ARRS Megamall P. Ltd. Vs DCIT (ITAT Chennai)
ITAT Chennai held that addition towards unexplained investment u/s. 69B of the Income Tax Act unsustainable as based merely on the basis of statement of Director of the Vendor Company without any additional corroborative evidence.
Facts-
The appellant is a Private Limited Company, filed its return of income admitting Nil total income. A search and seizure action u/s. 132 of the Income Tax Act, 1961 was conducted. During the course of search proceedings, it was noticed that the appellant company had purchased an immovable property measuring 1.97 acres of land and building from M/s. Premier Roller Flour Mills Ltd., for a consideration of Rs. 12 crores. A statement of Shri. C. Doraisamy, Managing Director of M/s. Premier Roller Flour Mills Ltd. was recorded where he had admitted that the property has been sold to M/s. ARRS Malls (P) Ltd., for a consideration of Rs. 24 crores, and the sale deed was executed for Rs. 12 crores only.
AO concluded that the evidence gathered during the course of search and post-search investigation coupled with statements recorded from Shri. C. Doraisamy and Shri. R. Srinivasan, clearly shows that the appellant company had paid additional consideration of Rs. 12 crores on or before the registration of the property i.e., on 03.01.2008 and thus, rejected explanation furnished by the assessee and made additions of Rs. 6.15 crores as unexplained investment u/s. 69B of the Act.
CIT(A) sustained additions made u/s. 69B of the Act, towards unproved amount paid for purchase of property. Being aggrieved, the present appeal is filed.
Conclusion-
Held that the statement of Shri. C. Doraisamy, cannot be taken as sacrosanct and on that basis additions cannot be made for assessment year 2008-09. Further, the Assessing Officer in the re-assessment order had concluded on the presumption that the appellant had paid disputed component of additional consideration during the assessment year 2008-09, solely on the basis of execution of the sale deed, which cannot be considered as correct approach in view of the peculiar facts of the present case. Therefore, in our considered view, the presumption of disputed sum being paid during the assessment year under consideration is wholly unjustified especially in view of the settlement of dispute in the subsequent assessment years. Therefore, we are of the considered view that the Assessing Officer should not have read the statement of Shri. C. Doraisamy in isolation and combined reading of the statement and facts emerging there from would establish the fact that the transactions is completed only in the assessment year 2013-14 and the appellant has established the source for balance consideration of Rs. 6.15 crores. The ld. CIT(A), without appreciating relevant facts simply sustained additions made by the Assessing Officer.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-19, Chennai, dated 01.03.2023 and pertains to assessment year 2008-09.
2. The assessee has raised the following grounds of appeal:
“1. The order of the CIT (Appeals) – 19 dated 01.03.2023 vide DIN ITBA/APL/M/250/2022-23/1050274837(1) for the above Assessment Year is contrary to law, fact and in circumstances
2. The CIT(Appeals) – 19 erred in sustaining the addition of Rs. being one of the components of the purchase consideration of an property owned by Premier Roller Flour Mills P. Ltd as investment in terms of Section 69B of the Act by reckoning such the previous year related to the assessment year under without assigning proper reasons and justification.
3. The CIT(Appeals) – 19 failed to appreciate that provisions of the Act had no application to the present case and in circumstances case, thereby negating the related findings in the impugned order
4. The CIT(Appeals)-19 failed to appreciate that sum of Rs. were paid to the seller of the disputed transaction during the period 01.04.2012 to 27.05.2012 with a view to remove the encumbrances to the property, thereby negating the presumption of applicability provisions of Section 69B of the Act.
5. The CIT (Appeals) – 19 failed to appreciate that having proved of the transaction of Rs. 6,15,00,000/- by placing on record the copies of ledger account, orders of the courts regarding the disputed property, settlement memo in the hands of the appellant company, presumption of applicability of provisions of Section 69B of the Act was wrong, erroneous, unjustified, incorrect, invalid and not sustainable both on facts and in law.
6. The IT(Appeals) – 19 failed to appreciate that the cross verification carried out by the revenue for coming to the conclusion on the completion of the transaction in the assessment year under consideration had no legal sanctity and ought to have appreciated that the sequence of events provided by the appellant backed up the evidences filed in support to establish the payment of the disputed component of the purchase consideration were completely overlooked and brushed aside, thereby vitiating the related findings in the impugned order.
7. The CIT(Appeals) – 19 failed to appreciate that the addition based on mere suspicion and surmises without looking into the facts provided by the appellant for substantiating the claim of payment of disputed component the subsequent assessment year as referred to consistently in the responses filed before him and before the JAO should be considered as nullity in law.
