THE issues before the Bench are - Whether addition made by the Assessing Officer merely on the basis of statement u/s 132(4) can be sustained in the absence of any evidence, material or recovery of any movable or immovable assets at the time of search to corroborate the disclosure made by the assessee and Whether the surrendered income has to be quantified on the basis of the incriminating material found during the search or on the basis of any other evidence collected during the assessment proceedings. And the verdict goes against the Revenue.
Facts of the case
M/s Columbia Holdings (P) Limited, a company having its registered office at New Delhi, is under the control of ‘Sareen Group’ doing the business of real estate development by way of entering into a joint venture with MGF Development Pvt. Ltd. M/s. Moonlight Continental (P) Ltd. is also a registered company under the control and management of ‘Sareen Group’ doing the business of real estate development by a joint venture with MGF Development Pvt. Ltd. Thus, both these companies were in the joint venture with MGF Development Pvt. Ltd. The Columbia Holdings (P) Ltd. was in joint venture in respect of "Metro Polis" at Gurgaon and residential development known as "The Villas" at Gurgaon. M/s. Moonlight Continental (P) Ltd. was into a joint venture partner with MGF Development Pvt. Ltd. in respect of development of a commercial/ shopping mall under the name and style of "Metro Polis" at Gurgaon and MGF Metropolitan, Saket, New Delhi. A Search and seizure operation u/s 132(1) was conducted on the ‘Sareen Group’ and warrant was in the name of Sareen Estate Pvt. Ltd. at registered office at 75-E, Himalaya House, 23, K.G. Marg, New Delhi and its corporate office. Other warrant was in the name of Shri Sudhir Sareen and Shri Siddharth Sareen, joint name in respect of residential premises at New Delhi. There was no search warrant in the name of these two Group companies. The assessments of these two companies were framed u/s 153C read with section 143(3) of the Act for the six AYs, i.e. 2002-03 to 2007-08 and no addition was made. Both these companies were part of the ‘Sareen Group’ and the controlling shares were held by persons of the ‘Sareen Group’. The statement recorded u/s 132(4) of the Act of persons in control and management of ‘Sareen Group’ were recorded and in these statements, no discloser of any additional income was made.
Simultaneously, search was also carried at the premises of Emaar MGF Limited and M.G.F. Development Ltd. Statement of Shri Shravan Gupta, Managing Director of Emaar MGF Land Limited was recorded during the search u/s 132(4) of the Act. In his statement, he admitted the additional income of Rs.225 crores. In the statement recorded u/s 131, Shri Shravan Gupta bifurcated this Rs.225 crores as, Rs.160 crores in the hands of M/s. Emaar MGF Land Limited and remaining Rs.65 crores in the other Emaar MGF Group companies/concerns/individuals and other entities. Further bifurcation was not provided in this statement. The details were provided at later date and as per this bifurcation, Rs.10 crores each was attributed to these two assessee companies. Thereafter, further Rs.6 crores was also attributed to each of these assessee companies. Thus, the surrendered amount u/s 132(4) was taken at Rs.16 crores in the hands of each of these two assessee companies, namely, M/s. Columbia Holdings (P) Ltd. and M/s. Moonlight Continental (P) Ltd. This amount was taken on the basis of surrender made by Shri Shravan Gupta, MD of Emaar MGF Land Limited while making statement u/s 132(4)/131 of the Act and thereafter submitting bifurcation of the surrendered amount. Columbia Holdings (P) Ltd. filed return declaring income of Rs.8,35,79,534/- only. The AO made the addition of balance of the amount on the basis of statement of Shri Shravan Gupta and the bifurcations submitted of Rs.225 crores. The CIT (A) has deleted the addition in both these cases.
On appeal by the Revenue, the Tribunal held that,
++ there were no incriminating documents seized in respect of the assessee company during the search operation. It is also an admitted fact that finally the Emaar MGF Group had disclosed Rs.335.66 crores as against the disclosure of Rs.225 crores made during the search operation. The allocation of disclosure in these assessee companies was from Rs.65 crores bifurcated in the statement u/s 131 of the Act and by a letter in further submissions. On the basis of documents available on record, it is clear that no incriminating documents were found and seized with regard to these assessee’s companies which could have been made basis for addition or additional income. No concealed income had been worked out. Assessee had disclosed income in respective companies by way of change in method of accounting or say by recognizing changing the method of the income. AO had not pinpointed any defect in this method. During the assessment proceedings as well as in the remand reports called by the CIT (A), the AO has not quantified any concealed income. These assessees were part of the ‘Sareen Group’ although Shri Shravan Gupta was Director in these companies but these companies were controlled by ‘Sareen Group’ persons only. Overall discloser by all these persons had been made of Rs.335.66 crores. The income disclosed by these assessee companies had not been challenged on the basis of any evidence except the initial bifurcation of undisclosed income;
Simultaneously, search was also carried at the premises of Emaar MGF Limited and M.G.F. Development Ltd. Statement of Shri Shravan Gupta, Managing Director of Emaar MGF Land Limited was recorded during the search u/s 132(4) of the Act. In his statement, he admitted the additional income of Rs.225 crores. In the statement recorded u/s 131, Shri Shravan Gupta bifurcated this Rs.225 crores as, Rs.160 crores in the hands of M/s. Emaar MGF Land Limited and remaining Rs.65 crores in the other Emaar MGF Group companies/concerns/individuals and other entities. Further bifurcation was not provided in this statement. The details were provided at later date and as per this bifurcation, Rs.10 crores each was attributed to these two assessee companies. Thereafter, further Rs.6 crores was also attributed to each of these assessee companies. Thus, the surrendered amount u/s 132(4) was taken at Rs.16 crores in the hands of each of these two assessee companies, namely, M/s. Columbia Holdings (P) Ltd. and M/s. Moonlight Continental (P) Ltd. This amount was taken on the basis of surrender made by Shri Shravan Gupta, MD of Emaar MGF Land Limited while making statement u/s 132(4)/131 of the Act and thereafter submitting bifurcation of the surrendered amount. Columbia Holdings (P) Ltd. filed return declaring income of Rs.8,35,79,534/- only. The AO made the addition of balance of the amount on the basis of statement of Shri Shravan Gupta and the bifurcations submitted of Rs.225 crores. The CIT (A) has deleted the addition in both these cases.
On appeal by the Revenue, the Tribunal held that,
++ there were no incriminating documents seized in respect of the assessee company during the search operation. It is also an admitted fact that finally the Emaar MGF Group had disclosed Rs.335.66 crores as against the disclosure of Rs.225 crores made during the search operation. The allocation of disclosure in these assessee companies was from Rs.65 crores bifurcated in the statement u/s 131 of the Act and by a letter in further submissions. On the basis of documents available on record, it is clear that no incriminating documents were found and seized with regard to these assessee’s companies which could have been made basis for addition or additional income. No concealed income had been worked out. Assessee had disclosed income in respective companies by way of change in method of accounting or say by recognizing changing the method of the income. AO had not pinpointed any defect in this method. During the assessment proceedings as well as in the remand reports called by the CIT (A), the AO has not quantified any concealed income. These assessees were part of the ‘Sareen Group’ although Shri Shravan Gupta was Director in these companies but these companies were controlled by ‘Sareen Group’ persons only. Overall discloser by all these persons had been made of Rs.335.66 crores. The income disclosed by these assessee companies had not been challenged on the basis of any evidence except the initial bifurcation of undisclosed income;
++ therefore, the disclosure made by Shri Shravan Gupta during the search operation and which has been further enhanced, shall not have adverse impact on income disclosed in the return of these assessees. Only on the basis of ad hoc bifurcation of the disclosure or surrendered income at initial stage of proceeding and in absence of any incriminating document shall not make such addition sustainable. Overall disclosure was of a high amount. Initial bifurcation was not based on any reliable calculation in view of changed method of recognizing income. The fact shows that these bifurcations were made on ad hoc basis only. It was not even based on any seized material. No statement u/s 132(4) of the Act recorded in these companies. Neither the authorized officer during the search operation nor AO had worked out any concealed income supported by any document. Hence, no adverse inference can be drawn when assessee filed return of income by making income on the basis of changed method of accounting. Therefore, the CIT (A) has rightly deleted the additions. The order of the CIT (A) was upheld and dismissed the revenue’s appeal.
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