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M/s. A.A. Estate Pvt. Ltd., Versus The ACIT, Central Circle-30, Mumbai

Reopening of assessment - addition on account of alleged unaccounted sale proceeds - Held that:- Annexure AB-1, there is no mention of payment of any on-money to the assessee. The presumption has been drawn from the statement of Shri Satish Kulkarni which has been retracted later on. The details given in the seized paper from a third party’s premises itself do not put any liability upon the assessee to explain the seized paper because it was not recovered from the possession of the assessee and .....

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ch could lead to a reasonable conclusion that the assessee has received some on-money which could be made basis for the reopening of the assessment. Accordingly, we set aside the notice u/s. 148 and hold the reassessment proceedings as invalid - AO himself has examined those flats were some extra money in the form of interior decoration was found to be given. It was not the case of the AO that all the flats sold have fetched some on-money. The DR further brought to our notice that the Direct .....

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affidavits. Considering all these facts in totality, in our humble opinion, the entire additions have been made on surmises and conjectures based upon irrelevant material ignoring direct evidences on record, therefore, the additions made by the AO cannot be sustained even on merit. - Decided in favour of assessee - I.T.A. No.2438/Mum/2013 - Dated:- 5-2-2014 - SHRI I.P. BANSAL, JM AND SHRI N.K. BILLAIYA, AM Appellant by: Shri J.P. Bairagra Respondent by: Shri S.D. Srivastava O R D E R PER N.K. BI .....

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riefly stated the facts of the case are that in the case of RNA builder group, search and seizure action was taken place on 30.11.2007 and the assessment was completed u/s. 143(3) r.w.s. 153A of the I.T Act by the order dt. 24.12.2009 determining total income at ₹ 7,77,49,790/-. The assessment was completed by making addition on account of unaccounted receipts to the tune of ₹ 1,23,61,951/- in respect of flats sold in RNA Azzure, Bandra. The said assessment was reopened u/s. 148 of t .....

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e to reopen the assessment. 3.1. The AO observed that during the search and seizure operation conducted in the premises of M/s. Ashoka Buildcom Ltd., Nasik, one document was found from Mr. Satish M. Kulkarni, Asstt. Manager of M/s. Ashoka Buildcom Ltd. The said document referred to as Annexure AB-1 contained some working relating to Mumbai flats. The statement of Shri Satish M. Kulkarni was recorded on 20.4.2010 in which he admitted that the difference between the total cost and agreement value .....

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ceedings for reopening on the basis of information received from DDIT (Inv), Nasik and the said information cannot be termed as vague or irrelevant. The Ld. CIT(A) further observed that what is sought to be assessed or reassessed under the new scheme is the total income of each of the relevant assessment years. Under the new scheme, the AO is not bound by the various constraints in distinguishing what is disclosed and what is undisclosed income. The AO is required to make a normal assessment or .....

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i. The Ld. CIT(A) further observed that the AO has also drawn support from his findings in the original assessment order dt. 24.12.2009 wherein it was noted that the assessee was adopting the modus operandi of selling the flats by executing two agreements, one between the buyer and the assessee and the other between the buyer and the interior decorator which was an arrangement to generate unaccounted cash. The said findings were not challenged by the assessee and have become final. The Ld. CIT(A .....

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The Ld. Counsel for the assessee further stated that the AO himself has observed the main reason for the addition in the original assessment was on the basis of material collected at the time of search action and statements recorded then. The Ld. Counsel continued to submit that the AO has considered the statement of Shri Satish Kulkarni but failed to consider the reply given by him to question No. 8 wherein he has clearly stated that he does not know the details of source of the cash paid and t .....

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Shri Ashok Kataria. The Ld. Counsel continued to state that even after receiving the information from the DDIT (Inv), Nasik, the AO did not apply his mind. When material available on his record clearly show that he has recorded the statement of the purchasers of the flats during the course of the original assessment proceedings itself and none of the purchasers have admitted to have paid on money on purchase of flat. The Ld. Counsel concluded by saying that the AO has acted only on the basis of .....

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alue as the same was retracted within 17 days by filing an affidavit before Executive Magistrate, Nasik. The Ld. Counsel further stated that the said Annexure AB-1 is only an estimate which contains working of capital gains and it cannot be made basis for making additions in the hands of the assessee. The said document was found during the search at M/s. Ashoka Buildcom Ltd., therefore the presumption is that the said document belongs to the person whose premises have been searched. The assessee .....

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e orders of the lower authorities stated that for reopening the assessment what is necessary is the relevancy of the document and not the sufficiency of the document. It is the say of the Ld. DR that the document found at the premises of M/s. Ashoka Buildcom Ltd., was very much relevant for reopening the assessment in the case of the assessee coupled with the statement of Shri Satish Kulkarni. The AO had sufficient reason to believe that the income originally assessed has been under assessed by .....

