Ita/8/2012 Of Commissioner Of Income Tax, Guwahati v. M/S Fantasti Buildcon Pvt Ltd

ITA 8/2012BEFOREHON’BLE THE CHIEF JUSTICE(ACTG.)HON’BLE MR JUSTICE P. K. SAIKIAHeard the appellant and the respondent. 2)The respondent company purchased a hotel by a registered sale deed dated30th October, 2006 for a sum of Rs 10.40-crore. The department during a search operation in the house of one Mr Modi, a real-estate broker, unearthed an agreement between Mr Modi and the erstwhile owner of the hotel. In the said agreement the sale price was fixed at Rs 3,500/- per square feet. On the basis of the saidagreement it was found that the sale price shown in the sale deed of the private respondent at Rs 800/- per square feet is deliberately undervalued. It also appears that a statement of Mr Modi was recorded in which he has stated that the agreement seized from his custody was made by him on behalf of the private respondent. On the basis of the said statement an enquiry was initiated that the company has suppressed its income to the tune of Rs 35.10-crore. 3)The assessing officer in the enquiry found on the basis of the statementof Mr Modi and the agreement found in the search proceedings that the respondent company is guilty of suppressing its income and avoiding the tax and after issuing a show-cause notice for reopening of the assessment under section 148 of the Income Tax Act, 1961 passed an assessment order under section 16 of the IncomeTax Act. Aggrieved by the said order the respondent filed an appeal before the Commissioner of Income Tax(Appeals) ~ Guwa-255/2010-11. 4)The Commissioner of Income Tax dismissed the said appeal. Aggrieved by the said order the respondent filed an appeal before the Income Tax Appellate Tribunal ~ ITA 104/Gau/2011. The Tribunal allowed the appeal. Aggrieved by the saidorder the department filed this appeal. 5)This Court framed the following substantial questions of law while admitting the appeal. 1)Whether on the facts and in the circumstances of the case, the Tribunal was perverse in deleting the addition made by the Assessing Officer on the ground that the two documents relied upon for such addition did not refer to the same property?2)Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in holding that even if the addition was justified, it should had been made under Section 69B of the Income Tax Act, 1961 and not under section 69 of the Income Tax Act, 1961. 3)Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in holding that the Department has failed to dischargethe burden under Section 69B of the Income Tax Act, 1961 of proving that the assessee made additional investment?4)Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in holding that the provision of Section 114(g)of the Indian Evidence Act, 1872 is attracted in the case? 6)The counsel for the appellant submits that the statement of the agreement-holder clearly discloses that the agreement was made on behalf of the respondent company. The agreement also discloses a payment of advance amount of Rs 4-crore, which, according to the agreement-holder, was paid by the respondent company. The respondent company issued cheques towards advance payment to the vendor and virtually purchased the property. Therefore there appears to be no reasonable nexus and substantial evidence available to show that the agreement made by Mr Modi with the erstwhile owner was in fact for the benefit of the company and thatthe Tribunal did not appreciate the evidence in proper perspective, thus erred in allowing the appeal. 6)The counsel for the appellant submits that the statement of the agreement-holder clearly discloses that the agreement was made on behalf of the respondent company. The agreement also discloses a payment of advance amount of Rs 4-crore, which, according to the agreement-holder, was paid by the respondent company. The respondent company issued cheques towards advance payment to the vendor and virtually purchased the property. Therefore there appears to be no reasonable nexus and substantial evidence available to show that the agreement made by Mr Modi with the erstwhile owner was in fact for the benefit of the company and thatthe Tribunal did not appreciate the evidence in proper perspective, thus erred in allowing the appeal. 7)Per contra, the counsel for the respondent submits that (1) the agreement which the department is placing reliance on is dated 4th August, 2006 when thecompany was not even incorporated, therefore the question of authorising Mr Modi by the company does not arise. (2) The cheques issued by the vendor company are in respect of the agreement which was entered into with the vendor company andtowards which part payments have been made by cheques. (3) The statement of Mr Modi before the assessing officer that he had entered into an agreement on behalf of the respondent company is incredible because to wriggle out of the awkward situation he had to name only the respondent company who has purchased the property, since he could not have successfully attributed to any other person except the respondent company. (4) The person who executed the sale deed on behalf of the vendor company or any of its directors have not been examined by the assessing officer in order to come to the conclusion that the agreement between the vendor company and Mr Modi was in fact for the benefit of the respondent company. 8)The Tribunal took all the above aspects into consideration and came to the right conclusion that the order of the assessing officer and the Commissionerof Income Tax(Appeals) is illegal and thus set aside the order. There is no perversity in the findings recorded by the Tribunal. We find that the submissions made by the counsel for the respondent company appears to be sound and proper. The first question of law is answered in the negative. 9)In respect of the question 2 and 3, the respondent company has shown thesale price in the account books at Rs 9-crore odd. The department has not foundany contra material to controvert the entries in the account books of the respondent company. Therefore the question 2 and 3 are answered in the affirmative. 10)It is the contention that the statement of the responsible part of the vendor company was recorded in course of the survey and the respondent company had insisted production of the said statement and furnishing copy of the same, which was not produced and copy not furnished to the respondent company. In that view of the matter the adverse inference drawn by the Tribunal is sound and proper. The question 4 is also answered in the affirmative. Accordingly the appeal is dismissed.