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Dy. Commissioner of Income Tax, Central Circle 21, New Delhi and others Versus Smt. Vinita Chaurasia, New Delhi and others

2015 (8) TMI 8 - ITAT DELHI

Disallowance of freehold charges - CIT(A) deleted the addition - Held that:- AO has not brought out any fact to support this allegation that the assessee made payment of freehold charges over and above the payment which was actually recorded in the books of accounts and the AO has also not brought out any fact or material to support this fact that the property in question was converted from leasehold to freehold during the year under consideration on the payment of freehold charges made by the a .....

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ment proceedings u/s 153C of the Act, to support this allegation that the assessee actually paid alleged amount either by cheque or in cash towards sinking fund and maintenance security to M/s Suncity Projects Pvt. Ltd. or any other entity or concern. The AO had also not brought out any fact on assessment records that the maintenance agreement was executed between the assessee and the developer i.e. M/s Suncity Projects during the FY 2009-10 pertaining to AY 2010-11 under consideration and the a .....

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and above the expenses reflected and recorded in her books of accounts and the assessee has made said payments from her unaccounted sources.- Decided against revenue.

Disallowance of commission - CIT(A) deleted the addition - Held that:- The presumption and inference taken by the CIT(A) u/s 292C of the Act against the present assessee is not valid as before taking such presumption, the CIT(A) was under obligation to hold that the document in question actually and factually does not be .....

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u/s 292C of the Act against the assessee is not valid and sustainable. We further hold that the directions given to the AO by the CIT(A) in operative para 12.4 of the impugned order are also not in accordance with provisions of the Act and law. We may further point out that in the case of person searched, who was alleged to be a broker in the deal being recipient of alleged commission, the CIT(A) herself has deleted the addition on account of receipt of unaccounted commission, hence, addition a .....

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in the capacity of the AO of the person searched meaning thereby Shri Lalit Modi and we are unable to see any satisfaction note on record by the AO of the other person viz. the assessee of the instant appeal i.e. Smt. Vinita Chaurasia. On a specific query from the Bench, ld. DR could not assist us to see whether any satisfaction note was recorded by the AO of the present assessee (other person). Under these facts and circumstances, it can safely be held that no valid satisfaction was recorded by .....

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in earlier AY 2009-10 but AO had not made any addition - Held that:- as per general human probability and mental level of a man of ordinary prudence, it cannot be accepted that while a property is being sold at approximately 25% higher rate as compared to circle rate and registered sale deed is executed for the consideration of ₹ 16,42,68,832 then how come said seller may be agreed to transfer an amount of pending rent of ₹ 8,91,15,757 to the purchaser under an undisclosed arrangemen .....

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ncome for the year under consideration and also in the previous AY 2009-10 cannot be held as valid, sustainable and in accordance with law. - Decided in favour of assessee.

Enhancement on account of excess payment - second part of contents of the document in question wherein “PDC cheque” of ₹ 16,42,68,522 has been mentioned and on the right side “recd” amount of ₹ 17,02,25,465 has been mentioned and in the last column on the right, amount of ₹ 59,56,943 has been ment .....

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e same. - Decided in favour of assessee.

Addition on account of brokerage - CIT(A) deleted the addition - Held that:- we are inclined to accept the contention of the assessee that the revenue has not brought any evidence on record or any such document in support of payment of brokerage or commission on the basis of which the fact of brokerage or commission or legally due or paid to the assessee can be sustained or established. The AO has not brought out any allegation, evidence, docum .....

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n of the CIT(A) are based on the legal principles and verification of the fact and we are unable to see any infirmity, perversity or any other valid reason to interfere with the same and hence, we uphold the same - Decided against revenue.

Capital gain arising out of sale of jewellery - Held that:- AO made addition on the basis of surmises and conjectures by adopting a hyper technical approach and ignoring the huge amount of surrender of ₹ 62 crore and the letter of the assessee .....

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revenue.

Disallowance u/s 14A - Held that:- DR has not disputed this fact that there was no exempt income for the assessee during the financial year under consideration i.e. AY 2009-10 relevant to AY 2010-11 and in the light of ratio of the judgment of Jurisdictional High Court of Delhi in the case of CIT vs Holcim India P. Ltd. (2014 (9) TMI 434 - DELHI HIGH COURT ), no disallowance u/s 14A of the Act can be invoked for making disallowance. The issue is squarely covered in favour of .....

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.3.2013 in Appeal No.306/11-12 for AY 2010-11. For the sake of brevity and clarity in our findings, both the appeals have been clubbed and we are adjudicating them together by this consolidated order. Revenue s appeal in ITA No. 3551/Del/2013 2. The Revenue has raised following grounds in this appeal:- 1. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of ₹ 1,24,90,084/- made by the Assessing Officer on account of disallowance of .....

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als) erred in law and on facts of the case in deleting the addition of ₹ 65,70,747/- made by the Assessing Officer on account of disallowance of commission. Ground No. 1 of the Revenue 3. Apropos ground no.1, we have heard arguments of both the sides and carefully perused the relevant material placed on record. Ld. DR submitted that the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of ₹ 1,24,90,084/- made by the Assessing Officer .....

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d order submitted that the property continues to be leasehold and therefore there was no occasion for the assessee to make payment of ₹ 1,24,90,084 as this payment was contingent upon the happening of the specific event on converting the property from leasehold to freehold. Ld. AR submitted that the AO has not brought out any evidence or incriminating material to show that the assessee made payment towards freehold charges, therefore, the CIT(A) was right in deleting the same. 4. On carefu .....

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tinues to be leasehold, there was no occasion for the assessee to make such payment. The relevant operative part of the impugned order which granted relief for the assessee on this issue reads as under:- 12.12.1. In so far as the payment of ₹ 1,24,90,084 is concerned, as evident from the registered sale agreement, it was contingent upon the happening of the specific and verifiable event of converting. the property from lease hold to free hold. Since as per the submission of the AR during t .....

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al to support this fact that the property in question was converted from leasehold to freehold during the year under consideration on the payment of freehold charges made by the assessee out of her books of accounts. Hence, we are unable o see any valid reason to interfere with the impugned order and hence, ground no. 1 of the revenue being devoid of merits is dismissed. Ground No. 2 & 3 of the revenue 6. Apropos ground no. 2, ld. DR submitted that the Commissioner of Income Tax (Appeals) er .....

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ade by assessee out of unaccounted money was rightly added by the AO. Ld. DR also submitted that the CIT(A) also erred in law and on facts of the case in deleting the addition of ₹ 29,73,830/- made by the Assessing Officer on account of disallowance of maintenance security as this payment was also made by the assessee over and above the booked expenses. Ld. DR submitted that the assessee paid impugned amount towards sinking fund and maintenance security, therefore, the AO rightly made addi .....

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under consideration. Ld. AR vehemently contended that the AO made addition on the basis of surmises and conjectures without bringing any adverse material on record which was rightly deleted by the CIT(A) after considering the fact that the maintenance agreement was not executed during the relevant financial year and therefore, there was no occasion to make any payment in this regard for the assessee. On careful consideration of above, at the outset, from the impugned order, we note that the CIT .....

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e facts and circumstances noted by the AO, we observe that the AO made the said additions holding that the assessee incurred expenditure towards payment of sinking fund and maintenance security from the income of her unaccounted sources. The basis of addition is that the AO has drawn an inference from Annexure A-1 page 5of incriminating material which is available at page 16 of the asessee s paper book wherein amount of sinking fund and maintenance security have been mentioned and on the right s .....

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been made by the assessee to the alleged payee, even otherwise, we are unable to see any detail, evidence or incriminating material found during the course of search and seizure operation or brought out by the AO during reassessment proceedings u/s 153C of the Act, to support this allegation that the assessee actually paid alleged amount either by cheque or in cash towards sinking fund and maintenance security to M/s Suncity Projects Pvt. Ltd. or any other entity or concern. The AO had also not .....

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arned from unaccounted sources. 9. It is also pertinent to note that the AO has not brought out any evidence or incriminating material to show that the assessee has actually made payment of sinking fund and maintenance security over and above the expenses reflected and recorded in her books of accounts and the assessee has made said payments from her unaccounted sources. The AO has also not brought out any fact to support his contention that the assessee entered into any maintenance agreement wi .....

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on of the CIT(A) and we uphold the same. Accordingly, ground no. 2 and 3 of the revenue being devoid of merits are dismissed. Ground No. 4 10. Apropos ground no. 4, ld. DR contended that the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of ₹ 65,70,747/- made by the Assessing Officer on account of disallowance of commission. Supporting the assessment order, ld. DR strongly contended that the AO rightly noted that the impugned document i. .....

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from her unaccounted sources, therefore, the AO rightly made addition in this regard. Ld. DR alleging the impugned order further submitted that the CIT(A) deleted the addition on account of commission without any plausible and acceptable reason, therefore, the impugned order may be set aside by restoring that of the AO. 11. Replying to the above, ld. AR took us through operative part of the assessment order i.e. from para 4.3 to 4.4 and submitted that the AO proceeded to make addition on accoun .....

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and against these payments, there is a mention of cheque in favour of Sun city Project Pvt. Ltd. but the AO proceeded to make addition by presuming that there was cash taken over and above the payment recorded by the assessee in her books of accounts and these additions were not found to be sustainable by the CIT(A) and have been deleted by the first appellate authority. Ld. AR further pointed out that in the right side down below corner of Annexure A-1, page 5, there is a mention of Commission .....

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rds page no. 124 and 125 of the assessee s paper book that Shri Lalit Modi has submitted this clarification before the revenue authorities that the document Annexure A-1 seized from his residence does not represent any transaction of property or otherwise by the assessee Mrs. Vinita Chaurasia and with any other party including Suncity Project Pvt. Ltd. Ld. AR has also contended that as per certificate submitted by the assessee before the revenue authorities available at page 125 of assessee s pa .....

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come it can be presumed and held that the purchase assessee of the present case i.e. Smt. Vinita Chaurasia paid commission either in the cash or by cheque to Shri Lalit Modi over and above books of accounts from the income earned from unaccounted sources. 13. From the assessment order para no. 4.3, we note that the AO has rejected this explanation of the assessee and held that this certificate obtained from Shri Lalit Modi is of no help to the assessee. From the relevant operative part of the im .....

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u/s 132 conducted on him, have revealed his role as broker in property deals. Hence, the presence at his residence of the seized paper that gives detailed working of the cheque and cash components of the property deal involving the appellant is not an imaginary and fanciful draft, as contended by him and the AR of the appellant. It is a reasonable presumption u/s 292C that the sum of ₹ 65,70,747 was paid to him by the appellant as commission. The outcome of this inference is that though &# .....

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onclusion of the AO as well as observations of the CIT(A), we note that the AO had no other document, evidence, material or basis, except Annexure A-1 to support the impugned addition on account of alleged commission payment to Shri Lalit Modi by the assessee. The AO has not brought out any other incriminating material or evidence or details fact to support this contention that the assessee had actually made payment of commission to Shri Lalit Modi over and above the amount recorded in her books .....

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e right side or commission amount ex facie show that the commission was due to pay. For making addition in regard to expenses on investment out of income from unaccounted sources, the onus is on the AO to establish this fact that the assessee actually made payment towards commission expenses over and above the entries made in the books of accounts in regard to purchase of said property and the payment was made by the assessee from the income of unaccounted sources, then only such kind of additio .....

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eferred for adjudication along with relevant ground 2(iii) to (vi) of the assessee. Assessee s appeal in ITA No.3343/Del/2014 16. Ground No. 5 and 6 of the assessee are general in nature which need no adjudication. Remaining grounds of the assessee read as under:- 1(i) That the initiation of proceeding u/s. 153C of the Act & order passed u/s 143(3) is illegal, invalid and without jurisdiction as alleged recording of satisfaction by ACIT, Central Circle - 21, New Delhi, was without any legal .....

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legal basis and merely based on presumption and surmises. (ii) That adverse inference in respect of alleged seized annexure is without any corroboration or proper investigation and application of mind. (iii) That seized annexure does not belong to appellant nor same was found from the possession of appellant or executed by appellant and as such addition on the basis of such annexure is highly arbitrary and misconceived. (iv) That even person from whose possession the said annexure was found has .....

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in terms of provisions of section 251 (2) of the Income Tax Act, 1961. (ii) That enhancement and consequential addition of ₹ 5,50,72,700/- is without proper appreciation of facts, application of mind and opportunity to the assessee. (iii) That presumption of any undisclosed payment or investment and consequential enhancement is highly arbitrary and uncalled for. (iv) That in the absence of any evidence in respect of any such payment, having been made by the appellant there could be no gro .....

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any factual basis or proper application of mind and opportunity to the appellant and as such these observations may be vacated and no adverse inference was called for. (iii) That observation of CIT(A) are illegal, arbitrary, unwarranted and without jurisdiction. 17. Briefly stated the facts giving rise to this appeal are that a survey operation u/s 132 of the Income Tax Act, 1961 (for short the Act) was conducted in the case of Shri Lalit Modi and a loose sheet Annexure A-1, page no. 5 (availab .....

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sessee preferred an appeal before the CIT(A). The CIT(A) deleted the addition of ₹ 2,59,99,766 and enhanced the assessment by ₹ 5,50,72,700/-. The CIT(A) enhanced the assessment on the basis of only impugned document seized during the search operation in the case of Shri Lalit Modi by adding the amount of refund of ₹ 59,56,943 and amount of pending rent of ₹ 4,91,15,757. Now, the aggrieved assessee is before this Tribunal in this second appeal with the grounds as reproduc .....

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ri Lalit Modi has recorded his satisfaction u/s 153C of the Act on 30.6.2011 but no satisfaction note was recorded in relation to the person other than the person searched i.e. the appellant of the present appeal. Ld. AR further submitted that satisfaction note in the case of Shri Lalit Modi (person searched) was recorded by ACIT, Central Circle-21, New Delhi on 30.6.2011 who is also the assessee of the present appellant assessee but it is a settled legal principle that even when the AO of the s .....

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t. Ltd. vs ACIT (ITAT Delhi) (ITA No. 2421/D/2014 (Dated 16.01.2015) ii) CIT vs M/s Gopi Apartment (All High Court) dated 1.5.2014 iii) CIT vs Shettys Pharmaceuticals & Biologicals Ltd. (AP High Court) I.I.T.A. No.662 of 2014 and batch dated 26.11.2014 iv) DCIT vs Aakash Arogya Mindir P. Ltd. (ITAT Delhi) (December 1st, 2014) v) ACIT vs Inlay Marketing Pvt. Ltd. (ITAT Delhi) (14.11.2014) 19. Ld. AR vehemently contended that the alleged document in question does not belong to the present asse .....

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s neither found from the possession of the assessee nor is in the handwriting of the assessee nor is executed by the assessee and not even originated from the computer of the present assessee and, therefore, so called sole document Annexure-1, does not belong to the assessee appellant. Ld. AR further pointed out that it is a settled legal position that the word belong to used in section 153C of the Act should be given a strict interpretation as per recent decision of Hon ble Jurisdictional High .....

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03-04 and 2004-05 and other cross appeals of the assessee and the revenue. 20. Ld. AR further contended that the authenticity and legal sanctity of the seized document Annexure 1 has not been proved and substantiated by the AO and mere loose sheet of paper without any corroboration does not constitute an admissible and acceptable evidence as per section 34 and 93 of the Indian Evidence Act 1872. Ld. AR has further drawn our attention to the observations of the CIT(A) at page 10 para 12.2 and sub .....

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action and in respect of alleged receipt of cash of ₹ 59,56,943 and for making enhancement of income of amount of pending rent amounting to ₹ 4,91,15,757 even though there was no such inquiry or investigation carried out neither by the AO nor by the CIT(A) in respect of such cash payments and sinking funds, maintenance security, freehold charges and commission and by the CIT(A) in respect of alleged refund of cash to the assessee and alleged receipt of pending rent by the assessee. 2 .....

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e CIT(A) which in itself creates and casts a reasonable doubt over the validity and correctness of the figures appearing in seized document Annexure A-1. Ld. AR further pointed out that in the statement of Lalit Modi available at Paper Book page no. 18 to 33, it is clear that Shri Lalit Modi has himself admitted that the seized Annexure A-1 is a proposal for future transaction as the date of seized Annexure is 18.5.2009 whereas the sale deed itself was executed on 13.5.2009 and as such, the same .....

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could not be acted upon and materialised therefore, no commission was earned by him i.e. Shri Lalit Modi, which also support the fact that no brokerage or commission was paid by the present assessee to Shri Lalit Modi. Ld. AR pointed out in these set of facts and circumstances no addition either u/s 69 or 69C of the Act can be made. 22. Ld. Counsel also pointed out that in the statement of Shri Lalit Modi recorded on 10.6.2009 before the CIT(A), Shri Modi made it clear that Annexure A-1 page 5 .....

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r and above the consideration reflected in the books of accounts of the assessee in this regard and from the income earned by the assessee from unaccounted sources. 23. Ld. AR reiterating its arguments submitted that the presumption u/s 132(4A) and 292C of the Act is misplaced as once it is admitted that the document is a proposal, then presumption of correctness of the figures mentioned therein is of no consequence considering the nature of document. Ld. AR strenuously pointed out that presumpt .....

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ugh noting or proposal cannot replace or dilute the evidentiary value of the registered sale deed and there is no document on record to show that anything over and above the amount mentioned in sale deed was paid by the assessee and the whole basis of the addition is based on surmises and conjectures which cannot be held as sustainable. Ld. AR vehemently contended that the sale consideration paid by the assessee for the property in question is well above tmore than 25% of the prevailing circle r .....

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controverted by the authorities below and even the allegation of cash payment over and above books of accounts has not been established by the AO and, therefore, the same shows that the figures appearing in the seized document Annexure A-1 are not true and correct and as such, the same are imaginary and hypothetical which cannot go beyond unmaterialised proposal and not supported by any corroborative evidence and as such, the same is unreliable and unsubstantiated being a proposal of property de .....

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mitted that there is no requirement of provisions of the Act to record satisfaction in the case of the person other than the person searched. Ld. DR further pointed out that the detail mentioned in the alleged Annexure A-1 seized during the search operation in the case of Shri Lalit Modi is from sale matching with the facts and figures recorded in the sale deed executed by M/s Suncity Project Ltd. in favour of present assessee, therefore, the AO was quite justified and right in making addition w .....

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he seller M/s Suncity Project Pvt. Ltd. by way of PDC i.e. post dated cheques and in addition to that and there was an excess payment of ₹ 59,56,943 by the assessee to the seller which was refunded to the assessee and therefore, addition of this amount was rightly made by the CIT(A) enhancing the assessment. 25.1 Ld. DR, supporting the enhancement of ₹ 4,91,15,757 on account of pending rent, also submitted that the property, which was purchased by the assessee, was already given on r .....

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for reassessment u/s 153C r/w section 143(3) of the Act as there was sufficient and valid ground to assume jurisdiction on the assessee on the basis of incriminating material Annexure A-1 seized during the search operation in the case of Shri Lalit Modi who facilitated the property deal and also signed the sale deed as attesting witness which also support this fact that the assessee paid commission of ₹ 65,70,747/- to Shri Lalit Modi over and above the payment recorded in the books of acco .....

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and order passed u/s 143(3)/153C of the Act are illegal, invalid and without jurisdiction as alleged recording of satisfaction by the CIT(A), CC-21, New Delhi (the AO of the person searched) was without any legal and factual basis. Ld. AR has drawn our attention towards paper book page no. 17 and submitted that the whole basis of recording of alleged satisfaction by the AO of the person searched and consequential assessment proceedings are illegal and invalid because the alleged seized document .....

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submitted that in the satisfaction note recorded by the AO of the person searched, there was nothing to indicate that the seized document Annexure A-1 did not belong to the person searched i.e. Shri Lalit Modi, secondly the said seized document, apparently a computer printout, seized during search operation on Shri Lalit Modi does not necessarily mean and imply that the same belongs to the person whose name is mentioned therein. Ld. AR also pointed out that unless it was established that the doc .....

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z. Lalit Modi. Furthermore, in this situation, the question of invoking section 153C of the Act would not arise and the AO of the person searched miserably failed to comply with the duty cast upon him to rebut the presumption that the document seized during the search operation upon Shri Lalit Modi does not belong to the person searched and the same actually belongs to the other person i.e. assessee of the present appeal Smt. Vinita Chaurasia. Ld. AR vehemently contended that merely because name .....

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umption of jurisdiction for issuing notice u/s 153C of the Act and framing reassessment u/s 143(3) r/w section 153C of the Act is not valid, bad in law and void ab initio. To support this proposition, ld. AR has placed reliance on the decision of Hon ble Andhra Pradesh High Court in the case of CIT vs Shettys Pharmaceuticals & Biologicals Ltd. in ITA No. 662 & 668 of 2014 dated 26.11.2014. Ld. AR has also placed reliance on the decision of Hon ble Jurisdictional High Court of Delhi in th .....

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. Ld. AR vehemently contended that it is a settled position of law that when a proceeding is to be done in one particular manner under the law or rules, then the same has to be done in that manner alone and not the other way. 28. Replying to the above, ld. DR contended that when the AO of the person searched and the AO of the other person is the same, then there is no need of recording two satisfaction notes viz. first in the case of person searched and second in the case of the person other tha .....

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hing contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such oth .....

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se of CIT vs Shettys Pharmaceuticals & Biologicals Ltd. (supra), the Hon ble Andhra Pradesh High Court held as under:- This appeal is sought to be preferred and admitted against the judgment and order of the learned Tribunal dt.28.S.2014 in relation to the assessment year 2009-2010 on the following suggested question of law. In the facts and circumstances of the case, whether the Honble Tribunal (ITAT) is correct in law in quashing the assessment framed under Section 153C of the Income Tax A .....

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have heard Sri B. Narasimha Sarma, learned counsel for the appellant Revenue and gone through the impugned judgment and order of the learned Tribunal. The learned Tribunal in this case did not accept the initiation of the action under Section 153C of the Income Tax Act, 1961 (hereinafter referred to as the Act). This action has to be taken against a third party in respect of the incriminating materials brought out in connection with search and seizure conducted on another party. Section 153C of .....

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the action. The argument apparently is very attractive, but the law is otherwise and the learned Tribunal has correctly applied. We therefore appropriately set out Section 153C of the Act. Assessment of income of any other person 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, Jewellery or other valuable article or thing or books of account or docume .....

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fied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub- section (1) of section 153A. (emphasis supplied) It is therefore clear that firstly satisfaction has to be recorded by the Assessing Officer who conducted search, that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisi .....

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n this connection we set out the text of the order of the Assessing Officer which is as follows. A search and seizure operation u/s. 132 was carried out in the group case of Dr. T. Yadhaiah Goud and others on 25.3.2010. During the course of search operation documents belonging to SHETTYPHARMACEUTICALS & BIOLOGICAL LTD., has been seized. Hence it is considered to initiate proceeding u/s. 153C of the I.T.Act. The aforesaid Section mandates recording of satisfaction of the Assessing Officer(s) .....

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r law this has to be done in that manner alone and not other way (See Nazir Ahmed v. King Emperor). We think the learned Tribunal has correctly followed the principle. We do not find any element of law to be decided." We accordingly dismiss the appeal. 31. In view of language used by the legislature in section 153C of the Act and the ratio laid down by Hon ble Andhra Pradesh High Court in the case of Shetty Pharmaceuticals (supra) in similar set of facts and circumstances, we note that firs .....

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the AO of the person searched shall record his satisfaction after examining the same independently without being prejudiced or influenced by the satisfaction of the AO of the person searched shall record his satisfaction that the books of accounts or documents or assets etc. seized or requisitioned have a bearing on the determination of total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A of the Act. Meaning thereby, section .....

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other than the person searched referred to in section 153A of the Act. The Hon ble High Court has further made it clear that this requirement does not dispense with only on the reason that the AO of the person searched and the other person is the same because when a thing is to be done in way particular manner under the law, this has to be done in that manner alone and not in any other way. In the present case, non-recording of satisfaction in relation to other person i.e. appellant assessee of .....

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nce of the ratio laid down by the jurisdictional High Court of Delhi in the case of Pepsico India Holdings Pvt. Ltd. vs ACIT (supra) wherein para 14, 15 and 16 at page 304 of the judgement lay down the ratio as follows:- 14. First of all we may point out, once again, that it is nobody s case that the Jaipuria Group had disclaimed these documents as belonging to them. Unless and until it is established that the documents do not belong to the searched person, the provisions of Section 153C of the .....

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searched person must be satisfied that the seized material (which includes documents) does not belong to the person referred to in Section 153A (i.e., the searched person). In the Satisfaction Note, which is the subject matter of these writ petitions, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group. This is even apart from the fact that, as we have noted above, there is no disclaimer on the part of the Jaipuria Group insofar as these documents a .....

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in question, whether they be photocopies or originals, do not belong to the searched person, the question of invoking Section 153C of the said Act does not arise. 16. Thirdly, we would also like to make it clear that the assessing officers should not confuse the expression belongs to with the expressions relates to or refers to . A registered sale deed, for example, belongs to the purchaser of the property although it obviously relates to‟ or refers to the vendor. In this example if the pu .....

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erence shares, unsigned leaves of cheque books and the copy of the supply and loan agreement - can be said to belong to the petitioner. 33. Turning to the facts of the present case, we note that it is not the case of the revenue that it is not the case of the revenue that the person searched Shri Lalit Modi had expressly disclaimed or disowned Annexure A1 as belonging to him. In view of ratio laid down by Hon ble Jurisdictional High Court in the case of Pepsico India Holdings Pvt. Ltd. vs ACIT ( .....

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r lordships speaking for Hon ble High Court of Delhi further held that it is necessary before the provisions of section 153C of the Act can be invoked that the AO of the searched person must be satisfied that the seized material, (which includes documents) does not belong to person searched and the impugned satisfaction note dated 30.6.2011, there is nothing to indicate that the seized document Annexure A-1 does not belong to Shri Lalit Modi and we also note that there is no disclaimer on the pa .....

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ection 153C of the Act and ratio laid down by Hon ble Jurisdictional High Court in the case of Pepsico India Holdings Pvt. Ltd. vs ACIT (supra), it is amply clear that the AO should not confuse the expression belonged to with the expression relates to or refers to . A document cannot be said that it belonged to the other person just because her name is mentioned in the document. 34.1 On the basis of foregoing discussion, we are inclined to hold that as per section 153C of the Act, the AO of the .....

