2015-TIOL-1373-ITAT-AHM
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'B' AHMEDABAD
IT(SS)A No. 493/Ahd/2011
CO No.206/Ahd/2011
Assessment Year: 2006-07
DEPUTY COMMISSIONER OF INCOME TAX
CENTRAL CIRCLE-2, SURAT
Vs
M/s KUMASH CONSTRUCTION PVT LTD
404 AMAR CHAMBERS, VALSAD
PAN NO:AACCK3027C
G D Agrawal, VP & S S Godara, JM
Date of Hearing: May 18, 2015
Date of Decision: May 22, 2015
Appellant Rep by: Shri O P Vaishnav, CIT-DR
Respondent Rep by: Shri S D Chheda, AR
Income Tax - Sections 131 & 132.
Whether addition made on the basis of statement recorded under sec. 132(4) and also on oath under sec. 131 of a person is justified when the statement of that person was recorded behind the back of the assessee and within a period of 4 days, such statement was retracted and the Revenue did not allow any opportunity to the assessee to cross-examine that person?
The search and seizure operation u/s 132 was carried out at the residential and business premises of the Malde group concerns. The assessee is one of the group concerns of Malde group. The assessee paid commission to Atul whose statement was recorded u/s 132(4) and also on oath u/s 131. In those statements, Atul stated that he received 1% commission on the flats sold by him. From the details of commission paid, the AO noticed that the commission has been paid at Rs.4,84,610/- while the sale value of the flats have been shown at Rs.2,42,24,700/-. The AO drew inference that the correct value of the flats sold was Rs.4,84,49,400/- and accordingly, he made the addition of Rs.2,42,24,700/-. The
CIT(A) deleted the addition observing that the AO has made addition without any evidence found in search proceedings or collected during post search enquiries or during assessment proceedings. Even no statement was recorded on sale value of any of the flats.
On Appeal before the Tribunal the DR submitted that the statement of Atul was recorded at the time of search as well as after the conclusion of search. The AR submitted that the statement of Atul was recorded behind the back of the assessee and the assessee specifically requested during the course of assessment proceedings to allow opportunity to

cross-examine Atul. However, the Revenue did not allow any opportunity of crossexamining.
Having heard the parties, the Tribunal held that,
++ the Revenue did not examine from any of the buyers of the flats the rate at which they have purchased the flats. Admittedly, the statement of Atul was recorded behind the back of the assessee and within a period of 4 days, such statement was retracted by him by furnishing the affidavit. The assessee, during the assessment proceedings, specifically made a request to allow opportunity to cross-examine Atul if Revenue wanted to rely upon his statement. However, the Revenue did not allow any opportunity to the assessee to crossexamine Atul. In the Return of Income filed by Atul prior to the date of search, he has disclosed the brokerage received by him and the brokerage paid to subbrokers. These facts also affirmed the explanation that the commission paid was about 2% out of which 1% was passed on by Atul to other brokers. The CIT(A) was fully justified in deleting the above addition made by the AO.
Revenue's Appeal Dismissed
ORDER
Per: G D Agrawal:
This is an appeal filed by the Revenue and the Cross-Objection filed by the assessee, both against the order of the Commissioner of Income Tax (Appeals)-II, Ahmedabad dated
23.05.2011, pertaining to Assessment Year 2006-07.
IT(SS)A No. 493/Ahd/2011 (Revenue's Appeal) : AY: 2006-07
2. In this appeal by the Revenue, following grounds were raised:-
1. The Ld. CIT(A) has erred in law and on facts in holding that the addition on account of determined suppression of unaccounted on-money income was erroneous.
2. The Ld. CIT(A) has erred in law and on facts in dismissing the relevant facts regarding the unaccounted income as collected and seized during search action and placed on record.
3. The Ld. CIT(A) has erred in law and on facts in relying on irrelevant materials, theoretical premises, surmises and conjectures regarding the on money receipts and commission payments made by the assessee concern.
4. The Ld. CIT(A) has erred in law and on facts in law in making erroneous interpretation of relevant facts and improperly rejecting admissible evidence.
3. The facts of the case are that search and seizure operation u/s 132 of the Income-tax
Act, 1961 was carried out at the residential and business premises of the Malde group concerns on 24.09.2008. The assessee is one of the group concerns of Malde group. During the accounting year relevant to assessment year under consideration, the assesseecompany paid commission to Shri Atul Premji Malde whose statement was recorded u/s
132(4) on 24.09.2008 and also on oath u/s 131 on 12.12.2008. In those statements, Shri
Atul Premji Malde stated that he received 1% commission on the flats sold by him. From the

computer data impounded from the office of Shri Bharat Malde, Director of the assesseecompany, following details of the flat sold and commission paid to Shri Atul Premji Malde was found:-
Atul P. Malde – Details of commission received – A/c Year 2005-06
Project Name
Om Keval, Sai Keval, Shree Keval,
SWubh Keval
No. of Flats sold
30 flats
Sales value Brokerage*
2,42,24,700 4,84,610
4. From the above details of commission paid, the Assessing Officer noticed that the commission has been paid at Rs.4,84,610/- while the sale value of the flats have been shown at Rs.2,42,24,700/-. Since Shri Atul Premji Malde has categorically stated that he received 1% commission on the flats sold, the Assessing Officer drew inference that the correct value of the flats sold was Rs.4,84,49,400/- and accordingly, he made the addition of Rs.2,42,24,700/-. On appeal, the CIT(A) deleted the addition with the following findings:-
"5. I have considered the assessment order and the basis of addition of ‘on money' received and also the submissions of the A.R. and I am totally in agreement with the learned A.R. that the addition of Rs.2,42,24,700/- has been made simply on the reverse working of sale of flats on the basis of commission paid to Shri Atul P. Malde. The commission payment as per Annexure-1 comes to 2% of the sale value out of which 1% commission is paid to the sub brokers which is also a part of Annexure-1 on page 2 to 4. In the assessment order for
A.Y.2007-08, the commission payment was 1% of the sale value but the rate of sale of flats was same in A.Y.2005-06, 2006-07 and 2007-08 as mentioned in the table above. It is interesting to note that the Assessing Officer has made the addition of Rs.2,42,24,700/- without making any enquiry from the purchasers or without any finding or any kind of evidence of receipt of 'on money' either during the course of search proceedings or post search enquiries. In the statement of Shri Atul P. Malde and Shri Bharat Malde, the main person of the group, there is not a single question on rate of sales of flat in any of the projects in which the flats have been sold through Shri Atul P. Malde. The pocket diary impounded from the office premises of the assessee does not contain any details of 'on money' collection on the projects developed and sold by the assessee company through Shri
Atul P.Malde. No defect or mistake in the books is pointed out by the Assessing Officer and the books of accounts have not been rejected for applying the comparative G.P. of another project. The Assessing Officer, without any basis, has doubled out the sale value of the flats on the basis of commission payment to Shri Atul P. Malde. At the most, he could have questioned the genuineness of excess commission of 1% paid to Shri Atul P. Malde because for booking the flats in the same project in A.Y.2005-06 and A.Y.2007-08, the commission
@ 1% was paid on sale of all flats.
6. In view of the above facts and circumstances of the case and evidences on record, it is held that the Assessing Officer has made addition of "on money" for Rs.2,42,24,700/- without any evidence found in search proceedings or collected during post search enquiries or during assessment proceedings, on any of the flats sold through Shri Atul P.Malde. Even no statement was recorded on sale value of any of the flats. It is therefore, held that the addition of Rs.2,42,24,700/- was unjustified and without any basis, hence the same is deleted.
5. The Revenue, aggrieved with the order of the CIT(A), is now in appeal before us.

6. At the time of hearing before us, it is submitted by the ld. Departmental Representative that the statement of Shri Atul P. Malde was recorded at the time of search as well as after the conclusion of search. He referred to his statement after the date of the search and pointed out that in the statement dated 12.12.2008, Shri Atul P. Malde has clearly stated that the commission has been received at 1%. He reiterated his statement of receipt of commission 1% even in respect of those 30 flats, the details of which were found from the computer of Shri Bharat Malde. He also clarified that if there is more than one brokers, he has to share the commission from his 1% of commission. The ld. Departmental
Representative submitted that the CIT(A) accepted the assessee's contention that the commission was paid at 2% which was contrary to the statement on oath of Shri Atul P.
Malde. He, therefore, submitted that the order of the CIT(A) should be reversed and that of the Assessing Officer may be restored.
7. The ld. Counsel for the assessee, on the other hand, pointed out that the statement of
Shri Atul P. Malde was recorded on 12.12.2008 and immediately within 4 days i.e.
16.12.2008 he gave an affidavit stating that since in respect of sale of those 30 flats one more broker was involved, therefore the total commission received was 2%, out of which
1% was passed on to sub-broker. During his statement, what he stated is the commission which was actually retained by him. He also referred to the computation of income and assessment order of Shri Atul P. Malde for Assessment Year 2006-07 which was completed u/s 143(3) before the search. He pointed out that the search in the assessee's group was conducted on 24.09.2008 while Shri Atul P. Malde filed his return of income for Assessment
Year on 22.03.2007, declaring income of Rs.2,52,284/-. In the computation of income, Shri
Atul P. Malde has clearly shown that out of the brokerage received at Rs.4,84,610/-, the brokerage paid by him was Rs.2,39,250/- and net brokerage received was only
Rs.2,45,360/-. The above return of income was scrutinized u/s 143(3) and the Assessing
Officer vide order dated 08.04.2008 completed the assessment at Rs.2,72,280/ - by making the addition of Rs.20,000/- on account of low household withdrawal. Thus, the brokerage paid by Shri Atul P. Malde to other brokers was disclosed by him prior to the search and was also accepted in the order passed u/s 143(3). He also referred to the statement of Shri
Bharat Malde dated 24.12.2008 in which Shri Bharat Malde has clarified that the commission paid to Shri Atul P. Malde was 2% and out of which he passed on 1% to other sub-brokers. Therefore, what he stated is the net commission. It was also submitted by the ld. Counsel that the statement of Shri Atul P. Malde was recorded behind the back of the assessee and the assessee specifically requested during the course of assessment proceedings to allow opportunity to cross-examine Shri Atul P. Malde. However, the
Revenue did not allow any opportunity of cross-examining Shri Atul P. Malde. The ld.
Counsel also pointed out from the CIT(A)'s order that the assessee sold flats/shops at the same rate in the preceding and subsequent years and the Revenue accepted the same. How in respect of same flats or shops the assessee is able to take the money double than the rate at which the flats were sold in the preceding and subsequent years? He, therefore, submitted that the order of the CIT(A) is perfectly justified and the same should be sustained.
8. We have carefully considered the arguments of both the sides and perused the material placed before us. After considering the facts of the case and arguments of both the sides, we do not find any justification to interfere with the order of the CIT(A). The additions have been made solely on the basis of statement of Shri Atul P. Malde in which he has stated to have received the commission at the rate of 1%. However, his statement dated 12.12.2008 was retracted by him by furnishing an affidavit on 16.12.2008 which was within 4 days from the date of the statement. Shri Bharat Malde in his statement has clarified that the commission was paid to Shri Atul P. Malde at 2% and since more than one broker was involved, Shri Atul P. Malde passed on about 1% to the sub-brokers and therefore, his

statement with regard to 1% commission should be considered as 1% net commission.
After the statement of Shri Bharat Malde and the affidavit of Shri Atul P. Malde, the
Department did not re-examine Shri Atul P. Malde. The Revenue also did not examine from any of the buyers of the flats the rate at which they have purchased the flats. Admittedly, the statement of Shri Atul P. Malde was recorded behind the back of the assessee and within a period of 4 days, such statement was retracted by him by furnishing the affidavit.
The assessee, during the assessment proceedings, specifically made a request to allow opportunity to cross-examine Shri Atul P. Malde if Revenue wanted to rely upon his statement. However, the Revenue did not allow any opportunity to the assessee to crossexamine Shri Atul P. Malde and made the huge addition relying upon the statement of Shri
Atul P. Malde which was not only recorded behind the back of the assessee but was retracted by Shri Atul P. Malde. In the Return of Income for Assessment Year 2006-07 filed by Shri Atul P. Malde prior to the date of search, he has disclosed the brokerage received by him and the brokerage paid to subbrokers. These facts also affirmed the explanation of Shri
Bharat Malde that the commission paid to Shri Atul P. Malde was about 2% out of which 1% was passed on by Shri Atul P. Malde to other brokers. The CIT(A) at page No.4 of his order has given the comparative rate for sale of flat in preceding and subsequent year. For ready reference the same is reproduced below:-
Rate/Project
Om Kewal (Res.)
Sai Kewal (Res.)
Shubh Kewal (Res.)
Sh. Kewal (Res.)
Sai Kewal (Shop)
A.Y. 2005-06 A.Y. 2006-07 A.Y. 2007-08
-500 500
500 per sq. ft.
500 500
400
400
3000
400
400
3000
400
400
--
From the above, it is evident that the assessee sold the flats in various projects at the same rate in A.Ys. 2005-06, 2006-07 and 2007-08. The Revenue has accepted the sale rates of flats in all the years, except sale of 30 flats sold through Shri Atul P. Malde in the year under consideration. It cannot be believed that the assessee sold 30 flats at double the rate then the sale rate of same flats to others in the preceding year, current year and subsequent year.
9. In view of the totality of the above facts, in our opinion, the CIT(A) was fully justified in deleting the above addition made by the Assessing Officer on the basis of the statement of
Shri Atul P. Malde which was recorded behind the back of the assessee and moreover, which was retracted by himself within 4 days from the date of giving of his statement. We, therefore, uphold the order of the CIT(A) and dismiss the appeal filed by the Revenue.
CO No.206/Ahd/2011 (Assessee's Cross-Objection) : AY: 2006-07
10. In the Cross-objection, the assessee has raised the following grounds:-
1. The learned CIT(A) has erred in law & in facts making disallowance of commission of
Rs.242305/- which is at 1% of sales value as against 2% of sales value.
2. The learned CIT(A) has wrongly observed that the learned A.R. had submitted that there was no justification for claiming additional 1% of commission & had agreed for disallowance of Rs.242305/-

3. The appellant leaves the right to amend, add, or alter the ground at the time of regular hearing.
11. At the time of hearing before us, the ld. Counsel for the assessee did not press the cross-objection. Moreover, from the perusal of the order of the CIT(A), we find that before the CIT(A) also the assessee agreed for the disallowance of Rs.2,42,305/- out of commission paid. The relevant finding of the CIT(A) reads as under:-
"7. During the course of the appellate proceedings, the learned A.R. of the appellant was requested to justify the excess commission payment of 2% as against 1% on sale of flats in the same projects during A.Y.2006-07 whereas commission @ 1% was paid, claimed and allowed in A.Y.2005-06 and A.Y.2007-08. He was also requested to explain any additional services rendered by the sub brokers for additional 1% commission particularly in view of the facts that Shri Atul P.Malde had clearly admitted that if there were more than one brokers involved in sale of the flats, the commission of 1% was to be distributed amongst the brokers. He was entitled for 1% commission at the maximum. The learned A.R. had submitted that there was no justification for claiming additional 1% of commission that works out to Rs.2,42,305/- on sale of 30 flats for Rs.2,42,24,700/- and he agreed for disallowance of Rs.2,42,305/-. Thus, the disallowance of Rs.2,42,305/- is made out of inflated commission debited in books of accounts."
In view of above, we dismiss the cross-objection of the assessee.
12. In the result, the Revenue's appeal as well as assessee's cross objection, both are dismissed.
(Order pronounced in the Court on 22.5.2015)