A.A. ESTATE P. LTD, V. ACIT CC 30,

ITA 2438/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75489 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2008-2009
• Appeal Filed On: 01-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Keywords: Search and seizure; Document seized; Corroborative evidences; Reason to believe; Reassessment proceedings
• Section: 143(3); 153A; 147; 148; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J B ENCH, MUMBAI . . , , !'#$ , % & BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLAI YA, AM ./ I.T.A. NO.2438/MUM/2013 ( ' ' ' ' / ASSESSMENT YEAR :2008-09 M/S. A.A. ESTATE PVT. LTD., 7 TH FLOOR, RNA CORPORATE PARK, NEAR COLLECTORS OFFICE, BANDRA (E), MUMBAI-400 051 / VS. THE ACIT, CENTRAL CIRCLE-30, MUMBAI ( % ./ ) ./ PAN/GIR NO. : AADCA 3019K ( (* / APPELLANT ) .. ( +,(* / RESPONDENT ) (* - / APPELLANT BY: SHRI J.P. BAIRAGRA +,(* . - / RESPONDENT BY: SHRI S.D. SRIVASTAVA . /0% / DATE OF HEARING : 15.01.2014 12' . /0% / DATE OF PRONOUNCEMENT :05.02.2014 3 / O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-39, MUMBAI DT.21.2.2013 PE RTAINING TO A.Y. 2008-09. 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. WITH GROUND NO. 1, THE ASSESSEE HAS CHALLENGED THE REOPE NING OF THE ITA NO. 2438/M/2013 2 ASSESSMENT U/S. 147 OF THE ACT AND WITH GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 1,70,94,000/- ON AC COUNT OF ALLEGED UNACCOUNTED SALE PROCEEDS. THIS GROUND BEING ON ME RITS OF THE CASE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT IN THE CASE OF RNA BUILDER GROUP, SEARCH AND SEIZURE ACTION WAS TAKEN PLACE ON 30.11.2007 AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) R.W.S. 153A OF THE I.T ACT BY THE ORDER DT. 24.12.2009 DETERMINING TOTAL INCOM E AT RS. 7,77,49,790/-. THE ASSESSMENT WAS COMPLETED BY MAKING ADDITION ON ACCOUNT OF UNACCOUNTED RECEIPTS TO THE TUNE OF RS. 1,23,61,951 /- IN RESPECT OF FLATS SOLD IN RNA AZZURE, BANDRA. THE SAID ASSESSMENT WA S REOPENED U/S. 148 OF THE ACT BY ISSUE OF NOTICE DT. 22.9.2010. THE R EASON FOR REOPENING THE ASSESSMENT WAS BASED ON THE INFORMATION RECEIVED FR OM ADIT (INV) UNIT II(2), NASIK. AS PER THE INFORMATION RECEIVED, IT WAS ALLEGED THAT THE ASSESSEE HAS RECEIVED CONSIDERATION OF RS. 4,27,35, 000/- AGAINST SALE OF THREE FLATS AT RNA AZZURE AS AGAINST RS. 2,56,41,00 0/- SHOWN BY THE ASSESSEE. ACCORDING TO THE AO, THIS DIFFERENCE OF INCOME OF RS. 1,70,94,000/- HAS ESCAPED ASSESSMENT ,THEREFORE, H E HAS REASON TO BELIEVE TO REOPEN THE ASSESSMENT. 3.1. THE AO OBSERVED THAT DURING THE SEARCH AND SEI ZURE OPERATION CONDUCTED IN THE PREMISES OF M/S. ASHOKA BUILDCOM L TD., NASIK, ONE DOCUMENT WAS FOUND FROM MR. SATISH M. KULKARNI, ASS TT. MANAGER OF M/S. ASHOKA BUILDCOM LTD. THE SAID DOCUMENT REFERR ED TO AS ANNEXURE AB-1 CONTAINED SOME WORKING RELATING TO MUMBAI FLAT S. THE STATEMENT OF SHRI SATISH M. KULKARNI WAS RECORDED ON 20.4.20 10 IN WHICH HE ADMITTED THAT THE DIFFERENCE BETWEEN THE TOTAL COST AND AGREEMENT VALUE IS PAID IN CASH AND IS OUT OF BOOKS. TAKING A LEAF OUT OF THIS STATEMENT OF ITA NO. 2438/M/2013 3 SHRI SATISH KULKARNI, THE AO WENT ON TO MAKE THE AD DITION OF RS. 1,70,94,000/- AS UNACCOUNTED SALE PROCEEDS. 4. THE ASSESSEE CHALLENGED THE REOPENING AS WELL AS ADDITION BEFORE THE LD. CIT(A). IT WAS CONTENDED BEFORE THE LD. CI T(A) THAT THE BELIEF OF THE AO WAS NOT BONAFIDE. THE CONTENTIONS AND SUBMI SSIONS MADE BY THE ASSESSEE DID NOT FIND ANY FAVOUR FROM THE LD. CIT(A ) WHO WAS CONVINCED THAT THE AO HAS INITIATED PROCEEDINGS FOR REOPENING ON THE BASIS OF INFORMATION RECEIVED FROM DDIT (INV), NASIK AND THE SAID INFORMATION CANNOT BE TERMED AS VAGUE OR IRRELEVANT. THE LD. CI T(A) FURTHER OBSERVED THAT WHAT IS SOUGHT TO BE ASSESSED OR REASSESSED UN DER THE NEW SCHEME IS THE TOTAL INCOME OF EACH OF THE RELEVANT ASSESSMENT YEARS. UNDER THE NEW SCHEME, THE AO IS NOT BOUND BY THE VARIOUS CONSTRAI NTS IN DISTINGUISHING WHAT IS DISCLOSED AND WHAT IS UNDISCLOSED INCOME. THE AO IS REQUIRED TO MAKE A NORMAL ASSESSMENT OR REASSESSMENT OF TOTAL I NCOME IN EACH OF THE RELEVANT YEARS, WHICH WOULD INCLUDE ALL ESCAPED INC OME WHETHER FOUND AS A RESULT OF SEARCH BEFORE OR AFTER THE SEARCH AN D IN PURSUANCE OF PRE OR POST SEARCH ENQUIRY. THE LD. CIT(A) ACCORDINGLY H ELD THE REOPENING AS VALID. 4.1. ON MERIT, THE LD. CIT(A) OBSERVED THAT THE ADD ITION MADE BY THE AO IS BASED ON ANNEXURE AB-1 DOCUMENT SEIZED FROM T HE PREMISES OF M/S. ASHOKA BUILDCOM LTD., COUPLED WITH THE STATEME NT RECORDED U/S. 132(4) FROM SHRI SATISH KULKARNI. THE LD. CIT(A) F URTHER OBSERVED THAT THE AO HAS ALSO DRAWN SUPPORT FROM HIS FINDINGS IN THE ORIGINAL ASSESSMENT ORDER DT. 24.12.2009 WHEREIN IT WAS NOTE D THAT THE ASSESSEE WAS ADOPTING THE MODUS OPERANDI OF SELLING THE FLATS BY EXECUTING TWO AGREEMENTS, ONE BETWEEN THE BUYER AND THE ASSESSEE AND THE OTHER BETWEEN THE BUYER AND THE INTERIOR DECORATOR WHIC H WAS AN ARRANGEMENT ITA NO. 2438/M/2013 4 TO GENERATE UNACCOUNTED CASH. THE SAID FINDINGS WE RE NOT CHALLENGED BY THE ASSESSEE AND HAVE BECOME FINAL. THE LD. CIT(A) WAS CONVINCED THAT THE SAID ANNEXURE AB-1 IS NOT AN ESTIMATE BUT CONTAINS ACTUAL TRANSACTION. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 1,70,94,000/- AS PART OF UNACCOUNTED SALE. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. A RGUING FOR THE REOPENING OF THE ASSESSMENT, THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT AT THE TIME OF PASSING THE ORIGINAL ASSESSMENT ORDER U/S. 143(3) R.W.S 153A, THE AO HAS CONSIDERED THE STATEMENTS OF THE F LAT PURCHASERS RECORDED U/S. 131(1) OF THE ACT. THE LD. COUNSEL F OR THE ASSESSEE FURTHER STATED THAT THE AO HIMSELF HAS OBSERVED THE MAIN RE ASON FOR THE ADDITION IN THE ORIGINAL ASSESSMENT WAS ON THE BASIS OF MATE RIAL COLLECTED AT THE TIME OF SEARCH ACTION AND STATEMENTS RECORDED THEN. THE LD. COUNSEL CONTINUED TO SUBMIT THAT THE AO HAS CONSIDERED THE STATEMENT OF SHRI SATISH KULKARNI BUT FAILED TO CONSIDER THE REPLY GI VEN BY HIM TO QUESTION NO. 8 WHEREIN HE HAS CLEARLY STATED THAT HE DOES NO T KNOW THE DETAILS OF SOURCE OF THE CASH PAID AND THE SAME CAN BE EXPLAIN ED BY CHAIRMAN SHRI ASHOK KATARIA. THE LD. COUNSEL FURTHER POINTED OUT THAT IN THE STATEMENT OF SHRI ASHOK KATARIA, HE HAS VERY CATEGORICALLY ST ATED THAT THE SAID DOCUMENT (ANNEXURE AB-1) APPEARS TO BE AN ESTIMATE. IT IS THE SAY OF THE LD. COUNSEL THAT WHILE RECORDING THE REASON FOR REO PENING OF THE ASSESSMENT, THE AO HAS CONSIDERED A PART STATEMENT OF ASSTT. MANAGER OF M/S. ASHOKA BUILDCOM LTD., WHO IS NOT EVEN A FLAT P URCHASER. THE AO HAS ALSO IGNORED THE ANSWERS GIVEN BY SHRI ASHOK KA TARIA. THE LD. COUNSEL CONTINUED TO STATE THAT EVEN AFTER RECEIVIN G THE INFORMATION FROM THE DDIT (INV), NASIK, THE AO DID NOT APPLY HIS MIN D. WHEN MATERIAL AVAILABLE ON HIS RECORD CLEARLY SHOW THAT HE HAS RE CORDED THE STATEMENT OF THE PURCHASERS OF THE FLATS DURING THE COURSE OF T HE ORIGINAL ASSESSMENT ITA NO. 2438/M/2013 5 PROCEEDINGS ITSELF AND NONE OF THE PURCHASERS HAVE ADMITTED TO HAVE PAID ON MONEY ON PURCHASE OF FLAT. THE LD. COUNSEL CONC LUDED BY SAYING THAT THE AO HAS ACTED ONLY ON THE BASIS OF SUSPICION AND IT COULD NOT BE SAID THAT IT WAS BASED ON BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS THE SAY OF THE LD. COUNSEL THAT THE AO HAS TO ACT ON THE BASIS OF REASON TO BELIEVE AND NOT ON REASON TO SUS PECT. THE LD. COUNSEL HAS PLACED RELIANCE ON THE DECISION OF PUNJAB AND H ARYANA HIGH COURT 311 ITR 38, DELHI HIGH COURT IN 338 ITR 51. 5.1. ARGUING ON MERITS OF THE CASE, THE LD. COUNSEL STATED THAT THE STATEMENT OF SHRI SATISH KULKARNI DOES NOT HAVE ANY EVIDENTIARY VALUE AS THE SAME WAS RETRACTED WITHIN 17 DAYS BY FILING AN AFFIDAVIT BEFORE EXECUTIVE MAGISTRATE, NASIK. THE LD. COUNSEL FURTHE R STATED THAT THE SAID ANNEXURE AB-1 IS ONLY AN ESTIMATE WHICH CONTAINS WO RKING OF CAPITAL GAINS AND IT CANNOT BE MADE BASIS FOR MAKING ADDITI ONS IN THE HANDS OF THE ASSESSEE. THE SAID DOCUMENT WAS FOUND DURING THE S EARCH AT M/S. ASHOKA BUILDCOM LTD., THEREFORE THE PRESUMPTION IS THAT TH E SAID DOCUMENT BELONGS TO THE PERSON WHOSE PREMISES HAVE BEEN SEAR CHED. THE ASSESSEE CANNOT BE QUESTIONED ON WHAT WAS FOUND IN THE PREMI SES OF A THIRD PARTY. THE LD. COUNSEL FURTHER ARGUED THAT DURING THE COU RSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS, THE FLAT OWNERS WERE EXAMIN ED BY THE AO HIMSELF AND NONE OF THE FLAT OWNERS HAVE CLAIMED TO HAVE PAID ANY ON MONEY TO THE ASSESSEE. THE LD. COUNSEL CONCLUDED T HAT NO ADDITION CAN BE MADE MERELY ON SURMISES AND CONJECTURES WITHOUT THERE BEING ANY CORROBORATIVE EVIDENCES. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SU PPORTING THE ORDERS OF THE LOWER AUTHORITIES STATED THAT FOR REO PENING THE ASSESSMENT WHAT IS NECESSARY IS THE RELEVANCY OF THE DOCUMENT AND NOT THE SUFFICIENCY ITA NO. 2438/M/2013 6 OF THE DOCUMENT. IT IS THE SAY OF THE LD. DR THAT THE DOCUMENT FOUND AT THE PREMISES OF M/S. ASHOKA BUILDCOM LTD., WAS VER Y MUCH RELEVANT FOR REOPENING THE ASSESSMENT IN THE CASE OF THE ASSESS EE COUPLED WITH THE STATEMENT OF SHRI SATISH KULKARNI. THE AO HAD SUFF ICIENT REASON TO BELIEVE THAT THE INCOME ORIGINALLY ASSESSED HAS BEE N UNDER ASSESSED BY A SUM OF RS. 1,70,94,000/-, THEREFORE, THE REOPENING OF THE ASSESSMENT IS VERY MUCH VALID AND ORDER OF THE LD. CIT(A) DOES NO T CONTAIN ANY ERROR SO FAR AS REOPENING IS CONCERNED. ON THE MERITS, T HE LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 7. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE CARE FULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RELEVANT MA TERIAL PLACED ON RECORD. WE HAVE ALSO PERUSED THE ORIGINAL ORDER PASSED U/S. 143(3) R.W. SECTION 153A. THE RELEVANT PART OF THE REASONS RECORDED FO R REOPENING OF THE ASSESSMENT READ AS UNDER: THE ASSESSEE HAD SHOWN PROFIT FROM RNA AZZURE PROJ ECT FOR THE A.Y. 2008-09 SPECIFYING THE SALE PROCEEDS OF RS . 31,47,62,391/-. THIS INCLUDED THE FOLLOWING SUMS, WHICH WERE SHOWN AT THE AGREEMENT VALUE INCREASED BY SOME OTHER CHARGES: ASHA ASHOK KATARIYA RS.89,44,030 SATISH D PARAKH RS.89,39,030 SATISH D PARAKH HUF RS.87,38,650 HOWEVER, THE INFORMATION RECEIVED FROM DDIT (INV)-I I NASIK ESTABLISHES THAT M/S. A.A. ESTATE PVT. LTD. HAS REC EIVED RS 4,27,35,000/- IN AGGREGATE FROM ABOVE MENTIONED PER SONS. THE DIFFERENCE, I.E. RS. 1,61,13,290/- WAS PAID IN CASH AND IS, THEREFORE, PRIMA FACIE UNACCOUNTED IN THE BOOKS OF ACCOUNT. THEREFORE, THERE IS SUPPRESSION OF INCOME TO THAT E XTENT AND INCOME HAS CONSEQUENTLY ESCAPED ASSESSMENT. ITA NO. 2438/M/2013 7 8. ANNEXURE AB-1 WHICH IS THE BASIS FOR REOPENING O F THE ASSESSMENT IS AS UNDER: S. NO UNIT NAME FLAT NO. AREA IN SQ.FT . RATE/ S.FT TOTAL COST AGREEME NT VALUE 6600 SQ.FT. AMINITY AGREEMENT 2200 S. FT. MIS C 220 0 SQ.FT. PARKIN G EXTRA CASH MISC. AT THE TIME POSSESSI ON TOKAN AMOUNT PAID CAPITAL GAIN INVESTMENT 1 ASHA 201 1305 11000 14355000 8613000 2871000 2871 000 500000 221320 500000 4285000 2 SDP 202 1305 11000 14355000 8613000 2871000 28710 00 500000 221320 500000 5650000 3. NOT- FINALISED 203 1275 11000 1402 5000 8414000 2805000 2805000 50 0000 216700 500000 0 9. NOW THE QUESTION TO BE DECIDED IS WHETHER THIS A NNEXURE WAS RELEVANT AND SO RELEVANT THAT IT COULD FORM BASIS F OR REOPENING A CONCLUDED ASSESSMENT U/S. 143(3) R.W.S. 153A OF THE ACT. IT IS AN UNTENABLE FACT THAT DURING THE SEARCH AND SEIZURE P ROCEEDINGS AT THE PREMISES OF THE ASSESSEE AND SUBSEQUENT TO THE SEAR CH, NO CORRESPONDING INCRIMINATING MATERIAL WAS FOUND. IT IS ALSO AN UN TENABLE FACT THAT ONE PERSON WHOSE NAME IS FOUND IN ANNEXURE AB-1 WAS EXA MINED BY THE AO DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND THAT PERSON HAS COMPLETELY DENIED OF HAVING PAID ON MONEY. IF WE S EE THE AFORESTATED ANNEXURE AB-1, THERE IS NAME OF ONLY ONE PERSON I.E . ASHA, THE SECOND NAME IS SDP AND THIRD NAME IT IS MENTIONED AS NOT FINALIZED. THE SAID ANNEXURE