NALIN P. CHOKSEY,MUMBAI vs. DCIT CIR 45, MUMBAI

आदेश / O R D E R PER BENCH:

These are six appeals filed by the assessee out of which five appeals involve common issues for the assessment year’s 2002-03 to 2006-07, these five appeals are arising out of the common order of learned Commissioner of Income Tax(Appeals)-38,Mumbai (Hereinafter called “the CIT(A)”) dated 31/12/2010 . While the sixth appeal for assessment year 2008-09 has arisen out of the separate order also dated 31/12/2010 of the CIT(A) . These six appeals are disposed of by this consolidated order for the sake of convenience.

“1. On the facts and in the circumstances of the case and in law the Commissioner of Income - tax (Appeals) erred in confirming the order of the Assessing Officer in making an assessment of the total income of the appellant at Rs.11,04,663/- as against income of Rs.6,54,923/- declared in response to Notice u/s 153A. 2. On the facts and in the circumstances of the case and in law the Commissioner of Income - tax (Appeals) erred in confirming the addition of a sum of Rs. 1,31,490/- as the estimated undisclosed income of the appellant from Sumangal Housing Project merely relying on the statement of the appellant recorded during the course of search at around 3 a.m. (when appellant was not mentally fit and had heart problem and to attend him a Doctor was called) totally disregarding the facts and circumstances of the case. 3) On the facts and in the circumstances of the case and in law the Commissioner of Income - tax (Appeals) has erred in ignoring that the Assessing Officer while estimating the profit of Sumangal Hsg. Project has not considered the actual payments made by the assessee amounting to Rs. 26.79 lacs towards purchase cost of TDR and land compensation. 4) The Appellant states that the CIT (Appeals) failed to appreciate the evidence found and seized during the course of search and that he has erred in not considering the same in determining the real income from the said project.

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The appellant states that the addition is based on surmises and conjectures without carrying on any independent investigation/verification to determine actual real profit by merely relying on the statement and not on any specific evidence.

The CIT (Appeals) has also failed to appreciate the time lag between the completion of the Sumangal project and the statement of the appellant and thus confirming the addition of Rs. 1,31,490/-. 5) On the facts and in the circumstances of the case and in law the Commissioner of Income - tax (Appeals) erred in confirming the addition of Rs.2,98,674/- as the estimated undisclosed income of the appellant in respect of M/s Lateef Garage, rejecting the income disclosed by the appellant computed on the basis of the material found during the course of search. The appellant states that the addition is based merely on the statement before DDIT – Unit-2(3) offering Rs. 25 lacs in respect of transactions in the undisclosed bank account with Samata Sahakari Bank Ltd., standing in the name of M/s Lateef Garage totally ignoring the credits and debits in the bank account.”

4.First we will take up appeal for the assessment year 2002-03. The original return of income for assessment year 2002-03 u/s 139 of the Act was filed by the assessee with the Revenue on 30/07/2002. Consequent to the search u/s 132(1) of the Act on 05/10/2007 , notice dated 04/04/2008 u/s 153A of the Act was issued and served upon the assessee against which return of income

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in compliance thereto was filed by the assessee declaring income of Rs. 6,54,923/- for the assessment year 2002-03.

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difference between the gross profit of Rs.1,37,00,000/- as surrendered in the statement dated 05/10/2007 recorded u/s 132(4) of the Act with respect to Sumangal Housing Project and the profit of Rs. 84,65,165/- as offered for taxation in the return of income filed with the Revenue in compliance to the notice dated 04/04/2008 u/s 153A of the Act on the following basis:- Sumangal project A.Y. Gross profit %age of Estimated profit Difference profit shown as per profit on disclosed to be added. submission shown income of 1.37 crores. 2002-03 Rs. 2,13,750 2.52% Rs. 3,45,240/- Rs. 1,31,490/- 2003-04 Rs. 8,85,870/- 10.46% Rs. 11,33,020/- Rs. 5,47,150/- 2004-05 Rs. 37,67,695/- 44.52% Rs. 60,99,240/- Rs. 23,30,545/- 2005-06 Rs. 32,46,850/- 38.35% Rs. 52,53,950/- Rs. 20,07,100/- 2006-07 Rs. 4,25,000/- 5.02% Rs. 6,87,740/- Rs. 2,62,740/- 2007-08 - - - - 2008-09 - - - - 2009-10 - - - - Total Rs. 84,65,165/- - Rs. 1,37,00,000 -

The A.O. made the addition of Rs. 1,31,490/- as shown above on proportionate basis for the assessment year 2002-03 as undisclosed income of the assessee on account of surrender made by the assessee vide statement dated 5th October 2007 recorded u/s 132(4) of the Act which as per AO is binding on the assessee in view of judgments passed in the case of Dr. S.C. Gupta v. CIT, 248 ITR 782 (All.) and Shri Ramesh T. Savla v. ACIT, Tax Appeal No. 655 of 2000 (ITA No. 1610/B/93) dated 27.7.2004 wherein the Hon’ble High Court held that if there is nothing on record to indicate that assessee was pressurized by undue influence or coercion, than the retraction can be ignored. The AO held that in this case, the assessee has not filed any retraction letter .

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The assessee during the course of search action has also surrendered an amount of Rs. 25 lacs on account of undisclosed bank account of proprietary concern of the assessee M/s Lateef Garage. The assessee has offered Rs. 10,37,079/- during assessment years 2001-02 to 2006-07 vide filing return of income with Revenue as income of his proprietary concern M/s Lateef Garage as against Rs. 25 lacs declared u/s 132(4) of the Act, hence AO held that addition was warranted which is being made on the following basis:- A.Y. Net profit as per % Estimated Difference of P&L A/c profit on undisclosed surrendered income. income of Rs. 25 lakhs 2001-02 Rs. 1,75,191/- 16.89% Rs. 422,250/- Rs. 2,47,059/- 2002-03 Rs. 1,69,158/- 16.31% Rs. 4,07,750/- Rs. 2,98,674/- 2003-04 Rs. 2,11,826/- 20.42% Rs. 5,10,500/- Rs. 2,98,674/- 2004-05 Rs. 2,33,585/- 22.51% Rs. 5,63,000/- Rs. 3,29,415/- 2005-06 Rs. 1,97,783/- 19.07% Rs. 4,76,750/- Rs. 2,78,967/- 2006-07 Rs. 49,536/- 4.37% Rs. 1,19,750/- Rs. 70,214/- Total Rs.10,37,079/- Rs.25,00,000/- Rs. 14,62,921/-

As the assessee had offered Rs. 1,69,158/- during the assessment year 2002- 03 vide return of income filed in compliance to notice u/s 153A of the Act as against Rs. 4,07,750/- as estimated surrendered profit, the difference of Rs. 2,98,674/- was added by the AO as undisclosed income on account of surrender made in the statement given u/s 132(4) of the Act with respect to Lateef Garage, which as per AO is binding on the assessee in view of judgments passed in the case of Dr. S.C. Gupta v. CIT, 248 ITR 782 (All) and Shri Ramesh T. Savla v. ACIT, Tax Appeal No. 655 of 2000 (ITA No. 1610/B/93) dated 27.7.2004 wherein the Hon’ble High Court held that if there is nothing on record to indicate that assessee was pressurized by undue influence or coercion, than the retraction can be ignored. The AO held that in this case, the assessee has not filed any retraction letter.

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The CIT(A) after considering the assessee’s submission and explanation offered, held that the assessee was given a fair opportunity to explain his

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business transactions and the profits earned from the housing projects during the search and seizure proceedings. In his answer to question No. 3 and 4 of the statement u/s 132(4) of the Act dated 5-10-2007, it was admitted by the assessee that he does not maintain the books of account on a regular basis and the books of account are prepared by his Chartered Accountant at the end of the year. The assessee has also denied having earned any income or making investments when the search party confronted him with certain other papers found during the course of search proceedings and the assessee’s version was accepted by the Department which clearly establish that the assessee was in a position to distinguish and point out the incomes, expenses and investments which had clear bearing on the computation of income and such other material which were stated to be relevant. The CIT(A) held that the explanations to the other questions by the assessee indicates that the assessee was in a position to recollect and furnish relevant information so as to arrive at the unaccounted profits earned by him from the residential projects undertaken by the assessee. The assessee has not retracted the statement made u/s 132(4) of the Act with reference to what was offered as undisclosed profits earned from Sumangal Housing project. It is only when the returns of income were filed in compliance to notice dated 04/04/2008 u/s 153 A of the Act, the assessee has not stood by his disclosure and reduced undisclosed profits declared from Sumangal Housing project by about Rs. 52 lacs. Thus, the CIT(A) dismissed the appeal of the assessee on the ground that the disclosure of Rs. 1,37,00,000/- made in the statement recorded u/s 132(4) of the Act is required to be adopted for the purpose of arriving at the additional income of Sumangal Housing Project after considering the income of 84,65,165/- offered in the return of income filed for assessment year 2002-03 to 2006-07 in compliance to the notice u/s 153A of the Act.

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income of Rs. 10,37,079/- was disclosed as against the original disclosure of Rs. 25 lacs made in letter dated 12.2.2008 filed before the DDIT.

The CIT(A) held that the assessee is not maintaining any books of account for the activity of trading in cars. He has not disclosed any income from such activity in the return of income and the only basis to arrive at the income from trading in cars was the peak credit available in the bank A/c No. 1127 in Samata Sahakari bank. There was no evidence submitted before the A.O. with regard to the P&L account prepared so as to justify lower incomes than what were originally disclosed in the letter dated 12.02.2008 filed before the DDIT. It was held by the CIT(A) that even during appellate proceedings, no additional evidences are produced in respect of the entries of the P&L account furnished in the paper book filed before the CIT(A). Mere preparation of P&L account without verifiable evidences are of no relevance for the purpose of bringing to tax the source of income which was never disclosed to the Revenue in the normal course. After considering all these facts and circumstances of the case, the CIT(A) dismissed the ground raised before him and held that the disclosure of income of Rs.25,00,000/- made by the assessee himself , on the basis of the peak credits in the bank is the most suitable method by which such undisclosed source of income can be assessed to tax.

9.Aggrieved by the orders dated 31/12/2010 of the CIT(A), the assessee has preferred further appeal before the Tribunal.

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The ld. Counsel submitted that in the return of income filed in compliance to the notice dated 04.04.2008 u/s 153A of the Act, the assessee has offered gross income of Rs. 84,65,165/- in aggregate from Sumangal Housing Project for the assessment year 2002-03 to 2006-07 based on the books of accounts maintained by the assessee in the regular course of business as against Rs. 1.37 crores surrendered by the assessee during search operations vide statement dated 05/10/2007 recorded u/s 132(4) of the Act. The ld. Counsel also submitted that the assessee has not retracted the statement dated 5th October 2007 with respect to profits earned from Sumangal Housing Project but while filing the return of income in proceedings u/s 153 A of the Act read with Section 143(3) of the Act, the assessee has filed income based on the correct information as per books of accounts and by taking into account all the expenses, including expenses towards the purchase of TDRs, the correct profit arising from Sumangal Housing project was worked out and the gross income of Rs. 84,65,165/- based upon the books of accounts was correctly arrived at which was included in the returns of income after claiming expense in the proceedings u/s 153A of the Act read with Section 143(3) of the Act for assessment years 2002-03 to 2006-07. The ld. Counsel for the assessee submitted that the Sumangal Housing project was completed in the assessment year 2006-07 while the statement was recorded on 5th October, 2007 and the statement about the profit from the Sumangal Housing Project was recorded by the assessee from his memory at the time of recording the statement . The Ld Counsel submitted that the search continued for a longer time extended into the late night and the recording of statement u/s 132(4) of the Act continued till late at night i.e. 3am when mental condition of the assessee was not in best of the state and medical assistance was called as he had high blood pressure. The Ld. Counsel of the assessee submitted that the assessee has rebutted the statement recorded on 05/10/2007 while filing the return of income in compliance to the notice u/s 153A of the Act. He submitted that prior to the search on 05/10/2007, the project was completed

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in assessment year 2006-07 itself and payment was received by cheque which was duly recorded in the books of account maintained by the assessee in regular course of business. The Ld. Counsel of the assessee made statement before us that the assessee has duly submitted a letter dated 14-12-2009 before the A.O. which is part of the assessment records , the copy of the same duly certified by the Ld. Counsel was also submitted before us and this letter dated 14.12.2009 is placed in the file. The relevant extract of this letter dated 14.12.2009 stated to be produced before the AO and part of assessment record is reproduced hereunder:-

“NALIN CHOKSEY Krishna Villa Linking Road Santa Cruz (W) Mumbai - 400 054 December 14, 2009 To Dy. Comm. of Income Tax, Central Circle - 45, Mumbai.

Dear Sir, Sub: Assessment Proceedings for A.Y.2002-03 to A.Y. 2008-09 Re : Mr. Nalin P. Choksey-PAN: AABPC0675L

I am in receipt of your letter No. DCIT/CC-45/Asst./2009-10 dated 10/12/2009 on 11/12109 for period relevant to the A.Y. 2002-03 to A.Y. 2008-09 calling upon me to submit explanations in respect of various points contained in your letter by the 14.12.2009. At the outset I wish to point out that the time allowed is very short and inadequate to respond to your letter. However, with a view to co-operate in the proceedings, I am submitting herewith details to the extent I could prepare and request you to be kind enough to accept the same with due regard to the paucity of time available to me to prepare the same. 1. i&ii) Regarding Maintenances of Books of Account: In response to question no. 3 and 4 of my statement recorded during the course of search at around 3.00 a.m. of 6.10.07, I had stated that I do not maintain Books of Account at my premises but the same are prepared and maintained at the office of my C.A. M/s. P.D.Heda at 4th floor Hind Rajasthan Building, Dadar

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T.T. I may mention that I employ and continue to employ an accountant who works on part time basis and prepares the accounts at my Chartered Accountant's Office at Dadar. Since at the time of search all the Books of Account were in the office of my Chartered Accountant, hence I could not produce the same before the search party. It may be mentioned that I had produced the books of account during my scrutiny assessment proceedings pertaining to A.Y. 2003-04 & 2005-06 , which have been completed prior to search. Moreover the backup of my computer taken on CD during the course of search also contains my Books of Account for the period under reference. You are requested to refer to the computer backup taken during the course of search and you will find that the same contains the trial Balance, Profit and Loss a/c of Mrs. Punita Choksey, M/s Shreenath Enterprises, Nalin Choksey, HUF and Hemen Motors. In view of these facts, it is absolutely untrue for you to state that books of accounts were not available or were not maintained as is alleged in your above referred letter. I may also emphasize that returns of income in the case of Nalin Choksey (prop. M/s Shrecnath Enterprises) are filed along with Tax Audit Report in so far A.Y. 2003-04 to 2008-09 are concerned and this itself is ample evidence of the maintenance of the books of account.

iii) Maintenance charges recorded of various plots of Sumangal Apartments & Pushpmangal Apartments (page 182 of Annexure A-2):- Maintenance charges received by me from various occupants/tenants relating to my projects namely Sumangal and Pushp Mangal Apartments have been duly accounted for and offered to tax in the respective year of receipts in the project account and the same can be verified from the books of account produced herewith.

