Case Law Details
M. D. Infra Developers Vs DCIT (ITAT Surat)
Facts- The assessee firm is in the real estate business. A search action under section 132 of the Income-tax Act, 1961, was carried out on 17-07-2012 in the group cases of Dalia (Badshah) Babariya Group of Surat.
The AO observed the modus operandi for purchase of said land that the Builder has paid full amount of consideration in cash and SATAKHAT at Jantri price has been executed. After payment of Document price by cheque, the same amount to the tune of cheque payment has been returned in cash to the Builder and additional amount (on-money) is being kept by the Land Seller. On the same line the payment of Rs.13,00,00,000/- was made to Shri Gulabkaka (Land Owner). The same is confirmed by Shri Naresh Talavia in his statement. The assessee was afforded necessary facility of inspection of seized material and also was requested to explain the contents of the said papers. However, the assessee did not prefer to avail the opportunities of submitting explanations, even though inspection of the documents was undertaken. Therefore, summons were served on the partners/ key persons of the group to explain the contents of the said pages. However, none of the partners did neither appear personally nor undertook any correspondence to present their case regarding these documents.
Post issuance of show cause notice and reply furnished by the assessee, AO noted that explanation merely disowns the sanctity of the documents as established by the statement u/s 132(4) of the Act and it is the claim of the assessee that the documents seized which indicate the evidence of the actual amount paid in the lands acquired for the project, are mere rough working for future projections. The same has also been submitted by way of an affidavit. AO however rejected the contention raised by the assessee in retracted affidavit.
Finally, the AO observed that the assessee-firm has made unaccounted investment of Rs. 6,50,00,000/- in AY 2011-12 and INR 9,35,91,500 during AY 2012-13 and accordingly made addition u/s 69B of the Act. further, the amount pertains to the AY 2011-12 to the tune of Rs.3,24,060/- and AY 2012-13 to the tune of Rs.26,19,720/- is held as paid by way of cash, so the provisions of section 40A(3) are attracted to these payments.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has confirmed the action of the Assessing Officer. Aggrieved, the assessee is in further appeal before us.
Conclusion- The Shri Naresh Talviya, (partner), being responsible for the functioning of the business, voluntarily gave statement u/s 132(4) of the Act, on 1807-2012, which does not indicate any sort of pressure or coercion but alert, presence of mind and clarity of thought of the assessee. By this statement, it was categorically and unequivocally stated that assessee-firm got on-money. These facts were within the exclusive knowledge of the assessee, who voluntarily stated the same. Therefore, with these facts in exclusive knowledge domain, once disclosed voluntarily in full consciousness, are binding on the assessee, as the contrary could not be proved. The seized documents along with the statement recorded under sections 132 (4)/131 of the Act constituted valid piece of evidence, which could be used in assessing undisclosed income. In the instant case, the assessee has clearly linked the unaccounted entries of concern to undisclosed income in statement under section 132(4) of the Act and hence, such statement is binding on the assessee. By filing retraction statement, the assessee is taking a plea to get away from his voluntary statement, which is an after-thought. The assessee has not produced any evidence that how and why his earlier statements were wrong. The Hon`ble Gujarat High Court in the case of Council of Institute of Chartered Accountants of India vs. Mukesh R. Shah (2004) 134 Taxman 265 (Guj), held that “a retraction, so as to dislodge the admission made, should come about at the earliest point of time. It goes without saving that a retraction made after a considerable length of time, would not have the same efficacy in law as a retraction made at the earliest point of time from the clay of admission. A belated retraction would fall in the category of afterthought instead of being retraction. That apart, for a retraction to be effective so as to dislodge the admission made earlier in point of time, the retraction has to be supported by contemporaneous evidence and the onus is on the person making such admission and retraction.
FULL TEXT OF THE ORDER OF ITAT SURAT
Captioned five appeals filed by the Assessee and Revenue, pertaining to Assessment Years (AY) 2011-12, 2012-13 and 2013-14 are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals)-4, Surat [in short “the ld. CIT(A)”], which in turn arise out of separate assessment orders passed by the Assessing Officer under section 144 r.w.s 153A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. Since, the issues involved in all the appeals of assessee and Revenue are common and identical, therefore these appeals have been clubbed and heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 3058/AHD/2016, for AY.2011-12, have been taken into consideration for deciding the above appeals en masse.
3. Although, these cross appeals filed by assessee and Revenue contain multiple grounds of appeals. However, at the time of hearing, we have carefully perused the grounds raised by the assessee as well as grounds of appeal raised by Revenue. We find that most of the grounds raised by the assessee as well as Revenue, are either academic in nature or contentions in nature. However, to meet the end of justice, we confine ourselves to the core of the controversy and main grievances of the assessee and the Revenue as well. With this background, we summarize and concise the grounds raised by the Assessee as well as Revenue, as follows:
(1) In assessee’s appeal in ITA No.3058/AHD/2016 for A.Y. 2011-12 and in ITA No.3059/AHD/2016 for AY 2012-13, the assessee’s solitary grievance is that Assessing Officer as well as Ld. CIT(A) erred in making addition under section 69B of the Income Tax Act, on account of unaccounted investments in the purchase of land.
(i) In assessment year 2011-12, addition was made to the tune of Rs.6,50,00,000/-. (ii)In assessment year 2012-13, the addition was made to the tune of Rs.9,35,91,500/-.
These alleged additions were made by the Assessing Officer invoking the provision of section 69B of the Income Tax Act, for the alleged “On-money” payment in purchase of the land, on the basis of the loose papers (incriminating material) found during the search at page no. 7, 10 and 11 of Annexure A-1. Assessing officer also rejected the retracted affidavit filed by partner. In both the assessment years, that is, AY.2011-12 and 2012-13, assessee raised eight grounds of appeals along with Form No.36, which we have considered.
(2) In the Revenue’s appeal, in ITA No.3093/AHD/2016 for assessment year 2012-13, the Revenue has raised two grounds against deletion of following additions:
(i) Assessee made payment in cash, thus violated the provisions of section 40A(3) of the Act, therefore Assessing Officer made addition to the tune of Rs.26,19,720/-, which was deleted by ld. CIT(A).
(ii) Assessing officer made addition of Rs.7,88,97,461/- on account of unexplained expenditure. Learned CIT(A) deleted the said addition. Therefore, Revenue is in appeal before us.
(3) Assessee’s appeal, in ITA No.3085/AHD/2016 for AY.2013-14 and Revenue’s appeal in ITA No.3094/AHD/2016 for AY.2013-14, are cross appeals.
(a) In assessee’s appeal, in ITA No.3085/AHD/2016 for AY.2013-14, the solitary grievance of the assessee is that addition restricted by the ld. CIT(A) to the tune of Rs.5,15,52,281/-made on account of alleged unaccounted income for suppressed receipts (i.e. “on-money” taken on sale of flats), is purely on estimated basis thus should be deleted. Assessing officer erred in rejecting affidavit and also erred in rejecting books of accounts. Assessee raised nine grounds of appeals along with Form No.36, which we have considered.
(b) In Revenue’s appeal in ITA No.3094/AHD/2016 for AY.2013-14, the solitary grievance of the Revenue is that ld. CIT(A) erred in restricting addition of Rs.5,15,52,281/- against the total addition made by the Assessing Officer to the tune of Rs.31,47,36,000/-.
Therefore, in these cross appeals, assessee’s grievance is that the addition restricted to Rs.5,15,52,281/- should also be deleted, whereas Revenue pleads that total addition made by the Assessing Officer to the tune of Rs.31,47,36,000/- should be sustained, therefore Assessee and Revenue both are in cross-appeals for the addition of Rs.5,15,52,281/- for the assessment year 2013-14.
4. Now, we shall take concise and summarized ground no.1, which is reproduced below for ready reference:
(1) In assessee’s appeal in ITA No.3058/AHD/2016 for A.Y. 2011-12 and in ITA No.3059/AHD/2016 for AY 2012-13, the assessee’s solitary grievance is that Assessing Officer as well as Ld. CIT(A) erred in making addition under section 69B of the Income Tax Act, on account of unaccounted investments in the purchase of land.
(i) In assessment year 2011-12, addition was made to the tune of Rs.6,50,00,000/-. (ii)In assessment year 2012-13, the addition was made to the tune of Rs.9,35,91,500/-.
These alleged additions were made by the Assessing Officer invoking the provision of section 69B of the Income Tax Act, for the alleged “On-money” payment in purchase of the land, on the basis of the loose papers (incriminating material) found during the search at page no. 7, 10 and 11 of Annexure A-1. Assessing officer also rejected the retracted affidavit filed by partner. In both the assessment years, that is, AY.2011-12 and 2012-13, assessee raised eight grounds of appeals along with Form No.36, which we have considered.
5. The relevant material facts, (qua above concise ground No. 1), as culled out from the material on record, are as follows. Assessee before us is a partnership firm. The assessee firm is in the real estate business. A search action under section 132 of the Income-tax Act, 1961, was carried out on 17-07-2012 in the group cases of Dalia (Badshah) Babariya Group of Surat. M/s M. D. Infra Developers is, one of the assessees who is covered u/s 132 of the Act. A notice u/s 153A of the Income Tax Act was issued on 22.01.2013 and served upon the assessee. In response to the said notice, the assessee furnished the return of his income on 31-07-2011, declaring total income at NIL. Thereafter, a notice u/s 143(2) was issued on 14.10.2014 subsequently, a questionnaire along with notice u/s 142(1) of the Income Tax Act, was issued to assessee. In the assessment year under consideration, the assessee – firm has been in the process of developing a Mega Township in the name and style of OM Township, at village Pasodara, Kamrej, Surat. Shri Bhagirath Manubhai Baldha (Pithavadiwala) is the main partner of the assessee firm. Shri Naresh Talavia and Shri Ankit Kachadiya, are other partners actively involved in the sub-group.
6. Shri Naresh Talavia (one of the partners) is actively involved in the day to day affairs of the assessee-firm. During the course of search proceedings, vide statement u/s 132(4) of the I.T. Act, Shri Naresh Talavia has disclosed Rs.15,00,00,000/- as an unaccounted additional income, over and above the regular income, in the hand of the firm. Shri Naresh Talavia, admitted that they (all partners) have charged ‘on-money’ on sale of units/flats and disclosed to have received on money @ Rs.200/-per square feet. The total super built-up area for project, OM township, arrived at approx. 7,50,000 square feet and disclosure of Rs.15,00,00,000/- was made in current year i.e. F.Y. 2012-13. The statement of Shri Naresh Talavia, was further also confirmed by Shri Bhagirath Baldha and Shri Ankit Kachadiya. The statements of Shri Naresh Talavia and other partners were recorded u/s 132(4) of the Act on 17th/18th/19th July 2012.
7. This is important to note that amount of disclosure was also confirmed by partner in post search enquiries and statements recorded u/s 131(1A) of the Act.
8. The details of project, as furnished by Shri Naresh Talavia (one of the partners) in his statement are reproduced below:
| Description | Details of land for project | Area of land | Type of flats |
No. of flats |
| PART-I | Block no. 15, 16 & 17, village Pasodara, Surat | 21400 Sq. Ft. | 2BHK | 428 |
| PART-II | Block No. 190, 196, 198, 199, 200 at village Pasociara, Surat | 9512 Sq. Ft. | 2BHK | 288 |
| Part-III | Block no. 177, village Pasodara, Surat. | 26196 Sq. Ft. | 2BHK | 850 |
| Total Number of Flats | 1566 |
9. During the course of search proceedings, at the residential premise of Shri Naresh Gordhanbhai Talavia (partner) at 6, Mamta Park Society, Kapodara, Varachha Road, Surat, a loose papers file was seized as per Annexure A-1, (page no. 1 to 140). After careful perusal of these pages, the assessing officer observed that pages no. 9 to 11 of Annexure A/1, are the profit and loss account, prepared for the period 01.04.2010 to 15.04.2012. The Page no. 9 represents the Profit and Loss account for “Om Township- Part -3. The page nos. 10 and 11, represent the consolidated Profit and Loss Account for “Om Township Part- 1 & 2. These Profit and Loss Accounts are actually receipts and payment records for the projects for consolidated periods covered in F.Y. 2010-11, 2011-12 and 01.04.2012 to 10.04.2012 (F.Y.2012-13). The assessing officer noted that figures appearing on these pages are actual payments made by the partnership-firm (assessee) on account of purchases of land for the project, expenses on account of labor, material purchased, loan/advance to/from partners as well as to/from others persons. The Page no. 9 contains loan/advances and payments received (sale income) on account of sale of units/flats related to Part-3 of Om Township. In this Profit and Loss account, other expenses are also mentioned under heads “Direct Expenses, Indirect Expenses, Fixed asset Expenses, Uchhina Apela and Total mistake”. All the entries made appeared to be out-of-books.
10. The Assessing Officer observed that at page no. 9 of loose papers, in expenses side, an entry of Rs.13,00,00,000/- is mentioned against GULABKAKA (land owner). The Om Township Part-3 is being constructed on land bearing block no. 177, village Pasodara, Surat. Vide “Satakhat” dated 04/03/2011 between M/s M. D. Infra developers through its Partners (purchaser) and Shri Gulabbhai Maganbhai &, others (seller) the land was purchased by the firm M/s M.D. Infra Developers and sale consideration of Rs.4,70,29,500/- was agreed upon. The said SATAKHAT was also seized by search team, as per Annexure A/2 page no. 70 to 80. On being confronted with the said pages/evidences, Shri Naresh Gordhan Talavia, in his reply to Q. No. 39, 40, 41 & 42 of the statement, recorded u/s 132(4) of the Act, on 17/18.07.2012, had admitted on oath the fact of payment of on-money to the land owners. Vide the same, Shri Naresh Gordhan Talavia, has confirmed that the payment of Rs.13,00,00,000/- was made to Shri Gulabbhai @ Gulabkaka against this land during period January 2011 to December 2011. Shri Naresh Gordhan Talavia, also confirmed that sale consideration was agreed at Rs.13,00,00,000/-among partners of the firm and land owners. Therefore the amount of Rs.13,00,00,000/-, mentioned in the profit and loss account is actual payment for the purchase of the land which proves that the entries/figure reflected in the said profit and loss accounts (page nos. 9 to 11) are reliable, true and actually made.
11. The Assessing Officer observed the modus operandi for purchase of said land that the Builder has paid full amount of consideration in cash and SATAKHAT at Jantri price has been executed. After payment of Document price by cheque, the same amount to the tune of cheque payment has been returned in cash to the Builder and additional amount (on-money) is being kept by the Land Seller. On the same line the payment of Rs.13,00,00,000/- was made to Shri Gulabkaka (Land Owner). The same is confirmed by Shri Naresh Talavia in his statement. During post search enquiries, the assessing officer allowed a lot of time to the assessee-firm to present their case. The assessee was afforded necessary facility of inspection of seized material and also was requested to explain the contents of the said papers. However, the assessee did not prefer to avail the opportunities of submitting explanations, even though inspection of the documents was undertaken. Therefore, summons were served on the partners/ key persons of the group to explain the contents of the said pages. However, none of the partners did neither appear personally nor undertook any correspondence to present their case regarding these documents.
12. Later on, Shri Naresh Gordhan Talavia, vide his affidavit dated 07-02-2014, has retracted from his earlier admission. The said retraction is after a period of more than one and a half year (19 months to be more – exact) after the search in the group cases. The Assessing Officer noted that if the assessee was under such pressure as is made out from the allegations in the affidavit then what prevented him from retracting him immediately. It is also mysteriously silent of the reasons for the reiteration of the same admission in the subsequent, separate statements by all the three partners, both under section 132(4) as well as under section 131 of the Income Tax Act. Therefore, Assessing Officer issued a detailed show cause notice to the assessee-firm, vide letter dated 12/02/2015 on various issues emerging from the seized evidences. The relevant show cause notice is reproduced at page Nos. 5 to 15 of the assessment order.
13. In response to the show cause notice issued by the Assessing Officer, the assessee submitted its reply, vide letter dated 12.03.2016, which is reproduced below:
“i) Regarding Page 9, 10 and 11 of Annexure A-l, being the loose papers seized from the residential premises of Mr. Naresh G. Talavia, the detailed explanations has already been given by Mr. Naresh G. Talavia vide his written submission dtd. 11-03-2015 in compliance to Show Cause Notice issued by you. I have to request you to consider the same in the right and proper perspectives. I may add that all the partners of the firm have already retracted their statements on oath recorded u/s 132(4) / 131(1 A) of the Act through the affidavit in original already filed with you.
ii) As explained above, the loose papers No. 9,10 and 11 are merely the loose papers and contains the figurative work, more particularly, rough and provisional cash flow of the project and certainly not the actual transaction. One of the partners of the firm, Mr. Naresh G. Talavia has already filed the page wise explanations of the material seized and placed on your records vide written submission dtd 11-03-2015. You will agree with the contention that the notings on these pages merely the provisional figures and much less, in view of the affidavits in original filed by all the partners retracting the statement on oath 132(4) / 131(1A) of the Act, it does not require any clarification.
In addition to above, I have to draw your kind attention to the written submission made by one of the partners Mr. Ankitbhai Manubhai Kachadiya in compliance to your earlier summons / notice u/s 142(1) of the Act whereby all the books accounts and other book records from the initiation of the firm till the Asstt.Year: 2013-14 of M/s M.D. Infra Developers have already been submitted. You will appreciate the very fact that the books of accounts are audited in compliance to the provisions of the law and supported by all the bills, vouchers, statements, etc. for the various expenses incurred and the income earned from the business of construction of residential projects during the relevant period. Not only that, we have provided the books of accounts with the breakup i.e. upto the date of search on 17-07-2012 and the period subsequent thereto. Thus, merely because the statement on oath recorded of the partners under mental torture and pressure, it could not be concluded that the books of accounts are not reliable for the allegation of unaccounted income derived purely on presumptions, assumptions and allegations. At the same time, we have produced all the books of accounts and the relevant records to justify that our firm has not earned any on money on sale of flats not only before the date of search but even after the date of search also.”
14. After getting the reply from the assessee, the Assessing Officer summarized the submissions made by the assessee, as follows:
(i). The explanation has already been given. The issue may, be examined with reference to the same.
(ii). They are merely loos papers and contain figurative work, more particularly rough and provisional cash flow of the project and certainly not actual transaction.
(iii). The statement given has already been retracted through an affidavit.
The Assessing Officer noted that explanation merely disowns the sanctity of the documents as established by the statement u/s 132(4) of the Act and it is the claim of the assessee that the documents seized which indicate the evidence of the actual amount paid in the lands acquired for the project, are mere rough working for future projections. The same has also been submitted by way of an affidavit. Therefore, assessing officer has analyzed the affidavit. The Assessing Officer noted that three partners filed separate affidavits with same content and they have retracted from ‘on-money’ of Rs.15 crores as declared during the course of search. The Assessing Officer reproduced the copy of affidavit, at page no.16 to 20 of assessment order which is not reproduced in this order for the sake of brevity.
15. After going through the contents of the affidavit, the Assessing Officer has analyzed the discussions made in the affidavit by the partners and details mentioned in the affidavit by Shri Naresh Talaviya, (partner of firm), under the following heads:
A. During the course of search statements were recorded forcefully and under the stress. Similarly in post search inquiries, statement was recorded without explaining them properly.
B. During the course of search, no accountant of firm or Chartered Accountant was allowed to enter for help regarding the books of firm.
C. Copy of statement recorded was not given despite number of times requested to department.
D. Entry during the course of search by search and pressure for disclosure.
E. Witnesses were not given the opportunity from explaining or understanding.
F. Though project was not fully completed but till forceful declaration was taken assuming the completion of project.
G. Under threat we accepted the separate paper as “Accounting book”.
The Assessing Officer noted that search action was taken place on Shri Naresh Talavia, on 17-07-2012 & 18-07-2012. If search date is compared with the date of Affidavit; then it is seen that Affidavit is notarized on 25th February 2014 i.e. 19 Months after the search. The basic question arises how Shri Naresh Talaviya has claimed all this facts after 19 months of search? If he was threatened or forced to make disclosure then why he was silent till dates? Why other partners’ have confirmed the disclosure during the post search enquiry? How Shri Naresh Talaviya confirmed the disclosure during the operation of PO at his home? All above questions clearly gives idea that contentions put forth by Shri Naresh Talaviya in affidavit are mere afterthought to cover up discrepancy of firm.
16. The Assessing Officer quoted the question and answer asked during the statement under section 132(4) of the Act and under section 131(1) of the Act, in the assessment order at page nos. 22 to 42. The above noted contents of the affidavit are discussed hereunder, one by one:
A. During the course of search statements were recorded forcefully and under the stress. Similarly in post search inquiries, statement was recorded without explaining them properly.
The Assessing Officer dealt this issue, as follows:
“Shri Naresh Talaviya in affidavit has repeatedly mentioned that his statements were recorded under threat and stress. The most important question arises whether such condition was there during the search? While going through statement of Shri Naresh Talaviya, it can be easily seen that he has given statement freely without any coercion. In concluding para of his statement, he has stated that he has given statement without any pressure and with full state of mind.
Now, on the date of search two witnesses were present. All proceedings of search were carried out on the presence of witnesses. Further, witnesses were called from the Shri Naresh Talaviya’s locality. They never reported that Shri Naresh Talaviya was pressurized during the course of search. Both these witnesses were, independent persons with no relationship with the Department. They have affirmed with their signatures of the fact that the statement was given in fully alert state of mind without any threat coercion or inducement. The assessee seems to be dishonouring the affirmations of these witnesses too without any reason or basis just for the sake of seeking sanctity to his arguments.
During the course of search operation and particularly at the point of disclosure, opportunity was given to him to consult with other partners. Shri Naresh Talaviya in consultation with other partners has made disclosure.
If Shri Naresh Talaviya was under pressure then he should have stated the same to partners. There is no evidence on record or submitted by Shri Naresh Talaviya showing that he was pressurized during the course of search. Thus, Shri Naresh Talaviya claim on above point in the affidavit is rejected.
B. During the course of search, no accountant of firm or Chartered Accountant was allowed to enter for help regarding the books of firm.
The Assessing Officer dealt this issue, as follows:
“Shri Naresh Talaviya has mentioned in satakhat that no accountant was allowed to meet during the course of search. Again from the statement it is seen that no such request was made by him to authorized officer. If the intent had been to somehow extract the disclosure then the authorized officer should not have allowed him to consult with partners of firm. But as the statement itself indicates, authorized officer considering the principal of natural justice allowed Shri Naresh Talaviya to consult the other partners. All of them after appreciation of the evidentiary value of the seized material and discussion, made the disclosure under consideration.
Further, the Shri Naresh Talaviya has stated that he was not given opportunity to consult with accountant regarding the accounts of firm. Now, again question arises whether Shri Naresh Talaviya has requested for such consultation? The answer is NO. Now, further question arises whether Shri Naresh Talaviya can hide umbrella by giving such excuses. To elaborate this, the partnership deed of Assessee firm is verified. The deed clearly fixes the responsibility on partners about the books of firm. It clearly proves that income and expenses of firm are very much known to partners of firm. It is also admitted position that the partners involved all are active partners with hands on approach in managing the affairs of the firm. None can seek refuge under the pretext of not knowing the rate and the actual amounts charged. What is discussed and disclosed in the statement is the broad but fundamental basis of the business under consideration.
