The Pr. Commissionerof Income Tax, Central -3 v. Sh. Trilok Chand Choudhary

$~17 *IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 271/2019 THE PR. COMMISSIONEROF INCOME TAX, CENTRAL -3..... AppellantThrough:Mr. Abhishek Maratha, Sr. StandingCounsel for Revenue. versus SH. TRILOK CHAND CHOUDHARY..... RespondentThrough:Mr. Ved Jain, Mr. Nischay Kantoorand Ms. Richa Mishra, Advocates. %Date of Decision: 27[th]October, 2022 CORAM: HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMEET PRITAM SINGH ARORA, J (ORAL): 1.The present appeal has been filed by Revenue under Section 260A ofthe Income Tax Act, 1961, (the ‘Act’) against the order dated 20[th]September, 2018, passed by the Income Tax Appellate Tribunal (‘ITAT’) inITA No. 5871/Del/2017, for Assessment Year (‘AY’) 2012-13. 2.The Return of Income (‘ITR’) was initially filed by the RespondentAssessee on 31[st]March, 2014, declaring an income of Rs. 7.28 crores.Thereafter, a search and seizure operation under Section 132 of the Act wascarried out on 11[th]September, 2013, and 17[th]September, 2013, in the caseof AKN Group. The case of the Assessee was also covered in the search and certain documents related to investments in properties were found andseized from the office premises of the Assessee. A Memorandum OfUnderstanding dated 14[th]December, 2011 (‘MOU’) marked as Annexure A-11 between one Shri Devender Kumar (‘Devender’) and M/s NewageInfrabuilders P. Ltd. (‘Newage Infra’) pertaining to investment in propertyin village Harchandpur, Gurgaon was seized from the premises of theAssessee. Devender made a payment of Rs. 20 crores cash for the purchaseof land at village Harchandpur from Smt. Saroj Sharma and others (‘Saroj’).The MOU led to the addition of Rs. 20 crores in the hands of the Assesseeunder Section 68 of the Act which has been deleted by the ITAT in itsimpugned order, and the said deletion is a subject matter of challenge in thepresent appeal. 3.Learned senior standing counsel for the Revenue states that the ITATfailed to consider that the MOU executed between Devender and NewageInfra was found at the premises of the Assessee. The non-traceability ofNewage Infra and its directors, the filing of the police complaint and courtcases against Smt. Saroj Sharma (‘Saroj’) in the name of the individuals isattributable to the Assessee as well as Devender and not the companies whoare stated to have provided the cash. He states that the Assessing Officer(‘AO’) correctly added the cash of Rs. 20 crores received by Devender tothe income of the Assessee under Section 68 of the Act. 4.He further states that the ITAT failed to consider that Devender in hissecond statement recorded before the Investigation Wing on 11[th]March,2016 had admitted that he had signed the seized MOU on the direction ofthe Assesee in lieu of commission income. He submits that in his secondstatement, Devender stated that cash transaction of Rs. 20 crores took place at the office of the Assessee, in the presence of the Assessee and the cashwas handed over to the parties in this office. He states that a perusal of thesecond statement of Devender shows that Devender was a mere pawn actingunder the instructions of the Assessee and in fact Devender was not evenaware of the name of Newage Infra. He states that the ITAT failed toconsider that the Assessee had failed to cross-examine Devender despite anopportunity provided to him in this regard. He lastly states that since theidentity, genuineness and creditworthiness of Newage Infra is doubtful andconsidering the contents of the second statement of Devender, it is apparentthat the said company Newage Infra is a company used by the Assessee as aconduit for his unaccounted cash. 5.We have heard the learned counsel for the parties. Having perused thepaper book, the facts of the case relevant for deciding the present appeal areas follows:paper book, the facts of the case relevant for deciding the present appeal areas follows: 5.We have heard the learned counsel for the parties. Having perused thepaper book, the facts of the case relevant for deciding the present appeal areas follows:paper book, the facts of the case relevant for deciding the present appeal areas follows: 5.1.During the course of post search investigation, Devender wassummoned by the Investigation Wing under Section 131 of the Act toexamine him and verify the seized documents and his statement wasrecorded on 18[th]October, 2013. In his statement, Devender admittedthat he had received a sum of Rs. 20 crores in cash from Newage Infraas per the MOU for purchase of land at village Harchandpur, DistrictGurgaon, from Saroj. He further stated that he had entered into twoseparate agreements to sell with Saroj and paid the sum of Rs. 20crores received from Newage Infra to Saroj. He has further stated inhis statement that the said land could not be transferred to NewageInfra because Saroj sold the land to some other person.summoned by the Investigation Wing under Section 131 of the Act toexamine him and verify the seized documents and his statement wasrecorded on 18[th]October, 2013. In his statement, Devender admittedthat he had received a sum of Rs. 20 crores in cash from Newage Infraas per the MOU for purchase of land at village Harchandpur, DistrictGurgaon, from Saroj. He further stated that he had entered into twoseparate agreements to sell with Saroj and paid the sum of Rs. 20crores received from Newage Infra to Saroj. He has further stated inhis statement that the said land could not be transferred to NewageInfra because Saroj sold the land to some other person. 5.2.The Assessing Officer (‘AO’) issued notices under Section 131 of the Act to the company Newage Infra to verify the said statement,however, the summons was received back unserved and the inspectorsdeputed to serve the summons reported that the company could not befound at the given address. Notices issued under Section 153A readwith Section 153C of the Act to Newage Infra also remainedunserved. Similarly, the notices issued by the AO to the directors ofNewage Infra remain unserved and the inspectors reported that nosuch person was found at the address. 5.3.During the course of the assessment proceedings, the Assesseesubmitted before the AO that Devender is an independent person andnot related to the Assessee. 5.4.The Assessee stated before the AO that he had entered into a separateagreement for purchase of land at village Harchandpur from Saroj onbehalfofadistinctcompanyMegatechRealtorsPvt.Ltd.(‘Megatech’) and had separately paid Rs. 10 crores to Saroj.However, the said transaction is independent, distinct and unrelatedwith the transaction undertaken by Devender on behalf of NewageInfra. 5.5.Though the statement of Devender had been recorded by theInvestigation Wing on 18[th]October, 2013, before the AssistantDirector of Income Tax (‘ADIT’) (Inv.), the AO summoned Devenderunder Section 131 of the Act and recorded afresh a statement on 11[th]March, 2016. Devender contradicted himself in his second statementrecorded before the AO when compared to his earlier statement dated18[th]October, 2013, and stated that the MOU was signed by him at thedirection of the Assessee and no cash was received by him fromInvestigation Wing on 18[th]October, 2013, before the AssistantDirector of Income Tax (‘ADIT’) (Inv.), the AO summoned Devenderunder Section 131 of the Act and recorded afresh a statement on 11[th]March, 2016. Devender contradicted himself in his second statementrecorded before the AO when compared to his earlier statement dated18[th]October, 2013, and stated that the MOU was signed by him at thedirection of the Assessee and no cash was received by him from Newage Infra. He also denied any knowledge with respect to theentity Newage Infra. Newage Infra. He also denied any knowledge with respect to theentity Newage Infra. 5.6.The AO relying on the second statement of Devender recorded on 11[th]March, 2016 issued a notice to the Assessee on 18[th]March, 2016, toshow cause as to why the cash amount involved in the transaction ofRs. 20 crores should not be added to the income of the Assessee. TheAssessee filed his reply and stated that the transaction on behalf ofNewage Infra undertaken by Devender with Saroj and the payment ofRs. 20 crores have no concern with the Assessee. He stated thatpursuant to the MOU, Devender entered into an agreement forpurchase of land with Saroj. When the transaction was denied bySaroj, Devender filed a police complaint against Saroj before theEconomic Offences Wing of Delhi Police as well as at Gurgaon. TheAssessee submitted that there was no justification with the AO tomake an addition of Rs. 20 crores under Section 68 of the Act as thetransaction undertaken as per the terms of MOU was not concernedwith the Assessee. However, the AO, did not accept the explanationof the Assessee and made an addition of Rs. 20 crores on account ofthe said MOU. 5.7.The Assessee filed an appeal against the assessment order before theCommissioner of Income Tax (Appeals) [‘CIT(A)’] challenging theaforesaid addition of Rs. 20 crores made on account of the MOUexecuted by Devender with Newage Infra. During the appellateproceedings, the Assessee filed additional evidences vide letter dated12[th]October, 2016, in the form of affidavit of Devender, retractingfrom his statement dated 11[th]March, 2016 made before the AO. However, the CIT(A) dismissed the appeal and confirmed the additionmade by the AO. 5.8.Aggrieved by the order of the CIT(A), the Assessee filed an appealbefore the ITAT, interalia, challenging the order of the CIT(A)confirming the aforesaid addition of 20 crores under Section 68 of theAct. The ITAT in the impugned order after considering the documentson record has returned a finding of the fact that the MOU wasexecuted between Devender and Newage Infra and the Assesseeherein is not even remotely connected to MOU. Thus, the ITAT heldthat the addition of Rs. 20 crores in the hands of the Assessee iswholly unjustified and thereby directed the deletion of the saidamount. The relevant finding of the ITAT is at paragraph 14 of theimpugned order, which reads as under: - “14. …… The AO ignored all these above material evidences on record andmerely relied upon the later statement of Sh. Devender Kumarrecorded on 11.03.2016 at the assessment stage in which Sh.Devender Kumar has stated that he has signed the agreement inquestion at the instance of the assessee. However, he has admittedthat he has purchased land from Smt. Saroj Sharma and others onthe basis of the agreement to sell. In this statement also he hasstated that police complaint was prepared at the instance ofassessee. From this statement, it appears that the AO deliberatelyrecorded this statement without any justification against thestatement recorded by the investigation wing immediately aftersearch on 18.10.2013. Sh. Devender Kumar tried to contradict thecontentsofMOU andtheagreementtosellwithoutanyjustification. The AO has not explained as to what was necessity torecord statement of Sh. Devender Kumar subsequently, at the fagend of the assessment proceedings. The statement would also showthat AO put the words in the mouth of Sh. Devender Kumar so as to hemaycontradicthisearlierstatementrecordedbytheinvestigation wing. No question was put to him as to why thedocuments were prepared in his name, if he was not party to theagreement to sell or MOU. The entire material on record clearlysupport the statement of Sh. Devender Kumar recorded by theinvestigation wing on 18.10.2013. The statement of Sh. DevenderKumar recorded by AO on 11.03.2016 is not corroborated by anyevidence or material on record. Thus, there was no justification forthe AO or CIT(A) to rely upon subsequent statement of Sh.Devender Kumar dated 11.03.2016. It may also be noted here thatthe assessee filed letter dated 12.10.2016 before Ld. CIT(A)supported by affidavit of Sh. Devender Kumar (PB 166 – 176) inwhich he has affirmed his statement made to the investigation wingon 18.10.2013. It is also stated in the affidavit that subsequentlynotice u/s 153C dated, 08.02.2016 was issued to him by Ms. PreetiSingh, ACIT, Central Circle-26, New Delhi and she told him thathuge liability to the extent of Rs. 20 crores would fall on him, if hestrict to his original statement made before investigation wing on18.10.2013. He has, therefore, disowned his statement recordedbefore AO on 11.03.2016. In this affidavit also he has confirmed allthe transactions recorded in his name on behalf of M/s NewageInfrabuilders P. Ltd. The Ld. CIT(A) without any justificationignored the affidavit of Sh. Devender Kumar. Though in this caseLd. CIT(A)called for the remand report from the AO, copy of whichis filed at page 256 of the PB dated 04.05.2017 but the AO has notrebutted the explanation of the assessee above. Therefore, contentsof the affidavit shall have to be read in the evidence in favour of theassesse. It appears that the authorities below merely on the basis ofsubsequent statement of Sh. Devender Kumar and that theDirectors of M/s Newage Infrabuilders P. Ltd. have not beenproduced for examination before AO confirmed the additionagainst the assessee. It is admitted fact that during the course ofsearch no cash was found or seized. There is no recovery of anyincriminating material against the assessee to connect him withaddition of Rs. 20 crores. Even if the Directors of M/s NewageInfrabuilders P. Ltd. were not produced for examination before AO,the entire material on record clearly justify explanation of theassessee that assessee had not dealt with amount of Rs. 20 crores. Signature Not Verified Thecontents ofthedocumentspeak againsttheRevenue-Department. The presumption against the assessee that thedocument belong to him have been rebutted by the above materialon record including the seized material found during the course ofsearch which is corroborated by statement of Sh. Devender Kumarrecorded on 18.10.2013 in ADIT(Inv.). Sh. Devender Kumar hastaken action against Smt. Saroj Sharma etc., therefore, there wasno justification to make addition of Rs. 20 crores against theassessee. Whatever reasons have been given by the authoritiesbelow for making addition against the assessee are irrelevant onthe face of the evidences brought on record. Therefore, thedecisions relied upon by the Ld. DR would not support case of theRevenue. In view of the above discussion, we are of the view thataddition of Rs. 20 crores against the assessee is wholly unjustified.We, accordingly, set aside the orders of the authorities below anddelete the addition of Rs. 20 crores.” 6.The ITAT considered the following documents to conclude that thestatement of Devender recorded on 18[th]October, 2013, before theInvestigationWingwasdulycorroboratedfromtherecord.Thecorroborative evidence considered by the ITAT is as follows: 6.1.The MOU dated 14[th]December, 2011, executed between Devenderand Newage Infra.and Newage Infra. 6.2.Assessment Order passed against Devender under Section 153A readwith Section 153C of the Act making an addition of Rs. 20 croresresulting in protective addition.with Section 153C of the Act making an addition of Rs. 20 croresresulting in protective addition. 6.The ITAT considered the following documents to conclude that thestatement of Devender recorded on 18[th]October, 2013, before theInvestigationWingwasdulycorroboratedfromtherecord.Thecorroborative evidence considered by the ITAT is as follows: 6.1.The MOU dated 14[th]December, 2011, executed between Devenderand Newage Infra.and Newage Infra. 6.2.Assessment Order passed against Devender under Section 153A readwith Section 153C of the Act making an addition of Rs. 20 croresresulting in protective addition.with Section 153C of the Act making an addition of Rs. 20 croresresulting in protective addition. 6.3.The agreement to sell dated 17[th]December, 2011 executed betweenSaroj and Devender for the purchase of land at village Harchandpur.Saroj and Devender for the purchase of land at village Harchandpur. 6.4.The receipt of Rs. 10 crores executed by Saroj, in favour of thepurchasers vide separate receipt dated 17[th]December, 2011.purchasers vide separate receipt dated 17[th]December, 2011. 6.5.The statements of Devender recorded on 18[th]October, 2013 and 11[th] March, 2016 respectively. 6.6.The application dated 6[th]April, 2012 filed by Devender before theSub Registrar, Sohna requesting not to register any sale deed for theland of Saroj.Sub Registrar, Sohna requesting not to register any sale deed for theland of Saroj. 6.7.The Complaint dated 4[th]June, 2012 filed by Devender against Sarojbefore the Deputy Commissioner of Police, New Delhi for cheatingand criminal breach of trust.before the Deputy Commissioner of Police, New Delhi for cheatingand criminal breach of trust. 6.8.The Complaint filed before the Commissioner of Police, Gurgaonagainst Saroj for cheating.against Saroj for cheating. 6.9.A copy of the suit for specific performance filed before the Court ofCivil Judge, Gurgaon.Civil Judge, Gurgaon. 6.10. Letter of the Assessee dated 12[th]October, 2013 along with affidavit ofDevender retracting from his statement dated 11[th]March, 2016 madebefore the AO.Devender retracting from his statement dated 11[th]March, 2016 madebefore the AO. 7.The ITAT on perusal of these documents on record held that theMOU recovered during the search pertains to Devender and not theAssessee. The presumption against the Assessee that the document belong tohim have been rebutted by the aforesaid materials which were placed onrecord before the ITAT, including the seized material found during thecourse of search which is corroborated by the statement of Devender,recorded on 18[th]October, 2013 before the ADIT(Inv.). The MOU is dulyattested by the notary. The terms of the MOU record that Devender isresponsible to acquire land at Harchandpur from Saroj and hand over thesame to Newage Infra. The MOU records that Newage Infra has paidconsideration of Rs. 20 crores in cash to Devender for the purchase of theland at Harchandpur. The Assessee is not named in MOU, either as a partyMOU recovered during the search pertains to Devender and not theAssessee. The presumption against the Assessee that the document belong tohim have been rebutted by the aforesaid materials which were placed onrecord before the ITAT, including the seized material found during thecourse of search which is corroborated by the statement of Devender,recorded on 18[th]October, 2013 before the ADIT(Inv.). The MOU is dulyattested by the notary. The terms of the MOU record that Devender isresponsible to acquire land at Harchandpur from Saroj and hand over thesame to Newage Infra. The MOU records that Newage Infra has paidconsideration of Rs. 20 crores in cash to Devender for the purchase of theland at Harchandpur. The Assessee is not named in MOU, either as a party or as a witness. No cash was found or seized during the search conducted onthe premises owned by the Assessee. or as a witness. No cash was found or seized during the search conducted onthe premises owned by the Assessee. 8.The ITAT also noted that since the evidence on record dulysubstantiated the stand taken by Devender in his first statement recordedbefore the investigation wing on 18[th]October, 2013, there was no occasionfor the AO to record a fresh statement on 11[th]March, 2016. Devender, in hisfirst statement recorded on 18[th]October, 2013 confirmed that he hadexecuted the MOU with Newage Infra. He also confirmed the receipt of Rs.20 crores in cash for the purchase of land in village Harchandpur from Saroj.Devender affirmed that he had paid Rs. 20 crores to Saroj vide twoagreements to sell, one of them was recovered during the course of searchand he agreed to supply the second agreement to the Investigation Wing.Devender confirmed that he agreed to undertake the said transaction for acommission of Rs. 50,000 per acre from Newage Infra. He stated that afterSaroj resiled from the agreement to sell, he filed a civil suit against Sarojand there is a stay order granted in favour of Devender. In his statement,Devender explained that since the Assessee herein has also entered into aseparate transaction for a purchase of land with Saroj and she has similarlyresiled from the agreement with Assessee, therefore Devender and theAssessee herein were jointly prosecuting their cases filed against Saroj and itwas in this background that the MOU recovered from the assessee werefound at the premises. 9.The ITAT held that the second statement recorded on 11[th]March,2016, is not corroborated by any evidence or material on record andtherefore, the AO or CIT(A) could not have relied upon the secondstatement. The ITAT also noted that the affidavit of Devender filed before the CIT(A) retracting his second statement dated 11[th]March, 2016, was notconsidered by the CIT(A) and therefore it had committed an error. 10.The learned senior standing counsel for the Appellant has not disputedthe aforesaid facts forming the basis of the finding of the ITAT that theAssessee herein has no concern with the MOU executed between Devenderand Newage Infra. 11.We are of the view that the facts and the law have been properly andcorrectly assessed by the ITAT. In view of the finding of fact by the ITAT,there is no infirmity in the impugned order of the ITAT deleting the additionof Rs. 20 crores under Section 68 of the Act against the Assessee. Therefore,we are of the considered view that there is no substantial question of lawraised in the present appeal. The Supreme Court in the case of Ram KumarAggarwal & Anr. vs. Thawar Das (through LRs), (1999) 7 SCC 303 hasreiterated that under Section 100 of CPC, the jurisdiction of the High Courtto interfere with the orders passed by the Courts below is confined tohearing on substantial question of law and interference with finding of thefact is not warranted if it involves re-appreciation of evidence. Thus, we seeno merit in the appeal and it is accordingly dismissed. 12.We may clarify that the AO had also made a further addition of Rs. 10crores in the hands of the Asseseee on the basis of a distinct MOU dated 14[th]December, 2011, executed between the Assessee and M/s Megatech. Thesaid addition was confirmed by the CIT(A). The ITAT has set aside the saidaddition and restored the issue to the file of the AO for a freshdetermination. The transaction undertaken by the Assessee on behalf ofMegatech is a subject matter of a separate addition of Rs. 10 crores which isnot impugned in the present appeal. Though grounds have been urged in the Signature Not Verified present appeal regarding the said addition, no questions of law were raisedby the Appellant on the same and no arguments were advanced. Therefore,the controversy pertaining to the said addition of Rs. 10 crores have not beenexamined by us and the said issue will be determined by the AO in theremand proceedings in accordance with law. MANMEET PRITAM SINGH ARORA, J MANMOHAN, J OCTOBER 27, 2022msh/kv