IS NEITHER SIGNED NOR DATED. MOREOVER, A CLOSE SCRUTINY OF THE ANNEXURE SHOWS THAT IT IS FOR THE PURPOSE OF CALCUL ATION OF CAPITAL GAINS AND CAPITAL GAIN INVESTMENTS. BY ANY STRETCH OF IM AGINATION, THIS WORKING CANNOT BE RELATED TO THE ASSESSEE. EVEN THE MARGIN AL HEADING ON THIS ANNEXURE IS MUMBAI FLATS WORKING WHICH CLEARLY SHOW THAT IT IS ONLY A WORK SHEET WHICH MUST HAVE BEEN PREPARED FOR THE PU RPOSE OF M/S. ASHOKA BUILDCOM LTD., AND RELATED PARTIES WHO INTEN DED TO PURCHASE FLATS FROM THE ASSESSEE. THIS DOCUMENT IS INCOMPLETE , C ONTAINS INFORMATION WHICH ARE FOREIGN TO THE ASSESSEE AND ABOVE ALL IT DOES NOT CONTAIN NAMES OF THE PURCHASERS EXCEPT FOR ONE ASHA. ITA NO. 2438/M/2013 8 9.1. THE LD. DR HAS STRONGLY RELIED UPON THE DECISI ON OF THE HONBLE SPREME COURT IN THE CASE OF RAYMOND WOOLLEN MILLS L TD. VS ITO 236 ITR 34 BUT WE FIND THAT THE FACTS ARE CLEARLY DISTI NGUISHABLE INASMUCH AS IN THAT CASE, THE HONBLE SUPREME COURT HAS HELD TH AT FOR DETERMINING WHETHER INITIATION OF REASSESSMENT PROCEEDINGS WAS VALID, IT HAS ONLY TO BE SEEN WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIE NCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THI S STAGE. THE LD DR ALSO RELIED ON THE DECISION OF THE HONBLE SC IN THE CAS E OF CENTRAL PROVINCES 191 ITR 662 WHERE IN IT HAS BEEN HELD THAT THE FINA L OUT COME OF THE PROCEEDINGS IS NOT RELEVANT . RELIANCE WAS ALSO PLA CED ON THE DECISION OF THE HONBLE MADRAS H.C IN ASSP & CO., 172 ITR 274 W HEREIN IT WAS HELD THAT THE AO CAN ISSUE NUMBER OF NOTICES TO REA SSESS ESCAPED INCOME. ON FRESH FACTS AND FRESH INFORMATION THE LD. DR REL IED UPON THE DECISION OF THE HONBLE S.C IN THE CASE OF PHOOLCHAND BAJRAN GLAL 203 ITR 456. 10. IN OUR UNDERSTANDING OF THE LAW THE FACTS OF T HE CASES RELIED UPON BY THE DR ARE CLEARLY DISTINGUISHABLE IN AS MUCH AS IN THE PRESENT CASE WHAT THE AO IS RELYING UPON IS ONLY A WORK SHEET TH AT TOO OF A THIRD PARTY, MOST OF THE WORKINGS ON WHICH ARE NOT EVEN REMOTELY CONNECTED WITH THE ASSESSEE. A DOCUMENT HAS TO BE CONSIDERED AS A WHO LE AND NOT IN PARTS. AS MENTIONED EARLIER, THE DOCUMENT DOES NOT CONTAIN NAMES OF THE PURCHASERS. IT IS PERTINENT TO NOTE THAT THE SAID DOCUMENT NOT EVEN CONTAINS THE NAME OF THE ASSESSEE, IT IS NOT SIGNED NOR IT IS DATED. IT IS NOT CLEAR TO WHICH ASSESSMENT YEAR IT BELONGS TO. IN O UR HUMBLE OPINION, THE ANNEXURE APPEARS TO BE DUMB DOCUMENT WHICH HAS NO R ELEVANCY AND CANNOT BE MADE A BASIS FOR REOPENING OF THE ASSESSM ENT. AFTER RECEIVING THE SAID DOCUMENT FROM THE DDIT (INV.), NASIK, THE AO HAS NOT EXAMINED THE INFORMATION BEFORE RECORDING HIS OWN SATISFACTI ON OF ESCAPED INCOME ITA NO. 2438/M/2013 9 AND INITIATING REASSESSMENT PROCEEDINGS. THE AO HA S ACTED ONLY ON THE BASIS OF SUSPICION. IF WE BUY THE THEORY OF THE LD . DR, THEN ANY DOCUMENT CONTAINING WORKINGS OF ACCOUNTS FROM AN UN RELATED PARTY MAY FORM BASIS FOR THE REOPENING OF THE ASSESSMENT. TH E ENTIRE PROCESS OF REASSESSMENT IS BASED