Subject: AKN Group, documents and data storage devices,
Referred Sections:
Section 153C of the Act
Section 2(22)(e) of the Act
Section 153C of the Act.
Section 292C/132(4)
Section 153C
Section 292C and 132(4A) of the I.T. Act,
Section 153C/143(3) of the I.T. Act
Referred Cases / Judgments
CIT vs. Raj Kumar 318 ITR 462,
CIT vs.Creative Dying and Printing P. Ltd. 318 ITR 476.
Konark Structural Engineering P. Ltd. vs. DCIT
DRB Exports P. Ltd. vs. CIT
Prem Casting P. Ltd. vs. CIT
CIT vs. MAF Academy P. Ltd. 361 ITR 258
CIT vs. Navodhya Castle P. Ltd. 367 ITR 306
CIT vs. N.R. Portfolio P. Ltd. 263 CTR 456.
Bhagirath Aggarwal vs. CIT 351 ITR 143,
CIT vs. M.S. Aggarwal 93 taxmann.com 247
PCIT vs. Avinash Kumar Setia, 81 taxmann.com 476
DCIT vs. T. Jai Chandaran in Civil Appeal No. 4341/2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `G' NEW DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
&
SHRI L.P. SAHU, ACCOUNTANT MEMBER
ITA No. 5871/Del/2017
(Assessment Year: 2012-13)
Mr. Trilok Chand vs ACIT
Chaudhary, Central Circle 26,
39, Gadai Pur, Mehrauli, New Delhi.
New Delhi. 110030
PAN No. AAEPC0683P
Assessee by Sh. Ved Jain, Adv.
Revenue by Sh. S.S. Rana, CIT (DR)
Date of Hearing 27.08.2018
Date of Pronouncement 20.09.2018
ORDER
PER SHRI BHAVNESH SAINI, J.M.
This appeal by assessee has been directed against the order
of Ld. CIT (Appeals)-31, New Delhi dated 27.06.2017 for AY 2012-
13.
2. The facts of the case are that in this case return of income
was originally filed on 31.03.2014 declaring income of Rs. 7.28
crores. A search and seizure operation u/s 132 of the Act was
carried out on 11.09.2013 and 17.09.2013 in the case of AKN
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Group of cases. The case of the assessee was also covered in the
search. During the course of search, carried out at the different
premises located in India in AKN Group, documents and data
storage devices, etc. belonging to the assessee were found and
seized. During the course of search operation, the assessee made
a total surrender of Rs. 15 crores. The breakup of the surrender is
that: - in AY 2009-10, assessee surrendered 1.2 crore being the
amount spent on marriage of daughter, in AY 2012-13, (under
appeal) Rs. 7.3 crores surrendered being amount paid to Sartaj
Hotel Apartment Villa Pvt Ltd. and in AY 2014-15, Rs. 6.5 crores
surrendered which includes seized cash of Rs. 2.95 crores from
the office of CDR Estates and Rs. 41 lakhs of advances during the
year. Notice u/s 153A was issued to the assessee, required the
assessee to furnish return of income within 15 days. In response
thereto, the return of income u/s 153A was filed by assessee on
31.03.2014 declaring income of Rs. 7.28 crores which was
declared in the original return of income filed u/s 139 of the Act.
During the year under consideration, the assessee has earned
income from other sources.
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3. During the search on the assessee on 17.09.2013 certain
documents related to the investment on properties were found and
seized from the office premises of the assessee and M/s CDR
Estate Pvt. Ltd. As per page no. 49-53 of Annexure A-11 party
no. TO-2, seized from the office premises of the assessee and M/s
CDR Estate P. Ltd., assessee had entered into Memorandum of
Understanding (MOU) with M/s Meghatech Realtors Pvt. Ltd. and
received Rs. 10 crores in cash for purchasing land in
Harchandpur. The assessee was confronted with the documents
in his statement recorded u/s 132(4) of the Act in which he has
said to have received Rs. 10 crores from M/s Meghatech Realtors
P. Ltd. This amount was subsequently paid to Smt. Saroj Sharma
and others for purchase of land at Harchandpur. It was stated by
assessee that he was acting on behalf of M/s Meghatech Realtors
Pvt. Ltd.
3.1 During the search on 17.09.2013, document annexurised as
page no. 41-45 of Annexure A-11 Party TO2 related to investment
on properties by Sh. Devender Kumar in Harchandpur was also
found and seized from the office premises of the assessee and M/s
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ITA No. 5871/Del/2017
CDR Estate P. Ltd. During the course of post search Investigation
Sh. Devender Kumar was summoned u/s 131 of the Act to
examine and verify the documents seized. Sh. Devender Kumar in
his statement recorded u/s 131 of the Act has stated that he has
received Rs. 20 crores in cash from M/s Newage Infrabuilders P.
Ltd. This amount was given to him by M/s Newage Infrabuilders
P. Ltd. as per the MOU with M/s Newage Infrabuilders P. Ltd. and
he was acting on behalf of company to purchase a land at
Harchandpur. It was said by Sh. Devender Kumar that both he
and the assessee together had tried to purchase the land at
Harchandpur from Smt. Saroj Sharma and others and accordingly
paid Rs. 20 crores as received from M/s Newage Infrabuilders P.
Ltd.
3.2 The AO in order to examine the facts issued summons u/s
131 to both the companies with whom Sh. Devender Kumar and
assessee had signed MOUs on 17.10.2013, however, the summons
received back un-served. Since the service of the summons could
not be made through postal means, Inspectors of the office of ADIT
(Inv.) were deputed to serve the summons on two aforesaid
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ITA No. 5871/Del/2017
companies. Despite the best efforts the Inspector of Income Tax
could not find the above companies on the given address. The
reports of the Inspectors are reproduced in the assessment order.
4. The AO noted that assessee in his statement recorded u/s
132(4) of the I.T. Act, has stated that Sh. K.V. Jain had facilitated
the above MOU with M/s Meghatech Realtors Pvt. Ltd. The AO
summoned Mr. K.V. Jain u/s 131 of the Act and his statement
was recorded. Sh. K.V. Jain admitted that he had facilitated the
MOU between assessee and M/s Meghatech Realtors Pvt. Ltd. and
Sh. Devender Kumar and M/s Newage Infrabuilders (P) Ltd. The
AO asked him to serve the summon upon both these companies
but Mr. K.V. Jain showed his inability to get the summon served
on both the companies.
4.1 In view of the reports of the Inspectors and statement of Mr.
K.V. Jain, Shri Devender Kumar and assessee were asked to
produce Directors of both the above companies. In response to
the notices, no compliance was made by Sh. Devender Kumar and
the assessee on the given dates. The AO in view of the non-
compliance of the assessee issued show-cause notice to Sh.
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ITA No. 5871/Del/2017
Devender Kumar and assessee as to why the cash amount
received by both of them should not be added to their income. In
response to the show cause notice both Devender Kumar and
assessee have furnished the copy of MOU with respective
company, copy of the balance sheet and profit and loss account as
on 31.03.2012 of both the companies but failed to produce the
Directors. On 03.01.2014, two letters have been received by the
AO from assessee signed by the Directors of both the companies
admitting therein of giving Rs. 10 crores and Rs. 20 crores to
assessee and Sh. Devender Kumar out of shareholder's money.
On 09.01.2013 same letters have been again received from
Directors of both the companies admitting of giving cash of Rs. 10
crores and 20 crores to the assessee and Devender Kumar out of
shareholder's money from the address D-111, South Ganesh
Nagar, Mandawali, New Delhi. The Inspector reported that no
such person was found at the aforesaid address.
4.2 During assessment proceedings, notices u/s 153A read with
section 153C of the Act were issued to both the companies,
however, both the notices returned back to the AO with the
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ITA No. 5871/Del/2017
remarks "no such firm exists". Inspectors of the Circle were
deputed, however, they have reported that no such entity existed
at the given address.
5. In order to verify the details of the Directors of both the
companies, notice u/s 133(6) of the Act was sent to Axis Bank,
New Delhi, where both the companies had their bank accounts for
furnishing of account opening form and account statement for the
period from 01.04.2009 to 31.03.2015. The Bank submitted the
required details from which it was found from account opening
form, name and address of the Directors of both the companies.
Summons u/s 131 of the Act were issued to the Directors of M/s
Meghatech Realtors Pvt. Ltd. for personal appearance before the
AO, however, the notices returned back with the remarks "no such
person exists on this address". Similar notices were issued to the
Directors of M/s Newage Infrabuilders P. Ltd. for personal
appearance before AO, however, some reports have been received
that no such person exists on this address.
5.1 The AO raised query to the assessee regarding the advance of
Rs. 10 crores received from M/s Meghatech Realtors Pvt. Ltd. and
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ITA No. 5871/Del/2017
advance received by Sh. Devender Kumar from M/s Newage
Infrabuilders P. Ltd. and to give explanation regarding the same.
The assessee was given show-cause notice to produce the
Directors of M/s Meghatech Realtors Pvt. Ltd. before AO. The
assessee filed reply along with audited account of this company
and submitted that this Company is a Private Limited Company
and all the records are available on public domain at the MCA
website. He has also stated that this company was introduced to
the assessee through Sh. K.V. Jain who had appeared in person
before ADIT(Inv.) and confirmed the facts. The company is
independent entity and is liable completely for the source of Rs. 10
crores advance to the assessee.
5.2 In respect of Sh. Devender Kumar, assessee submitted that
he has an independent person and not related to the assessee. He
has also entered into an agreement for purchase of land at
Harchandpur from Smt. Saroj Sharma and others. However, later
Smt. Saroj Sharma denied any such deal having been entered with
the assessee as well as with Sh. Devender Kumar and, as such,
they have been jointly finding the cases and that is why the
9
ITA No. 5871/Del/2017
agreement between him and Smt. Saroj Sharma was found in his
premises. The complaint by the assessee and Sh. Devender
Kumar have been filed with the economic offence wing of Delhi
Police for which all the documents were also seized from his
premises. Otherwise it is an independent deal and assessee is not
answerable for the same, even if, document was found from his
premises.
