Conclusion: The claim of assessee of receipt of Rs.41,20,000/- on account of proposed sale of Shop was not genuine as genuineness of a transaction was one of the most important, foundational and critical factors in determining whether explanation given by assessee was acceptable or not, and this genuineness was to be examined in the light of ground realities. When there was no clear documentary evidence to prove the identity of the assessee the burden of proof lies on him claiming the benefit of being the assessee.
Held: In the instant case, there was a survey under section 133A in the business premises of M/s.Vijay and various documents were impounded during the said survey. There was cash payments of Rs.30,60,000/- by Mr.R to Mr. Mr. Vijay on various dates. Before AO, assessee claimed that he received cash advance of Rs.41,20,000/- on various dates. However, the transaction was cancelled and advance was duly returned to Mr. R. AO rejected the claim of the assessee. It was held that assessee had not explained why the so-called purchaser had paid Rs.41,20,000/- when as per the so-called MOU the so-called consideration was to be paid based on stages of construction. The so-called MOU was of 5 pages but there was signature only on last page, which contained only the name of the parties. These parties had not put their signatures on all the pages. Thus, the genuineness of the MOU itself was in doubt. Similarly, the so-called cancellation deed was of 7 pages but signature of parties was only on the last page. The last page only contained names of the parties, no part of recital was on the last page. Therefore, genuineness of the so-called cancellation deed was also in doubt. No Cash Book had been produced before AO or the CIT(A) to explain the cash receipts and subsequent refunds. All these facts invariably lead to only one conclusion that the claim of the assessee that the cash was received as booking advance for Shop was not supported by any evidence. Genuineness of a transaction was one of the most important, foundational and critical factors in determining whether explanation given by the assessee was acceptable or not, it was its genuineness and this genuineness was to be examined in the light of ground realities. Therefore, after considering all these facts, that the claim of assessee of receipt of Rs.41,20,000/- on account of proposed sale of Shop was not genuine.
FULL TEXT OF THE ORDER OF ITAT PUNE
This is an appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeals)-12, Pune, Appeal No.PN/CIT(A)-12/376/2015-16 dated 15.12.2016 for the Assessment Year 2008-09.The Assessee raised the following grounds of appeal:
“1. On the facts and circumstances of the case and in law the Learned Assessing Officer have erred in initiating reopening proceedings u/s 147 of the Income Tax Act, 1961 which is invalid and bad in law, therefore appeal needs to be quashed.
2. On the facts and in the circumstances of the case and in law Lower Authorities have erred in making an addition of Rs.41,20,000/- u/s 68 of the Income tax Act, 1961, by rejecting appellants contentions in this regards.
The appellant craves for to leave, add, alter, modify, delete above ground of appeal before or at the time hearing, in the interest of natural justice.”
2. Brief facts of the case are that there was a survey under section 133A of the Act in the business premises of M/s.Vijay Constructions, Nashik on 01.10.2010. Various documents were impounded during the said survey. Page No.21 of Annexure-A3 shows cash payments of Rs.30,60,000/- by Mr.Rajegaonkar to Mr. Mr. Vijay Jadhav on various dates. Before the Assessing Officer(AO) the assessee claimed that Rajegaonkar is the Director of M/s.Suyojit Infrastructure Limited, who was partner in the firm called Suyojit Baug. The assessee submitted that assessee entered into an MoU with Suyojit Baug on 30.07.2007 for sale of Shop No.G-2 in the proposed Commercial cum residential complex for Rs.45,00,000/-. As per the said MoU, the assessee received cash advance of Rs.41,20,000/- on various dates. However, the transaction was cancelled vide Cancellation Deed dated 31.03.2008 and advance was duly returned to Mr. Rajegaonkar. The AO rejected the claim of the assessee. The relevant part of the assessment order is reproduced as under:
“From perusal of the above documents, it is clearly seen that these MOUs are not registered at all. They are done on simple stamp paper. Further Ld.AR of the assessee has contended that the assessee with 5 other persons had purchased the said land on 03/10/1997. But from perusal of the registered purchase deed it is seen that the name of Shri Vijay Dinkar Jadhav is mentioned as one of the purchasers and not the HUF. The name of the assessee HUF is appearing only on unregistered Sathe Khat which was done prior to this registered purchase. Therefore these is ambiguity as to who is the actual owner of the said land, Shri Vijay Dinkar Jadhav, individual or the assessee HUF. Further there are no documentary proof given by the Ld AR so as to prove that this land was entered into books of accounts of the assessee or not. Since the assessee had not filed even the Return of Income it is hard to establish whether this land is recorded in assessee’s books of accounts or not.
Further it is also pertinent here to mention that n the said land there was no construction of called shop No.G-2 ever. Further in the MOU it is written that the assessee intended to construct a commercial complex on the land. But till not the assessee has not produced any document whether the complex was really built or not. Further consent of other owners was taken or not is also not clear.
All these facts clearly prove that the assessee has given an accommodation entry to M/s Suyojit Baug in the garbs of cash advances. There is no documentary evidence to prove whether the cash was really received by the assessee from M/s Suyojit Baug or not. Therefore it is clear that there was no such transaction as stated by the assessee. The assessee has instead generated this cash from Shri Anant Rajegaonkar, director and key person of Suyojit group by unaccounted transactions which was written on the seized document. Therefore, Rs.45,00,000/- is added back to the total income of the assessee u/s 68 of the Act. Penalty proceedings u/s 271(1)(c) of the Act initiated separately.
3. Being aggrieved by the assessment order, the assessee filed an appeal before the ld.CIT(A). The ld.CIT(A) confirmed the addition of Rs.41,20,000/- out of Rs.45,00,000/- made by the AO.The relevant portion of Ld.CIT(A)’s order is reproduced here as under :
Quote, “ 4.2 I have considered the material placed before me. Brief facts are that during the course of survey at the business premise of associate concern M/s.Vijay Construction one loose paper was impounded vide page No.21/Annexure A3 which has been reproduced at page No.3 of the assessment order. In the impounded paper cash payments on different dates totaling to Rs.30,60,000/- by Mr.Rajegaonkar to Shri VijayJadhav were found recorded. Mr. Rajegaonkar was the reference for Mr. Anant Keshav Rajegaonkar, Director of M/s. Suyojit Infrastructure Ltd., the company which was partner in the firm M/s. Suyojit Baug. It was claimed that appellant entered into an MOU with M/s. Suyojit Baug on30.07.2007 for sale of shop No.G-2 admeasuring area 2000 sq.ft, in a proposedcommercial cum residential complex for total consideration of Rs.45,00,000/-. Asper the terms of MOU appellant had received cash advances of Rs.41,20,000/- on different dates starting with 27.07.2007. It was further claimed by the appellantthat this MOU dated 30.07.2007 was cancelled vide another MOU dated 31.0372005and appellant had returned back entire cash of Rs.41,20,000/- to M/s. SuyojitBaug. Both the MOUs have been reproduced in the assessment order. Appellantclaimed that cash receipts of Rs.30,60,000/- found recorded on the impoundedloose paper were part of payment received of Rs.41,20,000/-. In view of these two MOUs, appellant requested to delete the addition of Rs.45,00,000/- made bythe AO u/s 68 of the Act. However, I do not find the explanation of the appellantregarding cash credits recorded in the books of accounts in the name of M/s.Suyojit Baug as credible for the following reasons.
i. As pointed out by the AO, the land on which proposed residentialcum commercial complex was to be constructed was not owned bythe appellant. As per the registered purchase deed dated03.10.1997, there were 5 other co-ownersapart from Shri Vijay D.Jadhav. In the registered deed it was not mentioned that co-ownership of Shri Vijay Jadhav was on behalf of appellant HUF or inhis individual capacity alongwith other five co-owners. It was nowhere explained as to how the appellant had acquired development rights over the piece of land so as to enter into a MOUwith the prospective buyer. It was further noted that one of the co-owners of the land was M/s. Suyojit Builders Pvt. Ltd. a group company of firm M/s. Suyojit Baug the prospective buyer of shop No. G-2 in the proposed complex.
