The Raipur bench of Income Tax Appellate Tribunal (ITAT) directed for the deletion of the additional amount charged by the Assessing Officer (AO). An addition of Rs.2.10 crore was made by the AO, but the lack of evidence to prove the unexplained investment under 69 of the Income Tax Act,1961.
All the matters are related to various assessees of M/s NR Group & M/s Saleno Group, wherein search and seizure under section 132 of the Act was conducted concurrently on 24.10.2017 in their business and residential premises. The assessees in present casse are key persons and Directors in the aforesaid group, known as Shri Sanjay Agrawal, Shri Mukesh Agrawal & Shri Rajesh Agrawal.
Since the issues involved herein are common, interconnected and inextricably interwoven, therefore, for the sake of convenience and brevity, all the aforesaid matters are taken up for adjudication under this common order. ITA No.108/RPR/2020 has been taken up for adjudication first as the lead case.
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The assessee, Sanjay Agrawal represented by Sunil Kumar Agrawal & Vimal Kumar Agrawal, CA’s , who had derived income from house property, business of steel trading and income from other sources during the relevant Assessment Year 2018-19.
A search and seizure operation under section 132 of the Act was carried out 24.10.2017 on the business/ residential premises of the assessee and other business associates. Return of Income (ROI) under section 139(1) for the AY 2018-19 was filed on 31.08.2018, declaring income of Rs.34,60,410/-.
During the search, an incriminating document in the form of “Sauda-Ikrarnama” agreement to sale was found and seized from the premises of M/s NR Ispat & Power Pvt. Ltd., Raigarh, wherein the assessee is a director. The response of the assessee to the query raised by the AO was the piece of loose paper which is an undated, unsigned and proposed draft agreement titled “Sauda-Ikrarnama” found from the premises of M/s NR Ispat & Power Pvt. Ltd., in fact was kept ready unilateral (without the knowledge of Mr. Rajesh Agrawal & Mukesh Agrawal, the sellers mentioned in the said document).
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According to the assessee the document was prepared for negotiations/discussing the deal with M/s Seleno Steels Ltd.(now M/s NRVS Steels Ltd.) Assesse contended that this was only the offer/proposal and assesse submitted that the documents do not have any evidentiary value as it was neither executed nor it was signed by anyone, no date of execution was mentioned, there was cuttings and corrections at many places, there are interpolation by hand over the typed matter.
In statement u/s 132(4) recorded on oath of Mr. Rajesh Agrawal, director of Seleno Steel, when confronted with the alleged document, have denied to recognise and to have any knowledge of any such document which was not signed by him or his brother Shri Mukesh Agrawal. Mr. Rajesh Agrawal has also stated that the sale of shares of M/s Seleno Steel Ltd. was agreed on a consideration of Rs. 12.50 crores.
AO did not find the replies and explanations of the assessee justifiable as the alleged document “Sauda-Ikrarnama” has a mention of Rs. 25.00 crores as consideration of sale, he, therefore, with his conviction had made the addition on the basis of terms and conditions in para 3 of the “Sauda-Ikrarnama”, according to which the assessee was to pay Rs.70 lac per month starting from January, 2018, therefore, the amount for 3 months i.e., January to March 2018, in aggregate Rs. 2.10 crore was added as unexplained investment u/s 69 of the Act.
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Aggrieved by the decision by the AO, assessee preferred an appeal before the Commissioner of Income Tax (Appeals) (CIT(A)) . Based on the evidence it was told that the AO was not justified in making additions simply on guess work and solely on the basis of some dumb diary. Thus additions made by the AO amounting to Rs.2,10,00,000 are Deleted. Therefore, appeal on these grounds is Allowed. But through this ground of appeal, the appellant has taken plea that no proper approval was taken u/s 153D of the Act. On perusal of the copy of assessment order it was found that the AO before passing assessment order has taken approval from Joint Commissioner of Income Tax(Central), Raipur and approval was granted vide letter F.No. JCIT(c)/RPR/153D/2019-20/329 dated 20.12.2019. Therefore, the plea raised by the appellant has no merit and is therefore, rejected. Therefore, appeal on this ground is Dismissed.
The aforesaid decision of CIT(A) was not satisfactory by the revenue and the appeal was filed.
The CIT DR on behalf of the revenue submitted that the document surfaced during the search and seizure operation. Though the said document was unsigned, undated or on a plan paper still the same cannot be brushed aside as the proposed terms and conditions of the said document have been materialized in the due course of time. Later when issue was confronted to the assessee i.e, Mr. Sanjay Agarwal and Mr.Rajesh Agarwal it was observed that their responses were contradicting in nature.
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The Sale of the plant was done, however, the amount of consideration was changed on record. So it was established that the said agreement was the real outline of actual transactions. Based on aforesaid submissions, it was found that the transaction can be termed as unexplained investment under provisions of Section 69 of the Act. So the AO has rightly made the additions which deserved to be sustained and the decision of the CIT(A) which was under misinterpretation of the facts is liable to be set aside the court observed.
In rebuttal to the submissions of the CIT DR, AR on behalf of the assessee have furnished a detailed written submission.
The Division Bench consisting of Ravish Sood, Judicial Member and Arun Khodpia, Accountant Member observed that by considering the rival contentions, the document seized by the department titled as “Sauda-Ikrarnama” was drafted for acquisition of plant and machinery along with General Land, Adivasi land, JCB, Loader, Bus, Hyva, Stores items, Plots etc. It is an admitted fact that the said document was undated, unsigned and unwitnessed, printed on a plan paper, having certain handwritten corrections (copy placed at PB 36-38, also reproduced in the assessment order).
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Even though there are contradictions in between the oath of Mr. Rajesh Agarwal and Mr. Sanjay Agarwal, he was unable to expose such inconsistency. The department does not object to contentions such as no addition for remaining 17 installments of Rs.70 lac have been ever made by the department in the ensuing years. So it is clearly emanating that the document found during the search i.e., “Sauda-Ikrarnama” which was unsigned, undated, unwitnessed, denied by the counterparty, was just a loose paper having certain proposed transaction which were not carried out in toto, thus, the same constitutes a dumb document.
Such dumb document was believed by the AO, as a sacrosanct truth, admittedly neither seller groups or buyer groups had admitted such cash transactions. The allegation of cash transaction could not be substantiated by support of any independent incriminating material by the revenue; therefore, we concur with the findings of CIT(A), that the AO was not justified in making the additions simply on guess work and solely on the basis of a dumb document, we thus, approve the same and uphold the decision to delete the addition of Rs. 2.10 crore made by the AO.
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In result, appeal of revenue in ITA No. 108/RPR/2020, stands dismissed, in terms of our aforesaid observations.
While the hearing in the aforesaid case was in progress, AR of the assessee have furnished, an application dated 14.04.2023 on 12.06.2023, seeking to raise a legal contention / ground, so as to challenge the validity of approval granted u/s 153D in the present case.Since we have approved the decision of CIT(A), wherein the entire addition made by the AO has been deleted in terms of our observations hereinabove, therefore, we refrain to deal with the aforesaid legal ground raised by the assessee challenging the validity of approval granted u/s 153D of the Act in the aforesaid application u/r 27, the same thus, is left as open.
In the combined result, ITA No. 108/RPR/2020, ITA Nos. 06 & 07/RPR/2021 of the department are rendered as dismissed.
The assessee, Mukesh Kumar Agrawal, (06/RPR/2021) appeal is partly allowed in terms of the observation and findings depicted hereinabove.
The assessee, Rajesh Kumar Agrawal (07/RPR/2021) appeal is partly allowed in terms of the observation and findings depicted hereinabove.
The Respondent, Deputy Commissioner of Income Tax (DCIT) (Central-2), Raipur represented by S. L. Anuragi, CIT-DR.
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