SHASHIKIRAN SHETTY,MUMBAI vs. DCIT CEN CIR 44, MUMBAI

आदेश / O R D E R

PER RAMIT KOCHAR, Accountant Member ITA 5813/Mum/2013 & 2 ITA No. 5978/Mum/2013

First, we shall take assessee’s appeal in 2007-08.

“1) The Commissioner (Appeals) erred in confirming the addition of Rs.35,00,000/-to the income of the assessee on the ground that the assessee had paid consideration of Rs.35,00,000/- in cash on purchase of the land from the Maskar Family. 2) The Commissioner (Appeals) erred in not admitting the Affidavit dated 22nd January, 2010 filed by the assessee in the course of the appellate proceedings on the ground that new evidence not filed before the Assessing Officer could not be admitted in the appellate proceedings. 3) The Commissioner (Appeals) has failed to' appreciate the case of the assessee that the title to the property was not clear and the assessee had to indulge into litigation whereby the transfer of the land was delayed by a year and therefore, the assessee has not paid the cash consideration to the Maskar Family.

ITA 5813/Mum/2013 & 3 ITA No. 5978/Mum/2013

4) The order of the Commissioner (Appeals) is bad in law and without jurisdiction.”

5.Notice u/s 153A of the Act was issued and served upon the assessee and in response to the notice , the assessee filed return of income u/s 153A of the Act on 25th January, 2008 declaring total income of Rs. 4,11,86,820/-.

7.In the return of income filed by the assessee u/s 153A of the Act with the Revenue on 25-01-2008 for the relevant assessment year 2007-08, the assessee failed to declare the said amount of unaccounted cash of Rs.35 lacs paid to the Masker family.

The AO held that as per page 112 of Annexure A-14 dated 13-02-2007 impounded by the Revenue during survey operations on 26-04-2007, the Maskar family completed the deal on 13th September, 2006 and the land was transferred in the name of the assessee. The A.O. rejected the contention of the assessee in view of the land deal with Maskar family being completed on ITA 5813/Mum/2013 & 5 13th September, 2006 and hence the AO held that the contention of the assessee that the land deal is under process cannot be accepted as correct .

The A.O. held that the statement recorded u/s 131 of the Act on 26th April, 2007 in reply to Q. No. 6 Shri Diwan Singh, employee, categorically stated as under :

“Q.6. Kindly give the details of the lands, names of the sellers and transaction value in Cheque and Cash?

Ans. In the case of Maskers appearing in SL No. 5, 6 & 7 the total consideration of the land admeasuring 11.78 Acres a mentioned in the statement (whereas on physical verification the actual measurement of the land comes to 10 Acres as mentioned in the Sale Agreement) comes to Rs.1,70,81,000/- @ Rs.14.50 Lakhs/Acres . As stated above the actual measurement of the land is 10 Acres only @ Rs.14.50 Lakhs/Acres. However payments were made to the sellers for 10 Acres only @Rs.14.50 Lakhs/Acres. As stated above the actual measurement of the land 10 Acres only. Therefore the total payment made to the seller in respect of this land is Rs.1,45,00,000/- out of which Rs.1,10,00,000/- paid in Cheque and the balance amount of Rs.35,00,000/- was paid in Cash.”

Thus, vide statement u/s 131 of the Act dated 26/04/2007 , employee of the assessee Sh. Diwan Singh stated that the assessee acquired the land admeasuring 10 acres @ Rs. 14.50 lakhs per acre from Maskar family , for which the total payment were made by the assessee in respect of this 10 Acres land aggregating to Rs. 1,45,00,000/- @ Rs.14.50 lakhs/acre, out of which Rs. 1,10,00,000/- was paid by the assessee to Maskar family by cheque and the balance amount of Rs. 35 lacs were paid in cash.

ITA 5813/Mum/2013 & 6 The A.O. held that the assessee’s explanation that cash of Rs.35 lacs was not paid to Maskar family owing to dispute with the Maskar family with respect to the area measurement of the land and non availability of approvals for permission to sell from the State Government as the land was Adivasi/Kul land are not supported by any evidence on record and is an afterthought by the assessee to wriggle out of the tax liability . In view of the above facts, the A.O. added an amount of Rs. 35 lacs , being un-accounted cash of Rs.35 lacs paid by the assessee to the Maskar family for acquiring Nagpur land , to the income of the assessee vide assessment order dated 30th December, 2009 passed by the AO u/s 143(3) r.w.s. 153A of the Act.

It was submitted by the assessee before the learned CIT(A) that the assessee made an application to the Hon’ble Collector for permission for the sale of tenancy but the transaction was declared invalid and land vested back to the State Government by the Hon’ble Court of Tahasildar (Rural) Nagpur vide ITA 5813/Mum/2013 & 7 orders dated 17th October, 2007. Since the Masker family could not obtain the necessary approvals, the land was not transferable due to non-availability of State government clearance. However, the assessee made subsequent appeal against the order dated 17-10-2007 of the Tahsildar before the Hon’ble Sub- Divisional Officer, Nagpur and the sale was declared legal vide appellate orders dated 29th November, 2007 passed by Hon’ble SDO , Nagpur in favour of the assessee. Thus, though the sale deed was executed on 13th September, 2006 , the same was held to be legal only vide appellate orders dated 29th November, 2007 of the Hon’ble SDO.

In view of the above, the assessee submitted before the learned CIT(A) that the only payment made was Rs. 1.10 crores by cheque vide registered sale deed dated 13-09-2006 and the assessee has not paid unaccounted cash payment of Rs. 35 lacs to Maskar family for purchase of the Nagpur Land.

The assessee further submitted that the impounded paper page No. 112 of Annexure A-14 during survey operations u/s. 133A of the Act on 26-04-2007 only give details about the deal with the Maskar family such as name of the farmer, Khasra number, area , deal completion date and rate per acre. It does not mention any unaccounted cash payment of Rs. 35 lacs to Maskar family . It was submitted that the assessee in his statement on oath recorded u/s 132(4) of the Act on 27-04-2007 merely reiterated the facts stated by his Manager Mr. Diwan Singh with respect to the Maskar family property at Nagpur , the application for permission was already made and assuming that the same will be granted. It was submitted before the learned CIT(A) that his employee Mr. Diwan Singh and the assessee offered the afore-stated undisclosed income of un-accounted cash of Rs. 35 lacs paid to Maskar family towards purchase of Nagpur Land with a view to buy peace with the Revenue and not to litigate the matter any further. It was submitted that at the time of filing of return of income u/s. 153A of the Act with the Revenue ITA 5813/Mum/2013 & 8 on 25th January, 2008, the entire details were again verified and it came to the knowledge of the assessee that the cash of Rs. 35 lacs was not paid at all in view of the litigation expenses incurred by the assessee and since the title to the property was disputed. It was submitted that the declarations of Rs.35 crores have been made by the assessee and his group concerns u/s 132(4) of the Act in two searches conducted by the Revenue which have been honored by the assessee and his group concerns and there was no reason not to offer the amount of Rs. 35 lacs which is less than 1% of the total declaration made over and above the regular income.

The learned CIT(A) considered the submissions of the assessee and the facts of the case on record including the assessment order. The learned CIT(A) observed that based on the Annexure A-14, page No. 112 impounded during survey operations on 26-04-2007 u/s 133A of the Act against All Cargo Logistics Limited at Kaporoli Village, Tehisl Uran, District Raigadh, Maharashtra , and also the statement of Shri Diwan Singh, the employee of the company u/s 131 of the Act recorded on 26th April 2007, whereby it was stated that the total consideration of land of 10 acres @ Rs. 14.5 lakhs per acre which was sold by the Maskar family to the assessee for total consideration of Rs. 1,45,00,000/-. There was some discrepancy in the area measurement as the document impounded refers to the total area of the land sold at 11.75 Acres but on physical verification, the actual measurement of the land sold was only 10 Acres as mentioned in the sale agreement and Mr Diwan Singh clarified that finally out of total consideration of Rs. 1.45 crores, payment of Rs. 1.10 crores was made in cheque and Rs. 35 lacs was paid in cash to the Maskar family, for 10 acres of the land so transferred to the assessee by the Maskar family. The statement of Shri Diwan Singh , employee of the assessee recorded u/s 131 of the Act on 26-04-2007, was further confirmed by the assessee vide his statement on oath recorded on 27.04.2007 u/s 132(4) of the Act whereby the assessee admitted to have ITA 5813/Mum/2013 & 9 ITA No. 5978/Mum/2013 made payment of un-accounted cash of Rs. 35 lacs to Maskar family for acquisition of land at Nagpur. The assessee has not declared the unaccounted amount of cash payment of Rs. 35 lacs for purchase of land at Nagpur from Maskar family in the return of income filed with the Revenue u/s 153A of the Act on 25-01-2008 on the ground that this cash payment of Rs. 35 lacs was never made since the property was in dispute . But as per the statement on oath u/s 132(4) of the Act by the assessee on 27-04-2007 , the narration of the events reveals that the matter stands settled and the sale was declared legal vide order of the Sub Divisional officer dated 19-11-2007. The learned CIT(A) observed that the assessee stated that since the litigation involved certain expenses, the cash payment of Rs. 35 lacs was not paid to Maskar family towards acquisition of Nagpur Land but the said contention cannot be accepted for the reasons that the impounded document during Survey refers to the transaction in question as of a ‘deal completed as on 13th September, 2006’ which was later confirmed by Shri Diwan Singh in statement recorded u/s 131 of the Act on 26-04-2007 and corroborated further by the assessee vide his statements recorded u/s 132(4) of the Act on 27-04-2007 respectively. The CIT(A) observed that the payment of Rs. 14.5 lakhs per acre must have been paid by 13th September, 2006 which is clearly evident from the impounded document which shows that the deal was completed on 13th September, 2006 otherwise the assessee could have shown the transaction as ‘under process’ which is similar to the case of certain land transactions with a person named as Motiram J. Khairkar vide page 112 of Exhibit A-14. The statement of Shri Diwan Singh admitting payment of Rs. 35 lacs having been made in cash to Maskar family for purchase of land at Nagpur was also confirmed by the assessee which corroborate the contents of the impounded document. The assessee also submitted an affidavit dated 22nd January, 2010 from Maskar family before the learned CIT(A) whereby it is stated in the notorized affidavit that the total consideration was only 1.10 crores and no extra payment as originally agreed was received by the Maskar ITA 5813/Mum/2013 & 10 ITA No. 5978/Mum/2013 family. This document was an additional evidence furnished by the assessee during the course of the appellate proceedings before the learned CIT(A) and it was held by the learned CIT(A) that no case was made out by the assessee for admission of an additional evidences as required under Rule 46A(1) of the Income Tax Rules, 1962. This fresh evidence vide affidavit dated 22-01-2010 from Maskar family was not admitted by the learned CIT(A) since it was not produced before the A.O. . The learned CIT(A) rejected all the contentions of the assessee and the addition made by the A.O. of Rs. 35 lacs towards unaccounted cash paid to the Maskar family for purchase of Nagpur Land was confirmed, vide appellate orders dated 26-07-2013 passed by learned CIT(A).

11.Aggrieved by the appellate orders dated 26-07-2013 passed by the learned CIT(A), the assessee filed second appeal before the Tribunal.

S.No. Date Particulars of Event. 1 11.05.2006 Application to Collector for permission for sale of tenancy 2 13.09.2006 Registered Sale Deed for Nagpur Land from Maskar Family consideration of Rs.1.10 crores 3 26.04.2007 Date of Search u/s 132 (First) 4 27.04.2007 Statement u/s 132(4) offering income including Rs.35.00.000 for Nagpur land. 5 11.06.2007 Show Cause Notice u/s 122(1) of B.T. & A.L. (V.R.) Act. 1958 (Bombay Tenancy and Agricultural Lands (Vidharbha Region) served on assessee for declaring the transaction for Nagpur land as invalid and to restore the land to State Government. 6 31.07.2007 Return filed u/s 139 (I) declaring income of Rs. 4,11.86.818 7 17.10.2007 Court of Smt. Vijaya Bankar Tahasidar (Rural) Nagpur order u/s 57 B.T. & A.L. (V.R.) Act. 1958 of declaring agreement dated 13.9.2006 ITA 5813/Mum/2013 & 12 ITA No. 5978/Mum/2013 as invalid and initiated proceedings u/s 122(3) for land to be vested with State Government. 8 31.10.2007 An appeal under section 247 of Maharashtra Land Revenue Code.1966 filed against the order dated 17.10.2007 before Court of Sub Divisional Officer, Nagpur. 9 1.11.2007 Court of Sub Divisional Officer, Nagpur passed a Stay order against the order dated 17.10.2007. 10 29.11.2007 Court of Sub Divisional Officer, Nagpur passed quashing the order dated 17.10.2007. 11. 25.01.2008 Return in response to notice u/s 153A declaring income of Rs.4,11,86,818 12. 10.07.2009 Date of Search u/s 132(second) 13. 29.10.2009 Return in response to notice u/s. 153A declaring income of Rs.4,11,86,818 14. 31.12.2009 Assessment order u/s 143(3) r.w.s.153A determining income at Rs.4,46,86,820 (Addition of Rs. 35,00,000 for Nagpur Land) 15. 22.01.2010 Notorized Affidavit of Maskar family for not having received any other consideration other than Rs.1.10 crores as per agreement dated 13.09.2006 The ld. Counsel for the assessee drew our attention to the page 18-22 of the paper book whereby the Tahsildar (Rural) Nagpur directed for took over of the land by the State vide order dated 17th October, 2007 by declaring the sale transaction between the assessee and the Maskar family as invalid and vesting all the land with the state government. The ld. Counsel further drew our attention to the order of the SDO, Nagpur dated 29th November, 2007 whereby the order of the Tahsildar, Nagpur has been quashed and set aside and the sale transaction declared as valid (paper book page No. 36 to 43). The ld. Counsel also drew our attention to the affidavit dated 22nd January, 2010 from Maskar family which is placed at paper book page No. 44-45 whereby they confirmed having received Rs.1.10 crores towards sale consideration of their Nagpur Land and have denied to have received the ITA 5813/Mum/2013 & 13 unaccounted cash payment towards sale consideration of their Nagpur Land. The learned CIT(A) refused to admit the additional evidence by way of notorized affidavit dated 22-1-2010 filed for the first time before the learned CIT(A). The ld. Counsel submitted that permission for the transfer of the land was obtained by the buyer instead of the seller and the additional litigation expenses were incurred by the buyer and hence due to the dispute in the land and the litigation expenses being additionally incurred by the assessee instead of the seller, the amount of Rs. 35 lacs was withheld by the assessee and not paid to the seller.

The impounded document which is dated 13-02-2007 , A-14 page 112 clearly refers to the Nagpur land as ‘deal completed 13 Sep 06’, while with respect to Nagpur land deal with Mr. Motiram J Khairkar it is described that the deal is ‘under process’ The statement on oath recorded u/s 131 of the Act has not been retracted by Diwan Singh nor the assessee has retracted his statement recorded u/s 132(4) of the Act on 27-04-2007. The assessee has filed notorized affidavit dated 22nd January, 2010 of the Maskar family denying that cash payments were received by the Masker family from the assessee , which is almost after three years of the date of search and survey which cannot be admitted as additional evidence at this late stage and is merely a self serving document and is an after-thought . Moreover, the Masker family is recipient and beneficiary of this unaccounted cash of Rs. 35 lacs and it is very much understandable that to protect themselves against any potential action by the Revenue under the provisions of the Act , they have given this affidavit dated 22-1-2010 almost after three years after date of search and survey operations on 26-04-2007 against the assessee and his group concerns.

With regard to the permission/approval which are required from the courts as contended by the assessee being in the nature of dispute with the Maskar family and the main reason for non payment of cash of Rs 35 lacs to the Maskar family, the assessee was fully aware of the permissions required from the authorities and the application was duly filed with the Hon’ble Collector for approval on 11-05-2006 . The assessee got the land transferred on 13-09- ITA 5813/Mum/2013 & 17 2006 from Maskar family in his favour vide registered sale deed dated 13-09- 2006 whereby the consideration of Rs.1.10 crores was duly paid by the assessee to Maskar family by the cheque as reflected in the said registered sale deed against the total agreed consideration of Rs.1.45 crores . Now w.e.f 13-09-2006 the assessee is the owner of the property enjoying the possession of the property and it is highly improbable on touch stone of preponderance of probabilities that the Maskar family will transfer the title of the land on receiving payment of Rs.1.10 crores as is stated in the registered sale deed, without receiving the entire consideration of Rs 1.45 crores which is also confirmed vide impounded material vide page 112 Annexure A-14 whereby it is stated that deal with Maskar family is completed by 13-09-2006 and the un-accounted cash payment of Rs. 35 lacs having been made in cash to Maskar family for purchase of Nagpur land from Maskar family is further confirmed by the statement recorded u/s 131 of the Act of Mr Diwan Singh and also the statement on oath u/s 132(4) of the Act of the assessee recorded by the Revenue on 26-04-2007 and 27-04-2007 respectively .

We have given our anxious thought to the plea of the assessee that because the certain permissions were found to be taken to delete the word Adivasi/Kul, the consideration of Rs. 35 lacs was withheld but we are not agreeable with the contentions of the assessee as the assessee company has not produced any documents to support its contentions and has made a bald statement to that effect. In-fact as per the documents which are produced by the assessee in the paper book filed before the Tribunal, the assessee purchased this land from Maskar family which was an agricultural land bearing no. 93/1, 93/2 and 93/3 admeasuring 2.35 , 1.21 and 1.21 HR respectively of Mauza Borkhedi(Railway), Tehsil and District Nagpur. The Maskar family was occupying this land as occupancy tenants w.e.f 13-05- 1966. The land is governed by the Provisions of Bombay Tenancy and Agricultural Land (Vidharbha Region) Act,1958 and in view of Section 57 of ITA 5813/Mum/2013 & 18 the said Act of 1958, the previous sanction for transfer is mandatory except in a case land is purchased by an occupancy tenant. The transfer of the said land is subject to approval of the Hon’ble Collector as provided u/s 57 of the said Act of 1958 as under:

“ 57 (1) No land purchased by a tenant under section 41 or 46 or 49A or 57D or 130 or sold to any person under Section 91 or 122 shall be transferred by sale, gift, exchange , mortgage, lease or assignment without the previous sanction of the Collector .Such sanction shall be given by the Collector in such circumstances and subject to such conditions as may be prescribed by the State Government.

(2) Any transfer of land in contravention of sub-section(1) shall be invalid.

Provided that nothing in this section shall apply to the land purchased by an occupancy tenant.”

The assessee approached the Hon’ble Collector who vide letter dated 11-05- 2006 referred the matter to the Hon’ble SDO and the Hon’ble SDO vide letter dated 21-07-2007 referred the matter to the Hon’ble Court of Tahasildar (Rural), Nagpur to enquire the said application according to the law and submit the report to Hon’ble SDO for permission for the sale of tenancy land to the assessee. Thus, the assessee was fully aware of the permission required u/s 57 of the Act of 1958 for sale of this tenancy land by the Maskar family who were the occupying the land as occupancy tenants as the application was made for permission by the assessee with Hon’ble Collector on 11-05-2006 The Hon’ble Court of the Tahasildar who received the directions from SDO on 21-07-2007 was of the view that the assessee has violated the provisions of Section 57 of the Act of 1958 as no previous sanction was obtained from the Hon’ble Collector before purchasing the land . The assessee submitted before ITA 5813/Mum/2013 & 19 the Hon’ble Court of Tahasildar that the land is purchased by the assessee and the said land is also mutated in his favour in the revenue record .The assessee also stated that not any objections are received from the sellers or any other person after the publication of Jahirnama dated 08-06-2007. It is the averment of the assessee that the Sarpanch of Borkhedi(Railway) has given a positive certificate dated 08-06-2007 for regularization of the said transaction. The assessee contention before the Court of Tahasildar was that the land is situated in residential zone and therefore the provisions of Act of 1958 are not applicable to this land as per provisions of Section 128(b) of the Act of 1958 which provided as under:

“128. Nothing in the foregoing provisions of this Act shall apply,- ***** (b) to any area which the State Government may, from time to time , by notification in the Official Gazete , specify as being reserved for non- agricultural or industrial development ; ***** *****” The assesssee relied upon the government notification dated 12/05/2000 and the order dated 13-03-2007 passed by Hon’ble Collector Pune in the similar matter. The assessee made alternative argument that even if Section 57 of the Act of 1958 is applicable, still the sanction is not required as the land is purchased by the occupancy tenant. Further , it was submitted that if the permissions is required u/s. 57 of the Act of 1958 and the land is sold without prior permission of the Hon’ble Collector, then the Hon’ble Collector has to grant the sanction to the said transaction of sale of the land by following Rule 31-A of the Bombay Tenancy and Agricultural Land (Vidharbha Region) Rules,1959. The assessee did not furnished the copy of registered sale deed nor specified the date of purchase of the land before Hon’ble Court of Tahasildar despite being specifically asked by the ITA 5813/Mum/2013 & 20 Hon’ble Court of Tahasildar . The Hon’ble Court of Tahasildar declared the sale as invalid as per the provisions of Section 57 of the Act of 1958, as the assessee had violated the provisions of Section 57 of the Act of 1958 and Rules framed there-under and also gave directions for vesting the said land to the State Government.

The assessee thereafter filed Revenue appeal and an application for grant of stay with Hon’ble Sub-divisional officer, Nagpur on 31.10.2007 . The assessee submitted before the Hon’ble SDO that the assessee purchased the land from the original landlord Mr Vithoba Sakharam Maskar vide registered sale deed dated 13/09/2006. It was submitted that after the execution of sale deed on 13-09-2006, the assessee came to know that the original landlord was holding the land as occupancy tenant as defined under the Act of 1958 and the said occupancy tenant became owner of the land on 13-05-1966 by depositing the purchase price as determined by Agricultural Land Tribunal and Tahasildar, Nagpur by way of deposit of Rs.1179.95 in the Government Treasury. The assessee submitted that the assessee is bonafide purchaser in possession of the land. The assessee made application with Hon’ble Collector for permission which was forwarded to the Hon’ble SDO who in turn forwarded to the Hon’ble Court of Tahasildar for report , but Hon’ble Court of Tahasildar instead of submitting the report declared the sale as invalid as per the provisions of Section 57 of the Act of 1958, on the grounds that the assessee had violated the provisions of Section 57 of the Act of 1958 and Rules framed there-under and also gave directions for vesting the said land to the State Government, which is illegal. The assessee reiterated its submissions and the Hon’ble SDO, Nagpur vide orders dated 29-11-2007, quashed and set aside the orders dated 17-10-2007 of the Hon’ble Court of Tahasildar, Nagpur and granted sanction to the sale transaction dated 13/09/2006 in respect of the land purchased by the assessee.

ITA 5813/Mum/2013 & 21 Thus, the perusal of the above clearly reveals that the assessee was aware of the Maskar family holding the land as occupancy tenant for which the application was made to Hon’ble Collector as early as on 11-05-2006 i.e. before the sale deed was registered in assessee’s favour on 13-09-2006 by the Masker family. The dispute mainly arose when the Hon’ble Court of Tahasildar issued notice to the assessee after receipt of letter dated 21-07- 2007 from Hon’ble SDO , and by that time the land was already purchased by the assessee vide registered sale deed dated 13-09-2006 and possession was also enjoyed by the assessee .One of the contentions for invalidating the sale transaction taken is violation of Section 57 of the Act of 1958 by the Hon’ble Court of Tahasildar(Rural),Nagpur, but the assessee conduct was also not upto the mark as the assessee did not supplied the copies of the sale deed and the date of sale despite being called upon the Hon’ble Court of Tahasildar(Rural), Nagpur The assessee was aware that the Maskar family was having right to transfer the land which was vested vide orders dated 13-05-1966 passed by the Land Agricultural Tribunal and purchase price has been deposited by Maskar family with the Government Treasury.The Maskar family was having cultivating continued possession of the land since then and hence have duly complied with the requirements of the Section 43(5) of the Act of 1958.

The assessee was aware that the State Government has issued notification dated 12/05/2000 and in view of the provisions of Section 128(b) of the Act of 1958, no prior sanction of the Hon’ble Collector will be required under the Act of 1958.

The assessee was aware that if the permissions is required u/s. 57 of the Act of 1958 and the land is sold without prior permission of the Hon’ble Collector, then the Hon’ble Collector can grant the sanction to the said transaction of ITA 5813/Mum/2013 & 22 sale of the land by following Rule 31-A of the Bombay Tenancy and Agricultural Land (Vidharbha Region) Rules,1959.

Nothing is emanating from the records that the Maskar family agreed to obtain the permission for the sale of the afore-stated land. The Masker family has right and title to sell the land , but of course subject to approval as set out above. It is a contractual obligation which emerges from the contract between the parties as to the rights and obligations of each of the contracting parties which emerges from the contract entered into between the parties to the contract. It was for the assessee to demonstrate with positive evidence that the Maskar family obligated to obtain the permission for sale of the property at their cost by bringing on record agreement to sale/registered sale deed but the said documents are not brought on record to evidence the obligation of the seller to seek the permission for transfer of the said land at their cost. Rather , the assessee made an application with Hon’ble Collector and also with other relevant authorities as applicant while the seller Maskar family is a non-applicant , which also demonstrate in the absence of evidence to the contrary that it was the assessee who was obligated to take the necessary permissions for transfer of the land in his favour in compliance of the law. In the absence of any cogent material and evidences brought on record by the assessee to the contrary , the presumption will be against the assessee as the evidences are withheld by the assessee. In any case if the assessee came to know only on 11-5-2006 for the first time that land held by the Maskar family is held by them as an occupancy tenant when he made the application with Hon’ble Collector for grant of permission u/s 57 of the Act of 1958, nothing prevented the assessee from cancelling the deal with the Maskar family as the sale deed was registered only on 13-09-2006 or atelast putting the said new facts in writing with Maskar family putting onus on the Maskar family to bear all additional litigation costs with respect to the seeking approval u/s 57 of the Act of 1958 to avoid any dispute/litigation with the ITA 5813/Mum/2013 & 23 Maskar family in future as the same was not disclosed to the assessee by the Maskar family presumably at their fault while entering into the deal as claimed by the assessee, if the contentions of the assessee is to be believed to be true , which in our humble and respectful opinion we are not inclined to accept the same.

The contention of the assessee that it is because of Adivasi/Kul Land and additional permission to get the ‘KUL’ deleted from the records was undertaken by the assessee at his own cost, is not borne from the records and cannot be accepted. The affidavit of Masker family is dated 22-1-2010 which is almost 3 years after the date of search/ survey on 26-04-2007 and is a self serving document which is an afterthought as Maskar family is the recipient/beneficiary of Rs 35 lacs received from the assessee and it is understandable to protect themselves as against any potential threat of action by the Revenue to fasten tax liability against them, they have denied having receiving un-accounted cash of Rs. 35 lacs in order to support the claim of the assessee to wriggle out of possibility for an potential adverse action by the Revenue against them under the provisions of the Act.

From the records and facts as emerging from our detailed discussions and reasoning as set out above in the preceding para’s, we conclude on the touchstone of preponderance of probabilities as under - a) That the Masker family executed registered sale deed on 13-09-2006 in favour of the assessee with respect to the land under consideration . b). The assessee is enjoying peaceful vacant and physical possession of the land under consideration since the execution of registered sale deed in his favour w.e.f. 13-09-2006 by the Masker family.

ITA 5813/Mum/2013 & 24 c). The land under consideration was duly mutated in favour of the assessee in the revenue records after registered sale deed was executed in favour of the assessee by the Masker family. d). The impounded document A-14,page 112 clearly speaks that the land was purchased at the rate of Rs.14.50 lacs per acre, while the sale deed is registered @ Rs.11 lacs per acre . The sale deed is registered for Rs.1.10 crores for 10 acres and actual sale transaction value is Rs.1.45 crores , thus, Rs.35 lacs was duly paid in cash by the assessee to Masker family before execution of the registered sale deed on 13-09-2006 . The said impounded document clearly reveals that the deal with Masker family is completed on 13- 09-2006, while some other deal was stated to be under process in the same documents which is a document dated 13-02-2007. e). Sh Diwan Singh , employee of the assessee vide his statement recorded u/s. 131 of the Act on 26-04-2007 while confirming the impounded document A-14, page 112 has confirmed and admitted that Rs. 35 lacs was paid by the assessee in unaccounted cash to the Maskar family for purchase of land at Nagpur, which is confirmed and admitted by the assesse vide his statement on oath dated 27-04-2007 recorded u/s 132(4) of the Act. f). The statements recorded on 26-04-2007 and 27-04-2007 of Sh Diwan Singh u/s 131 of the Act and the assessee u/s 132(4) of the Act respectively are neither retracted by Mr Diwan Singh nor by the assessee so-far. g). It is highly improbable on the touchstone of pre-ponderance of the probabilities that Maskar family transferred the land vide registered sale deed on 13-09-2006 , handed over the peaceful, physical and vacant possession of the land on 13-09-2006 and allowed their land to be mutated in revenue record in favour of the assessee without receiving total consideration of ITA 5813/Mum/2013 & 25 ITA No. 5978/Mum/2013 Rs.1.45 crores for sale of 10 acres of their land at Nagpur before execution of registered sale deed on 13-09-2006. Thus, we conclude that the registered value was Rs.1.10 crores , while Rs. 35 lacs was unaccounted cash paid by the assessee out of undisclosed income before the execution of registered sale deed by the Masker family on 13-09-2006 in favour of the assessee with respect to the land under consideration. h). The notorised affidavit dated 22-01-2010 executed by Maskar family produced after 3 years and 5 months of completion of deal on 13-09-2006 and almost three years after the date of search and survey on 26-04-2007 is an after-thought and self serving document having no evidentiary value as the Masker family itself is beneficiary and recipient of the said un-accounted cash of Rs.35 lacs which affidavit is given to wriggle out themselves from possibility of an potential threat of action by the Revenue against them under the provisions of the Act. i). There was no evidence brought on record by the assessee with respect to the seller taking an obligation to get the clearances/permission for the sale of the land at their cost. j). There is no evidence brought on record by the assessee that there was delay taken place in transfer of land in his favour due to land being purchased by Masker family from Adivasi/Kul and the so-called delay occurred due to the deletion of ‘Kul’ from the records and extra litigation charges were incurred by the assessee and hence payment of Rs. 35 lacs to be paid as un-accounted cash to Maskar family was withheld by the assessee. k). The assessee applied before the Hon’ble Collector on 11-05-2006 for permission u/s 57 of the Act of 1958 . Thereafter the land was transferred and registered in favour of the assessee on 13-09-2006 and there-after the ITA 5813/Mum/2013 & 26 assessee was enjoying peaceful possession of the land under consideration . The land under consideration was mutated in favour of the assessee in revenue record. The dispute started when the Hon’ble Court of Tahasildar issued notice on 21-07-2007 as set out above , but by that time land was already transferred in favour of the assessee and the entire consideration was paid out by the assessee to the Maskar family as set out above in details. l). With respect to the technical aspect of the dispute with respect to clearance under section 57 of the Act of 1958 etc., we have discussed the entire factual matrix of the dispute in preceding para’s as set out above which is not repeated for sake of convenience and brevity, as the same also does not advance the case of the assessee.

Thus keeping in view the entire factual matrix of case and on touchstone of preponderance of probabilities, we hold that the assessee did paid an un- accounted cash of Rs. 35 lacs to Maskar family for acquisition of land under consideration at Nagpur from Maskar family before completion of the registration of sale deed dated 13-09-2006 and the additions so made to the income of the assessee as made by the AO and confirmed by the learned CIT(A) is upheld. We find no infirmity in the orders dated 26-07-2013 of the learned CIT(A) which we confirm and sustain.This disposes of all the grounds raised by the assessee in grounds of appeal filed with the Tribunal. We order accordingly.

We may also clarify that we have duly taken into consideration all the case laws relied upon and cited by the parties in their pleadings before us, before arriving at our above conclusions.

ITA 5813/Mum/2013 & 27 Now, we shall take up the appeal filed by the Revenue in ITA No. 5978/Mum/2013 for the assessment year 2009-10.

“1. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in deleting the penalty levied u/s.27lAAA without appreciating the fact that the assessee has not fulfilled the pre-requisite conditions for claiming immunity from levy of penalty u/s 271 AAA.

2. On the facts and circumstances of the case and in law, the Id CIT(A), erred in deleting the penalty levies u/s 27lAAA without appreciating the fact that the assessee has not substantiated with documentary evidence as to how the sum of Rs. 153 crores has come to the companies, M/s Sealand Ports Pvt. Ltd, M/s Avash Logistics Pvt. Ltd. and M/s All Cargo Global Logistics Pvt. Ltd. , where the assessee is a manager and which was further routed through these companies.

3. The Appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.”

Pursuant to the search operation u/ 132(1) of the Act, the assessee was issued and served with the notice u/s 153A of the Act. The assessee has filed his original return of income u/s. 139 on 30th September, 2009 declaring total income of Rs. 27,56,94,930/- . The assessee also filed his return of income u/s 153A of the Act on 29th October, 2009 declaring total income of ITA 5813/Mum/2013 & 28 Rs. 27,56,94,930/-. The AO completed the assessment u/s 143(3) r.w.s. 153A of the Act on 30th December, 2009 computing the total assessed income of Rs. 27,56,94,930/- whereby returned income was accepted. The Penalty proceedings u/s 271AAA of the Act was initiated against the assessee by the AO .

During the course of the assessment proceedings, certain loose papers seized from the office premises of All cargo Global Logistics Ltd. i.e. Annexure A-11, page No. 38 & 39 revealed that the assessee has spent a sum of Rs. 10 lakhs in cash to acquire Antique furniture for his property called Bastwal House and spent Rs. 17,15,980/- in cash for carrying out civil works in his property called SKS Enclave, Mangalore. There was also a disclosure by the assessee with respect to capital of Rs. 23 crores introduced in the company promoted by the assessee namely ‘India Tourist and Heritage Village Private Limited’ These amounts were declared in his return of income filed in response to notice u/s 153A of the Act i.e. totaling Rs.23,27,15,980/- as undisclosed business income , along with his other accounted for incomes from Salary , House Property, Capital Gains and Income from Other Sources.

Penalty proceedings were initiated by the AO against the assessee vide notice u/s 271AAA of the Act on 30th December, 2009 which was duly served upon the assessee. The assessee did not contest the quantum addition made by the Revenue before the learned CIT(A) and hence quantum assessment attained finality.

The assessee submitted that he also declared Rs. 23 crores for capital introduction along with Rs. 10 lacs for acquiring antique furniture at Bastwal house and Rs. 17,15,980/- for carrying out civil works at SKS Enclave, Mangalore which was offered in the statement recorded u/s 132(4) of the Act on 11/12th July, 2009. The assessee submitted that he also explained the ITA 5813/Mum/2013 & 29 manner in which said undisclosed income was derived and paid the taxes thereon along with interest. The assessment order was passed u/s 143(3) r.w.s. 153A of the Act on 30th December, 2009 whereby the AO assessed the income of the assessee at Rs. 27,56,94,930/- i.e. The same as returned income . Thus, the income disclosed in the return of income filed u/s 153A of the Act was accepted by the A.O. while framing the afore-stated assessment orders dated 30-12-2009.

Penalty proceedings were initiated u/s 271AAA of the Act for which the assessee submitted that he has fulfilled all the three conditions as laid down u/s. 271AAA of the Act . The assessee submitted that during the course of the search, statement of the assessee u/s 132(4) of the Act was recorded on 11/12th July 2009 and 03.09.2009 , whereby the assessee has offered the sum of Rs.23,27,15,980/- as the undisclosed income and specified the manner in which such income had been derived and also paid the tax along with interest in respect of the afore-stated undisclosed income before filing of the return of income with the Revenue. With Reference to the statement dated 11/12th July 2009 question and answers No. 16 & 18 and the statement dated 3rd September, 2009 question and answer No.2 & 5, the assessee submitted that the assessee has offered undisclosed income u/s 132(4) of the Act and specified the manner in which such income has been derived and paid due taxes on the same. The assessee submitted that during the course of the recording of the statement u/s 132(4) of the Act on 11/12th July, 2009 the assessee was confronted with questions which deals with the modus operandi and the manner in which the undisclosed income was derived for which replies have been given by the assessee accepting the facts unearthed by the Revenue. The assessee submitted that in respect of sum of Rs. 23 crores as share capital money in ‘India Tourist and Heritage Village Private Ltd’. in Q No. 16, the whole modus operandi , movement of fund was explained and accepted by the assessee. Further, the Annexure A-1, page No. ITA 5813/Mum/2013 & 30 41 found and seized on 3rd September, 2009 referred to the fund flow of the assessee which included Rs. 23 crores which has been dealt with in the statement recorded u/s 132(A) of the Act on 3rd September, 2009. The Q No. 2 and the answer which is reproduced below:-

“Q.2. During the course of P.O. action today at your office, following papers are seized and marked as Annexure AI containing 59 pages. Please go through the same and give your explanation and reply to the same.

Ans. Explanation Page No.

1-2 This is my capital account for the month of March 2008.

3-12 It is the ledger account of Yes Bank in the books of M/s Sealand Ports Private Limited for the year ended March, 2008. ……………………………………………………………….

41 This is the pending IOU clearance statement for May 2009. Left hand side is the fund flow of cash for the month. On the right hand side is the recording of cash receipt of Rs.23 crore from Ravi Jakhar, my employee. This is pertaining to my investment in M/s India Heritage and Tourist Village Private Limited which was routed through M/s Supreme Communication Private Limited by giving them the cash and in turn cheque was received. This was shown as Share application money in the said company in the name of M/s Supreme Communication Private Limited. This particular transaction was accepted by me in my earlier statement on 11.7.2009 and taxes were accordingly paid by me in august 2009. .

From the above it can be seen that the assessee has clearly substantiated the manner in which undisclosed income was derived. Thus the second condition is also fulfilled.

(iii) pays the tax, together with interest, if any, in respect of the undisclosed income.

The assessee has paid all the taxes alongwith interest due on the income disclosed in the statement u/s 132(4), ITA 5813/Mum/2013 & 31 ITA No. 5978/Mum/2013 rather even before the final statement u/s 132(4) was recorded on 3.9.2009 the assessee paid the taxes in August 2009. Thus the third condition is also fulfilled. From the above facts and explanation it can be observed that the offer of Rs. 23,27,15,980/- it is already covered under the exception to section 271 AAA (2), as the assessee has declared the same under statement recorded u/s 132(4) and fulfilled all the conditions stipulated in the said section. Under the circumstances the penalty proceedings initiated requires to be dropped ."

It was observed by the A.O. that the assessee has only highlighted the undisclosed income of Rs. 23,27,15,980/- and claimed that this undisclosed income was offered in the return of income filed with the Revenue and the fulfillment of the conditions stipulated in section 271AAA of the Act , whereas the assessee has not fulfilled all the conditions stipulated in section 271AAA of the Act. The AO observed that the assessee has not substantiated the manner in which the amount of Rs. 23,27,15,980/- was derived which was one of the pre-conditions to get immunity from the penalty. The AO observed that the assessee in this case first admitted this income in the hands of the company but subsequently declared in his own hands for which the reason is not know, the assessee was obliged to substantiate the source and manner in which the undisclosed income has been earned. The said income was unearthed only due to search and if there would not have been search u/s 132(1) of the Act, the assessee would not have disclosed this undisclosed income of Rs.23,27,15,980/- . The assessee has also not filed the return of income by 31-08-2009 i.e. the due date of filing of return of income and return of income was filed on 30-09-2009. The A.O. relied upon the decision of Hon’ble Supreme Court in the case of UOI v. Dharmendra Textile Processor, (2008) 306 ITR 277(SC), decision of Hon’ble Bombay High Court in the case of Indus Engineering Co. v. ACIT (Inv.) (2009)184 Taxman 269(Bom.) and held that the assessee has not fulfilled the conditions of 271AAA of the Act for the immunity from penalty and therefore the sum of Rs. ITA 5813/Mum/2013 & 32 23,27,15,980/- declared as undisclosed income in the return of income u/s 153A of the Act is liable for penalty due to contravention of section 271AAA of the Act , 10% of the undisclosed income which works out to Rs. 2,32,71,598/- is liable to be paid by the assessee as penalty u/s 271AAA of the Act , vide penalty orders dated 30-06-2010 passed u/s. 271AAA of the Act by the AO with the prior approval of the learned Additional Commissioner of Income Tax.

ITA 5813/Mum/2013 & 34 The assessee further made the following submissions with respect to the undisclosed income on account of share application money before the learned CIT(A):-

“Shri Mataji Ashapura Ports Private Limited (SMAPPL), a company incorporated under the Companies Act, 1956, having its Registered Office at Ahmedabad, Gujarat, is into the business of development of ship building/repair yard. Subsequently, the name of SMAPPL has been changed to Gujarat Integrated Maritime Complex Private Limited (GIMCO) w. e. f. November 3, 2008. SMAPPL was the absolute owner of and seized and possessed or otherwise beneficially, well and sufficiently entitled to approximately 367 acres and 35 gunthas of land in Traverse Survey No. 192/2 situated at Nana Layja, Taluka Mandvi in the State of Gujarat. SMAPPL had entered into an MOU dated 30.9.2007 with Gujarat Maritime Board (GMB) for development of shipbuilding / repair yard. The paid up share capital of SMAPPL is RS.10,00,000 comprising of 100,000 equity shares of Rs.10 each fully paid. Mr. Vasudev Ramdas Thacker alongwith his relatives held 99,900 Fully Paid-up Equity Shares of Rs.10/- each, consisting of 99.99% of the total paid-up Equity Share Capital.

Mr. Shashi Kiran Shetty (SKS) and or his nominees desired to set-up a ship building and ship repair facility in and around Nana Layja/Madvi Taluka (hereinafter referred to as "the said Project") and for this purpose has agreed to acquire 90,000 equity shares of Rs. 10/- each through Sealand Warehousing Pvt. Ltd. consisting 90% of the total paid up share capital of SMAPPL from Mr. Vasudev Ramdas Thacker and his relatives subject to fulfillment of terms and conditions as set out in the MOU dated 7.2.2008. To finance the aforesaid acquisition of shares of SMAPPL, SKS through his nominee Allcargo Global Logistics Ltd and Infrastructure Leasing & Financial Services Limited (IL&FS), invested 50% each of the cost by acquiring 50% equity stake in SWPL. SWPL in turn acquired SMAPPL. SWPL in turn acquired 90% shares of SMAPPL from then shareholders. SWPL is a Company wherein AGL & IL&FS is equal shareholders. In FY 2007-08, the share capital was Rs. 1,00,000 contributed equally by both the shareholders.

Over the last two years i.e. A. Y. 2008-2009 & 2009-2010 the group is also in the process of setting up a FTWZ & SEZ at Mota Lyza and other surrounding village near Mandvi in Kutch. To set up this project the group through flagship company All Cargo Global Logistics Ltd. along with IL & FS Ltd. set up two Special Purpose Vehicles (SPV) in joint venture namely Avash Logistics Park P. Ltd. & Sealand Port P. Ltd., wherein they acquired 1156 & 1460 acres of land.

ITA 5813/Mum/2013 & 35 ITA No. 5978/Mum/2013

As a result of the search, it was found that all the joint ventures had debited huge amounts in their books as Capital Expenditures on account of Land and Land Development Charges, of which certain amounts which found their way into the accounts of various hawala operators. On being questioned about these payments the group Chairman Mr Shashi Shetty, the appellant in his statement u/s 132(4) dated 11/07/2009 stated that the joint ventures had appointed Shri. Vasudev Thacker as a Consolidator/Aggregator/Facilitator for the acquisition of the entire land bank required for the Ship Repairing, FTWZ and SEZ Project, as acquiring land of this size from various farmers required great acumen and familiarity with the locals, to obtain it free of all legal and illegal encumbrances. Further he stated that Shri. Vasudev Thacker at the time of entering the M. O. U. had made it clear that he would be required to make many various payments for land acquisition in cash. Accordingly, the joint ventures kept making payments to Shri. Vasudev Thackar and parties nominated/directed by him, as per his instructions from time to time, which he utilized in his cash dealings. The said payments were made from the capital contributions of the joint venture partners. Shri. Vasudev Thacker in his statement recorded u/s 131 dated 17/07/2009 accepted all the facts stated by the assessee, The assessee groups as per the instructions of Mr. Vasudev Thacker made payments for various transactions /accommodation bills from hawala operators namely Mr Babulal Doshi, Mr Tarachand Shah, Mr Nilesh T Shah, Mr Santosh Bhosale, Mr. Vipul Rana, Mr Manoj Prajapati, Mr Sandip Sheth and their various group entities like M/s Jaliyan Construction & Developers Pvt Ltd , M/s Pooja Trade Link, M/s Sujeet Developers, M/s Kinjal Developers Pvt Ltd, M/s Sunlight Agency Pvt Ltd, M/s Tuticorin Vincom Pvt Ltd, Vibhankar Land Developer Pvt Ltd , M/s Violent Commercial Pvt Ltd., M/s Taral Vincom Pvt Ltd, M/ Supreme Communication Ltd etc.

There had also been search u/s 132 on Mr. Vasudev Thacker of Kutch and survey u/s 133A in the case of Mr Babulal Doshi & Mr Tarachand Shah.

The sum of Rs.23.00. crore was introduced as share application money by M/s Supreme Communication Ltd (entity of Mr Babulal Doshi & Mr Tarachand Shah) in India Tourist and Heritage Village Pvt Ltd (a company promote by the appellant) on 12.12.2008. The said share application money was routed against payments made by Sealand Port Pvt. Ltd. to Kinjal Developers Pvt Ltd (entity of Mr BabuLal Doshi & Mr Tarachand Shah) of Rs.20.00 crore on 24.10.2008 and Rs.3.00 crore on 12.12.2008.

ITA 5813/Mum/2013 & 36 ITA No. 5978/Mum/2013

In this connection reference is made to Q.No 16 of the statement recorded u/s 132 on 12.7.2009 of Mr Shashi Kiran Shetty which is reproduced:

Q.16. In the share application money account of M/s India Tourist and Heritage Private Limited as on 31/03/2009, it is shown that M/s Supreme communication private limited has paid Rs.23,00,00,000/- towards share application. On examination of the bank account of M/s Supreme Communication Private Limited in Union Bank of India Nariman Point branch (a/c no 378901010036661), it was found that against the payment of Rs.23 crore by this company, similar amount of money was credited on the same day from one company namely M/s Nishadh Investment and Finance private limited. Similarly, in this bank account on the same branch, money of same amount was credited from various group concerns of Shri Tarachand D Shah. In these accounts in the same branch, cash is deposited on the same day and was transferred to M/s Nishadh Investment and finance private limited to the tune of Rs.23 crore. I am showing you the statement recorded from Shri Tarachand D Shah during the course of survey action u/s 133A on 29/08/2008 at 42/48, Ramwadi, Kalbadevi, Mumbai in which he has clearly stated that through his concerns only accommodation entries are provided and he does not do any business at all. In this case, apparently, cash is being given and cheques have been received by the parties concerned. Since the intermediary companies are only paper companies, you are requested to establish the identity of the creditor and creditworthiness of the creditor to prove the genuineness of the credits received in the capital account of M/s India Tourist and Heritage Village Private Limited?

Ans: Based on the facts stated by you above, I am not in a position to prove the genuineness of the credits received in the capital account of M/s India Tourist & Heritage Village Pvt. Limited. Therefore, with a view to not to litigate matter and to buy peace of mind, I offer Rs. 23,00,00,000 in the hands of the said company for the AY 2009-10 and the necessary taxes thereon shall be paid within 30 days time.

The above specific question raised by the Investigation wings clearly spelt out the modus operandi and it also substantiated the manner in which the funds and transaction was routed. The appellant in the statement has accepted the facts and offered to tax the sum of Rs. 23.00 crores.

From the above it is very clear that the appellant has specified the manner in which income was derived i.e. routing of funds from group companies to Hawala operator's various companies which are only paper companies for which against cheque payments cash was ITA 5813/Mum/2013 & 37 ITA No. 5978/Mum/2013 received. The said cash received was utilized for obtaining cheque as share application money, which is nothing but appellants own cash which is routed. Therefore the appellant accepted the fact and offered the income for taxation. Further the reference to cash of Rs. 23.00 crore is referred on page no 41 of Annexure A- 1. (also referred in statement u/s 132(4) dated 3.9.2009) which also substantiates the appellants contention.

The above referred transaction/routing of funds against cash clearly substantiates the manner in which the undisclosed income has been derived.

In view of the above facts and circumstances it is clear that the appellant has satisfied all the conditions for claiming immunity from penalty u/s 271 AAA.

Further, the appellant has submitted before the learned CIT(A) a flow chart explaining the manner of deriving the undisclosed income of Rs.23.00 crores which is as under: -

"Point 1:

Sealand Ports Pvt. Ltd., Avash Logistics Park Pvt. Ltd. & Sealnd Warehousing Pvt. Ltd. are group concerns of Allcargo Global Logistics Pvt. Ltd., where the appellant is the Managing Director.

Point 2:

Cheques are issued by companies referred to in 1, for various transactions/accommodation bills from hawala operators namely Mr. Babulal Doshi, Mr. Tarachand Shah, Mr. Nilesh T. Shah, Mr. Santosh Bhosale, Mr. Vipul Rana, Mr. Manoj Prajapati, Mr. Sandip Sheth and their various group entities like M/s. Jaliyan Construction & Developers Pvt. Ltd., M/s. Pooja Trade Link, M/s Sujeet Developers, M/s. Kinjal Developers Pvt. Ltd., M/s Sunlight Agency Pvt. Ltd., M/s. Tuticorin Vincom Pvt. Ltd., M/s. Vibhankar Land Developer Pvt. Ltd., M/s. Violent Commercial Pvt. Ltd., M/s. Taral Vincom Pvt. Ltd., M/s Supreme Communication Ltd. etc. The same is detailed in Q.7 of statement recorded u/s.132(4) dated 11.07.2009.

ITA 5813/Mum/2013 & 38 ITA No. 5978/Mum/2013

The cheques were issued as per instructions received from Mr. Vasudev Thakker who knew the above parties. Copy of sample letters by Mr. Vasudev Thakker instructing to issue cheques are enclosed herewith. Further, he also acknowledged the receipt of the cheques, sample copies enclosed.

The total of cheques issued as per the statement recorded u/s.132(4) is of Rs.153 crores.

Point 3:

The above hawala operators / their concerns gave back the cash of Rs.153 crores against the cheques issued to them.

Point 4:

Of the said Rs. 153 crores, Rs.130 crores was received back by Mr. Vasudev Thakker. The said fact is acknowledged by Mr. Vasudev Thakker in his statement recorded u/s.131 dated 17.07.2009. He has offered his net income in his returns u/s.153A and paid taxes accordingly.

Point 5:

The balance Rs.23 crores (Rs.153 crores - RS.130 crores), was received by the appellant and is recorded as his inflow. The same is evident from the seized paper (page 41 of Annexure A1 containing 1-59 pages) as well as statement recorded u/s.132(4) dated 03.09.2009, refer Q.2 & Ans.

Point 6 to 9:

The said cash of RS.23 crores received by the appellant, was given to Mr. Tarachand Shah who in turn transferred the money to his various group concerns. From which the funds to the extent of Rs.23 crores were transferred to Nishadh Investment & Finance Pvt. Ltd., who in turn transferred the sum of RS.23 crores to Supreme Communication Pvt. Ltd. All the above transactions were routed via Union Bank of India, Nariman Point Branch of all entities belonging to Babulal Doshi / Tarachand Shah.

ITA 5813/Mum/2013 & 39 ITA No. 5978/Mum/2013

Supreme Communication Pvt. Ltd. in turn transferred the said sum of Rs.23 crores towards share application money to India Tourist & Heritage Pvt. Ltd., a company promoted by the appellant. In this connection reference is made to Q.No.16 of the statement recorded u/s.132 on 12.07.2009 of Mr. Shashikiran Shetty.

The above clearly explains the modus operandi and it also substantiates the manner in which the funds and transactions were routed and all the entities involved therein and their role in the movement of funds.

The appellant in the statement has accepted the facts and offered to tax the sum of Rs. 23.00 crores and paid taxes thereon with interest."

The assessee relied upon the following judicial decisions during the appellate proceedings before the learned CIT(A):

(i) CIT vs. Mahendra C. Shah (2008) 299 ITR 305 (Guj.) (ii) CIT vs. E.V. Balashanmugham (2006) 286 ITR 626 (Mad.) (iii) CIT vs. Nem Kumar Jain (2006) 151 Taxman 187 (All.)

(iv) CIT vs. Radha Kishan Goel (2005) 278 ITR 454 (All.) (v) Gulabrai V. Gandhi vs. ACIT (2003) 84 ITD 370 (Mum.)

(vi) Ashok Kumar Sharma vs. DCIT (ITA Nos.476 & 477/CTK/2011) (ITAT, Cuttack) dated 22.12.2011.

(vii) Pramod Kumar Jain, Bargarh vs. DCIT (ITA Nos.131,132 & 133/CTK/2012) (ITAT Cuttack) dated 20.07.2012

(viii) CIT vs. Radha Kishan Goel (278 ITR 454) (All.) (ix) DCIT vs. Pioneer Online (ITA No.1324/Ko1/2011) dated 17.02.2012 (x) DCIT vs. Rajendra Prasad Dokania (ITA No.525/Ahd.l2012) dated 04.05.2012. ITA 5813/Mum/2013 & 40 ITA No. 5978/Mum/2013

(xi) ACIT(OSD) vs. M/s. Kanakia Spaces Pvt. Ltd. (ITA No.6763/Mum/2011) dated 10.07.2013. (xii) Concrete Developers vs. ACIT, C(C)-2(2) (2013) 34 Taxmann.com 62 (Nagpur Trib.)

