TMI Blog2014 (10) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... counts, administrative and financial affairs of M/s URL and that they have purchased two floors at 10th & 11th Floor in Kamaleshwar Tower from assessee and as per the diary seized at the time of search action, Shri Mehul Parekh, Director of the company has paid ₹ 75,20,000/- in cash on different dates of the year 2005 to Mr. Rajubhai Dhiru, partner of assessee firm M/s Orbit Enterpises as on-money for purchase of two floors. M/s Unimark had also admitted this payment as its income in the block assessment. In view of documentary evidence found during the course of search along with statement of the payees recorded u/s.132(4), further fortified by cross examination allowed to the assessee clearly proves that assessee was in respect of on-money on sale of flats which were not accounted for in the regular books of accounts - the AO was justified in adding the same in assessee’s income and it was correctly confirmed by the CIT(A) after recording detailed finding of his appellate order which has not been controverted by the assessee by bringing any positive material on record – thus, the order of the CIT(A) is upheld – Decided against assessee. Reopening of assessment – Held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash :- Date M/s. Orbit Enterprises Amount 09/03/2005 Builder Rajubhai Rs.9,50,000/- DOO/- 19/03/2005 Builder Rajubhai Rs.10,00,000/- 22/03/2005 Builder Rajubhai Rs.16,00,000/- 000/- 28/03/2005 Builder Rajubhai Rs.13,70,000/- 30/03/2005 Builder Rajubhai Rs.11,50,000/- 30/03/2005 Builder Rajubhai RS.7,50,000/- 11/04/2005 -do- (exchange) Rs.7,00,000/- Total Rs.75,20,000/- During the F.Y.2004-05, the M/s. Unimark Remedies Ltd., has paid cash of ₹ 68,20,000/- and during F.Y. 2005-06 of ₹ 7,00,000/-. 4. On the basis of the documents found during the course of search at M/s Unimark, the AO recorded reasons to come to the conclusion that there is an escapement of income, accordingly, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of purchase of flats and these sums M/s. Orbit Enterprise had not offered for taxation. Accordingly, addition was made under the provisions of section 69A of the IT Act, 1961 as unexplained money. With these remarks, the total income was computed by the AO as under:- 1. Income from other sources, as per last scrutiny order dt. 26/ 12/2007. ₹ 1,33,360/- Add: Amount received from M/s. Unimark Remedies Ltd .. , as on money in cash as discussed above. ₹ 68,20,000/- Total income ₹ 69,53,360/- 5. By the impugned order CIT(A) confirmed the addition after having the following observations. 4.2 I have given careful consideration to this issue and find that Ld. Assessing Officer has very rightly recorded his 'reason to believe' for issue of notice u/s. 148 read with section 147. For issue of notice u/s. 148, there is no requirement of law to have full proof of material of escapement of assessment. The only point is to be considered is relevance of material on which a reasonable person could have formed requisite belief. In the case of ITO vs. Selected Dalurchand Coal Co. Pvt. Ltd.(1996) 217 ITR 597, 599 (SC), the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the appellant, assessment order and various case laws relied upon by the Ld. AR. After reviewing and considering all these evidences and counter arguments as well as the finding the AO, I reached to the conclusion that Ld. AO has made the addition of ₹ 68,20,0001- on proper foundation of the material facts, evidence on record and further after extracting independent corroborative evidences. duly emerged from the statement of Mr. Mehul Parekh and Mr. Yogesh Parikh, Directors of M/s. Unimark Remedies Ltd. and cross examination by the Ld. AR of the appellant. 5.2.1 Appellant is a partnership firm engaged in the business of builders and developers. It has started development of project known as Kamleshwar-Il at Tagore Road, Santacruz(W), Mumbai-54, which was completed in F .Y. 2005-06. This project is of ground floor + 11 storey building comprising of stilts. In this project, Mls. Unimark Remedieis Ltd. (briefly referred to URL) has purchased 4 flats at 10th 11th floors. Sale consideration of these flats as per documents prepared by the appellant is of ₹ 3,76,00,000/- whereas during the course of search and seizure action conducted on 10.11.2006, some loose papers&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... countant and I am Director - Finance of Mrs. Unimark Remedies Ltd. since 1990 and my duties are to look after accounts and administration and finance and I am drawing monthly salary of ₹ 2,00,0001- p.m. Q.3 Your company has purchased two floors at 10th and 11th floor in Kamleshwar Tower, Santacruz (Wj, from M/s. Orbit Enterprises, as per the diary seized at the time of search action Shri Mehul Parekh Director of the company has paid ₹ 75,20,000/- in cash on different dates of the year 2005 to Mr. Rajubhai Dhiru, partner offirm Mls. Orbit Enterprises) for the purchase of two floors as on money you are requested to confirm the same. A.4 I confirm that company has purchased above mentioned flat at Kamleshwar Tower from M/s. Orbit Enterprises and as per the diary I confirm the notings and it is declared as income in the assessment of the company. Q.5 Please give the source of funds- given in cash to Mls. Orbit Enterprises. A.4 At present I do not remember the exact details, however, the payment made to M/s. Orbit Enterprises as per diary has been admitted as income assessed in the assessment of Unimark Remedies Ltd., Mumbai in the block assessment . 