Further, attention is attracted towards point 7 in affidavit. The” relevant portion of same is produced as below:
“In spite of the accounting books of our firm submitted. without asking any question related to it, and reply to question asked on fabricated figures on miscellaneous papers as far away from true facts, hence I do not confess and agree and I declare it as cancelled.”
If books of accounts were known to Shri Naresh Talaviya and his accountant was denied entry into the premise, then who has submitted books of accounts, when it is submitted and where it is submitted is best known to Shri Naresh Talaviya. The fact is that the seized evidences were examined with the regular books during the course of the search proceedings itself and the incontrovertible conclusions thereupon were confronted to the assessee leading to the disclosure under consideration. Thus, Shri Naresh Talaviya claim on above point in the affidavit is rejected.
C. Copy of statement recorded was not given despite number times requested to department.
The Assessing Officer dealt this issue, as follows:
“Shri Naresh Talaviya, in affidavit has claimed that copy of statement recorded during the course of search was never given to him and once he received it, he made affidavit of retraction. Again question arises whether Shri Naresh Talaviya was unaware of his statement recorded during the search?? Whether he has really made request to department?? Whether he was not remembering the unaccounted receipts of firm on the basis of which he has made disclosure?? If we consider the series of evidence during the search and post search, answer of all above questions will be solved. The same are produced in below table:
|
Date |
Statement recorded under | Shri Naresh Talaviya’s statement |
| 17-07-2012 | Search at his residential premises; u/s 132(4) of IT Act | He has declared the on money receipts in the hands of firm |
| 01-08-2012 | u/s 131 of IT in Department | He has accepted the disclosure as made during the course of search. Further, he has confirmed the same in concluding para. Here, most important point to note that he has given the statement in presence of his advocate; thus, opportunity to consult with advocate was given to him. |
| 10 -9-2012 | Search at his residential premises while operating PO; u/s 132(4) of IT act | He was confronted about declaration as per question no 5; again he has stated that these are unaccounted business receipts of Assessee firm. Thus, he has accepted the validity of statement given during the course of search. |
The above table clearly shows that within gap of 2 months, Assessee has confirmed the disclosure on 3 occassions. Now, question arises how he was pressured each time. In fact, statement u/s 131 on 01-08-2012 in income tax department was recorded in presence of his advocate. Shri Naresh Talaviya on his own has stated that every point of statement is told to him in Gujarathi language by advocate, (see question and answer on page no.27 of assessment order).
It is inconceivable that the assessee was under the pressure in the presence of his own advocate. But if that has to be made a basis of retraction then there should be some concrete evidences to prove the same. Mere statement or affidavit by the assessee would not suffice when there were more than assessee as a party to the said admission.
From the above, it is also clear that Shri Naresh Talaviya, knew every point of his statement. He had the benefit of the counsel of his partners at the time of search proceedings when he gave his statement u/s 132(4) of the I.T. Act. He had appeared before the Addl.CIT and then only he has confirmed the disclosure on 01/08/14. Further, during the course of search, inspection was allowed to Shri Naresh Talaviya to verify every material seized from his premises on 14-08-2012.
It is thus clear that the assessee’s partner was well aware of the business affairs of the firm. He was equally well appraised of the facts and evidences as contained in the seized material. The issue relates to disclosure of a substantial amount of money, not some petty change. As could be seen the assessee in the space of three months had admitted the disclosure on three occasions through statement on oath. The assessee also had the benefit of inspection of the seized material in between. The same clearly indicates that the assessee had not only sufficient time to review his admission with evidences on record but also his statement of disclosure. Had there been any evidence or reason to retract, the immediate point for the same would have been after inspection. But that is not the case. He after the same has again confirmed the disclosure. No reasons or basis for the inordinate delay in coming out with the said allegation of threat and pressure and thus disclosure is not on record. Mere filling of the affidavit, that too after 18 months after search and without any corroborative evidences on the pretext of non-provision of copy of statement is no basis for retraction. Claims of Shri Naresh Talaviya on this count through affidavit is hereby rejected.
Thus, from above discussion, it clear that Shri Naresh Talaviya is just giving excuse of non-provision of copy of statement to hide discrepancy. But, above facts, proves that he was having whole knowledge of his case. Hence, Shri Naresh Talaviya claim on this ground is hereby rejected.
D. Entry during the course of search by search and pressure for disclosure. The Assessing Officer dealt this issue, as follows:
“Shri Naresh Talaviya in his affidavit has stated that search team entered his house without giving their identity, taken away his phone and asked sign on paper without explaining it. All these are mere excuses given by Shri Naresh Talaviya. In fact, from the search folder it is seen that every activity of search was carried out in front of witnesses. Further, search was conducted with all standard operating procedures of search. Also, Shri Naresh Talaviya was not pressurized during the search is already proved in earlier part of order. Thus, it is important to note that if Shri Naresh Talaviya wants to claim anything in his affidavit; he should have evidences to prove his claim. Merely raising the general queries without any rebuttal evidences makes no sense of it.
Shri Naresh Talaviya in affidavit has mentioned that his statement is recorded continuously for 2 days without any break given to him. Again, Shri Naresh Talaviya has made general statement without any evidence. An affidavit is a very important tool of submission of evidence. It’s primarily based on the innate trust that could be posed on an individual. If we see the statement it is seen that just completion of question number 43, adequate rest was given to him for whole night.(vide assessment order page no.30)
Thus, claim of Shri Naresh Talaviya proved wrong, as sufficient rest was given to him during the course of search. Further, there was no pressure on Shri Naresh Talaviya during the course of search is already proved in earlier point. Thus, claim of Shri Naresh Talaviya is hereby rejected.”
E. Witnesses were not given the opportunity from explaining or understanding. The assessing officer dealt this issue, as follows:
“Shri Naresh Talaviya in affidavit has stated that opportunity from explaining or understanding each question was not given to witnesses. Now, to correct the basic facts of Shri Naresh Talaviya, the role of witness is attend the search process and to check whether everything happens in their presence. Now, question arises whether witness have power to understand the questions? During the course of search, Shri Naresh Talaviya were confronted with questions related to business and why witness should understand them is best known to Shri Naresh Talkviya only. The duty of witness is to check whether questions were asked in front of him and Shri Naresh Talaviya has stated answer of same. Further, the witnesses have not made any complaint about this during search or post search.
Further, Shri Naresh Talaviya has stated that sign of witnesses was not taken on each page. What Shri Naresh Talaviya wants to show by putting such arguments is best known to him only. Is he makes claim on evidences then it considerable; but such facts which are not true are put forwarded by him. For this, if we see the copy of statement, then is clearly seen that witnesses has signed on first and last page. If Shri Naresh Talaviya has putting that the rights of witnesses were violated then duties are equally applicable to them also. In fact, rights and duties were provided to witnesses during the course of search. Every page of statement was signed by Shri Naresh Talaviya with sign of witnesses on first and last page. How witnesses have signed on page and how it is not known to Shri Naresh Talaviya is difficult to understand. (The copy of relevant statement is produced by assessing officer on page nos.31, 32 and 33 of assessment order)
Further, shri Naresh Talaviya in point no 5 of affidavit has stated that he was called on 01-08-2012 in income tax department. Further, while taking signature on statement, no witness or his Accountant or his Chartered Accountant or any person to remain present was not there. At this point, Shri Naresh Talaviya has reached the height of saying wrong facts continuously. Again, if we see his statement on 01-08-2012 then it is seen that statement was recorded in front of his advocate Shri MEHUL GANDHI.
Now, from statement it is clear that Shri Mehul Gamdhi also told Shri Naresh Talaviya about statement in Gujarthi. Such incorrect statements and that too in an affidavit display desperation on the part of the assessee to somehow wriggle out of the situation where his undisclosed business activities are caught black and white on paper. The claim of Shri Naresh Talaviya on this point is therefore rejected.
F. Though project was not fully completed but till forceful declaration was taken assuming the completion of project.
The Assessing Officer dealt this issue, as follows:
“ Shri Naresh Talaviya has again and again in affidavit has mentioned that due to excessive pressure and threats, he has made disclosure. There was no pressure and threat during the course of search, is already discussed.
It is to be noted that as per the loose papers found and impounded as BF-16 pges.89 to 119, the ‘on money’ receipts varies from Rs. 350 to Rs 482 per square feet. If the officer had really pressurized him for disclosure them it should have been for disclosure @ 350 to 482. But that is not the case to be. It appears to be more a case of an non adversarial statement where what is desired to be stated by the assessee is recorded by the authorized officer.
Further, Shri Naresh Talaviya has stated that authorized officer pressurized to accept amount of Rs.200/- per square feet as unaccounted income. Facts as emerging from the records are discussed below to clear the situation during the course of search. In fact, the authorized officer in question no. 60 has asked to explain rate at which flats are sold? In voluntary answer, Shri Naresh Talaviya has stated that difference of Rs.200/-as unaccounted income. How Shri Naresh Talaviya is shifting blame to authorized officer? How authorized officer knowing the exact rate of Rs.200/- as ‘on-money’ per square feet? The blame game by Shri Naresh Talaviya is brought to the fore by his own statement. (see relevant statement recorded by assessing officer on page nos. 35 and 36 of assessment order)
All this facts are stated by Shri Naresh Talaviya voluntarily. Unless and until, Assessee firm has received the ‘on money’; how Shri Naresh Talaviya has declared the ‘on money’. Now, the evidence found at the premises of Assessee firm clearly shows that there is an involvement of ‘on money’. This evidence along with their sanctity is already proved. Thus, Shri Naresh Talaviya’s claim that no on money is received by Assessee firm is incorrect.
Shri Naresh Talaviya has stated that project was not completed on the date of search but authorized officer has deliberately forced to write that it was completed. He further has provided the copy of few registered deeds and certificate of Architect engineer. Now, question arises about completion of project and ‘on money’ receipts. First, we will understand the accounting system adopted by Assessee firm. From the verification of form no 3CD of Assessee firm, point no 11 of same shows that method of accounting employed by Assessee firm is “Mercantile system.”. Now, if we consider the statements of Shri Naresh Talaviya then it is clear that he also stated that satakhat is prepared for Rs 1379/- per square feet while registry will be executed for Rs 1179/- per square feet. From the evidences impounded and statements of purchasers, it is clear that booking was done for Rs 1453/- per square feet while registry was executed for Rs 1073/-. Though, 2 different sizes of flats are developed in the scheme, but the average rate of booking remains more or less. Further, from the statement of Shri Naresh Talaviya, evidences impounded during the premises of Assessee firm ( As per annexure BF-16) and statement of purchaser; it is clear that on money is involved in the project is more than what Shri Naresh Talaviya has declared.
From the statement of Shri Naresh Talaviya, evidences impounded during the premises of Assessee firm (As per annexure BF-16) and statement of purchaser, it is clear that booking of project was over in the year under consideration. It is common practice in real estate that first booking is done with the entire amount of ‘on money’ and thereafter the payment as per cheque is received by firm as per agreement (generally in the form of a chit /small diary. Assessee firm is following same modus operandi as stated by Shri Naresh Talaviya in his statement). Once, cheque payment/payment is received from purchaser, registry is executed. The completion of construction is not necessary condition which can be linked with ‘on money’. In same line, Assessee firm made booking for all flats in year under consideration. Thus, income is received by the assessee firm. But is not disclosed to the department till the date of search. Accordingly, Shri Naresh Talaviya’s claim about non-completion of project is rejected.”
G. Under threat we accepted the separate paper as “Accounting book”.
The assessing officer has already dealt the ‘threat issue’ in above para, therefore we do not repeat the same.
17. This way, the Assessing Officer has rejected the contention raised by the assessee in retracted affidavit. The Assessing Officer noted that it is an established position of law that an admission is the best evidence that an opposing party can rely upon, and though not conclusive, is decisive of the matter unless successfully with-drawn or proved erroneous. From above all discussion about the retraction through affidavit filed by Shri Naresh Talaviya, following facts emerge:
(a) Shri Naresh Talaviya has not produced any evidence to prove his claim in
affidavit.
(b). Most of the facts are stated wrongly and without any base.
(c). It is merely afterthought by partner of firm, 19 Month after search.
(d). Such affidavit can’t take away the sanctity of evidences found during the search.
(e) There is nothing on record that has been brought forward by the assessee that proves that the earlier admission is erroneous.
Therefore, based on this factual position, the retraction through affidavit filed by the partner was rejected by the Assessing Officer.
18. Thereafter, the Assessing Officer discussed and analyzed the seized incriminating material, vide page Nos.39 to 48 of the assessment order and made addition on merit. The Assessing Officer observed that assessee has purchased the lands for the part-l,2&3 of the township at the amounts mentioned in the profit and loss statements seized (known as receipts and payments of unaccounted amount). The sanctity of these documents is established by the admission of the payment of on money in the statement u/s 132(4) of the I.T. Act. The assessee failed to adduce any such evidence that would rebut the presumptive evidence of these documents. The retraction of admission as contained in the affidavit is rejected for the reasons elaborated in detail in the earlier para of this order. Thus, assessing officer noted that at page no. 9 in expenses side an entry of Rs.13,00,00,000/-; is mentioned against GULABKAKA (land owner). The Om -Township Part-3 is being constructed on land bearing block no. 177, village Pasodara, Surat. Vide ‘Satakhat” dated 04/03/2011 between M/s M. D. Infra developers through its Partners (purchaser) and Shri Gulabbhai Maganbhai & others (seller) the land was purchased by the firm M/s M.D. Infra Developers and sale consideration of Rs.4,70,29,500/- was agreed upon. The said SATAKHAT was also seized as per Annexure A/2 page no. 70 to 80.
On being confronted with the said pages/evidences, Shri Naresh Gordhan Talavia in his reply to Q. No. 39, 40, 41 & 42 of the statement, recorded u/s 132(4) of the Act on 17/18.07.2012 had admitted on oath the fact of payment of on-money to the land owners. Vide the same Shri Naresh Gordhan Talavia has confirmed that the payment of Rs.13,00,00,000/- was made to Shri Gulabbhai @ Gulabkaka against this land during period January 2011 to December 2011. He also confirmed that the sale consideration was agreed at Rs. 13,00,00,000/- among partners of the firm and land owners. The Verification of records further reveals the details of land purchased by the assessee firm is as under:
| Part-1 | Part-1 | Part-1 | Part-2- | .Part-2 | Part-3 | Part-2 |
| Block No. 15 | Block No. 16 | Block No. 17 | Block No. 190, 199, 200 | Block No. 196 | Block No. 177 | Block No. 19 |
| Rs. 3538500 | 3568500 | 22474500 | 12 lacs | 1783500 | 47029500 | 3567000 |
| Detail” of payment | Details of payment | Details of payment | Details of payment | Details of payment | Details of payment | Details of payment |
| Rs. 51000 cash 13.12.2010 | Cash Rs. 51000 13.12.2010 | Cash Rs.111000 13.12.2010 | 6 lacs 24.3.2011 | Cash Rs 5004020 12.2010 | 10 lacs 15.2.2012 | Cash Rs 6102 20.12.2010 |
| Bank Rs. 1743750 15.12.2011 | 20 lacs 1.1.2012 | 25 lacs 15.1.2012 | 6 lacs 24.3.2011 | Cash Rs. 866730 10.03.2012 | 10 lacs 15.2.2012 | Cash Rs. 1752990 17.02.2012 |
| Bank Rs. 1743750 25.12.2011 | 1517500 7.1.2012 | 25 lacs 25.1.2012 | 288910 (ch.) 10.03.2012 | 10 lacs 16.2.2012 | 584330 (ch) 20.02.2012 | |
| 25 lacs 1.2.2012 | 288910 (ch.) 12.03.2012 | 10 lacs 16.2.2012 | 584330 (ch) 27.02.2012 | |||
| 25 lacs 7.2.2012 | 10 lacs 17.2.2012 | 584330 (ch) 5.03.2012 | ||||
| 25 lacs 15.2.2012 | 10 lacs 18.2.2012 | |||||
| 25 lacs 25.2.2012 | Deed executed on 19.10.2012 | |||||
| 25 lacs 1.3.2012 | ||||||
| 25 lacs 7.3.2012 | ||||||
| 2363500 15.3.2012 |
19.The assessee firm has purchased the above lands and developed Om township part-1,2,3. As evident from the above for part-1 & 2, the payment of land started in FY 2010-11 (AY 2011-12) whereas for part-3 the payment schedule started in FY 2011-12 (AY 2012-13). During the recording of the statement, Shri Naresh Talavia one of the partners of M/s. M.D.Infra Developers on oath u/s 132(4) of the IT Act admitted that payment of Rs. 13 crore was made to Gulabkaka (in registered deed name is mentioned as Shri Gulabbhai Maganbhai). In answer to question No. 39, Shri Naresh Talavia accepted that for block No. 177 (Om-township-3 total consideration of Rs.13 crore paid to Gulabkaka) He further stated that in answer to question No. 40 that the payment started from January 2011 and completed on December 2012. He has also stated that a total ‘on-money’ payment of Rs. 8,29,70,500/- (13,00,00,000-4,70,29,500). He has stated that the ‘on-money’ payment for this land made from January 2011 to December 2011. He further stated that out of Rs. 8,29,70,500/- ‘on money’ of Rs. 6,50,00,000/- paid between January 2011 to March 2011 for assessment year 2011-12 and balance Rs.1,79,70,500/-(Rs. 8,29,70,500-6,50,00,000) for assessment year 2012-13.
20. Payment schedule for part-1 part-2: The Assessing Officer noted that in answer to question No. 43, Shri Naresh Talavia has stated that a total payment of Rs.11,17,52,500/- has been made for the purchase of said land. The registered deed value of this land are Rs.3,61,31,500/-. Hence, on-money payment of Rs.7,56,21,000/- (Rs. 11,17,52,500- Rs.3,61,31,500/-) has been made from November 2011 to February 2012 (AY 2012-13).
The above statement of Shri Naresh Talavia (assessee) is also gets corroborated by the seized material as per annexure-A-1 page No. 9,10 & 11 which contains financial details related with profit and loss account of the assessee. The Page No.9 contains the name of Gulabkaka and against his name land owner is mentioned. He is the same Gulabkaka (Shri Gulabbhai Maganbhai) mentioned by Shri Naresh Talavia in his statement. Hence, it clearly proves that ‘on- money’ payment for the purchase of land is made by the assessee firm. Similarly for part-1 & 2 at page No. 10 payments made for part-3 amounting to Rs.11,17,52,500/- and for part-2 payment of Rs.58,19,720/- has been made. Hence, for part-1 and part-2 a total payment of Rs.11,75,72,220/- ( Rs.11,17,52,500 + Rs. 58,19,720) has been made against the registered deed of Rs.3,61,31,500/-.
Therefore, Assessing Officer observed that payment for ‘on-money’ for above said land is made to the tune of Rs.6,50,00,000/- in assessment year 2011-12, therefore addition to the tune of Rs.6,50,00,000/- in assessment year 2011-12 was proposed by assessing officer. For assessment year 2012-13, the assessing officer worked out the disallowance to the tune of Rs.9,35,91,500/- ( 1,79,70,500 + 7,56,21,000)
Therefore, Assessing Officer held that ‘on-money’ payment of Rs.6,50,00,000/-made during A.Y. 2011-12 and Rs. 9,35,91,500/- during A.Y. 2012-13 respectively and the said ‘on-money’ payment made towards purchase of said land and which was made before the assessee -firm started its bookings. So when the payment made towards purchase of land, the assessee -firm do not have any source for making such payments. It means that the assessee firm made payment for purchase of said land from its unaccounted sources and same is not reflected in the books of the firm. Therefore, assessee-firm made unaccounted investment of Rs.6,50,00,000/- in A.Y 2011-12 and Rs.9,35,91,500/- in A.Y 2012-13 respectively, hence Assessing Officer made addition under section 69B of the Act in both the assessment years.
21. The Assessing Officer also observed that assessee-firm made payments for purchasing the land in cash. That is, a certain amount of purchase consideration as reflected in the registered deed is made by way of cash. The amount pertains to the assessment year 2011-12 under consideration was to the tune of Rs.3,24,060/-. The amount pertains to assessment year 2012-13 is to the tune of Rs.26,19,720/- All the above amounts have been paid by way of cash, so the provisions of section 40A(3) are attracted to these payments, therefore, assessing officer made addition under section 40A(3) in both the years.
22. Aggrieved by the order of the Assessing Officer, the assessee carried thematter in appeal before the Ld. CIT(A) who has confirmed the action of the Assessing Officer. Aggrieved, the assessee is in further appeal before us.
23. Shri Mitish S. Modi, Learned Counsel for the assessee, pleads that loose papers found and seized from the residence of Shri Naresh G. Talaviya, one of the partners of the assessee firm, marked as Page 9,10 and 11 of Annexure ‘A-1’ are rough notings/estimates. Shri Modi pointed out that it is well settled proposition of law that document should be speaking in all aspects and the revenue authorities has no power to treat such loose papers partly. These loose pages contain the memorandum of projected accounts and does not speak anything about the alleged unaccounted business transactions in the assessee-firm. Therefore, the action of both the lower authorities to assume the jurisdiction for the application of presumption u/s 292C r.w.s. 132(4A) of the Act in the absence of any tangible material contrary to the explanations with evidence given by the assessee firm, is without jurisdiction. In the whole assessment order or in the appeal order, neither the assessing officer nor the CIT (Appeals) established with corroborative evidence either from the seized materials or through post search inquiry, that the loose papers at pages 9, 10 and 11 of Annexure ‘A-1’ were within the ambit of “books of accounts”. The notings in loose papers were prepared mainly with a view to estimation of the cost of the project, for the purposes of the projection of the whole housing project started by the assessee firm. Learned Counsel pointed out that these loose papers are not books of accounts. Therefore, a book which merely contains entries of items of which no account is made at any time is not ‘books of account’ in commercial sense. The ld Counsel pointed out that said pages are neither the Profit and Loss account nor Balance Sheet nor receipt and payment account, because, in these pages, no where they mention the statutory heads of income, expenditure, assets or liabilities nor there is any mention of any date of alleged transaction. Shri Modi also pointed out that in assessee`s case, not even a single incriminating material found/seized to corroborate the contents of these loose pages.
24.Regarding retraction of the statements on oath recorded u/s 132(4) / 131 of the Act by the ADIT (Investigation), Surat, Shri Modi stated that statements of partners were recorded under restless, sleepless and stressful state of mind with full of ambiguity. Hence, to remove the ambiguity and inconsistency in the answers given during the interrogations made by the authorized officers of the department, the affidavits of all three partners for retraction of the statements on oath had been filed to prove incorrectness.
25. Without prejudice to the above, Shri Modi argued that benefit of telescoping for the additions of Rs.6,50,00,000/- and Rs.9,35,91,500/- made u/s 69B of the Act for the expenditures towards the purchases of lands for business purposes for the assessment years 2011-12 and 2012-13 may be given to the assessee firm. Shri Modi has also submitted before the Bench, the compilation of precedents and case law relied by him on various aspects, in his written submissions, which we have gone through and considered.
26. On the other hand, Shri H. P. Meena, Learned CIT Departmental Representative (Ld. CIT-DR) for the Revenue submitted before us, that statement of Shri Naresh Talavia is got corroborated by the seized material of annexure-A-1 page No. 9,10 & 11 which contains financial details related with profit and loss account of the assessee. Some of the figures of annexure-A-1 page No. 9,10 & 11 are mentioned in the audited profit and loss account and Balance Sheet of the assessee firm therefore these are clearly incriminating material. These are not dump documents. The Page No.9 contains the name of Gulabkaka and against his name (land -owner) is mentioned. He is the same person mentioned by Shri Naresh Talavia in his statement. Hence, statement of Shri Naresh Talavia, along with annexure-A-1 page No. 9,10 & 11( incriminating material) prove that ‘on- money’ payment for the purchase of land is made by the assessee -firm. Therefore, addition made by the assessing officer should be sustained.
27. About retraction of statement by partners, the ld DR pointed out that retraction was made after a period of Nineteen months, hence it is an afterthought to cheat the revenue. Besides, Shri Naresh Talaviya (partner of assessee-firm) has not produced any evidence to prove his claim in affidavit. Most of the facts are stated wrongly and without any base. Such retracted affidavit cannot take away the sanctity of evidences found during the search. The second statement was taken in the presence of assessee`s advocate, and the assessee has confirmed the first statement. A belated retraction would fall in the category of afterthought instead of being retraction. The assessee, being responsible for the functioning of the business, voluntarily gave statement u/s 132(4) of the Income Tax Act, 1961 on 18-07-2012, which does not indicate any sort of pressure or coercion but alert presence of mind and clarity of thought of the assessee. The all facts were within the exclusive knowledge of the assessee, who voluntarily stated in the statement. Therefore, ld DR argued that retraction through affidavit filed by the partner should be rejected. The Ld. CIT-DR for the revenue also relied on case law of Hon’ble Gujarat High Court in Council of Institute of Chartered Accountants of India vs. Mukesh R. Shah [135 Taxman 265 (Guj.)].
28. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Though facts have been discussed in detail in the foregoing paragraphs, however in the succinct manner, the relevant facts and background are reiterated in order to appreciate the controversy and the issue for adjudication. The additions mainly have been based on alleged unaccounted payments for land, alleged unaccounted expenses and alleged unaccounted incomes earned from booking/sale of flats in the project ‘Om Township’ evidenced by noting on several pages, especially Annexure-A-1, Page No.9 to 11, seized during the course of search. The Assessing Officer has relied on the transactions recorded on these pages, giving reasons as to why he held them to be representing actual transactions and has relied upon the statements of the partners taken during the course of search and reaffirmed by them to be true subsequently also. The assessee had retracted from the sworn statements of the partners after around 19 months and filed an affidavit stating that earlier statements were not voluntary and were given/signed under coercion and duress; and has tried to retract from the admissions made in the statements earlier. The assessee has claimed that documents relied upon by the assessing officer are dumb documents and do not represent actual transactions. It has now been claimed that the transactions recorded in the regular books and the audited accounts are the true transactions and no unrecorded transactions were entered into. We note that during the appellate proceedings, the ld CIT(A) has gone through the seized documents, various statements recorded during the search and subsequently, the affidavit filed by the assessee, the contentions of the assessee and the various case laws, including relied upon by the assessee and the assessment order. We note that ld CIT(A) as well as assessing officer relied on several seized pages, especially Annexure-A-1, Page No.9 to 11, seized during the course of search. The important seized papers are reproduced below:
29. The assessee claimed during the appellate proceedings that earlier statements were not voluntary and were given/signed under coercion and duress; is without any basis and is a pathetic attempt to wriggle out of the admissions made in the various statements by the partners during the course of search and reaffirmed by them to be true subsequently also. The ld CIT(A) investigated the admissions by partners and subsequent retraction and reached on the following conclusion:
(i).The statement of partner Shri Naresh Talaviya, during the course of search was made on 17.07.2012 onwards. He was again examined on 01.08.2012 under section 131 of the Act, and again after almost 2 months u/s 132(4) on 10.09.2012. He did not refute his earlier statement but again admitted that they had got unaccounted business receipts and were doing business outside books of account.
(ii) As rightly pointed out by the assessing officer, the second statement i.e. the one recorded u/s 131 on 01.08.2012 was recorded in the presence of his advocate Shri Mehul Gandhi. Not only this, Shri Mehul Gandhi had also explained the statement for him in Gujarati, too.
(iii) Contrary to the claims made by the assessee; the statement during search was taken intermittently and he was given sufficient time for sleep and rest in between, but was recorded before the witnesses who had signed the statement. This has been discussed in the assessment order with evidences.
(iv) The assessee has tried to blame and claimed delayed receipt of document and statements as the reason for huge time gap of 19 months in retracting the statements. Not only is the assertion of delayed receipt of copies of documents wrong because the partners were given full opportunity for inspection of all the seized documents and this has been recorded in the register maintained for the purpose (refer to page no. 28 of the assessment order for A.Y. 2011-12). Otherwise too, all the three partners including Shri Bhagirath Baldha and Ankit Kachchdia have accepted in their separate statements on 17/18-07-2012 and 01.08.2012, independently that they were doing transactions out of books of accounts, earning unaccounted income and invested it in land, work in progress, cash outside books etc. The acceptance of same Rs. 15 crore unaccounted income shows that they were in consultation. Even the admissions made by Shri Naresh Talaviya; have been discussed and decided with other partners, who have signed the statement, after Q. No. 62 as their endorsement.
For argument sake even if it is taken that they were under pressure or coercion as per their charge, they cannot deny that they were knowing that they had accepted unaccounted transactions and income in their statements. What prevented them from retracting or making a complaint earlier?
(v). It is seen that assessee has paid substantial advance tax of Rs. 1.78 crores out of which Rs.1,50,00,000/- was paid as late as on 15.03.2013. Subsequently, a refund of Rs.1,46,06,260/- has been claimed in the return filed. It clearly shows that even after more than 6 months after search; the assessee was accepting substantially higher income and was following on the statement given during the course of search. Only much later, the assessee decided to try and avoid taxes and made up a story. The affidavits retracting the statements and the returns were filed very late.
(vi) The statements have not been taken without any supporting document/evidence. In fact, there was substantial proof of transactions having been done outside books of accounts.
30. Having examined the transactions noted in the seized documents and the supporting evidences and facts; the ld CIT(A) noted that pages 9 to 11 of Annexure A-1, represented actual transactions. In fact, although the heading to the pages is profit and loss account; actually it is receipt expenditure statement for the period 01.04.2010 to 10.04.2012, prepared using cash system of accounting and noting all incomings and outgoings through cash/bank. The contention of the ld Counsel that these represented only estimates and are dumb documents is fallacious and absurd. The assessing officer has also pointed out umpteen factual aspects which show that these documents represented actual transactions. Based on these facts, about seized papers, pages 9 to 11 of Annexure A-1, the ld CIT(A) concluded as follows:
(i) It is clearly a receipt and expenditure statement for the period 01.04.2010 to 10.04.2012, prepared using cash system of accounting and noting all incomings and outgoings through cash/bank. The very fact that below page no. 9, the print out as per computer shows net profit Rs. 17,68,389.70 but after encircling it, ‘balance (cash + bank)’ is mentioned; shows that these are actual transactions where cash/bank balance has been worked out from receipts after subtracting the outgoings.
(ii) As rightly pointed out by the assessing officer, the very mention of entries like ‘Uchhina Lidheia’ showing short period loans taken and ‘Uchhina Apela’ shows temporary loans given and the odd figures like 89,14,154 advance to Ankit Kachhdiya; leaves no doubt that these represent actual transactions.
(iii) The odd figures of expenditure like bricks Rs.20,54,330/-, cement expenses Rs.97,52,805/-, reti expenses Rs.24,01,551/- shows that these are representing actual transactions made during the period. Not only this, the bank charges are matching exactly with the actual bank charges as discussed in para 6.1 G(e) page 43 of the order. How can this be an estimate?
(iv) The payment against Gulab Kaka (land-owner) Rs. 13,00,00,000/- is clearly mentioned. The partner had given the statement that this payment is actually to the land-owner of Block No. 177, Vill. Pasodara, Shri Gulabbhai Maganbhai for the purchase of the land and that they have paid him because they had decided to pay this amount but show the consideration lower at Rs. 4,70,29,500/-. A satakhat for the declared amount was made for lower amount, because this amount was to be shown in the regular books and the sale agreement is needed for applying for permissions and bank loans etc. Even without the statement; when the amount is written against the name of the land-owner clearly, and the amount of consideration shown in the registered documents is much less; how could it be taken as rough working or just an estimate? There cannot be any other logical explanation, and the assessee without explaining it, is just trying to avoid it. The transactions on the seized documents supported by the statement of the partners, when they were confronted in the 132(4) statement itself, leaves no doubt about the conclusion that these are actual incomings and outgoings with balances worked out.
31. From the above factual analysis, the ld CIT(A) observed that seized documents and the statements of the partners prove that substantial transactions have been done out of the books of account. For example, the total flat sale income from part 1, 2 and 3 till 10.04.2012, as per seized documents, is Rs. 34,47,87,300/- (Rs. 14,69,97,800/- + Rs. 19,77,89,500/-) whereas in the regular books NIL revenue and only Rs.14,05,17,000/- is shown as advances from customers, till 31.03.2012 approximately the same period. Clearly, over 60% of the receipts are not taken into books. Similarly, the expenses, investment in land, loans and advances etc. are hugely different in the actual accounts, vis-a-vis the regular books of account. Therefore, the books of account maintained for disclosing to the department do not contain the actual transactions and are therefore, entirely unreliable and are rejected u/s 145(3) of the I.T. Act. The action of the assessing officer in not relying on and rejecting the books of account and working out the income independent of these books based on the statements of the partners and the seized documents is upheld in principle (without yet deciding the quantum of addition, which is justified on the facts of the circumstances of the case.
32. About quantum addition, the ld CIT(A) noted that justified quantum of additions for (i) unexplained/unaccounted investments in doing unaccounted business including unaccounted investment in land (ii) justified additions for unaccounted expenses of project (iii) unaccounted income from suppressed receipts (‘on- money’ taken for flats) and (iv) additions justified under technical provisions of the Act i.e. u/s 40A(3) of the Act. When business of a project is done, which is substantially having ‘out of books’ part investments, expenses and receipts can all be and are generally having unaccounted components. The ld CIT(A) observed that same is proved in assessee`s case. Therefore, in such a case, additions of unaccounted investment introduced as needed for initial investment in land and machinery etc. and initial investment in operating expenses which is mainly construction expenses in the case of a project are required to be made justifiably. Therefore, looking to the entirety of circumstances, and studying the incoming outgoing statement as per pages 9 to 11 of Annexure Al; the ld CIT(A) noted that undisclosed investment in land is the primary unaccounted investment. If an addition of this amount is made then no further addition for unaccounted expenditure in construction etc. is required to be made separately (considering the huge unaccounted investment in land), because there are substantial ‘on -money’ receipts also. The ld CIT(A) noted that sanctity of the statement of partners and the noting from the documents and observations of ld CIT(A) on the assessee’s contentions prove that not only the substantial part of the undisclosed investment is supported by the seized documents but is also supported by the admission statement of the partners. Therefore, ld CIT(A) held that assessing officer was perfectly justified in working out and making the additions of undisclosed investment in land of Rs.6,50,00,000/- in A.Y. 2011-12 and Rs.9,35,91,500/- in A.Y. 2012-13.
