Commissioner Of Income Tax v. Nitin Kedar Nath Gupta Through

* IN THE HIGH COURT OF DELHI AT NEW DELHI % Reserved on:18[th] July, 2012 Date of Decision:31[st] August, 2012 + ITA 706/2008 COMMISSIONER OF INCOME TAX .......Appellant Through: Mr. N. P. Sahni, Sr. Standing Counsel with Mr. Ruchesh Sinha, Advocate. Versus NITIN KEDAR NATH GUPTA Through: …..RespondentMr. Anoop Sharma and Mr. Manu K. Giri, Advocates. CORAM: MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR 1.Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? R.V. EASWAR, J.: 1. These are five appeals filed by the Commissioner of Income Tax before this Court under Section 260A of the Income Tax Act, 1961, hereinafter referred to as the „Act‟. They relate to the different assessees but since they are all connected, they are disposed of by a common judgment. 2. Substantial questions of law were framed in the case of Kedarnath Gupta and Mani Kakkar in ITA No.713/2008 and 892/2008 respectively. These are as follows: - Kedarnath Gupta “(1) Whether the Income Tax Appellate Tribunal was right in affirming the order of the Commissioner of Income Tax (Appeals) and deleting the addition of `4,71,05,000/-made by the Assessing Officer towards unexplained investment in KG Farms and Jyoti Farms? (2) Whether the Income Tax Appellate Tribunal was right in confirming deletion of addition of `19,35,769/- on account of undisclosed capital gains on sale of land at Jaipur Highway? (3) Whether the Income Tax Appellate Tribunal was right in upholding deletion of addition of `2.30 lacs made by the Assessing Officer on account of unexplained commission paid to the broker in connection with the sale of KG Farms? (4) Whether the order passed by the Income Tax Appellate Tribunal is perverse?” Mani Kakkar “(1) Whether the Income Tax Appellate Tribunal was correct in deleting addition of `2,27,80,000/- and `2,50,000/- made on account of undisclosed capital gains and undisclosed brokerage paid by the respondent assessee? (2) Whether the order passed by the Income Tax Appellate Tribunal is perverse?” In ITA No.948/2008, 707/2008 and 706/2008 (Asha Kedarnath Gupta, Rohit Kedarnath Gupta and Nitin Kedarnath Gupta respectively), no substantial questions of law have been framed because the assessment in these cases were made on protective basis. 3. The facts giving rise to the present appeals, shorn of irrelevant details, are these. A search was conducted in the premises of one Rajinder Gupta under Section 132 of the Act on 27.08.1998. Rajinder Gupta is the brother of Kedarnath Gupta. In the course of the search several documents were found including originals and photocopies in respect of purchase of farm houses in the name of the sons of Kedarnath Gupta, namely, Nitin Kedarnath Gupta and Rohit Kedarnath Gupta. The documents found also reveal that Kedarnath Gupta had incurred substantial expenditure on the construction/ renovation as well as the maintenance of the farm houses in Jaunpur (KG Farms) and Kishangarh (Jyoti Farms). In the course of the search, a statement was recorded from Rajinder Gupta on oath under Section 132 (4) of the Act. We may refer to the statement in some detail later but suffice here to note that he stated, inter alia, that he was the power of attorney holder of the family of Kedarnath Gupta and that Kedarnath Gupta was incurring about `10,000/- to `11,000/- per month on the maintenance of the farm houses and salaries of watchman and gardeners for the last three years till the date of search. He also stated that Kedarnath Gupta had purchased these farm houses with his on-monies and they were registered in the names of his sons. Kedarnath Gupta and that Kedarnath Gupta was incurring about `10,000/- to `11,000/- per month on the maintenance of the farm houses and salaries of watchman and gardeners for the last three years till the date of search. He also stated that Kedarnath Gupta had purchased these farm houses with his on-monies and they were registered in the names of his sons. 4. On the basis of the above, proceedings were initiated under Section 158BD of the Act against Kedarnath Gupta who is the respondent in ITA No.713/2008. He was required to file a return declaring his undisclosed income for the block period consisting of the period from 01.04.1988 to 27.08.1998. Kedarnath Gupta filed the block return declaring “nil” undisclosed income. Since he was stationed in Dubai, he would appear to have appointed one Anil Khatri as his power of attorney to sign the block return. The Assessing Officer appears to have issued a notice under Section 143(2) of the Act to Kedarnath Gupta at his Punjabi Bagh address in New Delhi requiring him to furnish the information regarding the sources of investment in KG Farm and Jyoti Farm, the sources of expenses incurred on the maintenance of the farm houses and also the details of all moveable and immoveable properties purchased and sold by him during the block period along with the capital gains or loss, if any. The bank accounts of Kedarnath Gupta were also called for. In addition, he was required to produce Rajinder Gupta on 15.03.2002 in connection with the sworn statement recorded from him on the date of search where he had referred to the purchase of farm houses by his brother Kedarnath Gupta. There was no response from the Kedarnath Gupta to this. 5. Thereafter, the Assessing Officer would appear to have invited objections from Rajinder Gupta as to why he should not be treated as the agent of Kedarnath Gupta, who is hereinafter referred to as the “assessee”, under Section 163 of the Act. The basis for this proposal was (a) that Rajinder Gupta was operating the NRO account of the assessee from Citi Bank, New Delhi, (b) he was also involved in the purchase of the farm houses for the assessee in the names of the assessee‟s sons. Rajinder Gupta objected to the proposal to appoint him as the agent of the assessee, though he did not rebut the fact that he was power of attorney holder of the assessee and was also authorised to operate the assessee‟s bank account; nor did he deny the allegation that he was involved in the negotiations and payments for the transaction of purchase of the farm houses. These facts, coupled with the fact that Rajinder Gupta himself had admitted in the course of the sworn statement that he had withdrawn the cash found during the search from the assessee‟s bank account, enabled the Assessing Officer to treat Rajinder Gupta as the assessee‟s agent. 6. The Assessing Officer thereupon proceeded to examine the investment made by the assessee in the purchase of the KG Farms (at Jaunpur) and Jyoti Farm at Kishangarh (Vasant Kunj). He referred to the fact that simultaneously a search was conducted on 27.08.1998 in the business premises of M/s. Pandit Estates, a broker firm which was involved in the transaction as also in the residential premises of Suraj Bhan Sharma who was an operative of Pandit Estates. A statement was recorded from him under Section 132 (4) of the Act in response to which he stated that he is a teacher in a Govt. School and also operates as real estate dealer/ agent from the office of Pandit Estates, Chhattarpur Mandir Mor, Mehrauli along with two of his relatives, namely, Radhey Shyam Sharma and Dharampal Sharma who was also an associate of Pandit Estates. Suraj Bhan Sharma was questioned about the purchase of farm houses for the assessee, which was finalised through him. The relevant portions of the statement are extracted in the assessment order of Kedarnath Gupta but it is not necessary to reproduce the same and we need only refer to the gist thereof: - (a). Suraj Bhan Sharma confirmed that the purchase of the two Farm houses by the assessee was done through him. He confirmed that KG Farms was purchased in May/ June, 1995 for a total consideration of `2.49 crores, out of which `26,00,000/- was paid through cheque and the remaining amount of `2.23 crores was paid in cash. This property was sold to the assessee by one Ashok Kakkar and consisted of 2.5 acres and 3 biswas of farm land having a two assessee was done through him. He confirmed that KG Farms was purchased in May/ June, 1995 for a total consideration of `2.49 crores, out of which `26,00,000/- was paid through cheque and the remaining amount of `2.23 crores was paid in cash. This property was sold to the assessee by one Ashok Kakkar and consisted of 2.5 acres and 3 biswas of farm land having a two storied house therein with built up area of 5000 Sq. ft. The property was registered showing sale consideration of `26,00,000/- in the office of Sub-registrar Vikas, Sadan, New Delhi. At the time of registration, Dharampal Sharma partner of Pandit Estates who also signed as witness was present along with Ashok Kakkar and his wife. Suraj Bhan Sharma was also present. (b). Since the normal rate of commission or brokerage was 1% of the actual sale consideration, an amount of `2,50,000/- was received from Ashok Kakkar by Suraj Bhan Sharma. consideration, an amount of `2,50,000/- was received from Ashok Kakkar by Suraj Bhan Sharma. (c). KG Farms was sold by the assessee about 4 months earlier (to the date of search); but in this transaction he or his firm was not involved. The sale transaction was put through M/s. Ravinder Properties (Proprietor Ravinder Sharma) who had his office at Andheria Mor, New Delhi. According to the market information, the property was sold for `3.10 crores. When the assessee had earlier asked Pandit Estates to search for a buyer for the property the price expected was in the range of `3.25 crores. search); but in this transaction he or his firm was not involved. The sale transaction was put through M/s. Ravinder Properties (Proprietor Ravinder Sharma) who had his office at Andheria Mor, New Delhi. According to the market information, the property was sold for `3.10 crores. When the assessee had earlier asked Pandit Estates to search for a buyer for the property the price expected was in the range of `3.25 crores. (d). Kedarnath Gupta and Rajinder Gupta purchased Jyoti Farm measuring 2.5 acres of land and built up area of 5000 Sq. ft. It was a double storied property purchased in August or September, 1995 for a total consideration of `2.60 crores, from one M. K. Subba. Out of the total consideration an amount of `26.10 lakhs was paid through cheque and the remaining amount of `2.39 crores was paid in cash. No commission was received by Suraj Bhan Sharma in the transaction, but he was assured by the assessee that he will be duly compensated in the next deal, if any. A commission of `2,60,000/- was, however, received from M. K. Subba. acres of land and built up area of 5000 Sq. ft. It was a double storied property purchased in August or September, 1995 for a total consideration of `2.60 crores, from one M. K. Subba. Out of the total consideration an amount of `26.10 lakhs was paid through cheque and the remaining amount of `2.39 crores was paid in cash. No commission was received by Suraj Bhan Sharma in the transaction, but he was assured by the assessee that he will be duly compensated in the next deal, if any. A commission of `2,60,000/- was, however, received from M. K. Subba. (e). Suraj Bhan Sharma confirmed in the statement that all the cash as well as cheque payment were made in his presence or in the presence of Dharam Pal Sharma, the other partner of Pandit Estates. He also confirmed that cash cheque payment were made in his presence or in the presence of Dharam Pal Sharma, the other partner of Pandit Estates. He also confirmed that cash (e). Suraj Bhan Sharma confirmed in the statement that all the cash as well as cheque payment were made in his presence or in the presence of Dharam Pal Sharma, the other partner of Pandit Estates. He also confirmed that cash cheque payment were made in his presence or in the presence of Dharam Pal Sharma, the other partner of Pandit Estates. He also confirmed that cash payment of the token money of `5,00,000/- and another sum of `20,00,000/- were paid by Rajinder Gupta to M. K. Subba. The same modality for payment of cash was adopted by the parties in the case of KG Farm by paying a token money of `5,00,000/- in cash by Rajinder Gupta to Ashok Kakkar and the balance payment of cash were spread over a period of three months. Suraj Bhan Sharma confirmed that “all the cash payments were made by the buyer to ”the seller in presence of either me or Shri Dharam Pal Sharma. (f). Suraj Bhan Sharma also brokered the purchase by Rajinder Gupta family of 4 acres of land near Bondsi Farm at Sohna. Though the total amount paid was `24 lakhs. He could not remember the cash/ cheque break up. In the course of the search at the residence of Suraj Bhan Sharma, the search authorities found a register marked Annexure A-1, pages 1 to 12 of which were found written as statement of income and expenditure. When he was asked to explain the entries in the register, Suraj Bhan Sharma replied that the details are regarding the sale of Jaunpur Farm to the assessee by Ashok Kakkar and the sale of Sohna land to Rajinder Gupta. 7. Dharam Pal Sharma, the partner of the Pandit Estate, also gave a sworn statement on 27.08.1998 under Section 132(4) of the Act in which he confirmed the statement of Suraj Bhan Sharma regarding the property transaction and also confirmed that the total price for KG Farms, paid by the assessee, was `2.49 crores and the total price for Jyoti Farms paid by the assessee was `2.6 crores. The statements of Suraj Bhan Sharma and Dharam Pal Sharma were shown to the Rajinder Gupta along with the register seized from the premises of Pandit Estate upon which he admitted that the total price paid for KG Farms and Jyoti Farms was `2.49 crores and `2.60 crores respectively and that the assessee purchased them in the names of his sons Rohit and Nitin. 8. So far as KG Farms is concerned, certain further facts were also brought on record by the Assessing Officer. There was a survey under Section 133A of the Act in the premises of M/s. Ravinder Properties of Andheria Mor, New Delhi. A sworn statement was recorded from Ravinder Sharma, the proprietor of Ravinder Properties, in which he had “graphically described” that Rjender Gupta had negotiated the sale of KG Farms for `3.10 crores to one Darshan Kumar Khosla and that the document was registered with the office of the Sub-registrar, INA, New Delhi for `40,00,000/-, with the remaining amount of `2.70 crores being paid in cash to the seller, before the registration. He further stated that he had received his commission in the deal also in the same proportion i.e. `80,000/- by cheque and `2,30,000/- by cash from the buyer Darshan Kumar Khosla, who was also known as Kumar Sahib. Another important fact noticed by the Assessing Officer was that during the survey an envelope addressed to M/s. PTC Bearing Pvt. Ltd., No.2392, Gupta Manson, Shradhanand –Marg, G. P. Road, Delhi 110006 was found. The envelope was sent by Pal India Shipping agency of Bombay. Ravinder Sharma, when asked to explain, stated that the received `1,00,000/- in cash as his commission on one of the installments of the price, from Ravinder Gupta in the envelope in which the cash had been put in `100/- and `50/- notes. A rough plan of the farm house was also found in the same envelope. 9. The Assessing Officer, from the statements of the two brokers recorded on the date of the search and from the statement of Rajinder Gupta recorded also on the day of the search concluded that the purchase consideration of KG Farms and Jyoti Farms and the sale consideration of KG Farms were heavily understated and substantial amounts of cash had changed hands. 10. There was also an additional fact which was noticed in the assessment order of the assessee. The documents in respect of the purchase of KG Farm by the assessee was dated 03.05.1995 and it consisted of 10 sale deeds showing consideration at `1,87,000/- each, totalling to `18,17,000/-. These documents were signed by Suraj Bhan Sharma as a witness. Similarly, the documentation for the purchase of Jyoti Farm from M. K. Subba was in 5 registered deeds and each of the deeds showed the purchase price at `4,35,000/- aggregating to `21,75,000/-. In these documents the other partner of the Pandit Estates, Dharam Pal Sharma, had signed as witness. The Assessing Officer thought it quite strange that farm houses which consisted of double storied building could be registered in this manner in split documents each showing a uniform consideration. According to the Assessing Officer, some of the documents showed only agricultural land whereas some of them showed both agricultural lands and double storied building; nevertheless, every document showed a uniform price of `4,35,000/-. This, according to the Assessing Officer, showed that the documents were registered without much examination and in a routine or mechanical fashion apparently without any field inspection. He, therefore, refused to accord any credence to the averments made and the authenticity of the consideration shown in the documents. It was also noticed by the Assessing Officer that even the sale of KG Farms was done in a similar fashion through 10 split documents each showing a consideration of `4,10,000/- and they were registered on 09.10.1997. Ravinder Sharma, who brokered the deal, had signed the documents as one of the witnesses. 