The ACIT, Central Circle-1(1), Ahmedabad V. M/s. Manav Infrastructure Pvt.Ltd., Ahmedabad

ITSSA 572/AHD/2011

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 2966 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 20-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SITA RAM MEENA
• Assessee Lawyers: T P HEMANI
• Keywords: Business income; Loose papers; Documents seized
• Section: 153A; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ IT(SS)A.NO.572/AHD/2011 AND IT(SS)A.NO.314/AHD/2012 / ASSTT. YEAR: 2008-2009 ACIT, CENT.CIR.1(1) AHMEDABAD. VS. M ANAV INFRASTRUCTURE P.LTD. SHRI BALAJI KUTIR OPP: DEV DARSHAN B/S.NARMADA CANAL ADALAJ, AHMEDABAD. PAN : AANFM 5020 F ( APPLICANT ) ( RESPONENT ) REVENUE BY : SHRI SITA RAM MEENA, SR.DR ASSESSEE BY : SHRI T.P. HEMANI, AR / DATE OF HEARING : 15/02/2017 / DATE OF PRONOUNCEMENT: 22/02/2017 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE OF THE REVENUE AGAINST ORDERS OF THE LD.CIT(A) DATED 11.8.2011 AND 13.4.20 12 PASSED IN THE ASSTT.YEAR 2008-09. 2. IN IT(SS)A.NO.572/AHD/2011, THE REVENUE HAS TAKE N FOUR GROUNDS OF APPEAL, BUT ITS GRIEVANCES REVOLVES AROUND A SINGLE ISSUE VIZ. THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,75,89,94 1/- WHICH WAS ADDED BY THE AO ON ACCOUNT OF UNACCOUNTED PROFIT UNEARTHED BY DE PARTMENT FROM SHREE IT(SS)A NO.572/AHD/2011 AND ANR. 2 BALAJI MALL. IN IT(SS)A.NO.314/AHD/2012 GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING PENALTY OF RS.3 7,58,994/- IMPOSED BY THE AO UNDER SECTION 271AAA OF THE INCOME TAX ACT, 1961 . FIRST WE TAKE QUANTUM APPEAL OF THE REVENUE I.E. IT(SS)A.NO.572/A HD/2011. 3. BRIEF FACTS OF THE CASE ARE THAT SEARCH UNDER SE CTION 132 OF THE INCOME TAX ACT, 1961 WAS CONDUCTED IN THE CASE OF BALAJI G ROUP ON 22.4.2008. IN ORDER TO GIVE A LOGICAL END TO THE SEARCH PROCEEDIN GS, NOTICE UNDER SECTION 153A WAS ISSUED ON 28.5.2009. IN RESPONSE TO THE N OTICE UNDER SECTION 153A, THE ASSESSEE FILED RETURN OF INCOME ON 10.9.2009 DE CLARING TOTAL INCOME AT RS.3,34,41,660/-. THE LD.AO HAD ISSUED NOTICE UNDE R SECTION 143(2) OF THE ACT. ON SCRUTINY OF MATERIAL, IT CAME TO THE NOTIC E OF THE AO THAT DURING THE COURSE OF SEARCH, CERTAIN DOCUMENTS INVENTORIED AS PAGE NOS.3 TO 8 OF ANNEXURE A/2 WERE SEIZED FROM SITE OFFICE OF SHREE BALAJI MALL, MOTERA, AHMEDABAD. ACCORDING TO THE AO, AN AMOUNT OF RS.6, 75,89,941/- HAS BEEN APPEARED ON PAGE NO.6 OF THE SEIZED PAPER. A SUM O F RS.3.00 CRORES WAS DEBITED FROM THIS AMOUNT ON ACCOUNT OF LAND COST, A ND NET AMOUNT OF RS.3,75,89,941/- WAS CALCULATED. THE LD.AO ASSUMED THAT THIS IS A NET PROFIT EARNED BY THE ASSESSEE ON ACCOUNT OF SALE OF SHOPS IN THE BALAJI MALL, AND ACCORDINGLY CONFRONTED THE ASSESSEE AS TO WHY THIS SHOULD NOT BE TAKEN AS A PROFIT AND ADDED IN THE TOTAL INCOME OF THE ASSESSE E. IN RESPONSE TO THE QUERY OF THE AO, THE ASSESSEE HAS FILED A DETAILED REPLY WHICH HAS BEEN REPRODUCED BY THE AO, BUT DID NOT CONCUR WITH CONTENTIONS OF T HE ASSESSEE. HE REJECTED EXPLANATION AND TREATED THE SUM OF RS.3,75,89,941/- AS UNACCOUNTED PROFIT. THE LD.AO FURTHER OBSERVED THAT DURING THE COURSE O F SEARCH, THE ASSESSEE HAS MADE A DISCLOSURE OF RS.3.00 CRORES IN THE STATEMEN T RECORDED UNDER SECTION 132(4) OF THE ACT AND IT HAS OFFERED A SUM OF RS.2. 00 CRORES FOR TAXATION IN THIS YEAR IN THE CASE OF THE COMPANY. THE AO HAS G IVEN SET OFF OF THIS RS.2.00 IT(SS)A NO.572/AHD/2011 AND ANR. 3 CRORES AGAINST THE ALLEGED TOTAL UNACCOUNTED PROFIT COMPUTED BY HIM, AND THEREAFTER MADE ADDITION OF RS.1,75,89,941/- TO THE TOTAL INCOME OF THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE AND FIND ING OF THE AO IS WORTH TO NOTE. IT READS AS UNDER: 'AS YOU ARE AWARE THAT DURING THE COURSE OF THE INC OME TAX PROCEEDINGS, THE SAID ASSESSEE HAD SUBMITTED ALL TH E DETAILS/DATA REQUIRED BY YOUR GOOD OFFICE AND WE HAVE ALSO SUBMI TTED ALL THE EVIDENCES/SUPPORTING DOCUMENTS CORRELATING EACH AND EVERY ENTRY/PAPERS SEIZED BY THE DEPARTMENT DURING THE CO URSE OF SEARCH OPERATIONS AND AS SUCH THE AMOUNT DISCLOSED BY THE ASSESSEE IS VOLUNTARY DISCLOSURE WHICH CANNOT BE CORRELATED WIT H A SPECIFIC ENTRY/EVIDENCE. HOWEVER, DURING THE COURSE OF THE A SSESSMENT PROCEEDINGS YOUR GOOD OFFICE HAD STATED THAT ON THE BASIS OF THE PAGE NO. 3 TO 8 OF ANNEXURE-A2, WHY AN AMOUNT OF RS. 3.7 5 CRORES PERTAINING TO THE PAPERS SEIZED BY THE DEPARTMENT D URING THE COURSE OF THE SEARCH OPERATIONS OF BALAJI MALL SHOULD NOT BE CONSIDERED AS PROFIT OF THE ASSESSEE COMPANY. IN THIS CONNECTION WE WOUL D LIKE TO SUBMIT THE FOLLOWING : 1. FIRST AND FOREMOST, IT IS TO BE STATED THAT THE PAPERS SEIZED BY THE DEPARTMENT DURING THE COURSE OF SEARCH ARE DIVIDED INTO THREE PARTS VIZ. TYPED DOCUMENTS, HAND WRITTEN PAPER IN GUJARAT I PERTAINING TO SHREE BALAJI MALL AND OTHER HAND WRITTEN DOCUMENTS IN ENGLISH WITH CERTAIN NUMBERS MENTIONED IN IT. IT IS TO BE STATED THAT TYPED DOCUMENTS STATING AREA IS OF SHREE BALAJI MALL BELONGING TO T HE COMPANY. AGAIN, HAND WRITTEN DOCUMENT STATING THE NAME OF SHREE BAL AJI MALL IN GUJARATI SEEMS TO BE OF BALAJI MALL. BUT THE HAND W RITTEN DOCUMENTS IN ENGLISH ARE NEITHER OF THE BALAJI MALL NOR OF THE C OMPANY. MORE SO, THE SAID PAPERS HAVE NEITHER BEEN DRAWN BY THE DIRECTOR S OR THEIR FAMILY MEMBERS. MORE 2. EVEN IF WE ASSUME, FOR THE TIME BEING, THAT THE SAID DOCUMENTS ARE PERTAINING TO BALAJI MALL, IT IS TO BE STATED THAT THE HANDWRITTEN DOCUMENT IN ENGLISH CLEARLY SHOWS BIFURCATION OF RS . 3.75 CRORES PROFIT AMONG VARIOUS PERSONS STATED 'S', 'A ' & 'A ' WITH 25%, AND 25% AND 50% SHARE AND THUS EVEN IF THE DEPARTMENT CONSIDERS THE SAID PAPERS PERTAIN TO BALAJI MALL THEN IT SEEMS THAT THIS PAPE R MIGHT HAVE BEEN PREPARED TO ENTER A PARTNERSHIP PROPOSITION AS AN E STIMATED PROFIT BY THE PERSON WHO MIGHT HAVE APPROACHED THE GROUP. THE GROUP IS IT(SS)A NO.572/AHD/2011 AND ANR. 4 RECEIVING SUCH TYPE OF PROPOSALS ON REGULAR BASIS B UT IT DOES NOT MEAN THAT THE GROUP HAS ENTERED INTO PARTNERSHIP AND EAR NED THE SAID PROFIT, NOR IT CAN CONCLUDE THAT THE PROFIT PERTAINING TO T HE COMPANY AS NEITHER OF THE 'LETTER' MENTIONED IN THE PAPER SUGGESTS THA T IT BELONGS TO THE COMPANY. THUS, THE ENTIRE PROPERTY IS IN THE NAME O F THE COMPANY ONLY AND THERE WAS NO OTHER PARTNER OR OWNER OF THE PROP ERTY, WHICH ITSELF IS A CONCLUSIVE EVIDENCE OF THE FACT THAT THE PAPERS D ID NOT BELONG TO THE ASSESSEE. AGAIN, NO DATES IS MENTIONED ON THE PAPER WHICH ALSO STATES THAT THIS WAS AN ESTIMATE AND THE QUESTION OF ANY A CCRUAL OF PROFIT TO THE COMPANY OR THE GROUP DOES NOT ARISE. 3. MORE SO, IT IS TO BE STATED THAT ONLY 12 OFFICE/ SHOPS OF BALAJI MALL WERE SOLD UP TO THE DATE OF SEARCH I.E.-UPTO 22.04. 2008 AND THE BALANCE OFFICE/SHOPS WERE SOLD ONLY AFTER THE DATE OF SEARC H AND THEREFORE THE QUESTION OF ACCRUAL OF PROFIT AS STATED IN THE PAPE R DOES NOT ARISE. THUS, FOR A TEMPORARY PERIOD, IF WE CONSIDER THAT THE SAI D PAPER IS PERTAINING TO THE BALAJI MALL, THAN IN THE PAPERS SEIZED BY TH E DEPARTMENT, DETAILS MENTIONED AS ANNEXURE 1. THIS ALSO JUSTIFIES THAT T HE SAID PAPERS DID NOT BELONGING TO THE ASSESSEE. 4. AGAIN CERTAIN OFFICES WERE SOLD AFTER THE DATE O F THE SEARCH TO THE FAMILY MEMBERS OF THE DIRECTOR OF THE ASSESSEE COMP ANY AND THE SAID OFFICES ARE BEING USED BY MANAV INFRASTRUCTURE PVT. LTD. AS ITS CORPORATE OFFICE. THUS, EVEN IF FOR THE TEMPORARY P ERIOD, IF WE CONSIDER THAT THE PAPERS SEIZED BY THE DEPARTMENT ARE CORREC T THEN IT CANNOT BE CONCLUDED THAT THE ASSESSEE HAD TAKEN CASH PROFIT F ROM ITSELF OR FROM ITS FAMILY MEMBERS, WHICH CAN NOT BE A CASE IN REAL SEN SE. CONSIDERING THE ABOVE FACT WE REITERATE THAT THE PA PERS SEIZED BY THE DEPARTMENT DURING THE COURSE OF SEARCH ARE NOT PERT AINING TO THE GROUP OR IT HAS NO RELEVANCE WITH THE WORKING OF THE BALA JI MALL AND THEREFORE THERE IS NO CORRELATION WITH THE AMOUNT SHOWN AS PR OFIT WHICH HAS BEEN EARNED BY THE ASSESSEE. IN VIEW OF THE ABOVE, WE HA VE TO STATE THAT THE PAPERS/DOCUMENTS SEIZED BY THE DEPARTMENT ARE NOT P ERTAINING EITHER TO THE GROUP OR TO THE COMPANY AND THEREFORE THE QUEST ION OF ANY ADDITION WITH RESPECT TO THE SAID DOCUMENT DOES NOT ARISE. WITHOUT PREJUDICE TO THE ABOVE FACTS, WE HAVE TO ST ATE THAT EVEN IF THE DEPARTMENT WANTS TO ADD THE SAID AMOUNT OFRS. 3.75 CRORES AS PROFIT OF THE ASSESSEE, THEN THE DEPARTMENT SHOULD GIVE RELIE F/CREDIT OFRS. 2.00 CRORES TO THE COMPANY WHICH IS DISCLOSED BY THE ASS ESSEE DURING THE IT(SS)A NO.572/AHD/2011 AND ANR. 5 COURSE OF SEARCH AND HAS ALSO PAID TAXES ON IT. THU S, NET ADDITION SHOULD BE REDUCED TO THAT EXTENT. WE AGAIN REITERATE THAT WE ARE NOT ACCEPTING THE DE PARTMENT'S CLAIM OF THE SAID AMOUNT AS PROFIT/INCOME OF THE ASSESSEE.' FINDING OF THE AO: THE SUBMISSION OF THE ASSESSEE IN THIS REGARD IS D ULY CONSIDERED. BUT IT IS NOT FOUND ACCEPTABLE IN VIEW OF THE FACTS STATED ABOVE. THE ASSESSEE'S DENIAL OF THE HAND-WRITTEN ENTRIES IS ALSO NOT ACCE PTABLE. IF PAGE NO 3 TO 8 OF ANNEXURE A-2 ARE SEEN IN ENTIRETY AND IN CONJU NCTION WITH EACH OTHER IT BECOMES OBVIOUS THAT THEY RELATE TO UNACCO UNTED PROFIT EARNED BY THE ASSESSEE COMPANY FROM BALAJI MALL PROJECT. M OREOVER, FROM THE DETAILS SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT IS SEEN THAT SOME OF THE SHOPS/OFFIC ES HAD BEEN SOLD DURING FY 2007-08. THEREFORE, THE PROFIT WORKED OUT ON THE SAID PAGES ARE NOTHING BUT THE UNACCOUNTED PROFIT EARNED BY TH E ASSESSEE FROM BALAJI MALL PROJECT. THEREFORE, THE WHOLE AMOUNT OF RS. 3,75,89,941/- IS TREATED AS UNACCOUNTED PROFIT EARNED BY THE ASSESSEE COMPANY O N THE SALE OF SHOPS OF SHRI BALAJI MALL PROJECT. FURTHER, SINCE T HE ASSESSEE HAS ALREADY MADE A DISCLOSURE OF RS. 2 CRORE IN ITS RET URN OF INCOME, CREDIT FOR THE SAME IS GIVEN AND THE BALANCE AMOUNT OF RS. 1,75,89,941/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDING U/S.271AAA IS INITIATED IN RESPECT OF THE ENTIRE UN DISCLOSED INCOME OF RS. 3,75,89,941/-. [ADDITION RS. 1,75,89,941/-] 4. DISSATISFIED WITH THE ACTION OF THE AO, THE ASSE SSEE CARRIED THE MATTER IN APPEAL. IT HAS REITERATED ITS CONTENTIONS AND LD.C IT(A) HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND DELETED THE ADDITIO N BY RECORDING THE FOLLOWING FINDING: 6. I HAVE CAREFULLY GONE THROUGH THE FINDINGS OF T HE ASSESSING OFFICER AND THE SUBMISSIONS MADE BY THE APPELLANT. THE APPE LLANT'S AR HAS DURING THE COURSE OF THE HEARING PRESENTED COPIES O F THE LOOSE PAPERS SEIZED AND INVENTORIZED AT ANNEXURE A-2 (PAGES 3 TO 8) BASED ON WHICH THE AO HAS MADE THE SAID ADDITION. THE AR OF THE AP PELLANT HAS EXPLAINED DURING THE COURSE OF THE HEARING, THE CON TENTS OF THE AFORESAID SEIZED MATERIAL. THUS APPARENTLY PAGE NO. 3 & 4 CONTAIN IT(SS)A NO.572/AHD/2011 AND ANR. 6 HAND WRITTEN NUMBERS WHICH APPEAR TO BE CERTAIN ROU GH WORKINGS WITHOUT ANY CLEAR CUT INDICATION AS TO WHAT THE SAI D NUMBERS REALLY LEAD TO OR RELATE TO. ON PAGE NO. 5 & 6 THERE SEEMS TO B E SOME WORKING SHOWING NET PROFIT OF RS.3,75,89,941/- APPARENTLY B ASED ON THE DIFFERENCE BETWEEN THE SALE VALUE AND THE COST. THE RE IS ALSO APPARENTLY A DISTRIBUTION BETWEEN SOME PARTIES DESIGNATED AS ' S', 'A' AND 'A'. HOWEVER, AGAIN ON THESE PAGES THERE IS NOTHING TO I NFER THAT IT RELATES TO.THE BALAJI MALL. AGAIN, THERE IS NO CLEAR CUT NE XUS EMERGING BETWEEN THE SALE VALUE DERIVATION AND THE BREAK-UP OF THE S HOPS AS GIVEN ON PAGE NO. 8 WHEREIN FLOOR-WISE SHOP DISTRIBUTION OF SHREE BALAJI MALL IS MENTIONED. SIMILARLY ON PAGE NO. 7 THERE ARE SOME G UJARATI WRITINGS, WHICH APPARENTLY RELATE TO CERTAIN SHOPS OF THE MAL L, BUT THEY REALLY DO NOT LEAD TO ANYTHING. 6.1 ON THE ABOVE BASIS IT IS NOT GETTING CLEAR AS T O HOW THE AO HAS CONCLUDED THAT PAGE NO. 3 TO 8 OF ANNEXURE A-2 IF S EEN IN ENTIRETY AND IN CONJUNCTION WITH EACH OTHER MAKES IT OBVIOUS THA T THEY RELATE TO UNACCOUNTED PROFIT EARNED BY THE APPELLANT. ON THE OTHER HAND THE DETAILED REASONING GIVEN BY THE APPELLANT LOOKS TO BE LOGICAL. IT IS QUITE NATURAL THAT WHEN A MALL IS IN THE PROCESS OF BEING LAUNCHED THERE COULD BE QUITE A FEW BUSINESS PROPOSITIONS ,OR VARI OUS TYPES OF ESTIMATED WORKINGS AND PROJECTIONS AND IT APPEARS T HAT THE ABOVE LOOSE PAPERS ARE MORE INDICATIVE OF SUCH PROPOSITIONS RAT HER THAN GIVING ANY CLEAR CUT INDICATION OF THE UNACCOUNTED PROFIT GENE RATED BY THE MALL. THUS, AS EXPLAINED BY THE APPELLANT THAT UPTO THE D ATE OF THE SEARCH, ONLY 12 SHOPS WERE SOLD AND SOME OF THE SHOPS HAVE BEEN OCCUPIED BY THE APPELLANT THEMSELVES AND ON WHICH OBVIOUSLY THE RE WOULD NOT BE ANY PROFIT. THE APPELLANT HAS ALSO SUBMITTED PARTY-WISE BREAK-U P OF THE SHOPS SOLD DURING FY 2007-08, FY 2008-09 AND FY 2009-10. FROM THE AFORESAID BREAK-UP IT IS EVIDENT THAT OUT OF TOTAL 24 SHOPS O NLY 12 SHOPS WERE SOLD IN FY 2007-08. FURTHER TWO SHOPS ON THE SECOND FLOO R AND THREE SHOPS ON THE 4TH FLOOR HAVE BEEN SOLD TO PROMOTER'S WIFE SMT. BINITABEN ASHISH SHAH. THUS, IT IS EVIDENT THAT ALLEGED PROFI T WORKING AS PER THE PAPERS SEIZED COULD NOT HAVE ACCRUED IN FY 2007-08, EVEN IF, FOR THE MOMENT, IT IS ASSUMED THAT THE SAME IS ATTRIBUTABLE TO THE BALAJI MALL PROJECT 6.2 THE APPELLANT HAS ALSO SUBMITTED AN ENGLISH TRA NSLATION OF THE RELEVANT PORTION OF THE STATEMENT MADE BY THE PRINC IPAL PROMOTER OF THE IT(SS)A NO.572/AHD/2011 AND ANR. 7 COMPANY SHRI ASHISH JAYANTILAL SHAH DURING THE COUR SE OF SEARCH, THE SAME IS REPRODUCED BELOW: Q.9: I AM SHOWING YOU CERTAIN PAPERS WHICH ARE INVE NTORIZED AT PAGE NO. 3-8 OF ANNEXURE- A/2 FOUND DURING SURVEY FROM Y OUR OFFICE SITUATED AT SHREE BALAJI MALL ON 22/04/2008. KINDLY LET ME K NOW YOUR FINDINGS ON THE SAME? ANS: I CERTAINLY AGREE WITH YOU THAT THE 'ABOVE PAP ERS WERE FOUND FROM MY 'OFFICE, BUT THE DETAILS INCLUDED WITHIN THESE A RE NOT RELATED TO MY BUSINESS. I DO NOT HAVE ANY INFORMATION REGARDING T HE PREPARER OF THESE PROJECTIONS. AND HENCE, I CANNOT PROVIDE YOU ANY IN FORMATION REGARDING THE DETAILS INCLUDED WITHIN THESE PAPERS. THUS, THERE IS NOTHING ON RECORD TO SHOW THAT ANYTH ING INCRIMINATING HAS BEEN FOUND DURING THE COURSE OF THE SEARCH WHIC H JUSTIFIES THE ADDITION MADE BY THE AO. FURTHER, IT IS PERTINENT TO MENTION THAT THE DISCLO SURE MADE BY THE APPELLANT IS A GENERAL PURPOSE DISCLOSURE AND IT WO ULD NOT BE CORRECT TO INFER THAT THE ENTIRE DISCLOSURE PERTAINS TO THE UN ACCOUNTED PROFIT RELATING TO BALAJI MALL ONLY. THIS ASPECT IS EVIDEN T FROM THE SUBMISSION MADE BY THE APPELLANT AND ALSO FROM THE NATURE OF D ISCLOSURE MADE BY THE APPELLANT. 7. IN THE RESULT THE ADDITION MADE BY THE AO IS DEL ETED AND THE APPEAL IS ALLOWED. 5. BEFORE US, WHILE IMPUGNING ORDER OF THE LD.CIT(A ), THE LD.CIT-DR TOOK US THROUGH PAGE NOS.2 TO 8 OF THE ANNEXURE AVAILABL E ON PAGE NO.6 TO 11 OF THE PAPER BOOK. HE POINTED OUT THAT A BARE READING OF THESE PAPERS WOULD INDICATE THAT THEY ARE RELATED TO THE TRANSACTIONS OF SHOPS IN BALAJI MALL. THE REPRESENTATIVE OF THE ASSESSEE MUST HAVE NOTED DETA ILS OF CERTAIN SHOPS AND THE AMOUNTS. THESE PAPERS WERE FOUND AT THE PREMISES O F THE ASSESSEE, AND THEREFORE, IT WAS FOR THE ASSESSEE TO EXPLAIN TRANS ACTION NOTED IN THEM. IT(SS)A NO.572/AHD/2011 AND ANR. 8 6. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESS EE CONTENTED THAT THE ASSESSEE HAS GIVEN AN ELABORATE EXPLANATION ABOUT T HESE PAPERS. ACCORDING TO HIM, NO DOUBT THESE PAPERS WERE FOUND FROM THE PREM ISES OF THE ASSESSEE, AND IT WAS THE DUTY OF THE ASSESSEE TO EXPLAIN THESE PA PERS. THIS WAS PUT TO DIRECTOR, SHRI ASHISH J. SHAH DURING THE COURSE OF SEARCH WHEN HIS STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. HE HAS E XPLAINED HIS POSITION THAT THESE PAPERS DID NOT RELATE TO ANY BUSINESS TRANSAC TION OF THE ASSESSEE AND THE REPLY TO THE AO WAS IN THE SIMILAR LINE. THE LD.CI T(A) HAS NOTICED THE QUESTION AS WELL AS REPLY OF THE DIRECTOR IN PARAGR APH NO.6.2. IT APPEARS THAT THE SEARCH PARTY WAS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND DID NOT ASK ANY OTHER QUESTION EITHER FROM THE BOOKS OR FRO M ANY OTHER EMPLOYEES. THE AO DID NOT MAKE ANY INQUIRY. HE SIMPLY OBSERVE D THAT EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE. HE HAS NOT ESTABLI SHED THE NEXUS BETWEEN THE NARRATIONS AVAILABLE ON THESE PAGES VIS--VIS THE B USINESS TRANSACTION OF THE ASSESSEE. ON THE STRENGTH OF HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF ACIT VS. DHARMENDRASINH R. WAGHELA, TAX APPEAL N O.1539 OF 2011, THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT NO DOUBT SECTION 132(4) OF THE ACT RAISED A PRESUMPTION ABOUT GENUINENESS OF THE DOCUM ENTS FOUND DURING THE COURSE OF SEARCH. BUT SUCH PRESUMPTION IS REBUTTAB LE AND IT IS TO BE DEMONSTRATED BY THE AO AS TO HOW THE PAPERS FOUND F ROM THE PREMISES OF THE ASSESSEE ARE RELATABLE TO ITS BUSINESS. ONLY, THER EAFTER, THE ASSESSEE SHOULD BE ASKED TO GIVE REPLY QUA THESE NARRATIONS. 7. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. SECTION 132(4A) CONTEMPLATES THAT WHER E ANY BOOKS OF ACCOUNTS, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING IS FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN COURSE OF A SEARCH, IT CAN BE ASSUMED THAT SUCH BOOKS OF ACCOUNTS OTHER DOCUME NTS ETC. BELONGS TO SUCH IT(SS)A NO.572/AHD/2011 AND ANR. 9 PERSON, CONTENTS IN THE BOOKS OF ACCOUNTS OR DOCUME NTS ARE TRUE. NO DOUBT SUCH AN EVIDENCE IS AN ADMISSIBLE EVIDENCE, BUT NOT A CONCLUSIVE ONE. PRESUMPTION OF BELONGING AND ITS GENUINENESS ARE RE BUTTABLE ONE. HONBLE HIGH COURT IN THE CASE OF DHARMENDRASINGH R. WAGHEL A (SUPRA) HAS ALSO PROPOUNDED THAT THOUGH SECTION 132(4A) OF THE ACT U SES EXPRESSION MAY PRESUME, MEANING THEREBY THAT SUCH PRESUMPTION IS REBUTTABLE ONE. IN THE PRESENT APPEAL, WE HAVE BEEN CALLED UPON TO CONSTRU E AND INTERPRETS THESE PAGES AND ARRIVE AT A CONCLUSION WHETHER ANY TRANSA CTION HAVING NEXUS WITH THE BUSINESS TRANSACTION OF THE ASSESSEE CAN BE INF ERRED. THE ASSESSEE HAS PLACED ON RECORD DETAILS IN TABULAR FORM EXHIBITING TOTAL SHOPS AVAILABLE IN BALAJI MALL AND HOW THESE SHOPS HAVE BEEN SOLD IN F .Y.007-08, 2008-09 AND 2009-10. THE ASSESSEE HAS ALSO COMPILED THESE DETA ILS FLOOR-WISE I.E. AVAILABILITY OF SHOPS ON GROUND FLOOR, SECOND FLOOR , THIRD FLOOR AND FOURTH FLOOR. IT HAS PLACED ON RECORD DATE OF SALES, AREA AND THE AMOUNT FOR WHICH THESE SHOPS HAVE BEEN SOLD. THUS, COMPLETE PICTURE OF THE SHOPS, THEIR AREA, THEIR GEOGRAPHICAL LOCATION, DATE OF SALE AND THE A MOUNT FOR WHICH THEY HAVE BEEN SOLD, HAVE BEEN PLACED BY THE ASSESSEE ON PAGE NO.43 TO 49 OF THE PAPER BOOK. DURING THE COURSE OF HEARING, WE HAVE CONFR ONTED THE LD.CIT-DR TO DEMONSTRATE NEXUS BETWEEN NARRATIONS AVAILABLE ON P AGE NO.7 TO 10 OF THE PAPER BOOK I.E. SEIZED MATERIAL VIS--VIS ALLEGED B OOK RESULTS BY THE ASSESSEE. HOWEVER, THE LD.CIT-DR COULD POINT OUT THAT ON PAGE NO.7 I.E. 2 ND PAGE OF THE SEIZED PAPER, NAME OF ASHISH J. SHAH WAS MENTIONED. IT CONTEMPLATES BUSINESS OF BALAJI MALL. ON AN ANALYTICAL EXAMINAT ION OF THESE DETAILS, WE FIND THAT SOME NARRATIONS HERE AND THERE, ARE HAVIN G A SLIGHT CONNECTION WITH THE SHOPS, BUT IT IS DIFFICULT TO ARRIVE AT LOGICAL CONCLUSION. THE STAND OF THE ASSESSEE BEFORE THE AO WAS THAT THESE PAPERS CAN BE DIVIDED IN THREE PARTS VIZ. (A) TYPED DOCUMENTS, HAND WRITTEN DOCUMENTS IN GUJA RATI PERTAINING TO SHREE BALAJI MALL AND OTHER HAND WRITTEN DOCUMENTS WRITTE N IN ENGLISH WITH CERTAIN IT(SS)A NO.572/AHD/2011 AND ANR. 10 NUMBERS MENTIONED IN IT. ACCORDING TO THE ASSESSEE THESE HAND-WRITTEN DOCUMENTS IN ENGLISH IS NEITHER OF BALAJI MALL NOR OF THE COMPANY. THESE PAPERS HAVE NEITHER BEEN DRAWN BY THE DIRECTORS OR THEIR FAMILY MEMBERS. THIS ASPECT WAS NOT ONLY EXPLAINED DURING THE COURS E OF ASSESSMENT PROCEEDINGS, BUT EVEN DURING THE COURSE OF SEARCH I TSELF. AGAINST THIS STAND OF THE ASSESSEE, THE DEPARTMENT DID NOT TAKE ANY STEP TO INVESTIGATE THE ISSUE FURTHER. THE AO HAS ALSO NOT TRIED TO SUPPLEMENT H IS REASONING BY INDUCTIVE METHOD I.E. HE HAS NOT MADE REFERENCE TO ANY OTHER CONNECTED MATERIAL EXHIBITING NEXUS BETWEEN THESE PAPERS WITH THAT OF THE ASSESSEES TRANSACTION. HE SIMPLY OBSERVED THAT EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE. THE ASSESSEE HAS MADE A DISCLOSURE OF RS.3 CRORES IN RE PLY TO QUESTION NO.10 RECORDED UNDER SECTION 132(4) OF THE ACT. OUT OF T HIS RS.3N CRORES, RS.2 CRORES HAS BEEN OFFERED FOR TAXATION IN THIS YEAR. WE HAVE BEEN INFORMED THAT REST OF RS.1 CRORE WERE OFFERED IN INDIVIDUAL HANDS . WE HAVE TRIED OUR BEST TO PERSUADE BOTH THE LD.REPRESENTATIVES TO SHOW SOME N EXUS OR REASONABLE CONCLUSION FROM ALL THE FIGURES MENTIONED IN THESE PAPERS. BY ANY SCIENTIFIC MEANS THEY DID NOT GOAD ADJUDICATING AUTHORITY TO A RRIVE AT A CONCLUSION THAT UNACCOUNTED PROFITS HAVE NOTICED IN THESE PAPERS. THE LD.CIT(A) HAS APPRECIATED THESE PAPERS AND ARRIVED AT A CONCLUSIO N THAT THESE ARE ROUGH WORK WITHOUT ANY CLEAR INDICATION AS TO WHAT THE SAID NU MBERS REALLY LEAD TO OR RELATES TO. ON AN ANALYSIS OF COMPLETE MATERIAL IN CLUDING STATEMENT OF DIRECTOR RECORDED UNDER SECTION 132(4) AND THE EXPLANATION O F THE ASSESSEE EXTRACTED (SUPRA) DURING THE COURSE OF ASSESSMENT PROCEEDINGS , WE ARE OF THE VIEW THAT THE LD.CIT(A) HAS APPRECIATED THE FACTS IN RIGHT PE RSPECTIVE WAY, AND DEPARTMENT IS UNABLE TO GOAD US TO ARRIVE AT ANY OT HER LOGICAL CONCLUSION. THEREFORE, WE DO NOT FIND ANY MERIT IN THIS APPEAL OF THE REVENUE. IT IS DISMISSED. IT(SS)A NO.572/AHD/2011 AND ANR. 11 8. NOW, WE TAKE IT(SS)A.NO.314/AHD/2012. 9. THE LD.AO HAS INITIATED PENALTY PROCEEDINGS UNDE R SECTION 271AAA OF THE INCOME TAX ACT ON THE GROUND THAT ADDITION OF R S.1,75,89,941/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. HE IMPOSED PE NALTY AT THE RATE OF 10% OF THE ALLEGED UNDISCLOSED INCOME. ACCORDINGLY, HE QU ANTIFIED PENALTY OF RS.37,58,994/-. ON APPEAL, THE LD.CIT(A) HAS DELET ED THE PENALTY BY OBSERVING AS UNDER: 4. WITH RESPECT TO RS.2,00,00,000 DECLARED IN THE RETURN FILED SUBSEQUENT TO SEARCH, THE AO IS OF THE OPINION THAT RS.2,00,00,000 DOES NOT FORM PART OF RS. 3,00,00,000 DISCLOSURE MADE BY SHRI ASHISH J. SHAH ON BEHALF OF ENTIRE SHRI BALAJI GROUP IN THE S TATEMENT RECORDED ON 25.04.2008 U/S. 132(4). HE IS OF THE OPINION THAT T HE LUMP-SUM DISCLOSURE OF RS.3,00,00,000 BY SHRI ASHISH J. SHAH DID NOT GIVE ASSESSEE-WISE AND ASSESSMENT YEAR WISE BREAK-UP AND HE FORMED AN OPINION THAT RS.2,00,00,000 DISCLOSED IN THE RETURN IS NOT PART OF DISCLOSURE OF RS.3,00,00,000. IN THIS REGARD IT IS SEEN THAT CIT(A)-I THROUGH ORD ER DATED 11.8.2011 HAS NOTED IN PARA 3 OF THE ORDER THAT THE AO HAD GI VEN CREDIT OF DISCLOSURE MADE BY THE APPELLANT OF RS.2,00,00,000 AS PROFIT ON SALE OF SHOPS OF SHRI BALAJI MALL PROJECT. BUT ABOVE THIS A MOUNT ACCEPTED AS DISCLOSURE MADE ADDITION OF RS.1,75,89,941 ON ACCOU NT OF PROFIT EARNED ON SALE OF SHOPS OF SHRI BALAJI MALL, AFTER GOING THROUGH RIVAL SUBMISSIONS IT IS SEEN TH AT THE PENALTY ORDER, STATES IN PARA 3 THAT DURING ASSESSMENT PROCEEDINGS , THE ASSESSEE SUBMITTED BREAK-UP OF OVERALL DISCLOSURE OF RS.3,00 ,00,000. AND THAT IS WHY THE AO GAVE CREDIT OF RS.2,00,00,000 DISCLOSED IN THE RETURN. ONCE THE AO HAS GIVEN CREDIT OF DISCLOSURE OF RS.2,00,00 ,000 IN THE ASSESSMENT ORDER, IN MY VIEW, IMPOSITION OF PENALTY U/S. 271AAA ON THIS AMOUNT IS NOT WARRANTED. FURTHER IT IS SEEN THAT THE ADDITION OF RS. 1,75,89 ,941 HAS SINCE BEEN , DELETED BY MY PREDECESSOR THROUGH HIS ORDER DA TED 11.08.2011, THEREFORE THERE IS NO REASON TO IMPOSE PENALTY ON T HIS AMOUNT EITHER. 5 IN THE RESULT THE APPEAL IS ALLOWED. IT(SS)A NO.572/AHD/2011 AND ANR. 12 10. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. FOR VISITING THE ASSESSEE WITH P ENALTY, THE LD.AO HAS CONSIDERED ADDITION OF RS.3,75,89,941/-. THIS ADDI TION CONTAINS TWO COMPONENTS I.E. RS.2 CRORES PLUS RS.1,75,89,941/-. THE AO HAS GIVEN A SET OFF RS.2 CRORES AGAINST TOTAL ADDITION ON THE GROU ND THAT THIS MUCH AMOUNT WAS DECLARED BY THE ASSESSEE IN THE STATEMENT UNDER SECTION 132(4) OF THE ACT. THEREFORE, HE MADE AN ADDITION OF ONLY RS.1,75,89,9 41/-. 11. ON DUE CONSIDERATION OF THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT ORDER OF THE LD.CIT(A) DOES NOT CALL FOR ANY INTERF ERENCE FOR TWO REASONS VIZ. WE HAVE UPHELD ORDER OF THE LD.CIT(A) FOR DELETING ADDITION OF RS.1,75,89,941/-. HAD THE LD.AO NOT SET OFF OF RS. 2 CRORES OF THE ALLEGED UNDISCLOSED INCOME DECLARED BY THE ASSESSEE IN THE STATEMENT UNDER SECTION 132(4) OF THE ACT, THEN, THE TOTAL ADDITION OF RS.3 ,75,89,941/- WOULD HAVE NOT STOOD SCRUTINY OF THE HIGHER APPELLATE AUTHORITY. BASIS FOR TOTAL ADDITION IS SAME TO THAT OF RS.1,75,89,941/-. THUS, THERE CANN OT BE ANY PENALTY ON THIS AMOUNT. APART FROM THAT EVEN IF FOR THE SAKE OF AR GUMENTS, IT IS PRESUMED THAT A SUM OF RS.2 CORES DISCLOSED BY THE ASSESSEE UNDER SECTION 132(4) OF THE ACT IS BEING TREATED SEPARATELY, THEN ALSO THIS AMOUNT DOES NOT CALL FOR VISITING THE ASSESSEE WITH PENALTY, BECAUSE AS PER SUB-SECTION 2 OF SECTION 271AAA, THE ASSESSEE CAN BE ABSOLVED FROM THE RIGOUR OF PENALTY PROVISION UNDER THREE CONDITIONS NAMELY, (1) IN THE COURSE OF SEARCH, UND ER SUB-SECTION (4) OF SECTION 132 ADMITS UNDISCLOSED INCOME AND SPECIFIES MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, (2) SUBSTANTIATES MANNER I N WHICH UNDISCLOSED INCOME WAS DERIVED, AND (3) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. IN THE PRESENT CASE, THE ASSESSEE HAS MADE DISCLOSURE IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. SO, FIRST CONDITION HAS BEEN FULFILLED. SO FAR AS CONDITION NO.(3) IS CONCERNED, IT IS ALSO IT(SS)A NO.572/AHD/2011 AND ANR. 13 NOT DISPUTED. THE ASSESSEE INCLUDED THIS AMOUNT IN ITS RETURN AND PAID TAXES ALONG WITH INTEREST. ONLY CONDITION NO.2 REMAINED TO BE EXAMINED I.E. ASSESSEE SPECIFIES MANNER IN WHICH SUCH INCOME WAS DERIVED AND SUBSTANTIATE THE MANNER. THIS ASPECT HAS BEEN CONSIDERED Y THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MAHENDRA C. SHAH, 299 ITR 305 (GUJ), IN THAT CASE, THE HONBLE HIGH COURT WAS EXAMINED SCOPE OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT WHERE SIMILAR CONDITIONS ARE B EING CONTEMPLATED. ACCORDING TO THIS DECISION OF THE HONBLE HIGH COUR T, THERE WAS NO OCCASION FOR THE ASSESSEE TO EXPLAIN MANNER IN WHICH UNDISCL OSED INCOME WAS DERIVED, BECAUSE NO SUCH QUESTION WERE PUT TO THE ASSESSEE D URING THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. IN THE P RESENT CASE ALSO NO SUCH QUESTIONS WERE PUT TO THE ASSESSEE. AS FAR AS ASSE SSMENT PROCEEDINGS IS CONCERNED, THE AO HIMSELF HAS TREATED THIS INCOME O F RS.2 CRORES AS A BUSINESS INCOME AND GIVEN SET OFF AGAINST THE ALLEG ED UNACCOUNTED PROFIT COMPUTED BY HIM. THIS ACTION OF THE AO IMPLIEDLY D EMONSTRATE THAT MANNER OF EARNING OF SUCH INCOME FROM DEVELOPMENT OF BALAJ I MALL HAS NOT BEEN DOUBTED. THUS, THE ASSESSEE HAS FULFILLED ALL THRE E CONDITIONS CONTEMPLATED IN SUB-SECTION 2 OF SECTION 271AAA OF THE ACT, AND IT COULD NOT BE VISITED WITH PENALTY QUA THE ALLEGED RS.2 CRORES DISCLOSED DURIN G THE COURSE OF SEARCH AND OFFERED THEM FOR TAX IN THE RETURN FILED BY THE ASS ESSEE. THE LD.CIT(A) HAS RIGHTLY DELETED THE PENALTY. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN BOTH THE APPEALS OF THE REVENUE. THEY ARE DISMISSED. 12. IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE COURT ON 22 ND FEBRUARY, 2017 AT AHMEDABAD. SD/- SD/- ( AMARJIT SINGH ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 22/02/2017