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TMI Blog2019 (11) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, particularly statement of Kunjan Arora recorded during search investigation, it further leads to the conclusion that the agreement to sell in question dated 22.08.2008 owned by RRFSL was executed for a sale consideration of ₹ 25,00,01,100/- as Kunjan Arora has specifically replied that He has paid a total sum of ₹ 9.66 crores over a period from December 2007 till date and had issued post-dated cheques of ₹ 8.84 crores which have not been encashed till date. Furthermore, a sum of ₹ 1,100/- was paid in cash as initial deal signing amount thus paid a total payment of ₹ 18,50,01,100/-. So, the question is answered accordingly that Agreement dated 22.08.2008 is not a dumb document. CIT (A) on facts primarily based on undisputed facts cannot be unsettled merely on the contention of the assessee that the draft agreement dated 22.02.2008 is merely a dumb document because the same has been categorically admitted by assessees in their statements as well as Kunjam Arora recorded during search proceedings, though retracted subsequently. But retraction cannot be relied upon on the ground that it was not spontaneous rather made in the well-orchestrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the factory because of flood on account of heavy rains. The stock in question has been physically verified by the officials of the Forest Department and declared the same actually destroyed and given the report that stock in question is as good as of nil value . Report of the Forest Department declaring the stock in question as spoiled/destroyed with nil value and correspondence with the Forest Department is available. On the basis of report that 549 quintals liquid Katha was unfit for sale, it was ordered to be destroyed and the ld. CIT (A) after verifying the opening and closing stock extracted in para 4.3 of the impugned order rightly reached the conclusion that this addition is not sustainable in the eyes of law and the report given by the Forest Department tallies with stock register maintained with the assessee. So, we are of the considered view that the ld. CIT (A) has rightly deleted the addition of ₹ 1,48,51,840/- made by AO on account of undisclosed sales of katha.So, the amount of ₹ 4,08,00,000/- has been rightly treated as income of the assessee in the year of receipt i.e. AY 2009-10 and not in the AY 2014-15 as contended by the ld. AR for th - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO on account of income from undisclosed sources. BRIEF FACTS OF ITA NOS.2504/DEL/2014 2773/DEL/2014 (CROSS APPEALS) IN CASE OF MS. KUSUM MEHTA ITA NOS.2503/DEL/2014 3347/DEL/2014 (CROSS APPEALS) IN CASE OF SHRI MAHESH MEHTA 4. Briefly stated the facts necessary for adjudication of the issue at hand are : On the basis of search and seizure operation carried out in case of Mahesh Mehta Group of Companies on 30.06.2009, assessment was framed under section 143 (3)/153A of the Income-tax Act, 1961 (for short the Act ). In response to the notice issued u/s 153A of the Act, assessee preferred to treat the return of income filed u/s 139 of the Act as reply to notice u/s 153A of the Act vide reply dated 25.11.2010 declaring taxable income of ₹ 1,53,50,110/-, which includes short term capital gain from sale of property of D-17, Ashok Vihar which was sold during the year under assessment for a sale consideration of ₹ 50,50,000/- by way of cheque and further receiving a sum of ₹ 1,49,50,000/- by way of cash. During the search proceedings, assessee surrendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Kunjan Arora and Associates and the original documents found from the residence of Mahesh Mehta also speaks of the transfer of the same manner which was finally executed and as such, company along with property was also transferred to Kunjan Arora and his associates for a consideration of ₹ 25,00,00,000/- as per Agreement. AO also noticed that the purchase of RRFSL was executed in accordance with the original agreement dated 22.02.2008 as Kunjan Arora has never denied the existence of the correctness of the agreement dated 22.02.2008 rather admitted the existence of the same as per his statement recorded with Income-tax authorities. AO further observed that Kunjan Arora has made payment of ₹ 18,40,00,000/- in cash to Mahesh Mehta and Kusum Mehta and the same is treated the income from undisclosed sources of Mahesh Mehta and Kusum Mehta and made addition thereof to the total income of Kusum Mehta and Mahesh Mehta to the tune of ₹ 9,20,00,000/- each. 7. In response to the notice issued u/s 153A of the Act, assessee Mahesh Mehta stated that the return of income filed by him on 15.06.2011 declaring income of ₹ 2,12,15,410/- be treated as havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute that Rakesh Kumar Garg and Santosh Kumar Garg of RRFSL was the original owner of the property in question. It is also not in dispute that out of the total sale consideration of ₹ 25,00,01,100/- settled in the draft agreement, an amount of ₹ 18,50,01,100/- was paid but the sum of ₹ 6,50,00,000/- was withheld by the owner till no objection certificate is issued by the HSIIDC for transfer of the plot from original owner, Rakesh Kumar Garg and Santosh Kumar Garg. It is also not in dispute that one Kunjan Arora vide his statement recorded by DDIT u/s131(1A) on 25.08.2009 admitted that he has paid a sum of ₹ 9,66,00,000/- up till December 2007 and given post dated cheques of ₹ 8,84,00,000/- to Kusum Mehta and Mahesh Mehta which have not been encashed till date, thus explained the total payment of ₹ 18,50,01,100/- made to Kusum Mehta and Mahesh Mehta. 12. Ld. AR for the assessee challenging the impugned order contended inter alia that the draft agreement dated 22.08.2008 on stamp paper worth ₹ 100/- found/seized during the search and seizure operation qua the sale of Plot No.115, Udyog Vihar, Gurgaon was never acted upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty in question and relied upon the decisions of Bela Juneja vs. CIT (2012) 20 taxmann.com 392 (Delhi), Surendra M Khandhar vs. ACIT (2010) 321 ITR 254 (Bombay), M/s. Pebble Investment and Finance Ltd. vs. ITO (2017-TIOL-238-SCIT), Greenview Restaurant vs. ACIT (2003) 263 ITR 169 (Gauhati), Raj Hans Towers (P.) Ltd. vs. CIT 373 ITR 9, PCIT vs. Avinash Kumar Setia (2017) 81 taxmann.com 476 (Delhi) and ACIT vs. Hukum Chand Jain 337 ITR 238 (Chhattisgarh) . 14. Undisputedly, Rakesh Kumar Garg and Santosh Kumar Garg were owner of 3500 shares of RRFSL and the said company was also owner of the said property, Plot No.115, Udyog Vihar, Gurgaon. It is also not in dispute that Mahesh Mehta and Kusum Mehta have entered into an agreement dated 04.09.2007 for purchase of 3500 shares of RRFSL from Rakesh Kumar Garg and Santosh Kumar Garg. 15. The Revenue to fasten the tax liability of both the assessees relied upon the draft unsigned agreement dated 22.02.2008 on a stamp paper with Ramesh Arora and Mrs. Deepti Arora through Kunjan Arora to sell 3500 shares of RRFSL for a consideration of ₹ 25,00,00,000/- along with token amount of ₹ 1,100/-. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuted for a sale consideration of ₹ 25,00,01,100/- as Kunjan Arora has specifically replied to question no.6 that :- He has paid a total sum of ₹ 9.66 crores over a period from December 2007 till date and had issued post-dated cheques of ₹ 8.84 crores which have not been encashed till date. Furthermore, a sum of ₹ 1,100/- was paid in cash as initial deal signing amount thus paid a total payment of ₹ 18,50,01,100/-. So, the question is answered accordingly that Agreement dated 22.08.2008 is not a dumb document. 20. In the backdrop of the aforesaid facts and circumstances of the case, now the second question arises for consideration is :- as to whether assessees, Mahesh Mehta and Kusum Mehta earned an amount of ₹ 2,04,00,000/- each from the deal of transfer of shares of RRFSL allegedly having been terminated by the parties, as has been held by ld. CIT (A)? 21. When the aforesaid question is examined in the light of undisputed facts inter alia that the total consideration by transfer of shares of RRFSL was ₹ 25,00,00,000/-, which facts is incor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second agreement dated 21.04.2009 to camouflage the actual transaction. Even Mahesh Mehta during recording of his statement u/s 132 (4) recorded on 01.07.2009 has not disclosed the existence of agreement dated 21.04.2009. Had there been any such agreement in question, Mahesh Mehta would have relied upon the same in support of his case. So, it is a document prepared anti-dated to evade the taxes. Moreover, terms and conditions of the agreement dated 21.04.2009 are against the settled convention followed in such transactions. Moreover, the second agreement was given in the post-search proceedings. 23. Consequently, we are of the considered view that ld. CIT (A) has rightly reached the conclusion that since the assessees have not become owner of the shares of RRFSL, profit of ₹ 4,08,00,000/- cannot be treated as their capital gain but it is certainly income from their business or from their sources as broker of the transaction as till today it is not brought on record if on the basis of legal notice issued to assessee for refund of that amount, any legal proceedings have been initiated or any order has been passed by the Civil Court and accordingly, made addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 21.04.2009 came into existence and in these circumstances is not entitled for protection under section 51 of the Act. 27. So far as question of deletion of addition of ₹ 9,20,00,000/- (correct amount is ₹ 7,16,00,000/-) each in case of Mahesh Mehta and Kusum Mehta by the Ld. CIT (A) is concerned, the AO has merely made addition by relying upon the statement of Mahesh Mehta, co-signed by Kusum Mehta u/s 132(4) of the Act. The ld. CIT (A) has deleted this addition to the extent of ₹ 7,16,00,000/- by returning following findings :- 4.5 I have carefully considered the assessment order, the submissions made and the rival claims relating to the matter in dispute. It is undisputed that the entire consideration for the transfer of the shares of RRFSL was ₹ 25 crore. This stands admitted by Shri Mehta as well as Shri Arora, and is part of both agreements dated 22.02.2008 and 21.04.2009 between Shri Mehta and Shri Arora. It is undisputed that the Mehtas never received NOC and PTC from HSIDC in their favour and, as a result, the shares of RRFSL were never transferred in their favour and they, in turn, could not tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n only be treated as income from 'business' or from 'other sources' as broker to the transaction. As the Mehtas have not claimed any business income from this transaction or any other brokerage, and as the profit cannot be treated as capital gain, it can only be treated as income from 'other sources'. The amount is to be allocated equally at ₹ 2.04 crore between the appellant and her husband Shri Mahesh Mehta. I hold accordingly. 4.8 In view of the above, out of the addition of ₹ 9,20,00,000/- the amount of ₹ 2,04,00,000/- is upheld as income of the appellant from other sources and directed to be charged to tax. Appellant gets relief of ₹ 7,16,00,000/-. This ground of appeal is decided in these terms. 28. Ld. CIT (A) has extensively dealt with the issue as to the deletion of addition of ₹ 9,20,00,000/- (correct amount is ₹ 7,16,00,000/-) in para 2.2.13 to 2.2.16 by explaining the facts that this addition has been made merely on the basis of presumption that both the assessees have received ₹ 18,40,00,000/- against the proposed sale deed for transfer of HSIIDC plot but there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifinished / liquid katha (unit not specified - whether kgs. / litres / any other unit). It also transpires from the said report that entire 549 units was found to be spoilt and ordered to be destroyed. The appellant has, in its accounts, written off the entire value of closing stock of goods valued at ₹ 1,48,51,840/- as destroyed and claimed is as loss. As against the said loss, the appellant had also written back all related liabilities amounting to ₹ 30,97,268/- and offered it to tax. The revenue, disbelieving the said report, or assuming that the said report did not establish the loss claimed, disallowed the loss of stock at ₹ 1,48,51,840/- claimed by the appellant. The assessment order is however, silent on the related liabilities amounting to ₹ 30,97,268/- written back and offered to tax by the appellant. 4.3 The claim of the appellant, on the other hand, is that during the year there was no production and after sales, whatever stock remained, was spoilt in the rain, destroyed and accordingly claimed as a loss. The appellant has also objected that the AO disbelieved the certification of another government department and made the disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15920710 - - 8173 1391601 54847 14851840 From the above details, it is observed that out of opening stock of 630.20 quintals of various raw materials, finished 1 semi-finished goods and by products, 81.73 quintals was sold leaving 548.47 quintals of finished I semi-finished goods. Here I have converted kilograms into quintals to make sense of the units (549) mentioned in the report of the forest department. This interpretation appears correct as 548.47 quintals approximates 549 units of goods remaining and found factory of the appellant by the forest department officials. The description of the goods in the said report of the forest department is mentioned as 'semi-finished katha' which also more or less approximates the description of the goods mentioned by the appellant in the table above. Most importantly, the reports specifically mentions that cutch (by-product) found was 'NIL', which tallies with informati ..... 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