Array Land Developers Pvt Ltd Vs DCIT (ITAT Chennai)
Conclusion: In present facts of the case, the ITAT observed that Guess work or estimation or extrapolation of income is not permissible unless there are strong evidences to suggest otherwise. The additions are to be based solely on tangible material and not on the basis of estimations or extrapolation theory.
Facts: In present facts of the case, the appeals by assessee for AY 2015-16, 2016-17 & 2017-18 arises out of common order passed in the matter of separate assessments framed by Ld. Assessing Officer [AO] u/s.143 r.w.s. 153A of the Act on 25-12-2019.
In present facts of the case, the assessee group was subjected to search action on 09.11.2017. During the course of search action, a laptop was found which was accepted to be used by one of the directors of the assessee company. In the laptop, an excel sheet was found which contained details of windmill purchased by the assessee from various parties. This sheet, inter-alia, contained the details of parties from whom windmill was purchased, HTSC No., KW details of wind mill, date of purchase, Land cost as per Sale Deed, Machinery Cost including VAT and Total cost which was summation of machinery cost and land cost. The total cost tallied with the total purchase value of the windmills along with the land as per the books of accounts of the assessee. The last column had no title but it mentioned certain acronyms like “7C95L” etc. Based on certain loose sheets, the term “C” & “L” was understood by Ld. AO as “Crores” and “Lacs” respectively. The same led a suspicion in the mind of Ld. AO that the assessee made cash payment over and above the recorded value and accordingly, impugned additions were made in the hands of the assessee u/s 69A for alleged cash payment.
It was observed by the ITAT that assessee’s representative has, all along, denied having made any such cash payment to the vendors over and above the recorded book value. The evidence being relied upon by Ld. AO was in the shape of editable excel sheets which do not convey anything to show that such payment, in fact, was made by the assessee to various vendors. The assessee also submitted that the laptop was personal laptop of major shareholder and on the basis of this sheet alone, the impugned additions could not be sustained in law. Under these circumstances, it was observed that the onus had shifted on revenue to controvert the submissions made on behalf of the assessee by bringing on record cogent evidences to controvert the submissions of the assessee. The same could be in the shape of further investigation from the vendors and confronting to them the said material found from the assessee’s premises. However, there was total lack of any further independent investigation on the part of Ld. AO despite the fact that the assessment was made after a considerable period of time and Ld. AO had ample time to carry out such an investigation. Except for passing on this information to other AO’s, no efforts have been made by Ld. AO to corroborate the stand taken by him. The impugned addition, has been made on mere presumptions and assumptions of cash payment by the assessee which is not backed up by any evidence on record.
Therefore, these documents are to be discarded as such and without there being any corroborative evidence to support the same, the same could not be used against the assessee to make the impugned additions.
Further, it was observed that it is trite law that in case of search proceedings, the additions are to be based solely on the basis of incriminating material found during the course of search operations. Guess work or estimation or extrapolation of income is not permissible unless there are strong evidences to suggest otherwise. The additions are to be based solely on tangible material and not on the basis of estimations or extrapolation theory.
Further, it was observed that in the judgment of CBI v. V.C. Shukla (1998 3 SCC 410) wherein it was held that any presumption of transaction on some vague, tenuous and dubious entries in a sheet of paper is not rational unless there is corroboration by corresponding entry in regular accounts of both the parties to the transaction. The Hon’ble Court observed that ‘Book’ ordinarily mean a collection of sheet or papers or other material, blank or written or printed, fastened or bounded together so as to form a material as a whole. Loose sheets are scraps of papers cannot be termed as books for they can easily be detached and replaced. Therefore, these are not admissible evidences.
