M/s Flow More Anti Counter Ltd., New Delhi V. ITO, New Delhi

ITA 3532/DEL/2008

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69571 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-11-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 01-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Income from undisclosed sources; Search and seizure; Document seized; Principle of natural justice; Source of fund; Documents seized
• Section: 148

Judgement Text

ITA NO. 3532/DEL/2008 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3532/DEL/2008 A.Y. : 200 1 - 0 2 M/S FLOWMORE ANTI COUNTERFEIT SECURITY SYSTEM P. LTD., A-4, FRIENDS COLONY (EAST), NEW DELHI 110 065 (PAN: AAACF6761F) VS. INCOME TAX OFFICER, WARD 11(12), NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. K. SAMPATH, ADVOCATE DEPARTMENT BY : MS. NIDHI SRIVASTAVA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XIII, NEW DELHI DATED 16.10.2008 PERTAINING TO ASSESSMENT YEAR 2001-02. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AUTHORITIES BELOW ERRED (I) IN REOPENING THE ASSESSMENT U/S. 147 OF THE ACT EVEN THOUGH THERE WERE WAS NO VALID REASON RECORDED BY THE ASSESSING OFFICER, LEADING TO THE BELIEF THAT THE INCOME HAS ITA NO. 3532/DEL/2008 2 ESCAPED ASSESSMENT. THE PROCEEDINGS SO INITIATED ARE WITHOUT JURISDICTION AND BAD IN LAW; (II) IN FRAMING THE ASSESSMENT U/S. 143(3)/147 OF THE ACT IN A GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE, RENDERING THE ASSESSMENT VOID AB INITIO. THE ASSESSING OFFICER HAS SELECTIVELY RELIED ON THE PART OF THE STATEMENT WITHOUT MAKING AVAILABLE A COPY OF THE WHOLE STATEMENT TO THE APPELLANT; (III) IN RECORDING A FINDING BASED ON SURMISES AND CONJECTURES THAT THE ASSESSEE HAD PAID RS. 41,00,000/- IN CASH FOR PURCHASING PLOT AND THEREBY MAKING AN ADDITION OF THE AMOUNT AS UNDISCLOSED INVESTMENT; 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) ERRED IN OBSERVING THAT THE ASSESSIN G OFFICER MAY CONSIDER ACTION U/S 148 OF THE ACT IN T HE HANDS OF SHRI ANSHU MITTAL, DIRECTOR OF THE COMPANY , ON A PROTECTIVE BASIS WITH REGARD TO THE ALLEGED UNDISCL OSED INVESTMENT AMOUNTING TO RS. 41,00,000/-. ABOVE ACTIONS OF THE AUTHORITIES BELOW ARE MOST AR BITRARY, UNLAWFUL AND UNJUST AND, THEREFORE, MUST BE QUASHED . 3. THE ONLY ISSUE PRESSED IN THIS CASE IS APROPOS ISSUE OF ADDITION OF RS. 41,00,400/- BEING AMOUNT INCURRED FOR UNDISC LOSED INCOME INVESTMENT. 