TMI Blog2021 (5) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... petition before Settlement Commission on 28.03.2018. As per the petition filed by MBDL before the Hon'ble Settlement Commission the `peak deposit' of unaccounted Capital introduced, loans and advances and interest paid and received was considered for computing the income. Accordingly income was offered on the basis of cloud data of N. Trading Company.The same is accepted by the Settlement Commission. CIT(A) observed that it is evident that the surplus being referred to by the Ld. AO is not profit from the projects but the receipts of 'on money' credited to the capital accounts of the partners which has been considered in the additional income offered by MBDL and accepted by the Hon'ble Settlement Commission. Thus on merits also since the amounts had already been added by the AO and the same had already been subjected to tax in the hands of MBDL and related entities, therefore, the ld. CIT(A) after considering all those facts had correctly deleted the addition made in various assessment years. The Bench also noted that no new facts have been brought by the Revenue in controverting the order of the ld. CIT(A) to the issue in question. In this view, of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the addition of ₹ 2,82,97,500/- made by the AO on account of unaccounted surplus profit earned by the assessee from various projects of Manglam Group. 3. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) is justified in ignoring the transactions found on Cloud Data and deleting the addition of ₹ 1,00,00,000/- made by the AO on account of undisclosed interest earned on cash loan/capital. 4. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) is justified in ignoring the fact that the entries pertaining to unaccounted capital and advances were found in the N Trading on Cloud Data and thus addition of unexplained unaccounted capital, advances, interest and surplus profit earned were on the basis of incriminating seized data. 5. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) is justified in giving relief to the assessee on the ground that Manglam Group had owned up the entire in the N Trading on Cloud Data before the ISTC. The order of the Hon'ble ISTC has already been challenged in writ before the Hon'ble High Court. ITA No. 36/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading on Cloud Data and thus addition of unexplained unaccounted capital, advances, interest and surplus profit earned were on the basis of incriminating seized data. 4. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) is justified in giving relief to the assessee on the ground that Manglam Group had owned up the entire in the N Trading on Cloud Data before the ISTC. The order of the Hon'ble ISTC has already been challenged in writ before the Hon'ble High Court. 2.1 First of all, we take up the appeal of the Revenue for the assessment year 2014-15 for adjudication. 3.1 Brief facts of the case are that the assessee is a partner in the firms M/s. J.K. Jewellers (3.3.34% shares), M/s. JK Jewellers International (20% shares), M/s. JK Jewells (50% shares), M/s. Upasand Colonizers (50% shares) , M/s. JK International (33.33% shares), M/s. Neemrana Developers (40% shares) and M/s. Precious Buildcon (50% shares) respectively. The assessee has declared income from house property, capital gain and interest from parties during this year. The original returns were filed as per details as under:- A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Surplus profit 2,46,25,600 2,82,97,500 25,89,900 Interest earned on capital employed 85,00,000 1,00,00,000 14,224,800 On money received 70,94,000 3.3 Against the order of the ld. CIT(A), the Revenue preferred respective appeals before us for the assessment years 2014-15 to 2017-18. 3.4 Now we take up the grounds of appeal of the Revenue for the assessment year 2014-15 as mentioned above to adjudicate. 3.5 The grounds raised by the Revenue are interrelated and interconnected and relate to challenging the orders of the ld. CIT(A) in deleting the addition. 3.6 The ld. DR appearing on behalf of the Revenue supported the order of the AO and submitted that the ld. CIT(A) was not justified in deleting the additions made by the AO on account of on money received by the assessee . It was submitted that the ld. CIT(A) ignored the transactions found on Cloud Data and also ignored the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Addition of ₹ 10,34,68,000/- u/s 69 of the Act on account of alleged undisclosed capital employed by the appellant in various projects of Manglam Group on the basis of cloud data. (ii) Addition of ₹ 2,46,25,600/- on account of surplus share profit in projects of Manglam Group on the basis of cloud data. (iii) Addition of ₹ 85,00,000/- on account of interest earned on the basis of cloud data. 2015-16 28.12.2018 8,78,62,760/- (i) Addition of ₹ 2,82,97,500/- on account of surplus share profit in projects of Manglam Group on the basis of cloud data. (ii) Addition of ₹ 1,00,00,000/- on account of surplus interest from Manglam Group on the basis of cloud data. 2016-17 28.12.2018 28,56,88,120/- (i) Addition of ₹ 1,50,00,000/- u/s 69 of the Act on account of alleged undisclosed capital in cash employed by the assessee in various projects of Manglam Group on the basis of cloud data. (ii) Addition of ₹ 25,89,900/- on account of surplus share pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded u/s 132(4) of the Income Tax Act 1961 on 09.11.2016 of Shri N.K. Gupta (Director and Key-person of Manglam Group) in reply to question no. 117 page 62 clearly stated that all the transactions of loan receipts and payments are transaction of MBDL and not related to other parties including the assessee and these are their own transactions as reproduced in assessment order in reply to question no. 117 to 119. The assessee also submitted affidavit of Shri N.K. Gupta in this regard to the learned AO that no cash loan/transaction with Shri Jugal Kishore Garg (Derewala) during the financial year 2010-11 to 2016-17 was undertaken by him or Manglam Group. The learned AO has rejected this affidavit without examining the contents of the affidavit or without making any enquiry from the person who has furnished this affidavit. The learned AO did not bring any material on record to controvert the facts stated in the affidavit and completed the assessment u/s 153C of the IT Act, 1961 by making such a huge additions which is void ab-initio deserves to be quashed. The assessee is further assailed the action of the learned AO in passing the assessment u/s 153C as under: - 2. Wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice uls 153C in the course of assessment proceedings. No incriminating documents were found in the course of search at the premises of M/s Artefact Projects Ltd. Observation of AO. that notice has been issued pursuance. to incriminating evidences found during the course of search at M/s. Artefact Projects Ltd. is factually incorrect. Consequent satisfaction as well as issue of notice u/s 153C of I.T. Act 1961 is not in accordance with law. (ii) CIT vs. Shetty Pharmaceuticals Biological Ltd. 232 Taxman (Andhra Pradesh H.C.) In this case it was held that section 153C and 153A mandates recording of satisfaction of the Assessing Officer(s) is a precondition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized must be belonging to the any other person other than the person referred to in Section 153-A of the Act. It is contended that the same Assessing Officer is involved in the matter. This fact does not dispense with above requirement. It is settled position of law that when a thing is to be done in one particular manner under law this has to be done in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). On facts, as the Department was not able to produce any material to show that the AO assessing the searched party had reached the satisfaction that any income belonged to the assessee, the assessment had to be annulled. (v) Other decisions- 1) (2015) 155 ITO 0501 (Delhi) CIT vs. Satkar Roadlines Pvt. Ltd.] ii) (2015) 232 Taxman 0268 (AP) CIT vs. Shettys Pharmaceuticals BiologicalLtd. iii) Hon'ble Madhya Pradesh High Court order in ITA No. 44/2011 in the case of M/s. Mechmen vide order dated 10107/2015. iv) (2014) 365 1TR 0411 (All) CIT vs. Gopi Apartment v) Hon'ble Bombay High Court in ITA No.1337 of 2013 in the case of M/s. Ingram Micro (India) Exports Pte. Ltd. vide order dated 2 9/04/2015 vi) Hon'ble Delhi High Court in ITA 422/2015 in the case of Nikki Drugs Chemicals Pvt. Ltd. Vide order dated 03/12/2 015. vii) ITTA No.254 of 2014 Judgement (per Hon'ble the Chief Justice Shri Kalyan Jyoti Sengupta) viii)ITAT order in ITA 4228/De1/2011 in the case of M/s. Shield Home Pvt. Ltd. vide order dated 24/02/2016 3. Action u/s 153C unwarranted - It is submitted that the assessment has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e therefore, cancel all the assessments made for all these years. Since we have cancelled the assessments, we do not propose to deal with grounds raised by the Revenue in appeals and ground raised by the assessee in cross-objections on the merits. Ground No. 2, 3 4 - 2. Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of ₹ 10,34,68,000/ u/s 69 of the Income Tax Act, 1961 on account of alleged undisclosed capital employed by the assessee in various projects of Manglam Group on the basis of cloud data of the person who owned that these transactions are only his transactions and paid tax and offered the transactions in settlement. 3. Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of ₹ 2,46,25,600/ on account of surplus share profits in projects of Manglam Group on the basis of cloud data of the person who owned that these transactions are only his transactions and paid tax and offered the transactions in settlement. 