Kusum Mehta, Delhi V. ACIT, New Delhi

ITA 2504/DEL/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6849 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Share purchase agreement; Capital receipt; Retraction; Documents seized; Set aside; Capital Gains
• Section: 153A; 208; 131; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2504/DEL./2014 (ASSESSMENT YEAR : 2009-10) MS. KUSUM MEHTA, VS. ACIT, CENTRAL CIRCLE 3, 2042, KATRA TOBACCO, NEW DELHI. KHARI BAOLI, DELHI 110 006. (PAN : AAPPM3938E) ITA NO.2773/DEL./2014 (ASSESSMENT YEAR : 2009-10) ACIT, CENTRAL CIRCLE 3, VS. MS. KUSUM MEHTA, NEW DELHI. 2042, KATRA TOBACCO, KHARI BAOLI, DELHI 110 006. (PAN : AAPPM3938E) ITA NO.2503/DEL./2014 (ASSESSMENT YEAR : 2009-10) SHRI MAHESH MEHTA, VS. ACIT, CENTRAL CIRCLE 3, 2042, KATRA TOBACCO, NEW DELHI. KHARI BAOLI, DELHI 110 006. (PAN : AGBPM7320C) ITA NO.3347/DEL./2014 (ASSESSMENT YEAR : 2009-10) ACIT, CENTRAL CIRCLE 3, VS. SHRI MAHESH MEHTA, NEW DELHI. 2042, KATRA TOBACCO, KHARI BAOLI, DELHI 110 006. (PAN : AAPPM3938E) (APPELLANT) (RESPONDENT) ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 2 ASSESSEE BY : SHRI SURESH GUPTA, ADVOCATE REVENUE BY : SHRI J.K. MISHRA, CIT DR DATE OF HEARING : 11.09.2019 DATE OF ORDER : 31.10.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : PRESENT CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE BEING DISPOSED OFF BY WAY OF COMPOSITE ORDER TO AVOID REPETITION OF DISCUSSION. 2. APPELLANT, MS. KUSUM MEHTA & SHRI MAHESH MEHTA ( HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEAL BEING ITA NO.2504/DEL/2014 & NO.2503/DEL/2014, SOUGHT TO SET ASIDE THE IMPUGNED ORDERS DATED 13.02.2014 & 14.03.2014 RESPECTIVELY P ASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS)-I, NEW DELH I QUA THE ASSESSMENT YEAR 2009-10 ON THE IDENTICAL GROUND INTER ALIA THA T :- THE LD. CIT (A) HAS ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING AN ADDITION OF RS.2,04,00,000/- BEING IN COME ALLEGEDLY EARNED BY THE APPELLANT FORM THE DEAL OF TRANSFER OF SHARES OF M/S. RAJ REFUELLERS & FIRE SAFETY EQUIPME NTS PVT. LTD. WHICH HAD BEEN TERMINATED BY THE PARTIES. 3. APPELLANT, ACIT, CENTRAL CIRCLE 3, NEW DELHI (HE REINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL BEIN G ITA NO.2773/DEL/2014 & 3347/DEL/2014, SOUGHT TO SET ASIDE THE IMPUGNED O RDERS DATED 13.02.2014 & 14.03.2014 RESPECTIVELY PASSED BY THE COMMISSIONE R OF INCOME - TAX ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 3 (APPEALS)-I, NEW DELHI QUA THE ASSESSMENT YEAR 2009 -10 ON THE GROUNDS INTER ALIA THAT:- ITA NO.2773/DEL/2014 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITI ON OF RS.9,20,00,000/- (CORRECT AMOUNT IS RS.7,16,00,000/ -) MADE BY AO ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCES. ITA NO.3347/DEL/2014 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING T HE ADDITION OF RS.1,48,51,840/- MADE BY AO ON ACCOUNT OF INCOME FR OM UNDISCLOSED SALES. 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN LAW AND ON FACTS OF THE CASE IN RESTRICTING THE ADD ITION OF RS.9,20,00,000/- MADE BY AO ON ACCOUNT OF INCOME FR OM UNDISCLOSED SOURCES. BRIEF FACTS OF ITA NOS.2504/DEL/2014 & 2773/DEL/2014 (CROSS APPEALS) IN CASE OF MS. KUSUM MEHTA ITA NOS.2503/DEL/2014 & 3347/DEL/2014 (CROSS APPEALS) IN CASE OF SHRI MAHESH MEHTA 4. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : ON THE BASIS OF SEARCH AND SEIZURE OPERATION CARRIED OUT IN CASE OF MAHESH MEHTA GROUP OF COMPANIES ON 30.06.2009, ASSE SSMENT WAS FRAMED UNDER SECTION 143 (3)/153A OF THE INCOME-TAX ACT, 1 961 (FOR SHORT THE ACT). IN RESPONSE TO THE NOTICE ISSUED U/S 153A O F THE ACT, ASSESSEE PREFERRED TO TREAT THE RETURN OF INCOME FILED U/S 1 39 OF THE ACT AS REPLY TO NOTICE U/S 153A OF THE ACT VIDE REPLY DATED 25.11.2 010 DECLARING TAXABLE ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 4 INCOME OF RS.1,53,50,110/-, WHICH INCLUDES SHORT TE RM CAPITAL GAIN FROM SALE OF PROPERTY OF D-17, ASHOK VIHAR WHICH WAS SOLD DUR ING THE YEAR UNDER ASSESSMENT FOR A SALE CONSIDERATION OF RS.50,50,000 /- BY WAY OF CHEQUE AND FURTHER RECEIVING A SUM OF RS.1,49,50,000/- BY WAY OF CASH. DURING THE SEARCH PROCEEDINGS, ASSESSEE SURRENDERED THE AMOUNT OF RS.1,49,50,000/- WHICH WAS SUBSEQUENTLY DISCLOSED IN THE RETURN OF I NCOME ALSO. 5. DURING THE SEARCH AND SEIZURE OPERATION, DOCUMEN TS ANNEXURE A-5 (BUNCH OF LOOSE PAPERS- PAGES 1 TO 102) QUA PROPERT Y BEARING PLOT NO.115, PHASE-I, UDYOG VIHAR, GURGAON, IN M/S. RAJ REFUELLE RS AND FIRE SAFETY EQUIPMENT CO. PVT. LTD. (HEREINAFTER REFERRED TO A S RRFSL) SEIZED DOCUMENTS INCLUDE DRAFT AGREEMENT ON A STAMP PAPER OF RS.100/- DATED 22.02.2008 QUA PLOT NO.115, UDYOG VIHAR, GURGAON OW NED BY MAHESH MEHTA AND KUSUM MEHTA SHOWING AGREEMENT OF SALE FOR A CONSIDERATION OF RS.25,00,00,000/- BY MAHESH MEHTA AND KUSUM MEHTA T O ONE KUNJAN ARORA, C/O M/S. LAMBDA MICROWAVE TECHNOLOGIES PVT. LTD.. ASSESSING OFFICER (AO) ALSO NOTICED FROM THE DOCUMENTS SEIZED THAT MAHESH MEHTA AND KUSUM MEHTA HAD PURCHASED SHARES OF RRFSL IN TH E MONTH OF NOVEMBER 2007 FROM RAKESH KUMAR GARG AND SANTOSH KU MAR GARG FOR RS.2,18,00,000/- AND PAID RS.3,00,00,000/- TOWARDS PAYMENT OF LOAN OUTSTANDING IN THE BOOKS OF RRFSL, THUS THE COST OF PURCHASE OF THE SHARES WAS RS.5,18,00,000/-. FROM THE AGREEMENT TO SELL, AO NOTICED THAT IT IS CLEAR THAT TRANSACTION QUA PROPERTY BEARING PLOT NO .115, PHASE I, UDYOG ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 5 VIHAR, GURGAON TOOK PLACE BETWEEN MAHESH MEHTA AND KUSUM MEHTA BEFORE THE DATE OF AGREEMENT AND THE AMOUNT HAS BEE N RECEIVED BY THE SELLER IS OF RS.18,50,01,100/- AS ON 22.02.2008. 6. WHEN DUE TO SOME TECHNICAL OBJECTION RAISED BY H SIIDC QUA THE TRANSACTION OF THE AFORESAID PLOT, MAHESH MEHTA AND KUSUM MEHTA AGREED TO TRANSFER THE PROPERTY TO KUNJAN ARORA THROUGH TR ANSFER OF SHARES IN FAVOUR OF ARORA FAMILY FOR RECORDED CONSIDERATION OF RS.5, 18,00,000/- AND THE REMAINING AMOUNT WAS APPARENTLY PAID IN CASH BY KUN JAN ARORA TO MAHESH MEHTA. AO ALSO RECORDED THAT MAHESH MEHTA ADMITTED THAT THE REAL TRANSACTION QUA THE PROPERTY WAS FOR RS.25,00,00,00 0/- ONLY AND FURTHER ADMITTED THAT NET PROFIT OF RS.18,40,00,000/- ON SA LE OF SHARES I.E. RS.9,20,00,000/- EACH IN HIS OWN HAND AND IN THE HA NDS OF HIS WIFE IS AN UNRECORDED INCOME. THE SAID STATEMENT WAS ALSO SIG NED BY KUSUM MEHTA. STATEMENT OF KUNJAN ARORA WAS ALSO RECORDED. FROM THE FACTS ON RECORD AND CIRCUMSTANCES IN THIS CASE, AO PROCEEDED TO HOLD TH AT THE PROPERTY BEARING PLOT NO.115, PHASE I, UDYOG VIHAR, GURGAON STANDS T RANSFERRED IN THE NAME OF KUNJAN ARORA AND ASSOCIATES AND THE ORIGINAL DOC UMENTS FOUND FROM THE RESIDENCE OF MAHESH MEHTA ALSO SPEAKS OF THE TRANSF ER OF THE SAME MANNER WHICH WAS FINALLY EXECUTED AND AS SUCH, COMPANY ALO NG WITH PROPERTY WAS ALSO TRANSFERRED TO KUNJAN ARORA AND HIS ASSOCIATES FOR A CONSIDERATION OF RS.25,00,00,000/- AS PER AGREEMENT. AO ALSO NOTICE D THAT THE PURCHASE OF RRFSL WAS EXECUTED IN ACCORDANCE WITH THE ORIGINAL AGREEMENT DATED ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 6 22.02.2008 AS KUNJAN ARORA HAS NEVER DENIED THE EXI STENCE OF THE CORRECTNESS OF THE AGREEMENT DATED 22.02.2008 RATHE R ADMITTED THE EXISTENCE OF THE SAME AS PER HIS STATEMENT RECORDED WITH INCO ME-TAX AUTHORITIES. AO FURTHER OBSERVED THAT KUNJAN ARORA HAS MADE PAYMENT OF RS.18,40,00,000/- IN CASH TO MAHESH MEHTA AND KUSUM MEHTA AND THE SAM E IS TREATED THE INCOME FROM UNDISCLOSED SOURCES OF MAHESH MEHTA AND KUSUM MEHTA AND MADE ADDITION THEREOF TO THE TOTAL INCOME OF KUSUM MEHTA AND MAHESH MEHTA TO THE TUNE OF RS.9,20,00,000/- EACH. 7. IN RESPONSE TO THE NOTICE ISSUED U/S 153A OF THE ACT, ASSESSEE MAHESH MEHTA STATED THAT THE RETURN OF INCOME FILED BY HIM ON 15.06.2011 DECLARING INCOME OF RS.2,12,15,410/- BE TREATED AS HAVING BEE N FILED U/S 153A OF THE ACT. ASSESSEE, MAHESH MEHTA HAS ALSO SURRENDERED A N AMOUNT OF RS.5,56,00,000/- DURING THE SEARCH PROCEEDINGS. AS SESSEE, MAHESH MEHTA HAS SHOWN HIS INCOME AS SALARY BEING DIRECTOR OF M/ S. MAHESH WOOD PRODUCTS (P) LTD., INCOME FROM HOUSE PROPERTY, SHAR E FROM THE PARTNERSHIP FIRM AND BUSINESS INCOME FROM THE PROPRIETARY FIRM, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. 8. ON FAILURE OF THE ASSESSEE, MAHESH MEHTA TO EXPL AIN AS TO HOW THE VALUE OF THE STOCK STATED TO BE DESTROYED OF RS.1,4 8,51,840/- WAS ARRIVED AT, AO PROCEEDED TO HOLD THAT SINCE DURING THE INSPECTI ON, SOME STOCK HAS BEEN FOUND TO BE SPOILED OF THE VALUE OF THE STOCK TO TH E EXTENT OF GROSS PROFIT ESTIMATED IS TREATED TO BE STRUCK OUT BY THE ASSESS EE, THUS A SUM OF ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 7 RS.1,48,51,840/- IS TREATED AS SALE OUTSIDE THE BOO KS BEING NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND THEREBY MADE ADDIT ION THEREOF TO THE TOTAL INCOME OF THE ASSESSEE. 9. ASSESSEES, MAHESH MEHTA AND KUSUM MEHTA, CARRIED THE MATTER BY WAY OF APPEALS BEFORE THE LD. CIT (A) WHO HAVE PART LY ALLOWED THE APPEALS VIDE ORDER DATED 13.02.2014 & 14.03.2014 PASSED IN CASE OF KUSUM MEHTA & MAHESH MEHTA RESPECTIVELY FOR STATISTICAL PURPOSE S. FEELING AGGRIEVED, BOTH THE ASSESSEE AS WELL AS REVENUE IN CASE OF MAH ESH MEHTA AND KUSUM MEHTA HAVE COME UP BY FILING CROSS APPEALS BEFORE T HE TRIBUNAL. 10. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. UNDISPUTEDLY, IN A SEARCH AND SEIZURE OPERATION CARRIED OUT AT THE PREMISES OF MAHESH MEHTA GROUP OF CASES ON 30.06.20 09, A DRAFT UNSIGNED AGREEMENT DATED 22.02.2008 ON A STAMP PAPER OF RS.1 00/- QUA THE PROPERTY BEARING PLOT NO.115, PHASE I, UDYOG VIHAR, GURGAON, AVAILABLE AT PAGES 4 TO 6 OF THE PAPER BOOK, WAS FOUND AND SEIZED. IT IS A LSO NOT IN DISPUTE THAT IN THE DRAFT AGREEMENT TO SELL, KUSUM MEHTA AND MAHESH MEHTA WAS REFERRED TO AS VENDOR AND KUNJAN ARORA WAS REFERRED TO AS BU YER. IT IS ALSO NOT IN DISPUTE THAT A RECITAL HAS BEEN MADE IN THE AGREEME NT TO SELL ITSELF THAT KUSUM MEHTA AND MAHESH MEHTA WERE NOT REGISTERED OW NER OF THE PROPERTY ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 8 IN QUESTION AT THE TIME OF EXECUTION OF THE AGREEME NT. IT IS ALSO NOT IN DISPUTE THAT RAKESH KUMAR GARG AND SANTOSH KUMAR GA RG OF RRFSL WAS THE ORIGINAL OWNER OF THE PROPERTY IN QUESTION. IT IS ALSO NOT IN DISPUTE THAT OUT OF THE TOTAL SALE CONSIDERATION OF RS.25,00,01, 100/- SETTLED IN THE DRAFT AGREEMENT, AN AMOUNT OF RS.18,50,01,100/- WAS PAID BUT THE SUM OF RS.6,50,00,000/- WAS WITHHELD BY THE OWNER TILL NO OBJECTION CERTIFICATE IS ISSUED BY THE HSIIDC FOR TRANSFER OF THE PLOT FROM ORIGINAL OWNER, RAKESH KUMAR GARG AND SANTOSH KUMAR GARG. IT IS ALSO NOT IN DISPUTE THAT ONE KUNJAN ARORA VIDE HIS STATEMENT RECORDED BY DDIT U/ S131(1A) ON 25.08.2009 ADMITTED THAT HE HAS PAID A SUM OF RS.9, 66,00,000/- UP TILL DECEMBER 2007 AND GIVEN POST DATED CHEQUES OF RS.8, 84,00,000/- TO KUSUM MEHTA AND MAHESH MEHTA WHICH HAVE NOT BEEN ENCASHED TILL DATE, THUS EXPLAINED THE TOTAL PAYMENT OF RS.18,50,01,100/- MA DE TO KUSUM MEHTA AND MAHESH MEHTA. 12. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNE D ORDER CONTENDED INTER ALIA THAT THE DRAFT AGREEMENT DATED 22.08.200 8 ON STAMP PAPER WORTH RS.100/- FOUND/SEIZED DURING THE SEARCH AND SEIZURE OPERATION QUA THE SALE OF PLOT NO.115, UDYOG VIHAR, GURGAON WAS NEVER ACTE D UPON NOR INTENDED TO BE ACTED UPON BY THE PARTIES AS KUSUM MEHTA AND MAHESH MEHTA WERE NOT REGISTERED OWNER OF THE PROPERTY IN QUESTION; T HAT THE PLOT IN QUESTION COULD NOT BE TRANSFERRED IN FAVOUR OF KUSUM MEHTA A ND MAHESH MEHTA DUE TO SOME QUERIES RAISED BY THE HSIIDC; THAT AO/CIT ( A) HAVE ERRED IN ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 9 REJECTING THE ACTUAL AGREEMENT DATED 21.04.2009 ON THE BASIS OF WHICH THE PROPERTY IN QUESTION WAS TRANSFERRED AND THEY HAVE ALSO ERRED IN MAKING THE ADDITION ON THE BASIS OF DRAFT AGREEMENT DATED 22.0 8.2008 WHICH IS A BALD DOCUMENT; THAT THE STATEMENT OF KUNJAN ARORA RECORD ED ON 25.08.2009 U/S 131 (1A) OF THE ACT HAS BEEN WRONGLY RELIED UPON BY THE AO WHICH WAS RECORDED SUBSEQUENTLY; THAT MAHESH MEHTA IN HIS STA TEMENT DATED 01.07.2009 RECORDED U/S 132 (4) CO-SIGNED BY KUSUM MEHTA DULY EXPLAINED THAT AGREEMENT FOUND WAS JUST A DRAFT AGREEMENT AND AS SUCH, IS A DUMB DOCUMENT; THAT MAHESH MEHTA HAS RETRACTED HIS STATE MENT UNDER RULES AND AS SUCH, THE SAME CANNOT BE RELIED UPON; THAT THE D EAL HAS NEVER BEEN MATURED ON THE BASIS OF DRAFT UNSIGNED AGREEMENT AS HSIIDC HAS RAISED CERTAIN OBJECTIONS; THAT ASSESSEE HAS DULY CLARIFIE D THAT HE HAS ALREADY ENTERED INTO SAME AGREEMENT AND THE POST-DATED CHEQ UES HAVE NEVER BEEN ENCASHED; THAT THE PROPERTY IN QUESTION HAS ALREADY BEEN TRANSFERRED IN SOMEONE OTHERS NAME AND THE ASSESSEE HAS BEEN CHEAT ED AND RELIED UPON THE CASES OF SHRI SANTOSH KUMAR GARG IN ITA NO.2864/DEL/2013 ORD ER DATED 29.09.2017, CIT VS. HARJEEV AGGARWAL (2016) 290 CTR 263 (DEL.), BANSAL HIGH CARBONS (P) LTD. (2009) 223 CTR 179 (DEL.), M. NARAYANAN & BROS. VS. ACIT (2011) 13 TAXMANN.COM 49 (MAD.), CHETNABEN J SHAH VS. ITO IN ITA NO.1437 OF 2007 ORDER DATED 14.07.2016, CIT VS. RAMANBHAI B. PATEL IN ITA NO.207 & 208 OF 2008 ORDER DATED 20.07.2016 AND CIT VS. K. BHUVANENDRA & ORS. (2008) 303 ITR 235 (MAD.) . ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 10 13. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVE NUE TO REPEL THE ARGUMENTS ADVANCED BY THE LD. AR FOR THE ASSESSEE C ONTENDED INTER ALIA THAT U/S 292C, PRESUMPTION IS ATTACHED TO THE STATEMENT OF MAHESH MEHTA RECORDED U/S 132 (4A) WHICH THE ASSESSEE HAS FAILED TO CONTROVERT THAT RETRACTION HAS NOT BEEN MADE SPONTANEOUSLY AND THE SUBSEQUENT AGREEMENT DATED 21.04.2009 HAS BEEN PREPARED JUST TO CAMOUFLA GE THE ACTUAL FACTS; THAT THE ASSESSEE HAS NEVER FILED ANY CRIMINAL CASE IF A NY FRAUD HAS BEEN COMMITTED WITH THEM QUA THE TRANSFER OF THE PROPERT Y IN QUESTION AND RELIED UPON THE DECISIONS OF BELA JUNEJA VS. CIT (2012) 20 TAXMANN.COM 392 (DELHI), SURENDRA M KHANDHAR VS. ACIT (2010) 321 IT R 254 (BOMBAY), M/S. PEBBLE INVESTMENT AND FINANCE LTD. VS. ITO (20 17-TIOL-238-SC- IT), GREENVIEW RESTAURANT VS. ACIT (2003) 263 ITR 1 69 (GAUHATI), RAJ HANS TOWERS (P.) LTD. VS. CIT 373 ITR 9, PCIT VS. A VINASH KUMAR SETIA (2017) 81 TAXMANN.COM 476 (DELHI) AND ACIT VS. HUKU M CHAND JAIN 337 ITR 238 (CHHATTISGARH) . 14. UNDISPUTEDLY, RAKESH KUMAR GARG AND SANTOSH KUM AR GARG WERE OWNER OF 3500 SHARES OF RRFSL AND THE SAID COMPANY WAS ALSO OWNER OF THE SAID PROPERTY, PLOT NO.115, UDYOG VIHAR, GURGAO N. IT IS ALSO NOT IN DISPUTE THAT MAHESH MEHTA AND KUSUM MEHTA HAVE ENTE RED INTO AN AGREEMENT DATED 04.09.2007 FOR PURCHASE OF 3500 SHA RES OF RRFSL FROM RAKESH KUMAR GARG AND SANTOSH KUMAR GARG. ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 11 15. THE REVENUE TO FASTEN THE TAX LIABILITY OF BOTH THE ASSESSEES RELIED UPON THE DRAFT UNSIGNED AGREEMENT DATED 22.02.2008 ON A STAMP PAPER WITH RAMESH ARORA AND MRS. DEEPTI ARORA THROUGH KUNJAN A RORA TO SELL 3500 SHARES OF RRFSL FOR A CONSIDERATION OF RS.25,00,00, 000/- ALONG WITH TOKEN AMOUNT OF RS.1,100/-. IT IS MENTIONED IN THE AGREE MENT TO SELL IN QUESTION THAT THE SELLER HAS RECEIVED AN AMOUNT OF RS.18,50, 01,100/-. IT IS ALSO ONE OF THE RECITAL IN THE AGREEMENT THAT AN AMOUNT OF RS.6 ,50,00,000/- HAS BEEN WITHHELD BY THE SELLER WITH THE PURCHASER TO FACILI TATE THE TRANSFER PROCESS AT HSIIDC AND THE BALANCE AMOUNT IS AGREED TO BE PAID IN TWO INSTALLMENTS, ONE AT THE TIME OF PROVISIONAL TRANSFER LETTER BY H SIIDC AND SECOND INSTALLMENT AT THE TIME OF ISSUANCE OF FINAL TRANSF ER LETTER AND IN CASE OF DISPUTE, THE ISSUE WAS AGREED TO REFER TO SOLE ARBI TRATOR, SHRI H.S. CHOUDHARY , R/O J-56, ASHOK VIHAR, PHASE I, NEW D ELHI-110052. 16. IT IS THE CASE OF THE ASSESSEE THAT DRAFT AGREE MENT DATED 22.08.2008 HAS NEVER BEEN ACTED UPON BEING A DUMB DOCUMENT RAT HER SALE HAS BEEN EFFECTED BY WAY OF AGREEMENT DATED 21.04.2009 WHICH WAS FOR THE SAME SALE CONSIDERATION BUT WITH DIFFERENT TERMS AND CONDITIO NS. 17. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE, ORDER PASSED BY THE LOWER REVENUE AUTHORITIES AND A RGUMENTS ADDRESSED, THE QUESTION ARISES FOR DETERMINATION IS :- AS TO WHETHER TRANSACTION TOOK PLACE AS PER DRAFT AGREEMENT DARED 22.08.2008 OR BY WAY OF SIGNED AGREEMENT DATE D 21.04.2009 BETWEEN THE PARTIES? ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 12 18. LD. CIT (A) EXTENSIVELY THRASHED THE FACTS OF T HE CASE IN PARAS 4.5 TO 4.8 OF THE IMPUGNED ORDER IN THE LIGHT OF THE STATE MENTS OF MAHESH MEHTA AND KUSUM MEHTA RECORDED DURING THE SEARCH & SEIZUR E PROCEEDINGS AND REACHED THE CONCLUSION THAT AGREEMENT DATED 21.04.2 009 IS NOT A LEGALLY ENFORCEABLE DOCUMENT FOR LACK OF CERTAINTY OF THE P URCHASER PARTY. WHEN WE EXAMINE BOTH THE AGREEMENTS DATED 22.08.2008 AND 21 .04.2009 IN THE LIGHT OF THE STATEMENT RECORDED BY MAHESH MEHTA DURING TH E COURSE OF SEARCH U/S 132 (4) TO WHICH PRESUMPTION IS ATTACHED AND HAS NO T BEEN RETRACTED SPONTANEOUSLY AND NO MATERIAL WHATSOEVER HAS BEEN B ROUGHT ON RECORD BY THE ASSESSEE IF THE SAID STATEMENT WAS MADE UNDER C OERCION OR UNDER ANY UNDUE INFLUENCE, AGREEMENT DATED 21.04.2009 DOES NO T INSPIRE CONFIDENCE TO BELIEVE THE SAME. 19. FURTHERMORE, WHEN WE EXAMINE FACTS AND CIRCUMST ANCES OF THE CASE, PARTICULARLY STATEMENT OF KUNJAN ARORA RECORDED DUR ING SEARCH INVESTIGATION, IT FURTHER LEADS TO THE CONCLUSION THAT THE AGREEME NT TO SELL IN QUESTION DATED 22.08.2008 OWNED BY RRFSL WAS EXECUTED FOR A SALE C ONSIDERATION OF RS.25,00,01,100/- AS KUNJAN ARORA HAS SPECIFICALLY REPLIED TO QUESTION NO.6 THAT :- HE HAS PAID A TOTAL SUM OF RS.9.66 CRORES OVER A P ERIOD FROM DECEMBER 2007 TILL DATE AND HAD ISSUED POST-DATED C HEQUES OF RS.8.84 CRORES WHICH HAVE NOT BEEN ENCASHED TILL DA TE. FURTHERMORE, A SUM OF RS.1,100/- WAS PAID IN CASH A S INITIAL DEAL SIGNING AMOUNT THUS PAID A TOTAL PAYMENT OF RS.18,5 0,01,100/-. ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 13 SO, THE QUESTION IS ANSWERED ACCORDINGLY THAT AGREE MENT DATED 22.08.2008 IS NOT A DUMB DOCUMENT. 20. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE, NOW THE SECOND QUESTION ARISES FOR CONSIDERATION IS :- AS TO WHETHER ASSESSEES, MAHESH MEHTA AND KUSUM ME HTA EARNED AN AMOUNT OF RS.2,04,00,000/- EACH FROM THE DEAL OF TRANSFER OF SHARES OF RRFSL ALLEGEDLY HAVING BEEN T ERMINATED BY THE PARTIES, AS HAS BEEN HELD BY LD. CIT (A)? 