33. On close reading of the pages 9,10,11 of Annexure ‘A-1’ of seized materials, we note that notings on the said papers are regular and both the lower authorities are made out a case . These loose papers are speaking documents. For the notings to be used, corroboration is the prerequisite, here we note that notings in loose papers are supported and corroborated by the statement of Shri Naresh Talviya, (partner). We do not agree with Learned counsel to the effect that these loose papers are not books of account, therefore, no addition should be made. It is universal truth and general phenomenon that a businessman does not keep unaccounted money in regular books of accounts. The accounts of the unaccounted money are kept in loose papers, diary and code notings etc. which are incriminating documents. To cheat the Revenue, the businessman does not enter the unaccounted money in regular books of accounts.
34. About retraction, we are of the view that it is an after -thought. The general rule with regard to admission is that the party or their representative says about the matter in dispute or facts relevant thereto which throw light on the issue in dispute or consideration. Although, in assessee`s case there has been no allegation of coercion. Thus, it is a clear and settled law that admission by a person is good piece of evidence, the reason behind this is that a person making a statement stops the opposite party from making further investigation. The Shri Naresh Talviya, (partner), being responsible for the functioning of the business, voluntarily gave statement u/s 132(4) of the Act, on 1807-2012, which does not indicate any sort of pressure or coercion but alert, presence of mind and clarity of thought of the assessee. By this statement, it was categorically and unequivocally stated that assessee-firm got on-money. These facts were within the exclusive knowledge of the assessee, who voluntarily stated the same. Therefore, with these facts in exclusive knowledge domain, once disclosed voluntarily in full consciousness, are binding on the assessee, as the contrary could not be proved. The seized documents, (pages 9,10, 11 and Annexure-A), along with the statement recorded under sections 132 (4)/131 of the Act constituted valid piece of evidence, which could be used in assessing undisclosed income. In the instant case, the assessee has clearly linked the unaccounted entries of concern to undisclosed income in statement under section 132(4) of the Act and hence, such statement is binding on the assessee. By filing retraction statement, the assessee is taking a plea to get away from his voluntary statement, which is an after-thought. The assessee has not produced any evidence that how any why his earlier statements were wrong. The Hon`ble Gujarat High Court in the case of Council of Institute of Chartered Accountants of India vs. Mukesh R. Shah (2004) 134 Taxman 265 (Guj), held that “a retraction, so as to dislodge the admission made, should come about at the earliest point of time. It goes without saving that a retraction made after a considerable length of time, would not have the same efficacy in law as a retraction made at the earliest point of time from the clay of admission. A belated retraction would fall in the category of afterthought instead of being retraction. That apart, for a retraction to be effective so as to dislodge the admission made earlier in point of time, the retraction has to be supported by contemporaneous evidence and the onus is on the person making such admission and retraction. The findings of the Hon`ble Court is reproduced below:
“An admission is a statement, oral or written, suggesting an inference as to any fact in issue made by a party to any proceeding. It is a statement of fact which waives or dispenses with the production of evidence by conceding that the fact asserted by the opponent is true. In other words, admission is confession or voluntary acknowledgement, made by a party as to the existence of certain facts which are in issue or relevant to an issue. The predominant characteristic of an admission, which is a type of evidence, consists of its binding character. Thus, an admission is of evidentiary value of only to the extent that its maker has personal knowledge of the matters admitted to. It is immaterial as to whom or before whom the admission is made, but it will operate as a foundation of the rights of the parties once making of admission is established. The effect of admission is that it constitutes a substantive piece of evidence in the case and, for that reason, can be relied upon for proving the truth of the facts incorporated in an admission. Once it is found that admission is clear, certain and definite and not ambiguous, vague or confused, it will have the value and effect of shifting of the onus of proving to the contrary on the party making admission, with the result that it casts an imperative duty on such party to explain the admission. In the absence of a satisfactory explanation it is presumed to be true. In other words, an admission, if clearly and unequivocally made, is the best evidence against the party making it and, though not conclusive, shifts the onus on to the maker as it must necessarily be presumed to be true and until the presumption is rebutted, the fact admitted must be taken to be established. Admission is the best evidence that an opposite party can rely upon. Though it is not conclusive, it is decisive of the matter unless it is successfully withdrawn or proved to be erroneous. But before that rule can be invoked, it must be shown that there is a clear and unambiguous statement by the opponent that such an admission will be conclusive unless explained. It is also well settled that the effect of admission depends upon the circumstances in which it was made and it can be evidenced against the maker unless he explains under what circumstances he made such admission. [Para 32]
An admission made in ignorance of legal rights or under duress cannot bind the maker of the admission. Admission may be oral or may be contained in documents e.g., letters, depositions, affidavits, plaints, written statements, deeds, receipts, horoscope, etc. Thus, the letters written by a person can be treated as evidence against him. Similarly, incriminating statement, not amounting to confession but made against his own interest, can be treated as an admission. [Para 33]
One ‘B’, the then ITO was examined by the Disciplinary Committee. It was deposed by him that he had become suspicious because persons purportedly, showing income in the range of Rs. 20,000 to Rs. 30,000 had been making payments of income-tax as self-assessment tax in the month of March of a large amount ranging from Rs. 10,000 to Rs. 15,000. That in the normal course of events the assessee would generally know by month of March when the financial year is likely to end, as to what his estimated income would be and on such meagre income it would not be necessary to pay self- assessment tax of such a large amount. That various such refund cases had arisen and that led him to make further detailed inquiry which evidently unearthed the fraud perpetrated on the department. Moreover, in all cases the bank accounts had been opened by the respondent, introduced by the respondent and/or his family members and as the bank records reflected, the said accounts were also operated by the respondent. That in all the bank accounts the address of the account holder was shown to be either the office address or the residential address of the respondent. ‘B’ further deposed that he had deputed an inspector to verify as to whether any of the said assessees were available at the address stated, viz., the office address of the respondent, and the report was that the premises were occupied by the respondent and one of the persons whose addresses were mentioned in the returns (office address of the respondent) was available at the said address. In the cross-examination, the suggestion on behalf of the respondent that the statements of the respondent as well as the assessee were recorded under threat/compulsion/coercion/inducement was flatly denied by ‘B’. ‘B’ also referred to the statement of the respondent as well as letter wherein the respondent had categorically admitted the modus operandi as deposed by ‘B’. [Para 34]
The respondent wrote to the ITO on his letter-head. Wherein it could be seen that the respondent not only admitted that in 22 cases listed in the said letter advance tax payments for assessment year 1992-93 were not genuine but credit for the same as per challans attached with returns might not be given so as to safeguard the interest of the revenue. In the second paragraph the respondent further categorically stated that for the assessment years 1990-91 and 1991-92 the refund orders already issued on the basis of ‘fake’ advance tax challans attached with the returns had already been encashed and the ITO was required to issue fresh challans for the amounts payable including interest so as to prevent any further loss of revenue. The entire contents and tenor of the letter left no room for doubt that complete intention and action of the respondent was geared towards unequivocal admission of the fraud perpetrated on the Income-tax Department and the respondent was ready and willing to co-operate so as to return the amount which admittedly did not belong to him and had been obtained by fraud. [Paras 36 and 37]
As per the statement of the respondent given to ITO on oath, it was clear that it became apparent that the respondent had admitted to the commission of fraud by way of forged/fabricated challans showing fake payments and obtained refunds, deposited the same in bank accounts in the names of different persons, withdrew the amount from the said bank accounts and utilised the same for personal purpose. Nowhere in the entire statement could one find any indication that the statement was obtained by any coercion or threat or inducement of any nature. That became amply clear when one took into consideration the fact that the respondent had appeared in response to summons issued to four different assessees. It was not as if the respondent had been issued any summons to appear and depose before the authorities. That factor significantly pointed to the unequivocal direction of volition of the respondent in tendering the statement. [Para 39]
The respondent also wrote letters to different income-tax authorities including the Commissioner admitting his guilt, pointing out the manner in which he had returned the amount to the Income-tax Department and finally also pointing out that the department had recovered excess sum of Rs. 12,219. In other words, it was the case of the respondent that though he was required to refund a sum of Rs. 21,75,500 to the Income-tax Department being the amount of refunds encashed by him along with interest, yet total payment was to the extent of Rs. 21,87,719, thus, resulting in the excess payment for which he sought credit or claimed a loss. That aspect demonstrated that it was the respondent who had perpetrated the fraud, encashed the refunds, utilised the said funds and ultimately refunded the said funds with interest and sought credit for the excess amount paid over by him to the Income-tax Department. That conduct pointed only in one direction and that was the guilt of the respondent. [Para 41]
In the event of the respondent not being responsible for the fraud, there was no occasion for the respondent to pay over the sum to the revenue because the case of the respondent had been that though a fraud had been committed so as to obtain amounts in the nature of refund fraudulently from the Income-tax Department, the respondent was not the person who had committed such a fraudulent activity and, hence, he should not be visited with any penal consequence. The moment the respondent agreed to return/pay the amount to the Income-tax Department it became abundantly clear that it was only he who had enjoyed the fruits of the fraudulent transaction and when such a fraudulent practice was discovered, he admittedly agreed to refund the amount and in fact refunded the amount with interest. [Para 42]
Once there was admission of the respondent in the form of identically worded letters supplying the list of cases in different wards wherein refunds had been fraudulently obtained, the contention that the complainant had led evidence in only four cases out of 168 did not merit acceptance. Even otherwise: it was the conduct of the respondent that was under scrutiny. If it amounted to misconduct – in one case or more – the number of cases became irrelevant. A proved misconduct remains so and there cannot be any mitigating circumstance on that count. [Para 43]
The respondent had strenuously endeavoured to build defence on the basis of retraction stated to have been made by way of communication dated 8-6-1993 addressed to the Commissioner as well as an affidavit dated 1-3-1995. The letter of retraction dated 8-6-1993 was a disputed piece of document inasmuch as the complainant did not accept that any such letter of retraction was filed, while, on the other hand, the respondent relied upon one acknowledgement receipt which stated that one letter dated 8-6-1993 was received on 8-6-1993.
Without entering into the disputed arena as to whether the letter of retraction had been filed or not and the belated filing of affidavit dated 1-3-1995, it became necessary to take note of the fact that both the retractions, by way of letter and affidavit, had come about after nearly a month and a half from the date of the first statement. Both in the letter and the affidavit it was stated by the respondent that he was induced to give various statements and that too with coercion and heavy pressure/undue influence/inducement or threatening words. During the course of proceedings before the Disciplinary Committee, the officers who had recorded statements of the respondent on different dates were examined on oath, the respondent was permitted to cross-examine the said officers and the categorical statement made by the said officers that the statements were made voluntarily without any coercion, etc., had not been shown to be incorrect in any manner. Though in the cross-examination a specific suggestion was made to the said officers as regards pressure or influence or threat being administered for making a statement, the same had been flatly denied and the respondent had not been able to show by any other evidence as to how and in what manner he was forced into making the said statement. As already stated, the theory of the statement having been obtained by coercion or threat, etc., did not stand when one considered that the first statement was made by the respondent in response to summons issued to four different assessees. The respondent had not even been called upon to appear before the authorities; the respondent admittedly did not present any authority and yet appeared out of violation, accepted that he would produce the authority and stated in no uncertain terms that he was authorised to make statement on behalf of four different assessees. It was in that statement that a categorical admission to the fraudulent practice adopted by the respondent came to be described by him. The manner and mode in which the fraudulent transaction was carried out along with details of Bank Account, etc., came to be stated. Therefore, in the aforesaid fact situation even on the assumption that letter of retraction had been filed, the said letter did not carry the case of the respondent any further. [Para 46]
Apart from the aforesaid, there was one more aspect of the matter. There was no explanation forthcoming as to why the letter retracting statement made was not filed at any earlier point of time. Similarly, the affidavit also came on record at a very belated stage. There was no explanation for the delay. A retraction, so as to dislodge the admission made, should come about at the earliest point of time. It goes without saying that a retraction made after a considerable length of time would not have the same efficacy in law as a retraction made at the earliest point of time from the day of admission. A belated retraction would fall in the category of afterthought instead of being retraction. [Para 49]
That apart, for a retraction to be effective so as to dislodge the admission made earlier in point of time, the retraction has to be supported by contemporaneous evidence and the onus is on the person making such admission and retraction. In the instant case, admittedly, the respondent had not been able to show even on the basis of preponderance of probabilities that the statements recorded on different dates, were made under coercion or threat or inducement of any nature. The Disciplinary Committee had taken note of the fact that the respondent had categorically accepted that he had no animosity against any of the officers of the department and similarly, none of the officers of the department had any personal bias, grudge or animosity against the respondent. In the circumstances, it was not possible to find any infirmity in the reasoning adopted by the Disciplinary Committee and the Council for rejecting so called retractions. [Para 50]
Applying the aforesaid tests, it was apparent that it was not possible to state that the petitioner-Council had acted in any manner which could be termed to be unjust, unwarranted or contrary to law, i.e., the findings were based on no evidence or the petitioner had proceeded on mere conjectures and unwarranted inferences. [Para 55]
The petitioner-Council is one such representative body charged with responsibility of ensuring discipline and ethical conduct amongst its members and impose appropriate punishment on members who are found to have indulged in conduct which lowers the esteem of the professionals as a class. Adopting the aforesaid approach, it was not possible to find any infirmity, either on facts or in law, in the reasoning and the findings recorded by the Disciplinary Committee and the petitioner- Council by holding the respondent as being guilty of ‘other misconduct’ under section 21, read with section 22 and, hence, there was no necessity to interfere with the punishment recommended. It had been proved beyond reasonable doubt, in the facts and circumstances of the case and by the evidence on record, that the respondent, and only the respondent, was guilty of ‘other misconduct’ and, hence, liable to punishment under section 21(6)(c ) of the Act, i.e., removal from membership of the Institute permanently. [Para 57]”
35. Thus, the legal position about the assessee’s belated retraction is clear that it is an after-thought. Thus, it is clear that the retraction was made after a period of Nineteen Months (19-Months).From record it is impossible to hold that any threat or coercion has been exerted during the confession statement of the assessee. There was no explanation for the delay. A retraction, so as to dislodge the admission made, should come about at the earliest point of time. It goes without saying that a retraction made after a considerable length of time would not have the same efficacy in law as a retraction made at the earliest point of time from the day of admission. A belated retraction would fall in the category of afterthought instead of being retraction. In view of the above position, and respectfully following the judgment of Jurisdictional Gujarat High Court in the case of Mukesh R. Shah (supra), the assessee’s unsuccessful attempt to retract from the disclosure is untenable being an after-thought and should be rejected.
36. We note that regarding parallel books of accounts, Shri Naresh Talaviya has stated that it is only rough estimate and financial planning for future. We note that Shri Naresh Talaviya also stated that due to threat by authorized officer he has accepted the transaction on paper. Now, Shri Naresh Talaviya has made serious allegations about the authorized officer. How authorized officer can threaten him about raid on his family members, whether witnesses knew the same, why till 18 months after search, Shri Naresh Talaviya was silent on this point; all these questions remains unanswered by Shri Naresh Talaviya. Assessee’s residence was already covered u/s 132 (search and seizure) so there remains nothing. It appears to be a desperate effort to amplify the gravity of his allegations. However, serious they might be they need at least an iota of substantiation. Without it they remain mere baseless allegations to gain undue mileage for personal benefit. The assessee has been provided access to his partners during the search. If the threat was so real to make him admit such amounts and issues then he definitely would have shared it with them (other partners). Even after the conclusion of the search at his residence he had come to the Department and given a statement u/s 131 of the I.T. Act along with his own Counsel (Advocate). With him by his side and the benefit of his knowledge none could have persisted with the threat. That being the case the reason and the basis for such disclosure even then defies reason. The reiteration of the same after a further lapse of one and half month on 10/09/2014 u/s 132(4) of the IT Act, belies the truth of the allegations. What has been stated and restated again and again was truth and nothing but truth. Thus, we note that allegations of the assessee were rightly rejected by the Assessing Officer.
37. We note that following papers/documents were seized from premise of Shri Naresh Talaviya, for which he is stating that it carries mere rough estimates of future planning, The same is reproduced below:
38. From above pages, the assessing officer noted that it is actual working sheet of i.e. parallel books of accounts of Assessee firm, to record unaccounted money. Shri Naresh Talaviya has accepted the same fact in his statement. Now, if we consider the entry” Gulabkaka (land owner)” on the page no. 9, which shows that amount paid by Assessee firm to seller of land on which project ‘Om township’ is carried out. Further, Shri Naresh Gordhan Talavia, one of partners of M/s M D Infra, in his reply to Q. No. 39, 40, 41 & 42 of the statement, recorded u/s 132(4) of the Act, on 17/18.07.2012, has admitted on oath the fact of payment of ‘on-money’ to the land owners. The relevant portion of statement is reproduced as below:
39. The fact that they are actual transactions, details further gets buttressed by the fact that the amounts mentioned therein are in exact amounts as are actually incurred. If it had been a rough /estimate then the amounts would have been in round figure. These statements also contain person-wise details of amounts taken /given as advance under the head “Uchhina Apela” and Uchhina Lidela”. Had it been the case of any projection or rough working there would no place for these entries. The fact that these are not rough estimates for future planning, but actual transactions is established by the fact that the said statement also takes into consideration the “Total Mistake”. It is impossible that a future projection or a rough working provides for totaling mistake and that too with such exactitude.
40. We note that some of entries are matching in terms with audit report of firm, thus proving the sanctity of pages (incriminating documents- Pages 9,10,11 and AnnexureA-1 and other seized papers) . If we consider the entry of the bank charges from above paper then following details are found:
| Bank charges | |||||
| As per audit report from 01-04-2010 to bx-03-2011 | As per audit report from 01-04-2011 to 31-03-2012 | Total | As per page no 9 Om township | As per page no Om township part 1-2 | Total |
| Rs 6948 | Rs30,179 | Rs37,127 | Rs 23,451 | Rs 13,677 | Rs37,128 |
Thus, from above table, it is clearly established that expenses matches exactly with the actual books. Thus, documents found by search team are incriminating material and therefore, these documents found by search team cannot be treated as dump documents, as claimed by ld Counsel. The sanctity of incriminating documents-Pages 9,10,11 and AnnexureA-1 and connected seized papers, are thus proved. Accordingly, Shri Naresh Talaviya’s claim that it is mere estimate, has rightly been rejected by the assessing officer.
41. At the cost of repetition, we state that assessee has executed and acted upon the statement given by him under section 132(4) of the Act. The assessee-firm has paid substantial advance tax of Rs. 1.78 crores out of which Rs.1,50,00,000/- was paid as late as on 15.03.2013. Subsequently, a refund of Rs.1,46,06,260/- has been claimed in the return filed. It clearly shows that even after more than 6 months after search; the assessee was accepting substantially higher income and was following on the statement given during the course of search. Hence the statement given by partner of firm under section 132(4) of the Act, has been substantially executed by the assessee-firm, therefore subsequent retraction is clearly an after -thought to cheat the revenue. On the date of search, Shri Naresh Talaviya, was given sufficient rest. On the date of search two witnesses were present. All proceedings of search were carried out on the presence of witnesses. Further, witnesses were called from the Shri Naresh Talaviya’s locality. They never reported that Shri Naresh Talaviya was pressurized during the course of search. Both these witnesses were, independent persons.In subsequent two admissions, Shri Naresh Talaviya, accepted the original admission, the series of evidence during the search and post search, are reproduced below:
| Date | Statement recorded under | Shri Naresh Talaviya’s statement |
| 17-07-2012 | Search at his residential premises; u/s 132(4) of IT Act | He has declared the on money receipts in the hands of firm |
| 01-08-2012 | u/s 131 of IT in
Department |
He has accepted the disclosure as made during the course of search. Further, he has confirmed the same in concluding para. Here, most important point to note that he has given the statement in presence of his advocate; thus, opportunity to consult with advocate was given to him. |
| 10 -9-2012 | Search at his residential premises while operating PO; u/s 132(4) of IT act | He was confronted about declaration as per question no 5; again he has stated that these are unaccounted business receipts of Assessee firm. Thus, he has accepted the validity of statement given during the course of search. |
The above table clearly shows that within gap of 2 months, Assessee has confirmed the disclosure on 3 occasions. Now, question arises how he was pressured each time. In fact, statement u/s 131 on 01-08-2012 in income tax department was recorded in presence of his Advocate. Therefore, his advocate was allowed by the Revenue Authorities to assist him. Shri Naresh Talaviya on his own has stated that every point of statement is told to him in Gujarathi language by advocate, (see question and answer on page no.27 of assessment order). Only much later, the assessee decided to try and avoid taxes and made up a story in retracted affidavit, which is not acceptable. That being so, we decline to interfere with the order of Id. CIT(A) in upholding the aforesaid additions. The ld CIT(A) has rightly upheld the additions of undisclosed investment in land of Rs.6,50,00,000/- in A.Y. 2011-12 and Rs.9,35,91,500/- in A.Y. 2012-13. Hence, order of ld CIT(A) on these additions are, therefore, upheld and the grounds of appeal of the assessee are dismissed.
42. In the result, appeal filed by the assessee in A.Y. 2011-12 and A.Y. 2012-13 (in ITA No. 3058/AHD/2016 and ITA No.3059/AHD/2016), are dismissed.
43. We shall take concise and summarized ground No.2, which is reproduced below for ready reference:
“(2) The Revenue’s appeal, in ITA No.3093/AHD/2016 for assessment year 2012-13, the Revenue has raised two grounds against deletion of following additions:
(i) Assessee made payment in cash, thus violated the provisions of section 40A(3), therefore Assessing Officer made addition to the tune of Rs.26,19,720/-, which was deleted by ld. CIT(A).
(ii) Assessing officer made addition of Rs.7,88,97,461/- on account of unexplained expenditure. Learned CIT(A) deleted the said addition. Therefore, Revenue is in appeal before us.”
44. We have already narrated the facts of the assessee-firm in detail, in above paras of this order, therefore, we do not reiterate the facts again. We have heard both the parties on this issue. So far ground no. 2(i) is concerned, we note that it relates to payment made in cash, thus violated the provisions of section 40A(3) of the Act, therefore Assessing Officer made addition to the tune of Rs.26,19,720/-, which was deleted by ld. CIT(A). During the assessment proceedings, the Assessing Officer observed that certain payments were made in cash by assessee-firm for purchasing the land, which is reflected in the registered deed. The cash payments pertain to the assessment year under consideration are as under:
| Block no | Date | Amount |
| 196 Part-2 | 10-03-2012 | 8,66,7.30 |
| 198 Part-2 | 17-02-2012 | 17,52,990 |
| Total | 26,19,720 |
All the above amounts have been paid by way of cash and so the provisions of section 40A(3) are attracted to these payments, therefore assessing officer made disallowance to the tune of Rs.26,19,720/-.
45.On appeal, ld CIT(A) deleted the addition. The ld CIT(A) observed that assessing officer disallowed expenditure in cash of Rs.3,24,060/- u/s 40A(3) in A.Y. 2011-12 and Rs.26,19,720/- in A.Y.2012-13. The assessee has pleaded before ld CIT(A) that disallowances cannot be made because the income has ultimately been worked on estimate basis after rejecting the books of account. No revenue has been recognized from sales and business income has not been assessed till A.Y.2012-13. The ld CIT(A) also observed that expenditure of Rs.3,24,060/- and Rs.26,19,720/- are clearly disallowable because they have been made in cash and no reason for exemption has even been claimed. However, ld CIT(A) noted that effect only would be to reduce the work in progress by the total amount of Rs.29,43,780/-(Rs.3,24,060 + Rs.26,19,720) as on 31.03.2012. The revenue has been recognized against these expenses for the first time in A.Y.2013-14. Therefore, no effect of disallowance would be there in A.Y. 2011-12 and 2012-13 and therefore additions made to total income in those years were deleted by ld CIT(A). As far as A.Y. 201314 is concerned, the proportionate expenses related to reduction in WIP were to be considered; but would not be effected because the profit has been determined on an estimate basis. Therefore, though the WIP carried forward as on 31.03.2012 is directed to be reduced by Rs.29,43,780/- no separate effect (other than covered in estimation of net profit) on total income. Based on the above facts, we note that there is no infirmity in the order of ld CIT(A), hence we confirm the findings of ld CIT(A).
