2016 (5) TMI 1503 - ITAT INDORE

Addition u/s 69/69B - unexplained investment - Assessee has taken a plea that even such investment was made by the assessee on behalf of his various investors by receiving funds either directly from the investors themselves or from various persons as borrowing on behalf of the investors - HELD THAT:- At various places AO himself has given clear finding that the assessee had borrowed funds from Shri Manish Kedia, Shri Sushil Golecha, Shri Rohit Sethi, etc. Therefore, once the borrowing of the funds by the assessee is admitted by the revenue itself, its availability for making investment by the assessee in various assets cannot be ruled out.

The assessee as contended that in the BS-8 diary, the receipt of funds by the assessee from various persons have clearly been reflected and the authenticity of such diary was duly accepted in so many words by the AO himself, in the body of the assessment order itself, therefore, following the principle of complete reliance on one document, due weightage deserves to be given to the sources of funds mentioned in such diary. - for verifying the claim of the assessee as regard to the sources of aforesaid ₹ 1,33,37,500/-, we restore the matter to the file of the AO with a specific direction that he would correlate the investment of ₹ 1,33,37,500/- with the funds shown to have been received by the assessee from various persons, either as borrowing or as custodian, as per the diary BS-8. If the sources of such investments are not found correlated, the addition to that extent, subject to maximum of ₹ 1,33,37,500/- shall be maintained in respect of unexplained investment in land at Bhaurasla. Accordingly, the grounds of appeal of the assessee 1(a) and 1(b) are partly allowed and ground No.6 of the Revenue is dismissed.

Addition based on loose sheets found in search - HELD THAT:- The various documentary evidences furnished by assessee have not been contravend by the CIT DR. The remaining sum of ₹ 62,41,650/- was paid by the assessee in cash to Shri Mohan Chugh for which, no corroborative evidence was found available with the assessee. The assessee had paid only a sum of ₹ 11,00,000/- to Shri Kamal Kumar. We find that out of sum of ₹ 18,42,50,000/- shown to have been paid to Shri Mohan Chugh at page No.25 of LPS-A/3, a sum of ₹ 8,00,00,000/- and ₹ 2,62,50,000/- were respectively purported to have been given in the form of plot in Dubai and flats in the projects. For such purported payments in kind, no case of unexplained investment can be made against the assessee.

The assessee had paid only a sum of ₹ 7,80,00,000/-, in form of cash/ cheque, out of which a sum of ₹ 2,30,00,000/- was paid through explained sources i.e. through cheques of the companies and the remaining ₹ 5,50,00,000/- was paid in form of cash. Again out of ₹ 5,50,00,000/- a sum of ₹ 4,87,58,350/- was made out of the on-money received against booking of flats in the project Phoenix Green for which separate additions have already been made by the AO in the hands of M/s. Phoenix Leisure & Lifestyle Pvt. Ltd. For remaining ₹ 62,41,650/- paid to Shri Mohan Chugh, the assessee has no concrete evidence or explanation. Finally, the assessee could be said to have made unexplained investment to the extent of ₹ 73,41,650/- only [i.e. ₹ 11,00,000 + ₹ 62,41,650] equally in two assessment years and to this extent only, addition is sustained. The remaining addition so made by the AO and confirmed by the CIT(A) is deleted.

Receipt of on-money if excess funds are available with the company - HELD THAT:- It is a settled law that if a transaction is considered to be genuine in the hands of the payer then it also deserves to be accepted in the hands of the payee as well. So, the receipt of payment of ₹ 5,00,00,000/- by the assessee from M/s. Phoenix Devcons Pvt. Ltd. and its subsequent utilization towards payment of on-money for purchase of land at Bhopal cannot be brushed aside abruptly. The assessee while rendering the account to M/s. Phoenix Devcons Pvt. Ltd. had shown the purpose of retention of sum of ₹ 5,00,00,000/- for making some investment in properties in Dubai through his one other company namely M/s. Phoenix Leisure & Lifestyle Pvt. Ltd. but due to non-approval of the necessary government permissions, the same could not be made and eventually such funds were utilized by the assessee for making investment in purchase of land at Bhopal.

Even from perusal of assessee’s BS-8 diary, it may be found that the assessee had made payment for purchase of land in Bhopal but no single evidence can be found as regard to making of any investment by the assessee in any property in Dubai. In our country any remittance, out of India, other than through banking channel is an offence and it is not the case of the Revenue that any Enforcement Agency has taken any action against the assessee on allegation of any Hawala transaction. There cannot be two views for the preposition that the funds of ₹ 5,00,00,000/- were very well available with the assessee for making investment in Bhopal land. Thus, there cannot be said to be any infirmity in the CIT(A)’s action in granting set-off of a sum of ₹ 4,93,73,000/- to the assessee against the investment in Bhopal Land.

In respect of addition of ₹ 2,86,00,000/-, it is the contention of the assessee that a sum of Rs. ₹ 1,00,00,000/- was directly paid by one company named and titled as M/s. MoneyCare Finance & Leasing Pvt. Ltd. to the sellers of the land. In support of the above assertion, assessee has filed a copy of audited financial statements as of 31-03- 2008 of the above named company as PB-198. In such balance sheet, two advances of ₹ 87,50,000/- and of ₹ 12,50,000/- have been shown respectively by such company in the name of Shri Irshad Ali Khan and Shri Iqbal Siddiqui. A copy of such financial statements were also filed by the assessee before the CIT(A) but for the technical reason of not filing an application for admission of such additional evidence under Rule 46A of the I.T. Rules, 1962 the learned CIT(A) has not admitted such financial statements.We are of the view that this evidence goes to the root of the matter, therefore, we admit such financial statements and restore this issue of receipt of ₹ 1 crore back to the file of the AO to decide the matter afresh after verifying the financial statements of the company Money Care Finance & Leasing Co. Thus, the issue is allowed for statistical purposes.

Sum paid by the assessee to the sellers of the Bhopal land, from time to time, by procuring funds from Shri Nitish Doshi and others - HELD THAT:- veracity and authenticity of the transactions recorded in such BS-8 have been relied upon by the Revenue for making various additions in the assessee’s case and therefore, the assertion of the assessee as regard to receipt of funds from Shri N. Doshi and others gets self established from such BS-8. In view of the above facts and circumstances, we find that the AO has not verified this transaction in light of the transaction recorded in diary BS-8, therefore, on the issue of ₹ 1,70,00,000/-, we restore the matter back to the file of the AO with direction to verify the various notings made in BS-8 diary and other loose papers which suggest receipts of certain funds by the assessee from investors and others. For the remaining sum of ₹ 16,00,000/- paid by the assessee for purchase of Bhopal land through its company, the AO is directed to verify the balance-sheet of the assessee’s such co. namely Phoenix Leisure & Life Style and decide the issue afresh. In the result, the departmental ground no.4 is dismissed and ground no. 3(a) and 3(b) of the assessee are allowed for statistical purposes.

Unexplained deposits of cash on different dates in bank accounts - HELD THAT:- We find from the order of the CIT(A) that assessee tried to prove the source of deposit from current year income as disclosed by the assessee as per return u/s 153A of the Act. The CIT(A) has held that the assessee did not prove the source of cash deposit, therefore, assessee did not prove the source of investor money, therefore, this contention of the assessee was rejected by the CIT(A). We hereby modify the direction of the CIT(A) to the extent that the assessee should be given full credit for cash withdrawn by him from his saving bank accounts for explaining the sources of cash deposits made in such accounts. Thus, the grounds of the assessee are partly allowed and that of the Revenue are dismissed.

Unexplained investment in the hands of the assessee either under s. 69 or 69B - CIT(A) has held that the document was found from the third party but assessee is director of the said company and as per the submission, ₹ 2 crores were received from Money Care Finance Leasing Ltd. and ₹ 25 lacs from Smt. Roshni Doshi - HELD THAT:- CIT(A) has treated 2 crores as explained deposit, we find that before the CIT(A), the assessee could be able to explain the genuineness of deposit of ₹ 2 crores made by M/s. Money Care Leasing and Finance P. Ltd. by producing all the necessary documentary evidences. We also find that the CIT(A) has directed the AO to inform the concerned AO in respect of introduction of ₹ 2 crores for necessary action. Therefore, on the issue of ₹ 2 crores, our interference is not required. In respect of ₹ 25 lacs, the assessee did not produce any evidence but assessee has taken the contention that in respect of this ₹ 25 lacs, CIT(A) has already made enhancement in the hands of M/s. Phoenix Devcon P. Ltd., therefore, addition cannot be made in the hands of the assessee. We reverse the finding of the CIT(A) and restore this issue to the file of the AO to verity whether ₹ 25 lacs given by Smt. Roshni Doshi to Phoenix Devcon P. Ltd. has been assessed or satisfactorily explained in the hands of the company i.e. Phoenix Devcon P. Ltd. The AO is directed to verify accordingly.

Unaccounted receipts of the assessee - HELD THAT:- Undisputed fact that a sum of ₹ 1 crore was received by the assessee from its co. through account payee cheque drawn on HDFC Bank. Assessee has submitted the copy of the account of the assessee in the books of the company. As per the ledger account after debiting the account of assessee with the aforesaid payment of ₹ 1 crore, the closing debit balance as on 31.3.2008 in the name of the assessee is getting appeared which fully tallied with amount shown under head “directors advance” in the audited balance sheet of Phoenix Devcon P. Ltd. which is on page 195 of the paper book. It is the contention of the assessee that once the assessee received this amount from the company as advnace, it is capital receipt only, therefore, in our opinion, this requires verification at the end of the Assessing Officer. AO is directed to verify the payment of ₹ 1 crore by the company to the assessee through account payee cheque on HDFC Bank. The Assessing Officer should also verify that whether or not the payment is shown under the head “director advance” in the books of Phoenix Devcon P. Ltd. The AO is directed to verify the claim of the assessee as per law

Denial of natural justice - appeal against the action of the CIT(A) in deciding the appeal against the principles of natural justice, without affording any opportunity to the AO or remanding it back in violation of the departmental instruction - HELD THAT:- We find that in the instant case, the notice was issued to the concerned AO. AO did not remain present before ld. CIT(A) during assessment proceedings. The CIT(A)has called for the remand report and AO has not made any compliance. The ld. CIT(A) has directed to make the further inquiry which ld. CIT(A) has no powers but looking into the facts and circumstances of the case, we feel it appropriate to direct the AO to make further inquiry as per the directions given elsewhere in this order which powers are well within the jurisdiction of the Tribunal. Therefore, in our opinion, the departmental ground is deserved to be dismissed and hence, it is dismissed.

Addition u/s. 68 - whether AO has not established that the assessee has borrowed such loans on Hundi and no Hundi, either live or discharged, was found and seized from any business premises of the group? - HELD THAT:- Provisions of s. 68 cannot be invoked. Even otherwise, The AO himself at various places in the body of the assessment order has firmly stated that the assessee had borrowed funds from various persons and, therefore, having given such finding of genuineness of the borrowing there does not remain any scope for the AO to make any addition in the assessee’s hands by regarding the same as his undisclosed income. For such proposition, we rely on the decision of Hon’ble ITAT Jodhpur Bench in the case of Sunil Rathi Alias Jitendra Rathi vs. ACIT [2007 (9) TMI 314 - ITAT JODHPUR] holding that receipt of a loan cannot be regarded as an income of an assessee. In view of above discussion, we dismiss this issue of the departmental appeal.

Unexplained cash deposits in the Citibank Account - HELD THAT:- We find that the assessee has received cash from various investors who were willing to make investment in the certain property around the Indore through assessee. We find that the assessee has also received ₹ 5 lacs from Shri Manish Kediya. The assessee has not given any evidence before the AO and ld. CIT(A) for establishing the nexus of cash deposits of ₹ 5,00,000/- with City Bank out of funds received from Shri Manish Kediya. The assessee is directed to give the evidence before the AO and AO is directed to verify the claim of ₹ 5,00,000/- with reference to BS-8 diary and documents seized during course of search. Rest of the addition is confirmed

Unexplained cash deposit in the bank of Rajasthan - HELD THAT:- Restore the matter to the file of the Assessing Officer with a specific direction that the full credit should be given to the assessee in respect of cash withdrawals made by him, from time to time, from his saving bank accounts in which cash deposits were found made by the Assessing Officer, as the Revenue Authorities could not establish that cash withdrawn by the assessee was utilized by the assessee for some other purposes and it was not available with him for making subject cash deposits. As regards availability of cash out of income of ₹ 30,00,000/- shown by the assessee in his return of income, for the assessment year under appeal, we find substance in the arguments of ld. Counsel of the assessee that tax on such income was paid by the assessee in subsequent years and not during the relevant year. Considering the fact that the assessee might have spent a sum of ₹ 5,00,000/- towards his household expenses, credit for remaining ₹ 25 lacs also deserves to be given to the assessee for explaining sources of cash deposits. Thus, the Assessing Officer is directed to verify the claim of the assessee

Addition under the head Dubai Hawala - CIT-A deleted the addition observing that the AO could not adduce any evidence other than the papers seized - HELD THAT:- As during the course of search, a loose paper inventorised was seized. CIT(A) has held that these documents are dumb documents. These documents do not contain any date or period. These documents also do not contain details that whether these are of nature of receipt or payment. AO has not made any inquiry after loose paper found. The AO has held that some companies like, M/s. Neel I Ltd. and M/s. CS Developers has made investment in their property. We find that ld. CIT(A) has held that the AO has not made any inquiry whether the assessee has made investment in the Dubai property or in M/s. Neel 1 Ltd. or CS Developers who have allegedly made investment in the property. The ld. CIT(A) has further held that if alleged Dubai hawala is made by the assessee, no action has been taken by the other govt. agencies as Enforcement Director, Fema Authorities. CIT(A) has also given the direction to the AO that if the E.D. or Fema Authorities or any authorities regulating the remittance of money from India gives any conclusive finding as regard making of hawala transaction by the assessee then the AO would be free to take action against the assessee in accordance with the provisions of law. We find that when ld. CIT(A) has given the specific direction and the Department is not bringing any evidence that assessee has made any investment in the property, no addition can be made on the basis of simple documents found from the possession of the assessee. CIT(A) is justified in his action for giving the direction and deleting the addition

Addition on account of real estate trading in Dubai - HELD THAT:- AO has not brought any evidence to show that assessee is connected with Wealthcare Investment Ltd. The assessee, during the course of search, has categorically denied that he and his wife has any business connection in Dubai. The AO has not made any inquiry that assessee had any interest in Wealthcare Investment Ltd. Therefore, we are of the view that no addition can be made without bringing the evidence on record. Moreover, the assessee is assessed to tax in India and he has not shown any income from outside India. Therefore, we are of the view that unless and until, the Department brings the concrete evidence that assessee has any interest in Wealthcare Investment Ltd., no addition can be made in the hands of the assessee. In the result, the departmental appeal on this issue is dismissed.

Ad-hoc basis on account of alleged profit on sale of Bhopal Land - HELD THAT:- there might have taken place some transaction of receipt of on-money on sales of the land and since, it was only the assessee, who had paid the on-money at the time of the purchase of the land, as a natural corollary, the presumption has to be made that such on-money was received by the assessee only. Undisputedly, in the instant case, through the estimation of the AO as regard to the sales consideration of ₹ 1000 lacs is not based upon any material, but taking note of escalation of property prices. Even we find that the appellant has not given any basis for determining the sale price at ₹ 110.50 lacs only. In view of the same, as the assessee has actively participated and made the payment of sale consideration of ₹ 851.58 lacs in the purchase of Bhopal Land. In view of the same and also on the basis of reasons assigned by A.O. given in para-7.13.1 to 7.14 of the order for such estimation for determining the profit out of sale of Bhopal Land is correct and justified. Accordingly the addition so made by A.O. is held to be justified and correct. Accordingly the addition so made by the A.O. is confirmed. The appeal of the assessee on this issue is dismissed.

Unexplained payment allegedly made by the assessee to Shri Chirag Shah - HELD THAT:- As the details enumerated by A.O. clearly evident that payment of ₹ 50,00,000/- was made by assessee, which was duly vouched as detailed by A.O. in the order, hence by no circumstances such duly acknowledged vouchers can be held to be wrong. In view of the same, we consider it proper and appropriate to hold that the addition made by AO of ₹ 50,00,000/- is completely justified and correct. Accordingly the addition so made by A.O. is confirmed. However, we are in agreement with the direction of the ld. CIT(A) that the assessee has already offered additional income of ₹ 1,45,00,000/- as per return filed u/s 153A of the Act, hence, we direct the A.O. to give telescopic credit of such additional income offered against the aforesaid addition