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TMI Blog2013 (7) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the panchanama are entirely different and the annexure "A-1 / Page-71" on which the Assessing Officer has placed reliance is entirely different - The alleged seized document on which the Assessing Officer has made the addition does not belong to the assessee and, hence, no addition is called for. Further, the said document which contains some entries is not based on double entry system as there is no matching debit / credit side entries. Various instances have been pointed out to show that there is no co-relation between the debit and credit side entries and, hence, it cannot be said that these entries suggest any kind of inflated expenses. Even the Assessing Officer not mentioned as to from where the document was found. If that is the fact, then, there cannot be any presumption under section 292C which postulates that onus is upon the assessee to explain the nature of all the documents and the entries given therein, if found from the possession of the assessee at the time of search. Under these facts and circumstances and without going into the merits of the addition, this matter required to be restored back to the file of the Assessing Officer to verify this fact – Decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 in the return of income to be filed by us for A.Y. 2007-08 and 2008-09 respectively." 3. During the course of search and seizure operation, certain papers were found and seized which reflected that the assessee has received on-money on the sale of flats inasmuch as there was discrepancy in the agreement rate and the actual rate of sale. Based on such seized papers, the assessee worked out on-money for various flats at Rs. 1.81 crores and offered for taxation. The seized material on which on-money was offered was in respect of 39 flats, the details of which have been incorporated at Para-10 of the assessment order as well as Para-3.2 of the learned Commissioner (Appeals)'s order. The Assessing Officer, while carrying out the scrutiny proceedings for the year of search under section 143(3), observed that the assessee has declared the on-money, only on the flats which were noted in the seized papers and the details of the flats which were not appearing in the seized papers has not been considered by the assessee for the purpose of declaration of on-money. Thus, he concluded that the receipt of on-money in respect of other flats which were not found in the seized papers cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s estimated, they were found to be in conformity with the sale agreement value which was mostly on a much higher rate even after adding the cost of on-money. One of the most important arguments which were raised was that the sale of flats depends upon various factors and sale rates cannot be uniform in case of real estate due to following factors:- a) Flats with "west open" would normally fetch a higher price as such flats are breezier then the other flats. b) Flats on higher floors would normally fetch a higher price then the flats on lower floors. c) Flats with relatively poor ventilation would fetch a lower price as compared to better ventilated flats. d) Flats with a "sea view" or a "garden view" or a "temple view" would normally fetch a higher price then other flats. e) Flats in accordance with "vaastu" principles would normally fetch a higher price. Buyers with purchasing power ready to make a down payment would have more bargaining power and can demand better terms as compared to a buyer who is going to opt for finance and may take longer time to make the payments. g) Flats sold at the initial stages of construction would fetch a lower price then the flats sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch higher rate, which is even higher than after adding the cost of on-money on the sale rate of those flats which found mention in the seized material; (iv) Instances were given where the booking has been made at the initial period i.e., at the time of construction where the prices were low and various other instances have been given for justifying the rates on which it was sold and, therefore, there could not be any case of further estimation on account of on-money. 7. Based on these submissions as well as facts and circumstances brought on record by the assessee, the learned Commissioner (Appeals) deleted the addition after observing and holding as under:- "13. I have considered the facts and submissions. In this case documents were found during the search that "on money" was received on some of the flats sold by the appellant and the appellant has offered the same as income and paid the taxes. The A.O. has also accepted the amount arrived by the appellant in the assessment with respect to such flats. It is also seen that in some of the flats mentioned in the same seized material that there was no "on money" received. 13.1 In the assessment order the A.O. has stated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of search. In support of his contention, he relied upon the judgment of Andhra Pradesh High Court in Gopal Lal Bhadruka v/s DCIT, [2012] 346 ITR 106 (A.P.) and other two judgments of Hon'ble Delhi High Court in CIT v/s Lachman Dass Bhatia, [2012] 254 CTR (Del.) 383 and CIT v/s Chetan Das Lachman Das, [2012] 254 CTR (Del.) 392. In all these judgments, he submitted that the High Courts have held that even if some material has been found in the seized material during the course of search, the same can also be the basis for estimating the income of undisclosed income in respect of other transactions which were not found mention in the seized material. He further relied upon the decision of the Tribunal, Mumbai Bench, in Diamond Investment Ors. v/s Department of Income Tax, in ITA no.5537/Mum./2009, order dated 29th July 2010 that the Assessing Officer can draw inference from the surrounding circumstances with regard to the payment of on-money. 10. Per contra, the learned Counsel, Ms. Ritika Agarwal, submitted that there were three kinds of flats which were sold during the year and income had been shown from them, firstly, the flats which were mentioned in the seized materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at a very high rates even more than after adding up the on-money. Thus, presumption cannot be raised against the assessee that the other flats have been sold at a higher rate than what has been mentioned in the agreement. She, thus, strongly relied upon the findings of the learned Commissioner (Appeals). 11. In the rejoinder, the learned Departmental Representative pointed out that if the contentions of the assessee regarding sale of flats at a higher rate is accepted on the second category of flats (which do not find any mention in the seized material) then, there are few instances of lower rates also and in such cases, it can be safely presumed that on-money has been received and estimate can be resorted to. 12. We have given our anxious consideration to the rival contentions, perused the relevant findings of the learned Commissioner (Appeals) as well as the Assessing Officer and the material placed on record. During the course of search and seizure operation, certain papers were seized which indicated that the assessee has received some on-money in respect of sale of some flats. The details of these flats have been incorporated at Page-10 of the assessment order and also a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale rate cannot be based on presumption or suspicion. Estimate of on-money in respect of every sale of flats, de-hors any material cannot be resorted to. 13. In this case, once the material was found in the form of seized material which shows some alleged transactions of on-money in respect of some flats, the Assessing Officer ought to have taken clue from this and could have carried out further enquiry from the flat owners or otherwise. There is nothing on the record that at the time of search, statement under section 132(4) was recorded wherein the assessee was asked about the alleged on- money with respect to sale of all the flats. If nothing was confronted to the assessee at the time of search, then, there cannot be any presumption that the assessee was involved in taking of on-money in respect of sale of every flats. Even the approach of the Assessing Officer for excluding some of the flats for making any kind of estimate of on-money, also goes to show that the assessee had not received any kind of on-money in respect of various other flats except for those mentioned in the seized material. Otherwise also, the rate of sale of flats depends upon various factors and there cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed differential rates from various parties and the Assessing Officer found that there was no proper explanation as to why lower rate was charged in respect of two flats with a particular party. It was in this background the Assessing Officer made an addition on account of suppressed sale with regard to the flat sold to that party. On these facts the Tribunal had come to a conclusion that the Assessing Officer can draw inference from the surrounding circumstances specifically when the Assessing Officer has brought on record that the flats in the same building had been sold to higher price than sold to a particular party. In the present case, a detailed explanation has been given that in respect of the flats which do not form part of the seized material, higher rates have been charged. Thus, the said judgment does not apply at all to the facts of the present case. ii) Gopal Lal Bhadruka v/s DCIT, [2012] 346 ITR 106 (All.) In this case, during the course of search and seizure operation, it came to the light that the sale consideration as per the sale deed did not tally with the actual payments made by the purchasers and there was suppression of sale receipts. On scrutiny of eight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reject the assessee's contentions. iii) CIT v/s Lachman Dass Bhatia, [2012] 254 CTR (Del.) 383 In this case, the Hon'ble High Court upheld the concurrent finding of the CIT and the Tribunal that there was no basis of making any addition towards low gross profit as in the search on the assessee did not yield any incriminating material on the basis of which it can be said that the assessee was indulging in any kind of under invoicing and suppression of sale. The documents on which the Assessing Officer had placed reliance was seized from different person and not from the assessee and there was no nexus between the said material. Thus, the entire decision is not applicable to the facts of the present case. iv) CIT v/s Chetan Das Lachman Das, [2012] 254 CTR (Del.) 392 In this case, it was found that the assessee has recorded two rates as found from the seized papers but entered only the lower rate in the sales bill. The entire seized material showed that the assessee was suppressing the profit rate disclosed in the books of account. On the basis of seized material, the Assessing Officer rejected the book results after applying the provisions of section 145 and estimated the tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observing and holding as under:- "15. I have considered the facts and submission. I have seen the copy of the seized document. The document was seized from the appellant's premises. It is not a dumb document. Names of the partners and contractors are appearing in this seized material. These amounts were qualified with the words "Extra Bill", "Adjustment Bills". From this it is clear that the appellant has inflated the expenses. It is the duty of the appellant to explain the nature of the expenses and the sources for such expenses. The appellant has failed to do so. The decisions relied on by the appellant is distinguishable since those cases are concerned with dumb documents. Whereas in this case, documents were found in the possession of the appellant, the payment also stated to be made to the partners for "extra bills" and "adjustment bills". In view of section 132(4A) of the I.T. Act, it should be taken that the contents are true since the appellant could not prove that the contents in the documents are not true. In view of these facts, I uphold the order of the A.O. on account of inflation of expenses. Addition of Rs.34,16,640/- is confirmed." 20. Before us, the learned Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t findings of the learned Commissioner (Appeals) and the material placed on record. On a perusal of the document "Annexure A-1 / Page-71", which is appearing at Page-77 of the paper book shows certain entries on the debit and credit side and further entries in the name of "Mr. Bharatbhai", "Fulji", "Yogesh Sir". Prima-facie the said entries are not based on double entry system and there is no co-relation between any of the figures given on the debit / credit side. The main contention of the learned Counsel is that the said document does not relate to the assessee firm as it was not found from the possession of the assessee firm at the time of search and also there is no mention in the panchanama prepared in the assessee's case. Even the Assessing Officer has not mentioned as to from where the document was found. If that is the fact, then, there cannot be any presumption under section 292C which postulates that onus is upon the assessee to explain the nature of all the documents and the entries given therein, if found from the possession of the assessee at the time of search. Under these facts and circumstances and without going into the merits of the addition, we are of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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