2019 (9) TMI 1180 - AT - Income Tax

Addition u/s 68 on account of alleged bogus premium - addition on the basis of the statement made by the director - HELD THAT - The entire action of the authorities below speaks total non-application of mind, lack of inquiry and colourable exercise of power, excessive highhandedness as also close mindedness resulting into addition merely on the basis of the statement made by the director of Ankush Finstock Ltd which was neither allowed to be cross examined; such addition, therefore is nullity , totally unjust, unfair and without due process of law having no legal basis and thus liable to be deleted. Hence with the above observations we delete the impugned addition to the tune of ₹ 4 crores made on the ground of bogus premium. This ground of appeal, is thus, allowed in favour of the assessee. Unaccounted investment in purchase of land of the project Ratnakar -IV of the assessee company - as revealed from the survey enquiry that the assessee had purchased land from three individuals for the construction of its residential project as Ratnakar IV - HELD THAT - As find from the submissions made by the revenue that they have prayed for setting aside the issue to the learned AOfor re examination of the matter which, according to us is not permissible at this stage. If the prayer is granted by us, then this will be nothing but a premium on the inaction made by the authorities below on this aspect when they failed to avail the chances to do so at the relevant time. Both the Learned AO or by the Learned CIT(A) failed to do it. Opportunity of cross verification from the vendors, in our considered view should not be given in the hands of the Revenue once again which will be opening a further avenue for multiple innings which has been deprecated by the Hon ble Jurisdictional High Court in the matter of Rajesh Babubhai Damania-vs-CIT 2000 (6) TMI 5 - GUJARAT HIGH COURT particularly when the alleged unaccounted investment made by the assessee in respect of the property in question has not been established by the Revenue before us. Thus, the addition made on the basis of the dumb document is unjustified, unwarranted and bad in law which is liable to be set aside. Hence, with the aforesaid observation, we delete the addition towards alleged unaccounted investment in purchase of land of the project Ratnakar -IV - Decided in favour of assessee. Addition on account of on money - HELD THAT - As relying on own case 2017 (3) TMI 1048 - ITAT AHMEDABAD we find that the issue has already been settled in favour of the assessee

Summary

Issues Involved:
1. Addition on account of alleged bogus premium to the tune of ?4 crores under Section 68 of the Act.
2. Addition of ?18,05,87,658/- on account of unaccounted investment in the purchase of land for the appellant’s project Ratnakar IV.
3. Addition on account of on money receipts to the tune of ?17,85,79,435/-.

Issue-Wise Detailed Analysis:

1. Addition on account of alleged bogus premium to the tune of ?4 crores under Section 68 of the Act:

The assessee was alleged to have received an investment amounting to ?4 crores from M/s Ankush Finstock Ltd. The director of Ankush Finstock Ltd, Shri Bharat M. Shah, admitted to the tax authorities that he was in the business of providing entries to various groups and had received ?4 crores in cash from the director of the assessee company, Shri Upendra C. Shah, which was then routed back as an investment in the assessee's company. The authorities added ?4 crores as unexplained credits under Section 68 of the Act.

The assessee argued that the addition was made on assumptions and the statement of Bharat M. Shah, which was not cross-examined despite requests. The assessee provided detailed documents, including share applications and board resolutions, to prove the genuineness of the transactions. The authorities, however, relied on the statement of Bharat M. Shah and concluded that the funds were introduced in a disguised manner.

The tribunal found that the authorities failed to allow cross-examination of Bharat M. Shah, making the addition unreliable. The tribunal also noted that the documents provided by the assessee were not considered by the authorities. The tribunal deleted the addition of ?4 crores, stating that the addition was made on surmises and conjectures without proper evidence.

2. Addition of ?18,05,87,658/- on account of unaccounted investment in the purchase of land for the appellant’s project Ratnakar IV:

The authorities alleged that the assessee paid ?18,05,87,658/- in cash for the purchase of land, in addition to the ?5,25,00,000/- reflected in the deed of sale, based on a loose paper found during a survey. The assessee retracted the statement made during the survey, claiming it was made under pressure.

The tribunal noted that the loose paper was a "dumb document" with no title, date, or details linking it to the appellant. The authorities did not conduct any independent enquiry to verify the payment with the land vendors. The tribunal cited various judgments, including V. C. Shukla and Dhakeshwari Cotton Mills, emphasizing that additions based on such documents without corroborative evidence are not sustainable.

The tribunal deleted the addition of ?18,05,87,658/-, stating that the authorities acted on assumptions without proper enquiry or evidence.

3. Addition on account of on money receipts to the tune of ?17,85,79,435/-:

The authorities alleged that the assessee received on money for the sale of flats in the Ratnakar II project, based on a document showing a higher price per square foot than reflected in the sale deeds.

The tribunal noted that the issue had already been examined in ITA No.1502/Ahd/2017 and settled in favor of the assessee. The tribunal deleted the addition of ?17,85,79,435/-, following the earlier judgment.

Conclusion:

The tribunal deleted all the additions made by the authorities. The addition of ?4 crores on account of alleged bogus premium was deleted due to lack of cross-examination and proper evidence. The addition of ?18,05,87,658/- for unaccounted investment in land was deleted as it was based on a "dumb document" without corroborative evidence. The addition of ?17,85,79,435/- on account of on money receipts was deleted, following the earlier judgment in favor of the assessee. The appeal was partly allowed in favor of the assessee.