2019 (6) TMI 426 - AT - Income Tax

Assessment u/s 153A - unaccounted business income alleged to be earned on sales of plot at Ganesh Vihar Scheme - addition computed on the basis of noting found in search proceedings - Proof of ownership of the plots filed before AO - HELD THAT - In the case of the assessee there is no positive material available on record to form a reasonable belief that the cash component in sale consideration of plots which were owned by third party was income of the assessee. No documents were found from the possession of assessee or from the other one to prove that any consideration was received/receivable to assessee. Detailed finding has been recorded by the ld. CIT(A) in this regard in appellate order which has not been controverted by the ld DR by bringing any contrary material accordingly we do not find any reason to interfere to hold that no cash component transaction was received by the assessee. Brokerage @ 4% earned on sale of plots - CIT (A) sustained the addition - HELD THAT - Keeping in view the nature of business in which the assessee was engaged it is reasonable to presume that the assessee must have earned some commission on the transactions routed through him. Keeping the case wherein normal part commission is earned by brokerage of seller and part commission is earned by the brokerage of buyer it is reasonable to presume that the assessee has earned commission @ 2% on the alleged transactions. Accordingly the A.O. is directed to restrict the addition to the extent of 2% of the brokerage on the alleged transaction of sale of plots. Undisclosed income alleged to be used for making undisclosed payment for purchases of agriculture land purchased from Shri Jai Singh Yadav - addition was made solely on the basis of search statement of Shri Nirmal Kedia partner of the assessee which were retracted later-on - corroborative evidence/document - HELD THAT - No corroborative or incriminating material was linked to the addition. The A.O made the addition of 5, 00, 00, 000/- merely on the basis of statement of assessee recorded u/s 131 during the survey at Sanganer Office and was subsequently confirmed in statement u/s 132(4) at residence Kedia House . The AO has not pointed out any material seized document incriminating material to support the addition. From the record we also found that the department had carried out survey at 1 Gaytri Nagar-1 Main Sanganer Flyover Tonk Road Jaipur on 19.11.2016. During the course of survey the survey party recorded the statement of partner of assessee u/s 131on 19.11.2016. In answer to question No. 18 and 19 of statement the partner of assessee accepted the undisclosed payment of 5 Crore made to Shri Jainsingh Yadav for purchases of agriculture land. In the case of assessee no any agreement receipt material was found to corroborate the surrender made in survey. Neither such material was found from the possession of assessee group nor from the possession of Shri Jai Singh Yadav group where the search was taken place on the same day. The surrender was obtained under duress coercion and in the atmosphere of fear. Further in view of several discrepancies pointed out by the assessee in recording of the statement the recording of statement is against the principle of natural justice vitiated in law and no cognizance of these statements should be taken. Detailed finding recorded by the ld. CIT(A) in this regard has not been controverted by the ld. DR by bringing any positive material on record. Considering the judicial pronouncements relied on by the ld CIT(A) vis a vis quoted by the ld AR and ld DR during the course of hearing before us in the context of factual matrix of the case we do not find any reason to interfere in the finding so recorded by the ld CIT(A) resulting into deletion of addition of 5.00 crores. Hence this ground of the revenue s appeal is dismissed. Addition on account of alleged unaccounted business income - CIT(A) has upheld the addition by estimating G.P. rate @ 30.6% on the alleged transaction - HELD THAT - CIT(A) has upheld the addition by estimating G.P. rate @ 30.6% on the alleged transaction. Referring to the weighted NP rate declared by the assessee we modify the order of the ld. CIT(A) and direct for applying profit rate of 6% in place of profit estimated by the ld. CIT(A) at 31% Addition based on dump documents - HELD THAT - CIT(A) has analysed each and every document and came to the conclusion that these documents are dump documents as name/date or narration return which could lead to an inference that the transaction on these documents are those which have been escaped assessment. Thereafter by following the judicial pronouncements the ld. CIT(A) has deleted the addition. The detailed findings so recorded by the ld. CIT(A) has not been controverted by the ld DR by bringing any positive material on record. Therefore we do not find any reason to interfere in the order of the ld. CIT(A) in deleting the impugned additions. Addition on the basis of AS-1 - HELD THAT - As found from the examination of the document that no name of any person is mentioned over this paper. From this paper it cannot be drawn any conclusion that this paper pertaining to the assessee. No any plot No. or name of the scheme has been written over this paper by which it can be conclude that these papers pertaining to business transaction of the assessee group. No date has been mentioned on this paper. There is no reference in this paper that whether the same regarding the revenue of expenses . There is no reference of Cash on this paper as alleged by the AO in the assessment order therefore from the examination of this paper it cannot be presumed that this paper is containing the unaccounted transactions. The basis details which are required for verification of transactions is not available on this paper therefore the same is not subject to verification from regular books of accounts and in absence of that the same can only be treated rough noting deaf dump paper. Had this paper would be having any relation with the real business transaction of the assessee group than there should have been some noting/hints regarding such business transaction but the same is missing in the seized document therefore the noting on this paper is nothing but only rough noting from which no conclusion can be drawn and no addition can be made. Addition in respect of AS-6 - HELD THAT - On examination of documents we observe that no name of any person is mentioned over this paper. From this paper it cannot be drawn any conclusion that this paper pertaining to the assessee or regarding to sales made by the assessee. No any plot No. or name of the scheme has been written over this paper by which it can be conclude that these papers pertaining to business transaction of the assessee group. No date has been mentioned on this paper. As during the course of day to day workings several clients and prospective buyers visit the office of the assessee group and the discussion is held by them with the sale team of the assessee group regarding purchases of plots. During such discussion rough notings were made by the sales team. Had this paper would be having any relation with the actual business transaction of the assessee group than there should have been some noting/narration such as plot No. name of buyer date etc. but the same is missing in the seized document therefore the noting on this paper is nothing but only rough noting from which no conclusion can be drawn and no addition can be made. Further the name of the assessee or name of its scheme is not mentioned over this paper than how the same can be treated as belonging to the assessee only. Addition as per Ext.-1 - HELD THAT - We found that the documents were found and seized from the residence of accountant of assessee group Shri Mohit Vijayvergiya. No name of any person is mentioned over this paper. From this paper it cannot be drawn any conclusion that this paper pertaining to the assessee or regarding to sales made by the assessee or assessee group. No name of any buyer or name of the scheme has been written over this paper by which it can be conclude that this papers pertaining to business transaction of the assessee group. No date has been mentioned on this paper. Assessee has only one scheme Kedia Kingdome wherein size of plot no 40 is 164.21 sq mt as against 196.94 mentioned in the seized paper. Similarly size of plot no 127 is 115.52 sq mt as against 169.62 mentioned in the seized paper. Similarly size of plot no 122 is 135.35 sq mt as against 100 mentioned in the seized paper. Most interestingly plot no 123 mentioned in the seized paper does not exist in the scheme of the assessee. The detail as per books of account of the assessee in respect of sales of plots Addition as per Ext.-10 Annexure-A - HELD THAT - The scribbling on the paper are in relation to some renovation work which was to be carried out but the same was actually not carried out by the assessee group. The assessee group was planning to carry out some renovation work therefore the staff of the assessee group send the tentative estimation for such renovation work. At the top of dairy dated 21/05/2014 (PB pg 78) Sardarji mentioned and at the top of dairy dated 23/05/2014 Sohan is mentioned. There is several repetitions of entries like AC CCTV Fan AC platform Map etc. this shows that the quotation was obtained from some Sardarji and Sohan . There is noting on the record that the renovation work was actually carried out by the assessee group. No such AC Sofa and wooden flooring as mentioned in the paper were found installed in the premises of the assessee group. Had this work would be actually carried out then some bills/vouchers in support of that will also found which proves that this work was actually did not carried out. In view of above submission this is to submit that no addition can be made on the basis of these paper and the addition made by AO is wrong and the CIT (A) rightly deleted the addition.

Summary

Issues Involved:
1. Addition of ?6,29,260 on account of brokerage.
2. Deletion of ?86,81,500 on account of unaccounted business income.
3. Addition of ?5 crore on account of undisclosed income for land purchase.
4. Addition of ?1,03,52,000 based on seized documents.
5. Various other additions based on seized documents.

Detailed Analysis:

1. Addition of ?6,29,260 on Account of Brokerage:
The assessee contested the addition of ?6,29,260 as brokerage income, arguing that the plots mentioned in the seized documents did not pertain to him. The CIT(A) upheld the brokerage addition, reasoning that the documents were systematically written and correlated with other evidence, thus not "dumb documents." However, the ITAT reduced the brokerage rate from 4% to 2%, acknowledging that while the assessee might have earned some commission, the exact amount was not substantiated by documentary evidence.

2. Deletion of ?86,81,500 on Account of Unaccounted Business Income:
The Revenue's appeal challenged the deletion of ?86,81,500 by the CIT(A). The CIT(A) had deleted this addition, noting that the seized documents did not conclusively prove that the cash component was the assessee's income. The CIT(A) emphasized that the documents were not "dumb" but did not justify taxing the entire cash component as the assessee's income. The ITAT upheld the CIT(A)'s decision, agreeing that no positive material linked the cash component directly to the assessee.

3. Addition of ?5 Crore on Account of Undisclosed Income for Land Purchase:
The AO made an addition of ?5 crore based on the assessee's statement during the search, which was later retracted. The CIT(A) deleted this addition, stating that mere statements without corroborative evidence could not justify the addition. The ITAT upheld this deletion, noting that the statements were recorded under duress and lacked supporting evidence. The ITAT emphasized that additions based solely on retracted statements without corroborative material were unsustainable.

4. Addition of ?1,03,52,000 Based on Seized Documents:
The AO added ?1,03,52,000 based on seized documents indicating unaccounted sales. The CIT(A) partly upheld this by applying a 31% GP rate, resulting in an addition of ?32,09,120. The ITAT modified this, directing a 6% profit rate instead, noting that the higher rate applied by the CIT(A) was not justified without comparable cases.

5. Various Other Additions Based on Seized Documents:
The AO made several other additions based on various seized documents, which the CIT(A) deleted, considering them "dumb documents" lacking necessary details to infer unaccounted transactions. The ITAT upheld the CIT(A)'s deletions, agreeing that the documents did not provide conclusive evidence of unaccounted income and were not sufficient to justify the additions. The ITAT emphasized that documents must be clear and unambiguous to support such additions.

Conclusion:
The ITAT's judgment involved a detailed examination of the seized documents and statements, emphasizing the need for corroborative evidence to support additions based on search findings. The tribunal upheld the CIT(A)'s deletions where documents were deemed insufficiently conclusive and modified the brokerage addition, reflecting a balanced approach to the evidence presented.