TMI Blog2016 (5) TMI 1501X X X X Extracts X X X X X X X X Extracts X X X X ..... . So, the addition on receiving on-money in question in the hands of the assesseegroup are not justified unless there is evidence on the issue in favour of revenue which is missing in this case. Moreover, revenue authorities ignored the fact that one of common directors of assessee companies, namely Mr. Shekhar Patel had categorically denied having received cash amount on the sale of land in question. Revenue has ignored the same which is not justified. Assessees have not been provided cross examination of person who is alleged to have made payment of cash of ₹ 15.07 crores. to the assessees which is again not justified. Taking all the facts and circumstances of the case, the addition made by the Revenue in all these groups alleged to be received from CCPL does not survive and same is directed to be deleted. This take care of main issue of on money in land deal in cases of all these assessees of this group. Disallowance of compensation paid - According to CIT(A) the assessee companies have not discharged the onus of proving the credit amount under the guise of compensation to Frontline Financial Services Ltd. - HELD THAT:- Disallowance in question has been made mainly o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee-companies, including this assessee. i. Matang Properties Pvt Ltd, ii Martand Estate Pvt Ltd iii Maitrik Buildcon Pvt Ltd iv Medbhuti Complex Pvt Ltd v Madhumati Realty Pvt Ltd vi Madhuj Realty Pvt Ltd vii Tirth Developers Pvt Ltd 3.1 The land was sold by assessee-companies to CCCPL on 17.10.2007 for a consideration of ₹ 2.50 crore as per the documents registered. M/s. CCCPL is a company run by group of Heart Specialist Doctors, who are popularly known as Heart Care Group and this is headed by Dr. Keyur Parikh, who is a renowned Cardiologist. The main persons of the group are as under :- Cardiologists (1) Dr Keyur Parikh (2) Dr Milan Chag (3) Dr. Urmil Shah (4) Dr. Hemant Baxi (5) Dr. Anish Chandrana (6) Dr Ajay Naik (7) Dr Satya Gupta Cardiac Surgeon (1) Dr Anil Jain (2) Dr. S.N. Mallya (3) Dr. Naman Shaslri (4) Dr. Vishal Gupta (5) Dr. Chirag Mehta (6) Dr. Dhiren Shah (7) Dr.Bharat Trivedi 3.2 The cardiologist and cardia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o each assessee-company is as under:- Sr. No. Name of the company Area square meters in Addition made by the AO 1 Matang Properties Pvt Ltd 1626 175,26,514 2 Martand Estate Pvt Ltd 1377 148,42,565 3 Maitrik Buildcon Pvt Ltd 1990 214,50,039 4 Medbhuti Complex Pvt Ltd 2197 236,81,275 5 Madhumati Realty Pvt Ltd 1998 215,36,270 6 Madhuj Realty Pvt Ltd 1997 215,25,492 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -82010' (Correct dated 21-8-2008) In the said satisfaction note, the documents referred as relevant to the appellant company and other six co-owners appellant companies were only Registered Sale Deed / Conveyance Deed of land belonging to the appellant company and other six co-owners appellant companies which are sold by them To CCCPL and other records which were the regular records duly reflected in the books of accounts and the satisfaction note was not referring to any other incriminating material and/or seized material for the alleged cash transactions for which the addition has been made in the assessment order The satisfaction note was also not referring to any of the Statements of Six Doctors which has been relied upon by the Ld AO while framing the assessment order as well as the Ld A.O. has also not relied upon the statement of Dr Keyur Parikh, Nihir Shah and Arpit Patel. In short, it can be said that the Ld A.O has not referred and/or relied upon the any of the statements of the Directors of CCCPL and/or any other persons of the management of CCCPL for recording of The satisfaction note. From the aforesaid analysis of satisfaction note, one can say that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any of the statements of the directors recorded in the year 2008 when the search took place and therefore, it can be said that the said six doctors as well as Dr. Keyur Parikh and/or other persons in the management of CCCPL have also not stated anything about the alleged cash payment to the appellant company and other six coowners appellant companies for which addition has been made in the assessment order. c) That the statements of six doctors have been recorded in April, 2010 which are nearly after a gap of more than one and half year after the search took place in the case of CCCPL group on 21-8-2008 and therefore, the statements which were brought on record in 2010 are an after-thought statements of 6 doctors and the statements given by six doctors are self-serving statements. From the perusal of the statements of six doctors brought on record in April, 2010 by the Ld. A.O in assessment order are not the statements on oath as the same seems to be not recorded by observing the procedure laid down for recording of the statement on oath as per the provisions of section 131 of the Act and from the questions raised to the six doctors, it is a stereo type questions raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpit Patel and accordingly, the appellant company humbly submits that either Dr. Keyur Parikh, Nihir Shah and Arpit Patel have not admitted in their statements the allegation made by the six doctors or the Ld. A.O has not recorded the statements of Dr. Keyur Parikh, Nihir Shah and Arpit Patel to complete the enquiry and investigation proceedings and bring the enquiry to the logical end. Accordingly, the appellant company has to submit that the Ld. A.O has not brought on record any cogent material and/or impendent clinching evidence for making an addition in the case of appellant company and other six co-owners appellant companies for the alleged cash payment received by the appellant company and other six co-owners appellant companies and therefore, the addition made in the case of the appellant company does not stand on facts, on merits' and/or legal grounds and the same is required to be deleted. e) The Ld. A.O has not brought on record any comparative sales instance from the land revenue records in support of the alleged cash payments received by the appellant company and/or other six co-owners appellant companies for the alleged land deal transactions for which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cardiology partners (promoters) and Dr. Asit Jain (Initial investment of Rs. __ million) have paid per share ₹ 66. However, this cannot be written by CCC as ₹ 56 is paid in CASH towards purchase of land . The above observation dearly establish that cash has been paid by the company CCCPL for purchase of land for hospital to aforesaid 7 companies. Since the total number of shares issued to the doctors on 3-2-08 and 31-3-08 is 2791838 shares, at ₹ 56 per share, the cash component of land price, was ₹ 15.63 crores. Please offer your comments on this issue. Ans. 22. Your observation is not correct, it is only a guess work. The page 22 shown to me no where refers the name of any of the 7 companies as well as it does not refers to any particulars of land such as location, survey No., Final Plot No. or area, therefore, the observation made by you in the question is only a guess work not related as well as relevant to the 7 companies. Similarly, from verification of page No. 23, it does not mention any where the name of any of the 7 companies and also it does not refer to the particular of any land such as Survey No., Final Plot No. or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s while the value of cash component is 15.07 crores is a false allegation merely on guess work. From the verification of documents produced before me, nowhere it has been found to be noted as cheque or cash. From the verification of computer printout document, no where it has been mentioned about the payment to 7 companies. The inference drawn by you is merely on presumption and guess work and you have not produced before me any evidence to substantiate allegation made in your question. The observation made by you that Under the circumstances, it is clear that the actual sale consideration of the land is not ₹ 2.5 crores but ₹ 2.5 crores in cheque and ₹ 15.07 crores in cash totaling to ₹ 17.57 crores is not correct. I have to state that the 7 companies have received the amount of sales consideration stated in the sale deed and over and above, the sales consideration stated in the sale deed the companies have not received any amount. I specifically deny the receipt of any alleged cash amount of ₹ 15.07 Crore by 7 companies . 3.5 To sum-up, Shri Shekarbhai Govindbhar Patel specifically denied the receipt of cash over and above the cheque amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid 3 persons. (viii) The Ld AO has violated the principle of natural justice and equity while not according the opportunity of cross-examination of aforesaid 6 Doctors and other 3 persons. (ix) The higher authorities monitoring the assessment proceedings have also violated the principle of natural justice and equity while not observing the CBDT Instructions/Circulars and other judicial pronouncement of the Hon'ble Supreme Court, various High Courts and Tribunals. (x) The Legal Decisions relied upon by the Ld. A.O are irrelevant in the appellant's case. 3.6 The CIT(A), having considered the same, confirmed the order of the Assessing Officer. Regarding the contention of the assessee that the notice issued under section 153C was bad in law, the CIT(A) observed that many documents including the ones belonging to the assessees in the form of sale deed was seized from the premises of CCCPL and other doctors which indicated that the assessees have sold land to CCCPL for documented price of ₹ 2.50 crores. These documents also indicated that beside the cheque amount of ₹ 2.50 crores, cash of ₹ 15.07 crores was also p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies; therefore, the assessment order passed by the Assessing Officer is bad in law. According to the CIT(A), the 6 doctors have admitted having paid cash component for the purchase of land to Dr Keyur Parikh, CA Arpit Patel and Mr.Nihir Shah working for CCCPL. In their statements, they have nowhere stated that they have directly paid cash to the assessee companies. Therefore, the CIT(A) held that the assessee-companies did not have any right to ask for the cross-examination of the 6 doctors. Since they have named Dr Keyur Parikh, C.A. Arpit Patel and Mr Nihir Shah working for CCCPL, the opportunity of cross examination was allowed to Dr Keyur Parikh in the month of June and July 2011 in which all the 6 doctors confirmed that they have paid cash to CCCPL for the purchase of land. Assessee should have been provided opportunity of cross-examination as prayed. Denial of same is against principles of natural justice which should be avoided. 5.2 Without prejudice to above, on the merit of the case whether over an above the cheque amount cash amount has been paid to the assessee or not, the Assessing Officer discussed in details the various seized documents which proved that ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, I have no hesitation in holding that the appellant companies have received total cash of ₹ 15.07 crores over and above the cheque amount of ₹ 2.50 crores. The addition of cash amount made by the AO in their respective hands on the basis of the area of the land owned by them is therefore confirmed. 5.3 In this background, ld. Authorized Representative for the assessee submitted that in the case of assessee-companies, the proceedings u/s 153C of the Act were initiated consequent to the searched assessee's case namely Dr. Keyur Parikh Others in whose cases assessment orders u/s. 153A r.w.s. 143(3) of the Act have been rendered. In the case of assessee-company, the order u/s. 153C r.w.s. 143(3) of the Act was rendered on 29-122010 which was challenged before the CIT (A) who has rendered the order in the case of the assessee-company vide appellate order dated 30-1 1-2011. Against the said order of the CIT (A), the assessee-company has preferred an appeal before us. In this back ground, the assessee-company submitted that in the case of assessee-company, in the order u/s. 153C r.w.s. 143(3) of the Act, the additions were made consequent to the additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made through cheque. Even after taking the extreme step of search, there was no document to demonstrate that some specific cash amount was paid over and above the sale consideration. At the out-set at this juncture it is noteworthy that in the absence of any specific document in our considered opinion it is not justifiable to presume that the assessee had made payment in cash. The documents have established the sale consideration and the payment of stamp duty but there is no other evidence. On the basis of those documents, the assessee has passed connected entries in the books of accounts. There were several working of the project which were found from the computer, but there was no direct evidence in possession of the Revenue Department to conclusively establish that in fact there was a cash component. The Revenue Department had made inquiries from those persons who have sold the properties. Those persons have made the statement before the AO and affirmed that there was no cash component. The AO had made up his mind to thoroughly investigate the existence of the cash component, but then after the inquiry it was noticed that there was no such money which was delivered at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety to private limited company. The CCCPL has volunteered to pay the stamp duty in respect of the transfer of the names. The additional payment of stamp duty was thereafter paid by the CCCPL. On the basis of these evidences the vehement contention of the assessee is that the correct fair market value as per the Registration Office was assessed on two occasions; hence, there was no question of raising any doubt. If one Government Authority has registered a document on an amount of consideration then that consideration should not be doubted unless and until there is concrete evidence against the sale value declared. 8.3 Next point. We have also examined the memorandum of understanding (MOU) arrived at between the CCCPL (hospital) and the group of doctors. This MOU was in possession of the Revenue Department, obtained during search operation. There was nothing incriminating in this MOU. The MOU has stated that the hospital project will cost ₹ 45,00,00,000/-. The purchase of land was to be finalized before the end of 31st January, 2007. The share capital was fixed at ₹ 25 crores. Through this MOU a Chairman, Vice Chairman, MD, etc., were selected. There is a claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 200,00,000 at 100% premium to give ₹ 400,00,000 EXPECTED INVESTMENT FROM Aalst group: ₹ 200,00,000 at 100% premium to give ₹ 400,00,000 Approx. Euros 6,66,000.00 or Lesser. The land is 13,500 Square meters Buying Price-₹ 18,00,00,000+ Approx. 3 Millions Euros) Interestingly the land value has doubted since the time we Paid/bought it 1.5 years ago! So the premium is already Absorbed by valuation of land so in reality you are getting the equity at the actual newer price of the land. If your group does not come, then two outside investors (Non Doctors) are willing to come at 200% premium at ₹ 6,00,00,000. Our group has enough funds so we would rather have a value added partner like yours and Kirti Patel (who will develop Medical Tourism for Indian Patients residing in UK NHS system and bring them to India) We have carefully examined the contents of this page. Indeed, it is mentioned that an amount of ₹ 18 crore invested in 2006-07. But this page alone and the word invested alone did not lead to a definite conclusion that the said amount of ₹ 18 crores was the consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .131 of IT Act. A statement recorded u/s. 132(4) is a statement on oath. Therefore, a statement recorded on oath can be used as an evidence. As against that a statement recorded u/s.131 is not a statement on oath, therefore, it cannot be used as an evidence hence, such a statement has no evidentiary value. Rather in this case it was made in the form of a questionnaire handed over to those out-going doctors, who have not answered the questions under oath. This is one of the reason that we are hesitant to uphold the revenue s reliance on a statement made before the AO. Moreover, Dr. Anil Jain has kept on changing his statement therefore as far as his statements are concerned, those are not said to be very dependable. In this connection, it is also worth to mention that a third party statement should not be made the basis of addition for income tax purpose. The Tax proceedings should be based upon certain direct evidence so that there must not be any miscarriage of justice. 8.6 Next point. The assessee has also tried to demonstrate that there was a dispute among the doctors and because of that dispute a group of the doctors have separated from the project. Few of them have m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the view that a clinching incriminating material can be used against a tax payer if unearthed at the time of search. The documents which were referred by the Revenue Department cannot be said to be falling under this category of documents. Those were computer generated document which were neither signed by any person nor properly dated. Be that as it was, but whether those documents can be said to be an authentic document to be used against the assessee to allege that onmoney was transacted for purchase of land. We are of the view that in the context of the prevailing facts it shall not be fair and reasonable to take an adverse view against the assessee merely on certain suppositions. Though we are aware that in the present era a computer generated record is important and trustworthy, hence the above observation is not to be used universally as we are conscious not to make a sweeping generalization in respect of the computer related evidences, for that reason, to be adjudged on the basis of the surrounding facts of each case. 8.8 Next point. We have also pondered upon an another point about the fair market value of the land in question. It was noted that the agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en it was wrong on the part of the Revenue Department to presume that unaccounted income was used for purchase of land. Where was the element of unaccounted cash availability, is the question remained unanswered?. When there was no evidence of generation of unaccounted cash by the assessee then the allegation of cash payment remained unsubstantiated. There was no proof found even after the search to establish that the assessee had generated unaccounted income from medical profession. Even it is difficult to believe in the case of the CCCPL, which was in the nascent stage, that there was a possibility of availability of such huge unaccounted cash. We are not therefore convinced about the direction of Ld. CIT(A) to examine this issue in the hands of CCCPL. 8.10 The Revenue Department has held that the 15% payment was in cheque and 85% payment was in cash which were mentioned on number of occasion as per the data sheets of the computer. Prima facie, those sheets have demonstrated that the contribution of the doctors was to be made in the said proportion. The explanation of the assessee in general is that percentage of contribution was fixed in the light of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue notice u/s 148 to bring to tax the bogus advances. It was held that the learned CIT(A) has failed to record a categorical finding justifying the direction given to the AO when the AO had not chosen for reopening of the assessment then the direction given by learned CIT(A) were to be set aside. In the light of these decisions, learned AR has vehemently pleaded that the direction made by learned CIT(A) to assess the cash component in the hands of the company was beyond his jurisdiction therefore required to be over ruled. Considering the circumstances under which such directions were given, it is hereby held, not valid in the eyes of law. 8.13 Next point. It is a universal law that the Suspicion howsoever strong cannot take the place of evidence . At best, it can only lead to investigation. No person can be punished merely on the basis of a doubt, but side by side, must not be spared on the basis of unfavorable evidence. So the procedure is that a mistrust leads to investigation and an investigation leads to collection of evidence. There are several decisions in the past pronounced by the Hon ble Apex Court wherein a general rule is framed that although the ITO is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the same which is not justified. Assessees have not been provided cross examination of person who is alleged to have made payment of cash of ₹ 15.07 crores. to the assessees which is again not justified. Taking all the facts and circumstances of the case, the addition made by the Revenue in all these groups alleged to be received from CCPL does not survive and same is directed to be deleted. This take care of main issue of on money in land deal in cases of all these assessees of this group. 6. Next issue is with regard to the disallowance of compensation of ₹ 2.75 crores paid to Frontline Financial Services Pvt Ltd by the seven assessee-companies i.e,. ₹ 32,22,400/- (M/s. Martand estate Private Limited), ₹ 27,28,000/- (M/s. Matang Properties Private Limited), ₹ 39,42,400/- (M/s. Matrik Buildcon Private Limited), ₹ 43,53,600/- (M/s. Methbhuti Complex Private Limited), ₹ 37,60,000/- (M/s. Madhumati Reality Private Limited), ₹ 39,56,800/- (M/s. Madhur Reality Private Limited) and ₹ 55,40,800/- (M/s. Teerth Developers Private Limited). This issue is common in all thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e confirmation from them and the reflection of same in the income tax return of the recipient. In response to this, the assessee did not submit any confirmation. As per the details submitted during the course of assessment proceedings, no amount has been paid to M/s. Frontline Financial Services Ltd till 31.03.2009. The amount of sale consideration of land received by the company is transferred to another group company M/s. Ganesh Plantation Ltd. The accounts of M/s. Frontline Financial Services Ltd for the AY. 2008-2009 and A. Y. 2009-2010 do not reflect any such income. The company is also not showing any debtors equivalent to the amounts of compensation received from assessee company. Therefore, the 'development agreement' with Frontline Financial Services Ltd Ltd is a concocted document created for reducing the tax liability of assessee-company. This is further supported by the fact that in March-2007 the purchaser of land M/s. CCCPL was paying stamp duty on behalf of vendor that means by that time the land was decided to sale land to M/s. CCCPL, on the other hand the development agreement with a clause of heavy penalty in case of termination, was being entered simultan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment of rights of the development by all 7 companies with the said FFSL as per the Termination Agreement dated 18-08-2007 (Refer No.136 to 141 of Paper Book No.l) 2. As per the said Termination Agreement, the appellant Company has paid ₹ 39,56,800/- as compensation for relinquishment of rights of development to FFSL. The appellant company has paid the compensation amount to FFSL and that is why the appellant company could execute conveyance deed for sale of land with other coowners. Therefore, unless the appellant company has settled the payment of compensation to FFSL, the sale transactions of the land of the company would not have been materialized and therefore, the compensation paid to FFSL for relinquishment of rights of development is an expenditure incurred wholly and exclusively in connection with the transfer of land of the appellant company and therefore, the said expenditure is deductible as per the provisions of section 48(1) of the Act in computation of capital gain. In support of aforesaid contention, the appellant company has relied upon the following decisions of various High Courts: i) CIT vs. Shakuntala Kantilal 190 ITR 56 (Bom.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tful by CIT(A). According to revenue Shri Tushan Shah, the director of FFSL (Frontline Financial Services Ltd.) stated before the ADIT (investigation) that he had not received any amount in question. He also doubted termination of same and made disallowance in question. 6.3 According to revenue said Tushar Shah the director of FFSL stated before the ADIT (investigation) that he had not received any amount from assessee companies. In this regard, the Authorized Representative of the assessee companies was asked to produce the directors of all the seven assessee companies before the CIT(A). Shri Shekhar Patel, director of all the seven assessee companies was produced before him inter alia he stated that Shri Tushar Shah of Frontline Financial Services Ltd was introduced to him by Shashikant Patel. At the recommendation of Shri Shashikant Patel, a broker, the development agreement was executed with FFSL. As per the development agreement, the seven assessee companies were to receive ₹ 4.31 crores from FFSL towards development charges. Subsequently, these companies decided to sell the land for ₹ 2.50 crores and paid compensation of ₹ 2.75 crores to FFSL state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tline Financial Services Ltd.- regarding - Please refer to your letter filed in this office on 15/11/2011 by Shri Dhiren Shah, your chartered accountant, requesting to allow cross examination of Shri Tushar S. Shah, the Director of Frontline Financial Services Ltd (FFSL in short). In this connection it is to be mentioned that since Frontline Financial Services Ltd. was your creditor in the assessment year 2008-09 and 2009-10 and during the course of appellate proceedings you were asked to prove the genuineness of the credits by producing the director of Frontline Financial Services Ltd., in response to which vide your letter dated 15/9/2011 you expressed your inability to produce Shri Tushar S Shah on the ground that you have no obligation to produce him before me as the transactions with FFSL are not covered by section 68 of the IT Act where the burden is on the assessee to produce the person for examination. You also requested me to issue summons to him u/s. 131 of the I.T. Act vide your letter dated 15/11/2011. Accordingly summons were issued to him u/s. 131 of the IT Act by me and by the ADIT, Unit-1 (3) at my request. In other words, the summon u/s. 131 were issued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 37,60,000/- vi) M/s Madhuj Realty Pvt. Ltd. ₹ 39,56,800 vii) M/s Tirath Developers Pvt. Ltd. ₹ 55,40,800/- Case of assessees is that all assessee companies have entered into a Development Agreement in respect of land with M/s Frontline Financial Services Ltd. As per said agreement, in case of assessee co-owners had to sale the land in question without development as agreed with FFSL. then assessee companies would have to pay compensation of ₹ 1600/- per sq. meter. According to assessees situation arose in such way that it had to sell the land in question without development and for relinguishment of development right assessees paid in total ₹ 2.75 crores to FFSL as discussed above. Same was disbelieved by CIT(A) for reasons discussed above. Though assessees did not produce Tushar Shah before CIT(A), however, but his presence was compelled by concerned ADIT (Investigation) and statement of Tushar Shah was recorded by concerned investigation wing inter alia said Tusha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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