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November 9, 2023

No further information under section 69A based on a statement made during the survey in the absence of supporting documentation

No further information under section 69A based on a statement made during the survey in the absence of supporting documentation

Fact and issue of the case

These cross appeals are directed against the order dated 7.7.2022 passed by the learned CIT(A), National Faceless Appeal Centre, Delhi and they relate to A.Y. 20 17-18. The assessee is aggrieved by the decision of learned CIT(A) in confirming the addition of Rs. 5.71 crores made by the Assessing Officer. The Revenue is in appeal assailing the decision of the learned CIT(A) in granting relief in respect of addition of Rs. 3.40 crores relating to receipt of on money on sale of flats.

We shall first take up the appeal filed by the revenue. The facts relating to the case are stated in brief. The assessee is a partnership firm and is engaged in the real estate business as builders and developers. The assessee filed revised return of income on 31.10.2017 declaring total income of Rs. 79,89,053/-. The Department had earlier carried out survey action under section 133A of the Act in the hands of the assessee on 30.8.2016. During the course of survey, a statement was recorded on oath from one of the partners named Shri Govind V. Vikmani. In the said statements, he had agreed to surrender a sum of Rs.4.23 crores for taxation over and above regular profit. The above said amount related to “on money” receipt on sale of The basis for arriving at the above said figure is explained in brief. During the course of survey operations, it was noticed that there was difference of Rs. 11,33,21,965/- between MM Value (Value determined by for stamp duty purposes) and Sale value and the said difference was considered as “on money receipts”. It was noticed that the assessee had offered a sum of Rs.7,10,00,000/- under Income Disclosure Scheme of 2016. Accordingly, it was agreed by the partner to surrender the balance amount of Rs.4,23,21,965/-. The Assessing Officer noticed that the assessee did not offer the above said amount as mentioned in the statement. Accordingly, during the course of scrutiny proceedings, the Assessing Officer asked the assessee to explain the same.

Before the Assessing Officer, the assessee filed a detailed reply stating that, during the year under consideration, it did not receive any “on money” from the flats sold by it. It was also submitted that the flats have been sold in all the subsequent years and hence the income relating to the flats sold during the year under consideration can be assessed to tax. In this regard the assessee filed a detail summary of sale of flats which contained sale value of flats, MM value (Manva Mandir Value) and difference between MM value and sale value. It was submitted that after survey operations/demonetization announced by GOI, the buyers of the flats did not pay anything in cash and accordingly, the flats were sold for actual sale consideration, which was more than the MM value. Accordingly, it was submitted that the difference in sale consideration of Rs.4.23 crores have already been included in the sale proceeds and offered to tax during the year under consideration and in the subsequent years. Accordingly, it was contended that no addition is called for during the year under consideration.

Observation of the court

We heard the parties and perused the record. Following arguments, inter alia, were advanced by Ld A.R:-

(a) The AO cannot rely upon the Statement given a third party, that too, when he has stated that the impugned document may/appears to belong to the assessee herein, i.e., even the deponent was not sure as to whom the said document belong to. Hence, the AO could not have related this document to the assessee.

(b) The impugned document is undated, unsigned, unnamed containing receipts and payments. Hence it cannot be definitely said that the transactions, even if it is assumed to belong to the assessee, pertain to the year under consideration. Hence, the AO could not have made addition in the instant year.

(c) The AO has assessed entire receipts as income of the assessee without establishing that the said receipts are revenue in nature. A careful perusal of the document would show that the total receipts of Rs.5.7 1 crores included “Loan from K Galia” amounting to Rs.4,25,00,000/-. This loan amount cannot be considered to be revenue receipt assessable to tax. Further, there are other receipts against individual names and the nature of those receipts has also not been mentioned. Hence, they cannot also be considered as revenue receipts.

(d) Even though the assessee had asked for cross examination of Mr. Hemal Bheda, the same was not provided by the AO. (e) Hence the above said document is a dumb document and the same should not have been relied upon by the AO.

We noticed earlier that the AO has made the impugned addition of Rs.5.71 crores on the basis of a piece of document found at the premises of a Trust. The assessee has been linked to the said document, since Shri Hemal Bheda said that this document may/appears to belong to the assessee herein. It can be seen that the reply so given is vague one and not authentic one. The above said person is son of one of the partners of the assessee firm. However, it was not shown that the above said Shri Hemal Bheda had active participation in the affairs of the assessee firm and he was involved in/aware of the day to day activities of the assessee firm. The document is undated, unsigned, unnamed. Hence, the AO should have conducted further enquiries in order to give a finding that the above said document did contain transactions belonging to the assessee only. Hence, we agree with the contentions of the assessee that the AO could not have placed full reliance on the vague statement at all. Even if he had given the reply in an authentic manner, the AO could not have made addition merely on the basis of said statement without corroborating the same with any other material.

We also notice that there was total non-application of mind on the part of the AO in making the impugned addition. We noticed that the AO has assessed entire cash receipts as income of the assessee without examining the nature of entries and further, whether those receipts can be considered as revenue receipts assessable to tax. We have earlier noticed that the aggregate receipts of Rs.5.7 1 crores included loan receipts of Rs.4.20 crores, which is not revenue receipt. Further, a sum of about Rs.44.00 lakhs have been shown against name of certain individuals and nature of those receipts are also not known. Further, we have noticed that this document is undated and hence it cannot be said that these transactions are related to the year under consideration, even if it is assumed that the said document belongs to the assessee. We also noticed that the AO did not make any independent enquiry with regard to this document.

Accordingly, we are of the view that the AO was not justified in making this addition on the basis of a document, which should be classified as a dumb document. Accordingly, we are of the view that the Ld CIT(A) was not justified in confirming this addition. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of Rs.5.71 crores.

In the result, the appeal filed by the assessee is allowed and the appeal of the revenue is dismissed.

Pronounced in the open court on 04/05/2023.

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