On basis of the above, it was observed that the impugned additions were not sustainable in any of the years and appeal was allowed by deletion of additions.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
1. Aforesaid appeals by assessee for Assessment Years (AY) 2015-16, 2016-17 & 2017-18 arises out of common order passed by Ld. Commissioner of Income-Tax (Appeals)-19, Chennai on 21-03-2022 in the matter of separate assessments framed by Ld. Assessing Officer [AO] u/s.143 r.w.s. 153A of the Act on 25-12-2019. The facts as well as issues are stated to be common in all the appeals. For the purpose of adjudication, facts from AY 2015-16 have been culled out by us in this order. The grounds of appeal taken by the assessee read as under: –
Ground No.1:
The High-Pitched Order was passed without application of mind, ignoring the principles of natural justice and not following the basic procedure:
The learned Commissioner of Income Tax (Appeals) has simply ignored the following objection raised by the Appellant objecting to the High-Pitched Order passed by the learned Assessing Officer was without application of mind, ignoring the principles of natural justice and not following the basic procedure:
On the facts and circumstances of the case, the learned Assessing Officer has erred in hurriedly passing the high pitched assessment order, making a huge addition of unjustifiable and unimaginable sum as “Unexplained Money”, without possessing any concrete material seized from the Appellant Company during search, in a highly arbitrary manner, without giving basic opportunity to the Appellant to defend itself, violating all norms of the law, without following the rules of natural justice, totally based on presumption and assumptions and based only on some excel sheets and alleged unsigned receipts not relating to the Appellant Company, not relevant for the above assessment year.
The learned Assessing officer before coming to the conclusion, has not observed the principles of natural justice, not applied his mind appropriately and acted in a gross negligence manner which had resulted in the addition made in the assessment order which are not backed by any sound reason or logic.
The learned assessing officer has misinterpreted the provisions of law and further the well-established facts on records in favour of the appellant have out rightly been ignored. Hence, it is proved that it is a prima-facie case of high-pitched assessment order.
Further, the very fact that the stand taken by the Ld. Assessing Officer with regards to the proposed addition has been varying between the first notice (issued u/s.142(1) dated 23.10.2019), wherein the proposed addition was Rs.34,04,25,860/- and subsequent notices (issued u/s.142(1) dated 14.12.2019 and 21.12.2019), wherein the proposed addition was Rs.50,95,00, 000/- and not having provided any reasons for the enhancement of Rs. 16,90,74,140/- based on the same materials, is by itself a proof that the aforesaid Assessment was completed without proper application of mind and without appreciating the facts on records.
Though the Appellant Company had repeatedly denied any connection with the aforesaid excel sheets and alleged unsigned receipts, the Ld. Assessing Officer was not justified in relying on the same without recording any statements from the parties mentioned in the said excel sheets and alleged receipts in order to establish any connection between the Appellant Company and the alleged transactions with the parties mentioned in the aforesaid excel sheets and alleged unsigned receipts.
The Ld. Assessing Officer has suppressed the fact that statements were recorded from Mr. V.S Sivakumar, the authorized representative and director of the Appellant Company and that he had made subsequent retractions on 03.01.2018 and 11.01.2018 while making the aforesaid Assessment.
On the facts and circumstances of the case, the High-Pitched Arbitrary Assessment Order passed without application of mind, ignoring the principles of natural justice and not following the basic procedure, is illegal, bad in law and liable to be quashed.
Ground No.2:
The order making additions u/s.69A of the Act, is illegal and not maintainable;
On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred in confirming the arbitrary assessment order, making a huge addition of unjustifiable and unimaginable sum as Income U/S.69A of the Act, under “Unexplained Money”, without possessing any concrete material seized from the Appellant Company during the search.
In the Search and Seizure operation conducted U/S.132 on 09.11.2017 in the case of the Appellant Company, the Appellant Company was not found to be the owner of any money, bullion, jewellery or other valuable article and hence the provisions of Sec.69A has no operation in the Appellant Company’s case.
On the above facts and circumstances of the case, the order making additions u/s.69A of the Income Tax Act, is illegal, bad in law and liable to be quashed.
Ground No.3:
Addition made u/s.69A towards Purchase of Windmill – Rs.50.95 Crores:
On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred in confirming the assessment order, making an arbitrary addition of Rs.50,95,00,000/- on the basis of assumptions and placing reliance on some excel sheets and alleged unsigned receipts not belonging to the Appellant Company and figures reflecting in an excel file not connected to the Appellant’s business, without any concrete material on hand to prove that the Appellant company had made cash payments for purchase of windmills and without considering the objection raised by the Appellant Company during the course of assessment proceedings.
The learned Commissioner of Income Tax (Appeals) failed to consider the fact that while making the aforesaid additions, the learned Assessing Officer has also included the amounts that has already been admitted in the Income Tax returns of the Appellant Company for the Asst. year: 2015-16 to the tune of Rs.16,90,74,140/- for purchase of windmills during the year without providing any reason for taking the stand in spite of specific requests of the Appellant Company. On the above facts and circumstances of the case, the order making arbitrary additions u/s.69A of the Income Tax Act, without any materials on hand and without any basis is liable to be quashed.
The Appellant Company may kindly be permitted to adduce any other relevant ground at the time of hearing of this appeal.
The Hon’ble Members of the Tribunal may kindly consider the above facts and circumstances and be kind enough to quash the arbitrary and illegal order making a huge addition of Rs.50,95,00,000/- as unexplained money u/s. 69A of the Income Tax Act, in the hands of the Appellant company without any concrete materials seized during the search and without giving opportunity to the Appellant company to defend itself in lines with the rules of natural justice.”
As is evident, the assessee is aggrieved by confirmation of certain additions in the impugned order as made by Ld. AO in the assessment order.
2. The Ld. AR, drawing attention to the factual matrix of the case, advanced arguments and submitted that the impugned addition has been made merely on the basis of loose sheet and unsigned agreements & receipts which do not carry any evidentiary value. These documents, as per the submissions of Ld. AR, are dumb documents which could not form basis of making impugned addition. It has further been averred that Ld. AO did not carry out any independent investigations to corroborate any of such documents and therefore, the impugned additions are not sustainable in the eyes of law. The Ld. CIT-DR, on the other hand, submitted that entries in the excel sheet found from the laptop tallied with the books of accounts of the assessee. The surrounding circumstances would justify impugned additions. Having heard rival submissions and after perusal of case records, our adjudication would be as under. The assessee being resident corporate assessee is stated to be engaged in the business of agriculture and allied activities.
Assessment Proceedings
3.1 Pursuant to search operations in the case of Smt. V.K. Sasikala and the assessee entity on 09.11.2017, certain alleged incriminating material was found which form the very basis of impugned additions. During the course of assessment proceedings, notice u/s 153A was issued in due course of time which was followed by statutory notices u/s 142(1) calling for requisite details from the assessee. The search was also carried out in the residential premises of one D. Shakila w/o Rajarajan (a close relative of Smt. V.K. Sasikala) at Door No.17/21, Padmanabhan Street, North Usman Road, T. Nagar, Chennai and a laptop (Asus Zen Book 02305 S.No./R41009504) used by Smt. V.K. Sasikala was seized. Smt. V.K. Sasikala confirmed that the laptop belonged to her and it was used by her.
3.2 On examination and analysis of the laptop, an excel file titled “WIND MILL RATE” was found in a folder titled “ARRAY WIND MILL”. This excel file contained an excel sheet by the name WIND MILL and the contents of the same has been extracted in para 4.3 of the assessment order. This sheet contained the details of parties from whom windmill was purchased, HTSC No., KW details of wind mill, date of purchase, Land cost as per Sale Deed, Machinery Cost including VAT and Total cost which was summation of machinery cost and land cost. The total cost tallied with the total purchase value of the windmills along with the land as per the books of accounts of the assessee. The last column had no title but it mentioned certain acronyms like “7C95L” etc. Based on certain loose sheets, the term “C” was decoded as ‘Crores’ whereas the term “L” was decoded as ‘Lacs’. The loose sheets were numbered as page numbers 252 to 258 and seized vide ANN/SP/VKS/Office/LS/S-Volume 2. These sheets were found at office block of ‘Veda Nilayam’, Old No.36, New No.81, Poes Garden, Chennai. The same was in the shape of receipt and the contents of the same have been extracted on page nos. 7 to 13 of the assessment order. It could be seen that the receipt does not bear signature of any of the parties and the same are in the shape of unsigned documents. The excel sheets coupled with these unsigned receipts led Ld. AO to believe that the assessee entity paid unaccounted cash towards purchase of windmills.
3.3 The conclusions drawn by Ld. AO on the basis of these documents were as follows: –
4.4 In page numbers 255 to 258 of the loose sheets seized vide ANN/SP/VKS/Office/LS/S – volume 2, it is seen that ‘Surana group’ comprising of ‘Surana Corporation limited’, ‘Surana Wind Energy Private Limited’ and ‘Gurudev Wind Energy Private Limited’ had issued a cash receipt confirmation of Rs.8,75,00,000/-(Rupees Eight Crores and Seventy Five Lakhs only) in favour of M/s. Array Land Developers Private Limited on 22nd day of June 2014 (22/6/2014) in lieu of sale of 5 wind mills(3 wind mills with HTSC no:2217,2218, 2219 of M/s. Surana Wind Energy Private Limited and 2 wind mills with HTSC no:2259 & 2293 of M/s.Gurudev Wind Energy Private Limited) along with lands (in the name of M/s. Surana Corporation limited) in which the windmills are situated. The said receipt of cash of Rs.8,75,00,000/- from M/s Array Land Developers is out of the total cash consideration of Rs.17,50,00,000/-(Rupees Seventeen Crores Fifty Lakhs only) to be paid to M/s Surana group. The facts established from the above mentioned loose sheets is in conformity with the notings made in the excel sheet titled “ARRAY LAND DEVELOPERS PVT LTD.PURCHASED THE FOLLOWING WINDMILLS WITH LAND AS ON” wherein it is mentioned that M/s. Array Land Developers had purchased Five windmills with the same HTSC No as mentioned in the loose sheet from Surana Corporation. But the consideration paid for the purchase of windmills from Surana group as per books of accounts of M/s. Array Land Developers is around Rs.5,00,00,000/- which is less than the total cash consideration to be paid as per the loose sheet which is Rs.17,50,00,000/-, which confirms the fact that M/s. Array Land developers had paid unaccounted cash towards the purchase of windmills. Further M/s. Array Land Developers Pvt Ltd had paid Rs.5,00,00,000/- to M/s. Surana group through banking channels whereas the total consideration to be paid by M/s. Array Land ‘Developers Pvt to M/s. Surana group as per the loose sheet is Rs.17,50,00,000/-.
Moreover, the cash consideration to be paid by M/s. Array Land Developers Pvt to M/s. Surana Group of Rs.17,50,00,000/- more or less matches with abbreviated value of “18C50L” which is Rs.18,50,00,000/- i.e., the total consideration as per the last column of the Excel sheet titled “ARRAY LAND DEVELOPERS PVT LTD. PURCHASED THE FOLLOWING WINDMILLS WITH LAND AS ON” .
4.5 Similarly Pg.no.253 and 254 of the loose sheets seized vide ANN/SP/VKS/Office/LS/S – volume 2, contains details of cash receipt of Rs.3,75,00,000/-(Rupees Three Crore Seventy Five Lakh only) by M/s. Saravana Insulators Limited from M/s. Array Land Developers Private Limited in lieu of sale of NIG Micon make 1650 KW windmill with HTSC no.2303,out of the total cash consideration of Rs.7,50,00,000/- (Rupees Seven Crore Fifty Lakh only). The above details inferred from the loose sheets matches the row with serial no.18 of the excel sheet titled ” ARRAY LAND DEVELOPERS PVT LTD. PURCHASED THE FOLLOWING WINDMILLS WITH LAND AS ON”, wherein it is seen that M/s. Array Land Developers Private Limited has purchased windmill with HTSC no: 2303 and 1650 KW from M/s. Saravana Global energy Limited. But the total consideration as per books of accounts of M/s. Array Land Developers Private Limited is Rs.3,50,00,000/-(Rupees Three Crore Fifty Lakhs only), whereas the last column in the said row with the notings “7C50L” can be inferred as Rs.7,50,00,000/- matches with the Total consideration as per the loose sheets elaborated above, which again proves the fact that M/s. Array Land developers had paid unaccounted cash towards the purchase of windmills, as seen by the difference between the total consideration as per the last column of the Excel sheet titled “ARRAY LAND DEVELOPERS PVT LTD.PURCHASED THE FOLLOWING WINDMILLS WITH LAND AS ON” and the accounted purchase value of the windmills purchased from Saravana group with same HTSC no. as per the books of accounts of M/s. Array Land developers pvt ltd.
4.6 Hence, based on the points as elaborated in above para 4.3 to 4.5, it is inferred that the notings made in the last column of the excel sheets in abbreviated forms shall be construed as total Consideration paid in cash by M/s. Array Land Developers towards the purchase of wind mills in various financial years with “C’ denoting Crores and “L” denoting Lakhs.
Hence Tabulation is made as follows to demarcate the unaccounted payments made in cash by M/s. Array Land Developers Pvt. Ltd to various vendors for purchase of windmills In various financial years by comparing the Total consideration paid for purchase of wind mill as per the notings in the last column of the excel sheet titled “ARRAY LAND DEVELOPERS PVT LTD.PURCHASED THE FOLLOWING WINDMILLS WITH LAND AS ON” and the Purchase value of the windmills as per the books of accounts of M/s. Array Land Developers.
