Deputy Commissioner of Income-tax, Nashik V. Rahul Shanta Sawale, Nashik

ITA 1126/PUN/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8880 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 04-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: WAY OF BANK
• Keywords: Sale consideration of property below Jantri Value; Unexplained expenditure; Search and seizure; Loose papers
• Section: 40A(3); 143(3); 50C; 54F; 22

Judgement Text

आयकर अपीलीय अधिकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1126/PUN/2017 धििाारण वर्ा / Assessment Year : 2013-14 Dy. Commissioner of Income Tax, Circle – 2, Nashik .......अपीलार्थी / Appellant बिाम / V/s. Shri Rahul Shanta Sawale, Plot No. 12, Survey No. 870B, Ambalika, Geetanjali Colony, Indira Nagar, Nashik – 422009 PAN : AJYPS8506L ......प्रत्यर्थी / Respondent Assessee by : Shri Sanket Joshi Revenue by : Shri M.G. Jasnani सुिवाई की तारीख / Date of Hearing : 22-03-2022 घोर्णा की तारीख / Date of Pronouncement : 09-06-2022 आदेश / ORDER PER S.S. VISWANETHRA RAVI, JM : This appeal by the Revenue against the order dated 03-02-2017 passed by the Commissioner of Income Tax (Appeals)-2, Nashik [‘CIT(A)’] for assessment year 2013-14. 2. Brief facts relating to the issue on hand are that the assessee is an individual and engaged in the business of purchase and sale of plots, flats and construction activity. The assessee declared a total income of 2 ITA No.1126/PUN/2017, A.Y. 2013-14 Rs.46,22,033/- against which the AO determined the same at Rs.3,00,63,945/- vide its order dated 28-03-2016 u/s. 143(3) of the Act inter alia making addition on account of unexplained expenditure and disallowance u/s. 40A(3) of the Act. The CIT(A) deleted additions partly made by the AO. Having aggrieved, the Revenue is before us. 3. Ground No. 1 raised by the Revenue challenging the action of CIT(A) in deleting the addition of Rs.1,56,37,412/- made by the AO on account of unexplained expenditure for purchase of land in the facts and circumstances of the case. 4. The ld. DR, Shri M.G. Jasnani submits that a loose paper found in the case of Zaheeruddin S. Kokani during search and seizure action which clearly pointed that a sum of Rs.2,00,00,000/- was paid by the assessee which is above the agreed sale consideration against the land at Survey No. 573/3/1 to 573/3/5. The AO taking into consideration added an amount of Rs.1,56,37,412/- on account of unexplained expenditure for purchase of land in the hands of the assessee. The ld. DR argued that the CIT(A) agreed with the assessee’s contention and deleted the addition made which is based on wrong appreciation of facts and judgment relied by the CIT(A) are completely distinguishable for the facts of the present case. He submits that Zaheeruddin S. Kokani never retracted his statement and denied the receipt of cash of Rs.2 crores. The notings of the seized paper completely corroborated with the statement of Zaheeruddin S. Kokani who confirmed the fact of payment to the assessee. The ld. DR contended that the assessee’s contention before the CIT(A) is that the said Zaheeruddin S. Kokani accepted the cash payment and did not deny the receipt of cash in order to take advantage of section 50C and 54F of the Act is incorrect. The ld. DR submits that the entries in the seized paper are very specific and 3 ITA No.1126/PUN/2017, A.Y. 2013-14 pointed the admission by the recipient of cash during search clearly substantiates payment of cash by the assessee and without considering the same the CIT(A) deleted the said addition and prayed to allow ground No. 1. 5. The ld. AR, Shri Sanket Joshi contends that the seized loose papers did not contain signature of any person and no date is mentioned in the same. Nothing is on brought on record by the ld. DR whether the said Zaheeruddin S. Kokani paid tax for the additional consideration. The said person did not state who paid cash of Rs.2 crores to him and also did not state the claim of such person who received cash from the assessee. The AO incorrectly basing on the seized loose papers made addition in the hands of the assessee which is not maintainable under law. The presumption u/s. 132(4A) of the Act is only applicable to Zaheeruddin S. Kokani in terms of seized loose papers which is undated and unsigned and placed reliance on the decision and drew our attention to the paper book from Page Nos. 30 to 137 of the paper book. He referred to order of this Tribunal in the case of M/s. Dhananjay Marketing Pvt. Ltd. in IT(SS)A Nos. 65, 67 & 69/PUN/2017 and argued that it is a settled position of law that no addition can be made merely based on statement of a third party u/s. 132(4) of the Act in the absence of incriminating material. He argued whether the statement of Zaheeruddin S. Kokani is a basis to form an opinion that the assessee made undisclosed investments in the purchase of property. He argued that the statement of a search person is not conclusive in the assessment of another person and material gathered in the search of one person is not an evidence in the assessment of another person. The AO misdirected by applying presumption u/s. 132(4A) of the Act to the assessee. The said presumption cannot be extended to a third person. The statement of Zaheeruddin S. Kokani cannot form a basis for 4 ITA No.1126/PUN/2017, A.Y. 2013-14 addition in the hands of assessee in the absence of any independent corroborative evidence. The appellant-revenue completely failed to establish that the assessee paid cash to the said Zaheeruddin S. Kokani and the notings of the said seized loose papers explains the cash payment by the assessee to the said person. He referred to order of this Tribunal in the case of M/s. Rajendra M. Developers & Builders Pvt. Ltd. in IT(SS)A No. 05/PUN/2018 for A.Y. 2014-15 and submits that this Tribunal held no addition can be made merely based on statement without bringing independent corroborative evidence on record stating that on-money consideration in cash was paid. Further, he referred to order of ITAT, Hyderabad in the case of Smt. K.V. Lakshmi Savitri Devi in ITA No. 1504/Hyd/2010 and argued that the appellant-revenue cannot draw inference on the basis of suspicion, conjectures, surmises that the cash consideration was passed on, basing on a loose sheet found at the premises of third party which is not enough material to sustain the addition. 6. Heard both the parties and perused the material available on record. According to the AO incriminating material being Annexure A, Item No. 3, Page No. 8 was found during the search and seizure on 08-09-2015 conducted at Kokani group at the premises of Mr. Zaheeruddin Sallauddin Kokani. A scanned image of incriminating document and relevant portion of letter of ADIT is also reproduced at Page No. 2 of assessment order. On perusal of the letter of ADIT, we note that Shri Rahul Shantaram Sawale, Mrs. Snehal Rahul Sawale and Shri Santosh Dayanand Punjabi are the purchasers. Further, we note that Mr. Shahnawaz Jauddin Kokani, Mr. Kutubuddin J. Kokani, Mr. Nuruddin S. Kokani, Mr. Zaheeruddin S. Kokani, Mr. Allauddin J. Kokani and Mr. Mainuddin J. Kokani are the sellers. It is also noted that the consideration of Rs.7.11 crores was paid 5 ITA No.1126/PUN/2017, A.Y. 2013-14 through various cheques, RTGS and cash from time to time. Further, it is noted that the purchasers have paid amount of Rs.63 lacs in cash and remaining was paid by cheques and RTGS. However, as per the notings mentioned on Page No. 8 that the purchasers have paid amount of Rs.2 crores in cash over and above sale consideration of Rs.7.11 crores. 7. We note that the entire addition made on account of unexplained expenditure is revolves around the seized document being Item No. 3, Page No. 8 of Annexure A. We note that the said seized document is reproduced by the AO in his order at Page No. 2. On perusal of the same, we note that no name of all the purchasers were reflecting but the AO basing on the information of letter received from ADIT proceeded to add the same on unexplained expenditure in the hands of assessee. We note that the base for the AO to proceed to add an amount of Rs.2 crores said to have been paid by the assessee is the statement of six sellers that they have received Rs.2 crores in cash over and above Rs.7.11 crores. During the course of cross-examination of the said Mr. Zaheeruddin Sallauddin Kokani admitted to have unable to confirm who paid a sum of Rs.2 crores to him. He also unable to re-collect the transaction and the total consideration therein. He also confirmed that the said agreement consideration was less than the Government valuation as the said land was involved in some litigation. Therefore, it is clear that the said Mr. Zaheeruddin Sallauddin Kokani did not disclose specifically from whom the cash payment was received as admittedly there were three purchasers. Further, the AO also reproduced the Q. No. 12 and its answer at Page No. 4 of his order. On perusal of the same, we note that the said Mr. Zaheeruddin Sallauddin Kokani confirmed receipts of cash of Rs.2 crores but however no mention of assessee was made by the said Mr. Zaheeruddin Sallauddin Kokani. In view of the same if we examine the seized document at Page No. 2 of the 6 ITA No.1126/PUN/2017, A.Y. 2013-14 assessment order we find no name of assessee is found. As it appears from the record that the AO made addition in the hands of assessee on account of unexplained expenditure only on the statement of the said Mr. Zaheeruddin Sallauddin Kokani in terms of the said seized loose document, in our opinion, is not sufficient evidence to make addition in the hands of assessee as there was no name, signature and date of assessee reflected in the said loose documents. There cannot be any addition by relying on a statement recorded u/s. 132(4) of the Act without there being any independent corroborative evidence. The contention of ld. AR is that the AO made disputed addition only on the presumption and assumptions and the presumption u/s. 132(4A) of the Act is not applicable to third parties other than the searched person. The CIT(A) in his order discussed the said issue at Page No. 17 and placed reliance on the order of Mumbai ITAT in the case of Straptex (India) Pvt. Ltd. reported in 84 ITD 320 which held the presumption u/s. 132(4A) of the Act is applicable only against the person from whom the possession of books of accounts or other documentary were found and not against any other person. Therefore, we find force in the arguments of ld. AR, we hold the AO is not justified in applying the provisions of section 132(4A) of the Act to the assessee. We note from the letter of ADIT (Inv.), which is at Page No. 2 of AO, that itself explains that purchasers have paid amount of Rs.63 lacs and the remaining amount was paid by cheques and RTGS, of which clearly establishes that the appellant-revenue is not clear about the allegation of cash payment by the assessee. Therefore, cash payment of Rs.2 crores as alleged by the Revenue in terms of the seized loose paper cannot be believed. Further, there is no conclusive evidence brought on record by the AO in support of its allegation of that the assessee paid cash of Rs.2 crores to Mr. Zaheeruddin Sallauddin Kokani and there is no indication of assessee’s name in the seized loose papers nor in the statement recorded 7 ITA No.1126/PUN/2017, A.Y. 2013-14 u/s. 132(4A) of the Act vide Q. No. 12. Therefore, the addition is made by the AO is not justified in view of discussion made by us hereinabove and the order of CIT(A) in this regard is justified. Thus, the ground No. 1 raised by the Revenue is dismissed. 8. Ground No. 2 raised by the Revenue challenging the action of CIT(A) in deleting the addition of Rs.50,62,800/- made by the AO on account of cash payment to various persons u/s. 40A(3) of the Act in the facts and circumstances of the case. 9. Heard both the parties and perused the material available on record. We note that the AO made disallowance of Rs.53,04,500/- u/s. 40A(3) of the Act regarding 23 cash payments made in excess of Rs.20,000/-. Admittedly, there was no dispute the said cash payments were made for purchase of plots of land which constitutes opening stock. We note that the AO discussed the issue of cash payment in respect of payments made in cash in Para No. 6 of his order and CIT(A) at Page No. 22 of impugned order. We find that the transaction in respect of purchase of plot at Adgaon Shivar, Gat No. 598/1, did not materialize and the payment made in cash of Rs.15,00,000/- was refunded to the assessee by way of bank cheques by Mr. Virendra Vijaysingh Pardeshi. Therefore, no addition is justified in this regard and we find no infirmity in the order of CIT(A). 10. Further, payment of Rs.20,81,300/- in cash was made on bank holidays and claim of exception provided in Rule 6DD(j) of the Rules. We note that no expenditure claimed as the said payment was made on cancellation of shathekhat (agreement to purchase). On perusal of impugned order at Page No. 24, we note that the assessee filed calendar for relevant period showing bank holiday, Office Circular No.07/2010 dated 8 ITA No.1126/PUN/2017, A.Y. 2013-14 24-11-2010 issued by Chief General Manager (HRD). The CIT(A) considering the bank holidays and circular relied there upon deleted the addition made by the AO. The ld. DR did not bring on record any evidence rebutting the finding rendered by the CIT(A) in terms of exception contemplated in Rule 6DD(j) of the Rules. Therefore, we find no infirmity in the order of CIT(A) in this regard. 11. Regarding the payment made to Mr. Gend Sagar Parasharam for Rs.11,00,000/- and Mr. Kamal Singh Sohansingh Chitodiya in respect of Rs.4,00,000/-, we note that the said two payments were made before the Sub-Registrar, Nashik which are part of sale consideration. We find the CIT(A) discussed the said issue in his order at Page No. 25 and by placing reliance on the order of this Tribunal in the case of Dnyaneshwar Jagannath Dhamne in ITA No. 202/PN/2016 for A.Y. 2009-10 vide order dated 08-07-2016, which held that the provisions of section 40A(3) of the Act are not attracted as the cash payments are part of sale consideration which are paid before Sub-Registrar i.e. State Government Office. The ld. DR did not bring on record any view contrary to the finding of CIT(A). Therefore, we find no infirmity in the order of CIT(A) and it is justified. 12. Regarding the other expenses which are claimed as various expenses to an extent of Rs.4,83,500/-. The ld. AR supported the order of CIT(A) and the relevant portion at Page No. 26 of impugned order is reproduced here-in-below for ready reference : “In respect of remaining cash payments of Rs.4,83,500/- it has been noticd that the said payment was made on account of expenses for Plot No.313/2 at Pathardi Rs.1,98,700/-, borewell expenses Rs.21,000/-, sign board expenses Rs.22,000/-, Plot litigation expenses Rs.2,15,300/- and office expenses Rs.26,500/-. It has been noticed that the plot litigation expenses of Rs.2,15,300/- and office expenses of Rs.26,500/- were paid on 15/08/2012 and 11/11/2012 as mentioned by the A.O. in para 6 of the assessment order. The appellant had correctly pointed out that the above 9 ITA No.1126/PUN/2017, A.Y. 2013-14 mentioned two expenditures were incurred on Independence day and Sunday which were bank holidays and hence the disallowance is not justified in view of exception provided in Rule 6DD(j) of the I.T. Rules. The disallowance of Rs.4,83,500/- is therefore deleted to the extent of Rs.2,41,800/-. The balance disallowance of Rs.2,41,700/- is confirmed.” 13. We find no evidence brought on record by the ld. DR challenging the finding of CIT(A). In the absence of which, we find no infirmity in the order of CIT(A). Thus, ground No. 2 raised by the Revenue is dismissed. 14. Ground No. 3 raised by the Revenue challenging the action of CIT(A) in deleting the addition of Rs.45,00,000/- made by the AO on account of payment made to Kokani family u/s. 40A(3) of the Act in the facts and circumstances of the case. 15. Heard both the parties and perused the material available on record. We note that the payment in cash to an extent of Rs.45,00,000/- were confirmed by the Kokani family before the Sub-Registrar and the said cash payment for forming part of total consideration of Rs.7,11,00,000/- vide registered sale deed. A contention was raised by the assessee that the said payments were added to the value of closing stock and the same were not claimed as expenditure during the year under consideration. We note that the AO discussed the issue in detailed in Para No. 7 of the assessment order. On perusal of the same, we note that the cash payments amounting to Rs.45,00,000/- made on insistence of Kokani family members which is part and parcel of total sale consideration vide the registered sale deed. We note that it is a settled position of law that the purchase price is a part of stock-in-trade and no expenditure claimed as deduction in this regard, therefore, in our opinion, no disallowance u/s. 40A(3) is justified. The transaction being genuine no disallowance u/s. 40A(3) of the Act is 10 ITA No.1126/PUN/2017, A.Y. 2013-14 maintainable. Further, it is also not disputed by the ld. DR that the said cash payment was part of closing stock and no expenditure concerning the same was claimed in the year under consideration. Therefore, we find no infirmity in the order of CIT(A) in this regard and it justified. Thus, the ground No. 3 raised by the Revenue is dismissed. 16. In the result, the appeal of Revenue is dismissed. Order pronounced in the open court on 09 th June, 2022. Sd/- Sd/- (Inturi Rama Rao) (S.S. Viswanethra Ravi) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ददिांक / Dated : 09 th June, 2022. रधव आदेश की प्रधतधलधप अग्रेधर्त / Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(A)-2, Nashik 4. The Pr. CIT-2, Nashik 5. धवभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण, “बी” बेंच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गार्ा फ़ाइल / Guard File. //सत्याधपत प्रधत// True Copy// आदेशािुसार / BY ORDER, वररष्ठ धिजी सधचव / Sr. Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune