DCIT, Central CIrcle-1(4), Ahmedabad V. M/s. Soham Infracon, Ahmedabad

ITSSA 120/AHD/2018

AI Insights

The case involves the Income Tax Department's appeal against the decision of the CIT(A) which had set aside the AO's rejection of the assessee's books of accounts and the addition of Rs.3,31,44,320/- as unaccounted profit. The assessee, a partnership firm engaged in building construction, was subjected to a search and seizure operation under section 132 of the Income Tax Act, 1961, which led to the recovery of a pocket diary and a hard disk containing financial transactions. The AO rejected the books of accounts based on the entries in these documents, which were alleged to indicate receipt of on-money and unaccounted transactions. The CIT(A) and the Tribunal found that the AO's conclusions were not justified as they were based on uncorroborated entries and lacked independent evidence.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 134516 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-12-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-09-2022
• Assessment Year: misc
• Appeal Filed On: 25-11-2021
• Other Referred Cases: Kachwala Gems Vs JCIT Jaipur, Champa Lal Chaudhary Vs DC1T Cent. Cir-02 Jaipur, Pawan Kumar Vs 1TO, Common Cause (A Registered Society) and Others vs. Union of India and Others
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Search and seizure; Loose papers; Document seized; Documents seized; Set aside
• Section: 131; 145; 132; 144; 143(3); 153A; 133(6); 12A; 250; 73; 13; 145(3)

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ A’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARATHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./IT(SS)A No. 120/AHD/2018 With C.O No.109/Ahd/2019 िनधाᭅरण वषᭅ/Asstt. Year: 2013-14 The D.C.I.T., Central Circle-1(4), Ahmedabad. Vs. M/s Soham Infracon, 404E, Sahjanand Shopping Centre, Opp. Swaminarayan Temple, Sahibaug, Ahmedabad-380004. PAN: ABSFS2309F (Applicant) (Respondent) Revenue by : Ms Nupur Shah, A.R Assessee by : Shri Vijay Kumar Jaiswal, CIT, D.R सुनवाई कᳱ तारीख/Date of Hearing : 21/09/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 14/12/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal and CO have been filed at the instance of the Revenue and the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad, dated 16/02/2018 (in short “Ld. CIT(A)”) arising in the matter of assessment order passed under s. 143(3) r.w.s 153A of the Income Tax Act 1961 (here-in-after referred to as "the Act"). The assessee has filed the Cross IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 2 Objection in the Revenue’s appeal bearing IT(SS)A No. 120/AHD/2018 for the Assessment Year 2013-2014. 2. The Revenue has raised the following grounds of appeal: 1. Whether on the facts and circumstances of the case and in law, the Ld. ClT(A) erred in holding that rejection of books u/s 145(3) was not justified without appreciating that assessing officer had brought out that seized material (diary) had been admitted both by Narendra Patel and Tushar Patel, under oath, belonging to Tushar Patel and relied upon seized material was also admitted to be in his handwriting and cheque entries were also admitted to be true and not only the seized material in hard copy but the seized digital data also corroborated the on-money receipts by assessee. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.3,31,44,3207- without appreciating that assessing officer had brought out that seized material contained evidences of on-money receipts in respect of 5 units out of 32 units and hence estimation of gross profits @ 45% was correctly applied by AO. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O, 4. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 3. The only effective issue raised by the Revenue is that the learned CIT-A erred in deleting the addition made by the AO for Rs. 3,31,44,320/- by holding that the rejection of books of account and estimation of profit was not justified. 4. The facts in brief are that the assessee in the present case is a partnership firm and engaged in the business of building construction. The Assessee has launched a project called as “Dev Arya” in July 2010 comprising of 49 units/Bungalow. The said project got completed in November 2012. The assessee was subject to search and seizure operation under section 132 of the Act which was carried out at its premises dated 13 th May 2012. As a result of search, a pocket diary was recovered from the premises of the assessee. Besides the pocket diary, a hard disk was also recovered containing various financial transactions. The pocket diary was containing certain transactions which are classified as under: i. Rough estimates about various expenses in relation to building no. 28. IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 3 ii. Cash of ₹ 20 lakhs by Shri Tushar Rajivbhai Patel in connection with land at Jundal Khokrej Hwalo survey number 407 by Shri Narender Jivanlal Patel & others. iii. Cheque payment of ₹ 5,50,000/- and cash payment of ₹55 lakhs only. 4.1 On question about the entries appearing in the pocket diary, the accountant of the firm namely Shri Narendra Jivalal Patel admitted that the diary belongs to and maintained by one of partner of assessee firm namely Shri Tushar Rajivbhai Patel. He further admitted that noting on the pages of the diary was made with respect to bungalow Number 28 of “Dev Arya” Project (a project of assessee) which was allotted to Shri Tushar Rajivbhai Patel and cheque amount of Rs. 5.5 lakh was received as token money for booking. However, with regard to cash payment of Rs. 55 lakh, he stated that no cash was received by the firm and he doesn’t know why such entry was made in the diary. 