M/s. Vrandawan Construction Company, Bhopal V. The Dy. CIT Circle-1, Bhopal

ITSSA 117/Ind/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 5371 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 24-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Income from undisclosed sources; Loose papers; Document seized; Source of fund; Cost of acquisition; Fair market value; Corroborative evidences; Validity of assessment; Onus to prove; Documents seized
• Section: 147; 56(2)(vii)(b); 143(3); 50C; 153A; 250; 251; 143(2); 191; 64; 43; 48; 72; 13; 22; 153C

Judgement Text

अपील य अ धकरण, इ दौर यायपीठ, इ दौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI MANISH BORAD,ACCOUNTANT MEMBER AND MIS MADHUMITA ROY, JUDICIAL MEMBER Virtual Hearing IT(SS)A No.117/Ind/2018 Assessment Year:2011-12 M/s. Vrandawan Construction Company Bhopal बनाम/ Vs. DCIT, Circle -1 Bhopal (Appellant) (Respondent ) P.A. No.AAKFV1480F IT(SS)A Nos.118 & 119/Ind/2018 Assessment Year:2011-12 to 2012-13 ACIT, Central-1 Bhopal बनाम/ Vs. M/s. Vrandawan Construction Company Bhopal (Appellant) (Respondent ) P.A. No.AAKFV1480F CO No.01/Ind/2020 (Arising out of IT(SS)A No.119/Ind/2018 Assessment Year:2012-13 M/s. Vrandawan Construction Company Bhopal बनाम/ Vs. DCIT, Circle -1 Bhopal (Appellant) (Respondent ) P.A. No.AAKFV1480F Appellant by S/Shri Anil Kamal Garg, & Arpit Gaur, ARs Revenue by Shri P.K. Mitra, CIT-DR M/s. Vrandawan Construction Co. 2 Date of Hearing: 09.12.2021 Date of Pronouncement: 13.01.2022 आदेश / O R D E R PER MANISH BORAD: The above captioned cross appeals for AY 2011-12, appeal at the instance of Revenue for AY 2012-13 and Cross objection by assessee for AY 2012-13 are directed against the order of Ld. Commissioner of Income Tax(Appeals), (in short ‘CIT(A)’)-3 Bhopal dated 30.07.2018, which are arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the ‘Act’) dated 21.12.2016, framed by DCIT-Central-1, Bhopal. 2. As the issues raised in these appeals are common and relate to same assessee, at the request of both the parties all the appeals and cross objection were heard together and are being disposed of by this common order for sake of convenience and brevity. The assessee has raised following grounds of appeal in IT(SS)Ano.117/Ind/2018 for AY 2011-12: 1. The assessment order is invalid, barred by limitation, illegal, bad in law, void-ab-initio and therefore liable to be quashed. 2. The ld CIT(A) erred in sustaining the assessment order which is invalid, barred by limitation, illegal, bad in law, void-ab-nitio and therefore liable to be quashed. 3. The ld CIT(A) has grossly erred in sustaining the addition of Rs.25,50,000/- and treating the same as unexplained investments. M/s. Vrandawan Construction Co. 3 The Revenue has raised following grounds of appeal in IT(SS)ANo.118/Ind/2018 for AY 2011-12: 1. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.29,94,50,000/- made by AO on account of unexplained investment. The Revenue has raised following grounds of appeal in IT(SS)ANo.119/Ind/2018 for AY 2012-13: 1. On the fact and in the Circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.10,80,00,000/- made by AO on account of unexplained investment. The assessee has raised following grounds of appeal in COANo.01/Ind/2021 (AY 2012-13): 1. On the facts and in the circumstances of the case, the assessment order is invalid, barred by limitation, illegal, bad in law, void-ab-initio and therefore liable to be quashed. 2. On the facts and in the circumstances of the case, the ld CIT(A) erred in sustaining the assessment order, which is invalid, barred by limitation, illegal, bad in law, void-ab-nitio and therefore liable to be quashed. 3. Brief facts of the case as culled out from the records are that the assessee is a partnership firm incorporated on 17-08-2010 with the main object of carrying out the business of real estate builders and developers. As per the financial statements placed on record, the assessee firm has not generated any revenue from its business activities during the years under consideration. A Search u/s.132 of the Act was carried out in the Regal Homes and Dwarkadhish Haweli Builders Group of Bhopal on 12-08-2014. According to the Ld.AO, during the course of search in the case of Smt. Sunita Maheshwari, certain loose papers, documents etc. allegedly belonging to the M/s. Vrandawan Construction Co. 4 assessee firm were found and seized from her residential premises situated at A-61, Indrapuri, Bhopal. Accordingly, Notices u/s. 153C of the Act were issued by the AO for the assessment years 2009-10 to 2014-15 and a Notice u/s. 143(2) was issued for the A.Y. 2015-16. In response to the Notices issued u/s.153C, the assessee inter alia furnished letters/returns declaring income of Rs. Nil for both the assessment years under consideration. During the course of the assessment proceedings, the assessee also furnished copies of its financial statements for the previous year relevant to the assessment years under consideration. Subsequently, Notices under s. 143(2) & 142(1) were served upon the assesse and in response , the assessee furnished its written replies along with the documentary evidences. During the years under consideration, the assessee firm had claimed to have purchased total 12 acres of land situated at village Damkheda, Bhopal for an aggregate consideration of Rs.5,48,36,000/- [8.40 acres for Rs.3,19,07,260/- in A.Y. 2011-12 and 3.60 acres for Rs.2,63,00,000/-] as per the details furnished by the AO at page no. 4 of the Assessment Order. The payments against such purchases of lands were claimed to have been made through banking channels and in consonance with the values adopted by the Stamp Valuation Authority. During the course of post search enquiries, summons were issued to some of the sellers of the lands u/s. 131 of the Act. The AO has reproduced the gist of the statements so recorded by the Investigation Wing in the body of the assessment order. Further, in the body of the assessment order, the AO has also scanned the copies of loose papers which were seized M/s. Vrandawan Construction Co. 5 from the premises of Smt. Sunita Maheshwari during the course of the search under s.132 of the Act in her case. Based upon such material, the AO after considering the reply from the assessee firm, reached to the conclusion that the assessee had purchased the subject 12 acres agricultural lands for a consideration of Rs.3cr per acre i.e. at Rs.36 cr as against the consideration of Rs.5,48,36,000/- shown in the registered sale deeds. However, while passing the common assessment order dated 21.12.2016 for the A.Y. 2011-12 to A.Y. 2015-16, the Ld.AO made the addition for the entire sum of Rs.36cr in two assessment years i.e. Rs.25.20cr in A.Y. 2011-12 and Rs.10.80cr in A.Y. 2012-13, by holding the entire investment as the unexplained investment of the assessee. 4. Aggrieved assessee preferred separate appeals, for AYs 2011-12 and 2012-13 before Ld. CIT(A) both on the legal ground and on merits. During the course of the appellate proceedings, the assessee challenged the validity of the assessment proceedings under s.153C of the Act on the count of lack of the seizure of any incriminating material and lack of proper satisfaction. On merits, the assessee agitated before the ld. CIT(A) that the loose papers referred to by the AO for making the impugned additions were mere proposals for construction of residential units which have not been actually implemented and were dumb documents and the entire additions made by the AO are merely on guess work and surmises. M/s. Vrandawan Construction Co. 6 5. The ld. CIT(A) for the years under consideration, while upholding the validity of the proceedings under s.153C, further held that there was no direct and cogent evidence to support the finding of the AO that the assessee purchased the impugned land (12 acres) by making alleged cash payment of Rs.36 crores @ Rs.3 crore per acre. The ld. CIT(A) further found that taking into consideration the entire factual matrix and evidence/material on record, inter alia, the statements recorded of each land owner, the additions made by the Ld.AO were found to be based on only assumptions, presumptions and conjectures. The ld. CIT(A), in the body of the Order, analyzed in depth each and every seized loose paper, as referred to by the AO in the body of the assessment order. After analyzing the loose papers, the ld. CIT(A) held that the loose papers found during the course of search are dumb documents and mere proposals for development of subject lands which are reflecting probable sale price and not the purchase price. The ld. CIT(A) further held that from the data obtained and spot enquiry conducted by his office, no development activity was found commenced on the subject lands even till the date of passing of the Order by him and the subject lands were lying vacant. The ld. CIT(A) also observed that in absence of any revenue or income generation activity, it was not discernible as to how the assessee firm could generate undisclosed income to the tune of Rs.36 crores to pay the sellers of land as ‘on money’. The ld. CIT(A) further noted that in absence of any corroborative evidence, the allegation of the AO that the assessee had paid purchase price @Rs.3 crore per acre was not tenable. However, the ld. CIT(A), at page no. 55 of his M/s. Vrandawan Construction Co. 7 Order, has also observed that two of the sellers namely Shri Malkhan and Shri Munnalal have admitted to have received cash amounting to Rs.5.50 lakhs and Rs.20 lakhs respectively over and above the sale consideration as per registered sale deeds which remained uncontroverted by the assessee. Accordingly, the ld. CIT(A) confirmed an addition to the extent of Rs.25,50,000/- for the A.Y. 2011-12, thereby granting relief of Rs.24,94,50,000/- for A.Y. 2011-12 and Rs.10,80,00,000/- for A.Y. 2012-13 to the assessee. 6. Now, aggrieved by the Order of the ld. CIT(A), both the assessee and revenue are in appeal before this Tribunal for A.Y. 2011-12. Further, for A.Y. 2012-13, the Revenue has preferred an appeal and the assessee has filed its Cross-Objections before this Tribunal. First we will take up Legal Ground Nos. 1 & 2 of the assessee in the appeal for A.Y. 2011-12 and cross objection for A.Y. 2012-13 challenging the validity of assessment proceedings qua the recording of satisfaction before issuance of Notices u/s. 153C 7. Through Ground Nos. 1 & 2 for both the assessment years, the assessee has challenged the action of the AO for initiating the assessment proceedings in its case without fulfilling the statutory requirement of recording a proper satisfaction as contemplated u/s. 153C of the Act. M/s. Vrandawan Construction Co. 8 7.1 Before the ld. CIT(A), the assessee had raised such legal ground and the ld. CIT(A), vide para (8.1) on page no. 27 & 28 of his Order, reached to a conclusion that the AO was having sufficient corroborative material to form his satisfaction before issue of notice u/s. 153C of the Act and various statements recorded during search/post-search also highlighted certain inconsistencies about the market value of land and payments made in respect of purchase of 12 acres of land. Accordingly, the ld. CIT(A) upheld the legality of the issuance of notice u/s. 153C of the Act and dismissed the legal ground of the assessee.Against the legal ground confirmed by the Ld. CIT(A), the assessee is in appeal before us. 7.2 Before us, learned Department Representative [In short ‘Ld CIT(DR)’] vehemently argued supporting the observations of the ld. CIT(A) on this issue. 7.3 Per Contra Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: “1.00 NO “SATISFACTION” WAS RECORDED BY THE AO AS REGARD TO “BELONGINGNESS OF SEIZED DOCUMENT” “TO THE ASSESSEE” - DECISION OF HON’BLE SUPREME COURT – SUPER MALLS PVT. LTD. Vs. PCIT 1.01 On a perusal of the reasons for issuance of notice under s. 153C to the assessee, as claimed by the AO to be the Satisfaction Note [kindly refer PB Page No. 156 & 157], it shall be appreciated by Your Honours that such satisfaction note does not meet the statutory requirement of recording the satisfaction as contemplated under s. 153C of the Act. 1.02 Your Honours, their Lordships of the Hon'ble Supreme Court in the case of Super Malls Pvt. Ltd. vs. PCIT (2020) 423 ITR 0281 (SC), have laid down the law that before issuing notice under Section 153C, the Assessing Officer of the searched person must be “satisfied” that any document seized or requisitioned “belongs to” a person other than the searched M/s. Vrandawan Construction Co. 9 person. Thus, it would be appreciated that there are three essential conditions for invoking the provisions of s.153C in a case viz. (i) “satisfaction” of the AO as regard to (ii) “belongingness of any seized document” (iii) to the “other person”. A copy of the judgment is being enclosed herewith, as Exhibit P-1. 1.03 In the instant case, none of the three conditions has been fulfilled by the AO in his so-called satisfaction note. Instead of the strict requirement of recording ‘satisfaction’, the AO had recorded his ‘reason to believe’. The AO has stated that ‘I have reason to believe that this is a fit case for assessment u/s 153C of the income Tax Act, 1961, from A.Y. 2009-10 to 2014-15.’ [kindly refer PB Page No. 157]. It is submitted that the provisions of s.153C strictly require the word ‘satisfied’ or ‘satisfaction’ which has a stronger meaning than the words ‘reason to believe’ which are contemplated under s.147 of the Act. Even the heading of the so-called satisfaction note is quoted as ‘Reason for assessment u/s 153C of Income Tax Act, 1961 for A.Y. 2009-10 to A.Y. 2014-15’. Thus, it would be appreciated that the mandatory requirement of the recording of ‘satisfaction’ has not been complied with by the AO. 1.04 Further, the AO, in the entire so-called satisfaction note, has not even referred to any seized document, what to talk about the belongingness thereof to the assessee! Thus, even such mandatory conditions of “belongingness of any seized document” to the “other person” have not met by the AO. 2.00 SATISFACTION NOTE ONLY REFERS TO SOME POST-SEARCH ENQUIRIES AND STATEMENTS OF SELLERS OF LANDS RECORDED POST-SEARCH 2.01 On a plain reading of the so-called satisfaction note [kindly refer PB Page No 156 & 157], it would be observed by Your Honours that the AO has not made any reference of even a single document or loose paper which could have formed the basis of forming a satisfaction for invoking the provisions of section 153C of the Act in the case of the assessee firm. The AO has merely referred to some post search enquiries and statements of some sellers of lands purchased by the assessee firm and there is no reference of any specific document or loose paper seized during the course of search which may be held to be belonging to the assessee. Since, in this case, there is no reference of even the documents seized, the question of forming the satisfaction regarding belongingness of the documents seized did not arise and in these circumstances only, on a perusal of the so-called satisfaction note, there is no reference or satisfaction recorded as regard to the belongingness of any documents seized to the assessee which is the sine-qua-non for assuming the jurisdiction under s.153C of the Act as per M/s. Vrandawan Construction Co. 10 the ruling laid down by the Hon'ble Supreme Court in the case of Super Malls supra. In the above circumstances and especially in light of the decision of the Hon’ble Supreme Court in the case of Super Malls supra, the entire assessment proceedings so initiated under s. 153C deserve to be quashed on this legal ground alone.” 7.4 Reference was also made by the assessee to its detailed submission, on this issue, made before the CIT(A) which is placed at page no. 2 of the common Paper Book. Before us, the ld. counsel of the assessee firm contended that the Hon’ble Supreme Court in the case of Super Malls Pvt. Ltd. vs. PCIT (2020) 423 ITR 0281 (SC) has laid down the law that before issuing notice u/s. 153C, the Assessing Officer of the searched person must be “satisfied” that any document seized or requisitioned “belongs to” a person other than the searched person. The ld. counsel pointed out that the AO, in the satisfaction note which is placed at page no. 157 of the Paper Book, inspite of recording a satisfaction under the strict requirement of s.153C, had recorded reasons to believe as contemplated u/s. 147 of the Act. The ld. counsel also contended that the AO has not referred to any single seized document in the entire satisfaction note and has merely referred to some post search enquiries and statements of some sellers of lands purchased by the assessee. Thus, as per the assessee, the mandatory requirement of belongingness of the seized document to the person other than the searched person did not get fulfilled as per the ruling of the Hon’ble Supreme Court in the case of Super Malls supra. M/s. Vrandawan Construction Co. 11 7.5 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides and also considered the decisions relied on from the sides. We find that the AO, in his satisfaction note, has made reference of some search and post search enquiries wherein it was found that the assessee firm had purchased 12 acres of land at village Damkheda. The AO has further noted that during the course of enquiries, bank statements of the assessee firm and the sellers of lands were obtained from bank. Further, the AO had noted the findings related to post search enquiries wherein summons were issued to the sellers of land and their statements were recorded u/s. 131 of the Act. Finally, the AO in the concluding para of the satisfaction note, has averted that several documents with regard to the transactions with Shri Bhav Singh Rajput were found and seized which were incriminating in nature. 