Friends on 1st march, 2019, BOMBAY TRIBUNAL held that the statements of the employees, in search and seizure cases, can be used only if they are supported by some kind of collaborative evidence. However, Ld. DR could not point out the evidence proving the receipt of alleged on money. As the assessment for the AY. 2008-09 was not pending, so, without some incriminating material, the AO should not have made the addition to the total income of the assessee. (Para 16)
the AO had made reliance on a single sheet of paper which does not reflect the name of the assessee or its project. Thus only on the basis of the single sheet of paper, no addition can be made on account of on-money received by the assessee. (Para 14)
the disallowance was made by the AO stating that the assessee was unable to establish that these expenses were incurred solely for ‘business purposes’ and thus made adhoc disallowance. However, the assessee being a company, is a separate juristic entity, therefore any element of ‘personal expenses’ would therefore need to be demonstrated with reference to the directors. The said proposition has been rendered in the case of Sayaji Iron & Engeneering Co. Vrs. CIT (254 ITR 749) and CIT Vrs. SSP Pvt. Ltd. (202 taxman.386). Thus, Ld. CIT(A) had rightly deleted the disallowances while keeping in view the above judgments. (Para 19)
DEPUTY COMMISSIONER OF INCOME TAX vs. GOODWILL PROPERTIES PVT. LTD.
BOMBAY TRIBUNAL
SANDEEP GOSAIN, JM & N. K. PRADHAN, AM.
ITA No. 4023 & 4026/Mum/2016 Mar 1, 2019
(2019) 55 CCH 0179 MumTrib
Legislation Referred to Section 68, 2(31)
Case pertains to Asst. Year 2008-09 & 2009-10
Decision in favour of: Assessee
Cases Referred to
ACIT vs. Janak Raj Chauhan (102 TTJ 316) (Amritsar)
Maheshwari Industries vs. ACIT (148 Taxman 74 (Jodh.) (Mag)
DCIT Vrs. Silver Arch Builders and Promoters ITA No. 3162 & 3163/Mum/16
Counsel appeared:
Awangshi Gimson, DR for the Appellant.: Vijay Mehta /Govind Jhaveri, AR for the Respondent
SANDEEP GOSAIN, JM.
1. The present two appeals have been filed by the revenue are against the order of Commissioner of Income Tax (Appeals)-47, Mumbai dated 14.03.16 for AY 2008-09 & 2009-10 respectively.
2. Since, the facts raised in both the appeals filed the revenue are identical, therefore for the sake of convenience; they are clubbed, heard and disposed of by this consolidated order.
3. First of all we take up appeal in ITA No. 4023/Mum/2016 filed by revenue for AY 2008-09 on the grounds mentioned herein below:-
1) “On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in deleting the addition of on-money of Rs. 3,87,28,6801- received on sale of flats relying on the observation and decision in the case of ACIT vs. Janak Raj Chauhan (102 TTJ 316) (Amritsar) and Maheshwari Industries vs. ACIT (148 Taxman 74 (Jodh.) (Mag)) without appreciating the facts that the addition was made on the basis of the statement of the Director Shri Haresh Mohanalal Mehta and three key employees of the assessee group namely Ms. Chaula Joshi (Sales and Marketing Executive of Rohan Group) and Mr. Vijay Jasani (Accountant of the Rohan Group) and also of Mr. Paresh Panchlotiya (Office Assistant/Liaison Officer) during the course of search. The CIT(A) further failed to appreciate that the Rohan Group had been searched earlier too on 10.08.2006 and even during the course of that search, the same Ms. Chaula Joshi had admitted to the fact that the group executed sales deed by accepting on money in cash which was over and above the agreement price.”
The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary.
4. The brief facts of the case are that the Rohan Group of entities alongwith Directors, family members and related parties were subject to search and seizure operation u/s 132 on 26.05.2011. The assessee company was also associated with the said group.
As per the impugned order, for A.Y. 2008-09, the assessee filed its original return of income u/s 139 on 30.09.2008 declaring total income at Rs.4,71,17,350/-. Original assessment u/s 143(3) was completed vide order dated 31.12.2010 making disallowances of Rs.4,37,414/- comprising personal element of conveyance, telephone and foreign travel expenses. Pursuant to the search, return for the same year was filed in response to notice u/s 153A on 04.03.2013 declaring income at Rs.4,74,54,730/-. The return was taken up for scrutiny thereafter. Assessment u/s 143(3) r.w.s 153A for A.Y. 2008-09, was completed vide assessment order dated 29.03.2014 determining total income at Rs.8,63,02,410/- on account of addition of ‘on- money’ of Rs. 3,87,28,680 and disallowance of additional claim of Rs.1,18,997/-.
Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, partly allowed the appeal of the assessee and deleted the additions.
Now before us, the revenue has preferred the appeals for respective years. However at present we are dealing with the appeal filed by the revenue bearing ITA No. 4023/Mum/2016 on the grounds mentioned herein above.
5. The solitary ground raised by the revenue relates to challenging the order of Ld. CIT(A) in deleting the addition of on-money of Rs. 3,87,28,680/- received on sale of flats.
6. Ld. DR appearing on behalf of the department relied upon the orders passed by the AO and submitted that Ld. CIT(A) has erred in deleting the additions of on-money received by the assessee on sale of flats by wrongly relying upon the observation and decision in the case of ACIT vs. Janak Raj Chauhan (102 TTJ 316) (Amritsar) and Maheshwari Industries vs. ACIT (148 Taxman 74 (Jodh.) (Mag). It was further argued that the addition was deleted without appreciating the facts that the addition was made on the basis of the statement of the Director Shri Haresh Mohanalal Mehta and three key employees of the assessee group namely Ms. Chaula Joshi (Sales and Marketing Executive of Rohan Group) and Mr. Vijay Jasani (Accountant of the Rohan Group) and also of Mr. Paresh Panchlotiya (Office Assistant/Liaison Officer) during the course of search. It was also argued that Ld. CIT(A) further failed to appreciate that the ‘Rohan Group’ had been searched earlier too on 10.08.2006 and even during the course of that search, the same Ms. Chaula Joshi had admitted to the fact that the group executed sales deed by accepting on money in cash which was over and above the agreement price.
7. Whereas on the contrary, Ld. AR appearing on behalf of the assessee relied upon the orders passed by Ld. CIT(A) and also reiterated the same arguments as were raised before Ld. CIT(A). It was also submitted that the identical ground has already been decided on merits in favour of the group concern of ‘Rohan Group’ by the order of the Coordinate Bench of ITAT in ITA No. 3162 & 3163/Mum/16 in the case of DCIT Vrs. Silver Arch Builders and Promoters.
8. We have heard counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find as per the facts of the present case, a search and seizure operation u/s 132 of the Act took place on ‘Rohan Group’ of entities on 26.05.11. The assessee company is also associated with the said group. The AO while making additions had observed that the assessee was engaged in the business of real estate development and during the year had undertaken the construction of a commercial project ‘Shiv Tapi. The AO further noted that statement of Shri Haresh Mohanlal Mehta, a Director in the Rohan Group was recorded during the search and therein Shri Mehta acknowledged that 30% on-money was accepted over and above the registered value of the agreements and that the same was outside the books of account. The AO also took note of the statements recorded from Ms. Chaula joshi (Sales and Marketing Executive in the Group), Mr. Vijay Jasani (Accountant in the Group), Mr. Paresh Panchlotiya (Office Assistant/Liaison Officer) for the proposition that on money was collected on sale transactions and accordingly asked the appellant to explain as to why such addition should not be made in its hands.