46. In concise ground no. 2(ii), the main grievance of the Revenue is that Assessing officer made addition to the tune of Rs.7,88,97,461/- on account of unexplained expenditure. However, Learned CIT(A) deleted the said addition. We have heard both the parties and considered the submissions made by ld Counsel, including case law relied by him. During the appellate proceedings, the ld CIT(A) noted that looking to the facts of the assessee`s case, further addition of Rs.7,88,97,461/- u/s 69C of the Act is not merited, keeping in view that substantial unaccounted investment in land which has been added and upheld. The findings of ld CIT(A) is reproduced below for ready reference:
“I consider the further addition of Rs.7,88,97,461/- u/s. 69C of the Act not merited; in my considered opinion. Keeping in view that the substantial unaccounted investment in land has been added and upheld; and looking to the facts of the case, these are considered as met out of undisclosed receipts from the booking of flats which is very substantial i.e. of the order of Rs. 20 crore till 10.12.2012, and in my opinion the undisclosed investment required in starting the business has been aptly covered by the addition of undisclosed investment in land, upheld earlier. The addition is therefore directed to be deleted and corresponding ground of appeal is allowed.”
47. We have gone through the above findings of ld CIT(A) and noted that there is no infirmity. Thus, the conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A).
48. In the result, the Concise and summarized ground No.2 (in ITA No.3093) of the Revenue is dismissed.
49. Now, we shall take concise and summarized ground No.3, which is reproduced below for ready reference:
(3) Assessee’s appeal, in ITA No.3085/AHD/2016 for AY.2013-14 and Revenue’s appeal in ITA No.3094/AHD/2016 for AY.2013-14, are cross appeals.
(a) In assessee’s appeal, in ITA No.3085/AHD/2016 for AY.2013-14, the solitary grievance of the assessee is that addition restricted by the ld. CIT(A) to the tune of Rs.5,15,52,281/-made on account of alleged unaccounted income for suppressed receipts (i.e. “on-money” taken on sale of flats), is purely on estimated basis thus should be deleted. Assessing officer erred in rejecting affidavit and also erred in rejecting books of accounts. Assessee raised nine grounds of appeals along with Form No.36, which we have considered.
(b) In Revenue’s appeal in ITA No.3094/AHD/2016 for AY.2013-14, the solitary grievance of the Revenue is that ld. CIT(A) erred in restricting addition of Rs.5,15,52,281/- against the total addition made by the Assessing Officer to the tune of Rs.31,47,36,000/-.
Therefore, in these cross appeals, assessee’s grievance is that the addition restricted to Rs.5,15,52,281/- should also be deleted, whereas Revenue pleads that total addition made by the Assessing Officer to the tune of Rs.31,47,36,000/- should be sustained, therefore
Assessee and Revenue both are in cross-appeals for the addition of Rs.5,15,52,281/- for the assessment year 2013-14.
50. This Concise and Summarized ground relates to the quantum or percentage of ‘on-money’ being taken for booking and sale of flats and what should be the corresponding addition for undisclosed/unaccounted income. We have already narrated the facts of the assessee`s case in our earlier para and therefore not being repeated for the sake of brevity.
51. We have gone through the written submissions of ld Counsel for the assessee. The ld Counsel argued that assessee did not take ‘on-money’ on sale of flats therefore entire addition should be deleted. We have also taken into account the precedents relied on by ld Counsel, in respect of the issue under consideration.
52. On the other hand, the Ld. DR for the Revenue vehemently argued that addition made by the assessing officer should be sustained. Therefore, ld DR has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
53. During the appellate proceedings, the ld CIT(A) noted that substantial investment/expenses nd incomes were being undertaken outside books of accounts. Therefore, ld CIT(A) observed that receipts from total flat sold, from part 1, 2 and 3 till 10.04.2012, as per seized documents was Rs.34,47,87,300/- (Rs.14,69,97,800 + Rs.19,77,89,500) whereas in the regular books NIL revenue and only Rs.14,05,17,000/- is shown as advances from customers, till 31.03.2012; approximately the same period. Therefore, ld CIT(A) was of the view that over 60% of the receipts are not taken into books of accounts. The assessee is claiming that they are selling two different sizes of flats i.e. flats of 618.09 sq. fts. and 569.29 sq.fts for 6,11,000/-; and Rs. 6,41,000/-, respectively. However, the fact that the assessee was taking ‘on -money’ for the flats is very clear from the documents seized (page no. 9 to 11 of Annexure Al which show additional unaccounted receipts of around Rs. 20 crore, different slips of bookings of flats discussed by the assessing officer and the admission of the partners themselves in their statements).
Therefore, regarding this issue, ld CIT(A) made the following pertinent observations:
(i) Page no. 89 (discussed at page no. 32 of the order for A.Y. 2013-14) is the undisputed booking for flat for Dhirubhai Katharia. Whereas the assessee is claiming that only the cheque amount of Rs. 6 lacs received is the actual receipts, the computation clearly shows otherwise. The amount of Rs.5 lacs is undisputed receipt through bank (assessee is not disputing it). The amount of Rs.2,43,000/- has been added to this figure and the amounts are added. The adding of amount shows that they are the same nature, and therefore, Rs.2,43,000/-was clearly received in cash earlier. Now, a figure of Rs.7,43,000/- has been reached. Still Rs.67,200/- has been worked out as receivable (baki). Therefore, undoubtedly the total consideration of the flat was Rs.8,10,200/- (Rs.5,00,000 + Rs.2,43,000 + Rs.67,200). Now because a payment of Rs. 1 lakh was received further in cheque (this type of transactions are there when subsequently bank loan etc., are arranged and payments made), therefore, extra amount than due was received. Therefore, Rs.32,800/-(1,00,000 – 67,200) has been worked out as returnable. Therefore, without an iota of doubt the actual consideration was Rs.8,10,200/- as against Rs.6,11,000/-claimed by the assessee.
(ii) Similarly, flat no. B-17, Block 1, as per page 93, shows that this was booked for Rs.8,27,400/-. This slip has been noted when payment of Rs. 2,27,000/- was received in cash and Rs. 6 lacs was discussed as an proposed payment through loan. The assessee’s contention that instead Rs. 1.4 lacs and Rs. 4 lacs have been received by cheque, is of no relevance because the subsequent actual reimbursement of loans is dependent on many situations, including the actual need, later on, by the purchaser. This does not in any way show that the rate was not fixed up Rs.8,27,400/-.
(iii). Similarly, the rate has been clearly taken as Rs.8,10,200/- in the case of Sanjaybhai Pratapbhai Solanki page no. 98; Rs.8,10,200/- in page no. 102 in the case of Pravinbhai Gundaliya and Rs.8,10,200/- in page no.103 in the case of Jayrajbhai Vohra. The facts of the case are similar to (ii) above and contentions of the assessee are rejected because of the reasons discussed above. Actual reimbursement of loans subsequently, for different amounts do not change the consideration fixed. In fact in some case like in the case of page no. 103, Jayraibhai Vohra, where Rs. 2,35,000/- was paid in cash and Rs. 4,90,000/- was planned to be received Canara Bank loan, exactly Rs. 4,90,000/- have been received by cheque payment after the search. Therefore, it proves that all these pages showed actual agreement and cash payments and some plans for cheque payment to be arranged through loans.
(iv). The Assessing Officer has given a full chart of such documents at page no. 45 and 46 of the assessment order wherein the consideration shown in books and taken in registration deeds of the flats in all these cases is Rs.6,11,000/- with area of 569.29 sq. ft. (The assessee has also stated that there are two types of flats having area of 569.29 sq. ft. and 618.09 sq. ft). The above discussion shows that the record also shows that the fiats were booked for rates mainly of Rs.8,10,200/- but were differing also, like in case (ii) above. We know that all flats, even of same size cannot be of same rate because of the location, terms of payments, date of booking etc. This also shows that the books of accounts of assessee are all made up. The transactions depicted in the documents are commensurate with the ‘on-money’ of around Rs. 2 lac per flat accepted by the partners in their statements during the course of search (the differences in area of these smaller flats stated during search as 443 sq. ft. and now as 569.29 sq. ft. is clearly because of various terminology used like carpet area, plinth area, built up area and super area and different ways of working them). The average actual sale price as per the chart prepared by the assessing officer on pages 45 and 46 of the assessment order (wherein the consideration shown in books is Rs.6,11,000/- with area of 569.29 sq. ft.) is worked out at Rs.8,21,133/- per flat. Therefore, the average ‘on -money’ on consideration shown in books is:
(v). Therefore, it is clear that assessee was taking consideration substantially out of books of account. The total sales as per books in Assessment Year 2013-14 is Rs. 30,97,77,000/-. The actual sales during the year including ‘on-money’ is therefore reasonably estimated at Rs.41,63,09,310/- (Rs.30,97,77,000/- x 1.3439). With many of the transactions of the land purchase, expenses, investments and loans not recorded as per actual books, the books are not reliable and have already been rejected u/s 145(3) of the Act. Considering that some expenses in the form of unaccounted payment for land, other unaccounted expenses and huge ‘on-money’ as discussed above; therefore, ld CIT(A) was of the opinion that a net profit rate of 15% on total sales would give a reasonable estimate of the profit. Therefore, ld CIT(A) noted that in various similar projects where flats sizes were small being less than 1500 sq. ft. and were started somewhere 2007-08, onwards net profit declared is even more than 25 to 30% and deduction was claimed u/s 80IB(10) of the Act therefore, the net profit from the business of sale of flats for the A.Y.2013-14 is estimated at Rs.6,24,46,396/- (15% of Rs.41,63,09,310/-) instead of Rs.1,08,94,115/- net business income after partners remuneration as declared in the return. It would mean an addition of Rs.5,15,52,281/- (Rs.6,24,46,396 – Rs.1,08,94,115). Therefore, an addition of Rs.5,15,52,281/- was upheld by ld CIT(A), and the remaining addition made by the Assessing Officer on this ground was deleted.
54. We have carefully gone through the above findings of ld CIT(A) and observed that many of the transactions of the land purchase, expenses, investments and loans were not recorded by the assessee-firm in actual books of accounts, therefore, the books of accounts are not reliable and therefore has rightly been rejected under section 145(3) of the Act, by assessing officer as well as by ld CIT(A). We have already adjudicated the issue relating to rejection of retracted affidavit therefore, our findings mentioned in para Nos. 33 to 41 of this order is applicable here. The percentage of ‘on-money’ being taken for booking and sale of flats, has been computed by the ld CIT(A) reasonably by applying reliable logic and pattern. We note that ld CIT(A) has considered all relevant facts and then passed the speaking order. Hence, these appeals ( assessee`s appeal and Revenue`s appeal) deserve to be dismissed by upholding the orders passed by the CIT(A) and they are dismissed.
55. In the result, Assessee’s appeal, in ITA No.3085/AHD/2016 for AY.2013-14 is dismissed and Revenue’s appeal in ITA No.3094/AHD/2016 for AY.2013-14, is also dismissed.
Order is pronounced on 06/05/2022 by placing result on Notice Board.
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