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TMI Blog2015 (12) TMI 1650X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the loose sheet with the stamp duty valuation. However, as pointed out by the assessee, the alleged cash payment together with the purchase value declared by the assessee far exceeds the stamp duty valuation and hence such kind of corroboration is not acceptable. Even otherwise, the stamp duty valuation stated to be adopted by sec 50C is only a legal fiction applicable to a seller of property and it does not automatically support the conclusion that the difference between the stamp duty valuation and the actual sale consideration as passed hands. Though the AO has interpreted that the cheque payment made by the assessee was ₹ 2.85 crores, the said interpretation has been proved to be wrong by the co-owners, since they have actually paid a sum of ₹ 3.85 crores by way of cheque. Further, the assessee has stated that the payments have been made in 2004, 2010 and 2011, which fact also does not support the interpretation given by the assessing officer. Under these set of facts, we are of the view that the Ld CIT(A) was justified in observing that the assessing officer has made the impugned addition on surmises and conjectures. The decision rendered by Hon’ble juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion that the assessee had paid cash of ₹ 6.84 crores out of her unaccounted income and accordingly assessed the same as undisclosed investment u/s 69 of the Act. In the appeal filed before Ld CIT(A), the first appellate authority deleted the addition and hence the revenue has filed this appeal before us. 4. At the time of hearing, the Ld D.R strongly supported the order passed by the assessing officer by contending that the loose papers found during the course of search conducted in the hands of Bharat Shah Group clearly indicate payment of cash in connection with the purchase of flats. On the contrary, the Ld A.R strongly defended the order passed by Ld CIT(A) by submitting that the loose paper was only an illegible dumb document and it is an undated document; did not contain the name of the assessee; and the assessing officer has made his own interpretation to suit his convenience. He further submitted that the view taken by the assessing officer was not corroborated with any other record. He further submitted that both the buyer and seller of the flats have not accepted the interpretation of the assessing officer and both of them have categorically denied ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Ashok M R Mehta 15th and 16th 5 x 5 = 25 SH recd 639.60 + 45L Q Recd 285.00 According to the Ld. AO., 639.60 and 45 written on top of the page was nothing but cash given by the appellant to the builder for purchase of a flat. For coming to the above conclusion, apparently, the Ld. AO. has not given any basis. However, she has found a corroborative evidence by way of comparing the same with the stamp duty rate which was ₹ 6,42,37,636/- against the price of ₹ 3,85,67,6401- shown by the appellant in the agreement. However, it is important to note that while dealing with the appellant's objection against the initiation of reassessment proceedings at page 19 of the order, the Ld. AO has herself stated that, in case of the appellant, provisions of section 50C was not invoked in the assessment proceedings as the appellant was a purchaser of the flats and not seller. Thus, there appears to be a disagreement in the grounds taken by the Ld. AO for making the addition vide para 9 at page 21 of the order and the findings given at page NO.19 of the order as referred to above. 2.4.26 Per contra, during the course of the appellate proceedings, Ld AR has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owhere on the loose sheet of paper (Page No. 15), the name of the appellant, Late Mrs. Vimla Mehta is mentioned. 3. You are, therefore, requested to go through the seized documents, statements recorded and give your comments on the issues raised by the appellant which may have a bearing on the outcome of the appeal. 4. Your report in the matter may please be furnished by 5.2.2014 and in case the report is not furnished in time, you may please attend and explain the details in person along with the seized documents etc, on that date 2.4.27 Pursuant to the same, Ld. AO submitted her remand report dated 14.02.2014 which reads as under:- Kindly refer to the above. 2. In the aforesaid appeal, on the basis of exhaustive submission made by the assessee in respect of additions made, a letter was sent to this office with a direction to submit a report as per the provisions of Rule 46A of I. T Rules. 3. I have gone through the assessee's written submissions submitted before your honour and a copy of which was sent to this office. The submission made by the assessee is not acceptable and do not justify for the following reasons:- i) A search seizure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.85 crores. (ii) As per para no. 9(iv) of the assessment order it has been mentioned that the Stamp duty authorities have valued the property atRS.6,42,37,636/- as against the purchase cost shown by the assessee at ₹ 3,85,67,640/-, which was corroborative piece of evidence to show the actual prevailing rate. The assessee has submitted that if the alleged cash of ₹ 6.85 crores is added to the cheque amount of ₹ 2.85 crores appearing at page no. 15 of the seized document, the alleged value would be ₹ 9.69 crores and ostensibly the assessee would not have paid ₹ 9.69 crores for an asset of which had market value of ₹ 6.42 crores only. The contention of the assessee is not acceptable since it is a general practice in city like Mumbai where properties were sold at much higher the value adopted as per stamp duty authorities but agreement were registered at below the value decide by the stamp authorities or at the market value. Sometimes it is seen that it was registered at the market value even the actual cost of flat would be more than the market value. So the question does not any meaning that assessee would not have pay ₹ 9.69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT CC 24 25, Mumbai, but also on the huge difference in the stamp duty valuation done by the stamp