TMI Blog2020 (8) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... onwards till September, 1995. Undisclosed income determined for investment and profit in remaining two land deals were also determined falling in the F.Y.95-96 and the brokerage amount was also not received. AO on the basis of the facts available on record has held that the assessee is not entitled to any set off of unaccounted income against the unexplained investment made as there is no co-relation between the unexplained cash receipts and unexplained investment. AO has rightly not granted the claim of the assessee for set off on the basis of the facts of the case as there is no even prima facie evidence to show that the income received by way of on money receipts was available for investment in the land deals and was not otherwise invested. Tribunal emphasized on a presumption that a reasonable view demands that subsequent payment should be presumed to be made out of the cash available from the earlier receipts, if any. The Tribunal without adverting to the facts has allowed the claim of the petition only on the ground of such presumption by referring to the principles of peak credit without applying the same to the facts of the case. Tribunal has also erred in disca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular area in absence of any specific address. Tribunal has committed grave error by shifting the burden on the department on the basis of such vague information provided by the assessee. Thus the very basis and foundation of the Tribunal to delete the addition made by the Assessing Officer is erroneous and perverse as the Tribunal has considered the irrelevant factor to arrive at such conclusion. With regard to the Sangvilla land deal it is not possible to understand on what basis the Tribunal has drawn such inference in absence of any corroborative evidence in support of such findings when the assessee has admitted in his statement that he paid ₹ 70 Lakhs after receiving the same from the prospective buyer, but such statement was not believed by the Assessing Officer as the assessee failed to provide the name of the person to whom the land was sold as well as the rate at which such land was sold. Tribunal further has erroneously and perversely held that as question was not asked to the assessee, the assessee cannot be faulted for not furnishing the details and the person to whom the land was sold and only because the assessee was a broker and he was not expected to mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h did not result into tangible benefit was allowable expenditure under section 37 of the Act as business loss under section 28 of the Act ? 3. Whether the order of the ITAT is not perverse as being contrary to the evidence on record or as in the case Amrakadamb land deal with Sangvilla land deal based on evidence at all ? 3. The Tribunal accordingly forwarded the statement of case along with paper book for opinion of this court on the above questions of law on the facts of the case stated therein. 4. The short facts of the case are that the assessee, who is an individual and dealer-cum-broker in lands was assessed under Section 158BD of the Act, 1961 on the basis of the seized documents and various statements recorded under Sections 132 and 131 of the Act, 1961 during the course of search and seizure operation on 21.09.1995 at the premises of two other land brokers one Shri Deepak Mehta and other Shri Suresh Patel. 4.1 The Assessing Officer completed assessment for the block period determining the total income of ₹ 34,63,47,179/- vide order dated 30th September 1997. 4.2 The assessee being aggrieved preferred an appeal before the Tribunal as per the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that contents of these pages and explanation of Shri Dipak Mehta appears to be correct with minor variations. 5.1 The assessing officer did not accept the explanation given in the reply furnished by the assessee as observed in Para 4.4.4 of the assessment order, which reads as under: i) Shri Dipak Mehta in his statements categorically stated that full considerations in cash ₹ 90,25,069/- was agreed with the assessee. ii) The assessee has admittedly accepted that the transaction was held between him and Saumya Construction Co. and as replied in his statement he has received ₹ 87 lacs in cash and ₹ 48 lacs were paid by cheque to the farmers directly by Saumya Construction through society. iii) The assessee was asked to file the confirmation letters of alleged cash payments to the farmers but he has neither submitted the addresses of the farmers in full and nor confirmation letters in support of cash payment to the farmers for purchase of land at the rate of 851 per sq. yd. including cheque payment has been filed. iv) The amount of ₹ 32.70 lacs claimed as surplus in the hands of the assessee is not acceptable as Shri Saurabh shah, Shri D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mdev-pir no -Tekro were received during the F.Y. 1993-94 The entire on money payment from RDIL at ₹ 12.80 crores has been received only from April 1995 onwards till September, 1995. Similarly the undisclosed income determined for investment and profit in remaining two land deals at 325, 292 have been also determined for part of search year falling in F.Y.95-96 and the brokerage amount, according to assessee s own version was not received and was receivable only. Thus on prima facie merits also assessee is not entitled to any set off of unaccounted income against the unexplained investment made. Further, it is to be clarified that considering the volume of huge land deals entered into by assessee it cannot be automatically presumed that Income received by way of on money receipts was available for investment in the land deals and was not otherwise invested. Hence, the assessee is not entitled to any claim of set off and all the income as well investment determined are liable to be considered without any set off against each other. 11. UNDISCLOSED INCOME OF ASST. YEAR 1995-96 11.2 So also unexplained cash credit has been determined at 11.85 Lacs as the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans the Department used to prepare such cash flow statement and then tax the peak amount. We are mentioning it because in those cases ledger accounts existed in different names and consolidation of all the ledger accounts meant that the repayments made to one of the alleged creditors was regarded available to this very assessee for introduction of credit on a subsequent date in another name. The assessee's case obviously stands on a better footing that they are undoubtedly admitted and/or treated as his own moneys received by him and paid by him. So in principle it is difficult to uphold the Department's view. We are not impressed by the plea mentioned in para 10.2 on page 102 that income received by way of on-money receipts cannot be regarded as available for investment in land deals. The Assessing Officer suspects that it was otherwise invested . In our considered opinion, in is not reasonable or judicious approach. There cannot be any reasonable cause for rejecting the assessee's claim of adjustment of subsequent payments against earlier receipts. Accordingly ground No.15.1 15.2 are allowed. SUBMISSIONS OF REVENUE FOR Q.NO.1 6. The learned senior adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, submitted that though the onus lies on the assessee, the assessee failed in providing any evidence with regard to the expenses/payments made and therefore, the unaccounted cash receipts and payments are required to be taxed under Sections 69B and 69C of the Act,1961 as unexplained investment/expenditure . 6.4 The learned advocate submitted that the Tribunal has not considered the provisions of Sections 69B and 69C of the Act, 1961 in proper perspective and in support of his contentions reliance was placed upon the following decisions: (i) Madathil Zainuddin vs. Commissioner of Income-tax, Kochi reported in [2014] 44 taxmann.com 241 (Kerala), wherein the High Court of Kerala has held as under: '7. The Tribunal proceeded to analyse the facts on record and opined that the stand of the assessee was different from time to time, so also opined assessee was not even able to establish that the source of income was from gold business. If the first stand of the assessee that funds were transferred from Mumbai to Kerala through bank accounts were to be believed, said amount cannot be his amount. But it is also surprising to see that he admitted income of ₹ 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference to the financial year 2000-01 shows ₹ 3 Lakhs followed by ₹ 2 lakhs in the financial year 2002-03 indicating that ₹ 2 Lakhs was from brother Hussein in the business. There were no details with regard to the nature of business. On the other hand, in the first letter addressed to the Deputy Director of Income Tax this ₹ 65 Lakhs was given to Mr. Azeez to purchase gold biscuits for the purpose of starting business by his brother and others. In other words, it was not the amount pertaining to his gold business but an amount for the purpose of gold for his brother's business. This is a relevant fact that has to be taken note of. Having regard to this stand of the assessee and also unexplained income reflected in the cash flow statement, the Tribunal was justified in not placing much reliance on the cash flow statement furnished by the assessee, as it was a self serving one without supported by any regular bank account and documents. 8. Then coming to the statement of assessee, the income of ₹ 1 Lakh each declared in the years relevant to the assessment years 1997-98 and 1998-99. there is doubt expressed by the Tribunal whether that Two Lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r receipts, should be brought to tax and treated as undisclosed income and the two amounts should not be separately taxed. Assessing Officer in the present case did not tax the unaccounted sales and has only taxed unaccounted expenses/expenditure/withdrawals. Before the tribunal, similar plea was raised but was rejected after making reference to the order of the tribunal in the case of Siddhartha Woolen Mills [IT Appeal No. 59 of 2000, dated 25-7-2013]. We have dismissed the appeal of the assessee in the case of Siddhartha Woolen Mills (supra). In the present case, we notice that the tribunal has given relief to the extent of ₹ 1,50,000/- and the Assessing Officer has not made any separate addition on account of profits from unaccounted sales. It is recorded in our order dated 25th July, 2013 in the case of Siddhartha Woolen Mills (supra) that the expenditure incurred was on account of electricity, petrol, tea pool, etc. and the names of the persons and details why the expenditure was incurred had not disclosed and furnished. The appellant has not, in the present case, furnished details or explained nature and purpose behind the expenditure . Some expenses have been incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hundi credits were introduced out of profits made in the trading account outside the books, it was not possible to telescope the two additions, with the result, he assessed a sum of ₹ 31,000 as income from other sources. Against the order of the ITO, the assessee preferred an appeal to the AAC and before that officer the assessee contended that the ruling of this Court in S. Kuppuswamy Mudaliar vs. CIT (1964) 51 ITR 757 (Mad) enabled the assessee to claim a set-off of the gross profit additions of the past years against the unexplained credits in the year in question. The AAC declined to accept this argument and, in his view, the decision of this Court in S. Kuppuswamy Mudaliar vs. CIT (supra) must be taken to have been overruled by the subsequent decision of the Supreme Court in CIT vs. Devi Prasad Vishwanath Prasad (1969) 72 ITR 194 (SC) : TC42R.1025 with the result, he sustained the order of the ITO. The assessee, thereafter, preferred a second appeal to the Tribunal. The Tribunal held that the decision of this Court in S. Kuppuswami Mudaliar vs. CIT (supra) applied to the facts of this case and that the decision cannot be said to have been overruled by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to explain the credits found in his accounts. The truth is that such additions are as real an income, at any rate as far as the Department is concerned, as the income returned by the assessee, and one can as much as the other constitute the source to explain the credits in the accounts in the subsequent years. Therefore, the decision of this Court does not invest such additions with any special significance as a source to explain the credits in the subsequent years. In any case, it will be a question of fact whether there was evidence to find that such additions were the source of the subsequent credits and in this behalf there is no difference between this source and any other source, apart from the position that with regard to the income assessed in the earlier years, its existence as a possible source of the credits will be a matter of record with the Department while with regard to other sources, their existence may be a matter to be proved. Referring to above decisions, it was submitted by the learned senior advocate Mr. Bhatt that the tribunal has committed an error in allowing set off of gross unaccounted payments on certain transactions against unaccounted receipts f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee. Moreover, details of payments were also available in the seized records. However, the Assessing Officer declined to believe assessee's claim for the reason that there is no written agreement between the assessee and the film directors for profit sharing over and above the agreed consideration paid to them and the cost reimbursed for the production of the film. Further the Assessing Officer has heavily relied on the denial made by the film directors against receipt of payments. We are unable to uphold the Revenue's claim for many reasons. In the first place, admittedly assessee was engaged in unaccounted business and accounts seized pertain to clandestine transactions showing unaccounted receipts and unaccounted expenditure. The assessee himself has voluntarily declared undisclosed income of ₹ 43 lakhs over the income returned for the block period. So much so, there is no justification for doubting the entries found in the seized records pertaining to expenditure while accepting the income found recorded therein. When the Department relies on the seized records for estimating undisclosed income, we see no reason why the expenditure stated therein shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 37 lakhs, only ₹ 22 lakhs was accounted and balance ₹ 15 lakhs was unaccounted payments, which is also seen recorded in the seized records. We do not think there is anything to doubt the genuineness of the transaction because generally what is found by the Department from the seized records is that the business is done partly with black money and partly with white money though accounting of income and expenditure are of insignificant amounts. 10. Learned Senior Standing Counsel for the Revenue has also made reference to the explanation to Section 37(1) of the Act and also to the scope of the proviso inserted to Section 69C of the Act by the Finance (No.2) Act, 1998 with effect from 01/04/1999. Learned counsel for the assessee contended that film production is not an illegal business and therefore payments made though without accounting cannot be said to be illegal payments attracting explanation to Section 37(1) of the Act. We do not think unaccounted expenditure in a proper business can be treated as an expenditure prohibited by law to attract explanation to Section 37(1). So far as the proviso to Section 69C is concerned, in the first place the proviso in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was therefore, submitted that the assessee is entitled to set off of payment made in cash against receipts in cash when the assessee has admitted to the existence of cash receipts and payments and in such circumstances, subsequent payment should be presumed to be made out of the cash available from the earlier receipts. Therefore, the Assessing Officer could not have added the entire gross receipt in the hands of the assessee. It was therefore, submitted that the Tribunal has rightly held that there is no reasonable cause for rejecting the claim of the assessee for adjustment of subsequent cash payments against the earlier cash receipts. OPINION FOR Q.NO.1 8. Having heard the learned advocates for the respective parties and having gone through the materials on record, it is pertinent to note that the assessee did not furnish any detail or particular about availability of the funds from the unaccounted land deals during the course of assessment proceedings as recorded by the Assessing Officer. The assessee failed to furnish the basic and primary facts. Moreover, it appears that the Tribunal has also not considered the fact that the amount of ₹ 2.53 crores pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as investment determined are liable to be considered without any set off against each other. 8.6 In view of the facts available on record, we are of the opinion that the Tribunal, which is a final fact finding authority has reversed the findings of the Assessing Officer only on the basis of the principles of law without referring to the facts available on record. Therefore, the decisions cited on behalf of the assessee which are based on facts of each case are not applicable and hence the same are not discussed in detail. 8.7. In such circumstances, we answer the question No.1 in negative i.e. in favour of the Revenue and against the assessee. QUESTION NO.2 9. As regards the Question No.2 for allowing the loss under Section 37 of the Act in respect of unexplained and unaccounted cash investment which did not result into tangible benefit, the factual aspects of the case relating to Baronet land and Jagatpur land are that the assessee claimed the loss of ₹ 2.93 crores on account of payment made to one Shri G.C. Patel for procuring land as the land deal could not be materialized. The Assessing Officer has referred to the statement of Shri G.C. Patel who ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denied in his statement recorded. In his statement dt. 13-11-1995 in reply to Q.11 it was clearly and categorically mentioned by the assessee that against cash payment of ₹ 2.93 crores paid by him, his development right with society were still outstanding and were yet to be settled. Further still in reply to Q.12 on 16-11-1995 it was again reiterated by assessee that he was having development right with society against cash payment and due to dispute between society and present developers he was not having written agreement with any of them. In reply to Q.16 of the statement on 16-11-1995 he clearly admitted existing investment of ₹ 2.93 crores in Baronet land for development rights. Still further when queried about his role in Baronet land deal in Q.11 of his statement recorded on 7-21996, the assessee maintained that this is true that on papers this land deal was finally done between Govind C. Patel and Adani, but all its negotiations were done by him and all cash payment were arranged by him. But since he did not have availability for payments to be made through cheques, he had arranged for cheque payments through Adani's. It was also negotiated by him. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that loss was incurred prior to the end of block period and value of investment made in cash at the end of block period was NIL and hence the claim of loss is not maintainable on facts as well as in law and is hereby rejected. (iv) In view of the aforesaid discussion, addition of ₹ 2.93 crores is made in the total income of block period in the hands of the assessee as unexplained investment. Since a sum of ₹ 50 lakhs is paid cash in the F.Y. 93-94 and ₹ 2.43 Crores is paid in cash in the F.Y. 94-95, hence, accordingly addition as unaccounted investment for ₹ 50 lakhs is made in the Asst. Yr. 1994-95 and ₹ 2.43 crores in the Asst. Yr. 1995-96 respectively. (A.Y. 1994-95 ₹ 0.50 crores, A.Y. 1995-96 ₹ 2.43 crores.) 9.3. Similarly with regard to the land at Jagatpur, the assessing officer in para 5.5.5 of the assessment order has observed as under : 5.5.5 DETERMINATION : i) It is an admitted fact that the land was purchased at the payment of ₹ 10 lacs from the farmers and sold to Shri Govind C. Patel at ₹ 2.16 crores and repurchased by the assessee at ₹ 3.36 crores. Against initial sale, a sum of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration was agreed at ₹ 2.16 crores and later the assessee reacquired at ₹ 3.36 crores. iv) In the face of this clear position of facts, assessee's contention of loss without any shred of evidence is required to be simply ignored as assessee is holding this land worth more than ₹ 3 crores obtain investment of ₹ 1.02 crores only. Further the assessee being self professed expert in land clearance etc., it is difficult to accept assesses contents as now taken that he could not get necessary clearance or permission which remains totally unsubstantiated in absence of any evidence. v) Further the amount payable at ₹ 43 lacs as contended in para 10.7 and treating the same as written back liability shows that such amount was not payable by the assessee to Govind C. Patel, which in turn confirmed all the happening about the land deal till date of recording of statement dt. 7-2-1996. vi) In view of the above discussion the total investment in the land at ₹ 102 lacs is added to the income of the assessee u/s. 69 of the Act which includes ₹ 87 lacs admitted by the assessee as his net investment. An undisclosed income of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss. Assessee's stand is that cash has been paid and the assessee has admitted it and on that basis he is being taxed, but there is no evidence which would be admissible in any civil litigation for supporting the assessee's case that he made that payment and acquired any rights in that land. Assessee claims that Shri G. C. Patel has not admitted to the receipt of this money. Therefore, according to the assessee the cash payment made by him is totally lost to him from the date of search itself due to a sort of precipitate action taken on that date and the sense that negotiations and transactions which were not intended to be recorded and shown came to that and hence the parties involved would take their respective stands on the basis of existing record. Since there is no record existing for booking Shri G. C. Patel and he has not admitted to the receipt of the money paid by the assessee it is a loss to him. 24. On the other hand, Department's contention is that assessee was still having some development rights outstanding which were to be settled and further that it was not conclusively proved by the assessee that the money paid by him was totally lost to him and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l documents of any type were executed in regard to this land and no cheque payment was also made. Assessee entered into agreement with Shri G.C. Patel to sell the land obviously in the hope that he would be able to pass on the rights of the farmers to Shri G.C. Patel. In the second part of the deal Shri G.C. Patel could not have passed on anything more than what he had acquired in the part of the deal because a transferor cannot pass anything more than what he has. So the first part of the deal for sale from the assessee to Shri G. C. Patel and the second part of the deal for reversal of the first part or even by way of sale by G.C. Patel to the assessee was in respect of the rights which were to be acquired from the farmers. In the absence of any agreement those rights were not acquired at all. Of course, there is evidence as pointed out to us available on record that there were disputes in regard to this land. e.g. Shri Suresh Patel's statement dated 30th October, 1995 at page 139 of the Paper Book. So on the facts and in the circumstances of the case and looking to the nature of transactions particularly in regard to the cash transactions which were not intended to be shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od adding this to 175 lacs paid / payable to Kanubhai he has come to the conclusion that ₹ 205 are paid against the receipt of money of ₹ 190 lacs and hence a sum of ₹ 15 lacs is extra paid. Now the real flaw lies in the fact that he has proceeded with the figure of ₹ 77 lacs for difference between loss of ₹ 120 lacs and unilateral remission of ₹ 43 lacs as admitted by the assessee and then he has adopted the figure of ₹ 105 lacs as on page 105. He appears to have fallen into the error that on the basis of page 105 the figure of payment would come to ₹ 62 lacs (i.e. 105-43) so this amount of ₹ 62 lacs with ₹ 15 lacs computed by Assessing Officer would give a figure of ₹ 77 lacs which is admitted by the assessee. In the computation of the Assessing officer this ₹ 15 lacs has, in effect, been considered twice over. Otherwise also it is obvious that the assessee had met from his undisclosed sources the effective loss of ₹ 77 lacs (120-43) and also paid ₹ 10 lacs to the original owners. Hence total investment comes to ₹ 87 lacs only and not ₹ 102 lacs. 10.3 Reliance was also placed upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment was in its favour for realising high electrical charges from the customers but subsequently when the concern was taken over by the government no such higher collection was made by the company but on technical view the department had included the income on accrual basis based on High Court Judgment whereas the Supreme Court was of the view that the income accrued to the assessee was only hypothetical and cannot be taxed because it did not realise the same. Mere adopting this decision to show that the actual income or the real income can only be taxed and further that only the deemed income as provide in the Act specifically such as Sec.69 can only be taxed. Accordingly aforesaid payments which ultimately did not result into tangible benefit shall be allowable also as expenditure u/s.37. 