D.C.I.T. CENT. CIR. - 4(1), CENTRAL RANGE - 4, Mumbai V. SHRI HIMMATLAL GOPAL PATEL SENGHANI, Mumbai

ITA 688/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9097 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2015-2016
• Appeal Filed On: 05-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S. YADAGIRI
• Assessee Lawyers: RISHABH S HAH
• Keywords: Unexplained expenditure; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Corroborative evidences; Onus to prove; Documents seized
• Section: 64; 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI M.BALAGANESH, AM & SHRI AMARJIT SINGH, JM ITA NO. 688 /MUM/201 8 ( ASSESSMENT YEAR : 2015 - 16 ) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 4(1), R.NO.1916, 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI 400 021 VS. SHRI HIMMATLAL GOPAL PATEL SENGHANI B - 3/1104, LOK EVEREST CHS, JSD ROAD, MULUND, MUMBAI 400 080 PAN/GIR NO. ABAPP6619H (APPELLANT ) .. (RESPONDENT ) CO NO.71/MUM/2019 (ARISING OUT OF ITA NO. 688 /MUM/2 01 8) ( ASSESSMENT YEAR : 2015 - 16 ) SHRI HIMMATLAL GOPAL PATEL SENGHANI B - 3/1104, LOK EVEREST CHS, JSD ROAD, MULUND, MUMBAI 400 080 VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 4(1), R.NO.1916, 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI 400 021 PAN/GIR NO. ABAPP6619H (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI S. YADAGIRI ASSESSEE BY SHRI RISHABH SHAH DATE OF HEARING 20 / 06 /2019 DATE OF PRONOUNCEMENT 10 / 07 /2019 / O R D E R PER M. BALAGANESH (A.M) : ITA NO .688/MUM/2018 & CO NO.71/MUM/2019 SHRI HIMMATLAL GOPAL PATEL SENGHANI 2 THIS APPEAL IN ITA NO. 688/MUM/2018 & CO NO.71/MUM/2019 FOR A.Y. 2015 - 16 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 52, MUMBAI IN APPEAL NO. CIT(A) - 52/IT - 368/DCIT - 4(1)/2016 - 17 DATED 03 /11/2017 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 30/12/2016 BY THE LD. DY.COMMISSIONER OF INCOME TAX 4(1), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). SINCE I DENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATE ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE ONLY ISSUE TO BE DECIDED IN THESE TWO APPEALS IS AS TO WHETHER THE ADDITION OF RS.8,70,00,00 0/ - COULD BE MADE IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE HANDS OF THE ASSESSEE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF CIVIL CONTRACT AND LABOUR CONTRACT. THE ASSESSEE HAD FILED ITS R ETURN OF INCOME IN THE A.Y.2015 - 16 ON 27/05/2016 DECLARING TOTAL INCOME OF RS.1,12,82,240/ - . THE ASSESSEE IS RUNNING A PROPRIETARY CONCERN IN THE NAME AND STYLE OF M/S. M.J. CONSTRUCTION AND SENGHANI ASSOCIATES. 3.1. A SEARCH AND SEIZURE ACTION WAS CARRIE D OUT U/S.132 OF THE ACT IN THE RUNWAL GROUP OF CASES AND ASSESSEE BEING A LABOUR CONTRACTOR OF RUNWAL GROUP WAS ALSO COVERED IN THE SAID SEARCH ACTION. IN THE COURSE OF SAID SEARCH ACTION CARRIED OUT IN THE PREMISES OF THE ASSESSEE, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED WHEREIN IT WAS NOTICED THAT CERTAIN UNACCOUNTED PAYMENTS MADE IN CASH BY THE ASSESSEE WERE ITA NO .688/MUM/2018 & CO NO.71/MUM/2019 SHRI HIMMATLAL GOPAL PATEL SENGHANI 3 FOUND. THE ASSESSEE EXPLAINED AT THE TIME OF SEARCH ITSELF IN THE FORM OF STATEMENT THAT THE SOURCE OF THESE UNACCOUNTED PAYMENTS ARE UNACCOUNTED RECEIPTS OF RS.8,70,00,000/ - FROM M/S. RUNWAL DEVELOPERS PVT. LTD., FOR THE CONTRACT WORK CARRIED OUT FOR THEM. IN OTHER WORDS, IN THE COURSE OF SEARCH OF THE ASSESSEE UNACCOUNTED LABOUR PAYMENTS IN CASH TO THE EXTENT OF RS.8,70,00,000/ - WAS F OUND, FOR WHICH THE ASSESSEE EXPLAINED THE SOURCE AS UNACCOUNTED RECEIPTS FOR THE VERY SAME AMOUNT OF RS.8,70,00,000/ - FROM RUNWAL DEVELOPERS PVT. LTD. THE ASSESSEE ALSO STATED BEFORE THE LD. AO THAT THE SEIZED DOCUMENTS IN THE FORM OF LISTED PAPER COMPONE NT LABOUR PAYMENTS MADE IN CASH WERE FOUND FOR THE WHOLE AMOUNT OF RS. 8,70,00,000/ - AT THE TIME OF SEARCH. DESPITE THE FACT THE ASSESSEE CAME FORWARD TO STATE IN HIS STATEMENT RECORDED DURING SEARCH THAT HE HAD RECEIVED A SUM OF RS.8,70,00,000/ - IN CASH F ROM RUNWAL DEVELOPERS PVT. LTD. AND HAD PASSED ON THE SAME AS LABOUR PAYMENTS IN CASH FOR THE VERY SAME SUM OF RS.8,70,00,000/ - . IN OTHER WORDS, THE ASSESSEE HAS STATED THAT HE HAD MERELY ACTED AS POST OFFICE IN THIS REGARD AND THERE IS NO QUESTION OF ANY INCOME IN HIS HANDS FOR THE SAID TRANSACTION. THE LD. AO HOWEVER, DID NOT CONSIDER THE STATEMENT OF THE ASSESSEE AND TREATED THE ENTIRE GROSS SUM OF RS.8,70,00,000/ - AS UNDISCLOSED INCOME OF THE ASSESSEE AND ADDED THE SAME TO THE TOTAL INCOME IN THE ASSESS MENT. 3.2. BEFORE THE LD. CIT(A), THE ASSESSEE ARGUED THAT THE LD. AO HIMSELF HAD QUOTED AND RELIED UPON THE STATEMENT GIVEN BY THE ASSESSEE WHEREIN ASSESSEE HAD CONFIRMED THAT THE PAGE NOS. 36 TO 64 OF ANNEXURE A1 I.E. SEIZED PAPERS RELATE TO THE PAYMENT MADE TO THE LABOURERS AND LABOUR CONTRACTORS. THE ASSESSEE HAD ALSO CONFIRMED THAT HE HAD RECEIVED TOTAL AMOUNT OF RS.8,70,00,000/ - IN CASH AS GROSS RECEIPTS FOR WORK DONE FOR RUNWAL GROUP AND HAD PAS SED ON THE SAME AS LABOUR PAYMENTS FOR THE CONTRACT WORK EXECUTED ON BEHALF OF RUNWAL GROUP. IT WAS PLEADED THAT ITA NO .688/MUM/2018 & CO NO.71/MUM/2019 SHRI HIMMATLAL GOPAL PATEL SENGHANI 4 THIS SUBMISSION OF THE ASSESSEE WAS MADE IN THE FORM OF A STATEMENT RECORDED DURING THE COURSE OF SEARCH AND IT WAS ACCEPTED BY THE SEARCH TEAM WHICH IS EVIDENT FROM THE FACT THAT NO