DCIT, New Delhi V. M/s. Century Metal Recycling Pvt. Ltd., New Delhi

ITA 540/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6761 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-10-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 04-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INDERJEET SINGH
• Assessee Lawyers: RAJESH MAHANA
• Keywords: Reassessment proceedings; Set aside
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI R.C. SHARMA ITA NO. 540/DEL/10 A.Y.: 2004-05 DCIT, CEN. CIR. 25, VS. M/S CENTURY METAL RECYCLI NG PVT. LTD. NEW DELHI. F-170-B, SAINIK FARM, WESTERN AVENUE , NEW DELHI. PAN/ GIR NO. AAACB3682J ITA NO. 4674/DEL/10 A.Y.: 2004-05 DCIT, CEN. CIR. 25, VS. SH. MOHAN AGGARWAL, NEW DELHI. F-170-B, SAINIK FARM, WESTERN AVENUE , NEW DELHI. PAN/ GIR NO. ADEPA0100C ITA NO. 4675/DEL/10 A.Y.: 2004-05 DCIT, CEN. CIR. 25, VS. SH. G.S. AGGARWAL, NEW DELHI. F-170-B, SAINIK FARM, WESTERN AVENUE , NEW DELHI. PAN/ GIR NO. ADEPA0101D ( APPELLANT ) ( RESPONDENT ) DEPARTMENT BY : SHRI INDERJEET SINGH SR. DR RESPONDENT BY : SHRI RAJESH MAHANA ADV. O R D E R PER R.P. TOLANI, J.M : THESE ARE THREE REVENUES APPEALS IN THE CASE OF CO MPANY AND ITS TWO DIRECTORS RELATING TO A.Y. 2004-05. 2. BRIEF FACTS ARE THAT THE APPELLANT M/S CENTURY M ETAL RECYCLING PVT. LTD. WAS ORIGINALLY KNOWN AS M/S BHAIRAV LEASING & FINANCE PVT. LTD. , WHICH WAS AGAIN CHANGED TO M/S CENTURY ALUMINIUM IN DUSTRIES PVT. LTD. AND THEREAFTER M/S CENTURY METAL RECYCLING PVT. LTD . THE ASSESSEE COMPANY THROUGH ITS DIRECTOR SH. MOHAN AGGARWAL VIDE AGREEM ENT TO SELL WITH POSSESSION DATED 3-2-2004 HAD ENTERED INTO AN AGREE MENT WITH M/S ACHAL INVESTMENT LTD. (FORMERLY M/S PRATAP GAS & CHEMICAL S PVT. LTD.), THROUGH ITS DIRECTOR SHRI SHASHI MAHESHWARI FOR THE PURCHAS E OF AN INDUSTRIAL PLOT BEARING NO. 7 IN SECTOR 4 OF FARIDABAD MEASURING 17 ,920 SQ. MTRS. FOR A SUM OF RS. 1,30,00,000/-. THE SALE DEED WAS EXECUTED ON 13-8-2004 BY SHRI G.S. AGGARWAL, DIRECTOR ON BEHALF OF M/S BHAIRAV LEASING & FINANCE PVT. LTD. 2.1. SURVEY WAS CARRIED OUT IN THE PREMISES OF THE SAID MR. N.S. GAHLAWAT, PROP. CHAUDHARY ESTATE AGENCY. A DIARY WAS FOUND DU RING THE COURSE THEREOF, WHICH WAS MAINTAINED BY THE SAID ESTATE BR OKER. ON PAGE 23 OF THIS DIARY NOTING OF RS. 3.25 CRORES WAS MENTIONED AGAI NST THE ENTRY OF THE VENDOR PRATAP GASES DATED 12-6-2003. ON THIS INFORM ATION, SURVEY WAS CONDUCTED IN THE PREMISES OF THE COMPANY AND TWO DI RECTORS. AO WAS OF THE VIEW THAT THE AMOUNT OF RS. 3.25 CRORES REPRESENTED THE VALUE OF THE PROPERTY OUT OF WHICH AN AMOUNT OF RS. 1,30,00,000/- WAS ACC OUNTED FOR AND THE BALANCE ON MONEY OR CASH COMPONENT OF RS. 1,95,00 ,000/- HAD ESCAPED ASSESSMENT. NOTICE FOR REOPENING THE ASSESSMENT WAS ISSUED. IT SHALL BE PERTINENT HERE TO MENTION THAT ASSESSEE IS NOT BEFO RE US AGAINST VALIDITY OF REASSESSMENT PROCEEDINGS. 