ASST. CIT CEN CIR 29, MUMBAI V. SUNIL MANTRI REALTY LTD, MUMBAI

ITA 6167/MUM/2011

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8799 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 06-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MANJUNATHA SWAMY
• Keywords: Unexplained investment; Capital asset; Search and seizure; Loose papers; Additional evidence; Reasonable cause; Retraction; Documents seized
• Section: 143(3); 153A; 69; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI , JM ITA NO S . 6167 & 7207 /MUM/ 2011 (ASSESSMENT YEAR S : 2007 - 08 & 2008 - 09 ) ASST. CIT, CENTRAL CIRCLE 29, ROOM NO. 411, 4 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 VS. M/S. SUNIL MANTRI REALTY LTD. G - 1, COURT CHAMBERS, GROUND FLOOR, V. THAKERSEY MARG, 35, NEW MARINE LINES, CHURCHGATE, MUMBAI PAN/GIR NO. AADCM 6966 F ( REVENUE ) : ( ASSESSEE ) & ITA NO S . 4900 & 5106 /MUM/ 2013 (ASSESSMENT YEAR S : 2007 - 08 & 2008 - 09 ) M/S. SUNIL MANTRI REALTY LTD. CHURCHGATE, MUMBAI VS. ASST. CIT, CENTRAL CIRCLE 29, MUMBAI - 400 020 ( ASSESSEE ) : ( REVENUE ) REVENUE BY : SHRI R. MANJUNATHA SWAMY ASSESSEE BY : SHRI PRAKASH JHUNJHUNWALA DATE OF HEARING : 10.10.2018 DATE OF PRONOUNCEMENT : 28.12 .2018 O R D E R PER SHAMIM YAHYA, A. M.: TH ESE ARE CROSS APPEAL S BY THE ASSESSEE AND THE REVENUE ARISING OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 40 (LD.CIT(A) FOR SHORT) AND PERTAINS TO THE ASSESSMENT YEAR S (A.Y.) 2007 - 08 AND 2008 - 09. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE FOR A.Y. 2007 - 08 READS AS UNDER: 1. ''WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD' CIT(A) WAS RIGHT IN DELETING THE SALES OF GOREGAON PROJECT WHILE THE SAME HAS BEEN DULY ACCOUNTED IN AUDITED BOOKS OF ACCOUNTS.' 2 - 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD' CIT (A) HAS ERRED IN RELYING UPON THE DATE OF REGISTRATION WITH RESPECT TO GOR EGAON PROJECT, WHILE IGNORING THE FACT THAT THE ACT OF REGISTRATION IS A PROCEDURAL AND TECHNICAL FORMALITY.' 2 M/S. SUNIL MANTRI REALTY LTD. 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD' CIT(A) WAS RIGHT IN ACCEPTING THE REVERSAL OF SALES TRANSACTION BY PASSING OF REVERSAL JOURNAL ENTRY AFTER CLOSURE OF FINANCIAL YEAR AND AFTER THE BOOKS OF ACCOUNT HAVE BEEN AUDITED.' 4. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD' CIT (A) HAS ERRED IN ACCEPTING THE REVISED AUDIT OF M/S. S UNIL MANTRI REALTY LTD., WHILE THERE IS NO SUCH PROVISION UNDER THE INCOME TAX ACT, 1961 WITH RESPECT TO THE SAME.' 5. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD' CIT (A) HAS ERRED IN IGNORING THE FACT THAT THE BUYER COMP ANY M/S. CARDINAL REALTORS PVT. LTD. HAS SUO MOTTO ACCEPTED THIS TRANSACTION AND HAS VOLUNTARILY FILED RETURN OF INCOME FOR A.Y. 2007 - 08 ACKNOWLEDGING THE SAME.' 6. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD' CIT (A) HAS ER RED IN ALLOWING RELIEF TO THE ASSESSEE COMPANY, WHILE IGNORING THE FACT THAT THE STATEMENT U/S 132(4) HAS BEEN MADE VOLUNTARILY AND ON THE BASIS OF MATERIALS FOUND AND IMPOUNDED DURING THE COURSE OF SEARCH ACTION.' 7. 'WHETHER ON THE FACTS AND 'CIRCUMSTAN CES OF THE CASE AND IN THE LAW, THE LD' CIT(A) HAS ERRED IN ACCEPTING PRINCIPALLY WITH THE ARGUMENT OF THE ASSESSEE COMPANY THAT BAD DEBT IS TO BE ALLOWED IN CASE SALES TRANSACTION IS CONSIDERED, WHILE THE BASIC NECESSARY CONDITIONS OF OFFERING OF INCOME AND CORRESPONDING APPLICABILITY OF PROVISIONS OF S. 41(1) OF THE IT ACT, 1961 HAS BEEN NOT LOOKED INTO.' REVENUES APPEAL (FOR A.Y. 200 7 - 0 8 ) : 3 . BRIEF FACTS OF THE CASE ARE THAT DURING COURSE OF SEARCH AND SEIZURE ACTION, CERTAIN DOCUMENTS WERE FOUND AT PREMISES OF THE ASSESSEE . THESE DOCUMENTS SEIZED BY THE DEPARTMENT AT ASSESSEE 'S OFFICE PREMISES AT G - L, : 5, COURT CHAMBERS, NEW MARINE LINE, MUMBAI CONTAINED AN AUDITED BALANCE SHEET AND P&L ACCOUNT WHEREIN SALES HAD BEEN DISCLOS ED OF RS. 1,47,50,28,209/ - AND PROFIT B E FORE TAX HAD BEEN DISCLOSED AT RS. 31,23,40,576/ - . THE SEARCHING AUTHORITIES CONFRON T ED SUCH BALANCE - SHEET TO ASSESSEE 'S DIRECTOR SHRI SUNIL MANTRI AND RECORDED HIS STATEMENT U/S 132(4) ON OATH. THE SAID DIRECTOR, IN R ECORDED STATEMENT, CONFIRMED THE CORRECTNESS OF THE FIGURES OF SALES AND PROFIT BEFORE TAX DISCLOSED IN SUCH BALANCE SHEET AND ADMITTED TO PAY TAX ON SUCH INCOME. THE DIRECTOR SHRI SUNIL MANTRI LATER ON RETRACTED HIS EARLIER STATEMENT. IT WAS CLAIMED THAT 3 M/S. SUNIL MANTRI REALTY LTD. THE ASSESSEE HAS ENTERED INTO AN MOU ON 31.03.2007 WITH A SISTER C ONCERN FOR SALE OF PROPERTY. HOWEVER, LATER ON THE MOU WAS CANCELLED ON 07.03.2008. HOWEVER, IT WAS CLAIMED THAT THIS SALES AS PER MOU WAS WRONGLY DISCLOSED IN T HE BALANCE SHEET FOUND DURING SEARCH ACTION . HENCE, THE PROFIT IS OVERSTATED BY RS. 137.10 CRORES AND PRO FIT BEFORE TAX ARISING OUT OF SUCH SALE IS OVERSTATED BY RS. 31.43 CRORES. THE DIRECTOR FURTHER STATED THAT APPELLANT COMPANY HAD PREPARED A REVISED AUDITED BALANCE SHEET WHEREIN ACTUAL SALES AND ACTUAL PROFIT BEFORE TAX IS DISCLOSED AT RS. 10.40 CRORES AND RS. 0.75 CRORES RESPECTIVELY A ND SUBMITTED THAT APPELLANT COMPANY HAD FILED ONLY THE CORRECTED BALANCE SHEET ALONGWITH ORIGINAL RETURN OF INCOME . 4 . THE A.O. REJECTED THE ASSESSEES CONTENTION IN NOTE SHEET BY HOLDING AS UNDER: A) IT IS NOT A COINCIDENCE THAT MOU DATED 31/03/2007 A ND TERMINATION MOU DATED 07/03/2008 WERE NOT FOUND DURING COURSE OF SEARCH; B) THE TERMINATION MOU WITH M/S. CARDINAL REALTORS PVT LTD WAS GENUINELY NOT N EXISTENCE AS IN PROVISIONAL FINANCIAL STATEMENT FOR F.Y. 2007 - 08, THE SAME FIGURES PERTAINING TO PREVIOUS YEAR ENDED 31/03/2007 AS FOUND IN AUDITED BALANCE SH E ET AS ON 31/03/200 7 ARE REFLECTED; C) THE CERTIFICATE OF CHARTERED ACCO UNTANT REGARDING NON RECEIPT OF SALE CONSIDERATION AGAINST MOU IS AFTERTHOUGHT; D) THE ASSOCIATE COMPANY M/S. CARDINAL REALTORS PVT LTD HAD ACKNOWLEDGED THE SALE TRANSACTION AS HAVE FILED THE RETURN OF INCOME ON RECORD. IN END, AO REJECTED APPELLANT'S S UB MISSION AND MADE ADDITION OF RS. 31.23 CRORES IN RESPECT OF SALES OF GOREGAON PREMISES MADE TO ASSOCIATE COMPANY M/S. CARDINAL REALTORS PRIVATE LIMITED OF RS. 137.10 CRORES. 5 . CONSIDERING THE ASSESSEES SUBMISSION, THE LD. CIT(A) OBSERVED THAT EIGHT ISSUES MADE OUT BEFORE HIM WERE AS UNDER: 1.0 TH E APPELLANT PURCHASED THE GOREGAON PREMISES ON 30/10/2007 FROM A COMPANY FORMED BY THE GOVERNMENT OF MAHARASHTRA ON EXECUTING A REG ISTERED DEED ON 31/10/2007, THUS DURING IMPUGNED YEAR VIZ. A.Y - 2007 - 08, APPELLANT WAS NOT EMPOWERED TO SELL THE GOREGAON PREMISES; 2.0 THERE IS NO REGISTERED SALE DEED EXECUTED WITH M/S CARDINAL REALTORS PVT LTD, THUS PROFIT ON INGENUTNE SALES CANNOT BE B ROUGHT TO TAX AND FURTHER THE 4 M/S. SUNIL MANTRI REALTY LTD. CONDITIONS PRESCRIBED UNDER SEC 54 OF TRANSFER OF PR OPERTY ACT, 1882 ARE NOT FULFIL LED ; 3.0 THE OWNERSHIP AND POSSESSION OF THE GOREGAON PREMISES HAD NEVER BEEN PASSED TO M/S CARDINAL REALTORS PVT LTD AND EVEN AS ON TODAY, THE CLEAR TITLE AN R L ABSOLUTE POSSESSION OF ENTIRE GOREGAON PREMISES REMAINS WITH THE APPELLANT; 4.0 THE CONCEPT OF REAL INCOME NEEDS T O BE ADOPTED AND NOTIONAL INCOME CANNOT BE BROUGHT TO TAX''AS APPELLANT HAD NOT RECEIVED ANY PART OF ALLEGED SALE CONSID ERATION FROM M/S CARDINAL REALTORS PVT LTD; 5 .0 THE ERRONEOUS BALANCE SHEET FOUND DURING SEARCH ACTION CANNOT BE RELIED AS IT WAS PREPARED ON BASIS OF A MOD DATED 31/03/2007 WHICH WAS SUBJECT TO FULFILLMENT OF SEVERAL CONDITIONS AND SUCH MOU WAS NOT ACTED UPON. THE MOU WAS CANCELLED W.E.F 31/3/2007 ON EXECUTING A TERMINATION MOU DATED 17/3/2008. THE REVISED BALANCE SHEET HAD ONLY BEEN FILED ALONGWITH ORIGINAL RETURN OF INCOME; 6.0 THE ADDITION CANNOT BE MADE SOLELY ON BASIS OF T HE STATEMENT OF TH E DIRECTOR AS WAS GIVEN ON STRESS AND IN CONFUSED STATE OF MIND AND WAS RETRACTED WITHIN ONE DAY OF LIFTING OF PROHIBITORY ORDER; 7.0 ONE INCOME CANNOT BE BROUGHT TO TAX FOR 2 TIMES AND ONE GOREGAON PREMISES CANNOT B E SOLD FOR 2 TIMES. THE APPELLANT, IN SUBSEQUENT YEARS, SOLD SEVERAL FLATS OF GOREGAON PREMISES ON DISCLOSING THE SALES OF OVER RS.222 CRORES AND INCOME OF OVER RS. 70 CRORES DURING A.Y - 2008 - 09 TO A.Y - 2011 - 12; 8.0 THE APPELLANT ALTERNATIVELY PLEADED TO ALLOW A CORRESPONDING REDUCTION OF THE I NCOME OF RS.70 CRORES ARISING FROM SALE OF FLATS OF SAME GOREGAON PREMISES ASSESSED TO TAX IN SUBSEQUENT YEARS FROM A.Y. 2008 - 09 TO A.Y. 2011 - 12. 6 . HE PROCEEDED TO ACCEPT THE ABOVE AND CONCLUDED AS UNDER: 6.33 CONSIDERING THE ENTIRE GAMUT OF CIRCUMSTANCES, FACTS AND ARGUMENTS IT IS HELD THAT THERE ARE OVERWHELMING FACTS DENYING THE OCCURRENCE OF SALE TO M/S.CARDINAL REALTORS P. LTD. AND IN VIEW OF SUCH COMPELLING ABSENCE OF EVIDENCE OF SALE, MERE STATEMENT OF SH N SUNIL MANTRI U/S.132(4) CANNOT BE TAKEN TO BE AN ABSOLUTE TRUTH, M ORE SO IN THE FACE OF HIS OWN DENIAL IN THE RETRACTION LETTER DATED 06.09.2008 AND 'STATEMENT U/S.131 DATED 20/12/2010. IN THE HOTEL KIRAN'S CASE (CITED SUPR A ), IT HAS BEE N HELD THAT 'THERE CANNOT BE ESTOPPEL AGAINST THE LAW. IF A PERSON IS NOT LIABLE TO TAX IN RESPECT OF ANY RECEIPT, HE CANNOT BE MADE LIABLE TO PAY TAX MERELY BECAUSE HE HAS AGREED TO PAY THE TAX IN THE STATEMENT U/S. 132. HE CAN ALWAYS RETRACT IN SUCH SITUATION. FOR E G. THE ASSESSEE MIGHT HAVE SOLD HIS AGRICULTURAL LAND AND NOT DECLARED ITS SA L E PROCEEDS IN HIS INCOME TAX RETURN. IF SUCH AGRICULTURAL LAND DOES NOT FALL WITHIN THE AMBIT OF THE WORDS 'CAPITAL ASSET', THEN NO TAX IS PAYABLE. IF THE ASSESSEE HAD OFFERED TO PAY TAX ON THE PROFITS ON SUCH SALE U/S.132(4), IN OUR OPINION, HE CAN ALWA Y S RETRACT FROM SUCH STATEMENT. SIMILARLY, IF THE ASSESSEE CAN SHOW THAT THE STATEMENT HAS BEEN MADE ON MISTAKEN BELIEF OF FACTS, HE CAN RETRACT FROM THE STATEMENT, IF HE CAN SHOW THAT FACTS ON THE BASIS OF ADMISSION SO MADE, WE RE INCORRECT. THIS IS WHAT HAS BEEN HELD BY THE H ON'BLE SUPREME COURT IN THE CASE OF PULLANGODE RUBBER & PRODUCE CO. LTD.' 5 M/S. SUNIL MANTRI REALTY LTD. 6.34 I T IS APPARENT F ROM THE CLAIMS MADE THAT EXCEPT THE BALANCE SHEET AND THE P&L ACCOUNT FOUND DURING THE COURSE OF SEARCH, THERE IS NO EVIDENCE TO SUGGEST SALE OF RS. 137.10 CRORES. EVEN IF IT IS PRESUMED THAT M/S.CARDINAL REALTORS P. LTD. AGREED TO PURCHASE THE PROPERTY AT STATED PRICE, DURING THE YEAR UNDER CONSIDERATION, IT CANNOT BE DENIED THAT THE SALE NEVER TOOK PLACE IN VIEW OF NO CONSIDERATION HAVING BEING PASSED AND THE PROPERTY NEVER HAVING BEING REGISTERED IN THE NAME OF THE BUYER. THEREFORE, IF THE SALE HAS BEEN RECORDED BY THE APPELLANT ON A PRESUMPTION, IT DEFINITELY FALL S WITHIN THE PHRASE OF 'MISTAKEN BELIEF OF FACTS'. THE RETRACTION LETTER HAS BEEN GIVEN ON THE VERY NEXT DAY OF CONCLUSION OF THE SEARCH, WHICH ALSO SMACKS OF THE EARLIER STATEMENT U/S.132(4) NOT BEING VOLUNTARY. IF THE APPELLANT HAD TAKEN SUBSTANTIAL TIME TO RETRACT THE STATEMENT, IT WOULD HAVE BEEN ONE WORD AGAINST THE OTHER, BUT IN THE PRESENT CIRCUMSTANCES, WHAT IS MOST IMPORTANT IS THAT NONE OF THE INGREDIENTS OF SALE OF GOREGOAN PROPERTY TO M/S. CARDINAL REALTORS P. LTD. IS IN EXISTENCE. THEREFORE, CO NSEQUENT DECLARATION AND STATEMENT ARE OF LITTLE CONSEQUENCE. THE APPELLANTS RETRACTION IS WELL WITHIN THE EXCEPTIONS PROVIDED BY VARIOUS JUDICIAL PRONOUNCEMENTS. IN VIEW OF THESE FACTS, THE LD. AO IS DIRECTED TO DELETE THE ADDITION OF RS.31,23,40,576/ - I N RESPECT OF THE ALLEGED SALE OF GOREGAON PROPERTY TO M/S. CARDINAL REALTORS P. LTD. 7. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. BEFORE PROCEEDING FURTHER WE MAY GAINFULLY REF ER TO THE PROVISIONS OF SECTION 132(4) AND 132( 4 A) AS UNDER: SEARCH AND SEIZURE. 132. (4) THE AUTHORISED OFFICER MAY, DURING THE COURSE OF THE SEARCH OR SEIZURE, EXAMINE ON OATH ANY PERSON WHO IS FOUND TO BE IN POSSESSION OR CONTROL OF ANY BOOKS OF ACCOUN T, DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION MAY THEREAFTER BE USED IN EVIDENCE IN ANY PROCEEDING UNDER THE INDIAN INCOME - TAX ACT, 1922 (11 OF 1922), OR UNDER THIS ACT. EXPLANATION. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE EXAMI - NATION OF ANY PERSON UNDER THIS SUB - SECTION MAY BE NOT MERELY IN RESPECT OF ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS FOUND AS A RESULT OF THE SEARCH, BUT ALSO IN RESPECT OF ALL MATTERS RELEVANT FOR THE PURPOSES OF ANY INVESTIGATION CONNECTED WITH ANY PROCEEDING UNDER THE INDIAN INCOME - TAX ACT, 1922 ( 11 OF 1922), OR UNDER THIS ACT. (4A) WHERE ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING ARE OR IS FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE COURSE OF A SEARCH, IT MAY BE PRESUMED 6 M/S. SUNIL MANTRI REALTY LTD. ( I ) THAT SUCH BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING BELONG OR B ELONGS TO SUCH PERSON ; ( II ) THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS ARE TRUE ; AND ( III ) THAT THE SIGNATURE AND EVERY OTHER PART OF SUCH BOOKS OF ACCOUNT AND OTHE DOCUMENTS WHICH PURPORT TO BE IN THE HANDWRITING OF ANY PARTICULAR PERSON OR WHICH MAY REASONABLY BE ASSUMED TO HAVE BEEN SIGNED BY, OR TO BE IN THE HANDWRITING OF, ANY PARTICULAR PERSON, ARE IN THAT PERSONS HANDWRITING, AND IN THE CASE OF A DOCUMENT STAMPED, EXECUTED OR ATTESTED, THAT IT WAS DULY STAMPED AND EXECUTED OR ATTESTED BY THE PERSON BY WHOM IT PURPORTS TO HAV E BEEN SO EXECUTED OR ATTESTED. 9 . A READING OF THE ABOVE MAKES IT CLEAR THAT THE S TATEMENTS GI VEN U /S. 132(4) AN D DOCUMENTS FOUND DURING SEARCH U /S. 132(4A) HAVE EVIDENTIARY VALUE. IN THE PRESE NT CASE , DURING SEARCH AND SEIZURE OPERATION , AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT HAS BEEN FOUND. AFTER HAVING ACCEPTED THE VERACITY OF THESE DOCUMENTS WHILE GIVING A STATEMENT UNDER OATH AND SEARCH U/S. 132(4) , THE DIRECTOR OF THE ASSESSEE C OMPANY HAS RETRACTED. FOR THIS PURPOSE EVEN REVISED AUDI TED ACCOUNTS HAVE BEEN PREPARED WHICH IS A B IZARRE P HENOMENON. THE EXPLANATION GIVEN IS THAT ASSESSEE HAS ENTERED INTO A MEMORANDUM OF UNDERSTANDING WITH ITS SISTER CONCERN ON 31.03.2007 F OR SALE OF P ROPERTY. FURTHERMORE , IT IS THE CLAIM OF THE ASSESSEE THAT SUBSEQUENTLY ON 07.03.2008, THIS MEMORANDUM OF UNDERSTANDING WAS CANCELLED . S TRANGELY NONE OF THESE MOUS WERE FOUND AT THE TIME OF SEARCH. HOWEVER , THE AS SESSEE'S PLEA IS THAT THE SAID SALE UNDER T HE MEMORANDUM OF UNDERSTANDING HAS BEEN WRONGLY ACCOUNTED FOR IN THE AUDITED BALANCE SHEET. THE SISTER CONCERN WITH WHOM THE TRANSACTION HAS BEEN SAID TO HAVE BEEN WRONGLY ACCOUNTED FOR HAS ALREADY ACCOUNTED FOR THE TRANSACTION AS A PURCHASE OF THE PROPERTY AND DULY F ILED ITS RETURN OF INCOME. IN THIS FACTUAL BACKGROUND , THE ENTIRE STORY MADE OUT BY THE ASSESSEE THAT AN ERROR HAS HAPPENED IS TOTALLY BASELESS. THAT THERE WAS A WRONG ACCOUNTING OF SALE BY RS.137.10 CRORES IN THE AUDITED BALANCE SHEET A ND THE AUDIT OR AND 7 M/S. SUNIL MANTRI REALTY LTD. THE DIRECTOR S OF THE COMPANY WERE UN AWARE OF THIS IS TOTALLY UNACCEPTABLE PROPOSITION. THEREAFTER , THE ASSESSEE'S EXPLANATION HAS BEEN BASED UPON THE P ROPOSITION THAT THE SAID SALE C O ULD NOT HAVE BEEN ACCOUNTED FOR , AS THE SAID PROPERTY WAS NOT ACQ UIRED BY THE ASSESSEE. THE LD.C IT (A) HAS ALSO DEVOTED HIS ENTIRE ORDER IN ACCEPTING THIS PROPOSITION AND DETAILING AS TO WHY THE SAID PROPERTY C OULD NOT HAVE BEEN S OLD BY THE ASSESSEE. EVEN THE CERTIFICATE FROM THE AUDITOR HAS BEEN GIVEN THAT SA LE PROCEEDS WERE NOT RECEIVED BY THE ASSESSEE. WE NOTE THAT THIS IS NOT A CASE OF WRONG ACCOUNTING OF SALES SIMPLICIT OR . THE ASSESSEE IS FULLY AWARE THAT REVERSAL OF THE SO CALLED WRONG SALE ENTRY WOULD RESULT IN ABNORMAL COMPARABLE PROFIT FIGURE. HENCE, I N THE REVISED ACCOUNT , COST OF SALES HAS ALSO BEEN REDUCED BY RS.1,06,61,36,186/ - FROM RS.1,16,97,63,920/ - TO RS.10,36,27,734/ - . THERE IS NO DETAIL FOR THIS. THUS, I T IS CLEAR THAT THESE ALTERATIONS HAVE BEEN DONE IN THE ACCOUNTS TO REDUCE THE PROFITS. FOR THIS , THE EARLIER DETAIL OF ACCOUNTING INGENUITY DISPLAYED HAS NOT BEEN BROUGHT ON RECORD. IN OUR CONSIDERED OPINION , EVEN IF THE SO - CALLED SALES WERE LATER ON NOT REALIZED, THE MATTER WAS OF NON - REALIZATION OF DEBT , A FTER THE SAME HAS DULY SOLD AND ACCOUNTED FOR BY THE GROUP COMPANY TO THE ASSESSEE. HENCE , THERE CAN BE NO JUSTIFICATION OF REVISING THE ACCOUNT AND REVERSING THE SALES BY MANIPULA TING THE AUDITED ACCOUNT ITSELF. I N THIS VIEW OF THE MATTER , IN OUR CONSIDERED OPINION , THE PROVISI ONS OF SECTION 132(4) AND 132(4A) AND INCRIMINATING MATERIAL FOUND ARE FULLY JUSTIFYING THE A.O.S ACTION. THE I NCRIMINATING MATERIAL FOUND DURING SEARCH HAS NOT AT ALL BEEN COGENTLY REBUTTED BY THE ASSESSEE. IN THESE CIRCUMSTANCES , IN OUR CONSIDERED OPINI ON , THE L D. CIT(A)S ORDER IS TO BE REVERSED AND THE ASSESSING OFFICER'S ORDER IS TO BE RESTORED. WE DECIDE ACCORDINGLY. IN THE RESULT, THE REVENUES APPEAL FOR A.Y. 2007 - 08 IS A L L O W ED. 8 M/S. SUNIL MANTRI REALTY LTD. REVENUES APPEAL (FOR A.Y. 2008 - 09) : 10 . THE GROUNDS OF APPEAL READ AS UNDER: A) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN GRANTING RELIEF OF RS 38,01,93,866/ - OUT OF INCOME OF RS 73,72,46,906 / - DECLARED BY THE ASSESSEE AND SO BROUGHT TO TAX. B) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE SUM OF RS 1.80 CRORES ADDED AS UNEXPLAINED INVESTMENT U/S 69 OF THE INCOME TAX ACT. 2) THE APPELLANT CRAVES TO LEAVE TO ADD, TO AMEND AND / OR TO ALTER ANY OF THE GROUNDS OF APPE AL, IF NEED BE. 3) THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUNDS STATED ABOVE, THE ORDER OF THE C I T(A) - 40,MUMBAI MAY BE SET ASIDE - SLID THAT OF THE ASSESSING OFFICER RESTORED. APROPOS DELETION OF ADDITION OF RS.38,01,93,866/ - : 1 1 . BRIEF FACTS OF THE CASE ARE AS UNDER: THE FACT OF THE CASE IS THAT DURING THE COURSE OF SEARCH AND SEIZURE ACTION, CERTAIN LOOSE PAPERS NUMBER 108 PAGES WERE FOUND AT THE PREMISES OF THE ASSESSEE . THESE PAPERS WERE SEIZED BY DEPARTMENT AT ASSESSEE 'S OFFICE PREMISES A T G - 1, 35, COURT CHAMBERS, NEW MARINE LINES, MUMBAI INCLUDED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR THE PERIOD ENDING MARCH, 2008 AND SCHEDULES THERETO COMPRISING OF 10 PAGES. IN THESE ACCOUNT, SALES HAD BEEN DISCLOSED AT RS. 2 , 36,66,70,145/ - AND PRO FIT BEFORE TAX HAD BEEN DISCLOSED AT RS. 73,72,46,906/ - . THE SEARCHING AUTHORITIES CONFRONTED SUCH UNAUDITED PROVISIONAL BALANCE SHEET TO ASSESSEE 'S DIRECTOR SHRI SUNIL MANTRI AND RECORDED HIS STATEMENT U/S.132(4) ON OATH. THE SAID DIRECTOR, IN RECORDED STA TEMENT, CONFIRMED THE CORRECTNESS OF THE PROFIT DISCLOSED AND ACCEPTED THAT THEY WERE AS PER THE BOOKS OF ACCOUNTS OF SHRI SUNIL MANTRI . LATER ON DURING POST SEAR CH STATEMENT SHRI SUNIL MANTRI CLAIMED THAT SALES OF RS.236 CRORES WAS PROJECTED AND E STIMATED AND IT DOES NOT RELATE TO BOOKS OF ACCOUNTS. HE 9 M/S. SUNIL MANTRI REALTY LTD. LATER STATED THAT IN - EXPERIENCED ACCOUNTS STAFF HAS PASSED WRONG ENTRIES . IN COMPLETED SALES, LOANS AND ADVANCES WERE TREATED AS SALES. THE DIRECTOR STATED THAT THE CORRECT SALES IS RS.110.40 CRORES A ND PROFIT BEFORE TAX IS RS.36 CRORES. 1 2 . THE ASSESSING OFFICER (A.O. FOR SHORT) IN THE ASSESSMENT ORDER REFERRED TO THE RECONCILIATION OFFERED BY THE ASSESSEE FOR THE FIGURES IN BALANCE SHEET FOUND DURING SEARCH AND THE AUDITED BALANCE SHEET FILED ALONG WITH THE ORIGINAL RETURN OF INCOME. THE RELEVANT PORTION IS REPRODUCED AS UNDER: I T IS FURTHER NOTED THAT THE RETURN OF INCOME FILED ON 30/09/2008 WHICH CONTAINS THE AUDITOR'S PROFIT AND LOSS ACCOUNT DID NOT REFLECT THE SALES FIGURES AS INDICATED IN THE PROFIT AND LOSS ACCOUNT FOR THE INSTANT ASSESSMENT YEAR AS PER PAGE 107 AS PER LOOSE PAPER FILE A - L. IN THIS REGARD IT HAS BEEN SUBMITTED BY THE ASSESSES THAT THE SAID PAGE NUMBER 107 IS A PROVISIONAL TRIAL BALANCE MADE TO PROJECT HIGHER FIGURES AND A ROSY PICTURE FOR AVAILING BANK LOANS. IT HAS BEEN STATED THAT THERE WERE MAJOR REVERSALS OF SALE ENTRIES WHICH WERE WRONGLY BOOKED OWING TO THE INEXPERIENCE OF THE NEW FINANCE STAFF. SUCH ENTRIES ARE AS UNDER: - SR. NO. PARTICULAR AMOUNT 1. ADVANCE RECEIVED FROM INDO SAIGAON AGENCY WRONGLY BOOKED IN SALE 10,00,00,000/ - 2. ENTITY OF MANTRI PARK FLAT SALE TO GROUP COMPANY (ALLIANCE FINSTOCK LTD.) 1 0,40,00,000 / - 3. ENTRY OF MANTRI PARK FLAT SALE TO GROUP COMPANY (MANTRI HOSPITALITY PVT. LTD.) 1 4,27,52,500 / - 4. ENTRY OF HYDERABAD PROPERTY SALE TO GROUP COMPANY CARDINAL REALTORS PVT. LTD. 95,00,00,000 / - TOTAL 1 29,67,52,500 / - 1 3 . FURTHER SHOW CAUSE NOTICE WAS ISSUED AND THE ASSESSEE GAVE FURTHER DETAIL. THE A.O. WAS NOT CONVINCED. HE AFFIRMED THE ADDITION BASED UPON THE MATERIAL FOUND IN SEARCH AND STATEMENT OF DIRECTOR OBTAINED DURING SEARCH. HE D ISBELIEVED THE VERACITY OF THE ASSESSEES EXPLANATION. HE INTER ALIA OBSERVED AS UNDER: 14. 1 IT IS FURTHER SEEN THAT THE ASSESSEE COMPANY HAS SHOWN WORK - IN - PROGRESS 10 M/S. SUNIL MANTRI REALTY LTD. TOTALLY VALUED AT RS.1,53,08,17,285/ - , WHICH HAD BEEN SOLD TO OTHER ENTITIES OF THIS GROUP BY WAY OF MOU IN THE PRECEDING YEAR. IT HAS BEEN EXPLAINED THAT THE MOU WITH REGARD TO THESE SALES HAVE BEEN TERMINATED/CANCELLED, BY VIRTUE OF WHICH THE PROJECT HAS BEEN CONTINUED TO BE SHOWN AS WORK - IN - PROGRESS. AS HAVE BEEN DISCUSSED, THE ASSESSEE COMPANY AND THE OTHER ASSOCIATE ENTITIES HAVE BEEN INDULGING IN CROSS TRANSFER OF PROPERTY BY WAY OF MOU AND RESELLING THE SAME BACK TO THE RESPECTIVE SELLERS BY RESCINDING THE MOU'S OR CA NCELLATION/TERMINATION OF THE SAME. THIS METHOD OF SALE AND RESALE WHICH HAVE BEEN CLANDESTINELY RESORTED TO BY WAY OF MOU AND RESCINDMENT OF THE SAME, ARE IN CONTRAVENTION TO THE ACCEPTED PRINCIPLES OF ACCOUNTANCY AND HENCE DOES NOT HOLD GOOD. THE SAME AR E TO BE HELD AS TRANSFER BY WAY OF SALE, WHICH NEEDS TO BE INCLUDED IN THE PROFIT & LOSS ACCOUNT AND REVENUE, IF ANY, FROM THE SAME SHOULD BE COMPUTED AND OFFERED FOR TAX. THIS VIEW HAS FOUND A MENTION IN THE ASSESSMENTS OF THE OTHER ENTITIES WHICH HAVE BE EN INVOLVED IN SUCH CROSS TRANSACTIONS, WHEREIN IDENTICAL VIEWS HAVE BEEN TAKEN. AS A CONSEQUENCE TO THIS CONCLUSION, THE PROJECTS SHOWN AS WORK - IN - PROGRESS TOTALING TO RS.1,53,08,17,285/ - ARE IN FACT THE PURCHASES OF THE ASSESSEE COMPANY FOR THE YEAR UND ER CONSIDERATION. 1 4 . AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A). 1 5 . THE LD. CIT(A) NOTED THE SUBMISSIONS OF THE ASSESSEE. HE TOTALLY IGNORED THE DOCUMENTS, THE BALANCE SHEET, THE PROFIT AND LOSS ACCOUNT FILED DURING SEARCH, THE STATEMENT OF DIRECTOR, THE A.O.S NON ACCEPTANCE OF SUBSEQUEN T EXPLANATION OF THE ASSESSEE. HE SUMMARIZED FOLLOWING ISSUES MADE OUT BY THE ASSESSEE : 1.0 THERE IS NO REGISTERED SALE DEEDS EXECUTED WITH ALLEGED 4 PARTIES, THUS PROFIT OF RS 38. 01 CRORES ON INGENUINE SAIES OF RS. 129.67 CRORES CANNOT BE BROUGHT TO TAX. FURTHER, THE CONDITIONS PRESCRIBED UNDER SEC.54 OF TRANSFER OF PROPERTY ACT, 1882 ARE NOT FULFILLED; 2. 0 THE APPELLANT IS NOT EMPOWERED TO SELL THE HYDERABAD PROPERTY AT ? 95 CRORES AS I T CONTAINED SERIOUS DISPUTES UNDER ENEMY PROPERTY ACT, 1968. THE APPELLANT, TILL TODAY, ITSELF HAD NOT BECOME THE OWNER NOR POSSESSION HOLDER NOR HAD EXECUTED ANY PURCHASE DEED OF SAID HYDERABAD PROPERTY, THUS IS NOT EMPOWERED TO SELL SUCH PROPERTY; 3 .0 THE APPELLANT HAD NOT SOLD ITS GOREGAON PREMISES TO ALLEGED 3 PARTIES AT RS. 34.67 CRORES AS THE OWNERSHIP AND POSSESSION OF THE GOREGAON PREMISES HAD NEVER BEEN PASSED TO ALLEGED PARTIES. EVEN AS ON TODAY, THE CLEAR TITLE AND ABSOLUTE POSSESSION OF GO REGAON PREMISES REMAINS WITH THE APPELLANT; 4.0 IN RESPECT OF ALLEGED SALE OF GOREGAON PROPERTY, ONE INCOME CANNOT BE BROUGHT TO TAX FOR 2 TIMES AND ONE PREMISES CANNOT BE SOLD FOR 2 TIMES. THE 11 M/S. SUNIL MANTRI REALTY LTD. APPELLANT, IN SUBSEQUENT YEARS, SOLD SEVERA L FLATS OF GOREGAON PREMISES ON DISCLOSING THE SALES OF OVER RS. 222 CRORES AND INCOME OF OVER RS. 70 CRORES; 5.0 THE CONCEPT OF REAL INCOME NEEDS TO BE ADOPTED AND NOTIONAL INCOME CANNOT BE BROUGHT TO TAX AS APPELLANT HAD NOT RECEIVED ANY PART OF ALLEGED SALE CONSIDERATION FROM SAID 4 ALLEGED PARTIES; 6.0 THE ADDITION U/S 153A CANNOT BE MADE ON THE BASIS OF ASSUMPTION AND SURMISE AS THERE ARE NO INCREMENTAL DOCUMENTS, FOUND DURING SEARCH ACTION, TO DOUBT THE ALLEGED SALES, THE FOUR PARTIES, DURING COURSE OF ASSESSMENT, FILED DOCUMENTARY EVIDENCE AND CONFIRMED OF HAVING NOT MADE ANY PURCHASE OF IMMOVABLE PROPERTY FROM THE APPELLANT; 7.0 THE ERRONEOUS PROVISIONAL UNAUDITED BALANCE SHEET FOUND DURIN G SEARCH ACTION CANNOT BE RELIED AS IT CONTAINED PROJECTED (TARGET) SALES AND DOES NOT CONTAIN ACTUAL SALES. THE AUDITED BALANCE SHEET HAD ONLY BEEN FILED ALONGWITH ORIGINAL RETURN OF INCOME; 8.0 THE ADDITION CANNOT BE MADE SOLELY ON BASIS OF T HE STATEMENT OF THE DIRECTOR AS WAS GIVEN ON STRESS AND IN CONFUSED STATE OF MIND AND WAS RETRACTED WITHIN ONE DAY OF LIFTING OF PROHIBITORY ORDER; 9.0 WITHOUT PREJUDICE, THE DEDUCTION OF BAD - DEBT U/S. 36(L)(VII) R.W.S.36(2) OF UNREALIZED ALLEGED SAL E CONSIDERATION BE ALLOWED. HE ACCEPTED THAT THERE IS NO DOCUMENTARY EVIDENCE, NOR ANY PROOF OF SALE OF RECEIPT OF SALE CONSIDERATION. HE HELD THAT THE ADDITION U/S. 1 53 A CANNOT BE MADE ON THE BASIS OF SURMISE AND CONJECTURE . FOR THIS PURPOSE, THE LD. CIT(A) ACCEPTED THE RELIANCE ON FOLLOWING CASE LAWS: 1. CIT VS. BOKARO STEEL LTD. 236 ITR 315 (SC) 2. GODHRA ELECTRICITY CO. LTD. 225 ITR 746 (SC) 3. CIT VS. MOTOR CREDIT CO. PVT. LTD . 127 ITR 572 (MAD - HIGH COURT) 1 6 . HENCE, THE LD . CIT(A) HELD THAT THE ASSESSEE HAS NOT RECEIVED THE SALE CONSIDERATION OR ANY PART THEREOF. HENCE, HE DELETED THE INCOME OF RS.38.01 CRORES THEREOF. THE LD. CIT(A) FURTHER OBSERVED THAT THE SALE OF RS.129.61 CORES WAS RECORDED MERELY ON PASSING WRONG JOUR NAL ENTRIES THAT THEY WERE CORRECTED AND PROPER AUDITED ACCOUNTS WAS FILED. THE LD. CIT(A) FURTHER PROCEEDED TO HOLD THAT EVEN THOUGH THE MATERIAL WAS FOUND DURING SEARCH AND WAS FOUND IN THE BALANCE SHEET PREPARED BY THE ASSESSEE HIMSELF, HE PROCEEDED TO HOLD THAT THE DISCLOSURE OF TAXABILITY OF INCOME WOULD 12 M/S. SUNIL MANTRI REALTY LTD. NOT DEPEND ON THE DISCLOSURE ON THE BALANCE SHEET , AS THE T HREE TRANSACTIONS WOULD HAVE TO BE JUDGED IN T H E TAXABILITY OF THE INCOME. IN THIS REGARD, HE PLACED RELIANCE UPON THE FOLLOWING CASE LAWS: 1. CIT VS. DEVI FILMS (P.) LTD. 143 ITR 386 (MAD - HIGH COURT) 2. BRAHAMPUTRA CAPITAL & FINANCIAL SERIES LTD. VS. ITO 119 ITD 266 (DEL) 3. MEENAKSHY LUCKY CENTRE VS. JCIT 74 TTJ 458 (COCH) 4. ITO VS. NAVIN GOYAL (2010) 133 TTJ 359 (DEL) 1 7 . DESPITE ACCEPTING THAT SPONTANEOUS STATEMENT U/S. 132(4) GIVEN BY THE DIRECTOR OF THE COMPANY HAS TO BE GIVEN DUE WEIGHTAGE AND MOST OF THE TIME SUCH STATEMENT HAS BETTER VALUE THAN THE SUBSEQUENT RETRACTIONS OR STATEMENTS, T HE LD. CIT(A) PROCEEDED TO HOLD THAT ON THE FACTS OF THE PRESENT CASE, THIS SHOULD NOT HAVE BEEN DONE. THEREAFTER, THE LD. C IT(A) KEPT ON REBUTTING THE SAME FINDINGS. 1 8 . AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 1 9 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. FIRST OF ALL WE NOTE THAT THIS ADDITION HAS BEEN MADE PURSUANT TO A SEARCH ACTION. THE ASSESSMENT HAS BEEN FRAMED U/S. 143(3) R/W S. 153A OF THE ACT. THERE WAS A SEARCH AND SEIZURE ACTION U/S. 132(4) ON THE ASSESSEE GROUP ON 09.07.2008. THE ASSESS EE HAD FILED THE RETURN OF INCOME U/S. 153A ON 20.10.2010. IN THE COURSE OF SEARCH CONDUCTED ON 09.07.2008, THE DEPARTMENT HAS SEIZED FROM THE ASSESSEES BUSINESS PREMISES, PAGES CONTAINING PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR THE PERIOD ENDING MA RCH, 2008 AND SCHEDHULE THERETO. PAGE NO. 7 OF THE SAID PAGES REFLECTED THE BALANCE SHEET FOR THE PERIOD 31 ST MARCH, 2008 AND IT WAS SIGNED BY THE DIRECTOR OF THE COMPANY. WE MAY GAINFULLY REFER TO THE SAID PROFIT AND LOSS ACCOUNT AND BALANCE SHEET WHICH IS REPRODUCED HEREUNDER: 13 M/S. SUNIL MANTRI REALTY LTD. 14 M/S. SUNIL MANTRI REALTY LTD. 15 M/S. SUNIL MANTRI REALTY LTD. 20 . SHRI SUNIL P. MANTRI, CMD OF THE SAID COMPANY GAVE A STATEMENT OF OATH ON 10.07.2008. IN THE SAID STATEMENT, THE SAID DIRECTOR, DULY ACCEPTED THE DETAIL PROVIDED IN THE UNAUDITED BALANCE SHEET. HE FULLY ACCEPTED T HE VERACITY OF THE FIGURES SHOWN THEREIN. HE ACCEPTED THAT AS PER THESE ACCOUNTS PRO FIT BEFORE TAX WAS RS.73.72 CRORES AND THE PROVISION FOR TAXATION IS ESTIMATED AT RS.25.08 CRORES. HE ALSO ACCEPTED THAT THESE ARE THE REFLECTION OF THE BOOKS OF ACCOUNTS O F THE ASSESSEE. SUBSEQUENTLY, THE SAID DIRECTOR MADE A RETRACTION. IT WAS CLAIMED THAT THE BALANCE SHEET FOUND DURING SEARCH WAS MEANT FOR GIVING 16 M/S. SUNIL MANTRI REALTY LTD. THE SAME TO THE BANK FOR OBTAINING HIGHER CREDITS. IT MAY BE NOTED THAT NO EVIDENCE WHATSOEVER OF THE ASSESSEE HAVING SUBMITTED THE SAID BALANCE SHEET TO THE BANK WAS FOUND. HENCE, THIS THEORY ENTERS COGENCY. FURTHERMORE, THE ASSESSEE ITSELF HAS MADE CONTRARY CLAIM THAT THE SAID ACCOUNT CONTAINED VARIOUS JOURNAL ENTRIES PASSED BY INEFFICIENT ACCOUNTS PEOPLE WHICH WERE SUBSEQUENTLY CORRECTED. THERE IS NO EXPLANATION WHATSOEVER AS TO HOW IN - EXPERIENCED ACCOUNTING STAFF CAN PASS JOURNAL ENTRIES, RESULTING IN A THOROUGHLY DIFFERENT BALANCE SHEET. WE FIND THAT IN THIS CASE A STATEMENT HAS BEEN OBTAINED U/S. 132(4) THAT DULY PROVIDES THAT SUCH A STATEMENT OBTAINED HAVE A N EVIDENTIALLY VALUE. WE MAY GAINFULLY REFER TO THE PROVISION OF SECTION 132(4) IN THIS REGARD AS UNDER: SEARCH AND SEIZURE. 132. (4) THE AUTHORISED OFFICER MAY, DURING THE COURSE OF THE SEARCH OR SEIZURE, EXAMINE ON OATH ANY PERSON WHO IS FOUND TO BE IN POSSESSION OR CONTROL OF ANY BOOKS OF ACCOUNT, D OCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION MAY THEREAFTER BE USED IN EVIDENCE IN ANY PROCEEDING UNDER THE INDIAN INCOME - TAX ACT, 1922 (11 OF 1922), OR UNDER THIS ACT. EXPLANATION. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE EXAMI - NATION OF ANY PERSON UNDER THIS SUB - SECTION MAY BE NOT MERELY IN RESPECT OF ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS FOUND AS A RESULT OF THE SEARCH, BUT ALSO IN RESPECT O F ALL MATTERS RELEVANT FOR THE PURPOSES OF ANY INVESTIGATION CONNECTED WITH ANY PROCEEDING UNDER THE INDIAN INCOME - TAX ACT, 1922 ( 11 OF 1922), OR UNDER THIS ACT. 2 1 . FURTHER, THE DOCUMENTS FOUND DURING SEARCH HAVE EVIDENTIARY VALUE. THIS IS DULY REFLECTED IN THE PROVISION OF SECTION 132(4A) OF THE ACT WHICH READS AS UNDER: SEARCH AND SEIZURE. 132. (4A) WHERE ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING ARE OR IS FOUND IN THE POSSESSION OR CONTROL OF A NY PERSON IN THE COURSE OF A SEARCH, IT MAY BE PRESUMED ( I ) THAT SUCH BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING BELONG OR BELONGS TO SUCH PERSON ; 17 M/S. SUNIL MANTRI REALTY LTD. ( II ) THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNT AN D OTHER DOCUMENTS ARE TRUE ; AND ( III ) THAT THE SIGNATURE AND EVERY OTHER PART OF SUCH BOOKS OF ACCOUNT AND OTHE DOCUMENTS WHICH PURPORT TO BE IN THE HANDWRITING OF ANY PARTICULAR PERSON OR WHICH MAY REASONABLY BE ASSUMED TO HAVE BEEN SIGNED BY, OR TO BE IN THE HANDWRITING OF, ANY PARTICULAR PERSON, ARE IN THAT PERSONS HANDWRITING, AND IN THE CASE OF A DOCUMENT STAMPED, EXECUTED OR ATTESTED, THAT IT WAS DULY STAMPED AND EXECUTED OR ATTESTED BY THE PERSON BY WHOM IT PURPORTS TO HAV E BEEN SO EXECUTED OR AT TESTED. 