ii. During the course of assessment proceedings as well as appellate proceedings, appellant was asked to substantiate that any such residential cum commercial project was planned and any application for approval of site plan / building plan was moved to the local authority. It was also asked whether any other booking was taken in the proposed complex. The appellant failed to furnish any documentation to support the claim that such complex was to be constructed and also failed to inform that any other booking was taken for same project.
iii. The appellant’s claim that MOU was cancelled due to increased cost of construction is without any basis as the proposed project was only in the mind of the appellant.
iv. It was noted that appellant as well as Rajegaonkar Group were working hand in hand and purchased land jointly around Nashik which was evident from several documents impounded during the course of survey and the other transactions found recorded in the impounded loose paper No.21 /Annexure A3. Despite that close association all the payments received against alleged booking were in cash totalling to Rs.41,20,000/- which is abnormal.
v. As per the terms of MOU dated 30.07.2007 out of agreed consideration of Rs.45,00,000/-, the payment of Rs.38,25,000/-was linked to the progress of construction and Rs.3,00,000/- was to be paid at the time of execution of sale deed. Balance amount of Rs.3,15,000/- was claimed to have been paid in cash from 27.07.2007 to 30.07.2007. As against these terms mentioned in the MOU, the appellant received cash of Rs.41,20,000/- when even the plan for construction of complex was not submitted to any authoritymeaning thereby that it was not genuine booking and MOUs weresigned to camouflage the actual transaction.
vi. Coming to the credibility of MOUs, it is noted that apart from thesetwo MOUs other documents produced during appellate proceedingswere either notarised or registered. These two MOUs were preparedsimply on 100 rupees stamp paper and there were no signatures of any witness in the MOUs. Therefore, MOUs appear to be self servingdocuments created to claim the booking and cancellation of sale ofshop in a complex which was never proposed to be constructed.
vii. Without prejudice to the genuineness of the MOUs, the AO asked theappellant to prove the genuineness of cash received from M/s.Suyojit Baug. Appellant failed to furnish any confirmation from M/s.Suyojit Baug and merely submitted copy of ledger account of M/s.Suyojit Baug in its books of accounts. During the course of appellateproceedings also the appellant was asked to substantiate the sourceof cash in the hands of M/s. Suyojit Baug but vide submission dated09.12.2016 it was stated that no separate confirmation could beobtained and requested that signature on the MOU may beconsidered as confirmation by M/s. Suyojit Baug.
In view of facts that there was no ownership or development rights with the Reliant to construct any complex on the land at Nashik and no proposal was ferSubmitted to any authority for approval of the project, the claim that it was sell a shop in the complex is mere hogwash to somehow explain the source of sh found recorded in the impounded paper. The MOUs signed on Rs.100 stamp per without presence of any witness and whose terms were also not acted upon the appellant render the same as self serving document without credibility.
Moreover, the appellant had failed to furnish the confirmation of the cash received of Rs.41,20,000 alongwith source of the same from M/s.Suyojit Baug despite specific directions by the AO and this office. In the circumstances, genuineness of the cash credits of Rs.41,20,000/- recorded the books of accounts in name of M/s.Suyojit Baug remains unexplained and the AO was justified to treat the same as deemed income u/s 68 of the Act. If the amount received was not in nature of revenue receipt and the appellant subsequently submit confirmation of cash received from M/s.Suyojit Baug, the same would have to be considered as cash loans as the story of cash received against booking of shop in hypothetical project was cooked up in order to avoid the penalty u/s 271D/271E. In any case, the appellant had failed to explain the true nature of the receipts hence, same is held as deemed income u/s 68 of the Act. However, the AO had erred in making addition of Rs.45,00,00/- u/s 68 as against credit recorded in the books of accounts of Rs.41,20,000/-, therefore, addition made by the AO u/s 68 of the Act is directed to be restricted to Rs.41,20,000/-. Ground raised by the appellant is partly allowed.” Unquote.
5. Being aggrieved by the order of the ld.CIT(A), the assessee has filed appeal before this Tribunal.
5. The ld.AR of the assessee took us through the copy of English Translation of MoU for Sale of Shop No.G-2 [Paper Book, Page No.54 to 58 and Cancellation Deed]. The ld.AR submitted that assessee has purchased a Plot of Land at Tidke Colony, Nashik vide Deed dated 03.10.1997 jointly with other Six(06) persons.
They decided to construct the commercial cum residential complex on the said Plot of Land of Tidke Colony, Nashik. The ld.AR submitted that they entered into an MoU with M/s.Suyojit Baug for sale of Shop No.G-2 in the proposed commercial cum residential complex for a total value of Rs.45 lakhs out of which Rs.41,20,000/- were received in cash on various dates.
5.1. The ld.AR further took us through the relevant documents. The ld.AR vehemently claimed that the cash was received for the proposed sale, however, it did not materialise, as a result, the amount was refunded back to M/s.Suyojit Baug.
6. On the other hand, the ld.Departmental Representative(ld.DR) for the Revenue heavily relied on the orders of the AO and ld.CIT(A). The ld.DR brought to our notice that the MoU dated 30.07.2007 was merely on a stamp paper of 100 rupees, there are no witnesses. The said MoU has been claimed to be entered between Suyojit Baug and Vijay Dinkar Jadhav(HUF). For HUF, Mr.Vijay Dinkar Jadhav signed as Karta. Then the ld.DR invited our attention to purchase land for the Plot of Land at Tidke Colony, Nashik [Page No.37 to 53 of Paper Book]. The ld.DR explained that the said plot of land has been purchased by Six(06) persons, the Sixth persons was M/s.Suyojit Builders Pvt. Ltd., thus, the ld.DR stated that how Mr.VijayDinakr Jadhav can enter into an MoU for sale of proposed of Shop No.G-2 when the plot belongs to Six Persons. Even for argument’s sake, it is presumed that these six persons were planning to construct a commercial complex, the sale of the individual units of the proposed commercial complex has to be with the approval of all six persons. Whereas, the assessee claims that the assessee has entered into MoU for sale of proposed Shop No.G-2 which was to be in the proposed commercial complex to be constructed on the plot of land at Tidke Colony, Nashik. Incidentally, out of six persons, one of the persons is Suyojit Builders Pvt. Ltd., which seems to be sister concern of Suyojit Baug. Therefore, the ld.DR submitted that the addition made by the AO may be upheld.
7. We have heard both the parties, perused the material available on record and have gone through the orders of the Lower Authorities. We find that it is a fact that during the survey a document called Page No.21 of Annexure-A3 was found and impounded. The said document has been reproduced by the AO on Page No.3 of the assessment order. It shows receipts of Rs.30,60,000/- from Mr.Rajegaonkar on various dates starting from 27.07.2007 to 08.04.2008. The appellant assessee tried to explain the said receipts as cash receipts from Mr.Rajegaonkar for purchase of Shop No.G-2 in the proposed commercial complex at Tidke Colony, Nashik. It is also a fact that assessee filed copy of MoU between assessee and Suyojit Baug. Suyojit Baug is a partnership firm in which one of the partners is Suyojit Infrastructure Limited and Mr. Ananth Keshav Rajegaonkar is the Director of Suyojit Infrastructure Limited. It is a fact that said MoU is on a 100 rupees stamp paper, the stamp paper was purchased by Vijay Dinkar Jadhav on 03.05.2007. It means that after more than two months of purchase of said stamp paper, the so-called MoU has been entered. The Cancellation Deed dated 31.03.2008 is on Rs.100 stamp paper, which was purchased on 28.02.2008 in the name of Suyojit Infrastructure Limited. Thus, the cancellation deed also has been entered almost after two months of purchase of stamp paper. Both these documentshave not been signed by any witnesses. As mentioned by the Ld.CIT(A), these MOU & Cancellation deed have not been registered whereas other documents found during survey were either registered or Notarised. The Assessee could not explain why these documents have not been either registered or notarised. During the Survey statement was recorded of Mr. Pavan Jadhav on 4/10/2010. Mr. Pawan Jadhav failed to