8. The CIT(Appeals) – 19 failed to appreciate that the encumbrances attached to the property were cleared only in the subsequent assessment years and hence ought to have appreciated that rejection of the claim of payment of the disputed component of the purchase consideration at a later point in time was wholly unjustified.
9. The CIT(Appeals) – 19 failed to appreciate that the sworn statement of Director of M/s Premier Roller Flour Ltd was not provided to the appellant before making the disputed addition under consideration, thereby grossly violating the principles of natural justice and fairness in taxation, the consequential reassessment order should be reckoned as bad in law.
10. The CIT(Appeals)-19 failed to appreciate that the assumption of jurisdiction u/s. 147 of the Act was without sanction of law and ought to have appreciated that the consequential re-assessment order accordingly should be reckoned as bad in law.
11. The CIT(Appeals) – 19 failed to appreciate that the reopening of the assessment on various facets was bad in law and ought to have appreciated that law laid down by the Apex Court in the case reported in 259 ITR 19 was not followed, thereby vitiating the consequential re-assessment completed.
12. The CIT(Appeals) – 19 failed to appreciate that the reopening of the assessment based on the misreading of the search results in the hands of the C. Duraisamy should be reckoned as bad in law and ought to have appreciated that having not possessed with any material to dislodge the stand of the appellant herein, the re-assessment completed based on the suspicion should fall to the ground.
13. The CIT(Appeals) – 19 failed to appreciate that having accepted on one side about the payment of the balance purchase consideration after the completion of the registration process, the rejection of the stand of the appellant in making the payment of the disputed component of the purchase consideration during 01.04.2012 to 27.05.2012 should accordingly considered as wrong and incorrect especially in the absence of direct evidence.
14. The CIT(Appeals) – 19 failed to appreciate that there was effective/proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law.
15. The appellant craves leave to file additional grounds/arguments at the time of hearing.”
3. The brief facts of the case are that, the appellant is a Private Limited Company, filed its return of income for the assessment year 2008-09 on 27.09.2008, admitting Nil total income. A search and seizure action u/s. 132 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) was conducted at the premises of Shri. C. Doraisamy on 09.03.2012. During the course of search proceedings, it was noticed that the appellant company had purchased an immovable property measuring 1.97 acres of land and building from M/s. Premier Roller Flour Mills Ltd., for a consideration of Rs. 12 crores. A statement of oath was taken from Shri. C. Doraisamy, Managing Director of M/s. Premier Roller Flour Mills Ltd., where he had admitted that the property has been sold to M/s. ARRS Malls (P) Ltd., for a consideration of Rs. 24 crores and sale deed was executed for Rs. 12 crores only. He further admitted that, additional consideration of Rs. 12 crores was unaccounted. In order to verify the transactions of purchase of property, an enquiry u/s. 131 of the Act, was conducted with M/s. ARRS Megal Mall Pvt Ltd and a sworn statement was recorded from Shri. R. Srinivasan, Managing Director of the company on 28.05.32012, in which he had deposed that the appellant company had purchased 1.97 acres of land belonging to M/s. Premier Roller Flour Mills Ltd., for a consideration of Rs. 24 crores and sale deed was executed only for Rs. 12 crores. He further admitted that, additional consideration of Rs. 12 crores has been paid on various dates between 02.04.2012 and 27.05.2012. A perusal of the return of income filed by the assessee for assessment year 2008-09 showed that, the assessee had not disclosed the above transactions fully. Therefore, the assessment has been reopened u/s. 147 of the Act, for the reasons recorded as per which income chargeable to tax had been escaped assessment and accordingly, notice u/s. 148 of the Act dated 07.02.2014, was issued and served on the assessee. In response to notice issued u/s. 148 of the Act, the appellant vide letter dated 14.02.2014 stated that the return of income originally filed on 27.09.2008 may be treated as return filed in response to notice u/s. 148 of the Act.
4. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer called upon the assessee to explain source for additional consideration of Rs. 12 crores paid to M/s. Premier Roller Flour Mills Ltd., for purchase of property vide sale deed on 03.01.2008. In response, the assessee vide letter dated 18.06.2014 submitted details of payment of Rs. 24 crores made to M/s. Premier Roller Flour Mills Ltd., for purchase of property and explained that sum of Rs. 4.85 crores has been paid for purchase of property on various dates starting from 02.04.2012 to 27.05.2012. The remaining amount of Rs. 1.50 crores has been offered to tax in the hands of Shri. R. Srinivasan, Director of the appellant company for assessment year 201314, because the assessee could not explain source for payment made for purchase of property.