9. Late Shri Jitendra Mehta, Director rebutted the conclusions drawn by the AO by stating that none of the individuals whose statements were relied upon by the AO were in anyway authorised to close sales transactions It was further stated that copies of the said statements had not been provided to him. It was stated that though Shri Haresh Mohanlal Mehta was Director in one of the many concerns of ‘Rohan Group’ (Rohan Developers Private Limited), he was not involved in sales and was not handling the day to day activities in the period pertaining to the search-related proceedings nor was he receiving any remuneration from the assessee company. It was submitted that no sales person or other staff of the company was reporting to Shri Haresh Mohanlal Mehta. It was further stated that Shri Haresh Mohanlal Mehta independently owned a construction company in the name of Raj Doshi Exports Ltd. It was submitted that the admission of receipt of on-money, over and above 30% of the registered value of the flats was given by Shri Mehta while referring to loose papers found from his premises during the search and that the said papers did not relate to the assessee group. It was further submitted that there was no nexus between the project of the appellant company and the independent project carried out by Shri Haresh Mohanlal Mehta and that the wife and daughter of Shri Haresh Mohanlal Mehta were in no way related to the appellant company. For these reasons it was argued that the declaration made by Shri Haresh Mohanlal Mehta u/s 132(4) could not be taken to apply to the projects of the assessee company.
10. However, the AO opined that there were sufficient evidences to show that the assessee company was accepting on- money in cash. These included:
1. Page 114, Annexure A-1, found and seized from 112-122, Hira Bhawan, Raja Ram Mohan Roy Road, Prarthana Samaj (panchnama dated 27.05.2011) – wherein the sales executive of the company had mentioned that part of sale price is taken in cheque and rest in cash.
2. Excess cash of Rs.25,86,687/- found at 112-122 Hira Bhawan, Raja Ram Mohan Roy Road, Prarthana Samaj – source unexplained
3. Excess cash of Rs.8,50,000/- and unexplained jewellery found at M/s Goodwill Properties – source unexplained
4. Statement of Ms. Chaula Joshi
5. Statement of Shri Vijay Jassani
6. Statement of Shri Haresh Mohanlal Mehta, Director
7. Disclosure of Rs.100 crores by the appellant group on the basis of the documents found in the search – source of amount unexplained.
11. The AO also rejected the contention of the assessee that no incriminating evidence was found in respect of on-money receipt. It was further noted by the AO that the delay in retraction of statement was also indicative of the fact that the assessee’s explanation was not genuine. Hence rejected the arguments of the assessee that flats were sold at the rates shown in the agreements and reached to the conclusion by holding that since the group had made disclosure of Rs. 100 crores, thus concluded that on-money had been taken by the group entities.
12. On appeal, the Ld. CIT(A) after considering the written submission filed by the assessee and considering the facts had deleted the additions. Ld. CIT(A) after appreciating the statements of Ms Chaula Joshi, Vijay Jasani, Paresh Panchlotia had categorically mentioned that in the statements of above said persons, no specific mention of either the assessee company or of the project undertaken by it was given and none of the statement reflect any specific details regarding the receipt of on-money by the assessee company in relation to the project i.e. carried on by it. It was also noticed that all the statements made by the above persons were subsequently retracted through affidavits. Since the AO had taken a specific stand that the disclosure of Rs. 100 crores by Late Shri Jitendra Mehta was indicative of the fact that the group had received on-money and in this respect a detail chart has been mentioned in the order of Ld. CIT(A) in para no. 5.2.10. However, perusal of the chart shows that the income offered was in respect to specific entities /persons and also with reference to specific sources /documents found in the search e.g. horse racing loss and property income in the case of Mr. Harresh Mehta, income with reference to seized paper at page 97, Annexure A-1 in the case of M/s Manav Builders Pvt. Ltd. etc. Hence in such circumstances, Ld. CIT(A) has correctly held that when the disclosure made is so specifically correlated, the same cannot be extended to include a quantum several times more without specific evidence. The Ld. CIT(A) also specifically dealt with the plea raised by the AO with regard to circumstantial evidence of cash and unexplained jewellery found during the search. In this regard, Ld. CIT(A) after appreciating the facts had rightly held that cash of Rs.25,86,687/- was seized from 112-122, Hira Bhawan, which was common premises for 4 entities of the assessee’s group i.e. M/s Rohan Lifescapes, M/s Rohan Developers, M/s Goodwill Properties and M/s Silver Arch. As per assessee, the total cash found from the various premises of group concerns/directors etc. was Rs.1,35,00,000/- and that from this sum, an amount of Rs. 1,09,13,313/- was reconciled with the books of accounts of the constituent companies, directors etc. of the Group. The balance amount of Rs. 25,86,687/- was stated to have been offered as undisclosed income in the hands of M/s Rohan Developers Private Limited for A.Y. 2012-13.
13. It is a settled law that for carrying out of proceedings against concerned persons, the materiality, relevance, admissibility or weight of retracted statements has to be examined. The retraction by itself does not provide an impenetrable shield to the concerned person, it is also equally true that a statement per se, by itself is not conclusive evidence. In this regard, we draw strength from the judgment in the case of ACIT vs Janak Raj Chauhan {102 TTJ 316 (Amritsar)}, wherein the Tribunal had held that admission made at the time of search is important but not conclusive. In case of Maheshwari Industries vs ACIT {148 Taxman 74 (Jodh)(Mag)}, the Tribunal held that additions should be considered on merits rather than on the basis of surrender made by an assessee.
14. In the present case, the AO had made reliance on a single sheet of paper which does not reflect the name of the assessee or its project. Thus only on the basis of the single sheet of paper, no addition can be made on account of on-money received by the assessee.
15. We have also perused the order of the Coordinate Bench of ITAT, wherein the identical ground has already been decided by the Coordinate Bench of ITAT in the case of group concernin ITA No. 3126 & 3163/Mum/16 in the case of DCIT Vrs. Silver Arch Builders & Promoters. The operative portion of the order of Hon’ble ITAT contained in para no. 2 to 5, which is reproduced below:-
2. The brief facts of the case are that Rohan group of entities along with directors, family members and related parties were subject to search and seizure operations u/s. 132 of the Act on 26/05/2011,that the assessees was also associated with the said group. Subsequent to the search a notice u/s. 153A was issued to the assessee on 11/01/2013.It filed a return on 04/03/2013, declaring income at Rs. 36.65 lakhs. During the assessment proceedings, the AO found that the assessee had undertaken the construction of acommercial project Rameswaram. During the search proceedings statements of Haresh Mohanlal Mehta(HMM), one of the directors of the Rohan group, were recorded, who admitted that that 30% on money was accepted over and above the receipt value of the agreement and the same was not recorded in the regular books of accounts. The AO also took note of the statements of sales and marketing executive, accountant of the group and of the liason officer for the proposition that on money was collected on saletransactions and accordingly asked the assessee to explain as to why such addition should not be made in its hand.
The assessee filed its reply stating that none of the individuals, whose the statements were relied upon by the AO, was in any way authorised to close sales transactions, that the copies of the said statement had not been provided to the assessee, that HMM was director in the one of the concerns of Rohan group, that he was not concerned with the sales, that he was not looking after day-to-day activities of the assessee, that no salesperson or other staff of the company was reporting to HMM, that he independently owned a construction company, that there was no nexus between the project of the assessee and the independent project carried out by HMM, that the declaration made by HMM u/s. 132(4) could not be taken to relates the projects of the assessee.
After considering the submission of the assessee and taking note of the cash and jewellery found at the office premises, the AO made an addition of Rs. 36.71 lakhs under the head on money received during the year under consideration.
3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA).Before her, the assessee challenged the validity of the order passed u/s. 153A of the Act and relied upon certain case laws. After considering the elaborate submissions of the assessee, the FAA held that original return u/s. 139 of the Act on 2/7/2007, that search was carried out in the case of Rohan group on 26/05/2011, that the time limit for issue of notice u/s. 143(2) for the year under consideration expired on 31/03/2008,that there was no proceedings pending in the case of the assessee, that it was not a case where assessment proceedings were pending and had abated. She referred to the case of All Cargo Global Logistics Ltd. of the special bench of the Tribunal and held that in cases where there had not been any abatement of assessment the assessment u/s. 153A of the Act would be made on the basis of incriminating material found in the course of search, that the order of the special bench of the Tribunal were challenged by the Department before the jurisdictional High Court, that the Hon’ble Bombay High Court had dismissed the appeal filed by the revenue and had upheld the order of the tribunal. She further observed that the case of the assessee for the year under consideration was not a pending or abated assessment, that in case of non-abated assessments addition had to based on incriminating material seized during the search, that the only document referred to in the impugned order was page 114 of annexure A-1 and the statements of HMM along with the statements of employees, that the perusal of the seized paper revealed that there was no mention of the assessee or the project undertaken by it on the said paper, that the above referred paper did not make any mention of the assessee, that the perusal of the statements of the employees reflected that no specific mention of receiptof on money, that the impugned assessment was not based on any incriminating material pertaining to the assessee seized during the search, that the addition made on account of on money was not emanating from the material found and seized during the search action. Finally, she deleted the addition made by the AO.
4. During the course of hearing before us, the Departmental Representative stated that the employees of the assessee had accepted the fact that on money at the rate of 30% of the registered value was accepted by the company. As stated earlier, none appeared on behalf of the assessee.
5.We have perused the available material. We find that the FAA has given a categorical finding of fact that no incriminating material was found during the search and seizure operation that could justify the addition made by the AO. She has analysed the page number 114 that was seized by the authorised party carrying out the search proceedings. It is very clear that neither the name of the assessee nor the name of the project is appearing in the paper. The assessee had objected before the AO that the statements of the employees were not given to it. We do not know as to whether same were made available to the assessee or not. The statements of the employees, in search and seizure cases, can be used if they are supported by some kind of collaborative evidence. On a specific query by the bench to the DR about supporting evidence proving the receipt of alleged on money, she could not refer to any material. As the assessment for the AY. 2007-08 was not pending, so, without some incriminating material the AO should not have made the addition to the total income of the assessee. The FAA had taken notice of the order of the special bench and dismissal of the Departmental appeal by the Hon’ble Bombay HighCourt and had decided the issue. In our opinion, her order does not suffer from any legal or factual infirmity. So, confirming the same, we decide effective ground of appeal (GOA-1&2) against the AO.
16. After having gone through the facts of the present case and also perusing the orders of the Coordinate Bench of ITAT in the case of group concern with regard to the same search, we are also of the view that the statements of the employees, in search and seizure cases, can be used only if they are supported by some kind of collaborative evidence. However, Ld. DR could not point out the evidence proving the receipt of alleged on money. As the assessment for the AY. 2008-09 was not pending, so, without some incriminating material, the AO should not have made the addition to the total income of the assessee. That the order of Ld. CIT(A) does not suffer from any legal or factual infirmity. Moreover, taking into consideration, the decision of the Coordinate Bench of ITAT in the case of group concern and also in order to maintain judicial consistency, we apply the same findings in the present case which are applicable mutatis mutandis. Resultantly this ground raised by the revenue stands dismissed.
Now we take up ITA No. 4026/Mum/2016 filed by revenue.
17. Since we have already decided the appeal filed by revenue in ITA No. 4023/Mum/2016 and dismissed the same on merits qua additions made by AO on account of on-money. Therefore following our own decision in ITA No. 4023/Mum/2016, we apply the same findings in order to maintain judicial consistency which is applicable mutatis mutandis in the present appeal of the revenue.
18. However, for the year under consideration, the revenue has also challenged the order of Ld. CIT(A) in deleting the disallowance on conveyance and telephone expenses.
19. On this ground, we have heard the counsels for both the parties and perused the material placed on record as well as orders passed by the revenue authorities, we find that the disallowance was made by the AO stating that the assessee was unable to establish that these expenses were incurred solely for ‘business purposes’ and thus made adhoc disallowance. However, the assessee being a company, is a separate juristic entity, therefore any element of ‘personal expenses’ would therefore need to be demonstrated with reference to the directors. The said proposition has been rendered in the case of Sayaji Iron & Engeneering Co. Vrs. CIT (254 ITR 749) and CIT Vrs. SSP Pvt. Ltd. (202 taxman.386). Thus, Ld. CIT(A) had rightly deleted the disallowances while keeping in view the above judgments.
20. Even before us, no new facts or contrary judgments have been brought on record in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings so recorded by the Ld.CIT(A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the revenue stands dismissed.
21. In the net result, both the appeals filed by the revenue stands dismissed with no order as to cost.
Order pronounced in the open court on 1st March, 2019