7.6 On a careful reading of the satisfaction note, we observe that the AO has merely referred to some enquiries conducted by the Department during the course of search or post-search, either from the sellers of the land or from one of the partners of the assessee firm. In our considered opinion, the conduction of the enquiries and recording of statements therein cannot be equated with the finding of incriminating material during the course of search in the case of searched person. Even if the recording of satisfaction is analyzed on the touchstone of belongingness of incriminating material, we M/s. Vrandawan Construction Co. 12 observe that the AO has referred to seizure of several incriminating documents regarding transactions with Shri Bhav Singh Rajput. If such a recording of the AO is co-related with the incriminating documents referred by him in the assessment order while making the impugned additions in the assessee’s income, we find that none of the loose papers inventorized as page no. 49 of LPS-4, page no. 3 of LPS-9 and page nos. 76 to 82 of LPS-1 contains any reference, whatsoever, of either the name of Shri Bhav Singh Rajput or any transaction with such person. However, at the same time, there is no denying to the fact that the AO, while framing the assessment, has relied upon certain incriminating loose papers, which were undisputedly found from the premises of one of the partners of the assessee firm namely Smt. Sunita Maheshwari. We also find that such loose papers were also confronted to the husband of Smt. Sunita Maheshwari namely Shri S.K. Maheshwari who had accepted that the loose papers inventorized as page no. 49 of LPS-4 and page no. 3 of LPS-9 were some proposals in respect of lands owned by the assessee firm. We also find that the AO, before initiating the proceedings in the case of the assessee firm, was in possession of such loose papers which were ultimately referred by him while making the impugned additions in the assessee’s income and therefore, it cannot be said that the AO was not having any material in his hand before invoking the provisions of s.153C of the Act in the case of the assessee. In our considered opinion, for initiating the assessment proceedings in the case of other person under the provisions of s.153C of the Act, a prima facie satisfaction is sufficient M/s. Vrandawan Construction Co. 13 and the law does not contemplates to make reference of each and every incriminating material in the satisfaction note. In such eventuality, we do not find sufficient merit in the contention of the assessee as regard to recording of proper satisfaction by the AO. Thus, we uphold the action of the ld. CIT(A) in dismissing the legal ground raised by the assessee. Accordingly, ground nos. 1 & 2 raised by the assessee for both the assessment years in appeal for AY 2011- 12 and cross objection for AY 2012-13 are hereby dismissed. Now we take up Ground No. 1 of the Revenue for A.Y. 2011-12 and A.Y. 2012-13 and Ground No. 3 of the Assessee for A.Y. 2011-12 8. Through the Ground No. 1 for both the assessment years, the Revenue has challenged the action of the ld. CIT(A) deleting the additions to the tune of Rs.24,94,50,000/- and Rs.10,80,00,000/- respectively for A.Y. 2011-12 and A.Y. 2012-13. Further, through Ground No. 3 raised for A.Y. 2011-12, the assessee has challenged the action of the ld. CIT(A) confirming the addition of Rs.25,50,000/- out of the total addition of Rs.25,20,00,000/- made by the AO. 8.1 The brief facts of the issue on hand are that during the course of search and post search enquiries, it was found that the assessee had purchased 12 acres of land at village Damkheda from various farmers i.e. Malkhan Singh, Munnalal, Shri Ghanshyam, Gopal Singh & others. Following is the detail of land purchased which interalia includes 6.85 acres of land was purchased from Munnalal M/s. Vrandawan Construction Co. 14 and Ghanshyam S/o. Pyarelal and 3.60 acres of land was purchased from Malkhan Singh S/o. Pyarelal under various sale deeds: S. No. A.Y. Date of Registry Name of the Seller Area (in Acre) Cost 1 2011-12 20-08- 2010 Sunil Kumari 0.669 8,98,000 2 20-08- 2010 Kunal Kumar 0.083 9,52,000 3 30-03- 2011 Munnalal, Malkhan Singh & Ghanshyam 1.060 79,20,000 4 30-03- 2011 --- do --- 4.740 1,26,66,000 5 31-03- 2011 Sandeep & Others 1.050 29,00,000 6 31-03- 2011 Gopal Singh 0.800 32,00,000 TOTAL (A) 8.402 2,85,36,000 7 2012-13 23-12- 2011 Munnalal, Malkhan Singh & Ghanshyam 0.710 83,00,000 8 23-12- 2011 --- do --- 2.370 1,45,00,000 9 23-12- 2011 Banwarilal 0.520 35,00,000 TOTAL (B) 3.600 2,63,00,000 GRAND TOTAL (A+B) 12.002 5,48,36,000 8.2. During the course of enquiries, bank statements of the assessee firm and the land owners Malkhan, Munnalal and Ghanshyam were obtained from bank and on a perusal of such bank statements, it was observed by the ld.AO that the cheques mentioned in the registries are first deposited in the account of the farmers and then immediately transferred back to the account of one of the partners of the assessee firm Sunil Maheshwari and one other firm M/s. Shri Balaji Infrastructure. As the consideration paid to the sellers of the land got transferred to one of the partners of the assessee firm, the AO inferred that the firm had not effectively paid any consideration to the sellers of the land. M/s. Vrandawan Construction Co. 15 8.3 During the course of post search enquiries, summons were issued to Ghanshyam, Malkhan and Munnalal and their statements were recorded u/s. 131 of the Act. During examination, the land owners were asked to provide complete details of land sold and purchased by them in last few years and they were also required to explain about the payments received from Sunil Maheshwari/ Vrandavan Construction Company (the assessee). Malkhan Singh, in his statement, stated that he had not received any amount from sale of 3.60 acre land to Sunil Maheshwari/ Vrandavan Construction Company and Sunil Maheshwari only gave Rs.54.80 lacs for purchase of 24.26 acres lands at Muskabad. Shri Malkhan further stated that the cheques given by Shri Sunil Maheshwari were returned to him. Shri Malkhan also stated to have received Rs.5.50 lacs in cash apart from aforesaid Rs.58.40 lacs. An abstract of statement of Shri Malkhan is scanned at page no. 6 to 8 of the Assessment Order. 8.4 Similarly, a statement of another seller Shri Munnalal was also recorded u/s. 131 wherein he stated that he sold 6.8 acres land at Damkheda for Rs.2,34,86,000/- out of which he received his share of Rs.1,17,43,000/-. He stated that Rs.20,00,000/- was received in cash from Shri Sunil Maheshwari and remaining amount was received through cheques. It was also noticed that all the cheques were immediately paid to Shri Sunil Maheshwari, who is one of the partners of the assessee firm. An abstract of statement of Shri M/s. Vrandawan Construction Co. 16 Munnalal is scanned at page no. 10 & 11 of the Assessment Order. Another statement of Shri Ghanshyam Singh was also recorded who stated that Shri Sunil Maheshwari gave 25.37 acres of land at Vidisha road in lieu of his land at Damkheda and no payment in cash or cheque etc. was given by Shri Sunil Maheshwari. When confronted about the deposits in his bank account, he stated that the said deposits were made in his account by Shri Sunil Maheshwari, however he took signed cheque book from him in return. Shri Ghanshyam Singh, in reply to Q. No. 10, stated that Shri Sunil Maheshwari had deposited Rs.88,00,000/- approximately in F.Y. 2011 through cheques and Shri Sunil Maheshwari immediately returned back the amount by taking his signature on his cheque books. An abstract of statement of Shri Ghanshyam Singh is scanned at page no. 13 & 14 of the Assessment Order. 8.5 On the basis of above statements, the AO inferred that payments made to the farmers were immediately returned back to partners/ assessee firm and certain cash payments were also paid to the sellers of lands. Subsequently, Statement of Shri Sunil Maheshwari was recorded on 24-11-2016 and 29-11-2016 wherein he was confronted with the statements of Shri Malkhan, Shri Munnalal and Shri Ghanshyam Singh. However, as per the AO, Shri Sunil Maheshwari gave evasive replies and no satisfactory explanation was given. Thus, the AO concluded that the assessee firm had not made any accounted payments to the sellers and the transactions shown in the books of account of the assessee and in M/s. Vrandawan Construction Co. 17 the registry documents are nothing but an eye wash. Accordingly, the AO held that the assessee had made payments towards purchase of land in cash only out of its undisclosed sources of income. 8.6 Further, according to the AO, during the course of the search and seizure operation, several incriminating documents were found and seized which prove that the prevailing rates of land in village Damkheda near Ayodhya Bypass Road was Rs.3cr per acre. For arriving at such rate of Rs.3cr per acre, Ld. AO placed reliance on some loose papers. As per the AO, one loose paper inventorized as page no. 49 of LPS-4 was seized from the residence of Smt. Sunita Maheshwari. As per the AO, Shri S.K. Maheshwari was specifically confronted with such loose paper and in response, Shri S.K. Maheshwari submitted that the said land situated at Damkheda was in his firm M/s. Vrandavan Construction Company. From such loose paper, the AO noted the price of land at village Damkheda was Rs.3cr per acre and accordingly the AO worked out the total price of 12 acres land at Rs.36cr. 8.7 Further, as per Ld. AO, during the search, another loose paper inventorized as page no. 3 of LPS-09 was also seized which contained proposal of Joint Venture at 3 acres of land situated at Damkheda regarding development of duplex bungalows. Such loose paper has been scanned by the AO at page no. 17 of the assessment order. According to the AO, such loose paper again confirmed that the price of land at village Damkheda was approx. Rs.3 crore per acre. Ld.AO M/s. Vrandawan Construction Co. 18 also referred to loose papers in the form of Draft JVA seized and inventorized as page no. 76 to 82. Such loose papers were confronted to Shri S.K. Maheshwari who stated that it was a draft joint venture agreement and on such land, a project in the name of Regal Jyoti was to be developed which is a project of bungalows for which minimum of 5 acres land was required. As per the AO, Shri S.K. Maheshwari admitted that the deal for their 2.43 acres of land was done for Rs.7 crores with Shri Manoj Singh, who would pay the said amount within 20 months. He also stated that advance of Rs.2.25 crores was also given to Shri Manoj Singh in the month of July 2014. An abstract of such loose papers has been scanned by the AO at page no. 18 & 19 of the assessment order. 8.8 On the basis of these loose papers, the AO arrived at a conclusion that the prevailing market rate of land in village Damkheda situated on Ayodhya Byepass Road, Bhopal was Rs.3cr per acre and since the assessee had purchased 12 acres of land at village Damkheda and had made the entire payment in cash out of its undisclosed income, the assessee had made unexplained investment of Rs.36cr for which a show cause notice dated 12-12- 2016 was issued and according to the AO, no submission was made by the assessee in this regard. Finally, the AO made the addition of Rs.36cr on account of unexplained investment in purchase of land, in two assessment years viz. A.Y. 2011-12 and A.Y. 2012-13, in the ratio of the area of lands purchased by the assessee firm, tabulated as under: M/s. Vrandawan Construction Co. 19 A.Y. Land Area purchased (in acres) Prevailing market rate @ Rs.3 crore per acre (in Rs.) 2011-12 8.40 25,20,00,000 2012-13 3.6 10,80,00,000 TOTAL 12.0 36,00,00,000 8.9 Aggrieved with the Order of Assessment, the assessee firm preferred separate appeals for the subject assessment years before the ld. CIT(A). During the course of the first appellate proceedings, the assessee firm made detailed written submissions along with the documentary evidences which were also furnished by it before the AO. 8.10 The ld. CIT(A), accepting the contentions of the assessee, the facts and circumstances of the case and as also, the various documentary evidences placed on record by the assessee firm, granted substantial relief to the assessee firm. The ld. CIT(A), at para (4) on page no. 2 of his Order, narrated the brief facts of the case of the assessee firm. At para (4.1) on page no. 4, the ld. CIT(A) has given the details of the lands purchased by the assessee firm at village Damkheda. At para (4.2) to para (4.5), the ld. CIT(A) summarized the findings of the AO made in the impugned assessment order. Further, at para (4.6) to para (4.8), the ld. CIT(A) described and discussed the nature of the loose papers which have been made as the very basis by the AO for making impugned additions in the assessee’s income. Thereafter, the ld. CIT(A), at para (4.9) & (4.10), has given the details of the additions of Rs.25,20,00,000/- and Rs.10,80,00,000/- made M/s. Vrandawan Construction Co. 20 by the AO in the assessee’s income respectively for A.Y. 2011-12 and A.Y. 2012-13. The ld. CIT(A), at para (5), has reproduced the grounds of appeal raised by the assessee firm before him. Further, at para (6) on page no. 10 to 25 of his Order, the ld. CIT(A) has reproduced the written submission made by the assessee firm before him. The ld. CIT(A), at para (7), has stated to have got conducted field enquiry to verify the status of the lands belonging to the assessee firm and also to obtain guideline values prevailing in the village Damkheda during F.Y. 2010-11 and F.Y. 2011-12. The field enquiry report of the Tax Assistant of the ld. CIT(A) along with the annexures are placed at page no. 283 to 307 of the Paper Book furnished by the assessee firm. The ld. CIT(A) also stated to have forwarded the aforesaid report to the AO for his comments. However, as per the ld. CIT(A), the AO did not submit anything. At para (8) on page no. 26 of the Order, the ld. CIT(A) has given his findings in respect of the issue on hand. At para (8.1), the ld. CIT(A) has adjudicated the Ground No. 1 raised by the assessee challenging the assessment proceedings under s.153C of the Act. The ld. CIT(A) dismissed the legal ground so raised by the assessee. At para (8.2), the ld. CIT(A) has given his findings in respect of the Ground No. 2 raised by the assessee on merits of the additions made by the AO. The ld. CIT(A) has discussed the issue at length by dividing his findings into 8 parts, viz.: S. No. Description Relevant Page Nos. of the CIT(A) Order A Additions based on ‘dumb documents’ are not sustainable 29 to 39 B Testimony of sellers do not support finding of AO 39 to 45 C Purchase transaction through banking channel and 45 to 48 M/s. Vrandawan Construction Co. 21 properly reflected in books D No business activity to generate income/ source 48 & 49 E Prevailing market rate not in consonance with estimate of AO 49 to 51 F Onus of proof on revenue 52 & 53 G No proof relating to cash payment 53 & 54 H Addition is not sustainable if made on assumption and presumption 54 8.11 The ld. CIT(A), finally, at the conclusion para on page no. 54 & 55 of his Order, held that the loose papers found during the course of search were dumb documents and mere proposals for development of subject lands which are reflecting probable sale price and not the purchase price. The ld. CIT(A) further held that from the data obtained and spot enquiry done, no development activity had got started on the subject lands even till the date of passing of the Order by the ld. CIT(A) and the subject lands were lying vacant. The ld. CIT(A) also observed that in absence of any revenue or income generation activity, it is not discernible as to how the assessee firm could generate undisclosed income to the tune of Rs.36 crores to pay the sellers of land as ‘on money’. The ld. CIT(A) further noted that in absence of any corroborative evidence, statement of seller or buyer, the allegation of the ld. AO that the assessee had paid purchase price @Rs.3 crore per acre is not found tenable. However, the ld. CIT(A), at page no. 55 of his Order, has also observed that two of the sellers namely Shri Malkhan and Shri Munnalal had admitted to have received cash amounting to Rs.5.50 lakhs and Rs.20 lakhs respectively over and above the sale consideration as per registered sale deeds which remained uncontroverted by the assessee. M/s. Vrandawan Construction Co. 22 Accordingly, the ld. CIT(A) deleted additions to the extent of Rs.24,94,50,000/- for A.Y. 2011-12 and Rs.10,80,00,000/- for A.Y. 2012-13 so made by the AO on account of unexplained investment in purchase of lands. However, the ld. CIT(A) confirmed addition to the extent of Rs.25,50,000/- in the assessee’s income for A.Y. 2011-12 on the basis of statements of two sellers of lands that cash amounting to Rs.5.50 lakhs and Rs.20 lakhs were paid by Shri Sunil Maheshwari over and above the consideration paid through cheques. 8.12 Aggrieved with the Order of the ld. CIT(A) for A.Y. 2011-12, both the revenue and the assessee are in appeal before us and for the A.Y. 2012-13, the revenue is in appeal against which the assessee has filed its cross-objections before us. 8.13 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 8.14 Per Contra, Learned Counsel for the assessee has filed written synopsis. The relevant portion of such synopsis is being reproduced as under: 6.01 PURCHASES OF LANDS MADE AT THE PREVAILING MARKET RATES ONLY Your Honours, it is submitted that the assessee firm has made purchases of land at the prevailing market rates only and at the purchase consideration stated in the registered purchase deeds. It is submitted that during the previous year relevant to A.Y. 2011-12, the assessee firm had purchased agricultural lands admeasuring 8.40 acres for an actual purchase consideration of Rs.2,85,36,000/-. The assessee firm had further incurred a sum of Rs.33,71,260/- towards stamp duty and registration expenses on purchase of such lands. Thus, the assessee firm has made purchases of the aforesaid lands for an aggregate consideration of Rs.3,19,07,260/- which is evident from ‘Schedule-6 of Purchases’ of the financial statements of the assessee firm placed at page no. 22 of our Paper Book. Further, during the previous year relevant to A.Y. 2012-13, the assessee firm had purchased agricultural lands admeasuring 3.60 acres for an aggregate consideration of Rs.2,63,00,000/- which is duly M/s. Vrandawan Construction Co. 23 getting reflected under ‘Schedule-7 of Purchases’ of the financial statements of assessee firm for the F.Y. 2011-12 [A.Y. 2012-13] [kindly refer PB Page No. 28]. The details of the lands so purchased have been given in a table at para (1.00) supra. 6.02 ENTIRE PAYMENTS MADE THROUGH BANKING CHANNELS Your Honours, it is submitted that the entire consideration towards purchase of the said lands have been paid by the assessee firm through banking channels only. The same is duly getting reflected in the bank statements of the assessee firm placed at page no. 152 to 155 of our Paper Book. It shall be pertinent to note that the entire payments made by the assessee firm towards purchase of lands are getting perfectly tallied with the details of payments stated in the registered purchase deeds placed at page no. 83 to 143 of our Paper Book. 6.03 STATEMENTS OF SELLERS OF LANDS – NO OPPORTUNITY TO CROSS- EXAMINE THE SELLERS 6.03.1 Your Honours, it is submitted that the AO has referred to the statements of sellers of the lands recorded u/s. 131 during the course of post- search enquiries. First of all, it is submitted that the statements of the sellers of the lands were recorded behind the back of the assessee firm and neither during the course of post-search proceedings nor during the course of the assessment proceedings, the assessee firm was ever provided an opportunity of cross- examination of these sellers. It is submitted that the AO committed gross violation of principles of natural law and justice by not affording any opportunity of cross examination to the appellant of the persons on whose statements the AO placed the reliance. In such circumstances, in view of the settled judicial position, the learned AO was not justified in drawing any adverse inference against the appellant merely on the basis of evidences collected behind its back. For such proposition, reliance is placed on the following judicial pronouncements: 6.03.2 Your Honours, the Hon’ble Jurisdictional ITAT, Indore Bench has also, in the case of Virendra Kumar Saklecha Vs. DCIT (1997) 59 TTJ 0785 (Ind.) and Shri Pradeep Kumar Barjatya & Co. Vs. CIT (1997) 57 TTJ 0727 (Ind.), has held that if an opportunity of cross examination of the witnesses, who had given adverse statements, is not given, then no cognizance of such statements can be taken against the assessee. 6.04 STATEMENTS OF SELLERS DO NOT SPEAK ANYTHING ABOUT PREVAILING MARKET RATE OF LANDS AS PRESUMED BY THE AO Your Honours, even if the statements of the sellers are relied upon by the AO, such statements, by themselves, do not speak anything about the prevailing market rate of Rs.3,00,00,000/- per acre of the subject lands as presumed by the AO. Instead, the sellers of the lands in their statements, have categorically stated that the lands have been sold by them at a rate of Rs.40-50 lakhs per acre [kindly refer statement of Shri Munnalal at PB Page No. 184; also reproduced by the AO at page no. 11 of the assessment order]. M/s. Vrandawan Construction Co. 24 6.05 AMOUNTS TAKEN BY SHRI SUNIL MAHESHWARI FROM THE SELLERS OF LANDS ARE DIFFERENT TRANSACTIONS Your Honours, it is submitted that the assessee firm has paid the entire purchase consideration of the lands to the sellers through banking channels which is clearly evident from the bank statements of the assessee firm as well as that of the sellers. It is submitted that the amounts taken by Shri Sunil Maheshwari from the sellers of the lands is altogether different transaction between Shri Sunil Maheshwari and the sellers and the assessee firm is not concerned with such subsequent transactions. 6.06 STATEMENT OF SHRI SUNIL MAHESHWARI ABOUT TRANSACTIONS WITH THE SELLERS OF THE LANDS Your Honours, it is submitted that a statement of Shri Sunil Maheshwari was recorded by the AO u/s. 131 of the Act on 24-11-2016 [kindly refer PB Page No. 223 to 233] wherein he was enquired about the transactions entered into by him with the sellers of the lands. It shall be pertinent to note that Shri Sunil Maheshwari, in reply to Q. No. 5 & 6 [kindly refer PB Page No. 226 to 229], has clearly stated that Shri Munnalal, Shri Malkhan & Shri Ghanshyam have close family relations with him and therefore, the amounts have been by them to Shri Sunil Maheshwari as unsecured loans. Further, Shri Sunil Maheshwari has stated that all the sellers are real brothers and they have sold their lands for the purpose of buying some other lands and for such purpose, since Shri Sunil Maheshwari had close family connections with the sellers, they have given the funds to Shri Sunil Maheshwari as a custodian with a condition that whenever they would require money for making investment, Shri Sunil Maheshwari would repay their unsecured loans. 6.07 STATEMENT OF SHRI SUNIL MAHESHWARI REGARDING DENIAL OF CASH PAYMENT OF Rs.5.50 LAKHS TOWARDS PURCHASE OF LANDS Your Honours, it would further be appreciated that through the aforesaid statement, Shri Sunil Maheshwari, vide Q. No. 8 [kindly refer PB Page No. 231], was required to furnish his reply on the statement of Shri Malkhan Singh who has stated that in lieu of the sale of 3.60 acres land for a sum of Rs.2.63 crores, he was paid a sum of Rs.54.80 lakhs for purchasing 24.26 acres land at Muskabad and Rs.5.50 lakhs in cash and the payments mentioned in the registered purchase deed of subject lands have been taken back by Shri Sunil Maheshwari. In reply, Shri Sunil Maheshwari has clearly stated that the amounts received from Shri Malkhan as unsecured loans have already been repaid to him substantially in the subsequent years. Shri Sunil Maheshwari further stated that the entire payments for purchase of the subject lands have been made by the assessee firm only through banking channels and no cash payment of even a single penny to Shri Malkhan Singh. M/s. Vrandawan Construction Co. 25 6.08 SUNIL MAHESHWARI FURNISHED THE DETAILS OF UNSECURED LOANS OBTAINED BY HIM AND OTHER PARTNERSHIP FIRM FROM THE SELLERS OF THE LANDS Your Honours, it shall be pertinent to note that Shri Sunil Maheshwari, through his letter dated 24-11-2016 [kindly refer PB Page No. 234 to 236], has also furnished the details of the unsecured loans obtained by him and his other partnership firm from the sellers of the subject lands. On a perusal of the ledger accounts of the sellers [kindly refer PB Page No. 237 to 257], it would be observed that the unsecured loans so obtained by Shri Sunil Maheshwari and his firms have been repaid substantially to the sellers from time to time in the subsequent years. The details of the unsecured loans taken, repaid and outstanding in the books of account of Shri Sunil Maheshwari & others are given, in a tabular form, as under: S. No . Loans obtained by whom Loan obtained from Amount taken Amount repaid Amount outstanding as on 31- 03-2018 Paper Book Ref. 1 Shri Sunil Maheshwari Shri Ghanshy am 52,00,000 10,74,000 41,26,000 237 & 238 2 M/s. Sukrati Enterprises --- do --- 25,00,000 - 25,00,000 239 to 243 3 Shri Sunil Maheshwari Shri Munnalal 20,00,000 15,50,000 4,50,000 244 & 245 4 M/s. Sukrati Enterprises --- do --- 35,00,000 - 35,00,000 246 to 250 5 Shri Sunil Maheshwari Shri Malkhan 8,00,000 12,37,000 (-)4,37,000 251 to 253 6 M/s. Shree Balaji Infras. --- do --- 2,12,00,000 2,00,92,000 11,08,000 254 to 257 TOTAL 3,52,00,000 2,39,53,000 1,12,47,000 6.09 ASSESSEE DULY DEMONSTRATED THAT PAYMENTS TOWARDS PURCHASES WERE MADE THROUGH BANKING CHANNELS ONLY AND AMOUNTS RECEIVED BY SHRI SUNIL MAHESHWARI FROM SELLERS WERE UNSECURED LOANS Your Honours, it shall thus be appreciated that during the course of the assessment proceedings, the assessee firm has duly explained and demonstrated that the entire payments made by it towards purchase consideration of the subject lands have only been made through banking chanels and the amounts received by Shri Sunil Maheshwari from the sellers were in the nature of unsecured loans which were also repaid to them from time to time. Thus, no adverse inference deserves to be drawn against the assessee firm in respect of the purchase of the subject lands. M/s. Vrandawan Construction Co. 26 7.01 EXPLANATION REGARDING LOOSE PAPER BEARING PAGE NO. 49 OF LPS- 4 [PB PAGE NO. 172] Your Honours, now, as regard the loose papers seized from the premises of one of the partners of the assessee firm namely Smt. Sunita Maheshwari, it is submitted that none of the loose papers referred to by the AO in the impugned Assessment Order have any bearing upon the assessee firm. It is submitted that the Page No. 49 of LPS-4 [kindly refer PB Page No. 172], as reproduced by the AO at page no. 16 of the impugned Order, is merely a ‘proposal’ for construction of residential units on the subject lands of the assessee firm. It is submitted that the proposal was merely discussed by the assessee firm with some builder which was factually never acted upon. It is further submitted that the loose paper is pertaining to the year of 2013-14 and the subject lands have been purchased by the assessee firm during the financial years 2010-11 & 2011-12 and therefore, any correlation of such loose paper with the purchase value of the subject lands would be extremely illogical. It is further submitted that after purchase of the lands, the assessee firm has not made any single construction thereon. It is submitted that the basis of rate mentioned in such loose paper is a proposed future rate of the entire project after complete development thereon and the same cannot be adopted for estimating the purchase cost of the subject agricultural lands which have been purchased in the past and do not have any development activity. 7.02 EXPLANATION REGARDING LOOSE PAPER BEARING PAGE NO. 3 OF LPS-9 [PB PAGE NO. 173] Your Honours, the AO has also referred to one loose paper bearing Page no. 3 of LPS-9 [kindly refer PB page No. 173] which has been reproduced at page no. 17 of the impugned Order. It is submitted that such loose paper is again a proposal prepared for construction of residential duplex bungalows at 3 acres land of Damkheda. It is submitted that at the bottom of the said loose paper, there is written that ‘Yes’ or ‘No’. Thus, it clearly suggests a draft proposal of duplex bungalows on the said land and once again, the same cannot be compared with the actual purchase cost of the subject agricultural lands. It shall not be out of place to mention here that none of the payment stated in the payment schedule on such loose paper has ever been received by the assessee firm. 7.03 EXPLANATION REGARDING LOOSE PAPERS BEARING PAGE NO. 76 TO 82 OF LPS-1 [PB PAGE NO. 174 TO 180] Your Honours, the AO has also referred to some draft Joint Venture Agreement (JVA), reproduced at page no. 18 & 19 of the impugned Order, inventorized as page no. 76 to 82 of LPS-1 [kindly refer PB Page No. 174 to 180]. On a perusal of the draft JVA, it would be observed that the JVA is not even pertaining to the assessee firm but the same is pertaining to two different persons namely Dr. Manoj Singh and M/s. R.B.M. Associate. It would further be observed that the draft JVA is undated and unsigned. It cannot be said that when the draft was prepared. It is submitted that the said JVA does not have any bearing upon M/s. Vrandawan Construction Co. 27 the assessee firm. Even on a perusal of the said JVA, it can be inferred that the said JVA has been drafted for some construction upon the land and the rates have been proposed only taking into consideration the development thereon. 7.04 SHRI S.K. MAHESHWARI, IN HIS STATEMENT RECORDED U/S. 131 BY THE SEARCH PARTY, HAS ALSO DULY EXPLAINED THE NATURE OF LOOSE PAPERS Your Honours, even during the course of the post-search proceedings, the statement of one of the partners of the assessee firm namely Shri S.K. Maheshwari (husband of Smt. Sunita Maheshwari) from whose premises the subject loose papers were found and seized, was recorded u/s. 131 of the Act by the Search Party on 15-11-2014 [kindly refer PB Page No. 158 to 171]. It is submitted that Shri S.K. Maheshwari, in reply to Q. No.1, 9 & 14 [kindly refer PB Page No. 158, 162 & 165], has duly explained the nature of such loose papers to the satisfaction of the search party. 7.05 ADDITIONS CANNOT BE MADE ON THE BASIS OF DUMB DOCUMENTS Your Honours, it shall be worthwhile to note that none of the loose papers referred to by the AO has any evidentiary value and all these documents are only dumb documents. It is submitted that none of the documents is a legally enforceable document. It is a settled law that a ‘dumb’ document cannot be used as an evidence to draw an adverse inference against the assessee. 7.06 NONE OF THE LOOSE PAPERS HAS ANY NEXUS WITH PURCHASE COST OF LANDS Your Honours, it would thus be appreciated that none of the loose papers referred to by the AO has any nexus with the purchase cost of the agricultural lands of the assessee firm. It is therefore, submitted that the assumption of prevailing market rate of Rs.3,00,00,000/- per acre made by the AO by correlating ‘apples’ with ‘oranges’ does not have any legs to stand and therefore, the same deserves to be struck down in its entirety. 8.00 NO ACTIVITY CARRIED OUT BY THE ASSESSEE ON THE SUBJECT LANDS Your Honours, after purchasing the subject lands, the assessee firm has not carried out any single activity to generate income on the said lands which is also evident from the copies of the financial statements of the subsequent years viz. F.Y. 2012-13 to F.Y. 2014-15 & F.Y. 2017-18 [kindly refer PB Page No. 29 to 46] wherein no development cost has been shown by the assessee firm. It is further submitted that the ld. CIT(A), while passing his Order, has also obtained vital information through field enquiry and spot verification of the subject lands. A copy of the report of the Tax Assistant of the ld. CIT(A) is placed at page no. 283 to 284 of our Paper Book. It is submitted that the photos of the subject lands, annexed with the Report [kindly refer PB Page No. 286 TO 293], clearly suggest that no development activity has taken place on the lands. Further, the Revenue Inspector, Govindpura Circle, Bhopal, as per his Certificate dated 06-06-2018 M/s. Vrandawan Construction Co. 28 [kindly refer PB Page No. 285], has also stated that no construction activity has been carried out on the said lands. Furthermore, on a perusal of the Forms P-II Khasra of the subject lands [kindly refer PB Page No. 294 to 307], it would be observed by Your Honours that the subject lands are still under ownership of the assessee firm and the same are only in the nature of agricultural lands. 9.00 PARALLEL CASES OF LANDS SOLD BY THIRD PARTIES COMPARED BY THE CIT(A) AT PAGE NO. 49 OF THE ORDER Your Honours, the ld. CIT(A), while passing the Order, has also taken comparative cases of the lands sold by third parties in the surrounding areas which have been given in a tabular form at page no. 49 of the Order of the ld. CIT(A). Further, the ld. CIT(A) has also given the comparative guideline rates (market rates) of the lands in village Damkheda in a tabular form at page no. 50 of his Order. On a perusal of the two tables prepared by the ld. CIT(A), it would be observed by Your Honours that the then prevailing market rates of the subject agricultural lands are not Rs.3 crores per acre but the same are near to the average purchase price paid by the assessee firm for the subject lands. 10.00 NO CORROBORATIVE MATERIAL OR EVIDENCE BROUGHT ON RECORD BY THE AO TO ESTABLISH THAT THE ASSESSEE HAD PAID ANY CONSIDERATION OVER AND ABOVE AMOUNTS STATED IN THE BOOKS AND REGISTERED SALE DEEDS 10.01 Your Honours, the AO has made exorbitant additions in the assessee’s income by alleging that the assessee has made unexplained investment in cash of Rs.25,20,00,000/- and Rs.10,80,00,000/- in A.Y. 2011-12 and A.Y. 2012-13 respectively for purchase of subject lands. It is submitted that the AO has not brought on record any tangible material on record which could establish that the assessee, infact, paid any consideration over and above the amounts paid through banking channels. It is further submitted that the onus to prove the allegation upon the assessee firm heavily lies upon the AO which the AO had miserably failed to discharge. It shall be pertinent to note that neither the sellers of the lands nor the partners of the assessee firm have ever admitted to have received/ paid any on-money towards sale/ purchase of the said lands. 10.02 It shall be pertinent to note that the ld. CIT(A), at para (G) on page no. 53 of his Order, has also given his findings to the effect that no evidence or material has been brought on record to prove that there was any exchange of money by CASH between the buyer and seller over and above the consideration shown in the registered deed. It is therefore, submitted that the AO could not bring on record any corroborative material to establish his allegation of payment of on-money by the assessee firm. For such proposition, reliance is placed on the decision of the Hon’ble Supreme Court in the case of K.P. Varghese 131 ITR 594 (SC). 11.00 THE ASSESSEE FIRM HAS NOT MADE ANY CASH PAYMENT OF Rs.25.50 LAKHS AS ALLEGEDLY ADMITTED BY THE TWO SELLERS NAMELY SHRI MALKHAN AND SHRI MUNNALAL M/s. Vrandawan Construction Co. 29 11.01 Your Honours, at the outset, it is submitted that the assessee firm has not made any payment of even a single penny for purchase of subject lands over and above as recorded in its regular books of account and that appearing in the registered sale deeds of the lands. 11.02 It is submitted that the ld. CIT(A), at page no. 55 of his Order, has averted that Shri Malkhan, in reply to Q. No. 8 [kindly refer PB Page No. 191], had admitted to have received cash of Rs.5.50 lakhs over and above the sale consideration stated in the registered sale deed. Further, the ld. CIT(A) has also averted that Shri Munnalal had admitted Rs.20 lakhs cash over and above the amount stated in the registered sale deed. 11.03 Your Honours, it is submitted that the assessee firm has never paid any cash of Rs.5.50 lakhs to Shri Malkhan or Rs.20 lakhs to Shri Munnalal. It is submitted that the AO never afforded any opportunity to the assessee to cross- examine the sellers of the lands. Further, no evidence has been brought on record by the AO to establish that any cash was actually paid by the assessee firm to the sellers of the land. Such fact has duly been admitted and acknowledged by the ld. CIT(A) himself while giving his findings at para (G) on page no. 53 of his Order. The ld. CIT(A) has categorically stated that no evidence or material has been brought on record to prove that there was any exchange of money by CASH between the buyer and seller over and above the consideration shown in the registered deed. 12.00 PRESUMPTION UNDER S.292C AS REGARD TO BELONGINGNESS OF LOOSE PAPERS CANNOT BE MADE AGAINST THE ASSESSEE Your Honours, without prejudice to the above, it is submitted that since the aforeasid loose papers were allegedly seized from the possession and control of Smt. Sunita Maheshwari and further since, such loose papers were belonging to Smt. Sunita Maheshwari only, then, as per the settled position of law, the liability of explaining such loose papers was only upon Smt. Sunita Maheshwari and presumptions as regard to belongingness of these loose papers can only be made against Smt. Sunita Maheshwari under the provisions of s.292C of the Act. 12.01 Your Honour, it is submitted that the provisions of s.292C of the Income-Tax Act, 1961 have been inserted in the statute by the Finance Act, 2007 w.r.e.f. 1-10-1975 to empower the income-tax authorities to make certain presumptions on books of account, other documents, money, bullion, jewellery or other valuable article or thing found in the possession or control of any person in the course of a search under s.132 even for the purpose of assessment. Such provisions have been inserted in the background of decision of Hon’ble Apex Court in the case of P.R. Metrani vs. CIT (2006) 287 CTR 209 (SC) in which the Hon’ble Apex Court held that the presumption under s.132(4A) is not available for the assessment proceedings. The phraseology used in sub-section (1) of section 292C is pari-materia with that of section 132(4A). M/s. Vrandawan Construction Co. 30 12.02 It is submitted that many judicial authorities in the context of provisions of section 132(4A) have clearly laid down the ratio that the presumption under s.132(4A) is available only against the person from whose possession the document is found and such presumption is not available against any third party. For such proposition, reliance is placed on the following judicial pronouncements: i) Smt. BommanaSwama Rekha vs. ACIT (2005) 94 TTl (Visakha) 885 ii) Straptex (India) (P) Ltd. vs. DCIT (2003) 79 TTl (Mumbai) 228 iii) Jaya S. Shetty vs. ACIT (1999) 64 TTl (Mumbai) 551 iv) Ashwani Kumar vs. ITO (1992) 42 TTl (Del) 644 v) Kishanchand Sobhrajmal vs. ACIT (1992) 42 TTl (IP) 423 vi) Rama Traders vs. First ITO (1988) 32 TTl (Pat) 483 (TM) vii) ACIT vs. Kishore Lal Balwant Rai & Ors. (2007) 17 SOT 380 (Chd) viii) ShethAkshayPushpavadan vs. DCIT (2010) 130 TTl (Abd)(UO) 42 ix) Canyon Financial Services Ltd. & Ors. vs. ITO & Ors. (2017) 399 ITR 202 (DelHC) x) PCIT vs. Himanshu Chandulal Patel (2019) 8 TMI 364 (GujHC) xi) Mahashian Di Hatti vs. DCIT (2013) 21 ITR 731 (DelTrib) xii) Amarjit Singh Bakshi (HUF) vs. ACIT (2003) 22 CCH 329 (DelTrib) 13.01 ADDITIONS CANNOT BE MADE ON THE PRESUMPTIONS AND ASSUMPTIONS DRAWN FROM STRAY JOTTINGS Your Honours, in the instant case, the impugned addition has been made by the learned AO in the appellant’s income merely on the basis of presumptions and assumptions drawn from the stray jottings made on the loose papers found and seized from the premises of a third person. It is submitted that the assessee has not been found to be an owner of any immovable or movable property other than the ones already disclosed by it. In such circumstances, without there being any iota of evidence available on record, no addition can be made in the appellant’s income. For such proposition, reliance is placed on the judgment of the Hon’ble Jurisdictional ITAT, Indore Bench in the case of Dr. Yogiraj Sharma vs. ACIT (2015) 169 TTJ 547 (IndoreTrib). 13.02 STRONG SUSPICION, STRANGE COINCIDENCE AND GRAVE DOUBTS CANNOT TAKE THE PLACE OF LEGAL PROOF – DECISION OF HON’BLE SUPREME COURT Your Honours, the Hon’ble Supreme Court, in its landmark judgment in the case of Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 754, was pleased to hold that there must be something more than mere suspicion to support an assessment and without there being any material or evidence, which have been confronted to the assessee, no addition can be made. The Hon’ble Supreme Court was pleased to hold as under: “8. As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the ITO is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not M/s. Vrandawan Construction Co. 31 be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-s. (3) of s. 23 of the Act, the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under s. 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh vs. CIT (supra). In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the Departmental Representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the ITO and the Tribunal, seems to be based on surmises, suspicions and conjectures. It is somewhat surprising that the Tribunal took from the representative of the Department a statement of gross profit rates of other cotton mills without showing that statement to the assessee and without giving him an opportunity to show that that statement had no relevancy whatsoever to the case of the mill in question. It is not known whether the mills which had disclosed these rates were situate in Bengal or elsewhere, and whether these mills were similarly situated and circumstanced. Not only did the Tribunal not showthe information given by the representative of the Department to the appellant, but it refused even to look at the trunk load of books and papers which Mr. Banerjee produced before the Accountant Member in his chamber. No harm would have been done if after notice to the Department the trunk had been opened and some time devoted to see what it contained. The assessment in this case and in the connected appeal, we are told, was above the figure of Rs. 55 lakhs and it was meet and proper when dealing with a matter of this magnitude not to employ unnecessary haste and showimpatience, particularly when it was known to the Department that the books of the assessee were in the custody of the Sub-Divisional Officer, Narayanganj. We think that both the ITO and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion. It is thus a fit case for the exercise of our power under Art. 136.” [Emphasis supplied] 13.03 MERELY ON THE BASIS OF ANY LOOSE PAPER, WITHOUT FINDING ANY OTHER CORROBORATIVE EVIDENCE, NO ADDITION CAN BE MADE Your Honours, it is a settled law that merely on the basis of any loose paper, without finding any other corroborative evidence, no addition can be made. Further, it has been judicially held that merely on the basis of excel sheets, stray jottings, etc. no addition can be made. Reliance is placed on the following judicial pronouncements: i) CIT Central & United Provineer Vs. Laxmi NarainBadreDass (1937) 5 ITR 170 ii) Central Bureau of Investigation v. V.C. Shukla and Others (1998) 3 SCC 410 iii) Common Cause (A Registered Society) v. Union of India (2017) 30 ITJ 197 (SC) M/s. Vrandawan Construction Co. 32 iv) Pr. CIT vs. Shri PukrajSoni (2019) 34 ITJ 489 MP (HC.) v) CIT vs. Anil Khandelwal (2015) 93 CCH 0042 (Del.) vi) Pr. CIT Central-1 vs. Hassan Ali Khan 2019 (2) TMI 1593 (BomHC) vii) Pr.CIT Central-2 vs. Vinita Chaurasia 2017 (5) TMI 992 (Del.) viii) Straptex (India) (P) Ltd. vs. DCIT (2003) 79 TTJ 228 (Mum) ix) Sheth Akshay Pushpavadan vs. DCIT (2010) 130 TTJ (Ahd) (Uo) 42 x) ACIT vs. Kishore Lal Balwant Rai & Ors. (2007) 17 SOT 380 (Chd) xi) Shri Arjun Singh vs. ADIT & Ors. (2000) 246 ITR 363 (MP) xii) Kishanchand Chelaram vs. CIT (1980) 125 ITR 713 (SC) xiii) KrishnaTextiles vs. CIT (2009) 310 ITR 227 (Guj) xiv) Bangodaya Cotton Mills Ltd. vs. CIT (2011) 330 ITR 104 (Cal) xv) Sir Shadilal Sugar & General Mills Ltd. vs. CIT (1987) 64 CTR (SC) 199 xvi) Mehta Parikh & Co. vs. CIT (1956) 30 ITR 81 (SC) xvii) Umacharan Shaw & Bros. vs. CIT (1959) 37 ITR 271 (SC) xviii) Lalchand Bhagat Ambicaram vs. CIT (1959) 37 ITR 288 (SC) In view of the above facts and circumstances of the case, it is submitted that the additions of Rs.25,20,00,000/- and Rs.10,80,00,000/- respectively for A.Y. 2011- 12 and A.Y. 2012-13 so made by the AO under s.68 of the Act deserves to be deleted in its entirety.” 8.15 Before us, the ld. counsel of the assessee also submitted that the assessee firm had purchased the subject lands at the prevailing market rates only and at the purchase consideration stated in the registered purchase deeds. The ld. counsel demonstrated that during the previous year relevant to A.Y. 2011-12, the assessee firm had purchased the agricultural lands admeasuring 8.40 acres for an actual consideration of Rs.2,85,36,000/- on which the assessee firm had further incurred a sum of Rs.33,71,260/- towards stamp duty and registration expenses and thus, the assessee firm had made purchases of 8.40 acres land at an aggregate consideration of Rs.3,19,07,260/- which is evident from Schedule-6 of Purchases of financial statements of the assessee firm placed on record. Further, during the previous year relevant to A.Y. 2012-13, the assessee firm had purchased 3.60 acres land for an aggregate consideration of Rs.2,63,00,000/- which is evident from Schedule-7 of the financial M/s. Vrandawan Construction Co. 33 statements for A.Y. 2012-13. The ld. counsel further submitted that the entire payments towards the purchase consideration were made through banking channels only which are getting clearly evident from the bank statements of the assessee firm placed at page no. 152 to 155 of the Paper Book filed before us. The ld. counsel also reconciled the payments reflecting in the bank statements of the assessee firm with the details of payments stated in the registered purchase deeds placed at page no. 83 to 143 of the Paper Book of the assessee. 8.16 The assessee firm also contended that since the AO placed a heavy reliance on the statements of sellers of the lands recorded during the course of post-search enquiries, the AO ought to have provided an opportunity of cross-examination of the sellers to the assessee firm. The ld. counsel contended that without affording the opportunity of cross-examination, merely on the solitary statements of the sellers for alleged receipt of cash of Rs.25.50 lakhs, no addition could have been made in the hands of the assessee firm.For this propostion reliance placed on following decisions:- i) M/s. Kishinchand Chellaram vs. CIT (1980) 125 ITR 713 (SC) ii) M/s. Andaman Timber Industries V/s. Commissioner of Central Excise, Kolkatta-II 2016 (15) SCC 785 (SC) iii) Ayaaubkhan Noorkhan Pathan vs. The State of Maharashtra and Ors., 2013 AIR 58 (SC) iv) CIT vs. Smt. Sunita Dhadda 2018 (3) TMI 1610 (SC) v) Principal Commissioner of Income Tax Ahmedabad and Ors. vs. Kanubhai Maganlal Patel 2017 (3) TMI 271 (Guj.) vi) Commissioner of Income Tax-V vs. Indrajit Singh Suri 2013 (8) TMI 111 (Guj.) vii) CIT vs. Supertech Diamond Tools Pvt. Ltd. 2013 (12) TMI 1529 (Guj.) viii) Commissioner of Income Tax vs. Ashwani Gupta (2010) 322 ITR 396 (Del.) ix) Commissioner of Income Tax vs. Ashwani Gupta (2010) 322 ITR 396 (Del.) x) ACIT vs. Govindbhai N. Patel 2013 (8) TMI 239 (Guj.) xi) CIT-13 Vs. M/s. Ashish International 2011 (2) TMI 1506 (Bom.) xii) CIT vs. S.C. Sethi (2007) 295 ITR 351 (Raj.) xiii) CIT vs. Smt. Sunita Dhadda 2017 (7) TMI 1164 (Raj.) M/s. Vrandawan Construction Co. 34 8.17 The ld. counsel submitted that the statements of the sellers do not convey that the prevailing market price of the lands was Rs.3,00,00,000/- per acre and instead, the sellers had accepted to have sold the said lands at Rs.40-50 lakhs per acre which is evident from the statement of Shri Munnalal as reproduced by the AO himself at page no. 11 of the assessment order. The assessee firm asserted that the amounts taken by Shri Sunil Maheshwari from the sellers of lands were altogether different and independent transactions between them and the assessee firm is not concerned with such subsequent transactions in any manner. The ld. counsel further contended that Shri Sunil Maheshwari, in his statement recorded by the AO u/s. 131 of the Act, had categorically stated that the sellers, who were real brothers, had given the amounts to Shri Sunil Maheshwari as unsecured loans with an intent to buy some other lands with a condition that whenever they would require money for making investment, Shri Sunil Maheshwari would repay their unsecured loans. Further, Shri Sunil Maheshwari had also categorically denied of making any cash payment of even a single penny to any of the sellers of lands. The ld. counsel also demonstrated that during the course of the assessment proceedings, Shri Sunil Maheshwari, vide his letter dated 24-11-2016, had furnished the details of unsecured loans obtained by him and his other partnership firm from the sellers of lands. In such details, Shri Sunil Maheshwari exhibited that out of the total unsecured loans aggregating to Rs.3,52,00,000/- obtained from sellers of lands, he M/s. Vrandawan Construction Co. 35 had already repaid substantial amounts aggregating to Rs.2,39,53,000/- in the subsequent years. 8.18 As regard the loose paper bearing page no. 49 of LPS-4, referred to by the AO while making the impugned addition, Ld. counsel for the assesse submitted that, as has been captioned in the subject loose paper itself, it was merely a ‘proposal’ for construction of residential units on the subject lands of the assessee firm and such proposal was merely discussed with some builder at some point of time and the same was factually never acted upon. The ld. counsel asserted that the subject loose paper pertains to the year 2013-14 and the lands were purchased by the assessee firm during the F.Ys. 2010-11 and 2011-12 and as such, at any rate, such loose paper cannot be viewed adversely for the purpose of estimating the purchase cost of the subject raw agricultural lands purchased in the past. 8.19 Further, as regard the loose paper inventorized as page no. 3 of LPS-9, Ld. counsel for the assessee contended that the said loose paper was again in the nature of a ‘proposal’ which was prepared for construction of residential duplex bungalows at 3 acres land of Damkheda. The ld. counsel brought our kind attention to the heading of the said loose paper which contained the word ‘Proposal’ and at the bottom, there was written ‘Yes’ or ‘No’. Thus, the assessee firm asserted that such loose paper, being a mere estimate only, also could not have been used for determining the purchase cost of the lands. M/s. Vrandawan Construction Co. 36 8.20 As regard the loose papers page nos. 76 to 82 of LPS-1, the Ld. counsel for the assessee contended that it was a draft (unsigned & undated) joint venture agreement (JVA) between some third parties and it was nowhere related to the assessee firm. A plain reading of the so-called draft JV agreement was purported to be executed between some Dr. Manoj Singh and some other partnership firm named and styled as M/s. R.B.M. Associate. In nutshell, in such loose paper, nowhere the name of the assessee has been mentioned. Even such draft JVA was drafted for some construction work and the rates were estimated on the basis of proposed development. In such eventuality, no cognizance could have been taken by the Ld.AO for arriving at the purchase cost of the lands on the basis of such draft JVA between third parties. 8.21 The ld. counsel of the assessee also contended that during the course of post-search enquiries, the husband of Smt. Sunita Maheshwari namely Shri S.K. Maheshwari were confronted with all such loose papers and in reply, Shri S.K. Maheshwari had clearly explained the nature of such loose papers to the satisfaction of the search party. The statement of Shri S.K. Maheshwari has also been filed by the assessee firm at page no. 158 to 171 of its Paper Book. 8.22 Thus, Ld. counsel for the assessee submitted that none of the loose papers referred to by the AO has any evidentiary value and all such documents are only ‘dumb documents’, which do not have any nexus whatsoever with the purchase cost of the subject agricultural lands. M/s. Vrandawan Construction Co. 37 For such proposition, the ld. counsel placed reliance on the following decisions: i) ACIT vs. Satyapal Wassan (2007) 295 ITR (AT) 352 (Jabalpur) ii) Rakesh Goyal vs. ACIT (2004) 87 TTJ (Del) 151 iii) Mohan Foods Ltd. vs. DCIT (2010) 123 ITD 590 (Del) iv) CIT vs. S M Agarwal (2007) 293 ITR 43 (Del) v) Jayantilal Patel vs. ACIT & Ors. (1998) 233 ITR 588 (Raj) vi) Ashwani Kumar vs. ITO (1992) 42 TTJ (Del) 644 vii) M M Financiers (P) Ltd. vs. DCIT (2007) 107 TTJ (Chennai) 200 viii) Monga Metals (P) Ltd. vs. ACIT 67 TTJ 247 (All. Trib) ix) Jagdamba Rice Mills vs. ACIT (2000) 67 TTJ (Chd) 838 x) CIT vs. Kulwant Rai (2007) 291 ITR 36(Delhi) xi) PrakashChand Nahta vs. CIT (2008) 301 ITR 134(MP) xii) Straptex (India) P. Ltd. vs. DCIT (2003) 84 ITD 320(Mum) xiii) ACIT vs. Narottam Mishra (2018) 32 ITJ 510 (Trib- Indore) 8.23 Ld. counsel for the assessee further submitted that after purchasing the said lands, no single activity to generate any income on such lands had been carried out by it and no development cost of even a single penny had been incurred by the assessee firm. Ld. counsel for the assessee has stressed upon the field enquiry and spot verification which was got done by the ld. CIT(A) before passing his Order. A copy of the report of the Tax Assistant of ld. CIT(A) is submitted by the assessee at page no. 283 & 284 in its Paper Book. The ld. counsel of the assessee firm also referred to the comparative cases of lands sold by the third parties in the surrounding areas which have been given by the ld. CIT(A) at page no. 49 of his Order. The ld. counsel also stressed on the comparative guideline rates of the lands at village Damkheda which are given by the ld. CIT(A) at page no. 50 of his Order. From such comparisons too, the prevailing market rates of the subject lands could not be inferred at Rs.3 crores per acre but on the contrary, the same are near to the average purchase price paid by the assessee for the subject lands. M/s. Vrandawan Construction Co. 38 8.24 The ld. counsel further contended that the AO has made exorbitant additions in the assessee’s income without bringing any cogent tangible material on record which could establish that the assessee firm had infact paid any consideration over and above the amounts paid through banking channels. The ld. counsel also contended that since the loose papers relied upon by the AO were seized from the possession and control of Smt. Sunita Maheshwari and further since, such loose papers were belonging to Smt. Sunita Maheshwari only, then as per settled position of law, the liability of explaining such loose papers was only upon Smt. Sunita Maheshwari and accordingly, presumptions as regard to belongingness of such loose papers can only be made against Smt. Sunita Maheshwari under the provisions of s.292C of the Act. For such proposition, the ld. counsel placed his reliance on the following decisions: i) Smt. BommanaSwama Rekha vs. ACIT (2005) 94 TTl (Visakha) 885 ii) Straptex (India) (P) Ltd. vs. DCIT (2003) 79 TTl (Mumbai) 228 iii) Jaya S. Shetty vs. ACIT (1999) 64 TTl (Mumbai) 551 iv) Ashwani Kumar vs. ITO (1992) 42 TTl (Del) 644 v) Kishanchand Sobhrajmal vs. ACIT (1992) 42 TTl (IP) 423 vi) Rama Traders vs. First ITO (1988) 32 TTl (Pat) 483 (TM) vii) ACIT vs. Kishore Lal Balwant Rai & Ors. (2007) 17 SOT 380 (Chd) viii) ShethAkshayPushpavadan vs. DCIT (2010) 130 TTl (Abd)(UO) 42 ix) Canyon Financial Services Ltd. & Ors. vs. ITO & Ors. (2017) 399 ITR 202 (DelHC) x) PCIT vs. Himanshu Chandulal Patel (2019) 8 TMI 364 (GujHC) xi) Mahashian Di Hatti vs. DCIT (2013) 21 ITR 731 (DelTrib) xii) Amarjit Singh Bakshi (HUF) vs. ACIT (2003) 22 CCH 329 (DelTrib) 8.25 The ld. counsel also stressed on the landmark judgment of the Hon’ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 754, wherein their Lordships were pleased to hold that there must be something more than mere suspicion to M/s. Vrandawan Construction Co. 39 support an assessment and without there being any material or evidence, which has been confronted to the assessee, no addition can be made.The ld. counsel also pointed out that in the instant cases, the ld. AO has made the additions in respect of the entire estimated value of the purchase consideration without giving any credit for the consideration already recorded in the regular books of account of the assessee firm. 8.26 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of lower authorities and written and oral submissions made from both the sides. We find that the AO has made the impugned addition of Rs.36cr in the assessee’s income by adopting the purchase cost of Rs.3cr per acre solely on the basis of three loose papers seized during the course of search from the premises of Smt. Sunita Maheshwari. On a perusal of the first loose paper inventorized as page no. 49 of LPS-4, which is scanned at page no. 16 of the body of the assessment order, we noted that such loose paper is a ‘Proposal’ for development of 12 acres residential land at village Damkheda. The heading of the loose paper reads as ‘ पोजल 12 एकड़ आवासीय भ ू म ाम दामखेडा अयो या बायपास मेन हाईवे रोड पर’ . As per such proposal, the rate per acre of land was shown at Rs.3cr and value of 12 acres land was stated at Rs.36cr. From the proposal, it appears that out of the aforesaid valuation, it was proposed that an advance of Rs.9cr would be paid till 1-7-2013 and the balance M/s. Vrandawan Construction Co. 40 amount of Rs.27cr would be paid from 01-08-2013 by way of monthly installments of Rs.75 lacs each for 36 months. Further, in such loose paper, the chargeability of penal interest @18% p.a. i.e. Rs.3,750/- per day in case of delay in payment of any installment and in case of pre-payment, deduction of the interest has been stipulated. But, from the loose paper, which is in a computerized form, we find that first of all, it is merely a proposal; secondly, it is undated; thirdly, from such loose paper, it is not discernible that by whom the proposal was made and to whom the proposal was made; and lastly, it has not been signed by any person. Thus, from such loose paper inventorized as page no. 49 of LPS-4, no inference can be drawn muchless of any inference regarding payment of any purchase consideration paid by the assessee firm to anyone at any point of time. On a plain reading of the entire proposal, anyone could interpret that this was some proposal relating to proposed development of land into plots and subsequent sale thereof under which the seller would be receiving Rs.9 crores uptill 01-07-2012 as advance and balance Rs.27 crores in 36 months. It thus follows that the said proposal was relating to proposed sale of subject 12 acres land owned by the assessee firm upon its development and the same is not relating to ‘purchase’ of the subject lands by the assessee firm. Further, as per such loose paper, the proposed payment terms also stretch in 36 monthly installments (3 years) meaning thereby the rate per acre stated at Rs. 3 crores would have a lesser present value on the date of preparation of proposal in the year 2013. We also find that the ld. CIT(A), while passing his Order, had got conducted a M/s. Vrandawan Construction Co. 41 physical spot verification of the lands and also obtained the land records wherein it was found that neither any development had been undertaken on the subject lands nor the said lands were sold by the assessee firm. Thus, we find sufficient merit in the contention of the Ld. counsel for the assessee that such a proposal was never actually acted upon and the same is merely a dumb document. In such eventuality, the loose paper page no. 49 of LPS-4 could not be used as legally admissible evidence to determine the purchase price of the subject lands as worked out by the AO at Rs. 3 crores per acre. Thus, the conclusion of the AO for working out the purchase price of the lands on the basis of such loose paper is devoid of any merits. 8.27 Now, with regard to loose paper page no. 3 of LPS-9, which is scanned at page no. 17 of the Assessment Order, we noted that such loose paper is again a Proposal and the heading itself reads as ‘ पोजल 3 एकड दामखेडा म & 'वोइंट वे+चर को -फ/स म ू 0य म & ’. We noted that such loose paper contains some proposal for construction of 69 to 72 duplex bungalows on 3 acres of land proposed to be sold @Rs.40 lacs per bungalow in the ratio of 40:60. As per the working, the share of the assessee firm works out at Rs.11.20cr for which a proposed schedule of payment is given. At the end of the loose paper, there is a mention ‘ हां या ना’ but no signature of any person is found on such loose paper to show any acceptance of such proposal. The ld. counsel for the assessee contended that during the course of search, S.K. Maheshwari was confronted with the aforesaid loose paper and in M/s. Vrandawan Construction Co. 42 response, Shri Maheshwari had stated that some broker had left this page with him for which he did not have any specific knowledge. We noted that the ld. CIT(A) had already got done the spot verification of the site through his office staff and there was no development on the subject lands. We thus find that the said loose paper was merely a proposal which never materialized. In such circumstances, we find sufficient merit in the contention of the Ld. counsel for the assessee that such loose paper is also a dumb document having no date, name or address of any party, description of land, signature of any person and therefore, such loose paper has no evidentiary value in the instant case. By any stretch of imagination, from such loose paper, it cannot be presumed that the purchase price of the impugned land was Rs.3 crores per acre as taken by the learned AO while passing the assessment order. 8.28 Further, as regard the loose papers page no. 76 to 82 of LPS-1 referred to by the AO, a part whereof is scanned at page no. 18 & 19 of the assessment order, we find that it is a Draft Joint Venture Agreement between some Dr. Manoj Singh as the ‘first party’ and M/s. R.B.M. Associate as the ‘second party’. We find that such draft JVA was confronted to Shri S.K. Maheshwari who stated on oath that a project was to be developed in the name of Regal Jyoti on the land bearing S.N. 205/2 area 2.43 acre in village Damkheda belonging to M/s. R.B.M. Associates and such project did not get materialized because such project was for constructing bungalows for which a minimum 5 acres land was required. We find that for the project, M/s. Vrandawan Construction Co. 43 both the parties to the agreement agreed for total sale consideration of Rs.7cr for 2.43 acre of land which works out at Rs.2.88 crore per acre. This JV agreement was executed in the ratio of 40:60 for which sellers had received Rs.2.25 crores in July 2014 and remaining amount was to be received in 20 months by way of sale proceeds of bungalows to be constructed. We find that undisputedly, such JVA does not pertain at all to the assessee firm. We further find that the assessee firm had purchased the said lands during the F.Y. 2010-11 and F.Y. 2011-12 but the said JVA pertains to some period of year 2014. Further, such JVA was again relating to some development of bungalows which certainly requires incurrence of expenditure and therefore, the price arrived at by the parties is the sale price and not the purchase price of land. In such eventuality, such loose papers are also to be considered as merely ‘dumb documents’ and cannot be relied upon for drawing any inference for the prevailing market price of the lands purchased by the assessee firm. 8.29 At this stage, it is relevant and necessary to consider the ratios of the following decisions. i) The Hon'ble High Court of Delhi in the case of CIT vs. Anil Bhalla (2010) 322 ITR 191 (Del.) observed that “no independent material or evidence had been brought on record by the AO to establish that the notings/jottings recorded on the loose sheet or paper represented an unaccounted transaction, then the explanation of the assessee should be accepted. In this situation, the Tribunal was right in holding that the loose sheet or document does not represent any investment or expenditure over and above the books of accounts of the M/s. Vrandawan Construction Co. 44 assessee out of income alleged to be earned from unaccounted sources”. ii) The Hon'ble ITAT Hyderabad ‘B’ Bench in the case of DCIT vs. M. Aja Babu following the decision of Hon'ble High Court of Delhi in the case of CIT vs. Anil Bhalla (supra), CIT vs. Dinesh Jain (HUF) 211 Taxman 23 (Del) and CIT vs. Jaipal Aggarwal 212 Taxman 1 (Del), ITAT Mumbai in the case of ACIT vs. JP Morgan India Pvt. Ltd. 46 SOT 250(Mumbai), held that the addition made by the AO based on the loose paper, which is not a conclusive evidence and therefore, the same is not sufficient for making the addition. The Tribunal also held that no addition can be made on the basis of dumb document/notebook/loose slips in absence of any other material to show that the assessee has made investment in land. The relevant observations and findings of the Tribunal in this case read as under:- 17 We have heard the arguments of both the padies, perused the record and have gone through the orders of the authorities below. In this case, the addition was made by the AO based on the loose paper and the same, in our view, cannot be considered as conclusive evidence. As held by the CIT(A) in the impugned order ”except relying , the notings in the loose slips, no attempt has been made to corroborate the notings with independent evidence. The parties to the ’transaction particularly the vendor has not examined. In every transaction there is a circle concerning two padies. /t is not known whether the vendor has disclosed the consideration as noted in the diary. Therefore, merely on the basis of presumption and some corroborated notings additions cannot be made.” In our opinion, the deletion of addition by the CIT(A) is justified and no interference is called for in the order of the CIT(A). The following cases supported the action of the CIT(A): 1. CIT Vs. Anil Bhalla [2010) 322 ITR 191 (Del.) - wherein held that the notings recorded on the loose sheet of paper do not represent any expenditure incurred by the assessee director and that the entries related to the company in as much as the assessee could explain from the books of the company that these projects were underdaken by it, and upheld the deletion M/s. Vrandawan Construction Co. 45 of the impugned addition under s. 69C, findings arrived at by the Tribunal are pure findings of facts and the same do not warrant any interference. 2. ACIT Vs. J.P. Morgan India (P) Ltd. [2011j 46 SOT 250 (Mum) 3. CIT Vs. Dinesh Jain HUF[2012) 211 Taxman 23 (Delhi) 4. CIT Vs. Jaipal Aggarwal [2013j 212 Taxman 1 (Delhi)- wherein it was held that Dumb documents seized, i.e. from which nothing could be clearly understood, cannot form a justified base for making additions to income of the assessee. 17.1 In view of the above discussion, we are of the view that the addition made by the Assessing Officer based on the loose paper, which is not a conclusive evidence and, therefore, the same is not sufficient to make the addition. In our opinion, no addition can be made on the basis of dumb documents/note book/loose slips in the absence of any other material to show that the assessee has made investments in land. Noting on the note book/diary/loose sheets are required to be suppoded/corroborated by other evidence and should also include the statement of a person who admittedly is a pady to the noting and statement from all the persons whose names there on the note book/loose slips and their statements to be recorded and then such statement undoubtedly should be confronted to the assessee and he has to be allowed to cross examine the padies. The vendor has not examined in this case. Therefore, we do not find any infirmity in the order of the CIT(A) in directing the Assessing Officer to delete the addition made on the basis of loose paper and the order of the CIT(A) is hereby upheld dismissing the grounds raised by the revenue on this issue. 18. As a result appeal in ITA No. 1756/Hyd/2012 is dismissed.” iii) The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Atam Valves (P) Ltd. (2011) 332 ITR 468 (P&H) held that when the loose papers did not relate to certain payments during the relevant period in question, then in absence of any supporting material or evidence, these loose sheets by itself were not found to be sufficient enough for making a sustainable and justified addition. iv) The ITAT Delhi ‘E’ Bench in the case of Atul Kumar Jain (1999) 64 TTJ 786 (Delhi) vs. DCIT held that when the seized papers have M/s. Vrandawan Construction Co. 46 being not corroborated by any independent evidence it cannot be considered as a reliable document or acceptable piece of evidence as a proof of investment in the house property and therefore, these kind of documents/papers are liable to be ignored and addition made on the basis of such document is not sustainable and in accordance with law. v) In CIT v/s Kulwant Rai (2007) 291 ITR 36 (Del) the ruling of the Supreme Court in Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) was relied upon. The Supreme Court held that even though Income Tax Authorities including the Assessing Officer has unfettered discretion and not strictly bound by the rules and pleadings as well as materials on record and is legitimately entitled to act on the material which may not be accepted as evidence, nevertheless such discretion does not entitle them to make a pure guess and base an assessment entirely upon it without reference to any material or evidence at all. Given the above state of law the Delhi High Court stated that it has no hesitation in so concluding, since the document seized was both undated and unsigned and even taken at face value did not lead to further enquiry on behalf of the AO. vi) The ITAT, Hyderabad in ITA 329/Hyd/2012 dated 04.01.2014 in the case of DCIT vs. Shri Babu Rao where in Para 26 to 29 held thus:- “26. It is clear from the above provisions of section 153A that the income of the assessee in case of a person where search is initiated u/s. 132, the books of account or other documents or any assets are requisitioned u/s. 132A, the Assessing Officer after issue of a notice to furnish income of the M/s. Vrandawan Construction Co. 47 assessee in respect of each assessment year falling within 6 assessment year immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition made, the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such 6 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisitioned, as the case may be, on bringing on record the material to show that there is undisclosed income of the assessee. In other words, there should be material on record to show that the income is assessed on the basis of material/ evidence in hands of the Assessing Officer. 27. Being so, in our opinion, guess work is not possible in case of search assessment framed u/s. 143(3) or u/s. 153A of the Act without any proper material. The AO shall have the basis for assuming that the expenditure incurred by the assessee is out of undisclosed income. It is not permissible to assess the undisclosed income in the absence of any other evidence on arbitrary basis. The unsubstantiated loose sheets cannot be considered as a conclusive evidence to make any addition towards undisclosed income. It was held by the Supreme Coud in the case of CBI vs. V.C. Shukla (1998) 3 SCC 410 that ”file containing loose sheets of papers are not books” and hence entries therein are not admissible u/s. 34 of the Evidence Act, 1872. 28. In the present case, the seized material (two note books) marked as KBR/A/02 and KBR/A/04 wherein certain entries are found recording various transactions pertaining to the assessee. These entries in the notebook are unsubstantiated and on that basis the AO reached to the conclusion that the figures mentioned therein are to be read by adding 3 zeros and thereby he came to conclude that there is undisclosed income in these 6 assessment years. In our opinion, the document recovered during the course of search was a dumb document and led nowhere. The CIT(A) rightly came to the conclusion that it cannot be acted upon and deleted the addition. 29. Other than the loose paper, the AO has not brought on record any corroborative material or evidence to show that the inference made by him is correct. The CIT(A) after taking the totality of the circumstances into consideration came to the conclusion that the addition made by the AO is not justified and the argument put forth by the assessee is supported by documentary evidence. This was not a case where relevant evidence had been ignored by the CIT(A) and their relevant evidence has been taken into consideration. The only test that was required to be applied was whether on the facts found and the state of evidence on record, the conclusion arrived at by the CIT(A) was one which could be arrived by a reasonable person properly informed in law. Applying this test, it could not be said that the decision recorded by the CIT(A) one which could not have been arrived at by M/s. Vrandawan Construction Co. 48 a reasonable person properly informed in law considering the state of evidence on record. Hence, in our considered opinion, the CIT(A) has reached a correct conclusion in deleting the addition made by the AO on the basis of loose sheets.” vii) The Hon'ble ITAT Jabalpur in the case of ACIT vs. Satyapal (2007) 295 ITR (AT) 352 (Jab.) held as under:- “The crux of these decisions is that a document found during the course of search must be a speaking one and without any second interpretation, must reflect all the details about the transactions of the assessee in the relevant assessment year. Any gap in the various components as mentioned in section 4 of the Income Tax Act must be filled up by the Assessing Officer through investigations and correlations with the other material found either during the course of the search or on investigation. As a result, we hold that document No. 7 is a non- speaking document. viii) The Hon'ble Delhi High Court in the case of CIT vs. S.M. Agrawal 293 ITR 043 (Del) held that unless and until the contents of the document are proved against the person, the possession of the document or handwriting of that person on such document by itself could not prove the contents of the document. It was further held that the document recovered during the course of search from the assessee was held to be dumb document and the addition on the basis of the same is not sustainable. ix) The Hon'ble Delhi High Court in the case of CIT vs. Vatika Landbase (P.) Ltd. (2016) 383 ITR 320 (Del) held that the addition made by the Assessing Officer on the basis of documents found and seized from the computer of an employee of the assessee company showing that the rate of sale of floor space in commercial was higher than the rate shown by the assessee was not sustainable as the rates mentioned in the seized documents did not represent any completed M/s. Vrandawan Construction Co. 49 or materialized transaction. Moreover, the Assessing Officer did not make any enquiry from the said employee or from the buyers of flats in respect of actual price paid by them. x) The Hon'ble Delhi High Court in the case of CIT vs. Ved Prakash Choudhary (2008) 305 ITR 245 (Del) has held that in the absence of corroborative material, the addition made on the basis of sketchy document which was unproved cannot be sustained in law. xi) The Hon'ble Delhi High Court in the case of CIT vs. Vivek Agrawal (2015) 231 Taxman 392 (Del) has held that unless the amounts stated the document were actually paid it cannot be presumed that the amount mentioned in the sale deed was not correct. xii) The Hon'ble M.P. High Court in the case of CIT vs. Kantilal Prabhudas Patel (2008) 296 ITR 568 (MP) has held that the addition cannot be made on guess work or estimates. 9. Thus, in view of the above discussion and the given facts and circumstances and respectfully following the judgements referred hereinabove, we do not find any infirmity in the findings given by the ld. CIT(A) qua the aforesaid three loose papers. 9.1 We further find that the AO had heavily relied upon the statements of the sellers of the lands recorded during the course of post search enquiries. Undisputedly, the assessee firm was never M/s. Vrandawan Construction Co. 50 afforded any single opportunity of cross-examination of the witnesses. On the solitary basis of the statements made by the sellers of lands to the effect that some payments were returned back to the partner of the assessee firm and some payments were received in cash, the AO reached to a conclusion that the assessee firm had not made any accounted payment to the sellers and the transactions shown in registry and books of account are nothing but an eye wash. As per the AO, the entire payments towards purchase of lands were made in cash only. We find that the assessee firm had given detailed rebuttal against each and every allegation of the AO which have been reproduced by the ld. CIT(A) at page no. 41 to 43 of his Order. We further find that none of the sellers had anywhere accepted that the subject lands were sold by them @Rs.3 crore per acre. On the contrary, we find that the sellers have admitted to have sold the lands only at those rates at which the actual purchase consideration were stated in the registered purchase deeds. We noted that Shri Malkhan, in reply to Q. No. 6 of his statement, had admitted to have sold 3.6 acre land to the assessee firm for a total consideration of Rs.2.63 crores which is clearly evident from the registered sale deed filed by the assessee firm. Further, Shri Munnalal, in reply to Q. No. 4 of his statement (as also reproduced by the AO at page no. 10 of his Order), has clearly stated that 6.85 acre land was sold to the assessee firm @ Rs.34.28 lakhs per acre and furthermore, on the next page (also reproduced by the AO at page no. 11 of his Order), Shri Munnalal stated to have sold 3.5 acre land @Rs.40-50 lakhs per acre. Lastly, the third seller namely Shri Ghanshyam Singh too, in M/s. Vrandawan Construction Co. 51 reply to Q. No. 6 of his statement (reproduced by the AO at page no. 13 of his Order), stated to have sold 3 acres land @Rs.34.20 lakhs per acre. Thus, all the sellers, whose statements were recorded, had accepted to have sold the subject lands only at the rates of Rs.35-45 lakhs per acre and except a receipt of Rs.25.50 lakhs, none of the sellers had stated to have received any substantial amount from the assessee firm or its partners in cash. 9.2 We find that the entire payments towards purchase of subject lands were made through banking channels only which is clearly evident from the copies of the bank statements of the assessee firm and copies of registered sale deeds containing details of payments, as filed in the Paper Book. The assessee firm also furnished a date-wise summary of payments made against purchases of subject lands which is also reproduced by the ld. CIT(A) at page no. 44 of his Order. We also find that along with the details of payments, the assessee firm has also furnished the source of investment in purchase of subject lands being out of the partners’ capital accounts. The details of such sources of funds have also been reproduced by the ld. CIT(A) at page no. 46 & 47 of his Order. On a careful perusal of the entire details and supporting documentary evidences, we find that the assessee firm has successfully established the sources of investment in the subject lands being out of the fresh introduction of capital in partners’ capital accounts. Although the source of funds is not a question before us, but still, to dispel any probable doubt, we are of the considered opinion that once the cash credit in the books M/s. Vrandawan Construction Co. 52 of account of the partnership firm is established from the partners’ capital accounts, then the responsibility of the firm is over and the cash credit cannot be assessed in the hands of the firm as held by the Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of CIT vs. Metachem Industries (2001) 116 taxman 572 (MP). We find that the AO could not bring any corroborative material on record which could establish that any payment over and above that reflected in the registered sale deeds and bank statements was made by the assessee firm. 9.3 We also note that when Shri Sunil Maheshwari, one of the partners of the assessee firm, was confronted with the statements of sellers of the lands, he had clearly explained that the amounts received by him from the farmers represent unsecured loans and are entirely different and independent transactions with the sellers of land. We find that the aforesaid explanation of Shri Sunil Maheshwari also finds sufficient support from the documentary evidences furnished by him before the AO which are also filed by the assessee firm at page no. 234 to 268 of its Paper Book. 9.4 Thus, in view of our above findings, we do not find any merit in the contention of the ld. CIT (DR) that the statements of sellers of the lands were against the claim of the assessee firm and instead, we fully concur with the findings of the ld. CIT(A) made on this count. The relevant findings of the ld. CIT(A) are reproduced as under: “[B] Testimony of sellers do not support finding of AO: M/s. Vrandawan Construction Co. 53 During post search enquiries, statement of certain sellers (farmers) of impunged land at Damkheda were recorded and bank statement were obtained. This is important to mention that appellant was not even allowed the opportunity to cross-examine any of the witness. Based on interpretation of these statements, ld AO reached to conclusion that assessee had made payments to farmers by cheque as mentioned in registry and same payments were immediately returned back to assessee/partners/sister concerns of the assessee. As per statement of farmers, ld AO reached to the conclusion that assessee firm made CASH payments to the purchasers and said cash is reflected in their respective bank statements. On being confronted Shri Sunil Maheshwari did not give any satisfactory reply and gave only evasive replies about these “circular transactions”. Ld AO has scanned the relevant portion of the statements in the assessment order. In para 9.8 of assessment order, ld AO has concluded that the assessee firm has not made any accounted payment to sellers and transactions shown in registry and books of accounts is nothing, but an eye wash. Accordingly, ld AO has held that payments towards purchase of land was made in CASH only. I have perused the relevant statements, bank statements and ledger a/c copies filed before me inter alia written submissions filed by the appellant. The findings of ld AO based on which he made the addition could be summarized as under:- i. At the time of registries the assessee has paid almost NIL amount. ii. The payments made to farmers were transferred back to the account of Sunil Maheshwari and Balaji Infrastructure. iii. The statement on oath was recorded of Shri Malkhan Singh in which he accepted that no amount was received against sale of land. He further stated that he has received cash from Shri Sunil Maheshwari. iv. Shri Munnalal in his statement stated that he has received cash of Rs. 20,00,000/-. It is stated by the AO that the payments received by Shri Munna lal were transferred back to Shri Sunil Maheshwari. v. Shri Ghanshyam in his statement stated that he has not received any payment against sale of land but he has received land at Vidisha in lieu of sale of land. The amount given by the assessee was taken back by Shri Sunil Maheshwari. vi. The contention of the AO is that the assessee has not made payment to the sellers of land by cheques but the entire amount was paid in cash. M/s. Vrandawan Construction Co. 54 On each and every allegation, appellant has filed detailed submission with supporting evidences as under:- Contention of the AO Submission At the time of registries the assessee has paid almost NIL amount. It is submitted that at the time of registries in the year 2010-11, the assessee has made payment of Rs. 18,50,000/- and for balance amount PDCs were issued which were cleared in the year 2012-13. The same fact is evident from the balance sheet as on 31.03.2013 in which no sundry creditors appears. Thus, it is very clear that the assessee has made all the payments to the sellers of the land which are duly reflected in the regular books of account of the firm. Sir, a table reflecting date wise payments made to sellers and the date of clearance of the cheque from the account of the assessee is made here under from which it is very clear that all the payments were duly made by the assessee and the cheques were also cleared to the account of the sellers. The payments made to farmers were transferred back to the account of Sunil Maheshwari and Balaji Infrastructure. It is submitted that the assessee firm has duly made the payments to all the sellers of land and the cheques were duly cleared from the bank account of the assessee. Sir, Shri Sunil Maheshwari in his individual capacity has taken unsecured loan from the sellers and due to this the