DCIT Vs Abhishek Atlani (ITAT Raipur)
Conclusion: Since AO made addition under section 153 on the basis of documents seized in case of third party but without mentioning of assesse’s name in any legal paper and non-establishment of relationship with searched party, therefore, the same was invalid.
Held: AO on the basis of documents seized from the premises of M/s. A Ltd. and its directors which were belonging to assessee initiated proceedings u/s 153C in case of assessee and, thereafter, made addition of Rs.2,61,50496/-. While doing so, he observed that assessee was entitled to receive compensation equivalent to 2,61,50,496/- which was the amount receivable as on 31.03.2006. According to him, the compensation received represented the investments which were not recorded in the books of account of assessee and, therefore, were hit by the provisions of section 69B. It was held the addition was to be deleted on the ground that similar addition had been deleted in the hands of M/s. A Ltd.. Further, AO had not demonstrated the nature of relationship with assessee and M/s. A Ltd.. Since the name of the assessee did not figure out in any official paper and AO did not establish the nexus of assessee with M/s. A Ltd, therefore, addition made in assessee’s case could not be sustained.
FULL TEXT OF THE ITAT JUDGEMENT
ITA Nos.185 & 186/RPR/2014 filed by the Revenue are directed against the separate orders dated 23.05.2014 of the ld. CIT(A), Raipur (CG) relating to assessment year 2006-07 respectively. ITA No.314/RPR/2014 filed by the Revenue is directed against the order dated 27.08.2014 of the ld. CIT(A), Raipur (CG) relating to assessment year 2006-07. Since common grounds of appeal have been taken by the Revenue in all these three appeals, therefore, they were heard together and are being disposed of by this common order for the sake of convenience.
2. First, we take up ITA No.314/RPR/2014 in the case of Taral Modi as the lead case.
2.1 Facts of the case, in brief, are that the assessee is an individual and derives income from house property, business income in the capacity of partner and income from other sources. A search and seizure action u/s 132 of the I.T. Act, 1961 was conducted on the business premises of M/s. Aarti Infrastructure & Buildcon Ltd., residential premises of its directors and the residential/business premises of the other members and related persons/ concerns in the above business group. The materials seized from the persons covered under search were examined and the relevant persons were asked to furnish their explanations upon findings of assets and entries made in the loose papers and various discrepancies found in accounts/documents. Certain papers were found from the above premises wherein the name of the assessee was mentioned in certain transactions of land and in redistribution of some assets on dissociation of the assessee and few others from the affairs of M/s. Aarti Infrastructure & Buildcon Ltd. In the course of verification of the documents seized from the residential premises of Shri Kishore Atlani (namely a pen drive) and also the documents seized from Shri Rajesh Atlani, certain documents belonging to the assessee were found, based on which the Assessing Officer issued notice u/s 153C to the assessee on 12.09.2012 after recording reasons. Since there was no compliance to this notice, a notice u/s 142(1) was issued on 09.01.2013 and a questionnaire was also issued separately. The assessee subsequently filed the return of income in response to notice u/s 153C on 12.03.2013 declaring total income of Rs.3,74,960/-.
3. During the course of assessment proceedings, the Assessing Officer observed that the assessee is related to one business concern namely M/s. Aarti Infrastructure & Buildcon Ltd. which is a company engaged in construction and sale of flats/shops, sale of lands and execution of government contracts. The assessee was a Director of said M/s. Aarti Infrastructure & Buildcon Limited then known as M/s. Aarti Buildcon Private Limited. But subsequently there was a change in the holding/controlling pattern of this company and the assessee severed himself from the functioning of this company. At the time of change of the controlling pattern, an agreement was executed between various persons in which the assessee was also a party. A copy of the agreement was seized from Shri Rajesh Atlani, who is the brother of the assessee and this agreement narrates transaction of sale of land and sharing of profit out of it by the outgoing stake holders mentioned in the agreement. As already mentioned earlier, the assessee is specified to be the beneficiaries from this devolution of the profits worked out and included in the agreement. The said company M/s. Aarti Infrastructure & Buildcon Limited was having receipts from sale of land also. In the accounts for financial year 2007-08, the sale of lands include sale of land at Mowa which was sold for Rs.3,53,52,000/- and included in the accounts of head-office. From its ledger account, it was also found that a land was sold for Rs.2,95,20,000/- on 13/03/2008 to one M/s. Purandar Promoters and Developers Private Limited vide sale deed on the same date. A copy of the sale deed was found in the office premises of the said company and seized under identification mark A/3/30 containing pages from 1 to 197. As per this document, the market value adopted for stamp duty calculation was Rs.3,68,90,000/- whereas the sale was registered at much lower amount of Rs.2,95,20,000/-. The payment was made through one demand draft of Rs.1,80,00,000/- bearing number 018122 dated 18/01/2006 and one cheque of Rs.1,15,20,000/- bearing number 864642 dated 01/06/2006. These details were found entered in the sale deed itself. The payments through above instruments were made more than 2 years ago, but the sale was registered much later. Further, the sale consideration which was adopted was on a lower side as compared to the stamp duty valuation. These findings made during the course of search was itself being probed when at premises of Shri Rajesh Atlani, a copy of agreements relating to sale of land at Mowa was found. Apart from this from the residence of Shri Kishore Atlani, one pendrive was seized in which one excel file was present showing details of one land transaction. On superficial examination above these transactions are found to be one and the same.
4. The Assessing Officer, therefore, asked the assessee to explain as to why the addition should not be made in the hands of the assessee to the extent of Rs.2,65,52,456/-. It was explained by the assessee that the funds to the extent of Rs.12,00,00,000/- were to be received by him along with others from M/s Suncity Projects Private Limited and initial payment of Rs.1,80,00,000/- was also made. But subsequently a severance of some directors from the activities of the company M/s. Aarti Infrastructure and Buildcon Limited was imminent due to which the outgoing directors were to be provided with some liquidity. He concluded by stating that the compensation allocated to him was never received.
5. The Assessing Officer held that the explanation offered in the above letter fails to satisfactorily explain that the assessee was not a beneficiary of the settlement worked out in the agreement. At the first place the assessee is not in a position to outright object the veracity of the agreement since it carries his signature. The assessee never claimed and also did not produce any documentary evidence substantiating that the agreement was unilaterally cancelled by him if it was to have no significance as has been contented by the assessee. The assessee mainly relied on two events subsequent to the date of the agreement. On this basis, one of the contentions of the assessee that the impugned land was sold to M/s. Suncity Projects Limited for a lower amount and it provided funds in form of inter-corporate loans to M/s. Aarti Infrastructure & Buildcon Limited. This argument was advanced by the company M/s. Aarti Infrastructure & Buildcon Limited in their case but by itself is not convincing. The fact that the impugned land was ultimately sold and that valuation of its price for stamp duty purposes is on lower side, does not preclude the possibility of the transaction taking place in the manner & amount as appearing from the seized documents. Thus there are umpteen cases where the actual sale price is much higher than the valuation for stamp duty purposes and this is a common feature in transactions relating to sale of lands. The company also contended that funds represent inter-corporate transfers but considering the circumstances in totality the argument does not substantiate that the sale of the land was done in other manner than as appearing in the seized document. Hence the assessee failed to clarify his position from the accounts vis-à-vis the situation appearing out of the execution of the above referred agreement.
6. The Assessing Officer further observed that the agreement clearly vests with the assessee the right and entitlement for compensation from M/s. Aarti Infrastructure & Buildcon Limited equivalent to Rs.2,61,50,496/- from the redistribution of various assets. The assessee is entitled for the above amount being his share on account of compensation equivalent to Rs.2,61,50,496/-, which is the amount receivable as on 31/0312006. In absence of any explanation from the side of the assessee, the Assessing Officer made addition to the income of the assessee by invoking the deeming provision of section 69B of Income Tax Act, 1961. According to him, the compensation received represents the investments which are not recorded in the accounts of hence by virtue of the deeming provisions, the addition of Rs.2,61,50,496/- was made by the Assessing Officer to the income of the assessee.
7. Before the ld. CIT(A), the assessee made elaborate submissions which has been summarized by the ld. CIT(A) and which read as under :-
“(i) No part of the agreement dated 01.04.2006 was ever implemented by any party to the agreement and it is no more than a MOU which has remained unimplemented.
(ii) That the agreement was signed by the directors of Aarti Infrastructure and Buildcon Ltd. (other than Shri Suresh Atlani) unwillingly. The immovable properties described in para no. 6 of the agreement were never given/transferred to the person named in the agreement.
(iii) Shri Suresh Atlani had filed a Civil Suit in the Court of Law for recovery of certain amount, which was later on withdrawn/terminated by entering into a compromise deal in Lok Adalat.
(iv) The appellant has relied upon the civil suit filed by Shri Suresh Atlani to establish that the agreement was never implemented. The contents of the agreement do not have any implication in the case of appellant and there is no material/evidence on record that any part of the agreement was actually carried out.
(v) The amounts stated to have been received from Suncity Project Pvt. Ltd. actually represent inter corporate loans given by Suncity Project Pvt. Ltd.
(vi) The contents of the pen drive are unauthentic, unreliable and do not represent correct state of affairs. In absence of any corroborative material, no addition could have been made.
(vii) Neither the copy of agreement dated 01.04.2006 nor the pen drive was found from appellant. No evidence has been brought on record correlating the allegation of AO.”
8. Based on the argument advances by the assessee, the ld. CIT(A) following his decision in the case of M/s Aarti Infrastructure & Buildcon Ltd. deleted the addition made by the Assessing Officer by observing as under :-
“6. I have carefully gone through the assessment order and submissions of the appellant. The addition has been made by the AO holding that as per the agreement dated 01.04.2006, the appellant was entitled to the amount of Rs.2,61,50,496/-. A perusal of the copy of agreement shows that major amount is comprised of share of appellant in the alleged undisclosed sale consideration of land sold by Aarti Infrastructure and Buildcon Ltd. (hereinafter referred to as AIBL) to Suncity Project Pvt. Ltd. On the basis of this very agreement, an addition of Rs.9,17,91,005/- was made by the AO as undisclosed capital gain in the case of AIBL. The issue covered by this ground of appeal is thus identical to Ground No. 1 in Appeal no. 30/13-14 in the case of M/s Aarti Infrastructure and Buildcon Ltd. for AY 2008-09. The said assessee had also filed an appeal which has been decided in assessee’s favour vide order dated 13.08.2013. Since the issue covered in this appeal is already decided in the above appeal, for the reasons detailed in the operative part of the appellate order dt. 13.08.2013, which have been reproduced below, the addition made in the instant case is deleted.
“6. 1 have carefully gone through the assessment order and written submissions of the appellant. It is not in dispute that the appellant had disclosed the sale of land at Mowa under question in its books of accounts as the A.O. has also recorded his finding of fact in Para 2 of the assessment order. It is gathered that the land was sold for Rs.2,95,20,000/- on 13.03.2008 to M/s. Purandar Promoters and Developers Private Limited through the registered sale deed on the even date. It is seen that as per registered sale deed, the market value adopted for stamp duty purposes was Rs.3,68,90,000/-, however, the sale consideration was Rs.2,95,20,000/-; that the payment was received two years before the registry of the sale deed through one demand draft of Rs.1,80,00,000/- bearing number 018122 dated 18.01.2006 and one cheque of Rs. 1,15,20,000/- bearing number 864642 dated 01.06.2006. The action of the A.O is based on the information gathered and inference drawn from the following:
a) At another premises, which is a residential premises of brother of one of the past director in the appellant company, a copy of agreements relating to sale of land at Mowa was found;
b) The sale consideration was much lower than the value adopted for stamp duty purposes.
c) From the residence of the same person, named Shri Kishore Atlani, one pen drive was seized in which one excel file was present showing details of one land transaction.
7. According to the A.O. the transaction are found to be one and the same. The A.O has also referred to the pen drive seized from Shri Kishore Atlani that contained one excel file named SUNCITY contents whereof have been reproduced by the A.O in Para 3 of the assessment order.
8. From the perusal of contents of the excel file, 1 find that the payment details, inter alia, contains details of cheque numbers vide which payments were made to following parties as extracted hereunder :
