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TMI Blog2005 (10) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... here, that was for the personal gain of Shri Khan, secretary and Shri Bhanwai Lal Vijay, president who are having the share of profit @ 51 per cent and 49 per cent, respectively. The said profit was earned in the name of M/s B.R. Properties and later it was converted under the garb of society. M/s B.R. Properties which is a partnership firm as per the partnership deed dt. 3rd Feb., 1990, has never filed its return. It means it was not doing any business and its business was doing under the garb of said society. Therefore, we are of the view that so-called society is not entitled for the benefit of mutuality specially when the accounts of the society were never audited. Thus, we are of the view that the society was not working for the welfare of its original members. In fact, there were no original members. It was working for the profit and personal gain of Shri iqbal Ali Khan and Shri Bhanwari lal vijay, so-called secretary and president. In the absence of books of account, the AO applied s. 145 and estimated the net profit rate at 10 per cent. We uphold the application of s. 145 for the reasons mentioned in the AO's order. However, .the addition is looking on higher side due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Samiti Ltd. which was under the administrator at that time. The office at 326, Sanjay Market, Ghat Gate, Jaipur, was for both, namely, society as well as for the said firm. 3. On 16th Feb., 2000, a survey was conducted at the business premises of the assessee under s. 133A, but the same was converted into search after examining the materials found during the survey. So the survey was merged into search operation Shri Iqbal Ali Khan is the secretary and Shri Bhanwari Lal Vijay is working as president of the said society. There were two more persons, namely, Shri Hemchand Joshi and Shri Kamlesh Sharma who are the employees. They made the statement to the search party. In their statements they stated that the sale price of the plots were shown in the books of account at 1/3rd of the actual sale proceeds and remaining 2/3rd were not accounted for. But, later on these statements were rebutted by them on 25th Feb., 2002. On the basis of the statement and seized material, the AO opined that assessee was engaged in purchasing of agricultural land, developing the same and selling them to different persons under the garb of society. The profit was earned by these two persons, namely, Shri I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been supplied to the assessee as per Annex. 'B' of the assessment order. During the course of search, surrender deeds from the original allottees were also obtained before putting the plot to sale. Thus, the so-called secretary and president were generating the income for their personal gain. No books of account were maintained though they were having the bank account in the name of the society but entries were minimum in the account. Heavy cash balance was maintained in the cash book and that was not deposited in the society's account. He also submitted that during the search no cash was found from the society's office. In other words, the so-called cash which was reflected in the cash book was neither available in the bank account of the society nor it was available in the society's office. It means cash was utilized by these two persons for their personal gain. 6. The learned Departmental Representative further submitted that these persons are in fact colonizers and they were also doing brokerage. Neither the firm nor the society has filed the regular return of income-tax during the block period. He further submitted that the employees of the society, Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of one Shri Azim Khan who has executed a will in favour of so-called society. He submitted that will can be executed in favour of the legal heir or trust but certainly not in favour of the society. So this was the modus operandi for acquiring the property in which no consideration was paid through the bank account nor any revenue was paid to the State Government for the transfer of the said land. The assessee was totally involved in the unaccounted business. Blank bond paper, affidavits duly signed by the president, Shri Bhanwari Lal Vijay witnessed by Shri Hemchand Joshi and Shri Iqbal Ali Khan, secretary were found wherein it (was) shown that the land was sold to Dr. Satish Gulati (who) is non-member of the society. He further submitted that the CIT(A) was wrong to observe that the statements of Shri Hemchand Joshi and Shri Kamlesh Sharma are not reliable. He said that both the persons were the regular employees of the assessee. They knew very well the modus operandi of the society. Their statements were recorded by the search party without any duress or inducement. However. on the threat, later they have rebutted their statement. Rebuttal was the tutored one and afterthought as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is not maintaining any cash book/record, how it can match. When no entry in the. cash book on the date of payment was made then the unaccounted payments were rightly added by the AO. About the validity of search, he relied on the ratio laid down in the case of C. Ramaiah Reddy vs. Asstt. CIT (2003) 81 TTJ (Bang)(SB) 1044 : (2003) 87 ITD 439 (Bang)(SB). Vinod Goel Ors. vs. Union of India Ors. (2001) 171 CTR (P H) 440 : (2001) 252 ITR 29 (P H). Lastly, he made a request that the order of the CIT(A) may be set aside and order of the AO may be restored. 13. On the other hand, the learned Authorised Representative relied on the order of the CIT(A). He further submitted that the society is a registered society and it works on principle of mutuality. No plots were found in the name of the secretary or the president. All were in the names of members of the society. There is no question of dummy holders. The assessee has tried to file the affidavits in the case of 10 (ten) persons in whose names pattas were found. But CIT(A) has not admitted by referring r. 46A. He further submitted that the CIT(A) has deleted the addition after having the remand report. He submitted that the soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the learned Authorised Representative submitted that the addition of ₹ 2,50,480 was also rightly deleted by the CIT(A) for the reason that AO has not issued the summons to the recipient persons. Impliedly, the AO has accepted that site plans, pattas and other documents were belonging to the society. 16. Similarly, for deleting the addition of ₹ 5,35,200, he relied on the order of the CIT(A) by submitting that the AO's order is patently wrong as the assessee has recorded all the impugned payment in the cash book which were duly reflected in the CIT(A)'s order at p. 25. On specific query of the Bench, he accepted that society has given the plots to the non-members in very special cases. 17. About the cross-objections, the learned Authorised Representative submitted that the survey was wrongly converted into search operation. Originally there was no warrant for the search so the entire search is ab initio null and void and it should be declared as annulled. 18. After hearing lengthy arguments on a number of days and also the perusal of records, it appears that the assessee has claimed that it was the registered society which was acquiring the land from the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there was unaccounted transactions in sale and purchase of the plot. 22. In the light of above, we are of the view that the society was not working for the welfare of its original members. In fact, there were no original members. It was working for the profit and personal gain of Shri iqbal Ali Khan and Shri Bhanwari lal vijay, so-called secretary and president. 23. About the submission made by learned Authorised Representative that no defect was pointed out in the books of account, we are of the view that these books of account were prepared later on under the expert advise. Originally, the assessee was not maintaining any books of account and never in the history the books were audited by the Registrar of Co-operative Societies or any auditor. Another interesting instance in this case is regarding transfer of agricultural land by will made by Shri Azim Khan. No Muslim can transfer the land by will against Sariyat (Muslim Law). This was an attempt to evade the transfer stamp duty. It proves that the assessee's business was not in the fair manner. By the doctrine of up-lifting the veil, we are convinced that there was no society in fact. The whole transaction was in the gar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we set aside both the orders of the lower authorities and restore the matter pertaining to the addition of ₹ 2,50,480 to the AO to examine it in depth afresh as per law but by providing reasonable opportunity to the assessee. Thus, this ground is allowed for statistical purposes. 29. Ground No. 4 relates to deletion of addition of ₹ 5,35,200 made on account of unexplained investment in purchase of agricultural land. 30. The AO made the addition regarding the details of payment which were alleged to be made to the agriculturists or farmers. According to the AO, certain transactions were not found placed in cash books which were prepared later on after the search. The CIT(A) has deleted the addition by mentioning that the transactions were recorded in the impugned cash book (which were prepared later on) as per the table given in his order at para 25. 31. In these circumstances, when the facts are contradictory, then we set aside both the orders of the lower authorities. In the interest of justice, this issue is also restored to the AO to examine in depth de novo but by providing reasonable opportunity to the assessee as per law. Thus, this ground is allowed for statistic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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