HARSH DEEP CONSTRUCTION, MUMBAI V. DCIT CC 47, MUMBAI

ITA 1942/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3774 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2014
• Court: TRIBUNAL
• Assessee Lawyers: DARSHANI GOHIL
• Keywords: Search and seizure; Validity of assessment; Retraction
• Section: 143(3); 142(1); 133A; 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 1941 /MUM/ 2014 (ASSESSMENT YEAR 2008 - 09 ) I.T.A. NO. 1942/MUM/2014 (ASSESSMENT YEAR 2009 - 10) M/S. HARSH DEEP CONSTRUCTION GROUND FLOOR SHAILESH BUILDING LINKING ROAD SANTACRUZ WEST MUMBAI - 400 054. VS. DCIT CENTRAL CIRCLE 47 MUMBAI. ( APPELLANT ) ( RESPONDENT ) PAN NO. AAEFH7011A ASSESSEE BY SHRI HARIOM TULSIYAN & MS. DARSHANI GOHIL DEPARTMENT BY SHRI RAHUL RAMAN DATE OF HEARING 25 .2 . 201 6 DATE OF PRONOUNCEMENT 11 . 5 . 201 6 O R D E R PER B.R. BASKARAN, A M : - BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER DATED 13 - 01 - 2014 PASSED BY LD CIT(A) - 38, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10. BOTH THE APPEALS WERE HEARD TOGETHER, AS THE ADDITION HAS BEEN MADE IN BOTH THE YEARS ON THE BASIS OF SAME SET OF DOCUMENTS AND HENCE THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.3.20 CRORES AND RS.11.80 CRORES RESPECTIVELY MADE IN AY 2008 - 09 AND 2009 - 10. 3. THE FACTS RELATING TO THE ISSUE ARE SET OUT IN BRIEF. THE ASSESSEE IS AN AOP AND IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL AND COMMERCIAL BUILDINGS. THE M/S. HARSH DEEP CONSTRUCTION 2 MEMBERS OF AOP ARE SHRI HARSHAD DOSHI AND SHRI DILESH SHAH HOLDING 95% AND 5% SHARE RESPECTIVELY. THE OFFICE OF THE ASSESSEE IS LOCATED AT SHAILESH BUILDING, LINKING ROAD, SANTACRUZ (WEST), MUMBAI. DURING THE YE ARS UNDER CONSIDERATION, THE ASSESSEE WAS DEVELOPING A PROJECT NAMED POONA, RESIDENCY AT MIRA ROAD AND WAS ALSO UNDERTAKING CONSTRUCTION CONTRACTS FOR OTHER GROUP COMPANY. 4. THE REVENUE CARRIED OUT SEARCH AND SEIZURE OPERATIONS U/S 132(1) OF THE AC T AT THE RESIDENCE AND BUSINESS PREMISES OF THE ASSESSEE GROUP ON 16.10.2008. DURING THE COURSE OF SEARCH AT THE RESIDENCE OF SHRI HARSHAD DOSHI LOCATED AT A - 103/104, RAJSHREE APARTMENT, ROYAL COMPLEX, ESKAR ROAD, BORIVELI (W), MUMBAI A PAPER (NUMBERED AS PAGE 98 IN ANNEXURE A - I) WAS FOUND WHICH CONTAINED FOLLOWING NOTING: - POONAM RESIDENCY NO. OF FLATS 104 & SHOPS AREA OF FLATS - 76,960 SQ. FT. AREA OF SHOPS - 5,700 SQ. FT. RECEIVED CASH UPTO 31.3.2008 3/20 + AREA OF FLATS - 53,910 SQ.FT. AREA OF SHOPS - 700 SQ.FT. RECEIVED CASH 11/50 TOTAL 14/70 AT THE TIME OF SEARCH CONDUCTED AT THE RESIDENCE OF SHRI HARSHAD DOSHI, HE WAS NOT AVAILABLE AND HENCE OTHER MEMBER OF AOP SHRI DILESH SHAH WAS CALLED AND HE WAS EXAMIN ED AFTER TAKING POWER OF ATTORNEY FROM SHRI HARSHAD DOSHI. THE STATEMENT OF SHRI DILESH SHAH WAS RECORDED ON 18.10.2008 AT THE RESIDENCE OF SHRI HARSHAD DOSHI U/S 132(4) OF THE ACT AND A SPECIFIC QUESTION WAS PUT TO HIM ABOUT THE CONTENTS OF THE ABOVE SAI D DOCUMENT. HE ADMITTED IN THE SWORN STATEMENT THAT THE CONTENTS THEREIN REPRESENT AMOUNTS RECEIVED BY WAY OF CASH AND THEY HAVE NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. HE ALSO AGREED TO OFFER RS.3.20 CRORES AS INCOME OF THE M/S. HARSH DEEP CONSTRUCTION 3 ASSESSEE IN AY 2008 - 09 AND RS.11.50 CRORES AS INCOME IN AY 2009 - 10. FURTHER HE ALSO AGREED TO OFFER ADDITIONAL AMOUNT OF RS.30.00 LAKHS IN AY 2009 - 10 TO COVER UP ANY COMMISSION OR OMISSION. HOWEVER, THE ASSESSEE AOP DID NOT OFFER THE ABOVE SAID AMOUNT IN THE RETURNS OF INCO ME FILED BY IT. 5. IT IS PERTINENT TO NOTE THAT THE RETURN OF INCOME FOR AY 2008 - 09 WAS FILED IN RESPONSE TO THE NOTICE ISSUED U/S 153A OF THE ACT AND THE ASSESSMENT WAS ALSO COMPLETED U/S 153A R.W.S 143(3) OF THE ACT, SINCE IT FELL WITHIN SIX YEARS PRIOR TO THE YEAR IN WHICH SEARCH TOOK PLACE. HOWEVER THE ASSESSMENT FOR AY 2009 - 10 WAS COMPLETED U/S 143(3) OF THE ACT. 6. THE ASSESSEE HAS RAISED A LEGAL ISSUE CHALLENGING THE VALIDITY OF ASSESSMENT FRAMED U/S 153A OF THE ACT FOR AY 2008 - 09. THE C ONTENTION OF THE ASSESSEE AOP IS THAT THE SEARCH DID NOT TAKE PLACE IN ITS HANDS AND ALSO AT ITS BUSINESS PREMISES. ACCORDINGLY IT WAS CONTENDED THAT THE AO WAS LEGALLY NOT ENTITLED TO FRAME ASSESSMENT U/S 153A OF THE ACT. THE CONTENTION OF THE ASSESSEE WAS REJECTED BY THE TAX AUTHORITIES BY GIVING A FINDING THAT THE WARRANT OF AUTHORISATION CONTAINED THE NAME OF THE ASSESSEE ALONG WITH THE NAME OF OTHER GROUP CONCERNS AND SUCH KIND OF JOINT AUTHORISATIONS WILL NOT MAKE THE SEARCH PROCEEDINGS INVALID IN V IEW OF INSERTION OF SEC. 2992CC OF THE ACT, AS HELD BY HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. DEVESH SINGH (I.T APPEAL NO.99 TO 110 OF 2010 DATED 23.07.12, 24 TAXMANN.COM 26). WITH REGARD TO THE CONTENTION OF THE ASSESSEE THAT THE SEARCH ACTI ON DID NOT TAKE PLACE AT ITS BUSINESS PREMISES, THE LD CIT(A) HELD THAT THE SEARCH CAN BE CONDUCTED AT ANY PLACE IN PURSUANCE OF WARRANT ISSUED IN THE NAME OF A PARTICULAR PERSON. ACCORDINGLY HE HELD AS UNDER: - THEREFORE, IT IS NOT CORRECT TO SAY THAT S INCE THERE IS NO SEARCH IN THE BUSINESS PREMISES WITH THE WARRANT OF AUTHORISATION ISSUED IN THE NAME OF THE APPELLANT AOP, NO VALID SEARCH HAS BEEN CONDUCTED INSPITE OF THE FACT THAT THE APPELLATE NAME APPEARS IN THE WARRANT OF AUTHORISATION AND SEARCH HA S TAKEN PLACE IN THE RESIDENTIAL PREMISES OF THE MEMBER OF THE APPELLANT AOP AS MENTIONED IN THE WARRANT OF AUTHORISATION. HOWEVER, IT IS VERY SIGNIFICANT TO NOTE THAT THE APPELLANT IN ITS SUBMISSION VIDE PARA 21 ADMITTED THAT THE PREMISES WHERE M/S. HARSH DEEP CONSTRUCTION 4 SEARCH HA S TAKEN PLACE WERE PARTLY USED BY THE APPELLANTS BUSINESS, HOWEVER IT WAS CONTENDED THAT NO PANCHANAMA WAS DRAWN IN THE CASE OF APPELLANT. FURTHER, THE LD CIT(A) PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF MDLR R ESORTS PVT. LTD (W.P (CIVIL) NO.823/2013 DATED 20.12.2013), WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THE NON - REFERENCE TO THE NAME OF THE ASSESSEE IN THE PANCHANAMA AND THE FAILURE TO NOTE THE TIME OF SUSPENSION/CONCLUSION OF THE SEARCH ARE LAPSES, I.E ., THEY ARE FAILURES TO COMPLY WITH THE REQUIREMENTS OF THE SEARCH AND SEIZURE MANUAL. THEY DO NOT AFFECT THE VALIDITY OF THE SEARCH OR ASSESSMENT ORDER U/S 153A. ACCORDINGLY HE DISMISSED THE LEGAL CLAIM OF THE ASSESSEE. 7. WE HAVE HEARD THE PARTIES ON THIS LEGAL ISSUE. THE CONTENTION OF THE ASSESSEE IS THAT THOUGH THE SEARCH WARRANT WAS PREPARED IN THE NAME OF THE ASSESSEE JOINTLY WITH OTHERS, NO SEARCH HAS BEEN INITIATED OR CONDUCTED IN PURSUANCE OF THAT WARRANT EITHER IN ITS BUSINESS PREMISES OR IN ANY OTHER PLACE. THE LD A.R ALSO SUBMITTED THAT THE PAGE NO.98 OF ANNEXURE I, ON THE BASIS OF WHICH THE IMPUGNED ADDITION WAS MADE, WAS FOUND AT THE RESIDENCE OF SHRI HARSHAD DOSHI WHEN THE SEARCH WAS CONDUCTED AT HIS RESIDENCE PURSUANT TO THE SEARCH WARRANT ISSUED IN HIS NAME. THE SAID SEARCH WAS NOT IN PURSUANCE TO THE WARRANT ISSUED IN THE NAME OF THE ASSESSEE. IN THIS REGARD, HE DREW SUPPORT FROM THE PANCHANAMA PLACED AT PAGE 66 TO 71 OF THE PAPER BOOK. A PERUSAL OF THE SAME SHOWS THAT THE WARRA NT WAS ISSUED IN THE CASE OF HARSHAD P. DOSHI. AGAINST THE QUESTION THE WARRANT TO SEARCH, THE ADDRESS OF THE RESIDENCE OF SHRI HARSHAD P DOSHI IS STATED, I.E., A - 103/104, RAY SHREE APARTMENT, ROYAL COMPLEX, EKSAR ROAD, BORIVALI(W), MUMBAI. THE ANNEX URE - I OF THIS PANCHANAMA CONTAINS THE PAGE NO.98, VIZ., THE INCRIMINATING DOCUMENT. 8. AT THE TIME OF HEARING, THE LD D.R PLACED RELIANCE ON THE ORDER PASSED BY LD CIT(A), WHEREIN HE HAD STATED THAT THE PREPARATION OF WARRANT OF AUTHORISATION IS SUFF ICIENT TO INITIATE ASSESSMENT PROCEEDINGS U/S 153A OF THE ACT. FURTHER, THE OMISSION TO MENTION THE NAME IN THE PANCHANAMA WILL NOT MAKE THE SEARCH ASSESSMENT INVALID. WE ARE UNABLE TO AGREE WITH THE SAID CONTENTIONS OF LD D.R. THE OMISSION TO MENTION M/S. HARSH DEEP CONSTRUCTION 5 T HE NAME OF THE ASSESSEE IN THE PANCHANAMA MAY NOT MAKE THE SEARCH ASSESSMENT INVALID, PROVIDED THE SEARCH WAS ACTUALLY INITIATED AND CONDUCTED IN PURSUANCE OF THE SEARCH WARRANT. IN THE INSTANT CASE, THE CONTENTION OF THE REVENUE IS THAT THE SEARCH WARRAN T WAS PREPARED IN THE JOINT NAMES OF MANY PERSONS INCLUDING THE ASSESSEE. HOWEVER, NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT THE SAID WARRANT OF AUTHORISATION WAS ACTUALLY EXECUTED BY INITIATING AND CONDUCTING THE SEARCH. THE REVENUE ALSO COULD NOT PLACE ANY MATERIAL TO SHOW THAT THE SEARCH CONDUCTED AT THE RESIDENCE OF SHRI HARSHAD DOSHI IS IN PURSUANCE OF THE WARRANT ISSUED IN THE NAME OF THE ASSESSEE AOP. UNDER THE INCOME TAX ACT, THE ASSESSEE AOP AND SHRI HARSHAD DOSHI ARE TWO DIFFERENT ASSESSAB LE ENTITIES. HENCE THE WARRANT ISSUED AND EXECUTED IN THE NAME OF HARSHAD DOSHI CANNOT ALSO BE CONSIDERED TO BE IN COMPLIANCE OF WARRANT ISSUED IN THE NAME OF ASSESSEE AOP. A CAREFUL PERUSAL OF THE PROVISIONS OF SEC. 153A WOULD SHOW THAT THAT ASSESSING O FFICER CAN ISSUE NOTICES U/S 153A OF THE ACT ONLY WHEN A SEARCH IS INITIATED UNDER SECTION 132 OR REQUISITION IS MADE U/S 132A AFTER THE 31 ST DAY OF MAY, 2003. HE IS REQUIRED TO ASSESS OR REASSESS TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. HENCE, IN ORDER TO INVOKE JURISDICTION U/S 153A OF THE ACT, THERE SHOULD BE INITIATION OF SEARCH AND THEREAFTER THERE SHOULD BE ACTUAL CONDUCTING OF SEARCH. 9. THE EXPRESSION SEARCH IS INITIATED WAS EXPLAINED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. WIPRO FINANCE LTD (323 ITR 467) AND THE HEAD NOTES READ AS UNDER: - HELD, ALLOWING THE APPEALS, THAT WHILE ASSIGNING MEANING TO ANY EXPRESSION IN ANY PROVISION OF A STATUTE, THE CONTEXT IN WHICH THE PARTICULAR EXPRESSION IS USED HAD TO BE BORNE IN MIND. THE EXPRESSION SEARCH INITIATED HAD TO BE INTERPRETED TO MEAN THE COMMENCEMENT AND CONDUCTING OF THE INITIAL SEARCH, I.E., THE FI RST SEARCH IN THE CASE. THE SEARCH IN THESE CASES WAS INITIATED ON JANUARY 3, 1997 AND JANUARY 8, 1997, BECAUSE IT WAS ON THESE DATES THAT THE INITIAL SEARCH IN THE PREMISES OF THE RESPECTIVE ASSESSEES WAS COMMENCED. THEREFORE, ASSIGNING THE MEANING SEA RCH COMMENCED OR MAKING BEGINNING OF THE SEARCH TO THE EXPRESSION SEARCH INITIATED, THE SEARCH WAS INITIATED RESPECTIVELY ON JANUARY 3, 1997 AND JANUARY 8, 1997, BUT NOT EITHER ON DECEMBER 30, 1996 ON WHICH DATE M/S. HARSH DEEP CONSTRUCTION 6 THE AUTHORISATIONS WERE SIGNED BY THE C ONCERNED AUTHORITIES OR ON ANY DATE PRIOR TO JANUARY 3, 1997. IN THE ABOVE SAID CASE, THE DATE OF AUTHORISATION OF SEARCH WAS DECEMBER 30, 1996 AND THE SAME WAS NOT TAKEN AS THE DATE OF INITIATION OF SEARCH. THE HONBLE HIGH COURT HAS HELD THAT THE DAT E OF COMMENCEMENT OF SEARCH IS THE DATE OF INITIATION OF SEARCH, MEANING THEREBY, THE SEARCH SHOULD HAVE ACTUALLY COMMENCED AFTER 31 - 05 - 2003 IN ORDER TO INVOKE THE PROVISIONS OF SEC. 153A OF THE ACT. 10. AS NOTICED EARLIER, IN THE INSTANT CASE, THOUGH THE WARRANT OF AUTHORISATION WAS PREPARED IN THE NAME OF THE ASSESSEE, YET THERE WAS NO COMMENCEMENT OR INITIATION OF SEARCH IN PURSUANCE OF THE SAID WARRANT. WHEN THERE IS NO COMMENCEMENT OF SEARCH AT ALL, THE QUESTION OF INVOKING THE PROVISIONS OF SEC. 153A SHALL NOT ARISE. WE NOTICE THAT THE LD CIT(A) HAS EXPRESSED THE VIEW THAT THE SEARCH NEED NOT TAKE PLACE AT THE BUSINESS PREMISES OF THE ASSESSEE ITSELF, BUT IT CAN BE CONDUCTED IN ANY OTHER PLACE ALSO. THERE SHOULD NOT BE ANY DISPUTE WITH THE OBSER VATIONS SO MADE BY LD CIT(A). BUT THE IMPORTANT POINT IS THAT THE SEARCH IN ANY OTHER PLACE SHOULD HAVE TAKEN PLACE IN PURSUANCE OF WARRANT OF AUTHORISATION ISSUED IN THE NAME OF THE ASSESSEE. IN THE INSTANT CASE, THE SEARCH AT THE RESIDENTIAL PREMISES O F SHRI HARSHAD DOSHI HAS TAKEN PLACE IN PURSUANCE OF WARRANT OF AUTHORISATION ISSUED IN HIS NAME AND NOT IN THE NAME OF THE ASSESSEE HEREIN. HENCE WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE ASSESSMENT ORDER PASSED FOR AY 2008 - 09 U/S. 153A O F THE ACT IS NOT VALID. 11. THE ASSESSMENT ORDER PASSED U/S 153A FOR AY 2008 - 09 ALSO SUFFERS FROM LEGAL INFIRMITY FROM ONE MORE ANGLE. THE ASSESSMENT HAS BEEN FRAMED ON THE BASIS OF PAGE NO.98 OF ANNEXURE I. WE HAVE NOTICED EARLIER THAT THE SAID DOC UMENT WAS SEIZED AT THE RESIDENCE OF SHRI HARSHAD DOSHI WHILE CONDUCTING SEARCH IN HIS HANDS IN PURSUANCE OF WARRANT OF AUTHORISATION ISSUED IN HIS NAME. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT SHRI HARSHAD DOSHI AND THE ASSESSEE HEREIN ARE TWO D IFFERENT ASSESSEES. SINCE THE IMPUGNED DOCUMENT WAS CONSIDERED TO BELONG TO THE ASSESSEE, AT THE MOST, THE AO SHOULD HAVE INITIATED PROCEEDINGS U/S 153C OF THE ACT, PROVIDED ALL THE CONDITIONS M/S. HARSH DEEP CONSTRUCTION 7 PRESCRIBED IN SEC. 153C WERE COMPLIED WITH. THAT IS NOT THE C ASE HERE AND HENCE ON THAT COUNT ALSO, THE ASSESSMENT ORDER PASSED FOR AY 2008 - 09 BECOMES ILLEGAL. 12. IN VIEW OF THE FOREGOING DISCUSSIONS, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) FOR AY 2008 - 09 AND QUASH THE ASSESSMENT ORDER PASSED U/S 153A OF TH E ACT FOR THAT YEAR. 13. WE SHALL TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR AY 2009 - 10. WE HAVE NOTICED THAT THE ASSESSMENT FOR THAT YEAR, BEING THE YEAR OF SEARCH, HAS BEEN COMPLETED U/S 143(3) OF THE ACT. WE HAVE ALSO NOTICED THAT THE ADDITION OF RS.11.50 CRORES PLUS 0.30 CRORES HAS BEEN MADE IN THIS YEAR ON THE BASIS OF PAGE NO.98 OF ANNEXURE I SEIZED IN THE HANDS OF SHRI HARSHAD DOSHI AND THE ADMISSION MADE BY SHRI DILESH SHAH, WHICH IS BEING CONTESTED BY THE ASSESSEE IN THIS APPEAL. HENCE T HE DECISION TAKEN ON THIS ISSUE WOULD AUTOMATICALLY COVER THE VALIDITY OF ADDITION OF RS.3.20 CRORES MADE IN AY 2008 - 09. 14. THE CONTENTION OF THE ASSESSEE IS THAT THE PAGE NO.98 OF ANNEXURE - I IS A DUMB DOCUMENT AND THE SAME HAS BEEN PREPARED BY SHRI DILESH SHAH AT THE INSISTENCE OF THE SEARCH OFFICIALS. IT WAS FURTHER CONTENDED THAT SHRI DILESH SHAH WAS PERSUADED TO OFFER, UNDER DURESS, THE AMOUNT SHOWN IN THE DOCUMENT AS CASH RECEIPTS AS INCOME OF THE ASSESSEE. ON MERITS, IT WAS CONTENDED THAT T HE ADDITION ON THE BASIS OF THIS DOCUMENT WAS NOT JUSTIFIED, SINCE THE SAME WAS NOT CORROBORATED WITH ANY OTHER MATERIAL. IT WAS ALSO SUBMITTED THAT THE ADMISSION MADE BY SHRI DILESH SHAH HAS BEEN RETRACTED THROUGH AN AFFIDAVIT PREPARED WITHIN TWO DAYS OF THE SEARCH. THE TAX AUTHORITIES HAVE REFUSED TO TAKE COGNIZANCE OF THE RETRACTION STATEMENT, SINCE THE SAID AFFIDAVIT WAS FILED WITH THEM AFTER EXPIRY OF TWO YEARS FROM THE DATE OF SEARCH, EVEN THOUGH THE SAME HAS BEEN CLAIMED TO HAVE BEEN PREPARED WITHI N TWO DAYS FROM THE DATE OF SEARCH. FURTHER, THE TAX AUTHORITIES NOTICED THE AGE OF SHRI DILESH SHAH HAS BEEN MENTIONED DIFFERENTLY IN THE STATEMENT TAKEN U/S 132(4) OF THE ACT AND IN THE AFFIDAVIT. ACCORDINGLY THEY M/S. HARSH DEEP CONSTRUCTION 8 HAVE HELD THAT THE RETRACTION MADE THR OUGH AFFIDAVIT IS A SELF SERVING DOCUMENT AND THE SAME IS AN AFTER THOUGHT. 15. AS NOTICED EARLIER, THE PAGE NO.98 OF ANNEXURE I WAS SEIZED FROM THE RESIDENCE OF SHRI HARSHAD DOSHI, WHEN THE SEARCH WAS CONDUCTED ON 17.10.2008. IT IS PERTINENT TO N OTE THAT SHRI HARSHAD DOSHI WAS NOT AVAILABLE AT HIS RESIDENCE WHEN THE SEARCH COMMENCED, AS HE HAD BEEN AWAY TO HIS NATIVE PLACE. SINCE SHRI DILESH SHAH WAS THE OTHER MEMBER OF ASSESSEE AOP. ACCORDING TO THE ASSESSEE, HE WAS CALLED TO THE RESIDENCE OF SH RI HARSHAD DOSHI BY THE SEARCH PARTY. LATER THE SEARCH TEAM OBTAINED AN AUTHORISATION LETTER FROM SHRI HARSHAD DOSHI IN FAVOUR OF SHRI DILESH SHAH THROUGH FAX AND THE SAID AUTHORISATION READS AS UNDER: - DATE : 17.10.2008 TO ADDITIONAL D.I. (INVESTIGAT ION) THANE. RESPECTED SIR, I HEREBY AUTHORIZE MR. DILESH C SHAH TO GIVE STATEMENT ON MY BEHALF AS WELL AS MY FIRMS BEHALF. HIS STATEMENT WILL BE BINDING ON ME. THANKING YOU (HARSHAD P DOSHI) THEREAFTER, THE SEARCH OFFICIALS HAVE TAKEN THE STATEMENT U/ S 132(4) OF THE ACT FROM SHRI DILESH SHAH, WHEREIN HE HAS ADMITTED INCOME ON THE BASIS OF PAGE NO.98 OF ANNEXURE I. 16. THE ABOVE SUBMISSIONS OF THE ASSESSEE HAVE NOT BEEN CONTRADICTED BY THE REVENUE. IT IS SUBMITTED THAT THERE WAS NO NECESSITY TO OB TAIN POWER OF ATTORNEY FROM SHRI HARSHAD DOSHI, WHEN SHRI DILESH SHAH IS ALSO A MEMBER OF ASSESSEE AOP WITH 5% SHARE AND HE IS EQUALLY AUTHORISED TO EXPLAIN THE TRANSACTIONS RELATING TO THE ASSESSEE AOP. THE VERY FACT THAT THE SEARCH OFFICIALS HAVE INSISTE D UPON TAKING A POWER OF ATTORNEY FROM SHRI HARSHAD DOSHI SHOWS THAT SHRI DILESH SHAH WAS NOT IN POSSESSION OR M/S. HARSH DEEP CONSTRUCTION 9 CONTROL OF THE IMPUGNED DOCUMENT. IT IS PERTINENT TO NOTE THAT THE STATEMENT U/S 132(4) CAN BE RECORDED UNDER OATH ONLY FROM A PERSON WHO IS FOU ND TO BE IN POSSESSION OR CONTROL OF BOOKS OF ACCOUNTS, DOCUMENT, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. HENCE, THE RELIANCE PLACED BY THE REVENUE ON THE SAID STATEMENT IS ALSO BEING QUESTIONED. FURTHER, IT WAS SUBMITTED THAT THE I MPUGNED DOCUMENT (PAGE NO.98 OF ANNEXURE I) WAS A DUMB DOCUMENT AND HENCE THE REVENUE SHOULD NOT HAVE PLACED RELIANCE ON IT. 17. WE SHALL NOW EXAMINE AS TO WHETHER THE REVENUE CAN PLACE RELIANCE ON THE PAGE NO.98 OF ANNEXURE I AND THE ADMISSION MADE IN THE SWORN STATEMENT TAKEN FROM SHRI DILESH SHAH. WE NOTICE THAT THE ASSESSING OFFICER HAS STATED IN HIS REMAND REPORT THAT THE ADMISSION GIVEN BY SHRI DILESH SHAH IS CORROBORATED BY THE PAGE NO.98 OF ANNEXURE I. WE ARE UNABLE TO AGREE WITH THE SAID VIEW OF THE AO. THE ADMISSION HAS BEEN MADE ON THE BASIS OF PAGE NO.98 OF ANNEXURE I. SINCE THE SAME WAS A LOOSE SHEET CONTAINING SOME NOTING, IN OUR VIEW, THE SAME REQUIRES CORROBORATION WITH SOME OTHER MATERIAL. IN THE ASSESSMENT ORDER, THE ASSESSING OFFIC ER HAS TRIED TO CORROBORATE THE NOTINGS SO MADE THEREIN AS UNDER: - (A) THE AFFIDAVIT, WHEREIN RETRACTION OF THE ADMISSION WAS MADE, WAS FILED WITH THE AO ONLY AFTER ISSUING NOTICE U/S 142(1) OF THE ACT, I.E., IT WAS NOT FILED AT THE EARLIER AVAILABLE OPPO RTUNITY. HENCE IT IS AN AFTER THOUGHT. (B) THE AO RECORDED A STATEMENT U/S 133A OF THE ACT FORM A REAL ESTATE BROKER NAMED SHRI NIRMAL KUMAR MALPANI. HE HAD GIVEN AN ADVERTISEMENT IN THE INTERNET SITE NAMED 99 ACRES.COM IN RESPECT OF THE PROJECT NAMED UNIQUE HEIGHT, BEING DEVELOPED BY ONE OF THE GROUP CONCERNS OF THE ASSESSEE HEREIN. IN THE SAID ADVERTISEMENT HE HAD STATED THE CONSIDERATION TOWARDS BALCONY AND CAR PARKING IS REQUIRED TO BE PAID BY WAY OF CASH. (IT IS PERTINENT TO NOTE THAT IN THE AD VERTISEMENT GIVEN BY SHRI MALPANI, THE CASH COMPONENT WAS SHOWN IN THE RANGE OF RS. 1.75 LAKHS PER FLAT). SHRI MALPANI CONFIRMED THE FACT THAT THE CASH IS BEING ACCEPTED BY GROUP CONCERN OF THE M/S. HARSH DEEP CONSTRUCTION 10 ASSESSEE. THE AO, ACCORDINGLY, INFERRED THAT THE ASSESSEE SHO ULD HAVE ALSO COLLECTED CASH AND THE SAME SUPPORTS THE NOTING MADE IN PAGE 98 OF ANNEXURE I. (C) THE SELLING RATE PER SQ. FT. FOR THE PROJECT DEVELOPED BY THE ASSESSEE (SURVEY NO.226 IN VILLAGE MEERA, THANE IN FY 2009 - 10) WORKED OUT TO RS.1,507/ - , WHERE AS THE SELLING RATE PER SQ.FT. FOR ANOTHER PROJECT DEVELOPED BY THE GROUP CONCERN (SURVEY NO.745 IN VILLAGE MEERA, THANE IN FY 2007 - 08) WORKED OUT TO RS.2,080/ - . ACCORDING TO THE AO, BOTH THE PROJECTS ARE GEOGRAPHICALLY LOCATED IN THE SAME SET OF INFRASTR UCTURE AND THE TIME FRAME IS ALSO CLOSE. THE PROJECT DEVELOPED BY THE ASSESSEE HAS GOT COMMERCIAL AREA ALSO. IF THE SALES RATE IS TAKEN AT RS.2080/ - , THE SHORT FALL IN THE SALES REALISATION WORKS OUT TO RS.9.17 CRORES AND WHEN PRICE ESCALATION IS TAKEN A T 15%, THE DIFFERENCE SHALL WORK OUT TO RS.14.05 CRORES (D) THE SELLING RATE IN OTHER PROJECTS DEVELOPED BY OTHER GROUP CONERN WAS BETWEEN RS.4,331/ - TO RS.4,734/ - . TAKING THE AVERAGE OF THE TWO RATES, VIZ., RS.4532/ - , THE SALES FOR THE ASSESSEE SHOULD HAVE BEEN RS.70.87 CRORES. THE LD CIT(A) HAS ALSO UPHELD THE ANALYSIS MADE BY THE AO. 18. ON A CAREFUL PERUSAL OF THE ANALYSIS MADE BY THE AO WOULD SHOW THAT THE SAME SUFFERS FROM MANY INFIRMITIES. THE AO HIMSELF HAS NOTICED THAT SHRI MALPANI HAS ST ATED THE CASH COMPONENT AS RS.1.75 LAKHS AND IF IT IS TAKEN INTO CONSIDERATION, THEN THE CASH COMPONENT FOR THE PROJECT DEVELOPED BY THE ASSESSEE WORKS OUT TO ONLY RS.1.82 CRORES (104 FLATS X RS.1.75 LAKHS). FURTHER IT IS NOT SHOWN BY SHRI MALPANI THAT TH E CASH RECEIVED BY THE GROUP CONCERN WAS NOT ACCOUNTED FOR BY IT. WE NOTICE THAT THE AO HAS ALSO NOT TAKEN ANY STEP TO ASCERTAIN AS TO WHETHER THE CASH COMPONENT MENTIONED IN THE PROJECT DEVELOPED BY THE GROUP CONCERN WAS NOT ACCOUNTED AT ALL, I.E., HE DI D NOT M/S. HARSH DEEP CONSTRUCTION 11 MAKE ANY ENQUIRIES EITHER WITH THE PURCHASERS OF THE FLAT OR THE GROUP CONCERN IN THIS REGARD NOR DID HE EXAMINE THE BOOKS OF ACCOUNTS OF THE GROUP CONCERN TO VINDICATE HIS STAND. FURTHER IT IS NOT ALSO ESTABLISHED THAT THE ACCOUNTING METHODOLOGY FO LLOWED BY THE GROUP CONCERN IS SAME AS THAT OF THE ASSESSEE. THUS, WE NOTICE THAT THE AO HAS ONLY DRAWN ADVERSE INFERENCES FROM THE ADVERTISEMENT AND STATEMENT GIVEN BY SHRI MALPANI, A REAL ESTATE BROKER, WHO IS NOT CONNECTED WITH THE ASSESSEE AT ALL. 19 . THE AO HAS COMPARED THE SELLING RATES OF TWO DIFFERENT PROJECTS, I.E., THE ONE DEVELOPED BY THE ASSESSEE AT RS.1,507/ - PER SQ.FT. AND ANOTHER ONE BEING DEVELOPED BY THE GROUP CONCERN AT RS.2,080/ - PER SQ.FT. THE AO HAS TAKEN THE VIEW THAT BOTH THE P ROJECTS ARE LOCATED IN THE SAME GEOGRAPHICAL AREA (VILLAGE MEERA) AND HENCE THE SELLING RATE DISCLOSED BY THE ASSESSEE IS LOWER. ACCORDING TO THE AO THE GROUP CONCERN HAS DEVELOPED THE PROJECT IN FY 2007 - 08 AND THE ASSESSEE HAS DEVELOPED THE PROJECT IN FY 2009 - 10. HENCE, BY TAKING PRICE ESCALATION AT 15% P.A., THE AO HAS WORKED OUT THE DIFFERENCE AT RS.14.05 CRORES. ACCORDINGLY THE AO HAS TAKEN THE VIEW THAT THIS FACT ALSO VINDICATES THE NOTING MADE IN PAGE NO.98 OF ANNEXURE I. WE NOTICE THAT THOUGH BOT H THE PROJECTS ARE LOCATED IN VILLAGE MEERA, YET THEY HAVE BEEN DEVELOPED IN TWO DIFFERENT SURVEY NUMBERS. THE AO HAS NOT CHOSEN TO VERIFY AS TO WHETHER BOTH THE LAND ARE ADJACENT TO EACH OTHER, SO THAT COMMONALITY OF THE FEATURES CAN BE INFERRED. FURTHE R, THE AO HAS NOT ESTABLISHED THAT THE QUALITY OF CONSTRUCTION AND FACILITIES CREATED IN BOTH THE PROJECTS ARE ALIKE. THERE SHOULD NOT BE ANY DISPUTE THAT THE SELLING RATE OF A PROJECT WOULD DEPEND UPON THE LOCALITY, QUALITY OF CONSTRUCTION, FACILITIES CR EATED IN THE PROJECT AND VARIOUS OTHER FEATURES. THE CONSTRUCTION PERIOD NOTED DOWN BY THE AO FOR THE PROJECT EXECUTED BY THE ASSESSEE IS ALSO NOT CORRECT. THUS THE AO HAS NOT CARRIED OUT ANY SUCH QUALITATIVE ANALYSIS AND INSTEAD, HE HAS SIMPLY MADE CERTA IN MATHEMATICAL CALCULATIONS TO BRING THE DIFFERENCE TO THE LEVEL NOTICED IN THE LOOSE PAPER. HENCE THE SAME CANNOT BE TAKEN AS FACTS SUPPORTING THE VIEW TAKEN BY THE AO. M/S. HARSH DEEP CONSTRUCTION 12 20. SIMILARLY, THE AO WAS ALSO NOT JUSTIFIED IN CONSIDERING THE SELLING RATE Q UOTED FOR OTHER PROJECTS DEVELOPED BY THE GROUP CONCERN WITHOUT POINTING OUT THE SIMILARITIES IN LOCATION, QUALITATIVE FEATURES ETC. 21. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE AO CANNOT BE SAID TO HAVE CORROBORATED THE NOTING MADE IN PAGE 90 OF ANNEXURE I. WE ALSO NOTICE THAT THE AO DID NOT MAKE DISCREET ENQUIRIES WITH ANY OF THE BUYERS OF THE FLATS IN ORDER TO ASCERTAIN AS TO WHETHER THEY HAVE MADE ANY PAYMENTS OVER AND ABOVE THE AGREED CONSIDERATION. ALL THE POINTS RECORDED BY THE AO WERE MERE INFERENCES, WHICH WERE DRAWN ONLY ON SURMISES AND CONJECTURES. HENCE WE ARE UNABLE TO AGREE WITH THE OBSERVATION OF LD CIT(A) THAT THE AO HAS CORROBORATED THE NOTING MADE IN PAGE NO.90 WITH OUTSIDE MATERIALS. 22. NOW WE SHALL EXAMINE AS TO WHETHER THE PAGE NO.90 IS A RELIABLE DOCUMENT OR DUMB DOCUMENT. THE ASSESSEE HAS POINTED OUT THE AREA OR EXTENT OF BUILT UP AREA MENTIONED IN THE LOOSE SHEET WERE NOT CORRECT. THE ASSESSEE HAS EXPLAINED THE SAME AS UNDER: - AS PER SEIZED PAPER AS PER BOOKS AREA OF FLATS BOOKED UPTO 31.3.2008 76,960 93,970 AREA OF FLATS BOOKED AFTER 31.3.2008 53,910 1,100 AREA OF SHOPS BOOKED UPTO 31.3.2008 5,700 5,663 AREA OF SHOPS BOOKED AFTER 3 1.3.2008 700 138 THE ASSESSEE HAS ALSO POINTED OUT THE AVERAGE RATE OF CASH RECEIVED PER SQ.FT. COMPUTED FROM THE FIGURES STATED IN THE LOOSE SHEET SHOW WIDE VARIATION: - TOTAL AREA (BOTH FLATS & SHOP) CASH RECEIVED RATE PER SQ.FT. UPTO 31.3.2008 (82660 SQ.FT.) 3.20 CRORES RS.387/ - AFTER 31.3.2008 (54610 SQ.FT.) 11.50 CRORES RS.2,105/ - M/S. HARSH DEEP CONSTRUCTION 13 23. THESE DISCREPANCIES POINTED OUT BY THE ASSESSEE HAVE NOT BEEN ADDRESS ED BY THE TAX AUTHORITIES. FURTHER, THE CONTENTION OF THE ASSESSEE IS THAT THE PAGE NO.90 ITSELF WAS PREPARED BY SHRI DILESH SHAH AT THE INSTRUCTION OF THE SEARCH OFFICIALS. SINCE THE ASSESSEE HAS NOT TAKEN ANY STEPS TO MAKE ANY COMPLAINT WITH HIGHER OFF ICIALS OR OTHER APPROPRIATE AUTHORITIES IN THIS REGARD, WE ARE NOT INCLINED TO ADMIT THIS CONTENTION AT THIS STAGE. HOWEVER THE DISCREPANCIES POINTED OUT BY THE ASSESSEE WOULD SHOW THAT THE PAGE NO.90 CANNOT BE CONSIDERED TO BE A DOCUMENT THAT COULD BE RE LIED UPON BY THE TAX AUTHORITIES PLAINLY WITHOUT CORROBORATING THE SAME WITH OTHER MATERIALS. THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING CASE LAW IN SUPPORT OF THESE SUBMISSIONS: - (A) CBI VS. V.C.SHUKLA (1998) (3 SCC 410), WHEREIN IT HAS BEEN HELD THE LOOSE SHEETS OF PAPER CANNOT BE CONSIDERED TO BE BOOKS. (B) CIT VS. P.V. KALYANASUNDARAM (294 ITR 49), WHEREIN IT WAS HELD AS UNDER: - NOTINGS ON THE LOOSE PIECES OF PAPER ON THE BASIS OF WHICH THE INITIAL SUSPICION WITH REGARD TO THE UNDER VALUATION H AD BEEN RAISED WERE VAGUE AND COULD NOT BE RELIED UPON AS IT APPEARED THAT THE TOTAL AREA WITH RESPECT TO THE SALE DEED AND THAT REFLECTED IN THE LOOSE SHEET WAS DISCREPANT. IT WAS ALSO OBSERVED THAT AS PER THE GUIDELINES FOR REGISTRATION THE FAIR VAUE FO R REGISTRATION ON THE RELEVANT DATE WAS RS.244 TO RS.400 PER SQ.FT. AND THE SALE CONSIDERATION FOR RS.850/ - PER SQ.FT. CLAIMED BY THE REVENUE WAS UNREALISTIC AND IGNORED THE GROUND SITUATION. IN THE INSTANT CASE, THE CLAIM OF THE ASSESSEE IS THAT THE PRO JECT WAS DEVELOPED BY IT FOR A SPECIFIC MINORITY COMMUNITY AND HENCE THE RATE WAS QUOTED COMPARATIVELY LESSER. (C) CIT VS. GIRISH CHAUDHARY (2008)(296 ITR 619)(DELHI), WHERE IN THE HONBLE HIGH COURT HELD THAT THE REVENUE HAS TO PROVE THE UNDISCLOSE INCO ME BEYOND DOUBT. FURTHER IT WAS HELD THAT THE DOCUMENT SHOULD BE A SPEAKING ONE AND IT SHOULD CONTAIN NARRATION IN RESPECT OF VARIOUS FIGURES NOTED THEREIN. OTHERWISE THE SAME SHOULD BE CONSIDERED AS DUMB DOCUMENT ON WHICH RELIANCE COULD NOT PLACED UPON. IDENTICAL VIEWS HAVE BEEN EXPRESSED IN THE FOLLOWING CASES: - (I) ACIT VS. SHARAD CHAUDHARY (2014)(165 TTJ 0145)(DELHI) M/S. HARSH DEEP CONSTRUCTION 14 (II) SUNITA DHADDDA VS. DCIT (2012)(71 DTR 0033)(JAIPUR) 24. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THAT THE REVENUE HA S NOT SEIZED ANY OTHER VALUABLES, CASH OR INVESTMENTS CORROBORATING THE FIGURE OF RS..15.00 CRORES. FURTHER THE NOTINGS MADE IN PANCHANAMA SHOWS THAT THE SEARCH COMMENCED IN THE RESIDENCE OF SHRI HARSHAD DOSHI AT 1.30 A.M. (ALMOST MIDNIGHT) ON 17.10.2008 AND CONTINUED UPTO 1.00 AM (AGAIN MID NIGHT) ON 18.10.2008. WE HAVE NOTICED EARLIER THAT SHRI DILESH SHAH WAS CALLED UPON TO THE RESIDENCE OF SHRI HARSHAD DOSHI. THE COPY OF SWORN STATEMENT FURNISHED IN PAGE NO.2 OF THE PAPER BOOK SHOWS THAT THE SEARCH O FFICIALS DID NOT RECORD THE TIME AT WHICH THE RECORDING OF STATEMENT WAS COMMENCED, EVEN THOUGH THE SHEET CONTAINED A COLUMN FOR RECORDING THE TIME. HENCE THERE COULD BE MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE STATEMENT WAS RECORDED AT THE FAG E ND OF THE SEARCH AND SHRI DILESH SHAH WAS EXHAUSTED AND HE WAS CONSTRAINED TO ADMIT THE ADDITIONAL INCOME. FURTHER, WE HAVE NOTICED THAT THE NOTING FOUND IN THE LOOSE SHEET DID NOT TALLY WITH THE ENTRIES MADE IN THE BOOKS OF ACCOUNT. NO OTHER MATERIAL WA S BROUGHT ON RECORD BY THE AO TO CORROBORATE THE NOTING MADE IN THE LOOSE SHEET. NONE OF THE BUYERS OF THE FLAT WAS EXAMINED TO ASCERTAIN THE TRUTH. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE LOOSE SHEET REFERRED ABOVE CANNOT BE CONSIDERED TO BE A DOCUMENT THAT COULD BE RELIED UPON. FURTHER, THE FACTS AND CIRCUMSTANCES SHOW THAT SHRI DILESH SHAH WAS UNDER SOME COMPULSION TO ADMIT ADDITIONAL INCOME. THE VERY FACT THAT THE ASSESSEE DID NOT OFFER THE SAME IN THE RETURN OF INCOME SHOWS THAT THE A SSESSEE WAS NOT IN AGREEMENT WITH THE ADMISSION SO MADE, AS ACCORDING TO IT, THE SAME DID NOT REFLECT THE TRUTH. EVEN THOUGH THERE IS NO PROPER EXPLANATION AS TO WHY THE AFFIDAVIT PREPARED WITHIN TWO DAYS OF THE SEARCH, WAS FILED AFTER EXPIRY OF TWO YEARS , YET THE SURROUNDING CIRCUMSTANCES SHOW THAT THE ASSESSEE WAS UNDER THE BELIEF THAT THE ADMISSION HAS BEEN WRONGLY MADE. FURTHER, WE HAVE ALSO, FOR THE REASONS DISCUSSED SUPRA, NOTICED THAT THE STATEMENT TAKEN FROM SHRI DILESH SHAH MAY NOT BE A STATEMENT TAKEN AS PER THE PROVISIONS OF SEC. 132(4) OF THE ACT. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN PLACING RELIANCE ON THE PAGE NO.90 OF THE ANNEXURE I AND THE SWORN STATEMENT TAKEN FROM SHRI DIL ESH SHAH. M/S. HARSH DEEP CONSTRUCTION 15 25. IN VIEW OF THE ABOVE, WE ARE UNABLE TO AGREE WITH THE VIEW TAKEN BY THE LD CIT(A) IN RESPECT OF ADDITION OF RS.3.20 CRORES AND RS.11.80 CRORES MADE RESPECTIVELY IN AY 2008 - 09 AND 2009 - 10. ACCORDINGLY, WE SET ASIDE HIS ORDER PASSED FOR BOTH THE YEARS AND DIRECT THE AO TO DELETE THE ABOVE SAID ADDITIONS. 26. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 11 .5 .2016 . SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN ) J UDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 11 / 5 /20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS