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2021 (4) TMI 627 - AT - Income TaxAddition based on seized document in search - undisclosed sales receipts on the sale of plots in the project N.R. Estate - assessee's sole grievance is that opportunity of cross examination was not provided and the additions were made merely on the basis of third party information gathered at the back of appellant - whether the Ld. A.O was justified in applying the estimated rate per sq. feet of land for the plots sold by both the assessee(s) as against the sales shown in the regular books of accounts duly evidenced by registered sale deeds ? - HELD THAT - We observe that in the alleged seized diary found from the premises of Mr. Kamal Goyal there was information of few plots of land and the rate of sale per sq.feet was ranging from ₹ 1150/- to ₹ 1131/- per sq.ft but the Ld. A.O failed to record the basis for adopting ₹ 500/- ₹ 900/- and ₹ 1300/- for Assessment Year 2009-10, 2011-12 and 2013-14 and the same is purely an estimate. Even the Ld. A.O has failed to take any valuation report from Departmental Valuation Officer to support the rate adopted by him. No incriminating material was found from the premises of M/s N.R. Finance Pvt. Ltd and similarly no evidence was gathered in the case of M/s N.R. Company to show that any consideration over and above the disclosed sale consideration in the books of accounts has been received. It is not in dispute that the sales recorded in the books of assessee are duly supported by registered sale deed signed by both the buyers and sellers and stating the consideration paid/received before the registering authority and transaction has taken place through proper banking channel. Ld. A.O has not rejected the books of accounts u/s 145(2) of the Act. Revenue has failed to prove that both the assessee(s) ever entered into any transaction of any nature with Mr. Kamal Goyal. Even in the affidavit given by Mr. Kamal Goyal he has not stated anything about the assessee(s) except that some plot of land of N.R. Estate was sold and it is also pertinent to note that even after specific request assessee was not offered any opportunity to cross examine Mr. Kamal Goyal which itself defies the principal of natural justice. The contents of the seized diary showing few transactions of sale of plot at N.R. Estate are totally different with the actual transaction which took place for plot numbers mentioned in the seized diary. Besides the mismatching of dates and names even the actual plot size do not tally The information contained in the seized diary which has been heavily relied upon by the Ld. A.O seems to be clueless showing no nexus with the actual transaction took place. There is no mention of the assessee firms name in the diary. The broker Mr. Kamal Goyal has also not uttered a word about having entered into any transaction with the assessee(s) except the notings made in the seized diary. Ld. A.O has failed to bring any clinching evidence to support the estimated rate adopted by him. All these facts collectively indicate only one thing that the alleged document i.e. few pages of the seized diary showing some incomplete information about sale of plots at N.R. Estate is merely a dumb document which under no circumstances can be used against the assessee to make the additions. See VATIKA LANDBASE PVT. LTD. 2016 (2) TMI 835 - DELHI HIGH COURT Thus we find merit in the finding of Ld. CIT(A) and submission made by both the assessee(s) and are of the considered view that the additions made by Ld. A.O applying the estimated rate of per sq. feet of land sold by both the assessee(s) seems to be purely a guess works and is merely made on surmises and conjectures and the impugned additions has thus been rightly deleted by Ld. CIT(A). Additional evidence in the form of registered sale deeds without giving any opportunity to the Ld. A.O as provided under Rule 46A of the I.T. rules and also not calling of Remand Report - HELD THAT - We find that evidence indicated by the Ld. Departmental Representative is registered sale deeds. There is no dispute to the fact that registered sale deed is available on public domain. The transaction of purchase and sale of immoveable property are registered before the registering authority appointed by the Government and the documents are available on public domain. These documents could have been called for by the Ld. A.O without informing the assessee(s). In these given facts and circumstances of the case and also under the provisions of I.T. Act which provides co-terminus power to Ld. CIT(A) as are there with the Ld. A.O, we are of the considered view that the alleged additional evidence cannot be categorized as additional evidence for the issue raised in the instant appeals. We accordingly dismiss the additional ground raised by the revenue in the case of M/s N.R. Finance Pvt. Ltd for Assessment Year 2012-13 and 2013-14. Excess development charges claimed by the assessee - HELD THAT - From perusal of the finding of Ld. CIT(A) we find no inconsistency since sale consideration received from sale of extra land to M/s N.R. Finance Pvt. Ltd is already included in the gross sales shown by the assessee and the profit arising there from has been offered to tax. This fact is duly verifiable from the development charges paid to M/s N.R. Finance Pvt. Ltd for Assessment Year 2009-10 to Assessment Year 2013-14. We thus confirm the finding of Ld. CIT(A) and dismiss Ground No.3 raised by the revenue for Assessment Year 2013-14 in the case of M/s N.R. Company. Cross Objections filed by the assessee namely M/s N.R. Finance Pvt. Ltd for Assessment Year 2012-13 and Assessment Year 2013-14 raising the issue that no opportunity was not given to cross examine the broker Mr. Kamal Goyal about the contents appearing in the seized diary - In the preceding paras we have already made specific observation that the action of Ld. A.O of making additions based on the third party information without providing opportunity of cross examination defies the principal of natural justice which the assessee is duly eligible for. There is sufficient merit in the assessee s cross objection since the specific request was made to Ld. A.O for providing cross examination but the same was denied. Thus even on this legal issue itself the assessee deserves to succeed and the additions made by Ld. A.O based on the seized document found from the premises of broker Mr. Kamal Goyal deserves to be deleted. In the result Grounds raised by the assessee in Cross Objections for Assessment Years 2012-13 and 2013-14 are allowed in the case of M/s N.R. Finance Pvt. Ltd.
Issues Involved:
1. Deletion of additions based on estimation of sale consideration. 2. Violation of Rule 46A by CIT(A) in accepting additional evidence. 3. Deletion of disallowance of development charges. 4. Denial of opportunity for cross-examination. Detailed Analysis: 1. Deletion of Additions Based on Estimation of Sale Consideration: The primary issue was whether the CIT(A) erred in deleting the additions made by the AO based on estimated sale consideration derived from seized documents found at the broker's premises. The AO had estimated the sale price of plots based on entries in a seized diary, which indicated higher rates than those recorded in the assessee's books. - Findings: The Tribunal noted that the AO's additions were based on assumptions and estimations without concrete evidence. The seized documents (pages 64, 66, and 68 of LPS-A3) were deemed "dumb documents" with no direct nexus to the actual transactions of the assessee. The AO failed to corroborate the entries with any independent evidence or statements from the parties involved. The Tribunal upheld the CIT(A)'s decision to delete the additions, emphasizing the lack of incriminating evidence and the failure to provide the assessee an opportunity for cross-examination. 2. Violation of Rule 46A by CIT(A) in Accepting Additional Evidence: The Revenue contended that the CIT(A) erred by accepting registered sale deeds as additional evidence without providing an opportunity to the AO to rebut the same, violating Rule 46A. - Findings: The Tribunal held that registered sale deeds are public documents and not additional evidence. These documents could have been obtained by the AO independently. The CIT(A) has co-terminus powers with the AO and is entitled to consider such public documents. The Tribunal dismissed the additional ground raised by the Revenue, affirming that there was no violation of Rule 46A. 3. Deletion of Disallowance of Development Charges: The AO had disallowed development charges of ?15,67,401/- on the grounds of excess area developed beyond the agreement. - Findings: The Tribunal found that the sale consideration for the extra area sold was already included in the gross sales shown by the assessee, and the profit from these sales was offered to tax. The development charges were debited as per the actual work completed and billed by the developer. The Tribunal upheld the CIT(A)'s decision to delete the disallowance, noting that there was no discrepancy in the development charges paid. 4. Denial of Opportunity for Cross-Examination: The assessee argued that the AO made additions based on third-party information without providing an opportunity for cross-examination, violating the principles of natural justice. - Findings: The Tribunal agreed with the assessee, noting that the AO's failure to provide an opportunity for cross-examination of the broker, Mr. Kamal Goyal, defied the principles of natural justice. The Tribunal emphasized that before using any material or statement recorded behind the back of the assessee, it should be confronted to the assessee, and the assessee should be allowed to cross-examine the parties involved. The Tribunal allowed the cross-objections raised by the assessee on this ground. Conclusion: The Tribunal dismissed all the appeals filed by the Revenue and upheld the CIT(A)'s orders, deleting the additions made by the AO based on estimated sale consideration and disallowance of development charges. The Tribunal also allowed the cross-objections raised by the assessee, emphasizing the importance of providing an opportunity for cross-examination and adhering to the principles of natural justice.
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