authorities of the said flats i.e ₹ 6.42 crores and the purchase price shown by the assessee in the agreement i.e ₹ 3.85 crores. The loose papers were recovered from the premises of M/s Prime Down Town Estate Pvt Ltd. It is also necessary to mention here that on the loose paper sheet found during the search action in the premises of Bharat Shah Group concerns are systematic records relating to actual sales transactions in Legand project promoted by Layer Exports Pvt Ltd, wherein Shri Bharat Shah is the Director in all the above companies. In this regard it may be noted that the search and seizure action was conducted on the entire Group concerns of Shri. Bharat Shah Most of the said loose papers contain details of flat numbers, flat size(total area), rate per sq. ft. total consideration bifurcated in cash and cheques, cash to be paid, cheques to be paid, details of re-negotiation, details of actual cash payment, details of actual cheque payments etc. In this regard, on page No. 15, there is recording of transaction related to sales of flats by Layer Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant's name is no where mentioned in the sheet. In a search material of the kind relied upon the addition cannot be fastened when it has no direct relation with the transactions of the appellant. The sheet is supposed to contain particulars relating to purchase cost, the cheque segment of which is of value of ₹ 2.85 crores. The report in para 3(i) mentions that the details of total payment of 3 cheques coming to ₹ 2.85 crores comprised of cheques nos 910755, 910760 633881 for ₹ 35,00,000, ₹ 2,00,00,000/- ₹ 50,00,000/- respectively was submitted by the appellant. The appellant submits that no such details were furnished to the AO. Further the A O. has stated in the report in point 3(i) that the appellant was given sufficient time to explain that the cheque payment was ₹ 3,85,67,640/- as against ₹ 2.85 crores but he did not prove the same. In this connection the appellant had explained during assessment proceedings that the cheque payment towards purchase of property is of ₹ 3,85,67,460/-and not ₹ 2.85 crores as contained in the loose sheet(Page 5 para 7 8 of assessment order). Further it was explained that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from ACIT CC 24 25, Mumbai but also on account of the huge difference in stamp duty valuation and purchase price shown by the assessee. This comment is factually incorrect because the reasons recorded for re-opening the assessment do not include any such observation. As far as the stamp duty valuation is concerned the appellant has to submit section 50C provides for substitution of stamp duty valuation in place of sale consideration for computation of capital gains. This is a deeming provision for a limited purpose of computation of capital gains. It however does not raise a legal presumption that the sale transaction has actually taken place at the amount computed on the basis of stamp duty valuation. As far as the appellant is concerned this provision has no relevance because the appellant is a purchaser and the provisions of section 50C apply in the case of the seller. Further where the appellant disputed the correctness of stamp valuation, section 50C(2) provide for reference to valuation authorities for determination of the value. In the circumstances mere difference between the purchase consideration and stamp duty valuation do not provide a legal basis for re-opening th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque payment till the date of search do not match with the noting in the sheet. 4.11 On a careful examination of the copy of seized document as provided together with the facts as admitted, and in light of the glaring mismatches as above, and absence of any independent, reliable, corroborative evidence, it cannot be' said that the said document, in any manner, can be held as genuine and reliable to hold that the assessee has paid unaccounted cash for the purchase of property as held by AO. 4.12 In view of submissions of Ld. AR and the case laws relied upon and the mismatch in the area of flat and the amounts of cheque payments, in absence of any other corroborative evidence to establish a direct nexus, it cannot be said that the notings in the said paper are genuine and, therefore, constitute sufficient evidence to hold that undisclosed cash payment of ₹ 1,60,90,191/has been made by the appellant with his wife. More so in view of the fact that in the seized paper, part of cash amount is shown receivable. 4.13 It is hereby held that addition made by the AO regarding payment of unaccounted cash for purchase of property is without any sound basis and hence i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the same. Kindly avail another opportunity to explain the same. Ans. In our office at 3rd Floor, Gamdevi, old papers since 1985 are lying. This office is a site office for construction project and so many persons/ customers visit who make different rough workings for prospective transactions. We are not regularly visiting that office and only our staff is handling that premise. Q.5 On going through these pages mentioned above, it is seen that details of flats at different floors along with details of area of flat, and part cheque consideration and part cash consideration have been mentioned. You are requested to explain which project these workings belong to and why it should not be construed that part consideration in respect of these flats has been received in cash outside the books of account? Ans. Since 1985 our many projects have been ongoing/ completed. Before the project and during the construction phase, we make plans for different size flats and also furnished flats i.e. special house and unfurnished flats without amenities. The plans get altered as per the customers' requirement and BMC FSI. Further cash is nowhere mentioned in the above mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the assessee. The Assessing Officer had drawn inferences, made presumptions, relied on surmises and thus made unsustainable additions. (ii) That document NO.7 was only a piece of paper and could not be called a book within the meaning of section 68. No addition under section68 of the Act could be made on the basis of the loose sheet being document No. 7 found during the search. ii) The Hon'ble ITAT Delhi Bench in the case of Steel Home vs. Assistant Commissioner of Income-Tax reported in 69 ITD 240 held as under : Since the document found in the form of Annexure-P could not be related to the assessee, no addition could be made on the basis of the aforesaid documents. Even though there are specific assets mentioned in the aforesaid documents, Before any addition could be made for low withdrawals, purchase of plots as well the stock as mentioned in the documents, it was necessary to have proved that the same related to the assessee. Since this exercise was not done the documents could not be considered for both the assessment years much less being made the basis for estimating income in the hands of the assessee. (iii) The Hon'ble ITAT Nagpur Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present the income of the assessee is not permissible under Section 132(4A). When a dumb document, like the present slip, is recovered and the revenue wants to make use of it, it is the duty of the revenue to collect necessary evidence which may provide an acceptable narration to the various entries. The evidence collected should be such that any reasonable man would accept, the hypothesis advanced by the revenue that the figures written on the right side of the slip represent incomes earned by the assessee. It was conceded by the learned Departmental Representative that no such evidence has been brought on record Therefore the additions cannot be sustained and they are hereby deleted. vi) Hon'ble Bombay High Court in the case of ACIT vs. Lata Mangeshkar reported in 97 ITR 696 wherein it was held that entries in the accounts of third party regarding payment to the assessee was not sufficient as there was no proof that the same was genuine. The Hon'ble High Court observed as under: The income-tax authorities sought to assess certain income as income from undisclosed sources received by the assessee. The evidence on which the income-tax authorities relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s vested with the right to claim that amount even though it may not be immediately. It further held, more importantly, that income accrues when there arises a corresponding liability of the other party from whom the income becomes due to pay that amount. 2.4.37 It follows from these decisions that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. Similarly, in Commissioner of Income Tax Vs. M/s. Excel Industries Ltd. [Civil Appeal No.125 of 2013 ] it has. been held as under by the Apex Court: in Godhra Electricity Co. Ltd. v. Commissioner of Income Tax, [1997]225 ITR.746 (SC) this Court reiterated the view taken in Shoorji Vallabhdas and Morvi Industries. 23. Godhra Electricity is rather instructive. In that case, it was noted that the High Court held that the assessee would be obliged to pay tax when the profit became actually due and that income could not be said to have accrued when it is based on a mere claim not backed by any legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in a realistic manner and it was held that there was no real accrual of income to the assessee in respect of the disputed enhanced charges for supply of electricity. The decision of the High Court was, accordingly, set aside. 27. Applying the three tests laid down by various decisions of this Court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. Essentially, the Assessing Officer is required to be pragmatic and not pedantic. 2.4.38 It is also a trite law that no assessment can be framed merely on the basis of conjectures and surmises. In Smt. Sushila Suresh Malge v. Assistant Commissioner of Income tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese circumstances, in the absence of any cogent evidence brought on record, the decision of the Tribunal in holding that the Assessing Officer has failed to establish the nexus between the cash amount deposited in the bank account of Mr. Trivedi is attributable to the cheque issued by Mr. Trivedi in favour of the assessee cannot be faulted. Consequently, the decision of the Tribunal in deleting the addition of ₹ 10,35,562/- cannot be faulted. 2.4.41 In the case of Pooja Bhatt V. ACIT 79 ITD 205 the Hon ble Mumbai ITAT deleted the addition made on account of alleged on money paid for purchase of flat. The ITAT held as under:- There may be a strong suspicion of payment of onmoney in respect of the property deals but no addition can be made on mere suspicion. It is established principle of law that howsoever strong it may be it does not take the place of proof. 2.4.42 In view of the factual and legal analysis, there is an overwhelming evidence in favour of the appellant rather than against her as neither her name was appearing in the loose sheet of paper nor was any mention of the total area or rate of the flat. Both, the builder shri Bharat Shah, and the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how that the letter written after 45 looks like C and hence it is capable to different interpretation also as against the interpretation given by the AO as Lakhs . The assessing officer has only tried to corroborate his interpretation by comparing the aggregate amount noted in the loose sheet with the stamp duty valuation. However, as pointed out by the assessee, the alleged cash payment together with the purchase value declared by the assessee far exceeds the stamp duty valuation and hence such kind of corroboration is not acceptable. Even otherwise, the stamp duty valuation stated to be adopted by sec 50C is only a legal fiction applicable to a seller of property and it does not automatically support the conclusion that the difference between the stamp duty valuation and the actual sale consideration as passed hands. Though the AO has interpreted that the cheque payment made by the assessee was ₹ 2.85 crores, the said interpretation has been proved to be wrong by the co-owners, since they have actually paid a sum of ₹ 3.85 crores by way of cheque. Further, the assessee has stated that the payments have been made in 2004, 2010 and 2011, which fact also does not supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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