21. WHEN THE AFORESAID QUESTION IS EXAMINED IN THE LIGHT OF UNDISPUTED FACTS INTER ALIA THAT THE TOTAL CONSIDERATION BY TR ANSFER OF SHARES OF RRFSL WAS RS.25,00,00,000/-, WHICH FACTS IS INCORPORATED IN BOTH THE AGREEMENTS DATED 22.02.2008 AND 21.04.2009 ENTERED INTO BETWEE N MEHTA AND KUNJAM ARORA; THAT ON ACCOUNT OF NON-RECEIPT OF NOC AND PT C FROM HSIIDC IN THEIR FAVOUR, ASSESSEE COULD NOT GET THE SHARES OF RRFSL TRANSFERRED IN THEIR FAVOUR AND CONSEQUENTLY, COULD NOT TRANSFER THE SAM E IN FAVOUR OF DEEPTI ARORA AND RAMESH ARORA; THAT THE LD. CIT (A) HAS BR OUGHT ON RECORD THE FACTS IN THE FORM OF COPY OF SHARE CERTIFICATES THA T AFORESAID 3,500 SHARES WERE TRANSFERRED ON 05.11.2008 IN FAVOUR OF ARORAS BY THE GARGS FOR A TOTAL CONSIDERATION OF RS.2,18,00,000/-; THAT THE LD. CIT (A) ALSO THRASHED THE FACTS FROM THE BANK ACCOUNTS OF M/S. LAMBADA MICROW AVE TECHNOLOGIES OF WHICH ARORAS ARE PARTNERS; THAT CHEQUES OF RS.8,84, 00,000/- HANDED OVER BY ARORAS AS PART OF THE DEAL TO MEHTA HAVE NEVER BEEN ENCAHSED NOR THERE IS ANY EVIDENCE ON RECORD THAT ANY PAYMENT HAS BEEN MA DE IN LIEU OF ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 14 UNENCASHED CHEQUES AMOUNTING TO RS.8,84,00,000/-; T HAT IT IS ALSO A FACT THRASHED BY LD. CIT (A) THAT TRANSFER OF SHARES BY THE GARGS IN FAVOUR OF ARORAS HAVE TOOK PLACE ON 05.11.008 MUCH PRIOR TO A GREEMENT DATED 21.04.2009 AND AS SUCH, TRANSACTION WAS NOT COMPLET ED THROUGH THE ASSESSEES; THAT ON THE OTHER HAND, IT IS PROVED FAC T ON RECORD THAT THE ASSESSEES HAVE RECEIVED RS.9,26,00,000/- AS CONSIDE RATION FROM THE AFORESAID TRANSFER FROM THE ARORAS FOR WHICH ARORAS HAVE SERVED A LEGAL NOTICE ON THE ASSESSEES BUT HAS NOT INITIATED LEGAL PROCEEDINGS FOR RECOVERY OF THE DISPUTED AMOUNT; THAT IT IS ALSO PROVED ON R ECORD THAT ASSESSEE HAD PAID RS.5,18,00,000/- TO RAKESH KUMAR GARG AND SANT OSH KUMAR GARG, WE ARE OF THE CONSIDERED VIEW THAT PROFIT FROM THE TRA NSACTION IN QUESTION HAS BEEN RIGHTLY ASSESSED AT RS.4,08,00,000/- BY THE LD . CIT (A) I.E. RS.9,26,00,000/- MINUS RS.5,18,00,000/-. 22. AFORESAID FINDINGS RETURNED BY THE LD. CIT (A) ON FACTS PRIMARILY BASED ON UNDISPUTED FACTS CANNOT BE UNSETTLED MEREL Y ON THE CONTENTION OF THE LD. AR FOR THE ASSESSEE THAT THE DRAFT AGREEMEN T DATED 22.02.2008 IS MERELY A DUMB DOCUMENT BECAUSE THE SAME HAS BEEN CA TEGORICALLY ADMITTED BY ASSESSEES IN THEIR STATEMENTS AS WELL AS KUNJAM ARORA RECORDED DURING SEARCH PROCEEDINGS, THOUGH RETRACTED SUBSEQUENTLY. BUT RETRACTION CANNOT BE RELIED UPON ON THE GROUND THAT IT WAS NOT SPONTANEO US RATHER MADE IN THE WELL-ORCHESTRATED MANNER BY PREPARING SECOND AGREEM ENT DATED 21.04.2009 TO CAMOUFLAGE THE ACTUAL TRANSACTION. EVEN MAHESH MEHTA DURING RECORDING ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 15 OF HIS STATEMENT U/S 132 (4) RECORDED ON 01.07.2009 HAS NOT DISCLOSED THE EXISTENCE OF AGREEMENT DATED 21.04.2009. HAD THERE BEEN ANY SUCH AGREEMENT IN QUESTION, MAHESH MEHTA WOULD HAVE RELI ED UPON THE SAME IN SUPPORT OF HIS CASE. SO, IT IS A DOCUMENT PREPARED ANTI-DATED TO EVADE THE TAXES. MOREOVER, TERMS AND CONDITIONS OF THE AGREE MENT DATED 21.04.2009 ARE AGAINST THE SETTLED CONVENTION FOLLOWED IN SUCH TRANSACTIONS. MOREOVER, THE SECOND AGREEMENT WAS GIVEN IN THE POST-SEARCH P ROCEEDINGS. 23. CONSEQUENTLY, WE ARE OF THE CONSIDERED VIEW THA T LD. CIT (A) HAS RIGHTLY REACHED THE CONCLUSION THAT SINCE THE ASSES SEES HAVE NOT BECOME OWNER OF THE SHARES OF RRFSL, PROFIT OF RS.4,08,00, 000/- CANNOT BE TREATED AS THEIR CAPITAL GAIN BUT IT IS CERTAINLY INCOME FR OM THEIR BUSINESS OR FROM THEIR SOURCES AS BROKER OF THE TRANSACTION AS TILL TODAY IT IS NOT BROUGHT ON RECORD IF ON THE BASIS OF LEGAL NOTICE ISSUED TO AS SESSEE FOR REFUND OF THAT AMOUNT, ANY LEGAL PROCEEDINGS HAVE BEEN INITIATED O R ANY ORDER HAS BEEN PASSED BY THE CIVIL COURT AND ACCORDINGLY, MADE ADD ITION OF RS.2,04,00,000/- MADE EACH IN THE NAME OF MAHESH ME HTA AND KUSUM MEHTA, THE ASSESSEES, IS SUSTAINABLE. 24. NO DOUBT, ASSESSEES ARE NOT IN THE BUSINESS OF SALE AND PURCHASE OF SHARES/PROPERTY BUT IT IS PROVED ON RECORD THAT THE Y HAVE BEEN BENEFITED TO THE TUNE OF RS.4.08 CRORES AND IT HAS TO BE TREATED INCOME IN THE YEAR WHEN THEY HAVE RECEIVED THE SAME AND NOT WHEN THE SALE D EED WAS EXECUTED. BECAUSE AFTER A PERIOD OF ABOUT 11 YEARS NO CIVIL PROCEEDINGS FOR RECOVERY ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 16 HAVE BEEN INITIATED AND BY NOW, LIMITATION TO RECOV ER THE AMOUNT HAS SINCE BEEN EXPIRED. IN OTHER WORDS, WE CAN SAY THAT THE AMOUNT OF RS.4,08,00,000/- HAS BEEN FORFEITED BY THE ASSESSEE S WHICH IS THEIR UNDUE ENRICHMENT AND HAS BEEN RIGHTLY TREATED AS THEIR IN COME DURING THE YEAR OF RECEIPT. 25. THE CONTENTION OF THE ASSESSEE THAT AT THE MOST , AMOUNT OF RS.4,08,00,000/- CAN BE TREATED AS CAPITAL RECEIPT IN THE HANDS OF ASSESSEES IS NOT SUSTAINABLE BECAUSE THE ASSESSEES HAVE NOT COME UP WITH CLEAN HANDS RATHER SUPPRESSED ONE FACT AFTER THE OTHER EVEN BY RELYING UPON ANTI-DATED DOCUMENT/AGREEMENT DATED 21.04.2009 WHICH WAS NOT I N EXISTENCE AT THE TIME OF STATEMENT OF MAHESH MEHTA, COSIGNED BY HIS WIFE, KUSUM MEHTA ON 01.07.2009 U/S 132(4). RATHER THE ENTIRE TRANSACTI ONS BETWEEN THE PARTIES HAVE BEEN FRUSTRATED AND THEN EXECUTED AS PER WELL- ORCHESTRATED PLAN AND IN THESE CIRCUMSTANCES, THE AMOUNT OF RS.4,08,00,000/- HAS BEEN RIGHTLY TREATED AS INCOME OF THE ASSESSEES FROM BUSINESS OR OTHER S OURCES BY THE LD. CIT (A). 26. SO FAR AS QUESTION OF APPLICABILITY OF PROVISIO NS CONTAINED U/S 51 OF THE ACT AS CONTENDED BY THE LD. AR FOR THE ASSESSEE S QUA THE FORFEITURE OF THE AMOUNT OF RS.4,08,00,000/- BEING NOT TAXABLE IS CON CERNED, AT NO POINT OF TIME, THE ASSESSEES HAVE COME UP WITH THE FACT THAT THEY ARE IN POSSESSION OF AMOUNT OF RS.4,08,00,000/- BY WAY OF FORFEITURE BY VIRTUE OF THE AGREEMENT DATED 22.02.2008 AND 21.04.2009 BUT CONTINUED TO SU PPRESS ONE FACT AFTER ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 17 THE OTHER FROM THE REVENUE AUTHORITIES AS WELL AS T HE TRIBUNAL AND HAVE TREATED THE AGREEMENT DATED 22.02.2008 AS A DUMB DO CUMENT. EVEN NO NOTICE IS PROVED TO HAVE BEEN SERVED BY THE ASSESSE ES TO FORFEIT THE AMOUNT OF RS.4,08,00,000/- THE ASSESSEES HAVE ALSO FAILED TO CLARIFY AS TO HOW AND UNDER WHAT CIRCUMSTANCES, THE SECOND AGREEMENT DATE D 21.04.2009 CAME INTO EXISTENCE AND IN THESE CIRCUMSTANCES IS NOT EN TITLED FOR PROTECTION UNDER SECTION 51 OF THE ACT. 27. SO FAR AS QUESTION OF DELETION OF ADDITION OF R S.9,20,00,000/- (CORRECT AMOUNT IS RS.7,16,00,000/-) EACH IN CASE OF MAHESH MEHTA AND KUSUM MEHTA BY THE LD. CIT (A) IS CONCERNED, THE AO HAS M ERELY MADE ADDITION BY RELYING UPON THE STATEMENT OF MAHESH MEHTA, CO-S IGNED BY KUSUM MEHTA U/S 132(4) OF THE ACT. THE LD. CIT (A) HAS DELETED THIS ADDITION TO THE EXTENT OF RS.7,16,00,000/- BY RETURNING FOLLOWI NG FINDINGS :- 4.5 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER, THE SUBMISSIONS MADE AND THE RIVAL CLAIMS RELATING TO T HE MATTER IN DISPUTE. IT IS UNDISPUTED THAT THE ENTIRE CONSIDERATION FOR THE TRANSFER OF THE SHARES OF RRFSL WAS RS.25 CRORE. THIS STANDS ADMITT ED BY SHRI MEHTA AS WELL AS SHRI ARORA, AND IS PART OF BOTH AGREEMEN TS DATED 22.02.2008 AND 21.04.2009 BETWEEN SHRI MEHTA AND SHRI ARORA. I T IS UNDISPUTED THAT THE MEHTAS NEVER RECEIVED NOC AND PTC FROM HSI DC IN THEIR FAVOUR AND, AS A RESULT, THE SHARES OF RRFSL WERE N EVER TRANSFERRED IN THEIR FAVOUR AND THEY, IN TURN, COULD NOT TRANSFER THE SAID SHARES IN FAVOUR OF THE ARORAS. IN FACT, COPIES OF THE SHARES CERTIFICATES AND SHARE TRANSFER FORMS OBTAINED DURING THESE PROCEEDINGS RE VEALS THAT THE SAID 3,500 SHARES WERE TRANSFERRED ON 05.11.2008 ITSELF IN FAVOUR OF THE ARORAS BY THE GARGS FOR REGISTERED CONSIDERATION OF RS.2.18 CRORE (1,750 SHARES BY SHRI RAKESH KUMAR GARG IN FAVOUR OF SMT D EEPTI ARORA FOR RS.1,10,00,000/- & 1,750 SHARES BY SHRI SANTOSH KUM AR GARG IN FAVOUR OF SHRI RAMESH KUMAR FOR RS.1,08,00,000/-). 4.6 PERUSAL OF BANK STATEMENT OF MIS LAMBADA MICROW AVE TECHNOLOGIES, OF WHICH THE ARORAS ARE PARTNERS, WIT H ING VAISHYA BANK LTD, NIT FARIDABAD, DURING AND SUBSEQUENT TO THEIR DATE OF ISSUE, REVEALS THAT CHEQUES OF RS.8.84 CRORES GIVEN BY THE ARORAS TO THE MEHTAS ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 18 REMAIN UNENCASHED. THERE IS NO EVIDENCE THAT THE ME HTAS RECEIVED PAYMENT IN LIEU OF UNENCASHED CHEQUES OF RS.8.84 CR ORE, OR FURTHER PAYMENT OF RS.6.S0 CRORE I RS.S.08 CRORE. IN VIEW O F THE ACTUAL TRANSFER OF SHARES BY THE GARGS TO THE ARORAS TAKING PLACE O N 05.11.2008, MUCH BEFORE THE AGREEMENTS DATED 22.02.2008 & 21.04.2009 COULD BE EXECUTED AND THE RELATED PAYMENTS DURING FYS 2007-08, 2008-0 9 AND 2009-10 COULD BE COMPLETED, IT APPEARS THAT THE TRANSACTION WAS NOT COMPLETED THROUGH THE MEHTAS, WHO GOT OUSTED FROM THE TRANSAC TION AT SOME STAGE. IN ANY EVENT, IF THERE IS COLLUSION AMONG THE PARTI ES, WHICH PARTY FINALLY PAID OR RECEIVED WHAT AMOUNT IS NOT CLEAR FROM THE FACTS ON RECORD. 4.7 YET, IT IS CLEAR THAT THE MEHTAS HAVE RECEIVED RS.9.26 CRORE AS CONSIDERATION FOR THE SAID TRANSFER FROM THE ARORAS AND THE ARORAS, HAVING SERVED A LEGAL NOTICE ON THE MEHTAS, HAVE NO T YET INITIATED ANY LEGAL ACTION FOR THE RECOVERY OF THE DISPUTED AMOUN T FROM THE MEHTAS. THE CONDUCT OF THE PARTIES TO THE TRANSACTION HAS N OT BEEN ABOVE BOARD AND, THEREFORE, THE TRANSACTIONS AND DISPUTES CREAT ED THEREIN APPEAR TO BE COLLUSIVE AND DIRECTED MAINLY TOWARDS FRUSTRATIN G THE REVENUE. THE MEHTAS HAD PAID RS.5.18 CRORE TO THE GARGS THE ORIG INAL SHAREHOLDERS OF RRFSL AND, THUS, THEIR PROFIT IN THE TRANSACTION WA S RS.4.08 CRORE (RS.9.26 CRORE MINUS RS.5.18 CRORE). AS THE MEHTAS COULD NEVER BECOME LEGAL OWNERS OF THE SHARES OF RRFSL, THIS PROFIT CA NNOT BE TREATED AS THEIR CAPITAL GAIN RELATING TO THOSE SHARES, BUT CA N ONLY BE TREATED AS INCOME FROM 'BUSINESS' OR FROM 'OTHER SOURCES' AS B ROKER TO THE TRANSACTION. AS THE MEHTAS HAVE NOT CLAIMED ANY BUS INESS INCOME FROM THIS TRANSACTION OR ANY OTHER BROKERAGE, AND AS THE PROFIT CANNOT BE TREATED AS CAPITAL GAIN, IT CAN ONLY BE TREATED AS INCOME FROM 'OTHER SOURCES'. THE AMOUNT IS TO BE ALLOCATED EQUALLY AT RS.2.04 CRORE BETWEEN THE APPELLANT AND HER HUSBAND SHRI MAHESH MEHTA. I HOLD ACCORDINGLY. 4.8 IN VIEW OF THE ABOVE, OUT OF THE ADDITION OF R S.9,20,00,000/- THE AMOUNT OF RS.2,04,00,000/- IS UPHELD AS INCOME OF T HE APPELLANT FROM OTHER SOURCES AND DIRECTED TO BE CHARGED TO TAX. AP PELLANT GETS RELIEF OF RS.7,16,00,000/-. THIS GROUND OF APPEAL IS DECIDED IN THESE TERMS. 28. LD. CIT (A) HAS EXTENSIVELY DEALT WITH THE ISSU E AS TO THE DELETION OF ADDITION OF RS.9,20,00,000/- (CORRECT AMOUNT IS RS. 7,16,00,000/-) IN PARA 2.2.13 TO 2.2.16 BY EXPLAINING THE FACTS THAT THIS ADDITION HAS BEEN MADE MERELY ON THE BASIS OF PRESUMPTION THAT BOTH THE AS SESSEES HAVE RECEIVED RS.18,40,00,000/- AGAINST THE PROPOSED SALE DEED FO R TRANSFER OF HSIIDC PLOT BUT THERE IS NO EVIDENCE ON RECORD TO PROVE TH AT ASSESSEES HAVE ACTUALLY RECEIVED THE AFORESAID AMOUNT. ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 19 29. IT IS SETTLED PRINCIPLE OF LAW THAT ADDITION CA NNOT BE MADE ON THE BASIS OF SOLE STATEMENT RECORDED U/S 132(4) OF THE ACT. M OREOVER WHEN THE TRANSACTION OF SALE OF PLOT HAS BEEN FRUSTRATED BY THE ORIGINAL OWNER AND THE BUYER BY BYE-PASSING THE ASSESSEES, THERE IS NO QUE STION OF MAKING ADDITION OF RS.9,20,00,000/- EACH. FURTHERMORE, WHEN AMPLE E VIDENCE IS THERE ON RECORD AND HAS BEEN SCANNED BY THE LD. CIT (A) THAT BOTH THE ASSESSEES HAVE REFUNDED THE ENTIRE AMOUNT RECEIVED IN THE DEAL EXC EPT AN AMOUNT OF RS.4,08,00,000/-, THIS ADDITION IS NOT SUSTAINABLE. SO THE LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION OF RS.9,20,00,000/- EA CH MADE IN THE HANDS OF MAHESH MEHTA AND KUSUM MEHTA. 30. AO HAS ALSO MADE ADDITION OF RS.1,48,51,840/- I N CASE OF MAHESH MEHTA ON ACCOUNT OF UNDISCLOSED SALES OF KATHA MANU FACTURED FROM KHAIR WOOD, A FOREST PRODUCT. IT IS THE CASE OF THE ASSE SSEE, MAHESH MEHTA THAT THE STOCK IN QUESTION WAS OLD STOCK OF LIQUID KATHA AND DUE TO SUSPENSION OF PRODUCTION WORK IN THE FACTORY DUE TO SOME LEGAL PR OBLEM, THE STOCK IN QUESTION GOT SPOILED/DAMAGED IN THE FACTORY BECAUSE OF FLOOD ON ACCOUNT OF HEAVY RAINS. 31. LD. CIT (A) DELETED THE ADDITION OF RS.1,48,51, 840/- IN CASE OF MAHESH MEHTA ON ACCOUNT OF UNDISCLOSED SALES OF KAT HA, A FOREST PRODUCT, BY RETURNING FOLLOWING FINDINGS :- 4.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE. FROM THE AVAILABLE INFORMATION I DOCUMENTS, T HE FACTS THAT EMERGE ARE THAT THE APPELLANT WAS CARRYING ON PROPR IETORSHIP BUSINESS OF MANUFACTURING KATTHA FROM KAIR-WOOD IN THE NAME & S TYLE OF M/S M M ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 20 PRODUCTS AT ITS FACTORY PREMISES LOCATED IN UNA DIS TRICT OF HIMACHAL PRADESH. THE SAID BUSINESS IS REGULATED BY THE FORE ST DEPARTMENT AND PERMITTED ONLY FOR THE LICENSEES. IT APPEARS THAT T HERE WAS HEAVY RAIN DUE TO WHICH SOME STOCK OF THE APPELLANT WAS DESTROYED. FROM THE INSPECTION REPORT OF THE FOREST DEPARTMENT, FILED BY THE APPEL LANT BEFORE THE AO AND ALSO DURING THESE PROCEEDINGS, IT IS SEEN THAT THE REPORT COVERS THE PERIOD 1.4.2008 TO 15.05.2008 (ALTHOUGH IT IS SUPPOSED TO BE FORTNIGHTLY), WHEREIN NO OPENING STOCK OF DIFFERENT PRODUCTS / RA W MATERIAL WAS FOUND. WHAT WAS FOUND BY THE FOREST DEPARTMENT, WAS 549 UNITS OF SEMI- FINISHED / LIQUID KATHA (UNIT NOT SPECIFIED - WHETH ER KGS. / LITRES / ANY OTHER UNIT). IT ALSO TRANSPIRES FROM THE SAID REPOR T THAT ENTIRE 549 UNITS WAS FOUND TO BE SPOILT AND ORDERED TO BE DESTROYED. THE APPELLANT HAS, IN ITS ACCOUNTS, WRITTEN OFF THE ENTIRE VALUE OF CLOSI NG STOCK OF GOODS VALUED AT RS.1,48,51,840/- AS DESTROYED AND CLAIMED IS AS LOSS. AS AGAINST THE SAID LOSS, THE APPELLANT HAD ALSO WRITTEN BACK ALL RELATED LIABILITIES AMOUNTING TO RS.30,97,268/- AND OFFERED IT TO TAX. THE REVENUE, DISBELIEVING THE SAID REPORT, OR ASSUMING THAT THE SAID REPORT DID NOT ESTABLISH THE LOSS CLAIMED, DISALLOWED THE LOSS OF STOCK AT RS.1,48,51,840/- CLAIMED BY THE APPELLANT. THE ASSESSMENT ORDER IS H OWEVER, SILENT ON THE RELATED LIABILITIES AMOUNTING TO RS.30,97,268/- WRI TTEN BACK AND OFFERED TO TAX BY THE APPELLANT. 4.3 THE CLAIM OF THE APPELLANT, ON THE OTHER HAND, IS THAT DURING THE YEAR THERE WAS NO PRODUCTION AND AFTER SALES, WHATE VER STOCK REMAINED, WAS SPOILT IN THE RAIN, DESTROYED AND ACCORDINGLY C LAIMED AS A LOSS. THE APPELLANT HAS ALSO OBJECTED THAT THE AO DISBELIEVED THE CERTIFICATION OF ANOTHER GOVERNMENT DEPARTMENT AND MADE THE DISALLOW ANCE WITHOUT ANY FURTHER ENQUIRY 1 VERIFICATION. THE DETAILS REGARDI NG THE OPENING AND CLOSING STOCK FILED BY THE APPELLANT ARE REPRODUCED AS UNDER: SL. PARTIUCLARS OPENING STOCK PRODUCTION SALES CLOS ING STOCK QTY (KG.) AMOUNT QTY (KG.) AMOUN T QTY (KG.) AMOUNT QTY (KG.) AMOUNT 1 KATHA DESSI BHATTI 25400 4572000 - - - - 25400 4572000 2 FINISHED GOODS KATHA 29925 11072250 - - 3040 1261600 26885 10119228 3 CUTCH (BY PRODUCT) 3800 32300 - - 3800 38000 - - 4 KATTHA PASTE 3895 244160 - - 1333 92001 2562 1606 12 63020 15920710 - - 8173 1391601 54847 14851840 FROM THE ABOVE DETAILS, IT IS OBSERVED THAT OUT OF OPENING STOCK OF 630.20 QUINTALS OF VARIOUS RAW MATERIALS, FINISHED 1 SEMI- FINISHED GOODS AND BY PRODUCTS, 81.73 QUINTALS WAS SOLD LEAVING 548.47 QU INTALS OF FINISHED I SEMI-FINISHED GOODS. HERE I HAVE CONVERTED KILOGRAM S INTO QUINTALS TO MAKE SENSE OF THE UNITS (549) MENTIONED IN THE REPO RT OF THE FOREST DEPARTMENT. THIS INTERPRETATION APPEARS CORRECT AS 548.47 QUINTALS APPROXIMATES 549 UNITS OF GOODS REMAINING AND FOUND FACTORY OF THE APPELLANT BY THE FOREST DEPARTMENT OFFICIALS. THE D ESCRIPTION OF THE GOODS ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 21 IN THE SAID REPORT OF THE FOREST DEPARTMENT IS MENT IONED AS 'SEMI-FINISHED KATHA' WHICH ALSO MORE OR LESS APPROXIMATES THE DES CRIPTION OF THE GOODS MENTIONED BY THE APPELLANT IN THE TABLE ABOVE. MOST IMPORTANTLY, THE REPORTS SPECIFICALLY MENTIONS THAT CUTCH (BY-PRODUC T) FOUND WAS 'NIL', WHICH TALLIES WITH INFORMATION FILED BY THE APPELLA NT IN THE TABLE ABOVE THAT THE ENTIRE STOCK OF 38 QUINTALS OF CUTCH WAS S OLD. IT IS CLEAR FROM THE ABOVE THAT THE CLAIM OF THE APPELLANT, THAT THE ENT IRE REMAINING STOCK WAS SPOILT AND ORDERED TO BE DESTROYED BY THE FOREST DE PARTMENT, APPEARS CORRECT. THERE WAS NO CREDIBLE BASIS TO REJECT THE CLAIM OF THE APPELLANT WITHOUT FURTHER ENQUIRY I VERIFICATION. I HOLD ACCO RDINGLY. THE DISALLOWANCE MADE IS NOT LEGALLY SUSTAINABLE AND IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 32. LD. CIT (A) VERIFIED ALL THESE FACTS AND IT HAS COME ON RECORD THAT THE STOCK IN QUESTION HAS BEEN PHYSICALLY VERIFIED BY T HE OFFICIALS OF THE FOREST DEPARTMENT AND DECLARED THE SAME ACTUALLY DESTROYED AND GIVEN THE REPORT THAT STOCK IN QUESTION IS AS GOOD AS OF NIL VALUE . REPORT OF THE FOREST DEPARTMENT DECLARING THE STOCK IN QUESTION AS SPOIL ED/DESTROYED WITH NIL VALUE AND CORRESPONDENCE WITH THE FOREST DEPARTMENT IS AVAILABLE AT PAGES 10 AND 11 OF THE PAPER BOOK. ON THE BASIS OF REPOR T THAT 549 QUINTALS LIQUID KATHA WAS UNFIT FOR SALE, IT WAS ORDERED TO BE DEST ROYED AND THE LD. CIT (A) AFTER VERIFYING THE OPENING AND CLOSING STOCK EXTRA CTED IN PARA 4.3 OF THE IMPUGNED ORDER RIGHTLY REACHED THE CONCLUSION THAT THIS ADDITION IS NOT SUSTAINABLE IN THE EYES OF LAW AND THE REPORT GIVEN BY THE FOREST DEPARTMENT TALLIES WITH STOCK REGISTER MAINTAINED WITH THE ASS ESSEE. SO, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS RIGHTLY DE LETED THE ADDITION OF RS.1,48,51,840/- MADE BY AO ON ACCOUNT OF UNDISCLOS ED SALES OF KATHA. 33. IN THESE CIRCUMSTANCES, JUDGMENTS RELIED UPON B Y THE LD. AR FOR THE ASSESSEES CITED AS TRAVENCORE RUBBER & TEA CO. LTD. VS. CIT 243 ITR 15 8, ITA NOS.2503, 2504, 2773 & 3347 /DEL./2014 22 IT VS. SAURASHTRA CEMENT LTD. 325 ITR 422 AND CIT V S. MEERA GOYAL ITA NO.1263/2011 ARE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. SO, THE AMOUNT OF RS.4,08,00,000/- HAS BEEN RIGHTLY TREATED AS INCOME OF THE ASSESSEE IN THE YEAR OF RECEIPT I.E. AY 2009-10 AND NOT IN THE AY 2014-15 AS CONTENDED BY THE LD. AR FOR THE ASSESSEES BECAUSE A S ON DATE NO DISPUTE QUA THE SAID AMOUNT IS PENDING BETWEEN THE PARTIES. 34. CONSEQUENTLY, WE FIND NO ILLEGALITY OR PERVERSI TY IN THE FINDINGS RETURNED BY THE LD. CIT (A), HENCE APPEALS BEARING ITA NOS.2503/DEL./2014 AND 2504/DEL./2014 FILED BY MAHESH MEHTA AND KUSUM MEHTA AND APPEALS BEARING ITA NOS.2773/DEL/2014 & 3347/DEL/2014 FILED BY THE REVENUE ARE HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED THE 31 ST DAY OF OCTOBER , 2019/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-I, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITA T NEW DELHI.