DCIT,CC-VII, KOLKATA, KOLKATA vs. SURYA PRAKASH BAGLA, KOLKATA

1 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA [Before Shri M. Balaganesh, AM & Shri K. Narsimha Chary, JM]

I.T.A No.857/Kol/2014 Assessment Year: 2010-11 & I.T.(SS)A Nos. 34 to 37/Kol/2012 Assessment years: 2006-07 to 2009-10

Deputy Commissioner of Income-tax, Vs. Surya Prakash Bagla Central Circle-VII, Kolkata. (PAN: AEBPB4558F) (Appellant) (Respondent) & I.T.A. No.1418, 1411, 1419 & 1412/Kol/2012 & C.O. Nos. 145 to 148/Kol/2012 Assessment Years: 2006-07 to 2009-10

Surya Prakash Bagla Vs. Deputy Commissioner of Income-tax, Central Circle-VII, Kolkata. (Appellant/Cross Objector) (Respondent)

Date of hearing: 10.08.2016 Date of pronouncement: 05.10.2016

For the Revenue: Shri Niraj Kumar, CIT, DR For the Assessee/Cross Objector: Shri J. P. Khaitan, Advocate & Shri S. Jhajharia, CA

ORDER Per Bench:

IT(SS)A Nos. 34 to 37/Kol/2012 and I.T.A. No.1418, 1411, 1419 & 1412/Kol/2012 and C.O. Nos. 145 to 148/Kol/2012 for Asst years 2003-04 to 2009-10 are arising out of common orders of CIT(A), Central-1, Kolkata vide Appeal Nos. 236-242/CC-VII/CIT(A)C- I/Kol/10-11 dated 6.8.2012 and separate order of CIT(A) for Asst Year 2010-11 in Appeal No. 172/CC-VII/CIT(A)C-I/13-14 dated 14.2.2014. Assessments were framed by DCIT, C.C.VII, Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) vide his separate orders. For the sake of convenience, we dispose of all the above appeals and COs by this consolidated order.

2 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 2. General Facts The brief facts of the case that the proceedings u/s 153A of the Act was initiated consequent to the search u/s 132 conducted on 25.2.2009 at the residential and business premises of “Saltee Group” promoted and owned largely with his family members by Mr. Surya Prakash Bagla. The assessee through its associate concern is engaged mainly in the business of Real Estate & Civil Construction. Consequent to search u/s 132 of the Act, notice u/s 153A of the Act was issued for Asst Years 2003-04 to 2008-09 and assessments framed u/s 153A of the Act thereon and for the Asst Year 2009-10, being the year of search, assessment was framed u/s 143(3) of the Act.

The assessee’s appeal is mainly containing the validity of the search and the grounds of appeal in all the years can be summarized as follows :

a) the order was made by the AO without having assumed legal and valid jurisdiction u/s 127 of the Income-tax Act on your appellant ;

b) without making full and complete compliance required with reference to section 153C and without proper recording of satisfaction etc. since in respect of all the additions made in the hands of the petitioner, the papers and documents had been seized not from your appellant but from some other persons and hence the AO was required statutorily to record satisfaction; and

c) the Search warrant / Panchanama being in the Joint names of several persons and not in the individual name of your petitioner only neither such search was valid nor such warrant was valid nor any assessment could not be made in the name of your petitioner as individual only on the basis of such Search warrant / Panchanama.

3 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 2.1. The ld AR during the course of the hearing did not press the grounds towards validity of search in these appeals and the same is taken as a statement from the Bar. Accordingly the grounds raised on the validity of search in various years are dismissed as not pressed and all the appeals are adjudicated herein only on merits of each addition.

Assessee's Seized Departmen appeal/C. material t's appeal O. Sl.N particula ITA/C.O. Grounds Grounds o rs No. A Y Amount No. No. Fort transactio 2006 1 n 34/K/12 -07 6,00,90,000 1 - 5 - 2007 35/K/12 -08 1,40,00,000 - 1 – 5 2010 857/K/14 -11 7,40,90,000 1 – 4 -

34/K/12, 2006 2 SSG/1 145/K/12 -07 4,30,272 7 5 36/K/12, 2008 74,27,109( +) 147/K/12 -09 3,03,65,126 2, 3 & 4 5 Addl. Ground 1- 147/K/12 3 (C.O) Addl. Ground 1- 4(A's 1419/K/12 appeal)

35/K/12, 2007 3 SSG/3 146/K/12 -08 18,00,000 7 5 36/K/12, 2008 147/K/12 -09 37,25,000 5 6 37/K/12, 2009 148/K/12 -10 84,66,724 3 8

37/K/12, 2009 4 SSG/6 148/K/12 -10 6,00,000 4 9 -

4 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 34/K/12, 2006 5 SSG 9/39 145/K/12 -07 8,61,501 (+) 3,60,500 9 & 10 7 35/K/12, 2007 146/K/12 -08 6,94,299 8 6 36/K/12, 2008 147/K/12 -09 6,28,500 7 8 37/K/12, 2009 148/K/12 -10 86,257 7 11

34/K/12, 2006 6 SSG/8 145/K/12 -07 10,00,000 8 6 36/K/12, 2008 SSG/44 147/K/12 -09 50,000 6 7 37/K/12, 2009 1,67,000(+)27,03,31, 148/K/12 -10 000 5 & 6 10 Addl. Gr.1 (in 148/K/12 C.O) Addl. Ground 1 (In A's 1412/K/12 appeal )

35/K/12, 2007 7 SSG/42 146/K/12 -08 50,64,383 9 7 2008 36/K/12 -09 5,89,47,000 8 - 2009 37/K/12 -10 45,456(+)1,30,00,000 9 & 8 -

35/K/12, 2007 8 SSG/45 146/K/12 -08 79,82,640 10 8 2008 36/K/12 -09 5,00,00,000 10 -

2008 9 SSG/48 36/K/12 -09 5,91,83,000 12 36/K/12, 2008 147/K/12 -09 1,85,08,949 11 9 37/K/12, 2009 148/K/12 -10 2,57,984 9 12

Jewellery, 10 Cash & 34/K/12, 2006 Bank 145/K/12 -07 65,300 6 4 35/K/12, 2007 85,863 / 67,411 6 4

5 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 146/K/12 -08 36/K/12, 2008 147/K/12 -09 69,882 1 4 37/K/12, 2009 148/K/12 -10 3,74,170(+)17,56,785 1 & 2 5, 6 & 7

A.Y 2007-08: (Department’s appeal – ITA No. 35/K/2012) 1. Ground No. 1 - The Ld. CIT (A) erred in holding that Rs. 14,00,00,000/- received in cash by Sri Bagla against the sale shares of Graphitech Tech India Ltd. is taxable in A.Y. 2010-11 and not in the A.Y. 2007-08 as against the CBDT Circular No. 704 dated 28/04/1995, which squarely fits in to the facts of the case. 2. Ground No. 2 - The Ld. CIT(A) has erred in not appreciating the fact that the applicant Shri S.P.Bagla himself has not treated the cash receipt of Rs. 1,40,00,000/- as Capital Gain from sale of shares , rather, he has taken it as undisclosed income from other sources in A.Y.2010-11.

6 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 3. Ground No. 3 - The Ld. CIT(A) has erred in holding that capital gain arising on the 100% sale of shares of M/s. Grahitech is taxable in 2010-11 and not in the year in which MOU (contract for Sale) i.e. /F.Y. 2006-07 relevant for A.Y.2007-08 was signed and that the order of Ld. CIT(A) is in contravention to the circular No. 704 dated 28/04/1995 of CBDT. 4. Ground No. 4 - The Ld. CIT (A) erred in directing A.O. to take the consideration as 14,01,00,000/- for sale shares of Graphitech as against sale value of Rs. 16,51,00,000/- mentioned in MOU (sale contract) 5. Ground No. 5 - The Ld. CIT (A) has further erred in holding that the sale consideration for the sale of shares is to be taken as Rs. 14,01,00,000/- and the date of sale as 25/05/2009.

A.Y 2010-11 – Department’s Appeal - ITA No. 857/Kol/ 2014

The grounds of appeal as emerging out of the order of the Ld. CIT(A)/ C- 1 are as under :

4.1. The brief facts of this issue is that Saltee Infotech Pvt Ltd was holding 100% shares in M/s Graphitech India Ltd, a company incorporated under the Companies Act, 1956. One Mr. Surya Prakash Bagla (assessee herein) is its director. M/s Graphitech India Ltd has long term lease on a piece of land measuring about 60 cottahs and there was no legal impediment to construct commercial building on the said land. There was a Memorandum Of Understanding (MOU) on 4.8.2005 between Saltee Infotech Pvt Ltd represented by its Director Mr. Surya Prakash Bagla and one Mr. Vivek Kathotia, with a recital that the shareholders of M/s Graphitech India Ltd went to transfer their 100% holding in M/s

7 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla Graphitech India Ltd to Mr. Vivek Kathotia for a consideration of Rs. 16,51,00,000/-. In the said MOU there was a recital to the effect that all the original share certificates and transfer deed shall be deposited with Mr. B. K. Jain Advocate in trust and the same shall be handed over to the transferee on making their full and final payment of the consideration amount. Further, vide clause 4 in liabilities and responsibilities of the transferor, it was stipulated that the transferor at his cost and efforts, shall be responsible to get building plans which shall be prepared by the transferee, sanctioned from the concerned authorities and also obtain all other permissions which shall include clearances from the departments of Fire, Airport Authority, Pollution Control Board, Water & Sewerage etc. as may be essential and necessary to enable the transferee to construct and complete the building on the said land without any problem. Further vide clauses 13 and 14 thereof it was stipulated that the Transferor has assured the Transferee that it shall get the plan sanctioned, prepared as per prevailing rules and regulation of the competent authority of different Govt. department of govt of West Bengal & Central Govt. Bidhannagar Municipality have sanctioned the plan up to a height of 75 metres and/or more subject to NOC from Airport Authority of India. Transferor has assured to get the plan sanctioned upto maximum height of 75 metres mentioned hereinbefore. If the Transferor fails to get plan sanctioned then the transferor shall refund the entire amount received from Transferee within one month. The Transferor shall, at his cost and responsibility get the lease deed modified from Urban development (UD) department, to the extent that the land can be used for construction of building for use of information Technology Industry. Vide clause 4 of consideration part, it is stated that the consideration amount shall be paid to the share holders of Graphitech and this will be valid discharge of payment.

4.1.1. Out of the sale consideration Rs.16.51 cr., a sum of Rs.6,00,90,000/- was paid in AY 2006-07 and Rs.1,40,00,000/- was paid in AY 2007-08 towards Cash portion. Subsequently, transferor pleaded that the Municipality refused to sanction the plan prepared by the transferee for its I.T complex and ultimately the transferee decided to abandon the project, and accordingly, about the 1st week of February, 2007 the parties mutually agreed to rescind the contract and to release each other from the obligation there under. At that time large amounts remained outstanding to the transferor and others in relation to the sale and purchase of shares.

8 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla

4.1.2. Saltee InfoTech filed Title Suit No. 216 of 2007 in the court of the Civil Judge, Senior Division, IInd Court, at Barasat seeking a decree declaring the memorandum dated 04.08.2005 as terminated with mutual consent, letters dated 01.11.2007 and 19.11.2007 as void, delivery up and cancellation of such letters and a decree for perpetual injunction restraining the transferee from demanding delivery of possession of the shares and from giving effect to the MOU dated 04.08.2005. In the said suit it was pleaded that pursuant to the MOU the original share certificates were deposited with Advocate Shri B. K. Jain and subsequently all the steps were taken to see that the terms of MOU are implemented, but inspite of various corrections made from time to time to the building plan got prepared by the transferee, the same could not be accomplished and Bidhannagar Municipality refused to approve the plan as such, the transferee ultimately decided to abandon the project and with mutual consent, the contract was rescinded but to the surprise of the transferor, a letter was received from Mr. B. K. Jain, Advocate, wherein the rescinding of contract was disputed and delivery of shares was insisted. In those circumstances, the declaratory suit came to be filed.

4.1.3. The transferee also filed another suit in T.S. No. 222 of 2007 before the Civil Judge (Sr. Division), 2nd Court at Barasat disputing the recession of contract and praying for specific performance thereof. According to the transferee, after receipt of substantial amounts, the transferor with oblique motive alleged that there is rescinding of contract with mutual consent. According to them, only a sum of Rs.2,59,10,000/- was due and a sum of Rs. 13,91,90,000/- was paid from time to time as such the transferee demanded the delivery of shares. According to the transferee, by incurring huge expenditure they got the building plan prepared and cooperated with the transferor to get them approved by the Municipality and according to them, such building plans were almost approved and at the final stage of receiving the amounts and issue formal sanction letter. However, it was effectively thwarted by the transferor only to concoct the story of non approval of plans by the Municipality. He further alleged that for the first time by way of letter dated 22.11.2007 Mr. B. K. Jain, Advocate informed the transferee that the transferor deposited only the share certificates but no share transfer deeds. In these circumstances, specific performance of contract was prayed for.

9 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 4.1.4. While the matter stood thus, there was a search and seizure operation at the premises of Saltee Group of companies on 25.2.2009 by the Income Tax Department u/s 132 of the Act including the residential and business premises of the assessee. Subsequently, the parties entered into a settlement pursuant to which T.S No. 216 of 2007 was dismissed and the other TS No. 222 of 2007 was decreed. Under the terms of settlement the transferor agreed to transfer the 100% shares except 30 shares to the transferee, handover all the papers, books etc., the transferee has to pay Rs.2,59,10,000/- to the transferor whereas the transferor had to pay Rs.2,50,00,000/- to the transferee towards cost of litigation, compensation etc. as such after adjustment of the amounts, the transferee paid a sum of Rs.9,10,000/- to the transferor etc. This was implemented by both the parties pursuant to the decree.

4.1.5. Now the questions are when the transfer of shares took place and what is the actual sale consideration for the purpose of reckoning Capital Gains? According to CBDT Circular No. 704 dated 28.04.1995 with reference to section 2(42A) of the Act, the Board, in case of transactions take place directly between the parties and not through stock exchanges, the date of contract for sale as declared by the parties shall be treated as the date of transfer, provided it is followed up by actual delivery of shares and the transfer deeds. In view of this circular, the date of contract for sale assumes importance. According to the revenue, the date of contract for sale is the date of MOU whereas, according to the assessee, the date of subsequent compromise by way of which the condition as to the approvals by different authorities was got rid of. Further according to the Revenue, the sale consideration is the entire Rs.16.51 Cr whereas the Assessee claims it to be only 14.01 Cr as reduced in the compromise decree by way of adjustment.

4.2. The assssee offered capital gains for sale of shares in Asst Year 2010-11 on the basis of transfer of shares that happened pursuant to decree and revised MOU dated 25.5.2009. The assessee also offered the sums of Rs. 7,40,90,000/- in the revised return for Asst Year 2010- 11 under the head ‘income from other sources’ being the cash component received on sale of shares. But during the course of assessment proceedings, the assessee pleaded before the ld AO to treat the sums of Rs. 7,40,90,000/- as part of share sale consideration and assess capital gains accordingly. This request was rejected by the ld AO. The ld AO ultimately framed the assessments for the Asst Years 2006-07 and 2007-08 by adding the sums of Rs.

10 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 6,00,90,000/- and Rs. 1,40,00,000/- respectively and capital gains in Asst Year 2010-11 as disclosed by the assessee by taking the consideration at Rs. 16.51 crores and assessed the sums of Rs. 7,40,90,000/- as income from other sources for the Asst Year 2010-11 as disclosed in the revised return by the assessee.

4.3. The ld CITA in his order appreciated the contentions of the assessee and deleted the additions of Rs. 6,00,90,000/- and Rs. 1,40,00,000/- made by the ld AO in Asst Years 2006- 07 and 2007-08 and also held that the same are to be treated only as advance received by the assessee against share sale consideration and further held that capital gains arose only in Asst Year 2010-11 as per the compromise decree entered into and revised MOU dated 25.5.2009.

4.4. It is the argument of the learned DR that the parties intended the transfer of a particular number of shares of a particular company for a particular consideration and ultimately the same thing happened even after the Court recording the compromise decree, as such for all practical purposes, what was enforced is only the MOU dated 4.8.2005, as such the date of contract for sale is 4.8.2005 only. He further argued that what is specifically enforced by way of compromise decree is the MOU dated 04.08.2005 and all the terms of compromise reached by the parties are nothing but reaffirmation of the terms of MOU dated 04.08.2005. In respect of consideration his argument is that all along the sale consideration remained same, because of the intervening litigation, the transferor was fastened with the liability to pay compensation to the transferee at Rs.2,50,00,000/- and it is only by way of adjustment, the amount payable had come down but as a matter of fact, there was no reduction in the sale consideration. He submits that the parties never intended to reduce the sale price of the shares but there is an agreement to pay compensation of a sum of Rs.2.5 cr. which liability does not arise with reference to the price of shares as stated in the MOU, but arose due to the intervening litigation. Since the transfer could not have materialized in the absence of payment of such compensation it forms part for sale consideration. According to him, sale consideration remained the same although the transaction but the liability of the transferor for compensation only intervened. He, therefore, argued that the date of MOU is the date of contract for sale and the sale consideration is the entire amount of Rs.16,51,00,000/-. On this premise, Ld. Counsel argued that the sale consideration of shares of the assessee is Rs.16.51 cr. and following the CBDT circular 704 dated 28.04.1995, such date (i.e the date

11 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla of MOU dt 4.8.2005) will be treated as the date of transfer, since, it is only pursuant to the terms of the MOU, the delivery took place. He placed reliance on a decision reported in AJAY GULIYA vs. ASSISTANT COMMISSIONER OF INCOME TAX (2012) 209 TAXMAN 0295 (Del) wherein it was observed that,-

The reasoning of the Tribunal is premised upon the fact that capital assets were transferred on a particular date the assessee passed on the execution of the agreement. There is no material on the record or in the agreement suggesting that even if the entire consideration or part is not paid the title to the shares will revert to the seller. In that sense the controlling expression of "transfer" in the present case is conclusive as to the true nature of the transaction. The fact that the appellant assessee adopted a mechanism in the agreement that the transferee would defer the payments would not in any manner detract from the chargeability when the shares were sold. 4.5. It is the argument of the Ld. AR that the MOU dated 04.08.2005 came to an end with rescinding thereof by the parties with mutual consent and also when it was substituted by a de novo contract by way of compromise decree. He further submitted that as per the agreement in compromise decree, Rs.2.5 cr. was adjustable against the balance sale consideration of Rs.2.591 cr. as such, to the extent of Rs.2.5 cr. the sale consideration was reduced and this amount alone has to be reckoned and in the year of compromise decree. Reliance is placed on a decision reported in COMMISSIONER OF WEALTH TAX vs. BABULAL JATIA (DECD.)137 ITR 540 (Cal)

When shares in the joint stock company were the subject-matter of transfer, the provisions of the Transfer of Property Act, were not conclusive and it should be seen whether there was transfer in accordance with the provisions of Companies Act and the transfer of the interest in the shares from the transferor to the transferee was independent of the requirement of its registration for the purposes of the Companies Act. Further reliance was placed on a decision in the case of CIT vs. Bhaskar Mitter reported in (1994) 73 Taxman 437 (Cal) at para 8 at p. 442 referred in MAYNAK PODDAR (HUF) vs. WEALTH TAX OFFICER (2003) 262 ITR 0633. In this decision, this Court observed :

"....... An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can he lawfully assessed under the Act. The law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so, he cannot assess an assessee on an amount, which is not taxable in law, even if the same, is shown by an assessee. There is no estoppel by conduct against law nor is there any waiver of the legal right as

12 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law. ........"

4.6. The Ld. AR in his rejoinder drew our attention to Circular relied upon by the ld AO which is placed at page 257 of paper book No. 2 and pointed out that even as per the Board’s Circular, taxability of shares arise only in the year of transfer of share certificates. The ld AR took us to pg 48 of PB No. 2 which is the MOU dt. 4.8.2005 and in the “consideration” part of such MOU at Clause 5 it has been categorically mentioned that share transfer deed were to be deposited with Mr. B. K. Jain (Advocate) in trust and were transferred to transferee (i.e. Vivek Kathotia) only on full and final payment of consideration. The ld AR further took us to the letter written by the assessee to the Solicitor Mr. B. K. Jain (Paper Book No.2 page 48) which shows that the Solicitor was holding such share certificates only in trust in terms of the MOU dt. 4.8.2005 and the shares were never transferred to Mr. Vivek Kathotia and/ or his assignees/ associates as mentioned in MOU. The ld AR further took us to ROC returns for Asst Years 2006-07 & 2007-08 as well as for Asst Year 2010-11 which are placed at pages 151 to 245 of the Paper Book No.2 and contended that since the share certificates have been transferred by the assessee and recorded in the Financial Year 2009-10 relevant to Asst Year 2010-11, the fact so contended by the ld DR is not correct and in terms of the Circular No. 204 itself the transfer had happened only in Financial Year 2009-10 relevant to Asst Year 2010-11. The ld AR further contended that the value of consideration at Rs. 14,01,00,000/- is in terms of direction of the Court only and accordingly has been considered by the ld CITA at Rs. 14,01,00,000/- only. The ld AR took us to page 134 along with page 136-137 of paper book No.2 which is part of compromise decree given by Barasat Court and as such this is a fact emanating from the records only. The ld AR further contended that since the same is taxable as capital gain only the ld CITA is right in treating the same as assessable in Asst Year 2010-11 in the head “capital gain” and not as “income from other source” shown by the assessee in such year.

4.7. We have heard the rival submissions and perused the materials available on record including the paper book containing all the relevant documents with regard to this addition.

13 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla It is not in dispute that there was a MOU between the parties. Consideration was ascertained and part is payable in installments. One of the terms of MOU is that the transferor shall be responsible to get building plans, which shall be prepared by the transferee, sanctioned from the concerned authorities and also obtain all other permissions which shall include clearance from the departments of fire, Airport Authority, Pollution Control Board, Water and Sewerage etc as may be essential and necessary to enable to Transferee to construct and complete the building on the land without any problem. Consideration amount to a tune of Rs. 13,26,00,000/- was payable by November, 2005 and a balance consideration of Rs.3,25,00,000/- has to be paid on receiving the sanction plan together with all other essential clearances from all the concerned departments as are required, and receiving all original documents, papers, account books, statutory registers etc.,

4.7.1. Irrespective of the fact of payment and receipt of the amounts and apart from readiness and willingness of the parties, performance of the contract by either of the parties is dependant on the permissions and sanctions to be granted by third parties like departments of fire, Airport Authority, Pollution Control Board, Water and Sewerage etc, and till the permissions are granted, neither of the parties will be in a position to perform or demand performance of contract from other party. By way of stipulation in the MOU by way of Clause 13 thereof, viz, if the Transferor fails to get plan sanctioned then the transferor shall refund the entire amount received from Transferee within one month, the parties adopted a mechanism in the MOU that till the transferor gets the required permissions and clearances, the amounts paid by the transferee would remain as advance only, and it is only on the accomplishment of this pre requisite condition, further steps would be taken. This intention is very clear from the MOU itself.

4.7.2. It is not in dispute that, for one reason or the other, permissions were not granted by the authorities and there was litigation. By the date of filing of the title suit No 222/2007 by the transferee seeking specific performance, transferee claims to have paid a sum of Rs. 13,91,90,000/- from time to time, and only a sum of Rs.2,59,10,000/- was due and as such the transferee demanded the delivery of shares following by filing of such suit. It is only by way of settlement deed, pursuant to which compromise decree was passed, the term relating to obtaining the permissions was removed and the parties, at their readiness and willingness could seek performance. Further on a perusal of the Annual Returns of Graphitech India Ltd

14 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla filed with the Registrar of Companies for Annual General Meeting held on 30.9.2005, 30.9.2006, 30.9.2007, and 30.9.2008 produced by the Assessee, the learned CIT(A) found that the shares in question continued in the name of the Assessee or their allied companies, whereas in the Annual Returns for the AGM held on 30.9.2009 those appear to have been transferred to the name of the purchaser and such transfer was duly recorded in the books of Graphitech India Ltd., suggesting that till the condition of obtaining the permissions and clearances was either fulfilled or removed, the parties did not consider it fit to proceed with the matter.

4.7.3. The question in these circumstances is that whether the parties are in a position to treat the amount received prior to obtaining all permissions and clearances from the departments of fire, Airport Authority, Pollution Control Board, Water and Sewerage etc. Because of the stipulation as to the annulment of the understanding and refund of the amounts received till such date within one month thereafter, it was not possible for the Assessee to treat such amount as part for sale consideration, because both the parties reasonably foresaw the contingent of non obtainability of the permissions and clearances, inasmuch as they have stipulated in the MOU that in such an event the amounts received by the Assessee are refundable within one month. Clause 13 of the MOU suggests that even if the entire consideration is paid and share certificates with Transfer deeds are delivered, the title to the shares will not pass to the seller unless the transferor obtains the requisite permissions and clearances. In that sense the controlling expression of "transfer" in the present case is non conclusive as to the agreement for sale or sale. Therefore, until permissions and clearances the terms of MOU were obtained, it cannot be said that terms and conditions required for contract for sale under the contract for sale are crystallised nor is there is any possibility of assessee treating the amounts received in this regard as part for sale consideration.

4.7.4. Circular No. 704 dated 28.04.1995 with reference to section 2(42A) says that in cases of transactions taking place directly between the parties and not through stock exchanges, the date of contract for sale as declared by the parties shall be treated as the date of transfer, provided it is followed up by actual delivery of shares and the transfer deeds. In this case according to the assessee, date of contract for sale is the date of compromise and compromise decree i.e 25.5.2009. For the reasons set forth in the preceding paragraphs,

15 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla we find that the date of MOU cannot be taken as the date of contract for sale because unless and until the condition in Cl 13 is fulfilled the understanding does not assume the character of agreement for sale, and it is only on that event the amount becomes the part consideration. Till such time it is only an advance amount only, not liable for tax under the head of capital gains.

4.7.5. Next question that arises is as to what exactly the sale consideration was, whether it was Rs.16,51,00,000/- as contemplated in the MOU or Rs.14,01,00,000/- as adjusted in Cl 12 (a) read with Cl 11 of the Terms of Settlement reached by parties and taken cognizance by the Court vide Compromise Decree in TS No 222 of 2007. We have carefully gone through the MOU dated 4.8.2005, subsequent court proceedings including the Plaints, terms of settlement and compromise decree. In MOU it was mentioned as 16.51 Crs. So also mentioned in the Plaint in TS 222 of 2007. In the plaint of TS 222/2007 the transferee vide paragraph 14 alleged that the sale consideration was Rs. 16,51,00,000/-. In Para 9(a) they have stated that they paid from time to time a sum of Rs. 13,91,90,000/- and vide Para 17 stated that only a sum of Rs.2,59,10,000/- was due. This factual position was not disputed by the parties in the terms of settlement and vide Para 5, they agreed that let there be a decree directing the transferee to pay a sum of Rs.2,59,10,000/- towards payment of the balance purchase consideration of the shares agreed to be transferred to the transferee under the MOU dated 4.8.2005. However, vide Para 11 of the Terms settlement, parties agreed for a decree against the transferor for a sum of Rs.2,50,00,000/- payable to the transferee towards cost of litigation, compensation, etc. Vide Para 12(a) of the said settlement, the parties agreed to adjust the amounts and the transferee will give Rs.9,10,000/- by way of cheque.

4.7.6. Nowhere in the papers could we find that the parties intended to reduce the sale consideration from Rs. 16.51 Cr. So also we did not find anywhere either from the Terms of Settlement or Compromise petition or the terms of the decree of compromise. Whatever that was mentioned in MOU dated 4.8.2005 remained throughout as sale consideration for the shares. Mere adjustment between the parties for adjustment of the mutual payments or set off the smaller amount payable by the transferor against the larger amount payable by the transferee does ipso facto cannot be said that the amount after such adjustment alone is the sale consideration. At best the amount of Rs. 2.5 Cr paid by the transferor to the

16 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla transferee towards costs, compensation etc could be an expenditure associated with the sale of the shares and accordingly could be construed as expenses on transfer while computing capital gains.

4.7.7. For the foregoing discussion, we hold that when the parties adopt a mechanism in the agreement for sale itself that if a specified condition is not fulfilled, the amounts paid shall be refunded and the agreement shall be abandoned, and it is only on the accomplishment of such condition any further steps would be taken, in such situation the controlling expression of "transfer" is non conclusive as to the true nature of the transaction till the condition is fulfilled and then the date of fulfillment of such condition shall be taken as date of contract for sale within the meaning of Circular No. 704 dated 28.04.1995 with reference to section 2(42A) and the amounts paid by the transferee till the fulfillment of such condition would remain as advance only, but not as part for sale consideration for the purpose of reckoning the capital gains. Further, in the absence of any express contract between the parties, any liability of the parties in the form of costs etc due to some intervening circumstances, would not in any manner detract from the chargeability of total sale consideration. At best those costs would be expenses relating to the sale or purchase as the case may be, which in any case, would be eligible for deduction while computing capital gains.

4.7.8. As regards the handing over of the share scripts to the Solicitor Mr. B. K. Jain, it is seen that it was not accompanied with the transfer deeds and indeed the transfer deeds have been executed only in May 2009 when the decree has been passed and the effect of which has been observed in the Annual Returns for 2009 wherein such transfer is duly reflected. A careful reading of the MOU along with compromise decree and even Circular No. 704 dt. 7.8.1995 it reveals the fact that the assessee has transferred the shares of “Graphitech India Ltd.” in favour of Sri Vivek Kathotia only in Financial Year 2009-10 relevant to Asst Year 2010-11. We find in the aforesaid factual matrix, it is clear that the share scripts were transferred in Asst Year 2010-11 and hence accrual of gain, if any, has happened only in Asst Year 2010-11 as per Sec 45(1) of the Act and such instrument of transfer having been executed in May 2009, “transfer” is effected only in May 2009. Hence, the entire gain arising on sale of transfer (including the cash component) of Rs. 6,00,90,000/- in Asst Year

17 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 2006-07 and Rs. 1,40,00,000/- in Asst Year 2007-08 has to be assessed in Asst Year 2010- 11 as part of the sale consideration and as “Capital Gain” only. The ld DR argued that the assessee had voluntarily disclosed a sum of Rs. 7,40,90,000/- as his income from other sources in the return filed for Asst Year 2010-11. But during the course of assessment proceedings, he requested to treat the same as part of share sale consideration and be part of computation of income under capital gains. In this regard, we find that it is not in dispute that the assessee had received the cash component of the subject mentioned transaction amounting to Rs. 7,40,90,000/- as per the MOU dated 4.8.2005 in Asst Years 2006-07 and 2007-08, which was not disclosed by him in his regular books of accounts. On the face of it, it might look undisclosed receipt. But in the search proceedings, it surfaced that the assessee was in receipt of the cash component of Rs. 740.90 lacs only towards the share sale consideration , the said receipt cannot be taxed / treated separately under any other head other than ‘capital gains’. We hold that the character of the receipt does not change pursuant to the search. Infact the search proceedings had rather sanctified the nature and character of such receipt to be part of share sale consideration. Accordingly, we hold that since it is a part of the transaction pertaining to sale of the shares, the cash component of Rs. 7,40,90,000/- cannot be treated separately and has to be treated as capital gain arising on sale of such shares and as such the contention of the revenue to treat the same as otherwise cannot be upheld in any manner even in Asst Year 2010-11. In any case, the said receipt cannot be taxed in Asst Years 2006-07 and 2007-08 separately.

4.7.9. As discussed earlier, transfer having taken place only in Financial Year 2009-10 relevant to Asst Year 2010-11, when executed transfer deeds along with share certificates were handed over Mr. Kathotia and when transfer pursuant to order of Court was completed, the entire capital gain is taxable in Asst Year 2010-11 only and cash components in this regard received earlier cannot be taxed in the Asst Years 2006-07 and 2007-08.

4.7.10. As a result, we hold as follows : Asst year Appeal No. Ground Nos. Result 2006-07 34/K/12 1 to 5 Dismissed 2007-08 35/K/12 1 to 5 Dismissed 2010-11 857/K/14 1 to 4 Dismissed

Hence, these grounds are disposed accordingly.

18 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla

C.O. 147/Kol/2012 Ground No.5 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming tbe action of the AO in treating Rs.74,27,109/- & Rs.3,03,65,126/- as undisclosed receipts of tbe appellant on the basis of alleged document SSG/1 and such action is without appreciating the fact that such amounts as mentioned and as alleged to have been found from the seized document were only estimate of the expenses and the actual expense were already recorded in the books of account. The Ld. ClT(A) failed to appreciate the fact that there was no material to justify the AO's action except mere assumption and without any cogent finding either during the assessment proceedings or appellate proceedings and no material having been brought on record by the Revenue to justify the action in treating the sum as undisclosed receipt, the action of Ld. CIT(A) is wholly unjustified. Hence the action of the Ld, CIT(A) in confirming the action of the AO in such regard is liable to be quashed/ cancelled and set aside. This ground is without prejudice to the fact that the appellant has shown the same as application of the income offered by it and hence it may kindly be considered accordingly. Addl. Ground No.1 - For that in view of the facts and circumstances the Ld. CIT(A) erred in treating Rs. 3,03,65,126/- as unexplained expenditure and such action of the Ld. CIT(A) is without appreciating the facts that the amount mentioned and alleged to have been found from the appellant were only estimate of the expenses and the actual expenses having been already recorded in the books of accounts, the Ld. CIT(A) failed to appreciate the facts that the alleged amount cannot be unexplained expenditure and in view of the facts and in the circumstances in may kindly be held accordingly. Addl. Ground No.2 - For that in view of the facts and in the circumstances and without prejudice to the legality of addition so made/ confirmed by the Ld. CIT(A)

19 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla treating the same as alleged unexplained expenditure. A.O. and the Ld. CIT(A) erred in appreciating the facts that the amount of Rs. 28,12,000/- pertaining to the seized document No. SSG/1 at page 9 has been added by the AO twice and as such, such amount having been considered twice by AO, the appellant's income has been increased by such amount wrongly and in view of the facts and in the circumstances it may kindly be held accordingly. Addl. Ground No.3 -For that in view of the facts and in the circumstances and without prejudice to the Ground No. 1 above, treating Rs. 3,03,65,126/- as unexplained expenditure, the AO and Ld. CIT(A) failed to appreciate the facts that the amount considered on the basis of SSG/1 at pages 29-30 has been wrongly considered at Rs. 1,16,00,000/- without considering the figures appearing in the books of account and on consideration of such amount as appearing in the books of account, the addition in respect of the such seized documents will reduce to 'Zero' and in view of the facts and in the circumstances it may kindly be held accordingly.

The additional ground raised in assessee’s appeal in ITA No.1419/K/12 have not been repeated since the assessee has submitted that such grounds are same as that in additional ground in Cross-objection and they have been raised only as a precaution and are hereby admitted for adjudication.

A.Y 2006-07: IT(SS) -34/Kol/2012 Ground No. 7 - Ld. CIT(A) is erred in directing the A.O. to consider the unexplained expenditure of Rs. 4,30,272/- added on the basis of seized document SSG/1 against the undisclosed cash receipt shown in cash flow statement and that the of Ld. CIT(A) is against the provision of section 69C of the Income Tax Act.

C.O No.145/Kol/2012 Ground No. 5 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming the action of the AO in treating Rs. 4,30,272/- as undisclosed expenditure of the appellant on the basis of the alleged document SSG - 1 and such action of the Ld.. CIT(A) in confirming the action of the AO is without appreciating the facts and in view of the facts and in the circumstances the addition so made is liable to be quashed / cancelled/ set aside.

5.1. The brief facts of this issue is that the ld AO has made addition of Rs. 74,27,109/- and Rs. 3,03,65,126/- in A.Y 2008-09 as undisclosed receipts and that of Rs. 4,30,272/- in A.Y 2006-07 as undisclosed expenditure on the basis of the seized document marked SSG/1. The ld AO has noted in the assessment order that the material seized at SSG/1 contains detail of

20 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla expenses incurred on purchase of land by different companies of the assessee group. These expenses mainly comprise value of the land, stamp duty and registration cost, miscellaneous expenses and land development cost. The ld AO examined the seized material with reference to the relevant books of account. It was found that except for the land development cost, the remaining expenses were recorded in the regular books of account. However, the land development cost as contained in the seized material was only partly recorded in the books of account. It was argued before the ld AO that the land development cost @ Rs. 5,000/- per cottah as mentioned in the seized material was only an estimate whereas the actual expenses are recorded in the books of account. The ld AO did not accept the explanation. He was of the opinion that when all other expenses were correctly recorded in the seized material, the land development expenses as recorded therein cannot be treated as estimate. The ld AO noted that the seized material contained land development expenses of Rs. 5,07,50,375/- out of which sum of Rs. 2,03,85,249/- only was recorded in the books of account. The ld AO treated the difference of Rs. 3,03,65,126/- as undisclosed receipt of the assessee which was assessable as his undisclosed income in A.Y 2008-09. The ld AO also found that the seized material shows receipt of cut money of Rs. 46,34,960/- and Rs. 27,92,230/- which was assessable in the case of the assessee as his undisclosed income in Asst Year 2008-09. The ld AO has mentioned in the assessment order that the assessee had already admitted the cut money of Rs.45,54,460/- and has also included the same in his statement of cash flow. The ld AO further noted that page 54 of SSG/1 shows undisclosed expenditure of Rs. 1,25,000/- on account of legal expenses and that of Rs. 3,05,272/- on account of land development cost which was assessable as undisclosed expenditure in Asst Year 2006-07.

5.2. On a perusal of the ld AO’s order it is observed as under :-

“Page 1 to 30 of the seized documents marked SSG/1 reflect land development expenses of Rs. 5,07,50,375/- and cut money of Rs. 45,55,460/-.

SSG/1 Page Name Amount (in No. Rs) 1 & 2 Saltee Citizone (Continuous Serials 1-66) 37,18,000/- 3 Saltee Buildcon (Land Development accounted for) 3,45,455/-

21 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 4 2,03,030/- 5 Puskar Niwas (Land development cost not shown other 10,89,578/- expenses shown as land development cost) 6 Saltee Valley 13,75,590/- 7 Syndicate Tanker 80,606/- 8 Mukti Shelter 1,90,818/- 9 Cozy Enclave (Started from page 10 and ends in page 9) 68,25,394/- 10 Anand Nirman (Started from page 11 (Sl . 1-21) ends page 10- 15,39,878/- 22-32) 12 Puskar Infrastructure 42,22,350/- 14 Utkarsh Horticulture 54,09,600/- 15 Darsh Enclave (P) Ltd. 9,30,000/- 16 Fast Flow 80,37,713/- 17 Debnath Consultant 18,69,151/- 18 Saltee Parks 16,00,000/- 22& Kerf Construction (P) Ltd. 35,69,939/- 23 23 & Saltee Village (Details starts from page 23 and end at 24) 16,54,485/- 24 25 Ankit Plantation 22,85,000/- 26 Dewan Export 26,59,970/- 29 & Marine Park (Statement started page 30 and B/F 26,70,967 and 31,43,788/- 30 end page 29) 5,07,50,375/-

5.2.1. The cut money receipt as per page 12 of the SSG/1 had already been admitted by the assessee as undisclosed receipt.

