TMI Blog2016 (2) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... 70/2014 - - - Dated:- 26-2-2016 - S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Mr. Dileep Shivpuri, Senior standing counsel with Mr. Zoheb Hossain, Junior For the Respondent : Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate JUDGMENT Dr. S. Muralidhar, J. 1. This appeal under Section 260A (1) of the Income Tax Act, 1961 ( Act ) by the Revenue against the impugned order dated 8th March 2013 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No. 162/Del/2006 for the Assessment Year ( AY ) Block Period 1st April 1997 to 8th May 2003. 2. At the outset it requires to be noticed that the impugned order dated 8th March 2013 was common to the appeals filed by both the Revenue [IT (S.S.) A. No. 162/Del/2006] as well as by the Assessee [IT (S.S.) A. No. 117/Del/2006]. Against the said common impugned order, the Assessee had also filed an appeal in this Court bearing ITA No. 2 of 2014 [Vatika Limited (formerly Vatika Land Base Private Limited) v. Commissioner of Income Tax] and that appeal was dismissed by the Division Bench of this Court on 6th April 2015. Search and Seizure operation 3. The background facts are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10th May 2005 to the Assessee by the AO asking it to explain the undisclosed receipts of sale of spaces/flats in VT. On 25th May 2005 the Assessee filed a reply stating that in respect of the spaces sold in VT, the entire sale consideration received had been disclosed. It was mentioned that a complete sale register marked A-18 was also found in the course of search of the office at First India Place, Gurgaon which was also referred in the notice issued to the Assessee. According to the Assessee, the register gives complete details of commercial space to different persons and figures of sale shown in this register are as per regular books of accounts. The list of persons to whom the sales were made along with their addresses was also part of the register. The response of the Assessee 8. As regards the allegations in the notice sent by the AO that from the information in the file found in the computer of Mr. Sunil Awasthi the rate of sale of the ground floor space was at ₹ 5,538 per sq.ft. and other floors was at ₹ 4,000 per sq.ft, the Assessee pointed out that Mr. Awasthi had been working as a Junior Executive under Mr. Pankaj Pal, Vice President (Marketing Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial bookings. Accordingly, as per the general trade practice, in order to launch a project the Assessee intended to make few block bookings, and announce them in the market. This was intended to be done through a group of flat owners who were already holding certain flats in VT. While the flat owners in VT expressed their interest in the project VW, they insisted that the Assessee should buy back all their existing flats in VT at a higher rate. The Assessee stated that it considered their offer seriously and offered to buy back all their flats in VT at high premium provided that such flat owners invested in VW at the offered rate @ ₹ 2,750 per sq.ft. against the going rate of ₹ 1200-1400 per sq.ft. The Assessee thus sought to explain that the sale of a total area of 10,000 sq.ft. sold in VW minus purchase of areas of 2829 and 2025 sq.ft. respectively in the 4th and 5th floors of VT at an average rate of ₹ 4,800 per sq.ft. (for fourth floor) and ₹ 4,682 per sq. ft. (for 5th floor) for a total sum of ₹ 1,52,93,217. On this basis the Assessee calculated the net revenue loss at ₹ 17,93,217. According to the Assessee, the hand writings at the bottom o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts. According to the AO, the seized material showed that certain amount of cash was paid over and above the cheque component/payment. 16. The AO negatived the plea of the Assessee as regards documents seized from Mr. Nag and Mr. Nagalia who were an employee and Director respectively of the Assessee. It was held that the documents found in their possession could therefore be held to belong to the Assessee. The seized documents proved that the Assessee had received higher consideration in respect of sale of space/flat in the commercial complex VT. The AO categorised the documents seized during the search into two types. One pertained to the working of anticipated sale revenue on account of sale of space in all floors. The other pertained to specific sale instances. Comparing the rates per sq.ft mentioned in the file stored in the computer of Mr. Sunil Awasthi for the second and third floor of VT with the actual sale figures of five flats by Mr. Rajesh Bhatia and Mrs. Poonam Bhatia it appeared that the figure of purchase of the five flats was higher than the disclosed amount. 17. The AO proceeded to draw the following inferences: (i) The plots in VT were surrendered by Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Relief granted by CIT(A) (Rs.) 1. Alleged undisclosed receipt on sale of flats/space in Vatika Triangle 31,01,09,834 5,60,73,380 25,40,35,454 2. Alleged undisclosed receipt on alleged sale of flats/space in Vatika World 13,84,20,000 2,00,14,904 11,84,05,096 3. Alleged undisclosed income on account of accommodation entries 1,04,39,000 20,00,000 (implied confirmation covered by the above additions) 1,04,39,000 21. According to the CIT (A), the AO should have confined himself to the documents found during the search and seizure action instead of making an addition based on estimates. The CIT (A) examined each of eight instances of sale of flats in VT and upheld the addition only to the extent of ₹ 5,60,73,380. He deleted the addition to the extent of ₹ 25,40,35,954. 22. Much of the discussions in the order of the CIT (A) as far as the seized material is concerned, was focused on the print out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angle. This addition to the undisclosed income has been worked out above in para 8.27 (a) at ₹ 5,60,73,380. No addition is possible on the basis of estimate as done by AO or other seized material referred by the AO. The total addition on account of unaccounted sales is thus, directed to be restricted to ₹ 5,60,73,380. The AO has made an addition of ₹ 31,01,09,834. The difference of ₹ 25,40,36,454 (Rs. 31,01,09,834 minus ₹ 5,60,73,380) is thus deleted. Appeals before the ITAT 24. Aggrieved by the above order of the CIT (A), the Revenue and the Assessee filed appeals before the ITAT. The Assessee questioned the order of the CIT (A) to the extent it sustained the addition of ₹ 5,60,73,380 as regards the sale of the second and third floor flats in VT and the two other additions made on account of sale of space in VW and accommodation entries. 25. As far as the Revenue s appeal was concerned, the following questions were urged by it before the ITAT: 1. The CIT(A) has erred In deleting the addition of ₹ 25,40,36,454 out of total addition of ₹ 31,01,09,834 made by the Assessing Officer because the addition of ₹ 31,01,09, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect evidence available with the AO indicating the sale of flats @ ₹ 4600 or ₹ 4800 per sq. ft. by the Assessee in VT. On presumptive basis, it cannot be said that assessee has sold all the flats @ ₹ 4,600 or 4,800 per sq.ft. (iv) On a plain reading of the evidence it cannot be conclusively held that the Assessee had received on money or that the sale was made at a rate higher than the one recorded by the Assessee in the document. (v) The AO did not call the vendees of the flats. He did not call Mr. Mrinal Nag for examination. He also did not make any other inquiry in order to corroborate his conclusion. (vi) The CIT(A) erroneously retained the addition at ₹ 5,60,73,380 on the basis of estimated projection made by Mr. Awasthi in the file of cashflow/Vatika Triangle at page Nos. 30 31. The present appeal 27. As already noticed both the Revenue and the Assessee filed appeals in this Court. As far as the Assessee s appeal was concerned, as already noticed, this Court by its decision dated 6th April 2015 in ITA No. 2 of 2014 rejected it and upheld the addition of ₹ 1,35,00,000 and ₹ 49,64,904 by the ITAT. 28. In the present appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious flats in Vatika Triangle. This clearly indicated that the declared sale consideration was lower than the actual sale consideration. 32. Relying on the decisions of the Supreme Court in Commissioner of Income Tax. v. Durga Prasad More (1971)82 ITR 540 (SC) and Sumati Dayal v. Commissioner of Income Tax (1995) 214 ITR 801 (SC), it was urged by Mr. Shivpuri that the ITAT should have appreciated the documents seized during the search from the standard of preponderance of probabilities. It was submitted that merely because Mr. Sunil Awasthi was not produced for examination and cross-examination, the documents recovered from his computer could not be ignored since he was an employee of the Vatika Group. It was safe to proceed on the basis of the documents recovered from the possession of the Assessee itself. Inasmuch as the documents indicated that two of the flats mentioned therein has already been sold, it could not be said to be mere projections as contended by the Assessee. 33. Mr. Shivpuri further submitted that the burden shifted on the Assessee to show that the other flats in VT were indeed sold only at the rate indicated in the sale register and not for a higher cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the Revenue to show the basis on which it could be said that the flats were sold at ₹ 3250 per sq.ft. Relying on the decision in Commissioner of Income Tax v. S.M. Aggarwal (2007) 293 ITR 43 (Del), Mr. Agarwal submitted that no adverse inference can be drawn unless the author of the document was examined, particularly since the document did not belong to the Assessee. Reliance was placed on the decision of this Court in Commissioner of Income Tax. V. D.K. Gupta (2009)308 ITR 230 (Del) to urge that since a remand report of the AO did not rebut the submission of the Assessee, no adverse inference could have been drawn by the CIT (A). Relying on the decision in Commissioner of Income Tax v. Ved Prakash Choudhary (2008) 305 ITR 245 (Del), it was urged that in the absence of corroborative material, the additions made on the basis of sketchy documents which were unproved cannot be sustained in law. Reliance was also placed on the decision in Commissioner of Income Tax v. Vivek Aggarwal 231 Taxman 392 to urge that unless the amounts stated in the documents were actually paid, it cannot be presumed that the amount mentioned in the sale deed was not correct. 37. Relying on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or reassessment of an income but are the provisions which are aimed to make addition of an undisclosed income detected as a result of search. The scope of the block assessment proceedings before the AO was explained by the Rajasthan High Court in CIT v. Rajendra Prasad Gupta (2001) 248 ITR 350 (Raj) in the following words: ...the correctness or otherwise of the returns filed in pursuance of the notice under section 158BC(a) has to be examined with reference to the material in the possession of the assessing authority having nexus to assessment of undisclosed income which is with the assessing authority, and premise of such proceedings. If the returns filed by the assessee do not accord with the materials which are already in the possession of the authority, it can be estimated to the best judgment by the assessing authority on the basis of the material in his possession. However, the assessing authority is not conferred with power to make estimation of income de hors the material in his possession, while making regular assessment order under section 158BB. It has to be borne in mind that proceedings under sections 158BB and 158BC are that of undisclosed income. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. The Court observed: It is well-settled that the only person competent to give evidence on the truthfulness of the contents of the document is the writer thereof. So, unless and until the contents of the document are proved against a person, the possession of the document or handwriting of that person on such document by itself cannot prove the contents of the document. These are the findings of fact recorded by both the authorities, i.e., the Commissioner of Income-tax (Appeals) and the Tribunal. 13. In Mahavir Woollen Mills case [2000] 245 ITR 297 (Delhi), during the course of search and seizure proceedings, certain slips were found, which, the Assessing Officer concluded, contained details of payment beyond those which were made by cheques and drafts and were duly reflected in the books of account. The assessee' s stand before the Tribunal was that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material to show as to on what basis the AO had reached a conclusion that the figure '48' occurring in one of them was to be read as ₹ 48 lakhs. 46. In the present case, there was again no material on the basis of which the AO could have applied a standard rate of ₹ 4,800 per sq ft for all the floors of VT. It was also not open to the AO to draw an inference on the basis of the projection in the document, particularly when the Assessee offered a plausible explanation for the document. The burden shifted to the Revenue to show, on the basis of some reliable and tangible material, how the rate at which the flats on the second and third floors of VT was higher than that indicated in the sales register or the sale deeds themselves. 47. In the circumstances, the Court is of the view that the ITAT was justified in coming to the conclusion that the addition of ₹ 5,60,73,380 made by the CIT (A) was not sustainable in law. 48. For the aforementioned reasons, the question framed by the Court is answered in the negative, i.e., in favour of the Assessee and against the Revenue. 49. The appeal is dismissed but, in the facts and circumstances, with no order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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