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.2842 /Del/2008 &
I.T.A.No. 1678/Del/2009
Assessment year : 2005-06 & 2006-07
ACIT, Circle I, Vs. Shri Ramesh Chand
Faridabad Prop. RAS Traders,
Mathura Road, Faridabad
GIR / PAN: ACTPC7226M
C.O. No.168/Del/2009
in I.T.A.No. 1678/Del/2009
(Assessment year 2006-07)
Shri Ramesh Chand, Vs. ACIT, Circle I,
Prop. RAS Traders, Faridabad
Mathura Road, Faridabad
(Appellant) (Respondent)
Department by : Ms. Parminder Kaur, Sr. DR
Assessee by : Shri J.P. Gulati, Adv.
ORDER
PER T.S. KAPOOR, AM:
These are two appeals filed by the Revenue against separate orders of
Ld. CIT(A) dated 30.06.2008 and 23.02.2009 respectively. The assesses has
also filed cross objection in assessment year 2006-07 against partial
upholding of addition by Ld. CIT(A).
2 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
2. The brief facts of the cases are that a survey u/s 133A was conducted
on 26.09.2005 at the business premises of the assessee and on the basis of
some incriminatory documents & on the basis of statements recorded, the
assessee had surrendered a total amount of Rs.70 lacs which was to be added
in the income of the assessee in assessment years 2005-06 & 2006-07 as per
the following details:
On account of excess stock Rs.23.95 lacs
On account of unexplained
construction of property Rs.29.95 lacs
On account of unexplained
investment in jewellery Rs.13.05 lacs
On account of excess cash found Rs.03.05 lacs
Total Rs.70.00 lacs
2.1 However, the above statement and surrender was retracted vide a
letter written to CIT received by his office on 03.10.2005, a copy of which is
placed at paper book page 10. The Assessing Officer while completing
assessment for assessment year 2005-06 and 2006-07 has made the
following additions:
Assessment year 2005-06:
On a/c of purchase of plot Rs.17,49,625/-
On a/c of cash of construction Rs.18,74,408/-
Assessment year 2006-07:
Addition on a/c of excess stock Rs.01,20,000/-
Addition on a/c of investment in jewellery Rs.13,05,000/-
Addition on a/c of excess cash found Rs.03,05,000/-
2.2 The Ld. CIT(A) in response to appeals filed by the assessee, deleted
the additions except in respects of partial upholding of addition in respect of
cash found.
2.3 In assessment year 2005-06, the revenue has taken two effective
grounds of appeal wherein it has challenged the deletion of Rs.17,49,625/-
3 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
made by Ld. CIT(A) on account of difference in valuation of a plot as per
valuation report and as per declaration by the assessee. The second
grievance of the Revenue is deletion of addition of Rs.18,74,408/- which the
Assessing Officer had made on account of undisclosed amount of
construction on a building. During the assessment year 2006-07, the
Revenue is aggrieved with the action of Ld. CIT(A) by which he had deleted
the addition of Rs.13,05,000/- made on account of unexplained investment
in purchase of jewellery. The revenue is further aggrieved by the action of
Ld. CIT(A) by which he had partly allowed relief to the assessee on account
of addition of cash made by the Assessing Officer. In the cross objection,
the assessee is aggrieved with the action of Ld. CIT(A) in partial upholding
of addition made by Assessing Officer on account cash found at the time of
survey.
3. Ld. D.R. at the outset submitted that additions were made to the
income of the assessee on account of surrender of total Rs.70 lacs which was
made by the assessee at the time of survey. Ld. D.R. submitted that as per
the Government valuer, the piece of plot was valued at Rs.25 lacs whereas
the assessee had declared the same at Rs.7,50,375/-. It was argued that the
land for purchase on 18.04.2004 for Rs.7,50,375/- cannot become Rs.25 lacs
by the end of December 2004. Therefore, it is apparent that the assessee had
declared lesser amount in his books of account as compared to market value
and, therefore the Assessing Officer had rightly made the addition. Ld. D.R.
further submitted that the assessee had accepted the additions on account of
undisclosed construction as per details of material and amount in respect of
construction material and building which was written on a piece of paper
and which the assessee had not recorded in his books of accounts.
4 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
Therefore, the action of Ld. CIT(A) disregarding these documents, was not
justified. Arguing the appeal for the assessment year 2006-07, the Ld. D.R.
submitted that during survey, a piece of paper was found wherein the fact of
having purchased jewellery worth Rs.13.05 lacs was written. The assessee,
during his statement recorded during the course of survey, had offered the
same as his income. Therefore Ld. CIT(A) had wrongly deleted the
addition. Arguing the ground No.2, Ld. D.R. submitted that the cash found
at the time of survey was already surrendered by the assessee during the
course of statement recorded at the time of survey proceedings in the
presence of his advocate, therefore, the part deletion was not justified.
4. Ld. A.R. on the other hand submitted that the assessee was forced to
surrender total amount of Rs.70 lacs during survey on 26.09.2005 and was
made to sign the statement and affidavit in this respect. It was submitted
that the assessee had signed the statement under pressure and, therefore, on
03.10.2005 itself, the assessee retracted from his statement and, therefore the
statement recorded during the survey is of no legal value. Regarding merits
of the case, the Ld. A.R. submitted that 50% of the land was purchased in
the year under consideration and 50% was purchased in the preceding year
and, therefore the Assessing Officer wrongly took the value of the entire
land in one year which itself shows that the Assessing Officer did not apply
his mind while passing the assessment order and simply relied upon the
documents seized during the survey and the statement of the assessee which
itself was recorded under pressure. Arguing the second ground in
assessment year 2005-06, the Ld. A.R. submitted that there was no
investment in the year under consideration as the certificate for completion
of property was applied on 13.12.2000 itself as held by the Assessing
5 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
Officer in the assessment year 1999-2000 and as noted by Ld. CIT(A) in his
order at page 25. Therefore, simply relying upon the piece of paper to make
the addition without verifying the actual facts, is not tenable in law and Ld.
CIT(A) has rightly deleted the same. Replying for Revenue's appeal in
assessment year 2006-07, Ld. A.R. submitted that surrender of jewellery was
also made on account of a piece of paper wherein no items of jewellery were
mentioned and assessee was only forced to sign the same. It was argued that
the nature of jewellery, from where it was purchased and its rate was not
mentioned on the piece of paper and the Assessing Officer simply on the
basis of a forced surrender has made the addition. As regards the 2nd ground
regarding cash, Ld. A.R. submitted that Ld. CIT(A) himself in his
concluding remarks has held that like other additions, the cash found at the
time of survey was also coked up story and, therefore should have deleted
the entire amount instead of giving partial relief.
5. Ld. D.R. in her rejoinder and replying to cross objections submitted
that Ld. CIT(A) has held that surrender at the time of survey was totally a
cooked up story which is not possible as the advocate of the assessee was
also present during survey and his signatures were also obtained on the
surrendered amount. In this respect, she submitted that complete survey
folder was available for inspection which can be examined.
6. We have heard rival parties and have gone through the material placed
on record. We find that the survey was conducted on 26.09.205 and within a
period of less than 10 days i.e. on 03.10.2005, the assessee had retracted
from his statement made during survey proceedings. Therefore, the
statement recorded during survey proceedings cannot be solely relied upon
for making the additions in the case of the assessee where other
6 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
corroborating material is not there. As regards the addition on account of
value of land declared by the assessee and as per valuation report obtained,
we find that firstly, the land as declared in the books represent only 50% of
the land. The Assessing Officer without verifying this fact, had made the
addition on account of market value as obtained from valuer which itself
describes the non application of mind by the Assessing Officer. Moreover,
we find that the addition simply on account of difference in valuation report
and as per declared value of land canto be made. Ld. CIT(A) on the basis of
submissions of the assessee and relying upon various case laws has held as
under:
"12.1 I have very carefully gone through the assessment order, the
written submissions, counter-comments of the AO and Rejoinder
thereto. In my considered opinion, the AO has miserably failed to
bring on record any worthwhile evidence or material which may
suggest that the appellant has paid any amount over and above the
amount mentioned in the sale deeds. So much so, the AO has not taken
care to notice that 50% of the investment in the purchase of plot of
land pertained to A.Y. 2004-05 and not to the A.Y. 2005-06.
Apparently, the AO has erred in law in holding that valuation of plot
of land, as per report dated 13/1212004 of the Govt. Approved Valuer
at Rs.25 lakhs is the investment and relevant to A.Y. 2005-06, when
admittedly as per purchase deeds dated 23/5/2003 and 18/6/2004, the
cost including stamp duty was paid at Rs.7,50,375/-. The onus lies on
the AO to prove that the appellant has paid any amount over and
above the amount recorded in the purchase deed( s) and thus the onus
has not been discharged, and no inquiry, whatsoever has been made
by the AO from the vendors or any property dealer or from any other
source.
12.2. The jurisdictional High court in CIT v. Nitin Kumar (2001) 248
ITR 478 ( P& H) has held that addition on a/c of unexplained
investment could only be made u/s 69 of the Act and that there was no
material evidence to establish that the appellant made investment over
and above than recorded in the sale deed and in the absence of any
such evidence, no addition could be made under section 69 of the
7 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
Income tax Act and the Revenue has also not made any enquiries from
the property dealers, vendors, etc., to establish that the appellant paid
any amount, over and above the apparent consideration in purchase
of the said plots. The Delhi High Court in CIT v. Naresh
Khattar(HUF) 261 ITR 664 (Del.) relying upon the ratio laid by the
Supreme Court in K.P.Varghese 131 ITR 59 (SC) has also held that
the statement of the assessee's counsel in civil suit would not be
sufficient material to come to the conclusion that Rs.13 crores odd
represented actual investment. Applying the ratio laid by the
Jurisdictional High Court and in view of the Delhi High's judgement,
referred to above, and other case-laws relied upon by the Appellant
and discussed extensively in the written submissions, I find that since
the AO has not led any evidence to discharge his onus either at the
time of assessment or even at the stage of appeal before me to prove
that the appellant has paid any amount over and above the amount
recorded in the sale deeds, I hold that the AO was legally not justified
to make an addition of Rs.17,49,625/- on a/c of alleged unexplained
investment in the purchase of Plot No.506/16A. Accordingly, the same
is cancelled. Ground No.l.1 and 1.2 are thus allowed."
7. We find no infirmity in the order of Ld. CIT(A) as regards ground
No.1, therefore, Ground No.1 is dismissed.
8. The findings of Ld. CIT(A) with regard to Ground No.2 are at page 25
where vide para 16.1, ld. CIT(A) had deleted the addition. The relevant
findings are reproduced as under:
"I have carefully gone through the assessment order, written
submissions, AO's counter comments and the Rejoinder. In my
considered opinion, the AO was not justified to rely only on the
jottings of Rs.29,95,282/- made on a piece of paper alleged to be
found during survey and admittedly not bearing date/month/year and
no corroborative material was found during survey, and the appellant
had rescinded by filing an affidavit dated 03110/2005 before the
CIT/Addl. CITI ITO Incharge Survey from his statement dated
2610912005, wherein he had agreed to the addition for AY. 2006-07.
The AO's reference in the assessment order of the affidavit of Shri
J.K.Garg, Advocate, does not lead to any evidence/credibility that
8 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
investment in the construction of H.No.506/16A and Property
No.217/9 was relevant to AY. 2006-07 at Rs.29,95,282/- as agreed by
the appellant in the statement recorded on 26/9/2005. The contents of
the affidavit are thus not relevant, particularly when the AO has
assessed investment forH.No.506116A in AY. 2005-06 and as per the
assessment order of AY. 1999-2000, completion certificate for
Property No.217/9 was applied on 13.12.2000. It is thus evident that
the AO has committed a grave and patent error in relying exclusively
on the jotting of the figures of 29,95,282/- the credibility of which is
shaken and not substantiated. I also find that the AO by estimating an
amount of Rs.l3,24,125/- , purely on imaginations, on account of items
left over in the jottings of 29,95,282 i.e. on account of sari a, sand etc.
has unnecessarily added another imaginative figure, instead of
thrashing the issue with wisdom, judicial and a rational approach. So
much so, the AO has not given any counter-comment on the relevant
and vital objections raised in para 37 of the written submission,
discussed in para 15 supra. It is well settled principle of law that no
addition can be made on imagination, guess work, suspicion, surmises
and conjecture. I am therefore, of the considered opinion and hold
that the AO has completely erred both on facts and in law in making
an addition of Rs. 18,74,408/- i.e. difference between the amounts of
Rs.29,95,282 +13,24,125 minus 7,20,000 on a/c of unexplained
investment in the construction of House No.506116A , whereas the
appellant had declared investment at Rs.17,25,000/-."
