Commissioner of Income Tax vs Fairdeal Textile Park P. Ltd.

Sonia Gokani, J.—The Revenue has challenged the order of the income tax Appellate Tribunal ("the Tribunal" for short) dated May 3, 2013, raising the following questions for our consideration:

(A) Whether the Appellate Tribunal has substantially erred in deleting the addition which was made by the Assessing Officer on the basis of the seized documents admitted to be correct by the assessee''s directors in their statement u/s 132(4), merely on the basis of the statement of the broker and no other corroborating evidence?

(B) Whether the Appellate Tribunal has substantially erred in ignoring the documentary evidence (i.e., satakhat) in which/the assessee himself admits of the fair market value of the land, as sufficient proof of prevailing market rate of the land of the area?

We have heard learned counsel, Ms. Mauna Bhatt, for the Revenue. She has strenuously argued before us that serious error has been committed by the Tribunal in not accepting the price of land at Rs. 2.80 lakhs per bigha. Despite there being two agreements concerning the land in question, found during the search proceedings u/s 132 of the income tax Act ("the Act" for short), she attempted to point out that huge on-money transaction in the purchase of the land becomes apparent from the record, and, therefore, perversity in the findings of the Tribunal requires interference.

Upon hearing learned counsel and on close examination of the material, all appeals since raise an identical question of facts and law as also the concerned respondent-assessees are of the same group, they are being decided by this common order.

Brief facts necessary for the purpose of deciding these appeals are as follows:

The Revenue had carried out search action u/s 132 of the Act at the business and residential premises of the Shahlon group on January 28, 2010. During the search proceedings at the residential premises of Dhirajlal Raichand Shah, two agreements (satakhat) were found and seized. What culled out from these two agreements was that one Shri Natvarsingh Nathusingh Admar was given cash of Rs. 50,000 and Rs. 40,000 by Shri Dhirajlal Raichand Shah and Shri Nitin Raichand Shah, respectively, for the purpose of purchase of land at Mahuvej, Mangrol, Surat. The rate reflected of the said land was Rs. 2.80 lakhs per bigha (2327 sq. metres). The land was being purchased for developing Fairdeal Textile Park Pvt. Ltd. under the SITP scheme of the Government of India. The total area for the said project was 92.29 bighas.

The Assessing Officer recorded the statements wherein the director of the said group had admitted to the cash payment to the transferor and, accordingly, summons was issued to Shri Natvarsingh Nathusingh Admar. On the basis of the statement of Shri Natvarsingh and on the basis of these documents, the Assessing Officer considered the sum of Rs. 42,40,636 as unexplained income and the same was added to the taxable income of the assessee.

When such addition was challenged before the Commissioner of income tax (Appeals), he also concurred with the findings of the Assessing Officer by holding that the entire evidence was to show that satakhat or the agreement to sell proved the market rate of the land at Rs. 2.80 lakhs per bigha, and, therefore the Assessing Officer was justified in making the addition u/s 69B of the Act.

When the assessee further challenged the same before the Tribunal, it quashed and set aside the order of the Assessing Officer and that of the Commissioner of income tax (Appeals) and held the entire addition to have been made on the basis of presumptions and surmises by holding thus:

From the above facts, it is apparent that the Revenue had made addition only on the basis of surmises and conjectures that the assessee would have paid Rs. 2,80,000 per bigha. The onus thrust upon the Revenue to prove its stand is not met. As pointed out by the assessee, the decision rendered in K.P. Varghese Vs. Income Tax Officer, Ernakulam and Another, comes to its rescue. There is no evidence to show that the assessee had paid on-money for purchase of the land. The entire addition was made only based on the inference drawn from the two agreements found during the search which were claimed to be cancelled by the executors of the same. There was nothing on record to show that the agreements were acted upon as per the terms stipulated therein. There was no trace of cash payment in excess of the amount shown in the registered documents either with the assessee or with the owners of the land who had sold the land to the assessees. Further, the land owners were not examined or investigation made on them to verify whether they had received on-money for the sale of their land to the assessee. Moreover, the learned Assessing Officer had not conducted any enquiry to find out the market value of the land or had referred the matter to the DVO to determine the market value of the land. On examining the entire facts of the case, it is quite apparent that the Revenue had made the additions only on the strength of the two agreements obtained at the time of search. It is pertinent to note the decision of the case in CIT v. Naresh Khattar HUF reported in [2003] 261 ITR 664 (Delhi) wherein it was held that inference has to be drawn on the totality of the circumstance and not on any single fact while making addition u/s 69B of the Act. From the facts and circumstances of this case and as per our above discussions, we are of the view that the aggregate addition made for Rs. 2,09,72,810 in the hands of all the abovementioned assessees based on assumptions and presumptions by the learned Assessing Officer which was further sustained by the learned Commissioner of income tax (Appeals) does not have any merit and deserve to be deleted. Accordingly, we hereby delete the additions made by the Revenue against all the abovementioned assessees aggregating to Rs. 2,09,72,810.

Resultantly, the present appeals raising the aforementioned questions of law before us.

We could notice from the entire material that both the Assessing Officer and the Commissioner of income tax (Appeals) were convinced that both the agreements executed between the company and Shri Natvarsingh since had reflected clearly the rate of the land at Rs. 2.80 lakhs per bigha. Subsequent registered sale deed effected in the name of the company at the rate of Rs. 70,000 to Rs. 80,000 per bigha was much lower in rate, and, therefore, only inevitable conclusion was the exchange of on-money in the entire deal. It can be noted from the detailed discussion of both the authorities that except these agreements, there was no other evidence on the record. Admittedly, the land had been originally agreed to be purchased through middleman. The statement given by Shri Natvarsingh is eloquently making it clear that such agreement had not been acted upon. In his statement in an answer to the question raised by the authority, he had admitted that he had expected the purchase price to be Rs. 70,000 to Rs. 80,000 per bigha, when he entered into the agreement to sell with the respondent-assessee. He also had expected to purchase the land he agreed to sell from other agriculturists. Being sure of striking such deals at the rate he had contemplated, he had entered into an agreement to sell for selling the land at Rs. 2.80 lakhs per bigha to the company expecting huge profit in the process. However, when some of the owners denied to sell him the land at the price that he expected, the amount of Rs. 90,000 that was received by him from the company by way of token towards sale consideration was asked to be returned. He had been emphatic that such deal did not get through and, therefore, the amount had been returned to the company. It could be thus noticed from the statement recorded of the director and others that the middleman had ensured the company to get the land at the rate of Rs. 2.80 lakhs per bigha. However, on realising that he needed to surreptitiously pocket the huge amount of money in the said deal, the purchase was made directly from the owners by the company, and, therefore, the price at which it purchased in fact had come on the record. The Tribunal, therefore, rightly noted the essential fact that the purchase of land was directly from the farmers. In the absence of any other evidence of on-money payment, as also in the absence of any suggestion of the market value of the land purchased by the respondents being far more than what had been reflected in the sale deed, the Tribunal did not endorse the views of both the Assessing Officer, and that of the Commissioner of income tax (Appeals). Another aspect that had weighed with the Tribunal was the fact that the registered documents had been executed at "jantri" value. There was no reference to the Valuation Officer to point out that the value of the land was below the market price.

Predominantly, the issue is based on factual matrix presented before the authorities. Cumulatively, all circumstances and the facts that had emerged on the record led the Tribunal to the decision which is impugned in the present appeal which, according to us, suffers from no perversity. No question of law much less any substantial question of law arises. All the tax appeals are, therefore, dismissed.