TMI Blog2010 (2) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... ry in their books of account as noted by the AO, how assessee could be blamed. The above conclusion of the AO is not supported by any material or evidence. The conclusion of the AO is purely based upon suspicion and surmises. It is settled law that suspicion howsoever strong may be could not take place of legal proof, appeal of the assessee is allowed. - ITA No. 3178/Ahd/2009; - - - Dated:- 5-2-2010 - Bhavnesh Saini, D.C. Agrawal, JJ. Rasesh Shah, for the Assessee Rajeev Agarwal, for the Revenue ORDER-Bhavnesh Saini, J.M.: This appeal by assessee is directed against the order of learned CIT(A)-II, Ahmedabad dt. 16th Oct., 2009 for asst. yr. 2007-08 challenging the confirmation of addition of Rs.3,70,00,000 for alleged unexplained investment in property. 2. We have heard learned representatives of both the parties, perused the findings of authorities below and considered the material available on record. It is stay granted matter. 3. Briefly the facts of the case are that during the course of search and seizure action under s. 132 of the IT Act, 1961 at the residence of the directors of M/s Avichal Group i.e. Shri Ramesh Arora and Shri Ajay Arora, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment be not considered as payment out of unaccounted income. The assessee explained that no paper was found in the premises of the assessee and the papers found in the search in another party have no evidentiary value for assessee's case. The legal presumption under s. 132(4A) is only against the person in whose possession documents are found. Further, in the seized paper, it was written that Rs.3.7 crores was to be paid hence, it was outstanding and never paid. Hence, the addition is not to be made. 4. The AO however rejected the explanation of the assessee by observing as under: (i) The unexplained investment in the properties (50 per cent owned by Shri Ramesh Arora), which are not recorded in the regular books of accounts of Shri Ramesh Arora, was accepted and disclosed by him in his statement recorded during the course of search. Rest of 50 per cent of the investment of the property pertains to the assessee. However, the assessee has not given any explanation in respect of on money paid by him for purchase of the said property. Merely saying that the on money was not paid by him and the on money was paid by Shri Ramesh Arora only cannot be believable at this stage, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the argument of the assessee is not tenable and hence not acceptable. (v) The said property was purchased jointly by Shri Ajay Arora and the assessee, which is confirmed from the agreement to sale. Being a local person, overall dealing in respect of said property was handled by Shri Akshay P. Sheth himself. It is very pertinent and relevant to mention here that the document was signed by Shri Akshay P. Sheth. In the statement recorded, Shri Ramesh Arora and Shri Ajay Arora have clearly stated that the deal was arranged by the assessee, regarding rate and other details. They have also admitted that payments on their behalf have been made by the assessee to the seller. In view of these facts, the assessee's argument that the on-money was not paid by him is not acceptable and the explanation of the same is hereby rejected. (vi) The said property was purchased by the assessee and the payment of Rs.5 crores has been reflected in the books of M/s Avichal Weaves (P) Ltd. On verification of the deed of conveyance, it is noticed that the vendor has sold and conveyed the said property with leasehold right to the purchaser on 1st Jan., 2007 and by this conveyance deed, the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument. (d) The handwriting of the diary was neither of the assessee nor any of his family members. The handwriting was owned up by Shri Ramesh Arora. (e) Without prejudice the assessee gives explanation as under. In the said writing, it was clearly mentioned that 3.7 to be paid, which suggests that nothing was paid, till the date of noting. Diary doesn't bear any date and the last date mentioned in the noting against the amount is 10th March, 2007. The search was conducted on 16th March, 2007 and so nothing was paid out of the amount of Rs.3.7 crores till the date of search. The amounts that were noted in the right hand side of the paper belong to Arora Brothers, which have been declared by them as their income from undisclosed sources. (f) The property was registered for Rs.5 crores vide sale deed dt. 1st Feb., 2007. In the case of real estate transaction, the on money payment always precedes the date of registered sale deed. If any amount is required to be paid after the date of sale deed. It doesn't have any legal force in absence of any agreement in writing. (g) No evidence was found in the case of the assessee that the assessee has paid on money before the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the course of search, the assessee never admitted to have paid any amount as on money. The declaration made by the assessee did not include the payment for on money. (n) There is no evidence on record that the assessee made unaccounted investment. As a result, deeming provision of s. 69/69B of the Act in regard to unexplained investment is not applicable. In support, the assessee relies on the decision of Gujarat High Court in the case of Ushakant N. Patel vs. CIT (2006) 201 CTR (Guj) 501 : (2006) 282 ITR 553 (Guj)." 6. The learned CIT(A) considering submissions of the assessee and materials on record has dismissed the appeal of the assessee. The findings of CIT(A) are reproduced as under: "5. I have considered the facts and the submissions, I do not agree with the appellant's view for the following reasons: (a) The said property is purchased in the name of M/s Avichal Weaves (P) Ltd., jointly by Shri Ramesh Arora and Ajay Arora with half the share and Shri Akshay Sheth with half the share. (b) The statement of both the persons i.e. Shri Ramesh Arora and Shri Ajay Arora was recorded on 22nd March, 2007 and both of them confirmed that their total investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the argument of the assessee 'that on-money of Rs 3.70 to be paid' is totally vague and cannot be acceptable. (e) The case law cited by the appellant in his submission is not comparable with the case of the appellant, as the facts and circumstances of the case law quoted by him are different than the instant case. Therefore, the same is also not acceptable. Accordingly, the action of the AO is upheld and the appellant's ground is rejected. 6. In the result, the appeal is dismissed." 7. Learned counsel for assessee reiterated the submissions made before the authorities below. He has referred the seized paper A1/10 (paper book 45) and submitted that there is nothing in this seized paper to indicate that assessee paid any on money. He has submitted that if these documents are considered as a whole, it would prove the case of assessee because the narration is "3.70 to be paid". This narration proved that nothing has been paid by the assessee. He has referred to the statement of S/Shri Ramesh Arora and Ajay Arora noted in the assessment order and submitted that their statements were recorded from the date of the search on 16th March, 2007 to 22nd March, 2007 in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of Tribunal, Ahmedabad Bench in the case of Prarthana Construction (P) Ltd. vs. Dy. CIT (2001) 70 TTJ (Ahd) 122 (copy filed) in which it was held "no addition could be made by invoking s. 158BC on the basis of the statements of third parties when no search operations were carried out in the case of the said parties and no documents were seized evidencing payment of alleged on money, addition was also not justified as the statements were recorded at the back of the assessee and it was not allowed any opportunity of cross-examination". Learned counsel for assessee also relied upon the assessment order in the case of Shri Ajay Kumar dt. 28th Feb., 2008 under s. 143(3) of the IT Act, 1961 (copy filed paper book-8) and referred to p. 18 of the said order to show that Shri Ajay Arora retracted from his earlier statement before the AO in his case. He has therefore, submitted that there is no basis for making any addition against the assessee. 8. On the other hand, the learned Departmental Representative relied upon orders of the authorities below and submitted that the assessee is one of the directors of the private limited company along with Shri Ajay Arora. Assessee has therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val submissions and material available on record. Sec. 132(4A) of the IT Act, 1961 provides: "Where any books of account, other documents, money, bullion, jewellery, or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested." 9.1 Hon'ble Delhi High Court in the case of CIT vs. SMC Share Brokers Ltd. (2007) 210 CTR (Del) 353 : (2007) 288 ITR 345 (Del) held "there is no doubt that the statement of Manoj Agarwal had evidentiary value but weight could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es (P) Ltd. the assessee and Shri Ajaykumar Arora signed the sale deed. The sale deed was executed for a sum of Rs.5 crores which according to submission of the assessee was fully financed by the bank. The AO did not dispute the above fact. The AO considering the business relation of the assessee with the Arora Brothers presumed that the assessee paid on money to the sellers i.e., M/s Mahan Corporation. The AO in that connection relied upon statements of S/Shri Ramesh Arora and Ajay Arora recorded on 16th March, 2007 to 22nd March, 2007 under s. 132(4) of the IT Act, 1961 during the course of search operation in their cases. It is also undisputed fact that Annex. A1/10 was seized from the possession of Shri Ramesh Arora. Since the seized paper is not recovered during the course of search from the possession of the assessee therefore, the presumption under s. 132(4A) of IT Act, 1961 cannot be invoked against the assessee. The learned CIT(A) recorded the narration of seized paper in the order which is also reproduced in this order and the relevant portion reads "3.70 to be paid". The AO treated the above figure as "on money paid by the assessee". However, the conclusion of the AO is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the seller. The presumption under s. 132(4A) would not apply in the case of the assessee therefore, it was necessary for the AO to have brought some reliable and cogent material and evidence on record to support his findings or to corroborate the statement of Arora Brothers. It may also be noted that Shri Ajay Arora in his statement later on retracted from his earlier statement as the same fact is mentioned by the AO in his assessment order dt. 28th Feb., 2008 (paper book 8-paper book 18) Therefore, no reliance could be placed on the statements of the Arora Brothers. Moreover, the AO has not mentioned any fact in the assessment order if the statements of Arora Brothers were ever put to the assessee for the purposes of cross-examination on behalf of the assessee. It is settled law that unless the statement is tested under the cross-examination, the same cannot be read in evidence against the assessee. Since, in this case, AO did not allow any cross-examination to the statements of Arora Brothers on behalf of the assessee therefore, their statements cannot be read in evidence against the assessee. The AO tried to use the admission of Arora Brothers made in their statements under ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
