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DCIT vs M/S. Ramprastha Builders Pvt… | ITAT Delhi 2016 | BharatTax

DCIT, NEW DELHI vs. M/S. RAMPRASTHA BUILDERS PVT. LTD., NEW DELHI

ITA 3238/DEL/2013Status: DisposedITAT Delhi16 February 2016AY 2010-1146 pages

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Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

Attar Singh Gurmukh Singh v. ITO
191 ITR 667 · 1991 · SC
254 citing
Madhav Prasad Jatia v. CIT
118 ITR 200 · 1979 · SC
125 citing
1. S.A. Builders Ltd. v. CIT
268 ITR 1 · 2004 · SC
38 citing
V.Kunhambu & Sons. v. CIT
215 CTR 313 · 1996 · HC
27 citing
Rakesh Mahajan v. CIT
214 CTR 218 · 2008 · HC
24 citing

Income Tax Appellate Tribunal, DELHI BENCH ‘F’ NEW DELHI

Before: SHRI G.D. AGRAWAL & SHRI SUDHANSHU SRIVASTAVA

For Appellant: Smt. Nandita Kanchan, CIT (DR)

PER BENCH

1.

All these four appeals are preferred by the Department. All the appeals pertain to Ramprastha Group of Companies.

2. In the assessee is Ramprastha Builders (Pvt.)

Ltd. and it pertains to Assessment Year 2010-11.It has been filed against the order dated 20.02.2013 passed by the Ld. CIT(A)-XXXIII,

I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 New Delhi. The main issue in dispute is deletion of the addition of Rs.12 crores by the Ld. CIT (A) based on alleged retraction of surrender statement by the Chairman of the Group. relates to another assessee Ramprastha Greens (P) Ltd. in the same group. The impugned order is dated 20.2.2013 and has been passed by the Ld. CIT (A)-XXXIII, New Delhi. In this appeal, the Department has challenged the deletion of addition of Rs. 2 crores, again on the basis of alleged retraction of statement.

Promoters & Developers Pvt. Ltd. in the Ramprastha group of companies. The impugned order is dated 20.2.2013 and has been passed by the Ld. CIT (A)-XXXIII, New Delhi. In this appeal for Assessment Year 2010-11, the Department is agitating the deletion of Rs.14 crores based on alleged retraction of statement by the Chairman of the Group. Another dispute in this appeal is regarding the deletion of addition of Rs. 7,31,89,263/- on account of pro rate notional interest on interest free advances given to associated concerns.

5. I.T.A. 3241 pertains to Assessment Year 2009-10 and the I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 assessee is Ramprastha Promoters & Developers Pvt. Ltd. This appeal has been preferred against the order dated 20.2.2013 passed by the Ld. CIT(A)-XXXIII, New Delhi. The issues in dispute in this appeal are deletion of addition of Rs. 55 crores (added u/s 40A (3) of the Income Tax Act, 1961 and deletion of Rs. 5,10,38764/- being notional interest on interest free advances given to associated concerns.

7.2 All the three assessees in their appeals before the first appellate authority challenged the additions made on the basis of statement of Shri Balwant Singh. The Ld. CIT(A) in the appeals of all the three assessees while allowing their appeals has given almost a similar finding that neither the Investigation Wing nor the Assessing Officer had correlated any seized document with I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 the surrender of stock or work-in-progress. The Ld. CIT (A) was of the view that Shri Balwant Singh was never confronted with the seized documents so as to establish their incriminating nature. As far as the blank letter heads were concerned, the Ld. CIT (A) was of the view that such blank letter heads will in no way prove unaccounted payment to the contractors specially since the various contractors of the Ramprastha group had been surveyed simultaneously and no document of unrecorded receipts were found and no addition was made in the hand of the contractors on this issue whereas the entire construction was done through the contractors. The Ld. CIT (A), accordingly, held that the entire addition was made only on the basis of the statement of Shri Balwant Singh. The Ld. CIT (A) also noted that in the post-search proceedings, the assessees had informed the Investigation Wing twice that the surrender on account of work-in-progress was made without pin-pointing any seized material. The Ld. CIT (A) was also of the view that the Assessing Officer did not take any action even after the statement was, in effect, retracted. The Ld. CIT (A) also held that the surrender was on mistaken facts because as per the statement of Shri Balwant Singh, cash payments for acquiring land were debited in the books of account I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 whereas as per records, Ramprastha group of companies had made payments only through cheques to Dharam Raj Construction and Infrastructure (P) Ltd. who in turn has made cash payments to the sellers of land. The Ld. CIT (A), in the result, proceeded to hold that additions based on retracted statement alone and that too based on mistaken facts could not be sustained. Hence, the appeals of the three assessees viz.