2 2 . FROM THE ABOVE, IT IS APPARENT THAT THE ADVERSE INFERENCE AGAINST THE ASSESSEE HAS BEEN FORMED NOT ONLY ON THE BASIS OF THE STATEMENT OF THE DIRECTOR U/S. 132(4) BUT ALSO ON THE BASIS OF THE IN CRIMINATING DOCUMENTS FOUND DURING SEARCH. IT IS S ETTLED LAW THAT THE ADDITION U/S. 153A CAN BE MADE IF INCRIMINATING MATERIAL IS FOUND DURING SEARCH. BY NO STRETCH OF IMAGINATION, THESE BALANCE SHEET, PROFIT AND LOSS ACCOUNT DULY SIGNED BY THE DIRECTOR ACC OMPANIED BY SCHEDULE THERE FOUND CAN BE SAID TO B E NOT INCRIMINATING . THERE IS NO EVIDENCE THAT THEY WERE MEANT TO BE PRESENT ED AT BANK . THERE IS NO EVIDENCE THAT THEY RESULTED FROM WRONG JOURNAL ENTRIES PASSED BY THE INEFFICIENT ACCOUNTING STAFF. 2 3 . THE ASSESSEE HAS STATED IN EXPLANATION THAT INEXPERIENCED STAFF HAS MADE THE FOLLOWING WRONG ACCOUNTING ENTRIES: SR. NO. PARTICULAR AMOUNT 1. ADVANCE RECEIVED FROM INDO SAIGAON AGENCY WRONGLY BOOKED IN SALE 10,00,00,000/ - 2. ENTITY OF MANTRI PARK FLAT SALE TO GROUP COMPANY (ALLIANCE FINSTOCK LTD.) 1 0,40,00,000 / - 3. ENTRY OF MANTRI PARK FLAT SALE TO GROUP COMPANY (MANTRI HOSPITALITY PVT. LTD.) 1 4,27,52,500 / - 4. ENTRY OF HYDERABAD PROPERTY SALE TO GROUP COMPANY CARDINAL REALTORS PVT. LTD. 95,00,00,000 / - TOTAL 1, 29,67,52,500 / - SUBSEQUENTLY, THE ASSESSEE STATED THAT FOLLOWING WRONG ENTRIES WERE PASSED: DEBTORS A/C. DR. 1,26,65,61,454 18 M/S. SUNIL MANTRI REALTY LTD. TO SALE OF FLATS & LANDS A/C (INCOME) CR. 1,26,65,61,454 (BEING SALES BOOKING, ADVANCES, ENQUIRIES OF SALES RECORDED) 2 4 . FIRSTLY WE NOTE THAT THE FIGURES IN THE SO CALLED DETAIL AND THE SO CALLED WRONG JOURNAL ENTRIES DO NOT MATCH. HENCE, THE VERACITY OF THIS IS NOT ACCEPTABLE. FURTHER, IF SUCH A HUGE ERROR ENTR Y WAS MADE AT THE END OF THE YEAR, AND IT REMAINED UNDETECTED TILL THE DATE OF SEARCH, I.E., 09.07.2008, IS TOTALLY IMPROBABLE. THAT SUCH WRONG OVER STATED SALES OF MORE THAN RS.100 CRORES BEING TWICE OF THAT OF ACTUAL INCOME WAS STATED IN THE AC COUNTS AND THE DIRECTOR WAS NOT AWARE WHEN HE SIGNED THE ACCOUNT, IS ALSO NOT ACCEPTABLE. THESE ARE CLEARLY AN AFTERTHOUGHT OF THE ASSESSEE. THE ASSESSEE HAS TRIED TO MAKE AN EXPLANATION THAT UNSOLD ITEMS HAVE BEEN ACCOUNTED FOR SALES WITHOUT PROPER EVIDEN CE. THE LD. C IT(A) HAS DEVOTED HIS ENTIRE ORDER IN REFERRING TO THE ASSESSEES EVIDENCE AS TO HOW THESE PLOTS HAVE REMAINED UNSOLD. IN OUR CONSIDERED OPINION, THESE ARE CLEARLY AN AFTERTHOUGHT OF THE ASSESSEE WITH NO IOTA OF EVIDENCE. THE VIEW THAT THE ASSESSEE HAS ONLY MADE AN AFTERTHOUGHT TO REDUCE THE PROFIT IS EVIDENT BY THE FACT THAT IT IS NOT A CASE OF WRONGLY ACCOUNTING FOR CERTAIN SALES. FULLY AWARE THAT SUCH REVERSAL OF SALE W ILL RESULT IN ABNORMAL C OMPARABLE PRO FITS , I N THE SUBSEQUENT ACCOUNT T HE C OST OF SALES HAS ALSO REDUCED BY RS.89,20,48,427 / - FROM RS.1,62,79,86,886/ - TO RS.73,59,38,459/ - . ADMITTEDLY, THIS CA N ONLY BE RESULT OF UNEXPLAINED O THER ACCOUNTING INGENUITY . NO DETAIL EXPLANATION FOR THIS IS ON RECORD. HENCE , IT IS EVIDENT THAT THE ACCOUNTS HAVE BEEN REV I S ED AFTER SEARCH TO REDUCE THE INCIDENCE OF TAX AND HALF BAKED F ACTS HAVE BEEN SUBMITTED IN EXPLANATION. THIS HAS ALSO TO 19 M/S. SUNIL MANTRI REALTY LTD. BE CONSIDERED IN THE BACKGROUND OF THE FACTS THAT IN THE SAME SEARCH , AUDITED ACCOUNTS WERE ALSO FOUND OF EARLIER YEAR, WHICH WERE LATER CLAIMED BY THE ASSESSEE TO BE WRONG. 2 5 . IN OUR CONSIDERED OPINION, THE ASSESSEE HAS FAILED TO REBUT THE PRESUMPTIONS U/S. 132(4) AND 132(4A) OF THE ACT AND THE CLEAR INCRIMINATING MATERIAL FOUND. THE LD . CIT(A) HAS ACCEPTED VARIOUS REASONING OF THE ASSESSEE WHICH PUT ONUS ON THE A.O. TO PROVE THA T CERTAIN ITEMS WHICH WERE IMAGINARY AND THE EXPLANATION OF THE ASSESSEE WHICH ARE CLEARLY AN AFTERTHOUGHT , WERE ACTUALLY SOLD AND THE SALE PROCEED WAS RECEIVED. IN OUR CONSIDERED OPINION, O NCE THE ASSESSEE HAS BEEN FOUND TO HAVE F AILED TO DIS PROVE THE PRES UMPTION U/S. 132(4) AND 132(4A) AND THE INCRIMINATING MATERIAL FOUND, T HE VARIOUS OTHER SUBMISSIONS OF THE ASSESSEE ARE IMAGINARY AND MERELY AN AFTERTHOUGHT . THE LD. C IT(A) IS REFERRING TO CASE LAWS WHICH ARE NOT AT ALL IN THE CONTEXT OF THE ADDITION U/S. 153A. THESE ARE OLD CASE LAWS PRIOR TO THE INSERTION OF SECTION 153A. THE LD. CIT(A) IS EVEN MENTIONING THAT EVEN IF THE ADDITION IS BASED UPON THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE SAME SHOULD NOT BE DONE AS THE A.O. HAS NOT BEEN ABLE TO PROVE THAT WHAT IS RECORDED IN THE BOOKS AS PER ASSESSEES AFTERTHOUGHT HAS ACTUALLY BEEN REALIZED BY THE ASSESSEE. TH I S, IN OUR CONSIDERED O PINION, IT IS TOTALLY UNSUSTAINABLE IN LAW. ACCORDINGLY, IN THE BACKGROUND OF THE AFORE - SAID DISCUSSION AND PRECEDENT, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE A.O. APROPOS DELETION/ADDITION OF RS.1.81 CRORES: 26. ON THIS ISSUE, THE A.O. MADE THE ADDITION ON THE BASIS OF MATERIAL FOUND DURING SEARCH. HE OBSERVED THAT W ITH REGARDS TO NOTINGS, IT HAS BEEN STATED BY THE ASSESSEE ON THE 20 M/S. SUNIL MANTRI REALTY LTD. DATE OF SEARCH AND DURING THE POST SEARCH PROCEEDINGS THAT THE SAME WERE RELATED TO THE ASSESSEE'S PROPOSED DEVELOPMENT PROJECT AT WALKESHWAR, MUMBAI. A . O . F U R T H E R O B S E R V E D A S U N D E R : THE FIGURES GIVEN THEREIN INDICATED THAT THE TENANTS WERE TO BE SETTLED FOR THE AMOUNT OF RS.9,01,00,000/ - AND THE FACILITATORS WERE TO BE PAID 16.05 CRORES. HOWEVER, THE FIGURE INDICATED IN THE PAGE 85 IS RS. 26.87 CRORES. THE APPLICATION TO THE BANK FOR ISSUE OF PAY ORDER/DD ALSO INDICATED ONLY THE AMOUNT TOTALING TO RS.25.06 CRORES, LEAVING AN AMOUNT OF RS.1.81 CRORES UNEXPLAINED. NO ADDITIONAL EVIDENCES OR MATERIAL HAVE BEEN SUBMITTED OR FURNISHED IN T HIS REGARD AND THE STAND TAKEN BY THE ASSESSEE COMPANY'S CMD THAT THIS WAS PROPOSED PROJECT AND PAYMENTS INDICATED IN THE BANKING DOCUMENTS ARE CORRECT, CANNOT BE ACCEPTED ON THE FACE VALUE AND HENCE THE DIFFERENCE OF RS.1.81 CRORES IS ADDED TO THE INCOME OF THE ASSESSEE COMPANY AS UNEXPLAINED INVESTMENT UNDER THE PROVISIONS OF SECTION 69 OF THE ACT. UPON THE ASSESSEE'S APPEAL, THE LD. CIT - A DELETED THE ADDITION HOLDING THAT THE ASSESSEE MIGHT HAVE FURTHER NEGOTIATED WITH THE PAYEES AND SETTLED FOR A LESSER AMOUNT THAN THAT WHICH WAS APPARENT FROM THE SEIZED MATERIAL. HE FURTHER OBSERVED THAT THE ASSESSING OFFICER SHOULD HAVE BROUGHT FURTHER MATERIAL THAT ASSESSEE HAS PAID THE IMPUGNED SUMS FROM OTHER SOURCES. 27. AGAINST THE ABOVE ORDER , THE R EVENUE IS IN APPEAL BEFORE US. 28. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT DOCUMENTS INCRIMINATING IN NATURE WERE FOUND IN THE SEARCH. FROM THE MATERIALS REFERRED BY THE ASSESSING OFFICER HERE - IN - ABOVE IT WAS CLEAR THAT A SUM OF RS.1.81 C RORES HAS BEEN PAID WHICH HAS NOT BEEN ACCOUNTED FOR. THE LD. CIT - A HAS DELETED THE ADDITION BY MAKING CONJECTURES THAT ASSESSEE MIGHT HAVE MADE FURTHER NEGOTIATIONS WITH THE PAYEES AND 21 M/S. SUNIL MANTRI REALTY LTD. SETTLED THE MATTER FOR AN AMOUNT LESS THAN RS. 1.81 CRORES. IN OUR CONSI DERED OPINION , THE ONUS WAS UPON THE ASSESSEE TO PROVE THIS IN VIEW OF THE MATERIALS FOUND DURING SEARCH AND THE PRESUMPTIONS ARISING OUT OF PROVISIONS OF SECTION 132(4A). INSTEAD THE LEARNED CIT - A HAS PUT THE ONUS ON ASSESSING OFFICER TO PROVE THAT THE IM PUGNED SUM WAS PAID BY OTHER MEANS BY THE ASSESSEE. IN OUR CONSIDERED OPINION , THE ACTION OF THE LEARNED CIT - A IS CLEARLY CONTRARY TO THE MANDATE OF PROVISIONS OF SECTION 132(4A) AND THE INCRIMINATING DOCUMENTS FOUND. HENCE , WE SET ASIDE THE ORDER OF LEARN ED CIT - A AND RESTORE THAT OF THE ASSESSING OFFICER . 29. IN THE RESULT, THE REVENUES APPEAL FOR A.Y. 2008 - 09 IS ALLOWED. ASSESSEES CROSS OBJECTION S : 30 . AT THE OUTSET, IT IS NOTICED THAT THERE IS A DELAY OF 662 DAYS FOR A.Y. 2007 - 08 AND 613 DAYS FOR A.Y. 2008 - 09 RESPECTIVELY IN FILING TH E S E APPEAL S BY THE ASSESSEE. AN AFFIDAVIT HAS BEEN FILED BY THE DIRECTOR OF THE COMPANY WHICH STATES THAT ON RECEIPT OF LD. CIT(A)S ORDER, THE SAME WAS HANDED OVER ALONG WITH THE RELEVANT DOCUMENT TO PREVIOUS CONS ULTANT SHRI ANIL JAIN, CHARTERED ACCOUNTANT WITH AN INSTRUCTION TO FILE A SECOND APPEAL. THAT PAPER IN THE SAID CAS OFFICE GOT MISPLACED. THAT LATER ON WHILE COMPILING THE PAPER BOOK BEFORE THE ITAT, THE COUNSEL SHRI PRAKASH JHUNJHUNWALA, C.A. ASKED FOR A COPY OF THE ASSESSEES APPEAL, THEN IT CAME TO NOTICE THAT THE PREVIOUS CONSULTANT HAS NOT FILED THE APPEAL. HENCE, IMMEDIATELY THE APPEAL WAS FILED WITH A DELAY OF 614 DAYS. FURTHERMORE, AN AFFIDAVIT FROM SHRI ANIL JAIN, CA IS ALSO BROUGHT ON RECORD. IN THE SAID AFFIDAVIT, THE A.O. MENTIONS THAT DUE TO WORK LOAD, THE FILING OF THE APPEAL WAS DEFERRED 22 M/S. SUNIL MANTRI REALTY LTD. FOR FEW DAYS AND THE DOCUMENT GOT MIXED UP DUE TO WHICH THE SECOND APPEAL BEFORE THE ITAT WAS NOT FILED BY HIS OFFICE. 31 . WE HAVE HEARD BOTH THE COUNSEL A ND PERUSED THE RECORDS. ON THE ISSUE OF THE CONDONATION OF THE DELAY, FIRST OF ALL WE NOTE THAT IT IS CLAIMED BY THE ASSESSEE THAT H I S CONSULT ANT CA HAS MISPLACED THE PAPERS AND WHEN THE APPEAL WAS PREPARED BY ANOTHER CONSULTANT SHRI PRAKASH JHUNJHUNWALA, CA, THE MATTER C A ME TO LIGHT THAT THE APPEAL BEFORE THE ITAT HAS NOT BEEN FILED. 32. IN THIS REGARD , IN THE AFFIDAVIT OF SAID SHRI ANIL JAIN, CA, WE FIND THAT THERE IS ONLY MENTION OF DEFERMENT OF FEW DAYS IN FILING THE APPEAL AND ACCEPTANCE THAT THE APP EAL WAS NOT FILED BY HIS OFFIC E. HIS AFFIDAVIT BY NO STRETCH OF IMAGINATION CAN BE SAID TO BE SUPPORTING THE DELAY OF 615 DAYS. FURTHERMORE , THE VERACITY OF THE ASSESSEES STATEMENT IS ITSELF NOT ACCEPTABLE. THE ASSESSEE S CLAIM THAT THE DELAY CA ME TO LIGHT WHEN HIS CONSULTANT SHRI PRAKASH JHUNJHUNWALA, CA WAS PREPARING THE PAPER BOOK FOR APPEAL BEFORE THE ITAT. WE NOTE THAT IN THE LD. CIT(A) S ORDER, THE ASSESSEE WAS REPRESENTED BY SHRI PRAKASH JHUNJHUNWALA, CA. HENCE, THE PLEA THAT ANOTHER CONSU LTANT WAS THERE TO FILE THE APPEAL AND SHRI PRAKASH JHUNJHUNWALA, CA C A ME TO KNOW THE SAME SUBSEQUENTLY, IS NOT AT ALL ACCEPTABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE NARRATED AND FOUND HEREINABOVE. HENCE, WE DO NOT FIND ANY COGENCY IN THE REASONABLE CAUSE ATTRIBUTED. HENCE, THE ASSESSEES CO IS DISMISSED IN LIMINE BEING TIME BARRED. 23 M/S. SUNIL MANTRI REALTY LTD. 33 . IN THE RESULT, THE APPEAL S FILED BY THE REVENUE ARE AL LOWED AND THE ASSESSEES APPEALS STANDS DISMISSED IN LIMINE. ORDER PRONOUNCED IN THE OPEN COURT ON 2 8 . 1 2 . 2 0 1 8 S D / - S D / - ( RAM LAL NEGI ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 8 . 1 2 . 2 0 1 8 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI