1 ITA Nos. 4922 &4257/Del/2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `F' NEW DELHI
BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER
AND
SHRI T. S. KAPOOR, ACCOUNTANT MEMBER
I.T.A .No. 4922/Del/2011
ASSESSMENT YEAR:- (2008-09)
DCIT vs Raj Hans Tower Pvt. Ltd.
nd
Circle-15(1), Room No. M-33, 2 Floor,
412, G.K-1
C.R. Building, I.P. Estate New Delhi
New Delhi AAACR0019H
(APPELLANT) (RESPONDENT)
I.T.A .No. 4257/Del/2011
ASSESSMENT YEAR:- (2008-09)
Raj Hans Towers Pvt. Ltd. vs ACIT (OSD)
nd
M-33, 2 Floor, CIT-V
Greater Kailash-1 New Delhi
New Delhi
AAACR0019H (RESPONDENT)
(APPELLANT)
Appellant by Sh. R. C. Singhvi, CA
Respondent by Ms. Meenakshi Vohra, DR
ORDER
PER I. C. SUDHIR, JM
These are the cross appeals by the parties against the common first appellate
order for the year.
ITA NO. 4922/DEL/2011
2. The Revenue has questioned first appellate order on the ground that the Ld.
CIT(A) has erred in deleting the addition of Rs.7,10,55,000/- made on account of
2 ITA Nos. 4922 &4257/Del/2011
bogus accommodation entries, when such fact was admitted on oath during the
course of survey.(Ground No.1) (Revenue)
3. The Revenue has also questioned the first appellate order on the ground that
the Ld. CIT (A) has erred in adjusting the unexplained expenditure against
unexplained credits when the nature of these two transactions is different and
requires different treatment. (Ground No.2).
4. The assessee on the other hand has impugned first appellate order on the
following grounds:-
(ITA No. 4257/Del/2011)
"1(i). That on the facts and circumstances of the case, the CIT(A) was not
justified in sustaining addition of Rs.6,65,00,000/- on account of
alleged undisclosed cash receipt.
(ii) That whole basis of addition is illegal, arbitrary and misconceived and
merely based on presumption and surmises in the absence of any
material or evidence in support of alleged cash receipt either at the
time of survey or during the course of assessment proceedings and as
such the impugned addition is not sustainable on facts and under the
law.
(iii) That alleged addition is not even in conformity with relevant annexure
and in the absence of particulars of party, project or period in respect
of alleged cash receipt, there is no legal or factual basis for any such
addition.
(iv) That lower authorities have not made reference to any corroborative
evidence in support of cash receipt of Rs.6,65,00,000/- and in the
absence of availability of cash or any unrecorded investment, whole
basis of addition is hypothetical and merely based on surmises and
conjectures.
(v) That having retracted survey statement, same is of no relevance
particularly when alleged surrender is not the basis of any supporting
3 ITA Nos. 4922 &4257/Del/2011
and corroborative evidence and also in disregard to Circular No. 286
dated 10/3/2003 of CBDT.
(vi) That the CIT(A) has himself accepted while considering ground No.1
that any addition even in the context of statement recorded at the time
of survey has not be on the basis of incriminating documents or
evidence and as a matter of corollary there is no ground or justification
to sustain addition of Rs.6.65 crore in the absence of any relevant
document.
2(i). That on the facts and circumstances of the case, the CIT(A) was not
justified in sustaining addition of Rs.63,63,260/- on account of alleged
unexplained entries in seized annexure A-17 and A-18.
(ii) That addition of Rs.63,63,260/- is without proper evidence or
material and same has been made on illegal and arbitrary basis and
same is not sustainable on facts and under the law."
5. We have heard and considered the arguments advanced by the parties in view
of orders of the authorities below, material available on record and the decisions
relied upon.
Ground No.1 ( Revenue)
6. The relevant facts are that the assessee engaged in the business of real estate
and building construction etc. was subjected to survey operation u/s 133A of the Act
by the Investigation Wing at its business premises. During the course of survey
statements of Shri. R. C. Goyal, Director of the assessee Company was recorded,
wherein he disclosed a sum of Rs. 15,00,55,000/- as additional income of the
Company outside the regular books of accounts as per the details given below:-
Sl. No. Head Amount in Rs.
1 On account of accommodation entries taken 7,10,55,000/-
in the shape of unsecured loans(Page 11 of
the statement of Sh. R.C. Goyal)
2 Undisclosed cash receipts (Page 12 of the 6,65,00,000/-
statement of Sh. R. C. Goyal)
3 Unexplained cash credits in the cash book 1,25,00,000/-
(page 11 of the statement of Sh. R. C. Goyal)
Total disclosed amount 15,00,55,000/-
4 ITA Nos. 4922 &4257/Del/2011
7. The assessee, however had not included its above unaccounted income
declared at the time of survey in its return of income. A show cause notice was
issued to the assessee by the AO specifically asking therein as to why the disclosed
unaccounted amount by Shri R.C. Goyal on behalf of the assessee company at the
time of survey may not be added back in the total income of the assessee company?
In reply, the assessee alleged that so called surrendered was not voluntary and
bonafide and the same was obtained in an illegal and arbitrary manner, particularly
in the absence of any evidence or material in relation to such surrender was called
for and as such the alleged surrender was retracted. Reference of CBDT Circular
No. 286 dated 10/3/2003 was made. It was contended that surrender at the time of
search or survey cannot be a sole basis of addition without corroboration and proper
apperception of facts and evidence on record. The AO countered the cause shown
by the assessee with this observation that the disclosure of unaccounted income at
the time of survey is based on the evidence gathered by the Department at the time
of survey in the case of Shri S. K. Gupta, Chartered Accountant and also the
Director in the assessee company and from the business premises of the assessee
company itself. The AO observed further that another Director Shri R. C. Goyal
available at the time of survey at the business premises of the assessee company was
duly confronted with the evidences, on the basis of which the disclosure was made.