I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 The Ld. DR emphasized that the courts have taken the view that the retraction is to be supported by the person making retraction with supportive evidence/material and he has to establish that the statement was given under such mistaken belief either of fact or of law. Any bald retraction is not permissible. A person retracting from the statement has to establish that the statement was not correct in view of the facts or material/evidence on record or such other facts or material/evidence which came to light at a later stage. Thus a failure on the part of the maker of the statement to prove that the facts earlier stated in the earlier statements were wrong is sufficient to conclude the matter. The Ld. DR submitted that for any retraction to be successful in the eyes of law, the maker of the statement has to show as to how the statement recorded earlier does not state the true facts or that there was coercion, undue influence or threat while recording his earlier statement. The Ld. DR further submitted that the courts have accorded importance to the statement recorded u/s 132(4) by observing that surrender made in the course of search by way of a statement u/s 132(4) has got evidentiary value and it could not be used to sidetrack the attention of the department from making deeper investigation in the matter. The Ld. DR submitted I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 that in the case of Rabindra D. Trivedi vs. CIT 2008 215 CTR 313 (Raj.), the Hon’ble Rajasthan High Court upheld the addition of Rs. 3 lacs representing discrepancies in the stock admitted by the assessee in the statement u/s 132 (4) by holding that during the search the assessee had accepted the discrepancies and had made disclosure by way of calculated attempt to sidetrack the attention of the search party and, therefore, sidetrack the investigations of the discrepancies. But on a later date, the assessee did not disclose the admitted income in the return of income. In these circumstances, the retraction was not allowed and the addition-was upheld. Reliance was also placed on the following decisions - (A) Kantilal C.Shah Vs ACIT Circle-3, Ahmedabad (ITAT Ahd. Ç Bench), (B) Narayan Bhagwantrao Gosavi Balajiwale vs Gopal Vinayak Gosavi & Ors. (AIR 1960 100 SC), (C) T.S. Kamarasamy vs ACIT (65 ITD 189) (ITAT Mad.), (D) Rakesh Mahajan Vs. CIT 214 CTR 218 (P&H)

He submitted that the exceptions provided in Rule 6DD are not exhaustive and therefore the provision of section 40A (3) shall not be attracted if the parties are identified and there is not material on record to doubt the genuineness of the payment. He submitted that the first proviso of section 40A (3) clearly provides the exceptions (as prescribed by the board in Rules), but the Rules are required to be framed keeping in view the legislative intention as prescribed in the main section and it clearly prescribed that the consideration of business consistency and other relevant factor are required to be considered before invoking the provision of section 40A (3). He submitted that the assessee has not claimed any expenditure for purchase of land in the profit and loss account and therefore did not reduce its income and as such I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 the provisions of section 40A (3) cannot be invoked in a mere technical manner. He submitted that if the contention of the assessing officer taken as correct an artificial income will be assessed. He further submitted that otherwise also, the Honorable Supreme Court in Attar Singh Gurumukh Singh vs ITO 191 ITR 667 has clearly observed that the purpose of section 40A(3) is to disallow bogus cash payment for increasing the expenditure for artificially reducing assessable income only but not to disallow genuine expenditure though incurred in cash due to business exigencies. He further submitted that the latest judgment of various High Court and Tribunals after considering the judgment of Attar Singh Gurumukh Singh vs ITO after considering the genuineness of the payment, identity of the payee and compelling and mitigating circumstances has taken a view favorable to the tax payer .He submitted that in the present case, the assessee is engaged in the business of real estate, it purchased agricultural land in village surrounding Gurgoan vide registered sale deed and the purchaser has admitted before the sub registrar having received the entire consideration. This clearly proves that the payment and the identity of the payee is not doubted. Further the assessee would not be able to purchase I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 land if the cash payment would not have been paid and the business of the assessee would have suffered and therefore exception as provided in rule 6DD will come to be invoked. He placed reliance on RC Goel vs. CIT 84 DTR 0432(Del), Sri Laxmi Stayanarayana Oil Mills vs. CIT 367 ITR 0200(AP), Smt. Harshila Chordia vs. ITO 208 CTR 0208 (Raj.), Anupam Tele Services vs. ITO 366 ITR 122 (Guj.), Walford Transport (Eastern India) Ltd. Vs. CIT 240 ITR 0902 (Gauhati). He submitted that the Ld. CIT has passed a reasoned order on the facts of the case and as such the same should be upheld.