10.4. It was submitted that the Tribunal after taking into consideration the facts of the case and after considering the case laws cited before it, has allowed the loss claimed by the assessee and the Tribunal also relied upon the amendment made in Section 69C of the Act w.e.f. 1st April 1999, whereby a proviso was added for disallowance for deduction under any other head of income wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually been incurred, the same is to be allowed as deduction as business loss. It was also noted that the assessee had exported substantial quantities of agricultural processed goods, including dehydrated garlic flakes and white onion powder, and it was in this connection that the assessee bona fide and in the course of normal business, gave advances to S.Y.P. Exporter, Sakar Overseas Pvt. Ltd. and Shri Ram Trading Co. It was also noted that criminal cases were also instituted against the persons who were given these advances, who turned out to be fraudulent in their conduct. These advances were accordingly held to be business loss. 6. The Tribunal, after considering the material on record, found that it was an undisputed position that the assessee did in fact trade in processed agricultural produce, in connection with which the advances in question were made, and it was in the course of this trading that, the business loss of making unrecoverable advances was incurred. The Tribunal found, as a matter of fact, that the losses were wholly incidental to the business carried on by the assessee. It further noted that there may not be any trading transactions of these products in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, and no capital asset came into existence; and therefore there was no question of granting any depreciation on such asset but as the land was not acquired, therefore, the payment made by the assessee was to be allowed at business loss. (iii) Relying upon the decision of the Delhi High Court in the case of Commissioner of Income-tax v. Rose Services Apartment India(P.) Ltd. reported in [2010] 326 ITR 100 (Delhi), it was submitted that the High Court has come to the conclusion in that case that the loss incurred by the assessee on account of refund of advance was in nature of business loss. (iv) Reference was made to the decision of this court in case of COMMISSIONER OF INCOME TAX vs. MAHENDRA N. SHAH reported in 280 ITR 462 (Guj), wherein it was found that the Tribunal has recorded as a matter of fact, that there is evidence in the form of telegrams, correspondence as well as assessee s attempt through Consulate General of India to recover the money, but in vain and that two post dated cheques received from intermediary had not been honoured and the assessee had not received anything against the amount which was collected by Dubai party by retiring letter of credit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into an agreement with Shri G.C. Patel to sell the land obviously in the hope that he would be able to pass on the rights of the farmers to Shri G.C. Patel. It appears that thereafter, the Tribunal relied upon the statement of Shri Suresh Patel dated 30th October 1995 that there were disputes with regard to the land in question and presumed that as the cash transactions were not intended to be shown to any Government Department, it is unreasonable to infer that even after the search, the assessee continued to hold some rights in that land. Thereafter, the Tribunal made an inference that assessee made some payments to the farmers being hardly 5% of the value in the hope that he would be able to acquire the rights in the lands and deal with them but ultimately on account of the land being vest with disputes, litigation and ultimately on account of the intervention of the search and seizure proceedings absolutely nothing came out of it and the assessee lost his money. However, the Tribunal presumed that the assessee made payment of ₹ 2.93 crores to Shri G.C. Patel in arriving at such finding which is not borne out from the record. It appears that the Tribunal has misdirected its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o find error in the finding of the assessing officer which is based on the entries made in the seized papers at sr. No.21 and 105. It appears that the Tribunal has considered irrelevant factors for holding that the assessing officer has considered twice the amount of ₹ 15 Lakhs by taking into consideration the entries in the seized papers observing that the assessing officer jumped from one seized paper to another, whereas on careful consideration of the assessment order, we are of the opinion that the Tribunal has arrived at a perverse finding contrary to the material on record. 11.3 In such circumstances, the Question No.2 is also answer in negative i.e. in favour of the Revenue and against the assessee and therefore, the assessee would not be entitled to claim ₹ 2.93 crores as business loss either as allowable expenditure under Section 37 or business loss under Section 28 of the Act,1961 with regard to the unexplained or unaccounted cash investment which did not result into tangible benefit to the assessee. As the Tribunal has remanded. QUESTION NO.3 12. With regard to the Question No.3, the Tribunal has deleted the addition made with regard to the two l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, in the course of which loose papers with rough jottings were found and paper marked 106 of Annexure-A3 related, inter alia, to the land of Shantinagar Shaila Co.O\op. Housing Society. At one time Shri Ashish Patel, Managing Director RDIL stated to the effect that the jottings were for payment of ₹ 12.80 crores to the assessee and Vasant Adani etc. In regard to these papers and transactions assessee, right from the beginning, has denied his involvement. 5. Then, in the course of yet another search on 3.8.96 in the premises of L. T. Shroff some seized paper allegedly depicted deposit of ₹ 10 lacs in cash by the assessee and the existence of this deposit is also denied all along by the assessee. 6. The assessment order itself runs into 112 typed sheets and carries almost an equal number of sheets as Annexures being Xerox copies of some of the seized papers and the copies / synopsis of some of the recorded statements. Assessee's grounds of appeal and SOF run into 48 types sheets and are accompanied with three Annexures. Very detailed hearings took place before us in the course of which the learned Advocates for the assessee pressed and elaborated very suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was absolutely no justification or adding separately a sum of ₹ 2.41 lacs as referable some other small plot. Even in regard to the cash receipt ₹ 84.81 lacs it is submitted that the assessee passed on major part of it to the original land owners viz. farmers who admittedly received the cash payments also directly from the housing society and he made a profit of ₹ 32.7 lacs only. 13. In the written submissions, the Sr. DR has again emphasised the aspect that the assessee has not furnished confirmatory letters or even the complete addresses of the farmers to whom he claims to have passed on substantial cash out of ₹ 84.81 lacs received by him. It is further contended by the learned Sr. DR that such cash payment by the assessee to the farmers is nowhere recorded in the seized documents. 14. It is submitted by the learned Advocate of the assessee that the learned Sr. DR is not justified in emphasising that the complete address of the original owners were not furnished. It is pleaded that the cheque payments are made to the original owners and those persons are identifiable and at any rate the assessee had given the names and Vejalpur was not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emise one has only to imagine and estimate what should be regarded as reasonable profit to the assessee. Moreover, the statement of the appellant is main basis for making this addition and accordingly Assessing Officer cannot be allowed to approbate and reprobate at a later stage while he has relied upon those part of the statement which favour the revenue but conveniently ignored those portions which favour the assessee. 16. On the facts and in the circumstances of the case we hold that the profit admitted by the assessee is reasonable and hence the addition required in respect of this land deal has to be restricted to ₹ 32.70 lacs. 12.2. With regard to Sangvilla land deal, the Tribunal has observed in para 40 to 42 as under : 40. Para marked 5.6 of the assessment order covers other land dealings under the heading A on page 62 he considers Sung villa Land bearing F. P. No. 259. The Assessing Officer has added ₹ 70 lacs for unexplained investment by the assessee by way of payment to Shri G. C. Patel and has also added ₹ 7.5 lacs for half share of the brokerage on this land. Assessee's contention is that he was merely one of the brokers for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whom the land was sold and other details of rate etc. This assessee's argument on this aspect is that such questions were never put to the assessee and the only question asked was as reproduced on pages 63 and 64 of the assessment order. Therefrom it is clear that this question was not asked and hence the assessee cannot be faulted for not furnishing it. On the face of it the assessee earned a brokerage and it is common knowledge that brokers are not expected to investment their money. They bring the parties together and the prospective buyers pay to the prospective sellers may be through the broker. We have no hesitation in inferring that either from the seized paper or from the statement which constitute the only basis for Departments inference it cannot be sustained. The whole addition of ₹ 77.5 lacs is deleted. SUBMISSIONS OF THE REVENUE FOR QUESTION NO.3 12.3 Referring to the aforesaid findings of the Tribunal, the learned senior counsel for the Revenue submitted that Tribunal erred in deleting additions, though the assessee failed in discharging his primary onus. Attention was invited to the observation made by the Tribunal with regard to Amrakadam la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntered into transaction by cheque and the details of information is given by the assessee then it was the duty of the Assessing Officer to directly make an inquiry and when no inquiry is made by the Assessing Authority to ascertain the factum of clearance of cheque from the bank, the Court held that the assessee has sufficiently discharged the burden which lie upon it to explain the nature and the source of credit entry appearing in his accounts and the burden clearly shifted in that case on to the Department to prove to the contrary. (ii) Similarly, the Allahabad High Court in the case of Commissioner of Income-tax Meerut v. Smt. Sadhana Jain reported in [2014] 45 taxmann.com 432 (Allahabad) has held that Once the assessee furnishes the evidence in nature of cheques, their dates, amounts, particulars of banks and addresses of persons who were stated to have sold shares had been furnished by assessee, burden of assessee stood discharged. 