FURTHER QUESTION S WERE POSTED BY THE SEARCH TEAM ON THE ASSESSEE. IT WAS PLEADED THAT ONCE THE SAME HAS BEEN ACCEPTED AS GENUINE BY THE SEARCH TEAM, THE LD. AO OUGHT NOT TO HAVE TAKEN A DIVERGENT STAND AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE TREATED THE SAME AS P AYMENTS MADE OUT OF UNDISCLOSED INCOME BY THE ASSESSEE. THE ASSESSEE ALTERNATIVELY PLEADED BEFORE THE LD. CIT(A) THAT HE BEING A CIVIL CONTRACTOR PROFIT FROM THE UNACCOUNTED CONTRACT RECEIPTS OF RS.8,70,00,000/ - ALONE COULD BE ESTIMATED AT THE RATE OF 8% A ND A SUM OF RS.69.60 LAKHS MAY BE ADDED AS UNACCOUNTED INCOME OF THE ASSESSEE. IT WAS ALSO PLEADED BY THE ASSESSEE THAT IN THE LINE OF BUSINESS OF LABOUR CONTRACTOR, LABOURERS HAVE TO BE PAID ON A PERIODIC BASIS WHICH IS NORMALLY WEEKLY / DAILY AND IF TH E LABOUR CONTRACTOR S ARE NOT PAID IN TIME BY THE CLIENT, LABOURERS CANNOT BE PAID IN TIME AND THIS MAY RESULT IN STOPPAGE OF WORK. SO, THE CLIENTS OF LABOUR CONTRACTORS ENSURE THAT PAYMENTS TO THE LATTER ARE NOT DELAYED. ACCORDINGLY, THE CLAIM OF THE ASSES SEE MADE IN HIS STATEMENT ON OATH AT THE TIME OF SEARCH ACTION THAT M/S. RUNWAL DEVELOPERS LTD., HAD MADE CONTRACT PAYMENTS IN CASH AS PER TEMPORARY ARRANGEMENT WITH THE ASSESSEE CANNOT BE REJECTED UNLESS THERE IS SOME SPECIFIC EVIDENCE TO SHOW OTHERWISE. THE LD. CIT(A) OBSERVED THAT RUNWAL GROUP IN THE HANDS OF M/S RDPL HAS OFFERED AMOUNTS OF RS. 7,36,15,000 / - , RS. 6,69,62,205 / - AND RS. 1,25,00,000 / - FOR TAXATION AS ADDITIONAL INCOME ON ACCOUNT OF UNDISCLOSED SALES OF SHOPS, RESIDENTIAL PREMISES ETC. IN IT S PROJECT 'RUNWAL ANTHURIUM' FOR A.YS. 2014 - 15 AND 2015 - 16 RESPECTIVELY. M/S RDPL HAS NOT RETRACTED FROM THE SAID DISCLOSURE EXCEPT THAT IT CLAIMS THAT THE SAID AMOUNT OF ON - MONEY IS TAXABLE IN THE YEAR WHEN THE FLATS/SHOPS ARE SOLD AND REVENUE IS RECOGNIZ ED. THUS, M/S. RDPL WAS IN POSSESSION OF AGGREGATE FUNDS TO THE ITA NO .688/MUM/2018 & CO NO.71/MUM/2019 SHRI HIMMATLAL GOPAL PATEL SENGHANI 5 TUNE OF RS. 15,30,77,205/ - (RS. 7,36,15,000 + RS. 6,69,62,205 + RS. 1,25,00,000) FROM THE PROJECT 'RUNWAL ANTHURIUM TILL THE RELEVANT ASSESSMENT YEAR, WHICH AGAIN CORROBORATES THE CLAIM OF THE ASSESSEE THAT AN AMOUNT OF RS. 8.7 CRORES HAS BEEN RECEIVED IN CASH FROM M/S. RDPL ON ACCOUNT OF CONTRACT WORK CARRIED OUT BY HIM FOR M/S. RDPL. FROM THE AFORESAID DISCUSSION, I FIND NO BASIS FOR THE REJECTION BY THE AO OF THE CLAIM OF THE ASSESSEE THAT T HE SOURCE OF THE UNEXPLAINED EXPENDITURE OF RS. 8.7 CRORES IS OUT OF THE UNACCOUNTED CONTRACT RECEIPTS IN CASH FROM M/S. RDPL. FURTHER, THE LD. CIT(A) OBSERVED THAT THE GROSS PROFIT EARNED BY THE ASSESSEE FOR THE PRECEDING THREE YEARS IN THE RANGE OF 11.6% TO 15.4%. HE OBSERVED THAT THIS GROSS PROFIT FOR THE LAST THREE YEARS SHOULD BE TAKEN AS A BASIS FOR PERMITTING THE ADDITION IN RESPECT OF THIS SUM OF RS.8.70 CRORES AND ACCORDINGLY, ADOPTED THE RATE OF 16% AS GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION AND APPLIED THE SUM OF RS.8,70,00,000/ - AND MADE AN ADDITION OF RS.1,39,20,000/ - THEREON. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS. THE PRIMARY FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE, THE SAME A RE NOT REITERATED HEREIN FOR THE SAKE OF BREVITY. WE FIND FROM THE STATEMENT RECORDED ON OATH AT THE TIME OF SEARCH, THE ASSESSEE HAD CLEARLY INFORMED THAT HE HAD RECEIVED UNACCOUNTED CONTRACT RECEIPTS OF RS.8.70 CRORES. FURTHER, IN THE COURSE OF SEARCH AC TION, PAPERS WERE ALSO SEIZED WHICH SHOWED THAT ASSESSEE HAD INCURRED UNACCOUNTED CASH EXPENSES WHILE CARRYING OUT THE CONTRACT WORK. THE ASSESSEE IN HIS STATEMENT SUBMITTED THAT THE SAID UNACCOUNTED CASH PAYMENTS WERE TO THE TUNE OF RS.8.70 CRORES WHICH W ERE RECEIVED IN CASH FROM RUNWAL DEVELOPERS LTD., BY THE ASSESSEE. HENCE, THE SOURCE FOR MAKING CASH PAYMENTS IS DULY EXPLAINED BY THE ASSESSEE AT THE TIME OF SEAR CH ITSELF BY WAY OF STATEMENT ON OATH. WE ALSO FIND THAT IN THE COURSE OF SEARCH ACTION, THE ASSESSEE WAS EXAMINED, ITA NO .688/MUM/2018 & CO NO.71/MUM/2019 SHRI HIMMATLAL GOPAL PATEL SENGHANI 6 IN PAGES 36 - 64 OF ANNEXURE - A1(SEIZED DOCUMENT), WHEREIN THE STATEMENT IN RESPONSE TO QUESTION NOS.13 & 14 WERE STATED AS UNDER: - Q.13 PLEASE GO THROUGH PAGE NO. 36 TO 64 OF ANNEXURE A1 AND COMMENT ON THE SAME. ANS. THESE PAGES CONT AIN THE DETAILS OF PAYMENTS MADE TO LABOURERS AND LABOUR CONTRACTORS FOR VARIOUS PROJECTS. PAYMENTS TO LABOURERS ARE MADE IN CASH WHEREAS PAYMENTS TO SUB - CONTRACTORS ARE MADE IN CHEQUE. Q.14 PLEASE GIVE EXACT DETAIL AND SOURCE OF CASH PAYMENTS MADE TO THE LABOURERS. ANS. SIR, IN CASE OF ALL THE WORKS BEING EXECUTED, SOURCE OF CASH PAYMENT IS WITHDRAWAL FROM BANK WHICH ARE DULY REFLECTED IN MY BOOKS OF ACCOUNTS. BUT, IN CASE OF PROJECT ' RUNWAL ANTHURIUM' BEING DEVELOPED BY M/S. RUNWAL DEVELOPERS P. LTD., MAJOR SOURCE OF CASH PAYMENT IS CASH RECEIVED FROM RUNWAL GROUP AGAINST CONTRACT WORK DONE BY US AS THEY HAD NO BANK BALANCE TO CLEAR OUR BILLS THROUGH OFFICIAL BANKING CHANNELS. AN INFORMAL ARRANGEMENT WAS REACHED BETWEEN US AND RUNWAL GROUP EMPLOYEE SUJM ATA RAO THAT AS SOON AS THEY WILL GET FUNDS, THE BILLS RAISED AGAINST THE CONTRACT WILL BE CLEARED AND AFTER ENCASHMENT, THE CASH WILL BE RETURNED TO THEM. TILL DATE, WE HAVE RECEIVED TOTAL AMOUNT OF RS. 8.70 CRORE IN CASH AGAINST BILLS RAISED BY M/S. M.J. CONSTRUCTION AND M/S. SENGHANI ASSOCIATES. THESE AMOUNTS WERE COLLECTED ON DIFFERENCE OCCASION IN LAST ONE YEAR BY MY SON MR. SANJAY SENGHANI FROM MISS SUJATA RAO, EMPLOYEE OF RUNWAL GROUP. ONCE, OUR BILLS ARE CLEARED, WE ARE SUPPOSED TO RETURN THE CASH A MOUNT TO RUNWAL GROUP'. 5.1. WE FIND THAT THE LD. DR VEHEMENTLY ARGUED THAT RUNWAL GROUP HAD CATEGORICALLY DENIED HAVING GIVEN IN CASH IN THE SUM OF RS.8.70 CRORES TO THE ASSESSEE. HE ALSO ARGUED THAT THERE WAS NO CONFIRMATION FROM RUNWAL GROUP THAT WAS FILED BY THE ASSESSEE TO JUSTIFY HIS STATEMENT RECORDED ON OATH. WE FIND THAT THE ASSESSEE HAD SUBMITTED PAGES 46 & 47 OF ANNEXURE A1 SEIZED FROM HIS RESIDENCE AT THE TIME OF SEARCH WHICH CONTAINS THE DETAILS OF THE BILLING FOR THE PROJECT RUNWAL ANTHURIU M. IT WAS SUBMITTED THAT AS PER THESE PAGES, THE TOTAL CONTRACT WORK , BILLING HAS BEEN CARRIED OUT FOR AN AMOUNT OF RS.9,53,44, 921/ - WHICH COMPRISED OF CERTIFIED WORK OF RS.3,06,43,683/ - AND PROFORMA INVOICES RAISED OF ITA NO .688/MUM/2018 & CO NO.71/MUM/2019 SHRI HIMMATLAL GOPAL PATEL SENGHANI 7 RS.63,16,291/ - . THE ASSESSEE FURTHER SUBMITTED BEFORE THE LD. CIT(A) THAT AGAINST THE PROFORMA INVOICE RAISED, M/S. RUNWAL DEVELOPERS PVT. LTD., HAD MADE UNACCOUNTED PAYMENTS TO HIM IN CASH. WE FIND THAT THE LD. DR VEHEMENTLY ARGUED THAT RUNWAL DEVELOPERS HAD OFFERED ON - MONEY RECEIVED FROM C USTOMERS BY THEM FOR A.Y.2014 - 15 AND 2015 - 16 FOR THIS SPECIFIC ANTHURIUM PROJECT AND NOT FOR THE LABOUR PAYMENTS MADE IN CASH AND ACCORDINGLY ARGUED THAT OFFER MADE IN THE HANDS OF THE RUNWAL DEVELOPERS PVT. LTD., HAS GOT NOTHING TO DO WITH THE ADDITION MADE IN THE SUM OF RS.8.70 CRORES IN THE HANDS OF THE ASSESSEE. PER CONTRA WE FIND THAT THE LD. AR PLACED ON RECORD THE COPY OF THE ASSESSMENT ORDER FRAMED IN THE HANDS OF M/S. RUNWAL DEVELOPERS PVT. LTD., U/S.143(3) OF THE ACT DATED 30/12/2016 FOR THE A.Y .2015 - 16 WHEREIN AFTER ELABORATE DISCUSSION WITH REGARD TO THE RECEIPTS AND PAYMENTS OF RUNWAL ANTHURIUM PROJECT TOGETHER WITH STATEMENTS RECORDED DURING THE COURSE OF SEARCH THEREON FROM VARIOUS AUTHORITIES, THE LD. AO HAD DED ICA TED SPECIFIC PARAGRAPHS VIDE PARAS 8.1 TO 8.6 GIVING CATEGORICAL FINDINGS IN THE CASE OF SHRI HIMMATBHAI SENGHANI (ASSESSEE HEREIN BEFORE US). THE RELEVANT FINDINGS OF THE ASSESSING OFFICER OF RUNWAL DEVELOPERS PVT. LTD., WITH REGARD TO THE ASSESSEE HEREIN ARE AS UNDER: - 8. FINDINGS IN THE CASE OF SHRI HIMMATBHAI SENQHANI 8.1 SHRI HIMMATDTIAT SENGHANI: ONE OF THE LABOUR CONTRACTOR FOR THE RUNWAL GROUP WAS ALSO COVERED UNDER SEARCH AND SEIZURE ACTION. SHRI HIMMATBHAI SENGHANI IS RUNNING PROPRIETARY CONCERN IN THE NAME & S TYLE M/S. M.J. CONSTRUCTION AND SENGHANI ASSOCIATES. FROM THE RESIDENCE PREMISE OF SHRI HIMMATBHAI SENGHANI CERTAIN LOOSE PAPERS WERE SEIZED. THE PAPERS CONTAIN DETAILS OF LABOUR PAYMENT MADE IN CASH. SHRI HIMMATBHAI SENGHANI WAS CONFRONTED WITH THE SAME. THE RELEVANT EXTRACT OF HIS STATEMENT RECORDED UNDER OATH IS REPRODUCED HEREUNDER: Q. 13 'PLEASE GO THROUGH PAGE NO, 36 TO 64 OF ANNEXURE - A1 ,AND COMMENT ON THE SAME. ITA NO .688/MUM/2018 & CO NO.71/MUM/2019 SHRI HIMMATLAL GOPAL PATEL SENGHANI 8 ANS. THESE PAGES CONTAIN THE DETAILS OF PAYMENTS MADE TO LABOURERS AND LABOUR CONTRACTOR S FOR VARIOUS PROJECTS. PAYMENTS TO LABOURERS ARE MADE IN CASH WHEREAS PAYMENTS TO SUB - CONTRACTORS ARE MADE IN CHEQUE. Q.14 PLEASE GIVE EXACT DETAIL AND SOURCE OF CASH PAYMENTS MADE TO THE LABOURERS. ANS. SIR, IN CASE OF ALL THE WORKS BEING EXECUTED, SOURCE OF CASH PAYMENT IS WITHDRAWAL FROM BANK WHICH ARE DULY REFLECTED IN MY BOOKS OF ACCOUNT BUT IN CASE OF PROJECT RUNWAL ANTHURIUM BEING DEVELOPED BY RUNWAL DEVELOPERS PVT. LTD. THE MAJOR SOURCE OF CASH PAYMENT IS CASH RECEIVED FROM RUNWAL GROUP AGAINS T CONTRACT WORK DONE BY US AS THEY HAD NO BANK BALANCE TO CLEAR OUR BILLS THROUGH OFFICIAL BANKING CHANNELS. AN INFORMAL AGREEMENT WAS REACHED BETWEEN US AND THE RUNWAL GROUP, THE BILLS RAISED AGAINST THE CONTRACT WILL BE CLEARED AND AFTER ENCASHMENT, CASH WILL BE RETURNED TO THEM. TILL DATE WE HAVE RECEIVED TOTAL AMOUNT OF RS. 8.70 CRORES IN CASH AGAINST BILLS RAISED BY M/S. M.J. CONSTRUCTION AND M/S. SENGHANI ASSOCIATES. 8.2 SHRI HIMMATBHAI SENGHANI HAS THUS ACCEPTED THAT CASH PAYMENT HAS BEEN RECEIVED FROM M/S. RUNWAL DEVELOPERS PVT. LTD. TO THE TUNE OF RS. 8.7 CRORES. FURTHER IT HAS BEEN STATED THAT IT IS A TEMPORARY ARRANGEMENT AND WAS TO BE REVERSED AS SOON AS THE CHEQUE AMOUNT WAS REALIZED FROM THE RUNWAL GROUP. THE AMOUNT OF RS. 8.7 CRORES HAS NOT BEEN ACCOUNTED IN THE BOOKS OF ACCOUNT OF SHRI HIMMATBHAI SENGHANI 8:3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS BEEN ASKED TO EXPLAIN WHETHER ANY PAYMENT HAS BEEN MADE TO SHRI HIMMATBHAI SENGHANI, PROP, OF M/S. M.J. CONSTRUCTION AND S ENGHANI ASSOCIATES IN THE F.Y. 2014 - 15 (SEARCH YEAR) RELEVANT TO A.Y.2015 - 16. THE REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED AS UNDER : - SHRI. HIMMATBHAI SENGHANI - RUNWAL DEVELOPERS PVT. LTD - CASH PAYMENT SHRI.. HIMMATBHAI SENGHANI IS A LABOUR CONTRA CTOR FOR THE RUNWAL GROUP. HE IS EXECUTING HIS CONTRACTS UNDER HIS PROPRIETORSHIP CONCERN RUNNING UNDER THE NAME OF M/S. M. J. CONSTRUCTION. IN HIS RESPECT, YOU HAVE SOUGHT / ASKED FOR THE FOLLOWING: YOUR GOODSELF HAS ALLEGED THAT HAS ADMITTED TO RECEIVIN G A S UM OF RS.8.70 CRORES FROM RUNWAL GROUP FOR WORK DONE, THE SAID PAYMENT BEING UNACCOUNTED AND RECEIVED IN CASH. IN THIS RESPECT WE HAVE TO SUBMIT AS UNDER : ITA NO .688/MUM/2018 & CO NO.71/MUM/2019 SHRI HIMMATLAL GOPAL PATEL SENGHANI 9 AT THE ONSET, WE HAVE TO HUMBLY SUBMIT THAT THE ASSESSEE GROUP IS NOT AWARE OF ANY SUCH ADMISSI ON BY THE SAID MR.HIMMATBHAI PATE L . IN CASE OF ANY SUCH ADMISSION MADE BY HIM, WE REQUEST YOU TO KINDLY SHARE A COPY OF HIS STATEMENT RECORDED UNDER OATH FOR THE SAME AND ALSO PROVIDE THE CORROBORATIVE EVIDENCES FOR THE SAME THAT MAY HAVE BEEN FOUND OR COL LECTED. THE ASSESSEE GROUP WAS NEVER SHOWN OR CONFRONTED WITH ANY SUCH ADMISSION BY THE SAID MR. HIMMATBHAI PATE L DURING THE COURSE OF THE SEARCH PROCEEDINGS. WE HUMBLY ALSO SUBMIT ON THEIR BEHALF THAT AN OPPORTUNITY MAY KINDLY BE GRANTED FOR THE CROSS EXA MINATION OF THE SAID MR.HIMMATBHAI PATEL IN CASE HE HAS ACTUALLY MADE SUCH AN ADMISSION. ' WHILE THEY CONFIRM THAT HE IS ONE OF THE CONTRACTORS TO WHOM CERTAIN LABOUR / CONSTRUCTION CONTRACTS FOR THE VARIOUS PROJECTS HAVE BEEN AWARDED, HOWEVER, THEY ALSO CONFIRM THAT ALL THE PAYMENTS TO THE SAID PERSON WERE ONLY BY ACCOUNT PAYEE CHEQUES AND AFTER DULY DEDUCTING TAXES AS APPLICABLE. THERE WERE NO PAYMENTS MADE BY THE ASSESSEE GROUP TO THEM WHICH ARE PAID IN CASH OR ARE UNACCOUNTED OR PAID THROUGH ANY UNEXPL AINED SOURCES FOR THAT MATTER.' 8.4 ON THE SUBSEQUENT QUERY TO THE ISSUE OF PAYMENT MADE TO SHRI HIMMATBHAI SENGHANI, THE REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED EXPLANATION WHICH READS AS U NDER : - THE PRESENT SUBMISSIONS ARE BEING MADE WITHOUT PREJUDICE TO THE FACT OF THE ASSESSEE ANY VEHEMENTLY DENYING ANY UNACCOUNTED PAYMENT MADE TO SHRI HIMMATLA L SENGHANI ALIAS SHRI HIMMMAT PATEL AS MENTIONED IN THE PAST SUBMISSIONS MADE BY THEM BEFORE YOUR GOODSELF IN THE PAST HEARINGS HAD WITH YOU. IT WOUL D HAVE TO BE APPRECIATED THAT IN CASE IT IS STILL BEING ALLEGED BY YOUR GOODSE L F THAT THE WHAT HAS BEEN STATED BY THE SAID SHRI HIMMATBHAI SENGHANI MAY BE TRUE AND IN CASE YOUR GOODSEL F PROCEEDS TO FRAME ANY ADDITION ON ACCOUNT OF THE SAME, PL EASE NOTE THA T WHILE THE SAME W OUL D BE INCORRECT OWING TO THE REASONS ALREADY PROVIDED TO - YOUR GOODSELF, IN CASE THE RECEIPTS ARE BEING CONSIDERED TO BE ON MONEY TAKEN BY THE ASSESSEE COMPANY, THEN THE CREDIT TOWARDS THE EXPENSES SHOULD ALSO BE DULY GRANTED SINCE - THE S AME HAVE BEEN INCURRED FROM THE SAME SAID SOURCE. FURTHER, THE CREDIT TOWARDS THE CONSTRUCTION COSTS INCURRED BY THE ASSESSES AS NOTED IN THE WORKING WOULD A/SO HAVE TO BE GRANTED SINCE THE SAME ARE ALLOWABLE COSTS . 8.5 THE SUBMISSION / EXPLAN ATION OF TH E ASSESSES HAS BEEN EXAMINED AND FOUND THAT THE SAME CANNOT BE ACCEPTED ON THE FACTS OF THE CASE. SHRI HIMMATBHAI SENGHANI IS WORKING AS A LABOUR CONTRACTOR W I TH THE RUNWAL GROUP. FROM THE SUBMISSION OF THE ASSESSES IT APPEARS THAT THE ITA NO .688/MUM/2018 & CO NO.71/MUM/2019 SHRI HIMMATLAL GOPAL PATEL SENGHANI 10 ASSESSES WANTS TO CR OSS EXAMINE THE WITNESS I.E. SHRI HIMMATBHAI SENGHANI AS IF HE IS NOT KNOWN TO THE ASSESSES AND IS STAYING FAR OFF. THE ASSESSES IS TRYING TO SHIFT ITS BURDEN TO PROVE THE GENUINENESS OF ITS CASH TRANSACTION. RELIANCE IS PLACED ON JUDGEM E NT OF THE GUJARAT HIGH COURT REPORTED IN CIT VS CHANDRA VILAS HOTEL (1987) 164 ITR 102 (GUJ). THIS ONUS HAS NOT BEE N DISCHARG E D BY THE ASSESSES. 8.6 THE YEAR UNDER CONSIDERATION, AN AMOUNT OF RS. 17,94,14,102 / - (AS M E NTIONED IN PARAS - 6 ABOVE) HAS BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THEREFORE, TH E ASSESSE E HAD SUFFICIENT UNACCOUNTED CASH BALANCE IN ITS HAND TO MAKE SUCH PAYMENT TO HIMMAT BHAI SENGHANI THE ASSESSEE COMPANY HAD GENERATED CASH BY RECEIVING ON MONEY FROM THE SA L E OF ITS RESI DENTIAL/COMMERCIAL UNITS. ON THE BASIS OF EXPLANATION, OFFERED BY THE ASSESSEE WHICH IS PLACED ON RECORD, TELESCOPING BENEFIT TO THE EXTENT OF RS. 8.70,00, 000 / - IS LIABLE TO BE .GIVEN TO THE ASSESSEE AND NO SEPARATE ADDITION IS MADE ON T HIS ACCOUNT . 5.2. FROM THE AFORESAID ASSESSMENT ORDER FRAMED U/S.143(3) OF THE ACT FOR THE A.Y.2015 - 16 ON 30.12/2016 IN THE HANDS OF THE RUNWAL DEVELOPERS PVT. LTD., WE FIND IN PARA 8.6 REPRODUCED SUPRA THAT THE ASSESSING OFFICER OF RUNWAL DEVELOPERS PVT . LTD., HAD GIVEN A CATEGORICAL FINDING THAT RUNWAL DEVELOPERS PVT. LTD., HAD INDEED MADE UNACCOUNTED CASH PAYMENTS OF RS.8.70 CRORES TO THE ASSESSEE. HENCE, THE ORDER OF THE DEPARTMENT ITSELF EXPLAINS THE SOURCE OF RS.8.70 CRORES FOR THE ASSESSEE IN RESPE CT OF LABOUR PAYMENTS THEREON BY THE ASSESSEE. HENCE, THERE CANNOT BE ANY ADDITION THAT COULD BE MADE IN THE HANDS OF THE ASSESSEE IN THE SUM OF RS.8.70 CRORES IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. WE ALSO FIND THAT BOTH THE ASSESSEE AS WELL AS RUNWAL DEVELOPERS PVT. LTD., WERE ASSESSED BY THE SAME ASSESSING OFFICER AND BY THE SAME CIRCLE NAMELY DCIT, CENTRAL CIRCLE 4(1), MUMBAI. ACCORDINGLY, WE HAVE NO HESITATION IN DIRECTING THE LD. AO TO DELETE THE ADDITION MADE IN THE SUM OF RS.8.70 CRORES IN THE HANDS OF THE ASSESSEE. ITA NO .688/MUM/2018 & CO NO.71/MUM/2019 SHRI HIMMATLAL GOPAL PATEL SENGHANI 11 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED WHEREAS CROSS OBJECTION OF THE ASSESSEE IS ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 / 07 /201 9 SD/ - ( AMARJIT SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 10 / 07 / 2019 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR , ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//