amount has been given by the sellers from their account to him. The firm has nothing to do with these transactions. Further, Shri Sunil Maheshwari has duly shown the unsecured loan taken from the sellers of land in his books of account and the same was repaid by him in coming years. If the payments are made by sellers to Shri Sunil Maheshwari does not mean that the said payments are made to firm. Sellers, the assessee firm and Shri Sunil Maheshwari are three different entities and the transaction between two does not in itself proves that there is involvement of third party also. The statement on oath was recorded of Shri Malkhan Singh in which he accepted that no amount was received against sale of land. He further stated that he has received It is submitted that in the statement of Shri Malkhan Singh question and answers are related to 3.60 Acres of land. Sir, the assessee firm has not purchased any 3.60 Acres of land from Shri Malkhan Singh. It is quite possible M/s. Vrandawan Construction Co. 55 cash from Shri Sunil Maheshwari. that Shri Sunil Maheshwari might have purchased the said land in his personal capacity. The assessee firm has nothing to do with this transaction. As evident from the above table of land purchased by the assessee firm, there is no land of 3.60 Acre which has been purchased. Further, the payments were duly made to him by account payee cheques which have been duly cleared to his account. As far as receiving payment in cash is concerned, it is submitted that the firm has not made any payment in cash to Shri Malkhan Singh. Why he has accepted to receive cash from Shri Sunil Maheshwari is not known. It is quite possible that he might have received the cash in lieu of other land sold to Shri Sunil Maheshwari. It is further submitted that the statement was recorded behind the back of the assessee and the assessee was never provided with the opportunity of cross examining him. Shri Munnalal in his statement stated that he has received cash of Rs. 20,00,000/-. It is stated by the AO that the payments received by Shri Munna lal were transferred back to Shri Sunil Maheshwari. It is submitted that Shri Munnalal no were in the statement has denied of payments made by the assessee firm to him. The transaction of him with Shri Sunil Maheshwari is of personal nature which has nothing to do with the assessee firm. Further, the personal transaction of him with Shri Sunil Maheshwari is duly reflected in the regular books of account of Shri Sunil Maheshwari. Sir, the assessee firm has purchased the land for which payments are made by account payee cheques which are duly reflected in the regular books of account of the assessee. Further, the assessee firm has not made any payment in cash to Shri Munnalal. Why he has accepted of receipt of cash is not known. It is further submitted that the statement was recorded behind the back of the assessee and the assessee was never provided with the opportunity of cross examining him. M/s. Vrandawan Construction Co. 56 Shri Ghanshyam in his statement stated that he has not received any payment against sale of land but he has received land at Vidisha in lieu of sale of land. The amount given by the assessee was taken back by Shri Sunil Maheshwari. It is submitted that Shri Ghanshyam no were in the statement has denied of payments made by the assessee firm to him. Sir, the assessee firm has duly made the payment against purchase of land and the same consideration is duly deposited in his bank account. It is submitted that while giving the statement Shri Ghanshyam has inter related two transactions with one. Sir, he has purchased land at Vidisha after selling his land to the firm. The said land is purchased from Shri Sunil Maheshwari and due to this reason Shri Sunil Maheshwari has taken his cheques as he has to receive payment for sale of his land at Vidisha. Sir, while giving the statement Shri Ghanshyam has mixed two transactions together. But both the transactions are different. The transaction of him with Shri Sunil Maheshwari is of personal nature which has nothing to do with the assessee firm. Sir, the assessee firm has purchased the land for which payments are made by account payee cheques which are duly reflected in the regular books of account of the assessee. It is further submitted that the statement was recorded behind the back of the assessee and the assessee was never provided with the opportunity of cross examining him. The contention of the AO is that the assessee has not made payment to the sellers of land by cheques but the entire amount was paid in cash. Sir, all the payments were made by cheques and all the cheques were duly cleared from the bank account of the assessee firm as mentioned in the table hereunder. Thus, it is clear that no cash was paid but the sale consideration was paid by cheques only. Appellant has successfully clarified each and every allegation made by the ld AO. It is evident from the bank statement of assessee firm that entire payment towards purchase consideration was paid by cheque (through banking channel) and duly reflected in the books of A/c of the firm. Hence, the allegation of ld AO is not borne out from the records/books of accounts. Ld AR has provided the date wise summary of payments made for each purchase transaction in following manner:- Name of the sellers Area of land Amount Date of Purchase Rate/Acre Cheque no. as mentioned in the registry Date of clearance From which bank account M/s. Vrandawan Construction Co. 57 Munnalal, Malkhan, Ghanshyam 1.06 Acre 79,20,000/ - 30.03.201 1 74,71,698 /- 515658 515659 515660 28.05.11 05.04.11 05.05.11 Bank of Baroda of the assessee firm Munnalal, Malkhan, Ghanshyam 4.74 Acre 1,26,66,00 0/- 30.03.201 1 26,72,152 /- 515652 515653 515654 515655 515656 515657 13.06.11 05.04.11 05.04.11 15.04.11 06.04.11 06.04.11 Bank of Baroda of the assessee firm Sandeep, Lilakishan 1.05 Acre 29,00,000/ - 31.03.201 1 27,61,905 /- 515665 515666 20.05.11 06.06.11 Bank of Baroda of the assessee firm Gopal Singh 0.80 Acre 32,00,000/ - 31.03.201 1 40,00,000 /- 515661 515662 515664 515663 07.04.11 07.04.11 07.04.11 06.04.11 Bank of Baroda of the assessee firm Munnalal, Malkhan, Ghanshyam 0.71 Acre 83,00,000/ - 23.12.201 1 515679 515680 515681 515683 01.06.12 16.08.12 16.08.12 22.09.12 Bank of Baroda of the assessee firm Munnalal, Malkhan, Ghanshyam 2.37 Acre 1,45,00,00 0/- 23.12.201 1 61,18,143 /- 515670 515671 515672 515673 515674 515675 515676 16.08.12 22.09.12 16.08.12 27.06.12 26.06.12 16.08.12 16.08.12 Bank of Baroda of the assessee firm Banwarilal 0.52 Acre 35,00,000/ - 23.12.201 1 67,30,769 /- 515677 515678 13.10.12 16.10.12 Bank of Baroda of the assessee firm Anita Sangwal, Sunil Kumari 0.083 Acre 9,52,000/- 20.08.201 0 372512 548004 131298 118536 131299 118537 25.08.10 25.08.10 26.08.10 25.08.10 25.08.10 25.08.10 Paid by partner Bhav Singh Rajpoot Paid by partner Bhav Singh Rajpoot Bank of Baroda of partner Sunil Maheshwari Paid by partner Bhav Singh Rajpoot Bank of Baroda of partner Sunil Maheshwari Paid by partner Bhav Singh Rajpoot Sunil Kumari 0.669 Acre 8,98,000/- 20.08.201 0 13,42,302 /- 131300 118538 26.08.10 20.08.10 Bank of Baroda of partner Sunil Maheshwari Paid by partner Bhav Singh Rajpoot Total 5,48,36,00 0/- It is evident that none of payments was made by CASH as alleged by AO and there is no payment i.e. “on money” payment over and above the consideration shown in registry. It is true that during year 2010-11, the assessee firm paid only Rs. 18,50,000/- and balance amount was paid by PDC which were cleared in the year 2012-13 but no adverse inference can be drawn for this fact especially when no evidence brought on record to impeach the genuineness of this payment. This has been clarified that Mr. Maheshwari has taken certain unsecured loans from farmers in his individual capacity duly reflected in his books having no M/s. Vrandawan Construction Co. 58 connection to assessee firm, hence no adverse view can be taken in the case of the assessee firm. From perusal of these statements, two main points emerge, one; that none of the farmer has stated that they have sold the impunged land @ Rs. 3 crores per acre at the same time except Shri Malkhan and Shri Munnalal who have accepted receipt of CASH to the tune of Rs. 5.50 lakh and Rs. 20 lakh, none of other land owners have accepted receipt of “on money” by CASH. second; that prevailing rate per acre during the relevant period was not exceeding Rs. 40-50 lacs per acre which is reflected in registered deeds. Shri Malkhan has admitted receipt of CASH of Rs. 54.80 lakh for purchase of land at Muskabad (different land) from Shri Sunil Maheshwari, as acknowledged by ld AO also, hence no adverse inference called for. Assuming the prevailing market rate @ Rs. 3 crore per acre at the time of purchase of impunged land is purely based on guess work of AO having no oral or documentary evidence to corroborate this finding, hence, it is held untenable in eye of law. [C] Purchase transaction through banking channel and properly reflected in books: It has been explained that assessee firm purchased 8.4 acre of land in Dhamkheda in year 2010-11 (Ay 2011-12) for Rs. 3,19,07,260/-. Against this part payment was made through the partner’s capital A/c and balance of Rs. 2,66,86,000/- was shown as liability in the Balance Sheet. For balance outstanding amount PDC (Post Dated cheque) were issued to land owners which later on cleared in their A/cs. in the year 2011-12 (AY 2012-13), the assessee firm purchased 3.6 acre of land at Damkheda for Rs. 2,63,00,000/- for which PDC were issued to land owners. Thus, the appellant has stated that assessee firm purchased total 12 acre of land in Damkheda for total cost of Rs. 5,48,36,000/- (excluding registry expenses), ld AR has vehemently challenged that all the transactions of purchase of land are duly reflected in the regular books of accounts of the firm. Details are as under:- S. No. Name of the seller Area (Acre) Cost Registry Date Mode Source 1. Sunil Kumari 0.669 8,98,000/- 20.08.2010 Cheque Partner’s capital account 2. Kunal Kumar 0.083 9,52,000/- 20.08.2010 Cheque Partner’s capital account 3. Munnalal, Malkhan Singh & Ghanshyam 1.060 79,20,000/- 30.03.2011 Cheque From bank account of the firm 4. Munnalal, Malkhan Singh & Ghanshyam 4.740 1,26,66,000/- 30.03.2011 Cheque From bank account of the firm 5. Sandeep and others 1.050 29,00,000/- 31.03.2011 Cheque From bank account of the firm 6. Gopal Singh 0.800 32,00,000/- 31.03.2011 Cheque From bank account of the firm 7. Munnalal, Malkhan Singh 0.710 83,00,000/- 23.12.2011 Cheque From bank account of the firm M/s. Vrandawan Construction Co. 59 & Ghanshyam 8. Munnalal, Malkhan Singh & Ghanshyam 2.37 1,45,00,000/- 23.12.2011 Cheque From bank account of the firm 9. Banwailal 0.52 35,00,000/- 23.12.2011 Cheque From bank account of the firm Total 12.00 5,48,36,000/- Besides this, source of investment in purchase of impunged land is from the disclosed and explained source of firm which is capital introduced by the partners as their capital contribution. The details are as under:- FY Name of the partner Amount of capital introduced Payments made to sellers of land 2010-11 Bhav Singh Rajpoot Rukmani Devi Sharma K. L. Sharma K. K. Bajaj Sunil Maheshwari Sunita Maheshwari Suresh Kumar Maheshwari 9,25,000/- 32,50,000/- 45,00,000/- 5,00,000/- 10,22,750/- 50,00,000/- 27,00,000/- 1,33,97,750/- 18,50,000/- 2011-12 Rukmani Devi Sharma K. L. Sharma K. K. Bajaj Sunil Maheshwari Sunita Maheshwari Suresh Kumar Maheshwari 25,00,000/- 1,05,00,000/- 10,00,000/- 8,55,000/- 70,00,000/- 10,00,000/- 2,28,55,000/- 3,49,86,000/- 2012-13 Bhav Singh Rajpoot Sunil Maheshwari Sunita Maheshwari Suresh Kumar Maheshwari 40,11,000/- 1,93,00,000/- 35,00,000/- 52,50,000/- 3,20,61,000/- 1,80,00,000/- Total 6,83,13,750/- 5,48,36,000/- Thus, appellant has successfully demonstrated that source of investment in purchase of impunged and flowing from the capital introduced by the partners from time to time who are assessed to tax. it is now settled law that when cash credit is found in the books of assessee firm and assessee has established that amount has been invested by partners, responsibility of firm is over and said amount cannot be added in the hands of firm as held in the case of CIT v/s Metachen Industries (2001) 116 taxman 572 (MP) by jurisdictional High Court. This is important to note that all the relevant details/evidences were also filed before ld AO during assessment proceedings who did not take any adverse M/s. Vrandawan Construction Co. 60 inference of the same. Nonetheless, ld AO is free to take appropriate action for the amount introduced as capital by partners in their hands, if not satisfied with their explanation about nature and source of money introduced by them as capital. Thus, no adverse view can be taken in the case of appellant firm when transaction has been properly reflected in its books with source of money properly explained.” 9.5 We also find that the Ld.AO had made the impugned addition of Rs.36cr in the hands of the assessee firm by alleging that the entire payment of Rs.36cr was made by the assessee in cash. It is surprising to note that assessee firm was incorporated on 17.08.2010 and had not carried out any single activity for generating revenue, then how such a huge amount came to the kitty of the assessee firm for making the investment in subject lands in cash. We find that the subject lands were lying vacant even till the date of passing the Order by the ld. CIT(A) which is clearly evident from the spot verification conducted by the office staff of the ld. CIT(A) along with actual site photographs and various documentary evidences obtained from land records. Further, the said lands were lying in the ownership of the assessee firm itself. In such eventuality, once it is established that no development activity was carried out by the assessee on such lands, then it is highly improbable that the assessee firm could have generated a huge income, whether disclosed or undisclosed, to make purchase of the said lands. Again, on this aspect too, we are inclined towards the findings of the ld. CIT(A). The relevant findings of the ld. CIT(A) are reproduced as under: “[D] No business activity to generate income/source: Ld AO has alleged that appellant firm has made unaccounted payments of Rs. 25,20,00,000/- and Rs. 10,80,00,000/- in FY 2010-11 & 2011-12 M/s. Vrandawan Construction Co. 61 (relevant to AY 2011-12 & 2012-13) towards purchase of impunged 12 acre of land. Without admitting, if it is presumed to be true then a very genuine question arise as to from where the assessee firm earned such a huge income i.e. Rs. 36 crores unaccounted income for making investment in land by CASH. It is proved beyond doubt that the impunged land purchased by assessee firm is still lying vacant which is evident from the “spot verification” done by staff of this office who obtained a certificate from Revenue Inspector, Govindpura Circle dated 06.06.2018 certifying that referred land (Survey Nos) is lying vacant and no construction has been done on said land. Photographs taken at actual site of said land (Surveys Nos) as well as “Google Map” inter alia report of Revenue Inspector proves that no development activities has taken place on said land. Besides this, extract of land record also shows “no change” in the ownership neither any mutation entry with regard to permission obtained from local authority for any proposed development/change in land use (other than agricultural). Once it is proved that neither land was sold or any development project had started on said land, then it is very intriguing for anybody to perceive any income generating activity-either disclosed or undisclosed to generate source for payment of Rs. 36 crores especially when the assessee firm has no other disclosed activity after than builders and developers and constituted only on 17.08.2010. Appellant has also filed copy of P & L Account and Balance Sheet for A.Y. 2018-19 sowing impunged land as closing stock at Rs. 5,44,07,937/- i.e. at historical cost which buttress this finding that no development activity carried out on said land.” 9.6 We also note that the ld. CIT(A), while passing his Order, has carried out an exercise to ascertain the actual market price of the subject lands which was prevailing at the time of purchase thereof by the assessee firm. We find that the ld. CIT(A) obtained the comparable sale instances of the lands in the surrounding areas at the relevant time of purchase by the assessee. We further find that the ld. CIT(A) has also obtained the comparative guideline rates as per Stamp Valuation Authority of the lands at village Damkheda at the relevant point of time. These details have been given by the ld. CIT(A) at page no. 49 & 50 of his Order. From such comparable cases M/s. Vrandawan Construction Co. 62 and prevailing guideline rates, we could safely infer that the claim of the assessee firm to have made the purchases of subject lands at an average rate of Rs.45.70 lakhs per acre is in consonance with the actual market rates which were prevailing at that time. The relevant findings of the ld. CIT(A) are given as under: “[E] Prevailing market rate not in consonance with estate of AO: It is well known that market rate of any property transaction can be best captured by real-life transactions where rate is determined by the free will and bargaining powers of buyers/sellers acting in free market situation. During appellate proceedings, I have collected the sale instances of AY 2011-12 & AY 2012-13 from O/o Sub-Registrar in relating to purchase/sale transactions taken place in village Damkheda and copy provided to present AO for comments/reports. Analysis of such sale instances and guideline value prevailing at the relevant time does not support the market value estimated by ld AO @ Rs. 3 crore per acre at the relevant time. Following analysis is self evident to establish the unsustainability of very high-pitched estimate made by ld AO for making such huge addition. Comparative sale instances for Market Value in AY 2011-12 and 2012-13 1 Hectare = 2.47 acre S. No. Descripti on of land purchase d/sold Area Name of seller Name of Buyer Date of registration Sale considerati on as per deed Market value as per stamp valuation Market Value Remarks Hectar e/Acre Per Acre 1 Khasra No. 171/1, 172/1 0.035 Acre Laxmi Meena, Smita Meena, Nayna Meena, Aashish Meena, Alok Meena Sarju Bai 26.07.2010 80,000.00 440,000.00 12,571,428.57 This plot was sold as per square feet rate in which market rates are always different 2 Khasra No. 84/1, 84/2/2 0.699 Acre Sunil Kumari, Rakesh Kumar Vrindawan Construction Co 20.10.2010 898,000.00 2,980,000.0 0 4,263,233.19 Agriculture land sale M/s. Vrandawan Construction Co. 63 3 Khasra No. 22, 23, 24 0.138 Acre Munnalal, Ghanshyam Singh, Malkhan Singh Gurbaksh Kaur, Grmeet Kaur, Jagjeet Jkaur, Gurcharan Kaur 02.09.2011 841,400.00 1,790,000.0 0 12,971,014.49 This plot was sold as per square feet rate in which market rates are always different 4 Khasra No. 19, 51/2, 54 0.48 Acre Pradeep Khanwalkar, Subhash Nigudkar, Pushpa Khanwalkar, AashaPuranik, Shalini Hatwalne, ranjana Kuchdekar Balaji Infrastructur e 26.11.2011 350,000.00 4,610,000.0 0 9,604,166.67 Agriculture land sale Comparative Guideline rate (Market Rate) as per Stamp Authority for village Damkheda FY Rate effective From Rate per Hectare for agriculture land Rate per Acre for agriculture land Irrigated Non Irrigated Irrigated Non Irrigated 2010-2011 01.04.2010 6,600,000.00 6,600,000.00 2,672,064.78 2,672,064.78 2011-2012 01.04.2011 20,000,000.00 20,000,000.00 8,097,165.99 8,097,165.99 2017-2018 01.04.2017 22,500,000.00 22,500,000.00 9,109,311.74 9,109,311.74 In comparison, it is seen that appellant has purchased various pieces of lands during AY 2011-12 & AY 2012-13 for average purchase price paid @ Rs. 45,70,000/- which is in line of market value derived from sale instances and guideline value prevailing at that time. Ld AR drew my attention that in some instances of purchase of land where registry of purchase deed was done on the basis of stamp Duty Valuation. It is settled law that in absence of any documentary evidence, purchase value cannot be “deemed” on the basis of value determined by Stamp Authority and assessee cannot be taxed for differential amount for which provision u/s 56(2)(vii)(b) has been inserted w.e.f 01.04.2014 applicable from AY 2015-16 not for AY 2011-12 and AY 2012-13. Hon’ble ITAT, Chandigarh Bench in the case of ITO v/s Mrs. Inderjit Kour (2012) 50 SOT 377 (Chd) has held that deeming fiction created u/s 50C regarding full value of consideration received or accrued to M/s. Vrandawan Construction Co. 64 seller, cannot be extended to the provisions of section 69, in the case of purchasers. Such statutory legal fiction cannot be extended, to rope in the purchasers, in the context of undisclosed investment u/s 69B. It has been held that legal fictions created for a definite purpose should be limited for that purpose and cannot be extended beyond their legislative needs. It is well-settled that deeming provision creating legal fictions, specially in taxing statute have to be strictly construed. Certain other case laws which also support this propositions are:- • CIT v/s K K Enterprises 13 DTR (Raj) 289 • ITO v/s Satyanarayan Agarwal 112 TTJ (Jd) 717 • Kamal Kishore Chandok v/s ITO 103 TTJ (Jd) 843 • JaiMarwar co. Pvt. Ltd. v/s ACIT 79 TTJ (Jd) 178 • ITO v/s Harley Street pharmaceuticals Ltd. (2010) 38 SOT 486 (Ahd) Nevertheless, in view of the above, facts and data do not support the imaginative high market value derived by ld AO @ Rs 3 crore per acre based on some ‘dumb document’ which is not sustainable on facts and in law. ld AO has failed to substantiate that actually any land in Damkheda village was purchased/sold @ of Rs. 3 crore per acre during the relevant period except relying on some proposed JV agreements which are relating to sale of land on later date.” 9.7 In our considered opinion, the AO has miserably failed to discharge his onus to prove that the assessee firm had actually made unexplained investment in purchase of land for a sum of Rs.25.20 cr and Rs.10.80 cr. respectively in A.Y. 2011-12 and A.Y. 2012-13 in cash. We further find that neither during the course of search in the Regal Homes Group, any specific incriminating material was found suggesting any payment of on-money by the assessee firm towards purchases of subject lands, nor the sellers of lands or any of the partners of the assessee firm had ever accepted to have received/ paid the consideration @Rs.3 crore per acre. We are of the considered opinion that when no evidence or material has been brought on M/s. Vrandawan Construction Co. 65 record to prove that there was any exchange of money by CASH between the buyer and seller over and above the consideration shown in the registered deed, no addition can be made. For such proposition, we find support from the decision of the Hon’ble Supreme Court in the case of CIT vs. K.P. Varghese 131 ITR 594 (SC). We thus agree with the following finding of the ld. CIT(A) that the onus of proving that the assessee firm had made unexplained investment was upon the Revenue:- “[F] Onus of proof on revenue: ld AO has made the allegation against the assessee firm that it had made unexplained investment of Rs. 25,20,00,000/- and Rs. 10,80,00,000/- in AY 2011-12 and AY 2012-13 by making payment by CASH. In absence of any admission by any partner on behalf of firm or by any of the sellers or any incriminating document/paper to establish that assessee firm paid cash to the tune of Rs. 36 crore to the sellers of various lands located at Damkheda. It is settled legal position that onus of proof is on the person who makes any allegation and not on the person who has to defend. As per legal maxim “affairmanti non neganti incumbit probation” means burden of proof lies upon him who affirms and not upon him who denies. Similarly as per doctrine of common law “incumbit probation qui digit non qui negat” i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. It is manifestly clear that except making allegation of payment of ‘on money’ or say payment of entire consideration by cash whereas cheque payments are properly reflected in the books and that too @ Rs. 3 crores per acre i.e. total 36 crores ld O has not brought any cogent evidence to substantiate her allegation. Hence, ld AO has failed to discharged her onus of proof especially when addition has been made under “deeming fiction” enshrine in section 69 of the Act. In view of this lacune on the part of AO, impunged addition is legally not sustainable. As held in the case of CIT v/s KP Varghese 131 ITR 574 (SC) by Hon’ble Apex Court in absence of evidence that actually assessee paid more amount than declared in registered deed, no addition can be made. In the case of Bansal Strips (P) Ltd & Ors Vs. ACIT (2006) 99 ITD 177 (Del) it has been held that :- M/s. Vrandawan Construction Co. 66 “If an income not admitted by assessee is to be assessed in the hands of the assessee, the burden to establish the such income is chargeable to tax is on the AO. In the absence of adequate material as to nature and ownership of the transactions, undisclosed income cannot be assessed in the hands of the assessee merely by arithmetically totally various figures jotted down on loosed document”. In this present case also the assesseee (buyer) as well as sellers (from whose possession, papers were seized) have denied about ‘on money’ transactions, and AO failed to discharge his burden of bringing corroborative evidence, hence ratio is squarely applicable. [G] No proof relating to cash payment: This is an undisputed fact that neither any incriminating material was found or seized during search proceedings nor the seller party or purchaser party has ever admitted in their statements about payment of purchase/receipt consideration with regard to impunged land @ Rs. 3 crore per acre assumed by ld AO. On the contrary the seller parties in their respective statement have clearly admitted that the sale relating to particular land was executed at the value shown as sale consideration in the registered deed. In absence of any corroborative evidence to prove that there was any exchange of money by CASH between buyer and seller over and above the consideration shown in the registered deed, AO has no locus to assume that some “on- money” must have been was paid that to in cash despite having no corroborative evidences to support his finding. Hon’ble Supreme Court in the case of CIT v/s KP Varghese (SC) 131 ITR 594 has held that:- “Accordingly, if the revenue seeks to bring a case within section 52(2), it must show not only that the fair market value of the capital asset as on the date of the transfer exceeds the full value of the consideration declared by the assessee by not less than 15 per cent of the value so declared, but also that the consideration has been understated and the assessee has actually received more than what is declared by him. There are two distinct conditions which have to be satisfied before sub-section (2) can be invoked by the revenue and the burden of showing that these two conditions are satisfied rests on the M/s. Vrandawan Construction Co. 67 revenue. This burden may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is understatement of concealment of the consideration in respect of the transfer.” 9.8 We find that the impugned addition has been made by the AO in the assessee’s income merely on the basis of presumptions and assumptions drawn from the stray jottings made on the loose papers found and seized from the premises of a third person. The Hon’ble Supreme Court, in its landmark judgment in the case of Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 754, was pleased to hold that there must be something more than mere suspicion to support an assessment and without there being any material or evidence, which have been confronted to the assessee, no addition can be made. The Hon’ble Supreme Court held as under: “8. As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the ITO is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-s. (3) of s. 23 of the Act, the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under s. 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh vs. CIT (supra). In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the Departmental Representative. Next, it did not give any opportunity to the company to M/s. Vrandawan Construction Co. 68 rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the ITO and the Tribunal, seems to be based on surmises, suspicions and conjectures. It is somewhat surprising that the Tribunal took from the representative of the Department a statement of gross profit rates of other cotton mills without showing that statement to the assessee and without giving him an opportunity to show that that statement had no relevancy whatsoever to the case of the mill in question. It is not known whether the mills which had disclosed these rates were situate in Bengal or elsewhere, and whether these mills were similarly situated and circumstanced. Not only did the Tribunal not showthe information given by the representative of the Department to the appellant, but it refused even to look at the trunk load of books and papers which Mr. Banerjee produced before the Accountant Member in his chamber. No harm would have been done if after notice to the Department the trunk had been opened and some time devoted to see what it contained. The assessment in this case and in the connected appeal, we are told, was above the figure of Rs. 55 lakhs and it was meet and proper when dealing with a matter of this magnitude not to employ unnecessary haste and showimpatience, particularly when it was known to the Department that the books of the assessee were in the custody of the Sub-Divisional Officer, Narayanganj. We think that both the ITO and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion. It is thus a fit case for the exercise of our power under Art. 136.”[Emphasis supplied] 9.9 Thus, in view of the above discussion, facts and circumstances of the case and judicial pronouncements, the allegation of the AO that the assessee firm had purchased the subject lands @ Rs.3 crore per acre i.e. at Rs.36 crore during the two financial years relevant to A.Y. 2011-12 and A.Y. 2012-13 is found patently wrong and untenable. The loose papers relied upon by the AO for making the impugned addition are either mere proposals or unrelated documents M/s. Vrandawan Construction Co. 69 which could only be classified as ‘dumb documents’ having no evidentiary value in the eyes of law. Further, from the spot verification and enquiry which was conducted by the staff of the ld. CIT(A), it has been established beyond all doubts that no development activity had started on such lands and the subject lands were lying vacant. We also noted that the comparable cases of sales and guideline rates as per Stamp Valuation Authority at the relevant point of time were also supporting the purchase price claimed by the assessee firm. The entire payments towards purchase of lands were duly reflected in the bank statements of the assessee firm and the payments were duly getting reconciled with the details given in the registered sale deeds. Therefore, we do not find any infirmity in the Order of the ld. CIT(A) in deleting the additions to the tune of Rs.24,94,50,000/- and Rs.10,80,00,000/- respectively for A.Y. 2011-12 and A.Y. 2012-13. 10. Now, as regard the ground no. 3 of the assessee challenging the action of the ld. CIT(A) in confirming the addition to the tune of Rs.25,50,000/- in A.Y. 2011-12 on the admission of two sellers namely Shri Malkhan and Shri Munnalal for receipt of Rs.5.50 lacs and Rs.20 lacs respectively in cash over and above the sale consideration as per registered sale deeds, we find that the ld. CIT(A) while confirming the aforesaid addition, had not considered a very vital aspect that the assessee firm had not been afforded any single opportunity of cross-examination of the witnesses. We are of the considered opinion that no addition could be made in the hands of M/s. Vrandawan Construction Co. 70 an assessee solely on the basis of statements of third parties recorded behind the back of the assessee without giving any opportunity of cross-examination. Our this view is supported by the following decisions: i) M/s. Kishinchand Chellaram vs. CIT (1980) 125 ITR 713 (SC) ii) M/s. Andaman Timber Industries V/s. Commissioner of Central Excise, Kolkatta-II 2016 (15) SCC 785 (SC) iii) Ayaaubkhan Noorkhan Pathan vs. The State of Maharashtra and Ors., 2013 AIR 58 (SC) iv) CIT vs. Smt. Sunita Dhadda 2018 (3) TMI 1610 (SC) v) Principal Commissioner of Income Tax Ahmedabad and Ors. vs. Kanubhai Maganlal Patel 2017 (3) TMI 271 (Guj.) vi) Commissioner of Income Tax vs. Ashwani Gupta (2010) 322 ITR 396 (Del.) 10.1 Thus, we consider it appropriate to direct the AO to ensure the presence of the concerning sellers for cross-examination of the assessee and only after cross-examination, to take a fresh view on the allegation of cash payment of Rs.25,50,000/- by the assessee firm to the concerning sellers. Accordingly, with the limited scope of examination of this issue of Rs.25,50,000/-, the issue is restored back to the file of the AO for the A.Y. 2011-12. Accordingly, the ground No. 3 of the assessee is allowed for statistical purposes. 10.2 To conclude, we hold that there is no infirmity in the finding of Ld. CIT(A) deleting the additions to the tune of Rs.24,94,50,000/- and Rs.10,80,00,000/- for the A.Y. 2011-12 and A.Y. 2012-13 and the addition to the extent of Rs.25,50,000/- for A.Y. 2011-12 confirmed by Ld. CIT(A) is hereby set-aside to the file of the AO for providing an opportunity of cross-examination of the sellers of lands to the assessee firm. Accordingly, on merits Ground No. 1 of the Revenue for the A.Ys. 2011-12 and 2012-13 are Dismissed and the M/s. Vrandawan Construction Co. 71 Ground No. 3 of the Assessee for the A.Y. 2011-12 is Allowed for statistical purposes. 11. In the result, the appeals of the Revenue in IT(SS)A No.118 & 119/Ind/2018 for Assessment year 2011-12 and AY 2012-13 are dismissed the appeal of the assessee IT(SS)A No.117/Ind/2018 for A.Y. 2011-12 is partly allowed for statistical purposes and the Cross- Objection No.01/Ind/2021 raised by the assessee for A.Y. 2012-13 are dismissed. Order pronounced as per Rule 34 of I.T.A.T., Rules 1963 on ... 13.01.2022. Sd/- (MADHUMITA ROY) Sd/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore; 1दनांक Dated : 13/01/2022 Patel/PS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Assistant Registrar, Indore