SH. SUNIL DUTT JAIN, PROP. M/S JAIN FOOD PRODUCTS,,266/33, DIGGI CHOWK, AJMER vs. ACIT, CENTRAL CIRCLE, , AJMER

PER BENCH :

This appeal by the assessee is directed against the order dated 21.03.2023 of ld. CIT (A), Udaipur-2 passed under section 250 of the IT Act, 1961 for the assessment year 2015-16. The assessee has raised the following grounds :-

2 ITA No. 307/JP/2023 Shri Sunil Dutt Jain, Ajmer.

post search proceedings vide letter dated 23.10.2018 and statement of even date.

manufacturing, wholesale and retail business of Namkeen and Sweet products in

his proprietary concern M/s Jain Food Products. This is the family business of

assessee which he carries out along with his brother Shri Kamal Kant Jain. He

filed his original return of income on 16.09.2015 declaring total income of

Rs.9,12,760/-. A search and survey was carried out on 12.09.2018 at the

residential and business premises of assessee. The assessee in response to notice

u/s 153A filed the return of income on 12.06.2019 declaring total income of

Rs.13,62,760/-. During the course of search certain documents marked as Pages

67 to 74 of Exhibit 21 of Annexure AS was found and seized. These documents are

unexecuted sale agreement, power of attorney and Vasiyatnama in respect of

property Plot No.12, Nosar, Ajmer (PB 109-119). As per the agreement this

property was purchased by Smt. Reena Mathur for Rs.7 lacs on 07.10.2014 which

she sold for Rs.20 lacs. In the sale agreement the name of buyer and in the power

of attorney & Vasiyatnama, the name of person in whose favour it has been

executed has been left blank. The assessee in his statement dated 12.09.2018

recorded u/s 132(4) of IT Act, 1961, in reply to Question No.31 (PB 14-15) and

Question No.58 (PB 38-39) admitted that he has purchased the above property

from Smt. Reena Mathur for Rs.20 lacs which has not been recorded in his books

3 ITA No. 307/JP/2023 Shri Sunil Dutt Jain, Ajmer.

of accounts and thus offered the same as his unaccounted investment.

Immediately thereafter assessee vide letter dt. 23.10.2018 to DDIT, Investigation,

Ajmer (PB 51-64, specific Pg 60) retracted from his statement stating that his

name is not written in any of the document and that Smt. Reena Mathur has

subsequently sold this property to third person which may be verified. He has

neither purchased this property nor made any payment towards the said purchase.

To examine the above facts, summon u/s 131 of IT Act was issued by DDIT,

Investigation, Ajmer to Smt. Reena Mathur. Smt. Reena Mathur vide letter dt.

27.11.2018 (PB 121) explained the reason for keeping the documents with

assessee. She further submitted that later on this plot was sold by her in two parts

to Smt. Padmini Meena and Sh. Praveen Barotiya for which she has received the

amount through cheque and the assessee has nothing to do with this. The AO,

however, held that it is a general tendency of market that one who wants to invest

his/her unaccounted money in immovable property, takes the chain of documents

i.e. Power of attorney, Will and Agreement of sale keeping the name of the

beneficiary blank, from the seller and pays his/her unaccounted money. Later on

whenever he/she feels feasible or wants to sell this property, he/she completes all

chain of documents by filing the name of the beneficiary and sells the property. In

this case also, the same has been followed by Shri Sunil Dutt Jain to invest his

unaccounted money and he purchased this property from Smt. Reena Mathur

amounting to Rs.20,00,000/- by keeping the name of the beneficiary blank. On the

basis of these documents Shri Sunil Dutt Jain in due course of time would have

either registered the above property in name of self or family member or could sold

this land to another party directly by just filling the name of beneficiary at blank

4 ITA No. 307/JP/2023 Shri Sunil Dutt Jain, Ajmer.

space in all the documents. All the original chain documents were found in

possession of Shri Sunil Dutt Jain at his residence and during the search proceedings

in his statement recorded u/s 132(4) of the I.T. Act, 1961, he accepted the dealing

of this plot in Rs.20,00,000/- and voluntarily surrendered the amount for taxation.

During the course of post search proceedings as well as during assessment

proceedings, Shri Sunil Dutt Jain retracted from his earlier statement of 12.09.2018

recorded at the time of search proceedings merely on the one ground that

documents executed by Smt. Reena Mathur are left blank and his name is not

written anywhere on the documents. Thus, it is apparent that Shri Sunil Dutt Jain

purchased this plot from Smt. Reena Mathur for Rs.20,00,000/-. Further he has sold

this plot through Smt. Reena Mathur and registered it for an amount of

Rs.11,81,000/- (4,11,000/- + 9,70,000/-). Therefore, an amount of Rs.20,00,000/- is

considered as his unexplained investment u/s 69 r.w.s. 115BBE of the I.T. Act, 1961.

2.1 Being aggrieved by the order of A.O, the assessee preferred appeal before ld.

CIT(A). The ld. CIT (A) held that the addition made by the AO is based on

statement u/s 132(4) and corroborative evidences. The statement recorded during

search operation u/s 132(4) is having strong evidentiary value. The appellant is

found in possession of original papers, Sale deed, Power of Attorney and Will of the

same plot of land. The sale deed is duly signed by the seller in the presence of two

witnesses. The document is duly notarized by an advocate named Mr. V. J. Singh

and date of 07.03.15 is noted on this document. The fact that this document is

found from the possession of the appellant proves that the transaction is done by

the appellant. In addition to this General Power of Attorney was also found and

seized where the name of person in favour of whom this power is given is not

5 ITA No. 307/JP/2023 Shri Sunil Dutt Jain, Ajmer.

written but it is also signed by Smt. Reena Mathur. Further Smt. Reena Mathur has

written a Will for this property. For the same property Sale Deed, General Power of

Attorney and Will is prepared on the same date. This was done by Smt. Reena

Mathur because she received cash consideration of the property from the appellant.

After a substantial gap of time the appellant retracted from the statement which is

nothing but an effort to avoid the tax liability. The statement of Smt. Reena Mathur

after search is not reliable because this does not disproved the signature of her on

sale deed prepared on stamp paper, in this sale deed cash receipt of Rs.20,00,000/-

is noted and Smt. Reena Mathur is an interested party and admission by her will cast

tax liability on her. He further relied on Page 66 of seized annexure (PB 120) to

held that this plot has been subsequently sold for Rs.32.93 lacs (correct amount

Rs.33.29 lacs) as against Rs.13,81,000/- (9,70,000 + 4,11,000) in the month of May

& August, 2018. Accordingly by relying on the various case laws, he confirmed the

addition made by AO.

Now the assessee is in appeal before us.

authorities on the basis of statement of assessee dated 12.09.2018 recorded u/s

132(4) where he has admitted that he has purchased the property from Smt.

Reena Mathur for Rs.20,00,000/- and on the basis of unexecuted Sale Agreement,

Power of Attorney & Will signed by Smt. Reena Mathur where the name of

buyer/name of person in whose favour it has been executed has been left blank

but were found in the possession of assessee made/confirmed the addition in the

hands of assessee by treating it as unexplained investment u/s 69 of the Act.

Regarding statement of assessee dated 12.09.2018 recorded u/s 132(4) it is

6 ITA No. 307/JP/2023 Shri Sunil Dutt Jain, Ajmer.

submitted that immediately thereafter assessee vide letter dt. 23.10.2018 to DDIT,

Investigation, Ajmer (PB 51-64, specific Pg 60) retracted from his statement

stating that his name is not written in any of the document and that Smt. Reena

Mathur has subsequently sold this property to third person which may be verified.

He has neither purchased this property nor made any payment towards the said

purchase. To examine this fact summon u/s 131 of IT Act was issued by DDIT,

Investigation, Ajmer to Smt. Reena Mathur. Smt. Reena Mathur vide letter dated

27.11.2018 (PB 121) submitted that as she was in urgent need of funds she has

given these documents to assessee so that in her absence assessee can sold the

plot by filling the name of buyer and receive the sale amount. However, later on

this plot was sold by her in two parts for which she has received the amount

through cheque and the assessee has nothing to do with this. Thus the documents

which she has given to assessee have become ineffective. The DDIT, Investigation,

Ajmer after considering this reply has not taken any further action. Hence the

statement of assessee which has been immediately retracted thereafter cannot be

the basis for making the addition.

3.1 So far as unexecuted sale agreement, Power of Attorney & will signed by

Smt. Reena Mathur which were found in the possession of assessee are concerned,

it is submitted that assessee’s name is not written in any of these documents. Smt.

Reena Mathur vide letter dated 27.11.2018 (PB 121) has explained the reason as

stated above for keeping these documents with the assessee. Subsequently she

has sold this plot in two parts to Smt. Padmini Meena vide sale deed dated

17.05.2018 for Rs.4,11,000/- (PB 122-135) & to Shri Praveen Barotiya vide sale

deed dated 07.08.2018 for Rs.9,70,000/- (PB 136-147) and has received the

7 ITA No. 307/JP/2023 Shri Sunil Dutt Jain, Ajmer.

amount through cheque. Thus all the documents which have been kept with the

assessee have become ineffective and hence no addition can be made in the hands

of assessee on the basis of these documents.

3.2 It may be noted that Smt. Reena Mathur has declared capital gain on sale of

this plot in AY 2019-20. The fact that this plot is sold to Smt. Padmini Meena and

Shri Praveen Barotiya is not in dispute. Therefore, in case addition is made on

account of unexplained investment in the year under consideration in the hands of

assessee, the AO ought to have computed capital gain/loss on subsequent sale of

this plot in AY 2019-20. Having not done so, it is not correct on part of the lower

authorities to make addition on account of alleged unexplained investment in the

plot only on surmises & conjectures.

3.3 The Ld. CIT(A) has referred to Page 66 of Exhibit 21 of Annexure AS (PB

120) to presume that this plot was finally sold at around Rs. 34,00,000/- in which

assessee has taken his share of cash plus some profit and Smt. Reena Mathur

might have taken the money transacted by cheque. This paper nowhere leads to

such inference. As per the calculation made on this paper the DLC value of land is

worked out at Rs.6,00,000/- whereas market value is estimated at Rs.32.93 lacs.

The actual sales consideration is Rs.13.81 lacs (9.70 lacs + 4.11 lacs). Thus the

actual sales consideration is much more than the DLC value. Had the market value

estimated on this paper is correct, the AO ought to have calculated capital gain

based on the amount recorded on this paper. However, this is not done. Hence

once on the basis of this paper no adverse inference is drawn, no addition for

alleged unexplained investment of Rs.20,00,000/- in the year under consideration

can be made.

8 ITA No. 307/JP/2023 Shri Sunil Dutt Jain, Ajmer.

3.4 The Ld. CIT(A) has made certain observations at Pages 7 to 16 of his order

and relied on certain case laws. He has stated that retraction of statement after a

considerable time is not acceptable. However, he ignored the fact that retraction is

made within 40 days of recording of statement u/s 132(4) which cannot be said to

be after a considerable lapse of time. Further, Smt. Reena Mathur in post search

proceedings has filed a letter dated 27.11.2018 to DDIT, Investigation, Ajmer

explaining the correct facts. This has not been controverted. Therefore, addition

confirmed by Ld. CIT(A) is without appreciating the correct facts.

In view of above, addition of Rs.20 lacs confirmed by Ld. CIT(A) be directed

to be deleted.

authorities.

through the orders of revenue authorities. We note that both the lower authorities

on the basis of statement of the assessee dated 12.09.2018 recorded u/s 132(4)

wherein he has admitted that he has purchased the property from Smt. Reena

Mathur for Rs.20,00,000/- and on the basis of unexecuted Sale Agreement, Power of

Attorney & Will signed by Smt. Reena Mathur, wherein the name of buyer/name of

person in whose favour it has been executed has been left blank but were found in

the possession of assessee, made/confirmed the addition in the hands of assessee

by treating it as unexplained investment u/s 69 of the Act. However, we find that

assessee vide letter dated 23.10.2018 to DDIT, Investigation, Ajmer retracted from

9 ITA No. 307/JP/2023 Shri Sunil Dutt Jain, Ajmer.

his statement stating that his name is not written in any of the documents and that

Smt. Reena Mathur has subsequently sold this property to third person. To examine

this fact summon u/s 131 of IT Act was issued by DDIT, Investigation, Ajmer to

Smt. Reena Mathur who vide letter dated 27.11.2018 stated the reasons as to why

these documents were given by her to the assessee and also admitted that later on

this plot was sold by her to other persons on which she also declared capital gain

in AY 2019-20. We find that during the course of search, no evidence was found to

prove that assessee has paid Rs.20,00,000/- to Smt. Reena Mathur. The statement

given u/s 132(4) is also retracted within 40 days of recording the statement. Smt.

Reena Mathur also affirmed that she has sold this plot to some other persons and

not to the assessee. Thus in the absence of any material on record that assessee

has paid Rs.20,00,000/- to Smt. Reena Mathur, addition confirmed by lower

authorities is not justified. Hence the same is deleted. The ground of assessee is

allowed.

Order pronounced in the open court on 29/08/2023.

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vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत