JAIRAM G. CHAWLA,MUMBAI vs. ITO WD 10(1)(2), MUMBAI

आदेश / O R D E R

Per Ashwani Taneja (Accountant Member):

First we take up appeal of Sh. Jairam G. Chawla in A.Y. 2008-09:

3.1. The facts of the case are that the assessee was a director of company namely M/s. Jaimajiki Development Ltd. along with his wife Smt. Deepa Jairam Chawla and 3 Jairam & Deepa Chawla two sons. The assessee filed return of income on 07.10.2008 declaring income of Rs.33,920/-. Thereafter a search was conducted on 19.02.2009 in the case of one Siddhi Group of concerns. During the course of that search it was allegedly found that the assessee along with his wife had booked shop no.106 on Ist floor at Little World Mall, Plot No.2 1, Sector 2, Khargar, Navi Mumbai, in their joint names for a stated consideration of Rs.2.57 crores, whereas the impugned agreement value was Rs. 1.29 crores only. It was also observed during search that the balance sum of Rs. 1.28 crores was paid in cash. During search, necessary statements were recorded on the basis of papers found during search. Pursuant to search action, the A.O. received intimation from the ADIT (Inv.) Thane on the basis of which assessee's return of income was selected for regular scrutiny.

3.2. During assessment proceedings, the assessee submitted a copy of purchase agreement in respect of purchase of above shop. As regard the payment of Rs.1.28 crores paid in cash for purchase of shop, the assessee submitted letter dt. 20.07.2010, and stated that no such payment was made by them (assessee and his wife) in cash. The assessee reiterated his argument that the agreement value was the only value paid by them for the purchase of said shop. The assessee's Authorized Representative argued before A.O. that keeping in view facts of the case and taking into account the case laws

4 Jairam & Deepa Chawla mentioned in submissions, the cash payment of Rs.1.28 crores for purchase of shop could not be added to the total income of the assessee.

3.3. The AO considered the submissions made by the assessee but he did not agree with same on the ground that Mr. Mayur Patel of Siddhi group of companies had stated in the statement recorded u/s 131 on 2nd April 2009 before the search team that there was practice of receipt of cash on account of ‘own money’ from the various purchasers and accordingly, an offer for taxing undisclosed income was made in the hands of M/s. Gayatri Homes. It was further held by the AO that although the assessee denied the statement of Mr. Mayur Patel but he could not discharge the burden to rebut the confession statement made by the developer of the Mall where shop purchased by the assessee was located. It was held by the AO that total consideration for the shop was Rs. 2.57 crores whereas only Rs.1.29 crores was paid by cheque, and therefore balance amount of Rs.1.28 crores was paid as ‘on money’. The assessee and his wife were co-owners in the shop of 50% each. Accordingly, a sum of Rs. 64 lakhs each (i.e. 50% of Rs.1.28 crores) was considered as value of unexplained investment in the hands of assessee and his wife Ms. Deepa Chawla.

3.4. Being aggrieved, the assessee contested the matter before the Ld. CIT(A), wherein it was submitted that sale deed was duly registered at Rs.1.29 crores and the same was accepted

5 Jairam & Deepa Chawla by the stamp valuation officer, and therefore, this value was to be adopted as the amount of sales consideration paid by the assessee, in view of section 50C. It was further submitted that merely relying upon the third party statement which was recorded at back of the assessee and that too without granting any opportunity of cross examination to the assessee, impugned addition could not have been made. In view of the submissions of the assessee, Ld. CIT(A) granted opportunity to the assessee to cross examine the said builder/ developer from whom the shop was purchased. In the statement recorded during cross examination, Shri Patel clarified that no cash was received from the assessee or his wife. But Ld. CIT(A) did not agree with the submissions/statements of the assessee and held that addition was rightly made by the AO on the basis of seized documents, and also held that the figure of Rs.12,800/- appearing in the said documents was rightly decoded by the AO as Rs.1,28,00,000/-. He did not find any credibility in the second statement given by the builder Shri Kantibai Patel during his cross examination by the assessee wherein he denied receipt of any cash payment from the assessee or his wife. Therefore, addition made by the AO was sustained.

3.5. Being aggrieved, the assessee has filed appeal before the Tribunal.

3.6. During the course of hearing before us, it has been argued by Ld. Counsel that addition made by the AO and sustained by the Ld. CIT(A) is contrary to the facts as well as 6 Jairam & Deepa Chawla law. It has been submitted that addition has been made by blindly relying upon a previous uncorroborated statement which was recorded at the back of the assessee and disregarding the statement which was recorded in the presence of the assessee during the process of cross examination. It was submitted that lower authorities followed a biased approach. The lower authorities have done a sort of cherry picking exercise by choosing one statement and disregarding other which did not suit them. He drew our attention towards the seized documents on the basis of which addition was made in the hands of the assessee and contended that it was a typed document and nothing was clear that who prepared it and for what purposes. It was also shown that area mentioned in the said paper against the name of the assessee was 3122 sq.ft., whereas the shop purchased by the assessee is having area of 1560 sq. feet, and thus when even the area does not tally, no credibility could be given to this document to the extent that addition of such a large amount could be made solely relying upon this dumb document.

3.7. It was further submitted that in view of these facts, the second statement of the builder wherein facts were clarified properly could not have been brushed aside by the Ld. CIT(A) in such an unfair manner. Lastly, he placed the reliance on the judgment of the Tribunal in the case of ITO vs. Synthetic Hydrocarbon (ITA No.5188/Mum/2011 dated 12.09.2012 wherein similar issue was involved and property was purchased by the said firm from the same builder i.e. M/s Gayatri Homes, and AO had made addition on the basis of 7 Jairam & Deepa Chawla same seized document as result of search and seizure action conducted in the case of Siddhi Group of companies. In the said case, Ho’ble Bench relying upon the statement of Shri Kantibai Patel of Gayatri Homes and finding out variation in the area mentioned in the agreement and seized document, deleted the addition. It was submitted that case of the assessee was covered with the judgment of coordinate bench having same facts and therefore, assessee’s appeal was to be allowed.

3.8. On the other hand, Ld. DR has supported the order of the lower authorities. In response to our query, he was not able to distinguish the judgment of the Tribunal in the case of Synthetic Hydrocarbon (supra).

3.9. We have heard both the sides and gone through the orders of lower authorities. It is noted by us that complete facts have not been considered by the lower authorities while adjudicating the issue against the assessee. From the discussion made above in our order, it would be clear that in the statement recorded during the process of cross examination facts were clarified by Shri Kantilal M. Patel. We find that similar issue had reached before the Tribunal in the case of Synthetic Hydrocarbon (supra), and relevant para of the said judgment is reproduced below:

“Revenue is before us against the finding of Ld. CIT(A). The Ld. Departmental Representative strongly supported the 8 Jairam & Deepa Chawla findings of the AO and submitted that any incriminating paper found on a computer hard disc of which print is taken, there cannot be any question of having signature on it. The Ld. DR further submitted that the builder Shri Kantilal M. Patel has confirmed in his statement that he has received cash over and above the registered value of the shop purchased by the assessee. The same cannot be brushed aside lightly. Rebutting the arguments and submissions of the Ld. DR, the Ld. Counsel for the assessee submitted that the entire addition has been made solely on the basis of some documents found at the premises of the builder. The Ld. Counsel for the assessee referred to the cross examination of the builder and submitted that during the cross examination, said builder specifically stated that as per his books he has received only Rs. 43,60,000/- from the assessee and the same payment was received in cheque. In support of which he has submitted ledger copies of his books. The Ld. Counsel concluded that entries in the seized document,, found from the premises of the builder cannot be relied upon in the light of the ratio laid down by the Hon'ble Supreme Court in the case of CBI Vs V.C. Shukla & Ors (supra).

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

10 Jairam & Deepa Chawla at Little World. The entire assessment has been made only on the basis of surmise, assumptions and conjectures. In our humble opinion, such additions cannot be sustained, more so in the light of the ratio laid down by the Hon'ble Supreme Court in the case of CBI Vs V.C. Shukla & Ors (supra). We do not find any reason to tinker with the findings of Ld. CIT(A) which we confirm. 11. In the result, appeal filed by the Revenue is dismissed.

3.10. It is noted that the facts of the case before us are identical to the facts of the above said case. In the case before also there is difference in the area. The seized document reflects the area as 3122 sq.ft., whereas agreement entered with builder shows area as 1560 sq.ft. Further, Mr. Kantibai Patel had clarified full facts during the course of his cross examination before the AO. Nothing was brought on record by the Revenue, thereafter, to negate the claim of the assessee. The addition was made by the AO and sustained by the Ld. CIT(A) solely relying upon seized document and statement of developer which was subsequently, retracted/modified during the cross examination.

3.11. It is further noted that in the appeal before Ld. CIT(A), it was submitted that sale deed was duly registered at Rs.1.29 crores and the same was accepted by the stamp valuation officer, and therefore, this value was to be adopted as the amount of sales consideration paid by the assessee, in view of section 50C. It was further submitted that merely relying upon

11 Jairam & Deepa Chawla the third party statement which was recorded at back of the assessee and that too without granting any opportunity of cross examination to the assessee, impugned addition could not have been made. In view of the submissions of the assessee, Ld. CIT(A) granted opportunity to the assessee to cross examine the said builder/ developer from whom the shop was purchased. Accordingly, AO recorded the statement of Shri Kantibai Patel of M/s. Gayatri Homes of Siddhi Group of companies. In the statement recorded, the builder Shri Kantibai Patel stated that he had agreed before the search party for offering the income of Rs.12.05 crores to buy peace of mind and to bury the litigation, and no where he had mentioned that he had received a sum of Rs.1.28 crores from Shri Jai Ram Chawla or Smt. Deepa Chawla. The AO confronted him earlier statement in which he had allegedly stated that he had received cash over and above the current value which was not accounted for in the books of accounts and which was offered as undisclosed income amounting to Rs.12.05 crores. But Shri Kantibai Patel remained firm in his statement that he had not mentioned that any cash was received from Chawla’s. Thereafter, AO showed the seized paper to Shri Kantibai Patel on the basis of which addition was made by the Ld. AO in the assessment proceedings, wherein names of various purchasers were mentioned along with amounts to be received and received from these persons. In response, Shri Kantibai Patel stated that these were the amounts as were ‘expected’ to be received from prospective buyers, and not the amounts ‘actually’ received. In nutshell,

12 Jairam & Deepa Chawla Shri Patel clarified and reconfirmed that no cash was received from the assessee or his wife. Thus, facts narrated in the orders of the lower authorities cannot take us to the conclusion that cash was paid by the assessee or his wife, over and above the stated consideration. It is well settled law that the burden is on the Revenue to prove that consideration of the immovable property has been understated, and no addition can be sustained without making proper inquiries and bringing on record cogent evidences. The bare statement of the seller is not sufficient to enable the AO to make addition in the hands of the assessee as was held by the Hon’ble Madras High Court in the case of CIT vs. DE Kalyan Sundaram 282 ITR 259. This judgment was subsequently affirmed by the Hon’ble Supreme Court in the judgment reported at 294 ITR 49. Identical issue has been decided by Hon’ble Bombay High Court on the similar lines in the case of CIT vs. Saffire Hotels Pvt. Ltd. 116 DTR 385 (Bom) (order dated 2nd March 2015), by affirming the view taken by the Tribunal that onus was upon the AO to corroborate his assertion that there was cash component in transaction of sale of immovable property.

3.12. Moreover, Hon’ble coordinate bench in the case of Synthetic Hydrocarbon (supra) did not find this seized material sufficient to sustain the addition made by the AO. Thus, taking into account all the facts and circumstances of this case and respectfully following the aforesaid decision of 13 Jairam & Deepa Chawla coordinate Bench, wherein facts involved are identical, the addition made by the AO is directed to be deleted.

3.13. Since we have decided the issue in favour of the assessee on merits, we are not inclined to decide other legal issues raised by the assessee before us.

Order pronounced in the open court on 6th January, 2016.