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TMI Blog2022 (2) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash found relating to undeclared sale of parking space and flats - The assessee is a separate legal entity. There is no mention whatsoever regarding the nature of particular material belonging to the assessee company, which gives rise to the inference of on money receipt. This is based upon statement of other employees of Lodha group and that of Shri Abhianndan Lodha. As pointed out by us above, assessee has already disputed that assessee is a distinct legal entity and the term Lodha group cannot be used to incriminate the assessee and that Shri Abhinandan Lodha is not at all related to the assessee company. Hence, the material referred are not germane and hence, the addition on merits is also not sustainable. None of the statement referred here are identified to be belonging to the assessee company. In these circumstances, we note that none of the case laws referred by ld.CIT(A) expound that statement of persons not belonging to the assessee company can be an evidence against the assessee and which can be the basis of addition of undisclosed income. CIT(A) has elaborately dealt with evidences and evidences act, his order is conspicuously silent on the evidences of electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration, i.e. AY 2010-11, where in an amount of ₹ 487 lakh was admitted on account of undisclosed cash receipt on sale of car parking space. That consequent to search, the Lodha Group was centralized with the Dy. Commissioner of Income Tax, Central Circle 7(3). That it is gathered that the Assessing Officer of the searched persons i.e., Lodha Group of cases recorded the satisfaction note mentioning therein the reason for a notice to be issued under section 153C of the Act in the case of the assessee company and thereafter the A.O. of the assessee company issued a notice under section 153C of the Act on 27th September 2012, which was served on the assessee on the same day. That in response to the said notice, the assessee had originally filed its return of income for the A.Y. 2011 12 on 29th September 2011, declaring total income of ₹ 5,32,73,099. That subsequently, the return of income was revised on 5th March 2013, showing income of ₹ 8,02,84,557. That in due consideration to the facts of the case, the Assessing Officer completed the assessment under section 153C of the Act on an income of ₹ 8,74,46,483, vide order dated 28th March 2013, by mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Arya Enterprises The cheques issued by the buyer were given to the seller i.e. Lodha Group. The Lodha Group used to pass on these cheques to Shri Hirachand Jain or any other entity for discounting the same and the cash generated after discounting was collected by Shri Hirachand Jain, the person to whom the cheques were given for discounting and it was ultimately passed to Lodha Group of concerns wherefrom it has been routed. At times, the car parking receipts were also accepted in cash. The episode narrated above shows how the cash is being generated in the Lodha Group of cases and the cash so generated is not reckoned in the books of account. Evidences to this effect were found in the form of unaccounted cash, cheques favouring third parties and linking them to various projects of the Lodha Group during the course of search. During the statement of Shri Abhinandan Lodha was recorded on 12/01/2011 whereby he was confronted with the various evidences found . During the course of statement, he has made an additional disclosure of income amounting to ₹ 199.80 Crs. This amount of additional disclosure has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parking. However the consideration received on sale of car parking was not accounted in the books of accounts there by not offered for tax in the return of income. During the course of search proceedings as discussed earlier this issue cropped up and disclosure was made of ₹ 40.52 lakhs on this account. However the disclosure though not incorporated in the return was found totally inadequate and insufficient, taking into consideration the prevailing rate of car parking of ₹ 4,41,000/-. This rate exactly matches with rate at which car parking were sold by the lodha group of company M/S NSIL having project in the same area of Thane city. Therefore going by this rate the assessee ought to have made disclosure of ₹ 1,05,84,0007- (24 x 4,41,000), Thus in addition to disclosure made by the assessee during the search of ₹ 40.52 lakhs further addition on this account is called for of ₹ 65,32,000/- which is also considered accordingly. In the background of the discussion in earlier sub paras the total addition on sale of car parking is made of ₹ 1,05,84,000/-. Accordingly penal proceedings u/s 271(1)(c) is initiated. 6. RECEIPT OF ON MONEY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Q.11 lam showing you another computer print out taken from the computer in Cabin No.2 which gives the summary of deviations for approval, wherein Column 'D' there is a remarks 30% in C'. The remarks made by the committee on this request are 'the C-component is a facility provided, no discount would be provided. Please give your comments. Ans. As per the printout, comment is made by Sales Manager named as Jayant for the project 'Casa Ultima', as myself is confused for the remarks which is given by the Committee as in approved column it's dearly mentioned 'NO'. Statement of Shrl Abhijit Shetty, Asst. Manager (Sales) recorded u/s. 131 on 10.01.2011 in the case of M/s. Casa Unlvts, Next to Bafana Motars Workshop/ Bhayanderpada, Ghodbunder Road, Thane 400604 Q.11 In the course of survey proceedings and on verification of your clients lists randomly at Page No. 29 Sr.n No. 476, Annexure A-l namely, Mr. Bhushan Sureshn Paranjaple, we confirmed with his wife over telephonic (0250-2506393) talk that 20% i.e. around ₹ 9 lakhs has been paid in cash and for the balance 80% is to be paid i.e. ₹ 39f83,850/- as per Schedule mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e flats which are sold almost in the same period had different rates as per agreement where there was no SCUD meeting the rates charged were higher viz-a-viz the rates fixed after SCUD meeting. Taking into consideration this factor, Mr. Abhinandan Lodha made a disclosure of ₹ 51 Crore accepting in principle that the Lodha Group of concerns were indulged in the acceptance of on money. After having accepted in principle that the Lodha Group of cases including assessee, the only question remains what is the quantum of on money received by the assessee company in the sale of flats. Therefore, the exercise was made to go thoroughly through the data collected at this end and then as a natural consequence it was decided that the highest rate at which any flat has been purchased or sold is the real marketable value and any flat which is sold at the rate lesser than the highest value is a result of receipt of consideration in cash. On the basis of this, the working of on money received has been made which is enclosed as Annexure A to this order. The quantum of on money determined works out to ₹ 2,07,21,096/- 4. Against the above order, assessee appealed before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Referring to the above, ld.CIT(A) held that it is abundantly clear that cash found and seized at various placed was in respect of the on money received on account of car parking and sale of flats a part of which belonged to assessees company, which the director of the assessees company, Shri Abhinandan Lodha declared as undisclosed income u/s. 132(4) fo the Act . Hence, he held that it clearly shows that unaccounted cash receipts of car parking and on money was resorted by the assessee. He further referred to the search action at the premises of Shri Somnathan Nair said to be the key employer of the Lodha Group and custodian of the unaccounted money. He observed that various documents were seized from the residence of Somnath Nair and these were considered by Shri Abhinandnan Lodha while making his statement. Hence, he observed that large number of incriminating documents were found during the search of the searched person. 8. Ld.CIT(A) observed that he finds enough indications of the evidence of incriminating material particularly unaccounted cash discovered during the course of search belonged to the appellant. That as per provisions of section 153C of the act notice can o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iries were carried out u/s.245D(3) which revealed that the applicant group continues to receive unaccounted car parking amounts after 16/09/2010 to the date of search. On the issue of car parking charges after the date of search, CIT mentioned in 245D(3) report that post search, no significant increase in rates of flats sold was noticeable. This would imply that the applicants continues to take car parking amounts outside the books even after search. 7.6 It is further observed by the Hon ble Settlement commission that the Lodha group of Companies, the appellant being one of the entities of such huge group, in this Statemnt of Facts (SOF) admitted the important basic fact of quantum directly reflected in the incriminating documents:s a) Cash received as part of sale proceeds (on money) 24 instances totaling to ₹ 1,05,84,000/- b)From Shri Hiralal Jain, Finance Broker, discounting of cheques through 11 sham concerns was found in the statement of bank accounts of these sham concerns. 10. Thereafter, ld.CIT(A) referred to the modus operandi as noted by the AO. He referred to the statement of employees of Lodha group and based upon that of Shri A Abhinand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 199.80 The appellant has accordingly offered additional income on account of sale of car parking. The appellant contends that he had sold parking slots but has not charged for some of them. It does not stand to reason that he sells parking without charging for them. The AO has rightly brought to tax the amount of such sale of car parking, which assessee has not offered for taxation on the premise that the same were not sold for a consideration. It does not seem plausible and has not been substantiated by the appellant. In the present case, the appellant company has not offered any amount on account of car parking in its original return of income as well as in a revised return filed u/s. 153C of the Act. In view of the above facts it may be concluded that the assessee was indeed involved in selling parking slots and considerations was received in cash which was unaccounted. Accordingly additions of ₹ 1,05,84(000/- made by the AO in this regard is upheld 11. As regards the issue of addition of ₹ 2,07,21,096, for on money on sale of flats, the learned CIT(A) noted the following submissions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and made additions in another group company M/s. National Standard (India) Limited (NSIL). A copy of the order of the AO is for AY 2010-11 is attached as Annexure 1. The fact pattern and reasons for assessment are identical, except the amount of MSIL and the appellant company. Your predecessor has already quashed the assessment of NSIL made u/s.!53A r.w.s. 153C vide order dated 24 April 2015. A copy of the order of CIT(A)-48 is attached as Annexure 2. The order of CIT(A) was subsequently challenged by the department before the Mumbai Tribunal and the Tribunal vide its order dated 28 July 2017 has upheld the decision of CIT(A) that the action of the AO u/s 153C is bad in law and illegal. A copy of the order of the Mumbai is attached as Annexure 3. As per the information available with the appellant, the department has accepted the decision of Mumbai Tribunal in the case of NSIL and has not preferred any appeal before the Bombay High Court. On Merits: SI. No. Issue Amount (Rs.) Assesse's Contention 1 Unaccounted sale of car parking 10,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement, however, cannot be said to be involuntarily made merely because it is subsequently sought to be retracted. It is also to be remembered that the law of evidence presumes regularity and correctness of the official actions unless proved otherwise and hence the said principle will also govern the statement recorded by a public official and this is more particularly so when it is recorded in pursuance of the statutory provisions of law. The provisions of Sub-section (4) of Section 132 at so create rebuttable presumption in favour of the statements recorded thereunder and authorize their use in evidence in any proceeding under the Income- tax Act. The burden is therefore squarely on the person who alleges that the statement was not made voluntarily to prove that it was involuntarily made or made under coercion or undue influence or that it was made under mistaken belief or was obtained by fraud or misrepresentation. Mere allegation will not suffice. Second situation is where the person seeking to retract proves, by leading cogent and reliable evidence, the erroneous or incorrect nature of the facts stated or confessed at the earliest possible opportunity. In the case before us, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same is therefore upheld. 14. As regards, the issue of carry forward of losses, he held as under:- This issue has been dealt with by the AO in para 4 of the assessment order. The AO was of the view that share holding pattern of the assesse company has undergone sea change as 100% shareholding which was held by Lodha Developers till31.03.2007, has been transferred to Elevation Buildcon P Ltd and therefore in view of provisions of section 79 of the Act, the brought forward losses from earlier years are not eligible for carry forward and set off against the income of subsequent years. I am inclined to agree with the AO and hold that the assessee is not eligible for carry forward of such losses after AY 2007-08. Accordingly, these grounds of the assessee also fail. 15. Against the above order, assessee has filed appeal before ITAT challenging the above. 16. We have heard both the parties and perused the records. We note that the first issue dealt with by the learned CIT(A) is the assessee s challenge that provisions of section 153C are not satisfied and hence, the jurisdiction of assessment in this case is defective and liable to be quashed. Before proceeding f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 132A, as the case may be, shall abate: Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years : Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless- ( a ) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; ( b ) the income referred to in clause ( a ) or part thereof has escaped assessment for such year or y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 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 documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was noted by the ITAT that as per provisions of section 153C of the act, incriminating material, which was seized had to pertains to assessment years in question and it is an undisputed fact that the document which were seized did not establish any correlation, document wise, with these for assessment years since this requirement under section 153C of the act is essential for assessment under the provision it becomes a jurisdictional defect. We find this reasoning to be logical and valid having regard to the provisions of section 153C of the Act. 18. A reading of the above makes it clear that for removal of jurisdictional defect, it is necessary that incriminating material seized during search has to pertain to the specific assessment year in question. If the documents, which are seized do not establish any correlation, document wise with the concerned assessment years, the assessment for that year suffers from jurisdictional defect. 19. Now, we refer to the finding of the authorities below regarding incriminating material found and seized and referring to the assessee in this case. It is noted that the search was not conducted at the premises of the assessee. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 153C giving jurisdiction to the AO to frame the assessment. Same is a situation of the material found relating to receipt of on money. These are also based upon materials found in the case of search of Lodha group and the statement of other employees of Lodha group and the statement of Abhinandan Lodha. There is no material whatsoever specifying the material pertaining to the assessment year found belonging to the assessee company. In this view of the matter, there is a jurisdictional defect in the assessment framed under section 153C and the same is liable to be set aside on the account itself. 22. Now, we come to the merit of addition in this case relating to on money received and the cash found relating to undeclared sale of parking space and flats. 23. As noted above, these are also not based upon reference to any specific materials relating to the assessees company. The additions are said to be based upon materials belonging to the Lodha group and statement of employees of Lodha group and statement of Shri Abhinandan Lodha, which has been retracted afterwards. 24. As found out by us above, the assessee is a separate legal entity. There is no mention wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strength. 26. Thereafter, Hon ble Supreme Court in paragraph 13 to 24 dealt with the provision of law in this regard and the decision of Anvar P.V(supra) as under:- 13. It is now necessary to set out the relevant provisions of the Evidence Act and the Information Technology Act, 2000. Section 3 of the Evidence Act defines document as follows: Document.-- Document means any matter expressed or described upon any substance by means of letters, figures or marks, or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter. Evidence in Section 3 is defined as follows: Evidence. -- Evidence means and includes-(1) all statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry; such statements are called oral evidence; (2) all documents including electronic records produced for the inspection of the Court; such documents are called documentary evidence. The Evidence Act also declares that the expressions Certifying Authority , electronic signature , Electronic Signature Certificate , electronic form , electronic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities; (c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and (d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities. (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether- (a) by a combination of computers operating over that period; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means of any appropriate equipment. Explanation. -- For the purposes of this section any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process. 17. The following definitions as contained in Section 2 of the Information Technology Act, 2000 are also relevant: (i) computer means any electronic, magnetic, optical or other high-speed data processing device or system which performs logical, arithmetic, and memory functions by manipulations of electronic, magnetic or optical impulses, and includes all input, output, processing, storage, computer software or communication facilities which are connected or related to the computer in a computer system or computer network; (l) computer network means the inter-connection of one or more computers or computer systems or communication device through (i) the use of satellite, microwave, terrestrial line, wire, wireless or other communication media; and (ii) terminals or a complex consisting of two or more interconnected computers or communication device whether or not the inter-connection is continuously maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contents of electronic records being proved in accordance with the provisions of Section 65B. Section 65B speaks of admissibility of electronic records which deals with existence and contents of electronic records being proved once admissible into evidence. With these prefatory observations let us have a closer look at Sections 65A and 65B. 20. It will first be noticed that the subject matter of Sections 65A and 65B of the Evidence Act is proof of information contained in electronic records. The marginal note to Section 65A indicates that special provisions as to evidence relating to electronic records are laid down in this provision. The marginal note to Section 65B then refers to admissibility of electronic records . 21. Section 65B(1) opens with a non-obstante clause, and makes it clear that any information that is contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document, and shall be admissible in any proceedings without further proof of production of the original, as evidence of the contents of the original or of any facts stated therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .V. (supra), a three Judge Bench of this Court, after setting out Sections 65A and 65B of the Evidence Act, held: 14. Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65-A, can be proved only in accordance with the procedure prescribed under Section 65-B. Section 65-B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub-section (2) are satisfied, company owning the mine is liable to prosecution. No question of violation of Article 14 therefore arises. 2 70. Perusal of the opinion of the Full Bench in B.R. Gupta-I [Balak Ram Gupta v. Union of India, AIR 1987 Del 239] would clearly indicate with regard to interpretation of the word any in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 65-B(2) of the Evidence Act; and (e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device. 16. It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, compact disc (CD), video compact disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. 17. Only if the electronic record is duly produced in terms of Section 65-B of the Evidence Act, would the question arise as to the genuineness thereof and in that situation, resort can be made to Section 45-A-opinion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t does not mean that secondary evidence cannot be given even if the law permits such evidence to be given in the circumstances mentioned in the relevant provisions, namely, Sections 63 and 65. It may be seen that it was a case where a responsible official had duly certified the document at the time of production itself. The signatures in the certificate were also identified. That is apparently in compliance with the procedure prescribed under Section 65-B of the Evidence Act. However, it was held that irrespective of the compliance with the requirements of Section 65-B, which is a special provision dealing with admissibility of the electronic record, there is no bar in adducing secondary evidence, under Sections 63 and 65, of an electronic record. 22. The evidence relating to electronic record, as noted hereinbefore, being a special provision, the general law on secondary evidence under Section 63 read with Section 65 of the Evidence Act shall yield to the same. Generalia specialibus non derogant, special law will always prevail over the general law. It appears, the court omitted to take note of Sections 59 and 65-A dealing with the admissibility of electronic record. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reference in para 72 as under:- 72. The reference is thus answered by stating that: (a) Anvar P.V. (supra), as clarified by us hereinabove, is the law declared by this Court on Section 65B of the Evidence Act. The judgment in Tomaso Bruno (supra), being per incuriam, does not lay down the law correctly. Also, the judgment in SLP (Crl.) No. 9431 of 2011 reported as Shafhi Mohammad (supra) and the judgment dated 03.04.2018 reported as (2018) 5 SCC 311, do not lay down the law correctly and are therefore overruled. (b) The clarification referred to above is that the required certificate under Section 65B(4) is unnecessary if the original document itself is produced. This can be done by the owner of a laptop computer, computer tablet or even a mobile phone, by stepping into the witness box and proving that the concerned device, on which the original information is first stored, is owned and/or operated by him. In cases where the computer happens to be a part of a computer system or computer network and it becomes impossible to physically bring such system or network to the Court, then the only means of providing information contained in such electronic record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, there is a disclosure of income u/s. 132(4) of ₹ 4.80 crores. As noted by us above the said so called disclosure was by Shri Abhinandan Lodha, who is not at all related to the assessees company and his statement was based upon the electronically retrieved data. As observed by us the above cannot distinguish the case from that of the assessees group company in NSIL ltd. Hence, the order of ld.CIT(A) is not sustainable on this ground also. 31. We note that assessee has raised a ground before the ld.CIT(A) that assessment is bad inasmuch as no notice u/s. 143(2) has been issued in this case. Ld.CIT(A) has dismissed this issue by noting that in case of assessment u/s. 153A, it has been held by Hon ble Delhi High Court and A Third Member Bench of the ITAT that 143(2) notice is not mandatory. In this connection, we note that these discussions by the ld.CIT(A) are besides the point inasmuch as in the submissions before us, the assesse has submitted that assessee has received notice u/s. 143(2) of the Act dated 27.09.2012 issued by ACIT,Circle-42, Mumbai to the assessee. Hence, this argument by the assessee before the ld.CIT(A) that notice u/s. 143(2) has not been issued is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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