ASHISH P PATEL,AHMEDABAD V. THE ACIT, CENTRAL CIRCLE-1(3), AHMEDABAD

CO 5/AHD/2020

AI Insights

The case involves multiple appeals and cross-objections filed by both the Revenue and the Assessee against the orders of the Commissioner of Income Tax (Appeals), Ahmedabad, concerning the assessment years 2004-05 and 2006-07. The primary issues revolve around the additions made by the Assessing Officer under various sections of the Income Tax Act, 1961, following a search operation conducted on the Assessee's premises. The Tribunal's decision addressed the legality of the additions made, the interpretation of seized documents, and the application of the principles of estimation of income and telescoping of income with expenditure.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712809 (ITAT-AHMEDABAD)
• Appeal Type: Cross Objection
• Pronouncement Date: 01-08-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2004-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Set aside; Business income; Proportionate interest; Business expenditure; Question of law; Corroborative evidences; Unexplained expenditure; Unexplained investment; Rejection of books of accounts; Income from undisclosed sources; Document seized; Documents seized; Search and seizure; Block assessment; Wrong claim; Source of fund; Loose papers; Assessment record; Notional interest; Deemed to accrue or arise in india; Bogus
• Section: 143(3); 271(1)(c); 132; 153A; 131; 69; 69C; 145; 37; 40A(3); 14A; 133A; 37(1)

Judgement Text

"आयकर अपील य अ धकरण, अहमदाबाद \u0014यायपीठ ‘A’ अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER Assessee represented by : Shri Vartik Chokshi & Shri Biren Shah, ARs Revenue represented by : Shri Alpesh Parmar, CIT-DR सुनवाई क तार ख/Date of Hearing : 06.05.2025 घोषणा क तार ख /Date of Pronouncement: 01.08.2025 आदेश/O R D E R PER DR.B.R.R. KUMAR, VICE-PRESIDENT: The above-captioned appeals have been filed by both the Revenue and the Assessee against the orders of the Ld. Commissioner of Income Tax (Appeals), Ahmedabad [hereinafter referred to as \"CIT(A)\"], passed under Section 250 of the SN IT(SS)A/CO No. AY Appellant Respondent 1 IT(SS)A No. 429/Ahd/2019 2004-05 Ashish Prafulbhai Patel, 1 s t Floor, Chinubhai Chambers, B/h. City Gold Cinema, Off Ashram Road, Ahmedabad [PAN : ACTPP 0045 R] DCIT, Central Circle-1(3), Ahmedabad 2 IT(SS)A No. 460/Ahd/2019 2004-05 ACIT, Central Circle-1(3), Ahmedabad Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] 3 CO No. 5/Ahd/2020 2004-05 Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] DCIT, Central Circle-1(3), Ahmedabad 4 IT(SS)A No. 431/Ahd/2019 2006-07 Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] DCIT, Central Circle-1(3), Ahmedabad 5 IT(SS)A No. 472/Ahd/2019 2006-07 ACIT, Central Circle-1(3), Ahmedabad Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] 6 CO No. 7/Ahd/2020 2006-07 Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] DCIT, Central Circle-1(3), Ahmedabad 7 IT(SS)A No. 462/Ahd/2019 2003-04 ACIT, Central Circle-1(3), Ahmedabad Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] 8 CO No. 193/Ahd/2019 2003-04 Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] DCIT, Central Circle-1(3), Ahmedabad Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 2 Income Tax Act, 1961 [hereinafter referred to as \"the Act\"], for the Assessment Years (AYs) 2004–05 and 2006–07. In addition, the Assessee has filed cross-objections for both of the aforementioned assessment years. For AY 2003–04, an appeal has been filed by the Revenue, and a corresponding cross-objection has been filed by the Assessee. Since the issues involved in the cross appeals filed by both parties and objection raised by assessee in the C.Os. are arising from the search action carried out by the Department on 04.08.2006, all these Appeals are taken together and decided through common order. 2. The brief facts of the case are that the assessee is engaged in the business of real estate dealings and financing activities. The assessee belongs to Radhe Group, Ahmedabad. During the A.Y. under consideration, assessee was running three proprietary concerns in his name which were (i) Abhyudaya Finance, (ii) Radhe Finance and (iii) Radhe Organiser. A search under Section 132 of the Act was carried out in case of assessee/Radhe Group on 4th August, 2006. The search was finally concluded by drawing final panchnama in the name of Assessee on 29th September, 2006. The Assessee had filed return of income for the year under consideration on 24th May, 2007 in response to notice under Section 153A of the Act, dated 4th May, 2007. 3. The Assessee had filed Settlement Application before Hon'ble Settlement Commission on 28th May, 2007 for A.Y. 2001-02 to 2007-08 but such settlement application was rejected by passing an order under Section 245HA on 4th October, 2007 on the ground that Assessee had not paid taxes for A.Y. 2004-05 and 2006-07. In the settlement application the assessee has disclosed additional income of Rs. 12,25,50,000/- for the year A.Y. 2003-04 to 2007-08. The assessee has challenged the order of Hon'ble Settlement Commission before Hon'ble Gujarat High Court. The Hon'ble High Court stayed operation of the Settlement Commission's order vide order dated 12.05.2008 and directed the Assessing Officer not to proceed with framing of the assessment. Against this order of the Hon'ble High Court, the Revenue filed SCA praying for vacating the stay granted. The assessee meanwhile filed another SCA before the Hon'ble High Court and the Hon'ble High Court passed the order on 07.12.2009 disposing both the SCA i.e. filed by the Revenue & the Assessee. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 3 4. The Hon'ble High Court directed the Assessee to pay the admitted dues for Α.Υ. 2004-05 & 2006-07 within period of 8 weeks. Subsequent to this, the assessee paid Rs. 24.20 lacs for A.Y. 2004-05 and Rs. 4,84,65,000/- for A.Y. 2006-07 on 02.02.2010. But the stay granted vide order dated 12.05.2008 by the Hon'ble High Court for A.Y. 2001- 02 & 2007-08 continued. Meanwhile another search was conducted upon the assessee by the department on 07.10.2009 and final Panchnama was drawn on 01.12 2009. In view of this second search upon the assessee, the pending assessment proceedings (stayed by HC) for A.Y. 2004-05 to 2007-08 were affected in view of the second provision to Sec. 153A(1) of the Act and were therefore abated. The Assessing Officer issued fresh notice u/s 153A on 08.03.2011 for A.Y. 2004-05 to 2007-08 (in respect of second search assessment of which was also over lapping with the first search) which was served upon the Assessee on 10.03.2011. 5. In response to second search, the Revenue filed SCA no. 10395 of 2011 before the Hon'ble High Court, which was disposed of by the court vide order dated 19 12.2011 restraining the Assessing Officer from further assessment proceedings for A.Y. 2004-05 to 2007-08 initiated u/s 153A of the Act. The Hon'ble High Court clarified that this order would be subject to final decision. On 07.09.2017, the Hon'ble High Court disposed of main SCA of the Assessee. 6. The Hon'ble High Court set aside the order passed by the Settlement Commission u/s 245HA dated 04.10.2007 to a limited extent. As per the above order of the Hon'ble High Court, proceedings before the Settlement Commission revived for A.Y. 2001-02, 2002-03, 2003-04, 2005-06 and 2007-08 in ITSC, hence proceedings for A.Y. 2004-05 & 2006-07 were affected. Hence, assessment for AYs 2004-05 & 2006-07 have been completed by the Assessing Officer vide order dated 03.11.2017 u/s 153A(1)(b) r.ws. 143(3). Further, the Settlement Commission passed order dated 16.11.2017 vide which application dated 28.05.2007 filed by the assessee was declared invalid u/s 245D(2C), hence assessment proceedings for A.Y. 2001-02, 2002-03, 2003- 04, 2005-06 & 2007-08 got revived before the Assessing Officer. Following this, the assessment proceedings were resumed and the assessments for all relevant years were completed u/s 153A r.w.s. 245HA of the Act. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 4 7. Aggrieved by the assessment orders for the aforesaid assessment years, the assessee filed appeals before the Ld. CIT(A), who partly allowed the same. While the assessee is now in appeal before the Tribunal challenging the additions sustained by the CIT(A), the Revenue has also filed appeals before the Tribunal contesting the deletions made by the CIT(A). 8. For the sake of convenience and clarity, we take Revenue’s appeal in IT(SS)A No. 460/Ahd/2019 for AY 2004-05 as the lead case. The facts and issues involved are common across all the years under appeal. Therefore, our findings and conclusions in this year shall apply mutatis mutandis to the other years. AY 2004-05 IT(SS)A No. 460/Ahd/2019 - Revenue’s Appeal 9. Grounds of appeal raised by the Revenue read as under:- “1 On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in law and on facts in restricting the addition to Rs 12,00,05,970/- as against addition of Rs 26,86,00,000/- made on account of unaccounted income earned through the land transactions of SICCL 2. The Ld. CIT(A) has erred in deleting, the addition of Rs 26,86,00,000/- on account of bogus payments even while accepting that the expenditure claimed by the assessee could not have been allowed as deduction under Section 37 of the I.T. Act, in para 5.1 of his order. 3. The Ld. CIT(A) has erred in holding that such disallowance was not warranted when income was estimated, without appreciating that the income of the assessee is required to be computed as per the provisions of the Act and when bogus claim of deduction u/s 37 exceeds the income estimated, the disallowance u/s 37 should prevail 4. The Ld. CIT(A) has erred in not appreciating the fact that not disallowing the expenditure u/s 37 amounts to condoning transactions which are not otherwise allowable under the IT Act and places a tax payer who indulges in incurring bogus expenses and making unaccounted payments at the same level of a complaint tax payer, which is not the purpose or the intention of the IT Act 5. The Ld. CIT(A) has erred in holding that the expenditure should be allowed as deduction based on entries in seized documents and such documents should be read as a whole, without appreciating that such a proposition cannot detract from application of the relevant provisions of the Act Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 5 6 The Ld. CIT(A) has erred not following the principles laid down by the Hon'ble Jurisdictional High Court in the case of CIT Vs Hynoup Food & Oil Ind. (P) Ltd -150 Taxman 194 (Guj), Hynoup wherein disallowance u/s 40A(3) was upheld even when income was estimated in respect of unaccounted receipts 7. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,27,00,000/- made on account of unexplained expenditure incurred for the land situated at Jamnagar, Palanpur and Surat treating the same as application of fund against undisclosed income even though no documents evidencing such application was pointed out by the assessee. 8. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in law and on facts in deleting the addition of Rs 23,00,000/- made on account of unexplained expenditure incurred through Nimish B Panchal for the land situated at Anand for SICCL treating the same as application of fund against undisclosed income even though no documents evidencing such application was pointed out by the assessee. 9. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in law and on facts in deleting the addition made on account of Unexplained expenditure of Rs. 3 lacs incurred for the land located at Ahmedabad and addition on account of Unexplained expenditure of Rs. 4 lacs incurred for the land located at Amravati treating the same as application of fund against undisclosed income even though no documents evidencing such application was pointed out by the assessee. 10. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in law and on facts in deleting the addition made on account of unaccounted business receipt of Rs.2,75,00,000/- in respect of land transactions at Surat, Palanpur, Amravati and Anand with SICCL even though no documents evidencing such application was pointed out by the assessee 11. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in law and on facts in deleting the addition of Rs. 50,00,000/- made on account of unexplained investment in cash for the purchase of plot at Bodakdev Ahmedabad even though no documents evidencing such application was pointed out by the assessee. 12. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in law and on facts in deleting the addition of Rs. 7,00,000/- made on account of unexplained expenditure incurred in the form of interest payments even though no link between this expenditure and the interest income was produced by the assessee. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 6 IT(SS)A No. 429/Ahd/2019 - Assessee’s Appeal 10. Assessee has raised following grounds of appeal :- “1. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) ought to have appreciated that the Order passed by AO is void and illegal and is required to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A)has erred in confirming addition of Rs. 12,00,05,970/- by estimating income from project of SICCL @ 20% of Rs. 60,00,29,850/-, when no such addition is called for. The addition confirmed by Ld. CIT(A) is required to be deleted. 3. In law and in the facts and in the circumstances of the appellant's case, even if income from project of SICCL is required to be estimated then it should be restricted to 12.5% of gross receipt as accepted by the appellant in his settlement application as well as his statement dated 29th February, 2006. 4. In law and in the facts and in the circumstances of the appellant's case, the Ld. CIT(A) has erred in estimating income from project @ 20% without appreciating that actual profitability from alleged project ranges from 6% to 11% which is evident from seized material found during the course of search. Addition in any case cannot exceed the actual profit earned by the appellant from alleged project. 5. In law and in the facts and in the circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition of alleged unaccounted interest income for Rs. 29,24,000 without appreciating the fact that loose papers found during the course of search is dumb document. No noting has been found which actually proves that Appellant has in fact received such interest income.” CO NO. 5/Ahd/2020 – By assessee 11. The grounds of cross-objections read as under :- “1. On the facts and in the circumstances of the case, the CIT(A) ought to have deleted addition of Rs.2,27,00,000 made on account of unexplained expenditure incurred for land situated at Jamnagar, Palanpur and Surat on merits of the case, as such addition was based upon letter found during the course of search at appellant's premises but no evidence of actual payment was found. On the facts and in the circumstances of the case, the CIT(A) ought to have appreciated that even during the course of search, other material was found reflecting surplus fund available with appellant for project carried on behalf of Sahara and in any case, payment need to be considered as application out of such income. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 7 2. On the facts and in the circumstances of the case, the CIT(A) ought to have deleted addition of Rs.23,00,000 made on account of unexplained expenditure incurred for land situated at Anand on behalf of Sahara Project on merits of the case, as such addition was based upon letter found during the course of search at appellant's premises but no evidence of actual payment was found. 3. On the facts and in the circumstances of the case, the CIT(A) ought to have deleted addition of Rs.3,00,000 made on account of unexplained expenditure incurred for land situated at Ahmedabad and Rs.4,00,000 for land at Amrawati on behalf of Sahara Project on merits of the case, as such addition was based upon letter found during the course of search at appellant's premises but по evidence of actual payment was found. 4. On the facts and in the circumstances of the case, the CIT(A) ought to have deleted addition of Rs.50,00,000 made on account of unexplained investment in land at Bodakdev on merits of the case, as appellant has categorically denied entering into any such transaction and deal was actually not materialized. 5. On the facts and in the circumstances of the case, the CIT(A) ought to have deleted addition of Rs.7,00,000 made on account of unexplained expenditure in the form of interest payment on merits of the case, as such addition was based upon notings and jottings mentioned in loose paper, such loose paper being dumb document and there being no evidence of actual payment of interest.” 12. A search u/s 132 of the Income-tax Act, 1961 on the assessee has been conducted on 04.05.2006. The Assessee is engaged in the business of real estate dealings and financing activities. During AY 2004-05 assessee was operating three proprietary concerns, which are as under :- (a) Abhyudaya Finance (b) Radhe Finance (c) Radhe Organiser 12.1 The assessee is involved in the land transactions of various schemes launched by Sahara City Homes of Sahara India Commercial Corporation Ltd. (SICCL). SICCL launched a scheme of Sahara City Homes at various cities of India, which includes Ahmedabad, Jamnagar, Bhavnagar, Porbandar, Rajkot, Palanpur, Surat, Anand, and Baroda. Land transactions of these schemes were executed/tried to be executed through Shri Ashish P. Patel of Radhe Group of Builders, Ahmedabad and his close associates from F.Y.2002-03 onwards. All of these cities are in Gujarat except Amrawati, which is in Maharashtra. It has been observed that Shri Ashish Patel the Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 8 main person of Radhe group of builders was instrumental in the land transactions of Sahara city Homes at Ahmedabad, Jamnagar, Bhavnagar and Rajkot. The land at Sahara City Homes scheme at Porbandar had been purchased through Shri Nimish B. Panchal, who had been later on proved as benami of Shri Ashish P. Patel. The land at Sahara City Homes scheme at Anand had been finally purchased through M/s. Harsiddhi Land Agency, though initially, it has been tried to be purchased through Shri Nimish B. Panchal. Land at Palanpur and Surat could not be finally purchased, though some money had been passed on for these schemes to Shri Ashish P. Patel. Land at Amrawati (Maharashtra) could again not be finally purchased, though some money had been passed on for this scheme through Shri Rajendrai Bhansali- a close associate of Shri Ashish P. Patel. The land at Sahara City Homes scheme at Baroda was finally purchased through M/s. Elegant Developers, though initially, land for this scheme was tried to be purchased through Shri Ashish P. Patel. From the material seized during the search and from the statements of Shri Ashish P. Patel and others, it has been established that the tax had been evaded at large scale on these land transactions. This tax evasion had taken place with the help of bogus land banakhat and development expenditure and cash payment at large scale to the original land owners and others including Mr Sundar Lal of SICCL. 12.2 The usual methodology adopted was that SICCL entered into separate MoU with Shri Ashish Patel and associates for negotiating with the original land owners. For the same, Shri Ashish P. Patel & associates first entered into Agreement to Sale (ATS)/Banakhats with these farmers, then paper advertisements were made and finally the sale deeds were executed. Once the banakhats were obtained & other legal formalities were completed, SICCL used to send cheques/DD's to Shri Ashish P. Patel & associates for purchase of land at different Cities. In this way, a huge amount of approx. Rs.89 Crores had been transferred to Shri Ashish P. Patel during the aforesaid period for the land deals of Ahmedabad, Jamnagar, Bhavnagar, Rajkot and Porbandar. Shri Ashish P. Patel & associates, in turn, would pay only a part of the amount received from Sahara group to the original landowners in cheques. In the matter of land dealings at Ahmedabad, Rajkot, Jamnagar, Porbandar and Bhavnagar, approx. Rs.62 Cr. had been claimed as land banakhat and development expenditure and accordingly shown in the Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 9 returns of income of Shri Ashish Patel and associates for different years. This amount is approx. 70% of total receipts of Rs.89 Cr. by Shri Ashish P. Patel from Sahara group on account of land purchases at Ahmedabad, Rajkot, Jamnagar, Porbandar and Bhavnagar. It has been found that land banakhat and development exp., in different years, are generally paid by Shri Ashish P. Patel to M/s. Rana Projects International Ltd., M/s Devi Durga Construction, M/s LR Construction and M/s Anjani Construction of Baroda. 12.3 Search & Survey actions at the premises of M/s Rana Developers, Raipur, M/s Devi Durga Construction, M/s LR Construction, M/s Anjani Construction of Baroda as well as at the sites of Sahara City Homes at all even cities of Gujarat, i.e. Ahmedabad, Jamnagar, Bhavnagar, Rajkot, Porbandar brought on record that no land development had been actually carried out at any of the places, and bogus bills had been issued for the land development exp., cash has been withdrawn from the accounts of these concerns and handed back to Shri Ashish P. Patel. Confession in the form of statements on oath and duly notarized affidavit had been given by Shri A. Srinivasan, the main person who represents/controls the work of M/s Rana Projects, M/s Devi Durga Construction, M/s LR Construction and M/s Anjani Construction from Baroda. When these evidences were confronted with Shri Ashish P. Patel during the course of search proceedings and post search enquiry, he admitted that approx. Rs.62 crores, received from Sahara, were shown as bogus land development expenditure and actually no development work had taken place on any of the sites of Sahara Cities as claimed in his ROI. Different concerns, which issued the bogus bills in this regard and paid back the cash after withdrawing the same from their accounts, were paid commission @ 1.5% of the total receipt. This has been duly accepted by Shri A. Shrinivasan (who represents/controls the work of M/s. Rana Projects, Raipur and M/s Devi Durga Construction, M/s LR. Construction and M/s Anjani Construction from Baroda) and Shri Rajesh P. Shah, partner of M/s L. R. Construction. On the basis of documents seized during the search proceedings at the office of Shri Ashish P. Patel at Ahmedabad, he further submitted that this undisclosed income had actually been shared, mostly in cash, among four entities i.e., the original land owners, the representatives of Sahara, few other brokers and himself i.e. Shri Ashish P. Patel. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 10 12.4 Generation of unaccounted income through the land transactions of SICCL in the hands of the assessee gets corroborated from various evidences and the statements of the search/survey persons recorded during the search action on Radhe Group. Further, these involve violations of the multiple provisions of the IT Act. 12.5 During the year, the assessee debited expenses of land development and bhanakhat of Rs.27.27 crores, out of which Rs.26.27 crores have been paid to three concerns namely Devi Durga Construction, LR Construction and Anjani Construction. During search, the assessee accepted of having issued bogus bills to Sh. Ashish Patel in lieu of the commission @ 1.5%. The Assessing Officer has gone into the payments made by the assessee to Devi Durga Construction, LR Construction and Anjani Construction and also examined the bank accounts maintained in the Central Bank of India, The Su- Vikas Peoples Co-op Bank Limited, The Shreenath Co-op. Bank Limited and Bhuj Mercantile Co-op. Bank. Further, based on the statement of Shri A. Srinivasan, one of the business partners of the assessee, who also accepted that 1.5% commission on the total amount of the bogus bills has been received, the Assessing Officer made addition of Rs.30 lakhs in the hands of Shri A. Srinivasan and Rs.20.05 crores as income of the assessee as received from Sahara India Commercial Corporation Ltd (SICCL) on account of bills given through Devi Durga Construction. Similarly, the Assessing Officer made addition of Rs.6.07 crores on account of the commission received through LR Construction and Rs.15 lakhs through Anjani Construction. In total the Assessing Officer made addition of Rs.26.86 Crores being the 98.5% of Rs.27.26 Crores paid as banakhat and development expenses. 12.6 Aggrieved by the order of the Assessing Officer, the Assessee filed appeal before the Ld. CIT(A) who modified the order of the Assessing Officer determining the amount earned at Rs.12.00 crores. For the sake of ready reference, the ratio of decision of Ld. CIT(A) on this issue is reproduced as under:- “5.5 I have carefully considered the Assessment Order and the submission filed by the Appellant. The brief facts of the case are that Sahara Industrial Commercial Corporation Limited (SICCL) had carried out various land transactions for their projects through Appellant from AY 2003-04. As per detailed discussion made in Assessment Order, it is found that Appellant has received various amounts from SICCL through account payee cheques/drafts which are shown as receipts in Profit Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 11 & Loss Account. The Appellant has claimed various expenditure including payment made to farmers through account payee cheques, land development expenditure, land commission, brokerage expenses, land filling expenses, etc.. During the year under consideration, Appellant has debited land banakhat and development expenses of Rs. 27.27 crores out of which Rs.26.27 crores were paid to three concerns being Devi Durga Construction, LR Construction and Anjani Construction, which were found to be bogus by Assessing Officer. The finding given by Assessing Officer for treating above expenditure to be bogus are based upon statement of Mr. A. Sreenivasan, main person of above concerns, statement of Appellant recorded during the course of search, Assessment Orders passed in the case of these concerns as well as three incriminating material found during the course of search being page No. 52 of Annexure-A/1, page No. 103 of Annexure A/42 and page No. 61 of Annexure A/35. The various observations made by Assessing Officer for arriving at the conclusion that such expenditure are bogus along with basis of additions are already summarised at para 5.1 to 5.4 herein above. On this basis it is found that AO has made addition of Rs.26.86 crores being 98.5% of total land development expenditure of Rs.27.27 crores mainly on following grounds: (i) The land and development expenditure debited in Profit & Loss Account and paid to four concerns are bogus hence such expenditure cannot be allowed as deduction under Section 37 of the Act. (ii) As cash amount was received back by Appellant for making unaccounted cash payment, provisions of Section 69A are applicable hence such amount is alternatively liable for addition in the hands of Appellant as unexplained money. (iii) As cash payments mentioned in three seized documents stand unexplained in the hands of Appellant, disallowance of such expenditure, unaccounted cash payment made and sourced through cash withdrawal from bank account of bogus billing concerns are liable for additions under Section 69C of the Act. (iv) The business receipts shown in Profit & Loss Account and expenditure claimed against such income clearly establish that Appellant was in the business of trading of land rights. Profit earned from SICCL projects at Ahmedabad, Rajkot and Bhavnagar is required to taxed in current year after applying margin of 20% on gross receipts of Rs.59.65 crores which works out to Rs. 11.93 crores. Separate addition of Rs.11.93 crores was not made as unexplained expenditure disallowed under Section 37/69A/69C for Rs.26.86 crores was higher than estimated income of the project. 5.7 During the course of appellate hearing, ARs of the Appellant have first discussed the role of Appellant for projects with SICCL and contended that he was only working as agent, facilitator and aggregator of the land and for such work, Appellant was required to acquire and aggregate the land, clear all litigations and to provide basic infrastructure such as land levelling, approach road, etc. It was contended by Appellant that for this project, Appellant will first execute agreement to sell with farmer, second agreement to sell with Appellant and Sahara and final sale deed will be between farmer, Sahara and Appellant being a conforming party and in such process, Appellant would receive funds from Sahara. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 12 To support such contention, Appellant has submitted copy of MOU of land acquired in the vicinity of Rajkot and all other agreements to sell and sale deed at paper book page No. 115 to 139. The Appellant at para 2.6 of his written submission as reproduced herein has referred to various statements recorded during the course of search and post-search enquiry to prove his claim that his role with SICCL was of broker/facilitator. The ARs of the Appellant have also drawn attention to page No. 35 and 85 of Assessment Order wherein also Assessing Officer has acknowledged Appellant as working for SICCL. On this basis, ARs of the Appellant have contended that Appellant has earned fixed remuneration for various land transactions for Sahara Group and he cannot be treated as trader for such transactions merely on the basis of accounting entries passed in the books of account. The Appellant has also drawn attention to his settlement application filed before Hon'ble Settlement Commission wherein he has offered additional income of Rs.11 crores being 12.5% of gross receipts from SICCL for Rs.88 crores in AY 2006-07 and contended that addition cannot be made beyond such admission. AO also stated that similar fact was also stated by Appellant in his statement recorded on 29th February, 2006 and relevant extracts of such statement are already reproduced at page 50 of Assessment Order. 5.8 With regard to addition of Rs. 26.86 crores being alleged unaccounted income earned through transaction of SICCL made under Section 37/69C of the Act, Appellant has stated that there is no denying of the fact that during the course of search, loose papers and notings of various sites were found which reflect payments received from SICCL and payment made for and on behalf of SICCL to the farmers, land levelling and other expenses. These facts are also stated by Appellant in his statement recorded during the course of search and referred by AO himself at various places in the Assessment Order. It was further stated by Appellant that he has made various payments to various concerns towards land development and land filling expenditure as per instruction of SICCL and cash was made available to Sahara Group by such concerns out of cheques issued by Appellant and various payments including payment to farmers, legal charges, brokerage charges and Mr. Sunderlal were made. The Appellant has stated that total land banakhat and development expenditure debited in Profit & Loss Account was Rs.54.12 crores from AY 2003-04 to 2005-06 and 98.5% of such expenditure works out to Rs. 53.31 crores (1.5% commission was retained by bogus concerns) and payment as seized material found during the course of search out of cash withdrawal from bank account of bogus concerns are around Rs.53.39 crores which means that Appellant has not earned any undisclosed income by claiming bogus expenditure. On this basis Appellant has argued that expenditure debited in books of account which were considered to be bogus by AO are eventually incurred for the purpose of the transaction because cash generated from such expenditure are ultimately used for making various payments related to land acquisition and Appellant not deriving any benefits, no adverse action is warranted in the hands of Appellant on account of alleged bogus expenses considering the role of Appellant being facilitator and entitled to only fixed percentage of profit on completion of the project. It was thus argued that Appellant has disclosed remuneration/commission in land dealing transactions in his statement recorded during the course of search and due taxes were paid on Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 13 such income hence there is no need for making separate addition either under Section 37 of the Act or 69A/69C of the Act. The ARs of the Appellant have further contended that seized material found during the course of search need to be read as a whole and when seized material itself contains details of cash withdrawal and cash payment made by Appellant for and on behalf of SICCL, the AO cannot tax entire cash withdrawals as deemed income under Section 69A of the Act or disallow unaccounted expenditure under Section 69C of the Act. The Appellant has mainly relied upon following decisions: (i) Gujarat High Court in the case of Glass Lines Equipments Co. Ltd. v/s. CIT [253 ITR 454 (Gujarat)]. (ii) High Court of Gujarat in the case of Navjivan Oil Mills v/s. CIT [2002] 124 TAXMAN.COM 392. (iii) High Court of Delhi in the case of Commissioner of Income Tax VERSUS D.D. GEARS Ltd. ITA No.896/2008. 5.9 The Appellant has also challenged the year of taxability of income earned in the project SICCL wherein it is stated that Appellant is entitled for compensation only when entire work for all the cities are completed. The Appellant at para 6.2 of his submission has stated that seized material referred by AO itself states that certain works are even pending on 7th April, 2006 which means that in any case income needs to be taxed in AY 2007-08 and not even in AY 2006-07 as disclosed by him before Hon'ble Settlement Commission. The Appellant has also relied upon Question-Answer - 4 of his statement recorded during the course of search on 29th February, 2006 wherein it is stated that he has computed profit in the month of April 2006 because entire work was getting completed in such year. On this basis Appellant has contended that profit margin computed by AO for Rs.11.92 crores on the concept of real income need to be taxed in AY 2007-08. The Appellant has also challenged the percentage considered by AO for estimating income on the ground that he has correctly disclosed 12.5% of gross receipts in AY 2006-07 and such additional income is after considering loose papers and percentage of margin available with Appellant. The ARs of the Appellant have also prepared tabular chart showing actual profit earned from various land transactions and such chart was prepared based upon loose paper found during the course of search and referred by AO in Assessment Order. The said chart is reproduced herein below and on this basis Appellant has contended that actual profitability percentage are in the range of 6% to 11% hence estimation of net profit @ 20% made by AO based upon seized letter addressed to Subroto Roy of SICCL is uncalled for. All these figures are taken from the seized documents. Particulars Bhavnagar Jamnagar Ahmedabad Rajkot Porbandar Grand Total Credit Amount Received 19 54 62 500 17 14 00 000 23 33 00 000 16 77 00 000 12 24 00 000 89 02 62 500 Total Credit 19 54 62 500 17 14 00 000 23 33 00 000 16 77 00 000 12 24 00 000 89 02 62 500 Debit Expenses Paid Paid to farmers-cheque 4 75 00 000 4 50 00 000 6 30 00 000 4 77 00 000 1 50 00 000 21 82 00 000 Paid by cash from Rana/devi etc. cash - 9 97 00 000 7 70 00 000 17 67 00 000 Advocate - - 1 00 000 1 00 000 Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 14 Paid to farmers - cash 7 63 00 000 7 00 00 000 - 5 78 00 000 - 20 41 00 000 Paid to S. lal 5 00 00 000 3 70 00 000 2 61 00 000 4 00 00 000 - 15 31 00 000 R.D.B. - - 1 35 00 000 - - 1 35 00 000 63C - 11 00.000 - - 11 00 000 Brokerage 5 00 000 3 50 000 57 00 000 5 00 000 5 00 000 75 50 000 Raju Joshi Cash - 20 00 000 20 00 000 Permission '10 00 000 - 10 00 000 Cash 19 00 000 - - 19 00 000 Misc. Expanse 10 00 000 31 50 000 19 00 000 60 50 000 Regi. Change 2 75 000 - 2 75 000 Survey 75 000 16 50 000 8 50 000 - - 25 75 000 Adv. Cheque 2 00 000 - - - - 2 00 000 Booking B. Mehta 3 00 000 - - - - 3 00 000 Road Making - - 20 00 000 - 20 00 000 Title/Possession/Misc. - - - - - Total (I) 17 80 50 000 15 40 00 000 21 31 00 000 15 10 00 000 9 45 00 000 79 06 50 000 Expenses – Payable Work Pending (Court Cases / Misc. title / 34 00 000 52 00 000 - 1 20 00 000 2 06 00 000 Govt. Land to be purchased - - 17 00 000 - 17 00 000 Road Land to be purchased - - 50 00 000 50 00 000 T.P. Scheme cancellation 25 00 000 - - - 25 00 000 Title/Permission 25 00 000 - - - 19 00 000 44 00 000 Total (ii) 50 00 000 34 00 000 52 00 000- 67 00 000 1 39 00 000 3 42 00 000 Total Debit (I + ii) 18 30 50 000 15 74 00 000 21 83 00 000 15 77 00 000 10 84 00 000 82 48 50 000 Net Profit 1 24 12 500 1 40 00 000 1 50 00 000 1 00 00 000 1 40 00 000 6 54 12 500 Profitability Percentage 6.35 8.17 6.43 5.96 11.44 7.35 5.10 On careful consideration of facts discussed in Assessment Order and submission filed by Appellant, following issues need to be adjudicated: Whether Appellant has worked as land aggregator/facilitator or has carried out trading transactions of land in projects executed for SICCL? (i) Whether AO was justified in making addition of land development expenditure under Section 37(1) of the Act or treating cash receipts received from bogus concerns against cheques issued for land development and filling expenses as undisclosed income under Section 69A of the Act? (ii) Whether unaccounted expenditure incurred from cash receipts referred supra are required to be disallowed under Section 69C or not? (iv) Whether profit from land transactions with SICCL are required to be estimated or not once AO has already treated land development expenditure as bogus and separate addition is made and if profit is required to be estimated from such transactions, whether such income need to be taxed in AY 2004-05 or in AY 2006-07 being the year in which Appellant has offered additional income before Hon'ble Settlement Commission or in AY 2007-08 as claimed in present submission and what should be reasonable rate of profit on such transactions? 5.11 Before adjudicating the issue relating to present addition made by AO it is relevant to consider the plea of Appellant that he has acted as facilitator or aggregator for land transactions for SICCL or not. During the course of search various memorandum of understanding (MoU) made with SICCL were found and one of the MoU relating to land situated in the vicinity of Rajkot was submitted by Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 15 Appellant in his paper book and perusal of such MoU which is entered into prior to sale deed in favour of SICCL, it is found that SICCL was interested in purchasing 100 to 150 acres of land for developing residential township for which Appellant has come forward with a proposal for 100 acres of land situated at village: Anandpar, District: Rajkot, and details of plot were earmarked as Annexure - 2 of such MoU. There is nothing on record which can prove that Appellant was already owning such land at the time of execution of MoU but lands were held in the names of various farmers. As per clause 3 of such MoU, average price of land was fixed at Rs.15.80 lacs per acre and even payment towards acquisition of land was to be released considering various stages of acquisition of land i.e. 10% of total consideration on producing notarized/registered banachhitti, 40% of total consideration on registration of agreement to sell and balance on registration of deed. The AO has also referred to such methodology at para 163 of Assessment Order which also supports above referred contention of Appellant. The Appellant has also submitted sample copy of agreement to sell executed with farmers, agreement to sell executed with SICCL and final sale deed wherein Appellant has signed only as conforming party and such details clearly prove that Appellant has acted only on behalf of SICCL and not as independent trader of land. It is also observed that Appellant has not acquired above land solely from his independent source but has acquired the land from the farmers from the funds provided by SICCL. It is relevant to refer to loose paper No. 89 and 90 of Annexure A/9 found and seized from Appellant's premises which is reproduced at para 7.3 of Appellant's submission and such loose paper being communication made by Appellant to SICCL on 29th December, 2013 regarding various surplus or deficit for land acquired for them which also support the contention of Appellant that he has only acted as facilitator in entire land acquisition transaction. The Assessing Officer at para 9 of his order has also stated that Appellant was instrumental in land transactions of Sahara Citi Homes at various places in Gujarat. The Assessing Officer at page No. 85 of his Assessment Order and while making addition of Rs. 2.75 crores being undisclosed business receipts has also observed as under: \"Assessee used to receive funds from SICCL in his bank accounts and made the payments to the farmers as and when required thereby retaining the difference amount as his business profits\" During the course of search and post-search proceedings, various statements of Appellant were recorded and for the sake of clarity relevant Question and Answer are reproduced herein below which should clearly establish that Appellant has played the role of broker/facilitator. (A) Excerpts from the Appellant's statement recorded under section 132(4) of the Act on 29/09/2006 Q.2 You have engaged into deals of land transactions for more than 100 Acres at each of the five Cities of Gujarat i.e. Ahmedabad, Jamnagar, Bhavnagar, Porbandar, and Rajkot. You have played the role of confirming party in these deals. Kindly clarify this role. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 16 A.2 I have played the role of broker (facilitator) with and for Sahara India Commercial Corporation Ltd. Whatever amount has been extended to me in these land deals from Sahara, I was required to give the same to the farmers and Shri Sunderlalji, Shri Sunderlalji is/was at the post of Advisor in Sahara Group of Companies, He gave these roles to me and wherever cash amount was required, he made me available the same. Q.4 Kindly look at the page No. 13 to 18 of the folder titled as Shara Correspondences which constitute a confidential letter written by you, in this letter, you have written that your profit margin should be 15% to 20% and your have charged this margin in all these deals. According to this, 15% to 20% of Rs. 88.05 Crores gives you profit margin in between Rs. 13.21 Crore to Rs. 17.61 Crores. The same ratio has been told by Shri Nilesh T. Patel of Jamnagar. Though this argument has not been accepted by the Department, since there is no proof of cash payments made by you. Therefore, explain as to why Rs. 9.78 Crores only should be accepted as your profit from the above mentioned deals? A.4 This matter I want to clarify as to whatever cash payments I have made so far, the same has been made by the people of Sahara or in accordance to the instructions received from Sahara and on behalf of Sahara, I also want to state that I do not know that Shri Nilesh T. Patel has made the cash payments as I have made, but I want to state that in the entire land dealings of 5 Cities of rs. 88.05 Crores received, on average I have received the profit of 12.5% and according to my calculation, this amount comes at Rs. 11 Crores (Eleven). In this matter I also want to state that I computed my profit in the month of April because accordantly to my perception, the entire works are getting completed in the current year only and my profit also comes in the current year. This amount of Rs. 11 Crores includes Rs. 9.78 Crores which is due to be given to Devi Durga and others as per my books of accounts. This amount is my income which is invested in my business assets. Balance amount of Rs. 1.22 Crores is given as Advance of expense or another investees. Thus I disclose total amount of Rs. 11 Crores and one (Rs. 11,00,00,001) as my undisclosed income in the current year and I request for exemption from penalty as per Section 271(1)(c) Explanation -5 as explained by you and whatever income-tax liability shall arise on this income, I will pay the same. This is my promise. I am also given you a post dated cheque of Rs. 50 lakhs to be encased on 6/11/2006 and promise to pay the balance liability along with my return of income. (B)Statement recorded on 06.11.2006 Q4. Kindly explain the contents of the Pages 1 to 6 of Annexure A/6 seized from Chinubhai Chambers on 4/8/2006. A.4 This is a letter written by my to Shri Subrato Roy, in which I have claimed the parentage profit in the margin 15% to 20% of total receipts and have rejected the proposal of Rs. 50,000/- per acre. This claim made by me was finally accepted by Subrato Roy and SaharaGorup. In this regard Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 17 I would like to confirm that purchase of lands for Shara Cities at Palanpur, Surat, Anand and Amravati could not be materialized through me. However in case of Anand they have purchased the land through some one else. I would rely on this letter to claim that my profit was not more than this percentage and the bogus claims made in my returns in the form of land development expense and banakhat expense were distributed amounts Shri Sundarla of Sahara, original land owners by myself and brokers etc. It is observed that Appellant has credited funds received from SICCL as revenue receipt and expenditure incurred on various lands are claimed as an expenditure does not mean that Appellant has carried out trading transaction as incriminating material found during the course of search, correspondence made with SICCL and statement of Appellant recorded during the course of search clearly prove that Appellant was a facilitator in these land transactions hence income is required to be computed considering such material facts. The Hon'ble Supreme Court in the case of CIT V/s Shoorji Vallabhdas - 46 ITR 144, Sutlej Cotton Mills Vis CIT Limited- 116 ITR 1, Godhra Electricity Co. Ltd. V/s CIT 225 ITR 746 and decision of Hon'ble Ahmedabad ITAT in the case of ACIT V/s Ashima Sintex Limited - 117 ITD 1 (SB) has held that book entries are not conclusive to decide the nature of transaction/income. Considering these facts, entire addition made by Assessing Officer being bogus expenditure debited in Profit & Loss Account and estimation of income is adjudicated in subsequent paras. 5.14 With regard to addition made by AO by treating 98.5% of land development expenditure as bogus expenditure after applying provisions of Section 37(1), 69A and 69C of the Act, it is an undisputed fact that Appellant has made payment to four concerns being Rana Developers, Devi Durga Construction and LR Construction and Anjani Construction, Baroda, who have admitted to have issued bogus bills and even Appellant himself in his statement recorded during the course of search has admitted to have made such bogus payment. Even Appellant has not contended for allowing such expenditure as business expenditure in written submission. On the contrary, after considering such incriminating material, the Appellant has offered undisclosed income of Rs.11 crores on gross receipts from SICCL for Rs. 88 crores in his statement recorded under Section 132(4) on 29th September, 2006 and on 8th November, 2006, as referred supra. Considering these facts expenditure claimed by Appellant cannot be allowed as deduction under Section 37 of the Act. If disallowance is required to be made under Section 37 of the Act it can be made but other evidences found during the course of search, as discussed in this order, requires estimation of income for land transaction carried out for SICCL which is discussed at length in subsequent paras. It is observed that AO has alternatively contended that as Appellant is receiving cash against cheque issued by it, provisions of Section 69A are applicable. The AO has also observed that by claiming bogus land banakhat and development expenditure, unaccounted cash payment which are sourced through cash withdrawal from bank account of bogus billing concerns are liable for addition under Section 69C of the Act. While arriving at this conclusion though the Assessing Officer has referred to three loose Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 18 papers pertaining to Ahmedabad, Rajkot and Bhavnagar but, has failed to appreciate the correct nature of the transaction. For the sake of clarity, though these loose papers are reproduced at page 36, 38 and 40 of Assessment Order same are reproduced herein below. Ahmedabad Total Received 23,33,00,000 - Paid to farmers - 6,30.00,000 - Paid to farmers cash - 9,97,00,000 cash withdrawal from Rana/Devi etc. a/c. for S.L. Paid to s.lal - 2,61,00,000 cash withdrawal from Rana/devi a/c. for S.L. - R.D.B. - 1,35,00,000 - 63(c) 11,00,000 Brokerage - 42,00,000 Survey & title - 8,50,000 - Misc. - 31,50,000 Brokerage cash 15,00,000 Raju Joshi 2,02,00,000 Road/ Misc, work pending 1,50,00,000 Cash paid to farmers Kanjibhai & family 2.00 Prabhudas & family 400 Dhuiabhai & family 300 Kanti Ghuma .57 9.57 16/1/2006 40 Raju To be sent to Someshji 9.97 (Sahara) _ Rajkot Received from Sahara 16,77 Paid to farmers cheque 4,77 Paid to farmer Khima Tida & family cash 5,78 Withdraw from Devi/Rana etc by & for Sahara Paid to s.lal 4.00 Withdraw from Devi/Rana a/cs.for Sunderlalji Brokerage cheque 0.05 Raju joshi cash 0.20 Permission etc. . 0.10 1,87,00,000=00 Govt, land to be purchased 1700,000=00 Road land to be purchased 50,00,000=00 Road Making 20,00,000=00 1,00,00,000=00 Raju To be sent to S. Lal 7/4/2006 Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 19 Bhavnagar Total Received 19,54,62,500 Paid by cheque to farmers 4,75,00,000 Paid by cash to farmers 7,63,00,000 Withdraw from Rana/etc for Sahara Paid S. Lal 5,00,00,000 Withdraw from Rana/etc. for S.lal Brokerage cheque 5,00,000 R. Joshi Cash 16,00,000 Mise. Exp. 10,00,000 Regi. Charge 2,75,000 Survey 75,000 Adv. Cheque 2,00,000 Cash 3,00,000 Booking B. Mehta 3,00,000 1,74,12,500 25,00,000 T.P. Scheme cancellation, 25,00,000 Title / Permission 1,25 1,23 Approx. 1. Lalubhai/Maganbhai 2. Raju Bhavnagar. 3. 4. It can be seen from above three loose papers which pertains to land transactions at Ahmedabad (page No. 52 of Annexure A/1), Rajkot (page No. 103 of Annexure A/42) and Bhavnagar (page No. 61 of Annexure A/35), that total amount received from SICCL are reflected as total received and such figures are already reflected as receipt in Profit & Loss Account. These loose papers clearly depict that cash withdrawn from four bogus concerns mentioned in Assessment Order are used for making payment in cash to farmers, S. Lal of Sahara and for various other land related expenditure. These facts clearly prove that though Appellant has claimed bogus expenditure in form of land development expenditure, cash generated from such expenditure are ultimately used for the purpose of acquiring land for SICCL and this cash is not retained by Appellant or used for any other purpose. This fact is further substantiated by Appellant in following tabular chart as reproduced at para 3.4 of his submission. Sr. No. Particular 5 Amount (Rs.) 1 Land Banakhat and Development expense as per the Profit & Loss account of: ________________ ____________________________ A.Y. 2003-04 14.61 crores A.Y. 2004-05 27.26 crores A.Y. 2005-06 12.24 crores Total 54.12 crores 2 98.5% of alleged expense 53.31 crores 3 Payment as per the seized material made out of cash withdrawal from bank account of Rana, Devi Durgaeic ____________ _______ ________________________________ Page no. 61 of Annexure A-35 (7,63,00,000 + 5,00,00,000) — 12.63 crores Page no. 113 of Annexure A-33 (7,00,0( ),000 + 37,00,00,000) 10.70 crores Page no. 52 of Annexure A-1 (9970000 0 + 26100000) 12.58 crores Page no. 103 of Annexure A-42 (57800, 000 + 4,00,00,000) 9.78 crores Page no. 102 of Annexure A-27 7.70 crores Total of expense 53.39 crores Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 20 It is observed that Appellant has claimed bogus land and development expenditure in three years for Rs.53.31 crores and cash also received against cheque payment are used for making payment towards acquisition of land for Rs.53.39 crores, which means that Appellant is not having any surplus from such cash received. The transaction relating to both receipts and payment for the project of SICCL is apparent in loose paper found during the course of search only hence this material aspect cannot be ignored. While passing the Assessment Order AO himself has referred to statement of Appellant recorded during the course of search at page No. 37 to 39 and 41 wherein Appellant has clearly explained the notings mentioned in the loose paper and how cash have been withdrawn from bank account of four parties and how such cash were utilised for the project SICCL. This transaction was further elaborated by Appellant in reply to Question No. 3 of his statement recorded on 29th September, 2006 which is also reproduced herein below. Q.3 How much profit you have earned as confirming party? From the seized records/accounts found from your premises during search it has been found that in the above mentioned five Cities of Gujarat, i.e. Ahmedabad (104 Acres), Rajkot (106 Acres), Bhavnagar (102) Acres, Jamnagar (108) Acres, Porbandar (102) Acres, you have received Rs. 88.05 Crores, out of which you have given Rs. 21.75 Crores to farmers. Please state as to why the balance amount of Rs. 66.30 Crores should not be considered as your profit. A.3 I want to clarify you in this matter that this balance amount is not my profit, I was required to give this amount to number of persons. I am giving you the details of the persons to whom I have given this amount in the above mentioned five Cities. This details have also been found today only during search action, and you are intending to seize the same. In the matter of Ahmedabad City, in File No. seized as Annexure A/1, In Page no 52, it is written that total land receipt was of Rs. 23.33 Crores, out of which Rs. 6.30 Crores has been given to the farmers through cheque on behalf of Sahara, Rs. 9.97 Crores has been given to the farmers in cash on behalf of Sahara after withdrawing the same from the accounts of Rana and Devi Durga, Rs. 2.61 crores has been withdrawn from the accounts of Rana and Devi Durga and has been given in cash to Shri Sunderlalji, Rs. 1.35 Crores has been given to R.D.B. Industries, Rs. 11 lakhs has been given to Collector as Donation (This amount has not been given as gratification, but as official, Rs. 42 lakhs as brokerage, Rs. 8.50 lakhs as survey and title clearance and Rs. 31.50 lakhs has been spent on Misc. head. Rs. 15 lakhs have been given in cash as brokerage to Rajubhai. In this account, Rs. 2.02 crores remain as balance with me against which Road construction and another petty works are pending which require expense of Rs. 52 lakhs and there is possibility of profit of Rs. 1.50 Corores to me. This paper contains names farmers also. Every cash payment has been made to the farmers by hands of employees of Sahara Group. Rana, Devi Durga, LR and Anjani used to give the leveling bills and we used to extend the cheque in this regards on that behalf Sahara and these Companies used to make available cash to Shri Sunderlalji and this entire arrangement was made by Shri Sunjderlalji of Sahara. Mr. Rana, the main person of Rana and other concerns, was acquainted to me by Shri Sunderlalji at Delhi and he told me that whenever you need cash, for the works of Sahara, you take the same from these concerns after giving the cheques, the fund of which you Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 21 receive from Sahara. He also used to take regular accounts of such transactions from me. In page no. 103 of Annexure A/42, details of Rajkot land dealing are available. Rs. 16.77 Crores have been received from Sahara for the land transaction, Rs. 4.77 Crores have been paid to the farmers by cheque, Rs. 5.78 crores have been paid to the farmers in cash, i.e. Shri Khima Tida and family members. This cash amount was withdrawn from the accounts of Devi Durga and Rana by and for Sahara. Rs. 4 crores have been withdrawn from the accounts of Devi Durga and Rana and have been paid in cash to Shri Sunderlalji, Brokerage cheque of Rs. 5 lakhs, brokerage of Rs. 20 lakhs to Raju Joshi, Permission and other misc, work of Rs. 10 lakhs to Raju Joshi, permission and other misc. work Rs. 10 lakhs were another expenses. The balance amount of Rs. 1.87 crores bears the liabilities of Govt. land purchase of Rs. 17 lakhs and Road land to be purchased of Rs. 50 lakhs, Road construction expenses of Rs. 20 lakhs. After these expenses, balance amount of Rs. 1 Crore remains. Details of Bhavnagar land transaction are in Page No. 61 of Annexure A/35. Rs. 19,54,62,500/- has been received from Sahara and out of the same Rs. 4.75 Crore has been paid by cheque to the famers. Cash of Rs. 7.63 Crore has been paid to the farmers after withdrawing the same from the accounts of Rana and other for Sahara. Rs. 5 crores has been withdrawn from the accounts of Rana and others and has been paid to Shri Sunderlalji. Brokerage cheque of Rs. 5 lakhs has been paid to Shri Raji Joshi along with cash of Rs. 16 lakhs. Misc. expenses of Rs. 10 laksh registration charges of Rs. 2.75 laksh, survey of Rs. 75,000/-advocate fees of Rs. 2 lakhs by cheque and Rs. 3 lakhs in cash and brokerage to Mr. B Mehta of Rs. 3 lakhs has been made. The balance amount of Rs. 1,74,12,500/- has the liability of Rs. 25 lakhs for TP scheme cancellation, and Rs. 25 lakhs for title passion and after the same, the approx.. Balance of Rs. 1.25 Crores is my profit. I have purchased the land of Bhavnagar from Lalubhai, Khengarbhai8, Rajubhai of Bhavnagar. The details of Jamnagar land are there in Page no. 113 of Annexure A/33. Total amount received is Rs. 17.14 Crores, paid to farmers by cheque Rs. 4.50 Crores, paid to farmers in cash, Rs. 7.00 Crores after withdrawing the same from Devi Durga and Rana. Rs. 3.70 Crores has been paid in cash to Shri Sunderlalji of Sahara after withdrawing the same from the accounts of Devi Durga and Rana. Brokers of Rs. 3.50 lakhs, survey, Advocates and Misc. Exps. Of Rs. 16.50 lakhs and pending work of court cases, title clearance, possession and other misc. exps. Of Rs. 34 lakhs. The balance estimated profit remains with me of Rs. 1.40 Crores. The details of Porbandar land transaction can be found in Page No. 102 of Annexure A/27. The same are like this. Amount of Rs. 12.24 Crore has been received as total payment out this Rs. 1.50 Crores has been paid by cheque to the farmers. Rs. 7.70 Crores has been paid to the farmers after withdrawing the same from the accounts of Rana and Devi Durga. Advocate fees of Rs. 1 lakhs, brokerage of Rs. 5 lakhs and misc. exps. of Rs. 19 lakhs have also been made and after the same, total balance of Rs. 2.79 Crores remains against which pending work of Rs. 1.20 Crores for 10 Acres of land yet to be brought on behalf of Sahara and after deducting the pending work of title, possession and other misc. expenses of Rs. 19 lakhs, the balance of Rs. 1.40 Crores is my expected profit. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 22 In this way, there is possibility of Rs. 7.04 Crores of profit from the brokerage services rendered to Sahara. Apart from this, the pending work yet to be done is of Rs. 2.05 Crores. If I do not perform the pending works, as on today, then my profit an be estimated at Rs. 9.09 Crores. If the same thing is visualized from another point of view, then Rs. 9.78 Crores is yet to be given by me to Devi Durga etc. for taking the cash from these concerns then this can also be considered as my profit. The Appellant in his statement recorded on 8th November, 2016 in reply to Question No. 21 has once again explained this fact and stated that all these transactions were done by him as per instructions given by Sunderlalji of Sahara and such reply is reproduced herein below. I have received around Rs. 89 Crores from Sahara for purchase of land at Ahmedabad, Bhavnagar, Rajkot, Jamnagar & Porbandar. This entire amount has been received by cheque in my bank accounts at Global Trust Bank, Central Bank of India, Bank of Rajasthan, HDFC Bank, Bank of Punjab and Oriental Bank of Commerce & other bank accounts. I have given to the agricultural land owners by cheque amount Rs. 22 Crores. Further remaining Rs. 67 Crores at my bank accounts I have transferred the funds of Rs. 52.30 Crores to the accounts of Rana Projects International Ltd, Devi Durga Construction and L.R. Construction by cheque getting cash to give the same to the original land owners, to Shri Sunderlalji of Sahara & to others. This was all done by me as per the instruction given to Shri Sunderlalji of Sahara. As per seized Annexure A-1, A-27, A-33 & A-42 which pertains to the transactions of land Ahmedabad, Porbandar, Jamnagar, Bhavnagar & Rajkot. I have given cash of Rs. 54 Crores approximately to farmers, Sunderlalji& others. It is pertinent to note that that the AO himself at para 16.7.6 has stated that \"a plain and simple reading of above referred seized material confirms the fact that the Assessee made cash withdrawal from the accounts of bogus billing concerns which were subsequently utilised for making unaccounted cash payment to the farmers, Mr. Sunderlal of SICCL and other persons\", which also support the contention of Appellant that cash were used for the business/land transaction for SICCL. The Assessing Officer even at para 16.7.7 of his order has observed as under: 16.7.7 From the above income expenditure details of the assessee for the three land projects, it is clear that assessee has booked huge amount of land development and filling expenses for each of the project, payment for which have been made to Devi Durga Construction and other bogus billing concerns (including Rana Pro Int. Ltd. another associated concern of Mr. A Shrinivasan) Moreover comparison of the above details with the seized material also shows that the total of unaccounted cash payments made to various persons almost matches with the land development and filling expenses booked by the assessee thereby establishing a direct nexus between the two- Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 23 On the basis of this discussion it is emanating that AO has considered expenditure debited in Books of Account as bogus expenditure after considering notings mentioned in loose paper but could not take note of other notings mentioned in very same loose paper, as discussed herein above. It is settled legal law that for deriving correct income seized material needs to be read as a whole and AO cannot make part addition ignoring other part of material. Reliance is placed on following decisions: (i) [2002] 124 ΤΑΧΜAN 392 (GUJ.) HIGH COURT OF GUJARAT Navjivan Oil Mills v. Commissioner of Income-tax For concealment of income \"Section 271(1)(c) of the Income-tax Act, 1961- Penalty Assessment year 1973-74-Whether seized material has to be read and accepted as a whole and it is not permissible to pick and choose or make further estimates therefrom unless and until there is cogent material in support of undertaking such an exercise Held, yes- Whether under Explanation it is necessary that any positive material should be produced by assessee in order to discharge burden which rests upon him - Held, no Whether he may claim to have discharged burden by relying on material which is on record, in penalty proceedings irrespective of whether it is produced by him or by revenue - Held, yes - Whether where after processing seized material, ITO estimated sales outside books at three stages in piecemeal, levy of penalty under Explanation was justified Held, no Whether in such circumstances it could be said that assessee had discharged burden under Explanation - Held, yes\" (ii) The High Court of Delhi At New Delhi, Date of Decision: 3rd August, 2012, Commissioner of Income Tax VERSUS D.D. GEARS LTD. ITA NO.896/2008 17. A perusal of the order of the Tribunal shows that it has followed a common sense approach that the seized material should be followed in its entirety and both the receipts and the payments are to be taken into consideration. The revenue is no doubt correct in contending that the payments are allowable as deduction only if they represent expenses allowable as business expenditure. However, the Tribunal has found that the expenses represent turning charges, overtime payments, payments to temporary workers, remuneration to excise consultants, incentives etc. The finding of the Tribunal that these are expenses incurred by the assessee for the purpose of the business is a finding of fact based on the seized material itself. The Tribunal's approach to consider the seized material in its entirety is a correct approach, for it would be unjust and contrary to the principles of income tax law to take note of only the income part reflected in the seized material, excluding the expenditure part reflected in the same seized material, provided the expenditure part is allowable as business expenditure. In our view the findings of the Tribunal, both of facts and law, do not suffer from any perversity. We may add that no documents or material was produced before us on behalf of the revenue, despite several opportunities, to show any perversity in the decision of the Tribunal. We therefore, do not think any substantial question of law arises out of the aforesaid decision of the Tribunal.\" Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 24 (iii) Decision of Hon'ble Hyderabad Tribunal in case of Prabhudaval Agarwal V. ACIT [2007] 11 SOT 50 (HYD.) (URO) wherein it was held as under: \"11. When the assessee has no right to demand interest from the purchaser, mere unilateral calculation or computation of interest does not enable the assessee to recover any amount from the purchaser. Therefore, in our opinion, the alleged computation of interest said to have been made by the assessee in the seized paper P-95 does not empower him to recover any interest from the purchaser Shri Amir Singh. Moreover human probability is to round off the figure whenever a fractional figure comes in. Admittedly, what was due as on 14th Oct., 2002 was Rs. 59,89,000. Out of this amount of Rs. 59,89,000, the purchaser paid Rs. 24,89,000 by way of three cheques and gave a pronote for the remaining Rs. 35,00,000. Therefore, technically speaking, the entire amount was paid on 14th Oct., 2002 and the assessee acknowledged the receipt of the money in the registered deed dt. 14th Oct., 2002. Though technically no amount was due as per the registered deed dt. 14th Oct., 2002, in fact the assessee had to realise Rs. 59,89,000 from the purchaser. Therefore, in our opinion, the assessee rounded off Rs. 59,89,000 to the nearest figure of Rs. 60,00,000 and computed the interest. Moreover, besides the above paper, there is nothing on record to suggest that the assessee has received on-money of Rs. 60,00,000 over and above the sale consideration mentioned in the registered deed. It is also pertinent to note that after 14th Oct., 2002, the assessee computed interest only on Rs. 24,89,000 and not on Rs. 59,89,000. This is obvious because the balance amount of Rs. 35,00,000 was payable subsequently in the month of November, for which the purchaser has issued four post dated cheques. If the intention of the assessee was to compute the interest on the entire outstanding amount, then the outstanding Rs. 35,00,000, which was really outstanding, would have been included in the computation. Had the cheques been realised on the date of presentation immediately after execution of the deed, the necessity of computation of interest might not have arisen. It is al settled principle of law that the date of payment would always relate back to the date of presentation of the cheque provided the cheque was not returned unpaid. In the case, on two or three occasions the cheque was returned unpaid and it was realised subsequently. Therefore, the assessee was prevented from using the money in the period in which, the cheque was returned unpaid. Therefore, a normal prudent person would naturally compute losses that arose to him due to return of the cheque and due to non-payment of the amount as per agreement. In those facts and circumstances, in our opinion, the seized document P-95 does not show anything about the receipt of on-money of Rs.60,00,000. The seized paper cannot be a basis to infer that the assessee has received on-money of Rs.60,00,000. The seized paper P-95 does not suggest anything about the receipt of on-money. Moreover, no addition could be made on surmises and suspicion. As rightly pointed by the learned representative for the assessee, the entire seized paper should be taken into consideration or rejected in toto. Part of the particulars cannot be considered as held by the Gujarat High Court in the case of Glass Lines Equipments Co. Ltd. (supra). It is not Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 25 permissible for the Revenue to accept a part of the paper and ignore the rest of the seized document.\" Considering these facts it is observed that Appellant has received funds from SICCL towards acquisition of land, issued cheques towards bogus land development and land filling expenditure, cash received from such transactions are ultimately used for acquisition of land only hence cash generated from such transactions cannot alone be considered as undisclosed income under Section 69A of the Act without considering its application being unaccounted business expenditure. The sources of unaccounted expenditure as mentioned in loose paper are incurred out of cash received against cheque issued from Books of Account which means that sources of expenditure are from accounted funds only hence even such expenditure cannot be disallowed under Section 69C of the Act. When AO himself is accepting that cash receipts are utilised for business purposes only, he cannot make addition of inflow and outflow either under Section 69A or under Section 69C of the Act. Considering these fact, and keeping in mind that entries made in Books of Account are not correct, income from the land transaction carried out on behalf of SICCL need to be estimated based on material evidences gathered during the course of search and such issue is dealt with in subsequent paras. It is observed that AO himself has computed profit earned on land projects of SICCL by applying 20% of gross receipts from project at Ahmedabad, Rajkot and Bhavnagar in year under consideration. It is observed that when income of the project itself is estimated no separate addition for disallowance under Section 37(1) or Section 69 is required to be made as estimate is made after considering all such facts. Reliance is placed on following decisions: (1) Hon'ble Gujarat High Court in case CIT Vs. Dhiraj R Rungta [2013] 40 taxmann.com 284 Head Note: Section 145, of the Income-tax Act, 1961 Method of accounting Rejection of accounts [Additions to income based on rejected books of account) - Assessment year 2007-08 - Assessee engaged in trading of dress materials filed his return of income declaring certain income Assessing Officer finding number of glaring mistakes, rejected books of account - He, however, made some additions by relying upon same books of account which had been rejected -Tribunal held that Assessing Officer once having rejected books of account, could not have made further additions by relying upon same books and that it would have been better if Assessing Officer had estimated a reasonable profit of assessee considering history and nature of business - Accordingly, Tribunal granted partial relief to assessee - Whether finding recorded by Tribunal being a finding of fact, no substantial question of law arose therefrom - Held, yes [Para 7] [In favour of assessee] (ii) Hon'ble Karnataka High Court in case of CIT Vs. Bahubali Neminath Muttin [2016] 72 taxmann.com 139. Head Note: Section 69B, read with section 145, of the Income-tax Act, 1961 Unexplained investment (Suppressed sales) - Assessee was a partnership firm carrying on Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 26 business as wholesale cloth merchants Consequent upon search conducted in case of assessee, certain additions were made such as undisclosed income, unexplained investments and gross profit on suppressed sales Tribunal held that when books of accounts were rejected and gross profit rate was applied on suppressed sales, no separate additions were required It thus deleted other additions - Whether, on facts, finding recorded by Tribunal could not be regarded as perverse and, thus, no substantial question of law arose therefrom - Held, yes [Paras 23 and 24] [In favour of assesseel (iii) Hon'ble Rajasthan High Court in case of Malpani House of Stones Vs. CIT [2017] 88 taxmann.com 546 Section 145 of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts - Where assessee's books of account were rejected and its income were assessed on basis of estimation, it would not be appropriate to simultaneously rely on books of account which had been rejected for purpose of adding undisclosed income by rejecting some of purchases [In favour of assessee) (iv) Hon'ble Punjab and Haryana High Court in case of Commissioner of Income Tax, Patiala Versus Shri Ajay Kumar Singla vide ITA No: 181 of 2014 dated 07/10/2014: Rejection of books of accounts - Addition u/s 40A(3) - Computation of income as per GP rate Held that:- When the income of the assessee was computed by applying gross profit rate, there is no need to look into the provisions of Section 40A(3) of the Act, inasmuch as that, when the gross profit rate is applied, then it takes care of the expenditure otherwise by way of crossed cheques - once books of accounts are rejected, no further disallowance can be made - relying upon Commissioner of Income-Tax. Versus Smt. Santosh Jain [2006 (8) TMI 167 - PUNJAB AND HARYANA High Court] the provisions of Section 40(3) of the Act could not be invoked in the estimation of gross profit thus, the discretion exercised by the Tribunal is based on relevant consideration and does not suffer from any legal infirmity as such no substantial question of law would arise for determination-Decided against revenue. (v) High Court of Punjab & Haryana, in the case of Commissioner of Income Tax, Jalandhar-II vs. Aggarwal Engg Co. [2006] 156 ΤΑΧΜΑΝ 40 \"Section 68, read with section 69B, of the Income-tax Act, 1961-Cash credits - Assessment year 1996-97 Assessee who was a civil contractor filed his return for relevant assessment year Assessing Officer completed assessment of assessee, but same was later cancelled Subsequently, in fresh assessment, Assessing Officer applied net profit rate on contract receipts of assessee for estimating income from contract work and also made separate addition on account of introduction of unexplained cash in assessee's books of account and on account of unexplained payments made for purchase made outside books Whether once net profit rate was applied on contract receipts of assessee for estimating income from contract work, no further addition was called for in respect of purchases and introduction of cash in view of facts and circumstances of instant case - Held, yes\" Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 27 The Appellant has contended that income from land transactions at above three places are required to be taxed in AY 2007-08 on the ground that certain works are yet to be completed in AY 2007-08 or when all the projects are completed, income can be estimated. However, this contention of Appellant cannot be accepted, as Appellant has entered into separate MoU for each place and receipt from all the three places were received in current year. When Appellant himself is claiming that he is working as facilitator for SICCL and such contention is found to be correct in preceding paras, income is required to be taxed when cheques are received from SICCL and more particularly substantial land acquisition work relating to these places were already completed in this year. With regard to project at Rajkot, Appellant has claimed that as per seized material there was obligation to incur certain expenditure but these were very meagre in comparison of total receipts of Rs.16.77 crores. It is observed that search in the case of Appellant was carried out on 29th September, 2006 and Appellant has not referred any loose paper being found during the course of search which can prove that any work has been carried out in AY 2007-08. Even Appellant himself in his settlement application filed before Hon'ble Settlement Commission has offered additional income on gross receipts from SICCL in AY 2006-07 which alone prove that there is no basis in argument of Appellant for taxing income in AY 2007-08. Thus, the contention of Appellant for taxing the income from these projects in AY 2007-08 is not accepted. For the reasons stated herein above, even income from these three projects cannot be taxed in AY 2006-07, as claimed by Appellant, as entire receipts from these three projects are received in current year. The Appellant has received the gross receipts from SICCL in various years as under: F.Y. Ahmedabad Rajkot Bhavnagar Jamnagar Porbandar Total 02-3 30,00,0 00 30,00,000 03-04 23,03,00,0 00 16,77,09,100 19,54,62,500 35,58,250 59,70,29,85 0 04-05 16,78,64,750 16,78,64,75 0 05-06 12,24,00,000 12,24,00,00 0 Total 23,33,00,0 00 16,77,09,100 19,54,09,100 17,14,23,000 12,24,00,000 89,02,94,69 0 In view of this chart, Appellant has received Rs.59,70,29,850 in current year hence income is required to be estimated on these receipts. Further, Appellant has received Rs.30,00,000 in AY 2003-04 which was merely reimbursement of expenses as mentioned in receipts itself hence such income is considered in year under consideration for estimating net taxable income. The AO has considered receipts of Rs.35,58,250 in AY 2005-06 considering the fact that major receipts were received in subsequent year. However, Appellant has received Rs.35,58,250 in year under consideration and even made land development expenditure and payment to farmers in current year hence such receipts are considered as receipts of current year while estimating income in current year in subsequent paras. 5.16 It is observed that Appellant has claimed that his income as facilitator for these transactions should be restricted to 12.5% of gross receipts of SICCL based upon his admission before Hon'ble Settlement Commission. The Appellant has not provided any basis of arriving at rate of 12.5% in his disclosure in settlement application. The ARs of the Appellant have stated that correct profit worked as per seized material for various projects are in the range of 6 % to 12% hence he has Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 28 offered higher income before in settlement application. The Appellant has also relied upon reply to Question No. 4 of his statement dated 29th September, 2006, which is reproduced at page No. 50 of Assessment Order, reply to Question No. 3 of his statement dated 29th September, 2006 as reproduced at para 2.6 of his submission wherein he has stated that average profit from project SICCL is 12%. However, this contention of Appellant cannot be accepted in view of letter dated 4th May, 2004 addressed to Mr. Subroto Roy of SICCL which was forming part of seized material being page No. 1 to 6 of Annexure - A/6 and reproduced by AO at para 16.8.2 of his order, which clearly states that Appellant enters into deal only if there is minimum margin of 15 to 20% and it is usual practice of real estate business. This letter is with reference to transactions of land carried out on behalf of SICCL and has direct bearing on income earned by Appellant hence such letter cannot be ignored. It is relevant to refer to answer to Question No. 4 recorded in statement of Appellant on 6lh November, 2006 wherein it is stated as under: Q.4 Kindly explain the contents of the Pages 1 to 6 of Annexure A/6 seized from Chinubhai Chambers on 4/8/2006. A.4 This is a letter written by my to Shri Subrato Roy, in which I have claimed the parentage profit in the margin 15% to 20% of total receipts and have rejected the proposal of Rs. 50,000/- per acre. This claim made by me was finally accepted by Subrato Roy and SaharaGorup. In this regard I would like to confirm that purchase of lands for Shara Cities at Palanpur, Surat, Anand and Amravati could not be materialized through me. However in case of Anand they have purchased the land through some one else. I would rely on this letter to claim that my profit was not more than this percentage and the bogus claims made in my returns in the form of land development expense and banakhat expense were distributed amounts Shri Sundarla of Sahara, original land owners by myself and brokers etc. The Appellant himself has stated that his profit was not more than percentage mentioned in letter addressed to SICCL and considering the incriminating material found during the course of search including Appellant's own statement, AO was correct in estimating income from the project of SICCL @ 20% which works out to Rs.12,00,05,970 (20 % of Rs.60,00,29,850) in year under consideration. 5.17 In holistic consideration of entire facts, as discussed herein above, it is held that Appellant has not disclosed correct income from project carried out for SICCL hence 20% of gross receipts received during the year are required to be considered as unaccounted income of Appellant in year under consideration. As net income earned from this transaction is taxed after applying profit margin on gross receipts, separate disallowance of expenditure under Section 37 is not required to be made. In the preceding paras I have already held that AO was not justified in making addition of Rs.26.86 crores either under Section 69A or 69C of the Act but income estimated herein above will cover all the discrepancies relating to profit earned from these transactions. In nutshell, addition made by AO for Rs.26.86 crores is restricted to Rs.12,00,05,970/-. Thus, this ground of appeal is partly allowed.” Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 29 12.7 Aggrieved by the order of the Ld. CIT(A), the Assessee as well as the Revenue filed appeal before the Tribunal on this issue. 12.8 Before us, the Ld. DR reiterated on the facts mentioned in the order of the Assessing Officer and the Ld. AR supported the order of the Ld. CIT(A). 12.9 Heard the arguments of both the parties and perused the material available on record. 12.10 The Assessing Officer treated 98.5% of land development expenditure as bogus and applied provisions of Section 37(1), 69A and 69C of the Income Tax Act. The assessee’s concerns namely Devi Durga Construction, LR Construction and Anjani Construction have admitted of having issued bogus bills. Further, during the search and seizure, loose papers have been found and sized which have been reproduced in the assessment order but not considered reflect payment of cash to different farmers on account of the land acquisition for SICCL. The entire events reveal that SICCL pays cheque to the assessee which is routed through assessee’s proprietary concerns, cash has been withdrawn and paid to farmers and utilized for other expenses. The seized material itself shows that the assessee has acquired 104 acres of land in Ahmedabad, 106 acres in Rajkot, 102 acres in Bhavnagar, 108 acres in Jamnagar and 102 acres in Porbandar. The assessee received monies from SICCL and a part has been paid to farmers in cheque and the remaining part has been paid in cash to farmers by withdrawal of the cash from his proprietary concerns. The assessee has acted as a facilitator and offered 12.5% of gross receipt before the Settlement Commission also. 12.11 At this juncture, it is relevant to understand the business of the assessee, material seized and found, statements recorded & derivation thereof, relevance of these statements to the seized material and the profits determinable based on the sized material. 12.12 It is relevant here to mention and applicable to the assessment years under consideration, mutandis-mutandis, about the role of the assessee in a transaction / deal with Sahara India Commercial Corporation Limited (hereinafter referred to as 'SICCL) Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 30 for determining the true and real income of the assessee. The relevant summary/ extract from the Orders, submission filed, loose papers seized and from the statement recorded of the assessee before the Investigating Authority is summarised as under: 12.13 SICCL entered into MOU with the Assessee for arranging the purchase of lands in vicinity of various cities of Gujarat. As agreed upon the Assessee would act an agent / facilitator /aggregator had to start approaching farmers / land owners, negotiate prices of lands with them within the range determined in consultation of Sahara People. 12.14 To facilitate the land transaction the Assessee had executed various MOU with the Sahara. As per the terms and conditions agreed upon with the Sahara, the Assessee will first execute \"Agreement” to sell with farmer. Immediately thereafter, a second Agreement to sell will be executed by the Assessee and Sahara. And final sale deed will be executed between the farmer (seller), Sahara (purchaser) and the Assessee (confirming party). The agreement for the sale were initially entered into between the Assessee and farmer / land owner for the reason that if the farmers would have known that the deal would be entered with Sahara which is a big fish in the real estate business having its tentacles all over the country they would be demanding higher price for land. Accordingly, the Assessee having local influence was appointed as an agent / facilitator /aggregator. As an agent, facilitator, aggregator the Assessee was entrusted with the work of (a) Aggregating the land (b) Clearing all litigation (c) To provide basic infrastructure such as land levelling, approach road etc. on behalf of Sahara group and with the funds provided by the Sahara group at various places such as Ahmedabad, Jamnagar, Rajkot, Bhavnagar, Porbandar etc. 12.15 As per the terms and conditions agreed upon by the Assessee with Sahara, Sahara would pay consideration for purchase of land at different stages of the transaction, which in turn, would be paid by the Assessee to the farmers. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 31 12.16 All the documents i.e. MOU, the first agreement to sell between the Assessee and farmers, second Agreement to sell between the Assessee and Sahara and final Conveyance deeds were registered documents. During the entire process the Assessee had received amounts towards such transaction which was required to be paid to farmers, land developers etc. as per the direction and instruction given by Sahara people. 12.17 In the light of the above analysis of facts, it clearly emerges that the relationship between Sahara and Assessee was that of principal and agent and not on principal to principal basis. In fact not a single piece of land has been purchased in his name by entering into Direct Sale Deed out of land pertaining to Sahara. 12.18 The fact that the Assessee only played the role of the mediator / arranger / facilitator in this entire transaction has been confirmed by the Assessee in the statement recorded during the course of search proceedings. The relevant extract from the statement of the Assessee are reproduced herein below:- (A) Extracts from the Assessee's statement recorded under section 132(4) of the Act on 29/09/2006. Q.2. You have engaged into deals of land transactions for more than 100 Acres at each of the five Cities of Gujarat i.e. Ahmedabad, Jamnagar, Bhavnagar, Porbandar, and Rajkot. You have played the role of confirming party in these deals. Kindly clarify this role. A.2 I have played the role of broker (facilitator) with and for Sahara India Commercial Corporation Ltd. Whatever amount has been extended to me in these land deals from Sahara, I was required to give the same to the farmers and Shri Sunderlalji, Shri Sunderlalji is / was at the post of Advisor in Sahara Group of Companies. He gave these roles to me and wherever cash amount was required, he made me available the same. Q.3 How much profit you have earned as confirming party ? From the seized records / accounts found from your premises during search it has been found that in the above mentioned five Cities of Gujarat, i.e. Ahmedabad (104 Acres), Rajkot (106 Acres), Bhavnagar (102) Acres, Jamnagar (108) Acres, Porbandar (102) Acres, you have received Rs. 88.05 Crores, out of which you have given Rs. 21.75 Crores to farmers. Please state as to why the balance amount of Rs. 66.30 Crores should not be considered as your profit. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 32 A.3 I want to clarify you in this matter that this balance amount is not my profit, I was required to give this amount to number of persons. I am giving you the details of the persons to whom I have given this amount in the above mentioned five Cities. This details have also been found today only during search action, and you are intending to seize the same. In the matter of Ahmedabad City, in File No. seized as Annexure A/1, In Page no 52, it is written that total land receipt was of Rs. 23.33 Crores, out of which Rs. 6.30 Crores has been given to the farmers through cheque on behalf of Sahara, Rs. 9.97 Crores has been given to the farmers in cash on behalf of Sahara after withdrawing the same from the accounts of Rana and Devi Durga, Rs. 2.61 crores has been withdrawn from the accounts of Rana and Devi Durga and has been given in cash to Shri Sunderlalji, Rs. 1.35 Crores has been given to R.D.B. Industries, Rs. 11 lakhs has been given to Collector as Donation (This amount has not been given as gratification, but as official, Rs. 42 lakhs as brokerage, Rs. 8.50 lakhs as survey and title clearance and Rs. 31.50 lakhs has been spent on Misc. head. Rs. 15 lakhs have been given in cash as brokerage to Rajubhai. In this account, Rs. 2.02 crores remain as balance with me against which Road construction and another petty works are pending which require expense of Rs. 52 lakhs and there is possibility of profit of Rs. 1.50 Crores to me. This paper contains names farmers also. Every cash payment has been made to the farmers by hands of employees of Sahara Group. Rana, Devi Durga, LR and Anjani used to give the levelling bills and we used to extend the cheque in this regards on that behalf Sahara and these Companies used to make available cash to Shri Sunderlalji and this entire arrangement was made by Shri Sunjderlalji of Sahara. Mr. Rana, the main person of Rana and other concerns, was acquainted to me by Shri Sunderlalji at Delhi and he told me that whenever you need cash, for the works of Sahara, you take the same from these concerns after giving the cheques, the fund of which you receive from Sahara. He also used to take regular accounts of such transactions from me. In page no. 103 of Annexure A/42, details of Rajkot land dealing are available. Rs. 16.77 Crores have been received from Sahara for the land transaction, Rs. 4.77 Crores have been paid to the farmers by cheque, Rs. 5.78 crores have been paid to the farmers in cash, i.e. Shri KhimaTida and family members. This cash amount was withdrawn from the accounts of Devi Durga and Rana by and for Sahara. Rs. 4crores have been withdrawn from the accounts of Devi Durga and Rana and have been paid in cash to Shri Sunderlalji, Brokerage cheque of Rs. 5 lakhs, brokerage of Rs. 20 lakhs to Raju Joshi, Permission and other misc. work of Rs. 10 lakhs to Raju Joshi, permission and other misc. work Rs. 10 lakhs were another expenses. The balance amount of Rs. 1.87 crores bears the liabilities of Govt. land purchase of Rs. 17 lakhs and Road land to be purchased of Rs. 50 lakhs, Road construction expenses of Rs. 20 lakhs. After these expenses, balance amount of Rs. 1 Crore remains. Details of Bhavnagar land transaction are in Page No. 61 of Annexure A/35. Rs.19,54,62,500/- has been received from Sahara and out of the same Rs. 4.75 Crore has been paid by cheque to the famers. Cash of Rs. 7.63 Crore has been paid to the farmers after withdrawing the same from the accounts of Rana and other for Sahara. Rs. 5 crores has been withdrawn from the accounts of Rana Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 33 and others and has been paid to Shri Sunderlalji. Brokerage cheque of Rs. 5 lakhs has been paid to Shri Raji Joshi along with cash of Rs. 16 lakhs. Misc. expenses of Rs. 10 lakhs registration charges of Rs. 2.75 lakhs, survey of Rs. 75,000/- advocate fees of Rs. 2 lakhs by cheque and Rs. 3 lakhs in cash and brokerage to Mr. B Mehta of Rs. 3 lakhs has been made. The balance amount of Rs. 1,74,12,500/- has the liability of Rs. 25 lakhs for TP scheme cancellation, and Rs. 25 lakhs for title passion and after the same, the approx.. Balance of Rs. 1.25 Crores is my profit. I have purchased the land of Bhavnagar from Lalubhai, Khengarbhai, Rajubhai of Bhavnagar. The details of Jamnagar land are there in Page no 113 of Annexure A/33. Total amount received is Rs. 17.14 Crores, paid to farmers by cheque Rs. 4.50 Crores, paid to farmers in cash, Rs. 7.00 Crores after withdrawing the same from Devi Durga and Rana. Rs. 3.70 Crores has been paid in cash to Shri Sunderlalji of Sahara after withdrawing the same from the accounts of Devi Durga and Rana. Brokers of Rs. 3.50 lakhs, survey, Advocates and Misc. Exps. Of Rs. 16.50 lakhs and pending work of court cases, title clearance, possession and other misc. exps. Of Rs. 34 lakhs. The balance estimated profit remains with me of Rs. 1.40 Crores. The details of Porbandar land transaction can be found in Page No. 102 of Annexure A/27. The same are like this. Amount of Rs. 12.24 Crore has been received as total payment out this Rs. 1.50 Crores has been paid by cheque to the farmers. Rs. 7.70 Crores has been paid to the farmers after withdrawing the same from the accounts of Rana and Devi Durga. Advocate fees of Rs. 1 lakhs, brokerage of Rs. 5 lakhs and misc. exps. of Rs. 19 lakhs have also been made and after the same, total balance of Rs. 2.79 Crores remains against which pending work of Rs. 1.20 Crores for 10 Acres of land yet to be brought on behalf of Sahara and after deducting the pending work of title, possession and other misc. expenses of Rs. 19 lakhs, the balance of Rs. 1.40 Crores is my expected profit. In this way, there is possibility of Rs. 7.04 Crores of profit from the brokerage services rendered to Sahara. Apart from this, the pending work yet to be done is of Rs. 2.05 Crores. If I do not perform the pending works, as on today, then my profit an be estimated at Rs. 9.09 Crores. If the same thing is visualized from another point of view, then Rs. 9.78 Crores is yet to be given by me to Devi Durga etc. for taking the cash from these concerns then this can also be considered as my profit. Q.4 Kindly look at the page No. 13 to 18 of the folder titled as Sahara Correspondences which constitute a confidential letter written by you, in this letter, you have written that your profit margin should be 15% to 20% and your have charged this margin in all these deals. According to this, 15% to 20% of Rs. 88.05 Crores gives you profit margin in between Rs. 13.21 Crore to Rs. 17.61 Crores. The same ratio has been told by Shri Nilesh T. Patel of Jamnagar. Though this argument has not been accepted by the Department, since there is no proof of cash payments made by you. Therefore, explain as to why Rs. 9.78 Crores only should be accepted as your profit from the above mentioned deals? A.4 This matter I want to clarify as to whatever cash payments I have made so far, the same has been made by the people of Sahara or in accordance to the Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 34 instructions received from Sahara and on behalf of Sahara. I also want to state that I do not know that Shri Nilesh T. Patel has made the cash payments as I have made, but I want to state that in the entire land dealings of 5 Cities of Rs. 88.05 Crores received, on average I have received the profit of 12.5% and according to my calculation, this amount comes at Rs. 11 Crores (Eleven). In this matter I also want to state that I computed my profit in the month of April because accordantly to my perception, the entire works are getting completed in the current year only and my profit also comes in the current year. This amount of Rs. 11 Crores includes Rs. 9.78 Crores which is due to be given to Devi Durga and others as per my books of accounts. This amount is my income which is invested in my business assets. Balance amount of Rs. 1.22 Crores is given as Advance of expense or another investees. Thus I disclose total amount of Rs. 11 Crores and one (Rs. 11,00,00,001) as my undisclosed income in the current year and I request for exemption from penalty as per Section 271(1)(c) Explanation -5 as explained by you and whatever income-tax liability shall arise on this income, I will pay the same. This is my promise. I am also given you a post dated cheque of Rs. 50 lakhs to be encased on 6/11/2006 and promise to pay the balance liability along with my return of income. Q.6 Kindly give the complete address of the farmers to whom you have made the cash payments. A.6 He detailed address of these farmers can be traced from the seized material in which the sales deeds of the concerned lands have been seized. Still, if the Department needs identification, I will make available the same. Third Party to whom cash payment is made is Shri Rajubhai Joshi and his address is at Bank of India Colony, B/h H.L. College, Navrangpura, Ahmedabad. Q.8 During the search operation on 4/8/2006, at 7 seven schemes of Sahara City Homes, Photography and videography of the sites was taken and the statement of number of persons were also taken from the same it was proved that no land development etc of the above sites has taken place. You have also accepted the same in this statement that all the four concerns, allegedly engaged in land development activity i.e. Rana Project, Devi Durga, L.R. Construction and Anjani Construction have received the cheques, just to give the cash from their accounts, to pay the same to the farmers, local brokers, and advisor of Sahara India, Shri Sunderlal. In this way, do you accept the entire scheme of land development was nothing but a means of withdrawing cash amounts from the accounts of land developer entities. A-8 All the above mentioned 4 concerns i.e. Rana Project, Devi Durga, L.R. Construction and Anjani Construction, all were introduced to me by Shri Sunderlalji which I have stated earlier also. Whatever payments have been made to these concerns, have been withdrawn in cash on behalf of Sahara and have been used as per the instruction of Sahara. This work has been done by these four concerns after taking commission @ 1.5%. Thus it is clear that this scheme of showing the bills was that of Shri Sunderlalii and all the schemes of Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 35 not doing real land development, issuing the bills, making the cash payments, etc. were the designs of Shri Sunderlalji. Q.9 Kindly clarify the land deal of Porbandar that the name of Shri Nimesh B. Panchal was just for name sake or he has played any role. Why have neither you nor Shri Nimesh shown the income from this land deal anywhere. A.9 Yes Shri Nimish B Panchal appeared for name sake only and the income arising from Porbandar land deal belongs to me only and this income is included in my disclosed income of Rs. 11 Crore and one. Q-10 Do you want to say anything else? A.10 I have disclosed Rs. 11 Crores and one in this statement and I seek immunity from the penalty under section 271(1)(c) Explanation -5 in this regard. (B) Statement recorded on 06.11.2006 Q.4 Kindly explain the contents of the Pages 1 to 6 of Annexure A/6 seized from Chinubhai Chambers on 4/8/2006. A.4 This is a letter written by me to Shri Subrato Roy, in which I have claimed the parentage profit in the margin 15% to 20% of total receipts and have rejected the proposal of Rs. 50,000/- per acre. This claim made by me was finally accepted by Subrato Roy and Sahara Group. In this regard I would like to confirm that purchase of lands for Sahara Cities at Palanpur, Surat, Anand and Amravati could not be materialized through me. However in case of Anand they have purchased the land through some one else. I would rely on this letter to claim that my profit was not more than this percentage and the bogus claims made in my returns in the form of land development expense and banakhat expense were distributed amounts Shri Sundarlal of Sahara, original land owners by myself and brokers etc. Q.5 Kindly refer page 38 & 39 in which payment of lands for Sahara City of Porbandar& Jamnagar are given. As per information found during search & post search inquiry, total receipts for Porbandar land is Rs. 12,60,77,500/-. However in Page No. 39 it is 14,40,21,250/-. Similarly for Jamnagar land as per details the amount received is Rs. 17,14,23,000/-. However as per Page No. 38 it is Rs. 18,03,95,000/-. Explain the reason for difference. A-5 From the seized material, I shall show your that I have given some deductions to Sahara Group and received less amount as against the understanding of not giving balance amount to Shri Sunderlalji of Sahara. From the seized material itself it can be seen that some amount is due to be received by me in case of each land of Sahara City for which I have worked. Q. 6 Kindly refer Page 76 & 77 of Annexure A/6 and explain as to whether the receipts of Surat & Palanpur and Anand were returned back to Sahara A.6 So far I have not returned this amount and the same is outstanding as creditors in the books of accounts, but some day I have to return this. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 36 (C) Statement recorded on 07.11.2006 Q.7 Please refer page 50 of A/1 and explain the contents of the same, which has been seized from Chunibhai Chambers on 29/9/06. A.7 This page contains the details of revised rates of acquiring land for Sahara cities at Seven places. In the matter of purchase of land for Sahara cities at Seven places. In the matter of purchase of land for Sahara City, Jamnagar MOU between myself and Sahara was done at the rate of Rs. 16.55lakhs per acre. The entire amount was not required to be paid to the land owners and amount at rate of 4.05 lakhs per acre was required to be returned back in cash to Shri Sundarlalji of Sahara. Similarly, understanding for all other Cities, i.e. Porbandar, Palanpur, Anand, Amravati, Jalgaon & Akola are written down. However only the deeds of Jamnagar &Porbandar, could materialise. It is also noteworthy that whatever amount I have received from Sahara in the matter of purchase of land in other cities the same is lying as advance with me. Q.8 Explain the contents of Page No. 52 of Annexure A/1 seized from Chunibhai Chambers on 29/9/06. A.8 These papers contain account of Ahmedabad land transactions or Sahara City at Shela Village, Ahmedabad. I have received total amount of Rs. 23.33 Crores from Sahara. Rs. 6.30 Crores have been paid to farmers through cheques. Rs. 9.97 Crores have been paid to the farmers in cash. These farmers are original land owners, Rs. 2 Crores paid to Kanjibhai & family, Rs. 4 Crores paid to Prabhudas & family, Rs. 3 Crores paid to Bhulabhai & family, Rs. 57 lakhs paid to Kantibhai Guma & Rs. 40 lakhs have been paid to other small land owners. This cash amount has been withdrawn from the bank accounts of Rana Projects International Ltd. and M/s Devi Durga Construction, L.R. Constriction & the cheques from my accounts were first issued to transfer this amount to these concerns bank accounts. Rs. 2.61 Crores has been paid in Cash to Shri Sunderlal of Sahara, this cash was withdrawn from bank account of the above three concerns as stated above. Rs. 1.35 Crores was transferred to the account of R.D.B. Industries of Calcutta. Rs. 11 lakhs were paid by cheques to the Collector Office of Ahmedabad. Rs. 42 lakhs has been paid through cheques brokerage to Space Management & others. Another cash payment as brokerage is Rs. 15 lakhs to Shri Raju Joshi, Bank of India Colony, Ahmedabad. The balance of Rs. 2.02 Crores was lying with me as on 16/1/2006 with the liability of road construction & misc. works, still against this is pending. Q.9 Please refer Page No. 53 & 54 and explain the same which were seized from Chunibhai Chambers on 29/9/06. A.9 These page of 53 & 54 of A/1 contain the details of date-wise payments made to Shri Sunderlalji of Sahara in cash on various dates like in Page 53, Rs. 1.30 lakhs have been paid on 24/12/2002 in ash at Ahmedabad City. Similarly other Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 37 entries are given in Page No. 54. Thus till 15/12/2003 1 have given to Shri Sunderlalji Rs. 12,26,69,750/- in cash after withdrawing the same from Rana & Devi & L.R. In the bottom of this page No. 54 cheque payment of Rs. 1,35,41,970/- given to R.D.B Industries and Rs. 13,47,48/,090/- given to Rana Projects through cheque in the grab of payment of Rs. 8.26 Crores to Devi Durga in the garb of Bhavnagar land levelling is given in detail. In the last line the payments made to Shri Sunderial & farmers aggregating to Rs. 35,35,59,810/- is written till 15/12/03. It also needs to be mentioned that oblique put before two zeros has not meaning Q.10 Kindly explain the contents of page 61 & 62 of A/1 seized from Chunibhai Chambers on 29/9/06. A.10 Page No. 61 & 62 Haphazard working of rates and payments made to Shri Sunderlalji and my margin are given as rough details. Q. 11 Explain the contents of page-80 of A/1 seized from Chunibhai Chambers on 29/09/06 A.11 This page contains the revised rates of Porbandar land of Sahara City from Rs. 14-50 lakhs per acre to Rs. 12 lakhs per acre and shunning the liability payments of Rs. 2.5 lakhs per acre to Sunderlalji because earlier rate understood was Rs. 14.50 lakhs. This page is also a rectification of Page -50 in which this rate was written by mistake as Rs. 15 lakhs per acre. Q.13 Please explain Page No. 21 of A/9 seized from Chunibhai Chambers on 29/9/06. A.12 This is a correspondence from me to Sahara for getting direction for levelling the land at Sahara City at Ahmedabad. Q.14 Please explain Page No. 34 to 61 of A/9 seized from Chunibhai Chambers on 29/9/06. A.14 These pages are the correspondences between myself and Sahara for doing various works and demand for payment for the same. There was a proposal for purchase of Gov. land at Rajkot, change of Zone from Agriculture to Non- Agriculture and a connecting road, but nothing could be done, since the payments were not received. Complete details of pending work at Ahmedabad, Bhavnagar, Jamnagar, Porbandar& Rajkot as well as Palanpur, Anand& Surat are given in Page 58 to 61 of this Annexure. Q.15 Kindly refer Page 102 to 170 seized from Chunibhai Chambers on 29/9/06. Explain the contents of the same. A.15 These pages contain the correspondences between we and Sahara for the pending work to be done from time to time as well as requirement of funds for the purchase of land at various places for Sahara Cities. In Page No. 102 the pending work at Ahmedabad, Jamnagar & Bhavnagar is written. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 38 In page No. 117 requirements of funds to be received by me from company is stated. In page 151, details of fund required for Bhavnagar are given. According to which I have received Rs. 10-76 Crores for Bhavnagar land, the balance to be received Rs. 8.73 Crores and stamp fee & registration fee has been directly given to the stamp office. In Page No. 153 requirement of fund for Rajkot, Jamnagar & Bhavnagar is written. According to which balance amount to be paid to farmers and stamp /registration directly to be given by Sahara is written. Q.16 Please explain the contents of A/13 seized from Chunibhai Chambers on 29/9/06 A.16 This file contains MOU between Nimish B Panchal & Sahara as well as difference proposals given to Sahara. Xerox copy of the draft received and title report / opinion by Advocate. This file pertains to Anand project of Township to be developed by Sahara. However, the purchase of land could not be materialized through me (Nimish B. Panchal is working for me and I have owned up all of this accounts which he has done on my behalf). Rs. 75 lakhs received in this regard is still lying with me as liability. Q.17 Kindly refer Annexure A/27 seized from Chunibhai Chambers on 29/9/06 and explain the contends of this folder. A.17 This folder contains the correspondences between Nimish B Panchal & Sahara City, Porbandar. I have already owned up the accounts of Shri. Nimish B. Panchal. The land of Porbandar is 98.048 acres till date. In page no. 87 to 91 there is a case filed against me /Nimish B. Panchal that I have not paid the agreed amount to the land owners of Rs. 3.65 Crores. However, payment of Rs. 85 lakhs had already been made through the cheque till the date of filling of the case against me, i.e. 25/1/05. In this regard it is important that as per compromise between us and agricultural land owners and the sale deed was executed on Rs. 1.5 Crores. From page No. 102 it is very clear that cash payment was also made to the farmers. As per Page No. 102 for Porbandar land we have received Rs. 12.24 Crores from Sahara and paid Rs. 1.50 Crores through cheque to farmers and Rs. 7.70 Crores by cash after withdrawing the same from Rana Project & Devi Durga. This cash amount of Rs. 707 Crores has been paid to Rajsinghbhai & Rambhai of Porbandar payments of Rs. 1 lakhs to Advocate, Rs. 5 lakhs as brokerage and Rs. 19 lakhs as misc. expenses and another related expenses. Thus balance amount as on 7/4/2006 lying with me was Rs. 2.79 Crores with liability of Rs. 1.20 Crores from additional land still to be bought and Rs. 19 lakhs as ancillary expense related to the same. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 39 Q.18 Please explain the contents of Annexure A/33 seized from chunibhai Chamber on 29/9/06 A.18 This folder contains the correspondences between me and Sahara for purchase of land at Sahara City, Jamnagar Page No. 1 to 3 are proposals send to Sahara. Page No. 14 to 27 are MOU between me and Sahara for purchase of land at Jamnagar. Page no. 36 to 70 are copies of receipts of DD / cheques received by me from Sahara As per page No. 113 of this Annexure total amount of Rs. 17.14 Crores have been received from Sahara out of which Rs. 4.50 Crores has been paid to the farmers by cheques and Rs. 7 Crores by cash. This cash amount has been withdrawn from the bank account of Devi Durga Construction & Rana Projects etc. The farmers to whom cash has been paid are Shri Nileshbhai and Kamleshbhai Joshi. Rs. 3.70 Crores has been paid in cash to Sunderlalji of Sahara after withdrawing the same from the accounts of Devi Durga and Rana Projects. Brokerage payment of Rs. 3.50 lakhs and another expenses of Rs. 16.50 lakhs is made by cheque / cash which I am unable to remember exactly. Thus as on 7/4/2006, balance of 1.74 Crores lies with me with over all liability of misc. expenses of approx. Rs. 34 lakhs.. (C) Statement recorded on 8/11/2006. Q.19 Please refer Annexure A/35 seized from Chunibhai Chambers on 29/9/06 and explain the contents of the same. A.19 This Annexure contains details of purchase of land at Sahara City, Bhavnagar in the form of correspondences In Page No. 39, a letter from Sahara to me is written in which they have sent a Draft of Rs. 5 lakhs for getting permission u/s 54 at Sahara City Bhavnagar. This amount is in addition to another receipts and is yet written as advance in my books is Sahara sundry creditors. Similar treatment has been given to Rs. 5 lakh received from Rajkot land as is reflected in Page - 51. Page No. 61 gives exhaustive details of receipts and payments relating to Sahara City, Bhavnagar. I have received Rs. 19,54,62,500/- from Sahara by cheque and paid Rs. 4.75 Cores to the land owners by cheque. Cash payment of Rs. 7.63 Crores is made to the land owners., Rs. 5 crores to Shri Sunderlal of Sahara after withdrawing the cash amount from the bank accounts of M/s Rana Projects, Devi Durga Construction & Others, to which I have transferred the fund as land development expense claim. Rs. 16 lakhs to Shri Raju Joshi & Rs. 3 lakhs to the Advocate has also been paid in cash. Shri Raju Joshi is staying at Bank of India Colony in Ahmedabad. Advocate Shri H.B. Bhayani is staying at Bhavnagar. Thus the balance remaining with me for the Bhavnagar land is Rs. 1,74,12,500/- with the outstanding liability TPS cancellation of Rs. 25 lakhs and Title / possession Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 40 etc. Rs. 25 lakhs. The original land owners in this case are Lallubhai & Khangarbhai & Rajubhai of Bhavnagar. Q.20 Please refer Annexure A/42 & explain the contents of the same. Seized from Chunibhai Chambers on 29/9/06. A.20 This folder contains the details of purchase of the land at Sahara City, Rajkot. Page No. 52 to 78 are details of receipts from Sahara. In Page No. 79 to 81 is an agreement between me and R.D.B. Industries of Calcutta for making a commission fees of Rs. 1.50 Crores. In Page 87 there is letter from Sahara to me in which a cheque of Rs. 38,20,480/- for change of zone & construction of approach road on Rajkot land is given. This amount is included in the sundry creditors and not included in total receipts. In Page No. 96 & 97 there is letter from Sahara to me in which there is mention of levelling of soil, filling of gorges / nala and removing of shrubs, grass, etc at Sahara City, Rajkot. But no such work has been done by me or by Company. This amount of Rs. 1.25 Crores has been paid as per Page No. 98 for the work of change of Zone and construction of road. Page No. 103 is the page in which all the receipts and payments for Sahara City at Rajkot are written. This page has been prepared on 7/4/06. Rs. 16.77 Crores has been paid by cheques to the farmers. Rs. 5.78 crores has been paid in cash to Shri Khimjibhai Tidabhai Makwana of Rajkot Rs. 4 Crores have been paid in cash to Shri Sunderlal. This cash has been withdrawn from the bank accounts of Devi Durga Construction & Rana Projects, etc. Rs 20 lakhs have also been paid cash to Shri Rajubhai Joshi of B.O.1 Colony of Ahmedabad. Q. 21 As has been stated by you on 29/9/2006 as well as the statement given on 6/7- 11-2006 that cash payment made to the farmers, to Shri Sunderlal & others have been made after withdrawing amounts from the bank accounts of Devi Durga Construction, Rana Projects and others where from you have received profit which has been disclosed s undisclosed income by you. A.22 I have received around Rs. 89 Crores from Sahara for purchase of land at Ahmedabad, Bhavnagar, Rajkot, Jamnagar & Porbandar. This entire amount has been received by cheque in my bank accounts at Global Trust Bank, Central Bank of India, Bank of Rajasthan, HDFC Bank, Bank of Punjab and Oriental Bank of Commerce & other bank accounts. I have given to the agricultural land owners by cheque amount Rs. 22 Crores. Further remaining Rs. 67 Crores at my bank accounts I have transferred the Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 41 funds of Rs. 52.30 Crores to the accounts of Rana Projects International Ltd, Devi Durga Construction and L.R. Construction by cheque getting cash to give the same to the original land owners, to Shri Sunderlalji of Sahara & to others. This was all done by me as per the instruction given to Shri Sunderlalji of Sahara. As per seized Annexure A-1, A-27, A-33 & A-42 which pertains to the transactions of land Ahmedabad, Porbandar, Jamnagar, Bhavnagar & Rajkot. I have given cash of Rs. 54 Crores approximately to farmers, Sunderlalji & others. As per my calculations Rs. 9.78 Cores is till lying with me as liability to be gent to Raja Projects, L.R. Construction, & Devi Durga Construction & Anjani Construction which in fact my profit since no actual liability of paying land development expense lies with me towards these parties. Moreover, my profit which would have stayed with my bank accounts after paying to farmers by cheque and to Rana, Devi Durga& others by cheques is not lying as bank balance as on today. Since I have applied this fund as investment / advances in purchasing the land at Nasmed Tal. Kalol Gandhinagar, Abhinav Arcade, Kocharab Ashram, Ashram Road, Paldi, Ahmedabad, some advances to Radhe Developers P. Ltd., some advances to Smt. Jahnviben A. Patel and some advances / loans /deposits. As per the above mentioned Annexures, the balance profit lying with me as on today can be worked out at Rs. 10.20 Crores. This balance bears some liabilities which are mentioned in the passes seized in the above mentioned Annexures. But around Rs. 2.5 Crores yet to be received from Sahara for all the Cities. Therefore, that future receipts can meet the pending liabilities which are mentioned in these papers. After careful consideration of all these above mentioned aspects I have disclosed income of Rs. 11,00,00,000/- in my statement dated 29/9/2006 and I reaffirm the same today. Q. 23 In the Annexures A/1, A/27, A/33, A/35 & A/42 seized on 29/9/06 from Chunibhai Chambers the details of cash. payment to farmers, Shri Sunderlalji & Others have been found. Kindly prove the identity of these persons. A.23 I am submitting a detailed sheet in which amount, name & addresses of all these persons are written. Copy of the same is attached hereunder Q.24 In the various Annexures seized it has been found that you have received Rs. 50 lakhs for advance for Surat, Rs. 75 Lakhs for Anand, Rs. 1 Crores for Palanpur & Rs. 50 lakhs for Amravati. What is the status of these projects, have your returned back this amount or adjusted the same against the pending receipts of other Cities or treated the same as income? A.24 These amounts have been received as Advances for purchase of lands at these Cities and are still lying in my books as sundry creditors. The same can be verified from any assessment records as well as from my books of in this regard Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 42 I also want to state that around Rs. 2.5 Crores is yet to be received from Sahara for various works to be done or for work already completed. If I fulfil the pending liabilities or commitments already pending then I will adjust the same and unless I don't receive this amount of Rs. 2.5 Crores from Sahara I am not going to fulfil any of the pending works. 12.19 The Revenue has also relied on the decision of the Gujarat High court in the case of CIT Vs Hynoup Food & Oil Ind. (P) Ltd.- 150 Taxman 194. We have gone through the facts of that case and observe that the facts in the case of Hynoup Food & Oil Ind. (P) Ltd are clearly distinguishable from the facts of the present case, for the reason that in the case of the assessee the income is estimated on the receipts which was not the case in the of CIT Vs Hynoup Food & Oil Ind. (P) Ltd., Once the income of the assessee is estimated and there being no specific claim of any expenses, there is no scope of making further disallowance and hence the provision of the section 40A(3) or 37(1) cannot be applied. The Ld. AR also pointed out that the payment were made to the above parties only at the instance of Sahara who in turn collected the cash for the purposes of making payment to farmers and incurring other expenses. Instead it was payment made through account payee cheques to parties at the instances of the ultimate land owners (Sahara Group) to whom the land was ultimately transferred. Therefore, the reliance of the department on the ratio of Hynoup Foods is also not correct and the addition made by the AO has been rightly deleted by the Ld. CIT(A). 12.20 The next issue which required adjudication and arising from ground of appeal is regarding the estimation of income which represent real income of the assessee. The issue which requires adjudication is; (a) as to what should be percentage of profit that is required to be estimated and, (b) in which year the estimated profit is required to be taxed. 12.21 The A.O. in his assessment order while adjudicating on the unaccounted income earned by the assessee on various projects of SICCL held that according to the last para on page no. 04 of the above letter where assessee has clearly mentioned his profit Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 43 margin on the projects of SICCL in the range the gross receipts. The Assessing Officer Held that Multiple copies of this letter were found and seized in various annexures including as page no. 1 to 6 of annexure A-6 seized from the office of the assessee on 04.08.2006. During the recording of the statement under oath of the assessee on 29.02.2006, assessee was asked about the contents of this letter. In his reply, the assessee stated that he had received profit of 12.5% on his gross receipts and based on this profit margin of 12.5%, he disclosed his unaccounted income worth Rs.11,00,00,001 computed @ 12.5% of his gross receipts of Rs. 88.05 Cr. Relevant portion of his statement is reproduced as under:- Q.4 Kindly look at the page No. 13 to 18 of the folder titled as Sahara Correspondences which constitute a confidential letter written by you, in this letter, you have written that your profit margin should be 15% to 20% and you have charged this margin in all these deals. According to this, 15% to 20% of Rs. 88.05 Crores gives you profit margin in between Rs. 13.21 Crore to Rs. 17.61 Crores. The same ratio has been told by Shri Nllesh T. Patel of Jamnagar. Though this argument has not been accepted by the Department, since there is no proof of cash payments made by you. Therefore, explain as to why Rs. 9.78 Crores only should be accepted as your profit from the above mentioned deals ? A. This matter I want to clarify as to whatever cash payments J have made so far, the same has been made by the people of Sahara or in accordance to the instructions received from Sahara and on behalf of Sahara. I also want to state that I do not know that Shri Nilesh T. Patel has made the cash payments as I have made, but I want to state that in the entire land dealings of 5 Cities of Rs. 88.05 Crores received, on average I have received the profit of 12.5% and according to my calculation, this amount comes at Rs. 11 Crores (Eleven). In this matter I also want to state that I computed my profit in the month of April because according to my perception, the entire works are getting completed in the current year only and my profit also comes in the current year. This amount of Rs. 11 Crores includes Rs. 9.78 Crores which is due to be given to Devi Durga and others as per my books of accounts. This amount is my income which is invested in my business assets. Balance amount of Rs. 1.22 Crores is given as Advance of Expense or another investments. Thus I disclose total amount of Rs. 11 Crores and one (Rs.11,00,00,001} as my undisclosed income in the current year and I request for exemption from penalty as per Section 271(1}(c) Explanation-S as explained by you and whatever Income-tax liability shall arise on this income, I will pay the same. This is my promise, I om also giving you a post dated cheque of Rs.SD lakhs to be encased on 6/11/2006 and promise to pay the balance liability alongwith my return of income. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 44 12.22 It is to be noted that vide para 6(a) and 6(b) of Exhibit-16 (full and true statements of facts regarding the issues to be settled) of the settlement application (page 851 of the application) filed by the assessee before Hon. Settlement Commission, assessee had offered net additional income @ 12.5% on gross receipts from Sahara for acquisition of land which includes the profit from the project at Porbandar. Further as mentioned in the para 6(b) of the application, this additional income was after considering the income already offered in the regular books of account and other expenses. In view of the above facts, seized evidences, statements of the assessee and the discussion made above, the profit margin of the assessee for the land projects of SICCL is estimated @ 20% of the gross receipts for the project by the Assessing Officer. 12.23 On the basis of the loose papers found and seized, it can be gathered that the profitability margin for different sites viz; a. Bhavnagar was 6.35% b. Jamnagar was 8.17% c. Ahmedabad was 6.43% d. Rajkot was 5.96% e. Porbandar was 11.44% 12.24 The average percentage for the above schemes on the basis of the loose paper was 7.35%. The range coming out from these loose papers was 6% to 11%. It is relevant to note that the assessee in the settlement application had disclosed additional income @12.5% of the receipts of SICCL before the Commission. It is noted that the letter which has been referred to by the A.O. for coming to the conclusion that estimated profit of 20% is dated 04th May 2004 is addressed to Mr. Subroto Roy of SICCL. Nonetheless the loose papers found during the course of search read with statement weighs much more than the decision of the A.O. It is also relevant to consider that the seized material has to be read as a whole and not in bits and parts. When the A.O. is taking the receipts as per the loose paper, he ought to have also consider the profit margin appearing the seized data in estimating the profit which both the lower authorities have failed. The assessee, though claimed to have been earned profit to the tune of 6 to 11% and offered 12.5% before the Settlement Commission, the correct evaluation of the earning of the profit on the bogus bills has not been taken into consideration. The Ld. CIT(A) estimated profit earned by the assessee @ 20%. We have gone through the Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 45 facts of the case, the role of the assessee with regard to SICCL, the statement recorded along-with the submission made before the lower authorities. The estimation of profit by the A.O. @20% relying on the letter sent to Sahara India wherein it was mentioned that the profit margin should be ranging between 15% to 20%. Hence, keeping in view the order of the Assessing Officer, entire bogus bills and the receipts have to be considered to determine the correct profit. Keeping in view the entire facts, we determine 20% of Rs 26,86,00,000/- as profit of the assessee for the year. The Assessing Officer shall recompute the net profit keeping in view the quantum of bogus bills raised. Unexplained Expenditure - Jamnagar, Palanpur, Surat - Addition of Rs.2.27 Crores: 13. During the course of search at the office of Ashish P. Patel located at Chunibhai Chambers behind City Gold Cinema, Ashram Road, Ahmedabad on 29.09.2006 various loose papers were found and seized in the form of Annexure-A9. Page No. 58 to 61 of this Annexure is a letter written by the assessee to Shri D.N. Ganjoo of Sahara India Commercial Corporation Limited on 31.05.2004 (Page No. 56 to 59 of the Assessment Order). Based on these papers, the Assessing Officer held that on page no. 2 of the above letter the assessee has mentioned about the out of pocket expenses of Rs. 24 lacs already incurred by the assessee on the land situated at Jamnagar. On page no. 3 of the letter, the assessee has mentioned about the payment of Rs.1.28 crore made for the Palanpur Land and Rs.2.25 crore made for the Surat Land. After receiving reply from the assessee, the Assessing Officer held that as far as the payment for the Palanpur land is concerned, assessee has made excess payment of Rs.28 lacs for which there were neither entries in the books of account nor its source of income has been explained by the assessee. For Surat Land transaction, Assessing Officer held that a sum of Rs. 1.75 Cr. remains unexplained in the hands of the assessee. Thus, in total, Assessing Officer made addition of Rs.2.27 crores (Rs. 24 lacs + Rs.28 lacs + Rs.1.75 crores). 13.1 Aggrieved by the order of the Assessing Officer, the Assessee filed appeal before the Ld. CIT(A) who deleted the addition made the Assessing Officer in this regard. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 46 13.2 Aggrieved by the order of the Ld. CIT(A), the Revenue filed appeal before the Tribunal taking up this issue at Ground No. 7. 13.3 Before us, the Ld. DR submitted that the seized material clearly proves that the assessee has spent monies which were neither in the books of accounts nor the source of amounts have been proved. The Ld. AR, on the other hand, submitted that the Ld. CIT(A) has rightly deleted the impugned addition in question on the ground that the payment of Rs.2.27 crores had to be considered as application of income as held by him in the appellate order vide paragraph No. 6.4. 13.4 Heard the arguments of both the parties and perused the material available on record. The inflow and outflow for land at Jamnagar, Palanpur and Surat based upon such seized material is reproduced herein below: Sr. No. Place Receipts Payments Difference 1 Jamnagar — 24 24 2 Palanpur 100 128 28 3 Surat 50 225 175 Total 227 13.5 It is an undisputable fact that the said payments have not been recorded in the books of accounts, hence shall be treated as unexplained expenditure u/s 69C of the Act. The Ld. CIT(A) held that if any undisclosed income is determined, application of such amount need to be given for such alleged unaccounted payment. The Ld. CIT(A) held that there is substantial force in the contention of the Appellant as both unaccounted income and payment cannot be taxed. It is settled legal law that higher of unaccounted income or expenditure being application of income can be taxed. Reliance is being placed on the judgments in the following cases:- (i) Reliable Surface Coatings v. A CIT [2012] 20 taxmann.com 268 (Ahd.) (ii) Shri Champaklal P. Bhimani v/s ACIT, Ahmedabad- ITA No.2891& 2832/Ahd/2003, dated 02.03.2010 (iii) ITO Vs. Agro Sales Corporation- ITA No.2294/Ahd/2006 -Ahmedabad ITAT, dated 23.12.2009 (iv) (v) M/s National Steel & Agro Industries Ltd. ACIT and vice versa in ITA Nos. 4558 to 4561/Mum/2008 for A.Ys. 2000-01 to 2003-04 & ITA No. 4476 to Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 47 4478/Mum/2008 for A.Ys. 2001-02 to 2003-04 dtd. 12.3.2010, wherein it was held as under:- \"Coming to the issue of telescoping which is ground No. 2 for assessment year 2001-02 and ground No. 3 for assessment year 2002-03 and ground No. 1 for assessment year 2003-04, in the light of our discussion and the legal position while considering ground No. 2 in the assessee's appeal, we fully agree with the findings of the CIT (Appeals) and hold that there is no error whatsoever in the direction of the CIT (Appeals) to the A.O. to grant the benefit of telescoping. When the assessee has declared additional income, obviously the same is available for explaining either expenditure or for explaining the investments made during that year. These grounds raised in the Revenue's appeals are dismissed.\" 13.6 Since telescoping of income to the expenditure is an accepted principle, we decline to interfere in the order of the Ld. CIT(A) on this issue. Unexplained Expenditure - Anand - Addition of Rs.23 lakhs : 14. Based on page No. 85 of Annexure A, found and seized during the search, which is a letter written by Shri Nimish Panchal addressed to J.C. Kukraty of SICCL regarding payment of Rs. 98 lacs made for Anand land. The said letter of Shri Nimish Panchal reads as under:- “January 18, 2004 Mr. J. C. Kukraty, Dy Chief Manager, Sahara India Commercial Corporation Ltd., 2, Kapporthala Complex, Aliganj, Lucknow-326024 Sub: Requirement of funds Ref : Land acquisition at Porbandar and Anand Respected Sir, With respect to the procurement of land at Porbandar, I have entered into Agreement to Sale (ATS) with the farmers for the land where funds are received from your side. However, the ATS are yet to be made for the land for which the funds are yet not received from your side for whom the titles are already given to you. We feel that if the funds are not received before the 20th of January, the farmers won’t cooperate with us. Also, it is important to note that the sale deeds are required to be made within 90 days of the ATS, which please make a note of. With respect to the procurement of land at Anand, we informed you on the first week of November, 2003 about the acquisition of the land. We also made payment to the farmers to the tune of Rs.98 lacs during the month of November. As no further instruction has been received from you, Bahna Chatas with the farmers as Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 48 well as the advertisement in the newspaper are pending. Farmers are also panicking for want of clarity regarding further payment. We feel that the payment is not made to farmers upto the 20th of January, it would be difficult to get co-operation from the farmers. We request to kindly look into the matter at the earliest. Thanking you, Yours faithfully, Sd/- (Nimish Panchal) 14.1 This letter makes clear that Shri Nimish Panchal made payment of Rs.98 lacs during November 2003. The Assessee explained that Annexure A-13 seized from Chunibhai Chambers on 29.09.2006 contains MoU between Nimish B. Panchal & Sahara as well as different proposals given to Sahara. Xerox copy of the draft received and title report / opinion by Advocate. The seized material pertains to Anand project of Township to be developed by Sahara. However, the purchase of land could not be materialized and Nimish B. Panchal is working for him. The assessee submitted that he has paid Rs.75 lakhs to Mr. Nimish. Hence, the Assessing Officer held that Mr. Nimish being the employee of the assessee and the employee paid Rs.98 lakhs to farmers, hence an amount of Rs.23 lakhs treated as payments made out of books of accounts. The Ld. CIT(A), in fact, upheld the addition and allowed telescoping of this expenses with that of the monies earned of Rs.12 crores. 14.2 Since telescoping of income to the expenditure is an accepted principle, we decline to interfere in the order of the Ld. CIT(A) on this issue. Unexplained Expenditure - Ahmedabad - Addition of Rs.3 Lakhs : Unexplained Expenditure - Amravati - Addition of Rs.4 lakhs: 15. During the course of search at the office of the assessee on 29.09.2006 located at Chunibhai chambers, Ahmedabad, a loose paper was found which was seized as Page no 137 of Annexure-A9. It was a letter written by the assessee to Shri. JC Kukerety of SICCL. In this letter, assessee had mentioned about the payment of Rs. 3 lacs made by him and requested that Rs. 7 lacs be paid to him. The Assessing Officer held that since Rs. 3 lacs has already been paid out of books, the same has been treated as unexplained expenditure u/s 69C of the Act. Similarly, for the Amravati project, the assessee has Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 49 made payment of Rs.54 lakhs against the payment of Rs.50 lakhs and the Assessing Officer treated the same as unexplained expenditure by the assessee. Thus, the Assessing Officer made total addition of Rs.7 lakhs with regard to unexplained expenditure with regard to appreciation of land at Ahmedabad and Amravati. The Ld. CIT(A) confirmed the addition in principle and allowed it to be telescoped with that of the monies earned of Rs.12 crores. 15.1 Since telescoping of income to the expenditure is an accepted principle, we decline to interfere in the order of the Ld. CIT(A) on this issue. Unexplained Investments – Bodakdev - Purchase of plots – Rs.50 lakhs : - 16. During the course of search on 29.09.2005 at the office of the assessee located at Chunibhai Chamber, Ahmedabad, various loose papers were found which were seized as Annexure A-27. Page no. 42 to 48 of this Annexure contains copies of the sale agreement (Banachitthi karar) and payment receipts for plot no. 321 located at survey no 236/1 and 236/2 at Bodakdev, Ahmedabad. All these documents carry the signatures of the sellers. Mrs. Sheetalben Nirmalbhal and Mrs. Madhuben Prabhudas with the payment receipts carrying revenue stamps duly affixed on them. Further, at page no. 43 carries the signature of Sh. Ashish P Patel also. Copies of page no. 43 to 48 of annexure A-27 were also found during the course of search on 04.08.2006 on the assessee at his residence located at 2, Vitthalbhai Patel Colony, Navrangpura, Ahmedabad and the same were seized as page no. 06 to 11 of annexure A-1. On enquiry, assessee submitted that the amount was paid for the bungalow of 6505 sq. yrds. which has been originally purchased by the assessee. Page No. 45 reflects payment of Rs.51.76 lakhs. Based on the seized material and after due verification the Assessing Officer made addition of Rs.50 lakhs being the amount paid in cash for acquisition of the property. Ld. CIT(A) affirmed the action of the Assessing Officer in principle. For the sake of ready reference, the relevant part of the order of the Ld. CIT(A) is reproduced hereunder:- “11.3 I have carefully considered the Assessment Order and the submission filed by the Appellant. The brief facts of the case are that Assessing Officer has referred to page No. 42 to 48 seized as Annexure - A/27 containing copies of sale agreement and payment of on-money for plot No 321 located at Survey 236/1 and 236/2 at Bodakdev, Ahmedabad. The seized material contains on-money payment of Rs.50 Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 50 lacs hence AO has made addition in year under consideration for the reasons stated at para 11.1 herein above. On the other hand Appellant has reiterated the arguments as were raised before AO and stated that loose paper is dumb document. The Appellant in his alternate contention stated that if any income is estimated in the case of Appellant, or any addition is sustained on receipt basis, application of such income/receipt may be given against alleged unexplained investment. On careful consideration of entire facts it is observed that during the course of search at Appellant’s premises banakhat karar for plot No. 321 was found which contains name of Appellant as well as names of sellers. This document is signed by seller and such agreement is made on stamp paper of Rs.50 which is bought by Prakash Shah on behalf of Ashish Patel. Further, page No. 43 of Annexure - A/27 seized during the course of search contains details of cheque payment towards this land which contain signature of Appellant as well as seller and cheques are reflected in bank statement of Appellant for year under consideration. During the course of search one more loose paper being page No. 42 of Annexure - A/27 was seized which contains details regarding payment of Rs.50 lacs in cash for very same land. Thus, there is live nexus between payment made through cheque and payment made in cash. Merely signature of Appellant is missing in cash receipt does not mean that no on-money payment has been made when signature of seller of land is apparent from document seized during the course of search. The document seized during the course of search bears the date of execution, signature of seller, name of Appellant and cheque details mentioned therein matches with bank account of Appellant which means that loose paper including banachhitti agreement cannot be treated as dumb document. When cheque transactions are reflected in regular books of account, presumption is that cash payment as mentioned in loose paper are in fact made. The Appellant has not brought any confirmation of sellers regarding non-receipt of on-money payment. The onus is on Appellant to prove that no on-money payment is made but in present case seized material itself reveals that such payment is made which is not accounted in books of account hence addition made by AO for Rs.50 lacs need to be upheld subject to observation made herein below. 11.5 However, undisclosed income i.e. Rs. 12 crores determined in the case of Appellant in preceding para is higher than unexplained payment found during the course of search hence considering decisions referred supra separate addition for unaccounted payment for Rs.50 lacs is not required hence addition made by AO is deleted. It is observed that if at a subsequent stage it is held that undisclosed income in the case of Appellant is required to be reduced in comparison with income determined herein above, application needs to be given to extent of undisclosed income. Subject to this observation, this ground of appeal is allowed.” 16.1 The Ld. CIT(A) confirmed the addition in principle and allowed it to be telescoped with that of the monies earned of Rs.12 crores. 16.2 Since telescoping of income to the expenditure is an accepted principle, we decline to interfere in the order of the Ld. CIT(A) on this issue. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 51 Amounts received for land transactions at Surat, Palanpur, Amravati and Anand – Rs.2.75 Cr. 17. The Assessing Officer has made this addition of Rs.2.75 crores received by the assessee for four lands and shown as liability in his books of account. The Assessing Officer has made this addition based on three different letters i.e. seized material found during the search, which contains the receipts of funds and expenditure incurred out of such funds for projects of SICCL. The seized material in relevance is Annexure A/9, page No. 58 to 61 & page No. 85 (AO page No. 76 to 79), Annexure A/16, page no. 61. These annexures are letter addressed to Shri D.J. Ganjoo of SICCL. These seized material shows that the amount is to be received and still shown as Sundry Creditors and hence the Assessing Officer made addition of Rs.2.75 crores. 17.1 The Ld. CIT(A) also observed that the land dealings for these four lands being Anand, Palanpur, Surat and Amravati were not materialized. The Ld. CIT(A) held that against receipt of Rs.2.75 crores, the assessee has made expenditure of Rs.2.30 crores and such amount is still lower than net income determined at Rs.12 crores, therefore, no separate addition of either undisclosed receipt or payment for four lands is required to be made as nothing is retained by assessee as income in these four lands for which transactions were not materialized. The relevant observations of the Ld. CIT(A) on this issue are reproduced hereinbelow: - “10.3 I have carefully considered the Assessment Order and the submission filed by the Appellant. The brief facts of the case are that AO has made addition of Rs. 2.75 crores received by Appellant towards for lands and shown as liability in his books of account till date. The AO has made this addition based upon three different letters found during the course of search which reflect receipt of funds and expenditure incurred out of such funds for projects of SICCL. These three loose papers were also considered by AO while making addition of Rs.2.27 crores (23 + 28 + 1.75) which is discussed at Ground No. 3, Rs. 23 lacs at ground No. 4 and Rs.4 lacs at Ground No. 6 herein above wherein he has made addition of net unaccounted payment as reflected in these loose papers. The tabular chart showing receipt and payments is summarized herein above. (Rs. In lacs) Sr. No. Place Receipts Payment Balance (Receipt - Payment) 1 Anand 75 98 23 2 Palanpur 100 128 28 3 Surat . 50 225 175 4 Amravati 50 54 4 Total 275 505 230 Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 52 During the course of Appellate Proceedings, Appellant has reiterated the argument as were discussed in earlier grounds and contended that he has only acted as facilitator in land aggregation between SICCL and land owners. He was entitled to fixed percentage of receipt of its income received either in the form of cheque or cash from SICCL. The Appellant has stated that while making addition of unaccounted payments for above referred four lands, AO has already given credit of receipts of Rs.2.75 crore and only net unaccounted payment is considered as undisclosed payment hence separate addition of Rs.2.75 crore is not required to be made. On careful consideration of entire facts and after referring the finding given at Ground No. 2 herein above, it was held that Appellant has acted as facilitator for SICCL for various lands. The land dealings for four lands being Anand, Palanpur, Surat, Amravati were not materialized. In the profess of carrying out land transactions, Appellant used to receive funds from SICCL against expenditure already incurred or to be incurred. The funds received for the land for which transactions were materialised are shown as receipt by Appellant and when transactions not materialised, same were reflected as sundry creditors in books of account. Similarly, Appellant has claimed bogus development expenditure for transactions in land where deals were materialized and such expenditure was claimed in Profit & Loss Account whereas expenditure incurred for other projects which were not materialised were not reflected in books of account, which means that Appellant has made unaccounted payment in the process of obtaining land on behalf of SICCL. As Appellant has already incurred expenditure on behalf of SICCL, which is evident from various letters addressed to SICCL, and seized during the course of search, receipts to the extent of expenditure cannot be considered as undisclosed income of Appellant as Appellant has already incurred expenditure out of receipts. As receipts and expenditure both relate to transactions carried out for SICCL and in present case it relates to land transactions which are not materialised and expenditure being higher than receipt, receipts, though classified as creditors do not become undisclosed income of Appellant. While adjudicating the ground of alleged unaccounted payment of Rs.2.27 crores, Rs. 23 lacs, Rs. 4 lacs and Rs. 3 lacs herein above it is already held that separate addition of unaccounted payment is not required to be made as undisclosed income determined in case of Appellant is substantially higher than such payments. In the present case it is observed that against receipt of Rs.2.75 crores, Appellant has made application of Rs.5.05 crores and such amount is still lower than net income determined at Rs. 12 crores herein above, separate addition of either undisclosed receipt or payment for above referred four lands is not required to be made as nothing is retained by Appellant as income in these four lands for which transactions were not materialised. Considering these facts, addition made by AO for Rs.2.75 crores is deleted.” 17.2 We find that the Ld. CIT(A) erred in considering Rs.5.05 crores. The receipts of Rs.2.75 crores and the payments were to the tune of Rs.5.05 crores. The excess payments made by the assessee would be Rs.2.30 crores for which the sources have not been explained. Hence, the same is treated as unexplained expenditure. Since telescoping of income to the expenditure is an accepted principle, the same shall be set off against the income offered. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 53 Unexplained Expenditure – Interest payment – Rs.7 lakhs :- 18 This addition is based on the seized material, page No. 51 and 77 of Annexure- A/1, which contains details of interest paid to R. Dalal and S. Salot. The assessee himself in his statement has explained that such loose papers are pertaining to loan of earlier year and settled in current year hence the Assessing Officer held that the interest payment reflected need to be held as unaccounted expenditure as assessee has not proved that such entries are already recorded in books of account. The assessee claimed that loose paper nowhere suggests that jotting belongs to assessee but this contention of assessee was not accepted by the Revenue Authorities as loose paper is found during the course of search at assessee’s premises and even assessee himself in his statement has admitted that such loose paper pertain loan taken in earlier year. Since the admission of the assessee has not been found to be contradictory to the facts, the addition of Rs.7 lacs is hereby confirmed being the unexplained expenditure. Thus, the appeal of the Revenue on this ground is allowed. IT(SS)A No. 429/Ahd/2019 – Assessee’s Appeal for AY 2004-05 19. Ground No. 1 to 4 Estimation of Income from SICCL – 20% of the receipts. Adjudicated in the appeal of the Revenue IT(SS)A No. 460/Ahd/2019 20. Ground No. 5 Undisclosed Income – Interest receipt– Rs.29.24 lakhs 20.1 The Assessing Officer made addition of Rs.29.24 lakhs based on the seized material found and seized at 2, Vithalbhai Colony, Navrangpura, Annexure-A/1, Page No. 80, 83 & 84. The Assessing Officer held that the details pertained to loans given to Haren Choksi as on the top left side of the pages the amount given to Haren Choksi is written and on the right side the received/receivables are written. The Assessing Officer held that it is the amount of the interest received during the year. The Assessing Officer tabulated the amounts from the seized material which is as under: Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 54 Sr. No. Noting on seized material Interest for FY 2003-04 1 51:20 1.4.02 to 31.10.03 Rs 18.86 Las (Rs. 51.2 Lacs * 7 months/19 months) 2 27:00 1.11.03 to 30.11.04 Rs 10.38 Lacs (Rs. 27 Lacs * 5 months/13 months) Total Rs. 29.24 Las 20.2 Since the interest receipts are in cash, the Assessing Officer made the entire addition as undisclosed income. The Ld. CIT(A) affirmed the action of the Assessing Officer holding that, though the assessee has claimed that loose paper being page No. 80 does not contain any information as to whether interest income is earned or interest expenditure is incurred and this loose paper is rough noting and jotting. The Ld. CIT(A) held that the contention of Appellant cannot be accepted as page No. 80 has noting “levanabaki\" which means that amount is to be received hence interest working reflected in this loose paper refers to interest income accrued to Appellant. The assessee in his statement has stated that entries/figures in these pages are his small transactions with Harin Choksi hence loose paper cannot be held as dumb document as claimed by assessee. This is the amount earned by the assessee. With regard to the year of taxability, since the amount has been mentioned with regard to the months in specific, the amount is rightly taxed in the current year. Interest being the income received, no telescoping is allowed. Appeal of the assessee on this ground is thus dismissed. CO No. 5/Ahd/2020 – AY 2004-05 – By assessee 21. All the issues raised by the assessee in the CO have been dealt with in IT(SS)A Nos. 429/Ahd/2019 and 460/Ahd/2019. In the result, the appeals of the Revenue, Assessee and Cross-objection filed by the assessee for AY 2004-05 are partly allowed. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 55 AY 2006-07 IT(SS)A No. 472/Ahd/2019 – Revenue’s Appeal 22. Grounds of appeal raised by the Revenue are as follows :- “1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in law and on facts in restricting the addition to 2,52,15,500/- as against addition of Rs 9,94,00,000/- made on account of unaccounted income earned through the land transactions of SICCL 2. The Ld.CIT(A) has erred in holding that such disallowance was not warranted when income was estimated, without appreciating that the income of the assessee is required to be computed as per the provisions of the Act and when bogus claim of deduction u/s 37 exceeds the income estimated, the disallowance u/s 37 should prevail. 3. The Ld.CIT(A) has erred in not appreciating the fact that not disallowing the expenditure u/s 37 amounts to condoning transactions which are not otherwise allowable under the I.T. Act and places a tax payer who indulges in incurring bogus expenses and making unaccounted payments at the same level of a complaint tax payer, which is not the purpose or the intention of the IT Act. 4. The Ld.CIT(A) has erred in holding that the expenditure should be allowed as deduction based on entries in seized documents and such documents should be read as a whole, without appreciating that such a proposition cannot detract from application of the relevant provisions of the Act. 5. The Ld. CIT(A) has erred not following the principles laid down by the Hon'ble Jurisdictional High Court in the case of CIT Vs Hynoup Food & Oil Ind. (P) Ltd. - 150 Taxman 194 (Guj), Hynoup wherein disallowance u/s 40A(3) was upheld even when income was estimated in respect of unaccounted receipts. 6. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in law and on facts in deleting the addition made on account of unaccounted business receipt of Rs. 14,37,85,494/- in respect of land transactions at Ahmedabad, Rajkot, Bhavnagar and Jamnagar with SICCL even though no documents evidencing such application was pointed out by the assessee. 7. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in law and on facts in deleting the addition of Rs. 10,00,000/- made on account of unexplained expenditure incurred in the form of interest payments even though no link between this expenditure and the interest income was produced by the assessee. 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.” Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 56 IT(SS)A No. 431/Ahd/2019 - Assessee’s Appeal 23. Grounds of appeal raised by the assessee are as follows :- “1. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) ought to have appreciated that the Order passed by AO is void and illegal and is required to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A)has erred in confirming addition of Rs. 2,52,15,500/- by estimating income from project of SICCL @ 20% of Rs. 12,60,77,500/, when no such addition is called for. The addition confirmed by Ld. CIT(A) is required to be deleted. 3. In law and in the facts and in the circumstances of the appellant's case, even if income from project of SICCL is required to be estimated then it should be restricted to 12.5% of gross receipt as accepted by the appellant in his settlement application as well as his statement dated 29th February, 2006. 4. In law and in the facts and in the circumstances of the appellant's case, the Ld. CIT(A) has erred in estimating income from project @ 20% without appreciating that actual profitability from alleged project ranges from 6% to 11% which is evident from seized material found during the course of search. Addition in any case cannot exceed the actual profit earned by the appellant from alleged project. 5. In law and in the facts and in the circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition u/s 14A at Rs. 2,16,134/- when no such addition was required to be made. The same shall be deleted.” CO NO. 7/Ahd/2020 – By assessee 24 The grounds of cross-objections read as under :- “On the facts and in the circumstances of the case, the CIT(A) ought to have deleted addition of Rs.10,00,000/- made on account of unexplained expenditure incurred in form of interest payment on merits of the case, as such addition was based upon notings and jottings mentioned in loose paper, such loose paper being dumb document and there being no evidence of actual payment of interest.” Ground No. 1, 2 , 3 & 6 – Revenue’s appeal Ground Nos. 2, 3 & 4 – Assessee’s appeal Restricting the addition to Rs.2.52 Cr. from Rs.9.94 Cr. on account of land transactions of SICCL:- 25. This issue stands adjudicated while dealing with the appeal in IT(SS)A No. 460/Ahd/2019 for AY 2004-05. The same ratio applies for the year in question. In the result, the appeal of the assessee & Revenue on this ground is partly allowed. To clarify, 20% of Rs.9.94 Cr. is treated as income of the assessee. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 57 Ground No. 7 – Revenue’s appeal Rs. 10 Lakhs – Interest payment unexplained expenditure 26. This issue stands adjudicated while dealing with the appeal in IT(SS)A No. 460/Ahd/2019 for AY 2004-05. The same ratio applies for the year in question. In the result, the appeal of the Revenue on this ground is dismissed. Ground No. 5 – Assessee’s appeal – Rs.2,16,134/- disallowance u/s 14A. 27. Owing to the low quantum, it was submitted that the issue is not being pressed. Hence, dismissed. CO NO. 7/Ahd/2020 – AY 2006-07 – By assessee 28. The grounds raised by the assessee in CO are related to Ground No. 7 of Revenue’s appeal mentioned above; hence, the same ratio applies. In the result, the appeals of the Revenue & Assessee are partly allowed, while Cross-objection filed by the assessee is dismissed. AY 2003-04 IT(SS)A No. 462/Ahd/2019 - Revenue’s Appeal 29. Grounds of appeal raised by the Revenue read as under:- “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that any addition during the assessment u/s. 153A has to be confined to the incriminating material found during the course of search u/s.132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 58 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s.158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec. 153A and sec. 153B1 specifically states that the provisions of Chapter-XIV-B, under which sec. 158BB falls, would not be applied where a search was initiated u/s. 132 after 31/5/2003. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s.132 is conducted in the case of the assessee and that if the interpretation of the ld. CIT(A) were to hold it will not be possible to assess such income in the 153A proceedings, while no other parallel proceedings to assess such other income can be initiated, leading to no possibility of assessing such other income, which could not have been the intention of the legislature. 5. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in law and on facts in holding that addition of Rs 3,61,18,980/- being interest income, Rs.8,73,86,000/- on account of unexplained cash deposits in bank accounts and Rs.2,00,461/- being disallowance u/s 14A of the Act are beyond the scope of section 153A of the Act and thus deleting the said additions/disallowances. 6. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.3,61,18,980/- made on account of interest on loans/advances even on merits without appreciating the materials facts and evidences brought on record by the AO. 7. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 14,82,90,060/- made on account of land development, land filling and commission expenses in respect of SICCL projects without appreciating the material facts and evidences brought on record by the AO. 8. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.8,73,86,000/- made on account of unexplained cash deposits in bank accounts. 9. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in law and on facts in restricting the addition to Rs.24,14,000/- from Rs.4,69,81,000/-made on the basis of seized papers/ documents and thus allowing a relief of Rs.4,45,67,000/-. 10. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.” Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 59 CO NO. 193/Ahd/2019 – By assessee 30. The grounds raised by the assessee in its CO read as under:- “1. On the facts and in the circumstances of the case, the CIT(A) erred in upholding the validity of Assessing Order passed under Section 153A of the Act without appreciating the fact that such order is passed beyond the time limit prescribed under Section 153B of the Act. 2. On the facts and in the circumstances of the case, the CIT(A) erred in directing the AO to make addition of interest income of Rs.24,14,000 based upon loose paper found during the course of search and inventoried as page No. 80 of Annexure A/1 without appreciating the fact that such loose paper is rough noting and jotting and even noting pertaining to interest income nowhere proves that such interest income is actually received by appellant 2.1 On the facts and in the circumstances of the case, the CIT(A) ought to have appreciated that loose paper referred by itself contained noting that outstanding amount is not received by appellant till the date of noting. 3. On the facts and in the circumstances of the case, the CIT(A) erred in upholding addition of Rs. 13,50,000 based upon ad hoc disclosure made in Settlement Application which was subsequently rejected and such disclosure was made only to cover any discrepancies.” Ground No. 5 – Revenue’s Appeal – Disallowance u/s 14A – Rs.2,00,461/- 31. Owing to the low quantum, Ld. AR submitted that the issue is not being pressed. Hence, appeal of the assessee on this issue is allowed. Ground No. 6 – Revenue’s appeal - Interest Income - Rs.3,61,18,980/- 32. For the sake of ready reference, the relevant part of the Assessment Order for A.Y. 2003-04 on this issue is reproduced as under: 10.3 In response to the said show-cause notice dated 19.11.2018, assessee has filed submission dated 24.11.2018 received in this office on 26.11.2018 at 05.30 p.m. where assessee submitted copy of ledger of parties to whom loans and advances were given. Assessee failed to provide reasonable explanation regarding interest earned on loans/advances given to others and also failed to substantiate the same with documentary evidence. Assessee only submitted those details which were already available on record as attachment to audit report submitted by assessee. Assessee did not submit any details as to when such advances or loans were given or when it was received back. Assessee failed to justify why interest income was Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 60 not charged and if not so, why the same is not brought into books of account. It may kindly be noted that assessee mentioned words like \"cash\" \"Hawala\", \"LewanaChhe\" etc. in seized material which indicates large amount of cash transactions. Hence, assessee's reply is considered but not found acceptable. Therefore, interest income calculated @ 12% of loan/advance given as under.- SN. Particulars Loan Given (In Rs.) Interest @ 12% 1 Radhe Finance 14,94,54,193 1,7934,503 2 Abhyudaya Finance 60,63,863 3 Ashish P. Patel personal A/c. 14,54,73,445 1,74,56,813 Total :- 26,64,38,853 3,61,18,980 10.4 In view of the above, interest income of Rs. 3,61,18,980/- earned on loan/advances added to total income for A.Y. 2001-02 Penalty proceedings u/s 271(1)(c) of the I.T. Act are initiated for concealment of income\". 32.1 Aggrieved by the order of the Assessing Officer, the assessee has filed appeal before the ld. CIT(A) who allowed the appeal of the assessee. 32.2 Aggrieved by the order of the Ld. CIT(A), the Revenue filed appeal before the Tribunal. 32.3 Before us, the Ld. DR relied upon the order of the Assessing Officer, whereas the Ld. AR relied upon the order of the Ld. CIT(A). 32.4 We have gone through the facts of the case and submission / contentions / arguments made at assessment and appellate stage. It is seen that the A.O. has observed that assessee has given various loans and advances amounting to Rs.30.09 crores from his proprietary concerns on which no interest has been received. The A.O. has applied interest rate of 12% on such advances and made addition of interest income. On the other hand, the assessee has contended that he has claimed interest expenditure of Rs.6,81,590/- in year under consideration and borrowed funds were used for the purpose of his business. The A.O. has not proved that borrowed funds were used for giving interest-free advances and not made any disallowance of interest expenditure under Section 36(1) (iii) of the Act hence the A.O. cannot make addition of hypothetical income in present Assessment Order. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 61 32.5 Even otherwise, on merits of the case, it is observed that AO has made addition of interest income of Rs.3.61 crores only on the ground that assessee has given interest- free advances to various parties. It is not the case of the A.O. that there is diversion of borrowed funds for giving such advances or net interest paid during the year is not allowable as deduction under Section 36(1)(iii) of the Act. The assessee has claimed only very meagre amount of Rs.6.81 lacs in current year which itself demonstrates that the assessee was having sufficient funds to grant interest-free advances to various parties. Reliance is placed on the following decisions: (i) Gujarat High Court in the case of CIT V/s Arihant Avenue & Credit Limited 217 Taxmann 105 (ii) Delhi High Court in the case of CIT V/s Eicher Limited 185 Taxmann 243 (iii) Rajasthan High Court in the case of CIT V/s Vijay Solvex Limited 59 Taxmann.com 294 32.6 Further, we also find that the issue is covered by the order passed of the co- ordinate Bench in the assessee's own case of A.Y. 2002-03- IT(SS)A No. 461 & 470/Ahd/2019. 32.7 Keeping in view the facts mentioned hereinabove we affirm the decision of the Ld. CIT(A) in deleting the addition made on notional interest receivable which, in fact, has not been received by the assessee. 32.8 In light of the above discussion, the Appeal filed by the Revenue on this ground is dismissed. Ground No. 7 – Revenue’s appeal Restricting the addition made on account of land transactions of SICCL:- 33. This issue has been dealt in detail in IT(SS)A No.460/Ahd/2019 for AY 2004-05 and the same ratio applies in this year as well. To clarify, 20% of Rs. 14,82,90,060/- is treated as income of the assessee. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 62 Ground No. 8 – Revenue’s appeal Cash deposit of Rs. 8.73 Cr. 34. For the sake of ready reference, the relevant part of the Assessment Order for A.Y. 2003-04 on this issue is reproduced as under: \"8.2 In view of the above show-cause notice, assessee has filed submission dtd: 24.11.2018 received in this office on 26.11.2018 at 05:30 PM where assessee failed to provide detailed explanation regarding the above mentioned cash deposits in his bank accounts and also failed to substantiate the same with documentary evidence. It may kindly be noted that the assessee provided copy of excel sheet mentioned as Annexure-2 where each of the cash deposit mentioned in show-cause notice is explained as \"Out of available cash\". Assessee did not provide any documentary evidence whatsoever despite giving no. of opportunities. Assessee did not clarify what was the source of available cash and whether taxes were paid on the same. It is also important to note that mere submission of cash book is not construed as cogent submission sufficient to explain such huge cash deposit. 8.3 It is well known fact that the assessee was working in real estate sector and at the relevant point of time, the regulatory function in this sector were not able to curb generation or utilization of black money. It is all the more important to note that assessee was also involved in shroff business that means business involving activity like advancement of money for interest earnings. Most of the times, such activities involve huge amount of cash transactions and only a small portion of the same could be taxed as the same was deposited in the bank account. Further, on verification of the seized material, number of pages were seen where words like \"cash\", \"hawala\" etc were written. It shows that assessee deposited cash which was earned and no taxes were paid on the same. Such vague submission at the fag end of the assessment proceedings itself can not save assessee from the provisions of the law. 8.4 Hence, assessee's reply is considered but not found acceptable. Further, the assessee neither attended this office in response to the summons u/s. 131 of the Act dtd: 12.11.2018 & 19.11.2018 and merely filed adjournment letter, assessee did not produce details as called for in the summons within stipulated time. Therefore, it is clear that the assessee was intentionally delaying the assessment proceedings and he did not have any explanation for such cash deposits in his bank accounts. Therefore, cash deposits in different bank accounts of the assessee remains unexplained. All the cash deposits in different bank accounts is tabulated as under.... 8.5 In view of the above table, total cash deposit (Financial year wise) made by the assessee in his bank account are tabulated as under. A.Y. Total cash deposit 2003-04 8,73,86,000/- Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 63 Total 8,73,86,000/- 8.6 Accordingly, Rs. 8,73,86,00/- is considered as unexplained /unaccounted for the year under consideration and added to the total income of the assessee for A.Y. 2003-04. Penalty proceedings u/s.271(1)(c) of the Act are initiated for concealment of income for Α.Υ. 2003-04. 34.1 The CIT(A) while adjudicating the said issue has deleted the addition for the reasoning given at para 9.3-9.5 of his order. 34.2 We have gone through the facts of the case and submission/contentions/ arguments of both the parties along with documentary evidences, details of which are listed in the course of assessment proceedings as well as first appellate stage. The AO after referring to the bank statements of the assessee observed that there was a cash deposit of Rs. 8,73,86,000/-and treated the same as unexplained as the assessee had not explained the source of the cash deposit. The assessee had stated that the cash deposit was part of the cashbook along with the books of account maintained by the assessee. The source of cash deposit was out of cash withdrawals made earlier. Accordingly, the source of the cash deposit was duly explained by the assessee. In fact, the AO has not brought any evidence or any material cash deposit and in the absence of any record or material showing adversely, the contention of the assessee that the withdrawn cash was used in redepositing the same has to be accepted. Reliance in this regard is placed on the following decisions: (1) Commissioner of Income-tax-III v. Manoj Indravadan Chokshi-[2014] 50 taxmann.com 419 (Gujarat) As such the assessee did explain the cash deposit in his bank account by submitting that he has taken the same as unsecured loan from other persons whose names were also given by him. Thus, as such the assessee did explain his deposit of the aforesaid amount in his bank account. Thereafter, it was immaterial whether the assessee had withdrawn the said amount and applied subsequently for his own use by re-depositing the same in his bank account. As rightly observed by the Commissioner (Appeals), once the source of cash deposit in bank account is explained, subsequent withdrawal is not required to be explained. In the facts and circumstances of the case, Commissioner (Appeals) has not committed any error in restricting the addition to the extent of Rs. 7,95,160 on account of unaccounted income. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 64 The restriction of addition by the Commissioner (Appeals) is confirmed by the Tribunal by observing that the Assessing Officer did not find any discrepancy between cash withdrawal from the bank and cash available in the cash book on a particular date. The assessee had not claimed any expenditure on account of interest payment. The appellant had filed the confirmation of the persons from whom loans were taken Sic-taleen. The assessee neither paid interest nor earned any income on account of interest on advance. This aspect has not been doubted by the Assessing Officer. There is no limit in cash withdrawing the re-depositing in the bank account. The assessee has offered a plausible and satisfactory explanation before the Assessing Officer for each financial transaction. Assessing Officer had not brought on record any evidence which proves that cash withdrawal had been invested somewhere else and cash balance in the cash book is artificial. (Para 4] In the facts and circumstances of the case, the view taken by the Tribunal as well as the Commissioner (Appeals) restricting the addition to the extent of Rs. 7,95,160 is to be agreed with. Under the circumstances, as there arises no substantial question of law, present tax appeal deserves to be dismissed. (ii) Decision of Hon'ble ITAT Delhi Bench \"F\" in the case of Rajesh Mangla v. Deputy Commissioner of Income-tax 162 taxmann.com 324 (Delhi Trib.)[21-02-2024] 22. We have heard both the parties and perused the material available on record. As could be seen from the bank account statement, in the year under consideration, the assessee had deposited cash amounting toRs.30,95,000/-, whereas, he had total withdrawals of Rs.25,50,000/-. The consistent stand taken by the assessee is to the effect that cash deposits were made out of cash withdrawals. As can be seen from the materials on record, on 03.04.2010, the assessee withdrew cash of Rs.7,50,000/- whereas, he deposited cash of Rs.3,00,000/- on 25.05.2010. Similarly, he withdrew cash of Rs.7,50,000/- on 26.06.2010 and 26.08.2010and deposited cash aggregating Rs.4,45,000/- on 31.08.2010 and 21.10.2010. Further, cash aggregating toRs. 10,50,000/- was withdrawn on 06.12.2010 and 18.01.2011. Whereas, cash deposits of Rs. 6,50,000/- was made on 02.02.2011. As can be seen from the aforesaid facts, the proximity between cash withdrawal and deposit is quite close, Further, the Departmental Authorities have not brought any material on record to establish that the cash withdrawals were utilized for any other purpose and not available with the assessee for re-deposit. Thus, applying the ratio laid down in the judicial precedents cited before us, we hold that the source of cash deposit has been explained by the assessee. Accordingly, we delete the addition of Rs. 13,50,000/- 23. In the result, the appeal is allowed. (iii) The Decision of Hon'ble ITAT Jaipur Bench \"A\" in the case of Ajay Data V. ACIT [2025] 171 taxmann.com 308 (Jaipur Trib.) 6. We have considered the rival submissions as well as the relevant material on record. We note that the only issue in this ground is whether the Ld. CIT(A) is justified in not allowing set off of cash considered unexplained by him against the Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 65 cash withdrawal of Rs.4,72,000/-made from M/s Vijay Industries between 05.04.2014 to 20.04.2015. We note that no document is found in search to come to a conclusion that the amount withdrawn by the assessee from M/s Vijay Industries has been utilized elsewhere. There is no law which prohibits an assessee to keep cash in hand and therefore only because assessee has not given explanation as to why the cash was withdrawn, when he has withdrawn the cash earlier also cannot be aground to reject the explanation of assessee. In various cases referred above, it has been held that where no evidence is brought on record that cash withdrawal has been utilized elsewhere, such cash should be considered as available with the assessee. Considering all these facts, we direct the AO to delete the addition of Rs. 4,28,830/- made by him. (iv) Delhi ITAT in the case of Muon Computing (P) Ltd. v. ITO ITA No. 7606/Del/2019 order dt.04.08.2021 (Del.) (Trib.) The relevant para 9 of this decision is reproduced as under:- \"9. There is no dispute with regard to the fact that Revenue has not brought any material suggesting that the withdrawal made by the assessee were utilized for making payments. It is also not brought on record that the amounts so withdrawn from the bank account was utilized for any other undisclosed purposes. Further, it is noticed that learned CIT(A) observed that despite having sufficient cash in hand, the assessee withdraw the amount. It is correct that the assessee has withdrawn higher amounts than the immediate preceding years but that cannot be sole reason for making addition purely on the basis of suspicion. Further, I failed to understand the reasoning of the AO that the amount was withdrawn to justify the cash deposits during demonetization period ie., between 9th Nov., 2016 to 30th Dec., 2016. It is also seen that the cash was withdrawn much prior to such event. So far observation regarding sharp increase in payable expenses is concerned, there is no finding by the AO that such expenses are bogus. Therefore, in my considered view, the addition has been made purely on the basis of suspicion. Such action of authorities below cannot be affirmed. I, therefore, direct the AO to delete the impugned addition. Thus, ground raised by the assessee in this appeal is allowed.\" (v) Delhi ITAT in the case of Nand Kumar Taneja & Anr. v. ΙΤΟ (2019) 55 CCH 0705 (Del.) (Trib.) The relevant para 6 & 7 of this decision is reproduced as under- \"6. Apart from that, the details of; opening cash, cash withdrawal, cash deposited, cash expenditure; closing cash in hand and increase cash in hand, in case of both the assessees were given before the authorities below, which has been incorporated above in para 3 and 3.1 No discrepancy or any inquiry has been done by Assessing Officer to disapprove the cash disclosed in the books of account and balance sheet. The sole reason for disbelieving the assessee's explanation is that, firstly, no prudent person after withdrawing the cash will keep at home; and secondly, if there was an account having negative balance on which interest is being charged, then there was no need to keep such huge cash in hand at home. Such reasoning dehors any contrary material on record that the cash disclosed in the books of accounts has been invested Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 66 somewhere else, then on mere surmise assessee's explanation cannot be discarded. If assessees have genuine sources of income which are received through banking channels, out of which cash has been withdrawn and have been disclosed in the income tax return and in the balance sheet as cash-in-hand, then I am unable to apprehend how the provision of section 69A is applicable. Because the section can only be invoked where in any financial year the assessee is found to be the owner of any money, etc., which has not been recorded in the books of account and assessee offers no explanation. Here in these cases, Assessee's cash in hand duly stands recorded and source has been explained from the income deposited in the bank account and withdrawal, then in my opinion deeming provision of section 69A cannot be invoked. The reasoning given by the AO and Ld. CIT (A) is vague and based on surmise as to what a prudent person should have done. Once assessee has explained that being of senior citizen they have maintained such liquidity of cash out of their own disclosed income with them for certain contingencies, then without any material to controvert such an explanation, addition cannot be sustained. Assessees before the lower authorities have filed following documents to substantiate the cash in hand with them: a. Income Tax Return with computation of total income. b. Balance Sheets for FY 2013-14, 2014-15 and FY 2015-16, c. Comparative Chart of cash movement FY 2013-14, 2014-15 and FY 2015-16. d. Cash book maintained by the assessee, e. Kotak Mahindra Bank Statement bearing A/c No. 6311509485f. Standard Chartered Bank: Statement of account. g. Bank: Book of Kotak Mahindra Bank. h. Bank Book of Standard Chartered Bank. i. Copy of all medical treatment documents. 7. All these documents have neither been rebutted nor there is any finding that cash- in-hand disclosed in the balance sheet was beyond the scope of their income or are not substantiated from the bank account. Simply because after the period of demonetization, that is, 08.11.2016, certain amount of cash has been deposited in the bank account, it does not mean that the cash in-hand as on31.3.2015 and 31.03.2016, duly shown in the balance sheet and disclosed to the department in the respective income tax return filed much earlier, is unexplained. Accordingly, in view of the above reasoning, addition made by the AO and sustained by the Ld. CIT (A) is directed to be deleted.\" (vi) Decision of Hon'ble Delhi ITAT in the case of Neeta Breja v. ITO ITA No. 524/Del/2017 order dt.25.11.2019 (Del.) (Trib.) The Hon'ble ITAT at Para 12 of its order held as under- 12. In the present case also the learned assessing officer or the learned CIT A did not show that above cash was not available in the hands of the assessee or have been spent on any other purposes. Further the coordinate bench in ACIT v. Baldev Raj Charla (2009) 121 TTJ 366 (Delhi) also held that merely because there was a time gap between withdrawal of cash and cash deposits explanation of the assessee could not be rejected and addition on account of cash deposit could not be made particularly when there was no finding recorded by the assessing officer or the Commissioner that apart from depositing this cash into bank as Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 67 explained by the assessee, there was any other purposes it is used by the assessee of these amounts. In vino of above facts, the ground number 1 of the appeal of the assessee is allowed and orders of lower authorities are reversed. 34.3 We find that the action of the A.O. in making the addition is on assumption without bringing any corroborative evidence to substantiate and prove that the cash withdrawn by the assessee was utilised and invested elsewhere. The assessee had submitted necessary evidences in the assessment proceedings to prove the source of cash deposit in the bank accounts. The assessee has also provided entire bank statements reflecting withdrawal of cash prior to the deposit in the bank accounts. Further no defects have been along with cash book forming part of audited financial statements. In fact, it is also seen that assessment under section 143(3) r.w.s. 153A was completed prior to this assessment order wherein A.O. has accepted various cash transactions including cash deposits as genuine cash deposits. 34.4 We also find that CIT(A) has observed that, that there is no negative cash balance and cash deposited in bank accounts are mainly from cash withdrawals forming part of regular books of account. Since the Assessing Officer has been unable to bring on record any instances of unaccounted receipts which has not been subjected to tax and also not been able to controvert factual submissions made by the Ld. AR clearly pointing out that the deposits have been made from available cash on hand the addition has been rightly deleted by Ld. CIT(A) 34.5 In our opinion, the assessee discharged his onus of explaining the nature and source of the transaction in the proceedings. On holistic consideration of the entire facts and circumstances of the case, the submissions and evidences filed including the reconciliation statement, we find that the CIT(A) has rightly deleted the addition on account of unexplained cash deposit since it has been made from the explained sources in his bank account. The entire details of cash deposits and withdrawals have been tabulated by the Ld. CIT(A) in his order at page no. 62 to 74. 34.6 Accordingly, we find no reason to interfere with the findings of the CIT(A) and the appeal of the Revenue on this ground is dismissed. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 68 Ground No. 9 – Revenue’s appeal Ground No. 2 of CO No. 193/Ahd/2019 Addition based on seized documents 35. The Addition made of Rs.4,69,81,000/- requiring adjudication and for which cross appeals are filed are purely facts based issue arising from interpretation of loose papers having various notings and appreciation regarding facts of the case. These items were subjected to examination at the AO level and further at the CIT(A) level. Each of the subject matter of addition arising from notings and jottings from the loose papers were discussed during the course of the hearing 35.1 For the sake of ready reference, the relevant part of the Assessment Order for A.Y. 2003-04 on this issue is reproduced as under: 9.4 In view of the above facts, assessee's reply is considered but not found acceptable due to above mentioned reasons. Therefore, as per column 4 of the table, the quantum as per seized documents remains unexplained to the extent of Rs. 4,81,37,000/- as follows:- SN Particulars AY Amount as per loose paper 1 Page no. 49 of Annexure A/1 2003-04 Rs.66,00,000 2 Page – 78 of Annexure A/1 2003-04 Rs.5,30,000/- 3 Page 80 of Annexure A/1 2003-04 Rs.1,57,51,000/- 4 Page 84 of Annexure A/1 2003-04 Rs.2,41,00,000/- Total Rs.4,69,81,000/- 9.5 In view of the above facts and compliance status ie. partial submissions or adjournment letter or irrelevant submission or non-submission, it is clear that the assessee intentionally does not want to explain the page wise seized documents during the course of search action as mentioned above and hence the entries on page-49, 78, 80 & 84 of Annexure A-1 seized at 2, Vithalbhai Patel Colony, Nr. Sardar Patel Colony, Navrangpura, Ahmedabad on 04.08 2006. Therefore, as per column 4 of the table mentioned Rs. 4.81.37.000/- remains unexplained and added to the total income of the assessee for A.Y. 2003-04 Penalty proceedings u/s 271(1)(c) of the Act for A Y 2003-04 are initiated for concealment of income. 35.2 The above loose papers in the table(supra) have been reproduced at page No. 26 to 31 of the Assessment Order of A.Y. 2003-04. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 69 35.3 Out of the addition made of Rs. 4,69,81,000/- in the assessment order. CIT(A) deleted the addition of Rs.4,45,67,000/- and sustained addition of Rs.24,14,000/-. The assessee has filed C.O. on the addition confirmed by the CIT(A) of Rs. 24,14,000/-. 35.4 We have gone through the facts of the case and observe that the Assessee has furnished relevant explanation along with documentary evidences, details of which are listed above in the course of assessment proceedings as well as first appellate stage. We have gone through the loose papers and observed that the AO had made addition of Rs.66,00,000/- on the basis of Page No. 49 of Annexure A/1 found and seized in search. The Ld. AR in the course of the hearing submitted that this loose paper is a dumb document and on the basis of the same no adverse action is warranted. 35.5 The notings in the loose paper seized are mere scribblings and do not contain any details so as to form any opinion as to whether that the same in in the nature of income Rs. 66,00,000/- which has been added by the AO. The incompleteness of the jottings can be seen from the fact that the scribblings do not contain any details viz. (a) There is no decoding of 66. (b) No names of the parties are mentioned. (c) No discerption about the land or other things is noted. (d) No details about the entity to which it is pertain is noted. (e) No reasonable conclusion can be drawn from such notings. (f) No corroboration of such notings made. 35.6 The CIT(A) has also observed that while recording the statement the assessee had categorically stated that these transactions have not been executed. The CIT(A) observed the following: 10.4 The AO has made addition of Rs 66,00,000 based upon loose paper page No 49 of Annexure A/1 which is reproduced at para 13.1 (1) of written submission herein above. This loose paper contains word \"profit - 66\" which is considered as unaccounted profit of Rs 66,00,000 by AO This loose paper is dated 24th March, 2003 The Appellant in his statement recorded during the course of search on 4 August, 2006 has stated that this loose paper pertains 1.6 lakh yards and 40,000 yards of land near to Radhe Acre 2 whose cost was Rs.3.85 crores and profit of Rs. 66,00.000 is to be given to broker but deal was not executed. On perusal of this loose paper it is seen that nowhere the name of Appellant is mentioned/other parties to the transactions is mentioned nor it proves that profit of Rs 66 lacs is accrued to Appellant It is mentioned that in meeting conducted on that day, following conditions are decided which includes profit of Rs 66 lacs However, this Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 70 does not mean that actual land transaction has taken place and Appellant has received such amount. While recording his statement, Appellant has categorically stated that this land transaction has not been executed and AO has not brought anything on record to prove that such transaction was actually materialised. When loose paper found during the course of search does not provide actual trail of the transaction or proves that Appellant has earned such profit, such loose paper is a dumb document and addition cannot be made based upon such loose paper. 35.6A. We may like to state that similar type of scribbling or notings or jottings were found and seized during the course of search for which addition is made by the A.O. in other A.Y. which are before us. It would be relevant now to discuss about admissibility of the notings/jottings/scribblings in the loose paper for which the Courts have consistently held that the onus is on the revenue to establish that the addition that is made is within the taxing provision. The addition cannot be made on the basis of assumption, surmises and conjectures and without corroborating the same. In the absence of the corroborative evidence and merely on the basis of notings found in the loose paper it is not open for the Revenue to make addition based on any scribblings or jottings found in the loose paper. Various Courts from time to time has held that addition in the absence of any corroborative evidence is not sustainable. Reference in this regard is made on the following decisions: (i) The Hyderabad bench of ITAT in case of Nagarjuna Construction Co. Ltd. v. Dy. CIT [2012] 23 taxmann.com 239/52 SOT 178 (URO) held as under: - “…………..The basis for addition is only note book/loose slips. These note books/loose slips are unsigned documents. Assessing Officer has not established nexus between the note book loose slips with accrual actual/receipt of interest. The note book/loose slips seized found during the course of search is a dumb document having no evidentiary value, no addition can be made in the absence of corroborative material. If there is circumstantial evidence in the form of promissory notes, loan agreement and bank entries, the addition is to be made on that basis to the extent of material available. The assessee is not expected to explain the loose papers found as there is no evidence other than note book/loose slips regarding accrual of interest. It is held no addition can be made on the basis of dumb documents/note book/loose slips in the absence of any other material to show that the assessee has carried on money lending business. Nothing on the note book/diary/loose sheets are required to be supported/corroborated by other evidence and are also include the statement of a person who admittedly is a party Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 71 to the noting and statement from all the persons whose names there on the note book/loose slips and their statements to be recorded and then such statement undoubtedly should be confronted to the assessee and he has to be allowed to cross examine the parties. In the instant case, undoubtedly no statement from the parties whose names found in the note book/loose slips has been brought to the notice and as such entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search is not possible.\" (ii) The Hon'ble Punjab and Haryana High Court in case of CIT v. Atam Valves (P.) Ltd. [2009] 184 Taxman 6: Held, by dismissing the Revenue's Appeal and held that no substantial question of law arose out of the Order of the Tribunal. In this case, a survey was conducted u/s. 133A and certain incriminating documents were found including a 'Slip Pad' containing payment of wages to various persons. The slips were written by Manoj Jain, an employee of the assessee, who was confronted with the slips, apart from questioning of the Director. It was held by the Tribunal that even though explanation of the assessee that the loose papers did not relate to payment of wages during the year in question may not be accepted, in absence of any other material, the loose sheets by itself were not enough to make addition as per estimate of the A.O. It was observed by the Tribunal (as quoted):- \"Now the question is regarding estimating the income on the basis of these loose slips. In our opinion, the Assessing Officer is not justified in estimating the sales on the basis of loose slips without substantiating that the assessee has actually made the sales to that extent of estimation made by the Assessing Officer and having no iota of evidence in the form of sale bills or bank account or movable and immovable property which represent earning of unaccounted income by the assessee. As such, the Id. CIT (A) to that extent is justified in holding that estimation of sales on the basis of loose slips represented payment of wages is not possible.\" (iii) The Delhi ITAT in case of Neeraj Goel v. ACIT [IT Appeal No. 5951 (Delhi) of 2017, dated 21-3-2018] held that: \"addition on account of alleged interest income is not sustainable in the eyes of law, because the document does not mention the name of the assessee, does not bear the signature of the assessee, not in the handwriting of the assessee, documents has imply jottings of certain figures and does not indicate whether it is an investment or deposit or loan, hence, the said seized document is dumb/bald and even otherwise, the same was never found either in the possession or control of the assessee. Therefore, on this basis, I delete the addition in dispute and accordingly reverse the orders of the authorities below. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 72 (iv) Hon'ble Supreme Court in case of Common Cause v. Union of India [2017] 77 taxmann.com 245/245 Taxman 214/394 ITR 220. In this case, the Hon'ble Supreme Court, following the judgment rendered in case of V.C. Shukla (supra), laid down the following principles:- (i) Entries in loose papers/sheets are irrelevant and not admissible under section 34 of the Evidence Act. It is only where the entries are in the books of account regularly kept, depending on the nature of occupation, that those are admissible; (ii) As to the value of entries in the books of account, such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. Even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability; (iii) The meaning of account book would be spiral note book/pad but not loose sheets; (iv) Entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another, (υ) Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is not enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts; (vi) The Court has to be on guard while ordering investigation against any important Constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the material on the basis of which investigation is sought is itself irrelevant to constitute evidence it is not admissible in evidence. Relying on the judgment of the apex court in case of Common Cause (supra), the Hon'ble Bench of ITAT, Ahmedabad in case of Nishant Construction (P.). Ltd. υ. ACIT ITA No. 1502/AHD/2015], held that in the absence of any corroborative evidence, loose sheet can at the most be termed as \"dumb document\" which did not contain full details about the dates, and its contents were not corroborated by any material and could not relied upon and made the basis of addition. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 73 (v) The Delhi ITAT in case of Shri Neeraj Goel Vs. ACIT in ITA No. 5951/Del./2017 vide order dated 21/03/2018 held that, \"addition on account of alleged interest income is not sustainable in the eyes of law, because the document does not mention the name of the assessee, does not bear the signature of the assessee, not in the handwriting of the assessee, documents has imply jottings of certain figures and does not indicate whether it is an investment or deposit or loan, hence, the said seized document is dumb/bald and even otherwise, the same was never found either in the possession or control of the assessee. Therefore, on this basis, I delete the addition in dispute and accordingly reverse the orders of the authorities below.\" (vi) The Mumbai ITAT in case of ITO Vs Kranti Impex Pvt. Ltd. in ITA No. 1229/Mum/2013 vide order dated 28/02/2018 held that, \"since the impugned seized papers are undated, have no acceptable narration and do not boar the signature of the asseessee or any other party, they are in the nature of dumb documents having no evidentiary value and cannot be taken as a sole basis for determination of undisclosed income of the assessee. When dumb documents like the present loose sheets of papers are recovered and the Revenue wants to make use of it, the onus rests on the Revenue to collect cogent evidence to corroborate the noting therein. The Revenue has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized papers reveal the unaccounted on-money receipts of the assessee. Further, no circumstantial evidence in the form of any unaccounted cash, jewellery or investments outside the books of account was found in course of search in the case of assessee. Thus, the impugned addition was made by the AO on grossly inadequate material or rather no material at all and as such, deserves to be deleted. Hence, we are of the view that an assessment carried out in pursuance of search, no addition can be made simply on the basis of uncorroborated noting in loose papers found during search because the addition on account of alleged onmoney receipts made simply on the basis of uncorroborated noting and scribbling on loose sheets of papers made by some unidentified person and having no evidentiary value, is unsustainable and bad-in- law. (vii) ITAT Hyderabad Sri Tarun Kumar V. Asst. Commissioner of Income Tax, Central Circle-3(2), Hyderabad Goyal456/Hyd/20 dated 20.04.2021: 13. Lastly comes the crucial issue as to whether the impugned seized material / 'Excel' sheet (not mentioning the assessees' names) forms a dumb document or not. We make it clear that the department has failed to corroborate the impugned seized document indicating assessee's alleged on money payment over and above the sale price itself. All it has done is to rely on their father's name only. It is nowhere clear as to whether it is an alleged document forming part of the books of account maintained in the regular course of business either by the vendor or vendee side. All it contains therefore is rough notings and jottings only. This tribunal co-ordinate bench's decision Nishan Constructions Vs. ACIT ITA No.1502/Ahd/2015; after considering the hon'ble apex court's landmark decision Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 74 in Common Cause, Vs. Union of India (2017) 77 taxmann.com 245 (SC) and CBI Vs. V.C. Shukla (1998) 3 SCC 410 (SC) holds that such loose sheets deserves to be treated as a dumb documents only since not revealing full details about the dates containing lack of further particular s and therefore, ought not to be made basis of an addition. Similar other judicial precedents ACIT Vs. Layer Exports P. Ltd., (2017) [184 TTJ 469] (Mumbai) & ITO Vs. Kranti Impex Pvt. Ltd., ITA No. 1229/Mum/2013, dt.28-02-2018 (dealing with a seized document seized not either bearing the taxpayer's name or signature). Shri Neeraj Goyal Vs. ACIT, ITA No.5951/Del/2017, dt.21-03-2018, (Del) (2012) 23. taxmann.com Vs. DCIT, CIT Vs. 269) Nagarjuna Construction Co. Ltd., S.M.Agarwal, [293 ITR 43], CIT Vs. Shri Girish Chaudhary (2008) 296 ITR 619 (Del) also echo the very principle. We accordingly hold that the impugned addition of on-money payment made in both these assessees hands on the basis of a mere dumb document and not corroborated by any other evidence is not sustainable. We thus direct to delete the impugned identical addition forming subject matter of adjudication in both these cases. (viii) CIT vs. Vivek Aggarwal [2015] 56 taxmann.com 7 (Delhi) wherein it was held as under: Section 69A, read with sections 132 and 158BB, of the Income-tax Act, 1961 Unexplained moneys (Seized documents) - Block assessment years 2001-02 to 2007-08-A search was carried out at assessee's premises in course of which Assessing Officer seized certain letters/e-mail - On basis of said documents, Assessing Officer made addition to assessee's income on account of undisclosed salary Commissioner (Appeals) as well as Tribunal deleted addition holding that in absence of any corroborative material to link such e-mail letter or its contents with assessee, inference that some additional income was earned by him by way of salary, was incorrectly drawn Whether since document seized was both undated and unsigned and even taken at face value did not lead to further enquiry on behalf of Assessing Officer, impugned order of Tribunal deleting addition was to be confirmed - Held, yes [Para 13] [In favour of assessee] (ix) ACIT, CENTRAL-1 BHOPAL VERSUS M/S. K.L. SHARMA & SUNITA ITAT INDORE dated MAHESHWARI, BHOPAL, TMI 1016 11.02.2022: \"Unaccounted cash expenditure u/s. 69C-Addition on the basis of some jottings found made in a diary seized during the course of search from the residence one of the partners of the assessee firm -HELD THAT: We are of the considered view that the impugned addition for unaccounted cash expenditure has rightly been deleted by the Ld. CIT(A) as they were merely based on the rough jottings on the alleged seized loose papers which do not convey either receipt/ payment, mode thereof, nature of transaction etc.. Undisputedly, neither during the course of the assessment proceedings nor during the course of submission of remand report before the Id. CIT(A), the AO was able to bring any single cogent material or evidence on record to justify the addition made on the basis of uncorroborated jottings in the diary. Therefore, the alleged seized loose papers are only Dumb Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 75 documents and no addition could have been made on such dumb documents. We therefore, do not find any reason to interfere in the findings of the ld. CIT(A) deleting the addition made in the assessee's income for A.Y. 201011. Accordingly, the ground No. 2 of the Revenue for A.Y. 201011 is dismissed. 12.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides. We observe that the AO, except placing sole reliance upon some jottings made on page nos. 2 to 12 of the diary LPS12, has not brought any cogent material or evidence on record to substantiate his allegation that the jottings made in the diary were actually pertaining to the transactions carried out by the assessee firm. We further note that the jottings made in the said diary are in abbreviated form, the figures jotted in such diary are in decimals from which it could be anybody's guess that whether the jottings are in hundreds or thousands or lakhs or crores and unless these jottings are corroborated with any cogent material on record, no definite conclusion can be drawn on the basis of such jottings. We also note that from these jottings, it is not discernible that who made such jottings, when such jottings were made and what was the purpose of making such jottings. These jottings also do not speak about carrying out of any actual transaction and as also, the nature thereof if they at all pertain to any transaction. From such jottings, it cannot be conclusively proved that these jottings pertained to the assessee firm only and not to any other entity. 15.4 In view of our detailed findings made above, we are of the considered opinion that the jottings made in the diary are only rough jottings which do not convey either receipt/ payment, mode thereof, nature of transaction, amount of transaction whether in hundreds, thousands or lakhs etc.. Thus, the said diary could only be termed as a 'dumb' document. Since we have already discussed at length the various judicial authorities while giving our findings in respect of Ground No. 2 of the Revenue for the A.Y. 2010-11, the same are not being discussed here again. Thus, considering the facts and circumstances of the case, we do not find any infirmity in the findings of the ld. CIT(A) in deleting the additions Rs. 1,50,00,000/-, Rs. 1,55,00,000/- and Rs.37,00,000/- respectively for A.Y. 2010-11, A.Y. 2011-12 and A.Y. 2012-13, made by the AO on account of unaccounted cash payments to Partner Shri K.L. Sharma. Similarly, we also consciously uphold the findings of the ld. CIT(A) in deleting the of Rs. 1,65,00,000/-Rs. 1,50,00,000/-, Rs. 1,00,00,000/- respectively for A.Y. 2010-11, A.Y. 2011-12 and A.Y. 2012-13, made by the AO on account of unaccounted cash payments to Partners Smt. Sunita Maheshwari and Shri Suresh Kumar Maheshwari. Accordingly, the Ground Nos. 3 & 4 of the Revenue for A.Y. 2010-11 and Ground Nos. 2 & 3 for A.Y. 2011-12 and A.Y. 2012-13 are hereby dismissed. 51. In the result, all the captioned appeals at the instance of revenue are dismissed.\" Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 76 (x) Smt. Harmohinder Kaur v. Deputy Commissioner of Income-tax, Central Circle-II, Jalandhar [2021] 124 taxmann.com 68 (Amritsar - Trib.): Section 69A, read with section 292C, of the Income-tax Act, 1961-Unexplained money (Presumptive addition) - Assessment year 2009. 10- Assessee sold a property and derived long-term capital gain -During search, diary of a third party was seized from residence of assessee - This diary had notings which showed an amount of Rs. 1.15 crores as sale consideration Assessing Officer observed that in registered sale deed, total consideration was shown at Rs. 29.50 lakhs - By making presumption as per section 292C, he considered sale consideration shown in diary as actual consideration and made additions accordingly - There was nothing on record to suggest that assessee had underestimated value of property and violated circle rate as prescribed by government - Even diary admittedly did not belong to assessee and noting of same were also not in handwriting of assessee Furthermore, entry recorded in diary qua amount of sale was not confirmed from buyers of property -Whether since Assessing Officer had drawn presumptions only on basis of notings of diary without making independent exercise; and entry found in diary was without any corroborative evidence and had no authenticity, no additions could be made in assessee's income - Held, yes [Paras 11 and 13] [In favour of assessee) (xi) ITAT MUMBAI BENCH 'D' in case of Embee Clearing & Shipping Services (P.) Ltd.* v. Assistant Commissioner of Income-tax, Circle 6(2), Mumbai vide [2007] 12 SOT 227 (MUM.) \"....III. Section 69 of the Income-tax Act, 1961 Unexplained investments Block period 11-1-1996 to 3-12-1999 - Whether in order to bring a case within ambit of section 69, Assessing Officer must bring sufficient materials on record to establish that assessee has made investments, which are not recorded in books of account maintained by him and that assessee has failed in satisfactorily explaining nature and source of such investments Held, yes Whether mere jottings in codified form on a sheet of paper seized on search under section 132 do not lead to presumption that such entries or jottings are investments hit by section 69 - Held, yes The Assessing Officer presumed the unexplained nature of jottings made in the said seized paper without examining the concerned parties who have filed their affidavits. Additions cannot be made on the basis of conjectures and surmises. In our view, the materials brought on record by the Assessing Officer are not sufficient to bring the case of the assessee within the ambit of section 69 of the Income-tax Act. Ground No. 2 is allowed. 13. Appeal filed by the assessee is allowed. 14. Before parting with both the matters, we may mention that all the submissions made by the parties including the authorities referred to by them at the time of hearing as also those mentioned in their written submissions have duly been considered though they may not have specifically been discussed in this order.\" Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 77 (xii) ITAT AMRITSAR in case of MR. RAJIV KUMAR KHANNA C/O M/S TIRATH RAM BANDARI NATH VERSUS DY. COMMISSIONER OF INCOME TAX, CIRCLE-II, BATHIND Avide 2022 (9) TMI 576 \"Addition of income from other sources u/s 69A-Assessee was found in possession of loose slips addition as made on assumption and presumption. HELD assessee challenged THAT:-As in the case at hand, it abundantly clear that the appellant was neither found to be owner of any money, Bullion or Jewellery etc., nor there was any value of such assets recorded in the books of account of the Assessee and further the explanation offered relating to the alleged amount supported by the statement of Mrs. Balwant Kaur as proves that no such amount was carried by the appellant to the office of Sub Registrar on 30.08.2010. Accordingly, the addition confirmed by the CIT(A) based on assumption and presumption u/s 69A of the act, without support of any cogent material evidence on record to establish that any disputed cash was found in the custody of the appellant and therefore, in our view, the addition confirmed by the CIT(A) is unjustified, unwarranted and illegal. The same is deleted. Thus ground nos. 3 and 4 are allowed.\" (xiv) Hon'ble Supreme Court Decision in J.J. Enterprises vs. Commissioner of Income-tax [2002] 122 Taxman 124 (SC) \"Head Note: Section 4 of the Income-tax Act, 1961 Income Assessable as Whether in matter of fact Tribunal's conclusion is final-Held, yes -Whether finding of Tribunal that addition to assessee's income had been made based on pure guess work, being a finding of fact, no question of remanding said issue to Assessing Officer for re- examination arose at all - Held, yes\" (xv) ACIT V/s M/S. SAHJHANAND EXPORTS vide 2023 (1) TMI 521-Surat \"HELD THAT:- We note that findings of ld CIT(A) states that such additions has been made merely on presumption that the assessee must have paid commission to accommodation entry provider. The assessing officer has not proved with cogent evidence that assessee has paid commission, hence such addition is not sustainable in the eye of law. Therefore, we note that conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss the ground raised by the Revenue.\" 35.7 In view of the above legal preposition of various Courts it is a well settled legal position that a non-speaking loose paper / scribbling without any corroborative documentary evidence on record and findings that such loose paper / scribbling has Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 78 materialized into transaction giving rise to the income of the assessee has to be disregarded for the purpose of assessment to be framed pursuant to search and seizure action. From the search and seizure perspective such non-speaking loose paper / scribbling are referred to as the dumb document. The Delhi ITAT in case of Ashwini Kumar v. ITO reported in (1991) 39 ITD 183 held that in the case of dumb document, revenue should collect necessary evidence to prove that the figures represent incomes earned by the assessee. As the loose paper / scribbling does not speaks about the real nature, in our considered view, no addition could be made on the basis of such loose paper / scribbling which have not been corroborated by any other evidence found as a result of search or brought on record by making independent enquiries during the course of appellate proceedings by Ld. CIT(A). It is further seen that no corroborative evidences or material was brought on record with respect to such alleged cash transactions either found as result of search or collected during post search investigation. 35.8 Having regard to the scribblings / jottings found and seized in the loose paper, the action of the AO in making the addition was on assumption and presumption basis without bringing any corroborative evidence was purely on suspicious basis. Accordingly, we hold that the CIT(A) was correct in deleting the addition and therefore we direct the A.O. to delete addition of Rs 66,00,000/-. 35.9 Regarding the addition of Rs.5,30,000/-, Rs.1,57,51,000/- and Rs.2,41,00,000/, we have gone through the loose papers and observed that the jottings in the loose papers are rough and tentative in nature and do not convey any conclusive finding from which decisive conclusion could be reached. Also, the A.O. has also not brought any corroborative material or evidence so as to prove that the jottings made in the loose papers has indeed taken place and represents actual transactions. Notwithstanding to the above the A.O. has not carried out any independent inquiry for coming to the conclusion that transaction has taken place. It is beyond our comprehension to believe that such type of scribblings in absence of corroborative evidence and independent inquiry leads to an addition particularly when the details about the parties, entities, nature, etc is missing. We have already discussed the evidentiary value of the notings Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 79 / scribblings in the loose paper supra. When no credible evidence of any unaccounted investment / earning of income is unearthed in respect of such notings during the course of search action the question of making addition on presumption and assumption does not survive. It is a settled proposition in law that no addition can be made on conjecture and surmises. The Hon'ble Supreme Court has dismissed the SLP by the revenue in the case of Commissioner of Income Tax v. Jeet Construction Co. [2021] 124 Taxmann.com 527. 35.10 The observation of the CIT(A) in respect of the additions made by the AO of Rs.5,30,000/-, Rs.1,57,51,000/- and Rs. 2,41,00,000/- as under: 10.5 So far as addition of Rs. 5,30,000 made by AO is concerned, it is observed that such addition is based upon loose paper No. 78 of Annexure A/1, reproduced herein above, which contains noting of received interest from 6-3-98 2003 for Rs. 5,30,000. The loose paper itself speaks about receipt of interest hence this loose paper cannot be held as dumb document, as stated by Appellant. However, this loose paper contains interest from 1998 to year under consideration i.e. for five years which means that interest income attributable to current year is Rs. 1,06,000 (5,30,000/5). On this basis, interest income of Rs. 1,06,000 is required to be taxed in the hands of Appellant. However, Appellant has already offered additional income of Rs. 13.50 lacs before Hon'ble Settlement Commission and also subject matter of addition by AO in present order which is already confirmed in preceding paras hence separate addition of Rs 1,06,000 is not made However, if at a subsequent stage it is held that Appellant is not liable for taxation for above referred Rs. 13.50 lacs. Separate addition of Rs.1.06 lacs needs to be upheld. On this ground, addition of Rs.5,30,000 is deleted. 10.6 The addition of Rs. 1.57 crores based upon page No. 80 of Annexure - A/1 and Rs.2.41 crores based upon page No. 84 of Annexure A/1 are inter-connected hence such issue is adjudicated together. The Appellant in his statement has stated that all these papers represent amount payable to Haren Choksi. The AO has made addition of Rs.2.41 crores based on page No. 84 which is reproduced herein above which clearly contain the noting outstanding balance as on 1st April, 2002 for Rs.241 00 and this amount is considered as Rs.2.41 crore by AO and held as unexplained in the hands of Appellant. As loose paper itself states that amount of Rs.2.41 crores is not advanced during the year or received during the year. Such amount cannot be subject matter of addition in current year. On this ground, addition made by AO for Rs.2.41 crore is deleted. On perusal of page No. 84 referred supra, there are notings on left side which also suggest how opening balance as on 1st April, 2002 for Rs.2.41 crores is arrived. This noting is completely ignored by Assessing Officer. The first entry on this page Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 80 states that amount as on 1st April, 1998 was Rs. 1, 14,620, on 1st April, 1997 was Rs. 1,02,000 and in this figure interest is added till 31st March, 2002 to arrive at figure of Rs. 2,00,470. In this figure. Rs. 27,000 to Aditya is added which makes balance at Rs 2,27,470 and at last it was stated that amount to be considered at Rs.2,41,000 and this figure is carried forward as opening balance as 241.00. As stated herein above, addition of Rs.2,41,00,000 cannot be made as it represents opening balance and outstanding amount is carried forward since 1997 even such balance cannot be subject matter of addition either in AY 2001-02 or 2002-03. However, the rioting on left side of the page contains interest till 31st March, 2002 and difference of Rs.85,850 (2.00.470-1, 14,620) represents interest income of Rs. 85,85,000 earned by Appellant from 1s1 April, 1998 to 31st March, 2002. The Appellant has not disputed the decoding made by AO while interpreting figures mentioned in this loose paper The Appellant has claimed that this amount is yet not received hence it cannot be subject matter of tax but Appellant is required to offer income on accrual basis hence undisclosed interest income is required to be taxed on accrual basis. On this basis proportionate interest for each year would be Rs. 21,46,250 (Rs. 85,85,000 14) meaning thereby AO is required to tax such amount both in AY 2001-02 and 2002-03 separately. While making such addition AO needs to allow credit of additional income offered to tax before Hon'ble Settlement Commission and forming part of addition in those Assessment Years. 10.7 On the basis of page No. 80. AO has made addition of Rs. 1.57 crores which is arrived at after reducing figure of Rs.83.49 lacs being Rs.43.49 towards plot and Rs.40 lacs being cheque from opening balance of Rs.2.41 crores as discussed herein above. As 1.57 crores is not representing amount advanced during the year and is balance amount from outstanding opening balance of Rs.2.41 crores discussed herein above, such amount cannot be subject matter of separate addition. However, on perusal of very same loose paper, it is mentioned that Rs.51.20 being interest from 1/4/2002 to 31/10/2003 which means that proportionate interest income for current year is required to be taxed as undisclosed interest income. It is pertinent to note that while passing the Assessment Order for AY 2004-05, AO has already made addition of Rs. 29,24,000 being undisclosed interest income from this loose paper and same is being confirmed in Appellate Order for that A. Ys years. As loose paper referred supra clearly indicates earning of undisclosed interest income and Appellant has failed to prove that such interest income is already offered to tax, proportionate interest income pertaining to year under consideration is required to be taxed as undisclosed income in the hands of Appellant. As per the working provided in Assessment Order for AY 2004-05, AO has made addition of Rs. 18.86 lacs out of figure of Rs.51.20 lacs and this figure of Rs. 18.86 lacs is forming part of addition of Rs. 29.24 lacs hence remaining figure of Rs. 32,34,000 is required to be considered as undisclosed income of Appellant in year under consideration. It is observed that Appellant has offered additional income of Rs 13.50 lacs in settlement petition filed before Hon'ble Settlement Commission and same is added to total income in present Assessment Order and credit of Rs.5,30,000 is already given in preceding para hence balance credit of Rs.8.20 lacs is given against undisclosed interest income of Rs.32.34 lacs. Thus, addition for undisclosed income for year under consideration is worked out at Rs.24,14,000/-. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 81 35.11 Accordingly, having regard to the facts of the case and for the reason that the addition is made simply on loose papers which are nothing but rough noting and jottings, the CIT(A) has rightly deleted the addition and accordingly we direct the A.O. to delete the addition of Rs.5,30,000/-, Rs. 1,57,51,000/- and Rs. 2,41,00,000/-. 36. In respect of the addition confirmed of Rs. 24,14,000/- by the CIT(A) for which the assessee has filed cross objection, we find that the CIT(A) has confirmed that there is a noting of interest in page No. 80 of Annexure A/1 found and seized during the course of search. The CIT(A) has observed that the interest jotting of Rs.51.20 lacs was assumed to have been earned and after giving the credit of income disclosed had confirmed the addition of Rs. 24,14,000/-. Similar issue has been adjudicated at Ground No. 5, (Undisclosed Income – Interest receipt– Rs.29.24 lakhs) for the Assessment Year 2004-05, wherein an amount of Rs.29,24,000/- has been confirmed being the receipt of similar nature, the same ratio holds good. CO of the assessee on this issue is dismissed. Thus, the total amount of (Rs.29,24,000/- + Rs.24,14,000/-) Rs.53,38,000/- is hereby confirmed. In the result, the Departmental Ground of Appeal No. 9 is dismissed and Ground No.2 of the assessee’s CO is also dismissed. Ground No. 3 of CO Ad-hoc addition of undisclosed income offered before ITSC of Rs.13,50,000/- 37. At the outset, both the parties fairly agreed that this issue stands covered by the order of the Tribunal in assessee’s own case for the AY 2003-03 in IT(SS)A No. 461 & 470/Ahd/2019. For the sake of ready reference, the relevant portion of the said order is reproduced hereunder:- “17. In the settlement application filed by the assessee for A.Y. 2001-02, assessee has disclosed additional income of Rs. 15,00,000/- before ITSC which was not offered in his original return of income filed by the assessee on 24.05.2007 for AY 2001-02 in response to notice u/s. 153A of the Act. The Assessing Officer held that assessee did not offer the undisclosed income of Rs 15,00,000/- for tax as disclosed before ITSC and that the assessee has total disregard for the tax-authorities and is changing his stand every now and then regarding the quantum of income on which taxes were not paid. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 82 17.1 Since the assessee has not offered the amount in the income-tax return and the same was accepted as additional income before the ITSC, Assessing Officer made addition of the amount of Rs.15,00,000/- towards undisclosed income. 17.2 Before us, the assessee submitted that the amount was offered before the Hon’ble Settlement Commission to cover any omission, error and discrepancy. The Settlement Commission has rejected the application of the assessee and the matter has been revived by the Assessing Officer for assessment under Section 153A of the Act. Since the assessment has been conducted under section 153A, the rigors of provisions of Section 153A would be applicable. It was submitted that since there was no material evidence or seized material pertaining to the addition of Rs.15,00,000/-, the action of the Assessing Officer making the addition simply by the virtue that the assessee has offered same before the Hon’ble ITSC cannot be sustained. 17.3 On the other hand, Ld. DR argued that assessee is the best judge of his affairs and the factum of his offering the amount of Rs.15,00,000/- as additional income before the Settlement Commission proves without any doubt that the assessee has earned Rs.15,00,000/- as undisclosed income. It was argued that the ratio of statement recorded u/s 132(4) would be applicable as the statement given before the ITSC becomes statutory and binding in nature. 17.4 Rebutting the arguments of the Ld. DR, the assessee argued that the validity of statement recorded u/s 132(4) cannot be equated with the statement given before the ITSC. 17.5 Heard both the parties and perused the material available on record. The provisions of Section 132(4) are as under:- (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. [Explanation.—For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income- tax Act, 1922 (11 of 1922), or under this Act.] 17.6 We have also gone through the circular of CBDT with regard to the disclosure made in the statement recorded u/s 132(4) sans seized material. Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 83 CBDT Instruction F. No. 286/2/2003-IT (Inv.), dated 10-3-2003 Regarding confession of additional income during the course of search & seizure and survey operation is as reproduced herein under – “Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess undisclosed income during the course of the search and seizure and survey operation. Such confession, if not based on credible evidence, are taken/retracted by the concerned assessees while filing return of income. In these circumstances, confession during the search and seizure and survey operation do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on 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 department. Similarly, while recording statement during the course of search and seizure operation, no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely”. 17.7 The CBDT also instructed the field authority not to rely merely on the statement in the absence of credible evidence. In this case, the Assessing Officer has not brought any evidence, material, incriminating document to make addition of Rs. 15,00,000/-. Merely because the assessee has offered the same before the Hon’ble ITSC does not necessarily convert the same as undisclosed income in the proceedings u/s 153 of the Act. This issue has also been examined by the Co- ordinate Bench of Mumbai in the case of Anantnadh Constructions and Farms (P.) Ltd. Vs. DCIT (166 ITD 83). The Tribunal held that no addition can be made on the basis of income suo-moto offered by the assessee before the ITSC when settlement got aborted for one reason or the other mentioned in section 245HA(1). The fact that the disclosure made under section 245D(1) of the Act even if constructed as if no order under section 245D(4) has been passed, it will not give a license to the Assessing Officer to use the confidential information disclosed in an annexure to the application of the Settlement Commission. If the application is treated as not admitted under 245D(1) of the Act, then the provisions are clear that confidential information can never be passed on to the Assessing Officer nor can it be used in evidence against the assessee. Section 245D(4) has clearly held that admission of assessee's application under section 245(1) was incorrect. 17.8 In the instant case also the Assessing Officer has not brought any evidence or made any inquiry that assessee has earned additional income of Rs.15,00,000/- . The Assessing Officer had not made any inquiry and not examined the material which was before him that how this income was declared by the assessee and addition has been made simply relying upon the declaration made in the application before the Settlement Commission under section 245D. Hence, we hold that the addition made by the Assessing Officer, as confirmed by the Ld. CIT(A), cannot be upheld. This ground of Cross Objection is allowed.” Printed from counselvise.com ITSSA No. 429, 460, 431, 472, 462 of 2019 & CO No. 5, 7, 193 of 2020 Shri Ashish P. Patel 84 37.1 Keeping in view the above order passed in the case of the assessee, the Ground No. 3 of the CO on this issue is allowed. In the result, appeal of the Revenue and Cross Objection of the Assessee, both are partly allowed. Order pronounced in the Court on 1st August, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (DR.B.R.R. KUMAR) VICE-PRESIDENT Ahmedabad, dated 01/08/2025 आदेश क\u001a \u001b त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ\u0018 / The Appellant 2. \u0019\u001aयथ\u0018 / The Respondent. 3. संबं धत आयकर आयु!त / Concerned CIT 4. आयकर आयु!त(अपील) / The CIT(A) 5. $वभागीय \u0019'त'न ध, आयकर अपील य अ धकरण / DR, ITAT, 6. गाड* फाईल / Guard file. आदेशानुसार/BY ORDER, TRUE COPY उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation- 18/28/29/30.07.2025 2. Date on which the typed draft is placed before the Dictating Member 31.07.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S. - ……31.07.2025……….. 4. Date on which the fair order is placed before the Dictating Member for Pronouncement …01.08.25.. 5. Date on which the file goes to the Bench Clerk : 01.08.2025 6. Date on which the file goes to the Head Clerk……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 8. Date of Despatch of the Order……………… Printed from counselvise.com "