2021 (12) TMI 726 - AT - Income Tax

Addition on account of alleged on money received on sale of flats - search and seizure operation under section 132 - assessee is a resident company and is stated to be engaged in Real Estate Development - search and seizure operation under section 132 of the Income Tax Act, 1961 was carried out on 26.05.2011 in case of M/s Rohan Developers Pvt. Ltd. and other companies and entities promoted by Shri Haresh N Mehta and late Jitendra N. Mehta as well as in the residential premises of the Directors and employees of the entities being part of Rohan Group. - Based on the seized document and statement recorded, proceedings under section 153A of the Act was initiated in respect of the searched persons - HELD THAT - To prove the content of seized document, the only other corroborative evidence available with the AO is the statements recorded from the Directors and employees of the Rohan Group. It is relevant to observe, in the statement recorded from Ms. Chaulla Joshi, a specific query was raised regarding the figures appearing against Siddhesh Jyoti E F Wing. In reply, it has been stated that the figures represent the quoted price for per square feet carpet area and the figure of ₹ 5,400/- represent rate per sq.ft. of built up area to arrive at the lump sum registered aggregate value. Except these evidences no other concrete evidence is available with the AO to establish on record that on money was actually received by the assessee. Therefore, proper enquiry has to be made with regard to the entries appearing in the name of Siddhesh Jyoti E F Wing, as mentioned in seized document. In course of hearing, it was brought to the notice of the Bench that based on the same seized document additions on account of on money was also made in case of Rohan Developers Pvt. Ltd. It was also brought to our notice that appeals relating to Rohan Developers Pvt. Ltd. involving identical issue have already been heard by the Tribunal. Decision in case of Rohan Developers Pvt. Ltd will have a crucial bearing on the issue involved in the present appeals, since, the additions therein have been made based on the very same seized document. In view of the aforesaid, we are inclined to restore the issue to the AO for fresh adjudication considering other materials on record including the orders passed by the Commissioner (Appeals) and Tribunal in respect of other group entities. Grounds are allowed for statistical purposes.

Summary

Issues:
- Addition made on account of alleged on money received on sale of flats.

Analysis:
1. The appeals by the assessee arose from two separate orders of the Commissioner of Income Tax for multiple assessment years. The central dispute in all appeals pertained to the addition made regarding alleged on money received on the sale of flats.

2. During a search and seizure operation, incriminating material was found, indicating on-money received in relation to various projects. Statements under section 132(4) were recorded, where individuals admitted to the receipt of on money. Consequently, proceedings were initiated against the assessee under sections 153A and 153C of the Income Tax Act.

3. The assessee denied receiving on money, providing explanations and affidavits retracting earlier statements. However, the Assessing Officer rejected these contentions, estimating on money received at 30% of gross sales based on seized documents and statements. The Commissioner (Appeals) modified this, directing an addition of 30% on gross sales of specific projects only.

4. The assessee argued that additions were made solely based on a seized document without corroborative evidence, emphasizing that no specific mention of on money was present. Comparisons were drawn with similar cases where additions were deleted by the Tribunal.

5. The Tribunal considered the seized document as the basis for additions and noted that similar additions were made in other cases within the Rohan Group. However, the Tribunal emphasized the need for corroborative evidence to establish the actual receipt of on money, beyond the seized document and statements.

6. Due to the relevance of decisions in similar cases within the group, the Tribunal decided to remit the issue back to the Assessing Officer for fresh adjudication in light of previous rulings. The AO was instructed to limit the assessment to the additions sustained by the Commissioner (Appeals) and provide the assessee with a fair opportunity to present their case.

7. Ultimately, all appeals were allowed for statistical purposes, with the decision pronounced in an open court session on November 24, 2021.