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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 ..... nnected entity by a string of transactions. That during the search proceedings, it was found that Lodha Group was engaged in suppression of sale receipts on account of sale of car parking space outside the regular books of accounts. That simultaneously, instances of receipt of on money against sale of flat were also found which shows that the group had been indulging in receipt of on money on sale of flats over and above the disclosed receipts. That shri Abhinandan Lodha, director and a key person of Lodha Group was confronted with the evidences found during the search of Lodha Group of Companies and his statement was recorded on 12th January 2011 under section 132(4) of the Act wherein he made a declaration of Rs. 199.80 crore as undisclosed income in the hands of various companies of Lodha Group on various accounts. That in his statement he had made a voluntary disclosure in the hands of the assessee company also for various assessment years including the assessment year under consideration, i.e. AY 2010-11, where in an amount of Rs. 487 lakh was admitted on account of undisclosed cash receipt on sale of car parking space. That consequent to search, the Lodha Group was centralize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f car parking stands as under :- The purchaser of car parking used to approach the developer of Lodha Group. If the terms of sale of car parking are accepted by the prospective buyer, the Lodha Group used to take a cheque from such buyer in the name of either of the following entities :- 1. Navkar Enterprises 2. Nakoda Enterprises 3. Raj Vijay 4. Arihant Enterprises 5. Dev Industries 6. Hirani Enterprises 7. Sh tv Sha kti Enterprises 8. V Raj Enterprises 9. Weaves Impex 10. Vijaylaksmi and Co. 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. Evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plausible explanation for not including the balance disclosure of 40.52 lacs in the return of income. In the backdrop of these facts, the additional income disclosed by the assessee of Rs. 40.52 lacs is brought to tax as additional income. As discussed in subsequent para the assessee has sold 24 flats during the previous year relevant to AY under consideration. Needless to mentioned that the sale of flats was coupled with car 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 Rs. 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 Rs. 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 Rs. 1,05,84,0007- (24 x 4,41,000), Thus in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entries. Ans. The alphabet 'c' in the above remarks stands for 'cash component and the remarks which is written in Column 'C and 'D' are made by the Sales Manager viz. Nayan Vora and Mukul Mehta to get the special deviation under SCUD as asked by the clients / customers for which no approval is given by the higher management. 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 proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue. Even the 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 Rs. 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 Rs. 2,07,21,096/-" 4. Against the above order, assessee appealed before the ld.CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 only be issued to a person with respect to whom incriminating material is found and the AO of that assessee makes a report that the said material is belonged to the said person. That in the present case, AO satisfaction was found that the cash discovered during the search of the searched person was unaccounted and belonged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 Rs. 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 Abhinandan Lodha and concluded as under:- From the above, it becomes clear that the appellant company had been collecting parking charges by cheques in the names of concerns operated by others. These cheques were then given to Hirachand for discounting and after deducting commission, Hirachand returned back cash to the appellant company, an entity of Lodha group. Certain evidences, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is upheld 11. As regards the issue of addition of Rs. 2,07,21,096, for on-money on sale of flats, the learned CIT(A) noted the following submissions of the assessee:- 8.1 Appellant's Submission: The appellant is part of Lodha Group of Companies. A search u/s 132 was conducted on Lodha Group on 10.1.2011. During the search, the statement of certain individuals were recorded, including Mr. Abhinandan Lodha, who was the director of Lodha Developers Pvt. Ltd. It may be clarified that Mr. Abhinandan Lodha was neither employee nor director of the appellant company. In the statement recorded for certain disclosure was made by Mr. Abhinandan Lodha in respect of on money and sale of car parking for project being developed by the appellant company. Based on the statement recorded, the assessment was completed and an assessment order was passed u/s I53A r.w.s. 153C/143(3) wherein the following additions were made: Sr. no. Particulars Amount (Rs.) 1 Unaccounted sale of car parking 1,05,84,000 2 Unaccounted on money on sale of flats 2,07,21,096 Appellant's Contentions: At the outset it is submitted that this being the year in which the search was conducted, no asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound or seized in respect of the appellant during the search process on Lodha Group. The AO has relied on pages 107 and 108 of Annexure A4 seized during the search action which represents the chart showing the projects of the appellant, sales consideration etc. At no place there is mention of project 'Casa Ultima' developed by the Appellant which proves that the appellant has not received any on money from the project. 2 Unaccounted on money on sale of flats 16,78,31,372 12. Thereafter, ld.CIT(A) referred to search in Lodha group and retrieval of a deleted file from computer. That the same contained on money collection. He again referred to statement of other employees of Lodha group and thereafter that of Shri Abhinandhan Lodha. He referred to following case laws i) Surjeet Singh chhabra v. Union of India (SC) ii) TS Kumarasami v. ACIT , 65 ITD 188 (Mad.) iii) MK Mohammad Kunhi v. CIT 92 ITR 341 (ker.) iv) V Kunhikannan v CIT 219 ITR 235 (Ker.) v) Hotel Kiran v ACIT, 82 ITD 453 (Pune.Trib) vi) Dr.SC Gupta v. CIT, 248 ITR 782(Alld) 13. He concluded as under:- "Respectfully following the above judicial authorities on the subject, I hold as under:- (i) Statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the evidence available on record shows that it was voluntarily made by the appellant with due care and caution and after necessary consultations with all concerned. Besides, there has been inordinate delay, which has not been substantiated to retract from the confessional statement. Retraction is also not supported by any independent or reliable evidence to prove the incorrect nature of the facts confessed in the statement. The confessional statement of the appellant is also corroborated by other evidence. For these reasons also, the AO was, therefore, in my view, justified in basing the impugned addition on the basis of confessional statement made at the time of search. (iiii) A confessional statement, which is not in the nature of declaration Under Section 115 of the Evidence Act, continues to have evidentiary value even after its retraction. However, such retracted confession/statement needs corroboration if it has been successfully retraced. As held above, the case of the assessee before us does not fall under this category. The appellant is a practicing Chartered Accountant and he is in the practice in the last 42 years. Considering his long legal background, the conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other person to whom section 153A is applicable. Section 153A in the explanation at the end provides that the procedure mentioned in this section shall also be applicable to cases covered under section 153C. The necessary provisions read as under:- Assessment in case of search or requisition:- 153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [but on or before the 31st day of March, 2021], the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.-For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorities below is based upon the search and material found in the case of Lodha Group. There is no mention of any specific material much less incriminating material relating to the assessee found in the search. The authorities below are also referring to statements given by the employees of Lodha group. There is no mention that these employees were that of the assessee's company. There is much importance given to the statement of Shri Abhinandan Lodha. The ld.CIT(A) has mentioned that the said person is a director in the assessee company. This has been disputed by the assessee even before the ld.CIT(A) that the said person is not a director of the assessees company. The assessee company has also mentioned that it has separate legal entity and the term Lodha group cannot be used against it without identifying the specific material belonging to it. The ld.CIT(A) has ignored this aspect despite reproducing the assessee submission before him in his appellate order. When the said person is not a director in the said company his statement by no stretch of imagination can be said to be applicable or binding upon the said company. In such eventuality, the said material cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mane and hence, the addition on merits is also not sustainable. In this regard, we also note that the ld.CIT(A) has given the elaborate reference to case laws regarding the evidence Act and evidentiary value of statements obtained. 25. In this regard, we note that 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. In this regard, it may also be relevant to refer to the material found in the search at other places and on the basis of which these statements have been obtained. The materials found in search mentioned is the retrieval of deleted file stored in computer system. In this connection, the law in this regard has been elaborately dealt with by the larger Bench Hon'ble Surpeme Court in the case of Arjun Panditrao Khotkar vs Kailash Kushanrao Gorantyal and ors in civil appeal No. 2407 of 2018, vide order dated 14.07.2020. The said larger Bench of Hon'bel Apex Court noted the reference b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion." 15. Section 45A of the Evidence Act, on the opinion of the Examiner of Electronic Evidence, then states: "45A. Opinion of Examiner of Electronic Evidence.-- When in a proceeding, the court has to form an opinion on any matter relating to any information transmitted or stored in any computer resource or any other electronic or digital form, the opinion of the Examiner of Electronic Evidence referred to in section 79A of the Information Technology Act, 2000 (21 of 2000), is a relevant fact. Explanation.-- For the purposes of this section, an Examiner of Electronic Evidence shall be an expert." 16. Sections 65-A and 65-B of the Evidence Act read as follows: "65A. Special provisions as to evidence relating to electronic record.--The contents of electronic records may be proved in accordance with the provisions of section 65B." "65B. Admissibility of electronic records.- (1) Notwithstanding anything contained in this 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 (hereinafter referred to as the computer output) shall be deemed to be also a document, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say, - (a) identifying the electronic record containing the statement and describing the manner in which it was produced; (b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by a computer; (c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this subsection it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it. (5) For the purposes of this section, (a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een processed in a computer system or computer network, and may be in any form (including computer printouts magnetic or optical storage media, punched cards, punched tapes) or stored internally in the memory of the computer;" "(r) "electronic form", with reference to information, means any information generated, sent, received or stored in media, magnetic, optical, computer memory, micro film, computer generated micro fiche or similar device;" "(t) "electronic record" means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche;" 18. Sections 65A and 65B occur in Chapter V of the Evidence Act which is entitled "Of Documentary Evidence". Section 61 of the Evidence Act deals with the proof of contents of documents, and states that the contents of documents may be proved either by primary or by secondary evidence. Section 62 of the Evidence Act defines primary evidence as meaning the document itself produced for the inspection of the court. Section 63 of the Evidence Act speaks of the kind or types of secondary evidence by which documents may be proved. Section 64 of the Evidence Act then enact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entifies the electronic record containing the statement and describes the manner in which it is produced, or gives particulars of the device involved in the production of the electronic record to show that the electronic record was produced by a computer, by either a person occupying a responsible official position in relation to the operation of the relevant device; or a person who is in the management of "relevant activities" - whichever is appropriate. What is also of importance is that it shall be sufficient for such matter to be stated to the "best of the knowledge and belief of the person stating it". Here, "doing any of the following things..." must be read as doing all of the following things, it being well settled that the expression "any" can mean "all" given the context (see, for example, this Court's judgments in Bansilal Agarwalla v. State of Bihar (1962) 1 SCR 331 and 1 "3. The first contention is based on an assumption that the word "any one" in Section 76 means only "one of the directors, and only one of the shareholders". This question as regards the interpretation of the word "any one" in Section 76 was raised in Criminal Appeals Nos. 98 to 106 of 1959 (Chief Insp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tput, depends on the satisfaction of the four conditions under Section 65-B(2). Following are the specified conditions under Section 65- B(2) of the Evidence Act: (i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer; (ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity; (iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and (iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity. 15. Under Section 65-B(4) of the Evidence Act, if it is desired to give a statement in any pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al law under Sections 63 and 65 has to yield. 21. In State (NCT of Delhi) v. Navjot Sandhu a two-Judge Bench of this Court had an occasion to consider an issue on production of electronic record as evidence. While considering the printouts of the computerised records of the calls pertaining to the cellphones, it was held at para 150 as follows: (SCC p. 714) "150. According to Section 63, "secondary evidence" means and includes, among other things, 'copies made from the original by mechanical processes which in themselves insure the accuracy of the copy, and copies compared with such copies'. Section 65 enables secondary evidence of the contents of a document to be adduced if the original is of such a nature as not to be easily movable. It is not in dispute that the information contained in the call records is stored in huge servers which cannot be easily moved and produced in the court. That is what the High Court has also observed at para 276. Hence, printouts taken from the computers/servers by mechanical process and certified by a responsible official of the service-providing company can be led in evidence through a witness who can identify the signatures of the certifying off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to that electronic record, is inadmissible. 23. The appellant admittedly has not produced any certificate in terms of Section 65- B in respect of the CDs, Exts. P-4, P-8, P-9, P-10, P-12, P-13, P-15, P-20 and P- 22. Therefore, the same cannot be admitted in evidence. Thus, the whole case set up regarding the corrupt practice using songs, announcements and speeches fall to the ground. 24. The situation would have been different had the appellant adduced primary evidence, by making available in evidence, the CDs used for announcement and songs. Had those CDs used for objectionable songs or announcements been duly got seized through the police or Election Commission and had the same been used as primary evidence, the High Court could have played the same in court to see whether the allegations were true. That is not the situation in this case. The speeches, songs and announcements were recorded using other instruments and by feeding them into a computer, CDs were made therefrom which were produced in court, without due certification. Those CDs cannot be admitted in evidence since the mandatory requirements of Section 65- B of the Evidence Act are not satisfied. It is cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions under Section 67C of the Information Technology Act and data retention conditions are formulated for compliance by telecom and internet service providers. (d) Appropriate rules and directions should be framed in exercise of the Information Technology Act, by exercising powers such as in Section 67C, and also framing suitable rules for the retention of data involved in trial of offences, their segregation, rules of chain of custody, stamping and record maintenance, for the entire duration of trials and appeals, and also in regard to preservation of the meta data to avoid corruption. Likewise, appropriate rules for preservation, retrieval and production of electronic record, should be framed as indicated earlier, after considering the report of the Committee constituted by the Chief Justice's Conference in April, 2016." 28. In terms of above, we note that though ld.CIT(A) has elaborately dealt with evidences and evidences act, his order is conspicuously silent on the evidences of electronic data referred in this case and the compliance with the above exposition of law. We are conscious that this issue has not been raised, but then it is also settled that there is no estoppel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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