5. The Assessing Officer, however was not convinced with explanation furnished by the assessee and according to the Assessing Officer, subsequent affidavit filed by the appellant along with confirmation letter from Shri. C. Doraisamy, for receipt of Rs. 12 crores on various dates for the financial year 2012-13 relevant to assessment year 2013-14, is only an afterthought to circumvent additions proposed towards unexplained investment for purchase of property. The Assessing Officer, had discussed the issue at length in light of certain judicial precedents including the decision of Hon’ble Supreme Court in the case of CIT vs Durga Prasad More 82 ITR 540 and Sumati Dayal vs CIT 214 ITR 801, in light of theory of preponderance of human probabilities and observed that no prudent person would sell his property and receive part consideration after period of four years. The Assessing Officer, further observed that the evidence gathered during the course of search and post-search investigation coupled with statements recorded from Shri. C. Doraisamy and Shri. R. Srinivasan, clearly shows that the appellant company had paid additional consideration of Rs. 12 crores on or before the registration of the property i.e., on 03.01.2008 and thus, rejected explanation furnished by the assessee and made additions of Rs. 6.15 crores as unexplained investment u/s. 69B of the Act. The relevant findings of the Assessing Officer are as under:
17. The facts of the case and the submissions made by the assessee and the details and documents produced and gathered by way of enquiry from the Banks are considered carefully.
➣ The assessee-company had purchased the property from M/s Premier Roller Flour Mills P Ltd on 3.1.2008. The sale consideration as per the registered document of Rs. 12 crores was however received on 9.4,2008 by way of cheque drawn on IOB.
➣ The sale was registered vide Sale Deed dated 3.1.2008 and the sale consideration was mentioned as Rs. 12 Crores paid by Cheque No. 43640o1 dated 3.1.2008 drawn on Indian Overseas Bank, Salem in favour of M/s Premier Roller Flour Mills (P) Ltd.
➣ The following concerns of the MD Sri R Srinivasan had made the additional payments of Rs. 5.85 crores as under:
1. M/s ARR Srinhvasan Firm – Rs. 4.85 Cr (Rs. 4.25 Cr + Rs. 0.60 Cr)
2. M/s ARRS Srinivasan & Sons – Rs. 1.00 Cr
18 . The Bank account Statements of Mis Premier Roller Flour Mlils (P) Ltd were called for and examined. It is seen from the same that an amount of Rs. 17.85 Crores has been received by the Company through Cheques / RTGS on the following dates.
i) On 5.1.2008 – Rs. 1 Crore
ii) On 23.1.2008 – Rs. 4.25 Crores
iii) On 5.2.2008 – Rs. 0.60 Crores
iv) On 9.4.2008 – Rs. 12 Crores [Cheque dated 3.1.2008)
19. In respect of the balance Rs. 6.15 crores as per the details filed and examined, cash payments are alleged to have been made to Sri C. Duraisamy on various dates beginning with 1.4.2012 and ending with 27.5.2012.
20. However, the following facts point to the impracticability of the entire payment schedule of the balance amount of Rs. 6.15 Crores and indicate that this is a carefully thought plan to avoid taxation of the said on-money payments:
➣ The Sworn statement of Sri C Duraisamy was recorded on 9.3.2012, on which date itself, he has deposed before the Investigation Authorities that the sale consideration of Rs. 24 Crores has already been received.
➣ Sri R Srinivasan was enquired u/s 131 (1A) of the IT Act on 28.5.2012, on which date, he had deposed that he had paid the registered sale value of Rs. 12 Crores and the additional consideration of Rs. 12 Crores and that the same was unaccounted.
➣ It is not possible that the payments made as recently as on 27.5.2012, practically a day before the said enquiry is not known / recolected as having been made from accounted or unaccounted source.
➣ Further, in the statement deposed by Sri C Doraisamy u/s 132 (4) of the Act during the course of search proceedings on 9.3.2012, he had furnished the details of payments made to various persons / parties as follows:
“Q.No.5 Please explain the sale and purchase transactions of M/s. Premier Roller Flour Mills Page/ Ltd in detail?
Ans: I state the transactions about M/s. Pramior Roller Flour Mlls Ltd as below Sale consideration Ms, Prermier Roller Flour Mills Ltd Rs. 24 Cr.
Less:
