TMI Blog2020 (10) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... this much only that cash payment was indeed made. Even if we accept this admission as sacrosanct, the said cash payment can be added in the hands of the firm and not in the hands of the partners without bringing cogent material on record to show that such cash payment was made by the partners out of their own funds by giving a break up of how much is from own source of which partner. Addition might have been made in the hands of the firm and not in the hands of the partners and we delete the addition made by the AO in the hands of the partners. We could have directed the AO to make addition in the hands of the firm but by now, it has become time barred because more than 8 years have elapsed after the end of the relevant assessment year 2011 12. This addition is deleted and Issue No. 1 is decided in favour of the assessee. Investment in Om Sai Riddhi Siddhi Developers - HELD THAT:- Adverse inference drawn by the AO as regards payment of on money for purchase of various properties in question is not sustainable and we delete the same in the hands of both the partners i.e. Mr. S. D. Kotian and Mr. M N Rajendra Kumar and also in the hands of the firm M/s Om Riddhi Siddhi Dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pervisor and material impounded during the course of survey conducted at the head office of SCDCC Bank on 27.12.2016 without bringing on record any material for corroboration in support of entries in loose sheets or digital evidence. Hence, the receipt of on money itself is not established beyond doubt. The value as per agreement is said to be ₹ 354,97,500/- and alleged receipt is only ₹ 200 Lacs i.e. ₹ 95 Lacs by cheque and ₹ 105 lacs by cash and hence, total alleged receipt is much less that value as per the agreement. Quantum of such receipts - AO has worked out the figures by multiplying the noted figures by 100 and 1000 - HELD THAT:- AO has been directed by CIT (A) to consider the cash receipt entries and unaccounted cheque entries if any as it is without multiplying it by 100 or 1000 and this finding and direction of CIT (A) has no infirmity because for such multiplication by 100 or 1000, no valid basis is given by the AO in the assessment order. Hence, we approve this finding of CIT (A) that unaccounted receipt is unaccounted turnover in respect of these projects and it should be computed by the AO by considering the entries in the seized materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on are applicable only in those cases, where the annual turnover is below a specified amount. In the present case, turnover is much higher and therefore, the rate specified in this section cannot be adopted. Adopting 3% profit rate will meet the ends of justice in the facts of the present case and therefore, we direct the AO to adopt 3% rate to compute net profit on unaccounted turnover to be worked out by him in respect of these projects. Addition based on the statement recorded during the search - HELD THAT:- no merit in making addition only based on the statement recorded during the search and loose sheets found when the statement is retracted and details in the paper are not deciphered. These findings of learned CIT (A) could not be controverted by learned DR of the revenue by bringing any additional evidence on record in respect of identity and address of the persons named in loose paper and by deciphering the loose paper. Hence the addition made by the AO is based on the statement alone which is not sustainable as per settled position of law by now. Addition on the basis of retraction of the assessee - HELD THAT:- Addition made is purely based on the statement ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13,06,250/- 2258 2 to 5 39,18,750/- Total Amount 52,25,000/- Issue No. Issue Description 2 Alleged Investment in Om Sai Riddhi Siddhi Developers ITA No. Ground No. Amount 2255 2 to 4 37,50,000/- 2256 2 to 4 127,74,562/- 2257 2 to 4 6,25,000/- 2260 2 11,25,000/- 2261 2 383,23,687/- 2262 2 18,75,000/- Total Amount 584,73,249/- Issue No. Issue Description 3 Alleged Investment in M/s K. D. Developers ITA No. Ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. Ground No. Amount 2373 2 86,00,000/- 2374 2 87,50,000/- 2375 2 885,67,000/- 2376 2 538,55,000/- Total Amount 15,97,72,000/- Issue No. Issue Description 9 Alleged Cash Receipt towards Construction of Garden City Project (Hindustan Bawa) ITA No. Ground No. Amount 2373 2 113,30,000/- 2374 2 219,00,000/- 2375 2 142,56,200/- 2376 2 190,00,000/- Total Amount 6,64,86,200/- Issue No. Issue Description 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deletion on the basis of Retraction of various Additions made by the AO ITA No. Ground No. Amount 2457 4 7,00,00,000/- Total Amount 7,00,00,000/- Issue No. Issue Description 5 Direction of CIT (A) to estimate income @ 8% out of alleged cash receipts as against addition by the AO of the entire amount of cash Receipts ₹ 199.30 lacs in A. Y. 2014 15, ₹ 306.50 Lacs in A. Y. 2015 16, ₹ 1746.91 Lacs in A. Y. 2016 17 and ₹ 794.75 Lacs in A. Y. 2017 18 ITA No. Ground No. Amount 2453 to 2456 2 2803.66 Lacs Total Amount 2803.66 Lacs 4. After the oral hearing was over, learned AR of the assessee was directed to file brief written submissions containing assessed summary of oral arguments advanced by presenting these arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order to furnish the same before the tribunal and therefore, the assessee should be directed to extend cooperation to the department to facilitate the production of a cloned copy with a certified copy to ITAT. It is also submitted by him in this letter that further time should be granted to furnish detailed submissions and case may be heard after the full submission is made by the department. As per this last request of the learned DR of the revenue, it appears that he is making this request with this mistaken understanding that hearing of these appeals is not yet over. This submission in this request is also peculiar that some relevant documents are not available with the AO and to obtain those documents, help of the assessee is required and therefore, the assessee should be directed to provide such help and then only, written submissions can be filed by him and thereafter, the appeals should be heard. We fail to understand that if those documents are not with the AO then how in absence those documents, addition was made by the AO which is stated to be on the basis of such seized documents and if addition made by the AO is not based on those documents then how the same is relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pers were seized, which were marked as Al to A26, the details of which are listed in the assessment order. One of the items seized was a pen drive, belonging to Sanjay in which an excel sheet was found saved. The contents of this excel sheet has been made the basis of additions made in the hands of the assessee. 9. During the course of the search action, a statement u/s 132(4) was recorded from the assessee extracting a confession of undisclosed income. This statement was later retracted by the assessee in the form of a detailed statement, wherein he has explained the circumstances under which the statement u/s 132(4) was recorded and why the statement does not represent the true state of affairs. I. General submission on Facts: 1. No incriminating material, undisclosed income/ assets/ expenditure was found in the Assessee's premises or in his possession or control. 2. The entire assessment and the additions made are towards the alleged cash investment/ receipts in the various business transactions of the firms/ companies in which the assessee is a partner/ director. 3. The additions are based on digital evidence, allegedly stored in a pen drive belonging to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OSSRD) is a partnership firm in which the assessee and Mr. Kotian are partners, having share of 75 % and 25 % respectively. This firm had constructed three projects, Exotica, Nakshatra and Paradise at Navi Mumbai. 11. By relying on the excel sheet found in the pen drive of Sanjay, the A.O has surmised that there has been payment of cash for purchase of land for these three projects. As corroboration of the excel sheet, the A.O has relied on another loose sheet in A20, which was also found in the same premise and is only a printout taken from the pen drive. (A20 was also the seized record of the same premise, as can be seen from the details of seized records listed in the assessment order). Therefore, both the sheets of documents referred in the assessment order are from the same premise and from the files stored in the pen drive of Sanjay. 12. From the two sheets, the A.0 has surmised that the cost of the plots was ₹ 2,62,00,000 and since an amount of ₹ 2,09,75,000 is shown in the Books of accounts, the balance amount of ₹ 52,25,000 has been assessed as the undisclosed investment in the purchase of the plots. Out of this amount of ₹ 52,25,000, an am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Payment for personal purposes 85,00,000 Hi) Payment for link road and Vasri hill 55,93,500 Total 5,86,30,500 14. Out of the above amounts, the amounts at i) of ₹ 4,45,37,000 was assessed in A.Y 2012-13 and the amount at ii) and iii) aggregating to ₹ 1,40,93,500 was assessed in A.Y 2011-12. 15. The CIT(A) upheld the additions but held that only those payments related to the year under consideration should be assessed to tax in the relevant year and the payments related to the earlier years were deleted by the CIT(A). Gist of our submission i) The A.O has only stated that details of the cash paid were recorded in the excel sheet found in the pen drive of Sanjay and typed out the details in the order. The actual excel sheet is not brought on record nor was it produced before the assessee, during assessment proceedings. Hence, the document cited is unreliable. ii) The addition has been made purely on assumptions and presumptions based on the pen drive data, belonging to Mr. Sanjay, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15 5,10,98,250 3,83,23,687 1,27,74,562 2015-16 25,00,000 18,75,000 6,25,000 Total 6,85,98,250 5,14,48,687 1,71,49,562 Gist of our submission i) The A.O has made the addition based on surmises and assumptions, based on the excel sheet in the pen drive of Mr. Sanjay, without bringing any corroborative evidence on record. ii) It is settled principle that digital evidence stored in a pen drive cannot be the basis of addition, without any corroborative evidence to support the same. It is also settled principle that additions cannot be made merely on the basis of loose sheets, without any corroborative evidence iii) Additions cannot be made, merely based on disclosure statement, unless there are corroborative evidences. Confessions extracted during search should be supported by collection of evidence of income iv) Absence of corresponding entries in the accounts/ confirmation of opposite party make the addition untenable. No attempt has been made to make any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of on money transactions, which has not been discharged vii) The A.O had admitted that the project is carried out by the company, Global Star Realtors Pvt. Ltd. As can be seen from the assessment order, the projects have been carried out by an agreement between Global Star Realtors and Property Infra Tech Pvt. Ltd. (PIPL). As such, the alleged cash component cannot be taxed in the hands of the directors. viii) Alleged incriminating material found during survey proceedings, that too in the premise of a third party, cannot be used in search assessment proceedings. ISSUE No. 5 Mr. M. N. Rajendra Kumar A.Y. 2013-14 ; ITA No.2260/Bang/2019 Cash payment made to the retiring partner Mr. Jayantilal Jain 19. Mr. Jayantilal Jain was the erstwhile partner of Om Sai Siddhi Riddhi Developers (OSSRD). Upon his retirement, his share was transferred to the assessee. 20. Based on the digital evidences in the form of files stored in the pen drive of Sanjay, the A.O surmised that an amount of ₹ 1,91,86,765 was paid to Mr. Jayantilal Jain for retirement from the firm and for retiring from Wadhghar project, over and above the amounts specified in the Books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assumptions and presumptions based on certain digital evidence found in third party premise, without any corroborative evidence. iii) It is settled principle that digital evidence cannot be the basis of addition, without any corroborative evidence to support the same. It is also settled principle that additions cannot be made merely on the basis of loose sheets, without any corroborative evidence iv) Additions cannot be made, merely based on disclosure statement, unless there are corroborative evidences. Confessions extracted during search should be supported by collection of evidence of income v) Absence of corresponding entries in the accounts/ confirmation of opposite party make the addition untenable. No attempt has been made to make any verification on the veracity of the loose sheets vi) Burden of proof is on Revenue / Assessing Officer who is making allegations of on money transactions, which has not been discharged vii) The A.O had admitted that the project is carried out by the company, Global Star Realtors Pvt. Ltd. As can be seen from the assessment order, the projects have been carried out by an agreement between Global Star Realtors and Property Infra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged incriminating material found during survey proceedings, that too in the premise of a third party, cannot be used in search assessment proceedings. ISSUE No. 8 - Revenue Appeal Mr. M. N. Rajendra Kumar A.Y 2016-17 ; ITA No.2457/Bang/2019 Investment in Jewellery 24. During search proceedings, certain jewellery was found and since the assessee was not able to explain the source at that time, an amount of ₹ 98,00,000 was disclosed as undisclosed investment in jewellery. However, during assessment proceedings, the assessee was able to explain certain jewellery as belonging to wife and daughter and the balance amount shown in the wealth tax return of the assessee. However, the A.O disregarded the explanation and added the same only because it was disclosed at the time of search action. 25. The CIT(A) considered the submissions and after considering the amount of jewellery allowed as per CBDT instruction for each member of the family and after considering the jewellery disclosed in the wealth tax return of the assessee accepted the explanation offered and deleted the addition. 26. The decision of the CIT(A) is based on facts and needs to be upheld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O had surmised that during search action, the assessee had declared an amount of ₹ 1 Crore towards unexplained investment in the factory premises of Kusuma Cashew and added the same to the undisclosed income of the assessee. 35. As this addition was without any basis and without any evidence, the CIT(A) deleted the addition, on the following grounds: i) It is settled position of law that unless disclosure statement is tested under cross examination, the same cannot be considered as evidence against the assessee ii) Admission itself cannot be considered as conclusive evidence, unless there is corroborative evidence on record 36. The finding of the CIT(A) is correct on principles, upheld by many decisions of higher judicial authorities and needs to be upheld. ISSUE No. 12 - Revenue Appeal Mr. M. N. Rajendra Kumar A.Y 2017-18 ; ITA No.2366/Bang/2019 Unexplained investment of in Om Sai Siddhi Developers ( SS Developers) in Novodaya Estate Land Development 37. The A.O had surmised that during search action, the assessee had declared an amount of ₹ 10 Crores towards unexplained investment in Novodaya Estate Land Development and added the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The assessee was having a proprietary concern by name, M/s Coastal Construction. This has entered into an agreement with various developers for construction of three commercial buildings and site development. 45. Based on certain loose sheets found during search, the A.O had surmised that the assessee has received cash from the developers as consideration for the various projects constructed by the firms and these amounts as undisclosed income in the hands of this assessee. As per the A.0, the assessee had received cash towards construction of three projects, namely, i) Sahakari Sadan by MA Smart builders developers ii) Garden city Project by Hindustan Bawa and iii) Oceanic view by Namko Builders 46. The A.O added the alleged cash received from these projects in various years, as detailed in the assessment order. 47. However, the CIT(A) treated the assessee as a contractor and considered these cash receipts as contract income and ordered taxing these receipts 8% of the receipts, thereby granting partial relief. 48. The A.O also made additions towards investment in gold jewellery, which was deleted by the CIT(A). Gist of our submission i) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-16, 2016-17 2017-18 ; ITA No.2453, 2454, 2455 2456/Bang/2019 Investment in Jewellery 51. Based on certain purchase bills found during search, the A.O had surmised that the assessee has made undisclosed investment in jewellery and added the same in various years, as detailed in the assessment order. 52. However, the CIT(A) deleted the addition by accepting the contention of the assessee that, i) No gold was physically found during search, corresponding to the bills, thereby supporting the claim that these were purchased on behalf of family members ii) The assessee had sufficient drawings to explain the purchases 53. The decision of the CIT(A) is based on facts and nothing has been brought on record to counter the same. M/S PROPERTY INFRATECH INDIA PRIVATE LIMITED ITA No.2356 /Bang/2019 for the A.Y.2016-17 under Section143(3) Conformance with the CBDT Circular No.17 of 2019: 54. The Assessee's case falls directly under the CBDT Circular No.17/2019 as the addition made by the Department is to a tune of ₹ 24,60,098, thereby keeping it out of the ambit of monetary limit set for appeals to be made by the department. 55. The Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to bring any evidence on record to support of his contention that he paid cash over and above the value declared. 61. Assessing Officer erred in alleging that additional income over and above the consideration was made in cash by director of the assessee company, Mr. Rohan Monteiro to directors of M/s. GSRL purely on assumptions and presumptions. 62. Further, the AO has erred in alleging that Mr. Rohan Monteiro has undertaken the responsibility to sell the flat and pay back the proceeds of the sale to Mr. M. N. Rajendra Kumar and the agreement is entered into by Mr. Rohan Monteiro and Mr. M. N. Rajendra Kumar in fact there is no such agreement at all. 63. The AO failed to make any independent inquiry with the other party where he is in receipt of cash or generation of unaccounted cash receipt/payment as alleged by AO. 64. Further, it was also submitted that no material was found during search or survey to make the addition by the AO. He did the same on presumption basis without any evidence, by relying on statement of Mr. M. N. Rajendra Kumar which was later retracted. Hence, in absence of cogent evidence in support of entries in loose sheet, no adverse conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also humbly submitted that the onus lies upon the AO to prove that a transaction as stated in the said loose paper. The same concept was adjudicated in the case of Smt. Bommana Swarna Rekha v. A. CIT (147 Taxman 59) wherein the Tribunal held in the favour of the assessee. 73. It is submitted that the presumption of the AO is discretionary and not mandatory or conclusive, and under Section 132 (4A), such presumptions can be rebutted. 74. The Hon'ble Tribunal in Delhi, in the case of Atul Kumar fain v. D. CIT (64 TTJ Del 786) has held that without any independent evidence cannot be considered as a document in proof of investment in house property and accordingly is liable to be ignored. 75. It is most humbly submitted that the department did not unearth any evidence regarding the exchange of cash Further, there was no agreement to sell flats between the assessee and any third party. The AO has failed to prove the existence of any such agreement or show any corroborating transactions. 76. It was also held that evidence found in the premises of a third party cannot be imposed on the assessee without any corroborating evidence, and therefore the additions made in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by him. It was a settled position of law that unless the statement is tested under the cross examination, the same cannot be considered as evidence against the assessee. The AO used the admission made in the statement recorded under section 132(4) of the Act. But the assessing officer failed to note that, admission itself cannot be considered as conclusive evidence against the assessee, unless there is corroborative evidence on record. 3. There is no other evidence on record to prove that, on money is received. The AO, without bringing on record any evidence to prove that, on money is exchanged between the parties, merely harping upon the loose sheet, which cannot be considered as conclusive evidence against the assessee to bring on money to tax as undisclosed income. The AO is required to bring further evidence on record to show that, actual on money is exchanged between the parties, but literally failed to do so. 4. The AO did not conduct any independent inquiry relating to exchange of money (sale) instead, merely relied upon the statement, which is not correct. Further, there is no proof of origin and destination of on money. 82. The learned CIT (Appeals) has also ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assesse and interest due thereon, during search, the assesse could not be saddled with tax liability. 90. The Hon'ble Tribunal at Vishakapatnam in Smt. Bommana Swarna Rekha v. A. CIT ([2005] 147 Taxman 59) observed that a sheet of paper without any name or date was seized to the premises of the husband of the assesse, using which an addition was made on the hands of the assesse. The Hon'ble Tribunal held that the onus was on the AO to prove that the loose sheet related to the assesse with the help of cogent evidence supporting the same. 91. In the case of A. CIT v. Ravi Agricultural Industries ([2009] 117 ITD 338 (Agra)), it was held by the Tribunal that the Commissioner rightly deleted the additions of the AO, and held that when the Partner had retracted the statement, the AO was to bring relevant cogent material in order to substantiate the additions. 92. We would also like to draw the lordship's attention to CBI v. V. C. Shukla (AIR SC 410) where loose sheets were ruled out to have any evidentiary value; and further in Amar feet Singh Bashi (HUF) v. A. CIT (263 ITR (AT) 75 Del) wherein it was also held that noting on loose sheets by itself cannot constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch and loose sheets found when the statement is retracted, and details in the paper are not deciphered, confronted and details written therein established. In view of the above the Ld.CIT(A) deleted the addition made u/s 69A of the Act and on the basis of statement recorded u/s 132(4) of the I.T.Act. The action of the Ld.CIT(A) is not accepted. The A.O. has sent the detailed facts and other statements recorded at the time of search and other case laws and chronological sequence of the events. I am submitting the same for kind consideration of the same and dismissal of the Ld.CIT(A) order. Conclusion : In view of the submissions made above, examination of submissions made by the department, the order of the Ld.CIT(A), Panaji is erroneous and bad in law. The Ld.CIT(A) order may be dismissed. Prayer : In the wake of the above submissions, it is humbly prayed to dismiss the order of the Ld.CIT(A) and any other order as may please your honours. Office of the Commissioner of Income Tax (ITAT)-3 Income tax Appellate Tribunal-3, No.51, Behind Jal Bhavan, Ist Cross, 4th 'T' Block East, Tilak Nagar, Jayanagar, Bangalore-560 041. Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taff. In view of this the Officials are reporting for duty only on alternate days subject to the containment zone restrictions. Hence there is a inevitable delay in culling out the details from assessment records, search folders and seized materials in respect of the 24 cases for which the written submissions are called for. The AO has filed the report in the case of Shri. Mohammed Ameer which were subsequently transferred to A Bench. In the circumstances, it is requested to grant further time to furnish the detailed submission and case may be heard after the full submissions are made by the Department in all the cases as issues are interconnected. Yours faithfully, (0,... (PRADEEP KUMAR) Commissioner of Income tax (ITAT-3), Bangalore. Office of the Commissioner of Income Tax (ITAT)-3 Income tax Appellate Tribunal-3, No.51, Behind Jal Bhavan, Ist Cross, 4th 'T' Block East, Tilak Nagar, Jayanagar, Bangalore-560 041. F.No.CIT (DR)/ITAT-3/ BNG/2020-21 To Sub: Request time for filing of Written Submission to be made before ITAT-C Bench Bangalore in Shri. M.N. Rajender Kumar Group Search related cases Reg. Ref: 1) ITA.No.2258-2457 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. M N Rajendra Kumar also paid cash for purchase of these lands and as per the seized material, land investment in three project is shown as ₹ 262 Lacs and when the evidence was posed to Mr. M N Rajendra Kumar, he accepted that the cash was indeed paid for the projects. On page 7 of the same assessment order, the AO has further noted that as per the Pen Drive, total investment is clearly written as 3.62 Crores and thereafter, the AO noted that on this account, only ₹ 209.75 lacs is reflected in the books of account of the firm as investment in ULWE Property and thereafter, for the difference of ₹ 52.25 lacs between these two figures ₹ 262 Lacs and ₹ 209.75 lacs, the AO came to the conclusion that this amount is brought to tax as unexplained investment in A. Y. 2011 12 and ultimately, he added 25% of ₹ 52.25 Lacs i.e. ₹ 13,06,250/- in the hands of Sri S. D. Kotian and balance 75% ₹ 39,18,750/- in the hands of Sri M N Rajendra Kumar. In ITA 2254/B/2019 filed by Mr. S. D. Kotian and in ITA 2258/B/2019 filed by Mr. M N Rajendra Kumar, only issue raised is about this addition of ₹ 13,06,250/- and ₹ 39,18,750/-. In the writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered opinion, addition might have been made in the hands of the firm and not in the hands of the partners and we delete the addition made by the AO in the hands of the partners. We could have directed the AO to make addition in the hands of the firm but by now, it has become time barred because more than 8 years have elapsed after the end of the relevant assessment year 2011 12. This addition is deleted and Issue No. 1 is decided in favour of the assessee. 99. Second issue in the appeals of the assesses as per Para 2 above is about alleged investment in Om Sai Riddhi Siddhi Developers in A, Ys. 2013 14 to 2015 16 and connected issue is issue No. 2 in the appeal of the revenue as per Para 3 above being deletion of the protective addition of ₹ 510,98,250/- in A. Y. 2014 - 15. It appears that in other two years i.e. 2013 14 and 2015 16, no appeal is filed by the revenue because of low tax effect because in these two years, total alleged investment was only ₹ 150 Lacs and ₹ 25 Lacs respectively. This issue is raised by the assessee in A. Y. 2013 14 to 2015 16 in both the cases i.e. Mr. S. D. Kotian and Mr. M N Rajencdra Kumar. On Page 17 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gi vs. ACIT as reported in 168 ITD 612 (Mumbai), copy on pages 1 to 14 of Case Law Compendium. Para 14 of this tribunal order is relevant and the same reads as under:- 14. We shall now take up the case of the assessee on merits and deliberate on the validity of the addition of ₹ 2.23 crore made by the A.O on the ground that the assessee had made a payment of on money for purchase of flats from M/s Lakeview developers. We have perused the facts of the case and the material available on record on the basis of which the addition of ₹ 2.23 crore had been made in the hands of the assessee. We have further deliberated on the material placed on record and the contentions of the ld. A.R to drive home his contention that no payment of any on money was made by the assessee for purchase of flats from M/s Lakeview Developers. We find that the genesis of the conclusion of the A.O that the assessee had paid on money of ₹ 2.23 crore for purchase of property under consideration is based on the contents of the pen drive which was seized from the residence of an ex-employee of Hiranandani group. We have perused the print out of the pen drive (Page 42 of APB) and find our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t value‟ fixed by the stamp valuation authority is found to be substantially high, further fortifies the veracity of the claim of the assessee that his investment made towards purchase of the property under consideration was well in order. We are of the considered view that though the material acted upon by the department for drawing of adverse inferences as regards payment of on money by the assessee formed a strong basis for doubting the investment made by the assessee for purchase of the property under consideration, but the same falling short of clinching material which would have irrefutably evidenced the said fact, thus, does not inspire much of confidence as regards the way they have been construed by the lower authorities for drawing of adverse inferences in the hands of the assessee. We thus are of a strong conviction that as the material relied upon by the lower authorities does not corroborate the adverse inferences drawn as regards the investment made by the assessee, therefore, the same cannot conclusively form a basis for concluding that the assessee had made payment of on money for purchase of the property under consideration. We thus in the backdrop of our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the facts of the present case which are similar to that case, we respectfully follow this tribunal order and hold that the adverse inference drawn by the AO as regards payment of on money for purchase of various properties in question is not sustainable and we delete the same in the hands of both the partners i.e. Mr. S. D. Kotian and Mr. M N Rajendra Kumar and also in the hands of the firm M/s Om Riddhi Siddhi Developers. Issue No. 2 in the appeals of the assessee as well as issue No. 2 in the appeals of the revenue are decided in favour of the assessee. 101. Third issue in the appeals of the assesses as per Para 2 above is about alleged investment in M/s K. D. Developers. In the written submissions filed by the learned AR of the assessee, his arguments about this issue are contained in the arguments for Issue No. 3 in his submissions. This issue is raised by the assessee in A. Y. 2011 12 and 2012 13 in the case of Mr. M N Rajencdra Kumar. In Para 11.7 on Page 14 of the assessment order for A. Y. 2011 12 in the case of Mr. M N Rajencdra Kumar, it is noted by the AO that M/s K. D. Builders (KDB) is a partnership firm (PAN : AAIFK9762D) of Mr. M N Rajendra Kumar and Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though various arguments are raised by the learned AR of the assessee but this argument itself is conclusive in the facts of the present case that since the AO has admitted that land purchases were made by the firm KDB, the alleged cash component cannot be taxed in the hands of the partners and therefore, we first consider the acceptability of this argument and other arguments will be considered if the assessee does not succeed on this argument. We find that this is not the case of the AO that the lands in question are owned by the Mr. MNR and not the firm M/s K. D. Builders. Hence, we proceed on this basis that the owner of these lands in question is the firm and not the partners of the firm. This is also not a finding of the AO that the cash component is paid by the partners out of their own funds by giving a break up of how much is from own source of which partner. Only this much is noted by the AO tin Para 11.10 to11.12 of the same assessment order that various cash payments were made to DPP on various dates in respect of Liberty Garden Plot Work, Link Road Plot Work and Vasari Hill Plot and some personal payments without any finding that these cash payments are made by Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement recorded on 16.03.2017 and its retraction vide letter dated 28.07.2018 and 11.10.2018. Thereafter on page 34 of the same assessment order, the AO has noted about this argument of the assessee also that the cash payment if any is made by the concerned company and not by Mr. MNR personally and that the assessee Mr. MNR is not actively involved in the regular operation of the company but the AO brushed aside these arguments by stating that the company is floated by the assessee himself with 90% being the assessee and his family members. The AO made the addition in the hands of Mr. MNR without bringing any cogent material on record to establish that the alleged cash payment is made by the assessee individual out of his personal funds. 103. On this issue also, although various arguments are raised by the learned AR of the assessee but this argument itself is conclusive in the facts of the present case that since the AO has admitted that land purchases were made by the company M/s GSRPL, the alleged cash component cannot be taxed in the hands of the directors or shareholders and therefore, we first consider the acceptability of this argument and other arguments will be conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned AR of the assessee, arguments on this issue are the arguments in respect of Issue No. 5 as per him. The main argument raised is this that file created and stored in pen drive of a third party or on the basis of loose sheets cannot be the basis of addition without any corroborative evidence to support the same. At this juncture we examine the basis adopted by the AO in respect of this addition. We find that para 14.3 of the assessment order in the case of Mr. MNR for A. Y. 2013 14 is relevant in this regard. In this para, the AO has noted that 25% of share of M/s Om Sai Siddhi Developers which belonged to Mr. Jayanti Lal Jain was transferred in favour of Mr. MNR and the amounts paid to JLJ was verified. He has noted that as per the Retirement Deed date 10.09.2012, ₹ 74,13,235/- was paid to JLJ but as per the evidences available which is mainly the pen drive of Sanjay, the total payment made to JLJ is ₹ 209 lacs. The difference worked out is ₹ 134, 86,765/-. It is further noted by the AO that an amount of ₹ 57 Lacs was paid to JLJ for the retirement from the Wadhgar project. Total was worked out at ₹ 191, 86,765/-. On page 38 of this assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions filed by the learned AR of the assessee, arguments on this issue are the arguments in respect of Issue No. 6 as per him. The main argument raised is this that file created and stored in pen drive of a third party or on the basis of loose sheets cannot be the basis of addition without any corroborative evidence to support the same. At this juncture we examine the basis adopted by the AO in respect of this addition. We find that para 14 of the assessment order in the case of Mr. MNR for A. Y. 2014 15 is relevant in this regard. In this para, the AO has noted relevant facts about MI CASA Project and he noted that M/s PIPL and M/s GSRL entered into MOU on 10.06.2013 for the development of 44 cents of land situated at Mangalore and as per this MOU, M/s PIPL agreed to pay monetary consideration of ₹ 4.4 Crores to M/s GSRL for taking over of its undivided rights in the said property for the proposed project of Multi Story apartment called as MICASA. 106. In the same para, the AO discussed about another project named VENTURA Project and noted that similarly a MOU was signed on 30.11.2013 between the same two companies for the development and construction of a multi story ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this reason alone and we do not discuss and examine other various arguments of both sides. 108. Now we discuss and decide Issue No. 3 in two appeals of the revenue for A. Y. 2016 17 i.e. in the case of M/s PIPL and Mr. Rohan Monerio. In para 5.1 of the order of CIT (A) in the case of the company M/s PIPL, it is noted by CIT (A) that the AO has stated in the assessment order that the assessee company is carrying on business of builders and developers and noted that in course of survey, certain incriminating material was found and impounded in the form of loose sheets pertaining to three projects viz. MICASA, VENTURA and PREMIRO of the assessee company M/s PIPL and M/s GSRL wherein Mr. MNR is managing director. The AO also noted that as per such material, consideration over and above the agreement value of these three projects was paid by M/s PIPL and the AO added ₹ 340,00,004/- in the hands of M/s PIPL in A. Y. 2016 17 by alleging that this much cash was paid by M/s PIPL for these three projects. As per para 5.13 of his order, learned CIT (A) deleted this addition by holding that an opportunity of cross examination was not allowed by the AO and unless such an opportun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court rendered in the case of CIT vs. IBC Knowledge Park (P) Ltd. (Supra). In para 5.17 of his order, this finding is also given by CIT (A) that evidence found in the premises of third party cannot be imposed on the assessee without any corroborative evidence by the AO. He also observed that both the parties i.e. the searched party Mr. MNR and the assessee Mr. RM have denied having exchanged the on money and he held that loose sheets alone in the absence of corroboration in support of entries in loose sheets cannot be a basis of addition. These findings of CIT (A) could not be controverted by the learned DR of the revenue. This is a settled position of law by now that in the absence of cross examination, the adverse statement cannot be a basis of addition and loose sheets alone in the absence of corroboration in support of entries in loose sheets also cannot be a basis of addition. In the present case of Mr. RM, the addition was made by the AO on the basis of statement of Mr. MNR and some loose sheets and the AO has not provided the opportunity of cross examination and did not bring on record any material for corroboration in support of entries in loose sheets and therefore, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the firm. The second reason is this that the addition was made by the AO on the basis of the statement of the supervisor and material impounded during the course of survey conducted at the head office of SCDCC Bank on 27.12.2016 without bringing on record any material for corroboration in support of entries in loose sheets or digital evidence. Hence, the receipt of on money itself is not established beyond doubt. The value as per agreement is said to be ₹ 354,97,500/- and alleged receipt is only ₹ 200 Lacs i.e. ₹ 95 Lacs by cheque and ₹ 105 lacs by cash and hence, total alleged receipt is much less that value as per the agreement. Under these facts and in view of this discussion, we decide this issue No. 7 also in favour of the assessee. 112. Issue No. 8 in the appeals of the assessee as per Para 2 above is about alleged cash receipts towards construction of Sahakari Sadan (MA Smart) of ₹ 86 lacs in A. Y. 2014 15, of ₹ 87.50 lacs in A. Y. 2015 16, of ₹ 885.67 lacs in A. Y. 2016 17 and ₹ 538.55 Lacs in A. Y. 2017 18 in the case of Shree Mohammad Ameer. Issue No. 9 in the appeals of the assessee as per Para 2 above is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the statement of the accountant Shri. Makeem, in which case he should have been allowed to be cross examined. If it emanates from the statement recorded during search of the appellant, then he has in effect retracted it; AO has failed to explain why the retraction is inadmissible, specially in the face of the evidence gathered which is claimed to have zeros missing; but this conclusion is not based on valid gathering of evidence as the accountant Shri. Makeem has not been cross examined. The principles of natural justice have also been violated, in the sense that the cross examination opportunity has not been provided. Besides, receipt by cheque have been treated as being at par with receipt by cash without providing the reason thereof. Hence, there is no merit in making additions based merely on the verbal statement, which have since been in effect retracted. On the other hand, I find that, the appellant is a contractor. He is not the developer of the buildings himself. Even in his disclosure during search, he has disclosed the said receipts , not income. Thus, the receipts on account of the project, even if unaccounted, are contract receipts, on which tax could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.4.3. On the other hand, in the AR's written submissions dated 09.09.2019. the AR has forcefully argued in respect of entire cash receipts based on the loose sheets impounded during survey, which is as under. AO is not correct in coming to the conclusion that. on money is exchanged between the parties based on a loose sheet found in the premises of M/s.Coastal Construction. To sustain the addition, the AO should have conducted an independent inquiry about the value of the project and ascertain whether any under valuation is done, if so what is the correct value of the project. Further, the AO did not bring on record any evidence to support her contention to say that there is on-money exchanged between the parties. In the absence of proper inquiry and sufficient evidences, there is no reason to confirm addition made by the AO towards on money. The AO merely acted upon the statement given by the appellant, which was subsequently retracted by him, It was a settled position of law that unless the statement is tested under the cross examination, the same cannot be considered as evidence against the assessee. The AO used the admission made in the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ill Vs. Lavanya Land (P) Ltd. (83 Taxmann.com 161) (Bombay). 6. CIT, Central - III Vs. Arpit Land (P) Ltd. (78 Taxmann.com 300)(Bombay). 5.4.5. I have considered the facts of the case and case laws as well as board circular relied on by the AR, the ratio laid down in the said cases are applicable to the appellant's case. 5.4.6. The AO merely acted upon on the statement given by the accountant Mr. Makeem, which was subsequently retracted by him. It is a settled position of law that unless the statement is tested under the cross examination, the same cannot be considered as evidence against the assessee. The AO also used the admission made in the statement recorded under section 132(4) of the Act. But, the assessing officer failed to note that, admission itself cannot be considered as conclusive evidence against the assessee, unless there is corroborative evidence on record; besides, the appellant has in effect retracted this statement as well. 5.4.7. To tax any particular payments, primary evidence is necessary and unless there is primary evidence, circumstantial evidence cannot be considered as conclusive evidence against any person to tax any particular pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these projects declared in any year, if these receipts are included therein. In the result, the appeal is partly allowed on this issue. 112. Now the first aspect to be decided is this as to whether extra amount was received by this assessee or not in respect of these projects. If it is found that there was no such receipt then there cannot be any addition but if it is found that extra receipt was there then we have to decide the quantum of such receipts and how much is taxable out of such extra receipts. Regarding the first aspect as to whether extra cash receipt was there or not, we find that on pages 9 to 11 of the assessment order for A. Y. 2014 15 and A. Y. 2016 - 17, the AO has noted the entries found in seized material and these entries are of cash and cheques both with dates. This is not the case of the assessee that these cheques are not received by him. If entries in the seized material about cheque receipts are correct then cash receipt noted on same documents should also be considered as correct. Hence, we hold that in the facts of the present case, extra cash was in fact received by the assessee for all these four years as alleged by the AO in all these four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of turnover cannot be said to be income even in respect of unaccounted turnover and hence, we hold that there is no merit in this issue no. 5 raised by the revenue in its four appeals filed in the case of Mr. Mohammad Ameer. 116. Learned CIT (A) has directed the AO to compute the income @ 8% of unaccounted turnover. Although no basis is indicated by CIT (A) for adopting 8% rate but it appears to us that he has been guided by the provisions of section 44AD of I T Act but the provisions of this section are applicable only in those cases, where the annual turnover is below a specified amount. In the present case, turnover is much higher and therefore, the rate specified in this section cannot be adopted. We find that on page 14 of his order for A. Y. 2015 16 and 2016 17 both, learned CIT (A) has noted the percentage of Net Profit declared by the assessee during A. Ys. 2011 12 to 2018 19 and that is in the range of 1.29 to 7.04 and average is 3.07 %. This is not the case of the AO that the income declared by the assessee as per books is lower and it is seen that no addition is made by the AO by alleging that the Net Profit declared by the assessee in respect of accounted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hering and unearthing of meaning and correlation and understanding the mathematics and the meaning of the transactions entered in the loose sheet, all of which may perhaps have been attempted by the AO, but without success. Hence, there is no merit in making additions only based on the statement recorded during the search and loose sheets found when the statement is retracted, and details in the paper are not deciphered, confronted and details written therein established. Therefore, I have no option but to delete the additions amounting to ₹ 1,83,00,000/-. This covers Ground no.1 to 6. 119. We find that in the above para, a categorical finding is given by the learned CIT (A) that no serious effort has been made by the AO to trace the persons named in the loose paper beyond merely asking the assessee to provide the address. This is also a finding of CIT (A) that the details written on the loose sheet have not been properly deciphered. He ultimately held that there is no merit in making addition only based on the statement recorded during the search and loose sheets found when the statement is retracted and details in the paper are not deciphered. These findings of learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case is relevant for (Issue No. 4 (i)), Para 6.4.9 of the order of CIT (A) in this case is relevant for (Issue No. 4 (ii)) and Para 6.5.9 of the order of CIT (A) in this case is relevant for (Issue No. 4 (i)ii),and hence, we reproduce the same for ready reference as under:- 6.3.8 I have considered the facts of the case and case laws relied on by the AR, the ratio laid down in the said cases are applicable to the appellant's case. Considering all the aspects, I hold that, the additions made is purely based on the statement made by the appellant without any corroborative evidence by the AO. The statement in oath considering acceptance, but lacks basis. In the absence of basis, the appellant could successfully retract that part of the statement. In the instant case, the appellant has denied having exchanged the on money for investment in dairy land. Even after the Appellant's case is covered under search operations under section 132, the department did not unearth any evidence regarding exchange of cash in sale transaction except statement of the appellant at the time of search operation. In the absence of proper inquiry and sufficient evidences, I find no reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure in Global Export, Ullal. 122. We find that in the above three paras reproduced above, a categorical finding is given by the learned CIT (A) in each of these paras that the addition made is purely based on the statement made by the assessee without any corroborative evidence by the AO. Before us also, learned DR could not produce any corroborative evidence which was available with the AO to make these additions. This is a settled position of law that any addition made only on the basis of statement of the assessee in course of search without bringing on record any adverse cogent material to corroborate such statement, the addition so made is not sustainable and therefore, we find no infirmity in the order of CIT (A) on these three issues and therefore, decline to interfere in this order of CIT (A) on these three issues. Accordingly, Issue No. 4 in the Appeals of the revenue is also decided in favour of the assessee. 123. In the result, all fifteen appeals of the assessee are allowed in the terms indicated above and all nine appeals filed by the revenue are dismissed. Pronounced in the open court on the date mentioned on the caption page. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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