4.2 Thereafter, the statement of Shri Tushar Rajivbhai Patel was recorded under section 131(1) of the Act. He admitted to have written the diary in his own handwriting in connection with bungalow No. 28 of Dev Arya Project which was purchased by him. He further admitted that noting on page no. 1 of Diary for payment of ₹ 20 lakhs “Jundal Khokrej Hwalo survey number 407” was made by him on the instruction of his father whereas other noting on page no-1, representing various miscellaneous expenses aggregating to Rs. 51,000/- approx. are made by office staff of Dev Arya which was signed by him and other office staff. With regard to noting on page no-2 he admitted that the cheque payment of ₹ 5,50,000/- paid for the booking of bungalow number 28 and noting has been made by him but he does not remember about cash payment of Rs. 55 lakh. The AO further found that survey number 409 at Jundal Khokrej has been purchased by Shri Narender Jivalal Patel & other who are part of the assessee firm for Rs. 78 lakh. Thus, the AO was of the view that noting made on page 1 for Rs. 20 lakh being “Jundal Khokrej Hwalo survey number 407” might be representing the payment made by Shri Tushar IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 4 Rajivbhai Patel against the purchase of bungalow No. 28. Similarly, noting on page number 2 for cheque payment of Rs. 5.5 lakh found true. Thus, the AO concluded that Shri Tushar Rajivbhai has paid on money to the assessee firm for Bungalow no. 28 in the form cash of Rs. 55 Lakh and Rs. 20 lakh in connection with the purchase of land bearing survey no. 407 which was ultimately purchased by Shri Nrender Jivanlal Patel. 4.3 The AO further found that there was a hard disk seized from site office of Dev Arya Project in which certain data were maintained and accordingly printout of the same was taken which were running into 42 pages. From page Nos. 36 and 37, the AO found that it contains the details of all the bungalows from 1 to 49 in the following format: Bung. No. SUPER PLOT AREA Sq. Mtr. Rate Rs. Amount Rs. Builtup AREA Sq.Mtr Rate Rs. Amount Rs. Including All Total 1 250 15000 3750000 221 9900 2188000 73 5938000 4.4 The information recorded in above sheet on page No. 36 with regard to 6 bungalows bearing Nos. 12, 12A, 16, 17, 28 and 42 are matching with the actual sale deed of such bungalow numbers. Similar, data with respect to the units sold in the year under consideration was also maintained by the assessee bearing page No. 109 impounded at Dev Arya site office which was matching with the details contained on page 36 of the seized document. 4.5 However, another page bearing No. 40 was printed from the hard disk recovered, containing the details of 5 bungalows bearing number 12, 12A, 16, 17 and 42 which have been sold, in the following format: B.No . Land Area Land Cost Const. Area Const. Cost Total Cost GEB/AUDA/Leg al Maint . Depo Grand Total IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 5 (Sq.yds ) (Sq.yds ) 12 240 552000 0 345 552000 0 1104000 0 200000 4000 0 1128000 0 4.6 On comparison of the data maintained by the assessee on page 40 viz a viz 36 of hard disk/109, there was mismatch in the amount of sale consideration. 4.7 Based on the above, the AO formed the view that the transaction recorded in the pocket diary and other documents as discussed above have not been recorded in the books of accounts correctly. As such the assessee has not shown the on money received by it by manipulating its financial transactions. Thus, the AO proposed to reject the books of accounts of the assessee and estimate the profit by issuing a show cause notice to the assessee. 4.8 The assessee in response to such show cause notice submitted that it has not received any element of cash from the partner of the firm namely Shri Tushar Rajivebhai Patel against the sale of bungalow No. 28. As such, the amount of ₹5.50 lakh was received through the banking channel at the time of booking the bungalow in the name of Shri Tushar Rajivebhai Patel and the balance amount of ₹ 92.33 lakhs was received at the time of registration of the conveyance deed through the banking channel. As regards the element of cash of ₹55 lakhs, there was no material available on record evidencing that cash payment was made by Shri Tushar Rajivebhai Patel. Likewise, neither the assessee nor the partner anywhere in the statement has admitted to have made the payment in cash. Without prejudice, if it is assumed that the assessee has received cash of Rs. 55+ 20 lakhs on sale of bungalow no.28 then the unaccounted sale receipt will amount to 45% of total sale value/cost. Such exorbitant price is not possible against the sale of bungalow. 4.9 Regarding the information contained about the land cost, land area and construction cost on pages 36 to 37 of hard disk data recovered during search IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 6 proceedings, it was submitted that the assessee has made the projections for making the sales of its different bungalows by incorporating the cost of land and the cost of construction. According to the assessee, it has sold its bungalows at the same price which was also matching with the documented price. As far as page 40 is concerned, it was submitted that the bungalow numbers 16, 17 and 42 were originally sold at the documented price to the parties namely Vishnubhai Baldevbhai Parmar, Devilal Kalicharan Somani & Urmilaben Somani and Surchi Yashvani Shrivastava & Yashvani Dayashanker Shrivastava. Thereafter, such parties approached the assessee for making the resale of their bungalows. Accordingly, the revised estimate was made as applicable at that relevant point of time wherein the value of the land and the construction cost along with other cost was recorded on estimated basis. At that time bungalow numbers 12 and 13 were not sold, therefore the estimate for these 2 bungalow was also made with other 3 bungalow as mentioned above. However, none of the buyer came to acquire the above said bungalows at such high price. Furthermore, there was riot in the area where project was under development. As such, the assessee could not fetch the higher price in case of resale of the bungalows and finally decided to sell the unsold bungalow bearing number 12 and 13 at the at documented price only. 4.10 It was also contended that there was no enquiry conducted from the respective parties/members of the society who have acquired the bungalows in order to find out the actual sale price of the bungalows and element of on money. Thus, the entire basis of proposing the addition in the hands of the assessee is based on the surmise and conjecture of the AO and therefore no addition of whatsoever is warranted. 4.11 However, the AO disagreed with the submission of the assessee by observing that the contention of the assessee that certain buyers have approached it (the assessee) to resale their bungalows is afterthought. It is for the reason that generally the buyers will not immediately approach after acquisition of the IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 7 bungalows for the resale and that too at an exorbitant price. Likewise, had they been intending to make a sale of the bungalows in reality, they would have made sales of the bungalows by now but none of the original buyer have sold their holding till assessment proceeding. Furthermore, the way the financial data has been maintained by the assessee in the form of B.No, Land Area, land cost, const. area, const. cost, GEB/AUDA legal charges, maintenance charges etc., it is appears that the data which have been maintained by the builder and not by the individual customers. 4.12 The financial transactions recorded in the pocket diary were corroborated by the evidences such as purchase of land at 407 at Jundal Khorej, cheque payment for the acquisition of the bungalow-28. Thus, in the light of the facts, the payment involving cash element of ₹55 lakhs cannot be said as a dumbed information, particularly in a situation when the partner of the firm has duly admitted to have written the diary in his own handwriting. The pocket diary was duly signed and the staff of the assessee Shri Narendra Jivalal Patel has also admitted that the diary belongs to the partner Shri Tushar Rajivbhai Patel. Thus, once part of the transactions recorded in the seized documents are matching with the other transactions of the assessee, the noting of cash payment of ₹55 lakhs recorded in the pocket diary cannot be overlooked merely saying that he does not know about such cash entry. 4.13 Likewise, the information contained on page 36, 37 and 40 of the seized hard disk represents the clinching evidences as it contains the financial data of the bungalows which have been sold to different parties. 4.14 Similarly, the provisions of section 292C of the Act provides presumptions with respect to the data seized during the search proceedings that the contents of such data are true and belongs to the assessee. IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 8 4.15 There was no need to make any enquiry from the members of the society who have acquired the bungalows for the reason that there were clinching evidences available on record about the on money received by the assessee. Based on the above, the AO rejected the books of accounts and estimated the profit in the manner as detailed below: 23. In light of the above, it is held that, the assessee had received on money and therefore, the books are not reliable and does not present a true and fair picture and hence, the same is required to be rejected. Sub-section 3 of section 145 lays down that where the assessing officer is not satisfied about the correctness or completeness of the accounts of the assessee, he may make an assessment in the manner provided in section 144 of the Act. The Hon. Supreme Court in the case of Kachwala Gems Vs JCIT Jaipur (288 1TR 10(SC) has held the rejection of books of accounts under section 145 justified and the best judgement assessment under section 144 o the Act. It was held that, the assessee himself who is to blame as he did not submit proper accounts. There was no arbitrariness in the instant case on the part of the authorities. In the case of Champa Lal Chaudhary Vs DC1T Cent. Cir-02 Jaipur, the 1TAT A Bench reported on 54 SOT 398 (UP) confirmed the rejection of books of account by holding tht the assesee's books of account do not ncet the test of detection of true and correct profit therefrom. Similarly, in the case of Pawan Kumar Vs 1TO (137 ITD 85) the Hon. 1TAT Chandigarh Bench A had held that, the discrepancies pointed out by he assessing officer while rejecting the book results have not been satisfactorily explained by the assessee..,. There were sufficient reasons to hold that the books of account maintained by the assessee are unreliable, incorrect and incomplete. Therefore, the books of account of the assessee have correctly beej rejected under section 145(3). Therefore, since there arc evidences of assessee having received on money and as the assessee failed to explain the same with proper documentary evidences, the provisiosn of section 145(3) are invoked and the books of assessee is rejected. 24. Once the books are rejected then the profit has to be estimated on the basis of proper material available on record. On the basis of the above discussion, the element of on money is clearly established. The ratio of on money works out around 45% (as per the seized material). The gross sales of units sold as per books, till the date of search (32 units) was _Rs 15,74,28,000/-. The assessee has offered profit of 15.31% as per its books. If the ratio of 45% on money factor is added to the total gros_s_ receipts as on the date of jearch the gross sales works out^to Rs 28,62,32,7277-- It is obvious that the assessee's profit on the on money element would be much higher than the profit as per books. This is because, most of the expenditure has already been booked. Hence, higher ratio of profit is required to be adopted on the on money component. Therefore profit @ 20% is adopted on the total gross sales of Rs 28,62,32,727/- which works out to Rs 5,72,46,5457-. Against this, the assessee has already offered profit @ 15.31% on reported sales of Rs 15,74,28,0007- which works out to Rs 2,41,02,2267-. Hence, the difference profit of Rs 3,31,44,3207- is added to the total income of the assessee being unaccounted profit earned from estate business, based on the seized materials found. 5. The aggrieved assessee carried the issue before the learned CIT(A). The assessee before the learned CIT (A) submitted that its books of account are duly audited by independent auditor for last several years. The auditor has not found IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 9 any defect in the books of account. Therefore, the books of account cannot be rejected under the provisions of section 145(3) of the Act without pointing out any specific defect. The assessee in this regard placed its reliance on several judicial pronouncement. 5.1 The assessee further submitted that the noting made on pocket diary found during the course of search was duly explained to the AO. There was no cash received form the partner Shri Tushar Patel against the booking of bungalow no. 28. The noting on page No. 1 of the pocket diary, containing miscellaneous expenses aggregating Rs. 55,000/-, were incurred by Shri Tushar Patel in his personal capacity for maintenance of bungalow no. 28. Likewise noting of Rs. 20 lakh in connection with survey no. 407 on page 1 of diary belong/pertain to the father of Shri Tushar Patel namely Shri Rajivbhai Patel. Further, on page 2 of diary cash and cheque amounting to Rs. 55 lakh and 5.5 lakh respectively was noted. The cheque amount duly received from Shri Tuhar Patel for booking amount against bungalow number 28, whereas cash amount of Rs. 55 lakh only represent the rough noting made for payment to be made in future. However, no cash payment was made but the balance amount was paid on the date of execution of sale deed through banking channel. 5.2 The assessee with regard to pages 36-37 reiterated that same was prepared before the launching of the scheme i.e. “Dev Arya” for entire bungalow nos. 1 to 49 for negotiation purposes. This can be established from the fact that the name of members nowhere was written on pages 36-37 against any of the bungalow number. The details of bungalow numbers which were actually booked after launching of the project were available in exhibit -1 from where it can be established that none of bungalow sold at the price less than the price quoted on page 36-37 except for bungalow number 27 which was booked before the launching of project and even before the receipt of development permission. Indeed some of the bungalows have been sold over and above the price quoted on pages 36-37. IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 10 5.3 With respect to page number 40, the assessee reiterated that the same was prepared for estimation purpose on the request of member holding bungalow Nos. 16, 17 and 42 as they wanted to resale their holdings. In this regard, the impugned member also filed affidavit but the AO ignored the same and drawn inference that same represents on money. The details of other two bungalow Nos. 12 and 12A were also representing the estimated price to make quotation to the prospective buyers. As such, the bungalow numbers 16,17 and 42 were sold in the year 2011 i.e. before the date of search to original members who were targeting to resale their bungalow but they did not get the estimated price. Hence the same were not resold. Likewise, the unsold bungalow numbers 12 and 12A also did not fetch the price as per page 40, therefore the same were sold after the date of search at the lower price which was duly recorded in the books of accounts. Therefore, no adverse inference can be drawn on the basis of page 40 of the hard disk data. 5.4 It was also contended that out of total units/bungalow i.e. 49 of the project “Dev Arya” 32 units/bungalow were sold till the date of search whereas the alleged incriminating documents on the basis of which the inference was drawn by AO for receipt of on money only contain information about 5 units/bungalows. Therefore, on the basis of such material, no inference can be drawn w.r.t. all 32 units. 5.5 The assessee further submitted that presumption under section 132(4) r.w.s 292C of the Act is a rebuttable presumption. The alleged document on which the AO relied are not having evidentiary value for the reason that there was not any corroborative material suggesting that the member or customer has paid cash. There was no inquiry made with the member of the project “Dev Arya’. During the search, the partner and the accountant in their statement recorded duly explained that the no cash above the documented price was received from any of the member/customer. Therefore, the receipt of on money nowhere gets established and the rejection of books of account on vogue allegation of receipt of on money is IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 11 not justified. Further, the AO after rejecting the books of account worked out the ratio of on money at the rate of 45% without any basis. 6. The learned CIT(A) after considering the facts in totality set aside the finding of the AO by observing as under: On Rejection of books: The submissions of the appellant, the reasons mentioned by the AO for rejecting the books of accounts, the provisions of section 145(3) of the Act and the case laws relied upon have been considered. The AO rejected the books of accounts on the basis of findings given by interpreting the contents of the seized documents that on money was received on sale of bunglows of Dev Arya Scheme. But it is a fact that figure of Rs.55 lakh written as cash was denied as receipt by Shri Narendra Patei & Shri Tushar R, Patel, whose statements were recorded on this issue. No date is mentioned against the figure of Rs.55 lakh written as cash. No number of bunglow or any other thing like payment/receipt is written against the figure of Rs.55 lakh. Search was also conducted at the residence of Shri Tushar Pate, partner & buyer of the bunglow No.28, but no evidence of payment of Rs.55 lakh in cash was found from his residence. Keeping in view the factual aspect, conclusion drawn by the AO on the basis of such dumb noting is not found justified for rejecting the books of accounts of the appellant. Further the plot area and built up area written on page No.36, 37 & 40 of the hard disk seized are different in size, therefore, these are not comparable. The cost of construction written on page no.36 & 37 is Rs.9900/- per sq.mtr, whereas in page no.40 it comes to Rs.16,000/- per sq.yard. When there is so much difference in cost of construction, difference of figures written on these pages is justified. Further, the affidavits filed by the appellant from the three buyers of bunglow no. 16, 17 & 42 have not been contradicted by the AO who confirmed the contention of the appellant that they put these bunglows for resale through the appellant and price written I expected consideration on re-sale. Bunglow No.12 & 12A(13) were not sold till the date of search, therefore, there is no question of receipt of any on-money on sale of these two bunglows. This is evident from the page no.36 & 37 which have been relied upon to reject the books of accounts of the appellant. Keeping in view the discussion above, the basis taken for rejection of books of accounts u/s. 145/3) by the AO is not found factually justified, therefore, this ground of appeal is allowed. On merit of addition: 5.2 The submissions of the appellant, facts mentioned in the assessment order, \ the case laws cited upon and the statement recorded during the course of search with reference to the documents found & seized during the course of search have been considered carefully and in totality. Regarding the page No. 1 & 2 of the diary of annexure BF/3 in which Rs.5,50,0007- is mentioned as cheque and Rs.55 iakhs has been mentioned as cash. Rs.5,50,000/- written by cheque has been admitted by Shri Narendrabhai Patei during the course of search and by Shri Tushar Patel, partner of the appellant firm while giving statement u/s. 131 of the Act that these figures pertain to the payment made for bungalow No.28. Bungalow No.28 was booked by Shri Tushar Patel, who is a partner in the appellant firm. However, for figure of Rs.55,00,OOO/- written as cash, Shri Narendrabhai Patel stated that the appellant firm did not receive this cash and Shri Tushar Patel stated that he does not remember about these figures of cash of Rs.55,00,OOO/-. As both these persons have not admitted about the receipt of cash by the appellant firm, finding of receipt of on money cannot be sustained only on the basis that it is written on paper. There is no date mentioned IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 12 against the figure of Rs.55,00,OOO/-. It is also not written for which this figure of Rs.55,00,OOO/- is written, whether it is a payment or it is a receipt, it is not clear. No bunglow number is written against this figure. Therefore, making such document basis for addition is not found justified. The Hon'ble High Court of Gujarat, Ahmedabad in the case of CIT vis. Maulikkumar K. Shah has held as under :- "Income —Addition —Addition on the basis of diary seized during search—In his statement under s. 132(4), assessee denied to have charged any "on money" on the booking of shops —Only evidence with the AO is the diary seized from assessee during search —AO did not examine any purchaser of shops —Right from the beginning assessee explained that notings in the diary are rough estimates for submission to the bank for obtaining loan —This is supported from the fact that seized papers contain floor-wise rate of the shops which is not a possible sale price-Burden had shifted on". The Hon'ble ITAT, Ahmedabad in the case of Nishant Construction P Ltd v/s. ACIT in ITA No.1502/Ahd/2015 reproduced the findings of Hon'ble Supreme Court in the case of Common Cause (A Registered Society) and Others vs. Union of India and Others in Writ Petition Civil Appeal No. 505 of 2015. These are reproduced as under :- " Coming to the evidentiary value of the impounded loose sheet mentioned elsewhere, the Hon'ble Supreme Court in the case of Common Cause (A Registered Society) and Others vs. Union of India and Others in Writ Petition Civil Appeal No. 505 of 2015 has observed as under:- 16. With respect to the kind of materials which have been placed on record, this Court in V,C. Shukla's case (supra) has dealt with the matter though at the stage of discharge when investigation had been completed but same is relevant for the purpose of decision of this case also. This Court has considered the entries in Jain Hawala diaries, note books and file containing loose sheets of papers not in the form of "Books of Accounts" and has held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible 17. It has further been laid down in V.C. Shukla (Supra) as to the value of entries in the books of account, that such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. It has been held even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability. 26-The Hon'ble Supreme Court further observed:- 17. From a piain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as/ relevant evidence, still, the statement made therein shaii not alone be sufficient evidence to charge any person with liability, it is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfill the requirements of the above section so as to be admissible IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 13 in evidence and if this question is answered in the affirmative then only its probative value need be assessed. 27.With respect to evidentiary value of regular account book, the Hon'ble Supreme Court in the case of V.C. Shukla 1998 (3) SCC 410 has laid down "37. In Beni v. Bisan Dayal it was observed that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another. In Hira Lai v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said, that the rule as laid down in Section 34 of Tie Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the saiient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It Is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts." 5.3 On going through the case laws mentioned above, it is found that the facts of the appellant's case are clearly covered by the above mentioned judgements, therefore, findings given on the basis of documents, which do not contain complete details of transactions are not found justified. Hence, keeping in view these binding judgements, the findings given on the basis of these papers are not found justified and deserves to be over ruled. Regarding the additions made on the basis of difference of value written in page no.36, 37 & 40, it is found that the findings of the AO are not factually correct, as the bungalow no.12 & 12A{13) were not sold on the date of search which is evident from page No.37, On page No.37, both these bungalows has been shown as unsold because whichever the bungalows were sold, remark as "sale deed OK" is written. However, against these 2 bungalows, no such remark is written. The findings of the AO by comparing these 3 pages are also found factually incorrect for the reason that for bungalow no.12 & 13 constructed/ built up area is written as 215 sq mtr in each bungalow on page no.37, whereas it is written as 345 sq yds on page no.40. Even after converting of built up area from sq. mtr to sq.yd, it is found that constructed area mentioned at page no.40 is too bigger than the built up area mentioned at page no.37. For Bungalow No.16 & 17, built up area in page No.37 is shown as 217 sq. mtr, however, it is written as 345 sq.yd on page no. 40. For bungalow no.42 similar discrepancies is there on these pages. These facts prove that the constructed area mentioned on page no.40 is too bigger than the constructed area mentioned in page No.36 & 37. Further, the construction cost is separately mentioned in both these pages. If the construction cost mentioned at page no.36 & 37 is taken, which is Rs.9900 per sq.mtr whereas if it is taken from page nc.40, it comes to Rs. 16,0007- per sq,yd which shows that there is a huge difference of cost of construction written on these pages and therefore, the difference in price mentioned in page no.36, 37 & 40 is not comparable at all and the findings given by the AO on the basis of in-comparable documents is not found justified. 5.4 It is further important to mention that the AO has extrapolated the on money receipt for 32 units on the basis of papers found only for 5 units and even the same were not found factually correct. Such extrapolation is not legally permissible. The Hon'ble High Court of Bombay in the case of CIT vis C.J. Shah & Co-246 ITR 671 held that estimation of IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 14 undisclosed profit made by the AO for the entire block period on the basis of seized loose papers which indicated undisclosed sales for three months was not justified. It was held by the ITAT, Pune Bench in the case of Samrat Beer Bar (75 ITD 19) that in the absence of any other evidence, AO is not empowered to estimate the suppression of sales for a larger period on the basis of the diary found in search showing suppression of sales for a particular period. The Hon'ble ITAT, Patna Bench in the case of Ramani D.N. Kamani HUF ( 70 ITD 77) held that documents regarding receipt of on money by assessee having been found in respect of sales of flats to one party, addition could not be made in respect of all the parties to whom assessee sold flats merely on the basis of presumption. The Hon'ble ITAT, Kolkata Bench has held in the case of Fort Projects Pvt Ltd (63 DTR 145) that AO was not justified in extrapolating few notings in a seized diary to balance flats in three projects given that no incriminating evidence pertaining thereto was found in the course of search. There are several other case laws in which it has been held that extrapolaton is not permissible and additions should be restricted only to the contents found during the course of search. Keeping in view the discussion above, the additions made by the AO on the basis of seized documents, is found justified and hence, is deleted. This ground of appeal is allowed. 7. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 8. The learned DR before us contended that the assessee was in receipt of unaccounted on money from the sale of the bungalows which is evident from the seized documents. The seized documents being pocket diary maintained by the partner of the firm were containing the transactions in cheque as well as in cash. The cheque transaction was duly recorded in the books of accounts whereas cash transaction was unrecorded. As per the learned DR, the seized document should be read as a whole and should be treated as genuine. It is for the reason that part of the transaction recorded in the seized document was the banking transaction which was duly recorded in the books of accounts of the assessee. Besides the above, there were other incriminating documents bearing pages 36, 37 and 40 which were showing different sale price of the bungalows which supports the receipt of on money by the assessee. The learned DR vehemently supported the order of the AO. 9. On the contrary, the learned AR before us filed a paper book running from pages 1 to 560 and submitted that there was no on money received by the assessee from the sale of its bungalow to various parties. The amount of sale price declared IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 15 by the assessee with respect to the bungalows in the later and the earlier years were duly accepted by the Revenue and no addition of whatsoever was made. The learned AR further contended that information on page 40 of the seized document was representing the estimation of the sale price of the parties who wanted to make the re-sale of the bungalows. Likewise, the bungalows bearing numbers 12 and 12A were representing the unsold bungalows, therefore the question of receiving the unaccounted on money with respect to such bungalows does not arise. Furthermore, the learned AR contended that the pocket diary containing the information about 55 lakhs of rupees was a rough noting made by the partner of the assessee which is evident from the statement given by the partner. Accordingly, no credence can be given to such entry recorded in the seized document. It was also submitted by the learned AR that there is no possibility for the assessee to make a sale of the bungalow to the partner at a price higher than the price to the other parties. The learned AR vehemently supported the order of the learned CIT- A. 10. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case have been elaborately discussed in the preceding paragraph and there is no ambiguity with respect to the same. Therefore, we are not inclined to repeat the same for the sake of brevity and convenience. From the preceding discussion, the controversy arises whether action of the AO is justified for the rejection of the books of accounts under the provisions of section 145(3) of the Act in the given facts and circumstances. In this regard, we find that the AO rejected the books of accounts of the assessee on the reason that the assessee is in receipt of on money from the sale of its projects. There were two reasons to arrive at the conclusion that the assessee was in receipt of on money from the sale of its projects. Firstly, as per the pocket diary bearing page Nos. 1 and 2, containing financial transactions in cash i.e. payment in cash of ₹20 lakhs for the in connection with the land at Jundal khorej bearing survey no 407 by the group person of the assessee and receipt of ₹55 lakhs from the sale of the bungalow IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 16 bearing No. 28 which was sold to the partners namely Shri Tushar Rajivbhai Patel. Secondly, there was mismatch in the sale price of the bungalows, specifically 5 bungalows bearing numbers 12, 12A, 16, 17, 42, recorded on page 40 of the seized document viz a viz the sale price recorded on pages 36/37 of the seized documents. 10.1 As regards the cash transactions found from the pocket diary, there is no ambiguity to the fact that it was containing various financial transactions. One of the transaction was reflecting the cash payment of ₹ 55 lakhs along with the cheque payment of ₹5.50 lakhs only. Admittedly, the cheque payment was representing the actual transaction which was duly recorded in the books of accounts as token money received from partner Shri Tushar Rajivbhai Patel against booking of bungalow no- 28. Thus the question arises what about the cash transaction i.e. ₹55 lakhs whether represents the incriminating information or dumped document. It is the settled position of law that the Hon’ble courts in series of the cases have pronounced that the seized document should be read as a whole and not in piecemeal. For this purpose, we refer to the order of ITAT Pune in case of Dhanvarsha Builders & Developers (P.) Ltd. vs. DCIT reported in 102 ITD 375 where it was held as under: On a perusal of the seized material, it was to be seen that the assessee was found in possession of meticulous record regarding monies received in respect of various godowns and shops to be constructed by it. The details, inter alia, contained the narration about the premises number, name of the customer, total sale cost, money received by way of cash, money received by way of cheque and the balance amount to be received. All the figures were written by omitting three zeros. The assessee fairly admitted that names mentioned in the list were of its customers. He also admitted that the amounts received by way of cheque would tally with the books of account if three zeros were supplied to the amount mentioned in the seized papers. His arguments against placing reliance on that paper, inter alia, that (i) the paper did not bear the name of the assessee, (ii) no evidence had been found regarding actual receipt of cash, and (iii) the paper did not contain the dates on which respective cash amounts were allegedly received, could not be agreed with for the reason that the authenticity of the names and decoding of amounts received by way of cheques would lead to establishment of the fact that the document belonged to the assessee and various amounts entered therein were correct if three zeros were supplied. The absence of the name of the assessee, thus, got fully corroborated on the basis of said interpretation of the document. The document spoke of receipt in cash and by way of cheques. The receipts by way of cheques tallied with the books of account. Therefore, it was a natural consequence that the receipt by way of cash had also been made. The date of receipt of cash was not material for deciding the assessment year in which the profits embedded in such receipts were to be taxed. The assessee was following project-completion method and, therefore, all amounts, i.e., amounts, received in cash as well as amounts received by way of cheques, were taxable in IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 17 the year in which project was completed or substantially completed. Therefore, the assessee’s arguments as regards all three grounds had to fail. Accordingly, the document was not a dumb document but it was a speaking document and it pertained to the business transactions of the assessee. [Para 6.1] So far as the argument of the assessee that the impugned papers not only showed the receipts but also the expenditure and, therefore, the document should be read as a whole and deduction for the expenditure incurred should be given to the assessee while computing undisclosed income was concerned, the seized document should be read as a whole if it has to be relied upon. It cannot be read only to the extent it is advantageous to the revenue and not read when it becomes disadvantageous to the revenue. It is an accepted principle of interpretation of documents that they should be read as a whole, as persons of common prudence will read them. They cannot be read in bits and parts to suit the convenience of one party or the other. 10.2 Thus, from the above, there remains no ambiguity to the fact that the information contained in the seized document reflecting the cash of ₹55 lakhs should be treated as the actual transaction. However, if such cash transaction is treated as actual payment towards the purchase of the bungalow bearing No. 28, then the gross sale price of the bungalow will stand at Rs. 1,52,83,000/- (5.5 lakh + 55 Lakh + 92.33) which is much higher than the other bungalows sold by the assessee to the outside different parties. Accordingly, there will remain an anomaly as far as the sale price of bungalow is concern. In majority of the cases, the sale price will certainly be lesser in comparison to the sale price of bungalow No. 28. The basis of such high sale price is nothing but transaction recorded in the pocket diary. A question strikes to our mind whether it would be justifiable to take the sale price of the bungalow No. 28 at such exorbitant rate in the given facts and circumstances, particularly in the situations where the sale price of the other bungalows was lesser than bungalow No. 28 which was sold to the partner of the firm. In this regard, we note that indeed there are contrary information available on record, thus in such facts and circumstances it becomes imperative to find out the prevailing rate of the bungalow which is something not impossible. In other words, there could have been conducted independent enquiries in order to work out the prevailing market rate as well as the Jantri value of such Bungalows but no inquiry has been done. As such the AO believing the financial information contained in the seized document as sacrosanct has held that the books of accounts of the assessee are not showing the IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 18 correct position and thereafter rejected the books of accounts. Admittedly, the information contained in the seized document is providing some source or the base for carrying out further investigation in a particular direction so that the facts could be brought on the surface. For this purpose, the revenue authorities have been empowered under different provisions of the Act such as section 131, 133(6) of the Act. Thus, we are of the view that it will be inappropriate to draw an adverse conclusion merely on the basis of some information contained in the seized document with respect to the correctness of the books of accounts of the assessee. At this juncture, it is also important to note that the assessee is in the development of real estate project and the sale price shown by the assessee have been doubted for the year under consideration. Once the sale price of the project has been doubted then all the sales recorded by the assessee in connection with the impugned project in different assessment years should be in doubt. As such, the impugned project comprises of 49 bungalows. Out of 49 bungalows some of the bungalows have been sold in the year 2011, specifically bearing bungalow numbers 16, 17, and 42 but the AO has not brought anything on record suggesting that the sale price of those bungalows were also disturbed by him in the assessment proceedings. Likewise, the other remaining units must have been sold by the assessee in the later year but no information has been brought on record whether the sale price of those units have been disturbed. If the sale price has not been disturbed in other years, then the sale price for the year under consideration should also not be disturbed so as to maintain the consistency. In the absence of any information, we hold that the sale price declared by the assessee in different assessment years have been accepted by the revenue except for the year under consideration. It is also important to note that generally the partner of the firm will buy the bungalow at the lesser price than the price offered to the outsiders being closely connected whereas the situation in the present case is just reverse. Likewise, there is no clarity whether the amount recorded at Rs. 55,00,000.00 represents cash payment or cash receipt. Accordingly, we are of the view that books of accounts of the assessee cannot be rejected considering them incorrect merely on the basis that IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 19 there was some information contained about the financial transaction in cash in the seized document until and unless such information corroborated by the documentary evidence in the given facts and circumstances. 10.3 With respect to the cash payment of ₹20 lakhs towards the purchase of land at Jundal Khorej bearing survey no. 407, in this regard we note that the assessee has not purchased any piece of land and therefore the same cannot be subject matter of consideration while framing the assessment of the assessee. 10.4 With respect to the difference in the sale price of the bungalows bearing numbers 12, 12A, 16, 17, 42 we note that the bungalows No. 12 and 12A were not sold by the assessee till the date of search. Thus in such an event, it is hard to believe based on the seized documents bearing No. 40 that the assessee has received any on money on the sale of such bungalow numbers. The question of receiving the on money arises when there is some understanding, booking and transaction in connection with the sale of the bungalows. In the absence of any sale or not even a whisper about the sale, the question of speculating the receipt of on money with respect to the bungalow numbers 12 and 12A does not arise. Moving further, the bungalow bearing numbers 16, 17 and 42, in this regard we note that these bungalows were sold by the assessee in the earlier years i.e. 2011, in this regard the assessee claimed that the members holding impugned bungalow numbers approached for resale their holding and for that the purpose an estimation was made i.e. impugned page no. 40 of seized material to quote the price to prospective buyer. The claim of the assessee was also supported by the affidavit filed by the members holding the impugned bungalows nos. 16, 17 and 42. Thus we find force in the contention of the appellant assessee that noting on impugned page number 40 was an estimation only. Thus, merely the transactions recorded on any Excel sheet cannot be a basis to draw an inference that the assessee has received on money until and unless there is available some corroborative material. However, we do not find anything from the assessment order with respect to the IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 20 difference in the sale prices as observed by the AO is based on any corroborative material. The document cannot be considered to draw any inference with respect to the financial transaction that such transaction represents the income of the assessee until and unless it is backed by some documentary evidence. In holding so we draw support and guidance from the judgment of Hon’ble Supreme court in case Common Cause (A Registered Society) vs. Union of India reported in 77 taxmann.com 245 where it was held as under: 17. It has further been laid down in V.C. Shukla (supra) as to the value of entries in the books of account, that such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. It has been held even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability. 10.5 It is also important to note at this juncture that the assessee has sold 32 units till the date of search and from the order of authority below, we note the bungalow bearing numbers 16, 17 and 42 which were sold in the earlier year. However, the AO has not brought any iota of evidence with respect to the bungalow numbers sold in the year under consideration to suggest that the assessee has accepted on money from the sale of these bungalows. Even, the AO has not conducted any enquiry from member/customer despite having sufficient time in his hand. The search under section 132 of the Act was carried out as on 13 th May 2012 and proceedings under section 153A of the Act were initiated by issuing notice dated 20 th of January 2014 whereas the assessment was completed 25 th February 2016. Thus, this cannot be the basis of drawing any adverse inference against the assessee that the books of accounts of the assessee are not correct. 10.6 Once we have held that the books of accounts of the assessee cannot be rejected in the given facts and circumstances, the question of making any addition on estimated basis does not arise. In other words no addition is liable to be made to the total income of the assessee. Hence the ground of appeal of the revenue is dismissed. IT(SS) No.120/AHD/2018 With C.O No.109/Ahd/2019 A.Y. 2013-14 21 10.7 In the result, the appeal filed by the revenue is dismissed. Coming to the CO filed by the assessee bearing No.109/Ahd/2019 (in IT(SS)A No.120/Ahd/2018 for A.Y. 2013-14. 11. At the outset, we note that the assessee in the CO filed by it has supported the order of the Ld. CIT-A. Accordingly, we hold that no separate adjudication is required for the CO filed by the assessee. Hence, we dismiss the same as Infructuous. 11.1 In the result, the CO filed by the assessee is dismissed as infructuous. 12. In the combined result, the appeal filed by the Revenue is dismissed and the COs filed by the assessee is also dismissed as infructuous. Order pronounced in the Court on 14/12/2022 at Ahmedabad. Sd/- Sd/- (SIDDHARATHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 14/12/2022 Manish