The AO mentioned that during the survey no coercion was made by the survey team
as the assessee did not register any complaint against the alleged act. The assessee
on the other hand contended that the only observation made in the shared statement
of Shri R.C. Goyal is that the amount was received from various fake companies.
Such observation alone cannot be any basis for the addition and is thus highly
arbitrary and uncalled for without proper opportunity or investigation. It was
contended that there is no reference to names of the companies or how and in what
5 ITA Nos. 4922 &4257/Del/2011
manner the inference was drawn relating to alleged accommodation entries. It was
submitted that these are all genuine transaction through banking channels and
correctness of all these transactions are fully supported and verifiable. The assessee
enclosed copy of account, income tax and assessment particulars as well as balance-
sheet of all the parties in support of these entries with this submission that it is self-
evident that genuineness of all these entries duly recorded in the books of accounts
are not in dispute and there is no case of any adverse inference. It was submitted
that all such entries were loan to the assessee company and has already been repaid
in the next years. It was also contended that most of the loans out of
Rs.7,10,55,000/-(added u/s 68 of the Act) are old and continuing from earlier years.
In support reference was made to audited balance-sheet showing that during the year
no fresh loan was received and on the contrary unsecured loans which remained
subject matter of dispute has come down as compared to precedent year and as such
there is no prima facie basis for any such addition. It was contended that the
Assessing Officer has not made any verification from concerned companies or from
office of Registrar of Companies and adverse inference was drawn on mechanical
manner merely on the ground that surrender was made at the time of survey. The
AO was not agreeable with these contentions of the assessee and made addition of
Rs.7,10,55,000/- u/s 68 of the Act on account of bogus accommodation entries. The
Ld. CIT (A) has however deleted the addition being satisfied with the
explanation/contention of the assessee. This action of the Ld. CIT (A) has been
impugned by the Revenue in Ground No. 1 of it its present appeal.
8. In support of the Ground, the Ld. DR has basically placed reliance on the
assessment order. She submitted that the assessee has retracted its statement made
during the course of survey making the surrender of Rs.7,10,55,000/- after the lapse
of 3 months from the date of survey thus it was nothing but an afterthought. There is
6 ITA Nos. 4922 &4257/Del/2011
no evidence that the statements of Shri R.C. Goyal were recorded during the course
of survey under duress or coercion nor any to their effect immediately after the
survey. The documents found during the course of survey was sufficient to support
the allegation of the AO that entries of Rs.7,10,55,000/- were nothing but
accommodation entries taken in the shape of unsecured loans. The AO was thus
justified in making the addition of the said amount on account of bogus
accommodation entries which was also admitted by the assessee during the course of
survey while surrendering the same. She referred contents of Para No.8 of the
assessment order.
9. The Ld. AR on the other hand reiterated submissions made before the
authorities below. He also referred Page No. 1 to 130 of the paper book i.e details of
outstanding loans with supporting documents relating to loans. The Ld. AR
submitted further that in earlier years, assessment u/s 143(3) was made. As per the
balance-sheet details furnished, most of the unsecured loans from the stated 15
companies in the assessment order are old belonging to earlier years and the
outstanding loan amount has been partly repaid during the year under consideration.
Most of the unsecured amount received by the assessee company from the above
lender companies are carried forward opening balances from earlier years. During
the year under consideration, the assessee had repaid Rs.1,15,40,000/-to three parties
and has received to only Rs.23 lacs from three parties out of the above mentioned
companies. He submitted that the impugned unsecured loan of Rs.7.10,55,000/- has
been received from various companies through account payee cheques/drafts and the
assessee to establish its genuineness had filed copies of confirmations/affidavits
from the said parties confirming the payment of the amount as unsecured loan,
copies of income tax returns, their PAN, their balance-sheets, their bank statements
etc in support of the claim. The AO has made the addition without verifying the
7 ITA Nos. 4922 &4257/Del/2011
correctness of these documents and merely on the basis of statement of Shri. R. C.
Goyal, Director of the assessee company recorded during the course of survey
proceedings. He submitted that it is incorrect to say on part of the AO that Shri. S.
P. Gupta was Director of lender companies or in control thereof. Shri Gupta is
Director only in M/s Champ Finvest Pvt. Ltd and has not been associated with other
companies either as a Director or share holder or in professional capacity, hence the
finding of the Assessing Officer that Shri S. K. Gupta was controlling these
companies is factually incorrect. He submitted that the assessee was not provided
any opportunity for cross-examination of Shri. S. K. Gupta and as such general
statement of Shri S. K. Gupta is not relevant and admissible. While referring
decisions relied upon by the assessee before the authorities below, the Ld. AR also
placed reliance on the following decisions:-
CIT Vs. Madhsy Films P. Ltd 301 ITR 384 (Delhi)
CIT, Kerala Vs. manick Sons 74 ITR 1 (SC)
CIT Vs. S. Khader Khan Son (2012) 79 DTR (SC) 184
Sonia Magu Vs. CIT (2011) 336 ITR 227 (Delhi)
CIT Vs. Anil Bhalla (2010) 322 ITR 191 (Delhi)
10. Considering the above submissions, we find from the assessment order that
during the course of survey by the Investigation Wing at the office premises of Shri
S. K. Gupta, Chartered Accountant by profession some computers and laptops were
impounded. The back up files relating to ledger accounts were retrieved and it was
revealed that during the year under consideration Shri S. K. Gupta had provided
accommodation entries to the assessee company through its Director Shri R. C.
Goyal. The summary of these ledger accounts is as under:-
Sl No. Particulars Closing Balance Remarks
Debit Credit
AGM Holdings Ltd.
1 350000 Indirapuram
2 Belief Chits P. Ltd 23525000 Indirapuram
8 ITA Nos. 4922 &4257/Del/2011
3 Beriwal Investment 175000 Indirapuram
and Chit Fund P. Ltd
4 Champ Finvest P. Ltd 2000000 Indirapuram
5 Cubic Commercial 1000000 Indirapuram
Resources Ltd
6 Dhamaka Trading and 2500000 Indirapuram
Construction Co.P Ltd
7 Giriasho Co. P. Ltd 2500000 Indirapuram
8 Novino Marketing P. 1116610 Indirapuram
Ltd.
9 V.A. Foods Pvt. Ltd 150000 Indirapuram
10 Vaudeva Farms P. Ltd 4600000 Indirapuram
11 Viagra Trading Co.P. 140000 Indirapuram
Ltd
12 Belief Chits P. Ltd 16550000 Kaushambi
13 Mitsu Securities 8940000 Kaushambi
Management P. Ltd
14 V.A. Foods P. Ltd 1500000 Kaushambi
15 Mitsu Securities 7300000 Head Office
Management P. Ltd
Total 12,91,610/- 7,10,55,000/-
11. The copies of this ledger accounts were shown to Shri R.C. Goyal, Director
of the assessee company available at the time of survey as the business premises of
the assessee company. In this regard, question no. 22 was raised to Shri R. C. Goyal
and his statement made in response thereto was recorded on oath, wherein he
surrendered these entries as undisclosed income for tax purposes. These question
no. 22 and the statement made by the Shri Goyal in response thereto are being
reproduced hereunder for a ready reference:-
" Q.22. During the course of survey, it has been noticed that you have
received accommodation entries from various fake companies who are
9 ITA Nos. 4922 &4257/Del/2011
basically entry providers. These entries amounting to Rs.7,10,55,000/-
have been received in the case of M/s Rajhans Towers(P) Ltd. in which
you are one of the directors.
Ans. I have carefully seen the entries in the current year's Balance Sheet
and hereby surrender these entries as my undisclosed income for tax
purposes. This income has been generated from my Real Estate
Business."
12. During the course of assessment proceedings the assessee company was also
confronted on this issue by supplying the copy of statement as well as impounded
materials. The assessee contended that the only observation made in the said
statement is that this amount was received from various fake companies which was
without any basis and highly arbitrary and uncalled for. It was without proper
opportunity or investigation. It was contended that there is no reference to names of
the companies or how and in what manner the inference was drawn relating to
alleged accommodation entries. The assessee claimed that all these transactions are
genuine made through banking channels and correctness of all these transactions are
fully supported and verifiable. The assessee has enclosed copies of account, income
tax and assessment particulars, balance-sheet of all the parties in support of these
entries under the certificate below the index of the paper book that those were filed
before the authorities below and with this submission that all these entries have been
duly recorded in the books of accounts and there is no case of any adverse inference.
It was submitted that all such entries were loan to the assessee company and has
already been paid in the next years. It was contended that the assessee had requested
to the AO that in case of any doubt and if it is so required, the AO may kindly make
necessary verification/confirmation from the concerned parties butthe AO did not
heed request of the assessee and rejected the explanation offered by the assessee
with this observation that during the course of the surveys conducted at the premises
of Shri S. K. Gupta, it was admitted that he had provided accommodation entries to
10 ITA Nos. 4922 &4257/Del/2011
various persons/concerns through a number of concerns effectively controlled by
him. The A.O observed further that simultaneously, during the course of survey
conducted at the business premises of the assessee company (in which Shri S. K.
Gupta also a Director), Shri R. C. Goyal, another Director of the assessee company
also admitted that he had received the accommodation entries from the concerned
parties mentioned in the above table, when the ledger accounts of these companies
were shown to him. The A.O has mentioned that the reply of the assessee at this
stage that these were not the accommodation entries but actually this were unsecured
loans, which has been returned in the subsequent years is not convincing as it is a
cock and bull story to rebut from his earlier statement in which he had disclosed his
unaccounted income. He noted further that the balance-sheet of these concerns
reveal that these companies do not have any reserve and surplus, rather losses of
them have as on 31/3/2008.
13. From the assessment order on the issue as discussed above, we find that the
AO has not bothered himself to verify the correctness of the documents filed by the
assessee in support of the genuineness of the claimed unsecured loan of
Rs.7,10,55,000/- from the above stated companies. The assessee as it is evident
from the assessment order had furnished the primary evidences, like copy of
account, income tax return and assessment particulars as well as balance-sheets of all
the parties with this submission that all these entries are duly recorded in the books
of accounts and that the entire loan amount was paid through cheques/drafts. We
thus find that the initial burden to establish the genuineness of the claimed unsecured
loan was discharged by the assessee. Thereafter onus was shifted on the AO to
dislodge those primary evidences as unreliable evidences to establish his allegation
that these were nothing but accommodation entries only. It is now an established
proposition of law that an addition cannot be made merely on the basis of statements
11 ITA Nos. 4922 &4257/Del/2011
recorded during search or survey surrendering an amount for the addition unless it is
corroborated by further evidence. Experiencing failure of Revenue's case made
solely on the basis of statement recorded during the course of survey/search, the
CBDT vide its Circular No. 286 dated 10/3/2003 has made it clear that the AO
should avoid making addition solely on the basis of surrender made during the
course of search/survey and should make effort to gather evidence in support so that
in case of retraction of the surrender subsequently, the case of Revenue should not
be failed. There is no denial by the AO that the above stated documents were
furnished by the assessee before him to establish the genuineness of the claimed
unsecured loan from the above stated parties nor is there any allegation by the AO
that on verification those documents filed by the assessee was found bogus or
unreliable. The AO has arrived at the conclusion that the claimed unsecured loan
was nothing but accommodation entries merely on the basis of statements of Shri S.
K. Gupta, a Chartered Accountant and Shri R. C. Goyal, a Director of the assessee
company. There is nothing on record to draw an inference except those statements
to arrive at this conclusion that the claimed unsecured loan of Rs.7,10,55,000/- from
the above named parties was not correct. The AO has also not bothered himself to
verify the explanation of the assessee that as per the balance-sheets furnished, most
of the unsecured loan amount received by the assessee company from the above
lender companies are carried forward opening balances from earlier years and during
the year under consideration the assessee had repaid Rs.1,15,40,000/- to three parties
and had received only Rs.23 lacs from three parties out of the above mentioned
companies. Under these circumstances, we are of the view, that the Ld. CIT(A) has
rightly held the action of the AO in making the addition of Rs.7,10,55,000/- u/s 68
of the Act as unjustified. The first appellate order in this regard is also well
supported by the decisions of Hon'ble High Courts and of Hon'ble Supreme Court
followed by the Ld. CIT(A). The Hon'ble Supreme Court in the case of CIT Vs.
12 ITA Nos. 4922 &4257/Del/2011
Lovely Exports (P) Ltd (2008) 216 CTR 195 (SC) has been pleased to hold that even
if the share application money received by the appellant company is from alleged
bogus share holder, whose identity is produced by the appellant company, the
revenue can always proceed against such share holders and if necessary re-open their
individual assessment. The Hon'ble Jurisdictional Delhi High Court in the case of
Dwarka Dheesh Investigation (P) Ltd. and Dwarka Dheesh Capital Pvt Ltd (supra)
vide its judgment dated 2/8/2010 has been pleased to hold that the onus of proof is
not a static one. Though in Section 68 proceedings, the initial burden of proof lies
on the assessee let once he proves the identity of creditors/share applicants by either
furnishing their PAN or income tax assessment and shows the genuineness of
transaction by showing money entered in his books either by account pay cheque or
by draft or by any other mode, then the onus of proof would shift to the revenue.
Again in the case of Sonia Magu Vs. CIT (Supra), the Hon'ble Delhi High Court has
been pleased to hold that where the assessee had made a surrender at the time of
search regarding assets, the acquisition of which she could subsequently explained,
there cannot be any addition regarding unexplained assets basing on the statement
given at the time of search. It is also an established proposition of law that the loan
amount pertaining to earlier years cannot be added during the year under
consideration as per the provisions of Section 68 of the Act. The Hon'ble Supreme
Court in the case of CIT Vs. S. Khader Khan Son (Supra) has been pleased to held
that provisions u/s 133A does not empower any income tax authority to examine any
person of authority and therefore any admission made in a statement recorded during
survey cannot by itself be made the basis for addition. In the case of CIT Vs. Anil
Bhalla (supra), the decision of the Tribunal deleting the addition after examining the
entire evidence on record including the statements made by the assessee during the
search proceedings as well as before the Assessing Officer, with this finding that the
addition could not be sustained in the absence of any other corroborative evidence,
13 ITA Nos. 4922 &4257/Del/2011
has been upheld by the Hon'ble Delhi High Court. In that case there was no
independent material to show that jottings of paper represented unaccounted
transaction of the assessee and the transactions were explained from books of the
company as relating to projects undertaken by it. In the present case before us, wse
find that the Ld. CIT(A) has passed a comprehensive and reasoned order after
discussing the case of the parties on issue in details. The same is upheld. Ground
No. 1 is accordingly rejected.
GROUND NO. 2 (REVENUE) & GROUND NO. 2 (ASSESSEE)
14. The relevant facts are that the AO made addition of Rs.1,58,92,460/- on
account of unexplained cash credit in the cash book. During the course of survey
cash book and ledger of the assessee company for the period 1/10/2007 to 6/11/2007
were found and impounded as Annexure A 17 & 18. There were entries on the
receipt side of Rs.5.32 crores. In reply to Question NO. 21, Shri R.C. Goyal stated
that this entry of Rs.5.32 crores contain withdrawal from banks and cross entries of
receipts and payments of Shri R. C. Goyal & ors after excluding these two types of
entries net figure of receipt in this ledger comes to Rs.1.25 crores which he
surrendered as undisclosed income for tax purposes. During the course of
assessment proceedings it was stated that above surrender was of a provisional
nature without proper verification of entries and opportunity for necessary
clarification. It was contended that complete details and evidence of all debit and
credit entries were submitted before the AO with request that the issue of addition
may be examined after proper appreciation of evidences on record. The AO has
observed in the assessment order that after consideration of assessee's reply and on
verification of the regular books of accounts, receipts of Rs.1,11,12,860/- and
expenditure of Rs.47,79,600/- were not found recorded in the regular books of
accounts and this fact was also admitted by the assessee during the assessment
14 ITA Nos. 4922 &4257/Del/2011
proceedings. The AO has thereafter added both the receipt of Rs.1,11,12,860/- and
expenditure of Rs.47,79,600/- totaling to Rs.1,58,92,460/- as assessee's income on
account of unexplained cash receipts and expenditure. Before the Ld. CIT (A) it was
argued by the Ld. AR that there is no corroborated evidence in support of the
receipts and expenditure which are not recorded in the regular books of accounts and
that the same are only rough and provisional entries and not recorded in the nature of
actual transaction of receipts and expenditure and accordingly the addition made by
the AO should be deleted. In alternative, it was also argued that if any addition is to
be made in respect of alleged receipts of Rs.1,11,12,860/-, then the benefit of
expenditure of Rs.47,79,600/- which were found recorded in the very same annexure
should be considered and the net amount of Rs.63,33,260/- can only be brought to
tax. The ld. CIT(A) did not agree with the above contention of the assessee but he
agreed with the alternative argument of the Ld. AR that if any addition is to be made
in respect of alleged receipt of Rs.1,11,12,860/- then the benefit of expenditure of
Rs.47,79,600/- which were found recorded in the very same annexure should be
considered and the net amount of Rs.63,33,260/- can only be brought to tax. The
revenue has questioned this action of the Ld. CIT(A) whereby an addition of
Rs.95,59,200/- has been deleted. The assessee on the other hand has impugned the
action of the Ld. CIT(A) in sustaining the addition to the extent of Rs.63,33,260/-.
15. In support of Ground No. 2 (Revenue), the Ld. DR has basically placed
reliance on the assessment order. She submitted that there were sufficient evidence
on record to come to the conclusion that Rs.1,58,92,460/- was unexplained cash
credit which was also admitted by Shri R.C. Goyal in his statement recorded during
the course of survey. In his statement in reply to Question No. 21 raised to him, Shri
R. C. Goyal had stated that this entry of Rs.5.32 crores contains withdrawal from
banks and cross entries of receipts and payments of Shri R. C. Goyal & ors,
15 ITA Nos. 4922 &4257/Del/2011
exclusion of these two types of entries, net figure of receipts in this ledger comes to
Rs.1.25 crores which was surrendered by him as an undisclosed income for tax
process. The Ld. DR contended that there was no reason for the Ld. CIT(A) to
delete the addition of Rs.95,59,200/- out of the total addition of Rs.1,58,92,460/-
made by the AO on account of unexplained cash credit in the cash book.
16. The Ld. AR on the other hand tried to justify the action of the Ld. CIT(A) to
the extent of relief of Rs.95,59,200/- given by him. He has, however, contended that
the Ld. CIT(A) should have deleted the entire addition as the same has been made
merely on the basis of statement of Shri R.C. Goyal recorded during the course of
survey which was provisional in nature without any verification. He submitted that
even during the course of survey in his statement Shri R.C. Goyal had accepted that
there are various transactions relating to receipt and payment to the extent of Rs.5.32
crores and it was noted that most of these credit entries are fully supported from
bank withdrawals and other evidence and addition was considered to the extent of
Rs.1.25 crore only. He submitted that entries as referred in query no. 6 are covered
in the query no. 25. The assessee had submitted complete details and evidence in
respect of all the debit and credit entries and accordingly there was no case of any
addition. He submitted that at the time of survey Assessing Officer had considered
net figure of receipt at Rs.1,25,000/- however during the course of assessment
proceedings the Assessing Officer has reconciled details of receipts and payment as
per these annexures with regular books of account and it was observed that receipt of
Rs.1,11,12,860/- and expenses of Rs.47,79,600/- were not found recorded in the
regular books of accounts and the Assessing Officer considered addition in respect
of both these items at Rs.1,58,92,460/-. He submitted that there is no corroborative
evidence in support of the receipt and expenditure which are not recorded in the
regular books of accounts. These are only rough and provisional entries and not in
16 ITA Nos. 4922 &4257/Del/2011
the nature of actual transactions of receipt or expenditure and the Assessing Officer
himself having observed in the context of expenditure of Rs.47,79,600/- that same is
not supported from bills and vouchers has on the basis of similar logic, made
addition, in respect of receipt of Rs.1,11,12,860/- without appreciating that same is
also not supported from any corroborative details. He submitted that these are rough
scrubbings and in the absence of any supportive and corroborative evidence, there
can be no case of any addition. In support, he placed reliance on the decision of
Hon'ble Delhi High Court in the case of CIT Vs. Anil Bhalla 322 ITR 191 (Delhi)
holding that additions could not be sustained in absence of any other corroborative
evidence. He also placed reliance on the following decisions:-
CIT Vs. Anil Bhalla 322 ITR 191 (Delhi)
CIT Vs. Indigo Airways Pvt. Ltd (2012) 349 ITR 85 (Delh)i.
CIT Vs. P.D. Abraham alias Appachan 74 DTR 34 (Kerala).
17. Having considered the above submission, we find that the addition of
Rs.1,58,92,460/- was made by the AO on account of unexplained cash credit in the
cash book on the basis of surrender made by the assessee during the course of
statement of Shri R.C. Goyal recorded during survey proceedings. The relevant
question was question no. 21. The same with reply of Shri R. C. Goyal thereto are
being reproduced hereunder:-
" Q. 21 During the course of survey cash book and ledger for the period
1/10/2007 of M/s Raj Hans Towers (P) Ltd. has been found which
contains entries of receipts side of Rs.5.32 Crore. Please explain
these entries.
Ans. This entry of Rs.5.32 Crores contains withdrawals from the bank
and cross entries of Receipts and Payments of Sh. R. C. Goyal &
ors. Exclusion of these two types of entries, net figure of receipts
in this ledger comes to Rs. 1.25 Crores, which I hereby surrender
as undisclosed income for tax purpose."
17 ITA Nos. 4922 &4257/Del/2011
18. Since the surrendered income was not declared during the assessment
proceedings the AO issued show cause notice and being not satisfied with the
explanation of the assessee he has made addition of Rs.1,58,92,460/-. The
contention of the assessee against this addition remained that even in the survey
statement itt was accepted that there are various transactions relating to receipt and
payment to the extent of Rs.5.32 crores and it was noted that most of these credit
entries are fully supported from bank withdrawals and other evidence and addition
was considered to the extent of Rs.1.25 crores only. It was submitted that the
alleged addition of Rs.1.25 crore was only of provisional nature without proper
verification of entries and affording opportunity for necessary clarification. It was
submitted that complete details and evidence in respect of all the debit and credit
entries were furnished. The AO denied the explanation of the assessee with this
observation that receipt of Rs.1,11,12,860/- and the expenditure of Rs.47,79,600/-
were not found recorded in the regular books of accounts. The AO accordingly
treated the receipt of Rs.1,11,12,860/- as assessee's unaccounted income and
expenditure of Rs.47,79,600/- has also been treated as unaccounted on the basis that
the same is not supported by bills and vouchers. The addition of Rs.1,58,92,460/-
was accordingly made by the Assessing Officer. The further contention of the
assessee remained that the contents of Annexure A-17 and Annexure A-18 was only
rough entries on which addition cannot be made, merely on the basis of statements
made on behalf of the assesssee during the course of survey which is not supported
by any corroborative evidence. Copies of these anneuxres have been made available
at Page No. 111 to 130 of the paper book, filed on behalf of the assessee.
19. Having gone through the contents of these annexures, we are unable to agree
with the contention of the assessee that entries made in this ledger account are rough
work as the entries are narrative mentioning the date, mode of payment page no of
18 ITA Nos. 4922 &4257/Del/2011
folio with the amount debited and credited as well as the balance. We thus find that
the surrender made by Shri R. C. Goyal was corroborated with the annexure found
during the course of survey which was confronted with him and thereafter Shri R. C.
Goyal had surrendered the amount for tax. The Ld. CIT(A) has thus rightly upheld
this action of the AO with this finding that the A.O has arrived at the figure after
verification. The Ld. CIT(A) has however following settled principle of law and
accountancy, has held that the benefit of netting cannot be denied to the assessee.
There is no dispute that the statement recorded during the survey was also on the
basis of the said netting principle. The Ld. CIT(A) was thus justified in sustaining
the addition to the extent of the net amount of Rs.63,33,260/- (Rs.1,11,12,860/-, -
Rs.47,79,600/-). In result the balance amount of Rs. 95,59,200/- was deleted. The
first appellate order is thus upheld.
20. Consequently Ground No. 2 of the appeals are rejected.
Undisclosed cash receipts of Rs. 6,65,00,000/-
21. During the course of survey, one handwritten sheet (page no. 96 of Annexure
A-5) was also found on 20/11/2007, which contains the details of amount of
Rs.6,65,00,000/- received in cash against the booking of flats/shops, during the
period of 2007-08. When the same was confronted to Sh. R. C. Goyal of M/S
RHTPL, he admitted that this amount had not been included in the regular books of
account and he offered this amount for taxation. The relevant portion of the
statement of Sh. R. C. Goel, recorded in the capacity of the director of the assessee
company, at the time of survey, is reproduced below:-
Q.23 During the course of the survey, it is seen tht you have received advance on
account of booking of flats and shops from various persons, which contains cash
19 ITA Nos. 4922 &4257/Del/2011
contents as per one sheet/paper found from your premises. The total amount of
booking of flats/shops is Rs.6.65 Crores. Please explain the nature of these receipts.
Ans:- These receipts of RS.6.65 Crores are on account of booking of flats/shops
which I have received in cash from various persons and these amounts were not
included in the regular books of account. I hereby also surrender this amount of
Rs.6.65 Crores as my income from the current financial year and will pay the tax on
this account.
Q.24. Please explain where this amount of cash of Rs.6,65,00,000/- is lying?
Ans:- This amount has been utilized in the construction of the property of M/s
Rajhans Towers Pvt. Ltd.
22. The next ground no.1 (Assessee's appeal) is regarding addition of
Rs.6,65,00,000/-. The Assessing Officer has made addition by making reference to
seized Annexure A-5 which has been placed in the paper book at page-72. The
relevant facts and observation of the Assessing Officer are extracted hereunder:-
23. During the course of assessment proceedings, the assessee company was
confronted on this issue by supplying the copy of statement as well as impounded
materials vide notice u/s 142(1) dated 27/11/2010. In response to the notice the
reply submitted by the assessee is reproduced as under:-
" The above query no. 23 with reference to Rs.6,65,00,000/- alleged to have
been received in cash against the booking of flats/shops during the period F. Y
2007-08. The relevant question and answer is reproduced hereunder.:-
Ques.23 During the course of the survey, it is seen that you have received
advance on account of booking of flats and shops from various persons, which
20 ITA Nos. 4922 &4257/Del/2011
contains cash contents as per one sheet/paper found from your premises. The total
amount of booking of flats/shops is Rs.6.65 Crores. Please explain the nature of
these receipts.
Ans:- These receipts of Rs. 6.65 Crores are on account of booking of
flats/shops which I received in cash from various persons and this amounts has not
been included in the regular books of accounts. I hereby also surrender this amount
of Rs. 6.65 Crores as my income from the current year and will pay the taxes on this
amount.
The contents of annexure forming part of statement are as under:-
Receipts
Receipts of flats/shops
Booking during the year
16/04/07 20,00,000/-
12/05/07 20,00,000/-
23/06/07 2,65,00,000/-
24. At the outset, the Ld. AR pointed out that there is totaling mistake in the
above referred seized annexure. The total of various figure referred to in this
annexure works out of Rs.3,05,00,000/- whereas amount was wrongly considered
and adopted at Rs.6,65,00,000/-. He submitted following facts in the context of said
annexure:
i. There is apparent totaling mistake in the said anneuxre.
ii It is not known on what basis figure of Rs.6,65,00,000/- was worked
out.
iii. There is no reference to any corroborative evidence.
21 ITA Nos. 4922 &4257/Del/2011
iv. There is no reference to details of project, party or person from whom
the alleged cash was received.
v. Even in the question raised at the time of survey, there is no reference
to evidence or material but only observation is "it is seen".
vi. The entire statement is vague without any corroboration, evidence or
material in the context of which there can be a case of any surrender.
vii. Further, there was no case of actual cash or any undisclosed or
unrecorded investment or u se of such cash.
viii. That piece of paper also not having the word CASH.
The Ld. AR submitted further that it is self evident that there cannot be any addition
on hypothetical basis or presumption and surmise. In view of above position, there
is no factual or legal basis for surrender of Rs.6,65,00,000/- or any addition even on
merits."
25. The CIT(A) has confirmed the above said addition by making following
observations.
"6.2 I have carefully considered the assessment order and the submission
made by the Ld. AR. As per the facts of this case, during the course of
the survey action conducted on 20/11/2007, one hand written sheet
(page No. 96 of Annexure A-5) was found which contained details of
rs.6,65,00,000/- received on various dates during the year under
consideration on account of receipts against booking of flats/shops. On
being confronted, Sh. R. C. Goyal, Director of the assessee company
admitted that the said amount had been received in cash from various
persons on account of booking of flats/shops and the said amount had
not been included in the regular books of account of the assessee and he
22 ITA Nos. 4922 &4257/Del/2011
officer the same for taxation. During the assessment proceeding, it was
contended by the assessee that there was a totaling mistake in the said
sheet and the amount of the figures written therein worked out to
Rs.3,05,00,000/- and the amount was wrongly considered
Rs.6,65,00,000/- and that no addition should be made on this count.
The AO has, however, rejected the contention of the assessee by
observing that in the settlement, Sh. Goel had categorically admitted
that Rs.6.65 Crores had been received in the cash booking of flats/shops
and that in the said sheet one has been left out inadvertently in the first
two entries, whereas the total has been clearly mentioned as
Rs.6.65.00.000/- which has been accepted by Sh. Goel. The AO has
accordingly added the above amount as income on account of
undisclosed cash receipts.
6.3 On careful examination of the matter, I find that the impounded sheet
found during the survey (Annexure A-17), photocopy of which has
been filed by the appellant vide page 58 of the paper book, has the
following notings.
26. At the outset of hearing, the Ld. AR pointed out that there is a totaling mistake
in the working out of the amount of Rs.6,65,00,000/- whereas the correct figure
referred to in the annexure works out to Rs.3,05,00,000/- only. The Ld. AR
submitted that there is no reference to any corroborative evidence to support the
allegation made by the AO and the surrender made by Shri. R.C. Goyal during the
course of survey proceedings which was without any verification. He submitted that
even in the question raised at the time of survey, there is no reference to any
evidence or material but it was only observation of the survey team. Thus, the entire
statement is vague without any corroboration, evidence or material in the context of
23 ITA Nos. 4922 &4257/Del/2011
which there can be a case of any surrender. There was no case of actual cash or any
undisclosed or unrecorded investment or use of such cash. The piece of paper found
also does not have the word "Cash". Thus the addition cannot be made on
hypothetical basis or presumption and surmises. The Ld. AR placed reliance on the
following decisions:-
Sonia Magu & Ors Vs. CIT 336 ITR 227 (Delhi)
CIT Vs. Anil Bhalla 322 ITR 191 (Delhi)
CIT Vs. S. Khader Khan 214 CTR 589 (Mad)
ACIT Vs. Manisha Gupta ITA No. 725/Del/2012
26.1 The Ld. AR also referred page nos. 19 to 59 of the paper book (a) wherein
complete reconciliation along with supporting documents of capital account have
been made available.
26.2 The Ld. AR also submitted that the statement made by Shri R.C. Goyal was
later on retracted by him. He referred page no. 53 to 60 of the paper book in this
regard wherein copy of the said retraction has been made available.
27. The Ld. DR on the other hand tried to justify the orders of the authorities
below in this regard. She submitted that retraction was made by Shri R.C. Goyal
after 3 months of recording his statement by the survey team on 20/11/2007. She
submitted that the documents found from the assessee speak itself and cited decision
of Hon'ble Chattisgarh High Court in the case of CIT Vs. D. R. Bansal, 327 ITR 44
(Chh.). She also referred contents of Para No. 19 at Page No. 8 of the assessment
order. She submitted that the disclosure by Shri R.C. Goyal was not made under
pressure or coercion but it was voluntary action on his part.
28. Considering above submission we find that there is no dispute that retraction
was made by the assessee and as such the survey statement is even otherwise not
24 ITA Nos. 4922 &4257/Del/2011
admissible. Further, survey statement was relied in total disregard to guidelines
issued by the CBDT instruction No. 286 dated 10/3/2003.
"To,
All Chief Commissioner of Income Tax (Cadre Contra) &
All Directors General of Income Tax Inc.,
Sir,
Sub: Confession of additional income during the course of search & seizure and
survey operation-regarding.
Instance have come to the notice of the Board where assessee have claimed that they
have been force to confess the undisclosed income during the course of the search
and seizure and survey operations. Such confessions, if not based upon credible
evidence, are retracted by the concerned assessees while filing returns of income. In
this circumstances, on confessions during the course of search and seizure and
survey operations do not serve and useful purpose. It is, therefore, advised tht there
should be focus and concentration collection of evidence of income which leads to
information on what has not been disclosed or is not likely to be disclosed before the
income tax departments. Similarly, while recording statement during the course of
search and seizure and survey operations no attempt should be made to obtain
confession as to the undisclosed income. Any action on the contrary shall be viewed
adversely.
Further, in respect of pending assessment proceedings also, assessing officers should
rely upon the evidences/materials gathered during the course of search/survey
operations or thereafter while framing the relevant assessment orders.
Yours faithfully,
Sd/-
( S. R. Mahapatra)
25 ITA Nos. 4922 &4257/Del/2011
Under Secretary (Inv.II)
29. We also find that the Assessing Officer and Ld. CIT(A) have totally
disregarded the following facts; argued by the assessee, which are material to
adjudicate upon the issue.
i. There is apparent totaling mistake in the said annexure.
ii. It is not known on what basis figure of Rs.6,65,00,000/- was worked
out.
iii. There is no reference to any corroborative evidence.
iv. There is no reference to details of project, party or person form whom
the alleged cash was received.
v. Even in the question raised at the time of survey, there is no reference
to evidence or material but only observation is "it is seen".
vi. The entire statement is vague without any corroboration, evidence or
material in the context of which there can be a case of any surrender.
vii. Further, there was no case of actual cash or any undisclosed or
unrecorded investment or use of such cash.
viii. That piece of paper also not having the word CASH.
30. In the light of the fact that there was totaling mistake of significant nature, it
was necessary and obligatory for the Assessing Officer to bring relevant facts and
evidence in support of allegation about alleged receipt of cash. It is self evident that
in the referred document, neither there is reference to any cash receipt or any details
relating to name of the party or name of the properties and as such the above said
statement is vague, unreliable and merely extracted document.
31. In this connection, reference may be made to the decision of Hon'ble Delhi
High Court in the case of CIT Vs. Anil Bhalla (Supra) wherein there was no
independent material to show that notings on paper represented unaccounted
26 ITA Nos. 4922 &4257/Del/2011
transactions of the assessee. The Hon'ble High Court was pleased to hold that the
transactions explained from books of the company as relating to the project
undertaken by it and finding of the Tribunal that additions should not be sustained in
absence of any other corroborative evidence is pure finding of fact, hence does not
warrant any interference.
In that case search and seizure was carried out in the premises of the assessee and
the premises of a company of which the assessee was a director. The Assessing
Officer made additions under the head of unexplained expenditure u/s 69C of the
Income Tax Act, 1961. The Commissioner (Appeals) and the Tribunal examined the
entire evidence on record including the statements made by the assessee in the
proceedings as well as before the Assessing Officer and then came to the conclusion
that the additions could not be sustained in the absence of any other corroborative
evidence. The Commissioner (Appeals) deleted the additions and this was
confirmed by the Tribunal. On appeal.
32. There is no dispute tht the whole addition is based on seized annexure A-5
which has been extracted in the assessment order itself. The Ld. DR has not
disputed the fact that there is totaling mistake in the said annexure. The total of
various figures referred to in the annexure works out to Rs.3,05,00,000/-, whereas
the Assessing Officer has adopted figure of Rs.6,65,00,000/-. Further, the Ld. DR
has not been able to produce any corroborative details in support of the figures
referred to in the seized annexure.
There is no dispute about the legal position that survey statement in itself cannot be
a basis for addition in the absence of proper support and corroboration. The
decisions of Hon'ble Madras High Court and Delhi High Court in the case of CIT
Vs. S. Khader Khan son 214 CTR 589 (Mad.) and Sonia Magu vs. CIT [2011] 336
ITR 227 (Del) support the legal position to this effect. We have also gone through
decision of ITAT (Delhi Bench) in the case of ACIT Vs. Manisha Gupta (ITA No.
27 ITA Nos. 4922 &4257/Del/2011
725/12) to which one of us was a party in which the decisions of Supreme Court and
Delhi High Court was considered and addition based on survey statement was
deleted.
In the light of settled legal position, the survey statement in itself cannot be a basis
for addition and the Assessing Officer is under statutory obligation to establish that
the notings on the said annexure represent undisclosed income of the appellant. It is
further noted that the survey statement has been retracted and CIT(A) has made
reference to this fact in para 5.4.8 of the appellate order while dealing with Ground
No. 1 and as such survey statement looses its significance.
Taking note of the retraction, the onus is on the Assessing Officer to establish that
bald notigns in the alleged annexure represent undisclosed income. We are of the
opinion that the contents of the seized annexure does not inspire any sound basis in
the absence of any corroboration or any supporting details relating to parties and
properties from whom the alleged cash was received. The Assessing Officer has not
rejected the audited books of accounts u/s 145 of the Income Tax Act, 1961 and
other than addition based on surrender, books of accounts were found to be in order
and declared income was accepted.
33. In the survey statement as well as seized annexure, there is reference to
advance received on account of booking of flats and shops from various persons.
However, no such details have been brought on record either during the course of
assessment or before the Ld. CIT(A) or even at the stage of the Tribunal in-spite of
specific contention raised by the appellant that the seized annexure was a
hypothetical document merely to extract surrender in the absence of any supporting
details or corroboration.
34. Further, the Assessing Officer has not found actual cash or any unaccounted
investment during the course of survey and on the contrary alleged cash was stated
to have been used in the construction of the properties as per contents of the survey
28 ITA Nos. 4922 &4257/Del/2011
statement as extracted above and as such case of so called receipt or expenses are
revenue neutral and it is not open to contemplate any undisclosed income. The
decision of Hon'ble Delhi High Court in the case of CIT Vs. Indeo Airways Pvt.
Ltd. 349 ITR 85 is relevant and applicable to the facts of the case under hand. The
statement recorded during the survey, which is the only basis for addition, if
considered in totality, cannot be considered as a basis to contemplate any
undisclosed income as the receipt and expenses are revenue neutral in the light of the
above decision of Hon'ble High Court.
35. In the light of facts as brought on record, it is self evident that addition was
made on mechanical basis as Assessing Officer has not been able to clarify the
reasons or ground for totaling mistake which give indication of arbitrariness in
respect of so called surrender.
36. The principle of natural justice and real income are well settled and in the
absence of details of the parties and properties in respect of which alleged cash was
stated to have been received, there could be no ground for any addition on the basis
of vague and unsubstantiated notings in the referred annexure. As per decision of
Delhi High Court in the case of CIT Vs. Anil Bhalla (Supra), no addition could be
made on the basis of mere jotting on paper in the absence of independent material or
proper enquiry or investigation. Various judgments referred to in respect of
principle of natural justice and real income are also relevant and support the
contention of the appellant.
In the light of above discussion, we are not inclined to confirm the order of the
Assessing Officer and CIT(A) in respect of addition of Rs.6,65,00,000/- and same is
directed to be deleted. The ground no. 1 (Assessee) is thus allowed.
29 ITA Nos. 4922 &4257/Del/2011
37. In result, appeal of the Revenue is dismissed and that of the Assessee is partly
allowed.
The order is pronounced in the open court on 12th June 2014.
Sd/- Sd/-
(T.S. KAPOOR) (I. C. SUDHIR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 12 /06/2014
*R. Naheed*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
30 ITA Nos. 4922 &4257/Del/2011
31 ITA Nos. 4922 &4257/Del/2011
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