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TMI Blog2014 (10) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... essee firm is adopting work completion method for taxation and for A.Y.2006-07, the firm has shown Rs. 61,08,803/- as total income. M/s. Unimark Remedies Ltd., is a pharma company assessed with the ACIT CC 45 Mumbai has purchased two floors at 10th & 11th in Kamelshwar- II from assessee firm M/s. Orbit Enterprises. M/s Unimark has total purchase 7520 sq. ft. area for their office. There was a search & seizure action u/s.132 at the premises of M/s. Unimark Remedies Ltd., by the DIT (Inv.), Mumbai and search party got some loose papers in the premises of the M/s. Unimark Remedies Ltd. Mr. Mehul Parekh, the director of the company admitted in his statement given on oath that the company has purchased 7520 sq. ft. area in Kamleshwar-II. Accordingly, M/s Unimark has given the following amount to partner of assessee firm Mr. Rajushri V. Dhruv in cash :- Date M/s. Orbit Enterprises Amount 09/03/2005 Builder Rajubhai Rs.9,50,000/- DOO/- 19/03/2005 Builder Rajubhai Rs.10,00,000/- 22/03/2005 Builder Rajubhai Rs.16,00,000/- 000/- 28/03/2005 Builder Rajubhai Rs.13,70,000/- 30/03/2005 Builder Rajubhai Rs.11,50,000/- 30/03/2005 Builder Rajubhai RS.7,50,000/- 11/04/2005 -do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Mumbai where the flats are purchased through the builders, there is open secret that 80% are paid by cheque and 20% by cash as on money. After verifying the statements and copies of loose papers received from the ACIT CC 45, Mumbai, the AO held that the assessee M/s. Orbit Enterprises has received Rs. 68,20,000/- from M/s. Unimark Remedies Ltd., as on money at the time of purchase of flats and these sums M/s. Orbit Enterprise had not offered for taxation. Accordingly, addition was made under the provisions of section 69A of the IT Act, 1961 as unexplained money. With these remarks, the total income was computed by the AO as under:- 1. Income from other sources, as per last scrutiny order dt. 26/ 12/2007. Rs. 1,33,360/- Add: Amount received from M/s. Unimark Remedies Ltd .. , as on money in cash as discussed above. Rs. 68,20,000/- Total income Rs. 69,53,360/- 5. By the impugned order CIT(A) confirmed the addition after having the following observations. 4.2 I have given careful consideration to this issue and find that Ld. Assessing Officer has very rightly recorded his 'reason to believe' for issue of notice u/s. 148 read with section 147. For issue of notice u/s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer is approved as same is legally tenable." 6. With respect to the merit of addition, the CIT(A) confirmed the addition so made, after having the following observation: "5.2 I have circumspected the entire spectrum of facts and circumstances of the case vis-a-vis perused carefully the evidence on record, rival submission of the appellant, assessment order and various case laws relied upon by the Ld. AR. After reviewing and considering all these evidences and counter arguments as well as the finding the AO, I reached to the conclusion that Ld. AO has made the addition of Rs. 68,20,0001- on proper foundation of the material facts, evidence on record and further after extracting independent corroborative evidences. duly emerged from the statement of Mr. Mehul Parekh and Mr. Yogesh Parikh, Directors of M/s. Unimark Remedies Ltd. and cross examination by the Ld. AR of the appellant. 5.2.1 Appellant is a partnership firm engaged in the business of builders and developers. It has started development of project known as Kamleshwar-Il at Tagore Road, Santacruz(W), Mumbai-54, which was completed in F .Y. 2005-06. This project is of ground floor + 11 storey building comprising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant paragraphs of his statement dated 19.12.2008 are as under :- Q.2 Please state your educational qualification and your designation in Mrs. Unimark Remedies Ltd., your length of service in this organization and details of duties assigned to you and your monthly emoluments with perquisite. A.2 I am Chartered Accountant and I am Director - Finance of Mrs. Unimark Remedies Ltd. since 1990 and my duties are to look after accounts and administration and finance and I am drawing monthly salary of Rs. 2,00,0001- p.m. Q.3 Your company has purchased two floors at 10th and 11th floor in Kamleshwar Tower, Santacruz (Wj, from M/s. Orbit Enterprises, as per the diary seized at the time of search action Shri Mehul Parekh Director of the company has paid Rs. 75,20,000/- in cash on different dates of the year 2005 to Mr. Rajubhai Dhiru, partner offirm Mls. Orbit Enterprises) for the purchase of two floors as on money you are requested to confirm the same. A.4 I confirm that company has purchased above mentioned flat at Kamleshwar Tower from M/s. Orbit Enterprises and as per the diary I confirm the notings and it is declared as income in the assessment of the company. Q.5 Please give th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue that appellant used to give no receipt of such on money due to that no such receipt was there in formal way but, there is circumstantial evidence in addition to documentary evidence that on money transaction was done by the appellant and the fact unearthed by the department (during the course of search and seizure proceedings had stood to the test of further inquiry as well as proceedings and even during cross examination. 5.2.4 The various case laws relied upon by the Ld. AR are not relevant to the specific facts of this case. The case of SMC Share Broker Ltd. vs. DCIT (2007) 109 TTJ 700 ITA T Delhi Bench is not of any avail to the appellant because, as held by the Hon'ble IT AT in para 27.3 of the judgement that in that case, the statement of Mr. Manoj Agarwal was recorded behind back of the assessee and the assessee was not afforded any opportunity to cross-examine him, Here, in this case, that is not the fact. The Ld. Assessing officer has given full and proper opportunity to the appellant for cross-examination of the concerned person of.Mzs. Unimark Remedies Ltd. It is also to reiterate that Shri Yogesh Parikh, Director (Finance) of URL, had admitted the fact of givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case as that cse in respect of transfer of house property at the same price at which property was purchased earlier and there was no evidence of any under statement of consideration hence, it was held that section 52(2) was not applicable. Here is not the case alike. There is documentary evidence on record duly admitted by concerned person that he had given on money and latent fact of the case reveals that appellant has suppressed the receipt of such on money in its books of account. Similarly, the ratio of case of Unique Organizers & Developers (P) Ltd. vs. DCIT (2001) 70 TTJ (Ahd) 131 is not applicable to the facts of the case because as has been found out in para 5 of the order that seized documents in that case was a dump document without any narration and the Assessing Officer had not brought on record any evidence to indicate the actual transaction and who were the parties to do it, what was the date of transaction, what are the figures on the paper actually indicated and how those figures were related to the assessee company. Here in this case, there is a corroborative evidence in the form of filing of return of income by URL and also there is a documentary evidence in posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er shows that he is not fettered by the technical rule of the evidence and the like, and AO may act on material which may not strictly speaking, be accepted as evidence in a court of law vide - Vimal Chandra Golecha vs. ITO (1982) 134 ITR 119, 130 (Raj) The material or evidence is not confined to direct testimony in the shape of statements made by witnesses but, all relevant circumstances which have bearing to the issue, reveal in the course of assessment can be regarded as evidence, which would cover the expression "Material or evidence" on which the ITO could rely-, Mangalchand Gobardhandas vs. CIT (1954).26 ITR 706, 710 (Assam). There may be evidences 'secondary in nature' or 'heresy evidence' which can be utilized after giving opportunity to the assessee for explanation and representation and if proper explanation or counter evidence is not adduced by the assessee, the use of such evidences cannot be presumed to be against the natural justice :- i) Seth Gurmukgh Singh vs. CIT (1944 12 ITR 393,425 (Lah) ii) Gangaram Balmokand vs. CIT (1937 5 ITR 164 (Lah). Therefore, in the light of above discussion and visible facts of the case, it is found beyond doubt th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to loose pages comprising A-2 unequivocally demonstrates that notings on those pages are really all proposed transactions, but not actual that have taken place and hence notings must also, based on theory that a thing is known by the company it keeps, be deemed to have not taken place, but only a future proposed event not at all connected with Appellant. The deposition is tutored and self serving because questions posed are leading more particularly, averment that Shri Mehul Parikh may consult Shri Yogesh Parikh before answering questions. Moreover, Appellant's Chartered Accountant cross examined Shri Mehul' Parikh but copy of cross-examination has not been furnished notwithstanding specific request vide letter dated 20.12.2008 and subsequent reminders dated 28.06.2012, 0l.08.2012 and 20.08.2012. 5) The seized papers have no evidentiary value/are unreliable because none of URL deponents throw light on following:- a) according to AD, payments of on-money are allegedly made from 09.03.2005 to 11.04.2005, but agreements were registered on 25.08.2004 151, and 02.06.2004 and keeping in view general-real estate trade practice and preponderance of human probabilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns the name or in the handwriting of the Appellant; whether the alleged amount is payable, paid, received, receivable and that too by or to whom and any payment of on-money in relation to the purchase offlats [ACIT v. SHAILESH S. SHAH 63 ITD 153 (MUM}-pgs 7, 9 of the Precedent Paper Book (PPB)). (6) The decisions in UNIQUE v. DCIT 70 TTJ 131 (AHD) [pg 14,15 (not in handwriting of any person connected with company), 17 [buyer offered income in block period, buyer's statement unreliable due to conflicting statements], 19 [loose papers not evidence, presumption under Section 132(4A) not applicable to third party] of PPS] and SHETH AKSHAY v. DCIT 130 TT J 42 (AHM}(URO) [pg 70- presumption under Section 132(4A) not applicable to third party, 71- when admission cannot bind maker of statement how can it bind third party without corroborative evidence], SUNITA v. DCIT 71 DTR 33 (JP)-presumption under Section 132(4A) not applicable to third party and secondary evidences cannot be relied upon as neither witnesses were produced nor persons who prepared documents and CIT v. LATA 97ITR 696 (BOM) are on all fours to facts of Appellant's case. (7) Only foundation for making addition is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O which must be exercised in Appellant's favour because of overwhelming preponderance of probabilities as set out above [CIT v. NOORJAHAN 237 ITR 570 (SC);DCIT v. ROHINI 256 ITR 360 [SLP DISMISSED-254 ITR (ST) 275]. (15) Supreme Court propounded in CIT v. RAMAN 67 ITR 11, 17 that law does not oblige a trader to make maximum profits. Similarly, Apex Court in KIKASHAI v. CIT 24 ITR 506, 510, 511 advocated that revenue has no jurisdiction to tax potential, fictional and notional profits. In addition, in SHOORJI 46 ITR 144 (SC) held that hypothetical and notional income cannot be subjected to tax. (16) Without prejudice, onus is on revenue to prove that impugned items are undisclosed income PARIMISETTI v. CIT 57 ITR 532 (SC)." 11. Reliance was placed on the decision of the co-ordinate bench of the Tribunal in the case of Shailesh S. Shah 59 TTJ 574, wherein it was held that vague figures noted on loose papers cannot be treated as commission and undisclosed income of assessee and addition thereof cannot be made under the substantive provisions of the IT Act without proving that the alleged receipt is income of assessee particularly when even the date of receipt is not known. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and correct. The entries are speaking about the cash component of Rs. 75.20 lakhs in respect of one flat at top floor consisting of area of 3760 sq ft .The on-money paid is Rs. 1000/ - in respect of one sq ft and for the entire area of 3760 sq ft the on-money component is Rs. 37.60 lakhs. The seized material mentions that Rs. 30.00 lakhs has been already paid and Rs. 7.00 lakhs is yet to be paid. This payment of Rs. 37 .60 lakhs cash has been further strengthened by the entries in the seized material which gives the payments made to the assessee as under: Page No. of paper book Date Description Amount Whether Shri Mehul Parekh has sized in the last column 21 9.3.05 Builder Raju 9,50,000 21 19.3.05 Builder Raju 10,00,000 22 22.3.05 Builder Raju 16,00,000 Yes 22 28.3.05 Builder Raju 13,70,000 Yes 22 30.3.05 Builder Raju 11,50,000 Yes 22 30.3.05 Builder Raju 7,50,000 Yes 23 11.04.05 Builder Rajubhai exchange 7,00,000 Yes 15. Ld. D.R. further contended that GRL has paid the above amounts to Shri Rajen Dhruv partner of MJ s Orbit Enterprises known as shortly as "Builder Rajubhai". The source of the amount in the hands of URL has also been explained by Shri Mehul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t authorities is determined for the purposes of collection of Stamp Duty at the time of registration of the sale agreement and it is also taken into account for the purposes of calculating the market value U/S 50 C of Income Tax Act 1961 for calculation of capital gain. The stamp duty value is determined by the State Govt Authorities for a specific area and not for a specific flat or for a specific building. It is determined for the purposes of collection of Stamp Duty and to have a check on the undervaluation of properties for stamp duty purposes at the time of registration of properties. The market price and stamp duty value are operating on a different plane and has no connection. 19. Controverting the A.R. 's contention for not giving the copy of cross examination on 7.11.07, ld. A.R. contended that firstly this issue was not raised before the CIT(A) and therefore the assessee cannot raise the issue now before the ITAT. Secondly the AO vide his letter dated 12.03.2014 has stated that no such cross examination statement exists in the record and a copy of the letter is enclosed herewith. Now a submission is made before the Bench to direct the assessee to furnish the evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remises of M/s Unimark Remedies Ltd., there was on-money transaction for payment of 4 flats purchased at 10th & 11th floor at Kamaleshwar II, Tagore Road, Santacruz, Mumbai constructed by the assessee firm. During the course of search itself, statement of Shri Mehul Parekh (Director Finance, M/s Unimark Remedies Ltd.) were recorded. In respect of transaction appearing in the incriminating documents inventorised as Annexure-A-2, Mehul Parekh admitted on behalf of URL the payment of on-money to the assessee. Thus, the admission of Mehul Parekh was on the basis of documentary and corroboratory evidence. This admission of Director on behalf of URL has been confirmed by another director Mr. Yogesh Parekh, who is also a CA. In his statement, Shri Yogesh Parekh admitted that he was looking after accounts, administrative and financial affairs of M/s URL and that they have purchased two floors at 10th & 11th Floor in Kamaleshwar Tower from assessee (M/s Orbit Enterprises) and as per the diary seized at the time of search action, Shri Mehul Parekh, Director of the company has paid Rs. 75,20,000/- in cash on different dates of the year 2005 to Mr. Rajubhai Dhiru, partner of assessee firm M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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