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2015 (8) TMI 1089 - ITAT MUMBAI

2015 (8) TMI 1089 - ITAT MUMBAI - TMI - Validity of proceedings initiated under section 158BD - addition on undisclosed income of the assessee - CIT(A) deleted addition - Held that:- Admittedly, in this case the AO of the searched person had not recorded any satisfaction about any undisclosed income of the assessee which had escaped assessment. The AO of the searched person had simply forwarded the documents to the AO of the assessee for examination. The AO, in the assessment order, has reproduc .....

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of the flat in question has been mentioned on the said document. The said document was a dumb document. Even the concerned person, from whom the said document was recovered, had stated that he was not aware of the correctness of the contents of the document. Merely based on the said loose paper, the addition in the case of the assessee without any corroborative evidence in this respect was not warranted and no evidentiary value can be attached to such a document in the absence of any circumstant .....

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orders of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] dated 23.05.08 are relating to the related assessees (husband& wife). Since the issues involved therein are identical in nature, the same are taken together for disposal by this common order. For the sake of convenience, facts have been taken from IT(SS)A No.78/M/2008 in the case of Shri Raymond Nariman Elavia. 2. The Revenue has agitated against the action of the Ld. CIT(A) in holding that the proceeding .....

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one Realtors Pvt. Ltd. [KRPL] on 21-01-2003. In the said operation, a loose paper no. 31 of Annexure A-3 was seized from the office of KRIL which indicated transaction related to sale of flat along with furniture. According to AO, a total sale consideration shown in this paper is of R. 39 lacs out of which ₹ 18 lacs have been received through cheque and balance of ₹ 21 lacs has been received in cash. The transaction was related to Ms. Parin N. Sanajana, who was Mausi of one of the di .....

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. Armaity Raymond Elavia. Therefore, AO of KRPL [DCIT, C.C.-10, Mumbai] has transferred a copy of seized material as well as the letter from the Secretary of the building, from where flat has been sold, to ACIT 6(3) vide his letter dated 13/3/2005. Therefore after considering the entire material facts on record, the then AO recorded his satisfaction that ₹ 2 I lacs has been paid in cash by Mr. Raymond N. Elavia & Mrs. Armaity Raymond Elavia for the purchase of the said flat. In view of .....

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N. Sanjana, who is Mausi of his father Mr. Sorabjee Choudhary, has sold one property i.e. flat no.304, 3rd floor, Plot No.666, New Orient CHS Ltd., Jehangir Road, Parsi Colony, Dadar, Mumbai to two parties and was also given to the assessee. In view of above AO asked the assessee to explain as to why the difference of ₹ 21.45 lacs (Rs.21 lacs cash paid for flat & ₹ 45,000/- paid for furniture) should not be considered as undisclosed income of the assessee. Assessee stated that n .....

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paid unaccounted cash, for purchase of flat, therefore I am of the opinion that it is a fit case to issue notice u/s. 158BD of the IT Act." In view of above and the fact that AO before issue of notice u/s. 158 BD was having copy of seized paper, letter of secretary of building, copy of agreement of flat and the letter from DCIT CC-10, AO held that he had recorded his satisfaction. Regarding assessee's contention that no addition can be made on the basis of Ioose paper only, AO observed .....

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2002 in which property rates of Mumbai residential was given, also show that Dadar area rate was between 4500-8500 per sq. feet. On the basis of above (Rs.4500 per sq. feet) value of above flat of 918 sq. feet comes to ₹ 41,31,000/- which was nearly the same as shown in such paper i.e. ₹ 39 lacs. In view of above, AO held that assessee and his wife have purchased the above flat for which they have paid unaccounted cash of ₹ 21.45 lacs. AO therefore made addition of ₹ 10,7 .....

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not warranted because there was no corroborative evidence that the assessee had paid any money in cash except ₹ 18 lakhs paid by cheque as sale consideration of the flat in question. The relevant observations of the Ld. CIT(A) for the sake of convenience are reproduced as under: "I have considered the facts of the case and detailed submissions made by the appellant. Submissions of the appellant are acceptable. As already discussed appellant has stated that there was no satisfaction of .....

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stated that transactions related to Ms. Parin Masi who is related to Mr. Percy Choudhary. Secretary of the building was summoned under s. 131 who stated that above flat has been sold on 18-03-2002 by Mr. Perin N. Sanjana to Mr. Raymond Nariman Elavia and Mrs. Armaity Raymond Elavia at the consideration of ₹ 18 lacs. It is on the basis of above that DCIT CC 10 has asked the AO to examine the payment of cheque and cash made by above mentioned persons as the case of Mr. Raymond Naniman Elavi .....

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hary filed an affidavit and got away with it. There is no other evidence to prove that what is stated by Mr. Percy Choudhary is true and correct. DCIT CC -10 has not confronted the material and affidavit of Mr. Percy Choudhary to the appellant before reaching the conclusion that document and entries made therein belong to the appellant. Even the details obtained from Secretary of the building do not help the case of AO. Secretary of the building replied that flat was sold by Ms. Perin N. Sanjana .....

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e construed as satisfaction as contemplated in the Act. The satisfaction is required to be preceded by the investigations and investigation is not required to be preceded by sataisfaction [Amity Hotels Pvt. Ltd. v CIT and others (2005) 272 ITR 75 Delhi]. In the above letter, what CC-10 requires is examination, i.e. investigation after he is satisfied which in my opinion is not permissible under the law. Satisfaction must be reached by the AO under section 158BD on the basis of materials disclosi .....

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on on the part of DCIT CC-10. Moreover, as stated by the appellant, letter dated 31-03-2004 speaks of only Mr. Raymond Elavia and AO has bifurcated the income and made addition of the amount of cash paid in the case of two assessees. For the above reasons and the reasons discussed hereinafter on merits of addition I am of the opinion DCIT CC-10 has not recorded his satisfaction as contemplated in the Act and judicial pronouncements and therefore, assessment made by AO in the case of assessee is .....

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0 014 from Ms. Perin N. Sanjana. However, on the above paper particulars of the above flat are not appearing. Name of the seller of the above flat i.e. Ms. Perin N. Sanajana also does not appear on the above paper except that "Perin Masi is bringing this along". The above words do not indicate that Ms.Perin N. Sanjana has sold the above flat and particulars of amounts mentioned in the above paper relate to the sale of flat purchased by the appellant along with his wife. Further, names .....

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se by appellant and therefore cash paid of ₹ 21 lacs and further amount of ₹ 45,000/- mentioned against furniture is the undisclosed income of the appellant and his wife. I am afraid, conclusion of both the officers is not supported by any evidence except the affidavit of Mr. Percy Choudhary director of KRPL in whose case search was conducted and from whose possession the above paper was found and seized. As already discussed earlier in this order, loose paper was found in possession .....

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lac. Mr. Percy Choudhary has not supported the fact of his statement that said paper is in relation to transaction of the flat and Ms. Perin N. Sanajana would have left it in his office. There is no statement or affidavit of Ms. Perin N. Sanjana who has sold the flat to the appellant, to support the view that above loose paper and entries made therein actually pertain to the flat sold by her to the appellant and his wife. DCIT CC- 10 and ACIT 6 (3) also do not appear to have made any attempt to .....

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in the purchase and sale of the flat i.e. appellant and his wife who have purchased the flat and Ms. Perin N. Sanjana who has sold the flat either have denied having made cash payment ₹ 21 lacs or are not available. The appellant has stated that he has not made any cash payment for purchase of flat except ₹ 18 lacs paid through chueque (Page 7 of assessment order). There is no confirmation from Ms. Perin N. Sanjana of having received cash payment. Even Mr. Percy Choudhary does not re .....

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to have overlooked the provisions of section 50C. Though AO has referred to the rates published by Times of India date March 9, 2002 to support his point but merely on the basis of such rates it cannot be concluded that appellant has made cash payment over and above the cheque payment. If that is so, then a question may arise whether in all cases of property transactions additions can be made on the basis of rates published in the newspaper. I am afraid, it cannot be so. Appellant has contended .....

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onsidered view that on the basis of the above document, it cannot be held that appellant and his wife have actually made cash payment of ₹ 21 lacs for the purchase of flat and ₹ 45,000/- for furniture and therefore no addition can be made on this account and consequently addition of ₹ 10,72,500/- made by the AO is deleted." Aggrieved by the order of the Ld. CIT(A), the assessee has come in appeal before us. 5. We have considered the rival submissions. Admittedly, in this c .....

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ll the requirement of said section and hence is liable to be treated as bad in law and consequently the assessment proceedings under section 158BD are thus liable to be held as null and void. Even on merits, the Ld. CIT(A) has given a reasoned and categorical finding that the searched person was in no way related to the assessee. Even there was no name of the assessee on the seized loose paper. It was stated by Mr. Percy Choudhary, director of M/s. KRPL, the searched party, that the loose paper .....

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