14.

We have heard the rival submissions and have perused the material on record. First and foremost issue is the issue with regard to additions made on the basis of the surrender statement of Shri Balwant Singh. The said surrender is highlighted in Answer to question no. 5 of impugned statement of Shri Balwant Singh, inter alia stating that "...The detailed explanation of these annexure of loose pages/hard disks/pen drive would be submitted by me later. Most of the transactions in these annexure are reflected in the books of accounts of various companies of Ramprastha Group. However, after prima facie going through these documents, I admit that some of the transactions are not reflected I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 and recorded in the books of accounts of various companies of Ramprastha Group. On account of non recorded/non reflection of these transactions, I hereby voluntarily admit following additional income for taxation... ” It is further explained in Answer to Question No. 15, 16 wherein it is stated inter alia that “ I have voluntarily admitted additional income of Rs 52 crores over and above regular income in the hands of various persons belonging to the group. ” We find that there is a gross lack of clarity and total vagueness in aforesaid statement of Shri Balwant Singh so as to lead to any conclusion, much less adverse conclusion, to fasten any tax liability. It is a well laid down law that there is no concept of "on the spot” assessment at the time of search u/s 132 of the Act. During Post search enquiries Shri Balwant Singh again repeated his surrender statement. The recording of the statement again by the Investigation Wing under the aforesaid circumstances is nothing but technically repeating the same exercise. We also find force in the arguments of the Ld. AR that mere one person not authorized by other persons (here assessee companies and individual) being independent and separate assessees cannot fasten any liability on others. Shri Balwant Singh I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 cannot be treated as spokesperson for others who have not adopted his statement in writing. Further, knowledge and capacity of a single person who is not having full and complete knowledge of financial affairs of everybody connected to search operations, needs to be appreciated.

Dadia (ITA Nos. 484, 1067 & 1194/Mum./2009) held that, “The judgment in Meghraj S. Jain (supra), relied upon by the learned Departmental Representative, does not come to the rescue of the Revenue for the reason that the High Court held that, a retracted I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 confession can be acted upon only when there is corroborative evidence gathered by the authorities. In this case, there is no corroborative evidence. The Assessing Officer has not done any investigation or collected any evidence. On the other hand, CBDT has, in its Circular, directed their officers to base their assessments on the evidence collected during the course of search and. during the course of assessment proceedings. It was specifically directed that no addition should be based solely on confession or disclosures made at the time of search. The Hon’ble Gujarat High Court in Kailashben Manharlal Chokshi (supra), has held that a statement recorded at midnight need not be given any credit as the person may not be in a position to make any c0rrect or conscious disclosure in a statement, if such statement is recorded at such odd h0urs. In view of the above and also in view of the fact that the assessee has never, at any, given point of time, stated or agreed that the purchase and sale of shares were not genuine, we are of the opinion that the Assessing Officer was wrong in basing his entire assessment order on this one answer given by the assessee at the time of search, that too, without investigation, subsequent to a retraction. Coming to the variation in statement recorded under section 131 of the Act during the course of I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 assessment proceedings, we do not find any merit in the conclusions drawn by the Assessing Officer which are presumably, based on the purported variations in the replies to questions, especially when the assessee has furnished evidence to show that he had, in fact, purchased and sold shares of M/s. Bolten Properties Ltd.. ”