5.3 Sh. Devender Kumar was summoned u/s 131 of the I.T.
Act for his personal appearance and his statement was recorded
on 11.03.2016 which is reproduced in the assessment order in
which he has stated MOU was signed by him on the direction of
the assessee and the cash was never handed over to him. He has
also stated that he is not aware of company M/s Newage
Infrabuilders Pvt. Ltd. It was written in English, whereas he can
barely understand English. He was just a signing authority only
on the direction of the assessee in lieu of commission income.
5.4 The AO issued show-cause notice to the assessee on
18.03.2016 mentioning all the above facts and asked for the
explanation of the assessee regarding both the MOU and show-
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ITA No. 5871/Del/2017
caused as to why the cash amount involved in the transaction of
Rs. 20 crores and 10 crores should not be added to the income of
the assessee. The assessee filed a reply before the AO in which
the assessee again reiterated that MOU of Rs. 20 crores is between
Sh. Devender Kumar and M/s Newage Infrabuilders Pvt. Ltd.
which does not belong to the assessee. It is independent deal
between them and Smt. Saroj Sharma and others. Statement
given before AO on 11.03.2016 is completely contradictory as
submitted in the statement before ADIT at the time of appraisal
proceedings on oath in which he has already explained that it is
an independent transaction. Even in the complaint filed with
Police Department and other authorities, he has stated that it is
an independent transaction and confirmed the same. Therefore,
there is no justification to make any addition of Rs. 20 crores in
the hands of the assessee. As regards MOU between assessee and
M/s Meghatech Realtors Pvt. Ltd., the assessee reiterated the
submissions already made and also explained that the transaction
is reflected in their balance sheet the assessee knew from the
market that they have moved to different places as they had also
raised loan from the market for the purpose of this deal on which
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ITA No. 5871/Del/2017
there is a police complaint and a lot of litigations, therefore, no
addition could be made on 10 crores in his hand.
6. The AO did not accept the explanation of the assessee and
noted that assessee failed to produce any of the Directors of both
the companies. Therefore, physical existence has not been proved.
It is difficult to believe that these companies after giving huge
advance did not bother to recover the amount in question. These
are companies in existing on papers. The assessee failed to prove
genuineness of the transaction in the matter. The AO also noted
that Devender Kumar in his statement submitted that MOU was
signed by him at the instance of the assessee in lieu of
commission income. The assessee failed to cross examine his
statement and the documents were found from premises of the
assessee, therefore, there is a presumption that all the documents
belong to the assessee. No complaints have been made against
both the companies. The AO, therefore, held that the entire cash
amount Rs. 30 crores is unexplained cash and added to the
income of the assessee from undisclosed sources. The AO,
accordingly, made an addition of Rs. 30 crores.
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ITA No. 5871/Del/2017
7. On perusal of the submissions filed by the assessee, AO
noted that during the year under consideration, assessee has
received an advance of Rs. 1,97,93,369/- from M/s Dream Green
Land Realtors P. Ltd. in which the assessee has 50% shareholding
and also received an advance of Rs. 25 lakhs from M/s Rosemary
Properties P. Ltd. in which he has 50% of the shareholding. The
assessee was asked to file complete details and asked to explain
why the advance received from above two companies do not attract
the provisions of deemed dividend u/s 2(22)(e) of the Act and why
the same should not be treated as his income being a major
shareholder in M/s Brownie Estates Pvt. Ltd. The assessee
explained that the said advances were received for purchase of
land for the company and section 2(22)(e) of the Act does not
include any advance or loan made in the ordinary course of
business. However, the assessee did not submit any audited
books of account of the above mentioned companies before AO in
order to verify the accumulated profit of the said companies. The
AO, therefore, directed that as to why the above amount received
should not be treated as deemed dividend in the hands of the
assessee because assessee was beneficial owner of the shares of
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ITA No. 5871/Del/2017
the above companies for the assessment year in question. The AO
noted that assessee has not filed any evidence in support of the
above claim for taking advance for business purposes. Therefore,
it was considered as deemed dividend. The assessee also did not
produce audited books of accounts of the above mentioned
companies in order to verify the accumulated profits, the entire
quantum of advances received by the assessee during the year
from the above mentioned companies were therefore, added to the
income of the assessee. The AO accordingly made an addition of
Rs. 2,22,93,639/-.
8. Both the above additions were challenged before Ld. CIT(A).
The written submission of the assessee is reproduced in the
appellate order in which the assessee reiterated the same
submissions as made before the AO. It was submitted that Sh.
Devender Kumar always maintained that he had entered into an
agreement with Smt. Saroj Sharma and others to sell the
Harchandpur land to them. Sh. Devender Kumar also filed a letter
before Tehsildar, Sohna, to stop executing the registry of the land
occupied by Smt. Saroj Sharma etc. The assessee also filed
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ITA No. 5871/Del/2017
application for admission of additional evidences on which remand
report from the AO was called for. The AO in the remand report
reiterated the facts stated in the assessment order. The assessee
filed the rejoinder to the remand report in which it was submitted
that affidavit of Sh. K.V. Jain has been filed and that report of the
Inspectors were not confronted to the assessee and no right has
been given to rebut the same. The Ld. CIT(A) noted that the
assessee failed to establish the identity and creditworthiness of the
creditors and genuineness of the transaction in the matter. Only
affidavit of the mediator was filed which do not satisfy three limbs
of section 68 of the Act. Sh. Devender Kumar had denied having
received any cash from M/s Newage Infrabuilders Pvt. Ltd. and
stated on both that he had signed the MOU at the behest of the
assessee. Therefore, affidavit of the mediator is having no
credibility. Ld. CIT(A) also noted that no action has been taken
against Smt. Saroj Sharma etc. The AO has reported that no such
investment was shown in the balance sheet of the above said two
companies available with MCA and no funds were available with
the aforesaid companies to make such huge investments. Ld.
CIT(A), accordingly, confirmed the addition of Rs. 30 crores. As
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ITA No. 5871/Del/2017
regards addition made on account of deemed dividend, the
submission of assessee was recorded for AY 2009-10 in which it
was also contended that addition u/s 2(22)(e) of the Act is justified
to the extent of accumulated profits of lender companies. Other
facts were reiterated as were submitted before AO. The Ld. CIT(A)
followed his order dated 31.03.2017 for AY 2013-14 and 2014-15
and directed the AO to make addition u/s 2(22)(e) of the Act to the
extent of accumulated profits. The appeal was, therefore, partly
allowed.
9. The assessee is in appeal before the Tribunal. Ld. Counsel
for the assessee did not press ground no. 1 & 3 of the appeal, the
same are dismissed as not pressed.
10. On the remaining grounds, the assessee challenged the order
of the Ld. CIT(A) in confirming the addition of Rs. 30 crores u/s 68
of the I.T. Act and addition of Rs. 2,22,93,369/- made u/s 2(22)(e)
of the Act.
11. Ld. Counsel for the assessee reiterated the submissions
made before authorities below and referred to various notices
issued by the AO and reply filed by the assessee and documents
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ITA No. 5871/Del/2017
on record along with statement of the assessee, Sh. K.V. Jain and
Sh. Devender Kumar recorded time to time. He has also
submitted that PB 166, the letter of the assessee dated 12.10.2016
along with affidavit of Sh. Devender Kumar retracting from the
statement made before AO. PB 180 is affidavit of Sh. K.V. Jain
and PB 184 is complaint made to Commissioner of Police,
Gurgaon. PB 349 is Civil Suit filed by Sh. Devender Kumar
against Smt. Saroj Sharma and others. PB 294 is assessment
order of Sh. Devender Kumar u/s 153A read with section 153C of
the Act. He has submitted that presumption u/s 292C of the Act
is that the document is correct. The document relating to addition
of Rs. 20 crores is not in the name of the assessee. Proceedings
u/s 153C of the Act were initiated against Sh. Devender Kumar
and other company and the document belongs to them. There is
no other material on record to prove that assessee received Rs. 20
crores. There is no evidence that cash of Rs. 20 crores is paid by
the assessee. Statement recorded by the AO is not relevant for
making addition. The affidavit of Sh. Devender Kumar has not
been rebutted by AO. Therefore, onus upon AO has not been
discharged. As regards addition of Rs. 10 crores, he has
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ITA No. 5871/Del/2017
submitted that the M/s Meghatech Realtors Pvt. Ltd. paid Rs. 10
crores and no efforts have been made by the AO to verify payment
to Smt. Saroj Sharma. No summon has been issued to Smt. Saroj
Sharma. No enquiries have been made from witnesses to all the
agreements or MOU. No report of Inspector has been confronted
to the assessee. Therefore, no addition can be made. Ld. Counsel
for the assessee as regards addition made u/s 2(22)(e) of the Act
reiterated the facts stated before the authorities below and
submitted that the accumulated profit as per remand report as on
31.03.2012 were as under:
1. Dream Green Land Realtor Ltd. was Rs. 4,26,330/- and
2. Rosemary Properties P. Ltd. Rs. 2,41,280/-.
He has submitted that the order of the Ld. CIT(A) need to be
modified as accumulated profit taxed as deemed dividend in
earlier year need to be excluded i.e. in the case of M/s Dream
Green Land Realtor Ltd. in A.Y. 2008-09 was Rs. 2,871/- and in
case of M/s Rosemary Properties P. Ltd. in AY 2009-10 was Rs.
86,111/-. Ld. Counsel for the assessee further submitted that
advance was received for purchase of land which will not fall
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ITA No. 5871/Del/2017
within the definition of deemed dividend and relied upon Board
Circular No. 19/2017 dated 12.06.2017, Judgment of Delhi High
Court in the case of CIT vs. Raj Kumar 318 ITR 462, CIT vs.
Creative Dying and Printing P. Ltd. 318 ITR 476. Ld. Counsel for
the assessee therefore, submitted that appeal of the assessee may
be allowed.
12. On the other hand, Ld. DR relied upon the orders of the
authorities below and submitted that the documents in question
were seized from the possession of the assessee. Therefore,
section 292C/132(4) apply. Summons issued to both the
companies were returned un-served. The Inspector also could not
serve the summons upon both the companies because some were
not available at the given address. Sh. K.V. Jain who facilitated
the above MOU's expressed his inability to get the summons
served on both the companies. The assessee did not produce
Directors of both the companies. The notices u/s 153A read with
section 153C were issued to both the companies which returned
un-served. Sh. Devender Kumar made a statement against the
assessee that he signed the MOU on the direction of the assessee.
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ITA No. 5871/Del/2017
Ld. DR, therefore, submitted that assessee failed to prove the
identity and creditworthiness of the creditors and genuineness of
the transaction in the matter. Ld. DR relied upon several
decisions in support of his contention including judgment of
Bombay High Court in the case of Konark Structural Engineering
P. Ltd. vs. DCIT 90 taxmann.com 56, judgment of Calcutta High
Court in the case of DRB Exports P. Ltd. vs. CIT 93 taxmann.com
490, judgment of Allahabad High Court in the case of Prem
Casting P. Ltd. vs. CIT 88 taxmann.com 189, judgment of Delhi
High Court in the cases of CIT vs. MAF Academy P. Ltd. 361 ITR
258, CIT vs. Navodhya Castle P. Ltd. 367 ITR 306 and CIT vs. N.R.
Portfolio P. Ltd. 263 CTR 456. Ld. DR also submitted that
statement recorded u/s 132(4) could be the basis for making
addition against the assessee and relied upon the decision of the
Delhi High Court in the case of Bhagirath Aggarwal vs. CIT 351
ITR 143, CIT vs. M.S. Aggarwal 93 taxmann.com 247 and PCIT vs.
Avinash Kumar Setia, 81 taxmann.com 476. Ld. DR, therefore,
submitted that addition of Rs. 30 crores was correctly made in the
hands of the assessee and as regards addition on account of
deemed dividend, Ld. DR relied upon the order of the CIT(A).
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13. We have considered the rival submission and perused the
material available on record.
14. In the instant case the authorities below have made and
confirmed the addition of Rs. 20 crores in the hands of the
assessee on the basis of recovery of MOU dated 14.12.2011 from
the possession of the assessee, copy of the same is filed at page
101 of the PB. According to section 292C and 132(4A) of the I.T.
Act, when such document was found in possession or control of
any person in the course of search, it may be presumed that such
document belong to such person and that contents of such
document are true and correct. However, such presumption is
rebuttable and is not conclusive in nature. The MOU in question
is executed in between Sh. Devender Kumar S/o Sh. Badle Ram
and M/s Newage Infrabuilder P. Ltd., New Delhi. According to the
MOU Sh. Devender Kumar is responsible to acquire the land at
village Harchandpur, District Gurgaon and to hand-over the same
to M/s Newage Infrabuilder P. Ltd. who has agreed to purchase
400 acres of the land from Smt. Saroj Sharma and others. Thus,
Sh. Devender Kumar was responsible to acquire the land in
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question from Smt. Saroj Sharma and others and then transfer it
to M/s Newage Infrabuilder P. Ltd. According to the MOU M/s
Newage Infra Builder P. Ltd. has paid Rs. 20 crores in cash to Sh.
Devender Kumar in consideration of the aforesaid MOU. The
ultimate sale deed shall have to be registered in the office of Sub-
registrar, Gurgaon. The MOU is attested by Notary public and
also attested by the witnesses. PB 96 is agreement to sell between
Smt. Saroj Sharma & others and Sh. Devender Kumar dated
17.12.2011, whereby Sh. Devender Kumar has paid Rs. 10 crores
to Smt. Saroj Sharma etc. for purchase of land at Harchandpur,
Gurgaon. Smt. Saroj Sharma and others have acknowledged
receipt of Rs. 10 crores from Sh. Devender Kumar. Smt. Saroj
Sharma and others have also executed receipt of Rs. 10 crores in
favour of the purchaser Sh. Devender Kumar vide separate receipt
dated 17.12.2011, copy of which is filed at page 100 of the PB.
The assessee is not party to the aforesaid MOU, agreement to sell
or the receipt. Even assessee is not witness to the MOU,
agreement to sell or the receipt. Assessee thus, has not even
remotely connected with the seized document found from
possession of the assessee during the course of search. PB 146 is
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ITA No. 5871/Del/2017
statement of Sh. Devender Kumar recorded on 18.10.2013 by
ADIT (Inv.). In this statement the investigation wing has
confronted Sh. Devender Kumar of the aforesaid document seized
during the course of search from possession of assessee which
includes agreements to sell executed with Smt. Saroj Sharma and
others and explanation of Sh. Devender Kumar was called upon.
Sh. Devender Kumar on such question has explained that he has
purchased land at Harchandpur from Smt. Saroj Sharma and
others for a sum of Rs. 15,50,000/- per acre in which he was a
commission agent on behalf of M/s Newage Infrabuilders P. Ltd.
He has stated in his statement that he has paid Rs. 10 crores in
cash to Smt. Saroj Sharma and others. Therefore, Sh. Devender
Kumar in his initial statement before ADIT(Inv.) has confirmed
execution of agreement to sell with Smt. Saroj Sharma and others
and execution of the receipts copies of the same are filed in the PB
at pages 96 -100 above (supra). In his statement Sh. Devender
Kumar has further stated that he has also executed one more
agreement to sell with Smt. Saroj Sharma and others and paid Rs.
10 crores in cash and agreed to supply copy of the same
agreement to sell to the investigation wing. He has further
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ITA No. 5871/Del/2017
affirmed in his statement that this agreement to sell was also
executed on behalf of M/s Newage Infrabuilders P. Ltd. The
Investigation wing further asked for the explanation of Sh.
Devender Kumar with regard to the documents recovered from the
possession of the assessee on 17.09.2013 which is the MOU dated
14.12.2011 (PB 101). Sh. Devender Kumar in answer to this
question has affirmed that he has executed the said MOU on
behalf of M/s Newage Infrabuilders P. Ltd. for purchase of land at
Harchandpur by acquiring the said land from Smt. Saroj Sharma
and others. He has further affirmed that M/s Newage
Infrabuilders P. Ltd. has paid Rs. 20 crores to him in cash for
purchase of land at Harchandpur, Gurgaon from Smt. Saroj
Sharma and others. In further statement Sh. Devender Kumar
explained that he would get commission of Rs. 50,000/- per acre
from M/s Newage Infrabuilder P. Ltd. Thus, in his initial
statement also Sh. Devender Kumar affirmed that he has executed
MOU in question with M/s Newage Infrabuilder (P) Ltd. for
acquiring the land from Smt. Saroj Sharma and others and
received Rs. 20 crores from M/s Newage Infrabuilder P. Ltd. He
has also affirmed that he has paid Rs. 20 crores to Smt. Saroj
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ITA No. 5871/Del/2017
Sharma and others vide two agreements to sell, one of them was
recovered during the course of search and he agreed to supply
copy of one more agreement to sell to the investigation wing.
Commission was to be paid @ Rs. 50,000/- per acre. He has
further stated in his statement that the aforesaid land could not
be transferred to M/s Newage Infrabuilders P. Ltd. because Smt.
Saroj Sharma and others sold the land to some other person and
he has filed a case in the court in which Stay has been granted in
his favour. He has further stated in his statement that assessee
has also entered into an agreement to sell for some other portion
of the property with Smt. Saroj Sharma and others and assessee
was also cheated by them, therefore, he along with assessee have
filed a case in the court against Smt. Saroj Sharma and others and
due to this reason only the aforesaid documents were found
during the course of search from the office premises of the
assessee. In his statement Sh. Devender Kumar did not make any
allegation, if money was paid by the assessee on his behalf. PB
110 is a letter dated 06.04.2012 filed by Sh. Devender Kumar to
Sub-Registrar, Sohna in which he has explained that he has
entered into an agreement to sell with Smt. Saroj Sharma and
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others for purchase of land at Harchandpur, Gurgaon and she has
executed a sale deed of some portion in favour of others. Sh.
Devender Kumar, therefore, requested Sub-Registrar not to
register any sale deed in future. PB 116 is complaint made by Sh.
Devender Kumar against Smt. Saroj Sharma and others dated
04.06.2012 to the Deputy Commissioner of Police, New Delhi for
cheating and criminal breach of trust which is supported by the
agreement to sell and receipt. PB 187 is also complaint lodge by
Sh. Devender Kumar to the Commissioner of Police, Gurgaon
against Smt. Saroj Sharma and others for cheating. PB 370 is a
copy of the plaint filed by Sh. Devender Kumar against Smt. Saroj
Sharma and others i.e. suit for specific performance of contract in
the Court of Civil Judge, Gurgaon. All these material evidences
clearly established that MOU in question is between Sh. Devender
Kumar and M/s Newage Infrabuilder P. Ltd. and further
agreement to sell were executed between Sh. Devender Kumar and
Smt. Saroj Sharma and others. Assessee is not party to any of the
MOU or agreement to sell and that on offence of cheating/breach
of trust committed by Smt. Saroj Sharma, Sh. Devender Kumar
filed a police complaint against her as well as filed suit for specific
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performance before the court. Thus, the Revenue Department has
failed to attribute any sale consideration of Rs. 20 crores to the
assessee. PB 294 is assessment order in the case of Sh. Devender
Kumar dated 28.12.2016 u/s 153A read with section 153C/143(3)
of the I.T. Act for AY 2012-13 in which the AO on the same set of
facts made addition of Rs. 20 crores in the hands of Sh. Devender
Kumar on protective basis. Thus, it established that AO has also
recorded satisfaction u/s 153C against Sh. Devender Kumar that
he was connected with amount of Rs. 20 crores in question. The
AO ignored all these above material evidences on record and
merely relied upon the later statement of Sh. Devender Kumar
recorded on 11.03.2016 at the assessment stage in which Sh.
Devender Kumar has stated that he has signed the agreement in
question at the instance of the assessee. However, he has
admitted that he has purchased land from Smt. Saroj Sharma and
others on the basis of the agreement to sell. In this statement also
he has stated that police complaint was prepared at the instance
of assessee. From this statement, it appears that the AO
deliberately recorded this statement without any justification
against the statement recorded by the investigation wing
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immediately after search on 18.10.2013. Sh. Devender Kumar
tried to contradict the contents of MOU and the agreement to sell
without any justification. The AO has not explained as to what
was necessity to record statement of Sh. Devender Kumar
subsequently, at the fag end of the assessment proceedings. The
statement would also show that AO put the words in the mouth of
Sh. Devender Kumar so as to he may contradict his earlier
statement recorded by the investigation wing. No question was
put to him as to why the documents were prepared in his name, if
he was not party to be agreement to sell or MOU. The entire
material on record clearly support the statement of Sh. Devender
Kumar recorded by the investigation wing on 18.10.2013. The
statement of Sh. Devender Kumar recorded by AO on 11.03.2016
is not corroborated by any evidence or material on record. Thus,
there was no justification for the AO or CIT(A) to rely upon
subsequent statement of Sh. Devender Kumar dated 11.03.2016.
It may also be noted here that the assessee filed letter dated
12.10.2016 before Ld. CIT(A) supported by affidavit of Sh.
Devender Kumar (PB 166-176) in which he has affirmed his
statement made to the investigation wing on 18.10.2013. It is also
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stated in the affidavit that subsequently notice u/s 153C dated
08.02.2016 was issued to him by Ms. Preeti Singh, ACIT, Central
Circle-26, New Delhi and she told him that huge liability to the
extent of Rs. 20 crores would fall on him, if he strict to his original
statement made before investigation wing on 18.10.2013. He has,
therefore, disowned his statement recorded before AO on
11.03.2016. In this affidavit also he has confirmed all the
transactions recorded in his name on behalf of M/s Newage
Infrabuilders P. Ltd. The Ld. CIT(A) without any justification
ignored the affidavit of Sh. Devender Kumar. Though in this case
Ld. CIT(A) called for the remand report from the AO, copy of which
is filed at page 256 of the PB dated 04.05.2017 but the AO has not
rebutted the explanation of the assessee above. Therefore,
contents of the affidavit shall have to be read in the evidence in
favour of the assesse. It appears that the authorities below merely
on the basis of subsequent statement of Sh. Devender Kumar and
that the Directors of M/s Newage Infrabuilders P. Ltd. have not
been produced for examination before AO confirmed the addition
against the assessee. It is admitted fact that during the course of
search no cash was found or seized. There is no recovery of any
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incriminating material against the assessee to connect him with
the addition of Rs. 20 crores. Even if the Directors of M/s Newage
Infrabuilders P. Ltd. were not produced for examination before AO,
the entire material on record clearly justify explanation of the
assessee that assessee had not dealt with amount of Rs. 20 crores.
The contents of the document speak against the Revenue-
Department. The presumption against the assessee that the
document belong to him have been rebutted by the above material
on record including the seized material found during the course of
search which is corroborated by statement of Sh. Devender Kumar
recorded on 18.10.2013 in ADIT(Inv.). Sh. Devender Kumar has
taken action against Smt. Saroj Sharma etc., therefore, there was
no justification to make addition of Rs. 20 crores against the
assessee. Whatever reasons have been given by the authorities
below for making addition against the assessee are irrelevant on
the face of the evidences brought on record. Therefore, the
decisions relied upon by the Ld. DR would not support case of the
Revenue. In view of the above discussion, we are of the view that
addition of Rs. 20 crores against the assessee is wholly
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unjustified. We, accordingly, set aside the orders of the
authorities below and delete the addition of Rs. 20 crores.
15. The AO made further addition of Rs. 10 crores in the hands
of the assessee on the basis of MOU dated 14.12.2011 (PB 105)
which is recovered during the course of search. This MOU is
executed between assessee and M/s Meghatech Realtors Pvt. Ltd.
According to this MOU assessee was responsible to acquire the
land at Village Harchandpur, Gurgaon from Smt. Saroj Sharma
and others and shall transfer the same to M/s Meghatech Realtors
Pvt. Ltd. in consideration to this MOU. M/s Meghatech Realtors P.
Ltd. paid Rs. 10 crores to the assessee. This MOU is attested by
Notary Public and also attested by the witness. As per the
agreement assessee has paid the same amount of Rs. 10 crores to
Smt. Saroj Sharma on behalf of M/s Meghatech Realtors P. Ltd.
Both MOU and agreement are filed at PB 105 and PB 338. Since
presumption is rebuttable, therefore, the case is to be examined
on the basis of material on record. The assessee in his initial
statement recorded by investigation wing dated 17.09.2013 (PB
276) has explained that he has received Rs. 10 crores from M/s
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Meghatech Realtors P. Ltd. for purchase of the land through Sh.
J.K. Jain. The assessee similarly filed complaint to the police
against Smt. Saroj Sharma and others and also filed letter to the
Sub-Registrar, Sohna, Gurgaon so that no further sale deed is
executed in favour of others. PB143 is statement of Sh.
Kulbhushan Jain recorded by investigation wing on 18.10.2013 in
which he has confirmed that he has arranged the deal of the
assessee with M/s Meghatech Realtors P. Ltd. The Hon'ble
Supreme Court in the case of DCIT vs. T. Jai Chandaran in Civil
Appeal No. 4341/2018 arising out of SLP No. 22112/2013 dated
24.04.2018 considered the issue, whether additional interest
payable to PSU cannot be assessed as income of respondent? It
was held that in the given facts the respondent had acted only as
broker and, as such, the amount in question could not be termed
as income of the respondent. The AO, therefore, should have
verified the facts from all the concern persons and should have
examined Smt. Saroj Sharma and others and witness to the MOU
before arriving at the finding of fact in the matter. The assessee
further explained that report of the Inspector was not confronted
to him, therefore, such evidence cannot be read in evidence
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against the assessee. No efforts have been made by the AO to
verify the facts from the AO of M/s Meghatech Realtors P. Ltd.
The AO also ignored balance sheet of this company filed with ROC
to verify the amount of advance shown of Rs. 10 crores. These
facts clearly show that despite corroborating material available on
record, the AO merely made the addition against the assessee
because the Directors of M/s Meghatech Realtors P. Ltd. were not
produced for examination before the AO. However, the fact
remained that sufficient material was available on record that
assessee acted on behalf of M/s Meghatech Realtors P. Ltd. and
assessee while acting on their behalf executed agreement to sell
with Smt. Saroj Sharma and others. However, Smt. Saroj Sharma
and others did not complete deal with the assessee, assessee has
taken action against her with the police as well as in the court of
law with Sh. Devender Kumar. Therefore, facts shall have to be
verified from all the concerned parties including Smt. Saroj
Sharma and witnesses to the MOU etc. It appears to us that AO
has not conducted proper investigation on this issue and merely
made addition for non production of Director of Company.
Therefore, the matter requires reconsideration and the level of the
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AO. We, accordingly, set aside the orders of the authorities below
and restore this issue to the file of AO with direction to re-decide
this issue in accordance with law and as per observations in the
order by giving reasonable opportunity of being heard to the
assessee. The AO shall made all efforts to enquire from all
concern parties about the facts of execution of MOU for M/s
Meghatech Realtors P. Ltd. and shall pass the reasoned order.
16. In the result, this ground of appeal of assessee is allowed for
statistical purposes.
17. As regards, the addition on account of deemed dividend, the
assessee pleaded that advance was received for purchase of land
for the company in ordinary course of business. However, during
the course of arguments Ld. Counsel for the assessee has not been
able to refer to any evidence to support such contention.
Therefore, this point was rightly rejected by the authorities below.
However, Ld. Counsel for the assessee submitted that addition for
deemed dividend could be made to the extent of accumulated
profits of the lender company. The Ld. CIT(A) following his order
dated 31.03.2017 for AY 2013-14 and 2014-15 accepted the plea
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of the assessee and directed the AO to make addition u/s 2(22)(e)
i.e. addition made are restricted to the extent of accumulated
profits. Ld. Counsel for the assessee referred to the remand report
filed by the AO before Ld. CIT(A), PB 250 i.e. on 31.03.2012, the
accumulated profit in case of M/s Dream Green Land Realtors P.
Ltd. and M/s Rosemary Properties P. Ltd. were Rs. 4,26,330/- and
Rs. 2,41,280/-. He has further submitted that the order of Ld.
CIT(A) need to be modified as accumulated profit taxed as deemed
dividend in earlier year need to be excluded i.e. in the case of
Dream Green Land Realtors P. Ltd. for AY 2008-09 was Rs.
2,871/- and in case of M/s Rosemary Properties Ltd. in AY 2009-
10 it was Rs. 86,111/-. We, accordingly, direct the AO to take into
consideration the above facts and submission of the assessee
while passing the appeal effect order in the matter. With these
modifications this ground of appeal of the assessee is partly
allowed for statistical purposes.
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18. In the result, the appeal of the assessee is partly allowed as
indicated above.
Order pronounced in the open court on 20.09.2018
Sd/- Sd/-
(L.P. SAHU) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 20.09.2018
*Kavita Arora
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
TRUE COPY
ASSISTANT REGISTRAR
ITAT NEW DELHI
Date of dictation 05.09.18 to 06.09.2018
Date on which the typed draft is placed before the dictating 17.09.2018
Member
Date on which the typed draft is placed before the Other Member
Date on which the approved draft comes to the Sr. PS/PS
Date on which the fair order is placed before the Dictating Member
for pronouncement
Date on which the fair order comes back to the Sr. PS/PS 20.09.18
Date on which the final order is uploaded on the website of ITAT 24.09.18
Date on which the file goes to the Bench Clerk 24.09.18
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant Registrar for
signature on the order
Date of dispatch of the Order
36
ITA No. 5871/Del/2017
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