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f the reasons recorded for reopening of the assessment read as under: The assessee had shown profit from RNA Azzure project for the A.Y. 2008-09 specifying the sale proceeds of ₹ 31,47,62,391/-. This included the following sums, which were shown at the agreement value increased by some other charges: Asha Ashok Katariya Rs.89,44,030 Satish D Parakh Rs.89,39,030 Satish D Parakh HUF Rs.87,38,650 However, the information received from DDIT (Inv)-II Nasik establishes that M/s. A.A. Estate Pvt. .....

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ement 2200 S. ft. Misc220 0 sq.ft. Parking extra cash Misc. at the time possession Tokan amount paid Capital gain investment 1 Asha 201 1305 1000 14355000 8613000 2871000 2871000 500000 221320 500000 4285000 2 SDP 202 1305 11000 14355000 8613000 2871000 2871000 500000 221320 500000 5650000 3. Notfinalised 203 1275 11000 14025000 8414000 2805000 2805000 500000 216700 500000 0 9. Now the question to be decided is whether this annexure was relevant and so relevant that it could form basis for reope .....

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there is name of only one person i.e. Asha, the second name is SDP and third name it is mentioned as not finalized . The said annexure is neither signed nor dated. Moreover, a close scrutiny of the annexure shows that it is for the purpose of calculation of capital gains and capital gain investments. By any stretch of imagination, this working cannot be related to the assessee. Even the marginal heading on this annexure is Mumbai flats - working which clearly show that it is only a work sheet wh .....

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able inasmuch as in that case, the Hon ble Supreme Court has held that for determining whether initiation of reassessment proceedings was valid, it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. The ld DR also relied on the decision of the Hon ble SC in the case of Central Provinces 191 ITR 662 where in it has been held that th .....

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h as in the present case what the AO is relying upon is only a work sheet that too of a third party, most of the workings on which are not even remotely connected with the assessee. A document has to be considered as a whole and not in parts. As mentioned earlier, the document does not contain names of the purchasers. It is pertinent to note that the said document not even contains the name of the assessee, it is not signed nor it is dated. It is not clear to which assessment year it belongs to. .....

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party may form basis for the reopening of the assessment. The entire process of reassessment is based upon this annexure coupled with the statement of Shri Satish Kulkarni. Shri Satish Kulkarni is not even a purchaser but only an employee of M/s. Ashoka Buildcom Ltd. What he is writing on a piece of paper under the instructions of his superiors cannot be considered adversely in the case of the assessee. In our considered view, the AO has acted only on the basis of suspicion and it could not be .....

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deliberated upon by the AO and after making rigorous enquiries, certain additions were made. Even at that point of time the AO had no information of the alleged on-money paid by the purchasers of the 3 flats which has been made basis for reopening the assessment. It is not a case where no enquiry was made at the time of original assessment proceedings. It is a settled position of law that the provision u/s. 132(4A) is only against person in whose possession document is found and not against any .....

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any on-money. Everything has been presumed by the AO against the assessee only on the statement of Shri Satish Kulkarni whereas the AO completely ignored the statements recorded by himself of the purchasers during the course of the original assessment proceedings. 11. Considering all the facts in totality, in the light of the aforestated annexure AB-1, we failed to persuade ourselves to find any relevancy on the said document which could lead to a reasonable conclusion that the assessee has rece .....

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ri Satish Kulkarni which was retracted later on. The Revenue authorities have applied the test of human probabilities strongly relying upon the decision of the Hon ble Supreme Court in the case of Sumati Dayal Vs CIT 214 ITR 801 and CIT Vs Durga Prasad More 82 ITR 540. The lower authorities strongly believe that since in the original assessment proceedings in the same project the assessee has sold certain flats as shell flats and has received some on-money therefore, applying the test of probabi .....

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the interior decorators. On examining certain buyers, the AO came to the conclusion that the agreement with the interior decorator was a make belief agreement and not genuine. According to the AO, the inclusion of an interior decorator was an arrangement made by the assessee with a view to accommodate and generate cash which was kept outside regular books. Considering the fact of the two agreements with specific verifications and specific examinations of certain buyers an addition of ₹ 1,2 .....

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such on-money. Even in the assessment order, the AO has mentioned that certain flats were sold as shell flats by executing two agreements . This itself shows that even during the original assessment proceedings, the AO did not say that all the flats were sold as shell flats by executing two agreements. Flats which were sold as shell with two agreements, the unaccounted profit has already been considered in the original assessment. In the proceedings under consideration, except for the retracted .....

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d to understand what prevented the AO to apply the test of human probabilities during the original assessment proceedings itself when it came to notice of the AO that assessee is taking some money outside the books of account. The only reason why the AO has not applied this test is that after thorough examination and verification, he found that only certain flats were sold where on-money was involved and the respective buyers of those flats have also confirmed this before the revenue authorities .....

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