5.2.2. Further there was also a receipt of cut money of Rs. 27,92,230/- from M/s Puskar Niwas as per page 5 of SSG/1. Therefore, total cut money receipt by the assessee was Rs. 74,27,109/- [Rs.46,34,960/- (page-12) + Rs,27,92,230/- (page 5) of SSG/1].

Page Name As per As per Difference No. seized books records 1 & Saltee Citizone (Continuous Serials 1- 3,718,000 845,672 2,872,328 2 66) 3 Saltee Buildcon (Land Development 345,455 302,987 42,468 accounted for) 4 203,030 - 203,030 5 Puskar Niwas (Land development cost 1,089,578 2,092,205 (1,002,627) not shown other expenses shown as land development cost) 6 Saltee Valley 1,375,590 280,197 1,095,393

22 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 7 Syndicate Tanker 80,606 130,328 (49,722) 8 Mukti Shelter 190,818 101,149 89,669 9 Cozy Enclave (Started from page 10 6,825,394 7,501,331 (672,937) and ends in page 9) 10 Anand Nirman (Started from page 11 1,539,878 456,202 1,083,676 (Sl . 1-21) ends page 10-22-32) 12 Puskar Infrastructure 4,222,350 2,990,048 1,232,302 14 Utkarsh Horticulture 5,409,600 613,258 4,796,342 15 Darsh Enclave (P) Ltd. 930,000 944,300 (14,300) 16 Fast Flow 8,037,713 - 8,037,713 17 Debnath Consultant 1,869,151 363,973 1,505,178 18 Saltee Parks 1,600,000 309,726 1,290,274 22& Kerf Construction (P) Ltd. 3,569,939 377,459 3,192,480 23 23 Saltee Village (Details starts from page 1,664,485 287,702 1,366,783 & 23 and end at 24) 24 25 Ankit Plantation 2,282,030 1,710,462 574,568 26 Dewan Export 2,659,970 1,078,250 1,581,720 29 Marine Park (Statement started page 30 3,143,788 - 3,143,788 & and B/F 26,70,967 and end page 29) 30 50,750,375 20,385,249 30,365,126

The difference is treated as the undisclosed income of the assessee.

Therefore, the sum of Rs. 3,03,65,126/- on account of ‘Land Development Cost’ receipt and Rs. 74,27,109/- on account of ‘Cut Money’ receipt totaling to Rs. 3,77,92,236/- is added as assessee’s undisclosed income for Asst Year 2008-09. It was further observed that Page 54 of SSG/1 shows some undisclosed expenditure of Rs. 1,25,000/- and Rs. 3,05,272/- on account of legal expenses and land development costs, which have been accepted as undisclosed. [Undisclosed income for Asst Year 2008-09 - Rs. 3,77,92,235/-] [Undisclosed expenditure for Asst Year 2006-07 - Rs. 4,30,272/-]

5.3. The ld CITA in his order had observed the following:-

“I have perused the assessment order wherein the AO has discussed the material fact in detail. I have also perused the remand report of the AO wherein he has merely reiterated the contentions as made in the assessment order. Though a copy of the written submission along with enclosures was forwarded to him, the AO has not offered any comments separately. I have considered the relevant material as

23 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla available on record. I have also considered the submission made on behalf of the appellant and the rejoinder to the remand report. The AO has mentioned in the assessment order that the appellant has admitted the receipt of cut money of Rs. 45,54,460/- vide his letter dt. 11.11.2010 along with which the computation of undisclosed income as per Annexure –U, the cash flow statement as per Annexure – X, and the explanation of seized documents marked SSG/1 as per Annexure – B was also furnished. The AO has also mentioned that the appellant has explained at Annexure – B that pages 1 to 39 of SSG/1 were statement of land purchased by the group companies which was duly shown in their regular books of account. The AO examined the material before him and then concluded that the expenses recorded in the books of account are much less than those mentioned in the seized documents. However the AO found that the land value, stamp duty and registration fees and miscellaneous expenses was duly recorded in the books of account. The AO rejected the submission of the appellant that the land development cost as mentioned in the seized document was merely estimate on the ground that all other expenses were tallying with the regular books of account of the group companies. The AO held that the land development cost was not fully recorded in the books of account. The AO made a comparative study on the basis of the seized document vis-a-vis the regular books of account of the group companies, and then, made addition of Rs. 3,03,65,126/- being the difference in the amounts as shown in the seized documents and those as recorded in the regular books of account of the group companies. The AO further held that the cut money also was not recorded in the books of account. The AO noted that though the appellant has admitted cut money of Rs. 45,54,460/- only, there was evidence of receipt of cut money of Rs. 46,34,960/- on page 12 and that of Rs. 27,92,230/- on page 5 of SSG/1. The AO also observed that the land development cost and the cut money has actually been received by the appellant as charges for the services rendered by him. In view of the above, the AO made total addition of Rs. 3,77,92,235/- (Rs. 3,03,65,126/- plus Rs. 74,27,109/-) on account of undisclosed receipts in A.Y 2008-09.

The Ld. A.R has argued that the seized documents were recovered from the custody and possession of the company Saltee Construction Co. Pvt. Ltd. and also the AO has brought no material or evidence on record to show that such seized documents were in the handwriting of the appellant or his accountant. Under the circumstances no addition could be made in the case of the appellant. The Ld. A.R contended that the land development cost as contained in the seized documents merely represented estimates, and, that the actual expenses incurred which was much lesser, was recorded in the books of account. It was also argued that the land development cost was incurred by the group companies who were the actual owners of the land and such expenditure was also accounted for by them in their regular books of account. Consequently, the excess expenditure, if any, on account of land development cost cannot be treated as undisclosed expenditure of the appellant, and so, no addition can be made in his case. The AO was conceptually wrong in holding that the excess expenditure on land development cost as recorded in the seized document was the undisclosed receipt of the appellant. By no stretch of imagination, the excess expenditure of Rs. 3,03,65,126/- on account of land development expenses can be treated as undisclosed receipt of the appellant. It was argued that the difference of Rs. 3,03,65,126/- can at best be treated as undisclosed expenditure of the group

24 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla companies. I find merit in this argument that the difference of Rs. 3,03,65,126/- which represents excess expenditure on account of land development cost can only be treated as undisclosed expenditure. The AO is conceptually incorrect in holding that such expenditure was the undisclosed receipt of the appellant. It was argued before me that such expenditure can be considered only in the hands of the respective companies, However, as the appellant is in control of the affairs of the group companies and as the appellant has also admitted the receipt of cut money on behalf of the companies, it is to be held that the excess expenditure was made by him on behalf of such companies and consequently the undisclosed expenditure was assessable in his hands.

As regards the receipt of cut money, the appellant has mainly contended that the addition has been made only on the basis of the confessional statement without bringing any corroborative material on record to show that such money was actually received by the appellant. I do not find merit in this argument. The admission made by the appellant is certainly corroborated by the documents seized in course of the search. The appellant has also included the cut money of Rs. 45,54,460/- in his statement as cash flow. The appellant is therefore not fair or justified in disputing the receipt of cut money. Secondly, once the appellant has himself admitted the receipt of cut money of Rs. 45,54,460/-, he cannot argue that similar cut money of Rs. 27,92,230/- recorded in the same seized documents SSG/1 does not belong to him. Hence the entire cut money of Rs.74,27,109/- should be treated as cut money received by the appellant; and, is assessable in his case as undisclosed income. Hence, this action of the AO in treating the cut money of Rs. 74,27,109/- should be treated as undisclosed receipt of the appellant is confirmed. However once the cut money of Rs. 27,92,230/- is assessed as undisclosed receipt, then consequential effect has to be given in as much as such receipt has to be considered as being available for use towards any unexplained expenditure made by the appellant.

I have considered the submission made on behalf of the appellant that the land development cost, which is mentioned on an average basis @ Rs 5000/- per cottah in the seized document, cannot be the same for all kinds of land and as such it should be considered as estimate only. However, the appellant on his part has failed to adduce any separate evidence in this regard. In this factual background, I am of the considered view that the difference of Rs. 3,03,65,126/- has to be treated unexplained expenditure incurred by the appellant on behalf of the group companies, and consequently the sum of Rs.3,03,65,126/- is confirmed as unexplained expenditure. Similarly, the addition of Rs. 4,30,272/- in A.Y 2006-07 which was made on account of undisclosed expenses as contained on page 54 of the seized document SSG/1 is also confirmed for the same reason. However the AO is directed to consider the receipt of the cut money of Rs. 74,27,109/- along with the cash received from the transaction with the Fort Group as part of the cash flow; and then consider the net of the unexplained expenditure of Rs. 3,03,65,126/- and Rs. 4,30,272/- if any, for the purposes of addition.

5.4. The ld AR advanced the following arguments :-

25 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla (i) At the outset the ld AR contended that the assessee had raised 3 Additional Grounds in the C.O raised by it and 4 Additional Grounds in assessee’s own appeal which also may kindly be considered. The ld AR further submitted that additional ground in C.O & assessee’s own appeal are similar and hence may be considered accordingly.

(ii) The assessee submitted that the sum of Rs. 3,03,65,126/- (Page 54 of SSG/1) , Rs. 74,27,109/- (Page 12 & Page 5 of SSG/1) aggregating to Rs.3,77,92,935/- has been treated as undisclosed income of the assessee by the ld AO. The ld AR stated that Rs. 74,27,109/- of alleged cut money in Asst Year 2008-09 and Rs. 4,30,272/- in Asst Year 2006-07 has been added only on basis of confessional statement and no other evidence was brought on record by ld AO. However, it was also submitted that the assessee had considered same as undisclosed income in assessment proceedings as part of cash flow being cash available for unaccounted expenditure as well.

(iii) As regards land development cost (LDC) of Rs.3,03,65,126/- it was stated that the LDC has been incurred by various companies as mentioned in such document and hence it has to be considered in their hands only and which have not been examined at any stage.

The assessee contended that such LDC represented estimated expenditure towards development of land at Rs. 5,000/- per cottah approximately in most cases and for which attention was drawn to pages 337, 353, 370, 403 & 483 and similar other pages at paper book No. 4. The assessee contended that at some places the estimate is little higher as well such as pages 470, 505, 528 & 555 of Paper Book No.4. However, the same is mere estimate of expenditure and cannot be treated as actual expenditure in any manner.

(iv) The ld AR also contended that such sum of Rs. 3,03,65,126/- merely represents expenditure and cannot be treated as income since the assessee had done land filling for such company which is corroborated by the expenses booked by respective companies to their books of account.

(v) The assessee then referred to Additional Ground No. 2 of C.O and Additional Ground No.2 of assessee’s appeal being addition of Rs. 1,16,00,000/-. The ld AR drew our attention

26 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla to the fact that such transaction pertains to Marine Park Ltd. details of which are at page 611 of the Paper Book (Volume 4). The ld AR then submitted that the land development expenses as per books has been considered at Nil by ld AO, whereas the same is Rs. 1,16,56,247/-. As such there could not be any addition on such account.

5.4.1. The ld AR then referred to Additional Ground No.3 of C.O and Additional Ground No.3 of assessee’s appeal being addition of Rs. 28,12,000/-. The ld AR drew our attention to the fact that such transaction pertains to Cozy Enclave (P) Ltd. details of which are at page 441 of Paper Book (Volume 4). Page 9 of SSG/1 reflects that the ld AO had added the brought forward amount of land development expenses Rs. 28,12,303/- twice and hence the same amounted to double addition.

5.4.2. As regards the ld CITA’s action in allowing the set off of the expenses so incurred by assessee and / or its associates, it was submitted by ld AR that there is no dispute in the fact that assessee had received cash on account of “transaction with Fort” to the tune of Rs. 7,40,90,000/- and also other receipts which was available with assessee and the expenses were out of such sums only and hence ld CITA was fully justified in allowing such set off. The ld AR also submitted that on a perusal of assessment order itself, it could be observed that ld AO himself had allowed such set off and now the revenue is disputing such action which amounts to disputing its own earlier action and which is not permissible as per law.

5.5. In response to this, the ld DR contended that the said amount of Rs. 3,03,65,126/- has to be treated as undisclosed income and relied heavily on the order of the ld AO. The ld DR further submitted that the document has been accepted by the assessee in the course of assessment proceedings itself and the assessee had also accepted the admission of cut money as undisclosed receipt. The ld DR further contended that the land development expenses cannot be construed as mere estimate of expenses in any manner and it is the actual receipt of such sum by the assessee and hence the same has to be treated as undisclosed receipt only.

5.6. The ld AR in his rejoinder re-iterated that such land development expenses were merely estimates of expenditure and the expenditure incurred subsequently was much lesser

27 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla and in number of cases, the expenses had been incurred till the date of search and hence particularly like page 16 of SSG-1 and hence it cannot be construed as undisclosed income in any manner.

5.7. We have heard the rival submissions and perused the materials available on record including the relevant pages of the paper book and the seized documents. The issue involved the aforesaid matter can be summarized vis-à-vis the seized document and the relevant pages are as follows : SSG/1 Page 54 Rs. 4,30,272/- Page 12 Rs.46,34,960/- Page 5 Rs.27,92,330/- Rs.78,57,562/- (Undisclosed receipt) Pages 1 – 30 Rs.3,03,65,126/- (Undisclosed receipt /expenses)

As regards the sum of Rs. 27,92,330/- and Rs. 4,30,272/-, the same has been accepted by the assessee at the assessment stage and as such we do not find much merit in the matter and since the nature of Rs. 46,34,960/- (comprised in Rs. 46,34,960/- + 27,92,330/- = Rs.74,27,290/-) is same i.e. cut money and since assessee has already accepted Rs.27,92,330/, Rs.46,34,960/- is also treated as undisclosed receipt only and hence the same treated accordingly as undisclosed receipt only.

5.7.1. As regards the sum of Rs. 3,03,65,126/- pertaining to pages 1 – 30 of SSG-1, we find assessee’s contention is that the same is an estimate of expenses. On a perusal of the document , we find that there is a much variation of such sums as reflected in seized documents and such sum is not merely Rs. 5,000/- per Cottah. The assessee’s contention in such seized documents pages 1-30 of SSG/1 cannot be accepted. However, the ld AR has successfully pointed out that in some documents such amount has been mentioned whereas nothing has mentioned in the books of account and hence it has to be necessarily followed that such sums are expenses incurred by the assessee and the actual expenses have been booked in the respective companies. Moreover, we find that the ld AO has chosen to treat the said sums as undisclosed income merely on assumption without any evidence being in his possession nor he examined such companies. Hence the assumption has to be followed

28 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla that since some of such companies are assessee’s associate concern as observed by ld CITA and which has also not been disputed by revenue in its appeal at any stage. Hence the necessary corollary of these facts is that these sums referred to as “Land Development Cost” is nothing but expenditure incurred and hence has to be treated as “Undisclosed expenditure” only. In respect of the treatment of the said sum as undisclosed expenses, we find substantial merit in the fact and we uphold the order of ld CITA.

5.7.2. As regards the revenue’s ground in treating Rs. 78,57,562/- (Rs.4,30,272/- + Rs. 46,34,960/- + Rs.27,92,330/-) as available for set off in cash flow and also allowing set off of Rs. 3,03,65,126/- out of available cash , we find merit in the fact that that the ld AO himself had allowed such set off in the assessment order so revenue cannot be allowed to change its stand now. Even otherwise, the revenue is not in possession of any evidence nor it has furnished any such fact on record that the sums expended were other than out of sum earned / received as cash by the assessee. Hence, we concur with the order of ld CITA in allowing sums as part of cash flow and as such the revenue’s ground fails on such account.

5.7.3. As regards the assessee’s contention in Additional Grounds No. 1, 2 & 3 in C.O 147/K/12 for A.Y 2008-09 and Additional Grounds No.1, 2, 3 & 4 in assessee’s appeal in ITA No.1419/K/12 we have gone through the material placed and we find merit in the matter. However, such issue pertaining to pages 29-30 (SSG/1) related to addition of Rs.1,16,00,000/- and page 9 (SSG/1) related to addition of Rs. 28,12,000/- is being set aside to ld AO for verification in the interest of justice and fairplay and direct the ld AO to decide these claims of the assessee. Pursuant to the verification by the ld AO, if the claims of the assessee are found to be true, then the relief sought by the assessee in that regard is to be granted. We direct the ld AO accordingly.

5.7.4. As a result, we summarize as follows :

Asst year Appeal No. Ground Result Nos. 2006-07 34/K/12 7 Dismissed 145/K/12 5 Dismissed 2008-09 36/K/12 2 Dismissed 3 Dismissed 4 Dismissed

29 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 147/K/12 5 Dismissed Addl. 1 Allowed Ground for statistical purposes Addl. 2 Allowed Ground for statistical purposes Addl. 3 Allowed Ground for statistical purposes

A.Y 2008-09 C.O. 147/Kol/2012 Ground No.6 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming the action of the AO in treating Rs. 37,25,000/- as undisclosed expenditure of the appellant on the basis of alleged document SSG-3 and in view of the facts and in the circumstances the action of Ld. CIT(A) in such regard is without appreciating the facts in the matter properly and in view of the facts and in the circumstances it may kindly be held accordingly.

A.Y 2009-10 C.O. 148/Kol/2012 Ground No.8 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming the action of the AO in treating Rs.10.00,000/- & Rs.84,66.224/- as undisclosed expenditure of the appellant on the basis of alleged document SSG-3 and in view of the facts and in the circumstances the action of Ld. CIT (A) in such regard is without appreciating the facts in the matter properly and in view of the facts and in the circumstances it may kindly be held accordingly.

30 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla A.Y 2007-08 IT(SS) 35/Kol/2012 Ground No. 7 - The Ld. CIT(A) is erred in directing the A.O. to consider the unexplained expenditure of Rs.18,00,000/- added on the basis of seized document SSG/3 against the undisclosed cash receipt shown in cash flow statement and that the of Ld. CIT(A) is against the provision of section 69C of the IT Act.

A.Y 2008-09 IT(SS) 36/Kol/2012 Ground No. 5 - The Ld. CIT(A) has erred in directing the A.O. to consider the unexplained expenditure of Rs. 37,25,000/- as per seized document SSG/3 against the unaccounted cash receipt of the assessee.

A.Y 2009-10 IT(SS) 37/Kol/2012 Ground No. 3 - The Ld. CIT(A) has further erred in directing the A.O. to consider the unexplained expenditure of Rs. 84,66,724/- as per seized document SSG/3 against the accounted cash receipt of Rs. 7,40,90,000/- in A.Y. 2006-07 & 2007-08.

6.1. The brief facts of this issue are that the ld AO found that the seized documents SSG/3 contain original money receipts by cash as well as by cheque. The ld AO has noted in the assessment order that the assessee admitted such undisclosed expenses of Rs. 18,00,000/-, Rs. 37,25,000/- & Rs.16,20,000/- in Asst Years 2007-08, 2008-09 & 2009-10 during the assessment proceedings and has also included them in the cash flow statement. The ld AO thus made addition of Rs. 18,00,000/-, Rs. 37,25,000/- & Rs.16,20,000/- in Asst Years 2007-08, 2008-09 & 2009-10 on account of undisclosed expenditure. The ld AO found that page 26 of the seized document SSG/3 contains undisclosed expenditure of Rs.17,63,664/- & Rs.36,53,564/- incurred in respect of projects at EN-62 and DN-18. The ld AO further found that page 27 contains detail of payments by cash as well as by cheque – the cash component being Rs. 6,51,288/-. Similarly, page 29 to 32 contain net loss of Rs. 7,77,878/- on book fair organized by the assessee. The ld AO concluded that undisclosed expenses of Rs. 7,77,878/- was embedded in such loss. The ld AO found, on the other hand, that page 3 of the seized document SSG/3 is account statement of Mackintosh Burn Limited reflecting unaccounted receipt of Rs. 10,00,000/- which was admitted by the assessee, and was also included in the cash flow statement. The ld AO thus made addition of Rs. 10,00,000/- in Asst Year 2009-10 as undisclosed receipt and additions of Rs. 18,00,000/-, Rs. 37,25,000/-

31 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla and Rs. 84,66,724/- (Rs. 16,20,000/- plus Rs. 17,63,994/- plus Rs. 36,53,564/- plus Rs. 6,51,288/- plus Rs.7,77,878/-) in Asst Years 2007-08, 2008-09 and 2009-10 as undisclosed expenditure on the basis of the seized documents marked SSG/3. The order of the ld AO is reproduced as under :- “This seized document consists of loose bunch of documents containing original money receipts in cash and cheque. During the assessment proceedings, the assessee has admitted Rs. 71,45,000/- as undisclosed expenditure vide Annexures – D and D-1 read with date wise undisclosed cash flow statement as per Annexure – X and statement of undisclosed expenditure as per Annexure – U, which are integral part of assessee’s letter dt. 11.11.2010. The year-wise undisclosed expenditure comes as follows : A.Y 2007-08 Rs. 18,00,000/- A.Y 2008-09 Rs. 37,25,000/- A.Y 2009-10 Rs. 16,20,000/-

The assessee further disclosed a sum of Rs. 10,00,000/- as received out of books for the F.Y 2008-09 relevant to A.Y 2009-10 as per page 3 of the above seized item which is an account statement of Mackintosh Burn Limited. Page 23 of SSG/ 3 contains the details of site wise figure of investments upto 15.2.2009 at different site/ projects of the assessee.”

6.2. The ld CITA in his order observed as follows : -

I have perused the assessment order and the remand report of the AO. I have also considered the submission of the appellant and the material on record. I find that the undisclosed receipt of Rs. 10,00,000/- as contained in page 3 of the seized document SSG/3 as well as undisclosed expenses of Rs. 18,00,000/-, Rs.37,25,000/- and Rs. 16,20,000/- has been included by the appellant in his statement as cash flow filed in course of assessment proceedings. There can be no dispute regarding the assessability of the undisclosed receipt of Rs. 10,00,000/- which has also been included by the appellant in his statement of cash flow. The addition of Rs. 10,00,000/- in A.Y 2009-10 on account of undisclosed receipt is confirmed. The undisclosed expenses of Rs. 18,00,000/-, Rs.37,25,000/- and Rs. 16,20,000/- are admitted by the appellant and also included in his statement of cash flow. As regards other expenses of Rs. 17,63,994/-, Rs. 36,53,564/-, Rs.6,51,288/- and Rs. 7,77,878/- the appellant has brought no material on record to rebut the findings of the AO that these are the undisclosed expenses of the appellant. I therefore uphold the order of the AO that all these expenses are to be treated as unexplained expenses of the appellant. However, I find merit in the argument that such undisclosed expenses are to be considered as being made out of undisclosed receipts as shown by the appellant and also accepted by the AO. The cash flow statement had been filed before the AO in respect of the unaccounted income which mainly comprised of cash received on different dates from the Fort Group in connection with sale of shares. The cash flow statement was forwarded to me by the AO along with his remand report. I find from its perusal that the appellant had sufficient cash balance available with him for expenses or investment. And, as the AO has brought no material on record to show

32 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla that such cash balance was otherwise invested or spent by the appellant, it has to be accepted that such cash balance was available with the appellant to cover for the unexplained expenses. Accordingly, the AO is directed to consider the net of the unexplained expenses of Rs. 18,00,000/-, Rs.37,25,000/-, Rs. 16,20,000/- , Rs. 17,63,994/-, Rs. 36,53,564/-, Rs.6,51,288/- and Rs. 7,77,878/- , if any, for the purposes of addition.

6.3. The ld AR argued the following:- (i) He contended that the money receipts are not in the name of the assessee, and so, no addition can be made in his case. It was also argued that the seized material was not found from the possession or custody of the assessee.

(ii) The ld AO had made the addition on the basis of the confessional statement of the assessee without bringing any cogent material on record.

(iii) From a perusal of the assessment order and page 18 of the assessment order, it will be seen that the ld AO had proposed the additions of Rs. 18,00,000/ -, Rs. 37,25,000/ -, Rs. 10,00,000/- & Rs. 84,66,724/- in Asst Years 2007-08, 2008-09, 2009-10 & 2009-10 respectively on the basis of the seized documents at SSG-3.

(iv) As will appear from the assessment order, the ld AO has made such additions on account of different money receipts issued by different persons in respect of payments made by them to different persons. The ld AO has treated such payments as unaccounted payments of the assessee.

(v) As will appear from the seized documents, none of such money receipts stand in the name of the assessee herein and as will further appear from the seized documents such money receipts have been issued by different persons including some Corporate Bodies and hence the assessee fails to understand as to under which provisions of the Act the same could be treated as unexplained expenditure in respect of unaccounted payments made by the assessee.

(vi) In this connection, it may not be out of place to mention that none of such persons who had issued such money receipts or received the amounts had ever been examined by the ld AO nor the ld AO had ever allowed any opportunity to the assessee to cross-examine such

33 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla persons nor the ld AO had ever examined of any books of account of such person.

(vii) None of such seized papers were seized from the custody and or possession of the assessee and all such seized documents were seized only from the possession of Saltee Construction Co. Pvt. Ltd. as will be apparent from Panchanama ‘B’ and hence the entire action of the ld AO in making such additions during different assessment years as under is wholly bad, illegal, unjustified and uncalled for and in view of the facts and circumstances accordingly prayed for deletion of the same.

6.4. In response to this, the ld DR argued that such documents having SSG/3 were found in the premises owned / controlled by assessee and / or its associated concern and hence it is necessarily to be presumed that such document pertains to assessee only. The ld DR vehemently argued that the said sum be treated as undisclosed expenditure only as per the finding given by ld AO in its order.

6.5. We have heard the rival submissions and perused the materials available on record including the paper books submitted in that regard. We have gone through the material placed i.e. SSG/3 particular pages as follows :

Pgs 3 & 8 Rs. 18,00,000/- A.Y 2007-08 Expenses Various pages Rs.37,25,000/- A.Y 2008-09 Expenses Pgs 32,33, 26 & 27 Rs.84,66,724/- A.Y 2009-10 Expenses Pg 33 Rs. 10,00,000/- A.Y 2009-10 Income

The assessee has merely re-iterated that the documents doesn’t belong to it. However, he failed to rebut the contention that the contents of such document does not relate to him and indeed we find that the ld AO had rightly added such sum as undisclosed receipt in respect of page 33 and undisclosed expenses in respect of pages 3,8,33 and other pages as mentioned . Hence, we find merit in the action of revenue and assessee’s grounds in that regard fails and are confirmed as undisclosed expenses / income accordingly.

As regards the revenue’s ground in treating Rs. 18,00,000/-, Rs.37,25,000/- & Rs.84,66,724/- out of available cash, we find merit in the fact that the ld AO himself has allowed such set off in the assessment order, so revenue cannot be allowed to change its

34 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla stand now. Even otherwise, the revenue is not in possession of any evidence nor it has furnished any such fact on record that the sums expended were other than out of sum earned / received as cash by the assessee. Hence, we concur with the order of ld CITA in allowing sums as part of cash flow and as such the revenue’s ground fails on such account.

As a result, we hold as follows : Asst year Appeal No. Ground Result Nos. 2007-08 146/K/12 5 Dismissed 35/K/12 7 Dismissed 2008-09 147/K/12 6 Dismissed 36/K/12 5 Dismissed 2009-10 148/K/12 8 Dismissed 37/K/12 3 Dismissed

Hence these grounds are disposed accordingly.

A.Y 2009-10 IT(SS) 37/Kol/2012 Ground No. 4 - The Ld. CIT(A) has erred in directing the A.O. to consider the unexplained expenditure of Rs. 6,00,000/- as per seized document SSG/6 against the accounted cash receipt in A.Y. 2006-07 & 2007-08.

7.1. The brief facts of this issue are that the ld AO found that page 13 of the seized documents SSG/6 contains detail of expenses totaling to Rs. 6,00,000/- on purchase of tickets and TV, and also cash payments of Rs. 3,55,080/-. It was contended before the ld AO that the seized document was not related to the assessee as it was not found from his

35 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla possession. The ld AO did not accept the explanation and made addition of Rs. 6,00,000/- as undisclosed expenses in A.Y 2009-10. The ld AR merely mentioned that such expenses be treated as part of cash flow out of available cash with the assessee.

7.2. The ld CITA in his order has observed and decided as follows : - The AO found that page 13 of the seized documents SSG/6 contains detail of expenses totaling to Rs. 6,00,000/- on purchase of tickets and TV, and also cash payments of Rs. 3,55,080/-. It was contended before the AO that the seized documents was not related to the appellant as it was not found from his possession. The AO did not accept the explanation and made addition of Rs. 6,00,000/- as undisclosed expenses in A.Y 2009-10. The Ld. A.R reiterated the submission made at the assessment stage. I do not find merit in the submission. The order of the AO in considering the expenses of Rs. 6,00,000/- is confirmed. However, the AO is directed to consider the same as part of the cash flow and then, consider the net of the unexplained expense of Rs. 6,00,000/- if any for the purposes of addition.

7.3. We have heard the rival submissions and perused the materials available on record including the paper book filed in that regard. We find no merit in assessee’s appeal. However, as regards revenue’s appeal, we hold that as regards the ld CITA’s action in allowing the set off of the expenses so incurred by assessee and / or its associates, it was submitted by the ld AR that there is no dispute in the fact that assessee had received cash on account of “transaction with Fort” to the tune of Rs. 7,40,90,000/- and also other receipts which was available with assessee and the expenses were out of such sums only and hence the ld CITA was fully justified in allowing such set off.

As regards the revenue’s ground in treating Rs. 6,00,000/- as available for set off in cash flow and also allowing set off of Rs. 3,55,080/- out of available cash, we find merit in the fact that that ld AO himself has allowed such set off in the assessment order so revenue cannot be allowed to change its stand now. Even otherwise, the revenue is not in possession of any evidence nor it has furnished any such fact on record that the sums expended were other than out of sum earned / received as cash by the assessee. Hence, we concur with the order of the ld CITA in allowing sums as part of cash flow and as such the revenue’s ground fails on such account.

As a result, we hold as follows :

36 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla Asst year Appeal No. Ground Result Nos. 2009-10 148/K/12 9 Dismissed 37/K/12 4 Dismissed

Hence these grounds are disposed accordingly.

A.Y 2006-07 C.O. 145/Kol/2012 Ground No. 6 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming the action of the AO in treating Rs.10,00,000/- as undisclosed expenditure on the basis of alleged seized document SSG-8 and such action of the Ld. CIT(A) in confirming the action of the AO is without appreciating the facts and in view of the facts and in the circumstances the addition so made is liable to be quashed I cancelled/ set aside.

A.Y 2008-09 C.O. 147/Kol/2012 Ground No. 7 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming the action of the AO in treating Rs.50,000/- as undisclosed expenditure on the basis of alleged seized document SSG-8 and in view of the facts and in the circumstances the action of Ld. CIT (A) in such regard is without appreciating the facts in the matter properly and in view of the facts and in the circumstances it may kindly be held accordingly.

A.Y 2009-10 C.O. 148/Kol/2012 Ground No.10 - For that in view of the facts and circumstances the Ld. CIT (A) erred in confirming the action of the AO in treating Rs.1,67,000/- as undisclosed expenditure on the basis of alleged seized document SSG-8 and in view of the facts and in the circumstances the action of Ld. CIT (A) in such regard is without appreciating the facts in the matter properly and in view of the facts and in the circumstances it may kindly be held accordingly. This ground is without prejudice to the fact that the appellant has shown the same as application of the income offered by it and hence it may kindly be considered accordingly. Additional Ground - For that in view of the facts and circumstances and without prejudice to the legality of addition of Rs. 26,64,00,000/- made on the basis of SSG-8 alleged to have been found from the appellant and without prejudice the Ld. CIT(A) erred in treating the said Companies as Group Companies of the appellant without

37 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla bringing the an evidence on record as to the shareholding of such company vested with the appellant and consequently the observation by the Ld. CIT(A) in such respect may kindly be deleted accordingly.

A.Y 2006-07 IT(SS) 34/Kol/2012 Ground No. 8 - The Ld. CIT(A) is erred in directing the A.O. to consider the unexplained expenditure of Rs. 10,00,000/- made on the basis of seized document SSG/8 against the cash receipt shown in cash flow statement during the hearing and that the order of Ld. CIT(A) is in contravention of the Section 69C of IT Act.

A.Y 2008-09 IT(SS) 36/Kol/2012 Ground No.6 - The Ld. CIT(A) erred in directing the A.O. to consider the unexplained expenditure of Rs. 50,000/- as per seized document SSG/8 against the unaccounted cash receipt of the assessee.

A.Y 2009-10 IT(SS) 36/Kol/2012 Ground No.5 - The Ld. CIT(A) has erred in deleting the addition of Rs. 27,03,31,000/- as undisclosed investment for purchase of Land of 2950.56 cottoh in Phase-1, Phase-2, Mohammadpur, Jamalpura. The Ld. CIT(A) has erred in not appreciating the pages 31,32,37 of the seized document-SSG/44 (correct SSG/8) Ground No.6 - The Ld. CIT(A) has erred in directing the A.O. to consider the unexplained expenditure of Rs. 1,67,000/- (as per seized document SS/8) against accounted cash receipt of the assessee.

8.1. The brief facts of this issue are that the ld AO found that the seized documents SSG/8 contain money receipts of Rs.10,00,000/-, Rs.50,000/- and Rs.1,67,000/- which was admitted by the assessee as his undisclosed expenses in Asst Years 2006-07, 2008-09 and 2009-10; and, has also been declared in his statement of cash flow. The ld AO thus made additions of Rs.10,00,000/-, Rs.50,000 and Rs.1,67,000/- as undisclosed expenses in Asst Years 2006-07, 2008~09 and 2009- 10. The ld AO has also referred to page 31 of SSG/8 which contains details under the head "ACCOUNT AS ON 15TH DECEMBER, 2008". The ld AO felt that the figures on page 31 are apparently written in lakhs. The figure of 3609.987 was mentioned against land area of 2950.56 cottah - the ld AO presumed that the figure 3609.987 actually meant Rs.36,09,98,700/- which was used for purchasing 2950.56 cottah of land. It was explained at the assessment stage that the figure of 3609.987 actually

38 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla represented Rs.36,09,987/- which was meant for land filling charges. The same was admitted as undisclosed expenses, and, was also included in the statement of cash flow. The ld AO noted that the explanation was not satisfactory. The ld AO referred to the seized documents SSG/44 to conclude that the cost of land was Rs. l Iakh per cottah. The ld AO then concluded that total investment of Rs.37,64,00.000/- was made towards the purchase of land. As sum of Rs.1l,00,00,000/- was recorded towards investment in land in the books of account of the group companies, the ld AO concluded that the assessee had made undisclosed investment or Rs.26,64,00,000/- towards purchase of land. The ld AO also considered the undisclosed expenditure on account of land-filling charges at Rs.37,64,000/-. The ld AO thus made total addition of Rs.27,03,31,000/- (Rs.26,64,00,000/- plus Rs.37,64,000/- plus Rs.1,67,000/-) in Asst Year 2009-10. The assessment order of the ld AO is reproduced as under -

Pages - 19, 21, 22 to 24 contains money receipt of Rs.50,000/-, Rs. 67,000/-, Rs.10,00,000/- , Rs. 20,11,000/- & Rs.1,00,000/- respectively, out of which the assessee admitted the following amounts as his undisclosed expenditure.

Payments F.Y A.Y Amount (Rs.) 2005-06 2006-07 10,00,000/- 2007-08 2008-09 50,000/- 2008-09 2009-10 1,67,000/-

It appears that page - 31 of SSG/8 contains the details of land purchased upto 15.12.2008 under the head written as “Account as on 15th December, 2008". The figures on this page is apparently written in lakh of Rupees. As per this page, a total land of 2950.56 Cottah was purchased for Rs. 36,09,98,700/- in phase -1, phase-2, Mohammad Pur, Jamalpara. [Also refer pages -31, 32, 37 of SSG-44]. From the lower part of the table appearing in page - 31 of SSG-8, it appears that a total amount of Rs. 37.64 crores had been received by the assessee out of which Rs. 70 lakhs had been claimed to have paid and Rs. 36.09 crores had been spent on land a/c. leaving balance of Rs.85 lakhs.

The assessee admitted undisclosed expenditure to the tune of Rs.36,09,987/- vide letter dt. 11.11.2008. The assessee was asked to substantiate the same. The assessee submitted vide letter dated 14.12.2010:- "In the last hearing, your goodself had asked us to substantiate the land filing charges vis-a-vis the regular books of accounts. In this connection, it is submitted that this page is an account given by the contractor for. .land filing expenses purported to have been .incurred by him as on 15.12.2008. The figure of Rs. 3609.987 represent 36,09,987/-. This is the amount purported to have been

39 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla incurred by him. Our clients had advanced Rs. 37,64,000/- as mentioned in the seized document itself which was more than the contractor's own bill. As such, Rs.70,000/- was returned by him as per his statement in the seized document mentioned above. "

In his clarification vide para-15 of letter dt. 14.12.2010, the assessee denied that figures at page - 31 of SSG/8 is Rs. 36,09,98,700/- and claimed that it is actually Rs. 36,94,000/- and claimed that it is actually Rs. 36,94,000/-.

The assessee's explanation is not acceptable and not supported with clinching evidence. It is found from the page 32 and 33 of SSG/44 that the assessee had purchased 66.34 cottah of land for Rs. 65,71,304 almost @ Rs. 1 lakh per cottah in Mohammedpur as on 15.3.2005. As per statement as on 15.12.2008 in the page 31 of SSG/8 it is found that 77.38 cottah of land purchased at Mohammedpur. If rate of Rs. 1 lakh per cottah is applied then investment for land purchase in Mohammedpur comes to nearly Rs. 77 lakhs which is almost matching with the rate 1.0405 for 77.38 cottah totaling to Rs. 80,51,100/- (written as 80.511 in: page 31 of (seized document SSG/8). Therefore, figure of 36.64 is actually Rs. 36.64 crores taking into note of the abbreviated figures of page 31 of SSG/8. The figure 1.2 in the column of rate actually denotes 1.20 lakhs for purchase of 2707.76 cottah for total value of Rs.32,49,31,400/- From the discussions in the earlier paras and the assessee’s admission vide letter dt. 11.11.2010 that assessee is in the habit of writing figures with zero suppressions. Therefore, Rs. 37,64,00,000/- is being considered as investment by the assessee in purchasing 2950.56 cottah of land in phase -1, phase – 2, Mohammedpur, Jamalpur. Since the above document has been found from the custody of the assesse during he search proceedings and on the basis of presumptive theory the entire undisclosed investment of Rs. 26,64,00,000/- ( out of this investment, Rs. 11 crores has been recorded as investment in the books of the different companies, incidentally it is to be mentioned that bank account details of these company were also found from the custody of the assessee ) is treated as assessee’s undisclosed investment.

[Undisclosed expenditure for A.Y 2006-07 Rs. 10,00,000/-] [Undisclosed expenditure for A.Y 2009-10 Rs. 50,000/-] [Undisclosed expenditure for A.Y 2007-08 Rs. 27,03,31,000/-]

8.2. The ld CITA observed as follows:-

I have perused the assessment order and the remand report of the AO. I have also considered the submissions of the appellant and the material on record. The AO has mentioned in the assessment order that the seized documents SSG/8 contain money receipts of Rs.10,00,000/-, Rs.50,000 and Rs.1,67,000/- which was admitted by the appellant as his undisclosed expenses in A.Ys 2006-07, 2008-09 and 2009-10; and has also been included in his statement of cash flow. The AO has thus made additions of Rs.10,00,000/-, Rs.50,000 and Rs.1,67,000/- as undisclosed expenses in A.Ys 2006-07, 2008-09 and 2009-10. I uphold the order of the AO that these expenses are

40 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla to be treated as part of the cash flow statement and the AO is directed to consider the net of expenses, if any, for the purposes of addition.

The AO has referred to page - 31 of SSG/8 which contains details under the head “Account as on 15th December, 2008”. I find merit in the argument that while interpreting the seized document, the AO has made too many presumptions and assumptions without any basis. For, the AO has simply presumed that the seized document contains details regarding purchase of land. The seized document has mentioned “Account as on 15th December, 2008”. It was nowhere mentioned that the account relates to purchase of land. But, then, the AO has presumed without any basis that it pertains to purchase of land. It is only on the basis of his own imagination that the AO has concluded that the document is related to purchase of land. But then the AO has presumed without any basis that it pertains to purchase of land. It is only on the basis of his own imagination that the AO has concluded that the document is related to purchase of land. It appears from the assessment order that the group companies have shown investment of Rs. 11 crores in land in their books of account. As the AO has allowed set off for the investment of Rs. 11 orores while computing the undisclosed investment, the AO seems to have presumed that the land was purchased by the group companies for which unaccounted payment was made by the appellant. But then, the detail of the sellers was available with the AO. The AO could have called for the land deed from the group companies and examined the sellers which he has failed to do. Even in course of the remand proceedings, the AO has failed to bring any positive material or evidence on record in support of his action. It was also argued that the entire investment in land was not made in the F.Y 2008-09. On the contrary, land was also purchased in the preceding years. And so, the “Account as on 15th December, 2008” cannot be related to purchase of land. Secondly, the AO has made another presumption without any basis that the figures are mentioned in lakhs. It was contended before me that the AO has wrongly mentioned in the assessment order that the appellant admitted vide submission dt. 11.11.2010 about his habit of suppressing zeros while writing figures. I find substance in the argument that the use of the words like “appears” or “apparently” only suggests that the AO is himself not sure of the facts and that he was relying more on presumptions and guess work that on material facts. I find from the assessment order that the appellant had explained before the AO that the seized document was related to land filling charges in respect of the land that was already owned by the group companies for which investment of Rs. 11 crores was also shown in the regular books of account. The seized document actually contained account given by the contractor for land filling expenses incurred by him as on 15.12.2008. The figure of 3609.987 actually represented Rs. 36,09,987/- the amount that was incurred by the contractor towards land filling charges. As advance of Rs. 37,64,000/- was already given to the contractor, he had returned Rs. 70,000/- and the balance of Rs. 84,013/- was pending. As the land filing expenses of Rs. 36,09,987/- was not recorded in the regular books of account of the group companies, the same was admitted as undisclosed income and was also included in the statement of cash flow. But, the explanation as made by the appellant was rejected by AO more on presumptions than on factual ground. The decision of the AO is not based on proper findings. While interpreting the seized document at page 31 of SSG/ 8, the AO has made too many presumptions which are totally arbitrary and

41 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla without any basis. The observations of the AO are not based on any material fact or documentary evidence. As assessment has to be made by the AO on the basis of the material and evidence available on record. But, in the present, case the order of the AO is based more on presumptions than on factual ground. The AO has only created hypothetical situation by his own imagination and then draws such conclusions which have no legs to stand the test of law. In view of the above, I am of the considered opinion that the conclusion drawn by the AO that the seized document SSG/8 represents undisclosed investment of Rs. 26.64 crores made by the appellant on behalf of the group companies is arbitrary and without any basis and that it was not supported by any material or evidence on record. The action of the AO cannot be upheld. The addition of Rs. 26,64,00,000/- is directed to be deleted.

The appellant has submitted that the seized document at page 31 of SSG/ 8 contains land filing expenses of Rs. 36,09,987/- in respect of land owned by the group companies. It was also admitted before the AO that these expenses were not recorded in the regular books of account of the group companies and so the same was included in the statement of cash flow. I therefore uphold the order of the AO that land filling expenses of Rs. 36,09,987/- had to be considered in the case of the appellant as undisclosed expenses. However, as these expenses are already included in the statement of cash flow, the AO is directed to consider the net of expenses, if any, for the purposes of addition.

8.3. The ld AR argued the following:-

(i) He contested that money receipts of Rs.10,00,000/-, Rs.50,000/- & Rs. 1,67,000/- has been declared in the statement of cash flow and so, these unexplained expenses are covered by the undisclosed income already declared to the department. The ld AO was therefore not justified in making separate additions on account of such undisclosed expenses.

(ii) The ld AR re-iterated that the seized document was not seized from the possession or custody of the appellant. Neither it contains the name of assessee or any associate firm / concern and indeed it didn’t contain any name.

(iii) Secondly, there was no material on record to suggest that the assessee has made purchase of land. The land belongs to the group companies and investment of Rs. 11 Crores is shown in their books of account.

(iv) The ld AR explained that page 31 of SSG/8 contains details under the head “ACCOUNT AS ON 15TH DECEMBER, 2008”. It was argued that the ld AO has made too many presumptions and assumptions about the seized document. The ld AO has presumed

42 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla that the seized document contains details regarding purchase of land which is nowhere mentioned on the seized document. The seized document has simply mentioned “ACCOUNT AS ON 15TH DECEMBER, 2008”. It has nowhere mentioned that the account relates to purchase of land.

(v) The ld AR contended that the observation made by the ld AO was factually incorrect. The use of words like “appears” or “apparently” clearly suggests that the ld AO was himself not sure about the facts. It was explained before the ld AO that the seized document was related to land filling charges for existing land that was owned by the group companies for which investment of Rs. 11 crores was also shown in their regular books of account. The seized document actually contained account given by the contractor for land filling expenses purported to have been incurred by him as on 15.12.2008. The figure of 3609.987 actually represented Rs. 36,09,987/-, the amount that was incurred by the contractor towards land filling charges. As advance of Rs. 37,64,000/- was already given to the contractor, he had returned Rs. 70,000/- and the balance of Rs. 84,013/- was pending. As the land filling expenses of Rs. 36,09,987/- was not recorded in the regular books of account of the group companies the same was admitted as undisclosed expenses and was also included in the statement of cash flow. The conclusion of the ld AO that the assessee has made undisclosed investment of Rs. 26.64 crores towards purchase of land is factually incorrect, and is not supported by any material or evidence on record. The conclusion is based purely on presumptions and assumptions. The ld AO has also added the land filling charges which amount to divergent stand of the ld AO and also amounts to double addition for the same document.

(vi) No part of the land area mentioned in page 31 of SSG-8 were ever purchased by assessee nor any such land or part of any such land belonged to assessee nor the ld AO has brought any cogent evidence on record to prove that such land was ever purchased by your assessee and in this connection this is to affirm and declare such land or part of any such land was never purchased by your assessee. To the best knowledge of assessee even neither Saltee Construction Co. Pvt. Ltd. or any group Company of assessee had ever purchased any such land or part of such land.

(vii) The ld AR then took us to the letter dt. 11.12.2010 filed before ld AO and which is

43 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla part of Annexure – I filed before us during the course of hearing. On page 2186 which was letter dt. 11.12.2010 it was explained before the ld AO that it is mere land filling charges.

(viii) The ld AR then took us to page 728 of paper book (Paper Book No.5) and also to pages 31, 32 and 33 of SSG/44 and submitted that the average rate of land is Rs. 44,281/ Cottah only. The ld AR then submitted that the ld AO has merely presumed the rate Rs 1,00,000 per Cottah on a particular area only and then superimposed this rate of 1,00,000 per Cottah on the entire area of 2950.56 Cottah (as on 15.3.2008) to justify his case of treating the figure “3609.987” as Rs.36,09,98,700/-. Hence the ld AO has merely picked up and chosen an amount of his choice without considering the document as a whole.

(ix) The ld AR also drew our attention to the fact that as per seized documents at page 32 – SSG/44 for the total land area of 2486.20 Cottah the value is Rs.11,00,93,463/- (as on 15.3.2008) whereas as per page 31 – SSG/8 the land area is 2950.56 Cottah the land value has been considered by ld AO at Rs. 36,09,98,700/- (as on 15.12.2008) and it is only mere presumption by the ld AO . This also clearly shows that said figure of “3609.987” is only land filling charges of Rs. 36,09,987/- and it has to be considered accordingly.

8.4. In response to this, the ld DR argued that such page 31 of SSG/8 represented the land purchased by assessee which was never reflected in books of account of the assessee , failed to prove such presumption of the ld AO. The ld DR also submitted that since assessee was engaged in real estate and such document read with pg 31 & 33 of SSG/44 proved that assessee has made such purchases in his group Companies, as such the same was undisclosed expenses of assessee.

8.5. We have heard the rival submissions and perused the materials available on record including the paper book of the assessee filed in that regard. We have gone through the material placed particularly the following seized documents along with other document was placed in paper book as well as order of the lower authorities :-. SSG/8 Pgs 21 & 22 Rs.10,00,000/- Pg 19 Rs. 50,000/- SSG/8 Pg 31 Rs.27,03,31,000/- SSG/44 Pgs 31, 32 & 37 (Rs.26,01,64,000/-+Rs.1,67,000/-)

44 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla As far as addition of Rs. 10,00,000/- & Rs.50,000/- in A.Ys 2006-07 and 2008-09 is concerned we do not find much merit in assessee’s contention and hence the assessee’s ground in such respect fails.

As regards the sum of Rs. 26,01,64,000/- , the assessee’s contention that there is no corroborative material to prove the allegation by the revenue , has substantial merit. On a perusal of pg. 8 of SSG/8 and pages 31,32 & 33 of SSG/44 it is very clear that the ld AO has done a pick and choose job and picked up an amount suitable to him and imposed it on entire paper without making any effort to understand the documents properly. The ld AO even failed to examine the fact as to land so mentioned in SSG/44 – pages 31, 32 & 33 actually belonged to assessee or not which he could have enquired with Registrar of Assurances since all such details of land were reflected in SSG/44 (being land of Mohammedpur etc.). The ld AO conveniently considered the same as purchase of land without proper examination of the matter. No corresponding verification was carried out in the hands of the seller of the land even though the details were very much avaialbel with the ld AO. The assessee had duly rebutted the presumption of the loose sheets as representing only land filling expenses and admittedly there is absolutely no evidence brought on record to conclude that the same represents amounts paid for purchase of land. We also agree with the argument of the ld AR that the ld AO had resorted to divergent stand on the same seized document by one treating it as purchase of land and the other treating it as land filling charges, thereby erroneously making addition on both the counts. It is pertinent from such documents that the value of 2486.20 Cottahs couldn’t have become Rs. 36,09,98,700/- for 2950.56 Cottahs from March 2008 to December 2008. As far as the contention of assessee to treat the (pg 31 of SG/8) as land filling charges, it appears to be credible since revenue’s action in that regard is merely on assumption. Even otherwise, the revenue failed to bring any evidence on record to prove its finding. Hence the ld AO’s action in such respect is rejected and do not find any justifiable reason to interfere with the finding of the ld CITA.

As regards the revenue’s ground in treating Rs. 10,00,000/-, Rs.50,000/-, Rs.1,67,000/- & Rs.36,09,987/- out of available cash , we find merit in the fact that that ld AO himself has allowed such set off in the assessment order, so revenue cannot be allowed to change its stand now. Even otherwise, the revenue is not in possession of any evidence nor it has

45 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla furnished any such fact on record that the sums expended were other than out of sum earned / received as cash by the assessee. Hence, we concur with the order of the ld CITA in allowing sums as part of cash flow and as such the revenue’s ground fails on such account.

As a result, we hold as follows:

Asst year Appeal No. Ground Result Nos. 2006-07 145/K/12 6 Dismissed 34/K/12 8 Dismissed 2008-09 147/K/12 7 Dismissed 36/K/12 6 Dismissed 2009-10 148/K/12 10 Dismissed 37/K/12 5 Dismissed 6 Dismissed Addl. Ground in 1 Dismissed C.O 148/K/12 Addl. Ground in 1 Dismissed 1419/ K/12

A.Y 2006-07 C.O 145/Kol/2012 Ground No. 7 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming the action of the AO in treating Rs.12,32,581/- as undisclosed investment of the appellant on the basis of SSG-9 to 39 and in view of the facts and in the circumstances the action of Lei. CIT (A) in such regard is without appreciating the facts in the matter properly and in view of the facts and in the circumstances it may kindly be held accordingly.

A.Y 2007-08 C.O 146/Kol/2012 Ground No. 6 - For that in view of the facts and circumstances the Ld. CIT (A) erred in confirming the action of the AO in treating Rs.6,94,299/- as undisclosed investment of the appellant on the basis of SSG-9 lo 39 and in view of the facts and in the circumstances the action of Ld. CIT (A) in such regard is without appreciating the facts in the matter properly and in view of the facts and in the circumstances it may kindly be held accordingly

A.Y 2008-09 C.O 147/Kol/2012 Ground No.8 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming the action of the AO in treating Rs.6,28,500/- as undisclosed investment of the appellant on the basis of SSG-9 to 39 and in view of the facts and in

46 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla the circumstances the action of Ld. CIT(A) in such .regard is without appreciating the facts in the matter properly and in view of the facts and in the circumstances it may kindly be held accordingly.

A.Y 2009-10 C.O 148/Kol/2012 Ground No.11 - For that in view of the facts and circumstances the Ld.CIT(A) erred in confirming the action of the AO in treating Rs.86,257/- as undisclosed investment of the appellant on the basis of SSG-9 to 39 and in view of the facts and in the circumstances the action of Ld. CIT (A) in such regard is without appreciating the facts in the matter properly and in view of the facts and in the circumstances it may kindly be held accordingly. This ground is without prejudice to the fact that the appellant has shown the same as application of the income offered by it and hence it may kindly be considered accordingly.

A.Y 2006-07 IT(SS) 34/Kol/2012 Ground No. 9- The Ld. CIT(A) is erred in directing the A.O. to consider the unexplained expenditure of Rs.3,60,500/- as unexplained expenditure as per seized document SSG-9-39 against the undisclosed cash receipt and that the order of the Ld. CIT(A) is against the provision of section 69C of the Act. Ground No. 10 - The Ld. CIT(A) is erred in directing the A.O. to consider the unexplained expenditure of Rs. 8,61,581/- added on the basis of seized document SSG/9-39 against the undisclosed cash receipt and that the order is against the 69C of the Act.

A.Y 2007-08 IT(SS) 35/Kol/2012 Ground No.8 - The Ld. CIT(A) is erred in directing the A.O. to consider the unexplained expenditure of Rs. 6,94,299/- made on the basis of seized document SSG/9-39 against the unaccounted cash receipt. This is against the Section 69C of Act.

A.Y 2008-09 IT(SS) 36/Kol/2012 Ground No.7 - The Ld. CIT(A) has erred in directing the A.O. to consider the unexplained expenditure of Rs. 6,28,500/- as per seized document SSG/9-39 against the unaccounted cash receipt of the assessee.

A.Y 2009-10 IT(SS) 37/Kol/2012 Ground No. 7 - The Ld. CIT(A) has erred in directing the A.O. to consider the unexplained expenditure as per seized document SSG/9-39 of Rs. 86,257/- against accounted cash receipt of the assessee.

47 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 9.1. The brief facts of this issue are that the ld AO found that the seized material marked SSG/9 to SSG/39 is small pocket diaries containing detail of payments made to different labour contractors in respect of projects undertaken by the group companies which was not recorded in their regular books of account. The ld AO has noted in the assessment order that the assessee has himself admitted undisclosed expenses of Rs.20,000/-, Rs.1,45,000/-, Rs.3,80,500/-, Rs.3,70,500/-, Rs.6,94,299/-, Rs.6,28,500/- and Rs. 86,257/- in Asst Years 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 respectively. The ld AO also found that undisclosed expenses of Rs.15,55,000/- and Rs.8,61,581/- related to Asst Years 2005-06 and 2006-07 was recorded in the seized documents SSG/10, 16 32 & 35. It was contended before the ld AO that these expenses relate to Saltee Infotex (P) Ltd. However the said company denied having any connection with such expenses. The ld AO concluded that the expenses relate to the assessee. The ld AO thus made additions of Rs.20,000/-, Rs.1,45,000/-, Rs.3,80,500/-, Rs.3,70,500/-, Rs.6,94,299/-, Rs.6,28,500/- and Rs. 86,257/- in Asst Years 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 as undisclosed expenditure on the basis of the seized documents marked SSG/9 to SSG/39. The order of the ld AO is reproduced as under :- SSG/9 to SSG/39 are small pocket diaries which contains the details of payment made to different labour contractor / contractors. The main contractors were T.T. Constructions, R.K. Nayer, Bablu Mondal, Hanuman Prasad, Jioan Ram, Dayanand Thakur, BSR Constructions Company, Sankar, S. R. Construction etc. the assessee vide Annexure – ‘J’ to letter dt. 11.11.2010 admitted undisclosed expenditure on account of labour payment amounting to Rs. 23,25,056/-.

However, in respect of labour payment on the project DN-9, the assessee claimed that the payments were made by “Saltee Infotex” and not related to us. However, during the assessment proceedings u/s 153A, M/s Saltee Infotex denied the payment of such expenses. Since these diaries are found from the possession of Sri Surya Prakash Bagla and his group companies, the same is presumed to be the expenses of Sri Surya Prakash Bagla and not disclosed in the regular basis. The year wise total of labour payment on DN-9 is as under : -

F.Y 2004-05(A.Y 2005-06) F.Y 2005-06 (A.Y 2006-07) SSG/10 (R. K. Narayan) Rs.30,000/- Rs.37,000/- SSG/16 (Bablu Mondal) Rs.90,000/- Rs.95,000/- SSG/32 ( S. R. Construction Rs.14,00,000/- Rs.6,79,581/- ) SSG/35 (Monoranjan Rs.35,000/- Rs.50,000/- Baraui) Total Rs.15,55,000/- Rs.8,61,581/-

48 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla

Therefore, total undisclosed expenses are worked out :

Undisclosed F.Y A.Y As per As per Total Application/ assessee’s discussion Expenses admission vide letter dt. 11.11.10 2002-03 2003-04 20,000/- - 20,000/- 2003-04 2004-05 1,45,000/- - 1,45,000/- 2004-05 2005-06 3,80,500/- 15,55,000/- 19,35,000/- 2005-06 2006-07 3,70,5010/- 8,61,581/- 12,32,081/- 2006-07 2007-08 6,94,299/- - 6,94,299/- 2007-08 2008-09 6,28,500/- - 6,28,500/- 2008-09 2009-10 86,257/- - 86,257/-

[Undisclosed expenditure for A.Y 2003-04 Rs. 20,000/-] [Undisclosed expenditure for A.Y 2004-05 Rs. 1,45,000/-] [Undisclosed expenditure for A.Y 2005-06 Rs. 19,35,000/-] [Undisclosed expenditure for A.Y 2006-07 Rs. 12,32,081/-] [Undisclosed expenditure for A.Y 2007-08 Rs. 6,94,299/-] [Undisclosed expenditure for A.Y 2008-09 Rs.6,28,500/-] [Undisclosed expenditure for A.Y 2009-10 Rs. 86,257/-]

9.2. The ld CITA observed the following:-

I have perused the assessment order and considered the submissions of the appellant, and also, the material on record. The has mentioned in the assessment order that the seized documents SSG/9-39 contain payments to labour contractors amounting to Rs. Rs.20,000/-, Rs.1,45,000/-, Rs.3,80,500/-, Rs. 3,70,500/-, Rs.6,94,299/-, Rs.6,28,500/- and Rs.86,257/- in AY 2003-04, 2004-05, 2005-06, 2006-07, 2007- 08, 2008-:09 and 2009-10 which was admitted by the appellant as his undisclosed expenses; and, has also been included in his statement of cash flow. I find from the perusal of the cash flow statement that two expenses of Rs. 5,000/- each booked in AY 2006-07 actually pertain to AY 2005-06 as they were incurred on 05-03-2005 and 25-03-2005. Consequently, the correct figures of undisclosed expenses pertaining to AY 2005-06 and 2006-07 should be Rs.3,90,500/- and Rs.3,60,500/- (instead of Rs.3,80,500/- and Rs,3,70,500/- as mentioned in the assessment order). It was contended that undisclosed expenses were incurred out of undisclosed receipts already declared to the department, and so, consequential relief should be allowed. Since the expenses of Rs.20,000/-, Rs.1,45,000/-, Rs.3,90,500/- pertain to AY 2003-04, 2004-05 and 2005- 06 when there was no undisclosed receipts, these additions are confirmed. However, as the undisclosed expenses of Rs.3,60,500/-, Rs.6,94,299/-, Rs.6,28,500/- and Rs.86,257/- relate to AY 2006-07, 2007-08, 2008-09 and 2009-10, they could possibly be' covered by undisclosed receipts. The AO is directed to consider these expenses as part of the cash flow statement and consider the net of expenses, if any, for the purposes of the addition.

49 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla The AO has mentioned in the assessment order that undisclosed expenses of Rs.15,55,000/- and Rs.8,61,581/- related to A.Y 2005-06 and 2006-07 was recorded in the seized documents SSG/10, 16, 32 & 35. It was contended before the AO that the expenses were related to Saltee Infotex (P) Ltd but then, the same was denied by the said company. The appellant thus failed to support its contention. I find that the appellant is in control of his group companies; and, has also admitted undisclosed receipts as well as undisclosed expenses of the group companies in his own case, I am therefore not inclined to accept the argument that the expenses contained in the seized documents SSG/10, 16, 32 & 35 are not assessable in the hands of the .appellant. However, these undisclosed expenses are to be considered as being made out of undisclosed receipts as shown by the appellant, and also accepted by the AO. The cash flow statement .had been filed before .the AO in respect of the unaccounted income which mainly comprised of cash received on different dates from the Fort Group in connection with the sale of shares. As there is undisclosed receipts in AY 2005-06, the addition of Rs.15,55,000/- in AY 2005-06 is sustained. However, the AO is directed to consider the net of the unexplained expenses of Rs.8,61,581/-, if any, for the purposes of addition.

9.3. The ld AR merely submitted that the undisclosed expenditure be allowed to be set off from cash available out of undisclosed income as per the date of expenses and availability of cash. The ld DR opposed the contention of ld AR for reasons mentioned earlier.

9.4. We have heard the rival submissions and perused the materials available on record including the paper book submitted by the assessee in that regard. As regards the revenue’s ground in treating Rs. 8,61,500/-, Rs.3,60,500/-, Rs.6,28,500/- & Rs.86,257/- out of available cash, we find merit in the fact that that the ld AO himself has allowed such set off in the assessment order so revenue cannot be allowed to change its stand now. Even otherwise, the revenue is not in possession of any evidence nor it has furnished any such fact on record that the sums expended were other than out of sum earned / received as cash by the assessee. Hence, we concur with the order of the ld CITA in allowing sums as part of cash flow and as such the revenue’s ground fails on such account which amounts to disputing its own earlier action and which is not permissible as per law.

As a result, we hold as follows:

Asst year Appeal No. Ground Result Nos. 2006-07 145/K/12 7 Dismissed 34/K/12 9 & 10 Dismissed 2007-08 146/K/12 6 Dismissed 35/K/12 8 Dismissed

50 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 2008-09 147/K/12 8 Dismissed 36/K/12 7 Dismissed 2009-10 148/K/12 11 Dismissed 37/K/12 7 Dismissed

A.Y 2007-08 IT(SS) 35/Kol/2012 Ground No. 9 - The Ld. CIT(A) is erred in directing the A.O. to consider the unexplained expenditure of Rs. 50,64,383/- as per seized document page no.4 SSG/42 against the unaccounted cash receipt.

A.Y 2008-09 IT(SS) 36/Kol/2012 Ground No. 8 - The Ld. CIT(A) has erred in deleting the addition of Rs. 5,89,47,000/- as undisclosed investment as per the page No. 6 of seized document SSG/42.

A.Y 2009-10 IT(SS) 37/Kol/2012 Ground No.8 - The Ld. CIT(A) erred in deleting the addition of Rs. 1,30,00,000/- made as unexplained investment on the basis of seized document page 6. SSG/42.

10.1. The brief facts of this issue are that the ld AO has mentioned in the assessment order that page 6 of the seized documents marked SSG/42 contains account of one ‘Kishanji’. The ld AO interpreted the seized document as containing detail of investment in different places or projects. It also appeared to the ld AO that the figures were written in lakhs of rupees. The ld AO concluded that page 6 of the seized document involves undisclosed investment of Rs. 7,19,47,000/- (comprising Rs. 5,89,47,000/- in Asst Year 2008-09 and Rs. 1,30,00,000/- in Asst Year 2009-10). He noted that it was for the assessee to explain the nature of the transactions as recorded in the seized document as it was recovered from him. As there was no proof regarding the genuineness of Kishanji, the ld AO held that the sum of

51 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla Rs. 7,19,47,000/- had to be treated as undisclosed investment of the assessee. The ld AO thus made addition of Rs. 5,89,47,000/- in Asst Year 2008-09 and Rs. 1,30,00,000/- in Asst Year 2009-10 on account of undisclosed investment.

10.2. The ld AO further noted that page 4 of SSG/42 contains detail of expenditure incurred upto 20.3.2008 in Jessore Road Project. The ld AO has mentioned in the assessment order that the assessee has admitted undisclosed expenses of Rs.12,64,383/- which was included in the statement of cash flow. However, the same was determined by reducing sum of Rs.38,00,000/- on the ground that the same had already been considered as undisclosed income under the seized document SSG/3. The ld AO observed that the entries in SSG/3 did not match and consequently no set off for Rs. 38,00,000/- could be allowed. The ld AO thus held that sum of Rs. 50,64,383/- had to be treated as undisclosed expenses of the assessee. The ld AO further noted that page 23 to 37 shows undisclosed expenses of Rs. 45,456/- which was admitted by the assessee. The ld AO further noted that pages 23 to 37 shows undisclosed expenses of Rs.45,456/- which was admitted by the assessee, and, has also been included in the .statement of cash flow. The ld AO thus made addition of Rs.50,64,383/- and Rs.45,456/- as undisclosed expenses in Asst Year 2007-08 and Asst Year 2008-09. The order of the ld AO is reproduced as under:- Page 6 of SSG/42 is the account of one 'Shri Kishanji' in which the detail of investment at different places/projects has been mentioned. It appears that the figures written on this page are in lakhs of rupees. The assessee submitted vide annexure ‘M’ to letter dt. 11.11.2010 ‘as not related to us’.

The documents were found in assessee’s possession. Onus is upon the assessee to explain the transactions. In absence of proof of genuineness regarding ‘kishanji’ the total investment is considered in the hand of the assessee. Therefore, amount of Rs. 7,19,47,000/- including cash of Rs. 4,82,00,000/- (other than those mentioned as ‘Ch’ meaning cheque) has been treated as undisclosed investment by the assessee as per dates mentioned in the seized page as below : -

Therefore year-wise addition will be :-

Payment / Application F.Y 2007-08(A.Y 2008- F.Y 2008-09 (A.Y 2009-10) 09) Rs. 5,89,47,000/- Rs. 1,30,00,000/-

Page 4 of SSG - 42 contains the details of expenditure incurred at Jessore Road

52 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla Project up to 20,03.2008. The assessee admitted the following undisclosed- expenditure vide Annexure ‘M' & ‘M2' attached to the letter dt.11.11.2010 to the tune of 12,64,383/- has been arrived at by reducing 38,00,000/- on the ground that the undisclosed income of Rs.38,00,000/- has already been considered in SSG/3. The assessee's explanation is examined. The disclosure for SSG/3 cannot be matched with entries with the seized document. Accordingly, the undisclosed income and expenditure from this seized document comes to Rs.50,64,383/- for A.Y 2007 - 08.

Pages 23 to 37 further shows expenses, out of which Rs. 45,456/- has been admitted as undisclosed for A.Y 2008-09.

[Undisclosed expenditure for A.Y 2007-08 Rs. 50,64,383/-] [Undisclosed expenditure for A.Y 2008-09 Rs.5,89,92,456/-] [Undisclosed expenditure for A.Y 2009-10 Rs. 1,30,00,000/-]

10.3. The ld CITA observed as follows:- I have perused the assessment order and considered the submissions of the appellant, and also, the material on record. The AO has mentioned in the assessment order that page 4 of the seized documents SSG/42 contain detail of expenses of Rs.12,64,383/-, and, that page 23 to 37 record expenses of Rs.45,456/- which was admitted by the .appellant as undisclosed expenses in AY 2007-08 and 2008-09, and, was also included in the statement of cash flow. The AO has also noted that expenses of Rs.12,64,383/- was arrived at by reducing Rs.38,00,000/- on the ground that it was already considered in SSG/3. The appellant has produced no evidence to substantiate his claim. I am therefore unable to accept the argument that Rs.38,00,000/- had already been considered under SSG/3. However, as undisclosed expenses are to be considered against undisclosed income, the AO is directed to treat the undisclosed expenses of Rs.50,64,383/- (Rs.12,64,383/- plus Rs.38,00,000/-) and Rs.45,456/- as part of the cash flow statement, and then, consider the net of expenses, if any, for the purposes of the addition.

It was argued before me that the seized document SSG/42 was not seized from the possession or custody of the appellant; and further, there was no material on record to suggest that the appellant had made investment in different places or projects as mentioned by the AO in the assessment order. The Ld. A/R explained that page 6 of SSG/42 contains certain details under the head “Kishanji Account’. It was argued that the AO has made too many presumptions and assumptions about the seized document. For, the AO has presumed that the seized document contains details of investment which is nowhere mentioned in the seized document. The seized document has simply mentioned “Kishanji Account’. It has nowhere mentioned that the account relates to investment in places or projects. But then, without any basis, the AO has presumed that it pertains to investment. The AO has nowhere explained in the assessment order as to why he believes that the figures written on the said document represented investment. The AO has made further presumption without any basis that the figures are mentioned in lakhs. The AO has mentioned in the assessment order that - “It appears that the figures written on this page are in lakhs

53 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla of rupees”. The Ld. A.R argued that the very language used by the AO only suggests that the AO is himself not sure about the facts. There was no reason or basis or justification for the AO to hold that the figures are in lakhs of rupees. The Ld. A.R has further argued that the seized document has to be considered and believed in totality. When it was mentioned in the seized document itself that it contained the account of Kishanji the AO was not justified in presuming, and that too, without any basis that the seized document was related to the appellant. The AO has made no efforts to locate or examine Kishanji with whom the seized document is possibly related. I find substance in the argument that the AO has brought no corroborative material on record to show that the account of Kishanji as mentioned in SSG/42 was in anyway related to the appellant or even to this group companies. There is no positive material on record to link the account of Kishanji either with the regular books of account of the appellant or his group companies or with the seized documents found in search. Without establishing any nexus, the AO cannot presume that the account of Kishanji was related to the investment made by the appellant. The seized document does not mention the name of the appellant or his group companies. On the contrary, it specifically mentions that the account pertains to Kishanji. In this factual background, the AO had no legal sanction or authority to presume that the period seized document relates to the appellant without bringing any corroborative material or evidence on record. Also, there is no material to show that the seized document actually represents detail of investment. It is only the presumption of the AO that the figures written on page 4 of SSG/42 are in lakhs of rupees. The conclusion of the AO that the appellant has made undisclosed investment of Rs. 7,19,47,000/- is not supported by any material or evidence on record; on the contrary, it is based only on the imagination of the AO. The decisions made by the AO are not based on proper findings. The AO has made his conclusions more from his presumptions and assumptions than from material facts. In view of the above, I am of the opinion that the addition of Rs. 7,19,47,000/- (comprising Rs. 5,89,47,000/- in A.Y 2008-09 and Rs. 1,30,00,000/- In A.Y 2009-10) on account of undisclosed investment is neither sustainable in law nor on facts; and so, the same is directed to be deleted.

10.4. The ld AR argued the following :- (i) He submitted that the ld AO had made two additions being as follows: Pg 6 of SSG/42 Assessment year : 2008-09 … Rs.5,89,92,456/- Assessment year : 2009-10 … Rs.1,30,00,000/- Rs.7,19,92,456/- & page 4 of SSG/42 –A.Y. 2007-08 Rs.50,64,383/- (ii) As regards pg. 4 of SSG/42 it represented accounts pertaining to Jessore Road project which was accounted for in the books of respective Company. However, to buy peace out of such sum of Rs.50,64,383/-, Rs. 38,00,000/- had already been offered under SSG/3 and hence only Rs. 12,64,383/- can be added. The ld AR also drew our attention to annexure – M-1 & M-2 of letter dt. 11.11.2010 which were at page 1085 & 1086 of paper book No.8

54 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla and hence addition, if any, be restricted only upto Rs. 12,64,383/-.

(iii) As regards page 6 of SSG/42 is concerned, he submitted that such document doesn’t pertain to it nor it is aware of contents of such document and rather it pertains to some “Kishanji” as mentioned in such document.

(iv) He submitted that is mere assumption & presumption on part of the ld AO to hold that contents of such page 6 are that of assessee and ld AO even presumed that the same is in “Lakhs” and/ or it represents ‘unexplained expenditure” without any corroborative material in such respect and / or without making any effort to make any enquiry during search subsequently.

(v) He submitted that presumption u/s 292C is not a mandatory presumption and rather a discretionary presumption. Section 292C uses the expression “may be presumed” and as such it is rebuttable presumption. He submitted that such page 6 was a mere loose sheet found at the premises searched. But it was neither under possession nor under control of assessee and nor its contents are corroborated or linked with assessee in any manner and hence it cannot be treated as conclusive evidence merely because it was found at the searched premises. He also relied on judgment of Hon’ble Kerala High Court in ITO v. Abdul Majeed 169 ITR 440 (Ker) and in such respect and also submitted that same has been followed by Coordinate Bench of this tribunal in the case of Rajesh Kr. Kankaria in ITA No. 70/ Kol/2009 dt. 25.6.2010.

(vi) He concluded by stating that page 6 is rather a dumb document and addition in such respect by treating the same as “unexplained expenditure” is bad in law.

(vii) As regards the ld CITA’s action in allowing the set off of the expenses so incurred by assessee and / or its associates, it was submitted by the ld AR that there is no dispute in the fact that assessee had received cash on account of “transaction with Fort” to the tune of Rs. 7,40,90,000/- and also other receipts which was available with assessee and the expenses were out of such sums only and hence the ld CITA was fully justified in allowing such set off. He also submitted that on a perusal of assessment order itself , it can be observed that the ld AO himself has allowed such set off and now the revenue is disputing such action which amounts to disputing its own earlier action and which is not permissible as per law.

55 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla

10.5. In response to this, the ld DR argued that the assessee is accepting one part of the said documents SSG/42 as its own and denying the ownership and content of another part i.e. page 6 of SSG/42 which is an anomaly by itself and such conduct proves that the document has to be treated in entirety along with other document in SSG/42 and action of ld AO be affirmed. Moreover, the seized document was found in the premises of Saltee Construction Co P Ltd as recorded in page 4 of the order of the ld AO. The same seized document resulted in the addition of Rs. 50,64,383/- which was confirmed by the ld CITA.

10.6. We have heard the rival submissions and perused the materials available on record including the paper book of the assessee submitted in that regard. As regards the page 4 of SSG/42, we find that assessee has accepted Rs. 38,00,000/- being part of SSG/3 and pleaded to add only Rs. 12,64,383/-. However, the assessee has failed to point out at which document in particular in the bunch SSG/3 such sum of Rs. 38,00,000/- has been disclosed. In the absence of same , we have no option other than to affirm the action of the ld AO in treating entire sum of Rs. 50,64,383/- as undisclosed expenditure only.

10.6.1. As regards page 6 of SSG/42, we find that the ld AO has presumed that the document belongs to assessee and / or its contents pertain to assessee. In this regard, we find that the point is whether the presumption u/s 292C shall be treated as mandatory under the law or whether it shall be treated as a rebuttable presumption and whether, even mandatory presumption about the documents as belonging to the assessee has the conclusive consequence of making the addition in the manner in which the assessment order has done it. In this context, the following observations of the Hon’ble Apex Court in the case of P.R. Metrani vs. CIT reported in (2006) 287 ITR 209 at page 220 about three types of presumptions under the law are relevant:- A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii] "conclusive proof”. "May presume" leaves it to the discretion of the court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the court not to make the presumption. The court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. "Conclusive proof' gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is an irrebuttable presumption.

56 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla The words in sub-section (4A) of section 132 are "may be presumed". The presumption under sub-section (4A), therefore, is a rebuttable presumption. The finding recorded by the High Court in the impugned judgement that the presumption under sub-section (4A) is a irrebuttable presumption in so far as it relates to the passing of an order under sub-section (5) of section 132 and rebuttable presumption for the purpose of framing a regular assessment is not correct. There is nothing either in section 132 or any other provisions of the Act which could warrant such an inference or finding." 10.6.2. In our considered opinion, this is the judgement which made the introduction of Section 292C of the Act with retrospective effect necessary as a matter of clarification. Nevertheless, the limited conclusion is that the language of section 132(4A) of the Act and of section 292C of the Act use the common expression "may be presumed". Consequently the opinion of the Hon'ble Supreme Court about the presumption being a rebuttable presumption in the light of such expression is applicable to section 292C of the Act as well. We have to consider what presumption is permitted in respect of the seized documents under consideration. From the perusal of the seized documents, we find it contains transactions of receipts and payments both in cash and by cheque. The name of the party stated is “Kishanji”. The paper does not refer to the assessee and there is no way in which the expressions about the parties in the documents can be related to the assessee nor the ld AO has given any finding in such respect. The presumption u/s 292C of the Act are that the document belongs to the persons from. whose possession and control it was found. The second presumption is that the contents of such documents are true. The third presumption is that the signature and handwriting shall be taken to be that of the person from whom the documents were found. It would be relevant now to decide as to how to deal with the documents with the first two presumptions? The documents belong to the assessee has not been proved. The contents are true has also not been corroborated. The dispute is : what are the contents? Is it permissible to draw the inference against the assessee on his failure to explain the contents of the documents after presuming that the contents are correct? This question is outside the rebuttable presumption made under section 292C of the Act. The legal presumption does not permit the inference that “Kishanji” is none other than the assessee or his representatives. The search action at the premises have not yielded any material which might justify such inference. It is not legally correct to hold that an adverse inference against the assessee unless the assessee explained the contents of the documents. In our opinion, even after presumption applied to the facts u/s 292C of the Act, there is no adequate material to conclude that the transactions in the seized documents are the

57 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla transactions of the assessee which remained undisclosed. The other aspects of the matter is that the presumption u/s 292C of the Act is rebuttable presumption and they don't lead to conclusive evidence. The assessee, under the principles of natural justice, has the right to rebut the presumption. Under that right also he is entitled to state that the transactions belonging to him are not recorded under any name as “Kishanji”. In our opinion, the information about the undisclosed expenditure, the assessee is based on inadequate or irrelevant material. Under the circumstances this ground of appeal is dismissed.

As regards the revenue’s ground in treating Rs. 50,64,383/- out of available cash, we find merit in the fact that that the ld AO himself has allowed such set off in the assessment order, so revenue cannot be allowed to change its stand now. Even otherwise, the revenue is not in possession of any evidence nor it has furnished any such fact on record that the sums expended were other than out of sum earned / received as cash by the assessee. Hence, we concur with the order of the ld CITA in allowing sums as part of cash flow and as such the revenue’s ground fails on such account.

As a result, we hold as follows:

Asst year Appeal No. Ground Result Nos. 2007-08 146/K/12 7 Dismissed 35/K/12 9 Dismissed 2008-09 36/K/12 8 Dismissed 2009-10 37/K/12 8 Dismissed

A.Y 2007-08 C.O 146/Kol/2012 Ground no. 8 - For that in view of the facts and circumstances the Ld.CIT(A) was wholly unjustified in confirming the addition of Rs.79,82,640/- on the basis of SSG- 45 without appreciating the fact that the said document contained mere working of un• materialized Joint Venture and in view of the facts and in the circumstances it may kindly be held accordingly. This ground is being taken without prejudice to the fact that the AO had been directed to delete the addition on the basis of the rotation statement.

A.Y 2007-08 IT(SS) 35/Kol/2012

58 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla Ground No. 10 - The Ld. CIT(A) is erred in directing the A.O. to consider the unexplained expenditure of Rs.79,82,640/- as per page no. 43 of the seized document SSG/45 to consider it against the unaccounted cash receipt of the assessee .The order is against the provision of section 69C of the Act.

A.Y 2008-09 IT(SS) 36/Kol/2012 Ground No. 10 - The Ld. CIT(A) has erred in deleting the addition of Unexplained investment of Rs. 5,00,00,000/-as per the page No. 40 of seized document SSG/45.

11.1. The brief facts of this issue are that the ld AO found that page 43 of the seized document SSG/45 contains detail of unexplained expenditure of Rs. 79,82,640/- which had been admitted by the assessee, and, was also included in the statement of cash flow. The ld AO thus made addition of Rs.79,82,640/- as undisclosed expenses in A.Y 2007-08 on the basis of page 43 of the seized document marked SSG/45.

11.2. The ld AO also referred to page 40 of SSG/45. The ld AO has inferred from the said document that the assessee and three other persons have received amount of Rs. 22.75 crores. The ld AO also concluded that the assessee along with other persons had taken over a company for which sum of Rs. 8.71 crores was paid. It was explained before the ld AO that the seized document contains the valuation of shares and working of joint venture which did not materialize. The ld AO has noted in the assessment order that no evidence was produced before him to show that there was no takeover of the company or that no transaction was actually made. The ld AO then concluded by stating that the figure of Rs.5 crores written against the assessee is treated as undisclosed investment made by him in cash in A.Y 2009-10. The order of ld AO is reproduced as under :-

Page 43 of SSG/45 is a statement is a receipt and payment account for the period July 2006 to September 2006, where some receipt and payment has been shown in cash and cheque. The assessee vide Cash flow statement of undisclosed transactions being Annexure – X of letter dated 11.11.2010 and vide Annexure – U being break- up of undisclosed income admitted Rs. 79,83,640/- as undisclosed expenditure of A.Y 2007-08. For the remaining amount, the assessee explained it to be part of regular books of various companies mentioned therein. The assessee produced bank statement of various companies including their audited final accounts and copy of IT returns, Cash flow statements. It was submitted that cash for land purchases were done by withdrawals of cash from bank itself and wherever the assessee could not link the cash expenditures with bank withdrawals, necessary disclosures have been

59 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla made.

“SSG/45, Page 43 is an account given by a broker. The left side shows amount received by the broker and the right side shows the amount expended by the broker. The receipt side and inter-alia shows Cash received by broker of Rs.6,60,00,000/- . This figures has been reconciled period wise from the account of various Companies and as evident from workings of Annexure P2 of letter dt.11.11.2010, a sum of Rs.6,08,50,000/- was withdrawn from Bank Account of five companies on whose name the land was acquired, as mentioned in the right side of the seized documents. A sum of Rs.70,50,000/- could not be backed by Bank withdrawals and treated as “undisclosed”. Besides this, page contains receipt of Rs. 9,32,640/- which could not be reconciled with regular books ad hence the same was also offered as “undisclosed”. As such, sum of right side of this page shows land value and other expenses incurred by broker which was reconciled with the books. A sum of Rs. 18,09,946/- could not be reconciled.

Page 40 of SSG/45, contains the details money consideration receipt and detail of cash / cheque receipt. It appears that total consideration of Rs. 8 Crores has been received as sale consideration and after reducing loan liability to 5 different concerns, profit of Rs. 3,90,56,668/- is remaining. In the 2nd half of page 40 of SSG/45, a statement containing records of cash of Rs. 14.04 crores and cheque of Rs. 8.71 crores had been written. As per this page the assessee, Sri Surya Prakash Bagla along with other three parties received Rs. 22.75 crores.

The assessee in his explanation stated that the page contains the valuation of shares and working of joint venture which did not materialize. However, it appears that the assessee along with other parties purchased a company after paying Rs.8 crores as consideration and for takeover of this company along with incidental expenses totaling to Rs. 8.71 crores because mention of the loan creditors as Adyama Nirman, Bishnu Nirman, Bishnupriya Plaza, Gayatri Plaza, Kartick Plaza cannot be treated as imaginary.

It is found from the working pages, bank statement of Saltee Infrastructure, Parimala Mercantiles etc. that on 5.9.2007, M/s Saltee Infrastructure Ltd., a company controlled by the assessee paid Rs. 1,00,00,000/- vide cheque No. 293330 drawn on ABN Amro Bank to M/s Shree Adyama Nirman Pvt. Ltd., a company mentioned in the above referred documents and it is shown as advance against properly in the balance sheet of Shree Adyama Nirman Pvt. Ltd. During the F.Y 2006-07, Shree Adyama Nirman Pvt. Ltd., of Embassy 1-B, 4, Shakespeare Sarani of Assurances – II, Kolkata 17.5.2006 for Rs. 6,00,000/-, 20.5.2006 for Rs. 10 lakhs, 21.7.2006 Rs. 10 lakhs [all payments made to Prasant Dey and Amal Chakraborty] and on 7.9.2000 for Rs. 5,16,327/- to Dum Dum Municipality for Development fees & Mutation fees. All the money as above had been received from M/s Saltee Infrastructure on 5.9.2007 is also perfect match cheque portion of Rs. 1.04 crores written against ‘SPB’ in this page 40 of SSG/45.

60 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla The assessee has not provided any details regarding this company nor any evidence to prove that the company was not taken over and no transactions were made. Therefore, the figure of Rs. 5 Crores written against the assessee is treated undisclosed investment of the assessee in cash for A.Y 2009-10.

[Undisclosed expenditure for A.Y 2007-08 Rs. 79,82,640/-] [Undisclosed expenditure for A.Y 2008-09 Rs.5 Crores]

11.3. The ld CITA observed as follows:-

I have perused the assessment order and considered the submissions of the appellant and also, the material on record. The AO has mentioned in the assessment order that page 43 of the seized documents SSG/45 contain detail of undisclosed payments Rs.79,.82,640/- which was admitted by the appellant as undisclosed expenses in A.Y 2007-08, and, was also included in the; statement of cash flow. I uphold the order of the AO that the payments of Rs.79,82,640/- was to be considered in the case of the appellant as undisclosed expenses. However, as undisclosed expenses are to be considered against undisclosed income the AO is directed to treat the undisclosed expenses of Rs.79,82,640/- as part of the cash flow statement, and then, consider the net of expenses, if any, for the purposes of the addition.

The Ld A/R has argued before me that, in his own assessment order, the AO has given contradictory findings with reference to the seized document at page 40 of SSG/45. For, on one hand, the AO has stated that the appellant along with other persons had received sum of Rs.22.75 crores. And subsequently, he has concluded that the appellant along with other persons had taken over a company by assessing sum of Rs. 8.71 crores. For, I find that the AO has taken diagonally opposite positions in interpreting the same seized document / (page 40 of SSG/45). It was argued that the name of the appellant was nowhere mentioned in the seized document which only states as under : - RAM … 1 SPB … 2 KEJ … 2 But, the AO has presumed that SPB meant Surya Prakash Bagla (the appellant), The AO has merely added the said figure of 2 + 2 + 1 = 5; and then, interpreted that the figure 5 actually represents 5 crores. The AO eventually held that the entries made on the seized document suggest that along with others, the appellant has taken-over a company by investing Rs.5 crores. I find merit in the argument that there is neither any evidence nor corroborative material to justify the finding of the AO. It was argued in course of the appellate proceedings that there could have been a proposal or negotiation for transfer of such 5 companies in A.Y 2008- 09; and, in case the deal was' finalized, the transaction would have been made as suggested in the seized document. But then, the deal having not materialized, there was no question of receipt or payment of any consideration. Hence, the addition based on the presumptions and assumptions of the AO that the appellant acquired or sold the

61 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 5 companies in AY 2008-09 cannot be sustained. It was also argued that when 1 was written against RAM, 2 against SPB and 2 against KEJ, there was no basis for the AO to presume that the entire consideration was received or paid by SPB alone, The Ld A/R has further argued that the AO ha§ mentioned in the assessment order that the appellant had received RS.14.04 crore in cash and Rs.8.71 crore by cheque. But then, the AO has not been able to substantiate or corroborate the receipt of the cheque with reference to the books of account or the bank statement of the appellant.

I find from the assessment order that the AO has made addition of Rs.5 crores, with reference to the seized document at page 40 of SSG/45 on the ground that the appellant along with other persons had taken over a company. The AO has noted in the assessment order that no evidence was produced before him to show that there was no take-over of the company or to show that no transaction was actually made. But then, such non-compliance cannot be made the basis for concluding that there was take-over of a company, Whether or not a company was taken-over is a matter of fact, and also, a matter of public record. The AO could have called for the annual return of the companies filed before the ROC. The A.O could have verified from the.list of share-holders whether or not there was any change in the share-holding pattern of the concerned companies. But, the AO has made no efforts to ascertain the facts. The AO bas brought no positive material or evidence on record to establish that there was take-over of any company by the appellant. The AO has simply presumed, without any basis, that .the appellant had taken-over a company, and then, has drawn his own conclusions. I find that the AO had made no efforts to verify the facts; and, that there is no material whatsoever to support the finding of the AO. Even in course of the remand proceedings, the AO has failed to bring any material on record to support his findings. I therefore directed the appellant in course of the appellate proceedings to produce the Audited Accounts of the 5 companies (mentioned in the seized document) for the period ending 31-03-2008, 31-03-2009 and 31-03-2010; and, the list of-share-holders along with the copy of Annual Returns as filed before the ROC. On perusal of such documents, I find that the contention of the appellant was factually correct. There was no change in the share-holding pattern and there was no take-over of any 'company. The AO had drawn his conclusions on the basis of the presumption that the appellant along with others had taken-over a company. But, once the appellant has been able to establish that there was no take-over of any of the 5 companies that was mentioned 'in the seized documents, all the subsequent conclusions and findings of the AO have fallen flat. 'In view of the above, I am of the considered opinion that the AO has made the addition of Rs.5 crores purely on presumptions and assumptions; that the findings of the AO as contained in the-assessment, order are self-contradictory that there is no material or evidence on .record to support the action of the AO; and also, that the decisions as made by the AO are contrary to the facts of the case and the material available on record. The addition of Rs.5 crores in AY 2008-09 is directed to be deleted.

11.4. The ld AR submitted that the assessee has already admitted undisclosed expenses of Rs. 79,82,640/- as contained on page 43 of the seized documents SSG/45. But, as these expenses have already been included in the statement of cash flow, no addition can be made

62 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla on this ground. It was argued that the ld AO was therefore not justified in making addition of Rs. 79,82,640/- in Asst Year 2007-08.

11.4.1. The Ld. A.R further submitted that the ld AO was totally confused in so far as the interpretation of the seized document at page 40 of SSG/45 was concerned. On the other hand, the ld AO has stated that the assessee along with three other persons had received sum of Rs. 22.75 crores. And, subsequently, he has concluded that the assessee along with other persons had taken over a company by investing sum of Rs. 8.71 Crores. The ld AO has also made many observations which are totally irrelevant to the facts of the case. The ld AO has mentioned in the assessment order that no evidence was produced before him to show that there was no takeover of the company or that no transaction was actually made. But then, what material the ld AO had brought on record to establish that a company was taken over by the assessee? The companies are required to file annual returns with the ROC which could have been summoned by the ld AO. The ld AO could have easily verified that no company was taken over as there was no change in the shareholding pattern. The ld AO made no efforts to ascertain the facts or to verify the contention of the assessee. The ld AO has simply presumed, without any basis, that the assessee had taken over a company, and then, concluded by stating that the figure of Rs. 5 crores written against ‘SPB’ along with others is treated as undisclosed investment made by him in cash in Asst Year 2009-10. The ld AR contended that there was no positive material on record to show that there was takeover of any company. On the contrary, the finding of the ld AO was factually incorrect, and also, contrary to the evidence on record. He filed the copy of annual returns filed before the ROC along with the list of shareholders for the 5 companies as mentioned in seized document to show that there was no change in the shareholding pattern.

11.4.2. He submitted that the addition is on following sums and documents :

i) Page 43 – SSG/45 … Rs. 79,82,640/- ii) Page 48 – SSG/45 … Rs. 5,00,00,000/-

11.4.3. He submitted that addition on basis of page 43 is merely on confessional statement and as such addition may kindly be not sustained.

11.4.4. He then submitted that page 45 of SSG/43, it will be seen that several people

63 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla combined together perhaps to acquire a company having 50,000 shares @ 781.13 per share but the deal might not have materialized and he submitted that it was a mere planning document which never happened actually. At least, the name of 4 (four) persons appear on second part of such seized document on which reliance has been placed by the ld AO for making addition of Rs 5 crores. The ld AO has unnecessarily confused himself with SPB which the ld AO has taken to represent Surya Prakash Bagla, which may be representing Shri Shree Prakash Bagla and or any other person by this abbreviation and not Surya Prakash Bagla. The ld AO has unnecessarily placed great reliance on amounts of liabilities which is reflected in the books of certain companies. Since the company proposed to be acquired and which ultimately was not acquired and might be having such liabilities in their books of account but it does not prove in anyway that such company which such liabilities were accounted for had been actually acquired by assessee. Moreover and even otherwise there being no date nor any year, under no circumstances, it could be presumed as that relating to Asst Year 2008-09. The ld AO even never examined such companies before coming to such wild conclusion. Moreover, the ld AO has brought no evidence on record to prove that any company was acquired or sold by your assessee.

11.4.5. In any case without prejudice and even otherwise, SPB could never mean Surya Prakash Bagla only and as stated above it might mean Shri Shree Prakash Bagla and any other person with such abbreviation also. Moreover, it will be seen from the paper seized in the name of SPB it is only Rs. 2/- which the ld AO has presumed to be Rs.2 Crores whereas another 2 appears in the name of KEJ and Re.1/- in the name of RAM and hence the assessee fails to understand as to how the entire 1 + 2 + 2 could be treated as unaccounted expenditure of SPB. Under no circumstances, in the case of SPB it could exceed Rs. 2/- but that SPB was not the assessee.

11.4.6. The ld AR also drew the attention to pages 1279, 1280, 1281, 1282, 1283 and then 1317, 1395, 1475, 1555 of paper book No.10 to strengthen his contention that there is no change in shareholding of such companies and hence the ld AO’s contention is even otherwise only an assumption.

11.4.7. As regards the ld CITA’s action in allowing the set off of the expenses so incurred

64 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla by assessee and / or its associates, it was submitted by the ld AR that there is no dispute in the fact that assessee had received cash on account of “transaction with Fort” to the tune of Rs. 7,40,90,000/- and also other receipts which was available with assessee and the expenses were out of such sums only and hence the ld CITA was fully justified in allowing such set off. The ld AR also submitted that on a perusal of assessment order itself it can be observed that the ld AO himself has allowed such set off and now the revenue is disputing such action which amounts to disputing its own earlier action and which is not permissible as per law.

11.5. In response to this, the ld DR heavily relied on the order of A.O and urged to sustain the addition on both pages 43 and 45 of SSG/45.

11.6. We have heard the rival submissions and perused the materials available on record including the paper book of the assessee submitted in this regard. As regards page 43 of the seized document, since assessee has not disputed addition and has only requested for set off in cash flow we direct accordingly for reason mentioned earlier in this order.

11.6.1. As regards page 48 of the seized document, we find that factually there is no change in shareholding of the impugned companies i.e Adamaya Nirman, Shree Bishnu Nirman, Shree Bishnu Priya Plaza, Shree Gayatri Plaza and Shree Kartic Plaza and hence even if it is assumed that the contents of page 48 are true, then also the very basis being transfer of such companies having not taken place and hence entire argument of the ld AO fails. However, in the facts and circumstances, we do not find merit in the ld AO’s contention since the transfer of company itself not having taken place and hence entire addition of Rs. 5,00,00,000/- fails.

As a result, we hold as follows: Asst year Appeal No. Ground Result Nos. 2007-08 146/K/12 8 Dismissed 35/K/12 10 Dismissed

65 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 2008-09 36/K/12 10 Dismissed

IT(SS) 36/Kol/2012 Ground No. 11 - The CIT(A) has erred in directing the A.O. to consider the unexplained expenditure of Rs. 1,85,08,949/- against un accounted cash receipt of Rs. 7,40,90,000/- in the A.Y.2006-07, the addition was made on the basis of seized document SSG/48. Ground No. 12 – The Ld. CIT(A) has erred in deleting the addition of Rs. of Rs. 5,91,83,392/- made on the basis of page No. 1 and 21 of seized document SSG/48.

A.Y 2009-10 C.O. 148/Kol/2012 Ground No.12 - For that in view of the facts and circumstances the Ld. ClT(A) was wholly unjustified in confirming the addition of Rs.2,57,984/- on the basis of SSG-48 and in view of the facts and in the circumstances it may kindly be held accordingly. This ground is being taken without prejudice to the fact of the AO had been directed to delete the addition on the basis of the rotation statement.

IT(SS) 37/Kol/2012

Ground No.9 – The Ld. CIT(A) has erred in directing the A.O. to consider the unepxlianed expenditure of Rs. 2,57,984/- made on the basis of seized document SSG / 45 against unaccounted cash receipt of the assessee.

12.1. The brief facts of this issue are that the ld AO found that pages 1 and 21 of the seized document SSG/48 contain detail of unexplained expenses of Rs. 1,85,08,949/- & Rs.2,57,984/- which had been admitted by the assessee, and, was also included in the statement of cash flow. The ld AO thus made addition of Rs. 1,85,08,949/- & Rs.2,57,984/-

66 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla as undisclosed expenses in Asst Years 2008-09 and 2009-10 on the basis of pages 1 and 21 of the seized document marked SSG/48.

12.2. The ld AO has mentioned in the assessment order that page 7 of the seized documents SSG/48 contained working of profit on sale of land held in the name of the companies. The ld AO noted that the profit was worked out at Rs.5,91,83,392/-, the assessee’s share being Rs. 2,07,14,187/-. The ld AO further noted that no details were filed about the other persons and also, no material was produced to show that the profit was recorded by such other persons in their regular books of account. The ld AO then added the entire profit of Rs. 5,91,83,392/- in the hands of the assessee in A.Y 2008-09. The order of the ld AO is reproduced as under :-

Page 1 of SSG/48 contains statement of account as on 10.9.2008. The assessee in his explanation vide Annexure – “S” [S2 & S3] through Cash flow statement of undisclosed transactions being Annexure – X of letter dated 11.11.2010 and vide Annexure – U being break-up of undisclosed income admitted Rs. 1,85,08,949/- as undisclosed expenditure of A.Y 2009-10. For the remaining account, assessee explained it to be part of regular books of various companies mentioned therein. The assessee produced bank statement of various companies, including their audited final accounts and copy of IT returns, cash flow statements. It was submitted that cash for land purchases were done by withdrawals of cash from bank itself and wherever the assessee could not link the cash expenditures with bank withdrawals, necessary disclosures have been made.

SSG/48, page 1 is also an account given by broker for land purchased by our Clients at different locations. The right side shows amount received by the broker and the left side shows the amount expended by the broker and the bottom side below the tabular firm represents amount due to be paid by our Clients against land purchase and amount expended by the broker.

The receipt side inter-alia shows Cash received by broker of Rs.6,91,20,440/-. This figure has been reconciled from the account of various companies and as evident from workings of Annexure – S2 of letter dt. 11.11.2010, a sum of Rs. 5,87,30,000/- was withdrawn from Bank account of four companies on whose name the lands was acquired, as mentioned in the left side of the seized documents. A sum of Rs. 1,03,90,440/- could not be backed by Bank withdrawals and treated as “Undisclosed”. Besides this, this page contains other receipts by broker of Rs.81,18,509/- which could not be reconciled with regular books and hence the same was also offered as “undisclosed”. As such a sum of Rs. 1,85,08,949/- was treated as undisclosed on the basis of receipts side of SSG/48, page 1.

The left side of this page shows land value and other expenses incurred by broker

67 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla which was reconciled with the books. A sum of Rs. 86,95,799/- could not be reconciled. The bottom side (showing expenses incurred by broker) below the tabular form was also reconciled with the books and a sum of Rs.33,58,229/-could not be reconciled and hence the same was treated as “undisclosed”.

Thus the broker accounts shows undisclosed payments of Rs. 1,85,08,949/- which was more than undisclosed expenditure of Rs.1,20,54,028/- made by him. As such a sum of Rs. 1,85,08,949/- has been treated as “undisclosed expenditure” in the working of undisclosed income filed vide letter dt. 11.11.2010.

Page 21 of SSG/48 contains account with Sanat. In this respect, the assessee admitted undisclosed expenses of Rs.2,57,984/- for A.Y 2009-10.

Pages 7, 8 and 9 contain the detail of purchase and sale of land and distribution of profit on sale of land relating to project at Chota Chandipur (recorded in the names of M/s Ankit Plantations Dewar Exports). In the submission the assessee claimed writing in these pages as estimates/ rough working except as per pages 8 & 9 which are as per regular books. These are other papers where the mention of Project at Chota Chandipur Projects has been found. Further, the total amount of expenses of Rs. 9,70,93,817/- appearing page 9 of SSG/46 as claimed by the assessee as per regular books is also noticed in the working as per page 13 of SSG/48 where it is recorded as purchase value 1642.79 Cottah-9,70,938.17 (‘OOtwo zero suppression). Total profit of Rs. 5,91,833.92/- (including assessee’s share of Rs. 2,07,14,187/-) as recorded after “OO’ two zero suppression is actually Rs. 5,91,83,392/- and treated as undisclosed income for the financial year 2007-08 relevant to A.Y 2008-09, in the hands of the assessee himself since he could not furnish details regarding other persons and whether the transactions were recorded in their regular books.

[Undisclosed income for A.Y 2008-09 Rs. 5,91,83,092/-] [Undisclosed expenditure for A.Y 2008-09 Rs.1,85,08,949/-] [Undisclosed expenditure for A.Y 2008-09 Rs.2,57,984/-]

12.3. The ld CITA observed as follows:-

I have perused the assessment order and considered the submissions of the appellant, and also, the material on record. The AO has mentioned in the assessment order that page 1 and 21 of the seized documents SSG/48 contain detail of undisclosed expenses of Rs. 1,85,08,949/- and Rs. 2,57,984/- which was admitted by the appellant as undisclosed expenses in A.Y 2008-09 and 2009-10, and, was also included in the statement of cash flow. I uphold the order of the AO that the expenses of Rs.1,85,08,949/- and Rs.2,57,984/- was to be considered in the case of the appellant as undisclosed expenses. However, as undisclosed expenses are to be considered against undisclosed income, the AO is directed to treat the undisclosed expenses of Rs. 1,85,08,949/- and Rs. Rs.2,57,984/- as part of the cash flow statement and then consider the net of expenses, if any, for the purposes of the addition.

The AO has also made addition of Rs.5,91,83,392/- on account of profit made on alleged sale of land held by the companies Ankit Plantation, Kerf Construction and

68 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla Dewan Exports on the basis of page 7, 8 and 9 of the seized documents SSG/48. It was explained that page 8 and 9 contain detail of investment made in land by the said-companies which is duly recorded in their books of account: and, which has also been acknowledged by the AO in the assessment order. It was contended that page 7 contained estimates or rough working and there was no actual sale of land by the companies as alleged by the AO. The AO has mentioned in the assessment order that no detail of the other persons was filed. But then, the name of the companies was available on the seized document. The AO could have examined those companies to ascertain the facts, and also, to verify the nature of entries as made in the seized document. I find from the assessment order that it was explained before the AO at the assessment stage that page 70 of the seized document SSG/48 only contained' estimates or rough workings; and, that there was no actual sale of land. In course of the appellate proceedings, I had required the appellant to produce copy of the profit & loss account and balance sheet of the concerned companies for the year ending 31.3.2008, 31.3.2009 and 31.3.2010. The appellant has produced the said documents along with the Annual Returns as filed before the ROC. I find that the land holding of the companies as shown in the balance sheet remained the same or had nominally increased. I also find that no profit or loss on account of sale of land was credited or debited in the profit & loss account of the companies. The appellant has brought sufficient material on record in support of his contention that actually there was no sale of land by the companies, and that the seized document merely contained estimates or rough workings. On the other hand, the AO has brought no material on record to show that any sale of land was actually made. No transfer deed was found in search nor was nay brought on record by the AO in course of the assessment proceedings. The AO has not identified the piece of land that was sold by the companies. The AO did not examine the companies to ascertain the facts or to verify the nature of entries as made in the seized document. The AO has blindly interpreted the seized document without ascertaining the facts or verifying the nature of the entries in the seized document. Even in course of the remand proceedings, the AO has failed to bring positive material on record to substantiate his finding that profit was made on sale of land held by the companies. The AO has simply presumed that there was sale of land resulting in profit of Rs. 5,91,83,392/-. The decision of the AO is not based on proper findings. The explanation submitted by the appellant has been summarily rejected by the AO more on presumption than in factual ground. There is positive material on record in the form of the profit & loss account and balance sheet of the concerned companies for the year ending 31.3.2008, 31.3.2009 and 31.3.2010 to show that no sale of land was actually made by the companies. All the three companies mentioned in the seized document still continue to hold such land as per their respective audited accounts and so the entire presumption of sale of land by the AO carries no force. The conclusion of the AO that profit was made on sale of land is contrary to the evidence on record. In this factual background, I am of the opinion that there is no material or evidence whatsoever to substantiate the finding of the AO. The addition of Rs. 5,91,83,392/- as made by the AO is directed to be deleted.

12.4. The ld AR submitted that addition is as follows : a) Page 1 – SSG/48 Rs 1,85,08,949/- b) Pages 7, 8 & 9 Rs.5,91,83,392/-

69 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla

12.4.1. He submitted hat addition on the basis of page 1 –Rs. 1,85,08,949/- is merely on confessional statement and as such addition may kindly be not sustainable.

12.4.2. He submitted that Rs. 5,91,83,392/- has been added on basis of page 7, 8 & 9 of SSG/48. As far as page 9 is concerned, it represents the land owned by different companies, the name of which are duly appearing therein, and such amount being duly reflected in respective companies books of account, and hence no adverse inference can be drawn in that regard. Similarly, page 8 simply shows certain balance sheet items of those companies and in that regard also, no adverse inference can be drawn. As regards pg 7 kindly appreciate that it does not contain anywhere the name of the assessee except the word “SP” and simply on such basis it cannot be presumed that the same belongs/ pertains to the assessee. Further the said document was merely a planning document and deal not having materialized such companies continue to hold such land in their books and hence no adverse inference can be drawn in that regard as well. Without prejudice to the earlier argument, even if it is presumed that SP means the assessee , then also only 35% of 59183392 could be treated in the hands of the assessee. However the ld AO not having corroborated in any manner the link of the assessee with such document, the presumption drawn is bad in law.

12.4.3. He drew our attention to pages 1970, 2021, 2063 of paper book No.12 to substantiate the fact that no change in shareholding of such companies have taken place and hence the entire contention of the ld AO has no substance.

12.4.4. As regards the ld CITA’s action in allowing the set off of the expenses so incurred by assessee and / or its associates, it was submitted by the ld AR that there is no dispute in the fact that assessee had received cash on account of “transaction with Fort” to the tune of Rs. 7,40,90,000/- and also other receipts which was available with assessee and the expenses were out of such sums only and hence the ld CITA was fully justified in allowing such set off. The ld AR also submitted that on a perusal of assessment order itself , it can be observed that the ld AO himself has allowed such set off and now the revenue is disputing such action which amounts to disputing its own earlier action and which is not permissible as per law.

70 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla

12.5. In response to this, the ld DR relied heavily on the order of AO and urged to sustain the addition arising out of page 43 and page 45 of SSG/45.

12.6. We have heard the rival submissions and perused the materials available on record including the paper book submitted by the assessee in this regard. As regards page 43 of the seized document , since ld AR stated that the same is not pressed, the said addition of Rs. 2,57,984/- is sustained and ground raised in CO of assessee is dismissed as not pressed. Hence we do not find any infirmity in the order of the ld CITA in this regard.

12.6.1. As regards page 48, we find that factually there is no change in the shareholding of the impugned companies i.e. Kerf Constructions, Ankit Plantation and Dewan Exports and hence even if we presume for the time being that the contents in pages 7, 8 & 9 are true, and then also, the very basis of ld AO’s addition has lost relevance and addition cannot be sustained on such account. However, we also find that ld AO has filed to corroborate the transaction in such respect nor has brought any evidence and has merely presumed of such transactions the entire addition is bad in law. In the facts of the matter we do not find any merit in ld AO’s contention and hence the entire addition of Rs. 5,91,83,392/- cannot be sustained and such ground of revenue fails.

12.6.2. As regards the revenue’s ground in treating Rs. 1,85,08,949/- out of available cash, we find merit in the fact that that ld AO himself has allowed such set off in the assessment order , so revenue cannot be allowed to change its stand now. Even otherwise, the revenue is not in possession of any evidence nor it has furnished any such fact on record that the sums expended were other than out of sum earned / received as cash by the assessee. Hence, we concur with the order of ld CITA in allowing sums as part of cash flow and as such the revenue’s ground fails on such account.

As a result, we hold as follows: Asst year Appeal No. Ground Result Nos. 2008-09 36/K/12 11 & 12 Dismissed

71 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla 147/K/12 9 Dismissed 2009-10 37/K/12 9 Dismissed 148/K/12 12 Dismissed

A.Y 2006-07 IT(SS) 34/Kol/ 2012 Ground No. 6 - The Ld. CIT(A) is erred in directing the A.O. to consider the undisclosed amt. of 65,300/- found in bank a/c of assesse's wife against the undisclosed cash receipt of assesse.

A.Y 2006-07 C.O. 145/Kol/2012 Ground No.4 - For that in view of the facts and circumstances the Ld. ClT(A) erred in confirming the action of the AO in treating Rs. 65,300/- being the sum credited in the bank account of the wife of the appellant as undisclosed investment of the appellant and such action of the Ld. CIT(A) in confirming the action of the AO is without appreciating the fact that the said bank account stood in the name of the wife of the appellant and if any addition were to be made such addition have been made in the hands of the wife of the appellant only. However, the Ld. CIT(A) without appreciating the fact sustained the addition so made and such action of the Ld. CIT(A) is liable to be quashed / cancelled / set aside.

A.Y 2007-08 CO. 146/Kol/2012 Ground No. 4 - For that in view of the facts and circumstances the Ld. ClT(A) erred in confirming the action of the AO in treating Rs. 85,863/- being the sum credited in the bank account of the wife of the appellant as undisclosed investment of the appellant and such action of the Ld. CIT(A) in confirming the action of the AO is without appreciating the fact that the said bank account stood in the name of the wife of the appellant and if any addition were to be made such addition have been made in the hands of the wife of the appellant only. However, the Ld. CIT(A) without appreciating the fact sustained the addition so made and such action of the Ld. CIT(A) is liable to be quashed / cancelled / set aside.

IT(SS) 35/Kol/2012 Ground No. 6 - The Ld. CIT(A) is erred in directing the A.O. to consider the undisclosed amt. of 67,411/- (Correct amount 85,863/-) found in bank a/c of assesse's wife against the undisclosed cash receipt of assesse.

A.Y 2008-09

72 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla C.O. 147/Kol/2012 Ground No.4 - For that in view of the facts and circumstances the Ld. ClT(A) erred in confirming the action of the AO in treating Rs. 69,882/- being the sum credited in the bank account of the wife of the appellant as undisclosed investment of the appellant and such action of the Ld. CIT(A) in confirming the action of the AO is without appreciating the fact that the said bank account stood in the name of the wife of the appellant and if any addition were to be made such addition have been made in the hands of the wife of the appellant only. However, the Ld. CIT(A) without appreciating the fact sustained the addition so made and such action of the Ld. CIT(A) is liable to be quashed / cancelled / set aside.

IT(SS) 36/Kol/2012 Ground No.1 - The Ld. CIT(A) is erred in directing the A.O. to consider the unexplained cash deposit of Rs. 69,882/- in the Bank account of the wife of assessee against unaccounted cash receipt of the assessee.

A.Y 2009-10 C.O. 148/Kol/2012 Ground No. 5 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming the action of the AO in treating Rs. 3,74.170/- as undisclosed assets of the appellant, although such sum was seized from the premises which does not belong to the appellant and as such the action of the Ld. CIT(A) in confirming the action of the AO is completely bad & illegal and in view of the facts and in the circumstances such action of the Ld. CIT(A) is liable to be quashed/ cancelled/ set aside. This ground is without prejudice to the fact that the appellant has shown the same as application of the income offered by it and hence it may kindly be considered accordingly. Ground No.6 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming the action of the AO in treating Rs. 67,411/- being the sum credited in the bank account of the wife of the appellant as undisclosed investment of the appellant and such action of the Ld. CJT(A) in confirming the action of the AO is without appreciating the fact that the said bank account stood in the name of the wife of the appellant and if any addition were to be made such addition have been made in the hands of the wife of the appellant only. However, the Ld. CIT(A) without appreciating the fact sustained the addition so made and such action of the Ld. CIT(A) is liable to be quashed /cancelled/set aside. This ground without prejudice to the fact that the appellant has shown the same as application of the income offered by it and hence it may be kindly be considered accordingly. Ground No.7 - For that in view of the facts and circumstances the Ld. CIT(A) erred in confirming lhe action of the AO in treating Rs.17,56,785/- as undisclosed investment of the appellant without appreciating the fact that such jewellery had not been found either in the possession of the appellant or from the premises of the appellant hence such action of the AO is without appreciating the fact that such jewellery belonged to the other persons and hence the action of the Ld. ClT(A) in confirming the action of the AO is liable to be quashed/ cancelled/ set

73 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla aside. This ground is without prejudice 10 the fact that the appellant has shown the same as application of the income offered by it and hence it may kindly be considered accordingly.

IT(SS) 37/Kol/2012 Ground No. 1 – The Ld. CIT(A) has erred in deleting the addition of Rs. 3,74,170/- the unaccounted cash seized from the premises of the assessee. Ground No. 2 - The Ld. CIT(A) has erred in deleting the addition of Rs. 17,56,785/- made against the undisclosed jewellery by stating that these are covered by the unaccounted cash receipt of Rs. 7,96,45,460/- in A.Y. 2006-07 & 2007-08.

A.Y 2008-09 IT(SS) 36/Kol/2012 Ground No. 9 - The Ld. CIT(A) erred in directing the A.O. to consider the unexplained expenditure of Rs. 45,456/- accounted cash receipt of the assessee.

13.1. The ld AR submitted that as regards the ld CITA’s action in allowing the set off of the amount of cash, jewellery and undisclosed bank account being out of available cash, it was submitted by the ld AR that there is no dispute in the fact that assessee had received cash on account of “transaction with Fort” to the tune of Rs. 7,40,90,000/- and also other receipts which was available with assessee and as such the cash found or the jewellery and / or the undisclosed bank account were out of such sums only and hence the ld CITA was fully justified in allowing such set off. He also submitted that on a perusal of assessment order itself, it can be observed that the ld AO himself has allowed such set off and now the revenue is disputing such action which amounts to disputing its own earlier action and which is not permissible as per law. On merits, the ld AR did not submit anything in particular.

13.2. In response to this, the ld DR objected to such contention of the ld AR and requested for affirming the addition.

13.3. We have heard the rival submissions and perused the materials available on record including the paper book of the assessee submitted in this regard. As regards assessee’s ground on merits, we do not find any substance nor the ld AR was able to point out any mistake in the order of the ld AO in that regard. Hence assessee’s ground in the respective years in that regard fails.

74 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla

As regards the revenue’s ground in treating Rs. 85,863/-, Rs.69,882/-, Rs.3,74,170/-, Rs.67,411/- & Rs.17,56,785/- out of available cash , we find merit in the fact that that the ld AO himself has allowed such set off in the assessment order so revenue cannot be allowed to change its stand now. Even otherwise, the revenue is not in possession of any evidence nor it has furnished any such fact on record that the sums expended were other than out of sum earned / received as cash by the assessee. Hence, we concur with the order of ld CITA in allowing sums as part of cash flow and as such the revenue’s grounds in respective years fails on such account.

As a result, we hold as follows: Asst year Appeal No. Ground Result Nos. 2006-07 34/K/12 6 Dismissed 145/K/12 4 Dismissed 2007-08 35/K/12 6 Dismissed 146/K/12 4 Dismissed 2008-09 36/K/12 1 Dismissed 147/K/12 4 Dismissed 2009-10 37/K/12 1 & 2 Dismissed 148/K/12 5, 6 & 7 Dismissed

Order pronounced in the open court on 05.10.2016

Sd/- Sd/- (K. Narsimha Chary) (M. Balaganesh) Judicial Member Accountant Member Dated : 5th October, 2016

Jd.(Sr.P.S.)

75 ITA No. 1418,1411,1419,1412,857/Kol/2012 & IT(SS)A No.34-37/Kol/2012 & CO Nos. 145-148/Kol/2012 Surya Prakash Bagla Copy of the order forwarded to: Assessee: Shri Surya Prakash Bagla, C/o, Salarpuria Jajodia & Co., 7, C. 1. R. Avenue, Kolkata0700 072. Revenue –DCIT, Central Circle-VII, Kolkata 2 The CIT(A), Kolkata 3. 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,

Asstt. Registrar.