4. THE BRIEF FACTS OF THE CASE ARE AS UNDER:- ITA NO. 3532/DEL/2008 3 A SEARCH U/S. 132 OF THE I.T. ACT WAS CONDUCTED ON MANAV RACHNA GROUP AT FARIDABAD ON 4.8.2005. DURING THE C OURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF SH. NAVNEET JHANAB A T H.NO. 1260, SECTOR-14, FARIDABAD CERTAIN DOCUMENTS RELATING TO SALE OF INDUSTRIAL PLOTS AT VILLAGE JHARSENTLI, DISTT. FARIDABAD WERE FOUND AND SEIZED. DURING THE COURSE OF ENQUIRIES, IT WAS GATHERED THA T THERE WAS A LAND AT VILLAGE JHARSENTIL WHICH BELONGED TO ONE KOLKATA BASED COMPANY M/S INDO AMERICAN ELECTRICALS LTD. WHOSE MANAGING C OMMISSIONER IS S. MANMOHAN SINGH. THIS COMPANY WAS REFERRED TO BIF R AND IT WAS DECIDED BY THE COMPANY BOARD THAT THE LAND AT VILLA GE JHARSENTIL MAY BE SOLD FOR RS. 1.5 CRORES THROUGH M/S RELIANCE ESTATE AGENCY (IN WHICH SH. NAVNEET JHANB HAPPENS TO BE A PARTNER ). THE DOCUMENTS SEIZED FROM RESIDENCE OF SH. NAVNEET JHA NB IS ALLEGED TO SHOW THAT THE LAND WAS SUB DIVIDED INTO INDUSTRIAL PLOTS AND WAS SOLD AT A CASH PREMIUM OVER AND ABOVE RS. 1.5 CRORES. FROM THE DOCUMENTS AND SEIZED, THE ASSESSING OFFIC ER INFERRED THAT THE ASSESSEE HAS PURCHASED PLOT NO. A-8, MEAS URING 6736 SQYDS. FOR THE TOTAL CONSIDERATION OF RS. 60,40,800 /-, OUT OF WHICH A SUM OF RS. 19,80,000/- HAS BEEN PAID BY THE CHEQUE AND THE REMAINING AMOUNT OF RS. 41,0,400/- HAS BEEN PAID BY WAY OF CASH. THE SAID ENTRIES HAVE BEEN FOUND RECORDED ON PAGE 61 OF ANNEXURE A-1 SEIZED FROM THE RESIDENCE OF SH. NAVNEET JHANB. ITA NO. 3532/DEL/2008 4 5. THE ASSESSEE DIRECTOR, SHRI ANSU MITTAL, WAS ASK ED TO MAKE EXPLANATION IN THIS REGARD. SHRI ANSU MITTAL REPLIE D THAT THE COMPANY HAS NOT MADE ANY PAYMENT IN CASH. HE FURTHER SUBMI TTED THAT PAYMENT MADE WAS DULY RECONCILED AND THE COMPANIES BANK ACCOUNT. ASSESSING OFFICER WAS NOT SATISFIED WITH THE ABOVE. HE OBSERVED THAT DETAILS HAVE BEEN RECORDED ON THE SEI ZED PAPER IN RESPECT OF THE PAYMENTS BY WAY OF CASH AS WELL CHEQ UE. THE PAYMENT MADE BY THE ASSESSEE BY WAY OF CHEQUE TALLI ES. THAT IT IS ALSO THE FACT THAT THE ASSESSEE HAS PURCHASED THE S AID PLOT. THAT THE PAYMENT OF RS. 9,27,825/- BEING THE DEVELOPMENT CHA RGES WHICH HAS ALSO BEEN FOUND RECORDED IN THE BOOKS OF THE ASSESS EE. THAT ONE PART OF THE SEIZED PAPERS HAVE BEEN FOUND TO BE TRU E. HENCE, THERE IS NO REASON FOR NOT FINDING THE OTHER PART OF THE SEIZED PAPER AS INCORRECT. ASSESSING OFFICER FURTHER OBSERVED THAT IT IS ALSO A FACT THAT THERE WAS ALWAYS CASH CONTENT IN THE PURCHASE AND SALE OF LAND. HENCE, HE REJECTED THE ASSESSEES CONTENTION AND ADDED A SUM OF RS. 41,00,400/- AS INVESTMENT MADE BY THE ASSESS EE OUT OF UNDISCLOSED SOURCES OF INCOME. 6. UPON ASSESSEES APPEAL LD. CIT(A) AFFIRMED THE A SSESSING OFFICERS ACTION. 7. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT ISSUE IN T HIS CASE PERTAINS ITA NO. 3532/DEL/2008 5 TO ADDITION ON ACCOUNT OF ON MONEY TRANSACTION. TH IS RELATE TO THE DOCUMENTS SEIZED IN THE COURSE OF SEARCH OF RESIDEN TIAL PREMISES OF SH. NAVNIT JHANB. LD. COUNSEL OF THE ASSESSEE POIN TED THAT THE ADDITION MADE ON THE BASIS OF SAME SEIZED DOCUMENTS IN THE CASE OF DUA AUTO COMPONENTS PVT. LTD. IN ITA NO. 4802/DEL/2 009 FOR THE ASSTT. YEAR 2003-04 VIDE ORDER DATED 16.7.2010 AND ADDITION IN THE CASE OF M/S INDICATION INSTRUMENTS LTD. IN ITA NO. 3513/DEL/2010 FOR ASSTT. YEAR 2002-03 VIDE ORDER DATED 28.9.2010 HAS BEEN DELETED BY THE TRIBUNAL. HE FURTHER POINTED OUT THAT HON BLE JURISDICTIONAL HIGH COURT IN I.T.A. NO. 603/2011 IN THE CASE OF CI T VS. INDICATION INSTRUMENTS LTD. AND IN ITA NO. 570/2012 IN THE CA SE OF CIT VS. PREM PRAKASH NAGPAL VIDE ORDER DATED 8.10.2012 HAS CONSI DERED THE ABOVE MENTIONED DECISION OF THE TRIBUNAL. THE HON BLE HIGH COURT HAS DISMISSED THE APPEAL FILED BY THE REVENUE IN TH IS REGARD. IN THESE CIRCUMSTANCES, LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. HE FU RTHER POINTED OUT THAT THAT IN THIS PARTICULAR CASE EVEN THE NAME OF THE ASSESSEE COMPANY IS NOT REFLECTED IN THE SEIZED DOCUMENTS. 9. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THIS TRIBUNAL IN THE CASE OF DUA AUTO COMPONENTS P LTD. (SUPRA) AND M/S INDICATION INSTRU MENTS LTD. ITA NO. 3532/DEL/2008 6 (SUPRA) HAS CONSIDERED SIMILAR ADDITIONS IN THE CAS E OF OTHER ASSESSEES WHICH WERE MADE ON THE BASIS OF SAME DO CUMENTS FOUND IN THE SAME SEARCH. THE TRIBUNAL HAS CONSIDERED THE ISSUE IN THE CASE OF DUA AUTO COMPONENTS P LTD. AS UNDER:- 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSMENT ORDER MENTIONS ABOUT TH E SEARCH AND SEIZURE OPERATION CARRIED OUT BY THE INVESTIGATION WING AT THE BUSINESS PREMISES OF M/S MANAV RACHNA GROUP OF COM PANIES ON 4.8.2005, WHEREIN IT HAS BEEN CLAIMED THAT CERTAIN INCRIMINATING DOCUMENTS WERE SEIZED WHICH INDICATED THAT THE ASSE SSEE COMPANY PURCHASED A PLOT. THE PLOT HAD BEEN SAID TO BE REGISTERED FOR RS. 1320521/- AND THE DOCUMENTS SEIZED INDICATE D THAT ASSESSEE HAS INVESTED RS. 60,36,000/- IN CASH FOR PURCHASE THE SAID LAND. 6.1 WE FIND THAT THAT THE ASSESSING OFFICER HAS NOT BROUGHT EVEN A SINGLE WORD REGARDING THE NATURE OF DOCUMENT AND HOW HE HAS CONCLUDED THAT THEY BELONG TO THE ASSESSEES AN D THAT ON MONEY TRANSACTION HAS BEEN TAKEN PLACE. HE HAS SIM PLY RELIED UPON THE REASONS RECORDED WITHOUT SHOWING ANY APPL ICATION OF MIND ON HIS PART. 6.2 IN THIS REGARD WE NOTE THAT IT IS ALSO NOT THE CASE THAT THE SELLER HAS MADE ANY STATEMENT OR HAD ACCEPTED THE RECEIPT OF ON MONEY I.E. CONSIDERATION OVER AND ABOVE THAT DISCLO SED. IT IS ALSO NOT THE CASE THAT THE SEIZED DOCUMENTS WERE IN THE HANDWRITING OF THE ASSESSEE OR THE SELLER OR WERE SEIZED FROM THE PREMISES OF SELLER ITA NO. 3532/DEL/2008 7 AND PURCHASER. LD. COMMISSIONER OF INCOME TAX (APP EALS) HAS BROUGHT OUT VARIOUS DISCREPANCIES IN THE SEIZED DOCUMENTS RELIED UPON BY THE REVENUE AND STRIKING FEATURE OF THESE A NOMALIES IS THAT IN THE SEIZED DOCUMENTS, IT HAS BEEN MENTIONED THAT THE IMPUGNED PLOT WAS NOT SOLD. THUS, THE WORKING AND THE FIGURES MENTIONED THEREIN CAN AT BEST BE SAID TO BE TENTATI VE OR EXPECTED AMOUNT. THIS BY NO STRETCH OF IMAGINATION CAN BE TREATED AS CONCLUSIVE PROOFS OF ON MONEY TRANSACTIONS. MORE OVER, IT IS AN ADMITTED FACT THAT THE DOCUMENTS BEING RELIED UPON SHOWED ACCOUNT AS ON 31.10.2001, WHILE AS PER THE REGISTER ED SALE DEED THE PLOT WAS SOLD ON 23.5.2002. UNDER THE CIRCUM STANCES, THESE ADDITIONS HAVE BEEN MADE ON THE BASIS OF DOCUMENTS FOUND DURING SEARCH AT THE PLACE OF A THIRD PARTY WHICH A T BEST ONLY SHOWED THE TENTATIVE /PROJECTED PURCHASE CONSIDERAT ION. IT IS NOT THE CASE THAT THE CIRCLE RATE OR THE VALUE AS PER S TAMP REGISTRATION AUTHORITIES OF THE IMPUGNED PROPERTY IS MORE THAN W HAT HAS BEEN DISCLOSED. IT IS ALSO NOT THE CASE THAT UNACCOUN TED CASH HAS BEEN FOUND TO BE PAID BY THE ASSESSEE OR RECEIVED BY THE SELLER. THERE IS ALSO NO STATEMENT OF THE SELLER ON RECORD THAT HE HAS OBTAINED ON MONEY. UNDER THE CIRCUMSTANCES, THE ADDITIONS MADE IN THIS REGARD IS NOT SUSTAINABLE. 6.3 IN THIS REGARD, WE PLACE RELIANCE UPON THE HON BLE APEX COURT IN THE CASE OF K.P. VARGHESE VS. INCOME TAX OFFICER, ERNAKULAM AND ANOTHER 131 ITR 597 (SC), WHEREIN IT HAS BEEN HELD THAT THE BURDEN OF PROVING IS THAT OF REVENUE WHEN THERE IS ALLEGATION OF UNDERSTATEMENT ON CONCEALMENT IN THE CONSIDERATION SHOWN. ITA NO. 3532/DEL/2008 8 6.4 WE ALSO PLACE RELIANCE UPON THE JUDGEMENT OF TH E HONBLE APEX COURT IN THE CASE OF C.I.T. VS. P.V. KALYANASUNDARAM IN (2007) 294 ITR 49 (SC) IN WHICH ALLEGATIONS OF ON MONEY TRANSACTION ON THE BASIS OF NON-CONVINCING LOOSE SHEETS FOUND DURI NG THE COURSE OF SEARCH AND CONFLICTING STATEMENT OF THE SELLER, WAS DELETED BY THE TRIBUNAL (TO WHICH, ONE OF US THE ACCOUNTANT MEMBER WAS THE PARTY) AND THE SAME WAS AFFIRMED BY THE HONBLE H IGH COURT AND HONBLE APEX COURT. 11. WE FIND THAT IN THE CASE OF M/S INDICATION INST RUMENTS LTD. (SUPRA), THE TRIBUNAL HAS OBSERVED THAT SINCE THE F ACTS AND DOCUMENTS IN THE PRESENT CASE WERE SAME AS REFERRED IN THE ABOVE TRIBUNAL DECISION, THE REVENUE ALLEGATION OF MONEY TRANSACTION WAS DISMISSED. THE ABOVE DECISION WAS SUBJECT MATTER OF AN APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ITA NO. 603/2011 IN THE CASE OF INDICATION INSTRUMENTS LTD. (SUPRA) AND IN ITA NO. 57-/2012 IN THE CASE OF PREM PRAKASH NAGPAL AND THE HONBLE HIGH COURT HAS DISMISSED THE REVENUES APPE AL. IN THE CASE OF PREM PRAKASH NAGPAL (SUPRA) THE CONCLUDING REMARKS OF THE HONBLE HIGH COURT IS AS UNDER:- THE ABOVE DECISION, MADE IN M/S INDICATION INSTRUME NTS LTD. (SUPRA) WAS AFFIRMED BY A DIVISION BENCH OF TH IS COURT IN ITA NO. 603/2011, CIT VS. INDICATION INSTRUMENTS LT D. (DECIDED ON 10.5.2012). IN VIEW OF THE ABOVE AND H AVING REGARD TO THE FACT THAT THE TRIBUNAL TOOK INTO THE ACCOUNT ITA NO. 3532/DEL/2008 9 AND APPLIED THE RATIO IN KP VARGHESE VS. ITO, ERNAK ULAM, (1981) 131 ITR 597 (SC) AS WELL AS THE SUBSEQUENT R ULING IN CIT VS. PV KALYANSUNDARAM, (2007) 294 ITR 49(SC), T HIS COURT IS OF THE OPINION THAT NO SUBSTANTIAL QUESTION OF L AW ARISES FOR CONSIDERATION. 12. THUS, WE FIND THAT THE ISSUE INVOLVED IS COVERE D IN FAVOUR OF THE ASSESSEE. TO RECAPITULATE IN THIS REGARD, THE SEI ZED DOCUMENTS WERE NOT IN THE HANDWRITING OF THE ASSESSEE OR THE SELLER. THE DOCUMENTS WERE NEITHER SEIZED FROM THE SELLER NOR T HE PURCHASER. THE SELLER HAS NOT BEEN MADE ANY STATEMENT AND HAS NOT ACCEPTED THE RECEIPT OF ON MONEY. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY COGENT BASIS AS TO HOW THE DOCUMENTS PERTAINED TO THE ASSESSEE AND THE ON MONEY TRANSACTION HAS TAKEN PLA CE. THE SEIZED DOCUMENTS DO NO SHOW THAT THE IMPUGNED PLOTS WERE SOLD. THUS, THE WORKING FIGURES MENTIONED THEREIN CAN A T BEST BE SAID TO BE TENTATIVE OR EXPECTED AMOUNT. THIS CAN NOT BE T REATED AS A CONCLUSIVE PROOF. IT IS ALSO NOT THE CASE THAT O N MONEY TRANSACTION IS PROVED ON THE BASIS OF THE REGISTERED SALE DEED. IT IS ALSO NOT THE CASE THAT CIRCLE RATE OR THE VALUE OF THE STAMP DUT Y OF THE IMPUGNED PROPERTY IS MORE THAN WHAT HAS BEEN DISCLOSED. IT IS ALSO NOT THE CASE OF THAT UNACCOUNTED CASH HAVE BEEN FOUND AND T O BE PAID BY THE ASSESSEE AND RECEIVED BY THE SELLER. IN THESE CIRCUMSTANCES, RATIO FROM THE HONBLE APEX COURT FROM THE DECISION OF THE KP ITA NO. 3532/DEL/2008 10 VARGHESE VS. ITO 131 ITR 597 (SC) AND ALSO FROM THE HONBLE APEX COURT IN THE CASE OF C.I.T. VS. PV KALYANSUNDARAM I N 294 ITR 49 (SC) ARE APPLICABLE. ACCORDINGLY, RESPECTFULLY FOLLOWIN G THE PRECEDENTS AS ABOVE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES B ELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 29/11/2013. SD/- SD/- [ [[ [I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 29/11/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 3532/DEL/2008 11