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tice u/s 153C of the Act is issued, two steps have to be taken, viz. first step is that the AO of the person who is searched must arrive at a clear satisfaction that the impugned document seized from the person searched does not belong to him but to some other person and secondly after such satisfaction is arrived at by the AO of the person searched, then the document is required to be handed over the AO of the other person to whom such document belongs or belonged to . In the present case, howe .....

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nged to such person. In simple words, these provisions mandate that whenever a document is found from a person who is being searched by the revenue authorities, normal presumption would be that the said document belongs to that person. At the same time, we further note that it is for the AO of the person searched to rebut that presumption and come to a conclusion by way of recording a satisfaction note that the document, in fact, belongs or belonged to somebody else. Obviously, there must be som .....

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that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are WP(C) 415/2014 & Ors. Page 15 of 15 to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word satisfaction or the words I am satisfied in the order or the note would not meet the .....

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ition the very first step prior to the issuance of a notice under Section153C of the said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, the notices under Section 153C are liable to be quashed. It is ordered accordingly. 37. Turning to the facts of the present case, we note that the AO of the person searched Shri Lalit Modi recorded satisfaction on 30.6.2011. For the sake of clarity in our observations and findings, the same is reproduced below:- 30-06-2011 Sa .....

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een examined. After examining such seized material, I am satisfied that the following seized documents belong to persons other than Shri Lalit Modi. The detail of such paper is as under: Annexure No. Page No. of Annexure Brief description of documents Person to whom the document belongs Ann A-1/Party 2 5 These papers contain detail of transaction entered in by Smt. Vinita Chaurasia for acquisition of property at Vasant Square Mall. Smt. Vinita Chaurasia 2. 0n the basis of document found and seiz .....

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t of ₹ 19,02,68,2891- is required to be assessed in the hands of assessee as undisclosed investment on the basis of entries mentioned on seized documents. 3. In view of the facts stated above it is evident that documents belonging to the assessee have been seized from a person covered under search u/s 132 of the LT. Act,1961, Hence proceedings u/s 153 C are being initiated for AY 2004-05 to 2009-10. 37.1 In view of contents of the satisfaction note as reproduced hereinabove, we clearly not .....

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valid satisfaction was recorded by the AO of the other person so as to fulfil the requirement of second step of valid assumption of jurisdiction u/s 153C of the Act which is sine qua non for validly assumed jurisdiction u/s 153A of the Act. At the cost of repetition, we also hold that the satisfaction recorded by the AO of the person searched does not meet the legal requirement of first step of section 153C of the Act. To support these conclusions, we respectfully follow the decision of Hon ble .....

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o. 2 (i) to (iii), 3(i) to 3(iii) & 4(i) to (iii) of assessee in ITA No. 3343/D/2013 & ground no. 4 of the revenue in ITA No. 3551/Del/2013 38. Apropos these grounds, ld. AR submitted that without prejudice to the legal objections of the assessee, even on merits, the additions made by the assessee, even on merits, the additions made by the assessee on account of disallowance of freehold charges, payment of sinking fund, maintenance security and payment of commission have been deleted by .....

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strongly pointed out that the only document picked up by the AO for making additions u/s 153C of the Act does not bear any signature of the present assessee or the person searched or anybody else and merely because the name of the present assessee has been mentioned therein and some details in regard to property purchased by the assessee is mentioned therein does not allow the revenue authorities to make additions u/s 69C or any other provision of the Act. 38.1 Ld. AR has further drawn our atten .....

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ssessee. Ld. AR submitted that when the amount of sinking fund, maintenance security and freehold charges was not found to be paid either by cheque or in cash by the assessee, by the CIT(A) while passing the impugned order, then other contents of the document cannot be accepted as gospel truth. Ld. AR further pointed out that at the bottom of Annexure A-1 right side commission on sale @2% is mentioned and at the extremely right side, the words to pay ex facie make it clear that no payment had be .....

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f commission on brokerage by the present assessee payer cannot be held as established and sustainable in facts and in law. 39. Ld. AR reiterating his earlier arguments further pointed out that as per the AO, the assessee had accounted an amount of ₹ 16.42 crore in the books of accounts which was paid by way of cheque and similar amount of payment was made over and above, what is accounted in her books of accounts, out of income from unaccounted sources. Ld. AR has further drawn our attenti .....

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. AR pointed out that if the PDC value is given a meaning of post dated cheque , then the AO and the CIT(A) were duty bound to bring out any allegation, material, evidence or fact to substantiate that the assessee made payment by way of PDC or in cash over and above the entries which were recorded in her books of accounts in regard to purchase of property. Ld. AR strongly pointed out that, in absence of such allegation or material, only on the basis of stand alone document Annexure A-1 which is .....

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pointed out that admittedly, the assessee purchased said property in the month of May 2008 pertaining to AY 2009-10, then without any other incriminating document, evidence or material, it cannot be held that the assessee received pending rent from 1.10.2006 to 30.4.2009 amounting to ₹ 8,91,15,747, therefore, enhancement of income of the assessee for AY 2010- 11 by ₹ 4,91,15,757 and enhancement of income by ₹ 4 crore in AY 2009-10 as directed by the CIT(A) in para 15 of the im .....

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Atul Kumar Jain vs DCIT (1999) 64 TTJ (Del) 786 ii) CIT vs Girish Chaudhary (2008) 296 ITR 619 (Del) iii) CIT vs Anil Bhalla (2010) 322 ITR 191 (Del) iv) CIT vs Atam Valves (P) Ltd. 184 Taxman 6 (P&H) v) ACIT vs Satya Pal Wassan (2007) 295 ITR (AT) 352 (Jabalpur) 42. Replying to the above, ld. DR supporting the action of the AO and the CIT(A) submitted that as per Annexure A-1, the assessee actually paid ₹ 17,02,25,465 over and above the amount which was recorded in her books of accoun .....

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ssessee in financial year 2008-09 pertaining to FY 2009- 10 and the CIT(A) was quite justified in directing the AO to make addition in this regard in the relevant assessment year. Ld. DR further pointed out that the balance amount of ₹ 4,91,15,757 has been revealed as an obligation of Suncity Project Pvt. Ltd. as to pay to the assessee, therefore, the same was added to the income of present assessment year under consideration in this appeal. 42.1 Supporting the order of enhancement, the ld .....

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yment of commission amounting to ₹ 65,70,747 to Shri Lalit Modi and the AO of the searched person had also made similar addition in the hands of Shri Lalit Modi as income earned from commission or brokerage. However, the ld. DR fairly accepted that the additions made in the hands of Shri Lalit Modi (the person searched) has been deleted by the respective CIT of person searched, but the DR, at the same time, also pointed out that the revenue has filed an appeal before the Tribunal challengi .....

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nce of Shri Lalit Modi which clearly reveals that the seized paper is the record of full and final settlement as on 18.5.2009 of all the transactions by cheque and in cash between purchaser assessee and seller Suncity Project Pvt. Ltd. and also between the purchaser assessee and broker Shri Lalit Modi. Ld. DR supporting the action of the CIT(A) submitted that the CIT(A) was not justified in enhancing the assessment by the amount of excess payment made by the assessee to M/s Suncity Project Pvt. .....

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ntentions of both the sides, at the very outset, we note that admittedly, the sole impugned document Annexure A-1(which we are enclosing here with this order as Annexure A-1) for the sake of clarity in our findings was seized during search and seizure operation held on 19.06.2009 at the premises of Shri Lalit Modi. We further note that the AO picked up document Annexure A-1 and held that the assessee Smt. Vinita Chaurasia has made payment in regard to purchase of property at Vasant Square Mall f .....

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from unaccounted sources. 44.1 At this stage, it is pertinent to mention that the additions made by the AO in regard to sinking fund, maintenance security and freehold charges has been deleted by the CIT(A) by passing the impugned order. It is also pertinent to mention that the CIT(A) while deleting the amount of freehold charges held that the property continues to be leasehold and there was no payment of freehold charges, therefore, addition is not found to be sustainable. In para 12.2.2 of th .....

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smissed by the Tribunal confirming the deletion of additions made by the AO. 45. From vigilant reading and careful perusal of Annexure A-1, we observe that this document appears to be a computer generated document which does not bear any signature or handwritten contents. On the top portion, there is detail of property in Vasant Square Mall in the name of present assessee Smt. Vinita Chaurasia in regard to area of 39651.06 sq ft. Down below there is a mention of value Ch value of ₹ 16,42,6 .....

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to hold that the additions made by the AO and enhanced by the AO are based only on the sole document i.e. Annexure A-1 and the AO and the CIT(A) has not brought out any allegation or material to show that the assessee made over and above payment either in cash or by cheque by using a specific modus operandi. 45.1 Ld. AR has drawn our attention towards paper book page no. 129 to 140 of the assessee and submitted that the assessee has filed cheque counterfoils for the relevant year period before .....

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have not found any other incriminating document, material or evidence which could support the fact that the assessee made over and above payment of ₹ 17.02 crore to the seller and made payment of ₹ 65,70,747 as brokerage and commission to Shri Lalit Modi over and above the books of accounts out of the income earned from her unaccounted sources, either by cheque or in cash. Admittedly, the additions made by the AO and enhancement made by the CIT(A) had been made only on the basis of .....