13.2 It was therefore, submitted that in the facts of the case, the Tribunal has found that the complete information was provided by the assessee with regard to the payments made to farmers and the Tribunal has rightly held that the burd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4.2 The assessee replied the show cause notice vid para 4.2 to para 4.5 vide his letter 11-9-95, the relevant portion is extracted as under : 4.2(d) That, in the same statement, upon being so asked, I have there and then stated that the rights in the land in question had been acquired by me only about a month before the deal of sale to Saumya Construction Pvt. Ltd. was struck and that except for the initial payment of ₹ 5 lacs which I had to the land owners in cash, all the remaining payments that had to be made to them in cash had been made out of the cash payments received by me from Saumya Construction Pvt. Ltd. Since the time lag between the acquisition and sale was very short, the payment by cheques to the land owners came to be made directly by the ultimate purchaser Saumya Construction Pvt. Ltd. through the medium of the Society. 4.2.(e) That, as explained there and then in my aforesaid statement, I had really got only the surplus of ₹ 32.70 lacs which this transaction had generated because the buyer for the land which had been agreed to be acquired from its owner at ₹ 851 per sq. yd., could found only within a matter of one month @ ₹ 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hukvya Manoj . This narration as explained by Shri Suresh Patel in Answer to Q. 28 of statement dated, 22-9-95 is as under : i) The first entry of 70 on front side of page. 105 refers to payment of ₹ 70 lacs in cash made by Shri Ahmedabad (Director of Neela Housing Infrastructure Pvt. Ltd.) to Shri Goving C. Patel of Ganesh Housing Corporation for purchase of land for Sungilla Society, F. P. No. 259. The land is situated Nr. Bodakdev, No. Judge's Bunglow. (Emphasis added) ii) In the statement dt. 30-10-1995 in reply to Q.4 Shri Suresh Patel was specifically asked to state the status of land of F.P. No. 259 as on that date. In reply to Q,4 Shri Suresh Patel stated as under : There is a litigation in this land hence it is still open plot of land. Shri Manoj Vadodariya has approx., paid ₹ 70 lacs for this land. No cheque payment is made. (Emphasis added) ii) In view of this clear position the assessee was asked to explain the soruces of the investment vide para 8 of the show cause notice dated, 14-8-1997 under : Para 8 : - Page 105 : seized from the residence f Suresh Patel contains a summary of land transaction between you and G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer and at what rate and when the land was sold. No confirmation was furnished from the alleged purchaser also. Further no attempt at all has been made to furnish clarification, details or evidence to substantiate and clarify this matter even during assessment proceedings. shri Suresh Pate in his statement has clearly and categorically stated that the assessee paid ₹ 70 lakhs in cash for purchase of land to Shri G. C. Patel. As further sale of land and receipt of money is totally unsubstantiated and this claim is rejected. It is accordingly held that payment of ₹ 70 lacs is made by Shri Manoj Vadodariya out of his undisclosed income. An addition of ₹ 70 lacs is made as unaccounted investment in the Asst. Year 96-97. Further Shri Manoj Vadodariya has himself stated that he was to receive brokerage of ₹ 7.5 lacs on the deal, hence on accrual basis an addition of ₹ 7.5 lacs is made as unaccounted income on the transaction of F. P. No. 259 as referred above. (Unaccounted investment of ₹ 70,00,000/- A.Y. 96-97: Unaccounted income of ₹ 7.5 lacs A.Y. 96-97) 14.3 On comparison of the aforesaid finding given by the Assessing Officer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o consideration the irrelevant factors that the broker only bring the parties together and the prospective buyers pay to the prospective sellers may be through the broker. The Tribunal has therefore; committed error in drawing inference that either from the seized papers or from the statement which constitute the only basis, the addition cannot be sustained. 14.5 We are therefore of the opinion that the Tribunal has arrived at perverse findings contrary to the evidence on record in case of two land deals of Amrakadam and Sangvilla without there being any evidence on record to arrive at such findings to delete the addition made by the Assessing Officer, which is supported by the cogent evidence on record. 14.6 In that view of the matter, the Question No.3 is also answered in negative i.e. in favour of the Revenue and against the assessee, holding that the order of Tribunal is perverse and contrary to the evidence on record in case of Amrakadam and Sangvilla land deals based on no evidence at all. 15. In view of the above, the Reference stands disposed of accordingly as allowed as all the three questions referred are answered in favour of the Revenue and against the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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