4. Under the facts and circumstances of the case the Assessing Officer has erred in making the addition of ₹ 85,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 136593600 And the above addition has been added to the income of the assessee on assumption and presumption that these transactions are pertained to the assessee. The assessee has submitted his reply during the course of assessment proceedings which is quoted as under: - 1. That in the show cause notice you have mentioned that on the basis of the seized material you are associated with M/s MBDL. In this regard you are requested to provide the copy of material or detail on the basis of which you have noticed that we are associated with MBDL. 2. Further you have reproduced the ledger account in the books of N. Trading Company in the name of DJK. In this regard we would like to submit that we have not made any transactions with N. Trading Company and we are not DJK. How you have identified that the ledger account of DX is ours. You are requested to provide us the basis or material or any evidence by which you have identified that DJK is Jugal Kishore Garg because we have no connection or transactions with N. Trading Company. ' 3. That the transactions recorded in the ledger account of N. Tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for cross examination of Shri N.K. Gupta. The Apex Court of the country has also held that \allowing cross examination is a serious flaw and makes the order nullity. The following case laws are quoted in support: -N The Apex Court has observed that not allowing cross examination is a serious flaw and makes the order nullity. Andman Timber Ind. Vs. Commission of Central Excise (2015) 281 CTR 211 (SC). not allowing the assessee to cross examine the witness by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order, is a serious flaw which makes the order nullity in as much as it amounted to violation of principle of natural justice because of which the assessee was adversely affected. (ii) COMMISSIONER OF INCOME TAX vs. BIJU PATNAIK HIGH COURT OF ORISSA 190 ITR0396 Although answers can be recorded either in favour of the. Department or against it, ultimately each answer would again become inconclusive on account of the final findings of fact of the Tribunal that ITO has not given reasonable opportunity to the assessee to rebut the statements recorded ex parte under s. 131 of the Act and to furnish expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was filed controverting the same, it was obligatory on the part of the AO to allow the prayer of assessee for cross-examination of M-AO having not summoned M U.s 131 inspite of the request of the assessee, evidence of M could not have used against the assessee- Therefore the assessment order is vitiated. (iv) HEIRS AND LRS OF LATE LAXMANBHA1 S. PATEL vs. COMMISSIONER OF INCOME TAX (HIGH COURT OF GUJARAT ) (2010) 3271TR 0290 Opportunity of being heard-During search of one R, key of bank locker along with two packets containing six promissory notes were recovered-Out of those six promissory notes, one was in the sum of ₹ 8,78,358 executed by one K in the capacity of partner of firm DCI-In his statement recorded during search, R stated that the key of locker and the two envelopes were handed over to him by the assessee-K also admitted in his statement recorded on the same day at 2.00 AM midnight that he had executed the pronote and signed it on behalf of DCI after obtaining a sum of ₹ 8,78,358-Later, K filed an affidavit that his statement was recorded at late hours in the night under coercion and pressure- Subsequently, K along with two other part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was placed by the AO is neither referred to in the assessment order nor copy thereof was given to the assessee nor the assessee was given an opportunity of cross-examining the said R-Authorities could not be absolved from doing so on the ground that the facts stated by R were admitted by the assessee-K had not only retracted his earlier statement but also made a voluntary disclosure, along with two other partners of DCI, in the sum of ₹ 11 lacs which included the amount of pronote of ₹ 8,78,358-Legal effect of the statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross-examination, is that if the addition is made, the same is required to be deleted on the ground of violation of the principles of natural justice-Orders of all the three authorities set aside and addition deleted. Principles of natural justice are applicable -The principals of natural justice are applicable to assessment proceedings. The elementary principle of natural justice is that the assessee should have knowledge of the material which is going to be used against him so that he may be able to meet it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng search except the conflicting statement of the third party. ACTT Vs. Prabhat Oil Mills 52 TTJ 533 (Ahm) Entries in the diary seized from the premises of third party were not sufficient to make addition in the hands of the assessee. The Assessing Officer was required to bring on record corroborative material. (iii) Associated Stone Industries (Kotah ) Ltd Vs. Dy. Deputy Commissioner of Income Tax 68 lTD 312 (Jaipur) Addition could not be made in the hands of assessee company on the basis of contents of a diary on an employee. (iii) Amariiit Singh Bakshi HUF vs. Assistant Commissioner of Income Tax (2003) 263 ITR 75 (Del) No addition can be made on the basis of notings on documents found during search at third party place, when assessee was not given any opportunity for cross examination. (iii) PS. Venkateshan Vs. Assistant Commissioner of Income Tax 74 ITD 298 (Cal) Addition could not be made in the hands of the assessee on the basis of statement given by third person without giving opportunity for cross examination. (iii) Sunil Aqawral vs. Assistant Commissioner of Income Tax 83 ITD 1 (Del) It was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional submission:- In constitution of our earlier submission in this regard we would like to submit as under: 1. That as per the tally data of N trading company found in the cloud data during the course of search of MBDL Group. All the entries related to loans and capital were accepted by Manglam Group before the settlement commission and the settlement commission has also accepted the stand taken by Manglam Group. It is in the settlement order on page no. 121 in para 7.2 where in the order of settlement the submission of the applicant s reply in rule 9A report was reproduced and it has been accepted that DKJ being the partner of the group and all the transaction in his capital account has been considered in the peak working statement and the peak of the same has been offered as income of the appellant. 2. In para 2.2 the peak statement prepared by the group Manglam Group has been explained. On page 141 of the settlement order in para 2.5 it has been mentioned that the Pr CIT has accepted the correctness of peak working and n page 143 in para 7.3 the verification report dated 06.02.2019 was accepted. In para 7.4 verification report dated 18.02.2019 was discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market to meet the requirements and as cash was generated from booking of flats/units/plots, the said loans were periodically repaid. Interest on the loans all in cash, were also paid.In the search conducted, in the seized data, all such complete recordings of loan received, repaid and interest paid was all found. However, during the course of the search itself, since these entries could not be explained by filing confirmation of parties, these cash loans were accepted to be the undisclosed income of the Applicant group in order to buy peace.Thus based on the above, therefore, to determine the net funds generated in business, peak of the loan accounts (including the capital cash entries) was worked out. It was the contention of the Applicant that the loan introductions/repayment and the capital introduction/withdrawals all represented inflow/ outflow of funds in the business and thus in the spirit of settlement, the peak of the same was offered as the undisclosed income of the Applicant group.In the working of such peak, the following cash entries relating to loans were considered: (the peak working is enclosed at pages 422-439 of the P/B). - Receipt of unsecured loans. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of cloud data of N. Trading Company. The same is accepted by the Hon'ble Settlement Commission at page 57 of the order dated 16.05.2019. The relevant extract of the final order wherein this issue is discussed is reproduced as under:- Para 21.2 of Page. 11 of the Hon'ble Settlement Commission order 21.2 Amount of Settled Booking Advances in Tally Data The Applicant Group received booking advances from its various customers in various projects in cash, which got settled when the entire 'on-money' due from the customer was received. In the tally data, such receipts have been distributed in capital account directly with account description 'surplus'. The nature of these booking advances was identical to unsettled booking advances as explained above, however, in such cases, no money remained further due from customers as far as 'cash component' was concerned, though, projects remains yet to be delivered to the customer. In the Tally Data, the said information is available with account head 'Surplus' for various schemes like Surplus Ananda , 'Surplus Ajmer Road, 'SurplusVaishali Estate'. All such boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of cash profit. The amount of undisclosed income settled in respect of the applicants in the respective assessment years are given in the following table. In view of above, the ld. CIT(A) observed that it is evident that the surplus being referred to by the Ld. AO is not profit from the projects but the receipts of 'on money' credited to the capital accounts of the partners which has been considered in the additional income offered by MBDL and accepted by the Hon'ble Settlement Commission. 3.12 Thus on merits also since the amounts had already been added by the AO and the same had already been subjected to tax in the hands of MBDL and related entities, therefore, the ld. CIT(A) after considering all those facts had correctly deleted the addition made in various assessment years. The Bench also noted that no new facts have been brought by the Revenue in controverting the order of the ld. CIT(A) to the issue in question. In this view, of the matter, we find no reason to interfere with the order of the ld. CIT(A). Thus the appeal of the Revenue for the assessment year 2014-15 is dismissed. 4.1 As regards the appeals of the Revenue for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