The learned CIT(A) after considering the replies of the assessee as well as the contentions raised by the assessee during the penalty proceedings observed that from the Q. No. 16 of the statement u/s 132(4) of the Act dated 11th July, 2009 recorded from the assessee , the manner in which the income has been derived is narrated and on the basis of which the assessee admitted undisclosed income of Rs. 23 crores. The extracts of Q No. 16 and the answer is as under:-

“Q No. 16: In the share application money account of M/s. India Tourist and Heritage Private Limited as on 31.03.2009, it is shown that M/s. Supreme Communication Private Limited has paid Rs.23,00,00,000/- towards share application. On examination of the bank account of M/s. Supreme Communication Private Limited in Union Bank of India, Nariman Point Branch (a/c. no. 378901010036661), it was found that against the payment of RS.23 crores by this company, similar amount of money was credited on the same day from one company namely M/s. Nishadh Investment and Finance Private Limited. Similarly, in this bank account on the same branch, money of same amount was credited from various group concerns of Shri Tarachand D. Shah. In these accounts in the same branch, cash is deposited on the same day and was transferred to M/s. Nishadh Investment and Finance Private Limited to the tune of Rs.23 crores. I am showing you the statement recorded from Shri Tarachand D. Shah during the course of survey action u/s.133A on 29.08.2008 at 42/48, Ramwadi, Kalbadevi, Mumbai in which he has clearly stated that through his concerns only accommodation entries are provided and he does not do any business at all. In this case, apparently, cash is begin given and cheques have been received by the parties concerned. Since the intermediary companies are only paper companies, you are requested to establish the identity of the creditor and creditworthiness of the creditor to prove the genuineness of the ITA 5813/Mum/2013 & 41 ITA No. 5978/Mum/2013 credits received in the capital account of M/s. India Tourist and Heritage Village Private Limited?

Ans. Based on the facts stated by you above, I am not in a position to prove the genuineness of the credits received in the capital account of M/s. India Tourist and Heritage Village Private Limited. Therefore, with the view to not to litigate matter and to buy peace of mind, I offer Rs. 23,00,00,000/- in the hands of the said company for the A. Y. 2009-10 for the A.Y. 2009-10 and the necessary taxes thereon shall be paid within 30 days time.”

From the above, the learned CIT(A) held that it is clear that the A.O. examined the manner in which the undisclosed has been derived vide Q No. 16 of the statement recorded u/s 132(4) of the Act dated 11th July, 2009. In reply, the assessee admitted the undisclosed income of Rs. 23 crores. The assessee later on admitted the undisclosed income in his hands instead of the company in view of the decision of the Hon’ble Supreme Court in the case of CIT v. Lovely Exports Ltd. , 216 CTR 195 and the decision in the case of CIT v. Divine Leasing & Finance Ltd. dated 21st January 2008 (TIOL 118 SC IT). The ld. CIT(A) after considering the decision of Hon’ble Gujarat High Court in the case of CIT v. Mahendra C. Shah, 299 ITR 305 and the decision of Hon’ble Allahabad High Court in the case of CIT v. Radha Kishan Goel [2005] 278 ITR 454 (All.) and the decision of ITAT in the case of ACIT v. Kanakia Spaces Pvt. Ltd. (ITA No. 6763/Mum/2011 dated 10th July, 2013) and in the case of Concrete Developers v. ACIT [2013] 34 Taxmann.com 62 , the learned CIT(A) held that the assessee has during the course of statement recording u/s 132(4) of the Act admitted the undisclosed income and has specified as well as substantiated the manner in which the undisclosed income was derived and also paid the due taxes on the undisclosed income, the penalty was not exigible and learned CIT(A) cancelled the penalty of Rs. 2,32,71,598/- levied by the AO u/s 271AAA of the Act, vide appellate orders of the learned CIT(A) dated 29-07-2013.

ITA 5813/Mum/2013 & 42 ITA No. 5978/Mum/2013

Before, we proceed further it is profitable to refer to Section 271AAA of the Act which is reproduced below:

“[Penalty where search has been initiated. 271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,— (i) in the course of the search, in a statement under sub- section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; ITA 5813/Mum/2013 & 46 ITA No. 5978/Mum/2013

(ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income.

(3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.—For the purposes of this section,— (a) “undisclosed income” means— (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has— (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; ITA 5813/Mum/2013 & 47 ITA No. 5978/Mum/2013

(b) “specified previous year” means the previous year— (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted.]”

As could be seen from Section 271AAA(2) of the Act, the penalty u/s 271AAA of the Act is not exigible when following three prescribed conditions are cumulatively met as under:

(i) in the course of the search, in a statement under sub-section (4) of section 132, the assessee admits the undisclosed income and specifies the manner in which such income has been derived;

(ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income.

It is the contention of the assessee that the assessee has duly admitted the undisclosed income of Rs. 23,27,15,980/- during the course of search u/s 132(1) of the Act against the assessee on 10-07-2009 , in an statement recorded u/s 132(4) of the Act on 11/12th July 2009 and 03-09-2009 respectively and also explained the manner in which the said admitted income of Rs.23,27,15,980/- was derived while recording his statements by ITA 5813/Mum/2013 & 48 the search team u/s 132 (4) of the Act on 11-07-2009 and 03-09-2009. However, the A.O. did not accept the contentions of the assessee as in the opinion of the AO the assessee has not substantiated the manner in which the undisclosed income was derived by the assessee which is also one of the prescribed conditions u/s 271AAA(2) of the Act to get immunity from the leviability of penalty u/s 271AAA of the Act. Accordingly, penalty of Rs.2,32,71,598/- u/s 271AAA of the Act was imposed by the AO on the assessee vide penalty orders dated 30-06-2010 passed u/s 271AAA of the Act. It was also held by the A.O. that the assessee has delayed the filing of return u/s 139 of the Act as the due date was 31st August, 2009 while the return of income was filed by the assessee u/s 139 of the Act with the Revenue on 30th September, 2009. It was also observed by the A.O. that initially the undisclosed income was declared in the hands of the company while later on it was declared in the hands of the assessee. However, on appeal the ld. CIT(A) cancelled the penalty levied by the A.O. as the assessee has duly explained in detail the manner in which the undisclosed income admitted by the assessee has been derived and duly substantiated the same vide learned CIT(A) appellate orders dated 29-07-2013. We have observed from the question No. 16 and 18 put to the assessee while statement u/s 132(4) of the Act was being recorded on 11/12th July, 2009 and also question no 2 and 5 vide recording of statement u/s 132(4) of the Act on 03-09-2009, the assessee has narrated the manner in which the income has been derived and on the basis of which the assessee admitted the undisclosed income of Rs. 23 crores. The Q. No. 16 and the answer is reproduced below:-

“Q No. 16: In the share application money account of M/s. India Tourist and Heritage Private Limited as on 31.03.2009, it is shown that M/s. Supreme Communication Private Limited has paid Rs.23,00,00,000/- towards share application. On examination of the bank account of M/s. Supreme Communication Private Limited in Union Bank of India, Nariman Point Branch (ale. no. 378901010036661), it was found that ITA 5813/Mum/2013 & 49 ITA No. 5978/Mum/2013 against the payment of RS.23 crores by this company, similar amount of money was credited on the same day from one company namely M/s. Nishadh Investment and Finance Private Limited. Similarly, in this bank account on the same branch, money of same amount was credited from various group concerns of Shri Tarachand D. Shah. In these accounts in the same branch, cash is deposited on the same day and was transferred to M/s. Nishadh Investment and Finance Private Limited to the tune of Rs.23 crores. I am showing you the statement recorded from Shri Tarachand D. Shah during the course of survey action u/s.133A on 29.08.2008 at 42148, Ramwadi, Kalbadevi, Mumbai in which he has clearly stated that through his concerns only accommodation entries are provided and he does not do any business at all. In this case, apparently, cash is being given and cheques have been received by the parties concerned. Since the intermediary companies are only paper companies, you are requested to establish the identity of the creditor and creditworthiness of the creditor to prove the genuineness of the credits received in the capital account of M/s. India Tourist and Heritage Vii/age Private Limited?

Ans. Based on the facts stated by you above, I am not in a position to prove the genuineness of the credits received in the capital account of M/s. India Tourist and Heritage Vii/age Private Limited. Therefore, with the view to not to litigate matter and to buy peace of mind, I offer Rs. 23,00,00,000/- in the hands of the said company for the A. Y. 2009-10 for the A.Y. 2009-10 and the necessary taxes thereon shall be paid within 30 days time.”

Further, the Annexure A-1, page No. 41 found and seized on 3rd September, 2009 referred to the fund flow of the assessee which included Rs. 23 crores which has been dealt with in the statement recorded u/s 132(A) of the Act on 3rd September, 2009, as explained by the assessee . The Q No. 2 and the answer which is reproduced below:-

“Q.2. During the course of P.O. action today at your office, following papers are seized and marked as Annexure AI containing 59 pages. Please go through the same and give your explanation and reply to the same.

ITA 5813/Mum/2013 & 50 ITA No. 5978/Mum/2013 Ans. Explanation Page No. 1-2 This is my capital account for the month of March 2008.

3-12 It is the ledger account of Yes Bank in the books of M/s Sealand Ports Private Limited for the year ended March, 2008. ……………………………………………………………….

41 This is the pending IOU clearance statement for May 2009. Left hand side is the fund flow of cash for the month. On the right hand side is the recording of cash receipt of Rs.23 crore from Ravi Jakhar, my employee. This is pertaining to my investment in M/s India Heritage and Tourist Village Private Limited which was routed through M/s Supreme Communication Private Limited by giving them the cash and in turn cheque was received. This was shown as Share application money in the said company in the name of M/s Supreme Communication Private Limited. This particular transaction was accepted by me in my earlier statement on 11.7.2009 and taxes were accordingly paid by me in august 2009. .

The assessee had further made the following submissions with respect to the undisclosed income on account of share application money before the learned CIT(A):-

“Shri Mataji Ashapura Ports Private Limited (SMAPPL), a company incorporated under the Companies Act, 1956, having its Registered Office at Ahmedabad, Gujarat, is into the business of development of ship building/repair yard. Subsequently, the name of SMAPPL has been changed to Gujarat Integrated Maritime Complex Private Limited (GIMCO) w. e. f. November 3, 2008. SMAPPL was the absolute owner of and seized and possessed or otherwise beneficially, well and sufficiently entitled to approximately 367 acres and 35 gunthas of land in Traverse Survey No. 192/2 situated at Nana Layja, Taluka Mandvi in the State of Gujarat. SMAPPL had entered into an MOU dated 30.9.2007 with Gujarat Maritime Board (GMB) for development of shipbuilding / repair yard. The paid up share capital of SMAPPL is RS.10,00,000 comprising of 100,000 equity shares of Rs.10 each fully paid. Mr. Vasudev Ramdas Thacker alongwith his relatives held 99,900 Fully Paid-up Equity ITA 5813/Mum/2013 & 51 ITA No. 5978/Mum/2013

Shares of Rs.10/- each, consisting of 99.99% of the total paid-up Equity Share Capital.

Mr. Shashi Kiran Shetty (SKS) and or his nominees desired to set-up a ship building and ship repair facility in and around Nana Layja/Madvi Taluka (hereinafter referred to as "the said Project") and for this purpose has agreed to acquire 90,000 equity shares of Rs. 10/- each through Sealand Warehousing Pvt. Ltd. consisting 90% of the total paid up share capital of SMAPPL from Mr. Vasudev Ramdas Thacker and his relatives subject to fulfillment of terms and conditions as set out in the MOU dated 7.2.2008. To finance the aforesaid acquisition of shares of SMAPPL, SKS through his nominee Allcargo Global Logistics Ltd and Infrastructure Leasing & Financial Services Limited (IL&FS), invested 50% each of the cost by acquiring 50% equity stake in SWPL. SWPL in turn acquired SMAPPL. SWPL in turn acquired 90% shares of SMAPPL from then shareholders. SWPL is a Company wherein AGL & IL&FS is equal shareholders. In FY 2007-08, the share capital was Rs. 1,00,000 contributed equally by both the shareholders.

