in confirming the addition of Rs. 1 72500 on account of commission income of the assessee. In the result ground No. 7 of the appeal is dismissed.
In the result appeal filed by the assessee is partly allowed.
Page 9 of 13 32. Now we come to the appeal of the revenue in wherein following grounds of appeal raised. “1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.1 Lakh made on account of jewellery when the assessee had no justification of jewellery to the tune of RS. 3,06,977/- as stridhan because it also included jewellery.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,53,500/- made on account of commission @ 2% from UNITECH Mohali project when the same were neither disclosed by the assessee in the P&L A./c nor any confirmation was produced from the UNITECH to the effect that this amount was not paid/payable to the assessee.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 6,37,500/- made on account of difference of amount collected from customers and sent to Manohar Singh & Co. for booking of plots at UNITECH Mohali Project when the addition was made on the basis of evidences including a copy of account of said person indication that the assessee has sent an amount of Rs. 1,20,37,500/- and there was no outstanding liability shown against the assessee.
4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,43,115/-made on account of commission charged from the customers for booking of plots in the UNITECH Agra project when the same were neither disclosed by the assessee in the P&L A/c nor any confirmation was produced from the UNITECH to the effect that this amount was not paid/payable to the assessee. (i) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 48,00,000/- made on account of the transactions relating to property D-14, Sector-122, NOIDA. (ii) That while deciding this issue Ld. CIT(A) has not appreciated the fact that the agreement for sale and purchase for the impugned property was found from the possession of assessee. (iii) That the impugned agreement was executed between one of the employee of the assessee and Shri. S. P. Sharma who have admitted on oath that they have put their signatures on the agreement. (iv) That assessee. in terms of provisions of section 132(4A) of I.T. Act 1961 has failed to discharge his onus of proving anything which he claims to be contrary to the facts manifested by any document seized from his possession. (5) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 9,22,500/- made on account of unexplained profit and commission on sale of property No. B- 191, Sector-46 Noida because he has not appreciated the fact that the addition was made on the basis of a document Page 10 of 13 recorded by assessee in his own handwriting for purchase and sale of the properties under question. 6. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 500000/- when the same was made on account of difference of income disclosed at the time of search vis-a-vis income shown in the return of income and the assessee was not able to support the difference with any documentary evidence." 33. The 1st ground of appeal is against deletion of the addition of Rs. 1 lakh made on account of jewellery when the assessee and no justification regularly to the tune of 306977 as stridhan because it also included jewellery of the latest model. Ld. assessing officer has made this addition of Rs. 50,000 considering the amount paid by the assessee out of the undisclosed income earned from omission real estate business of jewellery purchased on account of new purchase of the jewellery was found. On appeal before the Ld. CIT appeal he deleted the addition considering that the same jewellery was reflected in their additional income offer during the course of search and further he contended that this jewellery reference reason of his wife received by her at the time of marriage and the birth of the son. The Ld. departmental representative merely read the relevant paragraphs of the assessment order however he could not point out that how the order of the Ld. CIT appeal is not correct. In view of this we do not mention any infirmity in the order of the Ld. CIT appeal and hence we dismiss ground No. 1 of the appeal of the revenue.
34. Ground No. 2 of the appeal is against the deletion of addition of Rs. 5 3500 made on account of commission at the rate of 2% from Unitech Mohali project when the same was that the disclosed by the assessing the profit and loss account of any confirmation was produced and take to the fact that this amount was not paid or payable to the assessee.
35. The ld AR relied on the orders of the CIT(A) and ld DR relied on the order of the Assessing Officer.
36. We have carefully considered the rival contentions and the ld CIT(A) has dealt with this addition as under:- “The next grievance of the appellant is against the addition of Rs. 2,53,500/- on account of commission on UNITECH Mohali project from the customers. As far as this particular addition is concerned, the A.O. has no case as it is a project developed by the UNITECH Group and if at all any commission is due on booking of plots the same will flown from the Page 11 of 13 developer but not from the customers. There are large number of plots are available and being a buyers market it is for the developer to target potential buyers of its plots for which it engages agents/sub-agents on commission basis. But no customer would incur any additional expenditure in the form of commission to the broker. This practice of customer incurring commission is in vogue in respect of individual properties wherein both buyer and seller would approach the dealer/agent for their requirement. In such situation the payment of commission will be very much in the picture. But not in a case where a large number of plots are available in a project like the one in the present case. Further, there is no material suggesting the existence of commission from the customers. The basis of addition is purely on hypothetical ground^ but not on any constructive evidences. Hence the addition of Rs. 2,53,500/- is deleted.”
37. We do not find any infirmity in the order of the ld CIT(A), therefore the ground No. 2 of the appeal of the revenue is dismissed.
38. Ground No. 3 of the appeal of the revenue is against the addition of Rs. 637500/- deleted by the ld CIT(A).
39. The ld AR relied upon the order of the ld CIT(A), whereas the ld DR relied on the order of the AO.
40. The brief facts of the case is that there is difference on account of booking amount received by the assessee and paid to M/s. Manohar Singh & CO. the ld CIT(A) has deleted this addition as subsequently the said amount was paid by the assessee. On the basis of this finding of the fact we do not see any error in the order of the ld CIT(A) in deleting the above addition. Therefore the ground No. 3 of the appeal of the revenue is dismissed.
41. Ground No. 4 of the appeal is against the deleting the addition of Rs. 243115/- on account of commission as we have already agreed with the finding of the ld CIT(A) on account of Mohali project therefore, similarly we also confirm the finding of the ld CIT(A) in deleting the addition of Rs. 243115/- on account of commission. Therefore ground No. 4 of the appeal of the revenue is dismissed.
42. Ground No. 4(i) to (v) are against the deletion of addition of Rs. 48 lakhs on accounts of trading of the property. As we have already held in ground No. 5 of the appeal of the assessee that the property does not belong to the assessee and confirm the addition of Rs. 96000/- on account of brokerage, we dismiss ground No. 4(i) to (v) of the appeal of the revenue.
43. Ground No. 5 of the appeal of the revenue is against the deletion of addition of Rs. 922500/- on account of property B-191, Sector 46, Noida.
Page 12 of 13 44. We have already deiced ground No. 7 of the appeal of the assessee wherein we have held that the property does not belong to the assessee and confirm the addition of Rs. 172500/- on account of 2% of the brokerage. In view of this we dismiss ground No. 5 of the appeal.
Ground No. 6 of the appeal is against the deletion of addition of Rs. 5 lakhs on account of difference between income surrendered and income offered in the return of income.
The ld DR submitted that when the assessee has surrendered this income during the course of search and same has not been offered in the return of income and therefore ld CIT(A) erred in deleting the same.
Ld AR submitted that the ld CIT(A) has correctly deleted the addition as there was no basis for confirming this addition.
We have carefully considered the rival contentions. The ld CIT(A) has deleted this addition as under:- “The last addition is on account of difference between additional income surrendered and additional income offered in the return of income. A sum of Rs. 5 lakh has added to the returned income. While doing so, the A.O. has not made any reference to any material seized during search nor result of enquiries carried on during assessment proceedings to substantiate the said addition. Surrender per-se cannot be taken as such without referring to any material to support. No such evidences have been discussed in the assessment order to make addition of Rs. 5 lakh. It has been done purely on hypothetical basis only. Such addition cannot be sustained purely on the basis of statement made by the assessee. Accordingly, the A.O. is directed to delete the addition.”