Commissioner of Income Tax (Central-II) vs Swanpnil Properties (P) Ltd.

This appeal by the Revenue under Section 260-A of the Income Tax Act, 1961 (''Act'') is directed against the order dated 29th January 2014 passed by the Income Tax Appellate Tribunal (''ITAT'') dismissing the Revenue''s appeal ITA No. 2063/Del/2013 for the Assessment Year (''AY'') 2006-07.

The background facts are that a search and seizure operation under Section 132 of the Act was carried out at the residential/ business premises of Mr. Surender Modi, Director of the Respondent Assessee, on 19th June 2009. During the course of search, certain documents stated to be belonging to the Assessee, i.e., Swapnil Properties (P) Limited (including the document referred to Annexure 29 page 66), were seized. Proceedings under Section 153C read with Section 153A of the Act were initiated.

In response to the notice issued, the Assessee filed its income tax return declaring Nil income. The Assessing Officer (''AO'') proceeded on the basis of the seized documents and made an addition of Rs. 4,80,97,125 towards unaccounted cash payment.

Before the Commissioner of Income Tax (Appeals) [''CIT (A) ''] the Assessee objected it stating that the said seized document (Annexure A- 29 page 66) did not belong to it as no plots of land were purchased by the Assessee from the parties mentioned in those papers. The Assessee had merely paid an advance amount of Rs. 30,04,559 to those parties on behalf of Inmon Buildcon (P) Limited (''Inmon'') and the said advance amount was refunded in the subsequent years. It was contended that the seized document did not contain the name of the Assessee and did not represent transactions of purchase of properties supported with title documents of purchase and that the addition was beyond the scope of Section 153C of the Act. It was explained that the sum of Rs. 30,04,559 shown by the Assessee as ''advance against properties'' was paid by it Assessee on behalf of Inmon. However, the CIT (A) rejected the above pleas and upheld the order of the AO.

In the impugned order the ITAT has, while overturning the order of the CIT (A), returned the following factual findings:

(i) The seized document marked as Annexure A-29 page 66 was not found from the premises of the Assessee; it was not signed by any employee of the Assessee; the name of the Assessee did not appear in this seized document.

(ii) Proceedings under Section 148 of the Act in relation to the alleged cash transaction of Rs. 4,80,97,125 referred to in the said seized document (Annexure A-29 page 66) had been initiated by the Department against Inmon.

(iii) The contents of Annexure A- 29 page 66 related to property transactions of Inmon as was found in the inquiry in the proceedings initiated for enhancement under Section 251(2) of the Act;

(iv) The draft payment and stamp purchases related to Inmon and accounted for by Inmon. Accordingly the enhancement proceedings qua the Assessee were dropped.

(v) The mere fact that Mr. Surender Modi had made a declaration of Rs. 20 crores during his statements recorded under Section 132(4) of the Act in respect of undisclosed income and investment did not relieve the Revenue of the onus of producing supporting evidence, especially in the case of a search, that the transactions mentioned in the documents seized pertain to the Assessee.

The ITAT consequently held that there was no basis for sustaining the addition in respect of alleged cash transactions referred to in the document (Annexure A 29 page 66) in the hands of the Assessee.

It requires to be noted that pursuant to the proceedings under Section 147/143(3) of the Act were initiated against Inmon in relation to the alleged cash payment of Rs. 4,80,97,125 for AY 2006-07, by an order dated 31st March 2014 the AO has finalised the assessment of Inmon for AY 2006-07 by adding the above cash amount of Rs. 4,80,97,125 in its hands. It was noted therein that in Inmon''s balance sheet as on 31st March 2006 a sum of Rs. 38,06,873 was shown against the Assessee as creditor.

It was submitted by Mr. Rohit Madan, learned counsel for the Revenue, that when the Assessee had admitted the draft payment as shown in Annexure A 29 page 66 it could not deny the payment in cash recorded in the same document. He, however, did not dispute that the entire cash amount has been added in the hands of Inmon against whom proceedings under Section 147/143 (3) of the Act were initiated and the assessment against order in respect of Inmon for the same AY 2006-07 was finalised. He stated that Inmon''s appeal against the said order was pending before the CIT (A).

The Court is of the view that the Revenue having taken a conscious decision to initiate proceedings against Inmon under Section 147/143(3) of the Act, and having in those proceedings added the entire cash amount aforementioned in the hands of Inmon, must pursue those proceedings to their logical end. There is no factual or legal basis for seeking to add the same cash amount in the hands of both Inmon and the Respondent Assessee for the same AY. Further, nothing has been placed before the Court by the Revenue to doubt the correctness of the factual findings of the ITAT in respect of the document at Annexure A-29 page 66 qua the Respondent Assessee.

Consequently, the Court is satisfied that in the fact and circumstances of the case, no substantial question of law arises for examination. The appeal is dismissed.