11. The Assessing Officer after marshalling all the aforesaid facts and bringing them on record called upon the assessee to explain them. In response thereto, written submissions were filed on 24.04.2002 in which it was stated that there was no understatement of the purchase price which was correctly recorded in the registered documents, that the registration fee and the stamp duty was duly paid on the declared consideration as shown in the registered documents and that Rajinder Gupta as well as the brokers have retracted from their statements given on the date of the search and in these circumstances there was no material or evidence to support the allegation that the assessee indulged in understatement of the investment in the farm houses and the sale price of KG Farm house. 12. The submissions of the assessee were rejected by the Assessing Officer in the following words: - 12. The submissions of the assessee were rejected by the Assessing Officer in the following words: - “The averments of the A.R. are considered carefully with reference to the material available on record. Abundant evidence in the form of the entries made in the register maintained by the brokers M/s Pandit Estates and the envelope carrying cash towards commission paid to another broker Sh. Ravinder Sharma was found from the respective premises on 27.8.1998. On the same day all the brokers have stated in detail the actual transactions that had taken place and corroborated then statements with the material found during search/ survey. The graphic descriptions given by the brokers in their sworn statements on the date of search lends lot of credence to the unadulterated statements given by the brokers on the date of search which were not influenced by any extraneous consideration. The detailed description in the statement of the brokers recorded on the date of search appears natural and logical in the nature of their business. The statements of the brokers were put to the comments of Sh. Rajinder Gupta who is the Power Attorney holder of the assessee and who was involved in these transactions on the same day of their recording. Having gone through the contents of these statements and the evidence supporting them. Sh. Rajinder Gupta admitted on oath the veracity of the transactions as described by them. The subsequent retractions were only self-serving statements because the brokers were influenced/induced by the assessee and his agents and also with a view to avoiding taxes them-selves on the commission income. It has already been discussed above that the registration of the documents were done without and (sic) inspection on field and in routine and clerical manner and without an elementary scrutiny of their contents. Thus no credence can be given for the consideration shown in these documents. Not even the token money which is given by the prospective buyer to the seller on the finalization of the deal is mentioned in these documents.” 13. On the aforesaid reasoning the Assessing Officer computed the unexplained investment in the purchase of the two farm houses and the addition to be made in the assessment as follows: - “1. Unexplained investment in the purchase of KG Farm : Actual consideration paid `2,49,00,000/- Add: Commission paid to Broker `2,50,000/-`2,51,50,000/- Less: Amount paid from NRO A/c `18,70,000/- `2,32,80,000/- 14. The undisclosed capital gain on the sale of KG Farm was taken at `47,86,893/- this was computed as follows: - Less: 2. Cost of Transfer 15. In the course of the assessment proceedings the Assessing Officer estimated the total monthly expenses for maintenance of the two Farm house at `40,000/- and computed the total expenditure at `14,40,000/- for a period of 36 months and added the same as unexplained expenditure. An amount of `2,30,000/- was also added on account of unexplained commission paid in cash to Ravinder Sharma at the time of sale of KG Farm. This was on the basis of the statement of Ravinder Sharma that he received commission of `3,10,000/- from the assessee for brokering the sale of KG Farms out of which `80,000/- was paid to him in cheque and the balance of `2,30,000/- was paid to him in cash. Less: 2. Cost of Transfer 15. In the course of the assessment proceedings the Assessing Officer estimated the total monthly expenses for maintenance of the two Farm house at `40,000/- and computed the total expenditure at `14,40,000/- for a period of 36 months and added the same as unexplained expenditure. An amount of `2,30,000/- was also added on account of unexplained commission paid in cash to Ravinder Sharma at the time of sale of KG Farm. This was on the basis of the statement of Ravinder Sharma that he received commission of `3,10,000/- from the assessee for brokering the sale of KG Farms out of which `80,000/- was paid to him in cheque and the balance of `2,30,000/- was paid to him in cash. 16. One more addition made by the Assessing Officer in the block assessment order passed in the assessee‟s case is the amount of `19,35,769/- as “undisclosed capital gains on sale of land at Jaipur Highway”. The brief facts in connection with this addition may be noted. Pages 40 to 42 of the Annexure A-11 seized during the search consisted of three undated cheques of `4,24,000/- each issued by M/s. Azaad Coach Pvt. Ltd. in favour of Mrs. Asha Kedarnath Gupta, the wife of the assessee. The seized material also consisted of four photocopies of undated cheques, each for `3,25,000/- issued by Azaad Coach Pvt. Ltd. in favour of the assessee. The assessee was asked to furnish the details regarding the transactions to which these cheques related. The assessee replied as follows: - “The land at Jaipur Highway including approach road was purchased during the year 1994-95 and 1995-96 and the total registered documents were twenty six in number. The net consideration for the same including payment of registration charges and documentation was ` 44,82,535.00. Part of the land was sold during the financial year 1996-97 for a total consideration of ` 35,19,000.00 and the capital gains of ` 157098.75 arising on the sale of the above land has duly been reflected in the income tax computation. The balance land was also proposed to be sold during the financial year 1997-98 for a sum of ` 12,72,000/- but the deal did not mature as the buyer of the property Azad Coaches Pvt. Ltd. And not make the payments and the files were also not transferred in their favour. The assessee is still therefore holding a part of the Jaipur Highway land. The three unpaid cheques of ` 4,24,000/- (totaling ` 12,72,000) which were seized during the course of search operations hence stands explained. No amount has been incurred on the renovation/repair/construction of the aforementioned land.” 17. The explanation of the assessee was considered by the Assessing Officer in detail. He noticed that the assessee was unable to furnish the bifurcation of the total extent of land purchased and how much thereof was sold. He could not even explain whether his wife, shown to be a co-owner, had any independent sources of income to make the payment for purchase of the land. In this background, the Assessing Officer first held that the entire land would be taken to be that of the assessee and, therefore, 17. The explanation of the assessee was considered by the Assessing Officer in detail. He noticed that the assessee was unable to furnish the bifurcation of the total extent of land purchased and how much thereof was sold. He could not even explain whether his wife, shown to be a co-owner, had any independent sources of income to make the payment for purchase of the land. In this background, the Assessing Officer first held that the entire land would be taken to be that of the assessee and, therefore, the entire capital gains arising out of the sale of the land would be taken as the assessee‟s income. Since the assessee was not able to give a bifurcation between the extent of the land purchased and extent of land sold, the Assessing Officer made an attempt to reconcile the figures from the seized material. He noticed that the material seized from the residence of Rajinder Gupta consisted of three sale deeds, all of them dated 12.10.1994, by which the assessee had purchased 39/314[th] share of land of 15 bighas 4 biswas, each for an apparent consideration of `1,87,000/- in the joint names of himself and his wife. This land was purchased from Azaad Coach Pvt. Ltd. and the total purchase price was `6,31,125/- including stamp duty of `70,125/-. From the bank account of the assessee with Citi Bank, New Delhi, the Assessing Officer noted that the assessee received four cheques of `4,25,000/- each and two cheques of `3,25,000/- each in December, 1996 from Azaad Coach Pvt. Ltd. This totals to `23,46,000/-. According to the assessee, he was to receive another three cheques of `4,25,000/- each which did not materialise since the deal for the sale of the remaining land did not materialise. From these facts the Assessing Officer concluded that the land which was purchased by the assessee in 1994 from Azaad Coach Pvt. Ltd. was sold back to Azaad Coach Pvt. Ltd., but a part of the land could not be sold and the corresponding amount could not be realised. Since the assessee could not give any bifurcation of the cost of acquisition of `6,31,125/-, the Assessing Officer bifurcated the cost of pro rata according to the consideration received. The assessee has received consideration of `23,46,000/-, but did not receive `12,72,000/- as the sale did not materialise in part. This gave a ratio of 65:35. The cost of the land, that is, `6,31,125/- was bifurcated in this ratio and the cost attributable to the land sold came to `4,10,231/-. The capital gains were accordingly computed at `19,36,769/-, which was the excess of the sale consideration of `23,46,000/- over the cost of `4,10,231/-. The capital gains were also taken as the undisclosed income of the assessee since there was no disclosure of the same prior to the date of the search. 18. The assessee appealed against the assessment order to the CIT (Appeals) who disposed of the appeal by order dated 31.03.2003. We shall summarise the findings of the CIT (Appeals) only with regard to the issues on which substantial questions of law have been framed by us. 19. As regards the addition of the undisclosed investment of `4,71,05,000/- in respect of the KG Farms and Jyoti Farms, the CIT (Appeals) recorded the following findings: - “(a). The entire case of the Assessing Officer is based on the statements of Rajinder Kumar Gupta, the brother of the assessee, and those of the brokers Dharam Pal Sharma and Suraj Bhan Sharma there is no corroboration of these statements. (b). The assessment has been taken up at the fag end of the period of limitation. The statements referred to above were not put to the assessee for rebuttal in the course of the assessment proceedings. (c). The Assessing Officer has not been appointed to source of alleged money paid for the two Farm houses. (d). No action was taken against the sellers of the Farm houses. 19. As regards the addition of the undisclosed investment of `4,71,05,000/- in respect of the KG Farms and Jyoti Farms, the CIT (Appeals) recorded the following findings: - “(a). The entire case of the Assessing Officer is based on the statements of Rajinder Kumar Gupta, the brother of the assessee, and those of the brokers Dharam Pal Sharma and Suraj Bhan Sharma there is no corroboration of these statements. (b). The assessment has been taken up at the fag end of the period of limitation. The statements referred to above were not put to the assessee for rebuttal in the course of the assessment proceedings. (c). The Assessing Officer has not been appointed to source of alleged money paid for the two Farm houses. (d). No action was taken against the sellers of the Farm houses. (e). The assessee has submitted a valuation report of the registered valuer in support of the amounts invested in those properties as also a chart of properties in the vicinity for comparison purpose along with photocopies of the total Deeds of these properties. The consideration for those properties compares well with the consideration paid by the assessee for the two Farm houses. These details have not been disputed by the Assessing Officer. (f). No extra ordinary amount of cash or assets or investments or any agreement to sell, etc. was found during the search.” On the basis of the above findings, the CIT (Appeals) deleted the addition of `4,71,05,000/-. 20. As regards the alleged undisclosed capital gains on sale of land at Jaipur Highway in the amount of `19,35,769/-, the findings of the CIT (Appeals) can be summarised as follows: the capital gains can arise only if property is sold within the meaning of Section 2 (47) of the Act. The assessee is still holding a part of the land for which no consideration has been received. Therefore, there is no sale of the property which can be said to give rise to any capital gain. Even the original cheques form part of the seized documents which shows that the transfer did not take place. Therefore, there is no question of any undisclosed capital gains. In this view of the matter the addition of `19,35,769/- was deleted. 21. The addition of `2,30,000/- on account of unexplained commission paid to the broker in connection with the sale of KG Farm was also deleted by the CIT (Appeals) consequent to his decision that the sale of KG Farms was made only for `41,00,000/- and not for `3,10,00,000/- as assessed by the Assessing Officer. Since the commission was payable at the rate of 2% of the sale price, the CIT (Appeals) held that the actual commission paid was only `80,000/- which has been paid by cheque and there was no question of assessee paying any commission in cash. In this view he deleted the addition of `2,30,000/-. 22. The Revenue carried the matter in appeal to the Tribunal. The Tribunal examined the rival contentions and the facts and agreed with the decision of the CIT (Appeals) that there was no basis for addition of `4,71,05,000/-. The findings and conclusion of the Tribunal on this issue are as follows: - “2.1.5 We have perused the records and considered the matter carefully. The dispute raised in this ground of appeal relates to addition made by the A.O. on account of undisclosed investment in purchase of K G Farms and Jyoti Farms. The additions have been made on the basis of statement of Sh. Rajinder Gupta, the brother of the assessee and the two brokers who had subsequently retracted from their earlier statements. The brokers in their fresh statements supported by sworn affidavits have made it clear that the statements made earlier where under influence of threat and dire consequences by the official. No other material has been placed on record by the A.O. in support of the claim that the assessee had made undisclosed investments. Neither the vendors of the two properties have admitted “2.1.5 We have perused the records and considered the matter carefully. The dispute raised in this ground of appeal relates to addition made by the A.O. on account of undisclosed investment in purchase of K G Farms and Jyoti Farms. The additions have been made on the basis of statement of Sh. Rajinder Gupta, the brother of the assessee and the two brokers who had subsequently retracted from their earlier statements. The brokers in their fresh statements supported by sworn affidavits have made it clear that the statements made earlier where under influence of threat and dire consequences by the official. No other material has been placed on record by the A.O. in support of the claim that the assessee had made undisclosed investments. Neither the vendors of the two properties have admitted receiving any money over and above the stated consideration nor any extra ordinary cash was found during the course of search. On the contrary, the assessee has provided valuation report from registered valuer as well as some comparable cases of sale deeds in the adjoining area. These facts have not been controverted before us. Under the circumstances, we see no infirmity in the order of CIT (A) deleting the addition and the same is upheld.” 