5.2.3 It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search and seizure proceedings had stood to the test of further inquiry as well as proceedings and even during cross examination. 5.2.4 The various case laws relied upon by the Ld. AR are not relevant to the specific facts of this case. The case of SMC Share Broker Ltd. vs. DCIT (2007) 109 TTJ 700 ITA T Delhi Bench is not of any avail to the appellant because, as held by the Hon'ble IT AT in para 27.3 of the judgement that in that case, the statement of Mr. Manoj Agarwal was recorded behind back of the assessee and the assessee was not afforded any opportunity to cross-examine him, Here, in this case, that is not the fact. The Ld. Assessing officer has given full and proper opportunity to the appellant for cross-examination of the concerned person of.Mzs. Unimark Remedies Ltd. It is also to reiterate that Shri Yogesh Parikh, Director (Finance) of URL, had admitted the fact of giving on money to the appellant and his statement was corroborated with documentary evidence recovered by the department inventorised annexure 'A-2'. In his cross-examination by the appellant through AR, Shri Yogesh N. Parikh has reconfirmed the veracity of statement given by Mr. Mehul Parek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on record duly admitted by concerned person that he had given on money and latent fact of the case reveals that appellant has suppressed the receipt of such on money in its books of account. Similarly, the ratio of case of Unique Organizers Developers (P) Ltd. vs. DCIT (2001) 70 TTJ (Ahd) 131 is not applicable to the facts of the case because as has been found out in para 5 of the order that seized documents in that case was a dump document without any narration and the Assessing Officer had not brought on record any evidence to indicate the actual transaction and who were the parties to do it, what was the date of transaction, what are the figures on the paper actually indicated and how those figures were related to the assessee company. Here in this case, there is a corroborative evidence in the form of filing of return of income by URL and also there is a documentary evidence in possession by the department which reveals the on money and further, there is reference of such on money duly admitted by the AR while cross-examining Mr. Yogesh N,. Parikh vide question No.5 to cross-examine statement. Similarly, the case of Addl. CIT vs. Ms. Lata Mangeshkar 97 ITR 696 (BJm) and T.S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confined to direct testimony in the shape of statements made by witnesses but, all relevant circumstances which have bearing to the issue, reveal in the course of assessment can be regarded as evidence, which would cover the expression Material or evidence on which the ITO could rely-, Mangalchand Gobardhandas vs. CIT (1954).26 ITR 706, 710 (Assam). There may be evidences 'secondary in nature' or 'heresy evidence' which can be utilized after giving opportunity to the assessee for explanation and representation and if proper explanation or counter evidence is not adduced by the assessee, the use of such evidences cannot be presumed to be against the natural justice :- i) Seth Gurmukgh Singh vs. CIT (1944 12 ITR 393,425 (Lah) ii) Gangaram Balmokand vs. CIT (1937 5 ITR 164 (Lah). Therefore, in the light of above discussion and visible facts of the case, it is found beyond doubt that appellant has received the cash amount of s. 68,20,0001- from M/s. Unimark Remedies Ltd. but has not accounted it in its books of account and thereby has suppressed actual income. Therefore, the addition so made of ₹ 68,20,000/- is sustained. 7. Against the above ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to have not taken place, but only a future proposed event not at all connected with Appellant. The deposition is tutored and self serving because questions posed are leading more particularly, averment that Shri Mehul Parikh may consult Shri Yogesh Parikh before answering questions. Moreover, Appellant's Chartered Accountant cross examined Shri Mehul' Parikh but copy of cross-examination has not been furnished notwithstanding specific request vide letter dated 20.12.2008 and subsequent reminders dated 28.06.2012, 0l.08.2012 and 20.08.2012. 5) The seized papers have no evidentiary value/are unreliable because none of URL deponents throw light on following:- a) according to AD, payments of on-money are allegedly made from 09.03.2005 to 11.04.2005, but agreements were registered on 25.08.2004 151, and 02.06.2004 and keeping in view general-real estate trade practice and preponderance of human probabilities it is unbelievable that cash payments were made after registration of sale deeds; b) at times, narration that appears below name Raju/bhai is against deposit/exchange which cannot by any stretch of imagination linked to purchase of flats from Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. SHAILESH S. SHAH 63 ITD 153 (MUM}-pgs 7, 9 of the Precedent Paper Book (PPB)). (6) The decisions in UNIQUE v. DCIT 70 TTJ 131 (AHD) [pg 14,15 (not in handwriting of any person connected with company), 17 [buyer offered income in block period, buyer's statement unreliable due to conflicting statements], 19 [loose papers not evidence, presumption under Section 132(4A) not applicable to third party] of PPS] and SHETH AKSHAY v. DCIT 130 TT J 42 (AHM}(URO) [pg 70- presumption under Section 132(4A) not applicable to third party, 71- when admission cannot bind maker of statement how can it bind third party without corroborative evidence], SUNITA v. DCIT 71 DTR 33 (JP)-presumption under Section 132(4A) not applicable to third party and secondary evidences cannot be relied upon as neither witnesses were produced nor persons who prepared documents and CIT v. LATA 97ITR 696 (BOM) are on all fours to facts of Appellant's case. (7) Only foundation for making addition is loose paper and that there is no corroborative and independent evidence to substantiate same. No receipt or other acknowledgment were found or could be produced by URL in relation to ostensible cash payments wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SSED-254 ITR (ST) 275]. (15) Supreme Court propounded in CIT v. RAMAN 67 ITR 11, 17 that law does not oblige a trader to make maximum profits. Similarly, Apex Court in KIKASHAI v. CIT 24 ITR 506, 510, 511 advocated that revenue has no jurisdiction to tax potential, fictional and notional profits. In addition, in SHOORJI 46 ITR 144 (SC) held that hypothetical and notional income cannot be subjected to tax. (16) Without prejudice, onus is on revenue to prove that impugned items are undisclosed income PARIMISETTI v. CIT 57 ITR 532 (SC). 11. Reliance was placed on the decision of the co-ordinate bench of the Tribunal in the case of Shailesh S. Shah 59 TTJ 574, wherein it was held that vague figures noted on loose papers cannot be treated as commission and undisclosed income of assessee and addition thereof cannot be made under the substantive provisions of the IT Act without proving that the alleged receipt is income of assessee particularly when even the date of receipt is not known. 12. Reliance was also placed on the decision of Hon'ble Bombay High Court in case of Addl. CIT vs. Miss Latha Mangeshkar in support of the proposition that in the ledger account of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1000/ - in respect of one sq ft and for the entire area of 3760 sq ft the on-money component is ₹ 37.60 lakhs. The seized material mentions that ₹ 30.00 lakhs has been already paid and ₹ 7.00 lakhs is yet to be paid. This payment of ₹ 37 .60 lakhs cash has been further strengthened by the entries in the seized material which gives the payments made to the assessee as under: Page No. of paper book Date Description Amount Whether Shri Mehul Parekh has sized in the last column 21 9.3.05 Builder Raju 9,50,000 21 19.3.05 Builder Raju 10,00,000 22 22.3.05 Builder Raju 16,00,000 Yes 22 28.3.05 Builder Raju 13,70,000 Yes 22 30.3.05 Builder Raju 11,50,000 Yes 22 30.3.05 Builder Raju 7,50,000 Yes 23 11.04.05 Builder Rajubhai exchange 7,00,000 Yes 15. Ld. D.R. further contended that GRL has paid the above amounts to Shri Rajen Dhruv partner of MJ s Orbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration authorities of the state Govt and hence there can not be any on-money payment, has no effect. In So far as the value of FMV by the State Govt authorities is determined for the purposes of collection of Stamp Duty at the time of registration of the sale agreement and it is also taken into account for the purposes of calculating the market value U/S 50 C of Income Tax Act 1961 for calculation of capital gain. The stamp duty value is determined by the State Govt Authorities for a specific area and not for a specific flat or for a specific building. It is determined for the purposes of collection of Stamp Duty and to have a check on the undervaluation of properties for stamp duty purposes at the time of registration of properties. The market price and stamp duty value are operating on a different plane and has no connection. 19. Controverting the A.R. 's contention for not giving the copy of cross examination on 7.11.07, ld. A.R. contended that firstly this issue was not raised before the CIT(A) and therefore the assessee cannot raise the issue now before the ITAT. Secondly the AO vide his letter dated 12.03.2014 has stated that no such cross examination statement exists ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entary evidence found during the course of search at the premises of buyer of the flat M/s Unimark Remedies Ltd. As per the seized document found at the premises of M/s Unimark Remedies Ltd., there was on-money transaction for payment of 4 flats purchased at 10th 11th floor at Kamaleshwar II, Tagore Road, Santacruz, Mumbai constructed by the assessee firm. During the course of search itself, statement of Shri Mehul Parekh (Director Finance, M/s Unimark Remedies Ltd.) were recorded. In respect of transaction appearing in the incriminating documents inventorised as Annexure-A-2, Mehul Parekh admitted on behalf of URL the payment of on-money to the assessee. Thus, the admission of Mehul Parekh was on the basis of documentary and corroboratory evidence. This admission of Director on behalf of URL has been confirmed by another director Mr. Yogesh Parekh, who is also a CA. In his statement, Shri Yogesh Parekh admitted that he was looking after accounts, administrative and financial affairs of M/s URL and that they have purchased two floors at 10th 11th Floor in Kamaleshwar Tower from assessee (M/s Orbit Enterprises) and as per the diary seized at the time of search action, Shri Mehul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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