We find that Ld. CIT(A) had rightly deleted the addition and we do not find
any infirmity in the same. Therefore, ground No.2 is also dismissed.
9. Coming to appeal in assessment year 2006-07, the addition of
Rs.13,05,000/- has been deleted by Ld. CIT(A) by holding as under:
"7.11 Therefore, keeping in view the facts of the case, extracted
supra, and the position of law, stated above, I consider that the AO
was not justified in making an addition of Rs.13,05,000/- for purchase
of jewellery relying only on the statement recorded during survey and
the statement during survey could not been recorded on oath and that
such a statement has no evidential value. However, such an
information could be used against the assessee, if some thing positive
9 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
had been found that the assessee had actually purchased the
jewellery. The AO has not brought on record date/month/year of
purchase of jewellery, its description, name of the jeweller and is also
not aware if the jewellery in fact existed or not. In my opinion, the
surrender of extra income of Rs.13,05,000/-for the alleged purchase
of jewellery is similar in nature as was agreed on a/c of unexplained
investment in SCO 217/9 and H.No.506116A, discussed supra. It
would, however, be relevant to look into the affidavit dated
03.10.2005 submitted by the assessee before the then Commissioner of
1. Tax, Faridabad. It is reproduced below:-
"I, Ramesh Chand son of Shri Dharam Chand aged 60 years resident
of H.No.506, Sector 16-A, Faridabad and proprietor of M/s RAS
Traders, Mathura Road, Faridabad, do hereby solemnly declare as
under.-
1. That Shri N.K.Bansal, ITO, Ward 1(1), Faridabad and other
officers/ officials of the 1.T. Deptt: had conducted on 26127.09.2005
survey u/s 133A of the 1.T.Act,1961 and verified books of accounts,
documents, stock and cash found at the business premises.
2. That the survey team had prepared inventory of stock and the ITO
Incharge came to the conclusion that stock was excess by about Rs.23
lakhs but Shri N. K. Bansal ITO coerced the assessee to make a
surrender of Rs.70 Lakhs as extra income and also devised that it
should be declared to assessment year 2006-07 in the following
manners:-
(i) Acquisition of jewellery at Rs.13.05 lakhs.
(ii) Cash in hand at Rs.3.14 lakhs as against Rs.l4,000/- actually
found.
(iii) Rs.30 lakhs spent on the construction of house.
(iv) Excess stock of Rs.23.95 lakhs.
3. That Sh. N.K.Bansal, ITa instilled fear by giving multifarious
threats and thereby the deponent had written at his instance the
following particulars in a diary. Shri N.K. Bansal, ITa also knew that
what he was asking the assessee to write was not correct and the same
was false.
10 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
(i) "Uchanti Baija 13.05 lacs jewellery purchased"
(ii) " Makkan 506/217 payment made continuation Till date 9/L
Uchanti" with imaginary details for the amount of Rs.29,95,282/-
(iii) That cash was found at Rs.3,14,420/- and the same was returned
back.
4. Subsequently, Shri N.K.Bansal ITO has called the assessee to his
office and handed over a draft of the affidavit, which contain
confirmation of the above stated false facts. He has directed that the
proposed affidavit should be furnished and incase of failure, dire
consequences would follow.
5. That since the affidavit proposed by Shri N. K. Bansal, ITO do not
represent the correct facts, the deponent does not want to commit a
second blunder by giving a wrong affidavit, the first being committed
in the statement given at his instance. 6. That since the earlier
statement recorded during survey for surrender of income at Rs.70
lakhs at the instance of Shri N.K.Bansal, ITa was given under threat
and fear and based on imaginary writings, the same is thus rescinded.
Sd. Deponent.
Verification
The above mentioned deponent hereby confirm and verify that what is
stated above is true and correct to be best of my knowledge and belief
and nothing is false and nothing has been concealed.
Verified today the 3rd October, 2005 at Faridabad.'
Sd/- Deponent.
Attested as identified.
Sd/- Notary, Faridabad(haryana)
03 OCT 2005.
7.12. In view of the detailed discussions held supra, in my firm
opinion, the AO was not justified in making an addition of
Rs.13,05,000/- on the basis of the statement recorded during the
survey, particularly when the same was rescinded immediately by
filing a grievance petition supported with an affidavit before the
Higher Authorities. That, no evidence has been brought on record if
the assessee had purchased any jewellery in the financial year 2005-
06 relevant to A.Y. 2006-07. I, therefore, hold that the assessee's
explanation submitted before the AO relying upon the Grievance
11 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
Petition and Affidavit submitted to the Higher Authorities cannot be
brushed aside. Accordingly, the addition of Rs.13,05,000/- is
cancelled and Grounds Nos.1.1, 1.2 and 1.3 are allowed."
10. We find that Ld. CIT(A) had elaborately dealt with the issue and has
rightly deleted the addition and we do not find any infirmity in the same.
11. As regards the issue of addition of cash found during the year Ld.
CIT(A) had partly allowed relief by holding as under:
"8.9. I have very carefully gone through the assessment order and
considered the Appellant's written submissions, Grievance petition
and affidavit dated 03.10.2005, discussed supra. In my opinion, the
assessee's offer for additional income agreed at Rs.70 lakhs, including
the alleged unexplained cash of Rs.3,05,0001-stands demolished, as
per the detailed discussion made above. However, when I consider the
details of cash drawn at Rs.3,14,420/- and its return witnesseth by an
advocate, I am not able to comprehend as to why the assessee had put
his signatures on the details of cash and why Shri J.K. Garg,
Advocate witnesseth it, if he was not his counsel and no power of
attorney was executed in his favour. However, in view of the totality of
facts, though cash of Rs.3,14,4201- found also seems to be a made-up
affair similar to the purchase of jewellery and unexplained investment
in construction of H.No.506116A 1 207/9, yet in view of the details of
cash drawn and its return acknowledged, I cannot say positively as to
what is/was the truth of the matter and thus, I am not inclined to
cancel the whole addition. However, I allow benefit of cash at Rs.51
,646/-on 26.09.2005 on the basis of the cash book, since the AO has
not doubted its genuineness, even when cash book was not written at
the time of survey. I, therefore, give benefit of Rs,51 ,646/-as against
the cash allegedly found at Rs.3,14,4201- and uphold the addition at
Rs.2,62,774/- and cancel the addition of Rs.51,646/- [Rs.3,14,420 (-)
2,62,774]. Ground Nos. 2.1 & 2.2 are partly allowed.
10. In the result, the appeal is partly allowed giving a relief of
Rs.13,56,646/- (Rs.13,05,000/- + Rs.51,646/-) and confirming the
addition of Rs.2,62,774/-
12 ITA No.2842/Del/2008
I.T.A.No. 1678/Del/2009
C.O.No.168/Del/2009
12. Ld. CIT(A) in this regard has partly upheld the addition on account of
cash found though he observed that it also looked like a cooked up story but
the fact of denomination of cash mentioned on paper and its
acknowledgement of having received back from survey party in the presence
of advocate influenced him to accept it to be true and, therefore, he had
allowed the relief only on account of cash balance as reflected in the books
of account of the assessee as on the date of survey, which under the present
facts and circumstances is a correct approach and, therefore, we do not find
any infirmity in the same.
13. In view of above, both the appeals filed by the Revenue as well as the
cross objection filed by the assessee are dismissed.
14. Order pronounced in the open court on 25th July, 2014.
Sd./- Sd./-
(I. C. SUDHIR) (T.S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
th
Date: 25 July, 2014
Sp
Copy forwarded to:-
1. The appellant
2. The respondent
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.
True copy.
By Order
(ITAT, New Delhi).
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