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TMI Blog2019 (6) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... such statement is further supported by evidence in the form of incriminating material found during the course of search. The AO before estimating income has to bring on record some cogent materials to justify his action. In this case, on perusal of facts available on record, it is abundantly clear that nowhere the AO linked the seized material found during the course of search to the income estimated towards on-money received from sale of flats. While it is true that retraction by itself does not provide an impenetrable sheild to the concerned person, but it is also equally true that a statement per se by itself is not conclusive evidence. Supreme Court in the case of CIT vs Singhad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] has considered an identical issue and held that where incriminating material was found in the course of search, but was not related to the concerned years and hence, addition for those years could not be made in the assessment order passed u/s 153A of the Act. In this case, it is abundantly clear that there is nothing on record to indicate that there is a reference to seized material found during the course of search vis-a-vis addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Panchlotiya (Office Assistant/Liaison Officer) during the course of search. The CIT(A) further failed to appreciate that the Rohan Group had been searched earlier too on 10.08.2006 and even during the course of that search, the same Ms. Chaula Joshi had admitted to the fact that the group executed sales deed by accepting on money in cash which was over and above the agreement price. 3. The brief facts of the case extracted from ITA No.4031/Mum/2016 are that Rohan group of entities, along with directors, family members and related parties was subjected to search seizure action u/s 132 of the I.T. Act, 1961 on 26-05-2011. The assessee is also associated with the said group and search action was carried out on its registered office located at Govardhan Bldg No.2, Dr Parekh Road, Prarthana Samaj, Mumbai. Consequent to search, the case of the assessee was centralised and accordingly, DCIT, Cent.Cir.47, Mumbai issued notice u/s 153C of the I.T. Act, 1961 dated 28-03-2013 which was duly served on the assessee. In response to the notice, the assessee filed return of income on 21-10-2013 declaring income at ₹ 77,79,119. The case was selected for scrutiny and notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor and employees of the group, called upon the assessee to explain as to why income towards collection of on-money from sale of properties shall not be estimated @30% on total sales declared for the year under consideration. In response to show cause notice, the assessee, through its authorised representative, vide letter dated 13-01-2014 submitted that during the course of search, no incriminating material / evidence was found which indicated receipt of on-money from sales over and above registered value mentioned in documents in case of the assessee. Therefore, based on the statement of certain persons, estimating income towards collection of on-money, that too, in absence of evidence collected during the course of search is incorrect. The assessee further submitted that Shri Haresh M Mehta is not authorised to look after sales of assessee group. Therefore, the statement given by him during the course of search cannot be considered as relevant to assessee s case because when a person is not authorised to lookafter the business of the assessee, he is not aware of the facts. Therefore, unless there is corroborative evidence on record to prove that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case and the submissions of the assessee it is seen that the contention of the assessee that the income should not be extrapolated to the other projects and the other group companies is nothing but an eye wash. It is observed that the assessee is only harping upon its argument that there is no evidence to establish that on money is received in of its other projects. 7.39 The contentions of the assessee cannot be accepted as there is no reason as to why the assessee would charge on money in one project and not in the other. More so, in the statement given by Mr, Haresh Mohanlal Mehta, director of Rohan Developers Pvt. Ltd., he has clearly stated that the group is accepting on money on sales. Thus, the remark and observations for receipt of on money are for the group as a whole and not individual project. It is very obvious that if the assessee is involved in accepting cash in one project then definitely he would be doing the same for all the projects. In the backdrop of the seized material, it is also observed that the assessee has failed to convincingly establish that no on money was accepted on sales, Accordingly, I hold that the income with respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut fact remains that nowhere in the statement, they have indicated the name of the assessee and collection of on-money from sale of flats. Further, the persons, who gave the statement have retracted their statements by filing affidavit and also explained the circumstances under which they gave admission in the statement recorded u/s 132(4). The assessee has also explained the seized materials found n the possession of Shri Haresh M Mehta, as per which, none of the seized material pertained to business of the assessee or receipt of on-money, rather, all seized papers related to personal affairs of Shri Haresh M Mehta. Therefore, in absence of any material found as a result of search, which suggests receipt of on-money, estimation of on-money @30% on sales declared for the year is totally incorrect. 8. The Ld.CIT(A), After considering relevant submissions of the assessee and also by relying upon various judicial precedents including decision of ITAT, Special Bench in the case of All Cargo Global Logistics vs DCIT I.T.A Nos. 5018 to 5022 5059/M/10 held that it was clear from the records that necessary free condition to issue notice u/s 153C is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be made in the assessment framed u/s 153C of the Act. Therefore, by following the decision of ITAT, Special Bench in the case of All Cargo Global Logistics Ltd vs DCIT (supra) and also the decision of Hon ble Bombay High Court where the appeal filed by the department has been dismissed by the Court, held that the AO has made addition towards estimation of on-money without there being any incriminating material found as a result of search; consequently, the addition made by the AO cannot be sustained. He, accordingly, deleted addition made by the AO towards estimation of on-money. The relevant findings of the Ld.CIT(A) are as under:- 5.1 In Grounds No.l and2 the appellant has challenged the validity of the impugned order passed u/s 153C as being bad in law. The appellant has argued that as per the provisions of section 153C, the AO is required to be 'satisfied' that the seized material indicating undisclosed income pertains to the 'other person'. It is emphasised that proceedings can only be initiated where the AO is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llion, jewellery or other valuable article or thing found in the course of search belongs to a person other than the person searched, or b. That the Books of accounts or documents seized or acquisitioned belongs to a person other than the person referred in section 153A (i.e., person searched) and c. That the above consists of undisclosed income of the other person. It may please be noted that before proceeding with initiating proceedings u/s. 153C of the Act, the AO has to be thoroughly satisfied that the seized material indicating escaped income pertains to the other person (i.e. other than the searched party). 11. In this regard, at the outset, it is submitted that no incriminating material whatsoever (in the form of money, bullion, jewellery, books of account document seized, etc.) has been found, to suggest any concealed particulars of income pertaining to the appellant company. Further, proceedings u/s 153C of the Act can be initiated by the AO upon complete satisfaction that the seized material belongs to the appellant and that income has not been disclosed thereon. Thus, only on fulfilment of all of the aforementioned prerequisites, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken by it on the said page. During the year under consideration, as observed by the AO in the impugned order, the appellant company has executed the project named Moksh Plaza which name does not find mention on page 114, Annexure-Al. Perusal of the said document at page 114 reveals that the projects listed on it are namely Siddhesh Darshan; Mayuresh Apartments; Lifescapes Kshitij; Siddhesh Jyoti. In the submissions made in appeal, it is stated that these projects are undertaken by the following entities: Name of Project Entity of Rohan Group Siddhesh Darshan Meridian Construction Private Limited Mayuresh Apartment Rohan Developers Private Limited Lifescapes Kshitij Roxina Real Estate Private Limited Siddhesh Jyoti Manav Builders Private Limited Thus, it cannot be concluded that the seized paper makes any mention of the appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus the Special Bench held that in cases where there has not been any abatement of assessment, in addition to the income that had already been assessed, the assessment u/s 153A subsequent to search would be made on the basis of incriminating material, which in the context of relevant provisions means books of account and other documents found in the course of the search but not produced in the course of original assessment as well as undisclosed income or property disclosed in the course of the search. The decision of the Special Bench was challenged by the Department before the Jurisdictional High Court and vide order ITA No.523 of 2013 dated 21.04.2015, the Hon'ble Court upheld the view taken by the Special Bench. The principle enunciated regarding the scope of assessment u/s 153A extends to assessments completed u/s 153C also, inasmuch as the link to incriminating material is necessary for addition to be made in a non-abated assessment. 5.1.6 As discussed earlier, in the instant case, the impugned order does not show that any document, money, bullion, etc. was seized or requisitioned in the case of the appellant. Neither is there any indicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard it is noted that cash of ₹ 25,86,687/- was seized from 112-122 Hira Bhawan which was common premises for 4 entities of the appellant group i.e. M/s Rohan Lifescapes, M/s Rohan Developers, M/s Goodwill Properties and M/s Silver Arch. During the appeal proceedings, the appellant submitted that total cash found from the various premises of group concerns/directors etc. was ₹ 1,35,00,000/- and that from this sum, an amount of ₹ 1,09,13,313/- was reconciled with the books of accounts of the constituent companies, directors etc. of the Group (refer letter dated 24.10.2013 submitted during the course of assessment of M/s Rohan Developers Private Limited.). The balance amount of ₹ 25,86,687/- is stated to have been offered as undisclosed income in the hands of M/s Rohan Developers Private Limited for A.Y. 2012-13. This reconciliation has not been rejected or contradicted by the AO. 5.2.10 With reference to carrying out of proceedings against concerned persons, the materiality, relevance, admissibility or weight of retracted statements has been examined by various courts. While it is true that retraction itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when it was not relatable to seized material and where the Revenue had not brought on record any material to show that on-money had been paid. 5.2.12 In the decision rendered in the case of CIT vs Uttamchand Jain reported at 320 ITR 554 (Bom), the Hon'ble Court held that a retracted confession can be relied upon only if there is independent and cogent evidence to corroborate the statement. 9.2.13 Therefore, in light of the detailed discussion in the preceding paragraphs, the statements relied upon by the A.O. cannot be said to have provided sufficient evidence of on-money transactions with regard to the appellant company. As discussed earlier, the single sheet of paper on which the AO has placed reliance also does not reflect the name of the appellant or its project. Thus on the facts of the instant case and after due consideration of the judicial pronouncements cited above, the addition of on money of ₹ 3,90,53,280/- is deleted and the grounds raised by the appellant are allowed. 10. Aggrieved by the order of Ld.CIT(A), the revenue is in appeal before us. 11. The Ld.DR submitted that the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nava Sheva) Ltd 374 ITR 645(Bom) where it was categorically held that no addition could be made in assessment framed u/s 153A / 153C in absence of incriminating material found as a result of search, in unabated / concluded assessments. In this case, the assessment for the AY 2009-10 is unabated as on the date of search, because the search u/s 132 of the Act was carried out on 26-05-2011 and by that time the assessment for AY 2009-10 had been completed u/s 143(3) on 31-12-2009. Insofar as assessment years 2010-11 and 2011-12, both the assessments are unabated, because the assessments have been framed u/s 153C on the basis of notice issued u/s 153C dated 28-03-2013. As per the proviso to section 153C, in case of such other person, the reference to the date of initiation of the search u/s 132 or making of requisition u/s 132A in the Second Proviso to sub section (1) of section 153A shall be construed as reference to the date of receiving the books of account or other documents or assets seized or requisitioned by the AO having jurisdiction over such other person. In this case, on the basis of notice issued by the AO having jurisdiction over the assessee u/s 153C on 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the same cannot be considered as incriminating material, which throw light on receipt of on-money in the case of assessee. The Ld.AR further submitted that although the AO has taken note of statement recorded from director and other key employees of group, but none of them took the name of the assessee in the statement recorded u/s 132(4) nor did any reference to seized material find as a result of search. Further, the assessee has filed retraction statement filed by them alongwith their affidavits, where they have categorically denied of having received on-money by the assessee and also explained under what circumstance they were compelled to give admission of receipt of on-money. Therefore, in absence of any material found as a result of search, making estimation towards receipt of on-money, more particularly on adhoc basis by extrapolation of documents found in some other cases, is arbitrary and incorrect. The Ld.CIT(A), after considering relevant facts has rightly deleted addition made by the AO towards estimation of on-money and his order should be upheld. 14. We have heard both the parties, perused materials available on record and gone t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso not in dispute that during the course of search cash and other unaccounted income pertaining to the group was found and seized. But, the AO, nowhere in his assessment order, had brought out facts to the effect that the seized material found during the course of search has a direct nexus with the assessee and its project carried out during the year under consideration. Although, the AO has referred to the seized material page 114 of Annexure A- 1, to argue that there are seized materials, which indicated collection of onmoney from sale of flats, but the assessee has rebutted the allegation of the AO with necessary evidence and also proved that seized material page 114 of Annexure A-1 is nothing to do with business activity of the assessee and its project undertaken during the year. Insofar as seizure of cash during the course of search at No.112 122, Hira Bhavan, Rajaram Mohan Roy Road, Prarthana Samaj, Mumbai, the assessee made it clear that said amount has been seized from the residence of Shri Jitendra Mehta, director and this fact has been reflected in the Panchanama drawn during the course of search and also the same has been disclosed to tax in his indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to particular seized material found as a result of search. Similarly, the AO has taken circumstantial evidence of cash and unexplained jewellery found during the course of search to argue that the assessee is in the habit of suppression of sales by showing under valuation which was used in its business, but on perusal of cash and other assets found during the course of search it was very clear that the cash was found from 112-122, Hira Bhavan, Rajaram Mohan Roy Road, Prarthana Samaj, Mumbai, which was common premises for four entities of the assessee group and that the total cash found from various premises was almost equivalent to cash balance maintained in the books of account. Although, there is a difference of cash balance of ₹ 25,86,687, the same has been offered to tax in the hands of directors and also M/s Rohan Developers Pvt Ltd. Neither the Panchanama drawn during the course of search nor the statement recorded during search indicated that cash and other unaccounted assets found during the course of search belonged to the assessee. The Ld.AO has even failed to establish nexus between incriminating materials found during the course of search to the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of ACIT vs Janakraj Chauhan (supra) where it was held that admission at the time of search is important, but not conclusive. The Tribunal further held that addition should be considered on merits, rather than on the basis of sworn statement made by the assessee. The Hon ble Bombay High Court in the case of CIT vs Uttamchand Jain (supra) had considered the admission and subsequent retraction of the assessee and held that a retracted confession can be relied upon only if there is independent and cogent evidence to corroborate the statement. In this case, the AO has failed to bring any corroborative evidence to support the statement of directors as well as employees in order to support his action of estimation of on-money on sales declared by the assessee for the relevant financial years. Therefore, we are of the considered view that the AO was erred in estimating adhoc on-money received from sale of flats on the basis of statement of some employees even after such statement has been retracted and also nothing on record to indicate that the assessee is in receipt of on-money. 17. Coming to the legal argument taken by the assessee in the light of certain judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f receiving the books of account or documents or asset seized by the AO having jurisdiction over such other person. The arguments of the Ld.AR for the assessee is that in absence of any specific date on which the asset or other books of account requisitioned by the AO having jurisdiction over such other person, then only conclusion that can be drawn is that the AO of such other person other than searched has taken over the possession of the seized document on the date on which he recorded his satisfaction as required u/s 153C or the date on which notice u/s 153C has been served on the assessee. We find that if the date of search is considered, then assessment for AY 2010-11 and 2011-12 are abated, because the due date for issue of notice u/s 143(2) is expires on 30-09-2012 which after the date of search. If you consider date of issue of notice u/s 153C, i.e. 28-3-2013, then assessment for AY 2010-11 and 2011-12 are unabated, because the due date of issue of notice u/s 153C was expired on 30-09-2012 which before the date of search. But, in this case, there is no clarity with regard to date of receipt of receiving the books of account or documents or asset seized by the AO having jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d party was a jurisdictional issue and failure to satisfy it made the entire proceedings taken u/s 153C null and void. The Hon ble Delhi High Court in the case of ARN Infrastructure India Ltd vs ACIT (supra) had considered an identical issue and held that the requirement of section 153C of the Act cannot be ignored at the altar of suspicion. The revenue has to strictly comply with section 153C of the Act. Non satisfaction of the condition precedent which the seized document must belong to the respondent assessee is a jurisdictional issue and non satisfaction thereof would make the entire proceedings taken thereunder null and void. Further, the Hon ble Supreme Court in the case of CIT vs Singhad Technical Education Society 397 ITR 344 (SC) has considered an identical issue and held that where incriminating material was found in the course of search, but was not related to the concerned years and hence, addition for those years could not be made in the assessment order passed u/s 153A of the Act. 18. In this case, it is abundantly clear that there is nothing on record to indicate that there is a reference to seized material found during the course of search vis-a-vis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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