I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 It was also stated that any action on the contrary, shall be viewed seriously and the said circular has to be applied to all pending assessments. Thus the Board insisted the Assessing Officer to rely upon the evidences/materials gathered during search operation and that the assessment could not rest simply on the confession statements made. Thus going by the said decision of the Supreme Court, as well as the law declared in the decision reported in (1973) 91 ITR 18 (Pullangode Rubber Produce Co. Ltd. V. State of Kerala and another) that it is always open to a person who made the admission, to show that the statement to offer income is incorrect and had material to substantiate so, we hold that the Tribunal is not justified in placing undue emphasis on the confession statements made by the assessee. …As rightly pointed out by the learned counsel appearing for the assessee when the assessee had explained the statement made on the second day of the search with materials, that the amounts offered were the loans taken from the relatives who were already assessed on the said amount; apart from this, even otherwise, the transactions relating to pawn broking, related to years prior to the date of assessment and had no relevance to the year under consideration, rightly the Commissioner of Income Tax (Appeals) accepted the case of I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 assessee to cancel the assessment on Rs.4.00 lakhs. Thus when the assessee had explained his statement as not correct in the context of the materials produced, as held by the Apex Court in the decision reported in (1973) 91 ITR 18 (Pullangode Rubber Produce Co. Ltd. V. State of Kerala and another), we do not think that the Tribunal would be justified in its conclusion that the statement made would clothe the assessment with legality. Quite apart from that, the case of the assessee also stands supported by the Circular dated 10th March, 2003 of the Central Board of Direct Taxes, which has given categorical directions to the officers, who are entrusted with the job of assessment that undue emphasis should not Be placed on the statements recorded In fact, it had given a mandate not to obtain confession as to the undisclosed income. Thus applying the Circular dated 10th March, 2003 to the facts of the case, which is binding on the Revenue, we have no hesitation in setting aside the order of the Tribunal. ”.

Apex Court has stated that an admission, however, binds the person making it only in so far as facts are concerned but an admission is not a conclusive proof of the matter admitted, though it may, in certain circumstances, operate as estoppel. But in such cases, there should be no doubt or ambiguity about the alleged admission. However, an admission or acquiescence on I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 the part of the assessee cannot be the foundation of assessment, where the income is returned under an erroneous impression or misconception of law. It is always open to the assessee to demonstrate and satisfy the authority concerned that a particular income was not taxable in his hands and that it was returned under erroneous impression. In the present case before us, the assessee has proved that the disclosure made was neither the undisclosed / unaccounted income of the assessee-company and not even a single piece of incriminating paper or document or evidence of any nature were found from the impounded materials. Even the AO has made addition just on the basis statement recorded. There is no iota of evidence, which suggest that there is unaccounted / undisclosed income emerging out of the incriminating seized during the course of search. Thus, considering the entire factual matrix we find that the AO has not been able to demonstrate or give even an example of any document seized which has not been reflected in the books of accounts. The adverse inference drawn by the AO on the basis of the letterheads of different contractors found during the search is wrong and in fact contradictory. Firstly, the letterheads of the different contractors per se did not establish that assessee has I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 done something wrong. The AO has not even referred to any expenditure or deduction debited or claimed in the books of account which is not genuine. Under the law the assessee is supposed to state the correct income. The correct income will mean income which is not less than the income earned and not more than the income actually earned. Thus the assessee has offered the correct income in its return of income and AO has not been able to point out or give any instance of any error or discrepancy in the income offered. Having considered the entire facts and arguments, we find that the neither the Investigation