UPON THIS ANNEXURE COUPLED W ITH THE STATEMENT OF SHRI SATISH KULKARNI. SHRI SATISH KULKARNI IS NOT EVEN A PURCHASER BUT ONLY AN EMPLOYEE OF M/S. ASHOKA BUILDCOM LTD. WHA T HE IS WRITING ON A PIECE OF PAPER UNDER THE INSTRUCTIONS OF HIS SUPE RIORS CANNOT BE CONSIDERED ADVERSELY IN THE CASE OF THE ASSESSEE. IN OUR CONSIDERED VIEW, THE AO HAS ACTED ONLY ON THE BASIS OF SUSPICION AND IT COULD NOT BE SAID THAT THE SAME WAS BASED ON BELIEF THAT THE INCOME C HARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE AO HAS TO ACT ON THE BASIS OF REASONS TO BELIEVE AND NOT ON REASONS TO SUSPECT. FOR THESE OBSERVATI ONS, WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF CIT VS SMT. PARAMJIT KAUR 311 ITR 38. 10. IT WOULD NOT BE OUT OF PLACE TO MENTION HERE TH AT IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ISSUE OF ON MONEY HA S BEEN EXAMINED AT LENGTH AND HAS BEEN WELL DELIBERATED UPON BY THE AO AND AFTER MAKING RIGOROUS ENQUIRIES, CERTAIN ADDITIONS WERE MADE. EV EN AT THAT POINT OF TIME THE AO HAD NO INFORMATION OF THE ALLEGED ON-MO NEY PAID BY THE PURCHASERS OF THE 3 FLATS WHICH HAS BEEN MADE BASIS FOR REOPENING THE ASSESSMENT. IT IS NOT A CASE WHERE NO ENQUIRY WAS MADE AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. IT IS A SETTLED P OSITION OF LAW THAT THE PROVISION U/S. 132(4A) IS ONLY AGAINST PERSON IN WH OSE POSSESSION DOCUMENT IS FOUND AND NOT AGAINST ANY OTHER PERSON. EVEN IN THE SAID ANNEXURE AB-1, THERE IS NO MENTION OF PAYMENT OF AN Y ON-MONEY TO THE ASSESSEE. THE PRESUMPTION HAS BEEN DRAWN FROM THE STATEMENT OF SHRI SATISH KULKARNI WHICH HAS BEEN RETRACTED LATER ON. THE DETAILS GIVEN IN ITA NO. 2438/M/2013 10 THE SEIZED PAPER FROM A THIRD PARTYS PREMISES ITSE LF DO NOT PUT ANY LIABILITY UPON THE ASSESSEE TO EXPLAIN THE SEIZED P APER BECAUSE IT WAS NOT RECOVERED FROM THE POSSESSION OF THE ASSESSEE AND I T DID NOT LEAD TO ANY CONCLUSION THAT THE ASSESSEE HAS RECEIVED ANY ON-MO NEY. EVERYTHING HAS BEEN PRESUMED BY THE AO AGAINST THE ASSESSEE ONLY O N THE STATEMENT OF SHRI SATISH KULKARNI WHEREAS THE AO COMPLETELY IGNO RED THE STATEMENTS RECORDED BY HIMSELF OF THE PURCHASERS DURING THE CO URSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS. 11. CONSIDERING ALL THE FACTS IN TOTALITY, IN THE L IGHT OF THE AFORESTATED ANNEXURE AB-1, WE FAILED TO PERSUADE OURSELVES TO F IND ANY RELEVANCY ON THE SAID DOCUMENT WHICH COULD LEAD TO A REASONABLE CONCLUSION THAT THE ASSESSEE HAS RECEIVED SOME ON-MONEY WHICH COULD BE MADE BASIS FOR THE REOPENING OF THE ASSESSMENT. ACCORDINGLY, WE SET A SIDE THE NOTICE U/S. 148 AND HOLD THE REASSESSMENT PROCEEDINGS AS INVALI D. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 12. FOR COMPLETE ADJUDICATION OF APPEAL, NOW WE PRO CEED TO DECIDE ON MERIT, WE FIND THAT THE ENTIRE ADDITION HAS BEEN MA DE SOLELY ON THE BASIS OF THE DOCUMENTS FOUND FROM THE POSSESSION OF SHRI SATISH KULKARNI, AN EMPLOYEE OF M/S. ASHOKA BUILDCOM LTD., COUPLED WITH THE STATEMENT OF SHRI SATISH KULKARNI WHICH WAS RETRACTED LATER ON. THE REVENUE AUTHORITIES HAVE APPLIED THE TEST OF HUMAN PROBABIL ITIES STRONGLY RELYING UPON THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF SUMATI DAYAL VS CIT 214 ITR 801 AND CIT VS DURGA PRASAD MO RE 82 ITR 540. THE LOWER AUTHORITIES STRONGLY BELIEVE THAT SINCE I N THE ORIGINAL ASSESSMENT PROCEEDINGS IN THE SAME PROJECT THE ASSE SSEE HAS SOLD CERTAIN FLATS AS SHELL FLATS AND HAS RECEIVED SOME ON-MONEY THEREFORE, APPLYING ITA NO. 2438/M/2013 11 THE TEST OF PROBABILITIES, THE ASSESSEE MUST HAVE R ECEIVED ON-MONEY ON EVERY FLATS SOLD. 12.1. A PERUSAL OF THE ASSESSMENT ORDER SHOW THAT T HE ADDITION IN THE ORIGINAL ASSESSMENT WAS ON THE BASIS OF MATERIAL CO LLECTED AT THE TIME OF SEARCH ACTION AND STATEMENTS RECORDED THEN. ON THO ROUGH EXAMINATION AND VERIFICATION, THE AO FOUND THAT IN CERTAIN FLATS , THE ASSESSEE HAS EXECUTED TWO AGREEMENTS WITH THE BUYER OF THE FLAT, ONE AGREEMENT BETWEEN THE ASSESSEE AND THE BUYER AND THE OTHER AG REEMENT BETWEEN THE BUYER AND THE INTERIOR DECORATORS. ON EXAMINING CERTAIN BUYERS , THE AO CAME TO THE CONCLUSION THAT THE AGREEMENT WITH THE INTERIOR DECORATOR WAS A MAKE BELIEF AGREEMENT AND NOT GENUINE. ACCORDING TO THE AO, THE INCLUSION OF AN INTERIOR DECORATOR WAS AN ARRANGEME NT MADE BY THE ASSESSEE WITH A VIEW TO ACCOMMODATE AND GENERATE CA SH WHICH WAS KEPT OUTSIDE REGULAR BOOKS. CONSIDERING THE FACT OF THE TWO AGREEMENTS WITH SPECIFIC VERIFICATIONS AND SPECIFIC EXAMINATIONS OF CERTAIN BUYERS AN ADDITION OF RS. 1,23,61,951/- WAS ADDED TO THE ASSE SSEES INCOME. 13. NOW IN THE REASSESSMENT PROCEEDINGS, THE AO APP LYING THE TEST OF PROBABILITIES HAS CONCLUDED THAT THE ASSESSEE MUST HAVE RECEIVED ON- MONEY ON THE SALE OF THESE THREE FLATS ALSO. IT IS PERTINENT TO NOTE HERE THAT ALL THESE PURCHASERS WERE THOROUGHLY EXAMINED BY TH E AO DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS. NON E OF THE BUYERS HAVE STATED TO HAVE PAID ANY ON-MONEY. ON THE CONTRARY, ALL OF THEM CATEGORICALLY DENIED HAVING PAID ANY SUCH ON-MONEY. EVEN IN THE ASSESSMENT ORDER, THE AO HAS MENTIONED THAT CERTAIN FLATS WERE SOLD AS SHELL FLATS BY EXECUTING TWO AGREEMENTS. THIS ITSELF SHOWS THAT EVEN DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THE AO DID NOT SAY THAT ALL THE FLATS WERE SOLD AS SHELL FLATS BY EXECUTING TWO AGREEMENTS. FLATS ITA NO. 2438/M/2013 12 WHICH WERE SOLD AS SHELL WITH TWO AGREEMENTS, THE UNACCOUNTED PROFIT HAS ALREADY BEEN CONSIDERED IN THE ORIGINAL ASSESSM ENT. IN THE PROCEEDINGS UNDER CONSIDERATION, EXCEPT FOR THE RET RACTED STATEMENT, THE AO HAS NOT BROUGHT ANY MATERIAL EVIDENCE ON RECORD WHICH COULD SUGGEST THAT THE ASSESSEE HAS RECEIVED ON-MONEY ON SALE OF EVERY FLAT. THE AO HAS BELIEVED ON THE CIRCUMSTANTIAL EVIDENCES LIKE T HE RETRACTED STATEMENT OF SHRI SATISH KULKARNI AND ANNEXURE AB-1 AND IN TH E PROCESS, THE AO HAS COMPLETELY IGNORED THE DIRECT EVIDENCES BEING T HE STATEMENTS UNDER OATH OF THE BUYERS OF THE FLATS AND THEIR AFFIDAVIT S IN THIS MATTER. 14. APART FROM WHAT WE HAVE STATED HEREINABOVE, WE ALSO FAILED TO UNDERSTAND WHAT PREVENTED THE AO TO APPLY THE TEST OF HUMAN PROBABILITIES DURING THE ORIGINAL ASSESSMENT PROCEE DINGS ITSELF WHEN IT CAME TO NOTICE OF THE AO THAT ASSESSEE IS TAKING SOME MONEY OUTSIDE THE BOOKS OF ACCOUNT. THE ONLY REASON WHY THE AO HAS N OT APPLIED THIS TEST IS THAT AFTER THOROUGH EXAMINATION AND VERIFICATION , HE FOUND THAT ONLY CERTAIN FLATS WERE SOLD WHERE ON-MONEY WAS INVOLVED AND THE RESPECTIVE BUYERS OF THOSE FLATS HAVE ALSO CONFIRMED THIS BEFO RE THE REVENUE AUTHORITIES. HOWEVER, IN THE MATTER BEFORE US, THE BUYERS AT THE VERY FIRST STAGE HAS CATEGORICALLY DENIED NOR THE AO HAS CATEG ORICALLY STATED THAT ALL THE FLATS WERE SOLD FOR ON-MONEY. 15. BEFORE US, THE LD. DR HAS ALSO RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF DIAMOND INVESTMENT IN ITA N O. 5537/M/10, WHEREIN THE TRIBUNAL HAS HELD THAT FLATS IN THE SAM E BUILDING HAVE BEEN SOLD TO SOME PARTIES AT MUCH HIGHER PRICE WHEREAS F LATS TO THE RELATED PARTIES HAVE BEEN SOLD AT A MUCH LOWER RATE, THERE FORE, THE AO WAS JUSTIFIED IN TREATING THE DIFFERENCE AS INCOME OF T HE ASSESSEE. ITA NO. 2438/M/2013 13 16. THE FACTS OF THE CASE IN HAND IS CLEARLY DISTIN GUISHABLE ON FACTS INASMUCH AS IN THIS CASE, THE AO HIMSELF HAS EXAMIN ED THOSE FLATS WERE SOME EXTRA MONEY IN THE FORM OF INTERIOR DECORATION WAS FOUND TO BE GIVEN. IT WAS NOT THE CASE OF THE AO THAT ALL THE FLATS SOLD HAVE FETCHED SOME ON-MONEY. THE DR FURTHER BROUGHT TO OUR NOTIC E THAT THE DIRECTOR OF M/S. ASHOKA BUILDCOM LTD., HAVE MOVED THE SETTLE MENT COMMISSION ADMITTING PAYMENT OF ON-MONEY THEREFORE THE SAME SH OULD BE CONSIDERED IN THE HANDS OF THE ASSESSEE. THIS SUBMISSION OF T HE LD. DR CANNOT BE ACCEPTED BECAUSE WHAT A THIRD PARTY IS DOING BEFORE THE SETTLEMENT COMMISSION CANNOT BE SAID TO HAVE ANY RELEVANCE IN THE RE-ASSESSMENT PROCEEDINGS OF THE ASSESSEE WHEN THE BUYERS HAVE CA TEGORICALLY STATED THAT THEY HAVE NOT PAID ANY ON-MONEY WHICH FACT HAS ALSO BEEN STATED IN THE FORM OF AFFIDAVITS. CONSIDERING ALL THESE FACTS IN TOTALITY, IN OUR HUMBLE OPINION, THE ENTIRE ADDITIONS HAVE BEEN MADE ON SUR MISES AND CONJECTURES BASED UPON IRRELEVANT MATERIAL IGNORING DIRECT EVID ENCES ON RECORD, THEREFORE, THE ADDITIONS MADE BY THE AO CANNOT BE SUSTAINED EVEN ON MERIT. WITHOUT PREJUDICE TO THE GROUND NO. 1, GROU ND NO. 2 IS ALSO ALLOWED. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2014 . 3 . 2' % 4 56 5.2.2014 2 . 7 SD/- SD/- (I.P. BANSAL ) (N.K. BILLAIYA) /JUDICIAL MEMBER % / ACCOUNTANT MEMBER MUMBAI; 5 DATED 5.2.2014 . . ./ RJ , SR. PS ITA NO. 2438/M/2013 14 3 3 3 3 . .. . +/! +/! +/! +/! 8!'/ 8!'/ 8!'/ 8!'/ / COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. !:7 +/ , , / DR, ITAT, MUMBAI 6. 7; < / GUARD FILE. 3 3 3 3 / BY ORDER, ,!/ +/ //TRUE COPY// = == = / > > > > (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI