Asst. Commissioner of Income Tax,Central Circle, Panaji., Panaji V. Shri Prakash V. Kittur., Goa

ITA 186/PAN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1431 (ITAT-PANAJI)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K
• Assessee Lawyers: SHRINIVAS NAYAK
• Keywords: Unexplained investment; Unexplained expenditure; Capital asset; Business income; Search and seizure; Cost of acquisition; Revenue expenditure
• Section: 143(3); 153A; 69; 145; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 186 /PNJ/201 5 (ASST. YEAR : 200 8 - 0 9 ) ACIT, CENTRAL CIRCLE, PANAJI GOA VS. SHRI PRAKASH V. KITTUR, NO. C - 1, SPARSHA, LA - MARVEL COLONY, NEXT TO NIO, DONA PAULA, GOA. PAN NO. AAZPV 6075 B (APPELLANT) (RESPONDENT) C.O. NO. 20 /PNJ/201 5 (ASST. YEAR : 200 8 - 0 9 ) SHRI PRAKASH V. KITTUR, NO. C - 1, SPARSHA, LA - MARVEL COLONY, NEXT TO NIO, DONA PAULA, GOA. VS. ACIT, CENTRAL CIRCLE, PANAJI GOA PAN NO. AAZPV 6075 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHRINIVAS NAYAK C A. DEPARTMENT BY : SHRI NISHANT K. - D R DATE OF HEARING : 12 / 0 8 /2015 . DATE OF PRONOUNCEMENT : 1 2 / 0 8 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2 , PANAJI , DATED 0 6 /0 1 /201 5 . 2 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 2. IN THE REVENUES APPEAL , GROUNDS NO. 1 TO 3 READS AS UNDER: - 1. THE LD. CIT(A) - 2, PANAJI HAS ERRED IN NOT APPRECIATING THE PROVISIONS OF SECTION 2(47)(V) OF THE I.T. ACT R.W.S 153A OF THE TRANSFER OF PROPERTY ACT. 2. THE LD. CIT(A) - 2, PANAJI HAS ERRED IN HOLDING THAT THE PROFIT FROM THE SALE OF THE PROPERTY NEEDS TO BE TAXED IN A.Y. 2009 - 10 WHEN IT IS CLEAR THAT THE POSSESSION OF THE PROPERTY WAS HANDED OVER ON 08.0.32008 AND PART OF THE CONSIDERATION HAS ALREA DY BEEN RECEIVED DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2008 - 09. 3. THE LD. CIT(A) - 2, PANAJI HAS ERRED IN HOLDING THAT THE DISALLOWANCE OF EXPENSES IF ANY IS TO BE CONSIDERED FOR A.Y. 2009 - 10 AS IT IS EVIDENT THAT A TRANSACTION IS RELATABLE TO THE PREVI OUS YEAR RELEVANT TO A.Y. 2008 - 09. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT M/S. UNICORN DEVELOPERS SOLD THE PROPERTY ADMEASURING 2,46,400 SQ.MTS AT SURVEY NO. 22/1 AT GANCIM , TIWADI, GOA BY A REGISTERED SALE DEED DATED 08/03/2008 AND THE POSSESSION OF THE LAND WAS HANDED OVER TO THE BUYER M/S. NAIKNAVRE PRESTIGE ENVIRON HOUSING PVT. LTD. ACCORD I NG TO THE AUDIT REPORT OF M/S. UNICORN DEVELOPERS, THE METHOD OF ACCOUNTING REGULARLY EMPLOYED IS MERCANTILE METHOD OF ACCOUNTING . ACCORD I NG TO THE REGISTERED SALE DEED DATED 08/03/2008 , A CONSIDERATION OF 16,01,60,000/ - ACCRUED TO M/S. UNICORN DEVELOPERS ON 08/03/2008 . HE ALSO OBSERVED THAT JOINT AGREEMENT DATED 12/04/2008 GIVES DETAILS AND MODE OF PAYMENT OF BALANCE SALE CONSIDERATION . MR. PRAKASH KITTUR TOOK A STAND THAT THE SALE DEED WAS EXECUTED ON 04/04/2008 . HE OBSERVED FROM THE COPY OF THE REGISTERED SALE DEED SUBMITTED BY M/S. NAIKNAVRE PRESTIGE ENVIRON HOUSING PVT. LTD. THAT THE SALE DEED WAS EXECUTED ON 08/03/2008 AND IT WAS PRESENTED TO THE SUB - REGISTRAR FOR REGISTRATION ON 03/04/2008 AND WAS REGISTERED ON 04/04/2008. IT IS NOTI C ED THAT THE DATE OF SALE DEED MENTIONED WAS 07/03/2008, WHICH WAS CORRECTED BY HANDWRITING AS 08/03/2008 . MR. PRAKASH KIT TUR CERTIFIED THE CORRECTION OF DATE . HENCE, IT IS EVIDENT THAT SALE DEED WAS ACTUALLY EXECUTED ON 08/03/2008 . M/S.NAIKNAVRE PRESTIGE ENVIRON HOUSING PVT. LTD. ALSO ACCOUNTED FOR 3 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 PURCHASE OF LAND ON 08/03/2008 I.E. THE DATE OF EXECUTION OF THE SALE DEED , HENCE, PROFIT ON SALE OF ABOVE LAND AT GANCIM IS BROUGHT TO TAX FOR ASSESSMENT YEAR 2008 - 09 I.E. RELEVANT ASSESSMENT YEAR IN WHICH THE SALE DEED WAS EXECUTED. 4 . ON APPEAL , COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT DURING THE COURSE OF SEARCH, SALE DEED WAS FOUND AT THE OFFICE PREMISES OF THE ASSESSEE. THE SALE DEED WAS FRANKED FOR STAMP DUTY PURPOSE ON 08/3/2008. THE SAME WAS PRESENTED FOR REGISTRATION ON 04/04/2008 I.E. FINANCIAL YEAR 2008 - 09 REL E VANT TO ASSESSMENT YEAR 2009 - 10. TILL 08/03/2008 , THE ASSESSEE AND HIS NOMINEES HAD RECEIVED 5.50 CRORES AS SALE CONSIDERATION , WHICH IS 34% OF TOTAL CONSIDERATION TO BE RECEIVED. DURING THE FINANCIAL YEAR 2007 - 08 , THE POSSESSION OF THE LAND WAS ALSO N OT HANDED - OVER TO THE BUYER. THE COMMISSIONER OF INCOME TAX (APPEALS) CONCLUDED THAT SINCE THE SALE DEED WAS EXECUTED IN THE FINANCIAL YEAR 2008 - 09 RELEVANT TO ASSESSMENT YEAR 2009 - 10 AND THE MAJOR SALE CONSIDERATION WAS ALSO RE CEI VED IN AND AROU N D THAT PERIOD , IN HIS OPINION , THE PROFIT FROM THE SALE OF LAND NEEDS TO BE TAXED IN ASSESSMENT YEAR 2009 - 10 . 5. BEING AGGRIEVED BY THE SAID ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 6 . THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE ORDER COMMISSIONER OF INCOME TAX (APPEALS) AND ARGUED THAT ALTHOUGH SALE DEED OF THE LAND WAS REGISTERED ON 04/04/2008, BUT THE POSSESSION OF THE LAND WAS STILL WITH THE ASSESSEE AND THE SAME WAS HANDED OVER TO THE BUYERS ONLY IN THE ASSESSMENT YEAR 2010 - 11 . HE SUBMITTED THAT THE SALE DEED WAS REGISTERED TO ENABLE THE BUYER TO OBTAIN BANK LOAN TO PAY THE SALE CONSIDERATION TO THE SELLERS OF THE LAND . 4 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 THEREFORE, IT WAS THE SUBMISSION THAT THE PROFIT FROM THE SALE OF LAND SHOULD BE ASSESSED IN THE ASSESSMENT YEAR 2010 - 11 WHICH WAS SHOWN BY THE ASSESSEE AND ACCEPTED BY THE ASSESSING OFFICER IN ASSESS MENT MADE UNDER SEC. 143(3) OF THE ACT. 7. WE FIND THAT IT IS NOT IN DISPUTE THAT THE INCOME DERIVED FROM THE TRANSACTIONS IN QUESTION IS ASSESSABLE UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSIO N AND NOT UNDER THE HEAD CAPITAL GAINS. THE ASSESSING OFFICER HIMSELF TREATED THE INCOME ARISING FROM THE TRANS A CTION IN QUESTION AS BUSINESS INCOME OF THE ASSESSEE. 8. AS PER THE PROVISIONS OF SEC. 45 OF THE ACT, CAPITAL GAIN IS ASSESSABLE IN THE YEAR IN WHICH TRANSFER OF CAPITAL ASSET TAKES - PLACE WHEREAS AS PER THE PROVISIONS OF SEC. 28 READ WITH SEC. 145 OF THE ACT, BUSINESS INCOME IS ASSESSABLE AS PER THE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE EITHER CASH SYSTEM OR ACCRUAL SYSTEM. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE REGULARLY EMPLOYS ACCRUAL SYSTEM OF ACCOUNTING FOR ACCOUNTING HIS BUSINESS INCOME. AS PER ACCRUAL SYSTEM OF ACCOUNTING, THE INCOME IS ACCOUNTED FOR IN THE YEAR IN WHICH THE SAME IS ACCRUED TO THE ASSESSEE, WHICH MEANS THE LEGAL RIGHT TO RECEIVE THE INCOME ACCRUES TO THE ASSESSEE. 9. NOW IT IS ALSO A SETTLED POSITION OF LAW THAT TRANSFER OF A IMMOVABLE PROPERTY OF 100 OR MORE TAKES - PLACE ONLY ON EXECUTION OF A REGISTERED CONVEYANCE DEED . ONLY ON THE DATE O N WHICH A REGISTERED DEED IS EXECUTED IN RESPECT OF SUCH A IMMOVABLE PROPERTY IT CAN BE HELD THAT A LEGAL RIGHT TO RECEIVE CONSIDERATION VESTS IN THE ASSESSEE . 10. WE FIND TH A T THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ASHA LAND CORPORATION (1982) 133 ITR 55 (GUJ.) HELD AS UNDER: - 5 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 SECTION 4 OF THE ACT IMPOSES INCOME - TAX UPON A PERSON IN RESPECT OF HIS INCOME. IN OTHER WORDS, THE INCOME - TAX IS A TAX ON A PERS ON IN RELATION TO HIS INCOME. ' INCOME' AS DEFINED IN S. 2(24) INCLUDES PROFITS AND GAINS. SECTION 14 OF THE ACT ENUMERATES SIX HEADS UNDER WHICH THE INCOME OF AN ASSESSEE FALLS TO BE CHARGED. ONE OF SUCH HEADS IS ' PROFITS AND GAINS OF BUSINESS OR PROFESSION '. SO FAR AS THE INSTANT CASE IS CONCERNED, WE ARE CONCERNED WITH PROFITS AND GA INS OF BUSINESS. NOW, THE WORD ' PROFITS ' IS TO BE UNDERSTOOD AS OBSERVED BY LORD HALSBURY IN GRESHAM LIFE ASSURANCE SOCIETY V. STYLES [1892] 3 TC 185, 188 (HL), ' IN ITS NATURAL AND PROPER SENSE - IN A SENSE WHICH NO COMMERCIAL MAN WOULD MISUNDERSTAND '. T HE OBSERVATIONS OF THE PRIVY COUNCIL IN PONDICHERRY RAILWAY CO. V. CIT [1931] 5 ITC 363 AND OF THE SUPREME COURT IN BADRIDAS DAGA V. CIT [1958] 34 ITR 10 (SC), CALCUTTA CO. LTD. V. CIT [1959] 37 ITR 1 (SC) AND CIT V. BAI SHIRINBAI K. KOOKA [1962] 46 ITR 86 (SC) SHOW THAT THE PROFITS TO BE ASSESSED ARE REAL PROFITS AND THEY MUST BE ASCERTAINED ON THE ORDINARY PRINCIPLES OF COMMERCIAL TRADING AND COMMERCIAL ACCOUNTING. WHAT ARE CHARGEABLE TO INCOME - TAX IN RESPECT OF BUSINESS ARE PROFITS OF THE PREVIOUS YEAR. THEREFORE, THE QUESTION WHICH ARISES IN THE INSTANT CASE IS, WHETHER THE ASSESSEE HAD EARNED ANY PROFITS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1971 - 72, WHICH ARE CHARGEABLE TO INCOME - TAX. THE ASSESSEE IS A DEALER IN LAND. IN OTHER WORDS, ITS BUSINESS IS PURCHASE AND SALE OF LAND. THEREFORE, THE PROFITS WHICH IT WOULD DERIVE FROM THE TRANSACTIONS OF PURCHASE AND SALE OF LAND WOULD BE ITS PROFITS OF BUSINESS CHARGEABLE TO INCOME - TAX. THE LAND IS STOCK - IN - TRADE OF THE ASSESSEE. WHEN THE ASSESSEE PURCHASES LAND, SUCH LAND WOULD BECOME PART OF ITS STOCK - IN - TRADE. THE LAND WOULD CEASE TO BE ITS STOCK - IN - TRADE WHEN IT WOULD SELL IT. IN OTHER WORDS, THE LAND PURCHASED BY THE ASSESSEE WHICH FORMS PART OF ITS STOCK - IN - TRADE, WOULD CONTINUE TO BE ITS STO CK - IN - TRADE, UNTIL AND UNLESS, IT SELLS IT. THE ASSESSEE WOULD CONTINUE TO BE THE OWNER OF THE LAND WHICH IT HAS PURCHASED AND WHICH IS PART OF ITS STOCK - IN - TRADE, TILL IT IS DIVESTED OF THE OWNERSHIP BY COMPLETION OF THE SALE TRANSACTION. THE BUSINESS DEA L IN RESPECT OF A LAND OWNED BY THE ASSESSEE WOULD BE COMPLETE ONLY WHEN IT EXECUTES A REGISTERED SALE DEED. IT IS ONLY ON COMPLETION OF THE SALE TRANSACTION IN RESPECT OF THE LAND OWNED BY THE ASSESSEE THAT THE ASSESSEE COULD BE SAID TO HAVE EARNED PROFIT OR SUFFERED LOSS, AS THE CASE MAY BE. THE ASSESSEE PURCHASED THE LAND, A PORTION OF WHICH IS THE SUBJECT - MATTER OF DISPUTE BEFORE US, ON MARCH 15, 1967. ON AND FROM THE DATE OF PURCHASE, THE LAND 6 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 BECAME PART OF THE STOCK - IN - TRADE OF THE ASSESSEE. THE LAND WHICH FORMS PART OF THE STOCK - IN - TRADE OF THE ASSESSEE WOULD NOT, AS OBSERVED ABOVE, CEASE TO BE SO UNLESS THE ASSESSEE SELLS IT. AND SALE WOULD NOT BE COMPLETE UNLESS IT EXECUTES A REGISTERED SALE DEED. ADMITTEDLY, NO SALE TRANSACTION TOOK PLACE IN THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1971 - 72. ALL THAT HAPPENED IN THAT YEAR WAS THAT THE ASSESSEE ENTERED INTO AN AGREEMENT TO SELL CERTAIN PLOTS OF LAND OUT OF THE LAND PURCHASED BY IT IN 1967 TO THE SOCIETY UNDER THE AGREEMENT DATED NOVEMBER 4, 1970. SINCE NO ACTUAL SALE TOOK PLACE IN THAT YEAR, LAND OR ANY PORTION THEREOF WHICH WAS THE SUBJECT - MATTER OF THE AGREEMENT DID NOT CEASE TO BE THE STOCK - IN - TRADE OF THE ASSESSEE IN THAT YEAR. IT IS, HOWEVER, CONTENDED ON BEHALF OF THE ASSESSEE THAT IN P URSUANCE OF THE AGREEMENT FOR SALE, IT HAD RECEIVED RS. 5,000 BY WAY OF EARNEST MONEY AND RS. 2,08,772 AS ADVANCE TOWARDS THE TOTAL SALE PRICE OF THE LAND AGREED TO BE SOLD. THESE RECEIPTS, SAYS THE ASSESSEE, ARE ITS TRADING RECEIPTS AND, THEREFORE, THEY R EPRESENT ITS GROSS INCOME EARNED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1971 - 72. IT IS CONTENDED THAT SINCE THE BUSINESS OF THE ASSESSEE IS TO PURCHASE AND SELL LAND, IT IS IMMATERIAL AS TO WHEN THE SALE DEEDS IN RESPECT OF THE LAND AGREED TO BE SOLD ARE EXECUTED. WHATEVER IT RECEIVES IN ADVANCE TOWARDS THE SALE PRICE BETWEEN THE AGREEMENT TO SELL AND EXECUTION OF THE REGISTERED SALE DEEDS IS NOTHING BUT TRADING RECEIPT. IT IS FURTHER CONTENDED THAT SUCH TRADING RECEIPTS REPRESENT THE ASSESSEE 'S INCOME EARNED ON THE DATE ON WHICH THEY ARE RECEIVED. WE ARE UNABLE TO ACCEPT THIS ARGUMENT. ALL RECEIPTS ARE NOT INCOME. IN ORDER TO PARTAKE OF THE CHARACTER OF INCOME, RECEIPT MUST BE PART OF THE PROFITS EARNED BY THE ASSESSEE. IN OTHER WORDS, THE REC EIPT MUST ASSUME THE CHARACTER OF INCOME BEFORE IT BECOMES EXIGIBLE TO INCOME - TAX. THE ASSESSEE UNDOUBTEDLY RECEIVED A TOTAL SUM OF RS. 2,13,772 IN ADVANCE TOWARDS THE SALE PRICE OF THE LAND WHICH IT HAD AGREED TO SELL TO THE SOCIETY, BUT CAN THIS RECEIPT BE CONSIDERED TO BE ITS INCOME ? THE ANSWER MUST BE EMPHATICALLY ' NO '. BUSINESS OF THE ASSESSEE, AS POINTED OUT ABOVE, IS TO PURCHASE AND SELL LAND. UNLESS THE TITLE OF THE ASSESSEE IS EXTINGUISHED, THE TITLE OF THE PURCHASER CANNOT ARISE. BOTH CANNOT BE THE EXCLUSIVE OWNERS OF THE SAME PROPERTY AT THE SAME TIME. SO LONG AS THE ASSESSEE CONTINUES TO BE THE OWNER, HOW CAN IT BE SAID THAT HIS TITLE IS DIVESTED AND THE SALE HAS RESULTED IN ANY PROFIT TO HIM ? IT IS AXIOMATIC THAT AN AGREEMENT TO SELL DOES NOT CREATE ANY INTEREST IN FAVOUR OF THE PURCHASER. IT IS ON COMPLETION OF THE TRANSACTION 7 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 OF PURCHASE AND SALE CULMINATING IN THE EXTINGUISHMENT OF THE TITLE OF THE VENDOR AND SIMULTANEOUS CREATION OF THE TITLE IN THE VENDEE THAT THE ASSESSEE EARNS PROFIT OR SUFFERS LOSS. A TRANSACTION WHICH MAY OR MAY NOT ULTIMATELY RESULT IN A COMPLETED SALE BY EXECUTING A REGISTERED CONVEYANCE, IS NO TRANSACTION AT ALL FOR THE PURPOSE OF WORKING OUT PROFIT. RECEIPT OF RS. 2,13,772 WOULD ASSUME THE CHARACTER OF INCOME OR PR OFIT ONLY WHEN THE SALE TRANSACTION IS COMPLETED IN ACCORDANCE WITH LAW. IT IS THE TRANSFER OF TITLE IN LAND TO THE PURCHASER WHICH COMPLETES THE TRANSACTION OF SALE. IT WAS ARGUED THAT WHILE ACCEPTING RS. 2,08,772 TOWARDS PART PAYMENT OF SALE PRICE, THE A SSESSEE HAD PARTED WITH POSSESSION OF SOME OF THE PLOTS OF LAND AGREED TO BE SOLD. PARTING WITH POSSESSION OF THE LAND, IT WAS URGED, WOULD IN ANY CASE MAKE THE RECEIPT OF THE AFORESAID AMOUNT A TRADING RECEIPT. WE ARE AFRAID, WE CANNOT ACCEPT THIS ARGUMEN T ALSO. THE RECEIPT OF A PART PAYMENT OF PRICE COUPLED WITH THE PARTING OF POSSESSION OF SOME PORTION OF THE LAND AGREED TO BE SOLD WOULD NOT CONFER ANY TITLE ON THE PURCHASER, I.E., THE SOCIETY, EVEN IN RESPECT OF THE LAND OF WHICH POSSESSION IS GIVEN TO IT. DOCTRINE OF PART PERFORMANCE CANNOT BE BROUGHT INTO AID TO TREAT THE RECEIPT OF RS. 2,13,772 AS A TRADING RECEIPT. DOCTRINE OF PART PERFORMANCE EMBODIED IN S. 53A OF THE TRANSFER OF PROPERTY ACT HAS A LIMITED APPLICATION AND IT AFFORDS ONLY A GOOD DEFE NCE TO THE PERSON PUT IN POSSESSION UNDER AN AGREEMENT IN WRITING TO PROTECT HIS POSSESSION TO THE EXTENT PROVIDED IN THE SAID S. 53A OF THE TRANSFER OF PROPERTY ACT ; BUT, IN ANY CASE, THE AGREEMENT IN WRITING TO SELL, COUPLED WITH PARTING OF POSSESSION, WOULD NOT CONFER ANY LEGAL TITLE ON THE PURCHASER AND TAKE THE LAND OUT OF THE STOCK - IN - TRADE OF THE SELLER IF HE IS A DEALER IN LAND. IF A MERE AGREEMENT OF SALE WERE TO BE TREATED AS CREATING ANY SUCH RIGHT AS CONTENDED BY THE ASSESSEE, IT WOULD CREATE M ANY COMPLICATIONS WHICH WOULD BE DIFFICULT TO RESOLVE. FOR EXAMPLE, CAN A PERSON WHO HAS AGREED TO SELL HIS PROPERTY, EXCLUDE THE VALUE OF SUCH PROPERTY FROM HIS NET WEALTH WHILE FILING RETURN OF HIS NET WEALTH ? WOULD THE PERSON WHO HAS AGREED TO PURCHASE LAND BE LIABLE TO INCLUDE PROPERTY IN HIS NET WEALTH, EVEN THOUGH NO SALE DEED IS EXECUTED IN HIS FAVOUR ? BOTH THE QUESTIONS SHALL HAVE TO BE ANSWERED IN THE AFFIRMATIVE, IF THE CONTENTION OF THE ASSESSEE WERE TO BE ACCEPTED. WE HAVE, HOWEVER, NO MANNER OF DOUBT THAT THE ANSWER TO BOTH THE QUESTIONS IS IN THE NEGATIVE, FOR, AS DISCUSSED EARLIER, THE TITLE OF THE ASSESSEE STILL SUBSISTS AND THAT OF THE PURCHASER IS YET TO ARISE. WHETHER OR NOT TO INCLUDE THE PROPERTY IN THE NET WEALTH DEPENDS UPON, WHO IS 8 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 TH E OWNER OF THE PROPERTY. A MERE AGREEMENT TO SELL DOES NOT CONFER ANY TITLE ON THE PERSON WHO HAS AGREED TO PURCHASE OR DIVEST THE PERSON WHO HAS AGREED TO SELL OFF HIS TITLE. LET US TAKE ANOTHER EXAMPLE: ' A ' AGREES TO SELL HIS PROPERTY TO ' B ', BUT BEF ORE THE SALE DEED COULD BE EXECUTED, THE PROPERTY IS DESTROYED IN FIRE, WHO WOULD SUFFER THE LOSS RESULTING FROM THE FIRE - ' A ' OR ' B ' ? ANSWER IS OBVIOUSLY 'A ', BECAUSE TITLE HAS NOT BEEN PASSED ON TO ' B ', THERE BEING NO COMPLETED SALE. IN THE SAME E XAMPLE, IF AFTER THE EXECUTION OF THE AGREEMENT TO SELL AND BEFORE THE EXECUTION OF THE SALE DEED ' B ' DIES, WOULD THE VALUE OF THE PROPERTY AGREED TO BE SOLD BE LIABLE TO BE INCLUDED IN THE DUTIABLE ESTATE OF ' B ' ? HERE ALSO, THE ANSWER IS IN THE NEGATI VE, BECAUSE ' B ' HAD NOT ACQUIRED ANY LEGAL TITLE OVER THE PROPERTY. IN THE ILLUSTRATIONS WHICH WE HAVE GIVEN ABOVE, THE VITAL QUESTION TO BE ANSWERED IS, WHO IS THE OWNER OF THE PROPERTY OR IN WHOM THE TITLE TO THE PROPERTY VESTS. IN THE CASE OF A PERSO N WHO IS A DEALER IN LAND, THE BUSINESS TRANSACTION WOULD BE COMPLETED ONLY WHEN THE PURCHASE OR THE SALE TRANSACTION IS COMPLETE. IN ORDER TO DECIDE WHETHER THE BUSINESS TRANSACTION IS COMPLETE, THE QUESTION OF VITAL IMPORTANCE IS WHETHER TITLE IN THE PRO PERTY HAS PASSED. IT IS ONLY ON THE PASSING OF THE TITLE THAT THE TRANSACTION BECOMES COMPLETE, AND UNLESS THE TRANSACTION IS COMPLETE, AN ADVANCE RECEIPT OF MONEY TOWARDS THE TRANSACTION WOULD NOT FORM PART OF THE INCOME OR PROFIT. IN OTHER WORDS, THE REC EIPT WOULD PARTAKE OF THE CHARACTER OF INCOME ONLY WHEN THE TRANSACTION IS COMPLETE. WE ARE UNABLE TO SEE HOW THE METHOD OF ACCOUNTING HAS ANY RELEVANCE IN DETERMINING WHETHER THE RECEIPT OF THE TWO AMOUNTS, AS AFORESAID, BY THE ASSESSEE IS A TRADING RECE IPT OR INCOME. EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THE METHOD OF ACCOUNTING WHICH THE ASSESSEE FOLLOWS IS THE CASH METHOD, IT WOULD HAVE A BEARING ONLY IN RESPECT OF COMPLETED BUSINESS TRANSACTIONS. IF THE METHOD FOLLOWED IS THE CASH METHOD, ONLY A MOUNTS WHICH THE ASSESSEE HAS RECEIVED WILL FORM PART OF ITS INCOME, BUT THAT WOULD BE SO ONLY AFTER THE TRANSACTIONS IN RESPECT OF WHICH THE AMOUNTS ARE RECEIVED ARE LEGALLY COMPLETED. SUCH AMOUNTS CANNOT BE TREATED AS TRADING RECEIPTS TILL THE TITLE PASS ES TO THE PURCHASER AND THE LAND FOR WHICH THE AMOUNT IS RECEIVED GOES OUT OF THE STOCK - IN - TRADE OF THE ASSESSEE. IF THE METHOD OF ACCOUNTING FOLLOWED IS MERCANTILE, ON COMPLETION OF THE TRANSACTION THE ENTIRE SALE PRICE WILL BECOME THE INCOME OF THE ASSES SEE IRRESPECTIVE OF THE FACT WHETHER OR NOT HE ACTUALLY RECEIVED IT. 9 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 BUT, IN EITHER CASE, THERE IS NO QUESTION OF THE RECEIPT BECOMING AN INCOME BEFORE THE COMPLETION OF THE TRANSACTION AND A TRANSFER OF THE TITLE. THE REAL TEST IN DECIDING WHETHER THE REC EIPT IS THE ASSESSEE'S INCOME OR NOT, IS WHETHER THE ASSESSEE CONTINUES TO BE THE OWNER OF THE LAND, OR WHETHER HE IS DIVESTED OF SUCH OWNERSHIP. THE LAND OF WHICH THE ASSESSEE IS THE OWNER IS ITS STOCK - IN - TRADE AND THE LAND WHICH IS SOLD, I.E., THE LAND O F WHICH THE OWNERSHIP OR TITLE IS TRANSFERRED, CEASES TO BE ITS STOCK - IN - TRADE ONLY WHEN THE TRANSACTION IS COMPLETE. IN OUR OPINION, THEREFORE, EVEN ASSUMING THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS THE CASH METHOD, THE AMOUNT OF RS. 2,13 ,772 WHICH IT RECEIVED TOWARDS THE SALE PRICE IS NOT ITS TRADING RECEIPT, SINCE THE LANDS TOWARDS THE PRICE OF WHICH THE SAID AMOUNT WAS RECEIVED WERE NOT SOLD IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1971 - 72. AS POINTED OUT ABOVE, THE SALE DEE DS WERE ADMITTEDLY EXECUTED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1972 - 73. THEREFORE, NO PART OF THE AMOUNT OF RS. 2,13,772 FORMED PART OF THE TRADING RECEIPT OF THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1971 - 72. A S IMILAR QUESTION IN A DIFFERENT CONTEXT HAD ARISEN BEFORE US IN INCOME - TAX REFERENCE NO. 232 OF 1976, DECIDED ON MARCH 24/25, 1981. (CIT V. SHAH DOSHI & CO. - SEE P. 23 SUPRA). IN THAT CASE, THE ASSESSEE - FIRM, TRADING IN LAND, HAD ENTERED INTO AN AGREEMENT TO PURCHASE LAND FROM A FIRM, M/S. SHAH & COMPANY. THE ASSESSEE ENTERED INTO ANOTHER AGREEMENT WITH MAI KRUPA CO - OPERATIVE HOUSING SOCIETY LTD. TO SELL THE LAND WHICH IT HAD AGREED TO PURCHASE FROM M/S. SHAH & CO. THE RIGHT WHICH THE ASSESSEE ACQUIRED UNDER THE AGREEMENT WITH M/S. SHAH & CO. WAS SOUGHT TO BE TREATED AS ITS STOCK - IN - TRADE. THE QUESTION WHICH AROSE BEFORE US IN THAT CASE WAS WHETHER AS A RESULT OF THE AGREEMENT WITH M/S. SHAH & CO., THE ASSESSEE HAD ACQUIRED ANY STOCK - IN - TRADE. THIS COURT TOOK THE VIEW THAT, SINCE THE ASSESSEE WAS A DEALER IN LAND, ONLY SUCH LAND WHICH IT ACQUIRED IN THE COURSE OF ITS BUSINESS WOULD FORM PART OF ITS STOCK - IN - TRADE. IT WAS OBSERVED THAT A MERE AGREEMENT TO PURCHASE LAND WOULD NOT CONFER ANY TITLE ON THE ASSESSEE AND THE LAND AGREED TO BE PURCHASED COULD NOT BE TREATED AS ITS STOCK - IN - TRADE UNLESS AND UNTIL THE SALE TRANSACTION WAS COMPLETE. THE STOCK WHICH THE ASSESSEE HAD CONTRACTED TO PURCHASE, AND WHICH MIGHT HAVE BEEN APPROPRIATED TO THE CONTRACT, BUT THE PROP ERTY IN WHICH HAS NOT PASSED TO THE ASSESSEE, CANNOT BE REGARDED AS THE ASSESSEE'S STOCK - IN - TRADE. THE INSTANT CASE BEFORE US IS A 10 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 CONVERSE CASE. HERE, WHAT IS ARGUED ON BEHALF OF THE ASSESSEE IS THAT ON AND FROM THE DATE OF THE AGREEMENT TO SELL THE LAND TO THE SOCIETY, THE LAND CEASED TO BE ITS STOCK - IN - TRADE AND, THEREFORE, THE AMOUNT RECEIVED BY IT TOWARDS THE SALE PRICE SHOULD BE TREATED AS ITS INCOME. AS POINTED OUT ABOVE, THE LAND DOES NOT CEASE TO BE THE STOCK - IN - TRADE OF THE ASSESSEE UNLESS AND UNT IL THE SALE IS COMPLETED. THEREFORE, THE AMOUNT RECEIVED BY THE ASSESSEE BY WAY OF EARNEST MONEY AND PART PAYMENT OF THE PURCHASE PRICE CANNOT BE TREATED AS ITS TRADING RECEIPT. A QUESTION SIMILAR TO THE ONE WHICH HAS ARISEN BEFORE US HAD COME UP FOR CONS IDERATION IN THE CASE OF CHIDAMBARAM CHETTIAR V. CIT [1936] 4 ITR 309 (MAD). THAT WAS A CASE, IN WHICH THE ASSESSEE, WHO WAS CARRYING ON BUSINESS AT KLANG (IN BURMA), H AD ENTERED INTO AN AGREEMENT WITH ONE S. A. RM., WHO CARRIED ON BUSINESS AT PENANG, FOR THE PURCHASE OF HOUSE SITES BELONGING TO S. A. RM IN BRITISH INDIA. ON 3RD APRIL, 1929, A SUM OF RS. 50,000 WAS PAID TO S. A. RM AT PENANG BY THE ASSESSEE'S KLANG FIRM TOWARDS THE PRICE AND THE ASSESSEE WAS DEBITED WITH THIS AMOUNT ON THAT DATE. THE SALE DEED WAS EXECUTED ON 8TH MAY, 1929. IN THE ASSESSMENT FOR THE ACCOUNTING YEAR 13TH APRIL, 1929, TO 12TH APRIL, 1930, THE ASSESSEE CONTENDED THAT THIS SUM OF RS. 50,000 M UST BE DEEMED TO HAVE BEEN REMITTED TO HIM ON 3RD APRIL, 1929, AND NOT ON 8TH MAY, 1929, AND THAT IT COULD NOT, THEREFORE, BE INCLUDED IN THE INCOME OF THE YEAR ENDING 12TH APRIL, 1930. ON A REFERENCE, THE MADRAS HIGH COURT TOOK THE VIEW THAT THE ASSESSEE RECEIVED THE MONEY IN THE SHAPE OF HOUSE SITES ONLY ON THE 8TH MAY, 1929, AND SO THE AMOUNT WAS LIABLE TO BE ASSESSED TO TAX IN THE ACCOUNTING YEAR ENDING 12TH APRIL, 1930. IN OTHER WORDS, IT WAS HELD THAT THE ASSESSEE COULD NOT BE SAID TO HAVE RECEIVED MO NEY, UNLESS AND UNTIL THE SALE WAS COMPLETED ON MAY 8, 1929. SIMILAR VIEW WAS TAKEN IN RE KUNJAMAL AND SONS [1941] 9 ITR 358 (ALL). WE ARE, THEREFORE, UNABLE TO AGREE WITH THE VIEW TAKEN BY THE TRIBUNAL THAT THE AMOUNT OF RS. 5,000 RECEIVED BY THE ASSESSEE AS EARNEST MONEY AND RS. 2,08,772 RECEIVED BY IT AS PART PAYMENT OF PRICE CONSTITUTE THE ASSESSEE'S INCOME TAXABLE FOR THE ASSESSMENT YEAR 1971 - 72. 11. THUS, A READING OF THE ABOVE ORDER SHOWS THAT IN ORDER TO TAX THE INCOME IN THE ASSESSMENT YEAR , THREE CONDITIONS HAVE TO BE CUMULATIVE LY SATISFIED : - 11 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 1) S ALE DEED SHOULD BE REGISTERED ; 2) THE ASSESSEE SHOULD HAVE ACQUIRED A LEGAL RIGHT TO RECEIVE THE CONSIDERATION STATED IN THE REGISTERED SALE DEED; AND 3) THE POSSESSION OF THE PROPERTY MUST BE HANDED - OVER TO THE BUYER. 1 2 . IN THE INSTANT CASE , IT IS NOT IN DISPUTE THAT THE SALE DEED WAS REGISTERED ON 04/04/2008 WHICH IS THE PREVIOUS YEAR REL E VANT TO THE ASSESSMENT YEAR 2009 - 10 . THUS, ONE OF THE CONDITIONS FOR TREATING THE INCOME FROM SALE OF LAND AS INCOME ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER APPEAL IS NOT SATISFIED. THEREFORE, WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN HOLDING THE SALE CONSIDERAT ION FROM THE PROPERTY WAS NOT TAXABLE IN THE ASSESSMENT YEAR 2008 - 09. HENCE, WE DISMISS THE ABOVE GROUNDS OF APPEAL OF THE REV E NUE. 13 . GROUND NO.4 OF THE APPEAL READS AS UNDER: - 4. THE LD. CIT(A) - 2, PANAJI HAS ERRED IN DELETING IN ADDITION OF THE UNEXPLAINED INVESTMENT AMOUNTING TO RS.5,77,63,450/ - WITHOUT APPRECIATING T HE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 14 . BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF SEARCH AT THE OFFICE OF MR. PRAKASH KITTUR EVIDENCE RELATING TO SALE OF PROPERTY BY MR. PRAKASH KITTUR WAS FOUND AND SEIZED VIDE PAGES NO. 20 TO 27 OF ANNEXURE - A/PVK/19. AS PER THE SEIZED EVIDENCE, WHICH IS A DRAFT AGREEMENT BETWEEN M/S. UNICORN DEVELOPERS AND M/S. NAIKNAVRE PRESTIGE ENVIRON HOUSING PVT. LTD., THE PRO PERTY ADMEASURING 2,46,40 SQ.MTS. KNOWN AS OMELEM AFORAMENTO IN SURVEY NO. 22/1 AT GANCIM WAS SOLD FOR A CONSIDERATION OF 16,01,60,000/ - . IT WAS FURTHER NOTICED THAT THE SAID WAS PROPERTY SOLD TO M/S. NAIKNAVRE PRESTIGE 12 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 ENVIRON HOUSING PVT. LTD. VIDE REGISTERED SALE DEED DATED 08/03/2008 FOR A CONSIDERATION OF 16,01,60,000/ - . M/S. UNICORN DEVELOPERS, A PROPRIETARY CONCERN OF MR. PRAKASH KITTUR, HAD PURCHASED THE ABOVE PROPERTY ADMEASURING 2,46,400 SQ.MTS. AT SURVEY NO. 22/1 GANCIM, TISWADI, GOA FROM THE ORIGINAL OWNERS MR. SITACANT GARCO & OTHERS VIDE REGISTERED SALE DEED DATED 12/11/2007 FOR A CONSIDERATION OF 6,16,00,000/ - . 15 . IT WAS FURTHER NOTICED FROM THE SEIZED BOOKS OF ACCOUNTS OF M/S. UNICORN DEVELOPERS THAT TH E ABOVE SALE CONSIDERATION WAS NOT REFLECTED IN THE PROFIT & LOSS ACCOUNT . THE SAME WAS SHOWN IN THE BALANCE SHEET UNDER THE HEAD ADVANCES. MR. PRAKASH KITTUR WAS ASKED TO FURNISH THE DETAILS OF THE RECEIPT OF SALE CONSIDERATION AND THE POSSESSION OVER THE ABOVE PROPERTY. HE CLAIMED THAT HE AND HIS NOMINEES RECEIVED ONLY 12 CRORES AND THE BALANCE IS YET TO BE RECEIVED. HE CONFIRMED THAT THE POSSESSION HAS BEEN HANDED OVER TO M/S. NAIKNAVRE PRESTIGE ENVIRON HOUSING PVT. LTD. 16 . THE ASSESSING OFFICE R ALSO OBSERVED THAT ENQUIRIES WITH M/S. NAIKNAVRE PRE STIGE ENVIRON HOUSING PVT. LTD., PUNE, THEY SHOWED THAT THEY HAVE PAID 13 CRORES BY CHEQUE BEING 12 CRORES PAID TO M/S. UNICORN DEVELOPERS AND ITS NOMINE E S AND 1 CRORE PAID BY POST - DATED CHEQUES IN 25 INSTALMENTS OF 4 LAC. EACH COMMENCING FROM JANUARY 2009 AND THE BALANCE OF 3,01,60,000/ - WAS ADJUSTED AGAINST THE SHARE APPLICATION MONEY IN THE NAME OF M/S. UNICORN DEVELOPERS IN ACCORDANCE WITH THE TERMS OF THE JOINT DEVELOPMENT AGREEMENT DATED 24/12/2008 . THIS BALANCE AMOUNT OF 3,01,60,000/ - WAS AGREED TO BE TREATED AS DEPOSIT BY M/S. UNICORN DEVELOPERS FOR THE JOINT DEVELOPMENT OF THE PROPERTY ALONG WITH 15% OF THE MARGIN ARISING FROM THE DEVELOPMENT OF PROPERTY TO BE PAID TO M/S. UNICORN DEVELOPERS. 13 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 1 7 . THE ASSESSING OFFICER FURTHER NOTICED FROM THE SEIZED BOOKS OF ACCOUNTS THAT M/S. UNICORN DEVELOPERS DEBITED 2,52,36,550/ - FOR FINANCIAL YEAR 2007 - 08 UNDER THE HEAD INVESTMENT FOR GANCIM PRO P ERTY . OUT OF THE ABOVE AMOUNT OF 2,52,36,550/ - , AN AMOUNT OF 38,36,550/ - WAS DEBITED AS ADVANCE PAID FOR THE PURCHASE OF PROPERT Y AT GANCIM. FURTHER AN AMOUNT OF 2,14,00,000/ - WHICH WAS STATED TO HAVE BEEN RECEIVED FROM M/S. ELEGANCE PROPERTIES PVT. LTD. IS ADJUSTED AGAINST THE COST OF THE LAND. THE ASSESSING OFFICER NOTICED THAT THIS IS ONLY A JOURNAL ENTRY . ACCORDING TO THE ASSESSING OFFICER , THERE IS NO REASON WHY THE SAID ADJUSTMENT WITH M/S. ELEGANCE PROPERTIES PVT. LTD. CAN BE DEBITED TO THE PROFIT & LOSS ACCOUNT AS EXPENDITURE FOR PROPERTY AT GANCIM . THERE IS NO EVIDENCE IN THE REGISTERED SALE DEED S THAT M/S. ASHMA VIR FINANCE PVT. LTD. AND M/S. LA CALYPSO HOTELS PVT. LTD. ARE HAVING ANY INTEREST IN THE LAND. HENCE, ACCORDING TO THE ASSESSING OFFICER IT CAN BE CONCLUDED THAT MR. PRAKASH KITTUR ONLY ACCOUNTED 38,66,550/ - AS COST OF THE ABOVE LAND AT GANCIM. 1 8 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , ASSESSEE FURNISHED AN EXPLANATION OF THE SOURCE OF PURCHASE OF LAND AT GANCIM VIDE LETTER DATED 19/03/2013 FILED ON 28/03/2 0 13 WHICH READS AS UNDER: - (1) SOURCE OF PURCHASE: 1. I DID NOT HAVE SUFFICIENT FUNDS TO ACQUIRE GHANSEM PROPERTY. HENCE, I HAD MADE SOME INVESTORS TO DIRECTLY PAY THE PARTIES FROM WHOM I HAD PURCHASED THE PROPERTY. 2. DETAILS OF INVESTMENT FOR PURCHASE OF GHANSEM PROPERTY IS AS UNDER: PURCHASE CONSIDERATION AS PER PURCHASE DEED 6,16,00, 000 STAMP DUTY AND REGISTRATION 24,64,000 PROFESSIONAL FEES 2,25,560 TOTAL COST OF PURCHASE 6,65,28,000 3. DETAILS OF PAYMENTS DIRECTLY MADE BY MY INVESTORS ARE AS UNDER: ASHMA VIR FINANCE PUT. LTD. 3,50,00,000 TAHIR ISANI 2,00,00,000 RAJARAM DIVEKAR 10,26,000 14 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 PRAKASH BANDEKAR 10,26,000 TOTAL 5,70,52,000 BALA NCE PAID BY UNICORN DEVELOPER 94,76,000 I FURTHER SAY THAT, ALL THE ABOVE INVESTORS HAD MADE DIRECT PAYMENT TO THE SELLERS OF THE PROPERTY AS LISTED BELOW. LAND OWNERS NAME CHQ/D D NO. DATE BANK DETAILS AMOUNT SOURCE OF CHQ DATTARAJ R. SANKOW 718147 30/10/2007 KOTAK MAHIND RA 1541000 UNICORN GEETA V. JOSHI 498899 11/01/2007 DCB 3850000 TAHIRISANI GEETA J KAMAT 23022 11/02/2007 AXIS BANK 3850000 ASHMA VIR FINANCE PVT. LTD. KIRAN P. KUDCHADKAR 20491 30/10/2007 HDFC BANK LTD 1026000 DIVKAR KISHORI S. GHARSE 23024 11/02/2007 AXIS BANK 5133000 ASHMA VIR FINANCE PVT. LTD. KUMUDINI U KOLWALKAR 207773 30/10/2007 SARASWAT 5133000 UNICORN/ELEGA NCE NARCINVA R. SANCOW 498898 11/01/2007 DCB 1541000 TAHIRISANI RAMAKANT V. GHARSE 498897 01/11/2007 DCB 3850000 TAHIRISANI SITAKANT M GHARSE 498895 01/11/2007 DCB 12633000 TAHIRISANI 1SITAKANT M. GHARSE 207772 30/10/2007 SARASWAT 2767000 UNICORN/ELEGA NCE ASUPRABHA BHANDARE 23023 11/02/2007 AXIS BANK 3850000 ASHMA VIR FINANCE PVT. LTD. USHA PUNDALIK KARE 498896 01/11/2007 DCB 5400000 TAHIRISANI VINAYA V. KENKRE 350057 30/10/2007 BANK OF MAHARASHTRA 1026000 PRAKASH BANDEKAR USHA PUNDALIK KARE 23021 11/02/2007 AXIS BANK 7150000 ASHMA VIR FINANCE PVT. LTD. USHA PUNDALIK KARE 498901 11/03/2007 DCB 1850000 TAHIRISANI USHA PUNDALIK KARE 498906 11/03/2007 DCB 1000000 TAHIRISANI TOTAL 61600000 15 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 THE ABOVE PEOPLE WERE DIRECTLY PAID BY NAIKNAVRE PRESTIGE ENVIRON PVT. LTD. AS FOLLOWS: UNICOR DEVELOPERS 53,20,000=00 ASHMA VIR FINANCE PVT. LTD. 3,50,00,000=00 TAHIR ISANI 2,00,00,000=00 6,03,20,000=00 AS THE INVESTORS MADE DIRECT PAYMENTS TO THE SELLERS, WHEN WE MADE THE SALE TO M/S. NAIKNAVRE PRESTIGE ENVIRON HOUSING PVT. LTD. THEY MADE DIRECT PAYMENT TO THE INVESTORS. 1 9 . FROM THE ABOVE DETAILS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE TO ADD WEIGHT TO THE CLAIM THAT THE PAYMENT FOR PURCHASE OF LAND WAS MADE BY HIM AND OTHER PARTIES TO THE VENDORS ON HIS BEHALF IS NOW POINTING OUT THAT M/S. NAIKNAVRE PRESTIGE ENVIRON HOUSING PVT. LTD. TO WHOM THE SAME PROPERTY WAS SOLD FOR 16,01,60,000/ - HAS MADE DIRECT PAYMENTS TO THE SAME PERSON WHO PAID FOR THE PURCHASE . THE ASSESSING OFFICER OBSERVED FROM THE ASSESSEES SUBMISSIONS THAT IT IS SEEN THAT M/S. ASHMA VIR FINANCE PVT. LTD. HAS BEEN PAID 3,50, 00, 000/ - TAHIR ISANI 75,00,000/ - AND M/S. LA CALYPSO HOTELS PVT. LTD. (ON BEHALF OF TAHIR ISANI) HAS BEEN PAID 1,25,00,000/ - . BUT THE PAYMENTS DO NOT MATCH WITH THE ALLEGED INVESTMENTS AS UNDER: - DATE PAID TO BANK DD NO. AMOUNT 05.03.08 ASHMA VIR FINANCE PVT. LTD. HDFCBANKPANAJI 0111329 5000000 05.03.08 ASHMA VIR FINANCE PVT. LTD. HDFC BANK PANAJI 012110 30000000 TOTAL 35000000 05.03.08 M/S. LA CALYPSO HOTELS PVT. LTD.(ON BEHALF OF TAHIR ISANI) HDFC BANK PANAJI 012107 12500000 05.03.08 TAHIR ISANI HDFC BANK PANAJI 012108 7500000 TOTAL 20000000 16 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 NAME AMOUNT CLAIMED BY THE ASSESSEE AMOUNT PAID AS PER SALE DEED (RS.) TAHIRLSANI 3,01,24,000 75,00,000 + 1,25,00,000 TO LA CALYPSO HOTELS PVT. LTD. ASHMA VIR FINANCE PVT. LTD. 1,99,83,000 3,50,00,000 PRAKASH BANDEKAR 10,26,000 --- ELEGANCE PROPERTIES 79,00,000 --- TOTAL 6,00,59,000 5,50,00,000 20 . THE ASSESSING OFFICER FROM THE ABOVE TABLE OBSERVED THAT FROM THE DEED OF SALE DATED 08/03/2008 BETWEEN M/S. UNICORN DEVELOPERS AND M/S. NAIKNAVRE PRESTIGE ENVIRON HOUSING PVT. LTD. , IT IS NOTED THAT THOUGH THE PAYMENTS TO M/S. ASHMA VIR FINANCE PVT. LTD., TA HIR ISANI AND M/S. LA CALYPSO HOTELS PVT. LTD. HAVE BEEN MENTIONED THEREIN NOWHERE IS THE INTEREST OF THE PARTIES SPECIFIED. THE ASSESSING OFFICER, THEREFORE, OBSERVED THAT THERE IS NO CORRELATION BETWEEN PAYMENTS TO BE MADE TO THE ORIGINAL VENDORS OF THE PROPERTY BY TAHIR ISANI AND OTHERS AND THE PAYMENTS RECEIVED BY TAHIR ISANI AND OTHERS FROM M/S. NAIKNAVRE PRESTIGE ENVIRON HOUSING PVT. LTD. AS BROUGHT OUT IN THE ABOVE TABLE. HE, THEREFORE, MADE THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT OF 5 ,77,63,450/ - ( 6,16,00,000 38,36,550) AND BROUGHT THE SAME TO TAX IN THE ASSESSMENT YEAR 2008 - 09. 21 . DURING THE COURSE OF HEARING OF APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), ASSESSEE HAS SUBMITTED AS UNDER: - 2. THE AO HAS ERRED IN MAKING ADDITION OF RS.5,77,63,450/ - AS UNEXPLAINED INVESTMENT IN GHANSEM PROPERTY AS UNDER : PURCHASE CONSIDERATION RS. 6,16,00,000/ - LESS: AMT. PAID BY ASSESSEE RS. 38,36,550/ - BALANCE TREATE D AS UNEXPLAINED INVESTMENT RS 5,77,63,450/ - IN THIS REGARD WE STATE AS UNDER: 17 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 2.1 THE ASSESSEE PAID AMOUNT OF RS.6,16,00,000/ - TOWARDS PURCHASE OF GHANSEM PROPERTY AS BELOW : PARTY SAME CHEQUE NO. CHQ. DATE BANK AMOUNT PAID BY GEETA J. KAMAT 23022 11 - 02 - 2007 AXIS BANK 3850000 ASHMA VIR FINANCE PVT. LTD., KISHORI S GRARSE 23024 11 - 02 - 2007 AXIS BANK 5133000 SUPRABHA BHANDARE 23023 11 - 02 - 2007 AXIS BANK 3850000 USHA PUNDALIK KARE 23021 11 - 02 - 2007 AXIS BANK 7150000 RAJARAM DIVKAR KIRAN P. KUDCHADKAR 20491 30 - 10 - 2007 HDFC BANK LTD 1026000 VINAYA V. KENKRE 350057 30 - 10 - 2007 BOM 1026000 PRAKASH BANDEKAR GEETA V. JOSHI 498899 11 - 01 - 2007 DCB 3850000 TAHIR ISANI NARCINVA R. SANCOW 498898 11 - 01 - 2007 DCB 1541000 RAMAKANT V. GHARSE 498897 01 - 11 - 2007 DCB 3850000 SITAKANT M. GHARSE 498895 01 - 11 - 2007 DCB 12633000 USHA PUNDALIK KARE 498896 01 - 11 - 2007 DCB 5400000 USHA PUNDALIK KARE 498901 11 - 03 - 2007 DCB 1850000 USHA PUNDALIK KARE 498906 11 - 03 - 2007 DCB 1000000 DATIARAJ R. SANKOW 718147 30 - 10 - 2007 KOTAK MAHINDRA 1541000 UNICORN/ ELEGANCE KUMUDINI U. KOLWALKAR 207773 30 - 10 - 2007 SARASWAT 5133000 SITAKANTM. GHARSE 207772 30 - 10 - 2007 SARASWAT 2767000 . TOTAL 61600000 2.2 SHRI. RAJARAM DIVKAR AND SHRI PRAKASH BANDEKAR HAD INVESTED RS.20.54 LACS TOWARDS THE PURCHASE OF THE SAID PROPERTY AS THE ASSESSEE HAD ENTERED INTO JOINT VENTURE AGREEMENT DATED 18 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 30/12/2007 WITH THEM, COPY OF THE JOINT VENTURE AGREEMENT ENCLOSED. ANNEXURE V. 2.3 ASSESSEE HAD TAKEN UNSECURED LOANS FROM M/S. ASHMA VIR FINANCE PVT. LTD., RS.199.83 LACS AND SHRI TAHIR ISANI RS.301.24 LACS, WHICH HAS BEEN DULY ACCOUNTED IN THE BOOKS OF ACCOUNT AND SUBSEQUENTLY PAID BACK TO THEM. CONFIRMATION LETTERS AND LEDGER ABSTRACTS ENCLOSED. ANNEXURE VI. 2.4 AS SUCH THE TOTAL INVESTMENT OF RS.6. 16 CRORES TOWARDS PURCHASE OF PROPERTY AT SURVEY NO.22/ 1 , GHANSEM VILLAGE, WAS FUNDED BY ABOVE JOINT VENTURE AGREEMENT, UNSECURED LOAN AND THROUGH INTERNAL ACCRUALS OF THE ASSESSEE. 2.5 FURTHERMORE THE TOTAL INVESTMENT ON THE ABOVE PROPERTY RS.7,34,99,880/ - INCLUDING THE ABOVE PURCHASE COST OF RS.61600000/ - , TENANT SETTLEMENT RS.9284000/ - STAMP DUTY RS.1 232010, COMPENSATIONS RS.681550/ - , SITE EXPENSES RS.476760, PROFESSIONAL FEES RS.225560/ - , IS DULY ACCOUNTED IN THE BOOKS OF ACCOUNTS DURING THE FINANCIAL YEAR 2007 - 08 UNDER THE HEADING GHARSEM PROP ACQUISITION ACCOUNT. COPY OF THE LEDGER ABSTRACT ENCLOS ED ANNEXURE VII. 2.6 HENCE THE AO HAS ERRED IN TREATING THE ABOVE INVESTMENT AS UNEXPLAINED INVESTMENT ALTHOUGH THE INVESTMENT HAS BEEN DULY ACCOUNTED FOR AND THE SOURCE OF SUCH INVESTMENT HAS ALSO BEEN ACCOUNTED IN THE BOOKS OF ACCOUNTS WHICH ARE DULY AUDITED. 2.7 SECTION 69 OF THE INCOME TAX ACT1961 IS AS FOLLOWS WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOU RCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENTS OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE [ASSESSING] OFFICER, SATISFACTORY, THE VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE INC OME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. IT IS CLEAR FROM THE READING OF THE ABOV E ACT THAT THE INVESTMENT WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR ANY SOURCE OF INCOME AND THE APPELLANT OFFERS NO EXPLANATION ABOU T THE NATURE AND SOURCE OF INVESTMENT OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTORY, THE VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. IN THE PRESENT CASE AO HAS CHOSEN TO IGNORE THE FACT THAT THE ENTIRE INVESTMENT TOWARDS THE ACQUISITION OF THE PROPERTY HAS BEEN DULY ACCOUNTED 19 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 IN THE BOOKS OF ACCOUNT OF THE ASSESSE E AS SUCH THE SAME CANNOT BE SAID TO BE EXPLAINED INVESTMENT. 2.8 WE RELY UPON THE DECIDED CASES AS BELOW: [1998] 229 ITR 220 (KER.) HIGH COURT OF KERALA UPASANA HOSPITAL AND NURSING HOME V. CIT 2 9 FROM THE ABOVE IT IS CLEAR THAT THE AO ERRED IN TREATING THE INVESTMENT IN GHARSEM PROPERTY AS UNDISCLOSED INVESTMENT AND IS OUT TO BE DELETED. 7.4. THE A.O. WAS ASKED TO FURNISH HIS REPORT. THE CONTENTS OF THE AOS REPORT IS REPRODUCED AS UNDER: POINT NO.2: ADDITION OF RS.5,77,63,450/ - ON ACCOUNT OF UNEXPLAINED INVESTMENT: IN THE SEIZED BOOKS OF ACCOUNTS OF THE ASSESSEE IT WAS NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.2,52,36,550/ - ON ACCOUNT OF INVESTMENT IN GANCIM PROPERTY. OUT OF THE ABOVE SUM AN AMOUNT OF RS.38,35,500/ - WAS DEBITED AS ADVANCED PAID FOR THE PURCHASE OF THE SAID PROPERTY. FURTHER AN AMOUNT OF RS.2,14,00,000/ - WHEN IT STATED TO HAVE BEEN RECEIVED FROM M/S. ELEGANCE PROPERTIES PVT. LTD., IS ADJUSTED AGAINST THE COST OF THE LAND. FURTHER IT IS NOTICED THAT THERE IS NO REASON WHY THE SAID ADJUSTMENT WITH ELEGANCE PROPERTIES PVT. LTD., CAN BE DEBITED TO THE PROFIT & LOSS A/C. FRO M THE ABOVE IT CAN BE SEEN THAT THE ASSESSEE HAS ACCOUNTED AS RS.38,66,550/ - TOWARDS COST OF THE LAND AT GANCIM. THIS ISSUE IS DISCUSSED IN D ETAILS IN THE ASSESSMENT ORDER. 22 . THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE ASSESSEES SU BMISSIONS AND REMAND REPORT OF THE ASSESSING OFFICER , DELETED THE ADDITION OF 5,77,63, 450/ - AS UNEXPLAINED INVESTMENT S. 23 . THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 24 . THE A SSESSEE DURING THE COURSE OF HEARING ARGUED AND SUBMITTED AS UNDER: - 2. THE AO HAS ERRED IN MAKING ADDITION OF RS.5,77,63,450/ - AS UNEXPLAINED INVESTMENT IN GHANSEM PROPERTY AS UNDER: PURCHASE CONSIDERATION RS. 6,16,00,000/ - 20 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 LESS: AMT. PAID BY ASSESSEE RS. 38,36,550/ - BALAN CE TREATED AS UNEXPLAINED INVESTMENT RS 5,77,63,450/ - IN THIS REGARD WE STATE AS UNDER: 2.1 THE ASSESSEE PAID AMOUNT OF RS.6,16,00,000/ - TOWARDS PURCHASE OF GHANSEM PROPERTY AS BELOW: PARTY SAME CHEQUE NO. CHQ. DATE BANK AMOUNT PAID BY GEETA J. KAMAT 23022 11 - 02 - 2007 AXIS BANK 3850000 ASHMA VIR FINANCE PVT. LTD., KISHORI S GRARSE 23024 11 - 02 - 2007 AXIS BANK 5133000 SUPRABHA BHANDARE 23023 11 - 02 - 2007 AXIS BANK 3850000 USHA PUNDALIK KARE 23021 11 - 02 - 2007 AXIS BANK 7150000 RAJARAM DIVKAR KIRAN P. KUDCHADKAR 20491 30 - 10 - 2007 HDFC BANK LTD 1026000 VINAYA V. KENKRE 350057 30 - 10 - 2007 BOM 1026000 PRAKASH BANDEKAR GEETA V. JOSHI 498899 11 - 01 - 2007 DCB 3850000 TAHIR ISANI NARCINVA R. SANCOW 498898 11 - 01 - 2007 DCB 1541000 RAMAKANT V. GHARSE 498897 01 - 11 - 2007 DCB 3850000 SITAKANT M. GHARSE 498895 01 - 11 - 2007 DCB 12633000 USHA PUNDALIK KARE 498896 01 - 11 - 2007 DCB 5400000 USHA PUNDALIK KARE 498901 11 - 03 - 2007 DCB 1850000 USHA PUNDALIK KARE 498906 11 - 03 - 2007 DCB 1000000 DATIARAJ R. SANKOW 718147 30 - 10 - 2007 KOTAK MAHINDRA 1541000 UNICORN/ ELEGANCE KUMUDINI U. KOLWALKAR 207773 30 - 10 - 2007 SARASWAT 5133000 SITAKANTM. GHARSE 207772 30 - 10 - 2007 SARASWAT 2767000 . TOTAL 61600000 21 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 2.2 SHRI RAJARAM DIVKAR AND SHRI. PRAKASH BANDEKAR HAD INVESTED RS.20.54 LACS TOWARDS THE PURCHASE OF THE SAID PROPERTY AS THE ASSESSEE HAD ENTERED INTO JOINT VENTURE AGREEMENT DATED 30/12/2007 WITH THEM, COPY OF THE JOINT VENTURE AGREEMENT ENCLOSED. ANNEXURE - VI . 2.3 ASSESSEE HAD TAKEN UNSECURED LOANS FROM M/S. ASHMAVIR FINANCE PVT. LTD., RS.199.83 LACS AND SHRI TAHIR ISANI RS301.24 LACS, WHICH HAS BEEN DULY ACCOUNTED . IN THE BOOKS OF ACCOUNT AND SUBSEQUENTLY PAID BACK TO THEM. CONFIRM A TION LETTERS AND LEDGER A BSTRACT ENCLOSED ANNEXURE VII 2.4 AS SUCH THE TOTAL INVESTMENT OF RS.6.16 CRORES TOWARDS PURCHASE OF PROPERTY AT SURVEY NO.22/ 1 , GHANSEM VILLAGE, WAS FUNDED BY ABOVE JOINT VENTURE AGREEMENT, UNSECURED LOAN AND THROUGH INTERNAL ACCRUALS OF THE ASSESSEE. 2 .5 FURTHERMORE THE TOTAL INVESTMENT ON THE ABOVE PROPERTY RS.7,34,99,880/ - INCLUDING THE ABOVE PURCHASE OST OF RS.61600000/ - , TENANT SETTLEMENT RS.9284000/ - STAMP DUTY RS.1232010, COMPENSATIONS RS.681550/ - , SITE EXPENSES RS.476760, PROFESSIONAL FEES RS.225 560/ - , IS DULY ACCOUNTED IN THE BOOKS OF ACCOUNTS DURING THE FINANCIAL YEAR 2007 - 08 UNDER THE HEADING GHARSERN PROP ACQUISITION ACCOUNT. COPY OF THE LEDGER ABSTRACT ENCLOSED ANNEXURE - V III . 2.6 HENCE THE AO HAS ERRED IN TREATING THE ABOVE INVESTMENT AS UNEXPLAINED INVESTMENT ALTHOUGH THE INVESTMENT HAS BEEN DULY ACCOUNTED FOR AND THE SOURCE OF SUCH INVESTMENT HAS ALSO BEEN ACCOUNTED IN THE BOOKS OF ACCOUNTS WHICH ARE DULY AUDITED. 2.7 S ECTION 69 OF THE INCOME TAX ACT 1961 IS AS FOLLOWS WHERE IN THE FINA NCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENTS OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. IT IS CLEAR FROM THE READING OF THE ABOVE ACT THAT THE INVESTMENT WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR ANY SOURCE OF INCOME AND THE APPELLANT OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF INVESTMENT OR THE EX PLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF IHE AC, 22 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 SATISFACTORY, THE VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. IN THE PRESENT CASE AO HAS CHOSEN TO IGNORE THE FACT THAT THE ENTIRE INVESTMENT TOW ARDS THE ACQUISITION OF THE PROPERTY HAS BEEN DULY ACCOUNTED IN THE BOOKS OF ACCOUNT OF THE ASSESSE E AS SUCH THE SAME CANNOT BE SAID TO BE EXPLAINED INVESTMENT. 2.8 W E RELY UPON THE DECIDED CASES AS BELOW: [1998] 229 ITR 220 (KER.) HIG H COURT OF KERALA UPASANA HOSPITAL AND NURSING HOME V. CIT 2.9 FROM THE ABOVE IT IS CLEAR THAT THE AC ERRED IN TREATING THE INVE STMENT IN GHARSEM PROPERTY AS UN DISCLOSED INVESTMENT AND IS OUT TO BE DELETED. 25 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE PURCHASED A LAND AT SURVEY NO. 22/1, GANCIM , TISWADI, GOA ADMEASURING 2,46,400 SQ.MTS. BY REGISTERED SALE DEED DATED 12/11/2007 FOR A CONSIDERATION OF 6,16,00,000/ - . ON REQUIRED TO EXPLAIN THE SOURCE OF THE SAME, THE ASSESSEE SUBMITTED THAT TOTAL PURCHASE COST OF GANCIM PROPERTY WAS 7,34,99,880 / - COMPRISING PURCHASE CONSIDERATION AS PER PURCHASE DEED 6,16,00,000/ - , STAMP DU TY 12,32,010/ - , PROFESSIONAL FEES 2,25,560/ - . HE SUBMITTED THAT THE SAME WAS PAID DIRECTLY TO THE LAND OWNERS BY M/S. ASHMA VIR FINANCE PVT. LTD. 3,50,00,000/ - , TAHIR ISANI 2 CRORES, RAJARAM DIVEKAR 10,26,000/ - , PRAKASH BANDEKAR 10,26,000/ - AND THE BALANCE OF 94,76,000/ - WAS PAID BY UNICORN DEVELOPER. 26 . THE ASSESSEE SUBMITTED THAT WHEN THE LAND WAS ULTIMATELY SOLD BY THE ASSESSEE TO M / S. NAIKNAVRE PRESTIGE ENVIRON HOUSING PVT. LTD. , THE SAID PARTY DIRECTLY MADE PAYMENTS TO UNICORN DEVELOPERS 53,20,000/ - M/S. ASHMA VIR FINANCE PVT. LTD. 3,50,00,000/ - AND TAHIR ISANI 2 CRORES. THE ASSESSING OFFICER OBSERVED FROM THE SALE DEED DATED 08/03/2008 THAT 2 CRORES WAS TO BE PAID TO TAHIR ISANI AND 3.50 23 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 CRORES WAS TO BE PAID TO M/S. ASHMA VIR FINANCE PVT. LTD., BUT IN THE SALE DEED NOWHERE SPECIFIED THE INTEREST OF THE PARTIES. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED 3,01,24,000/ - FROM TAHIR ISANI , 1,99,83,000/ - FROM M/S.ASHMA VIR FINANCE PVT. LTD. , 10,26,000/ - FROM PRAKASH BANDEKAR AND 79,00,000/ - FROM ELEGANCE PROPERTIES AGGREGATING TO 6,00,59,000/ - . BUT, AS PER THE SALE DEED, THE AMOUNT PAYABLE TO TAHIR ISANI WAS 2 CRORES AND TO M/S. ASHMA VIR FINANCE PVT. LTD. WAS 3.5 CRORES AND THERE WAS NO MENTION OF THE OTHER PARTIES. IN THE ABOVE CIRCUMSTANCES, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD SHOWN 38,36,550/ - AS ADVANCE PAID FOR PURCHASE OF PROPERTY AT GANCIM WHICH IS THE COST OF THE LAND AT GANCIM ACCOUNTED BY THE ASSESSEE. THEREFORE, HE HELD THAT THE BALANCE AMOUNT OF 5,77,63,450/ - IS ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT. 2 7 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION BY OBSERVING AS UNDER: - 7.5. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. THE APPELLANT, ADMITTEDLY, PURCHASED THE PROPERTY FOR A CONSIDERATION OF RS 6,16,00,000/ - THE A 0 ASKED THE APPELLANT TO PROVE THE SOURCES OF PAYMENT OF RS.6,16,00,000/ - . THE PROPERTY WAS IN JOINT OWNERSHIP OF MANY PERSONS AND THEREFORE, THE PAYMENT WAS ALSO MADE TO MANY PERSONS. THE APPELLANT GAVE DETAILS OF PAYMENTS MADE TO THE A.O., WHICH THE A .O. HAS MENTIONED AT PAGE 8 OF THE ASSESSMENT ORDER. HOWEVER, THE A.O. TREATED AN AMOUNT OF RS.38,36,550/ - AS EXPLAINED AND BALANCE AMOUNT OF RS.5,77,63,450/ - HAS BEEN TREATED AS UNE XPLAINED MAINLY FOR TWO REASONS: I) APPELLANTS INVESTORS HAVE PAID MONEY DIRECTLY TO THE ORIGINAL LAND OWNERS AND THE BUYER M/S. NAIKNAVRE HAVE ALSO PAID THESE INVESTORS DIRECTLY. THE A.O. HAS MENTIONED OF SOME DISCREPANCY IN TERMS OF AMOUNTS. II) IN THE AGREEMENT WITH NAIKNAVRE, THIS FACT OF DIRECT PAYMENT TO INVESTORS IS ME NTIONED, BUT IT HAS NOT BEEN SPECIFICALLY MENTIONED AS TO WHAT RIGHT THE INVESTORS HAVE IN THE PROPERTY. ON PERUSAL OF FACTS IN MY OPINION, THE CONCLUSION DRAWN BY THE A.O. HAS INBUILT CONTRADICTION IN IT. ON THE ONE HAND - ENTIRE SALE 24 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 CONSIDERATION OF RS..16,O1,60,000/ - IS BEING TREATED AS RECEIPT IN THE HANDS OF THE ASSESSEE, EVEN THOUGH A SUBSTANTIAL PART HAS BEEN PAID TO THE INVESTORS DIRECTLY BY THE PURCHASER, AND ON THE OTHER HAND, HE HAS EXCLUDED AMOUNTS PAID BY THE INVESTORS DIRECTLY TO THE ORIGI NAL OWNERS FROM THE PURCHASE COST AND TREAT THEM AS UNEXPLAINED INVESTMENT OF THE ASSESSEE. THE A.O. HAS NOT DOUBTED THE FACTS THAT ENTIRE PAYMENT TO THE ORIGINAL LAND OWNERS HAVE BEEN MADE THROUGH CHEQUES BY THE INVESTORS. THE INVESTORS ARE TAHIR ISANI, A SHMA VIR FINANCE, DIVKAR AND PRAKASH BANDEKAR. THE APPELLANT, AT NO POINT OF TIME CLAIMED THAT THESE PAYMENTS HAVE BEEN MADE BY HIM, NOR THE A.O. SAID THAT THESE PAYMENTS HAVE BEEN ROUTED THROUGH HIM. THIS FACT REMAINS UNDISPUTED THAT M/S. ASHMA VIR FINANC E, TAHIR ISANI AND PRAKASH BANDEKAR DIRECTLY MADE PAYMENT TO THE ORIGINAL OWNERS AND THEREFORE, BY ANY STRETCH OF IMAGINATION, THESE AMOUNTS CAN BE TREATED AS UNEXPLAINED IN THE HANDS OF THE ASSESSEE AND BE ADDED IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED INVESTMENTS. THE ASSESSEE NEVER CLAIMED TO HAVE INVESTED THESE AMOUNTS. HE ALL ALONG MAINTAINED THAT THESE MONIES WERE DIRECTLY PAID TO THE ORIGINAL OWNERS BY THESE PARTIES. IN VIEW OF THESE FACTS, I HAVE NO HESITATION IN DIRECTING THE A.O. TO DELETE ADDI TION AMOUNTING TO RS.5,77,63,450/ - . THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED ACCORDINGLY. 28 . BEFORE US, THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND CONTENDED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN DELETING THE ADDITION IN ITS ENTIRETY. 29 . ON THE OTHER HAND , AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND CONTENDED THAT THE FULL DETAILS OF THE SOURCE OF INVESTMENT IN GANCIM PROPERTY WAS EXPLAINED TO THE ASSESSING OFFICER WITH FULL NAMES AND ADDRESSES OF THE PERSONS FROM WHOM MONEY WAS RE CEIVED AND IN ABSENCE OF ANY MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW ANY DISCREPANCY AFTER EXAMINING THE SOURCE , T HE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF 5,77,63,450/ - . 25 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 30 WE FIND NO SPECIFIC ERROR IN THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) COULD BE POINTED OUT BY THE R E VENUE . THE ASSESSEE EXPLAINED THE COST OF THE LAND WAS MET FROM THE FUNDS RECEIVED FROM 04 PERSONS NAMELY M/S. ASHMA VIR FINANCE PVT. LTD. , TAHIR ISANI, RAJARAM DIVEKAR AND PRAKASH BANDEKAR , WHO DIRECTLY PAID THE MONEY TO THE SELLERS OF THE LAND AND THE BALANCE AMOUNT OF 94,76,000/ - WAS PAID FROM THE PROPRIETARY CONCER N OF THE ASSESSEE NAMELY M/S. UNICORN DEVELOPERS. 31 WE FIND THAT THE IDENTITY OR THE CREDITWORTHINESS OF THE ABOVE NAME D 04 PERSONS HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. NO MATERIAL WAS BROUGHT ON RECORD BY THE ASSESSING OFFICER AFTER EXAMINING THE SAID 04 PERSONS TO SHOW THAT THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED. SIMPLY BECAUSE IN THE SUBJECTIVE OPINION OF THE ASSESSING OFFICER , THE INTEREST OF THE 04 PERSONS IN ASSISTING THE ASSESSEE IN ACQUIRING THE LAND COULD N O T BE EXPLAINED DOES NOT EMPOWER THE ASSESSING OFFICER TO TREAT THE SOURCE AS UNEXPLAINED. FURTHER, SIMPLY BECAUSE THE PERSONS TO WHOM THE ASSESSEE SOLD THE LAND PAID DIRECTLY TO 02 PERSONS, AMOUNT DIFFERENT FROM THE AMOUNT TAKEN FROM THEM FOR THE PURPOSE S OF ACQUISITION OF LAND BECAUSE OF OTHER TRANSACTIONS OF THE ASSESSEE WITH THOSE 02 PERSONS DOES NOT MEAN THAT NO FUNDS WERE RECEIVED FROM THOSE 02 PERSONS. IT I S OBSERVED THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE SOURCE OF 94,76,000/ - CLAIMED BY THE ASSESSEE AS PAID OUT OF HIS OWN PROPRIETARY CONCERN STYLE D M/S. UNICORN DEVELOPERS CANNOT BE ACCEPTED AND WHY THE ASSESS EE COULD NOT HAVE INVESTED THE SAID AMOUNT FROM HIS PROPR IE TARY CONCER N . 32 . IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) . 26 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 THEREFORE, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONFIRMED AND THE GROUNDS OF THE APPEAL OF THE REVENUE ARE DISMISSED. 3 3 . GROUNDS NO. 5 & 6 READS AS UNDER: - 5. THE LD. CIT(A) - 2, PANAJI HAS ERRED IN ADMITTING THE EVIDENCE FILED BY THE ASSESSEE ON THIS POINT WITHOUT ALLOWING AN OPPORTUNITY TO THE AO TO EXAMINE THE EVIDENCE. 6. FOR THE ABOVE GROUNDS AND ANY ADDITIONAL GROUNDS THAT MAY BE AGITATED DURING THE COURSE OF THE HEARING IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) - 2, PANAJI MAY BE QUASHED AND THAT OF THE AO RESTORED. 3 4 . AT THE TIME OF HEARING, NO SPECIFIC SUBMISSIONS WERE MADE BY THE DEPARTMENTAL REPRESENTATIVE, HENCE, SAME ARE DISMISSED. C.O. NO. 20/PNJ/2015 : 3 5 . IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED 09 GROUNDS OF CROSS OBJECTION. GROUND NO S .1 & 9 ARE GENERAL IN NATURE , THEREFORE, REQUIRES NO SEPARATE ADJUDICATION BY US. 3 6 . GROUND NOS. 2 TO 4 OF THE CROSS OBJECTION ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINING ADDITION O F 28,25,000/ - TOWARDS CASH PAID TO M/S. HAZRAT CONSTRUCTIONS. 3 7 . BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF SURVEY PROCEEDINGS AT THE BUSINESS PREMISES OF MR. PRAKASH KITTUR DETAILS OF CASH PAYMENTS MADE TO M/S. HAZRAT CONSTRUCTION WERE FOUND AND SEIZED. ACCORDING TO THE ASSESSING OFFICER, M/S. HAZRAT CONSTRUCTION IS THE CONTRACTOR FOR MOST OF CONSTRUCTION S UNDERTAKEN BY MR. PRAKASH KITTUR. ACCORDING TO THE ASSESSING OFFICER, IT IS OBSERVED FROM PAGE NO. 88 OF ANNEXURE A/PVK - 2/4 DATED 21/05/2010 THAT PAYMENT OF 27 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 79,20,000/ - IN CASH HAS BEEN MADE TO M/S. HAZRAT CONSTRUCTION. ACCORDING TO THE ASSESSING OFFICER, THIS PAGE IS THE EXTRACT OF THE CASH PAYMENTS MADE ON THE DATES MENTIONED ON THE SEIZED MATERIAL. THE HEADING OF THE SE IZED MATERIAL CLEARLY READS AS CASH PAYMENTS. AS PER THE ASSESSING OFFICER IN THE BODY OF THE PAGE, IT IS MENTIONED THAT CASH PAID, CASH PAID BY SIR, CASH PAID IN OFFICE . THEREFORE, ACCORDING TO THE ASSESSING OFFICER THIS CLEARLY GOES TO SHOW THA T ACTUAL CASH WAS PAID BY MR. PRAKASH KITTUR ON THAT PARTICULAR DATE. THE ASSESSING OFFICER FURTHER OBSERVED THAT IT IS SEEN FROM THE SEIZED PAGED UNDER REFERENCE THAT EVEN THE PROJECT/SITE DETAILS HAVE BEEN MENTIONED AGAINST THE CASH PAYMENTS VIZ. MAPUSA (PROJECT AS MAPUSA), NAVHIND DEVELOPERS (PROJECT UNDERTAKEN WITH NAVHIND DEVELOPERS PVT. LTD.), ASHA SHET (HOUSE CONSTRUCTION OF SMT. ASHA SHET) . THEREFORE, THE ASSESSING OFFICER INFERRED THAT THE ABOVE EVIDENCE IS ALSO CORROBORATED BY 18 & 19 OF A/PVK - 2/4 DATED 21/05/2010 . ACCORDING TO PAGE 18 OF A/PVK - 2/4, TOTAL PAYMENTS MADE TO M/S. HAZRAT CONSTRUCTIONS WERE AT 2,96,60,435/ - . OUT OF THIS AMOUNT , PAYMENTS OF 80 LAC. WERE M A DE IN CASH DURING THE PERIOD 09/05/2007 TO 03/08/2009. THE BALANCE PAYMENTS APPEAR TO BE MADE TH R OUGH BANKING CHANNELS. SIMILARLY , ACCORDING TO PAGE 19 OF A/PVK - 2/4, TOTAL PAYMENTS MADE TO M/S. HAZRAT CONSTRUCTIONS WERE AT 3,14,75,235/ - . OUT OF THIS AMOUNT, PAYMENTS OF 76,50,000/ - WERE MADE IN CASH DURING THE PERIOD 09/05/2007 TO 01/08/2009 . ALL THE ABOVE SEIZED PAGES SHOWS THE CASH PAYMENTS FOR THE PERIOD 06/02/2008 TO 29/06/2009 AND THE BALANCE PAYMENTS APPEAR TO BE MADE THROUGH THE BANKING CHANNELS. 3 8. THE ASSESSING OFFICER F URTHER OBSERVED THAT T HE ABOVE CASH PAYMENTS WERE NOT REFLECTED IN THE SE IZ ED BOOKS OF ACCOUNT OF M/S.UNICORN DEVELOPERS WHOSE PROPRIETOR IS MR. PRAKASH KITTUR. VERIFICATION OF THE CASH BOOK FOR THE SAME PERIOD DOES NOT CONTAIN THESE ENTRIES. HENCE, MR. PRAKASH KITTUR WAS CONFRONTED WITH THE ABOVE 28 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 SEIZED EVIDENCE. HE FAILED TO EXPLAIN THESE ENTRIES AND STATED THAT HE WILL VERIFY HIS RECORDS AND FURNISH THE DETAILS. 3 9 . THE ASSESSING OFFICER FURTHER OBSERVED THAT DURING THE COURSE OF ASSESSMEN T PROCEEDINGS , THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF THE TRANSACTION AND VIDE LETTER DATED 15/03/2013 , T HE ASSESSEE HAS EXPLAINED AS UNDER: - 1. THE SLIP SHOWN TO US IS NOT ON ANY KIND OF LETTER HEAD NOR IT IS SIGNED BY ANY OF US OR RECIPIENT. AS SUCH THE SAME IS NOT A VALID DOCUMENT, WHICH CAN BE CONSIDERED FOR MAKING ADDITION. 2. I HAD DENIED HAVING PAID ANY CASH AMOUNT TO M/S. HAZRAT CONSTRUCTIONS IN MY STATEMENT ON OATH RECORDED UNDER SEC. 132(4) ON 24/06/2010 IN ANSWER TO QUESTION NO. 31. 4 0 . THE ASSESSING OFFICER FROM THE ABOVE EXPLANATION CONCLUDED THAT THE ASSESSEE HAS MERELY DENIED HAVING PAID ANY CASH AMOUNTS TO M/S. HAZRAT CONSTRUCTIONS AND STATED THAT ALL THE PAYMENTS HAVE BEEN MADE BY CHEQUE. HOWEVER , THE FACT REMAINS THAT THE SEIZED MATERIALS DETAILED ABOVE, CLEARLY INDICATE THAT CASH HAS BEEN PAID TO M/S. HAZRAT CONSTRUCTIONS TOTALLING TO 79,20,000/ - IN RESPECT OF ASSESSMENT YEAR 2008 - 09 TO 2010 - 11 AND 12 LAC. IN RESPECT OF ASSESSMENT YEAR 2011 - 12 , THE SOURCE OF WHICH HAS NOT BEEN EXPLAINED BY THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT IT IS ALSO CLEAR THAT THE SEIZED MATERIAL HAS BEEN SEIZED FROM THE PREMISES OF THE ASSESSEE DURING THE COURSE OF SEARCH PROCEEDINGS. HENCE, IT IS THE DUTY OF THE ASSESSEE T O EXPLAIN THE TRANSACTIONS NOTED ON THE PAPERS . THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE IN SUPPORT AND THUS FAILED TO PROVE THE PRESUMPTIONS LAID DOWN UNDER SEC. 132(4A) OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER BROUGHT TO TAX UNEXPLAINED CA SH PAYMENT TO THE TUNE OF 79,20,000/ - IN THE HANDS OF MR. PRAKASH KITTUR FOR THE RESPECTIVE ASSESSMENT YEARS AS UNDER: - 29 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 PAYMENTS MADE IN FY AY UNEXPLAINED INVESTMENTS (RS.) 2007 - 08 2008 - 09 56,50,000 2008 - 09 2009 - 10 19,50,000 2009 - 10 2010 - 11 3,20,000 THEREFORE, UNEXPLAINED PAYMENTS OF 56,50,000/ - WAS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE IN THE YEAR UNDER APPEAL . 4 1 . ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE HAS SUBMITTED AS UNDER: - 4. THE AO HAS ERRED IN ADDING RS.56,50,000/ - AS UNEXPLAINED PAYMENTS MADE IN CASH TO M/S. HAZRAT CONSTRUCTIONS BASED ON THE LOOSE SHEET OF PAPER FOUND DURING THE SEARCH, THE ADDITIONS MADE ARE FOR AY 2008 - 09 RS.56,50,000/ - , AY 2009 - 10 RS.19,50,000/ - & AY 2010 - 11 RS.15,2 0,000/ - WITHOUT VERIFYING THE BASIC FACTS AS BELOW: 4.1 THE LOOSE SLIP ON THE BASIS OF WHICH THE ADDITION HAS BEEN MADE BY AO IS A COMPUTERISED STATEMENT, WHICH DOES NOT BELONGS TO THE ASSESSEE NOR IT HAS ANY SIGNATURE/WRITING OF THE ASSESSEE. 4.2 FURTH ER, THE TOTAL OF THE SHEET ALSO DOES NOT MATCH TO THE AMOUNTS SHOWN IN THE STATEMENT, WHICH ITSELF PROVES THAT IT IS SOME IRRELEVANT PIECE OF PAPER WHICH THE AO HAS RELIED FOR MAKING THE ADDITION WITHOUT VERIFYING THE AUTHENTICITY OF THE SAME. ENCLOSED COP Y OF THE LOOSE SHEET. ANNEXURE X. 4.3 FURTHER, ASSESSEE NEVER PAID ANY CASH TO M/S. HAZRAT CONSTRUCTIONS, WHICH HAS ALSO BEEN CONFIRMED BY M/S. HAZRAT CONSTRUCTIONS IN THEIR CONFIRMATION LETTER ENCLOSED ANNEXURE XI. 4.4 ALL THE PAYMENT MADE BY THE ASSESSEE TO M/S. HAZRAT CONSTRUCTIONS ARE THROUGH BANK AND AFTER DULY DEDUCTING THE APPLICABLE TAX AT SOURCE, ENCLOSE IS THE LEDGER ABSTRACT OF THE PARTY CONFIRMING THE DEDUCTION OF TDS AND ALSO THE PAYMENTS MADE TO THEM. ANNEXURE XII. 4.5 AO HAS TOTALLY OVERLOOKED THE CONTENTION F THE ASSESSEE THAT M/S. HARZRAT CONSTRUCTION WAS CONTRACTOR FOR THE ASSESSEE 30 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 AND ANY AMOUNT PAID TO THEM IS REVENUE EXPENDITURE OF THE ASSESSEE. 4.6 AS DENIED BY THE ASSESSEE FROM THE START, THE LOOSE SHEET SEIZED BY THE AO DOES NOT BELONG TO THE ASSESSEE NOR HAS ANY REFERENCE FOR MAKING THE ABOVE ADDITIONS. 4.7 CONSIDERING THE ABOVE WE PRAY FOR DELETION OF THE ABOVE WRONGFUL ADDITIONS MADE BY THE AO. 4.8 WE RELY UPON THE DECIDED CASES IN THE MATTER AS BELOW: [2012J 23 TAXMA NN.COM 275 (JODHPUR - TRIB.) IN THE ITAT JOD. BENCH ASSISTANT COMMISSIONER OF INCOME - TAX VS. HEENA INVESTMENT (P.)LTD. [2011] 12 TAXMANN.COM 4 (HYD.) IN THE ITAT HYDERABAD BENCH B DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE 1, HYDERABAD V S. C. KRISHNA YADAV. 4 2 . THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HELD AS UNDER: - 9.4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE FACTS CAN BE SUMMARIZED AS UNDER: THERE WAS A SEARCH AT THE OFFICE PREMISES OF MR. PRAKASH KITTUR. DURING THE COURSE OF SEARCH MANY DOCUMENTS AND PAPERS, ETC. WERE FOUND. ONE SUCH DOCUMENT WAS A COMPUTERIZED SHEET OF PAPER ON WHICH DETAILS OF CASH PAYMENTS MADE TO M/S. HAZRAT CONSTRUCTION WAS WRITTEN. THE CASH PAYMENT MADE SPREAD OVER MANY FINANCIAL YEARS I.E. F.YR.2007 - 08, 2008 - 09 AND 2009 - 10. M/S. HAZRAT CONSTRUCTIONS IS A CONTRACTOR OF THE APPELLANT. SHRI. PRAKASH KITTUR. ADMITTEDLY, HAZRAT CONSTRUCTIONS HAVE ALSO B EEN PAID BY CHEQUE, THROUGH BANKING CHANNELS AND THESE PAYMENTS HAVE BEEN RECORDED IN THE BOOKS OF THE APPELLANT ASSESSEE. DETAILS OF CASH PAYMENT MADE TO M/S. HAZRAT CONSTRUCTIONS HAVE NOT BEEN RECORDED IN THE BOOKS OF THE APPELLANT. THE APPELLANT W AS CONFRONTED DURING THE COURSE OF SEARCH ITSELF, BUT THE ASSESSEE DID NOT GIVE ANY EXPLANATION. DURING THE COURSE OF SEARCH ASSESSMENT, THE APPELLANT CLAIMED THAT SINCE THE COMPUTER - SHEET IS NOT SIGNED BY ANYONE, THEREFORE, VERACITY OF DOCUMENTS ARE NO T PROVED AND HE DENIED HAVING MADE ANY PAYMENT IN CASH TO M/S. HAZRAT CONSTRUCTIONS. 31 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 NOW, IN CASE OF SEARCH, IT IS A BASIC PRESUMPTION THAT ANY DOCUMENT/PAPER FOUND AT THE PREMISES OF THE ASSESSEE, BELONGS TO THE ASSESSEE, UNLESS THE ASSESSEE IS ABLE TO PROVE OTHERWISE. THE ASSESSEE WAS CONFRONTED WITH THE CONTENTS OF THE PAPER FOUND DURIN G THE SEARCH ITSELF, BUT THE ASSESSEE DID NOT OR COULD NOT GIVE ANY EXPLANATION . THE EXPLANATION GIVEN, DENYING THE CONTENTS OF THE COMPUTER - SHEET ON THE GROUND THAT THE SAME IS NOT SIGNED BY ANYONE DOES NOT HOLD GOOD, AS THE TRANSACTION HAS BEEN DONE IN C ASH AND IS NOT REFLECTED IN THE BOOKS OF THE APPELLANT. M/S. HAZRAT CONSTRUCTION IS A CONTRACTOR OF THE APPELLANT AND IT HAS BEEN MADE PAYMENTS THROUGH BANKING CHANNELS DURING THE PERIOD UNDER CONSIDERATION. OBVIOUSLY, PAYMENTS MADE THROUGH BANKING CHANNEL S HAVE FOUND ITS PLACE IN THE BOOKS OF THE APPELLANT AND CASH PAYMENTS HAVE REMAINED OUTSIDE BOOKS. THUS, ON THE BASIS OF FACTS OF THIS CASE, I AM CONVINCED THAT THE CONTENTS OF THE COMPUTER - SHEET, FOUND DURING THE COURSE OF SEARCH AT THE BUSINESS PREMISES OF THE APPELLANT ARE TRUE AND CORRECT AND THE SAME HAVE NOT BEEN REFLECTED IN THE BOOKS OF THE APPELLANT. ADDITION OF RS.56,50,000/ - MADE FOR A.YR.2008 - 09 BY THE A.O. IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE APPELLANT IS DISMISSED ACCORDINGLY. 4 3 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD . IN THE INSTANT CASE, A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 16/04/2010. DURING THE COURSE OF SEARCH, A LOOSE SHEET MARKED AS ANNEXURE A/PVK - 2/4 WAS FOUND AND SEIZED FROM THE OFFICE PREMISES OF THE ASSESSEE. THE SAID LOOSE SHEET IS A COMPUTER PRINTED PAPER. ON THE SAID LOOSE SHEET AT THE TOP NAME HAZRAT CONSTRUCTIONS IS WRITTEN AND BELOW IT IS WRITTEN CASH PAYMENT AND THEREAFTER CERTAIN DATES WITH AMOUNTS MENTIONED AGAINST THAT DATE ARE WRITTEN. AS PER THOSE DATES , THE AMOUNT RELATING TO THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2008 - 09 COMES TO 56,50,000/ - . 4 4 . I N THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CONFRONTED THIS LOOSE DOCUMENT TO THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THIS PAPER DOES NOT BELONG TO HIM AND IT DOES NOT REFLECT THE TRANSACTIONS BETWEEN THE ASSESSEE AND THE SAID M/S. H AZRAT 32 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 CONSTRUCTIONS . THE ASSESSEE ADMITTED THAT M/S. HAZRAT CONSTRUCTIONS WAS A CONTRACTOR, WHO ALSO WORKED FOR THE ASSESSEE , HOWEVER, THE PAYMENTS FOR THE WORK DONE BY M/S. HAZRAT CONSTRUCTIONS WERE MADE THROUGH BANKING CHANNEL AND, THEREFORE, RECORDED IN HIS BOOKS OF ACCOUNTS . THE ASSESSEE ALSO POINTED OUT THAT DURING THE COURSE OF SEARCH ITSELF, THE ASSESSEE STATED UNDER OATH THAT NO PAYMENT IN CASH HAS BEEN MADE BY HIM TO M/S. HAZRAT CONSTRUCTIONS. HE ALSO POINTED OUT THAT THE SAID LOOSE SHEET DOES NOT BEAR THE NAME OF THE ASSESSEE . N EITHER IT BEAR S SIGNATURE OF THE ASSESSEE N OR WAS I T I N THE HANDWRITING OF THE ASSESSEE. IN FACT, THE SAID LOOSE SHEET ALSO DOES NOT CONTAIN ANY SIGNATURE OF M/S. HAZRAT CONSTRUCTIONS OR ANY PERSON AND IT CANNOT BE ASSUMED ON THE BASIS OF THIS LOOSE SHEET THAT IT RECORD S ANY ACTUAL OR REAL TRANSACTIONS BETWEEN ANY PERSON S . HOWEVER , THE ASSESSING OFFICER NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND ASSUMED THAT THE LOOSE SHEET REFLECTS ACTUAL TRANSACTIONS AND THA T THE TRANSACTIONS WERE ENTERED BETWEEN THE ASSESSEE AND M/S. HAZRAT CONSTRUCTIONS AND THE SAID TRANSACTIONS W ERE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE. THE ASSESSING OFFICER MADE THE ADDITION OF 56,50,000/ - TO THE INCOME OF THE ASSESSEE OF THE YEAR UNDER CONSIDERATION AS UNEXPLAINED EXPENDITURE OF THE ASSESSEE. 4 5 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE LOOSE SHEET WA S FOUND IN THE OFFICE OF THE ASSESSEE. 4 6 . BEFORE US, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FILED THE COPY OF LOOSE SHEET WHICH IS PLACED AT PAGE NO.177 OF THE PAPER BOOK. HE POINTED OUT THEREFROM THAT NOWHE RE THERE IS NAME OF THE ASSESSEE OR SIGNATURE OF THE ASSESSEE. HE ALSO SUBMITTED THAT IT DOES NOT CONTAIN HANDWRITING OF THE ASSESSEE. THE SAID LOOSE SHEET ALSO DOES NOT BEAR THE SIGNATURE OF M/S. HAZRAT CONSTRUCTIONS. THUS, THE SAID LOOSE SHEET 33 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 CANNOT BE TREATED AS AN EVIDENCE OF ANY REAL TRANSACTION , MUCH LESS OF A TRANSACTION BETWEEN THE ASSESSEE AND M/S. HAZRAT CONSTRUCTIONS . HE ARGUED THAT THE LOOSE SHEET HAS NO EVIDENTIARY VALUE IN THE EYES OF LAW. HE ALSO CONTENDED THAT DURING THE COURSE OF SEAR CH, NO MATERIAL TO CORROBORATE THE INFERENCE OF THE ASSESSING OFFICER THAT THIS LOOSE SHEET REFLECTS ACTUAL TRANSACTIONS BETWEEN THE ASSESSEE AND THE SAID M/S.HAZRAT CONSTRUCTIONS WAS FOUND. IN ABSENCE OF ANY CORROBORATIVE MATERIAL FOUND DURING THE COURSE OF SEARCH, NO ADDITION ON THE BASIS OF SUCH LOOSE SHEET WHICH HAS NO EVIDENTIARY VALUE COULD BE MADE IS THE ESTABLISHED POSITION OF LAW. 47 . ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 48 . AFTER GOING THROUGH THE LOOSE SHEET, WE FIND THAT MERELY FROM THE SAID SHEET IT CANNOT BE CONCLUDED THAT IT RECORDS ACTUAL FINANCIAL TRANSACTIONS BETWEEN THE ASSESSEE AND M/S. HAZRAT CONSTRUCTIONS OR ANY OTHER PERSON. FROM THE SAID LOOSE SHEET, IT CANNOT BE CONCLUDED THAT THE ASSESSEE ACTUALLY PAID THE AMOUNT STATED ON THE DATES MENTIONED THEREIN OR EVEN M/S. HAZRAT CONSTRUCTIONS ACTUALLY RECEIVED THOSE AMOUNTS FROM ANY PERSON. THUS, THE SAID DOCUMENT WHICH WAS NOT A PART OF REGULARLY MAINTAIN ED BOOKS OF ACCOUNTS CANNOT BE TREATED AS EVIDENCE OF ACTUAL TRANSACTION OF THE ASSESSEE WITHOUT ANY CORROBORATIVE EVIDENCE FOUND DURING THE COURSE OF SEARCH. IN ABSENCE OF ANY CORROBORATIVE EVIDENCE BEING BROUGHT ON RECORD BY THE R E VENUE , IN OUR CONSIDERED VIEW THE ADDITION MADE MERELY ON THE BASIS OF LOOSE SHEET WHICH DOES NOT BEAR SIGNATURE OF ANY PERSON AND WHICH DOES NOT CREATE ANY LEGAL RELATIONSHIP BETWEEN THE ASSESSEE AND ANY OTHER PERSON CANNOT BE SUSTAINED. 34 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 4 9 . IN THE ABOVE CIRCUMSTANCES , WE ARE UNABLE TO SUSTAIN THE ADDITION MADE BY THE REVENUE AND ACCORDINGLY THE SAME IS DELETED. THUS, THESE GROUNDS OF CROSS OBJECTION ARE ALLOWED. 50 . GROUNDS NO. 5 TO 8 OF THE CROSS OBJECTIONS READ AS UNDER: - 5. THE LD CIT(A) HAS WRONGLY SUSTAINED AMOUNT OF RS.20,80,000/ - FROM THE ADDITION OF RS.1,00,00,000/ - AS INCOME FROM M/S. SHIRDI INFRASTR UCTURE AND DEVELOPERS PVT. LTD. 6. THE LD CIT(4) HAS TOTALLY IGNORED THE PREY OF THE ASSESSEE THAT HE IS AGREEABLE TO DECLARE RS.1 CRORE AS BROKERAGE INCOME UNDER THE CONDITION THAT THERE WILL NOT BE ANY ADDITION ON ACCOUNT OF ALLEGED CASH PAYMENT TO M/S. HAZRAT CONSTRUCTIONS. 7. THE LD CIT(A) HAS SUSTAINED THE B ALANCE AMOUNT OF RS.20,80,000/ - (RS.10000000 7920000 ALLEGED CASH OF M/S. HAZRAT), WHICH IS TOTAL LY WRONG AND UNDESIRED AS CIT(A) HAS SUSTAINED THE ADDITIONS OF ALLEGED CASH PAID TO M/S.HAZRAT CONSTRUCTIONS IN HIS ORDER. 8. THE LEARNED CIT(A) HAS ERRED PASSING THE ORDER WITHOUT CONSIDERING THE FACT THAT NO CROSS EXAMINATION IS PROVIDED AND NO EVIDENCE IS PROVIDED OR DISCUSSED IN THE ORDER OF AO AS WELL AS OF THE CIT(A). ADDITION SUSTAINE D ARE MAINLY ON THE BASIS OF COMM UNICATION FROM THE ASSESSEE WHICH ARE NOT SUBSTANTIATED BY ANY SECONDARY DIRECT EVIDENCE COLLECTED FROM THE ASSESSEE. 51 . AT THE TIME OF HEARING, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING THESE GROUNDS OF CROSS OBJECTION AND ALSO MADE AN ENDORSEMENT TO THIS EFFECT ON THE GROUNDS OF CROSS OBJECTION FILED TOGETHER WITH MEMO OF CROSS OBJECTION . HENCE, THESE GROUNDS OF CROSS OBJECTION ARE DISMISSED AS NOT PRESSED. 52 . THE ASSESSEE HAS ALSO RAISED THE ADDITIONAL GROUNDS OF CROSS OBJECTION, WHICH READ AS UNDER: - 1. THE ID AO HAS TOTALLY IGNORED THE FACT WHILE MAKING THE ADDITIONS ON ACCOUNT OF DISALLOWANCE OF EXPENSES OF RS. RS.8,35,77,999/ - AND OTHER EXPENSES, THAT THE ASSESSEE 35 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 NEVER CLAIMED THE EXPENSES IN THEIR PROFIT AND LOSS ACCOUNT FOR AY 2008 - 09. 2. THE AMOUN T OF EXPENSES OF RS. 83577999/ - WERE CARRIED FORWARD IN THE BALANCE SHEET AS WORK - IN - PROGRESS AND WERE NOT CLAIMED AS EXPENSES OF AY 2008 - 09. 3. THE RESPONDENT PRAYS TO BE ALLOWED TO ADD, VARY AND AMEND THE GROUNDS OF CROSS - OBJECTIONS AT OR BEFORE THE DAT E OF HEARING . 53 . AT THE TIME OF HEARING, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING THE ADDITIONAL GROUNDS OF CROSS OBJECTION RAISED BY HIM AND ALSO MADE AN ENDORSEMENT TO THIS EFFECT ON THE COPY OF THE ADDITIONAL GROUND S FILED BEFORE THE TRIBUNAL ON 0 7 /08/2015 . THEREFORE, THE ADDITIONAL GROUNDS OF CROSS OBJECTION RAISED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED . 54 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 1 2 TH DAY OF AUGUST , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 12 TH AUGUST , 201 5 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER 36 ITA NO. 186/PNJ/2015 C.O.NO. 20/PNJ/2015 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 2 - 14 / 0 8 / 2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 14 .08 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 14 /08 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 14 /0 8 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 14 /08 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 12 /0 8 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 1 4 /08 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER