AI Structured Summary
Not yet generated for this judgment
Judgment
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the assessee against the order dated 31.07.2025 of the Ld. Commissioner of Income Tax (Appeal)-30, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN No: ITBA/APL/M/250/2025-26/1079146407(1) arising out of the assessment order dated 28.03.2025 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by ACIT, CC-31, New Delhi, for AY: 2023-24.
Heard and perused the records. A search and seizure operation under Section 132 of the Act was conducted in the case of the Goyal Group on 10.01.2023. The Appellant was also covered under the said search action. Pursuant to the search, the Appellant for the year under consideration i.e., AY 2023-24 filed its return of income on 19.10.2023 declaring a total income of Rs.2,02,25,890/-. The case was selected for compulsory scrutiny and notice under Section 143(2) dated 24.06.2024 was issued by the AO and after examining the response addition was made on allegation of assessee receiving ‘on money’, in sale of immovable property, industrial plots. Same is sustained by ld. CIT(A) and for which assessee is in appeal and has raised following grounds;
“1.That on the facts and circumstances of the case, the order passed u/s 250 by the Ld. CIT (A) is without proper opportunity and the same is not sustainable on facts and bad in law.
2.1That on the facts and circumstances of the case, the Ld. CIT (A) was not justified in upholding the addition of Rs.11,12,31,740/- made u/s 45 on the ground of additional long term capital gain on sale of plots in total disregard to submission and documentary evidences placed on record.
2.2That there being no case of any receipt of cash consideration over and above consideration recorded in the registered sale deed, the allegation of under reported consideration is highly arbitrary and contrary to prevailing market value which is duly supported from valuation report.
2.3That in the absence of certificate u/s 65B of the Evidence Act, the digital data seized from the mobile phones has no evidentiary value and there being no corroborative evidence or material in support of allegation of receipt of excess consideration on sale of plots, the Ld. CIT(A) has fallen into error in upholding the addition which is highly arbitrary, uncalled for and devoid of merits.
2.4That the allegation of after-thought vis-a-vis documentary evidences and allegation of existence of so called modus operandi being unsubstantiated and merely based on hypothetical presumption, the order of CIT(A) is mechanical and wholly unfounded.
2.5That the CIT(A) has grossly erred in accepting the increased value of plots adopted by the AO in the absence of valuation report from DVO which is illegal and bad in law.
2.6That in the absence of any opportunity of cross examination, the adverse inference based on third party statement is misconceived and untenable.
2.7That in any case, the allegation of cash consideration based on search being only with reference to 8 plots, the Ld. CIT(A) has grossly erred in upholding the extrapolation and consequential addition in respect of remaining 16 plots which is irrational, unwarranted and without any legal or factual basis.
3.That there being no case of any receipt of cash or violation of provisions of section 269SS, the Ld. CIT(A) has erred in upholding the initiation of penalty u/s 271D which is illegal and bad in law.
4.That the Ld. CIT(A) was not justified in upholding the validity of the assessment order even though the same was passed without valid approval from the superior authority.
5.That the orders passed by the lower authorities are not justified on facts and bad in law.
6.That the appellant craves leave to add, amend, alter or forgo any or all of the grounds as may be necessary and in the interest of justice.”
The assesse has raised following additional ground before us:
“1.That on the facts and in the circumstances of the present case, the Learned Commissioner of Income Tax (Appeals) ["Ld. CIT(A)"] has erred both on facts and in law in not quashing the assessment order dated 28.03.2025 passed under section 143(3) of the Income Tax Act, 1961 by the Assistant Commissioner Of Income Tax Central Circle 31, Delhi ("Ld. Assessing Officer"), despite the same being without jurisdiction, bad in law, barred by limitation and void ab initio.
2.That the notice dated 24.06.2024 issued under section 143(2) of the Act is without jurisdiction, bad in law, illegal, and consequently liable to be held void ab initio.
3.That on the facts and in the circumstances of the case and in law, the assessment order passed by the Assessing Officer under Section 143(3) of the Act is illegal, void ab initio, without jurisdiction, and contrary to the provisions of the Act, inasmuch as the AO failed to issue any notice under Section 148 of the Act, which is a mandatory precondition for validly assuming jurisdiction to complete the assessment proceedings pursuant to the search.
4.That on the facts and in the circumstances of the present case and in law, the impugned assessment order deserves to be quashed, as the approval accorded by the Ld. Additional Commissioner of Income Tax, Central Range-08, New Delhi vide Letter No. ITBA/COM/F/17/2024-25/1075126749(1) dated 27.03.2025 is mechanical in nature, having been granted without due application of mind and without proper consideration of the material on record, and is therefore unsustainable in the eyes of law.
5.That on the facts and in the circumstances of the present case and in law, the impugned assessment order is bad in law, illegal and void ab initio, having been passed at the behest and under the directions of higher authorities, namely the Range Head, as is evident from Para 18 of the assessment order, thereby vitiating the independent application of mind and statutory discretion mandatorily required to be exercised by the Assessing Officer.”
The relevant facts are that Appellant owned land situated at Poysha Industrial Estate, Plot No. 4, NIT, Faridabad, admeasuring approximately 4.91 acres, which was subdivided into 36 industrial plots of varying sizes. Out of the said 36 plots, 24 plots had been sold up to the date of search. During the course of search conducted at the business premises of the Appellant situated at 37, Ring Road, Lajpat Nagar-IV, New Delhi, the mobile phone data of Shri Rajeev Gupta, who was stated to be assisting Shri S.C. Goyal in relation to property dealings of Poysha Industrial Estate, was cloned and inventorized. Further, certain documents, Whatsapp chats, screenshots and images were also extracted and seized. Further, the statement of Shri Rajeev Gupta was recorded during the course of search proceedings. Ld. AO relied these alleged incriminating evidences to conclude that the Appellant had received consideration over and above the amount disclosed in the registered sale deeds and books of account.
However, the case of assessee is that out of the total 24 plots sold by the Appellant up to the date of search, the alleged incriminating material relied upon by the AO was found only in relation to 8 plots. More importantly, out of these 8 plots, only one plot pertained to the year under consideration, i.e., AY 2023-24, whereas the remaining 7 plots related to transactions of earlier financial years.
Ld. Counsel has submitted that this material when examined shows that even in respect of the aforesaid one plot pertaining to AY 2023-24, the material relied upon by the AO merely comprised a WhatsApp communication relating to brokerage with the broker Sh. Jitendra Arora. It was further contended that no incriminating material related to the year under consideration was found. Shri Rajeev Gupta was neither the owner of the project nor authorized to negotiate or finalize the sale consideration. His role was confined to coordinating customer visits and communicating project-related information under the directions of Shri S.C. Goyal. This fact was also confirmed in his statement recorded during search. The rates reflected in the chats pertained to developed plots, whereas the plots actually sold were undeveloped plots. During the course of search itself, the Department seized brochures and marketing material demonstrating that the Appellant was offering purchasers two distinct options, namely developed plots and undeveloped plots, each carrying different pricing structures and development costs. The actual transactions were duly evidenced by registered sale deeds, books of account, purchasers' confirmations, statements recorded under Section 131 of the Act, valuation reports and comparable sale instances and no seized document, WhatsApp chat or image contained any express reference to receipt of cash by the Appellant.
Ld. DR has relied the findings of ld. Tax authorities.
Appreciating the submissions and material it comes up that that during AY 2023-24, the Appellant had sold only 8 plots. Significantly, out of these 8 plots, the Department could identify alleged material in respect of only 1 plot. Even in respect of the said plot, no incriminating material was found. Thus, there was admittedly no incriminating material evidencing receipt of undisclosed consideration in respect of any of the 8 plots sold during the year under consideration. However, by way of inferences drawn form the alleged incriminating material in the form of WhatsApp chats, images and other material pertaining to plots sold in earlier financial years ld. AO has extrapolated the same to all 8 plots sold during AY 2023-24. In doing so, the AO adopted the highest alleged rate of Rs.45,000/- per sq. yard appearing in the seized material in relation to plots measuring 566.66 sq. yards and 583.33 sq. yards and applied the same across the transactions undertaken during the year under consideration. Though there is no material on record to establish that such rate was applicable to the plots actually sold by the Appellant.
The foremost contention of ld. Counsel has been with regard to additional ground no. 5 that the impugned assessment order is liable to be quashed as the same has not been framed on the independent satisfaction of the AO but has been passed under the dictates, directions and influence of superior authorities. It being a legal ground which can be decided on admitted facts coming up from record is admitted for hearing.
The assessment order itself contains a categorical admission, as part of record, in Para 18 of the assessment order where AO has categorically recorded that the issues arising from the appraisal report were discussed on a regular basis with the Addl. Commissioner of Income Tax, Central Range-8, New Delhi and that the "directions and inputs emanating out of such discussions have been incorporated during the assessment proceedings."
Ld. DR has contended that administrative instructions have been followed by ld. AO and that doesn’t prejudice assessee.
However, having considered the manner in which ld AO, rests his conclusion on approval of Addl. Commissioner of Income Tax, Central Range-8, New Delhi, show that ld. AO doesn’t make it just by referenc to any administrative instructions but as if Addl. Commissioner of Income Tax, Central Range-8, New Delhi, has been part of quasi-judicial proceedings, of assessment. It is as express acknowledgment of the fact that that the directions and inputs received from the superior authority, Addl. Commissioner of Income Tax, Central Range-8, New Delhi, formed basis of the assessment. Such, an approach is not permissible under the Act, which defines the statutory powers and role of ‘tax authorities’, in the assessment. Administrative guidance and supervisory control by superior authorities may be permissible for ensuring proper conduct of proceedings but the appreciation of incriminating material to reach conclusion and determination of issues arising in assessment proceedings is a quasi-judicial function entrusted exclusively to the AO and such statutory responsibility cannot be abdicated or exercised under the dictates, instructions or influence of any superior authority. It is a settled principle of law that an authority entrusted with a quasi-judicial function must exercise its own discretion and arrive at its own conclusions. An order passed under the dictates of another authority is legally unsustainable as it amounts to a surrender of statutory discretion. The requirement of independent application of mind is fundamental to the validity of assessment proceedings and any departure therefrom vitiates the entire assessment. The aforesaid proposition is squarely supported by decision in the case of Fin Doc Finvest (P.) Ltd. v. Deputy Commissioner of Income-tax, Central [2025] 172 taxmann.com 773 (Punjab & Haryana), where the Hon'ble High Court has held that where the assessment order reflected that additions were made pursuant to directions received from superior authorities and not on the independent satisfaction of the AO, the assessment could not be sustained. Similarly, in Shri Dheeraj Chaudhary v. Assistant Commissioner of Income Tax (ITA Nos. 6158 to 6160/Del/2018) (Third Member, ITAT Delhi), this principle has been reiterated, that assessment proceedings are quasi-judicial in nature and the AO must independently evaluate the evidence and arrive at his own satisfaction. Any assessment influenced by dictates or directions of superior authorities is contrary to law. Similar views have also been expressed in DCIT, Central Circle-20 v. Proform Interiors Pt. Ltd. (ITA Nos. 4153 & 4008/Del/2025) and Hydrise Foods Pvt. Ltd. v. DCIT, Central Circle, Agra (ITA Nos. 86 & 87/AGR/2024), wherein it has been held that the statutory obligation of the AO to independently examine the facts and evidence cannot be delegated, surrendered or exercised under external influence. Thus this additional ground deserves to be sustained and appeal be allowed.
Then on merits even we find that the impugned addition rests primarily upon the statement of Shri Rajeev Gupta recorded under Section 132(4) during search. The AO has relied upon portions of this statement wherein Shri Rajeev Gupta referred to prevailing market rates and interpreted WhatsApp chats as reflecting actual sale consideration. But there has been no opportunity to assessee to cross examine the said person and confront the evidences.
In this context we are of considered view that where the alleged incriminating material in the form of any document, specially in electronic evidences is sought to be relied, and ld. AO, intends to reach a conclusion not on the basis of contents of the evidences alone but his own interpretation of the contents, then certainly assessee needs opportunity to confront the said material to the authors of said content. Here the ld. AO has proceeded on the bare assumption that figures appearing in such communications represent actual sale consideration received by the Appellant, and that the difference between such figures and the registered sale deed consideration constitutes unaccounted cash receipts.
On the contrary ld. Counsel has demonstrated that this assumption is factually erroneous, legally untenable and is demolished by the Department's own seized material. It comes up that the AO has invoked the presumption under Sections 132(4A) and 292C to treat the WhatsApp chats, screenshots and images found on Shri Rajeev Gupta's mobile as establishing receipt of undisclosed consideration. This is rebuttable presumption and more so presumption is only against the person from whom the material is found. The search party itself seized brochures and marketing material for Poysha Industrial Estate [PB Vol. 2, Pages 197-216], which unambiguously establish, two distinct product offerings, undeveloped plots and developed plots with development facilities and separate, higher pricing structures and development charges applicable to developed plots. The existence of varying figures in the chats is entirely and naturally explained by these two distinct product offerings. Then the statement of Shri Rajeev Gupta mentions of the rates of Rs. 45,000-60,000 per sq. yard but the same was given in the context of developed plots with development facilities. These rates cannot be mechanically transposed to undeveloped plots, which is what the Appellant actually sold. The AO has committed a fundamental error by treating figures applicable to a different product category as the actual sale consideration for the transactions under scrutiny. Then the development Agreement with Purchaser agreements [PB Vol. 2, Pages 161-196] contain clauses relating to development obligations, schedules, and post-dated cheques towards development activities establishing that discussions frequently concerned the developed plot option, even where transactions ultimately concluded for undeveloped plots alone.
Then we find that statements of few purchasers were recorded under Section 131 [PB Vol. 2, Pages 505-774] and same constitute direct evidence negating the on-money allegation. They explain that they were offered both developed and undeveloped plot options and tat they opted out of the developed plot option and had purchased undeveloped plots only, The consideration paid was exactly the consideration reflected in the registered sale deeds. Thus each purchaser categorically denying payment of any cash. These statements are from the actual counterparties to the transactions and in a case one of the contracting parties has stated a fact which benefits the assessee then the benefit goes to the assesse. It is a time-tested proposition of law that when a Court is faced with a situation wherein two different views appear to be reasonably possible, the matter is to be decided in favour of the person under prosecution. Thus, the benefit of a counter possibility goes to the assessee in such cases. Certainly, these statements carry far greater evidentiary weight than inferences drawn from chats on a third party's mobile phone. Critically, the AO has neither rebutted nor discredited a single such statement, nor has he brought any material on record to contradict the purchasers' denials. In these circumstances, the purchaser statements completely negate the allegation that figures appearing in the chats represent actual undisclosed consideration.
On the contrary, the statement of Rajeev Gupta, which is heavily relied by ld. AO, doesn’t indicate that he had any authority to determine sale consideration. He was neither a director nor a shareholder of the Appellant company. His role was limited to coordinating site visits and communicating project information to prospective purchasers. Final negotiations and commercial decisions rested exclusively with Shri S.C. Goyal. Any opinion of Shri Rajeev Gupta on market rates or expected sale prices is therefore the opinion of a peripheral functionary it is not, and cannot be treated as, evidence of actual consideration received by the Appellant. Thus to rely the same assessee needed an opportunity to discredit the veracity of the statement. Specially when purchasers who are contracting party had supported the claim of assessee, that all the more warranted opportunity to cross examine witness, whose uncorroborated statement are sought to be relied by ld. AO.
At the same time on behalf of the Appellant, there was evidence in the form of valuation report given by Nagpal Associates, a qualified and registered valuer [PB Vol. 2, Pages 298-303], which specifically values undeveloped industrial plots in Poysha Industrial Estate matching the consideration reflected in the registered sale deeds. The ld. AO has neither rejected this report nor assigned any reason for disregarding it. This report is not even countered by any discussion to say that on facts and any evidences collected by ld. AO, this valuation report is not reliable. Furthermore in this context only assessee also placed on record a detailed comparative analysis of contemporaneous registered sale transactions of similar undeveloped industrial plots in the same locality and period [PB Vol. 2, Pages 220-2971. The assessment order contains no rebuttal of this analysis, no contrary comparable, and no identification of any registered transaction supporting the rate applied by the AO.
Thus in the case where there is no corroborative evidence in regard to whatsapp chats, in the form of cash found during the course of search, cash trail, receipt acknowledging cash payment, admissions of purchaser or even unaccounted asset, investment or expenditure representing deployment of alleged cash receipts, the assumptions drawn from WhatsApp chats, cannot be sole basis of a conclusive belief that there payment of ‘on money’. Thus impugned addition of Rs.11,12,31,740/- made by recourse to Section 45 has is outcome of superfluous inferences and estimation or to say out of surmise.
The factual matrix of this case also indicate substance in contention of ld. Counsel, the ld. AO’s assertion are not sustainable as out of 24 plots sold up to the date of search, the ld. AO found alleged incriminating material in respect of only 8 plots, spread across multiple financial years and out of these 8 plots, only one plot pertains to AY 2023-24. The sole material for that one plot is a WhatsApp chat relating to brokerage not to sale consideration, not to cash and for the remaining 7 plots sold during AY 2023-24 there is not a whisper of incriminating material in any seized document, chat or communication. Thus the AO's own findings exhibit a complete disconnect between alleged incriminating material and the other evidences on record. The impugned addition is thus not outcome of incriminating material pertaining to the plots sold during AY 2023-24, but extrapolation of content of certain WhatsApp chats relating to isolated transactions of earlier years.
As a consequence of aforesaid discussion we are inclined to sustain the ground corresponding additional ground and grounds on merits as well. The appeal is allowed and impugned addition is deleted.