2.2. AO MADE THE ABOVE ADDITIONS IN THE CASE OF COM PANY AS WELL AS IN THE CASE OF BOTH THE DIRECTORS ONE HALF IN EACH CASE, BY FOLLOWING OBSERVATIONS: AS REGARDS ASSESSEE COMPANYS CONTENTION THAT THE ALLEGED UNDISCLOSED INVESTMENT OF RS. 1.95 CRORES HAS ALREA DY BEEN ASSESSED/ TAXED IN THE CASE OF DIRECTORS OF THE ASS ESSEE COMPANY NAMELY, SHRI MOHAN AGGARWAL AND SHRI G.S. AGGARWAL (RS. 97.50 LAKHS IN EACH CASE) FOR THE A.Y. 2004-05 VIDE ORDER DATED 29-12-06 MADE U/S 153A/143(3) OF THE ACT, IT IS SUB MITTED THAT THERE IS NO DOUBT THAT THE AFORESAID ALLEGED UNDISC LOSED INVESTMENT HAVE ALREADY BEEN ASSESSED IN THE NAMES OF ABOVE MENTIONED TWO DIRECTORS, BUT IN FACT THE WHOLE AMOU NT OF ALLEGED UNDISCLOSED INVESTMENT OF RS. 1.95 CRORES S HOULD BE ASSESSED IN THE NAME OF THE ASSESSEE COMPANY FOR TH E REASON GIVEN HERE UNDER:- I) THE AGREEMENT TO SELL WITH POSSESSION DATED 3-02 -04 FOR THE PURCHASE OF INDUSTRIAL PLOT BEARING NO. 7 IN SE CTOR-4 OF FARIDABAD MEASURING 17920 SQ. MTRS. FOR A SUM OF RS. 1,30,00,000/- HAS BEEN EXECUTED BETWEEN THE ASSESSE E COMPANY NAMELY, M/S BHAIRAV LEASING AND FINANCE PVT . LTD. (NOW CONVERTED IN THE NAME OF M/S CENTURY META L RECYCLING PVT. LTD.) AND M/S ACHAL INVESTMENTS LTD. (FORMERLY M/S PRATAP GAS AND CHEMICALS PVT. LTD. THROUGH ITS DIRECTOR SHRI SASHI MAHESHWARI. II) A SUM OF RS. 1100000/- WAS PAID VIDE CHEQUE NO. 591108 DATED 14-01-04 DRAWN ON ASSESSEE COMPANYS ICICI BANK LTD. SECTOR 15, FARIDABAD IN EXECUTION O F THE AGREEMENT TO SELL WITH POSSESSION. III) THE SALE DEED WAS ALSO EXECUTED ON 13-08-04 IN THE NAME OF ASSESSEE COMPANY THROUGH ITS DIRECTORS SHRI G.S. AGGARWAL, AFTER THE REMAINING AMOUNT WAS PAID BY TH E ASSESSEE COMPANY FROM ITS BANK ACCOUNT. 2.3. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL BEF ORE THE CIT(A), WHERE THE ADDITION WAS DELETED BY FOLLOWING OBSERVATIONS: COMPANY : IN THE PRESENT CASE THE DCIT HAS COMPLETELY FAILED TO BRING ANY COGENT EVIDENCE ON RECORD TO JUSTIFY THE ADDITI ON OF RS. 1,95,00,000/- TO THE DECLARED CONSIDERATION PAID BY THE APPELLANT TO THE SELLER. THERE IS NOTHING IN THE DI ARY AND THE STATEMENT OF THE PROPERTY DEALER TO SUPPORT THE DEP ARTMENTS CONTENTION THAT THE SAID AMOUNT WAS PAID BY THE APP ELLANT TO THE SELLER OVER AND ABOVE THE DECLARED CONSIDERATION. T HE LOCAL ENQUIRIES SAID TO HAVE BEEN MADE BY THE DEPARTMENT REGARDING MARKET VALUE, HAVE NEITHER BEEN CONFRONTED TO THE A PPELLANT NOR THE SAME HAVE BEEN BROUGHT ON RECORD IN THE PRESENT CASE. IN THE CASE OF KISHIMICHAND CHELLARAM 125 ITR (AC), IT HAD BEEN HELD THAT EVIDENCE NOT CONFRONTED TO THE APPELLANT CANT BE USED AGAINST THE ASSESSEE. THE ASSESSING OFFICER HAS ALS O NOT SHOWN THAT ANY AMOUNT OTHER THAN THE DECLARED CONSIDERATI ON HAS BEEN ADDED IN THE ASSESSMENT OF THE SELLER. FOR THE REASONS MENTIONED ABOVE, I AM FULLY SATISFI ED THAT THE ADDITION MADE BY DCIT IS NOT MAINTAINABLE, SINCE TH ERE WAS NO MATERIAL AVAILABLE WITH THE DEPARTMENT TO MAKE THE SAID ADDITION. THEREFORE, THE SAID ADDITION IS DELETED. DIRECTORS : III) THE APPELLANTS CONTENDED THAT THE ADDITION OF RS. 1,95,00,000 HAS ALSO BEEN MADE IN THE HANDS OF THE SAID COMPANY FOR ASSESSMENT YEAR 2004-05 AND AS SUCH, TH E ADDITION OF RS. 97,50,000 EACH IN THE HANDS OF THE APPELLAN TS CANNOT BE SUSTAINED. THE APPELLANTS FURTHER SUBMITTED THAT THE DETAILED SUBMISSIONS HAVE BEEN MADE BY THE COMPANY IN APPEAL NO. 201/07-08 WHICH IS PENDING BEFORE ME. IV) DURING THE REMAND PROCEEDING THE DCIT, CENTRAL CIRCLE- 25, NEW DELHI HAS STATED AS UNDER VIDE LETTER DATED 7/03/2009. AS REGARDS, ASSESSEES CONTENTION THAT THE PLOT WA S PURCHASED BY THE COMPANY NAMELY M/S BHAIRAV LEASING AND FINAN CE (P) LTD. AND THEREFORE THIS ADDITION COULD NOT BE MADE IN THE HANDS OF THE ASSESSEE. IN THIS RESPECT, IT IS TO BE SUBMI TTED THAT THE ADDITION IN RESPECT OF UNDISCLOSED INVESTMENT IN TH E SAID PLOT HAS ALSO BEEN MADE IN THE HANDS OF THE COMPANY, BY THE UNDERSIGNED, WHILE COMPLETING ASSESSMENT OF THE COM PANY VIDE ORDER PASSED DURING THE MONTH OF DEC., 2007. M Y PREDECESSOR HAD MADE THIS ADDITION IN THE HANDS OF TWO DIRECTORS OF THE COMPANY I.E. 50% IN THE HANDS OF T HE ASSESSEE TO THE TUNE OF RS. 97,50,000/- AND ALSO 50% IN THE HANDS OF SHRI G.S. AGGARWAL TO THE TUNE OF RS. 97,50,000/-, WHERE AS I HAVE MADE ADDITION OF RS. 1,9500,000/- (97,50,000+97,50, 000), IN THE HANDS OF THE COMPANY NAMELY M/S BHAIRAV LEASING AND FINANCE (P) LTD. IT IS TO BE DECIDED BY YOUR GOOD-S ELF AS TO WHETHER THE ADDITION IS TO BE SUSTAINED IN THE HAN DS OF THE ABOVE MENTIONED TWO DIRECTORS (ASSESSEE ) OR IN THE HANDS OF THE COMPANY. V) I HAVE CAREFULLY CONSIDERED THE CONTENTION OF TH E APPELLANTS AND THE DCIT AND HAVE GONE THROUGH THE D OCUMENTS AND INFORMATION PLACED ON RECORD. I AM FULLY SATISF IED THAT MERELY BECAUSE THE APPELLANTS WERE DIRECTORS OF THE SAID COMPANY, NO ADDITION COULD BE MADE IN THE HANDS OF THE APPELLANTS, SINCE THE PLOT WAS PURCHASED BY AND IN THE NAME OF THE COMPANY WHICH IS A SEPARATE ENTITY AND WHICH HA S BEEN ASSESSED SEPARATELY IN RESPECT OF THE SAME INCOME B Y DCIT, CC-25, NEW DELHI. IN VIEW OF THE ABOVE, THE ADDITION OF RS. 97,50,000 /- EACH IN THE CASE OF BOTH THE ASSESSEES IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTED THE INCOME OF THE APPELLANTS ACCORDINGLY. 3. LEARNED DR RELIED ON THE ORDER OF AO AND CONTEN DS THAT THE DIARY RECOVERED FROM THE ESTATE AGENT HAS BEEN OWNED BY M R. GAHLAWAT; HE HAS GIVEN A GENERAL STATEMENT HAS BEEN MADE THAT THE VE NDOR ESTIMATED VALUE OF THE PROPERTY AT RS. 3.25 CRORES WHEREAS THE PROPERT Y HAS BEEN ACTUALLY SOLD FOR RS. 1,30,00,000/-. IT IS PLEADED THAT THE EXPLA NATION DOES NOT CARRY ANY CREDENCE INASMUCH AS NO PERSON WILL AGREE TO SELL A PROPERTY AT RS. 1,30,00,000/- FOR WHICH THE PRICE HAS BEEN QUOTED A T RS. 3.25 CRORES. THE PROPERTY WAS IN INDUSTRIAL LOCALITY OF FARIDABAD AN D IT CANNOT BE ASSUMED THAT THE EXISTENT PRICE AND THE REALIZED PRICE WILL HAVE SUCH A DIFFERENCE. IT IS CONTENDED THAT THE DIARY CONSTITUTES AN IMPORTANT E VIDENCED WHICH HAS NOT BEEN DISOWNED AND IT IS CLEAR FROM AOS REPORT ALSO THAT THE PRICE IN SURROUNDING AREAS IN FARIDABAD WERE VERY HIGH AND THEREFORE IT IS A CASE OF UNDERSTATEMENT OF CONSIDERATION. THE DIFFERENCE DES ERVES TO BE TAXED. 3.1. APROPOS THE ADDITION IN THE HANDS OF COMPANY A ND DIRECTORS, IT IS PLEADED THAT THE SAME MAY BE TAXED EITHER IN THE HA NDS OF THE COMPANY OR BETWEEN TWO DIRECTORS. 4. LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND CONTENDS THAT STATEMENT OF MR. GAHLAWAT, ESTATE BROKER, WAS RECOR DED U/S 133A ON 2-11- 2004, ON THE DATE OF SURVEY, IN WHICH QUESTION NO. 9 HE HAS STATED THAT PLOT NO. 7, SECTOR 4, FARIDABAD THE VENDER SHRI SHASHI M AHESHWARI EXPECTED A SUM OF RS. 3.25 CRORES. HE HAS FURTHER STATED TO VENDORS REPRESENTATIVE THAT THE MARKET VALUE OF THE PLOT WAS AROUND RS. 1.05 C RORES. THE VENDOR ALWAYS KEEPS THE DEMAND HIGHER AND THE RECORDING IN THE DI ARY IS BASED ON THIS TELEPHONIC CONVERSATION. BESIDES, SHRI GAHLAWAT HAD FILED AN AFFIDAVIT DATED 13-12-2006 CONFIRMING THE ACTUAL VALUE OF TRANSACTI ON TO BE RS. 1,30,00,000/-. THE STATEMENT AND AFFIDAVIT ARE PLAC ED IN PAPER BOOK. LEARNED COUNSEL RELIES ON FOLLOWING JUDGMENTS AND PROPOSITI ONS: - CIT VS. SMT. NILOFER I. SINGH 309 ITR 233 (DEL.); - CIT VS. GODAVARI CORPORATION LTD. 200 ITR 567; - CIT VS. RAVI KUMAR 294 ITR 78 (P&H) - CIT VS. BALAJI WIRE P. LTD. 304 ITR 393 (DEL.); - CIT VS. SHIVAKAMI CO. PVT. LTD. 159 ITR 71 - K.P. VARGHESE VS. ITO 131 ITR 597 - KISHINCHAND CHELLARAM VS. CIT 125 ITR 713. 4.1. IT IS PLEADED THAT: (I) THE PROPERTY BEING IN THE NAME OF THE COMPANY, WHIC H IS AN INDEPENDENT AND DISTINCT ENTITY, ADDITION CANNOT BE MADE IN THE HANDS OF THE DIRECTORS. (II) IN THE HANDS OF THE COMPANY, MERELY ON THE BASIS OF DIARY NOTING ADDITION CANNOT BE MADE INASMUCH AS THE ESTATE BRO KER WHO HAD MAINTAINED THE DIARY, HAS CLEARLY MENTIONED THAT TH E ACTUAL TRANSACTION WAS FOR RS. 1.30 CRORES WHICH IS DULY E XCHANGED AND THE AMOUNT OF RS. 3.25 CRORES IN THE DIARY WAS ONLY WISHFUL DEMAND OF THE VENDOR AND NOT THE SALE CONSIDERATION . (III) AO IN THE REMAND REPORT HAS CLEARLY MENTIONED THAT THE CIRCLE RATE ADOPTED BY THE ASSESSEE IN THIS TRANSACTION IS MORE THAN THE CIRCLE RATE PRESCRIBED BY THE HUDA FOR THIS LOCALITY. SI NCE THE CIRCLE RATES ON WHICH DUES PAID BY THE ASSESSEE WAS MORE THAN AS PRESCRIBED BY THE GOVERNMENT AGENCIES, IT CANNOT BE ASSUMED THAT THERE WAS SOME CASH COMPONENT/ ON MONEY PAYMENT. CORRESPONDING ADDITION HAS NOT BEEN MADE IN THE CAS E OF VENDOR OF THIS PROPERTY. 4.2. IN VIEW OF THESE FACTS, ADDITION CANNOT BE MAD E IN THE HANDS OF THE ASSESSEE COMPANY ALSO. ORDER OF CIT(A) WAS RELIED O N. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. APROPOS THE CONTENTION ABOUT ASSESSEE IN WH OSE HANDS ADDITIONS ARE TO BE MADE, IN OUR VIEW, THE COMPANY IS DISTINCT A ND SEPARATE ENTITY AND DIRECTORS ARE SEPARATELY ASSESSED. IT HAS NOT BEEN DENIED THAT THE PROPERTY WAS PURCHASED IN THE NAME OF THE COMPANY, THEREFORE, IN OUR VIEW, ADDITION CANNOT BE MADE IN THE HANDS OF THE DIRECTORS. COMIN G TO CIT(A)S ORDER ABOUT ADDITION IN THE HANDS OF THE COMPANY, WE FIND THAT THE SOLE BASIS OF THE AO TO MAKE THE ADDITION IN THE HANDS OF THE COMPANY WAS BECAUSE OF A NOTING IN THE DIARY OF A THIRD PERSON MR. GAHLAWAT I.E. ESTATE BROKER. HE HAS GIVEN STATEMENT AT THE TIME OF SURVEY, STATING THAT THE PROPERTY WAS TRANSACTED FOR RS. 1.30 CRORES AND NOT FOR RS. 3.25 CRORES. THE LATTER FIGURE WAS THE SAME EXPECTED PRICE BY THE VENDOR OF THE P ROPERTY AND THE PROPERTY WAS SOLD FOR A REASONABLE MARKET PRICE AND NO ON MONEY WAS PAID IN THIS TRANSACTION. CIT(A) CALLED REMAND REPORT FROM THE A O ALSO IN WHICH IT IS ACCEPTED THAT THE ASSESSEE PURCHASED THE PROPERTY A T A RATE WHICH WAS MORE THAN THE CIRCLE RATE PRESCRIBED BY THE REGISTRATION AUTHORITIES. WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) INASMUCH AS AOS B ASIS OF ADDITION IS ONLY ON A NOTING IN THE DIARY OF ESTATE BROKER, WHICH HA S BEEN CLARIFIED BY MR. GAHLAWAT AND ON WHICH NO ADVERSE INFERENCE CAN BE D RAWN AGAINST THE ASSESSEE. AO HAS SUPPORTED HIS SURMISE ONLY BY H OLDING THAT NOBODY WILL AGREE TO SELL THE PROPERTY IF THE QUOTATION WAS RS. 3.25 CRORES. NEITHER THE VENDORS HAVE BEEN PUT ANY QUESTION NOR THE ESTATE B ROKER HAS SUPPORTED THIS VERSION. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) DELETING THE ADDIT IONS IN THE HANDS OF THE COMPANY. HIS ORDERS ARE UPHELD. 8. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 12-11-2010. SD/- SD/- (R.C. SHARMA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12-11-2010. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR