IN HIGH COURT OF DELHI AT NEW DELHI ITA 803/2014 Date of decision: 23rd December, 2014 COMMISSIONER OF INCOME TAX (CENTRAL) II Appellant Through Mr. Rohit Madan, Sr. Standing Counsel with Mr. Ruchir Bhatia, Advocate. versus HOME DEVELOPERS PVT.LTD. Respondent Through CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE V. KAMESWAR RAO SANJIV KHANNA, J. (ORAL) This appeal filed by Revenue pertains to assessment year 2004-05 and impugns findings recorded by Income Tax Appellate Tribunal (Tribunal, for short) in their order dated 21 st September, 2012. 2. appeal, it appears, was filed within time, but returned under office objection and there is prolonged delay of 650 days in re-filing of appeal. However, before issuing notice on application for condonation of delay, we deem it appropriate to examine grounds of appeal on merits. 3. respondent, company and persons associated with it, ITA 803/2014 Page 1 of 10 were subject to search and seizure operations under Section 132 of Income Tax Act, 1961 (Act, for short) on 28th March, 2006. Notice under Section 153A was issued and return of income for assessment year 2004-05 was filed declaring income of Rs.10,15,899/-. respondent company had surrendered undisclosed income of Rs.2 crores during course of search. In addition, disclosure of Rs.2 crores in name of Yogesh Gupta, Rs.2 crores in name of Rajiv Bahal and his family members, Rs.9 crores in name of Realtech Project Pvt. Ltd. and Realtech Construction (P) Ltd. was made. aforesaid surrender is not in dispute and amount has been brought to tax. 4. In order passed under Section 153A of Act, Assessing Officer referred to reply submitted by assessee in response to notice for violation of Section 269SS and 269T of Act, wherein it was mentioned that during period in question, assessee had taken advance/loan on certain commitments for buying property, which after property was sold, was returned with commitment as agreed. In this way, transaction of one property was cleared and surplus fund so generated along with further requirement of funds as arranged on commitments deployed in another property and so on. surplus income earned by assessee was used in other properties. Assessing ITA 803/2014 Page 2 of 10 Officer observed that reply was roundabout and was not specific and to point. He held that assessee had accepted that they had received cash loan and had repaid same in cash along with interest. Assessing Officer referred to one document, which was found at residence of Yogesh Gupta and observed that figures mentioned in said document/register, when decoded, revealed cash loan transactions. This, he held, was indicative of violation of Sections 269SS and 269T as loan was taken in cash and was also returned in cash along with interest. findings recorded by Assessing Officer are to be found in paragraphs 8.4 and 2, which for sake of convenience are reproduce below:- 8.4 It is seen that Shri Yogesh Gupta is main person of group. As facts and circumstances suggest loans etc. were used for purpose of business of flagship company M/s Home Developers Private Limited. Further, most of documents under reference were in hand writing of Shri Yogesh Gupta (mostly in pencil). In view of facts, loan transactions and repayment of loans are considered in hands of M/s Home Developers Private Limited. additions to be made on this account would be as per discussion in following paragraphs wherein specific documents evidencing receipt of loan and its repayments has been indicated. xxxxxx 2. Similar are facts of Page No. 16 to 18 (Annexure A- 11) seized from residence of Yogesh Gupta. These pages gives details of loans/ deposits and interest paid/ payable thereon to some Ojhaji & Sharmaji which comes to 75 lacs (8 lacs to 67 lacs) in AY 04-05. It is held that these loans received, have been repaid in AY 04-05 itself. Further, interest thereon as paid/ payable comes to Rs. 15 lacs. Total addition on account of this page would work out to Rs.90 lacs. (75+15). This page is found mentioned on page No. 22 of Annexure A-11. I am satisfied assessee has furnish/ concealed particulars of his ITA 803/2014 Page 3 of 10 income. Penalty proceedings u/s 271(1)(c) is being initiated on this point separately. 5. Commissioner of Income Tax (Appeals) in quantum appeal observed that addition on account of unaccounted transactions was not justified as assessee himself had surrendered Rs.2 cores and it would cover all investments made by assessee. As per Assessing Officer, assessee had also returned money and, therefore, amount returned had to be set off. In these circumstances, he directed deletion of principal amount i.e. Rs.2.4 crores and Rs.75 lacs (in all Rs.3.15 crores). However, he sustained addition made on account of interest of Rs.28.35 crores by holding that assessee must have paid interest on loans and in view of Section 69C, payment of interest should be added to declared income as unaccounted for interest paid. He however reduced rate of interest from 20% as directed by Assessing Officer to 18% per annum. 6. Tribunal has, however, deleted said addition recording following reasons:- 25. From above, it is evident that detailed enquiry was made from Shri Yogesh Gupta in respect of various papers seized from him and in respect of not single paper, he has stated that noting on paper is relating to borrowing by assessee. In respect of each and every paper, he explained nature of transaction and in most of cases also explained name of group concern to which such paper belonged. In respect of only few papers i.e. page Nos.77 to 84 of Annexure (see reply to question No.12), he mentioned that these papers belonged to M/s Home Developers (P) Ltd., i.e., assessee. He stated that these papers are relating to purchase of property No.A- 9/33, Vasant Vihar, New Delhi in ITA 803/2014 Page 4 of 10 respect of which cash payment of Rs.54 lakhs was made and which was offered as additional income. Hon'ble Jurisdictional High Court has also considered his statement while deciding Revenue's appeal for AY 2001-02, 200203 & 2003- 4 and has recorded similar finding that with regard to loose papers, Shri Yogesh Gupta had stated that these were unaccounted transactions in cash. In his statement, he also surrendered income of Rs.13 crores in his name and in name of group concern. Hon'ble Jurisdictional High Court had also noted that Revenue was fully satisfied by surrender made and closed their investigation. above finding of Hon'ble Jurisdictional High Court is squarely applicable to year under appeal also because we find that in year under appeal also, Revenue has brought no other material on record to establish that as per loose papers, any amount was borrowed by assessee. They have not even examined person whose name is claimed to have been mentioned on loose papers. In loose papers, no where it is mentioned that they belonged to assessee i.e. M/s Home Developers (P) Ltd. which is company. Admittedly, loose papers were found from Shri Yogesh Gupta and not assessee company. undisclosed income represented by such loose papers had already been offered by Shri Yogesh Gupta and other group companies which has been accepted by Revenue. Photocopy of loose papers have also been produced by assessee in his paper book. For sake of brevity, we shall mention herein below only one loose paper i.e. page No.43 in which, according to Revenue, there is evidence of loan of 22,40,00,000/- taken by assessee. We find that Assessing Officer has considered entries at left hand side of paper which is totaled to 22,40,000/-. On this loose paper, only one name Paliwal is written and there are dates and amounts without any narration. total of amounts is 22,40,000/-. It is inference of Assessing Officer that assessee is making entries ignoring '00'/'000' (2/3 zeros). It seems that in 22,40,000/-, he increased '00' (2 zeros) and made it 22,40,00,000/-. As per Assessing Officer, entry is for receipt of loan, though in loose ITA 803/2014 Page 5 of 10 paper there is no such narration except date and amount. Assessing Officer further presumes that assessee has repaid loan alongwith interest and he presumed rate of interest to be 20%. He made addition in respect of such alleged repayment of loan with interest. learned CIT(A) has deleted addition with regard to repayment of loan on ground that since loan amount itself was available with assessee out of which this repayment was made, he reduced interest. Thus, addition is partly sustained by him. However, after considering entire facts and arguments of both sides, we find that entire addition is based upon presumption of Assessing Officer. On loose papers, there is noting of dates and amounts without any narration. total of such amount is 22,40,000/-. first presumption by Assessing Officer is that it is not 22,40,000/- but 22,40,00,000/-.The second presumption is that noting is relating to loan taken by assessee. third presumption is that loan was repaid during accounting year relevant to assessment year under consideration. fourth presumption is that repayment of loan was along with interest at rate of 20%. On these series of presumptions, he not only made huge additions running into crores of Rupees but also levied penalties under Sections 271D & 271E. His finding is neither based upon noting on loose papers nor any corroborative evidence brought on record during course of assessment proceedings. On other hand, material available on record is contrary, i.e., (i) papers were found from Shri Yogesh Gupta and not assessee, (ii) statement of Shri Yogesh Gupta was recorded in which he stated that these were unaccounted transactions, (iii) he surrendered income from such unaccounted transactions in his hands as well as in hands of group concern, (iv) income from unaccounted transactions as surrendered by Shri Yogesh Gupta and all group concerns has been accepted by Revenue. In view of these facts, if Revenue wanted to take view that noting on loose papers is with regard to loan taken by assessee, then burden was upon Revenue to establish so. However, Assessing Officer did nothing except to make series of presumptions and then made ITA 803/2014 Page 6 of 10 addition and levied penalty on basis of his presumptions. We find that similar situation was dealt with by ITAT while considering Revenue's appeal for penalty for AY 200102, 2002-03 & 2003- 04 and ITAT has held that document does not indicate that assessee has accepted loan or deposit from any other person. name of assessee is completely absent from said document. Identical is situation in years under appeal before us. None of documents indicate that assessee i.e. M/s Home Developers (P) Ltd. has taken any loan or deposit from any other person. above finding of ITAT has been upheld by Hon'ble Jurisdictional High Court. Hon'ble Jurisdictional High Court held that though there is doubt but it is not established that respondent assessee had taken loan/deposit in cash. Their Lordships further observed that there is suspicion but this alone without any further verification and investigation cannot justify finding that respondent-assessee had taken loan/deposit in cash. With these observations, their Lordships upheld finding of ITAT. In our opinion, above observation of their Lordships of Jurisdictional High Court in assessee's own case for AY 2000-01 to 2003-04 would be squarely applicable in years under appeal also. In these years also, at most, it can be doubt of Assessing Officer that unaccounted transactions are in nature of loan taken. However, doubt or suspicion of Assessing Officer is not enough to hold that assessee had taken loan/deposit in cash. Moreover, in years under appeal, Assessing Officer made further presumptions that there was repayment of loan in cash though there is no such noting on loose paper. In our opinion, finding of ITAT as well as Hon'ble Jurisdictional High Court in AY 2000-01 to 2003-04 would be squarely applicable to years under appeal. We further hold that when it is not established that assessee had taken loan or deposit, question of further presumption that such loan or deposit was repaid during year under consideration was without any basis or material on record. 26. In view of above, we, respectfully following decision of ITAT and Hon'ble ITA 803/2014 Page 7 of 10 Jurisdictional High Court in assessee's own case for AY 2000-01 to 2003-04 (supra), hold that addition made by Assessing Officer for unexplained repayment of loan and also interest thereon cannot be sustained. Therefore, order of learned CIT(A) to extent he deleted addition is upheld and Revenue's appeals in ITA Nos.3312/Del/2008,3577/Del/2008 & 3287/Del/2008 are dismissed. So far as addition in respect of interest sustained by learned CIT(A) is concerned, same is reversed and addition sustained by learned CIT(A) in respect of interest is deleted. Accordingly, assessee's appeals in ITA Nos.2954/Del/2008,3101/Del/2008 & 2 955/Del/2008 are allowed. 7. Tribunal has also referred to statement of Yogesh Gupta, which was recorded during course of search and it was observed that Yogesh Gupta had never accepted or agreed that there were any loan transaction in cash or there was payment of interest. It is noticeable that even in assessment order, reply quoted by Assessing Officer refers to real estate transactions and advances/loans received against certain commitments for purchase of properties. Tribunal noticing statement made by Yogesh Gupta on oath during course of search came to conclusion that findings of Assessing Officer that there were loan transactions in cash and interest was paid in cash was merely assumption. Even on quantum, addition made was on mere assumption. 8. Tribunal in impugned order has referred to order passed by this Court on 23rd May, 2012 in ITA Nos. 301, 304 and 305 of 2012 ITA 803/2014 Page 8 of 10 titled CIT versus Home Developers Pvt. Ltd. said order records that substantial surrender was made during course of search. Reference was made to statement of Yogesh Gupta wherein he had accepted that there were unaccounted for transactions in cash, but no question was put to him about details of writer or recipient i.e. details of person, who had received said amounts. At that time, officers were duly satisfied with investigation and surrender. It is further recorded that allegation that loans/deposits must have been taken in cash was mere suspicion, which could have been cause for further verification and investigation, but mere suspicion cannot be ground to hold that loan/deposits were received in cash. findings of Tribunal were not perverse. 9. We also notice that Revenue has not filed before us any document or material to show that in fact loan was taken and interest payment was made. persons to whom allegedly interest was paid, their details and particulars were not ascertained, verified and examined. 10. findings of Tribunal are factual. reasoning refers to several factual aspects and four different assumptions drawn by Assessing Officer. said findings are not shown to be perverse, or contrary to facts, evidence or material. ITA 803/2014 Page 9 of 10 11. In these circumstances, we are not inclined to issue notice on application for condonation of delay in re-filing. Consequently, application and appeal are dismissed. SANJIV KHANNA, J. V. KAMESWAR RAO, J. DECEMBER 23, 2014 NA ITA 803/2014 Page 10 of 10 Commissioner of Income-tax (Central)-II v. Home Developers Pvt. Ltd