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under:- It would be relevant to mention that the land in reference has never been registered or transferred in the name of the assessee. The document relied upon is unsigned. The other party of the document Mrs. Jind was examined and she denied to have received any cash amount of ₹ 1 crore from the assessee. The AO has also not brought out any material on record to prove the transfer of ₹ 1 crore by the assessee to Jind particularly when both have denied the transfer and also the pur .....

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ment order that the addition was made on the basis of assumption. Therefore in my considered opinion the addition made by the AO on this ground is not tenable and therefore, the appeal of the appellant is allowed and the AO has been directed to delete the addition of ₹ 1 crore made on this account. 5. The Income Tax Appellate Tribunal also examined this issue once again and came to the conclusion that as the transaction itself never took place, there would be no question of investment and, .....

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nal are as under:- 5. On due consideration of the above facts, we are of the opinion that the Assessing Officer has given unnecessary weightage to the copy of MoU. The factum of transfer of a capital asset by Mrs Jind Singh in favour of the assessee was not established. The case of the assessee is that he has not purchased any land. The alleged MoU is a document exhibiting the negotiation of the purchase of land, but it never materialized. The Assessing Officer has erroneously observed that it i .....

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earned First Appellate Authority has rightly considered this aspect and deleted the addition. 6. After having heard the counsel for the parties on this issue of the deletion of the addition of ₹ 1 crore on account of the alleged unexplained investment, we are of the view that the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal have deleted the said addition on examination of facts. In our view, no question of law arises for our consideration. The facts, as establ .....

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e facts of the case and submissions made before us. The facts are that in the course of search of the residence of the assessee a computer print out was found, which shows receipts in respect of sale of some immovable property and payments made in respect of some immovable property. The receipts exceed the expenditure by an amount of ₹ 13,900/-. The paper does not contain any name, the dates of transaction, details of bank or the descriptions of the property. The AO has ignored the receipt .....

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in the course of search, it may be presumed that such document belongs to him and its contents are true. It is a rebuttable presumption and, in fact, it is for the courts to make such a presumption or not. Even if such a presumption is raised in this case, the same has been rebutted by the assessee on the date of search itself when it was stated that the paper does not belong to him or his family member or that they never dealt in such a property. Nothing further has been done by the revenue to .....

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of investment made may be deemed to be the income of the financial year. As already held in the case of Chiraayu Estate & Development Pvt. Ltd. (supra), the burden is on the revenue to show that the assessee has made an investment. Thereafter, the investment has to be related to a financial year. The course of events show that revenue has not proved that investment in the immovable property was made by the assessee. The year in which the investment was made is also not discernible from the d .....

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l Bhalla (supra), CIT vs Dinesh Jain (HUF) 211 Taxman 23 (Del) and CIT vs Jaipal Aggarwal 212 Taxman 1 (Del), ITAT Mumbai in the case of ACIT vs. JP Morgan India Pvt. Ltd. 46 SOT 250(Mumbai), held that the addition made by the AO based on the loose paper, which is not a conclusive evidence and therefore, the same is not sufficient for making the addition. The Tribunal also held that no addition can be made on the basis of dumb document/notebook/loose slips in absence of any other material to sho .....

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CIT(A) in the impugned order "except relying , the notings in the loose slips, no attempt has been made to corroborate the notings with independent evidence. The parties to the 'transaction particularly the vendor has not examined. In every transaction there is a circle concerning two parties. It is not known whether the vendor has disclosed the consideration as noted in the diary. Therefore, merely on the basis of presumption and some corroborated notings additions cannot be made." .....

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jects were undertaken by it, and upheld the deletion of the impugned addition under s. 69C, findings arrived at by the Tribunal are pure findings of facts and the same do not warrant any interference. 2. ACIT Vs. J.P. Morgan India (P) Ltd. [2011] 46 SOT 250 (Mum.) 3. CIT Vs. Dinesh Jain HUF [2012] 211 Taxman 23 (Delhi) 4. CIT Vs. Jaipal Aggarwal [2013] 212 Taxman 1 (Delhi)- wherein it was held that Dumb documents seized, i.e. from which nothing could be clearly understood, cannot form a justifie .....

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y/loose sheets are required to be supported/corroborated by other evidence and should also include the statement of a person who admittedly is a party to the noting and statement from all the persons whose names there on the note book/loose slips and their statements to be recorded and then such statement undoubtedly should be confronted to the assessee and he has to be allowed to cross examine the parties. The vendor has not examined in this case. Therefore, we do not find any infirmity in the .....

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independent material or evidence had been brought on record by the AO to establish that the notings/jottings recorded on the loose sheet or paper represented an unaccounted transaction, then the explanation of the assessee should be accepted. Ld. AR also pointed out that in this situation, the Tribunal was right in holding that the loose sheet or document does not represent any investment or expenditure over and above the books of accounts of the assessee out of income alleged to be earned from .....

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ot entitle them to make a pures guess work and base an assessment entirely upon it without any reference to any material or evidence at all. The relevant observations of the Hon ble High Court read as follows:- 10. In the judgment reported as CIT Vs. Girish Chaudhary (2008) 296 ITR 619 (Delhi), the Division Bench, which was called upon to decide the correctness of an addition made on the basis of a numeric entry in the document which led to addition of ₹ 48 lakhs, held as follows: "12 .....

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closed income on the basis of seized material. 14. The above being the position, no fault can be found with the view taken by the Tribunal. Thus, the order of the Tribunal does not give rise to a question of law, much less a substantial question of law, to fall within the limited purview of Section 260- A of the Act, which is confined to entertaining only such appeals against the order which involves a substantial question of law. 15. Accordingly, the present appeal filed by the Revenue is, here .....

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the documents were 'dumb documents' which did not contain full details about the dates of payment and its contents were not corroborated by any material and could not be relied upon and made the basis of addition. The Tribunal considered this aspect and observed that on comparison of the seized documents and ledger accounts of the parties, the seized documents could not be regarded as 'dumb documents'. 12. While dismissing the appeal, the Apex Court held: That the Tribunal had co .....

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restingly the ruling of the Supreme Court in Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) was relied upon. The Supreme Court held that even though Income Tax Authorities including the Assessing Officer has unfettered discretion and not strictly bound by the rules and pleadings as well as materials on record and is legitimately entitled to act on the material which may not be accepted as evidence, nevertheless such discretion does not entitle them to make a pure guess and base an as .....

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ourt's opinion is inapt because in that case there was other corroborative material for the income tax authorities to link the description of the transactions found in ITA No.66-69/2014 & 75-77/2014 Page 10 the said innocuous document seized with respect to other material. However, such inference cannot be drawn in this case because there is no other material. On the contrary the AO's acceptance and finalization of the assessment for 2007-08 on the basis of salary income of the asses .....

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ng the pendency of appellate proceedings, the affidavit relied upon by the assessee in Brij Bhushan Gupta was not adversely commented upon. This being a factual finding the Court finds no reason to interfere with the ITAT's order. 15. That leaves the Court with the addition initially made by the AO for the sum of ₹ 3.64 crores. Here too the addition was made only on the basis of some loose papers and a chit. This too would fall in the same category of material which could not have been .....

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books of account or other documents or any assets are requisitioned u/s. 132A, the Assessing Officer after issue of a notice to furnish income of the assessee in respect of each assessment year falling within 6 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition made, the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such 6 assessment years immediately .....

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e Act without any proper material. The AO shall have the basis for assuming that the expenditure incurred by the assessee is out of undisclosed income. It is not permissible to assess the undisclosed income in the absence of any other evidence on arbitrary basis. The unsubstantiated loose sheets cannot be considered as a conclusive evidence to make any addition towards undisclosed income. It was held by the Supreme Court in the case of CBI vs. V.C. Shukla (1998) 3 SCC 410 that "file contain .....

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me to conclude that there is undisclosed income in these 6 assessment years. In our opinion, the document recovered during the course of search was a dumb document and led nowhere. The CIT(A) rightly came to the conclusion that it cannot be acted upon and deleted the addition. 29. Other than the loose paper, the AO has not brought on record any corroborative material or evidence to show that the inference made by him is correct. The CIT(A) after taking the totality of the circumstances into cons .....

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le person properly informed in law. Applying this test, it could not be said that the decision recorded by the CIT(A) one which could not have been arrived at by a reasonable person properly informed in law considering the state of evidence on record. Hence, in our considered opinion, the CIT(A) has reached a correct conclusion in deleting the addition made by the AO on the basis of loose sheets. (Emphasis supplied by underlining) 51. We also find it appropriate to consider the ratio of the judg .....

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ock assessment. Ld. DR also pointed out that while document Annexure A-1 clearly belongs to the present assessee, the addition made on the basis of the same should be held as valid and sustainable. On these contentions of the revenue, ld. AR strenuously contended that the facts of that case are clearly distinguishable from the facts of the present case as there were seized documents which had been written by the partner in his own handwriting and all the entries regarding various properties have .....

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perusal of the judgment of Hon ble Delhi High Court in the case of CIT vs Sonal Construction, we note that the benefit of the ratio of the decision is not available for the revenue as the facts of the present case are clearly distinguishable because the impugned document viz. Annexure A-1 has not been either written or signed by the present assessee or by the person searched from whom the same was alleged to be seized during search and seizure operation u/s 132 of the Act. 52. Ld. AR has also t .....

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ed by the AO is a printed document which has not been written or signed either by the present assessee (other person) or Shri Lalit Modi (person searched). 53. Ld. AR has also placed reliance on the decision of ITAT Jabalpur in the case of ACIT vs Satyapal Wassan (supra) wherein elucidating and elaborating the same issue the Coordinate Bench of the Tribunal held as under:- The crux of these decisions is that a document found during the course of search must be a speaking one and without any seco .....

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tive is that addition could be considered under section 68. In our considered view, this submission is misplaced. In fact it does not arise from the order of the Assessing Officer. He has only made addition under section 69 for the undisclosed advances given by the assessee. The question of treating them as cash credits is only an afterthought. The Department is not sure as to whether the alleged entries are payments or receipts. If the Department itself is vacillating and two interpretations ar .....

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operation or during investigation or during assessment or reassessment poceedings. It was further held that the document should be clear and unambiguous in respect of all four components of charge of tax and if the document is not so, then the document is only a dumb document and no charge of tax can be levied on the assessee on the basis of a dumb document. 55. On behalf of the assessee, the support has also been sought from the ratio of the judgment of Hon ble Punjab & Haryana High Court i .....

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j Jain as well as Director of the assessee explained the position as to how the slips had been written and the stand of the assessee was that the same did not represent payment of wages during the year in question but were for the earlier year. However, the Assessing Officer did not accept the explanation and made an addition. The CIT(A) as well as the Tribunal partly set aside the addition. It was held that even though explanation of the assessee that the loose papers did not relate to payment .....

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aking a sustainable and justified addition. On this issue, ld. AR has also taken us through the order of ITAT Delhi E Bench in the case of Atul Kumar Jain vs DCIT (supra) wherein it was held that the seized papers have being not corroborated by any independent evidence cannot be considered as a reliable document or acceptable piece of evidence as a proof of investment in the house property and therefore, these kind of documents/papers are liable to be ignored and addition made on the basis of su .....

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was further held that the document recovered during the course of search from the assessee was held to be dumb document and the addition on the basis of the same is not sustainable. 58. Turning to the factual matrix of the present case, if we logically analyse the contents of the document and its reliability in the light of ratio laid down by the Hon ble High Court and Coordinate Bench of the Tribunal, we note that it is not in dispute that the seized document was recovered during search and sei .....

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been deleted by the CIT(A) vide order dated 28.10.2013 and the revenue has disputed the said deletion by way of file appeal no. 329/Del/2014 is also being disposed of by this order. 58.1 It is also pertinent to note that on the basis of the same seized document Annexure A-1, the AO made certain additions and during first appellate proceedings, the CIT(A) has deleted the additions made on account of freehold charges, sinking fund and maintenance security against the present assessee Smt. Vinita C .....

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the additions made by the AO of the present assessee i.e. other person, on account of payment of freehold charges, maintenance security, signature found and commission has been directed to be deleted by the CIT(A) by passing the order in question in this appeal. We may further point out that the addition made by the AO in the case of present assessee Smt. Vinita Chaurasia on account of payment of freehold charges, payment of sinking fund, maintenance, security and commission have not been found .....

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he allegation of over and above payment of commission of brokerage by the present assessee (payer) to Shri Lalit Modi (payee) has not been found to be sustainable on fact and law by the respective first appellate authorities i.e. CIT(A). 59. The fact remains that the CIT(A) has upheld the addition of ₹ 16,42,68,522 as alleged cash component of the sale consideration and the CIT(A) has also enhanced the taxable income of the present assessee by an amount of ₹ 59,56,943/- by holding th .....

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nt perusal of Annexure A-1 available at page 16 of assessee s paper book, we observe that first part of the document contains name of present assessee Smt. Vinita Chaurasia and detail of property purchased by the assessee and total cost has been mentioned as ₹ 32,85,37,354 @8285.71 per sq ft. Challenging these contents, ld. AR has drawn our attention towards para no. 7 of the impugned order and submitted that the CIT(A) noticed this fact that as per circle rate, the value of the property p .....

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d property. To support this contention, the AR has placed reliance on various judgments and orders of Hon ble Supreme Court and various High Courts including decision of Hon ble Supreme Court in the case of Kishan Chand vs CIT 125 ITR 715 (SC) and order of Hon ble Allahabad High Court in the case of CIT vs Rajpal 149 Taxman 32 (All). Now, the onus was on the AO to bring out any fact, evidence, material or any other corroborative evidence to support this contention that the assessee actually paid .....

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me of purchase transaction. 61. In the present case, addition made by the AO pertaining to unexplained investment falls within section 69 of the Act and addition pertaining to payment of commission/brokerage falls within the ambit of section 69 of the Act. It is apt to analyse section 69 and 69C of the Act which can be applicable provisions in the facts and circumstances of the present case. For the sake convenience, section 69 and 69C of the Act are being reproduced below:- Section 69 Unexplain .....

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. - 69C. 2 Unexplained expenditure, etc. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the 3 Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year.] Provided that, notwithstanding anything contained .....

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by him is not, in the opinion of the AO, satisfactory, then value of the said investment may be deemed to be income of the assessee of such financial year. On plain reading of section 69C of the Act following key features or elements are noticeable:- i) That there is an expenditure; ii) Which is actually incurred by the assessee during the financial period under consideration; iii) The same is unaccounted; and, iv) There is no satisfactory explanation provided by the assessee for the same or the .....

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above conditions are required to be satisfied on factual and actual basis and even presumption u/s 132(4A) and section 292C of the Act cannot be imported to section 69 or section 69C of the Act for making valid and legally sustainable additions. 64. On logical analysis of facts and circumstances of the present case, it is relevant to consider the contents of the impugned document Annexure A-1 and reliability and acceptability of the contents in the light of allegations of the AO, the conclusion .....

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ed the additions by holding that the addition made by the AO on the basis of presumption u/s 132(4A) of the Act by stating that it is burden of the assessee to prove that the contents of the documents are not true and correct. The CIT(A) further held that the AO had completely ignored and not considered the confirmation of the purchaser Smt. Vinita Chaurasia (other person) filed in this regard that the said deal did not mature through the assessee of that case i.e. person searched Shri Lalit Mod .....

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nexure A-1, page 5 to 8 are rough planning and on page 5, proposal from Vasant Kunj Square Mall for sale was received and the deal did not materialise through him. The relevant part of said question answer verbatim reads as under:- Q: 25. I am showing you page no. 5 to 8 of Annexure A-1, please explain the contents. Ans: Pages no. 5 to 8 are rough planning on page 5 proposal from Vasant Square Mall for sale was received and the deal did not materialise through me. 66. We further note that subseq .....

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al got materialised. The relevant question answer verbatim reads as under:- Q3. During the course of search proceedings at your residence at L-48, Lajpat Nagar -11, New Delhi, loose papers were found and seized vide annexure A-l. I am showing you page No. 5 of the said Annexure A-1. Kindly explain the transactions mentioned in it. Ans. The Chaurasia family is known to me. At the time of execution of sale deed in favour of Mrs. Vinita Chaurasia by M/s Suncity Projects Ltd. in respect of commercia .....

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ercial space at Vasant Square Mali, I telephoned her and got the details of cost etc. of her commercial space in Vasant Square Mall and told these facts to the said brokers. After few days, the broker came to my residence and delivered a proposal, which is nothing but the same document shown to me as page No. 5 of Annexure A-1. The said proposal remained with me and before the same could be forwarded to Mrs. Vinita Chaurasia, a search and seizure operation by the Income Tax Department at my resi .....

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on/certificate (available at page 126 of assessee s paper book) given by Shri Lalit Modi has again repeated the very fact that the document in question viz. Annexure A-1, contains a draft proposal presumably by a broker who might have left this paper in his premise and the said document was not prepared by him. Shri Lalit Modi expressly denied that the said document in question does not represent any transaction of purchase of property by Smt. Vinita Chaurasia from M/s Suncity Project (P) Ltd. S .....

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facts, we further observe that the payment of commission on sale @2% has been categorically denied by the other person i.e. present assessee payer. In the case of broker Shri Lalit Modi, the person searched, the CIT(A) has deleted the addition on account of receipt of alleged commission on brokerage and the same was not found to be sustainable and in accordance with law. Under above noted facts and circumstances, we are unable to see any corroborative material, evidence, details or any other sup .....

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id by the purchaser assessee of the present case to the alleged broker Shri Lalit Modi the person searched till date of preparation of document in question Annexure A-1. We are also inclined to accepted contentions of the ld. AR that the person searched i.e. Shri Lalit Modi never disowned or declined the said Annexure A-1 and never stated at any point of time that the said document belongs to the present assessee. 68.1 At this stage of adjudication, we find it necessary to continue further with .....

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n 292C of the Act for making presumption against the assessee on the basis of document in question Annexure A-1 as the presumption can be made only against the person from whom such document was seized during search operation. 68.2 Apropos ground No. 4 of the Revenue, the ld. DR submitted that the CIT(A) was not correct in deleting the addition made by the AO on account of disallowance of commission. The ld. AR replied that as per relevant para 12.4 of the impugned order, the CIT(A) has not dele .....

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while addressing the issue, which is clear from para 12.4 of the impugned order. Ld. AR pointed out that the brokerage or commission paid towards purchase of immovable assets is capital expenditure which cannot be deducted. Ld. AR pointed out that the brokerage or commission paid towards purchase of immovable assets is capital expenditure which cannot be deducted. Ld. AR further pointed out that when in the case of person searched, then the conclusion of the CIT(A) in the case of present assess .....

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Ltd, the said document in question is not admissible and attributed to the assessee for making presumption u/s 292C of the Act. 68.3 On careful consideration of above, we note that the person searched has never stated that the document in question belongs to the present assessee. Admittedly, the document in question Annexure A-1 was seized from the possession of person searched i.e. Shri Lalit Modi but from his statement recorded during search and seizure operation on 19.6.2009 u/s 132(4) of th .....

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the present assessee cannot be taken u/s 132(4A) of the Act and section 292 C of the Act. 68.4 On vigilant reading of operative part of the impugned order, as reproduced in para 13 of this order (supra), we note that the CIT(A) has held that presence of the seized paper gives detailed working of the cheque and cash component of the property deal involving the present assessee is not an imaginary or fanciful draft and it is a reasonable presumption u/s 292C of the Act against the present assessee .....

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made the deduction for the same as brokerage paid to Shri Lalit Modi. The presumption and inference taken by the CIT(A) u/s 292C of the Act against the present assessee is not valid as before taking such presumption, the CIT(A) was under obligation to hold that the document in question actually and factually does not belong to the person searched and the same belongs to the other person viz. present assessee. As we have already noted that the person searched never stated that the document in qu .....

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rder are also not in accordance with provisions of the Act and law. We may further point out that in the case of person searched, who was alleged to be a broker in the deal being recipient of alleged commission, the CIT(A) herself has deleted the addition on account of receipt of unaccounted commission, hence, addition and consequent deduction in this regard in the case of alleged payer, i.e. the present assessee on the basis of invalid presumption cannot be held as sustainable. Therefore, obser .....

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on the issue of pending rent but the CIT(A) has enhanced the assessment on this issue by the said amounts in respective AY 2010-11 and also in earlier AY 2009-10. The facts of this issue have been dealt in detail in the earlier part of this order and on chronological analysis of the same, we note that the sale deed for the property purchased by the present assessee was executed and registered on 13.5.2009 during AY 2010-11 and this fact has not been controverted or dislodged either by the AO or .....

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57 was an obligation of seller Suncity Project Pvt. Ltd. to pay to the assessee, therefore, the same amount was added to the income of the assessee for AY 2010-11. 70. From vigilant reading of the impugned order of the CIT(A) we note that except contents of document Annexure A-1, the CIT(A) had no other incriminating material, evidence, detail, or any supporting leg to establish this fact that the assessee had actually received an amount of ₹ 8,91,15,757/- on account of pending rent for th .....

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osed addition pertain to alleged pending rent for the period 1.10.2006 to 31.4.2009, whereas the property was purchased by the assessee in May 2009, therefore, there is no question of making addition on said amount. 71. Ld. DR on this issue supported the action of the CIT(A) and contended that there was an undisclosed arrangement between the present assessee (purchaser) with M/s Suncity Project Ltd. (seller) for payment of pending rent to the assessee, therefore, the enhancement was quite justif .....

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nt amounting to ₹ 4 crore in AY 2009-10 and for the remaining amount of ₹ 4,91,15,757 in AY 2010-11. However, it is relevant to mention that as per general human probability and mental level of a man of ordinary prudence, it cannot be accepted that while a property is being sold at approximately 25% higher rate as compared to circle rate and registered sale deed is executed for the consideration of ₹ 16,42,68,832 then how come said seller may be agreed to transfer an amount of .....

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d appropriate inquiry in this regard and in absence of the same the enhancement of income for the year under consideration and also in the previous AY 2009-10 cannot be held as valid, sustainable and in accordance with law. 73. The next issue for our consideration remains the addition made by the AO on account of second part of document in question wherein the amount of ₹ 16,42,68,832 has been mentioned towards ch. value undisputedly the same amount has been shown and reflected in the sale .....

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ed. The AO made addition of ₹ 16,42,68,522 by holding that the said amount was made over and above the sale consideration which was recorded and reflected in the books of accounts of the assessee. During first appellate proceedings, the CIT(A) not only accepted and upheld the conclusion of the AO but also added that the assessee had actually paid ₹ 17.02 crore which resulted in excess payment of ₹ 59,56,943 which was reflected in the document in question to refund and she also .....

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iture, the onus is on the AO and other competent revenue authorities to establish that there was an amount of investment or expenditure; which was actually invested or incurred by the assessee during the financial year under consideration; the same was unaccounted and not reflected in the books of accounts of the assessee and there was no satisfactory explanation provided by the assessee for the same or the explanation advanced or offered by the assessee has not been found to be satisfactory by .....

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s not made any investment or expenditure during the financial period under consideration which was unaccounted in the books of accounts of the assessee out of income or receipts from unaccounted and undisclosed sources. 76. In the present case, the AO and the CIT(A) has solely relied on the document in question i.e. Annexure A-1 for making addition of ₹ 16,42,68,522 perhaps u/s 69 of the Act and the CIT(A) also enhanced the assessment by ₹ 59,56,943 perhaps u/s 69C of the Act only on .....

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e same amount to the present assessee. 77. Since we have already observed that the other contents of the document pertaining to payment of sinking fund, maintenance security, freehold charges by the assessee and income accruing from receipt of pending rent from 1.10.2006 to 31.10.2009 have not been found to be sustainable and in accordance with law. The addition made by the AO of the broker Shri Lalit Modi (searched person) has been deleted by the CIT(A) during first appellate proceedings. There .....

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charged, it could not be concluded that an unexplained investment had been made by the assessee to attract addition u/s 69 of the Act. The Hon ble High Court further upheld the observations of the Tribunal that AO ought to have established that the alleged land was purchased by the assessee and he failed to disclose the source of such purchase. In the present case undisputedly, the investment reflected in the sale deed has been recorded in the books of accounts of the assessee which is admittedl .....

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e. 79. We further observe that although the revenue authorities including AO has unfettered discretion and not strictly bound by the rules and provisions of the Evidence Act 1872 and Civil Procedure Code as well as material and evidence on record and they are legally empowered to take action on the material which may not be accepted as an evidence under Evidence Act 1872, nevertheless, such discretion does not provide them to act as a monarchy and does not entitle them to make a pure guesswork a .....

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the basis of dumb document/note/book/loose slips in absence of any other corroborative or supportive material to show that the assessee had made investment. It was also held that noting on the notebook etc. are required to be supported/corroborated by the other evidence and should also include the statement of a person who admittedly is the party to the noting and statement of all the related persons, then such statement should be confronted to the assessee and he should be allowed to cross-exa .....

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d fall in the same category of material which could not have been the sole basis for addition without some surveillance of the substantiation. In this judgment, their lordships referring to its own judgement in the case of CIT vs Kulwant Rai (supra) and judgment of Hon ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. vs CIT (supra) noted that the income tax authorities including the AO enjoy unfettered discretion but the same should be used judiciously and such discretion does not e .....

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be applied was whether on the facts found and the state of evidence on record, the conclusion arrived at by the CIT(A) was one which could be arrived by a reasonable person properly informed in law. The Tribunal also made it clear that the document recovered during the course of search which was a dumb document, then the same cannot be the sole basis for making additions. 82. Ld. AR has also placed reliance on the decision of ITAT Jabalpur in the case of ACIT vs Satya Pal Wassan (supra) wherein .....

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ase, as we have already noted that except issue of over and above payment of ₹ 17,02,25,465, the additions made in the hands of present assessee Smt. Vinita Chaursia on account of over and above payment of sinking fund, maintenance charges, freehold charges have not been found to be sustainable by the CIT(A). In the case of alleged broker Shri Lalit Modi, the CIT(A) of searched person has also held that the addition made by the AO of the person searched on account of receipt of commission .....

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other supportive or incriminating material or evidence or detail except stand alone document in question Annexure A-1. 83. On careful consideration of entire material placed before us, inter alia assessment order and appellate order passed in the cases of person searched and the other person, we are unable to see any effort of making any further investigation or inquiry by the respective assessing officers on this issue and they simply proceeded to make additions in the respective hands of perso .....

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ther investigation or enquiry from other related entities, addition made by the AO and enhanced by the CIT(A) cannot be held as valid and legally sustainable and we are unable to accept and uphold the same. Accordingly, ground no. 2(i) to (vi), 3(i) to (iv) and 4(i) to (iii) of the assessee are hereby allowed and the AO is directed to delete the impugned additions on account of unexplained investment, expenditure and receipt of pending rent for AY 2010-11. We further hold that under above noted .....

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o. 4 of the revenue in ITA No. 3551/Del/2013 also gets conclusion and we hold that the present assessee Smt. Vinita Chaurasia has not made any payment on account of commission or brokerage to Shri Lalit Modi or anybody else as the deal was materialised directly with the seller M/s Suncity Project Pvt. Ltd. and there was no occasion or question for payment of commission or brokerage to Shri Lalit Modi or anybody else by the assessee. Hence, ground no. 4 of the revenue in ITA No. 3551/Del/2013 bei .....

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Commissioner of Income Tax (Appeals) has erred in law and on facts in deleting an addition on account of undisclosed income on sale of jewellery of ₹ 40,00,000/-. 3. The Commissioner of Income Tax (Appeals) has erred in law and on facts in deleting an addition of ₹ 6,81,298/- on account of disallowance u/s 14A of the I.T. Act. 87. Briefly stated the facts giving rise to this appeal are that the assessee filed a return on 20.11.2010 u/s 139(1) of the Income Tax Act, 19061 (for short t .....

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closed income on sale of jewellery and disallowance u/s 14A of the Act and the assessment was finalised at net taxable income of ₹ 63,21,14,871/- as against the aforesaid returned income. The aggrieved assessee preferred an appeal before the CIT(A) which was allowed on all three issues by deleting the additions made by the AO. Now, the aggrieved revenue is before this Tribunal in this second appeal with the grounds as reproduced hereinabove. Ground No.1 88. Apropos ground no. 1, ld. DR sup .....

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able property transaction, the commission is always paid or received and the documents seized during search operation clearly show the quantum of commission and in the case of Smt. Vinita Chaurasia, the said property was duly found accounted for, therefore, the contentions of the assessee are not acceptable. Ld. DR also pointed out that u/s 132(4A) of the Act, the burden is on the assessee to prove that the contents of the document are not true and when the property transaction has actually take .....

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as never received by the assessee because the deal was never materialised through the assessee. Ld. AR reiterating its arguments before the CIT(A) further contended that the assessee filed a confirmation of Smt. Vinita Chaurasia having denied paying any commission to the assessee as the property deal did not materialise through the assessee. 90. Ld. AR vehemently contended that the AO was not justified to make addition on account of alleged commission, on the basis of document of proposal which .....

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done through the assessee i.e. Mr. Lalit Modi and no commission was paid to any broker as it was a direct deal of property. Ld. AR also pointed out that in the seized sole document, there was no mention of the fact that the said deal had matured through the assessee and the base document was simply a recording of the proposal which did not bring any commission or income for the assessee as the deal was not materialised through the assessee. Ld. AR also pointed out that when the assessee had disc .....

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which was rightly deleted by the CIT(A). 91. On careful consideration of above submissions, we note that the AO made addition on the basis of Annexure A-1 which is available at page 16 of the Paper Book of the assessee. The CIT(A) granted relief for the assessee with the following findings and conclusion:- I have considered the facts stated by the assessee in his submission and the grounds raised in appeal. The Assessing Officer has made the addition on the basis of presumption u/s 132(4A) of t .....

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did not mature through the assessee. The presumption u/s 132(4A) is rebuttal presumption as also observed by the Assessing Officer and since the assessee had rebutted the same by way of filing of confirmation of Mrs.Vineeta Chaurasia in this regard, there is no justification on the part of the Assessing Officer to make addition of ₹ 65,70,747/- in the hands of the assessee as alleged commission received in the deal in favour of Smt.Vineeta Chaurasia regarding property of Big Bazar, Vasant .....

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had actually taken place between Mrs. Vineeta Chaurasia and the Suncity, therefore, he has no hesitation in holding that the assessee had earned commission income of ₹ 65,70,747/- on the said property deal. The CIT(A) took a well-founded legal approach that the presumption u/s 132(4A) of the Act, on the other hand, is a rebuttable presumption and since the assessee had rebutted the same by way of filing of confirmation (available at page 125 of assessee s paper book) from Mrs. Vineeta Chau .....

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resumption is rebutted by the assessee and purchaser, then onus was on the AO to further demolish the same to restore the presumption u/s 132(4A) of the Act by way of relevant material or evidence by conducting further inquiry or investigation from the seller and other related parties and the AO had not conducted such exercise. The addition in the hands of said recipient/payee cannot be sustained especially when the addition in the hands of the payer-purchaser has not been found to be sustainabl .....

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ion, evidence, document or opinion on record during the assessment proceedings or appellate proceedings to support this fact that the deal was actually materialised through the present assessee and, therefore, the presumption made by the AO only on the basis of document in question Annexure A-1 does not seem to be well-founded that the assessee had actually received commission or brokerage from the deal or transaction or sale of property between Mrs. Vineeta Chaurasia and Suncity project. The fi .....

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ce. Ld. DR further pointed out that during statements vide question no. 33, the assessee was specifically asked about the possession of jewellery of ₹ 3.51 crores and the assessee admitted that he sold jewellery in cash and at that moment, he was not able to produce the evidence. 95. Ld. DR also contended that the jewellery belonged to the assessee Shri Lalit Modi and his wife Smt. Rajul Modi and there was no surrender by Smt. Rajul Modi and in the case of assessee nothing had been brought .....

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t the AO rightly estimated the capital gains of ₹ 40 lakh in the hands of assessee which was deleted by the CIT(A) without any justified reason and basis. Ld. DR lastly prayed that impugned order may be set aside by restoring that of the AO. 96. Ld. AR vehemently contended that the assessee had surrendered huge amount of ₹ 62 crore for AY 2010-11 which included entire income of the assessee from all known and unknown sources, therefore, impugned addition made on account of undisclose .....

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arned some capital gain on sale of jewellery, then also the said amount was duly covered in the amount of income declared and searched by the assessee during the course of search operation. Ld. AR vehemently contended that the AO himself accepted that the assessee and his wife declared said jewellery in the wealth tax returns and in the event of sale of said jewellery, any capital gain or surplus cannot be considered separately, ignoring the huge amount of surrendered income of ₹ 62 crore. .....

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income arising out of sale of jewellery has been accounted for and the assessee replied that the said income got subsumed in the surrendered amount of income made in AY 2010-11 of ₹ 62 crore. The AO did not consider the reply of the assessee dated 10.8.2009 submitted to DDI(Inv) wherein the assessee accepted the position of jewellery and this explanation was considered by the first appellate authority. Under the above noted facts and circumstances, we are in agreement with the conclusion o .....

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is being reproduced as under:- It is seen that there is no basis for estimation of capital gains amounting to ₹ 50 lacs worked out by the Assessing Officer out of which ₹ 40 lacs was added in the hands of the assessee, Shri Lalit Modi and ₹ 10 lacs added in the hands of his wife Smt.Rajul Modi. It is a fact that except for the statement of the assessee, there is no evidence found during the course of search to suggest and prove that the assessee had in fact sold any part of jew .....

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ncome declared during the course of search. Further the Assessing Officer himself accepted the declaration of the said jewellery in the wealth tax returns filed by the assessee and his wife. In view of the detailed submission, addition of ₹ 40 lacs towards alleged capital gain on alleged sale of jewellery is directed to be deleted. Ground raised in appeal is allowed. 98. On the basis of foregoing discussion, we reach to a logical conclusion that the AO made addition on the basis of surmise .....

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out any basis on the imaginary facts ignoring the sustainable explanation of the assessee and the CIT(A) rightly deleted the same. Accordingly, ground no. 2 of the revenue deserves to be dismissed and we dismiss the same. Ground No. 3 99. Apropos ground no. 3, ld. DR pointed out that the CIT(A) granted relief for the assessee by passing brief and slipshod observation without any basis. Ld. DR has drawn our attention towards para no. 8 of the assessment order and submitted that the assessee had c .....

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lowance amounting to ₹ 6,81,298/-. Ld. DR submitted that the impugned cryptic order may be set aside by restoring that of the AO on this issue. 100. Ld. AR replied that there is no dispute that the assessee has not claimed any exempt income for the year under consideration and, therefore, no disallowance u/s 14A of the Act r/w Rule 8D of the Income Tax Rules 1962 can be made. Placing reliance on the decision of Jurisdictional High Court of Delhi in the case of CIT vs Holcim India Pvt. Ltd. .....

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d even if no dividend income was earned, yet Section 14A can be invoked and disallowance of expenditure can be made, there are three decisions of the different High Courts directly on the issue and against the appellant-Revenue. No contrary decision of a High Court has been shown to us. The Punjab and Haryana High Court in Commissioner of Income Tax, Faridabad Vs. M/s. Lakhani Marketing Incl., ITA No. 970/2008, decided on 02.04.2014, made reference to two earlier decisions of the same Court in C .....

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