answer specific question related to the said impounded document. Also, Mr. Vijay Jadhav has not made any attempt to explain the said document during the survey. Clause 2 (Page No.56 of Paper Book) of the said MOU explains payment schedule, as per the said clause, Rs.38,25,000/-was to be paid depending on the various stages of construction. In this case the so-called project has not even been formed on paper by Architects or Engineers but the Assessee claims that he received Rs.41,20,000/- which is highly unlikely. Assessee has not explained why the so-called purchaser has paid Rs.41,20,000/- when as per the so-called MOU the so-called consideration was to be paid based on stages of construction. The so-called MOU is of 5 pages (page number 54-58 of Paper Book) but there is signature only on last page, which contains only the name of the parties. These parties have not put their signatures on all the pages. As mentioned, the last page contains only the name of the parties one cannot be sure that the last page is part of the said MOU. Thus, the genuineness of the MOU itself is in doubt.Similarly, the so-called cancellation deed is of 7 pages (Page Number 59-65 of Paper Book) but signature of parties is only on the last page. The last page only contains names of the parties, no part of recital is on the last page. Therefore, genuineness of the so-called cancellation deed is also in doubt. No Cash Book has been produced before the Assessing Officer or the ld.CIT(A) to explain the cash receipts and subsequent refunds. The assessee HUF has not filed the return of income for Assessment Year 2008-09 under section139 but it was only filed after the survey on 25/10/2010. All these facts invariably lead to only one conclusion that the claim of the Assessee that the cash was received as booking advance for Shop No.G-2 is not supported by any evidence. The so-called MOU is nothing but a self-serving document created by these persons. The land referred in the MOU on which the proposed construction was to take place was in the name of 6 persons but the shares have been defined in the said Sale deed dated 3/10/1997as per said registered sale deed 1333.33 sq.meter is jointly owned by Vijay Dinkar Jadhav & Kalpana Dilip Chavan (page 39-46 of Paper Book). Thus, the land was jointly owned by Vijay Jadhav and Kalpana Chavan. It is obvious that Vijay Jadhav is not the sole owner of the land at Survey No.618+620/1/4/1 final plot number 144(P) mentioned in the so-called MOU, in individual capacity so he cannot sale so called proposed shop in individual capacity or in the capacity of Karta. Nemo dat quod non habet.As per Section 106 of Indian Evidence Act, when any fact is especially within the knowledge of any person the burden of proving that fact is upon him. The Hon’ble Supreme Court in the case of Indore Municipal Corporation vs. Caltex India Limited AIR  (SC) 454 observed that “burden of proof that goods were not sold to consumers within corporation limits and that they were sent out lies on respondent company having special knowledge and not on Corporation.”
However, in this case the appellant assessee has failed to discharge the onus of proving the fact claimed by him. As Hon’ble Supreme Court has observed, in the case of CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)], ….Quote, “it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents” Unquote. Genuineness of a transaction is one of the most important, foundational and critical factors in determining whether explanation given by the assessee is acceptable or not, it is its genuineness and this genuineness is to be examined in the light of ground realities. Therefore, after considering all these facts we are of the opinion that the claim of the appellant assessee of receipt of Rs.41,20,000/- on account of proposed sale of Shop is not genuine. Therefore, after considering all these facts, we uphold the order of the ld.Commissioner of Income Tax(Appeals), accordingly, this Ground No.2 raised by the assessee is dismissed.
8. The ld. Authorised Representative(ld.AR) for the assessee submitted that he is not pressing the Ground No.1, therefore, the Ground No.1 is dismissed as not pressed.
9. In the result, the appeal of the Assessee is dismissed.
Order pronounced in the open Court on 13th May, 2022.