23. With regard to the addition of `19,35,769/- as undisclosed capital gains on sale of land at Jaipur Highway, the Tribunal‟s findings and conclusions are reproduced below: - “2.3.4 We have perused the records and considered the matter carefully. The A.O. had made addition of ` 1935769/- on account of undisclosed capital gain on sale of land at Jaipur Highway. The addition has been made only on the basis of some amount deposited in the bank account and on the basis of unpaid cheques found during search. The assessee had been purchased during the year 1994-95 and part of which was sold during financial year 1996-97 on which capital gain of ` 157098.75 had been declared by the assessee in the return of income. The balance land was proposed to be sold in financial year 1997-98 but the deal did not mature as the buyer i.e. Azad Coaches Pvt. Ltd. did not make the payments and the titles were therefore, not transferred. The assessee also submitted that the very fact that unpaid cheques were found during search showed that the payments had not been received by the assessee. We find that no material is available with the revenue to controvert the claim of the assessee. No inquiry had been made either from Azad Coaches Pvt. Ltd. or from any other person to substantiate the allegation of sale of land. There is no material to show that the land was transferred during the year and therefore, no capital gain could be charged. In the absence of any such material, capital gain cannot be charged to tax only on the basis of some unpaid cheques found during search or some amount deposited in the bank account. We see no infirmity in the order of CIT (A) deleting the additions and same is upheld.” 24. As regards the addition of `2,30,000/- for unexplained commission paid in cash to broker Rajinder Sharma, the Tribunal accepted the decision of the CIT (Appeals) that it was consequential to the deletion of the addition made for unexplained investment in KG Farms. Since the assessee was held to have invested only `41,00,000/- as against the investment of `3,10,000/- crores as estimated by the Assessing Officer, the corresponding commission of `2,30,000/- was also directed to be deleted by the CIT (Appeals) and this finding was upheld by the Tribunal. 24. As regards the addition of `2,30,000/- for unexplained commission paid in cash to broker Rajinder Sharma, the Tribunal accepted the decision of the CIT (Appeals) that it was consequential to the deletion of the addition made for unexplained investment in KG Farms. Since the assessee was held to have invested only `41,00,000/- as against the investment of `3,10,000/- crores as estimated by the Assessing Officer, the corresponding commission of `2,30,000/- was also directed to be deleted by the CIT (Appeals) and this finding was upheld by the Tribunal. 25. Before we examine the rival contentions in the appeals, it is necessary to refer to the assessment of Mani Kakkar in ITA No.892/2008. She is the wife of Ashok Kakkar. It may be recalled that Kedarnath Gupta, the assessee in ITA No.713/2008, had purchased a farm house from Mani Kakkar, the name of which was “KG Farms”at village Jaunpur, Mehrauli. This property had been purchased by Kedarnath Gupta in the name of his son Rohit Kedarnath Gupta. The property was purchased on 03.05.1995. The corresponding sale price was dealt with in the assessment of Mani Kakkar, who is hereinafter referred to as the “assessee”. According to the Assessing Officer who completed the assessment of Mani Kakkar under Section 158BD of the Act consequent to the search in the case of Rajinder Gupta, the property was sold by Mani Kakkar to Kedarnath Gupta for `2.59 crores and not for `18,70,000/- as declared by the assessee herein. The Assessing Officer also found that the assessee had executed 10 registered sale deeds for `1,87,000/- each, aggregating to `18,70,000/- and had denied that the farm house was sold for `2.49 crores. On a perusal of the sale documents, the Assessing Officer found that there was no reference therein to the superstructure which existed on the land. According to him, since material facts were not disclosed to the registering authority and the documents did not mention the fact that there was a super structure on the land, no credence can be given to the consideration declared in the documents. The Assessing Officer also referred to the statement of Ravinder Sharma, broker and proprietor of Ravinder Properties, through him the deal was done. He has stated that the KG Farms was purchased in the name of Rohit Kedarnath Gupta for a consideration of `2.49 crores and he had been paid brokerage accordingly, though the consideration stated in the sale deeds was much less. The statement of Suraj Bhan Sharma, who was associated with Pandit Estates, the brokerage firm, was put to the assessee for rebuttal. By written submissions dated 05.01.2005 the assessee stated that the land sold was agricultural land and reiterated that the total consideration was only `18,70,000/- and not `2.49 crores. The assessee again submitted in writing on 19.01.2005 that the reliance placed by the Assessing Officer on the statement of Suraj Bhan Sharma was unwarranted. These written submissions are reproduced at pages 6 and 7 of the assessment order dated 28.01.2005 passed by the Assessing Officer in the case of Mani Kakkar. The Assessing Officer, however, rejected the submissions of the assessee for the reasons given in the assessment order at pages 7 and 8 thereof and ultimately computed the capital gains on the basis that the actual sale consideration was `2.49 crores as against `18,70,000/- disclosed by the assessee. The ultimate addition came to `2,27,80,000/- as “undisclosed capital gains”. 26. The assessee had denied payment of any commission for putting through the transaction which was not accepted by the Assessing Officer on the ground that the broker himself has admitted to have received commission of `2,50,000/- in respect of the sale transaction. The amount was added in the block assessment as undisclosed brokerage. 26. The assessee had denied payment of any commission for putting through the transaction which was not accepted by the Assessing Officer on the ground that the broker himself has admitted to have received commission of `2,50,000/- in respect of the sale transaction. The amount was added in the block assessment as undisclosed brokerage. 27. These two additions were challenged in appeal by the assessee before the CIT (Appeals). A preliminary objection was raised by the assessee to the effect that no proper “satisfaction” was recorded by the Assessing Officer under Section 158BD of the Act and, therefore, the assessment was without jurisdiction. This aspect of the matter was considered by the CIT (Appeals) in detail by calling for a remand report from the Assessing Officer. After reproducing the “satisfaction note” recorded on 20.11.2002 and after examining the legal position, the CIT (Appeals) upheld the objection of the assessee in the following words: - “4.18 I have considered the reasoning given by the AO and the submissions made by the Ld Counsel. As far as the reasoning of the Ld. Counsel that no satisfaction has been recorded by the AO of the person searched i.e Sh. Kedar Gupta is concerned, the same is not tenable. This is so because the first satisfaction which is for centralization of case of the appellant has been recorded by DCIT, CC-6, March 02. In the second satisfaction in November 2002, the AO has issued u/s 158BD on the basis of reasons recorded by his predecessor. The issue that needs examination is whether the initial satisfaction can be said to be satisfaction within the meaning of sec. 158BD or not. A plain reading of this satisfaction indicates that the same was recorded for the purpose of centralization of the case of appellant and to investigate whether any capital gain has been declared by the appellant. Notice u/s 158BD of the Act was to be issued to the appellant. In the second satisfaction, the succeeding officer relied on this reason and issued the notice. In other words neither the first officer nor the second one ever recorded the satisfaction that any undisclosed income of the appellant has been detected as a result of search u/s 132 in the case of Sh. Kedar Gupta. I am also in agreement with the submissions of Ld. Counsel that notice u/s 158 BD was issued on 6.1.2003 which is much beyond the date of assessment in the case of Sh. Kedar Nath Gupta and decision of Hon’ble Gujarat High Court in the case of Khandu Bhai Vasantji Desai (Supra) is thus applicable to the facts of appellant.” 28. Even though the CIT (Appeals) upheld the preliminary objection of the assessee (Mani Kakkar), he proceeded to deal with the merits of the additions. After examining the issue in detail, he noted that in the case of the buyer of the property, namely Kedarnath Gupta, the CIT (Appeals) has deleted the addition made for unexplained or undisclosed investment in the purchase of KG Farms. Eventually the CIT (Appeals) summarised his findings in the following words: - “5.23 I have considered the reasoning given by the AO and the submissions made by the Ld Counsel. the main reasoning of the AO in treating the sake (sic) consideration of the KG Farms at `2,49,00,000/- against declared sale consideration of `18,70,000/- is the statement of Sh. Suraj Bhan Sharma. The AO did not allow appellant any opportunity to cross-examine this person. I am in agreement with the submissions of Ld. Counsel that without allowing appellant such an opportunity no adverse view can be taken. Even the persons viz Sh. S B Sharma and Sh Dharma Pal Sharma have “5.23 I have considered the reasoning given by the AO and the submissions made by the Ld Counsel. the main reasoning of the AO in treating the sake (sic) consideration of the KG Farms at `2,49,00,000/- against declared sale consideration of `18,70,000/- is the statement of Sh. Suraj Bhan Sharma. The AO did not allow appellant any opportunity to cross-examine this person. I am in agreement with the submissions of Ld. Counsel that without allowing appellant such an opportunity no adverse view can be taken. Even the persons viz Sh. S B Sharma and Sh Dharma Pal Sharma have retracted from the statements given by them. Thus also no adverse view can be taken. The AO has also drawn adverse inference from the fact that the said sale deeds. I fail to understand as to how an adverse view can be drawn from not mentioning the built up portion on the land if no evidence of payment over and above the stated consideration is found. The Ld. CIT(A) has in appeal no 137/2002-03 vide his order dated 31.3.2003 has deleted the addition in the case of Sh. Kedar Nath Gupta, a person who purchased the said KG Farms. While deleting the addition, the Ld. CIT (A)–I held that there is no corroborative positive evidences in addition to the statements of the search parties to draw a conclusion that the appellant had undisclosed income which he has invested in the purchase of these agricultural farm lands. The Ld. CIT(A)-I further observed that addition has been made merely on the basis of statements of the two brokers which have not been confronted to the appellant. Based on facts of the case Ld. CIT(A)-I deleted the addition in the case of Sh. Kedar Nath Gupta. In view of detailed reasoning given by CIT(A)-I and the facts of the case, I find no reason to differ from the finding given by Ld. CIT(A)-I. I am thus of the view that the AO was not justified in making the addition of `2,27,80,000/- to the undisclosed income of the appellant as short term capital gains. The same is deleted. 5.24 Regarding the brokerage of 2,50,000/- which is calculated @ 1% of the sale consideration of `2.49 crores, the same is also not sustainable. Since the sale consideration of `2.49 crores is held to be incorrect. This addition is also the