Over the last two years i.e. A. Y. 2008-2009 & 2009-2010 the group is also in the process of setting up a FTWZ & SEZ at Mota Lyza and other surrounding village near Mandvi in Kutch. To set up this project the group through flagship company All Cargo Global Logistics Ltd. along with IL & FS Ltd. set up two Special Purpose Vehicles (SPV) in joint venture namely Avash Logistics Park P. Ltd. & Sealand Port P. Ltd., wherein they acquired 1156 & 1460 acres of land.

As a result of the search, it was found that all the joint ventures had debited huge amounts in their books as Capital Expenditures on account of Land and Land Development Charges, of which certain amounts which found their way into the accounts of various hawala operators. On being questioned about these payments the group Chairman Mr Shashi Shetty, the appellant in his statement u/s 132(4) dated 11/07/2009 stated that the joint ventures had appointed Shri. Vasudev Thacker as a Consolidator/Aggregator/Facilitator for the acquisition of the entire land bank required for the Ship Repairing, FTWZ and SEZ Project, as acquiring land of this size from various farmers required great acumen and familiarity with the locals, to obtain it free of all legal and illegal encumbrances. Further he stated that Shri. Vasudev Thacker at the time of entering the M. O. U. had made it clear that he would be required to make many various payments for land acquisition in cash. Accordingly, the joint ventures kept making payments to Shri. Vasudev Thackar and parties nominated/directed by him, as per his instructions from time to time, which he utilized in his cash dealings. The said payments were made from the capital contributions of the joint venture partners. Shri. Vasudev Thacker in his statement recorded u/s 131 dated 17/07/2009 accepted all the ITA 5813/Mum/2013 & 52 ITA No. 5978/Mum/2013 facts stated by the assessee, The assessee groups as per the instructions of Mr. Vasudev Thacker made payments for various transactions /accommodation bills from hawala operators namely Mr Babulal Doshi, Mr Tarachand Shah, Mr Nilesh T Shah, Mr Santosh Bhosale, Mr. Vipul Rana, Mr Manoj Prajapati, Mr Sandip Sheth and their various group entities like M/s Jaliyan Construction & Developers Pvt Ltd , M/s Pooja Trade Link, M/s Sujeet Developers, M/s Kinjal Developers Pvt Ltd, M/s Sunlight Agency Pvt Ltd, M/s Tuticorin Vincom Pvt Ltd, Vibhankar Land Developer Pvt Ltd , M/s Violent Commercial Pvt Ltd., M/s Taral Vincom Pvt Ltd, M/ Supreme Communication Ltd etc.

There had also been search u/s 132 on Mr. Vasudev Thacker of Kutch and survey u/s 133A in the case of Mr Babulal Doshi & Mr Tarachand Shah.

The sum of Rs.23.00. crore was introduced as share application money by M/s Supreme Communication Ltd (entity of Mr Babulal Doshi & Mr Tarachand Shah) in India Tourist and Heritage Village Pvt Ltd (a company promote by the appellant) on 12.12.2008. The said share application money was routed against payments made by Sealand Port Pvt. Ltd. to Kinjal Developers Pvt Ltd (entity of Mr BabuLal Doshi & Mr Tarachand Shah) of Rs.20.00 crore on 24.10.2008 and Rs.3.00 crore on 12.12.2008.

In this connection reference is made to Q.No 16 of the statement recorded u/s 132 on 12.7.2009 of Mr Shashi Kiran Shetty which is reproduced:

Q.16. In the share application money account of M/s India Tourist and Heritage Private Limited as on 31/03/2009, it is shown that M/s Supreme communication private limited has paid Rs.23,00,00,000/- towards share application. On examination of the bank account of M/s Supreme Communication Private Limited in Union Bank of India Nariman Point branch (a/c no 378901010036661), it was found that against the payment of Rs.23 crore by this company, similar amount of money was credited on the same day from one company namely M/s Nishadh Investment and Finance private limited. Similarly, in this bank account on the same branch, money of same amount was credited from various group concerns of Shri Tarachand D Shah. In these accounts in the same branch, cash is deposited on the same day and was transferred to M/s Nishadh Investment and finance private limited to the tune of Rs.23 crore. I am showing you the statement recorded from Shri Tarachand D Shah during the course of survey action u/s 133A on 29/08/2008 at 42/48, Ramwadi, Kalbadevi, Mumbai in which he has clearly stated that through his concerns only accommodation entries ITA 5813/Mum/2013 & 53 ITA No. 5978/Mum/2013 are provided and he does not do any business at all. In this case, apparently, cash is being given and cheques have been received by the parties concerned. Since the intermediary companies are only paper companies, you are requested to establish the identity of the creditor and creditworthiness of the creditor to prove the genuineness of the credits received in the capital account of M/s India Tourist and Heritage Village Private Limited?

Ans: Based on the facts stated by you above, I am not in a position to prove the genuineness of the credits received in the capital account of M/s India Tourist & Heritage Village Pvt. Limited. Therefore, with a view to not to litigate matter and to buy peace of mind, I offer Rs. 23,00,00,000 in the hands of the said company for the AY 2009-10 and the necessary taxes thereon shall be paid within 30 days time.

The above specific question raised by the Investigation wings clearly spelt out the modus operandi and it also substantiated the manner in which the funds and transaction was routed. The appellant in the statement has accepted the facts and offered to tax the sum of Rs. 23.00 crores.

From the above it is very clear that the appellant has specified the manner in which income was derived i.e. routing of funds from group companies to Hawala operator's various companies which are only paper companies for which against cheque payments cash was received. The said cash received was utilized for obtaining cheque as share application money, which is nothing but appellants own cash which is routed. Therefore the appellant accepted the fact and offered the income for taxation. Further the reference to cash of Rs. 23.00 crore is referred on page no 41 of Annexure A- 1. (also referred in statement u/s 132(4) dated 3.9.2009) which also substantiates the appellants contention.

The above referred transaction/routing of funds against cash clearly substantiates the manner in which the undisclosed income has been derived.

In view of the above facts and circumstances it is clear that the appellant has satisfied all the conditions for claiming immunity from penalty u/s 271 AAA.”

Further, the assessee submitted before the learned CIT(A), a flow chart explaining the manner of deriving the undisclosed income of Rs.23.00 crores which is as under: - ITA 5813/Mum/2013 & 54 ITA No. 5978/Mum/2013

"Point 1:

Sealand Ports Pvt. Ltd., Avash Logistics Park Pvt. Ltd. & Sealnd Warehousing Pvt. Ltd. are group concerns of Allcargo Global Logistics Pvt. Ltd., where the appellant is the Managing Director.

Point 2:

Cheques are issued by companies referred to in 1, for various transactions/accommodation bills from hawala operators namely Mr. Babulal Doshi, Mr. Tarachand Shah, Mr. Nilesh T. Shah, Mr. Santosh Bhosale, Mr. Vipul Rana, Mr. Manoj Prajapati, Mr. Sandip Sheth and their various group entities like M/s. Jaliyan Construction & Developers Pvt. Ltd., M/s. Pooja Trade Link, M/s Sujeet Developers, M/s. Kinjal Developers Pvt. Ltd., M/s Sunlight Agency Pvt. Ltd., M/s. Tuticorin Vincom Pvt. Ltd., M/s. Vibhankar Land Developer Pvt. Ltd., M/s. Violent Commercial Pvt. Ltd., M/s. Taral Vincom Pvt. Ltd., M/s Supreme Communication Ltd. etc. The same is detailed in Q.7 of statement recorded u/s.132(4) dated 11.07.2009.

The cheques were issued as per instructions received from Mr. Vasudev Thakker who knew the above parties. Copy of sample letters by Mr. Vasudev Thakker instructing to issue cheques are enclosed herewith. Further, he also acknowledged the receipt of the cheques, sample copies enclosed.

The total of cheques issued as per the statement recorded u/s.132(4) is of Rs.153 crores.

Point 3:

The above hawala operators / their concerns gave back the cash of Rs.153 crores against the cheques issued to them.

Point 4:

Of the said Rs. 153 crores, Rs.130 crores was received back by Mr. Vasudev Thakker. The said fact is acknowledged by Mr. Vasudev Thakker in his statement recorded u/s.131 dated 17.07.2009. He has ITA 5813/Mum/2013 & 55 ITA No. 5978/Mum/2013 offered his net income in his returns u/s.153A and paid taxes accordingly.

Point 5:

The balance Rs.23 crores (Rs.153 crores - RS.130 crores), was received by the appellant and is recorded as his inflow. The same is evident from the seized paper (page 41 of Annexure A1 containing 1-59 pages) as well as statement recorded u/s.132(4) dated 03.09.2009, refer Q.2 & Ans.

Point 6 to 9:

The said cash of RS.23 crores received by the appellant, was given to Mr. Tarachand Shah who in turn transferred the money to his various group concerns. From which the funds to the extent of Rs.23 crores were transferred to Nishadh Investment & Finance Pvt. Ltd., who in turn transferred the sum of RS.23 crores to Supreme Communication Pvt. Ltd. All the above transactions were routed via Union Bank of India, Nariman Point Branch of all entities belonging to Babulal Doshi / Tarachand Shah.

Supreme Communication Pvt. Ltd. in turn transferred the said sum of Rs.23 crores towards share application money to India Tourist & Heritage Pvt. Ltd., a company promoted by the appellant. In this connection reference is made to Q.No.16 of the statement recorded u/s.132 on 12.07.2009 of Mr. Shashikiran Shetty.

The above clearly explains the modus operandi and it also substantiates the manner in which the funds and transactions were routed and all the entities involved therein and their role in the movement of funds.

The appellant in the statement has accepted the facts and offered to tax the sum of Rs. 23.00 crores and paid taxes thereon with interest."

We have also gone through the assessment orders dated 30-12-2009 passed by the AO u/s 143(3) read with Section 153A of the Act whereby the relevant para 5 of the said order is reproduced hereunder:

ITA 5813/Mum/2013 & 56 ITA No. 5978/Mum/2013

“ Over the two years the asessee along with a few of his group companies is in the process of setting up a Ship Building Yard & SEZ at Nana Lyza near Mandvi in Kutch. To set up this project the assessee through his flagship company All Cargo Global Logistics Ltd. along with IL&FS , set up a joint venture company called Sealand Warehousing Pvt Ltd. The said joint venture on the basis of a M.O.U. between the assessee and Shri Vasudev Thakkar, promoter of a company called Saimata Ashapura Port P. Ltd(SMAPPL) acquired the shares of Saimata Ashapura Port P. Ltd from its various shareholders for a sum of Rs.100 crores. The said Saimata(SMAPPL) was the owner of 367 Acres of land at Mandvi along with various Government licenses/permissions to run a Ferry Wharf Terminal etc. . Thereafter the assessee created two Special Purposes Vehicles(SPV) in joint venture with IL & FS namely Avash Logistics Park P. Ltd. & Sealand Port P.Ltd., wherein they acquired 1156 Acres and 1460 Acres of land contiguous to the land of Saimata Ashapura Port P. Ltd.. The assessee participated in these two SPV’s in his personal capacity through his personal company called India Heritage & Tourist Village P.Ltd. (IH&TV Pvt. Ltd.). As a result of the search, it was found that all the three joint ventures had debited huge amounts(153 Crores) in their books as Capital Expenditure on account of land and Land Development Charges, which found their way into the accounts of various Hawala Operators. On being questioned about these payments the assessee in his statement dated 11/07/2009 stated that the three joint ventures had appointed Shri Vasudev Thakkar as a Consolidator , Aggregator and Facilitator for the acquisition of the entire land bank required for the Ship Repairing and SEZ Project , as acquiring land of this size from various farmers required great acumen and familiarity with the locals, to obtain it free of all legal and illegal encumberances. Further he stated that Shri Vasudev that Shri Vasudev Thakkar at the time of entering the M.O.U. had made it clear that he would be required to make many payments for land acquisition in cash. Accordingly, the three joint ventures kept making payments to Shri. Vasudev Thakkar and parties nominated by him, as per his instructions from time to time, which he might have utilized in his cash dealings. The said payments were made from the capital contributions of the joint venture partners. Shri Vasudev Thakkar in his statement dated 17/07/2009 accepted all the facts stated by the assessee, but maintained that he had received only 130 crores and not 153 crores as stated by the assessee. On being confronted with the statement of Shri Vasudev Thakkar, the assessee in his statement u/s. 132(4) given on 03/09/2009 confessed that he was unable to explain the capital contribution of 23 Crores in his personal company i.e. India Heritage & Tourist Village Pvt. Ltd. , which had come to him through the account of one of the Hawala operators namely Supreme Communication Pvt. Ltd. and accordingly offered the same for tax.”

From the above submissions of the assessee before the authorities below and the assessment order dated 30-12-2009, it becomes clear that the alleged payments vide cheques have been made to various accommodation entries ITA 5813/Mum/2013 & 57 giving companies promoted by Hawala operators and in turn cash was allegedly taken back from these hawala operators by Mr Vasudev Thakkar in connection with the land acquisition activities which were handled by said Mr Vasudev Thakkar for proposed ship building yard and SEZ at Nana Lyza near Mandvi whereby IL&FS were joint partner with the assessee. The payments of Rs 153 crores were allegedly made from the capital contribution of the joint venture partners against which Rs 130 crores were admitted to have been received by Mr Vasudev Thakkar vide statement dated 17/07/2009 which was confronted to the assessee when his statement of the assessee u/s 132(4) of the Act on 03-09-2009 was recorded whereby the assessee admitted that he is not able to explain the capital introduction of Rs 23 crores in ‘India Tourist and Heritage Village Private Limited’ , which had allegedly come through the account of one of the Hawala Operator Mr Tarachand D Shah promoted company Supreme Communications Limited whereby cash is allegedly given by the assessee to hawala operator to get cheques towards capital introduction of Rs.23 crores in ‘India Tourist and Heritage Village Private Limited’ . The modus operandi of routing the funds allegedly from joint venture group companies to hawala operators through various accommodation entries giving companies promoted by these hawala operators which are only paper companies for which against cheques given by the assessee, equivalent cash was allegedly received and the said cash received was utilized for obtaining cheques for share application money of Rs 23 crores which are nothing but assessee’s own cash which is routed back into the assessee company ‘India Tourist and Heritage Village Private Limited’ via hawala operators through their accommodation entries giving companies . This has been broadly explained and accepted by the assessee when the statement was recorded during the course of search u/s 132(4) on 11th July, 2009 and 3rd September 2009. It was in-fact incumbent on the Revenue authorities to have brought to the notice of the assessee implications of the penalty proceedings u/s 271AAA of the Act while the statement of the ITA 5813/Mum/2013 & 58 ITA No. 5978/Mum/2013 assessee was recorded u/s 132(4) of the Act, as the assessee is not expected to be aware of all the technical aspects of the provisions of the Act . The assessee while recording statement specified the manner and admitted the undisclosed income of Rs. 25 crores on account of inability to prove the genuineness of share capital introduction of Rs 23 crores in ‘India Tourist and Heritage Private Limited’ and as well Rs 2 crores to cover discrepancies in annexure A-1 to A-11 vis-à-vis books of accounts .The Revenue authorities confronted the assessee with the statement dated 17/07/2009 of Sh Vasudev Thakkar while recording assessee’s statement u/s 132(4) of the Act on 3-09- 2009 with respect to the confirmation of Rs 130 crores having received by Mr Vasudev Thakkar , while the joint venture partners having made payments of allegedly Rs 153 crores to the accommodation entries giving companies promoted by Hawala operators , which left a gap of Rs 23 cores and the assessee on being confronted surrendered Rs 23 crores capital introduction in his promoted company ‘India Tourist and Heritage Village Private Limited’ in order to buy peace and avoid litigation with Revenue. The fact of such statement dated 17/07/2009 of Sh. Vasudev Thakkar being confronted to the assessee on 03-09-2009 while recording statement u/s 132(4) of the assessee on 03-09-2009 is borne out from para 5 of the assessment order dated 30-12- 2009 passed by the AO u/s 143(3) read with Section 153A of the Act, but unfortunately the same was not recorded by the Revenue authorities in the statement recorded of the assessee u/s 132(4) of the Act on 03-09-2009. It is well known that the statements under the provisions of the Act are recorded in question and answer form , whereby the Revenue authorities ask question and the tax-payer answer the specific question put by the Revenue authorities to the tax-payer. Normally, stress level of the tax-payers is very high while the statements are being recorded by the Revenue authorities as these statements can be used by the Revenue against the tax-payer later on and it is not expected that the answers of the tax-payer, which are given normally out of the tax-payer memory as the professionals/employees of the tax-payer are ITA 5813/Mum/2013 & 59 ITA No. 5978/Mum/2013 not normally allowed to participate in the recording of the statement, shall be marked with perfection under these abnormal situations. It becomes all the more important and onerous responsibility is cast on the shoulders of the Revenue authorities to ensure that complete and correct statements are recorded of the tax-payer whereby the rights and duties of the tax-payer are properly explained to the tax-payer and proper assistance should be afforded to the tax-payer by the Revenue authorities while recording statement under the provisions of the Act, of course without compromising on the collection of the correct taxes from the tax-payer which undisputedly is the mandate of the Act . It is not expected from the Revenue that they will extract the disclosures from the tax-payer to suit their convenience , while the tax-payer is not made aware of the provisions of the Act which may later burden them with penalties and prosecution such as provisions of Section 271AAA of the Act entitling the tax-payer immunity from penalty. Attention is drawn to Circular No. 14(XL-35) of 1955, dated 11.4.1955, issued by the Central Board of Direct Taxes reads as under: "Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a tax payer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a tax payer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessee on whom it is imposed by law, officers should –

(a) draw their attention to any refunds or reliefs to which they appear ITA 5813/Mum/2013 & 60 ITA No. 5978/Mum/2013 to be clearly entitled but which they have omitted to claim for some reason or other;

(b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs".

In the return of income filed with the Revenue, the assessee has declared the undisclosed income of Rs. 23,27,15,980/- offered for taxation vide statement recorded u/s 132(4) of the Act on 11/12th July 2009 and 03/9/2009 during the course of search operations u/s 132(1) of the Act and due taxes have been paid by the assessee to the Revenue in the month of August 2009 itself before filing of return of income with the Revenue . In our considered view, the assessee has duly explained the manner in which the undisclosed income of Rs. 23,27,15,980/- has been generated while recoding the statement u/s 132(4) of the Act on 11/12th July 2009 and 03-09-2009 persuant to the search action u/s 132(1) of the Act conducted by the Revenue on 10-07-2009. So far as substantiation of the manner of deriving the undisclosed income of Rs.23,27,15,980/- by the assessee is concerned which is also one of the conditions for availing immunity from penalty u/s 271AAA of the Act , as per the facts emerging from the records before us, the assessee came forward with the details as set out above to substantiate the manner in which undisclosed income was derived before the learned CIT(A) in penalty proceedings for the first time who accepted the contentions of the assessee without affording opportunity to the Revenue to examine and verify the bona- fide and correctness of the claims and the contentions of the assessee to that effect as per the requirement of Rule 46A(3) of the Income Tax Rules, 1962. The principles of natural justice are therefore clearly breached as the Revenue is deprived of an opportunity to examine and verify the correctness of the claims and contentions of the assessee which were raised before the learned ITA 5813/Mum/2013 & 61 ITA No. 5978/Mum/2013 CIT(A) for the first time, before affording the assessee an immunity from penalty under the provisions as well mandate of Section 271AAA of the Act. The CIT(A) also did not made any attempt to verify the claims and contentions of the assessee and accepted the same without verification. Thus , in our considered view and in the interest of justice, the order of the learned CIT(A) cancelling the penalty levied u/s 271 AAA of the Act cannot be sustained and is to be set aside and issue is restored to the file of the AO to decide de-novo on merits the issue of leviabiliy of penalty u/s 271AAA of the Act with respect to the admission of undisclosed income of Rs. 23,27,15,980/- by the assessee in the statement recorded u/s 132(4) of the Act on 11/12th July 2009 and 03-09-2009 and which was duly declared and disclosed in the return of income filed by the assessee with the Revenue, after examining and verifying the correctness of the claims and contentions of the assessee with respect to substantiation of the manner in which undisclosed income admitted by the assessee was derived. With respect to the contention of the Revenue that the assesse filed return of income u/s 139 (1) of the Act on 30-09-2009 , while due date was 31-08-2009 as per the AO, the assessee has submitted that the assessee was liable to get his accounts audited u/s 44AB of the Act and hence the due date was 30-09-2009 , this issue is also set aside to the file of the AO for verification. The contention of the AO that initially the assessee offered the undisclosed income in the hands of his company ‘India Tourist and Heritage Village Private Limited’ in which share capital of Rs. 23 crores were received while recording statement u/s 132(4) of the Act , and while filing return of income the assessee declared the said income of Rs 23 crores in his personal return. The assessee has given bona-fide and satisfactory replies that in view of Hon’ble Supreme Court decision in the case of CIT v. Lovely Exports Ltd. , 216 CTR 195 and the decision in the case of CIT v. Divine Leasing & Finance Ltd. dated 21st January 2008 (TIOL 118 SC IT), the said income was offered as his personal income as against the company’s income, which in our view the said decision of the assessee cannot be faulted ITA 5813/Mum/2013 & 62 with and in any case no prejudice is caused to the Revenue as the entire income was offered for taxation albeit in personal hands instead of company’s hand. Thus, appeal filed by the Revenue is allowed for statistical purposes. We order accordingly.

Order pronounced in the open court on 25th May , 2016. आदेश क� घोषणा खुले �यायालय म� �दनांकः 25-05-2016 को क� गई ।