SUDHAKAR S. MODY,MUMBAI vs. ASST CIT CIR 7(2), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य, राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार/ PER Rajendra A.M.- अनुसार Challenging the order,dated 6.6.2014 of the CIT(A)-13, Mumbai, the assessee has filed the present appeal.Assessee,an individual filed his return of income on 26.9.2009, declaring total income at Rs.1.85 crores.The Assessing Officer (AO) completed the assessment u/s.143(3) of the Act, on 16.12.2011,determining his income at Rs.2.56 crores. 2.The effective ground of appeal is about upholding the addition of Rs.71 lacs. During the assessment proceedings it was found that the assessee had purchased a shop (No.105, Little World Mall at Kharghar, Navi Mumbai) along with his son and that the value declared in the sale agreement was Rs.50 lacs,that the shop was purchased from M/s. Gayatri Homes, that the agreement was signed by Mayur Patel, a partner of M/s. Gayatri Homes, that an action u/s. 132(1) of the Act was carried out in the case of Siddhi Group on 19.02.2009, that during the course of search an incriminating paper was seized from the premises of the key persons of the group, that the paper revealed that the assessee had booked a shop for a total considera -tion of Rs.1.21 crores,that statement of Kantilal Patil,a key person of the group,were record - ed on 02.04.2009,that he admitted that cash was received over and above the agreement value and same had not been accounted for in the books of account, that Kantilal Patil had offered Rs.12.50 crores as the undisclosed income of M/s.Gayatri Homes and the amount included the sale consideration received from the assessee and other purchaser of the shop in the said mall,that the admission made by Kantilal Patil was confirmed by Mayur Patil and Kirit Patil. Referring to the statements of Kantilal Patil (dated 2.4.2009) and Kantilal M Patil (dated 04. 05.2005),the AO held that details mentioned against shop purchased by the assessee as appearing in the seized paper matched with the details of the shop purchased by him, i.e.,

After considering reply of the assessee,the AO held that the assessee had purchased shop no. 105 for a sale consideration of Rs.50 lacs, that paper seized from the premises of the vendors had all the details of the payment received from the assessee, that the vendors had accepted all the contents of the paper,that they had admitted receipt of cash element over and above the apparent consideration made by way of cheque,that they had admitted such cash receipts of sale consideration as there undisclosed income, that assessee was not able to refute any of the contents of the seized paper, that he had made a payment by way of cash amounting to Rs.71 lacs to the vendors.Accordingly, the AO made an addition of Rs.71 lacs to the income of the assessee treating it as undisclosed income as per the provisions of the section 69 of the Act.

3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions.Before her,the assessee submitted that he had written to the AO to summon the builder for cross examination,that a remand report should be called from the AO after the builder was crossed examined by him, that he had not paid any cash money to the builder.The assessee requested the FAA to allow him to cross examine the builder in presence of the AO during the appellate proceedings. The FAA held that the assessee had not asked for the cross-examination of the builder during the assessment proceedings,that the very issue of cross examination was raised only after 2 ½ years after the assessment order was passed,that the assessee had not taken any ground in that regard.Referring to Rule 46A of the Income Tax Rules, 1962 (Rules),the FAA held that the assessee did not have any reasonable cause as required by the provisions of 46A of the Rules. Referring to the statements recorded by the Investigation Wing of the department, the FAA held that the assessee had accepted half of the details of the seized paper, that the builder had admitted to have received cash of Rs.71 lacs from the assessee. She referred to the matter of Poonam Chawla decided by the Hon’ble Delhi Court in CM(M) 374/2008 dated 17.3.2009 and H. Siddhique vs. A. Rama Lingam (2011) 5 SCR 587 and held that there was no denial that the document was seized during the course of search and seized proceedings, and the contents were admitted by the builders, that the assessee had admitted the basic facts about purchase of shop,that his own admission was corroborated with the other details available in the same very document, that he did not ask for an opportunity to cross examine the builder during the assessment proceedings, that the document had to be read in full and not in part. Finally,the FAA held that the AO was justified in making the addition of Rs.71 lacs.

ITA /5064/Mum/2014-AY.2009-10,Sudhakar S. Mody 4.During the course of hearing before us, the Authorized Representative (AR) argued that the assessee had paid Rs.50 lacs only to the builder, that as per the seized document the price of the shop was Rs.41 lacs,that the assessee had denied to paid cash to the builder when his statements were recorded on 20.2.2009, that the paper seized by the department was a mere loose paper,that the statement of third party was not binding on the assessee, that Kirti Patil had,later on,stated that in each case cash was not charged. He referred to the case of Synthetic Hydro Carbon (ITA No. 5188/Mum/2011-AY.2008-09,dated 12.9.2009) and referred to Pg. No.2,17,29,32,38 of the paper book.The Departmental Representative(DR)contended that the seized paper clearly established cash payment of Rs.71 lacs by the assessee to the builder,that the assessee himself had accepted the part of the paper, that the assessee had purchased 1190 sq. ft.,that the builder had admitted an undisclosed income of Rs.12.50 crores.

5.We have heard the rival submissions and perused the material before us.We find that a unsigned paper was seized from the residential premises of one of the group members of the builders,that the group had made a disclosure of Rs.22.50 crores,that there are two statements of same member of the group,that in one of the statements he had stated that in all the cases cash was not received,that the assessee had denied payment of cash for purchase of the shop, that he was not allowed to cross examine the builder.In our opinion,Rule 46A is not applicable to the facts of the case.The assessee had not filed additional evidences before the FAA,so,there was no justification for invoking the provisions of Rule 46A of the Rules.We find that in the case of Synthetic Hydro Carbon(supra),the Tribunal has dealt with the same issue.In that matter also a shop was purchased from the same vendor and on the basis of the seized paper the AO had made an addition to the income of the assessee.In the appellate proceedings,the FAA deleted the addition.The ground of appeal raised by the AO,before the Tribunal read as under: “"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 52,26,000/- made by the AO as the assessee had made payment of unaccounted money of Rs. 52,26,000/- for acquisition of Shop No. 119 in Little World, Khharghar, Navi Mumbai."

The Tribunal narrated the facts of the case as follow: 3. The facts giving rise to the grievance of the Revenue show that a search and seizure action U/s. 132 was conducted in the case of Siddhi Group on 19.2.2009. During the course of the search, some documents were seized from the premises of key persons of the group in which it was found that M/s. Synthetic Hydrocarbons (assessee) had booked a shop at 119, Little World, Kharghar, Navi Mumbai for which the total consideration of the shop was Rs. 92,26,000/- as per the seized document. During the course of the assessment proceedings, the assessee was asked to explain the nature of transactions and amounts paid for purchase of shop and was asked to explain the source of cash which was paid for the purchase of shop No.

“9.We have considered the rival submissions and carefully perused the orders of lower authorities. The whole dispute revolves around the entries in the document found during search and seizure operation carried on at the premises of the builder M/s. Gayatri Homes. The entire assessment has been made only on the basis of all the entries found in the seized document and the statemet of Shri Kantilal M. Patel of Gayatri Homes. It would be pertinent to note that in the seized document, the total area of shop mentioned is 909 sq. ft., however, the actual area purchased by the assessee is 454.50 sq. ft only This fact is also not disputed by the assessing officer. It appears that the AO has accepted partly the genuineness of the seized document in so far as it relates to the cash payment is concerned i.e. Rs. 52,26,000/- and ignored the area of shop as noted in the seized material as 909 sq. ft. On going through the cross examination, statement of Shri Kantilal M. Patel recorded on 20.12.2010 and exhibited at pages 17 to 19 of the paper book filed by the assessee, we find that the said Shri Kantilal M. Patel has not given any specific answer which could point out that the assessee has actually paid Rs. 52,26,000/- over and above the purchase consideration paid by cheque. On the contrary, we find that Shri Kantilal M. Patel has stated that the seized document is a computer generated paper and he is not aware of who has prepared it. He has offered the cash receipt amount as his additional income to purchase peace of mind and to avoid litigation.

ITA /5064/Mum/2014-AY.2009-10,Sudhakar S. Mody We find that the facts of the case are similar to the facts of Synthetic Hydro Carbon(supra). Nothing contrary was brought on record for not following the said order of the Tribunal.So, respectfully following the above order of the ITAT and reversing the order of the FAA,we decide the effective ground of appeal in favour of the assessee.