Navneet Jhamb v. Assistant Commissioner Of Income Tax, Central Circle, Faridabad

ITA No. 497 of 20181] IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No. 497 of 2018Date of decision: 29.1.2020 Navneet Jhamb .. Appellant V. Assistant Commissioner of Income Tax, Central Circle, Faridabad.. Respondent CORAM:HON'BLE MR. JUSTICE AJAY TEWARIHON'BLE MR. JUSTICE AVNEESH JHINGANHON'BLE MR. JUSTICE AVNEESH JHINGAN Present: |Ms. Radhika Suri, Senior Advocate withMr.Manpreet Singh Kanda, Advocate for the appellant. Mr.Manpreet Singh Kanda, Advocate for the appellant. Mr. Tajender K. Joshi, Senior Standing Counsel forthe revenue.the revenue. AVNEESH JHINGAN, J. 1]By this common order, three appeals bearing ITA Nos. 496,497 and 3508 of 2018 are being disposed of as similar issue is involved.The assessment years involved are 2001-02 to 2003-04. For the sake ofconvenience, facts from ITA No. 497 of 2018 are taken. Followingsubstantial questions of law have been claimed: BC.DWhether in the facts and circumstances of the case, theITAT has erred in law on facts in upholding the orderspassed by the Lower Authority and in confirming theaction of Ld. A.O. in making the addition ofRs. 78,88,222/- as undisclosed income allegedly beingITAT has erred in law on facts in upholding the orderspassed by the Lower Authority and in confirming theaction of Ld. A.O. in making the addition ofRs. 78,88,222/- as undisclosed income allegedly being ITA No. 497 of 2018|2]| profit on sale of plot merely on the basis of conjectureand surmises and without of any basis? C..DWhether in the facts and circumstances of the case, theITAT has fallen in error in sustaining the additions madeby the A.O. and CIT (A) on the basis of loose papersWhich were even not being the documents within themeaning of Section 32 of Indian Evidence Act, 1972?ITAT has fallen in error in sustaining the additions madeby the A.O. and CIT (A) on the basis of loose papersWhich were even not being the documents within themeaning of Section 32 of Indian Evidence Act, 1972? C...DWhether in the facts and circumstances of the case, theITAT has failed to consider the fact that the Ld. A. O|had made the additions on the basis of calculations takenfrom loose documents found during search in which theAppellant was even not mentioned as a buyer or seller,which is totally perverse as and when the seller wasM/s Indo American Electricals Ltd., and the purchaserwas Shri G. L. Verma, then where is the occasion for theassessee/appellant to show any profit or loss arising fromthese transactions in his return of income.ITAT has failed to consider the fact that the Ld. A. O|had made the additions on the basis of calculations takenfrom loose documents found during search in which theAppellant was even not mentioned as a buyer or seller,which is totally perverse as and when the seller wasM/s Indo American Electricals Ltd., and the purchaserwas Shri G. L. Verma, then where is the occasion for theassessee/appellant to show any profit or loss arising fromthese transactions in his return of income. C.2DWhether in the facts and circumstances of the case, theITAT has erred in law and on facts in confirming theaction of Lower Authorities in framing the assessmentU/s 153A in violation of principles of natural justice andpassing the impugned order by recording incorrect factsand findings and without confronting the entire adversematerial used against the assessee?”ITAT has erred in law and on facts in confirming theaction of Lower Authorities in framing the assessmentU/s 153A in violation of principles of natural justice andpassing the impugned order by recording incorrect factsand findings and without confronting the entire adversematerial used against the assessee?” ?D Though number of substantial questions have been claimed, yet the pin-pointed controversy is: ITA No. 497 of 2018}3]] “Whether the addition made on account of undisclosedearned profit on sale and purchase of property owned andsold by others could be sustained, especially when theaddition in the hands of the purchaser on the basis ofseized document has been set aside’. ?D Though number of substantial questions have been claimed, yet the pin-pointed controversy is: ITA No. 497 of 2018}3]] “Whether the addition made on account of undisclosedearned profit on sale and purchase of property owned andsold by others could be sustained, especially when theaddition in the hands of the purchaser on the basis ofseized document has been set aside’. 3,The facts of the case are that on 4.8.2005, search andseizure was conducted at the premises of the appellant, he is partner of thereal estate broker concern, namely, Reliance Estate Agency. Certaindocuments and loose papers were seized from his _ residential premisesNotice under Section 153A of the Income Tax Act, 1961 (for short, ‘theAct’) was issued, return was filed declaring income oft=4,13,720/-. Apartfrom other additions, the Assessing Officer made addition on account ofundisclosed earned profit on sale of industrial plots at village Jharsentli,Tehsil Ballabgarh, District Faridabad. The land was owned by M/s IndoAmerican Electricals Limited (hereinafter described as ‘the seller’).Manmohan Singh was the Managing Director of the company. It was notedthat M/s Reliance Estate Agency was appointed by the seller to advertiseand procure bids for sale of the land. M/s TML Investments (P) Ltd. showedinterest but the deal did not mature, thereafter plots were subsequently sold,The Assessing Officer came to the conclusion that actual sale considerationof 16 plots tabulated in the assessment order was much more than thefigures shown in the registered sale-deeds. The Assessing Officer relyingupon the loose sheet seized, mentioning the amount received in cash andcheques calculated the profit and divided the same in half vis-a-vis theassessee and Manmohan Singh, Managing Director of the seller-company.The assessment was finalised on 24.12.2007. The Appellate Authority vide ITA No. 497 of 20184] order dated 28.1.2011 partly allowed the appeal, however, sustained theadditions of profit. Further appeal was filed before the Tribunal which wasdismissed on 25.6.2018, hence the present appeal.4Learned counsel for the appellant argued that theTribunal erred in sustaining addition inspite of the fact that the additionsmade on the same basis, in the hands of the purchaser was deleted by theTribunal and in case of ITA No. 1985 of 2010 --Prem Parkash Nagpal v. Assistant Commissioner of Income/tax, and the appeal filed by therevenue was dismissed by Delhi High Court. It is submitted that noaddition was made in the hands of the owner of the property, i.e. either theseller-company or the Managing Director, 5 Learned counsel for the revenue defended the order andargued that the addition made in the case of buyer was deleted on technicalground, moreover the documents were seized from the premises of theappellant and the said deletion is of no help to the appellant. 6 There is no dispute that on the basis of the loose sheet seizedduring the search, the addition was made on the buyer and the same hasbeen deleted. Learned counsel for the revenue is not in a position to disputethe averment that no addition was made in the hands of the seller.TiThe Tribunal while dealing with the averment that there isdeletion of addition made on buyer stated that the same is of noconsequence, as it was. deleted only on technical ground. The reason|recorded is against record and not plausible. The relevant portion of theorder of the Tribunal in the case of [TA No. 4802/Del/2009--ITO v. M/sDua Auto Components P. Ltd.$which was followed in cases of otherbuyers, like ITA No. 3532/Del/2008—M/s Flowmore Anti Counterfeit ITA No. 497 of 20185 ]| Security System P. Ltd. v. Income Tax Officer>»ITA No. 3514/Del/2010JDCIT, Circle 1101) v. M/s Indication Instruments Ltd,etc. 1sreproduced below:| ITA No. 497 of 20185 ]| Security System P. Ltd. v. Income Tax Officer>»ITA No. 3514/Del/2010JDCIT, Circle 1101) v. M/s Indication Instruments Ltd,etc. 1sreproduced below:| “6.1 We tind that the Assessing Officer has not brought evena single word regarding the nature of document and how hehas concluded that they belong to the assessee's and on moneytransaction has been taken place. He has simply relied uponthe reasons recorded without showing any application of mindon his part. 6.2 In this regard we note that it is also not the case that theseller has made any statement or had accepted the receipt ofon money i.e. consideration over and above that disclosed. Itis also not the case that the seized documents were in thehandwriting of the assessee or the seller or were seized ftrothe premises of seller and purchaser. Ld. Commissioner ofIncome Tax (Appeals) has brought out various discrepanciesin the seized documents relied upon by the revenue andStriking feature of these anomalies is that in the seizeddocuments, it has been mentioned that the impugned plot wasnot sold. Thus, the working and the figures mentioned thereincan at best be said to be tentative or expected amount. This byno stretch of imagination can be treated as conclusive proofsof on money transactions. Moreover, it is an admitted fact thatthe documents being relied upon showed account as on31.10.2001, while as per the registered sale deed the plot wassold on 23.5.2002. Under the circumstances, these additions ITA No. 497 of 2018160] have been made on the basis of documents found duringsearch at the place of a third party which at best only showedthe tentative/ projected purchase consideration. It is not thecase that the Circle Rate or the value as per stamp registrationauthorities of the impugned property is more than what hasbeen disclosed. It is also not the case that unaccounted cashhas been found to be paid by the assessee or received by theseller. There is also no statement of the seller on record thathe has obtained on money. Under the circumstances, theadditions made in this regard is not sustainable,6.3 In this regard, we place reliance upon the Hon'ble Apex’Court in the case of K. P. Varghese Vs. Income Tax Officer,Ernakulam and Another 131 ITR 597 (SC), wherein it hasbeen held that the burden of proving is that of Revenue whenthere is allegation of understatement on concealment in theconsideration shown. 6.4 We also place reliance upon the judgement of the Hon'bleApex Court in the case of C.I.T. vs. P. V. Kalyanasundaram in(2007) 294 ITR 49 (SC) in which allegations of on moneytransaction on the basis of non-convincing loose sheets foundduring the course of search and conflicting statement of theseller, was deleted by the Tribunal (to which, one of us theAccountant Member was the party) and the same wasaffirmed by the Hon'ble High Court and Hon'ble Apex Court.”8 While deleting the additions, the Tribunal recorded that thefigures mentioned in the document at the best be said to be tentative or ITA No. 497 of 2018|7] expected amount. The document seized showed account as on 31.10.2001while the registered sale deed of the plot was dated 23.5.2002. It was not thecase of the revenue that the circle rate was more than what had beendisclosed. No unaccounted cash was found to be paid by the buyer to theseller. There is no statement of the seller regarding obtaining the money andtherefore the addition was not sustained. ITA No. 497 of 2018|7] expected amount. The document seized showed account as on 31.10.2001while the registered sale deed of the plot was dated 23.5.2002. It was not thecase of the revenue that the circle rate was more than what had beendisclosed. No unaccounted cash was found to be paid by the buyer to theseller. There is no statement of the seller regarding obtaining the money andtherefore the addition was not sustained. Q It may be noted at this stage that it is not the case of thedepartment that the property was owned by the appellant or M/s RelianceEstate Agency. The case set up was that apart from the amount mentioned inthe registered sale deeds or the payment received by cheques, there werecertain cash transactions which were divided between the assessee and theManaging Director of the seller-company. Without having any quarrel withthe issue that there may be a possibility that the assessee could apart fromcommission earn profit in a sale-purchase transaction but the basic issuewould be that some cash amount would have been paid by the purchaser.The addition on said account made on the buyer never withstood thescrutiny in appeal. There is nothing on record to show that any addition wasmade in hand of the seller or the Managing Director of the seller-companyfor the alleged cash amount received. In this background, it would not beappropriate to hold that only intermediatory or the broker can be saddledwith the additions. QOThe contention of learned counsel for the revenue that the roleof the appellant was more than that of a broker and he had earned profit alsodoes not enhance the case of the revenue for the reasons mentioned above. ITA No. 497 of 201813] 10.The appeals are allowed. The question formulated in para 2 ofthe judgment is answered in favour of the assessee. (AVNEESH JHINGAN)(AJAY TEWARI)JUDGE JUDGE29. | 202;/Whether speaking/reasoned:Yes/NoWhether reportable:Yes/No