TMI Blog2012 (3) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... orities below, we are of the considered view that as the assessee had failed to properly/satisfactorily explain the generation of such funds and, accordingly, sustained the additions made on this count. Addition on ‘on money’ for sale of office space - Held that:- It is an undisputed fact that the amount in question has been received through cheques and, according to the CIT (A), the receipt of which by way of cheques has also been accounted for in the books of the society. Such being the scenario, the receipt of such payments through cheques cannot be categorized as ‘on money’ for sale of office space as branded by the AO. In view of the above facts, we are in agreement with the finding of the CIT (A) on this point. In essence, the deletion of addition of ₹ 11,85,630/- is sustained. - IT(SS)A No.63/Ahd/2005 , IT(SS)A No.59/Ahd/2006 , IT(SS) A No.58/Ahd/2005 , IT(SS) A No. 52/Ahd/2005 - - - Dated:- 30-3-2012 - G. C. GUPTA A. MOHAN ALANKAMONY , JJ. For The Appellant : S. K. Gupta, For The Respondent : N. C. Amin ORDER PER A. MOHAN ALANKAMONY: 1. These are four appeals (i) two appeals by the assessees and (ii) another two appeals by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 11.85,630/- made on account of unaccounted receipts from AMCO Bank; (3) As the grounds raised in 3 4 being general and no specific issues involved, they have become inconsequential. III IT (SS)A 59/A/2006 By the Revenue [Shri Rajendra M Vyas]: (1) A solitary ground being that the CIT (A) had erred in deleting the addition of ₹ 12,38,815/- on account of on money receipts; (2) The other two grounds raised do not survive for consideration as they were in general and with no specific issues involved. IV IT (SS)A 63/A/2005 By the assessee [Shri Rajendra M Vyas block period 1.4.95 to 26.2.2002]: The twenty nine grounds raised by the assessee are reformulated keeping in view the convenience and clarity as under: Gr. No.1 (Ground Nos.1, 28 29) being general, no adjudication was warranted; Gr. No.2 (Ground Nos.2 to 8) the CIT (A) erred in confirming the addition of ₹ 64,45,000/- being excessive investment; Gr. No.3 (Ground Nos. 9 to 11) the CIT (A) erred in directing to delete the amount from addition of ₹ 27,97,069/- without simultaneously deleting the addition; Gr. No.4 (Ground Nos.12 to 19) the CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther party being inter-linked to the same assessee, they were heard, considered and disposed off, for the sake of convenience and clarity, in this common order. 4. We shall now deal with the issues raised, chronologically, in the following manner: I IT (SS)A 52/2005 By Shri Manubhai P Vyas: 5. The assessee was dealing in lands. By issuance of a Notice u/s 158BC of the Act dated 20.2.2004, the assessee was required to furnish a return and, accordingly, he had furnished a return disclosing undisclosed income at NIL on 16.3.2004. After examining the materials unearthed at the residence of the son of the assessee on 26.2.2002, considering the assessee s contentions in response to the queries and for the reasons recorded elaborately in his impugned order under dispute, the AO had made the following additions, among others, under various heads, namely: (i) Unaccounted investment properties at Tragad (protectively) ₹ 15,00,000 (ii) Unaccounted receipts/expenses ₹ 4,35,000 (iii) Unaccounted principals interest ₹ 81,150 (iv) Unexplained receipts ₹ 8,00,000 6. Aggrieved, the assessee took up the issues, among others, before the CIT (A) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocument does note the cash transaction which have not been explained by the appellant as relating to any other person. It is also a well known fact that the land is often held through documents indicating power of attorney. Now, unless the appellant proves that the transactions are of any other individual, the agreement for land transaction in his name where cash payment of ₹ 7 lakhs is evidenced, it is to be held to have been paid by appellant. Even the later change in power of attorney holding would then be safely held to be a sale made by the appellant. Claim of merely being a manager is not proved by the person Ahmedkhan Sadatkhan and reason for cash payment by appellant is not explained. In fact, later receipt of ₹ 8 lakh in cash (dealt with in ground of appeal Nos.18 to 20) may also be linked to this apparent change in power of attorney for the seized document discussed by the AO, the addition made is upheld on substantive basis . (ii) (iii) Unaccounted receipts/expenses of ₹ 4.35 lakhs unaccounted principles and interest of ₹ 81,150/-: 4.2 .I find that appellant s explanation is not backed with any documentary evidence of any sort t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct remains no longer res integra in the light of the ruling in the case of Chitra Devi which was upheld by the Hon ble Supreme Court and the dismissal of SLP of the Revenue against the ruling of Hon ble High Court in (2009) 313 ITR (St) 28; - with regard