iv) Sale of flat to Louis Pereira (page 81 of Annexure A-I). Mr. Louis Percira had initially desired to buy flat of 560 sq. ft. in Project-II (Pushp Mangal). However, nearer to completion of the building he has opted for smaller flat of 471 sq. ft. built-up in place of 560 sq. ft. in January 2006. We are also enclosing herewith copy of the Agreement accordingly executed for flat No.53 in Pushp Mangal Apartment purchased by Mr. Pereira for your reference. The initial money paid by him was Rs.50000/-, which has been duly accounted for. Amount received from Mr. Pereira has been duly accounted for in the books of account of M/s Shreenath Enterprises, which are produced herewith for your verification. Since the flat bought by Mr. Pereira was smaller than the original one, he has paid lesser consideration of Rs. 11,07,600/- as against initially agreed consideration for the bigger flat of 560 sq. ft.of Rs.12,32,000/-. I may clarify that the noting dated 8.9.03 referred to by you is the noting in UB Diary (page 81 of Annexure A-I) for the offer given by me to him on that date for the flat admeasuring 560 sq. ft. at which time I have quoted the rate of Rs.2,200/- per sq. ft.

v) Profit from Projects namely Sumangal Apartment and Pushp Mangal Apartment: In reply to question no.5 of the Statement recorded u/s, 132(4) of 1. T. Act on 06.10.2007, I had given the approx. figures about Sales proceeds

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of flats for Project-I (Sumangal-which contains 24 flats only erroneously mentioned 35 flats) at Rs.3.50 crores approx. In fact the actual sale proceeds of the project- I (Sumangal) was Rs.3.26 crores only, which can be reconciled with the sale values as mentioned in the agreements and books of accounts produced before your goodself. Similarly while giving the figure of project cost in my statement, I had taken the cost of land at Rs.23,00,000/- plus stamp duty, which was the initial value of the land debited in the books of accounts in the financial year 2000-2001.In my above said statement I did not consider the subsequent payments made by me towards cost of land compensation and TDR amounting to Rs.26.79 lakhs. The above said payment of Rs.26.79 lakhs includes i) Compensation of Rs.10.00 lacs paid on 29.3.2004 to Shri Godfrey Jacob (sole heir of Smt. Catherine Jacob (mother) and Smt. Mary John from whom the plot was purchased vide agreement for sale dated 28.11.1995) and a sum of Rs.16,79,184/- was paid to M/s Pranay Investment towards purchase of TDR (vide agreement dated 6.9.01 seized at the time of search emphasis supplied).The above said payment has been accounted for as project cost (sources explained below) and also mentioned by you at point no.6 below, which was loaded on the plot and which resulted in the construction of excess area above the sanctioned FSI of 1, which cost also remained to be mentioned at the time of my statement. These costs are imperative and cannot be ignored in the computation of cost of project even if they had remained to be mentioned in my statement. If these figures are considered you will find that the same more or less tallies with the actual figures shown by me in the accounts enclosed with the returns for· the corresponding period. Since the figure given by me were approximates as could be recollected from my memory, the same should not be compared with the exact figures of the sale proceeds and expenditure of the project. Moreover my mental condition at the time of recording the statement i.e. at 3 o'clock in the night was not in the best of state and I had high blood pressure. In fact a doctor was called up to examine my blood pressure and to start medical treatment. You will definitely appreciate the position of my mental condition as I had stated in my statement that there are 35 flats in the Project I (Sumangal) but in fact there are only 24 flats in said project, which can be physically verified. I am enclosing herewith year wise details of Project Account for both the projects along with summary of the same, which is in agreement with the results / income of the projects reflected in my books of accounts and offered to tax in the return of income filed for the respective years. I am also producing herewith bills, vouchers etc. for your verification and in support of above said payments. I may also add that as regards profit of Pushp Mangal Apartments I have disclosed total profit of Rs.l.08 crores as against the figure of Rs. 1.00 crore referred to by you at point no. I(v) in your letter dt.l0.12.2009 and therefore the same constitutes clear evidence of the measure of the correctness of my accounts as regards my business activities in so far as my project figures are concerned. It may be further added that your assumptions do not include the profits offered by me in A.Y. 2009-10 which works out to Rs.74.18 lacs and which itself constitutes a large chunk of income from the project not considered by you while arriving at the figures incorporated in your letter under reference.

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3.In point no. 3 of your letter you have worked out estimated profit considering the profit of the project @ Rs. 2.37 crores, which is totally incorrect and without any proper basis. I have already submitted here above that there is no mismatch in the figure of profit referred by me in my statement recorded u/s.132 (4) and profit drawn from the books of accounts maintained by me. I may further submit that being a Developer I am following percentage of receipt basis of accounting on account of which I am offering profit @15% of the receipts in so far as Sumangal Apartments project and @ 10% of the receipts in so far as Pushp Mangal Apartments is concerned, for deriving the profit on year to year basis. The method of accounting followed by me for construction of the housing projects is a recognised method of accounting and was regularly followed by me from year to year till completion of the projects. I may also mention that you have worked out the profits of the construction business for various A.Y. 2002-03 to 2008-09 at Rs.23678670/- and attempted to compare the same with the figures of the profits of business as appearing in the computation. In this regard I wish to point out that the position of profits of construction business if you wish to compare should be taken from the Profit & Loss A/c wherein the estimated profits have been adopted as per details mentioned below:-

A.Y. Total Establishment Net profit credits/Estimated Expenses as shown in profit as per P&L per P&L A/c computation A/c Sumangal Project 2002-03 2,13,750 1,67,384 46,366 2003-04 8,85,870 1,23,623 7,62,247 2004-05 37,68,695 4,48,772 33,19,923 2005-06 32,46,850 98,517 29,14,923* 2006-07 4,25,000 - 4,25,000# Total Profit 84,65,165

Pushpmangal Project 2005-06 2,33,410 - 2,33,410*

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2006-07 10,94,758 3,92,797 7,01,961# 2007-08 9,83,836 4,54,744 5,29,091 2008-09 11,07,500 5,87,655 5,19,845 2009-10 74,18,358 1,67,463 72,50,895++ Total Profit 1,08,37,862

*29,14,923 +2,33,410=31,48,333(shown in P & L a/c for A.Y.2005- 06) # 4,25,000 + 7,01,961=11,26,961(shown in P&L A/c for A.Y. 2006- 07) ++ not considered by you in your letter and already pointed out in explanation given herein above.

From these figures various establishment expenses which have been incurred have been claimed leading to the figures referred to by you as appearing in the computation. To sum up therefore your proposition is not acceptable and you are requested not to adopt any other figure of profit other than what has been disclosed and assessed as no evidence has been found during the search to reflect a higher earning of profits over and above what has been disclosed.

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5.Regarding alleged unexplained deposits in Bank A/c No. 1127 of Samata Sahakari Bank Ltd. in the name of Lateef Garage ( Prop. Nalin Choksey): In response to the notice u/s 153A, I have filed the return of income for the year relevant to A.Y.2002-03 to 2008·09, wherein I have included the income in respect of all transactions i.e. receipts being referred to by you in the bank account No.1127 with Samata Sahakari Bank Ltd. in the name of M/s Lateef Garage as is evident from the profit and loss account already submitted to you earlier. I have also submitted the details of deposits and withdrawals of the above said bank account for the period under reference vide letter dt.14.10.2009. On the basis of details of deposits and withdrawals in the above said bank account, I have prepared and furnished the Profit & Loss Account of M/s Lateef Garage for the above said period alongwith my letter dt.4.11.2009. Since I have already considered the figure of profit of Lateef Garage in the return of income filed by me for the A.Y.2001·02 to 2006·07, any addition u/s 69A of the I.T. Act in this regard as proposed by you will only amount to double taxation of the same income. The details of income offered by me on account of business transactions in the Bank A/c No.1127 with Samata Sahakari Bank Ltd. are as follows.

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A.Y. F.Y. Net profit of Lateef Garage 2001-02 2000-01 1,75,191 2002-03 2001-02 1,69,158 2003-04 2002-03 2,11,826 2004-05 2003-04 2,33,585 2005-06 2004-05 1,97,783 2006-07 2005-06 49,536 6. Payment of Rs. 16,79,184/- to M/s Pranay investments: During the year relevant to A.Y. 2002-03, I had made the following payments totaling to Rs. 1679184/- to M/s Pranay Investments towards purchase of TDR for my housing project-Sumangal Apartments at Vakola. The said payments were made out of my income for the year and accumulated savings lying in the bank and the details of the same are as follows:

Cheque No. Date Amount Drawn on 08.07.2001 Rs. 2,00,000/- Samta Sahakari Bank Ltd. 750237 750241 05.09.2001 Rs. 2,88,255/- Samta Sahakari Bank Ltd. 750242 06.10.2001 Rs.11,90,925/-Samta Sahakari Bank Ltd.

I am producing herewith the books of accounts for the year under reference for your verification and in support of my above submission. It is submitted that the original document relating to purchase of above referred TDR was seized during the course of search and forms a part of the seized material.

0………..0……….0 I hope that you will find above details/explanation in order. However, in case you still unsatisfied or should you require any further details/clarifications in this regard, I shall be pleased to furnish the same on hearing from you.

Thanking you,

Yours faithfully,

Sd/-

(Nalin Choksey)

Encl:As above”

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05.10.2007 u/s 132(1) of the Act related to Sumangal Housing Project and the addition has been made by the Revenue merely on the basis of statement on oath u/s 132(4) of the Act dated 5th October 2007 recorded during the course of search u/s 132(1) of the Act and hence no addition can be made solely relying on the statement as per the provisions of the Act and more so it is un-abated completed and concluded assessment. The ld. Counsel submitted that the time limit for framing the assessment for assessment year 2002-03 u/s 143(3) read with Section 143(2) of the Act has already expired as the return of income was filed on 30th July, 2002 while the search has been conducted on 5th Oct, 2007 and additions can only be made based upon the material found during the course of search as this is a concluded and un- abated assessment, while no incriminating material has been found during the course of search , hence addition cannot be made merely on the statement recorded during the course of search. The asessee has duly declared gross income from Sumangal Housing Project aggregating to Rs. 84,65,165/- as per details submitted for the assessment year 2002-03 to 2006-07 and the Revenue has not found any defect in the books of account maintained by the assessee nor books of accounts were rejected by the Revenue and the assessee has rebutted with evidences with respect to the statement recorded u/s 132(4) of the Act that the gross profit of the assessee from the Sumangal Housing Project is Rs. 84,65,165/- and not Rs.1,37,00,000/- and the Revenue has not brought on record any evidence to disprove the same.

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motu come forward with the statement with respect to the undisclosed income which is based on the assessee’s knowledge of facts which are within exclusive knowledge of the assessee. He submitted that the search was conducted on 5th October, 2007 and the assessee has not retracted the statement although assessee was issued summon by the DDIT u/s 131 of the Act and the assessee had a chance to retract the statement before the DDIT. The assessee did not appear before the DDIT on 12th Feb. 2008 in pursuance to summons u/s 131 of the Act nor retracted the statement while the assessee filed letter with DDIT on 12/2/2008 with respect to income from his proprietary concern ‘Lateef Garage’, and hence the statement dated 05-10- 2007 is binding on the assessee and the A.O. has rightly made the additions of the income based upon the statement recorded on oath u/s 132(4) of the Act. The statement is very clear to the facts and it is not a vague statement, hence the addition needs to be sustained.

“Q No. 1 Please identify yourself? And you have been told about consequences of telling false statement under the oath. Ans. I am Nalin P.Choksey s/o Parvin M.Choksey, age 52 years, resident of Krishna villa, linking Road,. Santa Cruz west, B.Com. I have been told by yourself about consequences for false statement in detail. Q.2 Please give details of your business activities/ transactions in last seven years.

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Ans. I don 't have anything, off hand.

Q. 3 During the course of physical verification at your residence we are not able to find any books of accounts for any of the year, and you have also accepted in your preliminary statement that you prepare your books of accounts at the end of the year only, that too have also not been found therefore, why it should not be considered, that, you are not maintaining any books of accounts and also why it should not be deduced that you are showing the taxable income as per your own choice, please comment.

Ans. I do not maintain any books of account at my premise, all are prepared at the end of my CA, office, P.D. Heda & Company, 4th floor, in Rajasthan building, Dadar T.T.

Q. 4 Can you produce your books of accounts now? , as you have not produced the same since morning, despite have made various requests to you.

Ans: No I cannot produce the same. Q .5 Please give complete details of projects completed/or going on, in your M/s Shree Nath enterprises.

Ans: I have purchased the land in 1995 for Rs.23 lacs +stamp duty, for Sumangal Project, construction was started on Feb. 1997, and construction was completed in August 2003. Total area constructed was carpet area of 13,500 sq. feet, and build up area of 18,000sq. feet, contract for construction was given to M/s M.A. Construction for Rs.1.55 crore, and other expenses to the tune of Rs.35-40 lacs have been made. Total flats constructed were 35 flats, total sale proceed received were Rs.3.5 crores, therefore total profit of Rs:1.37 crores have been made by me, most of that I have offered for tax, remaining amount, I am hereby surrendering for taxation in respective year .”

It is submitted and stated before us that there is no incriminating material found during the course of search operations with respect to the Sumangal Project by the Revenue and the addition has been made merely on the basis of statement u/s 132(4) of the Act recorded during the course of search operation which has not been contradicted by the Revenue. We have observed that the statement recorded u/s 132(4) of the Act on 05/10/2007 has not been retracted by the assessee except through return of income filed with the Revenue in pursuance to notice dated 04/04/2008 u/s 153A of the Act,

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whereby the gross income from this project was disclosed at Rs. 84,65,165/- for the assessment year 2002-03 to 2006-07 as against the income from this project of Rs. 1.37 crores declared and disclosed in the statement dated 05/10/2007 of the assessee recorded u/s 132(4) of the Act. Now, coming back to the issue in dispute, we have observed that the assessee has developed the Sumangal Housing project and has stated that proper books of account were duly maintained by the assessee in the regular course of business and payment for this project has been received by cheque which are duly accounted in the books of account and these books of accounts were produced before the AO which is stated to be evident from the letter dated 14/12/2009 produced by the assessee before us and being part of the assessment records . It is also submitted before us that based on the books of accounts maintained by the assessee in regular course of business, the return of income was filed with the Revenue in compliance to notice u/s 153A of the Act declaring the total gross profit arrived at as per the books of account of Rs. 84,65,165/- from this Sumangal Housing project earned during the assessment years 2002-03 to 2006-07 and the same was offered for taxation . It was submitted before us that no defect , discrepancies or falsity has been pointed out by the Revenue in the said books of accounts so maintained and produced by the assessee before the AO nor books of accounts were rejected by the Revenue. It was also stated before us that the search continued for a very long time till 3am in the late night and the statement was recorded after midnight whereby the assessee’s health deteriorated and resultantly the Doctor was being called in for medical assistance of the assessee. It was stated before us that the assesee has made the statement of earning profit of Rs. 1.37 crores from the Sumangal project out of the memory of the assessee as the project was completed much before the date of search on 05/10/2007 whereas the actual gross profit earned was Rs. 84,65,165/- as per books of accounts maintained by the assessee which is the correct profit chargeable to tax. Our attention was also invited to

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question No.5 whereby the assessee was asked to give the complete details with regard to the Sumangal Housing Project whereby the assessee stated in reply that the land was purchased in 1995 for Rs. 23 lacs plus stamp duty. The assessee stated in the afore-stated statement that the project was started in February, 1997, and construction was completed in August 2003. The ld. Counsel of the assessee submitted before us that the assessee has erroneously stated in his statement vide answer to Q. No. 5 that the land was purchased in 1995 for an amount of Rs.23 lakhs and the stamp duty for Sumangal Housing project was also paid but the assessee submitted before us that he did not considered while recording of the statement , subsequent payments towards land compensation and TDR amounting to Rs. 26.79 lakhs which was also paid towards this land out of which Rs.10 lakhs compensation was paid on 29.3.2004 to Shri Godfrey Jacob (sole heir of Smt. Catherine Jacob) and Smt. Mary John from whom the plot was purchased vide sale agreement dated 28.11.1995 and a sum of Rs. 16,79,184/- was paid to M/s Pranay Investment towards purchase of TDR vide agreement dated 6.9.2001 which was seized at the time of search . The above payment has been accounted for as project cost which was loaded on the plot and which resulted in the construction of excess area above the sanctioned FSI of one and the assessee has not mentioned the same in the statement recorded during the course of search operations. The assesee also submitted that erroneously the assessee has stated in his statement vide answer to question No.5 that 35 flats were constructed while the fact of the matter is that there were 24 flats only which was constructed which can be physically verified . It was also submitted by the assessee that in the statement the total sale proceeds stated were Rs. 3.5 crores while actual sale proceeds were only Rs. 3.26 crores which can be reconciled from the books of accounts which were duly produced before the A.O. during the course of assessment proceedings u/s 153 (A) r.w.s. 143(3) of the Act. The assessee also submitted that all these facts were brought on record before the AO during the proceedings u/s 153A

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read with Section 143(3) of the Act vide letter dated 14.12.2009 which is part of assessment records as well the said facts were also produced before the CIT(A). Thus the assessee submitted that if these two figures are considered then the difference of Rs. 52 lacs is duly reconciled. The assessee also submitted that all the records , books of accounts were produced along with bills , vouchers etc for the verification before the AO in support of the payments during the course of assessment proceedings u/s 153A of the Act read with Section 143(3) of the Act which is reflected from para 1 (v) and 2 of letter dated 14th December, 2009 filed before the AO and it was stated to be part of the assessment record and also of proceedings before the CIT(A) . The assessee submitted that the Revenue has not find defects , discrepancies and falsity in the books of accounts of the assessee and the same were not rejected by the Revenue but the Revenue is merely relying on the statement recorded during the search operations conducted u/s 132(1) of the Act on 5th October, 2007 whereupon the assessee stated that the profit earned from this project is Rs. 1.37 crores , out of which most of the profits have already been offered for taxation by the assessee vide return of income filed u/s 139 of the Act for relevant assessment year’s and the remaining amount is hereby surrendered for taxation in the respective years.

We have heard rival parties and carefully perused the records. In our considered view , the assessee during the course of search operations u/s 132(1) of the Act on 05/10/2007 vide his statement u/s 132(4) of the Act has stated that the profit of Rs. 1.37 crores has been earned by him out of Sumangal Housing project comprising 35 flats while the actual flats stated to be constructed were 24 which the assessee requested the authorities below to verify physically during the relevant proceedings u/s 153A of the Act .It was incumbent on the AO to verify these important aspects but the AO instead chose to rely on statement dated 05/10/2007 u/s 132(4) of the Act . The assessee also stated that most of the profits has already been offered for tax

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vide original returns filed u/s 139 of the Act filed with the revenue while for the remaining profit from the said project, the assessee agreed to surrender during the respective relevant years as is evident from answer to question No. 3 , 4 and 5 as recorded in the afore-stated statement. The books of account were not readily available during the course of search. Although, we have observed that the assessee has stated that the backup of the books of account were already part of the backup taken on CD during the course of search which contained the books of account for the period under reference as stated in para 1 of the assessee’s letter dated 14th December, 2009 filed before the A.O and which is stated to be part of the assessment records and was also stated to be submitted before the CIT(A) during appellate proceedings. The assessee has also stated in the said letter dated 14.12.2009 that during the scrutiny proceedings u/s 143(3) of the Act read with Section 143(2) of the Act for the assessment year’s 2003-04 and 2004-05 concluded prior to search, the books of accounts were also produced before the AO. The said orders dated 27.02.2006 and 21.12.2006 passed by the AO u/s 143(3) of the Act for assessment year 2003-04 and 2004-05 are placed in the file. As seen from the documents produced before us, the assessee during the course of assessment proceedings have produced books of accounts, bills, vouchers etc. to substantiate that the profit earned by the assessee from his Sumangal project is Rs. 84,65,165/- as per books of account maintained by the assessee in the regular course of business and no defects , discrepancies or falsity have been pointed out by the Revenue in the said books of accounts of the assessee and also no incriminating material with respect to this project has been found during the course of search operations as submitted by the assessee and not contradicted by the revenue . The assessee has more or less reconciled the difference of Rs.52 lacs between the profit declared and disclosed while recording statement u/s 132(4) of the Act stated to be from his memory and the profits as reflected in the books of accounts maintained by the assessee in the regular course of his business by submitting that he

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has stated during the course of search erroneously that the sale proceed of Sumangal Housing Project was Rs. 3.50 crores while the actual sale proceeds of the Sumangal Housing Project was Rs. 3.26 crores only as per books of accounts maintained by the assessee in the regular course of business and produced before the AO during the assessment proceedings. Similarly, the assessee reconciled the rest of the difference by stating that there was further difference of Rs. 26.79 lakhs on account of land compensation and TDR which was not taken into account while making the statement during search operations while the same is duly accounted for in the books of accounts regularly maintained by the assessee. We are of the considered opinion that statement recorded under Section 132(4) of the Act is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Here in this case, the AO has reached to the conclusion based merely on the basis of statement resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) of the Act and when there is incriminating admission against himself, then it is required to be examined with due care and caution. The AO has failed to give reason for the rejection of the contentions of the assessee and the AO has failed to proceed further to enquire into the income based on the disclosure made by the assessee in the statement recorded u/s 132(4) of the Act and more so no incriminating material was stated to be found during the course of search and the assessee has duly produced books of accounts along with bills, vouchers etc for verification of the AO and the returned profit was based on the books of accounts maintained by the assessee in regular course of business.Our above view is fortified by the decision of Hon’ble Jharkhand High Court in the case of Shree Ganesh Trading Co. v. CIT (2013) 257 CTR 0159 (Jh.HC) .The initial onus which lay on the assessee on account of the statement u/s 132(4) of the Act recorded u/s 132(4) of the Act on 5th October, 2007 to rebut the earning of profit of Rs. 1.37 crores from Sumangal Housing Project as per the statement has been

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discharged by the assessee by giving reasonable and plausible explanation. More so, the Revenue is merely relying on the statement which is a material obtained during the course of search and the statement is not even material found during the course of search and it was stated before us and not disputed by the Revenue that there was no incriminating material found during the course of search based on which additions have been made by the Revenue and the whole case of the revenue hinges on the statement recorded on 05/10/2007 u/s 132(4) of the Act. The assessee has also produced the books of account before the A.O. during the course of assessment proceedings u/s 153A of the Act read with Section 143(3) of the Act and hence the burden has now shifted to the Revenue to bring on record cogent material/evidences to demolish the submissions made by the assessee that the profit from Sumangal Housing Project is Rs. 84,65,165/- as per books of accounts instead of Rs.1,37,00,000/- as per the statement , by bringing on record defects, discrepancies and falsity in the books of accounts and other records produced by the assessee before the AO during the course of the assessment proceedings. We find that the Revenue has not brought on record any defects, discrepancies and falsity in the books of account , vouchers , bills etc. and other documents produced by the assessee before the AO and no further enquiry was conducted by the AO to verify the correctness of the contentions of the assessee during the course of assessment proceedings u/s 153 A of the Act read with Section 143(3) of the Act. The Revenue has also not rejected the books of account maintained by the assessee. Thus, we are of the considered view that the assessee has duly discharged the onus which lays on him by bringing on record the cogent material by way of books of account , bills, vouchers and other documents etc. to substantiate its stand that the profit earned from Sumangal Housing Project is Rs. 84,65,165/- as per books of accounts regularly maintained by the assessee and not Rs. 1,37,00,000/- as declared by the assessee in the statement recorded on 05/10/2007 u/s 132(4) of the Act and the Revenue is merely relying on the

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statement recorded u/s 132(4) of the Act during the course of search operations u/s 132(1) of the Act on 05/10/2007, as the assessment u/s 153A of the Act with respect to un-abated completed and concluded assessments u/s 153A of the Act can only be made based upon the incriminating material found during the course of search as per mandate of the Section 153A of the Act which has been held by Hon’ble Delhi High Court in the case of CIT v. Kabul Chawla (2015) 61 taxmann.com 412 (Del HC). The relevant extract of decision of the Hon’ble Delhi High Court in CIT v. Kabul Chawla(supra ) is as under:

“37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:

i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.

ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.

iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".

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iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."

v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings.

vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.

vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion

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incriminating material was unearthed during the search, no additions could have been made to the income already assessed.

The original return of income u/s 139 of the Act in the instant case was filed by the assessee on 30/07/2002 and as per Section 143(2) of the Act , the revenue could have proceeded to issue notice u/s 143(2) of the Act till 31/07/2003 to proceed to frame assessment u/s 143(3) of the Act while the search was conducted on the assessee on 05/10/2007 and thus, the assessment for the instant assessment year is a completed and concluded un- abated assessment as per Section 153A of the Act as held by Hon’ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Limited (2015) 58 taxmann.com 78 (Bom. HC). Thus, in the instant case , in our considered view , the additions to the income cannot be sustained merely on the statement recorded u/s 132(4) of the Act which is also later on retracted through return of income filed in pursuance to notice u/s 153A of the Act unless the statement is corroborated by or relatable to the material found during the course of search or post search enquiries relatable to material found during the course of search , as the assessee in the instant case has brought on record cogent material by way of books of accounts, bills , vouchers etc maintained in regular course of business to substantiate its contentions in which no defect, deficiency or falsity is pointed by the revenue and more-so the statement recorded during the course of search is a material obtained during the course of search and is not even a material found during the course of search. In case the Revenue wants to make additions based on the statement recorded u/s 132(4) of the Act , then the same should be relatable to or corroborated by the material found

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during search or post search enquiries relatable to the incriminating material found during the course of search which in the instant case is lacking. In view of our above discussions and reasoning, we are of the considered view that the addition of Rs.1,31,490/- made by the A.O. and confirmed by the CIT(A) on account of undisclosed profit from Sumangal Housing Project during the assessment year solely on the basis of statement dated 05/10/2007 of the assessee on oath u/s 132(4) of the Act recorded during the course of search u/s 132(1) of the Act which is not corroborated by or relatable to any incriminating material found during the course of search or post search enquiries relatable to material found during the course of search as in the instant case cannot be sustained and hence is therefore ordered to be deleted. We order accordingly.

“From: Nalin Choksey Krishna villa, Linking Road, Santacruz west Mumbai-400054. Date : 12/02/08. To

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B.P. Singh, DDIT Unit-2 (3), 4th floor, Scindia house, Bellard Estate, Mumbai.

Sir,

Ref: SUMMONS DATED NIL. RECEIVED BY ME ON 09/02/08. Please refer to the above summons requiring my attendance on 12th February, 2008 and calling for information pertaining to debit and credit in the account No. 1127 in Samata Sahakari Bank and also purchases made to different person from whom commission is received.

In this regards I wish to state that as regards to details of purchase and sales made to different persons I have to state that I have not entered in to any types of purchases and sales as is understood by you. I have only acted as a facilitator between buyers and sellers of cars and on successful completion transactions between 2 persons I have received commission which I have offered for tax in the respective assessment years. I have already stated during the search proceedings and as also subsequently when I had attended before you that I am not in a position to trace the details of the persons from whom I have received the commission and therefore at this point of time I am unable to furnish the details as called by you.

As regards to explanations of debit and credit entries in account No. 1127 of' Samata Sahakari Bank, since I was not able to get the details of debit and credit entries in this bank account, with a view to avoid unnecessary litigations I have already intimated to you that I agree to offer additional income of Rs. 25,00,000/- (Twenty five lacs) on account of transactions in this account. (Copy enclosed). This amount has been determined by me after considering the peaks of the balance in this bank account assuming without admitting that I may not be in a position to substantiate these transactions. The peak so determined is lesser than the amount I have offered as additional income and is sufficient to cover omissions and lapses that could have occurred on account of transaction in this and or any other account. Though some of the credits in this bank account can be substantiated I have agreed to offer additional income assuming that I am not being in a position to substantiate the same. Please note that my being able to substantiate the entries could only lead to reduction of peak considered by me form the purpose of offering additional income.

My above statement may be considered as compliance to the summons and my personal attendance may be waived.

I hope that the above explanation given will clarify the issue.

Thank you,

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Sd/- (NALIN CHOKSEY) Encl: copy of submission dated 30-1-08.”

The ld. Counsel submitted that while filing the return of income in compliance to notice dated 04/04/2008 u/s 153A of the Act for the assessment years 2002-03 to 2006-07, the assessee has duly included the income from this proprietary concern M/s Lateef Garage while in the letter dated 12th February, 2008 the assessee has agreed to offer additional income of Rs. 25 lacs on account of transaction with the Bank account no 1127 maintained with Samata Sahakari Bank account . However, the declaration was assuming without admitting that he may not be in a position to substantiate these transactions later. The assessee also submitted that in the letter dated 12-02-2008 filed before the DDIT, it was stated by the assessee that if he is able to substantiate the transactions in the said bank account, it will lead to reduction of peak considered for offering additional income. The ld. Counsel submitted that the assessee has offered this conditional income of Rs. 25 lacs by way of letter and no statement on oath u/s 132(4) of the Act was recorded. The ld. Counsel submitted that the assessee has duly declared the income of Rs. 10,37,079/- from assessment years 2001-02 to 2006-07 based upon the Profit and Loss account and details prepared from the said bank account maintained by the assessee. It was submitted that the Revenue authorities has not found any deficiency, discrepancy and falsity in the Profit and Loss Account and other details produced before the Revenue and the addition has been made merely on the basis of letter given before the DDIT and not even the statement was recorded u/s 132(4) of the Act, hence the addition cannot be sustained. The ld. Counsel also submitted that for the assessment year 2001-02, the assessee has declared income of Rs. 2,55,000/- on account of proprietary concern M/s Lateef Garage. The assessee submitted that the Revenue has only made ad-

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hoc addition of 15% on the expenses claimed by the assessee in the assessment order passed u/s 147 read with Section 143(3) of the Act.

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letter dated 12.02.2008 to DDIT offering this conditional additional income with the condition that if at a later stage , the assessee is able to substantiate the transactions , then said peak credit will be accordingly reduced. Now it is for the Revenue to bring on record cogent material / evidence to point out the defects , discrepancies and falsity in the Profit and Loss and other details of deposits and withdrawals etc. submitted by the assessee before the AO to justify the addition which has not be done by the Revenue rather the revenue merely made the additions based on disclosure made by the assessee before the DDIT vide letter dated 12.2.2008. The Revenue should have proceeded to make further enquiries to demolish the contentions of the assessee with respect to profit earned from the propitiatory concern but Revenue chose not to make further enquiry and proceeded to frame assessment based on the conditional disclosure made by the assessee before DDIT vide letter dated 12- 02-2008. The ld. Counsel for the assessee during hearing pointed out that no other incriminating material was found during the course of search except bank account No. 1127 of Samata Sahakari Bank in the name of proprietary concern of the assessee M/s Lateef Garage , which is not contradicted by the ld. DR. The income of the proprietary concern of the assessee M/s Lateef Garage was not disclosed in the original return of income filed earlier with revenue u/s 139 of the Act but was later included in the return of income by considering all deposits and withdrawals in the said bank account by filing with the revenue return of income for the assessment year 2001-02 in the proceedings u/s 147/148 of the Act and for the assessment year 2002-03 to 2006-07 in the proceedings u/s 153A of the Act read with Section 143(3) of the Act. The conditional additional income offered by the assessee has been assessed by the Revenue vide order dated 7th October, 2008 u/s 147 read with Section 143(3) of the Act for assessment year 2001-02 whereby only ad- hoc disallowance of only 15% of the expenses was made by the A.O while for assessment year 2002-03 to 2006-07, the additions have been made based on the letter of the assessee dated 12.02.2008 filed before the DDIT without

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pointing any defect , discrepancies or falsity in the Profit and Loss account and other details of deposits, withdrawals etc. filed before the AO and also without making any further enquiry by the Revenue as to the correctness of the contentions of the assessee . Thus, in our considered view based on our above discussions and reasoning given above , the addition made by the Revenue based on letter dated 12.2.2008 filed before DDIT in excess of the returned income by the assessee cannot be sustained since the assessee has discharged his burden by bringing on record the return of income backed with the details of such income . Now, the onus has shifted to the Revenue to point out defects , discrepancies and falsity in the said details which the Revenue failed to bring on record in the instant case and rather the revenue chose to make additions based on disclosure of the assessee before DDIT vide letter dated 12.02.2008. Accordingly, the additions of Rs.2,98,674/- made by the AO and as confirmed by the CIT(A) cannot be sustained and is hereby ordered to be deleted. We order accordingly.

ITA No.1774/Mum/2011 for Assessment Year 2006-07

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Only one assessment shall be made for the assessment year on the basis of the findings of the search and any other material existing or brought on the record of the AO as held by Hon’ble Bombay High Court in CIT v. Continental Warehousing Corporation(Nhava Sheva) Limited(supra) and Hon’ble Delhi High Court in CIT v. Kabul Chawla(supra). The rest of the facts in this case are identical as in the appeal no. ITA No.1769/Mum/2011 for assessment year which we have discussed in details in the preceding para’s and are not repeated for the sake of brevity. We have observed in the said appeal being ITA No.1769/Mum/2011 that no incriminating material was found during the course of search with respect to profit earned by the assessee from Sumangal Housing Project and the Revenue has relied upon the statement of the assessee recorded u/s 132(4) of the Act on 05/10/2007 during the course of search proceedings u/s 132(1) of the Act. The assessee has not retracted the said statement dated 05/10/2007 but while filing return of income in pursuant to notice u/s 153A of the Act , the assessee has declared gross profit of Rs.84,65,165/- earned from Sumangal Housing Project vis-à-vis profit of Rs.1,37,00,000/- declared in the statement u/s 132(4) of the Act recorded on 05/10/2007 during course of search proceedings and said gross profit in the return of income filed by the assessee was duly supported by books of accounts maintained in regular course of business and other evidences such as bills, vouchers etc which were produced before the AO. We have also observed that instead of making further enquiries and bringing on record cogent material to demolish the submissions of the assessee during the course of assessment proceedings with respect to profit of Rs.84,65,165/- earned from Sumangal Housing Project vis-à-vis profit of Rs.1,37,00,000/- declared in the statement u/s 132(4) of the Act , the Revenue chose to merely rely on statement recorded on 05/10/2007 u/s 132(4) of the Act to make additions of Rs.2,62,740/- for assessment year 2006-07 against the assessee. The detailed discussions are in the preceding para’s of this order in ITA No.1769/Mum/2011 which we are not repeating for the sake of brevity. We

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are of the considered opinion that statement recorded under Section 132(4) of the Act is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Here in this case, the AO has reached to the conclusion based merely on the basis of statement resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) of the Act and when there is incriminating admission against himself, then it is required to be examined with due care and caution. The AO has failed to give reason for the rejection of the contentions of the assessee and the AO has failed to proceed further to enquire into the income based on the disclosure made by the assessee in the statement recorded u/s 132(4) of the Act and more so no incriminating material was stated to be found during the course of search operations and the assessee has duly produced books of accounts along with bills, vouchers etc for verification of the AO and the returned profit was based on the books of accounts maintained by the assessee in regular course of business. Our above view is fortified by the decision of Hon’ble Jharkhand High Court in the case of Shree Ganesh Trading Co. v. CIT (2013) 257 CTR 0159 (Jh.HC) .The initial onus which lay on the assessee with respect to statement u/s 132(4) lay discharged and the onus now shifts to revenue to demolish the correctness of contentions of the assessee raised during the assessment proceedings which revenue failed to discharge in the instant case and we are of considered view, that the additions of Rs.2,62,740/- made by the revenue with respect to Sumangal Housing Project for assessment year 2006-07 , even if the assessment for the assessment year 2006-07 has abated in accordance with provisions of Section 153A of the Act , cannot be sustained keeping in view peculiar facts and circumstances of the case. We order accordingly.

Similarly, AO has made addition of Rs.70,214/- for assessment year 2006-07 with respect to income from the proprietary concern of the assessee M/s Lateef Garage being difference between the amount declared and offered by

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the assessee as income of Rs.25,00,000/- in the letter filed with DDIT on 12- 02-2008 and income of Rs.10,37,079/- in the return of income filed with Revenue in proceedings u/s 147/148 of the Act for assessment year 2001-02 and u/s 153A of the Act for the assessment year 2002-03 to 2006-07 on proportionate basis. We have also observed in the preceding para of this order that the assessment for the assessment year 2006-07 in the original proceedings is an abated assessment u/s 153A of the Act as time limit for issue of notice u/s 143(2) has not yet expired on date of search . We have observed that the search had taken place on 5th October, 2007 whereby there was a bank account No. 1127 of Samata Sahakari Bank in the name of proprietary concern of the assessee M/s Lateef Garage was found during the course of search which is an incriminating material found during the course of search and no other incriminating material was found during the course of search operations. The income from this proprietary concern was not declared and disclosed in the original return of income filed u/s 139 of the Act with the Revenue. The assessee has offered conditional income of Rs. 25 lakhs, keeping in view the peak credits in the bank account on the assumption that he will not be able to substantiate the entries in the bank account with a condition that later if he is able to substantiate the entries in afore-stated bank account, this income will be reduced accordingly. The assessee has prepared the Profit and Loss account and other details of his proprietary concern M/s Lateef Garage based upon the deposits and withdrawals from the said bank account and based upon that the assessee offered an aggregate sum of Rs. 10,37,079/- as an additional income for the assessment years 2001-02 to 2006-07. Thus in our considered view, the assessee has discharged its primary burden by bringing on record the details before the AO. Moreover, the statement on oath was not recorded u/s 132(4) of the Act whereas in the instant case the assessee has only submitted a letter dated 12.02.2008 to DDIT offering this conditional additional income with the condition that if at a later stage , the assessee is able to substantiate the

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transactions , then said peak credit will be accordingly reduced. Now it is for the Revenue to bring on record cogent material / evidence to point out the defects , discrepancies and falsity in the Profit and Loss and other details of deposits and withdrawals etc. to demolish the submissions of the assessee before the AO during assessment proceedings to justify the addition which has not be done by the Revenue rather the Revenue merely made the additions based on disclosure made by the assessee before the DDIT vide letter dated 12.2.2008. The Revenue should have proceeded to make further enquiries to demolish the contentions of the assessee with respect to profit earned from the properietory concern but Revenue chose not to make further enquiry and proceeded to frame assessment based on the conditional disclosure made by the assessee before DDIT vide letter dated 12-02-2008. Thus, in our considered view based on our above discussions and reasoning given above , the addition made by the Revenue based on letter dated 12.2.2008 filed before DDIT in excess of the returned income by the assessee cannot be sustained since the assessee has discharged his burden by bringing on record the return of income backed with the details of such income . Now, the onus has shifted to the Revenue to point out defects , discrepancies and falsity in the said details which the Revenue failed to bring on record in the instant case and rather the revenue chose to make additions based merely on the disclosure of the assessee before DDIT vide letter dated 12.02.2008. Accordingly, the additions of Rs.70,214/- made by the AO as undisclosed income and as confirmed by the CIT(A) cannot be sustained and is hereby ordered to be deleted. We order accordingly.

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assessment year 2004-05, ITA No. 1771/Mum/11 for assessment year 2005- 06 and ITA No. 1773/Mum/11 for assessment year 2003-04 filed by the assessee and the said appeals of the assessee are allowed

ITA No. 1772/Mum/2011 for 2008-09.

“No. 17 During the search proceedings total cash of Rs. 5,01,040/- has been found from your bedroom, please explain the source of the same. Ans. Same is my cash income of this year, as I do not maintain regular cash book, therefore, I am hereby offering same for taxation.”

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Thus, as could be seen from the above statement of the assessee, the cash amount of Rs. 5,01,040/- was found in the bedroom of the assessee which was offered for taxation by the assessee as cash income of the assessment year 2008-09 for which no regular cash book was maintained. During the scrutiny proceedings u/s 143(3) of the Act read with Section 143(2) of the Act, the source of cash was not explained before the A.O. and hence the addition was made by the A.O. u/s 69A of the Act to the total income of the assessee as undisclosed income on account of surrender made in the statement given u/s 132(4) of the Act on 5th October, 2007 which as per AO is binding on the assessee particularly in view of judgment in the case of Dr. S.C. Gupta v. CIT, 248 ITR 782 (All. HC) and Shri Ramesh T. Savla v. ACIT, Tax Appeal No. 655 of 2000 (ITA No. 1610/B/93) dated 27.7.2004 wherein the Hon’ble High Court held that if there is nothing on record to indicate that assessee was pressurized by undue influence or coercion, than the retraction can be ignored. The AO observed that in this case no retraction letter has been filed by the assesse.

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The assessee submitted that this was also explained before the A.O. and the A.O. has not considered the same while framing the assessment. The CIT(A) rejected the contentions of the assessee holding that the assessee has voluntarily offered this amount of Rs. 5,01,040/- for taxation vide statement recorded u/s 132(4) of the Act on 5th October, 2007 while there is no mention to indicate that the source of the cash is related to certain transactions pertaining to his wife Smt. Punita Nalin Choksey. Further, it was observed by the CIT(A) from the letter dated 12.2.2008 that a disclosure of Rs. 25 lakhs was made in respect of proprietary concern M/s Lateef Garage and that no retraction or clarification was furnished even after four months on 12-02- 2008 while filing letter with DDIT with regard to the source of said cash found during the search proceedings. Accordingly, the CIT(A) held that the action of the A.O. to assess the cash found amounting to Rs. 5,01,040/- as additional income in the hands of the assessee is justified and dismissed the appeal filed by the assessee before him .

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05/10/2007 which is also placed at page 27 of paper book . The assessee submitted that out of the afore-stated cash advance of Rs. 20 lacs, the amount of Rs. 15 lakhs in cash was refunded by Mr. Ashok Kumar Keshavlal Jogani to Mrs Punita Nalin Choksey i.e. Rs.8,20,000/- refunded in cash on 08/06/2007 and Rs. 6,80,000/- refunded in cash on 10/07/2007 vide confirmation of accounts filed by the assessee which is placed at page 28 of paper book, and this cash of Rs. 5,01,040/- found during the course of search operations from bed room of the assessee was out of the said amount of Rs.15,00,000/- refunded in cash by said Mr. Ashok Kumar Keshavlal Jogani to the assessee’s wife Mrs. Punita Nalin Choksey. The assessee drew our attention to Q. No. 10 of the statement which is reproduced below:-

“Q. No. 10 I am showing you a loose paper file marked as Annexure A-1, page No. 1, found from the cupboard of your bed room, showing the money given in cash of Rs. 20,00,000/- to Mr. Ashok Kumar Keshav Lal Jogani, for property CST bearing 979 of Juhu at Kishore Kumar Ganguly, Juhu Marg, Juhu Tara, Juhu, Mumbai explain the source of the money, and whether same has been reflected in your books or not. Ans: I have given this money as loan to the party, but for safety purpose I have taken paper for advance against property. Same has been paid in cash, from my cash income generated from my business. As I have already told you that I do not maintain books. They are generated only at the end of the year on the basis of my bank accounts. Therefore I offer Rs. Twenty lacs as my additional income for the current year apart from my regular income.”

Thus, in nutshell, the assessee contended that this cash amount of Rs. 5,01,040/- which is found from the bed room of the assessee is out of Rs. 15 lakhs in cash refunded by Mr. Ashok Kumar Keshavlal Jogani to Mrs Punita Nalin Choksey against the cash advance for property of Rs. 20.0 lacs taken earlier by Mr. Ashok Kumar Keshavlal Jogani from Mrs Punita Nalin Choksey. The ld. Counsel also drew our attention to the return of income filed by Mrs. Punita Choksey for the assessment year 2008-09 u/s 139 of the Act whereby

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Rs. 20 lakhs was declared as brokerage income which is placed at page 29-31 of the paper book.

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These two transactions of Rs. 20 lakhs being cash advance for purchase of property at Juhu and cash found in the bed room of the assessee of Rs.5,01,040/- are clearly different transactions which in our considered view has no link with each other. The assessee is trying to explain cash of Rs.5,01,040/- found from the bed room of the assessee at the time of search on 05/10/2007 out of refund of Rs 15,00,000/- from Ashok Kumar Keshavlal Jogani for which the confirmation of account is placed in the paper book while at the time of search no such explanation was submitted by the assessee. In our considered view, the A.O. has rightly made the addition of Rs.5,01,040/- based on the cash found during the course of search which is an incriminating material(valuable) found during the search and which the assessee is not able to satisfactorily explain while in the statement under oath recorded u/s 132(4) of the Act during the course of search , the assessee has offered the same for taxation as his income duly corroborated by and relatable to cash of Rs.5,01,040 /- found during the course of search and which is rightly confirmed by the CIT(A).We donot find any infirmities in the orders of the authorities below and we sustain and confirm the addition of Rs.5,01,040/- made by the AO and as rightly confirmed by the CIT(A) with respect to cash of Rs.5,01,040/- found from bed room of the assessee during the course of search operations u/s 132(1) of the Act on 05/10/2007 against the asssessee and which cash of Rs.5,01,040/- found during the search was also offered for taxation by the assessee while recording statement dated 05/10/2007 u/s 132(4) of the Act . We order accordingly.

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Order pronounced in the open court on 11th December, 2015. आदेश क� घोषणा खुले �यायालय म� �दनांकः 11-12-2015 को क� गई ।

Sd/- sd - (AMIT SHUKLA) (RAMIT KOCHAR) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated 11-12-2015 [ व.�न.स./ R.K. R.K., Ex. Sr. PS R.K. R.K.

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT(A)- concerned, Mumbai 4. आयकर आयु�त / CIT- Concerned, Mumbai �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai H Bench 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai