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TMI Blog2025 (2) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... of other partner of the joint venture has already deleted the addition on account of such on-money received on sale of flats in the project Ganga Acropolis, we are of the considered opinion that no addition is called for in the hands of the assessee. Accordingly, the addition made by the AO for assessment year 2017-18 being share of the assessee on account of extrapolation is deleted. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... When these documents were correlated with entries found in other documents and Whats App chats, it becomes evident that the assessee firm is involved in accepting on-money in cash. After analyzing the various incriminating documents as well as evidences collected during the course of search and survey action, the Assessing Officer noted that the receipt of such on-money is clearly evident. He referred to the statements recorded of Shri Deepak Tugave, Smt. Anajana Domkavale and Vinit Singh who all are Sr. Sales Managers who have stated in their statements that the assessee has received on-money on account of sale of flats to different persons. However, the Assessing Officer noted that the assessee has not offered any on-money received in the ITRs filed. He, therefore, asked the assessee to file reply as to why the addition should not be made on account of receipt of on-money. 5. The assessee in response to the same filed a detailed reply which reads as under: "1. It is respectfully submitted that the noting found during the course of survey at the site office are rough noting made by sales representatives. These do not have any finality, as all the details are finalized only afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly established beyond doubt of receipt of on-money by the assessee firm which also corroborated with the statement of the employees of the assessee. Thus, the authenticity of incriminating document as well as its contents could not be doubted. After holding so, the Assessing Officer analyzed the number of flats sold in various years and accordingly calculated the year-wise receipt of on-money as per the impounded material which is as under: Sr No AY Amount of on money Infrastructure charges Total 1 2018-19 25,00,000 6,25,000 31,25,000 2 2019-20 2,64,64,000 6,50,000 2,71,11,400 9. The Assessing Officer further noted that the assessee has sold other flats in the current year as well as in earlier years. Since the evidences of on-money taken by the assessee were found related to 15 flats, therefore, he held that the probability of acceptance of on-money in other flats cannot be ruled out. Therefore, he asked the assessee to explain as to why such on-money should not be added in other years on the basis of extrapolation. Rejecting the various explanations given by the assessee and relying on various decisions, the Assessing Officer proceeded to calculate such on-m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the assessment year 2019-20 is concerned, the Assessing Officer made addition of Rs. 1,50,63,093/- on account of on-money received which is not recorded in the books of account and Rs. 8,92,53,040/- on account of extrapolation being the share of the assessee in the project. 11. In appeal, the Ld. CIT(A) upheld the action of the Assessing Officer by observing as under: "6.8 I have considered the facts of the case, assessment order, the submissions made by the appellant along with the judicial pronouncements relied upon by the appellant. During the course of search/survey proceedings, the search/survey team had collected the evidence and impounded various incriminating documents/diaries as under. i) As per scanned copy of page no. 32 of bundle no. 4, the said page enumerates the methods for calculating prices for sale of flat with on-money and without cash component. Here Rs. 5600/- is the quote price and 4400 is the rate on which the flat is to be registered. The difference amount of Rs. 1200/- is the amount that will be charged on each square feet area of property sold for the consideration to be received as cash component. The same is reproduced hereunder for ready referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ready reference. Sr. No. Customer name Flat details Other charges (Infrastructure charges) Cash amount accepted (In Rs. in lakhs) Amount shown in ledger up to date of survey (In Rs. ) 1 Nishikant kale D-1603 Not paid 17 10,36,960/- 2 Yash Khandelwal D-803 Not paid 18.64 9,75,000/- 3 Mayank Agarwal D-802 Paid 4 24,92,700/- (1 lakh at the time of booking and 23,92,700/- subsequently) 4 Hingmire E-601 Not paid 0.75 25,000/- 5 Ashish Modi D-1405 2,25,000/- 15 16,00,000/- 6 Akash jawle E-1501 Not paid 25 1,00,000/- 7 Hingmire (pg-42) E-601 Not paid 27.25 25,000/- 8 Anil Desai D-202 Not paid 20 1,00,000/- 9 Aditya Patil E-1003 - 25 1,00,000/- 10 Ketan ChabilalRahangdale C-1103 6,25,000/- 25 Ledger N/A 11 Maulik Shah B-602 Paid 40 Ledger N/A 12 Imran Khan A-502 Paid 37 Ledger N/A 13 Shobhit Joshi B-501 Not paid 15 4,05,790/- 14 Venkat Charan D-902 4,25,000/- 10 1,00,000/- Total 279.64 Furthermore, the AO has mentioned that most of the flats mentioned in the said table are sold below the Quoting rates and in some cases "Other Charges" have also not been taken. On this basis, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perandi of accepting cash, is not found to be true. The sales executives have explained the modus operandi of accepting on money in depth. Accordingly, the view taken by the AO that the appellant has accepted on-money, which was not recorded in the books of accounts is found to be correct and the action of the AO in determining proportionate share of the appellant of Rs. 2.42,12,902/- (4,35,79,737 x 55.36%) in its hands is hereby upheld for the year under consideration. Similarly, for AYs 2018-19 and 2019-20, the addition of 'on-money' income of Rs 5,31,70,746/- and Rs. 10,43,16,133/-, respectively made in the hands of the appellant is s also upheld vide the foregoing paras. This ground of appeal is, therefore, dismissed. 6.10 Since the quantum addition has been upheld in respect of ground no. 1 of the appeal, grounds No. 2 to 5 raised do not require separate adjudication." 12. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: 1. On facts and circumstances prevailing in the case and as provisions and scheme of the Act it be held that the First Appellate Authority erred in upholding the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellant be granted just and proper relief in this respect. 2. Without prejudice to Ground No. 1 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that if any addition needs to be sustained then that should only be restricted to the incriminating material found during the course of search proceedings. The addition made over and above such incriminating material, being merely on the basis of estimations is unwarranted, unjustified and contrary to the provisions of the Act and therefore deserves to be deleted. It be held that the Appellant be granted just and proper relief in this respect. 3. Without prejudice to Ground No. 1 and 2 and on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that in case additions are sustained on estimation basis, then the addition should be restricted only to the Gross Profit that might have been earned by the Appellant on such on-money. The addition made by the First Appellate Authority be reduced. The Appellant be granted just and proper relief in this respect. 4. Without prejudice to Ground No. 1, 2 and 3 and on facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to alter, delete, modify, add or amend any ground of appeal. 14. The Ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) in confirming the various additions made by the Assessing Officer. Referring to pages 127 and 128 of the paper book, he submitted that some rough notings were found on pages 41 and 42 of diary-3 seized during the course of search which were made by Shri Vinit Singh who is an employee of M/s. Kalyanee Fortune Constructions. Referring to the order of the Ld. CIT(A) in the case of M/s. Kalyanee Fortune Constructions, he drew the attention of the Bench to the same and submitted that the Ld. CIT(A) has deleted the addition made on account of on-money received on sale of flats / units in their project Ganga Acropolis. He submitted that not a single question was asked to Mr. Subhash Goel about the statement of any of the employees which were recorded u/s 131. So far as the incriminating documents are concerned, he submitted that it relates to one penth house which has not been sold. Further, the employee whose statement was recorded joined the service in 2018 and no statement of any old employee has been recorded. He submitted that when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 1,00,000 20-12-2018 18-12-2018 24-12-2018 14 D 905 Nitesh Rathore Milind Gautamrav Jiwan 1,00,000 - 15-01-2019 NA Sold to Milind Jawane 15 E 1803 Sneha Desai Vikram Tandon 1,00,000 - 25-02-2018 No entry in tally Sold to Vikram Tandon 16 D 404 Anibrata Routh Anibrata Routh 1,00,000 1,00,000 25-02-2019 04-01-2019 18-01-2019 17 D 606 Neelam Shrivastava Neelam Shrivastava 1,00,000 1,00,000 20-01-2019 01-01-2019 01-02-2019 (emphasis supplied) 16. He submitted that a perusal of the same shows that most of the sales have not been made to those persons whose names are appearing in the seized documents. The Assessing Officer has not called a single buyer to find the truth by recording his statement. He submitted that none of the buyers are related to the assessee and the entire addition made by the Assessing Officer is on the basis of surmises and guesswork. 17. Referring to the following decisions, he submitted that the statement recorded u/s 133A of the Act has no evidentiary value: i) CIT vs. Khader Khan Son (2008) 300 ITR 157 (Mad) ii) Paul Mathews & Sons vs. CIT (2003) 129 Taxman 416 (Ker) iii) CIT vs. P. Balasubramaniam (2013) 33 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is proposed to be made on account of Whats App messages retrieved from the employees of the assessee, the same could be restricted only to the transactions related to the said Whats App messages and no extrapolation could be made with respect to other transactions having no relation to the said Whats App messages whatsoever. 23. Referring to the following decisions, he submitted that the addition on the alleged on-money being accepted by the assessee should be restricted to the profit element embedded in the alleged on-money received by the assessee. i) CIT vs. President Industries (2002) 124 TAXMAN 654 (Guj) ii) CIT vs. Gurubachhan Singh J. Juneja (2008) 171 Taxman 406 (Guj) iii) Jyotichand Bhaichand Saraf & Sons (P.) Ltd. vs. DCIT (2012) 26 taxmann.com 239 (Pune) iv) Kush Corporation vs. ACIT vide ITA No.357/Srt/2022 v) CIT vs. Balchand Ajit Kumar (2004) 135 Taxman 180 (MP) vi) Madanlal Narendrakumar (HUF) vs. ACIT (2003) 131 TAXMAN 41 (Indore)(Mag.) 24. He accordingly submitted that no addition should be made in the hands of the assessee on account of on-money received by the assessee. 25. In his alternate argument, the Ld. Counsel for the assessee submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in accordance with law should be upheld and the grounds raised by the assessee be dismissed. 29. The Ld. Counsel for the assessee in his rejoinder submitted that in the case of Harish Textile Engrs. Ltd. vs. DCIT (supra) it was accepted by the assessee that it has received on-money, whereas in the instant case the director / partner of the assessee firm has completely denied the receipt of any on-money. He submitted that when the statements of the senior sales managers were recorded u/s 131 of the Act and they have made certain statements, the same were not corroborated with any evidence or any further enquiry from the buyers. Since nothing has been done, therefore, the said decision is not applicable. 30. So far as the decision of the Hon'ble Supreme Court in the case of Pooran Mal vs. Director of Inspection (supra) is concerned, he submitted that there is no dispute to the fact that the evidences can be used but the same has to be corroborated. When the assessee has stated that the negotiations were going on and the final price is as per the form signed by the director and the brokerage has also been given on the final price, the lower authorities could not have brushed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a single question has been asked by the search party on account of receipt of any on-money on the basis of the statements recorded u/s 131 of the senior sales managers. We further find none of the persons to whom the flats have been sold have ever been examined either by the search party during the course of search or post-search enquiries or by the Assessing Officer during the course of assessment proceedings. Further, a perusal of the details furnished by the assessee shows that most of the flats were sold to the persons other than the persons whose names are appearing in the seized documents. It is also an admitted fact that nothing is brought on record to show that any of the buyer to whom the flats have been sold are related to the assessee and the entire addition, in our opinion, has been made on certain guesswork on the basis of statements of the sales managers and some rough notings. Even the incriminating documents which relate to the penth house has not been sold. We, therefore, are of the considered opinion that the entire addition made by the Assessing Officer and sustained by the Ld. CIT(A) being on guesswork and surmises cannot be upheld. 33. We further find the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in the appellant own case for A.Y. 2016-17, 2017-18, 2018-19 & 2020-21 have already been decided in favour of appellant. The relevant portion of the order is reproduced hereunder: "I find that the view taken by Hon'ble Apex Court in the case of Common Cause (A Registered Society) v. UOI 245 taxman 214 (SC) that the entries in loose papers and electronic data from the premise of a third party which were not regularly kept during the course of business has no evidentiary value is also affirmed by the Hon'ble Karnataka High Court in the case of DC IT v. Sunil Kumar Sharma - [2024] 159 taxmann.com 179 (Karnataka). I find merit in the contention that on the basis of decision of the Hon'ble Apex Court (supra), entries in loose papers recovered at premise of third party have no evidentiary value. The alleged transactions mentioned in the rough notings of a third party were not recorded by the appellant. The alleged transaction vi/as not corroborated from the material found at survey in the appellant own case. It is well settled in law that the loose papers and documents cannot possibly be construed as books of account regularly kept in the course of business. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the same. In this regard, I find that the Hon'ble Apex Court has, in plethora of cases, advised against the use of suspicion however strong, for the purpose of making addition as under: • Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC) Whether though ITO is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence on account of law, but in making assessment under section 23(3) of 1922 Act he is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all - Held, yes. • Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) In this case, Hon'ble Supreme Court observed that both ITO and ITAT arriving in their conclusions had indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained or finding was perverse which could not be sustained and therefore Supreme Court was entitled to interfere with such finding and the addition made was liable to be deleted. • Umacharan Shaw & Bros. v. CIT [1959] 37 ITR 271 (SC) "Taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only if it is supported by the relevant material to substantiate the same. 38. We find the Mumbai Bench of the Tribunal in the case of Smt. Madhu Gupta vs. DCIT (2006) 8 SOT 691 (Mum), has held that the statements which are not confronted to any of the partners of the assessee should not be considered as the basis for making addition. 39. So far as various decisions relied on by the Assessing Officer as well as the Ld. CIT(A) are concerned, the same, in our opinion, are not applicable to the facts of the present case. In the case of Surendra M. Khandhar (supra), the Hon'ble Bombay High Court has held that where Xerox copy of document seized from the assessee was not denied the same showed advancement of certain sums to one 'C' and two signatories of said document were also not denied by the assessee and as the document was seized from assessee's control, presumption under section 132(4A) and 292C was clearly applicable. However, in the present case, the managing partner of the assessee firm has denied to have received any such on-money and no further questions were asked either to the managing partner or to any of the customers to whom the flats / shops have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put to Mr. Subhash Goel about the statements of the employees and the incriminating documents which relate to the sale of penth house has actually not been sold, most of the flats were sold to the persons other than the persons whose names were appearing in the loose sheets towards sale of the said very flats and the buyers are unrelated parties and since the Ld. CIT(A) in the case of other partner of the joint venture has already deleted the addition on account of such on-money received on sale of flats in the project Ganga Acropolis, we are of the considered opinion that no addition is called for in the hands of the assessee. Accordingly, the addition of Rs. 2,42,12,902/- made by the Assessing Officer for assessment year 2017-18 being share of the assessee on account of extrapolation is deleted. The grounds raised by the assessee are accordingly allowed. 43. Since the grounds raised by the assessee in the other two years are identical to grounds of appeal in assessment year 2017-18, therefore, following similar reasonings, we hold that neither any addition on account of any on-money received nor on account of extrapolation can be added. The grounds raised by the assessee are ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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