to the confirming the addition of ₹ 15 lakhs on substantive basis , the CIT (A) had failed to peruse the documentary and legal evidences furnished during the course of appellate proceedings; - that the AO had not brought any material on record and merely on assumption made the additions which was confirmed by the CIT (A) 7.1. In conclusion, the Ld. A R had vehemently argued that the proceedings initiated in the case of the assessee was not legal, valid and in accordance with law and, therefore, the proceedings concluded were ab initio void, illegal and contrary to the provisions of the Act. During the course of the hearing, the Ld. AR had furnished voluminous paper books containing various correspondences entered into with the authorities below and also copies of various documents etc., The Ld. A R had also placed reliance on various case laws in support of the assessee s claim. 7.1.1. On the other hand, the Ld. D R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.1.3. In conclusion, it was urged by the Revenue that the remedy lies by way of a writ petition before the Hon ble High Court and not by way of appeal before the Tribunal and in view of the above, the additional ground of appeal of the assessee deserves no merit which requires to be dismissed and the appeals be adjudicated on merits. 7.2. We have duly considered the rival submissions, meticulously perused the relevant case records, the documentary evidences advanced by the Ld. A R in the shape of paper books and also the numerous case laws quoted by either party in their favour. 7.2.1. Before venture to adjudicate the issues on merits, we would like to deal with the validity of search and initiation of proceedings u/s 158 BC of the Act which has been raised by Shri Rajendra M Vyus who is the legal heir of the present assessee. 7.3. Ground No. 1: Briefly stated, search and seizure operation took place in the residence of Shri Rajendra M Vyus - son of the assessee - on 26.2.2002 and as per the seized materials [page 36 of Annexure A 3], it was noticed that there was an investment of ₹ 15 lakhs [Rs.8 + 7 lakhs] in survey No.305 of Tragad, ad-measuring 7200 sq.yds i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search and search was neither jurisdictional fact nor adjudicatory fact and, therefore, the same cannot be dwelled upon or delved into in an appeal [Source: 290 ITR 128 (MP]. 7.3.3. Further, the Hon ble jurisdictional High Court, in its recent ruling, in the case of Neesa Leisure Ltd v. Union of India reported in (2011) 16 Taxmann.Com 163 (Guj), has observed as under: For the purpose of exercise of powers under section 132, two conditions precedent are required to be satisfied. The first condition is that the concerned officer must have some information in his possession, and the second conditions for exercise of the power to order search exist. The basis for exercise of power must be some material which can be regarded as information which must exist on the file on the basis of which the authorizing officer can have reason to believe that action under section 132 p is called for. Such information should be fairly reliable and should not be a mere rumour or an unverified piece of gossip or a hunch. The Court, therefore, while examining the validity of the authorization issued under section 132, would firstly be required to examine as to whether there exists any informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch for initiation of proceedings u/s 158BC of the Act has no legs to stand and that to decide the justifiability or otherwise of such an action u/s 132 of the Act by the authorities below does not fall within the purview of this Bench. It is ordered accordingly. 7.3.6. Before parting with the issue, we would like to reiterate that the case laws relied upon by either party have been duly perused and kept in view while deciding the issue. We shall now proceed to adjudicate the other issues on merits chronologically. Ground No.2 Addition of ₹ 15 lakhs on substantive basis : 8. We have duly considered the elaborate submission made by the assessee before the first appellate authority as reproduced verbatim and also reasoning for upholding the addition on substantive basis by her in her impugned order under consideration. During the course of hearing, no credible documentary evidence was brought on record to thwart the reasonableness of the CIT (A) s finding. We are, therefore, of the considered view that there was no infirmity in her conclusion which requires our intervention. The issue is, therefore, decided against the assessee. Gr. No3: Confirming the additions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - without properly verifying the facts. At this juncture, we would like to reiterate that the assessee had not come out with any plausible documentary evidence to rebut the reasoning of the AO. Moreover, the assessee had claimed/explained that he borrowed money or pledged/sold jewellery to raise the funds. If it were to be so, what had prevented the assessee to furnish the names and addresses of the persons from whom he had allegedly borrowed the funds and to whom he had pledged the family ornaments to raise funds? Further, Chit No. IV referred to various figures totaling to 435 and one of the figures being 15 lite bills/tel. bills . As per the assessee s theory, does it mean that ₹ 15/- being for bills for light and telephone charges? As rightly highlighted by the CIT (A), the assessee had failed to discharge the onus cast on him u/s 132(4A) of the Act even at this stage. In the absence of any plausible documentary evidence to rebut the stand of the authorities below, we are of the considered view that as the assessee had failed to properly/satisfactorily explain the generation of such funds and, accordingly, sustained the additions made on this count, Gr. No.4 (Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 lakhs in the hands of the assessee, otherwise, it would have led to double taxation of the same amount. 10.2.2. In view of the above facts, we are of the considered view that the stand of the CIT(A) requires no intervention of this Bench at this juncture. It is ordered accordingly. 10.3. The other ground of the Revenue being that the CIT (A) erred in deleting the addition of ₹ 11,85,630/- made on account of unaccounted receipts from AMCO Bank. 10.3. The stand of the AO was that: 2.4 The submission of the assessee is perused carefully but cannot be accepted as: From the list of the members and the payments shown to have been received from them, it can be seen that the assessee has received monies by way of onmoney receipts in the book of the scheme, for shops as well as flats, after 1.4.95 i.e., for the period of the block. e As regards, the payment of ₹ 17,85,630/- is concerned, not a single rupee out of this is taken to the books by the assessee, although the money has been received by way of cheques from a financial institution. An amount of ₹ 10 lakhs was received by the assessee from AMCO Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace as branded by the AO. In view of the above facts, we are in agreement with the finding of the CIT (A) on this point. In essence, the deletion of addition of ₹ 11,85,630/- is sustained. III IT (SS)A 59/2006 u/s 250 of the ACT By the Revenue [Shri Rajendra M Vyas]: 11. The solitary ground raised by the Revenue being that the CIT (A) had erred in deleting the addition of ₹ 12,38,815/- on account of on money receipts for 12 flats in Tower B of Mansi Project by entertaining the additional evidences in violation of the provisions of rule 46A of I.T. Rules 1962. 11.1. We have duly considered the submission of the Revenue as well as perused the findings of the CIT(A) in her impugned order under dispute. 11.1.1 The main grievance of the Revenue was that the CIT (A) had contravened the provisions of rule 46A of I.T. Rules while entertaining the additional evidence purportedly advanced by the assessee at the time of appellate proceedings. 11.1.2. Before venture to address to the grievance of the Revenue, we shall have a glimpse at the relevant provisions of rule 46A and, for the appreciation of facts, they are extracted as under: R.46A.Producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the block period. Adverse findings to that extent will be deleted. 11.1.5. In our considered view, the CIT (A) had not admitted any additional evidence as projected by the Revenue, in stead, the AO has been directed to verify from the seized documents which were in the possession of the Department itself. Therefore, there was no case for the Revenue to agitate the directions of the CIT (A). It is ordered accordingly. IV IT (SS)A 63/2005 By the assessee [Shri Rajendra M Vyas block period 1.4.95 to 26.2.2002]: 12. The additional ground with regard to the validity of search for initiation of proceedings u/s 158BC of the Act etc., raised by the assessee has since been decided in favour of the Revenue for the reasons recorded supra (Paras 7.3.3. 7.3.5 ). 13. Gr. No.2: It was contended by the assessee that the CIT (A) erred in confirming the addition of ₹ 64,45,000/- being excessive investment and expenses which were greater than the unaccounted income which the CIT (A) had approved which was illegal and invalid in law; that the income determined by the AO by working out alleged unaccounted on money was totally not in accordance with law and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of accounts of the Societies, the AO arrived at the conclusion that the assessee had actually earned on money which had not been entered in the books of accounts nor it had been disclosed for the purpose of taxation. 4.1.1. however, after calculating the undisclosed investments/expenses by the AO whereby that amount at ₹ 64,45,000/- was found to be greater than the undisclosed income of ₹ 58,89,060/-, no addition was separately made towards undisclosed income. 4.1.2. During the course of appeal proceedings, the appellant had submitted written submissions on 27.9.04, 19.10.04 and later on 5.11.04. The matter has been discussed at great length and report of the AO has also been obtained on the various submissions made. It is, in short, the objection of the appellant that the AO failed to appreciate the fact that possession of most of the flats and shops had been given before 31.3.95 as would be clear from possession letters placed on paper book page 21 to 57 which were also in seizure. Only very few persons were given possession thereafter which list is given vide letter dated 3.11.04 showing total payments of ₹ 17,78,000/- being partly f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm it mildly, is unfounded. 13.2. Gr. No.3 The grievance of the assessee was that the CIT (A) erred in directing to delete the amount from addition of ₹ 27,97,069/- without simultaneously deleting the addition; 13.2.1. While dealing with the addition of ₹ 27,97,069/-, the CIT (A), after due consideration of the assessee s contentions that there was no question of such receipt falling within the block period since majority of those flats were handed over to the purchasers/members in the period prior to the block period etc., has observed thus: 4.2.3 I have carefully considered the facts and the submissions made. I have seen the photo copies of the letter issued by the ACIT, CIB, Ahmedabad to Sunita Construction in the year 1992 and again in March, 1994 to Dhaval Co-op Housing Society and certain details were duly filed by the appellant at that time indicating payments received in the years 1991, 1992, 1993 and accordingly therefore, the receipts of on money for those units handed over to members prior to 1.4.95 would fall beyond the block period. It is also evident from the photo copies of the return filed by M/s. Sun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objected that noting on paper was dated 14.6.1995 and, thereafter no entries were made so current position and status of the land was not clear and that the land being in the vicinity of Reliance Complex, it had high value and the assessee was making regular investments in benami names etc. 13.3.2. On the other hand, the assessee had objected that no money of ₹ 90,000/- was invested on 13.2.1996 and 23.11.1996 as pointed out by the AO and that the AO s addition was not justified being based on a proposal brought by a broker which did not materialize. It was, further contended that the said proposal did not bear any authenticated signature or seal of anybody and there was also no receipt of payment of ₹ 90,000/-. It was, further, contended that the addition of ₹ 9,65,000/- as discussed on page 14 of the assessment order was not justified because there was, in fact, no indication of name, survey number, banakhat or any other documentary evidence for purchase of lands in question. There were mere proposals brought by the brokers, however, they did not materialize. In conclusion, it was averred before the CIT (A) that no investment of ₹ 30,30,000/- as mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards agreement . In the absence of proper explanation for all these entries, the interpretation given by the AO is found to be justified and the additions made on this account are sustained. 13.3.4. We have carefully considered the arguments put forth on behalf of the assessee and also diligently perused the reasoning of the CIT (A) in turning down the assessee s contentions. When the assessee had produced a Photostat copy of the land certificate purportedly issued by the Deputy Collector, the AO disputed the assessee s claim that the hat patrak and Gam Namuna No.6 showed Government ownership of the land bearing survey No.51 whereas the land under consideration bearing survey No;164/5 of Jamnagar. This very fact brought on record by the AO has not been satisfactorily disputed by the assessee with any documentary evidence. Further, the assessee did not have any cogent documentary proof to satisfactorily explain the entries of ₹ 30,30,000/- which were reflected on page 29 of Annexure X-1 relating to survey No.164/5. There were conflicting facts in his submissions too. 13.3.5. Taking into account the facts and circumstances of the issue as discussed in the fore-goin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disturbance due to earthquake and appreciating the facts the addition made by the AO and, subsequently, sustained by the CIT (A) requires to be deleted. 13.4.4. We have duly considered the submission of the assessee as well as reasoning of the authorities below in making the addition of ₹ 3 lakhs. 13.4.5. It is an undisputed fact that there was an entry in the seized material that the assessee had shown to have given ₹ 3 lakhs to Bengali on 10.5.96 and when the assessee was confronted, he merely objected to the addition [source: his letter dt.23.2.04 Para 6.3 of Asst. order]. However, in his statement on oath dt.26.2.2002, he had admitted that the jotting in the seized material was his handwriting. However, subsequently, he came up with a story that the amount given to Bengali was meant for making payment to GSFC. Astonishingly, the Photostat copies of cheques produced before the first appellate authority, justifying his claim being payments of ₹ 3 lakhs and ₹ 4 lakhs to GSFC were, in fact, much later precisely after seven years i.e., on 1.5.2003 and 1.11.2003 respectively. This, in our view, doesn t absolve the assessee from the cash payment mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transactions were genuine and bona-fide, but, just to peace and to co-operate with the Department, the assessee was ready to offer being taxed at 3.5% of these receipts of ₹ 24.07 lakhs and that since the details of credits and debits was not available from the Bank and the circumstances were beyond his control and in the interests of natural justice, the assessee s plea for being taxed at 3.5% be accepted. 13.5.3. After due consideration of the assessee s contentions cited supra, the CIT (A) had recorded her findings as under: 8.2 .I find that the appellant has repeatedly before the AO and in appeal proceedings made submissions in writing to the effect that the total receipts relating to Manasi Project were of ₹ 2,40,31,492/- for accounting years 1991-902 to 1996-97 and that the total work done for the project was covered in the following manner: Sr.No A/c year Asst.year Total work done 1 1991-92 1992-93 ₹ 41,72,052 2 1992-93 1993-94 ₹ 34,46,513 3 1993-94 1994-95 ₹ 58,45,437 4 1994-95 1995-96 ₹ 35,04,778 5 1995-96 1996-97 ₹ 46,73,324 6 1996-97 1997-98 ₹ 23,89,38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he possession of flats to the allottees without clearing the installments due from them. 13.5.6. In fact, he conceded that he was not in a position to advance any documentary evidence to substantiate his claim and came up with an alternative compromise formula, according to which, he had offered income at the rate of 3.5% on the total credits in the Bank account. This suggestion of the assessee makes it implicitly clear that he had no cogent documentary proof to rebut the stand of the AO. 13.5.7. Considering the facts and circumstances of the issue and for the reasons recorded therein, the CIT (A) came to a conclusion that in the absence of any adequate explanation or contemporary evidence to reconcile/explain the individual entries made in the bank account, the AO was right in his stand to consider the entire sum of ₹ 24,97,923/- credited in the bank account No. 243 in AMCO Bank represents undisclosed income of the assessee. 13.5.8. Even at this stage of hearing also, the assessee had failed to come up with any impeccable documentary evidence to refute the stand of the authorities below on this count. 13.5.9. In view of the above circumstances, we are of the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable and held that had there been no search operation, the evasion of income could not have come to the fore? 13.6.2. By applying the provisions of s.44AD of the Act and for the detailed workings recorded in his impugned order, the AO had arrived at the income of the assessee at ₹ 18,64,486/- and since ₹ 1,91,144/- had suffered tax as per the then CIT (A) s order, the balance amount of ₹ 16,73,342/- [1864486 191144] was brought to tax net as income from the project not offered for taxation. 13.6.3. After carefully considering the assessee s contentions coupled with case laws as recorded in her impugned order under consideration, the Ld. CIT (A) had observed thus: 9.2 ..I find myself in agreement with the AO s findings that the carrying on of this business as a developer of Manasi Scheme and the finding out that the appellant was whole and sole in-charge of the scheme which was carried on in a personalized manner; that these facts would not have been revealed unless search had been conducted and, therefore, coupled with the fact that the appellant did not file any return of income after AY 1997-98 and was not assessed to tax for the AYs 1995-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion in the total undisclosed income for the block period. The addition is, therefore, sustained. 13.6.4. During the course of hearing before this Bench, the assessee had conceded that he was not in a position to find out the documentary evidences and, accordingly, offered the income at the rate of 3.5% on the total credits in the bank account, however, the CIT (A) had not accepted and confirmed the addition holding that the said amount represents undisclosed income of the assessee; that the CIT (A) had further erred in confirming the addition, holding it not offered for tax on the income estimated u/s 44AD at the rate of 8% on total construction work carried out by the assessee; and that the CIT (A) had failed to appreciate the fact that for certain assessment years, returns have been filed and also offered the work done and tax payable thereon at the rate of 3.5% on agreed terms and on the basis of documentary evidences, the income offered by the assessee have been accepted by the Department and that there was no plausible cause to make duplicate addition of Rs.,16.73 lakhs and moreover the AO had, further, added ₹ 24.07 lakhs, thereby heavy additions have been mad ..... 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