9911796707
TMI Blog2023 (6) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 2. Present appeals arise on account of assessment framed pursuant to search action conducted on the assessee u/s 132 of the Act on 07.01.2014. The issues involved, it was common ground, were similar arising in the background of identical facts. Therefore, all the appeals were taken up together for hearing and are being disposed of by way of this consolidated order. 3. We shall first take up the appeal of the Department and the CO of the assessee pertaining to the Asst. Year 2012-13. IT(SS) 245/Ahd/ 2017 Revenues appeal CO 24/Ahd/2018 of the assessee for A.Y 2012-13 4. At the outset, the ld.DR contended that the Revenue is aggrieved by order of the ld.CIT(A) passed in the present case, for having deleted all the additions made on the sole legal ground and proposition, that in the absence of any incriminating material found during the search, no addition could have been made in the impugned case as the assessment pertaining to the impugned year was unabated. The ld.DR pointed out that the ld.CIT(A) had held so following the proposition of law laid down by the Hon'ble jurisdictional High Court in the case of Pr. CIT Vs. Saumya Construction P. Ltd. (2016) 387 ITR 05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order has been set aside on the legal ground raised by the assessee, the ld.CIT(A) had rightfully found no need to decide the appeal on merits as it was a mere academic exercise. 6. We have heard both the parties. The facts relating to the case, as arise from the orders of the authorities below, are that there was search action under section 132 of the Act in the Bafna Panchal group of cases including the assessee, on 7.1.2014. Thereafter notice under section 153A was issued on 3.7.2014 and the assessee filed return of income on 27.11.2014 declaring income of Rs. 4,47,520/- for the impugned Asst. Year 2012-13, which was the income as shown in the original return of income. In the assessment framed under section 153A of the Act, the AO made addition on account of unexplained deposits/unsecured loans from M/s. Zeelan Infrastructure P.Ltd. amounting to Rs. 50.00 lakhs, disallowed interest paid on the unexplained deposits amounting to Rs. 1,46,427/- and made addition on account of unrecorded sales receipt (on-money) of Rs. 2,13,14,769/-. 7. Before the ld.CIT(A), the assessee contended that the AO had not referred to any incriminating material found from the assessee or f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the residential premises of Shri Sanjay Doshi ,who was partner in M/s. Shalibhadra Developers, Dharnidhar Reality and M/s. Sumangal Enterprise, a diary containing details of "on-money" (A/1) was seized which also contained details of accommodation entries in lieu of cash received as on-money for sale of units and introduced in the books. He noted that Shri Sanjay Doshi also admitted under section 132(4) of the Act, how on-money was received and how accommodation entries in the form of unsecured loans were arranged from three companies viz. Highland Industries, Snazzy Export Ltd., and Sampda Chemical Ltd. He further noted that after finding this diary and admission of Shri Sanjay Doshi, the AO verified books of accounts of all firms/companies of the group during the course of search proceedings, and noticed that all the firms/companies of the group had taken similar type of loans from companies having address of Kolkatta/Mumbai. He noted that the AO further verified these companies from ITD system and under section 133(6) of the Act and found that these companies were sham companies with negligible income and most of the notices issued to them had remained unserved. He thereafter ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized from the appellant or seized from any other premises also, for getting "triggered for" or for supporting the additions u/s 68, he does refer to a document seized from Chetan Jogi (which invariably pertains to the appellant) for making addition of "on-money" receipts. Having perused this document, however, I fully agree with the AR that this document is not the quotation for "bulk deal for flats", and has indeed nothing to do also with the price of the flats. As such, when the document itself quotes different "offer prices" for "units" giving speeds of 0.7 m/s and ] m/s, and when the seized paper is explained by the holder of the paper to be "quotation for lifts", the AO has no authority to disbelieve such plausible explanation simply on conjectures and without bringing any positive material to establish that "these are the rates of sale of Units in the projects of the appellant". The AR is also right in his submission that even if this document is considered to be "for bulk deal of flats", there is no in criminality in this document so as to confer valid jurisdiction on AO in revisiting the issue of "on-money receipt" in a concluded unabated assessment because there is no "tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments recovered or seized from the appellant. As such, as per even the AO in the assessment order, the additions u/s 68 for both the assessment years are based on verification of information which was already available in the pre-search return of income filed by the appellant which had attained finality as on the date of search. Similarly, addition of "on-money" for A.Y.2012-13by adopting an arbitrary liverage rate of sale of Rs. 2000 per sq. ft. is by merely comparing the appellant's own sales of different units and is founded on non-incriminating, irrelevant and dumb document seized from third party premises which has been read in a twisted and convenient way by the AO and is thus a pure guess-work of the AO without any meaningful foundation in any material, leave aside seized material. I strongly believe that while AO could possibly rely exclusively on circumstantial and collateral evidences for making addition in regular assessments or "abated assessments", he has no such authority de hors seized incriminating evidences in revisiting issue and making addition on the foundation of such circumstantial evidences in "unabated" assessments like the present ones. Thus and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l High Court, having challenged it before the Hon'ble Supreme Court and therefore, the order of the ld.CIT(A), it has been pleaded, be reversed. 11. We do not find any merit in this contention of the Revenue. Undisputedly, the order of the ld.CIT(A) is in conformity with the proposition laid down by the jurisdictional High Court in the case of Pr.CIT Vs. Saumya Construction P.Ltd. (supra). The factual findings of the Ld.CIT(A) regarding absence of any incriminating material found has remained unchallenged before us. There is no reason therefore for us to reverse the order of the ld.CIT(A) which has admittedly been passed in accordance with law. Therefore, the contention of the Revenue that the ld.CIT(A) had applied incorrect proposition of law while deciding the present appeal is dismissed. Ground No. 1 & 2 are dismissed. 12. As for the ground raised by the Revenue that the ld.CIT(A) ought to have decided the case on merits also, we hold that the ld.CIT(A) has rightly treated the same as a mere academic exercise, since the assessment order has been held to be invalidly passed. Ground of appeal No.3 is dismissed. And as a consequence grounds raised on merits of the additions del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years amounted to Rs. 2,12,85,806/- and Rs. 1,10,06,379/-. 19. The AO made addition of unsecured loans under section 68 of the Act for both the years on protective basis subject to finalization of the addition on account of unrecorded sales receipts to the extent of unsecured loans. The Ld.CIT(A) deleted the addition made of unsecured loan pertaining to that received from M/s Vansh Glass P. Ltd of Rs. 53 lacs noting that the said amount stood disclosed to and accepted by the Settlement commission by Param Enterprises. The remaining addition pertaining to unsecured loans was also deleted by the Ld.CIT(A) noting that nothing adverse against the assessee was found during search on the assessee or its group entities, while the assessee had discharged its onus of proving the genuineness of the loans. The addition made of unaccounted sales receipts was also deleted noting that the adverse material relied upon by the AO for making the addition pertained to some other transaction of the assessee. However the Ld.CIT(A) applied net profit rate of 17.5% to the turnover of the assessee for estimating its profits based on the disclosure made by other group entities to the Settlement Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year, since it formed one of the crucial basis for the AO for finding unsecured loans to be accommodation entries. Accordingly we take up first the issue of undisclosed income/ on-money receipts, added to the income of the assessee by the AO in two years, and deleted by the ld.CIT(A). Issue No.1 - undisclosed Sales/ On money receipt 24. A perusal of the assessment order reveals that the AO arrived at his finding of unrecorded sale receipts by the assessee on the following basis: i) He noted that the assessee had undertaken one residential projects viz. "Green Heaven" at Atladra-Padra Main Road, Nr.Bhayali Station, Samiyala, Baroda. He noted that M/s. Lupin Enterprise, another group concern also had similar project in the same area and key person of the said enterprise, Shri Sanjay Jogi, had in a statement recorded under section 132(4) of the Act admitted to the rate of booking of the project to be Rs. 2,000/- per square feet; ii) Documents seized from the residence of Shri Chetan Jogi, key-person of the assessee, being Annexure-BS/1 Page No.50 & 51, as per the AO revealed that cheques and cash components of the receipts was in the ratio of 75:25; iii) From the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt to Rs. 1.92 crores while the documents mentioned final offer at Rs. 2.5 crores, which was not commensurate at all with the price at which lifts were ultimately purchased by the assessee. He further pointed out that while documents mentioned cheque and cash ratio of 75:25%, the account of the lift purchased showed that the assessee had made almost 50% upfront payment for the purchase of lifts. Para 6.4 to 6.6 is reproduced hereunder: "6.4 The assessee's submission is duly considered. It is found that during the course of search proceedings, Shri Sanjay Jogi, the key person of the group, in his statement u/s 132(4) of the I T Act has admitted that the rate of booking the Green heaven project is Rs. 2000 per sq. ft. Sh. Sanjay Jogi is a partner of M/s Lupin Enterprise & his brother Sh. Chetan Jogi is a partner of the assessee firm. 6.5 Another piece of evidence (Annx. BS/1 page no. 50 & 51) was found and seized from the residence of Shri Cheatn Jogi, partner of Heaven Associates, where in a working in respect of sale of 16 flats have been worked out at a price of Rs. 2,37,27,845 and below this amount it was written that w above calculation is based on c/i@ 75% and ca @ 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounted sale receipts, at para 4.6 to 4.7 are as under: "4.6 So far additions for undisclosed income being alleged on-money receipts from customers are concerned, it is observed that while deciding the appeal for A.Y.2011- 12 & 12-13 my predecessor GJT(A) has categorically held that no documents relating to receipt of such income was found and the AO has made entire addition on assumption. The AO has estimated sale price @ Rs. 2000/- per sq feet based upon statement of Shri Sanjay Jogi recorded u/s 132(4) dated 07/01/2014 but the statement is with reference to M/s Lupin Enterprise and not with reference to units constructed by appellant firm. Even Shri Sanjay Jogi in very same statement had clarified that he had no relation what so ever with M/s Heaven Associates and he was not the partner of Heaven Associates. When the appellant and M/s Lupin Enterprise both are separate entities, statement in case of one firm cannot be made applicable to the other case and even the AO himself has mentioned that size of flats are different. 4.7 It is also observed that while estimating on money receipt, the AO has referred to loose paper found during the course of search at Shri Chetan Jogi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified. The ld.CIT(A) has deleted the addition noting that no incriminating relating to any on money receipt by the assessee on sale of flats/office was relied upon by the AO while making the impugned addition and there was no direct evidence proving the case of the AO that the assessee had sold units/flats/ @ Rs. 2000/- per sq. ft. The Ld.CIT(A) has categorically mentioned that the statement of Sanjay Jogi relied upon by the AO was with respect to another enterprise viz. M/s. Lupin Enterprise, and had nothing to do with the assessee-firm. He has also noted that even Sanjay Jogi in his statement clarified that he had no relation whatsoever with the assessee-firm. As for the loose paper found during the search at Shri Chetan Jogi, the partner in the assessee-firm, the impugned document was not found to be incriminating by the ld.CIT(A) in his order passed for the immediately preceding assessment year i.e. Asst. Year 2012-13. The ld.CIT(A) also in the said order had noted that the assessee's explanation of the loose paper as pertaining to the quotation of lift was plausible, pointing out that the paper mentioned "0.7m, 1 ms" which had no relation nor any connection was established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and final revised offers, which lend more credence to the assesses explanation that 0.7 m/s and 1m/s' represented speed of lifts and different revised offers related to different quotations for the lifts, as opposed to the AO who ignored these details and read the document in part only and found it as relating to the sale price of the units sold by the assessee. The assessee's explanation, we agree with the Ld.CIT(A), is more plausible than that the AO, and for the said reasons, we agree with the Ld.CIT(A) that the document had nothing to do with the units sold by the assessee. 31. Moreover, the basis adopted by the AO for computing the undisclosed sale by taking Rs. 2000/- per sq. meter as average sale price of the each unit is not correct, more particularly, in the absence of any incriminating material indicating this rate to be correct rate. The AO, we find, inferred from the details submitted by the assessee that the unit sold during the year, showed large variance in the rate of sale of different units during year, which variance was not justified by the assessee. According to the AO, there was no reason for such variation in the sale price of the units in the year itself, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Param Enterprise and accordingly deleted the addition made to that extent in the case of the appellant for Asst. Year 2014-15. His finding at para 4.2 and 4.3 of the order are as under: 4.2 So far as addition u/s 68 of the Act and interest thereon, it is observed that appellant has taken loan of Rs. 53,00,000/- from M/s Vansh Glass Ind. Pvt. Limited in A.Y. 2014-15 and same has been claimed to be considered in the Settlement Application filed in the case of Param Enterprise". The Ld ARs. of the appellant has submitted copy of said settlement application wherein in STATEMENT OF FACTS, at para 13, it was stated that "applicant has utilised cash generations in obtaining accommodation entries of unsecured loan." Further in para 14.1, the said applicant has also stated as under: "Since the applicant had received cash and additional income, it was utilised to procure entries of unsecured loans by giving cash and obtaining cheques in lieu thereof. Against the interest paid on such unsecured loans, the applicant has received back cash after adjustment of tax payable by the entry provider and commission. It is submitted that year wise list of unsecured loans which are not genuine is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15 by the assessee, the said party had responded to the summons issued to it, and had confirmed having given loan to the assessee. For the remaining parties, he found that these parties had either not responded to the summons or were not found at their given address. The ld.CIT(A) noted that jurisdictional High Court in the case of PCIT Vs. D&H Enterprises, 72 taxmann.com 91 had held that merely because the parties had not responded to the summons transactions could not be held to be ingenuine, particularly when the assessee had filed all documents evidencing the transaction. He also referred to the decision of various other High Courts in this regard, and accordingly held that addition on account unsecured loans in the present case, in the absence of any incriminating documents found during the course of search relating to these parties. The assessee on the other addition merely on the basis of investigation conducted by the department by reporting that parties had not responded to the summons issued to them. His finding at para 4.4 to 4.5 of the order as under: 4.4 So far as other unsecured loans and interest paid thereon, it is observed that during the course of exhausti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch loan. It is observed that bank statement of depositors clearly prove that funds are given to appellant and the AO has not proved that sources of such funds are undisclosed income of appellant. The appellant has discharged its onus cast u/s 68 of the Act by proving identity, genuineness and creditworthiness of depositors but the AO has failed to bring any direct material on record to prove that parties are shell companies or they have given accommodative entries. Hon'ble Gujarat High Court in case of Principal Commissioner of Income Tax Vs. RSA DIGI Prints vide Tax Appeal No: 503 of 2017 dated 06/09/2017 "3. From the materials on record, Commissioner of Income Tax (Appeals) and Tribunal both had come to the conclusion that the assessee had produced the copy of PAN card, address confirmation, copy of the return and the bank statements of the payee for the present assessment year as well as in the earlier assessment year where such an issue had cropped up. Essentially, Commissioner of Income Tax (Appeals) as well as the Tribunal held that the assessee established the genuineness of transaction, creditworthiness of payee and the source of the payment. The issue hinges on apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re particularly when the assessee has been found by the Ld.CIT(A) to discharge its onus of proving the genuineness of the transactions. The ld.CIT(A), we find, noted that the assessee had filed all evidences to prove genuineness of the transaction. With regard to the unsecured loans taken by the assessee in Asst. Year 2014-15 from Vansh Glass P. Ltd. The ld.CIT(A) has recorded a categorical finding of the fact that this amount was offered for settlement by Param Enterprise, an entity of the group searched. The above factual finding of the ld.CIT(A) have not been controverted by the ld.DR before us. Therefore we are in complete agreement with the Ld.CIT(A) that there was no basis or material with the AO for treating the unsecured loans of the assessee as being accommodation entries. 40. In view of the above, we do not find any infirmity in the order of the ld.CIT(A) deleting the additions on account of unsecured loans. As a consequence, the disallowance made of interest paid on unsecured loans by the AO, deleted by the ld.CIT(A), is also upheld. This issue also is decided in favour of the assessee. Issue No.3 - Net Profit estimation 41. The ld.CIT(A) further went on to make add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st paid on unsecured loans made in both the assessment years are deleted. The AO is directed to make addition on account of low gross profit for Rs. 27,75,740/- in A.Y. 2013-14 and Rs. 23,73,113/- in A.Y. 2014-15. Thus, related grounds of appeal are partly allowed." 42. We have gone through the orders of the Ld.CIT(A) authorities. 43. We are not agreement with the ld.CIT(A)for estimating the net profit of the assessee by application of net profit rate of 17.5% to the turnover disclosed by the assessee in his books of accounts, based on net profit rate disclosed by other entities in the group to the Settlement Commission. An estimated net profit rate was applicable only in the circumstances where books of accounts of the assessee were found to be not reliable and rejected by the Department. In the present case, both the ld.CIT(A) and even ITAT have found no infirmity in the books of accounts of the assessee. All additions made by the AO on account of unsecured loans or unaccounted sale consideration have been deleted both by the CIT(A), and his order has been upheld by us above in the earlier part of this order. Therefore, no infirmity found in the books of accounts of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Rs. 27,75,740/- on turnover shown in books of account without appreciating fact that both AC and CIT(A) has not found any discrepancies in books of account maintained by the appellant and same was not subject matter of addition made by A.O. 1.1 In law and Ld, CIT (A) has grossly erred in estimating-profit @ 17.5% in of appellant relying upon order of Settlement Commission passed in of group cases of appellant, without appreciating the fact that even as per his own stand, there is no on-money taken by the appellant in present project whereas in before Hon'ble Settlement Commission, during the course of search evidences were found that said concern have taken on-money on various projects executed by them, Addition made by the AO deserves to be deleted." 50. Ground No.1 and 1.1 raised by the assessee are against addition made to the income of the assessee by estimating net profit earned by applying rate of 17.5% to its turnover, as disclosed by other entities of the assessee-group to the Settlement Commission. This issue has been dealt with by us at Issue No.3 (above) deleting the addition made. Accordingly, ground no.1 and 1.1 of the assessee's both the appeals are allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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