Ved Jain, Adv. for the Petitioner. Pramita M. Biswas, CIT DR for the Respondent.

1. These are two appeals of two different assessee involving identical facts and circumstances including the amount of addition involved, parties also confirmed the same, put forth their arguments identically, therefore, both these appeals are disposed of by this common order. As the learned Commissioner of Income Tax (Appeals) [theLD CIT (A)]has dealt with the facts in case of ITA number 5181/del/2014 in case of Mr. Madhur Mittal, it is taken as lead appeal.

2. Mr. Madhur Mittal, assessee has raised the following grounds of appeal in ITA No. 5182/Del/2014 for the Assessment Year 2010-11 against the order passed by The Ld CIT –A dated 23/07/2014 :-

“1. That the ld CIT Appeal was wrong in facts and in law by rejecting the ground of the appellant of not providing the grounds of approval taken for making the assessment of the appellant of the appellant by the AO before the completion of the assessment.

2. That the ld CIT Appeal was wrong on facts and in law to confirm the addition of Rs. 8.75 crores based on the draft unsigned document found during search operation from a laptop belonging to the appellant based on hypothetical and surmises grounds.

3. Without prejudice to the aforesaid grounds, each ground of appeal is independent to each other.”

3. Identical grounds were raised in appeal of Mr. Sumit Mittal.

4. Briefly stated the facts shows that search and seizure on „Triveni group‟ of companies was carried out on 28/9/2010. Assessee was covered in that search also. Assessee filed his return of income on 10/12/2012 under section 153A of The Act declaring an income of ₹ 995540/- in response to notice under section 153A of the Act dated 7/2/2012. Notice under section 143 (2) of the Act was issued on 28/12/2012. Assessment under section 153A read with section 143 (3) of the act was passed on 25th of March 2013 determining total income of the assessee at Rs. 9,22,36,540/- by The Deputy Commissioner Of Income Tax, Central Circle – 22, New Delhi[ the ld AO ] . Only addition, which has travelled before us, is an amount of ₹ 8.75 crores in the hands of the assessee with respect to alleged commission on sale of a property. The assessee contested the addition before the learned CIT – A –III, New Delhi [The ld. CIT (A)]. He passed an order dated 23/7/2014 confirming the addition. Therefore, assessee is in appeal before us on that single issue.

5. During the course of search on „Triveni Group” of companies, Annexure A – 23 was seized. Based on that the ld AO has alleged that assessee has received a commission of Rs. 8.75 crore in respect of sale of property at 7, Sikandra Road, New Delhi purchased by three individuals from court auction which was bid by Triveni group for purchase of the above property at ₹ 117 crores.

6. To understand the issue, it is important to look at the chronology of the events. On 26/9/2006, the Honourable Delhi High Court auctioned property at 7, Sikandara Road, New Delhi. Triveni infrastructure development Co Ltd [hereinafter referred to as TIDCO] made a bid of ₹ 117 crores, which was accepted. On 5/10/2006, the Honourable High Court received a 25% of the above consideration, roughly amounting to Rs 29.25 crores and a schedule for payment of the balance installments was drawn. As the substantial payment was not made by TIDCO, on 5/5/2009 the court directed, it to deposit ₹ 90 crore in two tranches on or before 31 December 2009. The court also directed that in case of failure to deposit the above sum penalty be also to be levied of ₹ 5 crores. On 12 June 2009, the court allowed the sale deed to be executed in the name of group concern of TIDCO namely Angel infrabuild Ltd. However, as the substantial payment was outstanding, there was delay in payment of the balance installments. As the bidder was facing financial crunch and in order to avoid forfeiture of advance money paid to the tune of Rs 29.25 crores and further penalty of ₹ 3 crore, the group decided to transfer its rights in the auction of the property. Therefore, TIDCO floated various proposals in the market. For better realization of the property price, it wanted the property to be converted from leasehold to freehold; it entered into a contract with M/s Konark Care on 24 January 2007. The court appointed Commissioner has also made an effort for conversion of above property. The matter reached the court for directions to LDO. The honourable court granted a direction on 15 May 2007. However as per the steps taken by the court Commissioner, TIDCO cancelled the agreement entered into with Konark care. As nothing happened, On 14 August 2007, TIDCO re-entered into an agreement with the same company for conversion of land and expedite the process for conversion into freehold property from leasehold property. Meanwhile agreement with Konark care also went into litigation before the Honourable Delhi High Court, Konark care preferred an appeal for recovery of an amount of ₹ 18 crores from TIDCO and restraining it from dealing in the property. The Honourable Delhi High Court disposed of the appeal of the Konark Care per order dated 24/9/2009 that was further appeal by Konark care on 4/11/ 2009. On 4/11/2009 an ex parte injection was passed restraining TIDCO from dealing with the property in any manner. For removal of the above injunction, TIDCO approached Honourable Supreme Court, Honourable Supreme Court vide order dated 8/2/2010 vacated injunction subject to furnishing security of Rs 18 crores. Thus, process of such conversion was delayed substantially. For all these reasons, it floated various proposals in the market for sale of the above property. In this proposal the three gentlemen namely Mr. Kabul Chawla, Mr. Chetan Shabarwal and Mr. Nitin Shabarwal came to its rescue. As per letter dated February 20, 20 10, they wrote letter to the assessee [ Mr. Madhur Mittal] and his brother [ Mr. Summit Mittal , another assessee] that they have agreed to buy property bearing number 7, Sikanadra Road, New Delhi and a definitive agreement is signed. In this regard, they have agreed to pay an amount of Rs. 2,18,75,000/- to Mr.Madhur Mittal and identical sum to Mr.Summit Mittal as commission for purchase of the said property. This was the communication by one of those three gentlemen. Identical communication was also received from another gentleman. The third communication was from the third gentlemen who agreed to pay an amount of Rs. 4,37,50,000/- to Mr. Madhur Mittal and identical sum to Mr. Summit Mittal as commission for purchase of the said property. Thus, three gentlemen issued letter dated 20/2/2010, to pay the assessee and his brother total commission of Rs 17.50 Cr for the above property. However, On 24 February, 2010, the assessee responded to them with respect to the above draft proposal and sent an email communication appreciating the offer made by those persons on 20/2/2010 to pay ₹ 17.50 crore under the head of commission to comply with the order of the Supreme Court. It was stated that legal opinion was taken in this regard from their legal team and it was advised by the advocates, that due to the pending court cases against the company and its directors, no such payment can be received in personal name as commission or otherwise. Therefore, the assessee declined to accept the offer and stated that they cannot take any amount directly in the name of the directors. Thus they requested that the entire amount of the sale consideration be deposited with the High Court for the execution of sale deed. It was further promised that the company is making effort for vacation of the Stay which would be intimated very soon. Subsequently on 20 April 2010, the High Court permitted the execution of sale deed in favour of the purchasers i.e. Mr. Kabul Chawla, Nitin Shabarwal and Chetan Shabarwal as they deposited bank draft of ₹ 89.75 crores with the Hon. Court. On 21/4/2010 sale deed was executed in favour of the purchaser for Rs122 crores comprising of Rs. 117 crores of sales consideration and Rs 5 crores of penalties. Thus, the property, which was bid by TIDCO for Rs 117 crores on 26/9/2006, was ultimately transferred on 21 April 2010 in favour of three different individuals jointly at the same price plus a penalty of ₹ 5 crores. Thus, TIDCO recovered the sum of Bid Money of Rs 29.25 crores paid earlier.

7. The learned assessing officer referred to the document dated 20/2/2010 where all these three purchasers agreed to pay commission of ₹ 17.5 crore to Shri Madhur Mittal and Shri Summit Mittal who are the owners and promoters of TIDCO is the subject matter of dispute. Based on the above chronology of events, the learned assessing officer took these letters dated 20/2/2010 written by three individuals to the assessee where they have agreed to pay commission of ₹ 17.5 crores to Mr. Madhur Mittal and Mr. Summit Mittal. The assessee was questioned.

8. The assessee explained that they are directors of „Triveni” Group of companies wherein the assessee with the several parties were in negotiation for the purpose of saving the earnest money deposited for the purchase of the above properties. The main intention of the assessee was that the money that has been deposited by the assessee company for the purpose of purchase of the above property in pursuance of the bid of Rs 29.25 crores could be recovered. This is so because of huge litigation involved in the property and severe financial crunch faced by TIDCO. Therefore, the main intention of the group was to save Rs 29.25 cr paid as earnest money against the bid of the above property. It would be forfeited well as penalty could be levied further. It was further stated that the above letters stated to be have been written by the three different individuals have never been acted upon. Those documents are unsigned and did not materialize. Assessee also referred to the email communication dated 24 February 2010 written to all these three individuals amongst others, in response to their earlier communication for the payment of commission stating that the advocates have advised them that due to the pending court cases against the company and its directors, no payment can be received in personal name as commission or otherwise. Therefore, they requested that the total payment is required to be made as per the direction of the honourable High Court for the execution of the sale deed of the above property in their name.

It was further explained that passports of the assessee have been deposited before the honourable High Court as per the direction of the honourable High Court and further the office of the TIDCO Group were seized by the office of the official liquidator attached to the honourable Delhi High Court. Therefore, it is facing huge financial crunch. Assessee also submitted that it has not received any such payment from these three gentlemen. Assessee submitted his bank account and the books of accounts for verification of the fact. Therefore, it was submitted that the assessee has not received any commission from these three gentlemen. In view of this, assessee submitted that it has not earned any such commission and therefore it is not chargeable to tax in his hands.

9. The learned assessing officer was of the view that as those documents were recovered from the laptop of Mr. Madhur Mittal, promoter of the Triveni group of companies, which was subjected to search, there is good evidence. In view of this, he made an addition of ₹ 8.75 crores in the hands of assessee and another Rs 8.75 crores in the hands of Mr.Summit Mittal. Accordingly, assessment under section 153A read with section 143 (3) of the act was passed on 25th of March 2013.

10. Assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT – A. He passed an order on 23 July 2014. On the arguments of the assessee before him that those documents are dumb documents, The learned CIT – A has held that it is not a dumb document, in view of the provisions of section 292C of the act and presumption available under section 132 (4A) of the act. Assesee also argued that buyers were not examined. With respect to the examination of the buyer of the property, he held that the buyer of the property could not depose against these parties as per the decision of the honourable Delhi High Court in case of Sonal construction and Urmila Lodhi. He was further of the view that as Triveni has deposited ₹ 30 crores for the purpose of purchase of the property before three years. The sales deed is executed in 2010. Therefore the property is now may be valued at ₹ 200 – 300 crores. Therefore, there is no reason that the assessee should forego such a huge sum. Hence, he held that above sum is paid by that buyers and received by the assessee as commission. Therefore, he confirmed the addition. Against that order of the learned CIT – A, assessee is in appeal before us.

11. The LD AR vehemently submitted that addition made is devoid of any merit. His arguments have following points.

a. The main plank of the argument is that the seized documents merely say that the parties „agreed to pay‟ the above commission to these two persons. However, it was merely a proposed transaction which was refused by the assessee on 24th of February 2010 which was also prior to the date of search and whole consideration has been received as determined by the honourable High Court. It was stated that the proposal of these three gentlemen were never accepted. Full consideration was received for the sale of the above property through the High Court registry, which was agreed to in the bid proceedings except Rs 29.25 crores, which is received by TIDCO Group.

b. He further submitted that provisions of section 292C is a rebuttable presumption for which case the assessee has shown the details that the offer given by the three gentlemen was not at all accepted by the assessee. Along with the letters dated 20/2/2010 of these three gentlemen, the email dated 24/2/2010 of the assessee refusing to above offer was also in the search proceedings. Therefore those letters are accepted by the LD AO for making addition but, immediate correspondence thereafter of the assessee also prior to the date of search was not at all accepted. Thus, the offer made by the third party is used for making addition but its rejection by the assessee is totally ignored.

c. He further submitted that property was sold in pursuance of the orders of the honourable High Court as well as the assessee company who bid for the above property went in to dire financial consequences. Therefore it wanted to get out of the whole transaction. For this assessee roped in these 3 gentlemen, who agreed to buy the property at the agreed bid price. Thus the rebuttable presumption has been explained by declining the offer.

d. It was further stated that no corroborative evidences were found during the course of search which shows that the assessee has received the above consideration. It was further submitted that the assessing officer did not have any corroborating material whatsoever to support the action and AO has not carried out any enquiry in respect of the said matter.

e. It was further stated that assessee is not the seller of the property but merely a director of the company who obtained right to get the registration of the property in favour of that company. The consideration was also agreed by the honourable High Court, therefore there was no reason or there was no purpose of paying commission to the assessee over and above agreed price.

f. It was further stated that buyer of the property was not examined on this issue.

g. He submitted that the addition made in the hands of the assessee only based on three unsigned letters from the buyers, which was refused by the assessee, prior to the date of search, could not result into any addition in the hands of the assessee as commission income.

h. Ld AR further submitted that only the real income is required to be taxed in his hands, the sale of the property was obtained in an auction and the whole consideration was paid by cheque. It was further submitted that the unsigned letters merely state that the said amount has been proposed to be paid, and it nowhere states that the amount has been actually paid to the assessee. Therefore, the AO has merely based on surmises and conjectures made the impugned addition.

i. The learned authorised representative further relied on the decision of the coordinate bench in ITA number 7089/MUM/2011 as well as in ITA number 1551/BANG/2012.

j. It was further submitted that a document cannot be used selectively against the assessee and portion of the document which are in favour of the assessee cannot be ignored just at the option of the assessing officer. He therefore submitted that the learned assessing officer should have given due weightage to the word used „agreed‟ in the document as well to consider that the amount was merely proposed to be paid as against „actually‟ paid. The ld AO simply ignored He further referred to the decision of the honourable Delhi High Court in CIT versus vatika Townships private limited in ITA number 1329/2010 dated 10/9/2010 and the honourable Gujarat High Court in case of Glass Lines Equipments Co Ltd versus CIT (2002) 253 ITR 454.

k. The assessee further submitted that the observation of the learned CIT – A in holding that the remaining infrastructure or to sell the property at higher rate to compensate for rise of prices is devoid of any manner. TIDCO would have in fact lost Rs 29.75 crores, if such settlement would not have been made. He further referred to the several litigations entered into in the above property and stated that at each stage the assessee was having risk of forfeiture of above amount.

l. In the end , he submitted that even otherwise, the assessing officer himself in its order has stated that the series of events that the sale deed was executed on 20/4/2010 that is relevant to assessment year 2011 – 12 and not to the assessment year 2010 – 11 for which the appeals are filed. He submitted that even otherwise, the commission cannot be, if at all, is required to be taxed in the year under appeal as the transaction of the sale of the property has not taken place during the year.

m. In view of this, it was submitted that the order passed by the learned assessing officer and confirmed by the learned CIT – A of the addition of ₹ 8.75 crores in the hands of the assessee is devoid of any merit.

12. The learned departmental representative vehemently supported the orders of lower authorities. She submitted the copies of the three letters namely Kabul letter.doc, Nitin Letter.doc and Chetan letter.doc available in the working copy of annexure A – 23 of the seized documents. The learned DR vehemently supported the argument by the decision of the honourable Delhi High Court in CIT versus Sonal construction [2012 – HC – 851 – Del – IT] (Delhi).

13. In rejoinder, the learned authorised representative submitted that the facts in the case of Sonal constructions (supra) are quite distinct where certain figures were found with respect to the four projects that the assessee had undertaken in the course of his business. The seized documents in fact contain figures relating to the four projects, which were admittedly undertaken by the assessee. One of the partners in that case admitted. He referred to Para no 15 of that judgment and tried to distinguish the same. However, in the present case the assessee himself denies that it has not accepted any commission and written an email prior to the date of search to these three parties that the above transaction cannot take place. Therefore, the reliance placed by the learned departmental representative on the above decision of the honourable Delhi High Court is incorrect.

14. We have carefully considered the rival contention and perused the orders of the lower authorities. The facts of the whole transaction has already been narrated, therefore sake of brevity they are not repeated here. The crux of the issue and evidences based on which these appeals rotate are three letters found during the course of search from the laptop of the assessee. Admittedly, the addition has been made only on those documents. All these three letters are dated 20/2/2010. For the purposes of examination we reproduce the contents of Nitin letter.doc which is as under:-

15. Identically worded of even date letter was one documents namely Chetan Letter.doc where the same amount was mentioned and another even dated letter was of Kabul Chawla as Kabul Letter.doc however in that letter the amount of commission mentioned was Rs 4,37,50,000/-. Thus, the total commission amount mentioned in these three letters was Rs 17.50 CR. All these are word documents. Property [ word document property] of these three letters was not obtained by the revenue and therefore , who prepared those letters and how assessee came in to possession of these documents was not known. There is also no reference by the assessing officer about when these documents were prepared. In absence of these properties of the documents, it is difficult to ascertain veracity of those documents. However, undoubtedly these documents were found in the laptop of the assessee. Be that it may be, the assessee has also not denied that above letters were found from his possession. Therefore according to the provision of section 292C of the Income Tax Act , Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A , it may, in any proceeding under this Act, be presumed-(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. Therefore, assessee in the present case cannot deny that those documents belong to the assessee, the contents of such documents are true. Assessee is also not denying the same but trying to submit that such documents must be read in the proper perspective.

He is further saying that there is another electronic evidence in the form of email dated wed, 24th February 2010 communicated at 14:36:24 sent by Nivedita Bisht from email id enquiry@triveni.net to many persons which is placed at page no 5 of the paper book which reads as under :-

While appreciating the offer made by you on 20.02.2010 to pay Rs 17.50 Crores to Mr. Madhur Mittal and Mr. Sumit Mittal under the head of commission to comply with the order of the supreme court of the total sales consideration. The legal opinion was taken in this regard from our legal team. It is advised by the Advocates that due to pending court cases against the company and its directors , no payment can be received in personal name as commission or otherwise. Thus, we cannot accept your offer nor can take any amount directly in the name of the directors. Thus, you are requested to make the entire amount of the sale consideration before the high court only for the execution of sale deed. The company is making legal efforts for vacation of stay , which will be intimated to you.

16. Therefore, it is apparent that, in absence of any other evidence, it was an offer by the buyers to the assessee for taking commission of Rs 17.50 crores for giving only the solvent guarantee of Rs 18 crores before Honorable Supreme Court in terms of order dated 8/2/2010. Assessee subsequently settled the case with Konark care in terms of order of the Honourable Delhi High court 13.04.2010. Therefore, it is apparent that assessee was not to deposit cheque of Rs 18 crores but only to provide solvency guarantee before Hon Supreme Court to release the property, which is already agreed to be transferred to the parties by the agreement dated 7/12/2009.

Subsequently this agreement was terminated and new agreement was entered in to on 19/4/2010. Revenue did not show that there is any change in the consideration. Therefore, assessee accepted that he received such offer from buyers . However, he also says that by email he refused to accept that offer. Therefore, the content of the documents were accepted to be true. Therefore, assessee did not dispute applicability of section 292 C of the act but says that there is rebuttable presumption and assessee has rebutted the presumption by producing reliable explanation. However, the real issue is that whether from these documents there is any income received by the assessee or not. If the letters of the three buyers and the reply correspondence of assessee is looked as a compendium of correspondence as „one”, Assessee has clearly shown that yes as per those documents the assessee received an offer and by another document, which is totally ignored by the revenue authorities, assessee refused to accept that offer. Both receipt of offer and refusal to accept that offer- rejection-both were prior to the search and both the electronic evidences were available with the AO. However, ld AO made an addition based on offer received by assessee for those three parties completely ignoring the refusal to accept such offer by assessee. Therefore, in the present case, we do not find that part of the records found during search can be used against the assessee for taxing his income , where in other documents clearly suggest that there is no such income accruing to the assessee. Assessee has also brought on record all possible evidence which assessee could have to show that there was no immediately, therefore, there cannot be any income in the hands of the assessee on that rejected offer. Thus, assessee has rebutted the presumption available to the revenue u/s 132 (4A) and 292C of the Act.

17. With respect to the arguments of the ld AR that there should also be some corroborative material available with ld AO to make the addition , the Honourable Delhi High court in Sonal Construction [supra] that case has held in para no 17 as under :-

“17. As to the corroboration sought by the Tribunal in support of the seized documents, it is not an inviolable rule applicable to all situations and to all cases that every seized document should be corroborated before any addition can be made based on it. If calculations and computations have been made in the seized documents in such a manner that its probative value and genuineness cannot be doubted, nothing prevents the Assessing Officer from making additions based on such documents despite the absence of any corroboration. It must be remembered that in such cases it is difficult to obtain corroboration, particularly of the type contemplated by the Tribunal. The Tribunal observed that corroboration could have come in the form of a valuation of the property by the Departmental Valuation Officer or from the purchasers of the property who could have said that they did pay consideration over and above what has been recorded by the assessee in the books of accounts. The valuation of properties can at best be only an estimate. It may not be practical to expect the purchasers of the property to depose against the seller since both of them are party to the same transaction in which on- money is allegedly involved. When documents which are not meant for the eyes of the Revenue are unearthed after undertaking an exercise which involves an intrusion into the privacy of the assessee, it is not permissible to discount the veracity, genuineness and truthfulness of the contents therein for the flimsiest of reasons. It would be proper to insist upon strong evidence in rebuttal of the contents of the documents, particularly after the introduction of Section 292C with retrospective effect from 1.10.1975.”

18. Therefore, if there is income element in those documents seized form the possession of the assessee, then there was no requirement of bringing any corroborative material on record. However, there has to be existence of income in the documents seized. If the documents seized does not show any income earned by the assessee, then ld AO cannot rest on provision of section 292C without bringing any corroborative material on record. Further, the ld AO did not examine buyers of the property with respect to the commission paid by them to the assessee. Even assessee was also not questioned during the course of search with respect to these three letters. As we have already held that there is no income accrues to the assessee based on these three documents, without bringing any corroborative material, it could not have been taxed in the hands of the assessee.

19. Further while confirming the addition, ld CIT (A) was of the view that TIDCO has won bid for the property in 2006 for Rs 117 crores, TIDCO sold that property in 2010, therefore, market value of the property would have gone up to Rs 200 -300 crores and assessee therefore would have received the commission. Sale deed of the property shows consideration of Rs 122 Crores only. There was no corroboration of the valuation presumed by the dl CIT (A). He did not bring on record even the circle rate of the property to show that market value of the property has increased so much. Alleged commission was only Rs 17.50 Crores. Had the property price would have gone up by (assuming at the lowest estimate of ld CIT (A) of Rs 200 crores then the property is appreciated by Rs. 83 Crores ( Rs 200 -117 ) Crores. Had the appreciation been so much, nobody would have forgone the profit of Rs 83 Crores for Rs 17.50 Crors. Therefore, such reason given by the ld CIT (A) cannot be the basis for confirming the addition.

20. In view of this, we reverse the orders of the lower authorities and direct the ld AO to delete the addition of commission income in the hands of Mr. Madhur Mittal and Mr. Sumit Mittal of Rs 8.75 crores.

21. Accordingly, both these appeals of assessee are allowed.